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Odebrecht Construction Company, a Target of the Car Wash Investigation, Loses Half of its Revenue

02/08/2017 - 14h45

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RAQUEL LANDIM
FROM SÃO PAULO

The generator of one of the primary sources of financial resources for the overall group, Odebrecht Engenharia e Construção (Odebrecht Construction and Engineering) today has been reduced to half of the size that it formerly had when it first became a target of the so-called Car Wash operation.

The company has fired more than 50% of its 107 thousand employees and its revenue should come in at US$ 6 billion in 2016, a 57% reduction compared to 2014.

Full financial results for 2016 haven't yet been released, but the revenue projection was divulged by the construction company to analysts and investors.

With less money coming in, Odebrecht has burned through US$ 2.9 billion (R$ 9 billion) of its cash on hand to maintain operations since revenues haven't been sufficient to cover operating expenses.

The net cash position of the company today stands at US$ 1,6 billion (R$5 billion). Beyond its own difficulties, the construction company continues to fund efforts to rescue other companies in the group that are in an even worse situation and has already transferred US$ 350 million (R$ 1 billion) to the holding company.

The primary problem facing the construction company is the difficulty in obtaining new contracts, after the revelations uncovered by the Car Wash Operation being conducted by the Federal Police.

Between December 2014 and September 2016, Odebrecht's project portfolio went from a record of US$ 33.9 billion to US$ 21.3 billion, a decrease of 37%. Additionally, more than 40% of current projects are moving along very slowly, due to the recession in Brazil and crises in Venezuela and Angola - the company's three largest markets.

Analysts and investors expect the scenario to begin to improve during this year, after the Odebrecht Group committed to paying R$ 6.7 billion (US$ 1.9 billion) in fines in Brazil, the United States and Switzerland.

The agreement reached with American authorities, however, uncovered instances of corruption in other Latin American countries. The Peruvian government, for example, has already decided to rescind a contract for the construction of a gas pipeline.

Translated by LLOYD HARDER

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