The Competition Commission (CC) said despite low demand in
recent years, producers have managed to raise prices and
profits.

“The established producers know too much about each other’s
businesses and have concentrated on retaining their respective
market shares rather than competing to the full,” said CC Deputy
Chairman Martin Cave.

Because the market was restricted to four players – Lafarge
Tarmac , Cemex, HeidelbergCement’s
Hanson and Hope Construction Materials – the lack of
competition cost customers at least 180 million pounds ($275
million) between 2007 and 2011, the CC said on Tuesday.

Cave said the CC’s findings did not mean the companies were
explicitly colluding or operating a cartel.

Lafarge, which co-owns Lafarge Tarmac with Anglo American,
and Cemex both said they believed effective competition existed
and that they would assist the CC in its investigation.

“The suggested possible ‘remedies’ are wholly
disproportionate,” Cemex said.

The CC said it might require one or more of the top three
producers to dispose of some plants or reduce their cement
production capacity.

It could also create a cement buying group to give smaller
customers more bargaining power or restrict the disclosure of
government and industry market data which have provided the
companies with a high level of understanding about each other.

The CC’s criticisms come as the cement industry battles weak
demand from the construction sector and follows a decade which
has seen the European Union and German authorities fine firms
such as Cemex and Lafarge for cartel activity.

The EU Commission has been investigating companies including
Lafarge, Holcim, Cemex and HeidelbergCement in 10 countries in
the European Union since 2008 for illegally setting prices,
restricting imports and market sharing.

HeidelbergCement, which owns British cement maker Hanson,
said it was cooperating with the CC but would not comment on the
findings before the final report, due by next January.

Hope Construction had no comment.

The Essen-based group, controlled by Spain’s ACS
and which appointed Marcelino Fernandez Verdes as chief
executive in November, said it was raising its earnings targets
on the back of its exit from less profitable, capital-intensive
businesses.

Driven by relief over the end of more than three years of
unsuccessful attempts to divest the unit, Hochtief shares jumped
more than 5 percent, hitting their highest level since July
2011, compared with a 1.6 rise in the European construction
sector.

Verdes, a 58-year old former ACS manager, is leading a drive
to shed airports and real estate development businesses, aiming
to cut the company’s debt – which stood at 944 million euros at
the end of December, the last figures available – while making
it a leading global infrastructure provider.

It sold the airports unit to Canada’s Public Sector Pension
Investment Board. The division has holdings in airports in
Budapest, Duesseldorf, Hamburg, Sydney and Tirana. It also sold
Athens Airport as part of the transaction, even though it had
previously taken that hub out of the bundle, citing economic
troubles in Greece.

Hochtief had halted the sale early last year when it was
unable to fetch a price of 1.5 billion euros ($2 billion), but
later revived its efforts.

“The fact that the airport assets are going to be disposed
completely after such a long time is positive news and should
outweigh possible discussions on the pricing,” said DZ-Bank
analyst Marc Nettelbeck.

Verdes also aims to leave behind large and risky
construction projects that led to billions of euros of
writedowns and aims to reduce the size of projects and better
manage risks, he told Hochtief’s annual shareholders’ meeting.

“We have to put an end to nasty surprises like profit
warnings,” Verdes told the 591 investors present, representing
81 percent of Hochtief’s share capital. “Infrastructure is our
real expertise.”

STRATEGIC SHIFT

Posting first-quarter earnings above expectations, the group

also raised its earnings outlook for this year, saying it
expected earnings before tax to rise to as much as 680 million
euros in 2013, compared with 656 million predicted previously.

The group’s strategic shift, which also includes
strengthening its Australian mining unit Leighton and
building power plants such as offshore windmills, will take at
least two years, Verdes said.

Hochtief’s strategy contrasts with that of peer Bilfinger SE
, which is focusing on servicing buildings, power
stations and industrial plants, and managed to achieve a higher
profitability than Hochtief at the services unit.

Bilfinger generated an EBITA margin of 4.7 percent at its
building and facility services unit, compared with a pretax
profit margin of 2.7 percent at Hochtief.

The Mannheim, southern Germany-based competitor expects
orders for maintenance to be more stable than construction
projects, which hinge on the overall state of the economy, a
strategy that Hochtief also pursued until Verdes became CEO.

Bilfinger is sticking with that strategy as builders
struggle in the face of weak economic growth and sluggish
construction activity across Europe, with several announcing
writedowns, restructuring plans and job cuts.

