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Main findings of Finpro 09 Pulse Survey
Executive Summery in Construction sector
Finpro CSE
January-February, 2009
© Finpro ry / 2009
1. Background & investigated areas
Background
• Finpro CSE has contacted the relevant associations and major companies in
• Construction,
• Logistics &
• Machinery sector
• The geographical coverage was Central and Southeast Europe, as in following countries
• Austria
• Czech Republic,
• Slovakia
• Hungary
• Slovenia
• Croatia
• Serbia
• Romania
• Bulgaria
• Turkey
• Around 100 managers were interviewed
• The phone-based survey was conducted in February 2009.
• Special note: the Survey is not based on representative primary research, it just gave some “feelings” & summarize some subjective thoughts from market players` point of views.
© Finpro ry / 2009
2. Main findings from Finpro Pulse 09 survey
Notes:
• Scaling at sector performance from 1 (deep recession) to 7 (healthy growth)
• Scaling at sector openness from 1 (no opportunities to launch new technologies & business model) to 7 (lucrative business to come up with new technologies & business models)
0,0
1,0
2,0
3,0
4,0
5,0
6,0
Pulse 09: Construction
Performance Openness
© Finpro ry / 2009
3. Major comments from the region
Country Sector performance Major problem in the
sector
Major opportunity in your
sector
Austria
There was a slight fall in October 2008, which
settled on in November. Currently the forecast
is positive. The invoicing in the industry
remains. Amount of projects might fall very little,
but only reason is that sold projects are larger.
Very difficult to forecast, there is a need that
extreme fall in the end of the year and very hard
make any forecasts. The bigger companies will
survive but for those having a lower financial
status have difficulties
Industry is dependent on
financing. If the financing of
housing projects will kept at 0-
level, it could have an negative
impact
No new projects and all the
existing larger projects are on
hold status. This means that
no new investments will be
made
Even if a lot of bad credits were
issued and a lot of people lost
money, there are those who kept
their investments in a very
conservative funds. This means
that there is a lot of money to be
invested in good solid products.
Very hard to say, most like none.
Czech
Republic
It is expected that for construction the growth
will be in between 0 and 0.5%, no big crisis is
expected in the CZ
The first half of the year will experience
decrease of 2-3%, but it will start getting better
in the second half, it might not reach the level of
2008, but should not be too far below it.
Most of the projects have stopped, banks not
giving almost any credits, developers are
unwilling to go down with price, buyers waiting
for the prices to go down. Dead market
Restricted funding
Funds are not distributed
among the projects. They
exist, but still are not released
Banks holding back the money
Public tenders, but foreign
company must cooperate with
domestic players (some kind of
joint venture) in order to be eligible.
Otherwise, no real opportunities
Public tenders, cooperating with
CZ company, for example: Gemo
Olomouc (healthy company, can
go on for 4 years with losses
without having have to downsize),
a lot of CZ construction companies
are in very good shape
Public tenders, but construction is
generally moving towards the east
(Russia, Ukraine, Belarus)
© Finpro ry / 2009
3. Major comments from the region
Country Sector performance Major problem in the sector Major opportunity in your
sector
Slovakia
Last year construction grew by 10%,
small decrease expected this year,
down to 8%, but construction should
remain in good shape.
Sector had unnaturally high growth
up to this point, hopefully decrease
will adjust it to the appropriate pace.
However, projects are only planned
till the end of the second quarter and
no indication as to what will happen
after that. Volume will go down, but
don't expect it to be more then 10%.
Inactivity, everyone waiting to see what
happens
No plans nor projects for the second
half of the year. Market seems to be
dead. No funds available. However,
market will have to act, but everybody
is holding back and waiting to see what
direction it will take.
Euro zone, cheap labor compared
to the neighboring countries and
rest of the EU, stable political
environment: all this should
diminish the impact of the crisis
Civil engineering & infrastructure:
airports, highways
Hungary
Small decline (2-5%) due to the
expected EU finance big projects
(Pecs Cultural City projects, last
year +6% growth at transport
concrete.
-40 – 50% drop forecasted
No EU-financed projects & still keeping
low-prices at big players to control the
market,
Banks do not want to finance even
signed contacts, Major market,
Germany is in recession and major
neighboring countries (RO & Ukraine)
as well.
Prosperous projects in Ex-Yugoslavia
still on-hold
Non-paid invoices, financial problems
(no bank loans for developers)
Financial issues (late payments & cash
flow problems)
New highway projects (M6 and
M35), Rail-line constructions, Pecs
2010 Cultural City, industrial sector
in eastern part of Hungary
Survive 2009 & force banks to end
their current business practice (no
loans to companies)
If banks will change their current
attitude, EU funds will open -->
consolidation will start
Consolidation as cleaning the
market & cooperation among
players to share/utilize better
resources (even machineries)
© Finpro ry / 2009
3. Major comments from the region
Country Sector performance Major problem in the
sector
Major opportunity in
your sector
Slovenia
Drops regarding to new investments with payments
problems at customers; New markets, maybe focusing on
more private investors (now more public)
Payments from the customers, liquidity
of the investors
New markets, maybe focusing on
more private investors (now more
public)
Developments at Koper Port
Croatia
Significant slowdown in economic growth, also in State
financed infrastructural and private investments.
