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Uncertainty for construction industry

14 November 2017

POLAND The revenue of the largest Polish construction companies was down by around 3 pct y-o-y in 2016 while delays to key infrastructural projects and the increasing rigidity of the labour market will further increase the competition and create additional risks for the industry, claims Deloitte in its ‘Polish Construction Companies 2017’ report.

In H1 this year the ten largest construction companies on the WSE saw a 2 pct rise in their sales revenue y-o-y, while the revenue of the 15 largest construction companies in Poland decreased by 2.7 pct representing a decrease of PLN 53 mln. According to the report, the postponement of key infrastructure projects will result in a glut of projects between 2018 and 2020, generating additional risks and putting pressure on margins. As expected, after the rise of construction activity between 2014 and 2015, there was a slowdown in 2016. “The slowdown in the growth of the construction market was caused by the tender announcements for new projects financed by EU funds for 2014-2020 being delayed, however by the end of 2016 and in 2017 a revival could be seen as well as an improvement in the economic circumstances of the construction industry,” says Maciej Krasoń, the CEE head of the real estate and construction at Deloitte. Budimex came top of the Deloitte’ ranking of Poland’s 15 largest construction companies in 2016 with a revenue of PLN 5.6 mln (up by 8.5 pct y-o-y). Skanska with a revenue of PLN 3.8 bln came second while third position went to Strabag, which saw an 11-pct decrease in its revenue. Mostostal Zabrze and Mirbud appeared in the ranking for the first time replacing Hochtief and Torpol. At the end of 2016 the total market value of the ten largest construction companies quoted on Warsaw Stock Exchange was PLN 9.7 bln a rise of PLN 1.7 bln y-o-y. At the end of 2017 the WIG Construction index rose by 20 pct.

“On the other hand the 2017 results of construction industry companies, which came in lower than analysts had been expecting, somewhat dampened investor sentiment, and this resulted in the WIG Construction index falling in the second half of this year. 2017 is unlikely to be a period of intensive construction activity as a large number of the deals are design and build contracts, which means that the construction phase and the time when payment is made are considerably delayed, even by up to 12-18 months from the award of the tender,” says Łukasz Michorowski, the director of the Audit & Assurance department at Deloitte

The health of the industry is largely dependent on the use of EU funds for 2014-2020 which in particular will be of key importance in road and railway construction. The EU has earmarked around EUR 82.5 bln for Poland over this period with the two largest financing programmes being the Operational Programme Infrastructure and Environment (EUR 27.4 bln) and the Operational Programme Eastern Poland (EUR 2 bln).

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