Balfour Beatty wary of tariffs amid profit dip

London-based builder Balfour Beatty hasn’t skilled any disruptions from regime change in Washington, however it’s keeping track of tariffs coming from the U.S., CEO Leo Quinn informed listeners throughout the firm’s 2024 full-year earnings call on March 12.

“The one space we’re targeted on is definitely the tariffs,” Quinn stated on the decision. “You realize, when somebody places metal up by 50% from Canada, we should be cautious as a result of we supply an enormous backlog, and all of it goes into the subcontract base.”

The looming threat of tariffs — blanket value hikes on items from Canada, Mexico, China and the European Union and additional will increase on sure supplies, equivalent to metal and aluminum — has put contractors in a tough place. Builders are now adjusting contracts for cover from sudden value jumps and stockpiling supplies to get forward of costs.

Quinn, who’s stepping down as CEO in September, stated in response to a monetary analyst’s query that Balfour Beatty would probably act as a “conduit” within the brewing commerce struggle, passing prices down first to subcontractors, after which to shoppers.

“Now, our threat would not sit with us, it sits with the subcontract base, and, for causes of change of legislation or sure phrases and situations, it flows again to the client,” Quinn stated.

Nonetheless, issues may crop up if a subcontractor goes bankrupt, whereupon the legal responsibility may reverberate again up the chain. Quinn stated the agency was managing the state of affairs rigorously, and making certain that subcontractors are bonded and secured to lower its personal threat.

Philip Harrison, the corporate’s CFO, added that bonds or insurance coverage can be the corporate’s fallback plan, ought to a subcontractor go bankrupt. 

“Our threat is all the time schedule, not the subcontractor going bust,” Harrison stated.

The numbers

The contractor reported a 2024 pre-tax profit of 214 million pounds ($277 million), down 12% from 2023’s 244 million pounds, in keeping with a March 12 information launch detailing the corporate’s monetary outcomes.

Harrison pointed to a small variety of delayed U.S. civil jobs that continued to tug on that unit’s profitability. Income from the agency’s total U.S. development enterprise shrank 2% in 2024 to three.6 billion kilos. 

“As we progress by way of these delayed civil initiatives, we count on U.S. Development PFO to enhance in 2025,” Harrison stated, referring to the agency’s revenue from operations.

Regardless of the dip in earnings, Balfour Beatty reported 18.4 billion kilos in backlog — which it refers to as its “order ebook” — on the yr, up roughly 12% from 2023’s 16.5 billion kilos. Its U.S. Buildings phase led the cost with 26% backlog development, per the discharge. Income rose to 10 billion kilos, up roughly 4% from 2023’s 9.6 billion kilos.

But that development of pending work within the U.S. could possibly be a double-edged sword, as Quinn famous, because of the impression of future tariffs. 

Within the U.Okay., the corporate’s efficiency within the energy infrastructure sector echoed the prediction Quinn made throughout Balfour Beatty’s half-year earnings call in August. The corporate claims it holds market-leading capabilities within the area and that backlog for energy transmission and distribution work greater than doubled in 2024, per the information launch. Its total Help Providers’ backlog, which incorporates energy transmission and distribution initiatives, grew 14% to three.2 billion kilos.

Balfour Beatty stated that within the U.S., its natural development technique and a extra secure economic system has resulted within the development, alongside elevated demand throughout most of its geographies and shopper sectors, in keeping with the information launch.

“We’re optimistic about 2024/25,” Quinn stated. “We all know that we have a number of quantity on the market which permits us to be selective in what we do.”