Zut alors! France, sans KB Home, catches the housing flu

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KB Home Corp. may not have seen the U.S. housing crash coming, but it wasn’t going to make the same mistake in Europe.

Now the L.A.-based home builder’s decision to jettison its European operations a year ago is looking pretty smart: Kaufman & Broad SA, the Paris-based builder sold by KB Home, on Thursday suffered its biggest-ever share price decline after reporting a 71% drop in fiscal first-half earnings and slashing its sales forecast for the year.

Kaufman & Broad’s stock tumbled 17% in Paris to the equivalent of $43 a share.

Looks like they’re reliving America’s housing nightmare in France. Bloomberg quotes Kaufman & Broad’s CEO, Guy Nafilyan, warning that ‘it is plausible to say that [home] orders in France will probably fall this year by 15% or 20%. It’s a tough market.’

He added: ‘The current slowdown is here to stay, for at least two years. We’re in a cycle and once they are started, cycles don’t end in six months.’

Tell us about it, Guy!

Back to KB Home’s move: In May 2007 it agreed to sell its 49% stake in the European builder to buyout firm PAI Partners for 601 million euros, at the time worth $812 million.

KB Home began building homes in Paris in 1968 as a diversification move. But with the U.S. housing market well into implosion mode by last spring, CEO Jeffrey Mezger decided to abandon the Continent after 40 years there and use the sale proceeds to pare debt.

If KB Home still held the Kaufman & Broad stake today it would be worth about half the price Mezger got.

So even though the L.A. company’s shares, at $19.06 Thursday, are down 56% from a year ago, there may be some small comfort for shareholders in knowing that things could be even worse.

On this decision, at least, they can say: Touche, Monsieur Mezger.