Construction sector in Poland
A large fall in the optimism of Polish construction companies
A paltry 9% of major building companies operating in Poland assess the sector’s situation as positive, while a year ago, a staggering 82% of the respondents shared this view. Construction companies’ forecasts for the next 12 months vary – 31% of the surveyed companies predict that the market situation will improve, while 33% of them expect that it will continue to deteriorate.
Polish construction companies’ assessment of their portfolios of orders has deteriorated as well – 31% of the respondents provided a positive assessment of the current number of orders (compared with 80% six months earlier); 32% of the surveyed companies hold the opposite view. Furthermore, the companies are divided over the future size of their portfolios – 33% of them expect their order portfolios to grow further in the upcoming 12 months, while 38% of the major builders anticipate a fall in the volume of orders.
Financial standing of construction companies still positive
The largest construction companies continue to assess their financial situation as good – 60% of the surveyed companies believe this to be the case (compared to 86% six months ago). 28% of the major building companies in Poland forecast that at the end of 2009 the financial condition of their enterprise will be better than in 2008, while 32% of the surveyed companies take the opposite view. “Good financial situation of construction companies is first and foremost due to excellent conditions prevailing in the construction market in 2006–2007 and contracts concluded on highly advantageous terms. It should be noted that due to reduced prices of building materials, numerous contracts concluded in 2008 and scheduled for execution in 2009-2010 will be characterised by margins higher than originally planned. Therefore, the financial standing of major construction enterprises will not deteriorate significantly,” says Bartlomiej Sosna, Senior Construction Analyst at PMR and the author of the report.
Threat of deflation to the construction industry becomes more real
As demonstrated by the survey’s results, faced with the crisis, construction businesses intend to compete with each other mainly on pricing. More than half of the large companies included in the survey declare that they will seek cheaper suppliers of materials and subcontractors, with over 40% of them planning price renegotiation with the existing business partners. Based on these efforts, a steep 44% of the surveyed companies plan on winning new orders by submitting lower bids in tender procedures. A significantly lower percentage of construction companies intend to achieve savings through administrative costs reductions, workforce cuts and more efficient management of the machinery stock.
“These results show that the downward pressure on prices of building services will continue to grow in the coming months, and the inflation rate in construction, which was a paltry 1.3% in March 2009, may dip below the zero mark in H2 2009. More importantly, deflation in construction will also lead to lower construction and assembly output as the same volume of work will be performed at a lower cost,” adds Bartlomiej Sosna.
Public investments to the rescue
Almost three-quarters of the surveyed companies expect the public authorities to increase the pace of execution of large projects co-financed by the EU. Concurrently, almost half of companies expect that contractors participating in projects of this type should obtain advance payments. In the opinion of more than 40% of the surveyed companies, the negative impact of the slowdown in the construction market can be offset by a larger number of construction projects executed under public-private partnership schemes.
According to the surveyed companies, the most attractive construction segments at the two-year horizon include roadwork projects (88% of responses), sports and recreation facilities (50%) and power engineering construction (35%). At the opposite end of the spectrum were the following sectors: residential construction (5%), warehouse construction (9%) and office construction (12%), which were considered the least promising segments of the construction market for the coming two years.
Polarisation in expectations of construction companies
The results of the most recent PMR survey significantly vary from the results published in the earlier editions of the survey. In particular, serious discrepancies concern construction companies’ expectations for the forthcoming year – almost one-third of the surveyed companies expect the situation to deteriorate and almost nearly the same number predict improvement.
“Polarisation in forecasts formulated by construction companies is primarily driven by different market situations in civil engineering construction and building construction. Extrapolation of the survey results shows that companies whose core activity is civil engineering construction (approx. 57% of the surveyed companies) expect continued improvement in the market situation, as different from companies whose primary area of business is residential or non-residential construction (17% and 26%, respectively) which are significantly less optimistic about improvement in the coming year,” concludes Bartlomiej Sosna.
This press release is based on information contained in the latest PMR report entitled “Construction sector in Poland, H1 2009 – Development forecasts for 2009-2011”
For more information on the report please contact:
tel. /48/ 12 618 90 00
PMR Publications (www.pmrpublications.com) is a division of PMR, a company providing market information, advice and services to international businesses interested in Central and Eastern European countries and other emerging markets. PMR key areas of operation include market research (through PMR Research), consultancy (through PMR Consulting) and business publications (through PMR Publications). With over 13 years of experience, highly skilled international staff and coverage of over 20 countries, PMR is one of the largest companies of its type in the region.
ul. Supniewskiego 9, 31-527 Krakow, Poland
tel. /48/ 12 618 90 00, fax /48/ 12 618 90 08
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