ICA's Return.

After a rough stretch, Mexico's largest construction company is rebuilding.

FOR SIX YEARS, DIFFICULT MARKET conditions combined with bad decisions hammered Empresas ICA to the brink of extinction. Today, Mexico's largest construction company is rebuilding. "Circumstances made things very difficult, but we're now seeing a big turnaround," says Bernardo Quintana, ICA's Chairman and CEO.

At the very least, Quintana seems to have ended the free fall. According to the LATIN TRADE Consensus Forecast, ICA will lose another US$3 million in 2001, but that compares very favorably to $160 million in losses in 1999 and 2000. Analysts expect the company to be back in black in 2002 with profits of about $10 million.

In 2001, ICA's backlog is picking up substantially. The company was hired to erect a Mexico City office building for Bermuda-based telecommunications company Global Crossing, a power plant for Canadian energy company TransAlta in Campeche, and a Banco de Mexico branch in Hermosillo, Sonora. The undertakings will fetch ICA about $109 million. Meanwhile, internationally, the company won a $140 million contract to build a power plant in the Dominican Republic for U.S.-based power conglomerate AES.

"We are taking a more conservative approach," says Quintana. The company withdrew from the $190 million Esti hydroelectric project in Panama. ICA decided that changes in the contract shared with General Electric would have increased risk for the company.

The new-found aversion to risk may be tied to new contracts coming at home. This year ICA's getting a boost from government-sponsored projects, such as a $17 million highway contract and construction of seven sulfur recovery plants for Pemex for an undisclosed sum. In 2002, the Mexican government is expected to open bidding on several sought-after infrastructure projects.

"ICA is starting anew and this is only the beginning of the construction sector's recovery," says Elizabeth Barrera, construction analyst for BBVA-Bancomer.

To get ready to bid on big government projects, ICA is repairing its balance sheet. It is selling assets worth $270 million and restructuring its colossal debt. So far, ICA has cut its total debt to $778 million, a 71% reduction from 1994.

"The government requires [bidding] companies to prove that they're in good financial condition," says Barrera. "That's why they're paying off debt now."

The company is taking its pain in other ways, as well, ICA in May announced layoffs affecting 20% of its workforce.

ICA has always been a prime contractor for the Mexican government. Go anywhere in Mexico and you're bound to run into something made by the company. In the half century following its 1947 founding by Bernardo Quintana Arrioja, the current CEO's father who died in 1984, the company built 40 ports, 16 airports, 6,000 kilometers of highways and bridges, 1,000 buildings, 19 hotels, 34 thermoelectric plants and 41 petrochemical plants.

"To talk about ICA was to talk about Mexico," recalls veteran banker Marcos Martinez, president of Grupo Financiero Santander Mexicano. "If ICA did well, Mexico did well and vice versa."

Because of its prominence, ICA was hit like an earthquake when the December 1994 peso crash slammed Mexico into economic crisis. The construction industry crumbled and the company was forced to slash its 45,000-member workforce in half, sell its assets and borrow money. That's when Bernardo Quintana, who had worked at his father's company since age 22, took the reigns.

In its struggle to survive, the company took on high-risk projects. In 1999, the company hit the wall after losing $90 million because of cost overruns on a road-repair project in Colombia and a pipeline project in Brazil. Together, those two projects erased an entire year's operating profit. Although ICA recovered a portion of its losses in suits against the Colombian government, the company was left in bad shape.

"We made mistakes," admits Quintana. "We had decades of experience in these countries, but got into bad situations."

Despite that, ICA, has managed to survive, pay down debt and restructure its business in preparation for a rebound in Mexico's construction sector.

Quintana, a 60-year-old father of seven and grandfather of five, predicts ICA will recover before his 2005 retirement. "We are going to make this work," he says." I have my patrimony invested in this company so it has to work."