Source: portfolio.hu
András Gergely
13 November 2023 08:00
Cover photo and photos by László Mudra - Portfolio

The domestic construction sector continues to languish, and the end of the negative spiral is not in sight for the time being. Only those players can survive that operate transparently, increase their efficiency and try to cover as much ground as possible across the entire industry vertical. Sustainability is becoming increasingly important for listed companies, their suppliers and subcontractors, but the market is currently so price sensitive that "green" operation is completely overshadowed by the bid price as a deciding factor in winning a tender. Sustainability investments require a lot of resources, which in turn raise serious competitiveness issues: market protection measures may be needed in parallel with tightening rules. Portfolio asked Milan Palkovics, Chairman of the Board of Épduferr Plc, about the reasons behind the poor construction performance, market consolidation, sustainability issues and the company's plans for the future.

According to the latest data, the domestic construction industry is performing extremely poorly, with order books in August 2023 almost 25 percent lower than a year earlier. What trends are affecting the sector and what are the prospects?

I am not surprised to see the statistics, it is just a continuation of the negative trend that was visible in the previous period of the year. Market conditions have not changed in substance, inflation has fallen, but financing remains expensive and market demand has also fallen, especially in the residential segment. I think that the price of building materials will not fall significantly in the future, the domestic market is highly exposed, we import a lot of materials and domestic production is very energy intensive, so exchange rate movements and energy prices can have a decisive impact on price levels. Large public investments have so far not started due to a lack of EU funding, and housing projects have also stalled due to a drop in demand. That said, there are segments that can be profitable, such as industrial, commercial and logistics real estate, but luxury real estate could also be a breakout point.

The weakness of the construction sector is also reflected in the production of building materials, with the production of heavy building materials and masonry elements, for example, falling by a fifth, according to information from manufacturers. Production is only for stock, and the yards of building materials dealers are beginning to empty, with their stocks dwindling. But if no walls are built, there is no need for insulation and paint, so the negative spiral is rapidly continuing.

THE SITUATION IS SIMILAR IN GENERAL CONSTRUCTION: THE SITUATION IS FORCING CONTRACTORS INTO A COMPETITIVE SITUATION THEY HAVE NOT FACED FOR SOME TIME.

We are bidding for many projects that a few years ago only two or three companies were bidding for projects like this, but today it is more like 20-30. this fierce competition will clearly lead to a market cleansing, with only those companies surviving that can deliver projects cost-effectively, quickly, to a high quality and with a work culture that can attract foreign investors.

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