FULL REPORT: The world's 200 largest construction companies

Vinci was the world's largest contractor in 2007 according to the results of International Construction's annual ranking of the worlds largest construction companies. Fellow French company Bouygues maintained its second place, but further down the top 10 there were major changes.

New in third position is Spain's ACS, rising two places from fifth last year. The company pushed the largest US company in the ranking, Bechtel, down one place to fourth.

Fifth and sixth places are taken by Chinese contractors, with China Railway Construction Corporation taking a huge leap up 17 positions from no. 23 in last year's rankings. Also new to the top 10 this year is China Communications Construction Group in ninth place.

Spain's Ferrovial is the other new addition to the top 10, in eighth position, while Hochtief and Skanska lost places compared to their rankings in last year's edition of the table.

For the first time in the league table's history, there are no Japanese companies in the global top 10. The highest placed this year was Kajima - last year's eighth placed company - at no. 14. Taisei also fell sharply, ranking at no. 17 this year, compared to no. 10 last year.

But the biggest fall from last year's top 10 was for Lennar of the US. The house building specialist was ranked seventh in last year's rankings, but this year has been placed at no. 31, some 24 places lower.

Massive losses

This is just one of the symptoms of the residential construction crash in the US, which has seen operating profit margins for the 44 US companies in the global top 200 fall from 6.52% last year (based on 2006 results) to an operating loss of -5.08% 12 months on.

Not all US companies are in trouble. Companies like Fluor, Jacobs and Peter Kiewit, which operate outside the residential market imprved their positions in this year's table. However, there are 15 specialist US housebuilders in the Top 200, and it is these that did the damage.

Total revenues for these companies was US$ 76.7 billion in 2007, a massive -30.7% decline on 2006's figure of US$ 110.7 billion. But more dramatic was the change in profits. In 2005, at the height of the residential boom in the US, these companies had an operating margin of 17.7%. That fell to 8.2% in 2006 when things started to cool, but in 2007 the figure crashed to -13.7%, which is to say these 15 companies made losses totalling US$ 10.5 billion.

This is what pulled the overall profit figure for US companies into the red in this year's analysis. It also had a major impact on the profitability of the sector as a whole.

The overall operating margin for the 100 largest construction companies fell to 4.82% this year, from 6.20% last year (based on 2006 figures). This was the lowest it has been since 2003, and the fall occurred despite a +15% increase in revnues for the top 100.

Falling revnues for many US companies was a big factor in shaping this year's league table, with 21 of the 44 US companies listed losing places since last year.

More striking though has been the decline of Japan's construciton companies over the last 12 months. Only three of the Japanese companies listed improved their standing compared to last year, while one maintained its position and 31 lost places. Profitability also suffer - in last year's report on the Top 200 contractors, Jpaanese companies had an average operating margin of 2.86%. In this year's analysis, that already poor figure has weakened to 1.93%.

Risers

But if 52 of the 79 US and Japanese companies in the Top 200 have lsot ground over the last year, this means other companies must have benefited.

The first group to mention is the Chinese contractors. All nine in the Top 200 have improved their positions compared to last year, and as previously noted, there are now three inside the top 10.

Equally impressive has been the performance of the Spanish contractors. There are now 11 in the Top 200, with Aldesa being ranked for the first time, and nine of the remaining companies improved their positions on last year. ACS and Ferrovial are in the top 10, while FCC moved up 14 places to no. 11 over the last year.

As well as growing revenues, the Spanish contractors have improved their porfitabiility over the last year. In the analysis 12 months ago the overall operating profit margin for this group was an impressive 10.10%. However, this has improved even more to 12.28% in this year's ranking.

Like Spain, many of the Euro zone countries saw their contractors rise up the rankings this year, and one reason for this was the appreciation of the Euor against the Dollar during 2007. In 2006 iC used an exchange rate of € 1 = US$ 1.257, which was the average for the year. However, the average for 2007 was € 1 = US$ 1.369, which was the figure used to calculate the latest rankings.

If the Dollar had held its ground against the Euro last year, most of the European companies in the Top 200 would be one or two places lower. Overall, the appreciation of the Euro added US$ 31 billion to the total revenues of the Top 200.

Record revenues

Total revenues for the Top 200 contractors broke through the US $ 1 trillion mark for the first time last year to reach a figure of US$ 1144 billion. Last year the figure was US$ 992 billion, for a year-on-year increase of 15.3%.

As well as organic growth, several mergers and acquisitions in the industry have helped to drive up revenues. In the UK alone, famous names like George Wimpey and Alfred McAlpine have disappeared this year, following their acquisition by Carillion. Amec is also absent, following the break-up of its construction business.

With a handfull of US and Japanese construction companies falling off the bottom of the table, these factors have combined to make space for some new names in the Top 200 this year. There are a total of 15 new players in the league table this year from 13 different countries.

Many of these newcomers are from what would be described as developing countries including Egypt, India, Mexico and Thailand. But while these contractors may be moving up the rankings, they are yet to trouble the giants of the mature markets.

Besides the six Chinese contractors in the top 100, it contains only five other companies from developing world countries. The highest placed is Turkey's Enka at no. 60, followed by India's Larsen & Toubro E&C (no. 72), Brazil's Odebrecht (79) and Andrada Gutierrez (87) and Israel's Africa Israel Investments (96).

In fact companies from the developed world dominate the picture - 178 out of the Top 200 come from the EU, US, Australia, Canada, Japan or South Korea. The remaining 22 are drawn from nine emerging markets - China, Brazil, Egypt, India, Israel, Mexico, South Africa, Thailand and Turkey.

Oddly, companies from the emerging markets are on average larger than their developed world counterparts. Mean revenues last year for the 178 developed world contractors were US$ 5.6 billion, compared to US$ 6.7 billion. However, the picture is a little distorted by the presence of China's massive contractors - nine former state industries with average annual revenues of US$ 12.3 billion and a total workforce of just over 1 million people.

Taking Chinese companies out of the equation, and the average size of the remaining 13 emerging market contractors falls to US$ 2.9 billion revenues last year. This illustrates the gap that exists between construction companies in mature markets and their peers in the world's emerging economies.

Health check?

For the last five years, the prospects for the construction industry have been bright, based on analysis of our league table of the industry's 200 largest companies. But can the same be said this year?

Profits in the industry fell dramatically in 2007 - not just because of the crash in US house building, but also due to weakening profitability in other major markets. With the US arguably in worse trouble than it was a year ago and construction slowing in other major markets like the UK and Spain, next year's Top 200 league table and analysis could make for grim reading.

FULL TABLE: The world's 200 largest construction companies