Strabag stable despite Eastern European slowdown

The Austrian developer expects heightened price pressures and strong German dealflow to be major themes in 2014.

Strabag’s yearly results, due at the end of April, will reflect the diverging fortunes of European markets in a year that saw the continent show uneven signs of recovery.

In a preview of its 2013 financial performance unveiled today, the Vienna-listed developer underlined that last year’s slight decline in output (by 3 percent) and relatively flat order backlog (which grew 2 percent) came amid a tough climate for the European construction sector, which is still reeling from the burst of industry bubbles and the after-effects of the financial crisis.

“Against the backdrop of the difficult underlying conditions in the European construction sector, we are satisfied with the output volume of €13.6 billion in 2013,” said Thomas Birtel, chief executive of STRABAG, in a statement.

The company expected its yearly EBITDA to meet its €260 million target, which would represent a 25 percent uplift on 2012.

Yet the overall picture masked contrasting levels of activity across the company’s main markets.

Eastern and Southern Europe posted disappointing performance, with Poland, Strabag’s third-largest market, singled out as a bad performer still trying to recover from “the end of the construction boom”.

Canada, Benelux and Romania were also cited as slow markets, although this was attributed to a slowdown in projects undertaken by the company rather than to market-wide dynamics. Order backlog was 12 percent down on Strabag’s ‘South + East’ division overall, with output also losing 3 percent.

These were nearly balanced out by strong activity in Hungary, Austria and Africa. The rebalancing was expected to continue this year, with Germany, Slovakia and Czech Republic expected to pick up momentum.

But the continent’s more promising markets were also seen as prone to significant price pressures, as slack dealflow in other areas of focus push developers to concentrate their bidding efforts on fewer countries and projects.

“While the price pressure continues in transportation infrastructures in Germany, affordable financing conditions present STRABAG with solid demand in building construction in this country. The picture is similar in Austria – in both of these home markets, therefore, the company expects a stable yet highly competitive situation,” the company said.

A positive outlook was offered by transportation infrastructure in Slovakia, where several large motorway and expressway projects are currently being tendered.