Top International Design 2011.pdf

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Issue: 07/25/2011

ENR's Top 200 International Design Firms for 201107/20/2011

By Gary Tulacz

[ Page 1 of 3 ]

The shift in the markets for large international design firms is reflected in ENR's Top 200 International Design Firms list.

As a group, the Top 200 saw a 9.9% revenue increase in 2010, to $57.66 billion from $52.45 billion in 2009, fromprojects outside their respective home countries. However, domestic revenue for these firms rose only 0.3%, to $59.40billion in 2010 from $59.37 billion in 2009. Overall, the group enjoyed a 4.8% increase in overall design revenue, to$117.20 billion in 2010 from $111.81 billion in 2009.

The real story is that the struggling markets in the U.S.and Europe have been offset by surges in Asia andAustralia, Africa and Latin America. International revenuefrom projects in Asia and Australia rose 21.3% in 2010 to$13.31 billion, making that region the top regionaldestination for international designers. The Africanmarket, particularly in north Africa, also surged, rising14.0% to $4.65 billion. Latin America was up 11.9%, to$3.54 billion.

Europe also was up in 2010, rising 6.7% to $13.26 billion.The U.S. market also showed a gain, hitting $6.78 billionin 2010 from $6.24 billion in 2009. However, the U.S.gains are misleading. For example, since Balfour Beattyacquired New York-based engineering giant ParsonsBrinckerhoff in 2009, PB's domestic U.S. revenue of $733million now is counted as international revenue for BalfourBeatty. Without PB's contribution to Balfour Beatty's U.S.revenue, the U.S. market actually declined by 3.2% in

2010.

The global financial crisis of the past few years has hurtthe overall market, particularly in developed countries.There's no doubt that the recession had an impact on thecapital markets and on lenders' appetite for risk, saysJohn Pearson, global managing energy director forCanada's Hatch Group.

Many international design firms worry infrastructureprojects, employed as a fiscal stimulus, will declinebecause of government debt concerns. With public debtproblems now coming to the forefront in many countries,there is a tapering off of public infrastructure spending,and private-sector spending has not yet necessarilybounced back to the point where it is filling the gap, saysKeith Reynolds, group chief executive of New Zealand'sBeca Group.

The recession has also meant some owners have put thebrakes on projects. We have seen delays in powerplantprojects and also in privately financed renewable-energyprojects, says Bernd Kordes, CEO of Lahmeyer

International.

However, Pearson says resource-rich countries havesuffered the least from the recession and have recoveredthe quickest. [Canada] is probably the best example of a

country that had a relatively light bump in the road economically, compared to the United States and much of Europe,he says. Chile, Brazil and South Africa also have recovered well, he adds.

The recession has caused the global market to move from developed countries to emerging nations. There has been arecent shift in economic prosperity from the Western world to the East, says Wael Allan, regional managing director forthe Middle East for Hyder Consulting. He says the Western world is a mature market, with less demand forinfrastructure. There are more opportunities in the East, where there are emerging markets and a much greaterdemand for enhanced infrastructure.

These emerging markets increasingly are drawing private corporate investment to feed a growing middle class. Ourclients are investing in new facilities in Russia, China, Vietnam, Indonesia and India, says Ton van der Velden, boardmember at Tebodin. He says countries in the Middle East are providing opportunities not just in oil and gas but ingeneral infrastructure. The area also is becoming a consumer market, resulting in investments in all sorts of facilities[that produce] for the local market, he says.

U.K. Firms Seek Stability

With risks spread geographically and across sectors, large European firms report stable business with some prospectof growth. The U.K.'s Arup Group, Halcrow Group and Mott MacDonald Group see little change in sales over last year,

though profits have dipped.

Mott's managing director, Richard Williams, attributes the company's consistency, despite the European recession, toits geographical spread. Demand in Asia and Latin America compensates for weakening European and U.S. orders,adds Halcrow's business development director, Mark Brown.


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Williams

Facing excess European design capacity, DHV Group is on a two-year program to cut staff in itsNetherlands base by 25%, to 1,800, by year's end, says company President Bertrand van Ee. DHVglobal staffing will shrink at a slower pace, to around 5,200 employees from 5,500. We see continuing high demand for world-class competence, he says.

U.K.-based W.S. Atkins plc last month reported a 12.7% rise on global sales. Our strategy isworking. We are keeping to our core business, says CEO Keith Clarke, who retires this month.

Lars-Peter Sbye, CEO of Denmark's Cowi A/S, is also bullish. Business is now much better thanin 2010, he says. I expect growth to pick up. The nearby Nordic market is robust, and Sbyesees growth globally in transportation.

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Issue: 07/25/2011


By Gary Tulacz

[ Page 2 of 3 ]

Although Arup's margins are down, its sales are doing better, says Chairman Philip Dilley, who forecasts modestimprovement. With increasing mergers and acquisitions, the marketplace is changing very rapidly, he adds. Arup willnot grow through acquisitions, says Dilley. He sees alliances as a way to achieve a necessary operational scale.

Last month, Arup took a major step along this route, signing a memorandum of understanding with China RailwayGroup for bids in Africa, the Middle East, South America and Southeast Asia. The agreement will boost China Railway'sambition for global growth in the years ahead, notes the company's international general manager, Chen Zhigong

The slowdown in established markets in Europe and the U.S. has caused many Western firms to look at the developingmarkets in Asia, Africa and Latin America. But this shift has caused some concern for firms already in those markets.For example, the biggest worry about the international market for Australia's SMEC is increased competition fromestablished companies in the U.K. and U.S.A. into SMEC markets, says Ross Hitt, CEO.