Government spending cuts and tightening private sector
budgets in Europe have held back a recovery in construction
markets in the region, in contrast to the United States, which
is seeing signs of improvement.

Some shareholders therefore questioned Verdes’ strategy.

“Are you part of the solution or are you part of the
problem?,” asked Marc Tuengler of the DSW association of
shareholders.

But for now Verdes’ strategy is paying off and Hochtief
swung to a first-quarter net income of 43.5 million euros from a
loss of 34.8 million a year before, compared with a forecast
23.6 million.

Hochtief shares were up 6.1 percent at 56.65 euros by 1036
GMT, while ACS was up 6 percent at 21.075 euros.
($1 = 0.7659 euros)

(Additional reporting by Ludwig Burger in Frankfurt; Editing by
David Holmes)

Lufthansa offered to raise salaries by 1.2 percent from
October this year and a further 0.5 percent a year later, in a
deal that would run for 29 months and would not contain job
guarantees, a spokeswoman for Verdi said on Wednesday.

“We will discuss the offer tomorrow and possibly decide …
if we’re going on strike again,” she said, noting passengers
would be informed in due course if the union was calling further
stoppages.

Lufthansa said it had offered to raise salaries in two steps
in a deal that would last from February this year to June 2015,
giving total increases of between 1.7 percent and 2.3 percent
depending on the division an employee worked in, said a
spokeswoman, declining to give more details.

Staff have already held a one-day strike on March 21,
forcing Lufthansa to cancel nearly 40 percent of its flights for
the day.

Efforts by big European airlines such as Lufthansa and Air
France-KLM to cut costs – in the face of soaring jet
fuel prices and fierce competition from Middle Eastern airlines
and low-cost carriers – have fanned tensions with workers.

Verdi is demanding a 5.2 percent pay rise for 33,000 cabin
crew and ground staff at Lufthansa Cargo, Lufthansa Technik,
Lufthansa Systems, catering unit LSG Sky Chefs and ground crews.
It also wants a commitment by Lufthansa to safeguard jobs.

Lufthansa, Europe’s biggest airline by revenue, wants to
freeze pay and get staff to work an hour more each week to help
it remain competitive.

The airline is cutting 3,500 jobs, revamping low-cost
carrier Germanwings and bundling procurement for its airlines as
it seeks to cut costs and improve earnings.

Last year it agreed to a mediated deal to raise cabin crew
pay almost 4 percent, adding 33 million euros to costs, after a
series of strikes forced it to cancel more than 1,000 flights.

Staff costs accounted for just over a fifth of its overall
operating expenses last year. That compares with a 30 percent
share at Air France, but budget carriers such as Ryanair
and easyJet have a much lower cost base.

The comparable figure for the latter two is closer to 10
percent, allowing them to undercut “legacy” or
longer-established carriers on fares.

IVG, which reported an unexpected 100 million euro ($129
million) loss in 2012, burdened by its projects abroad, is
shifting a loan to finance the building from Swiss francs to
pounds in order to satisfy demands from the banks, a spokesman
said on Wednesday.

The valuation of the Gherkin has dropped to as little as 473
million pounds ($715 million) from the 600 million it was valued
at when IVG’s fund bought half of it in 2007, according to the
most recent prospectus of the closed-end fund called EuroSelect
14, as rental income did not meet expectations.

Rents in London’s financial district are dropping in some
areas and the vacancy rate was 7.3 percent in February versus
4.8 percent at the start of 2007, before the financial crisis,
according to property consultancy CBRE.

IVG’s investments outside Germany are a drag on
profitability and it said on March 5 that those investments were
partly responsible for the 100 million euro loss.

The group also did not pay a dividend for last year and
could not service a convertible bond.

A 40 percent rise in the franc against the British pound
since the Gherkin was financed in 2006 has led to a rise in
indebtedness, or the ratio of the loan to the value of the
building, to almost 100 percent, according to a statement on
IVG’s website.

MONEY BACK

Under the terms of the loan, banks have the right to ask for
their money back as soon as the ratio hits 67 percent and have
therefore asked for the loan to be shifted to pounds to reduce
the currency risk, said the spokesman.

IVG is also trying to find an investor for the building by
the end of the year as part of the banks’ demands. The company
and the banks will at that time convene again to discuss the
investment, said the spokesman.

He declined to name the five German banks.

