ANALYSIS: Mexico highway firms motor toward new alliances

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Friday, November 21, 2014

It will become increasingly common to see companies with interests in the provision of roads in Mexico selling part of their holdings in the sector and making strategic alliances – which is exactly what OHL Mexico has announced it plans to do.

The company said recently it would sell up to a 10% stake in Conmex, its most important concession operator.

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Marco Medina, a construction sector analyst with financial group Bx+, said companies like OHL Mexico and competitor ICA are selling part of their stakes in road concessions so they can participate in new road projects being launched .

"The trend is to see new strategic alliances between companies and sales of their participation in concessions, in order to have sufficient resources to enable them to continue participating in the projects included in the national infrastructure plan 2014-2018," Medina said.

The new alliances will be formed so that, above all, companies can monetize their assets.

OHL Mexico shares fell earlier this week after its parent company, the Spanish engineering group OHL, announced the sale of 7.5% of its subsidiary.

Meanwhile, OHL Mexico's announcement that it would sell part of its stake in Conmex also likely contributed to the drop.

Medina believes that the company's share price will stabilize. He said that in 2015 the firm is expected to continue as one of the major players in the road concession sector.

Among the projects included in the national infrastructure plan 2014-2018 is the Atizapán - Atlacomulco road. The concession contract for the 9.35bn-peso (US$686mn) project was awarded to OHL Mexico. Another project, the Tuxpan -Tampico highway and the Cardel-Poza Rica road were awarded to Mota-Engil.

OHL posted a net profit of 87.5mn euros (US$109mn) for the first nine months, a 41% year-on-year drop. Sales fell 1.80% to 2.55bn euros, with Central America and South America accounting for 26.7% of income.