Sector Study: Construction Materials
Domestic demand for construction materials has remained low
The domestic sector of construction materials is examined in a recent study of Infobank Hellastat S.A. According to Alexis Nikolaidis, Economic Research & Sectorial Studies Senior Analyst, in 2016, domestic demand for most categories of construction materials remained stagnant due to limited liquidity of the market, mostly coming from projects on major road routes, which have now been completed. This fact will reduce consumption further, since the projects that will follow are under planning, without any specific time schedule being in place for the commencement of works.
Furthermore, demand coming from the building sector has continued to be weak. Total building activity, as it is expressed in the number of permits, has shown a constant decline after 2005, reaching 12,526 permits in 2016, and subsiding by 5.5%, compared to the year before. Therefore, this figure has shown a cumulative decline of 85% over the last decade.
In 2017, the market (both the construction and building sector) remained at low levels, whereas a number of positive signs resulted from the implementation of tourism infrastructure works.
Nevertheless, internationally-oriented companies continued to export a large portion of their production output, facing severe competition. Demand from the Eurozone countries decreased, while positive trends resulted from countries outside the E.U. that are characterized by a growth outlook.Furthermore, the domestic production activity of the broader sector of non-metal minerals, as it is expressed by the relevant production index of ELSTAT, recorded a significant increase of 14.3% in 2016, which is largely attributed to the cement manufacturing sector and the readymade concrete sector.It should be noted that the market shows liquidity problems due to late payments from customers and difficulty of access to loans. The troublesome collection of receivables causes bad or doubtful debts and high credit risk levels.
According to Mr. Nicolas Gouzelos, President & CEO of Infobank Hellastat, “The interest of outward-looking companies should be focused on markets outside the E.U. that demonstrate an economic growth outlook, which could either be de-veloped markets, such as Northern America, or develop-ing ones, since domestic demand will continue to be weak.”
In the study conducted by IBHS, an analysis takes place of the financial statements of 106 companies. The key conclusions are summarized as follows:
- The Turnover rose by 6.2% in 2016, at €328.15m.
- EBITDA rose by 24.2%, to €33.63, while EBT more than doubled to €14.5m, from €6m in 2015.
- The EBITDA and EBT margins rose to 5.5% and 1.5%, respectively.
- Capital leverage remained at 0.9 over 1.
- Receivables were collected within a period of 4.5 months, while Inventories were held over a period of 3.5 months.