Finding an investors might turn out to be difficult, as the
some 9,000 private investors in the fund would have to agree to
the new stakeholder, which would reduce the value of their
holdings, after their initial agreement to the start of the
search.

Fifty percent owner Evans Randall also has to agree to the
new investor, said the spokesman. Evans Randall declined to
comment.

“We’re expecting to find a holistic solution by the end of
the year,” said the IVG spokesman. “Finding an investor is an
ambitious target,” he said, declining to detail any alternative
solutions.

Bonn-based IVG has been negotiating with the banks since
2009 when indebtedness, also called the loan to value ratio,
rose to above 67 percent.
($1 = 0.7760 euros)
($1 = 0.6615 British pounds)

(Editing by David Holmes)

Shares in the company rose over 4 percent on Thursday, after
it said it had agreed to buy a 25 percent stake in Cement
Australia from Swiss rival Holcim for an undisclosed
price, giving the two firms equal 50-percent ownership.

Rising demand from North America and Africa would also boost
earnings, HeidelbergCement said, forecasting a “moderate”
increase in operating profit, a “significant” rise in pretax
profit and higher net income this year, without elaborating.

“The outlook is positive from our view,” DZ Bank analyst
Marc Nettelbeck said. “We stay optimistic for the mid-term.”

HeidelbergCement’s shares were up 4.2 percent to 56.85 euros
at 1220 GMT, the biggest rise on Germany’s blue chip DAX
index and outperforming a 1 percent increase on the
STOXX Europe 600 Construction index.

According to Thomson Reuters StarMine, analysts expect
HeidelbergCement’s 2013 operating income to rise to 1.68 billion
euros ($2.2 billion) from 1.61 billion euros in 2012.

The company said on Feb. 7 it expected to be able to raise
prices this year following a pick-up in demand in some of its
markets including Ghana, the north-American west coast and
Indonesia.

AUSTRALIAN EXPANSION

HeidelbergCement’s expansion in Australia gives it a bigger
share of a business which had sales of A$1 billion ($1 billion)
in 2012. Cement Australia owns two cement factories, as well as
a crushing mill, and is building a second crushing mill.

Holcim and HeidelbergCement will jointly manage the venture.

HeidelbergCement buys around 40 percent of the cement from
Cement Australia, as much as Holcim, and holding stakes of the
same size would eliminate conflicts about the price of the
cement, HeidelbergCement Chief Financial Officer Lorenz Naeger
said at a press conference.

The German firm, which is cutting debt in a bid to win back
an investment grade credit rating, said its net debt had fallen
to 7 billion euros at the end of December, 800 million euros
less than three months before and less than half of what it was
at the end of 2007 after the takeover of British peer Hanson.

HeidelbergCement said in February it aimed to accelerate a
cost-cutting programme to save an extra 150 million euros this
year, bringing its target for cutting annual costs over the
three years ending 2013 to 1 billion euros.

The company is aiming for net debt of 6.5 billion euros in
the medium term in order to keep it at a level that would be
manageable even in the case of another economic crisis, Chief
Executive Bernd Scheifele said.

Scheifele did not detail when he expects to reach that
target, but said it would not be this year.

HeidelbergCement plans to propose a dividend of 0.47 cents a
share for its 2012 financial year, up from 0.35 cents the year
before.

($1 = 0.7722 euros)($1 = 0.9716 Australian dollars)

(Editing by Mark Potter)

The German cement company also said it would double its
stake in an Australian cement maker to 50 percent as it expects
rising demand from the region will boost profits in 2013.

HeidelbergCement will buy a 25 percent stake in Cement
Australia from Swiss company Holcim for an undisclosed
price to form a joint venture.

Cement Australia, based in Milton, Queensland, generated
sales of A$1 billion ($1 billion) in 2012. It has two cement
factories as well as a crushing mill and a second crushing mill
is being built.

HeidelbergCement’s shares were indicated 0.7 percent higher
at 0644 GMT, according to brokerage Lang & Schwarz.

The company, based in Heidelberg in southern Germany, said
on Feb. 7 it expected to be able to raise prices this year
following a pick-up in demand in some of its markets in Asia,
Africa and North America.

It also said in February it aimed to accelerate a
cost-cutting programme to save an extra 150 million euros this
year, which will bring its target for cutting annual costs over
the three years ending 2013 to 1 billion euros.

