CFE - 2006 annual report - Vinci

CFE and its real-estate development subsidiaries have teams that are specialised in real-estate matters, they work together
with well-known architects and design offices and they do their own project management, the construction division being in
charge of project execution.
CFE has put in place investment committees to which projects are presented before they are submitted to the Board of
Directors. Finally, in order to reduce risk exposure, CFE endeavours to diversify its operational portfolio (residential, office
buildings, shopping centres), and is currently limiting the office portion. Given the external factors, the risks involved in real
estate activities can not be completely avoided.
1.1.3 Dredging
Dredging activities are performed by DEME (in which the group has a 50% stake) and its subsidiaries.
DEME is one of the leading players in the world dredging market. Its market includes both maintenance dredging and infra-
structure dredging (“capital dredging”). The latter is particularly related to growth in world trade and to decisions by states to
invest in major infrastructure projects.
The DEME group is also active in the environmental arena through its subsidiary, Ecoterres, in which it has a 75% controlling
share. This company is specialised in the treatment of sludge and contaminated soil.
DEME, through DBM (“Dredging Building Materials”) is also present in the gravel supply market.
In addition to the fact that it is primarily a maritime activity, dredging is also characterized by its “capital intensive” side, which
is proven by the heavy level of investment in the sector. In this regard, DEME is faced with complex investment decisions.
In addition to the risks that are specific to maritime work and to project execution (see 1.1), dredging also has its own risks:
• technical design of the investment (type of dredger, capacity, power, etc) and mastery of new technologies;
• time between the decision to invest and the commissioning of the boat, and anticipation of the future market;
• control over construction by the shipyard once the decision to invest has been made (costs, performance, compliance, etc.);
• management of the fleet and planning of activities;
• financing.
Finally, as DEME works mainly overseas, it is subject to political risks. DEME has qualified staff who are able to design
dredgers, and to design and execute large-scale projects. Given the very nature of the activity, and of all the external factors
to be taken into account, the risk inherent in the activity cannot be completely eliminated.
1.2 The economic climate
The construction sector is, by its very nature, perceived as being subject to strong cyclic fluctuations. However, this observa-
tion must be qualified by segment or sub-segment of activity, as the key factors can be different in each:
• Civil engineering activities are strongly linked to government investments in large infrastructure projects. Thus, a lasting
delay in the major infrastructure projects planned for Belgium and the Netherlands, such as the Antwerp Ring, the
Liefkenshoektunnel or the Coentunnel, or the non-awarding to CFE of a significant proportion of these projects, could
affect this activity;
• The office-building component of construction and real-estate development activities follows the classic
economic cycle, whereas housing activity responds more or less directly to interest rate levels;
• Dredging activities are more sensitive to the world economic situation, to the growth of world trade and to government
investment policies in the area of major infrastructure projects.
C F E F I N A N C I A L R E P O R T 2 0 0 6 I 1 2 6 t h c o r p o r a t e f i n a n c i a l y e a r
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