Inflation and growing skills shortage could hold back growth, says CIMIC boss Juan Santamaria

Huge government infrastructure spending suggests a strong outlook for CIMIC, but the company’s boss has warned the price of skilled labour and raw materials could hold back growth.

Massive government infrastructure spending suggests a bright outlook for construction companies such as CIMIC.

Skills shortages in Australia could cost construction giant CIMIC the chance to accelerate growth over the coming year, according to executive chairman and chief executive Juan Santamaria, as the company eyes bids on up to $480bn worth of new worth.

CIMIC’s minority shareholders will find out next week whether its Spanish parent company’s $22 a share hostile bid to take complete control of the company has captured the 96 per cent shareholding required to trigger the compulsory acquisition threshold and mop up holdouts among its smaller investors.

The bid was made by German construction group Hochtief, itself owned by Spain’s ACS. Hochtief controlled 87.8 per cent of CIMIC shares at its last market update earlier this week.

Mr Santamaria told minority shareholders at the company’s annual shareholder meeting on Wednesday the outlook was bright for CIMIC’s core businesses, given the massive pipeline of infrastructure work available in Australia as a result of moves by state and federal governments to boost the economy in the wake of the coronavirus pandemic.

But he warned the company’s growth prospects could be crimped by the Australia-wide skills shortages and the sharp escalation in costs amid soaring fuel and raw material prices.

“Like other major Australian companies we are facing growth constraints related to skills shortages, particularly among key trades, and the escalation of material and fuel costs,” he said.

Mr Santamaria joined calls for a boost in immigration levels made by major business lobby groups, and said CIMIC was stockpiling raw materials where it could to ensure it could deliver on contracting work.

“Restoring permanent migration levels will go some way to assist with attracting the best skilled talent. Regarding materials escalation, wherever possible, we are securing supply contracts upfront, procuring and storing materials or commodities, or undertaking financial hedging,” he said.

Hochtief’s bid for CIMIC closes on Monday April 11, but the German construction giant could extend the offer if it is closing on the target needed to trigger compulsory acquisition clauses and mop up CIMIC’s remaining minority shareholders.

Mr Santamaria has been anointed as the next global chief executive of ACS, with a shareholder vote on his appointment due on May 6 in Madrid.

Almost 4.5 per cent of shares voted in the CIMIC shareholder meeting were cast in opposition to the company’s remuneration report, a strong protest vote given the extent of Hochtief’s control of the company.

CIMIC shares closed unchanged at $22.01 on Wednesday.