In February, the company reported a 10.9 percent rise in
operating income in the fourth quarter to 455 million euros.

According to Thomson Reuters StarMine, analysts estimate
2013 operating income rising to 1.68 billion euros ($2.18
billion) from the 1.61 billion euros HeidelbergCement posted for
2012.

($1 = 0.7722 euros)
($1 = 0.9716 Australian dollars)

(Reporting By Peter Dinkloh. Editing by Jane Merriman)

Bilfinger is seeking to benefit from a European Union drive
to curb carbon dioxide emissions and help build offshore
windparks, modernise and revamp power plants and cut energy use
in buildings.

The business, which Hochtief is selling to focus on becoming
one of the biggest infrastructure providers worldwide, would
have to fulfil Bilfinger’s expectations of profitability, Chief
Executive Roland Koch said on Wednesday.

Bilfinger would be joining a number of bidders including
Finland’s YIT, Denmark’s ISS, Vinci
and Cofely of France, according to German magazine
WirtschaftsWoche.

Austria’s Strabag already said it was interested in the
business. Hochtief, which is controlled by Spain’s ACS,
is expecting to get up to 170 million euros ($221 million) for
the division, the magazine said.

“Modernising commercial real estate will be very
interesting,” Bilfinger Chief Koch said. “The market for
efficiency increases will be worth billions… It’s an area that
will grow dramatically as companies expect they will become
subject of government regulation.”

Excluding a possible takeover of the Hochtief unit,
Bilfinger reiterated a forecast that its operating earnings
adjusted for disposals would rise for a sixth consecutive year
in 2014 thanks to bigger profits from servicing industrial
plants and power stations.
($1 = 0.7680 euros)

(Reporting By Peter Dinkloh; Editing by Tom Pfeiffer)

Fraport, whose biggest customer is German flagship carrier
Lufthansa, said on Tuesday net profit would shrink
this year from the 238 million euros ($310 million) reported for
2012.

The company said this reflected the impact of costs from a
fourth runway opened in 2011 and expansion of one of two
terminals at Frankfurt, Europe’s third-busiest airport by
passenger numbers.

Fraport’s cautious outlook fell short of analysts’
expectations, which had looked for an increase in Frankfurt
passenger numbers this year after the airport’s expansion.

Analysts in a Reuters poll had also forecast a rise in net
income this year to 254 million euros.

“The macro-economic environment will also remain challenging
in 2013,” Chief Executive Stefan Schulte said. He also cited
burdens on the aviation industry from a planned European
emissions trading scheme and from Germany’s air travel tax.

Fraport’s shares fell 3.7 percent to 43.37 euros by 1040
GMT, one of the biggest fallers on the German midcap MDAX index
, which was flat.

“I think they are very cautious after their harsh
disappointment last year, when they had to lower their
expectations for passenger growth by half,” said Equinet analyst
Jochen Rothenbacher, who had estimated an increase in passenger
numbers for 2013 of 1.5 percent.

DZ Bank analyst Robert Czerwensky said he had expected a 1
percent gain in passenger volume there this year.

CEO Schulte told journalists at a news conference that
business had been “very good” so far in March and that an upturn
in the economy could boost the number of travellers.

Airlines in Frankfurt plan to reduce flight movements by 1.4
percent in the European summer, Fraport said. Lufthansa, which
accounts for more than 50 percent of Fraport’s business in
Frankfurt, had reduced its capacity by 3 percent in its European
winter schedule.

Fraport forecast earnings before interest, tax, depreciation
and amortisation (EBITDA) rising to between 870 million euros
and 890 million euros from 850.7 million in 2012, missing
analysts’ consensus forecast of 910 million euros.

For last year, Fraport reported a 6 percent rise in core
profit (EBITDA), but its net profit fell by about 1 percent on
financing costs as well as a slump in profit at its ground
handling business.

The airport operator has made major investments to boost the
number of passengers it handles at Frankfurt airport, driving up
its interest costs by a quarter in 2012 and boosting net debt by
11 percent to 2.9 billion euros ($3.8 billion).

The Frankfurt investments weighed on earnings at Fraport’s
aviation business, which generates about a third of group
revenues but less than a quarter of operating profit.

The addition of 12,000 square metres of retail space at the
expanded terminal boosted Fraport’s retail income. Net revenue
per passenger at Frankfurt airport rose almost 5 percent.

