BAMNB Royal BAM Group NV

Dutch construction company Royal BAM Group NV (BAMNB.AE) reported a 19% rise in first-quarter net profit as profitability at most of its units improved, but revenue dropped 13% as market prospects remain uncertain.

The company also announced that Chief Executive Joop van Oosten will retire next year. "My departure is due to the fact that I'm now 62 and will be 63 when I retire," Van Oosten told reporters.

The Bunnik-based company said net profit for the first three months of 2010 rose to EUR9.9 million from EUR8.3 million in the same period a year ago.

Revenue fell to EUR1.54 billion from EUR1.77 billion a year ago due to poor winter weather and lackluster volumes in the residential and commercial property markets.

Analysts were caught off guard by the results. They had expected a EUR1 million net loss and revenue of EUR1.63 billion.

"BAM reported results that were ahead of our--and far ahead of consensus--estimates in operational results and somewhat light on revenues," said Edwin de Jong, analyst at SNS Securities. He rates BAM at hold.

Investors cheered the results. At 1021 GMT, BAM shares traded up EUR0.31, or 6.2%, at EUR5.32 while the benchmark AEX index traded up 0.1%. Over the past 12 months, BAM shares have lost almost 30% of their value, while the AEX has gained over 20%.

The company reiterated it's expectation of EUR8 billion in revenue for 2010, but said it is impossible to predict profitability due to uncertainty in all its markets.

BAM earns almost 50% of its revenue in the Netherlands, which has endured a severe slump in the construction sector. The country faces parliamentary elections June 9 and it remains uncertain what will happen to government spending on infrastructure and other public construction projects after the poll. The company earns most of its money doing construction work for third parties, but also develops its own commercial and residential property.

It's real-estate unit was its only loss-making business during the first quarter, mostly due to underutilization.

In 2009, BAM booked EUR266 million in losses on its real-estate business and announced a EUR250 million rights issue in its full-year results in March. Thursday, it said it expects to conclude the rights issue in the middle of this year.

If the rights issue is successful, the company's loan covenants will be loosened, while interest payments will rise. However, it agreed to use part of the proceeds it may fetch from selling its 21.5% stake in Dutch dredging company Van Oord to pay down its debt.

Talks about a possible sale of the Van Oord stake are expected to take place this summer. "But it won't be easy to reach an agreement this year," Van Oosten said.

Van Oosten will be replaced by Nico de Vries, who has been an executive board member at BAM since 1998. De Vries will become chairman on Oct. 1, 2010, while Van Oosten will leave the company March 31, 2011, after a 35-year career at BAM.

"Van Oosten's departure comes as a surprise, but I'm positive about his successor," De Jong at SNS said.

"The contribution of the first quarter of a year is always so small in this business, that we don't believe (the better-than-expected results) will lead to significant upgrades in consensus expectations," said analyst Michael Roeg at KBC Securities. He rates BAM at accumulate.

-By Robin van Daalen and Eelco Hiltermann, Dow Jones Newswires; +31 20 571 52 01; robin.vandaalen@dowjones.com

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