Balfour Beatty profits dip on weak US office, tech sectors
- Balfour Beatty’s pre-tax profit dipped to 82 million pounds ($104.7 million) for the first half of 2023, down from 83 million pounds a year ago, on a 9% increase in revenue to 4.5 billion pounds, the contractor announced during its half-year earnings call on Aug. 16.
- The London-based contractor said its U.S. segment, which had been a bastion of strength, took a hit due to weakness in the office and technology sectors in Texas and the Northwest, respectively. The firm’s backlog fell to 16.4 billion pounds, a 7% decrease from last year’s mark of 17.7 billion pounds.
- U.S. revenues slipped to 1.73 billion pounds, down from last year’s 1.76 billion pounds. Despite the dip, Balfour Beatty characterized the segment’s performance as “consistent,” with U.S. profits holding steady at 21 million pounds.
Balfour Beatty Group Chief Executive Leo Quinn pinned difficulties in its U.S. segment on the tech and office sectors.
He noted that the market in the Northwest, primarily funded by tech industry giants like Meta, Amazon and Microsoft, was on the decline. 2023 has been a tough year for big tech, as the largest corporations have cut tens of thousands of jobs amid a harsh economic climate.
Further south, developer decisions to put office projects on hold in Texas have been influenced by interest rates, Quinn said. However, he noted that it hasn’t stopped the contractor from picking up potential future work despite the current slowdown.
“Interestingly, in Texas, the work is piling up,” Quinn said. “We’ve got our largest order book of awarded but not contracted [work]. The challenge is, until the developers get certainty, they won’t move onto contract. We’ve got a lot of pent-up demand here.”
Despite the struggles, Quinn pointed to sectors that he believed were demonstrating growth across the country. He said the company sees strong growth in California through school projects, federal projects in the Washington, D.C., metro area and the demand of Disney and Universal Studios in Florida for hotels and leisure projects.
“The U.S. is a solid performer, and we’re waiting for the dam to break so that we can be more optimistic about the outlook for the next year and the year after,” Quinn said.
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