Reduced cement demand and an increasing general
insolvency in Croatian Economy will affect Cement Sector
considerably.
Possibly the loss of jobs.
The market will decrease up to 50%
The biggest investor in Croatia is the
Croatian state. State cuts the budget
mostly on the investment side
No bank loans for investors
need to cut costs and find new
markets
Ability to fight the reduced
production & market through
appropriate pricing and selling
strategy
European union projects and
standards that must be
implemented.
Serbia
Major infrastructure project are to be financed by foreign
funds, and most of the funds are already accounted for,
but some funding is still needed, such as part of Belgrade
subway system: Prokop station.
Low chance of getting new FDI, not enough domestic
funds
The most dynamic sector with 3-4% higher growth then
the average, 2008 performance is expected to have
dropped by 2% to 9%. Further decrease expected in 2009,
3-4%
Everything depends on the political situation: if there
would be new elections, everything starts from the scratch
again. But construction is one of the biggest drivers of the
economy, and especially with all EU requirements, it
should sustain the growth
Difficult to say, a lot depends on the
FDI and how much it'll decrease.
Rumors about US Steel Smederevo
closing down, if it happens, it'll hit all
industries.
General depreciation of dinar: from 72
to 93 (for 1 euro) in 2008, 2009
expected to be worse, bad financial
situation
Political instability, no domestic funds,
only FDI
A lot of areas for investment:
railroad "Corridor 10", 7-8 years
project amounting to expected
EURO 4.6 bn, Belgrade Subway
system,
Business centres are being built
all over the place, especially in
Belgrade
A lot of companies to be
privatized, tourism is booming, so
a lot of hotels and tourist resorts
are being built
© Finpro ry / 2009
3. Major comments from the region
Country Sector performance Major problem in the
sector
Major opportunity in your
sector
Romania
The sector of Romanian construction industry will
be in 2009 on a lower level against 2008. We think
that a growth of 1-2 % against 2008 will be the most
happy level. This appreciation is based on all the
aspects of the now a day crisis.
Deeper recession on the residential market; bigger
industrial construction projects from last year are
ongoing; recovery is expected from the middle of
2010
Inevitable will take place a consolidation of the
construction market. due to the exaggerated panic
and perplexity more developers, then it would have
been necessary, stopped the new projects and the
ongoing ones were left on hold; market culture will
change positively;
No more financial availability of
developers and of buyers. Lower
bank activity.
major big clients are cutting the
orders; lack of finances
increasing lack of financial
resources both on the developers
and buyers' side
Intervention of the state for great
infrastructure orders based on own,
EU and private funds. Romania needs
a lot of infrastructure works.
Absorbing EU funds for introducing
new technologies in the agricultural and
industrial fields;
Decreasing labor costs; land prices &
construction material prices
Availability of cheap
lands/properties/medium sized
companies and cheap workforce;
Bulgaria
Some slowdown in construction of buildings is
expected, which will lead to bankruptcy of some
small companies, but this will not have tremendous
effect on the sector.
Some foreign investors have postponed or even
cancelled their investment plans in Bulgaria - mainly
shopping malls, office buildings and holiday
developments.
Slowdown in construction will continue for about 2
years. In 2010 the market will start growing again
but not as rapidly as 3-5 years ago. Decrease in
demand for office and retail spaces in Bulgaria
leading to change in investment plans.
Limited financing from banks, both
for investors and for end
customers, with strict conditions
for providing bank loans.
Withdraw of foreign investors due
to difficulties on Western markets.
Financial issues - more
requirements for developers
Uncertainty in future demand.
Slow administrative procedures in
Bulgaria.
The effect of the economic crisis on
construction sector can be diminished
by more investments in large
infrastructure projects.
Development of large infrastructure
projects - highways, railways - as well
as energy projects in nuclear and hydro
power.
Renovation of old buildings and shift to
infra projects.
Shift from construction of shopping
malls and office developments to
industrial projects.
© Finpro ry / 2009
3. Major comments from the region
Country Sector performance Major problem in the
sector
Major opportunity in your
sector
Turkey
Sharp decline in local market -
financial cries - 2009 is lost - private
sector stopped - public investment
are waiting
In spite of the growing internal and
external market opportunities, exports
will be again important for cement
sector because of increasing costs
and low domestic prices.
It is estimated that, sector will shrink
between 5-10% in 2009
30-40 % decrease in new projects-
two digit decline in whole sector-we
will see real damage in first 4months
Postponement of most of new
project - huge housing stock -
unbalance supply and
demand
The global recession
dominating national
economies, has also seriously
affected the Turkish economy,
consequently facing with slow
growing rates in the coming
years.
Finance needed …no new
investment -all major project
postponed
Energy related projects-railways -
road construction more opportunity
for public investments
The prevailing economic difficulty is
expected to continue in 2009 to
cause a further slowdown in national
demand. Producers will continue
their efforts to grow in export markets
if the current potential does not
deteriorate. In the course of 2009, it
is envisaged that Middle-East and
African markets will continue to be
the most important potential for the
exporters.
Decrease in energy and raw material
price - decrease in real estate price-
opportunity for mergers ands
acquisition M&A