Aurecona 2009 merger between Connell Wagner, Australia, and Africon and Ninham Shand, both of South Africamanaged to diversify while spreading the risk of economic downturns. The merger helped reduce the risk by increasingglobal diversification and enabling greater access to growing economies, especially in the developing world, says PaulLombard, Aurecon's general manager, emerging regions.

The one bright spot for many global design firms is the flourishing market in natural resources. Commodity prices aresolid, and our clients are going forward with their development plans to pull ore out of the ground and get it to market asefficiently as possible, says Pearson. He says the surge in the mining and metals market also requires energyupgrades and infrastructure investments as the facilities need power and the products need to be transported.

This increase in commodity prices has helped sophisticated firms in the metals and mining market. Often theseprojects are located in difficult-to-reach areas that are engineering-intensive, says Reynolds.

Mixed Signals on China

In China, Arup is doing brilliantly, says Dilley. The firm has increased its bases to six cities from three cities. But themarket remains elusive for many firms, notes Mott's Williams. Mott MacDonald is doing well on high-speed rail projects,he says.

[In China], you need to be a niche player, opines Van Ee. DHV is selling water treatment technology and, this month,won the master-plan design competition for a vast domestic airport in Beijing. Able to handle 130 million passengers ayear, the airport will have four large terminals.

India is increasingly seen as a larger prospect than China. India continues to see growth, says van Ee, highlightingpublic-private highway projects. Cowi aims to expand its mapping business into engineering, says Sbye. For Arup'syoung business in India, the challenge is sorting out the one job that's going to happen from the 15 that don't, saysDilley.

Getting work in India has its drawbacks. There was a big increase in [international] competition when Dubai started tosuffer its problems, says Halcrow's Brown, who says the firm is investing heavily in India.

Among other positive markets, Australia is booming on the back of natural-resource exports to China, says Mott'sWilliams. Anything connected with commodities is doing brilliantly, agrees Dilley. But the domestic economy is not sogood.

However, many firms believe Australia has great potential beyond natural resources. Australia has an attractive

business environment, offers good local project financing options and has enormous infrastructure developmentpotential, says Reynolds.

Latin America also is attracting new interest. Arup has set up a small office in Brazil, which has a difficult commercialenvironment, says Dilley. The company plans to persevere but with caution, he says.

Halcrow is building on its long presence in Argentina to grow in the region, says Brown. Halcrow is a the governmentadviser on the Rio-So Paulo high-speed-rail project.

Keywords: The Top 200 International Design Firms;International Architects;International Engineers;ENR's TopLists;Largest Building Engineers;Parsons Brinckerhof;Balfour Beatty

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Issue: 07/25/2011


By Gary Tulacz

[ Page 3 of 3 ]

Resiliency in Middle East

Despite political unrest, the Middle East is resilient, says Brown. Halcrow repatriated seven staff members from Libya,but we are in a number of sectors in quite a few countries, he adds. Sbye says the unrest delayed projects, such asthe Bahrain-Qatar causeway. Public procurement in Oman is at a standstill, he adds.

Many Middle Eastern countries have active markets. Abu Dhabi and Qatar are the two places withpromise, says Dilley, noting increasing competition. We are not bidding to win the work at anycost.

Atkins' regional order book is beyond excellent, says Clarke. There is very strong plannedeconomic growth now in the Middle East in infrastructure. Atkins has been recovering delayedpayments, he adds.

The Middle East's growing population will require a lot of investment in infrastructure, and thedemand is great in all aspects of life, says Allan of Hyder. He says that while the U.A.E. is steady,there are great opportunities in Qatar and Saudi Arabia.

Fuelled by natural-resource exports, Mozambique is undergoing unbelievable growth, says van Ee. From struggling tofind work for 30 staff members two years ago, DHV now has 90 people at work in Mozambique, he adds. Our Africadivision has been the fastest-growing division, adds Hitt of SMEC.

U.S. Continues To Attract

Though the U.S. has poor finances, it retains European interest. DHV finds the aviation sector attractive. [NorthAmerica] will go from strength to strength, adds Cowi's Sbye. Arup is maintaining its U.S. workload, helped by largetransportation infrastructure projects. Commercial work is down, but Arup has won several jobs for cultural buildings,says Dilley.

Atkins already is shipping work to its U.S. acquisition, Florida-based PBSJ Corp., notably from Saudi Arabia, saysClarke. Now named Atkins North America, PBSJ has undergone quite radical change at the top but has lost few of itscore staff, he adds.

The picture is mixed in Europe. Apart from the Nordic region and the U.K., Cowi has little work in Western Europe, saysSbye. The firm aims to be even more focused on selected countries in Eastern Europe. The Russian market is OK,but the business environment is quite difficult, Sbye adds.

European public spending will continue to be down for the near future, says van Ee. He expects privatization,especially in Portugal and Greece, to generate high-level advisory work. Poland continues to struggle with itsinfrastructure projects, he adds.

The U.K. government is cutting budgets deeply but has listened to the need to keep some [infrastructure] investmentgoing, says Williams. Arup's Dilley reports ample transportation infrastructure work and a reviving commercial marketin London.

The current market has forced design firms to become responsive to quick market changes. Few firms on the Top 200were tested this year more than New Zealand's Beca Group. Reynolds says the firm's work on search-and-rescue,

damage assessment and the initial rebuild in the wake of February's devastating earthquake in Christchurch, NewZealand, reinforced the need for us to maintain flexibility and fluidity in our decision-making to enable us to reactquickly to rapidly changing and developing events.

Keywords: The Top 200 International Design Firms;International Architects;International Engineers;ENR's TopLists;Largest Building Engineers;Parsons Brinckerhof;Balfour Beatty

[ Page 3 of 3 ]


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