Odebrecht Engenharia e Construção (OEC) announced to investors last Friday (3) its consolidated results for 2015. Gross revenue came to R$ 58.0 billion, 87% of which came from its international operations and was denominated in U.S. dollar. The amount was impacted primarily by the depreciation in the Brazilian real in the period of nearly 50% and by the hyperinflation of 180.9% in Venezuela. Normalized for these two effects, gross revenue was in line with the amount in 2014. 

EBITDA (earnings before interest, tax, depreciation and amortization) amounted to R$ 5.8 billion, supported by the 161 contracts being executed in the 18 countries where the company operates. 

Approximately R$ 13 billion of the revenue generated overseas came from Latin America, with the operations in Mexico, Peru and the Dominican Republic posting strong revenue growth. The remainder is related to projects in Africa and, to a lesser degree, in Portugal and the United Arab Emirates. The contribution from Brazil to total revenue decreased from 45% in 2011 to 13% in 2015, reflecting the country’s recession.     

OEC’s project portfolio ended 2015 at US$ 28.1 billion. International contracts represented 79% of the portfolio, while contracts in Brazil accounted for 21%, with private-sector projects accounting for 85% of the total. 

Net income and debt

In 2015, OEC posted net income of R$ 890 million, representing a decline of R$ 914 million from the net income recorded in 2014. The company’s gross debt ended the year at R$ 14.0 billion, while cash and cash equivalents came to R$ 9.9 billion, resulting in net debt of R$ 4.0 billion. Cash measured in U.S. dollar declined 43% in 2015, from US$ 4.4 billion at the end of 2014 to US$ 2.5 billion at December 31, 2015. Because of its scale and the fact that it works with advances from clients, the company’s operations are funded entirely by its own cash, with this demonstrated by the fact that approximately 25% is held in the various countries where it operates.

Corporate governance and compliance

In 2015, OEC identified opportunities to implement improvements in its governance practices and compliance system, based on best global practices.

A Board of Directors was created with a view to enhancing its governance. 

The company also engaged two renowned firms specializing in corporate governance, with one of the “Big 4” consulting firms conducting a diagnosis of the level of maturity of the company’s compliance program, and an international law firm conducting an assessment of the global risk of non-compliance with anticorruption legislation. 

In both cases, the expert firms indicated opportunities for improvement, with various measures already implemented in recent months to address them. A highlight was the creation of the Compliance Committee (CC). The CC is responsible for effectively monitoring risk exposure, the internal control systems and compliance with laws, rules and regulations, as well with the company’s policies; and for effectively supervising the process of drafting the financial reports in order to ensure their quality and integrity. 

Also as part of this effort, the company hired a Chief Compliance Officer (CCO). Mike Munro is a prominent attorney with over 25 years of international experience in compliance programs and initiatives, having served in leadership positions at several global companies. He reports to the CC and leads the team that will work on advancing the implementation of a highly effective compliance program.

The compliance teams are working on implementing measures to address the other opportunities for improvement, in line with best international practices. 

In parallel, OEC engaged expert law and forensic accounting firms to analyze the allegations made in connection with Operation Car Wash. 

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