As expected, Fraport will pay a dividend of 1.25 euros per
share for 2012, unchanged from a year earlier.

($1 = 0.7684 euros)

(Reporting by Maria Sheahan. Editing by Harro ten Wolde and
Jane Merriman)

Fraport makes more than a third of its operating earnings
from retail outlets at Frankfurt and sales of surplus land. It
has expanded one of its two terminals there to tap passenger
growth after the fourth runway opened in 2011.

Chief Executive Stefan Schulte said the investment costs
from the new runway and terminal were booked so that the
increase in traffic would help operating earnings. He declined
to give a more specific forecast.

The group’s earnings before interest, taxes, depreciation
and amortisation (EBITDA) in the three months through September
rose by a third to 317 million euros ($405 million), beating
market expectations in a Reuters poll of analysts for an EBITDA
of 307 million euros.

Fraport’s shares rose 5.3 percent at 1429 GMT, outperforming
a 0.7 percent rise in the index of medium-sized companies in
Frankfurt.

Concessions at 13 airports worldwide, including in Turkey
and Peru, make the company’s international business its second
biggest earnings contributor.

“We are very well positioned with the international
business, where we expect further growth,” Schulte said, adding
that expansion in China was a possibility.

The company’s strategy is paying off with investors. It
trades at 17 times expected earnings per share for the next 12
months, according to StarMine, compared with a multiple of 13
for rivals Flughafen Wien and Flughafen Zuerich
.

But the airport faced protests over Frankfurt’s fourth
runway and has had to spend more money on reducing noise
pollution than planned. As a result, it has predicted profits at
its aviation business will fall this year.

In addition, airlines are facing pressure on profits from
the weak economic climate and are reducing flights.

Schulte to predicted a difficult winter. “We will have to
manage our business very closely,” he said.

Fraport cut its expectations for revenue in 2012 and said
sales would not exceed 2.5 billion euros, as previously
predicted, because it is investing less in Bulgarian airports
Varna and Bourgas as well as its Peruvian airport in Lima.

Investments in concessions are booked as sales under
Fraport’s accounting standards, a spokesman said. As the company
needs more time to spend a mid-double digit million euros amount
on those three airports, it will book less revenue this year
than it expected, he added.

Freight volumes in Frankfurt have been hurt by a night
flight ban imposed at the end of October and by weaker economic
growth due to the European financial crisis, with volumes down
8.1 percent in the first nine months of the year.

The group reiterated its expectations for 2012 earnings.

($1 = 0.7823 euros)

(Reporting by Peter Dinkloh; Editing by Jane Merriman and Helen
Massy-Beresford)

Lanxess relies on the automotive industry for 40 percent of
its business and warned in November that it expected to reach
the lower end of its forecast range for 2012 core profit growth
as the European car market nears a 20-year low.

Earnings per share (EPS) jumped to 0.62 euros ($0.81) in the
three months through December from 0.06 euros a year earlier,
the company said on Thursday, unexpectedly publishing key
financial results ahead of schedule.

Analysts had on average expected fourth-quarter EPS of 0.77
euros, according to Thomson Reuters StarMine.

“Soft underlying demand in the second half of 2012 has
continued into 2013 across most businesses, against the usual
seasonal trend,” Lanxess said in a statement on Thursday.

A spokesman declined to say why the company released
earnings ahead of March 21, when it plans to publish full
financial figures for 2012.

Shares in Lanxess slipped 5 percent to 63.49 euros by 1223
GMT, making it the worst performer in the European chemicals
sector, which was 0.2 percent lower.

Consultancy LMC Automotive said on Wednesday it sees western
European demand for passenger cars shrinking 4 percent this
year, the fourth straight annual decline, with conditions
remaining “desperately weak as a dismal economic backdrop
continues to hamper sales”.

Lanxess earnings before interest, taxes, depreciation and
amortisation (EBITDA), excluding special items, rose 7 percent
to 1.23 billion euros in 2012, it said on Thursday.

In the fourth quarter alone, they were up 37 percent 239
million euros thanks to cost cuts. A devaluation of inventories
in the previous year was not repeated.

Lanxess said it expected demand to pick up over the course
of the year and affirmed its medium-term earnings outlook for
adjusted EBITDA of 1.4 billion euros in 2014 and 1.8 billion
euros in 2018.

($1 = 0.7692 euros)

(Additional reporting By Christiaan Hetzner, editing by Paul
Casciato)