1. Main findings of Finpro 09 Pulse Survey
Executive Summery in Construction sector
Finpro CSE
January-February, 2009

2. 1. Background & investigated areas
Background
• Finpro CSE has contacted the relevant associations and major companies in
• Construction,
• Logistics &
• Machinery sector
• The geographical coverage was Central and Southeast Europe, as in following countries
• Austria
• Czech Republic,
• Slovakia
• Hungary
• Slovenia
• Croatia
• Serbia
• Romania
• Bulgaria
• Turkey
• Around 100 managers were interviewed
• The phone-based survey was conducted in February 2009.
• Special note: the Survey is not based on representative primary research, it just gave some
“feelings” & summarize some subjective thoughts from market players` point of views.
© Finpro ry / 2009

3. 2. Main findings from Finpro Pulse 09 survey
Pulse 09: Construction
6,0
5,0
4,0
3,0
2,0
1,0
0,0
Performance Openness
Notes:
• Scaling at sector performance from 1 (deep recession) to 7 (healthy growth)
• Scaling at sector openness from 1 (no opportunities to launch new technologies & business model)
to 7 (lucrative business to come up with new technologies & business models)
© Finpro ry / 2009

4. 3. Major comments from the region
Country Sector performance Major problem in the Major opportunity in your
sector sector
There was a slight fall in October 2008, which Industry is dependent on Even if a lot of bad credits were
settled on in November. Currently the forecast financing. If the financing of issued and a lot of people lost
is positive. The invoicing in the industry housing projects will kept at 0- money, there are those who kept
remains. Amount of projects might fall very little, level, it could have an negative their investments in a very
but only reason is that sold projects are larger. impact conservative funds. This means
that there is a lot of money to be
Austria Very difficult to forecast, there is a need that No new projects and all the invested in good solid products.
extreme fall in the end of the year and very hard existing larger projects are on
make any forecasts. The bigger companies will hold status. This means that Very hard to say, most like none.
survive but for those having a lower financial no new investments will be
status have difficulties made
It is expected that for construction the growth Restricted funding Public tenders, but foreign
will be in between 0 and 0.5%, no big crisis is company must cooperate with
expected in the CZ Funds are not distributed domestic players (some kind of
among the projects. They joint venture) in order to be eligible.
The first half of the year will experience exist, but still are not released Otherwise, no real opportunities
decrease of 2-3%, but it will start getting better
in the second half, it might not reach the level of Banks holding back the money Public tenders, cooperating with
2008, but should not be too far below it. CZ company, for example: Gemo
Czech
Olomouc (healthy company, can
Republic Most of the projects have stopped, banks not go on for 4 years with losses
giving almost any credits, developers are without having have to downsize),
unwilling to go down with price, buyers waiting a lot of CZ construction companies
for the prices to go down. Dead market are in very good shape
Public tenders, but construction is
generally moving towards the east
(Russia, Ukraine, Belarus)
© Finpro ry / 2009

5. 3. Major comments from the region
Country Sector performance Major problem in the sector Major opportunity in your
sector
Last year construction grew by 10%, Inactivity, everyone waiting to see what Euro zone, cheap labor compared
small decrease expected this year, happens to the neighboring countries and
down to 8%, but construction should rest of the EU, stable political
remain in good shape. No plans nor projects for the second environment: all this should
half of the year. Market seems to be diminish the impact of the crisis
Sector had unnaturally high growth dead. No funds available. However,
Slovakia up to this point, hopefully decrease market will have to act, but everybody Civil engineering & infrastructure:
will adjust it to the appropriate pace. is holding back and waiting to see what airports, highways
However, projects are only planned direction it will take.
till the end of the second quarter and
no indication as to what will happen
after that. Volume will go down, but
don't expect it to be more then 10%.
Small decline (2-5%) due to the No EU-financed projects & still keeping New highway projects (M6 and
expected EU finance big projects low-prices at big players to control the M35), Rail-line constructions, Pecs
(Pecs Cultural City projects, last market, 2010 Cultural City, industrial sector
year +6% growth at transport in eastern part of Hungary
concrete. Banks do not want to finance even
signed contacts, Major market, Survive 2009 & force banks to end
-40 – 50% drop forecasted Germany is in recession and major their current business practice (no
neighboring countries (RO & Ukraine) loans to companies)
as well.
Hungary If banks will change their current
Prosperous projects in Ex-Yugoslavia attitude, EU funds will open -->
still on-hold consolidation will start
Non-paid invoices, financial problems Consolidation as cleaning the
(no bank loans for developers) market & cooperation among
players to share/utilize better
Financial issues (late payments & cash resources (even machineries)
© Finpro ry / 2009
flow problems)

6. 3. Major comments from the region
Country Sector performance Major problem in the Major opportunity in
sector your sector
Payments from the customers, liquidity New markets, maybe focusing on
Drops regarding to new investments with payments
of the investors more private investors (now more
problems at customers; New markets, maybe focusing on
Slovenia public)
more private investors (now more public)
Developments at Koper Port
Significant slowdown in economic growth, also in State The biggest investor in Croatia is the need to cut costs and find new
financed infrastructural and private investments. Croatian state. State cuts the budget markets
mostly on the investment side
Reduced cement demand and an increasing general Ability to fight the reduced
insolvency in Croatian Economy will affect Cement Sector No bank loans for investors production & market through
Croatia considerably. appropriate pricing and selling
strategy
Possibly the loss of jobs.
European union projects and
The market will decrease up to 50% standards that must be
implemented.
Major infrastructure project are to be financed by foreign Difficult to say, a lot depends on the A lot of areas for investment:
funds, and most of the funds are already accounted for, FDI and how much it'll decrease. railroad quot;Corridor 10quot;, 7-8 years
but some funding is still needed, such as part of Belgrade Rumors about US Steel Smederevo project amounting to expected
subway system: Prokop station. closing down, if it happens, it'll hit all EURO 4.6 bn, Belgrade Subway
industries. system,
Low chance of getting new FDI, not enough domestic General depreciation of dinar: from 72 Business centres are being built
funds to 93 (for 1 euro) in 2008, 2009 all over the place, especially in
expected to be worse, bad financial Belgrade
The most dynamic sector with 3-4% higher growth then situation
Serbia the average, 2008 performance is expected to have A lot of companies to be
dropped by 2% to 9%. Further decrease expected in 2009, Political instability, no domestic funds, privatized, tourism is booming, so
3-4% only FDI a lot of hotels and tourist resorts
are being built
Everything depends on the political situation: if there
would be new elections, everything starts from the scratch
again. But construction is one of the biggest drivers of the
economy, and especially with all EU requirements, it
© Finpro ry / 2009
should sustain the growth

7. 3. Major comments from the region
Country Sector performance Major problem in the Major opportunity in your
sector sector
The sector of Romanian construction industry will No more financial availability of Intervention of the state for great
be in 2009 on a lower level against 2008. We think developers and of buyers. Lower infrastructure orders based on own,
that a growth of 1-2 % against 2008 will be the most bank activity. EU and private funds. Romania needs
happy level. This appreciation is based on all the a lot of infrastructure works.
aspects of the now a day crisis. major big clients are cutting the
orders; lack of finances Absorbing EU funds for introducing
Deeper recession on the residential market; bigger new technologies in the agricultural and
industrial construction projects from last year are increasing lack of financial industrial fields;
Romania ongoing; recovery is expected from the middle of resources both on the developers
2010 and buyers' side Decreasing labor costs; land prices &
construction material prices
Inevitable will take place a consolidation of the
construction market. due to the exaggerated panic Availability of cheap
and perplexity more developers, then it would have lands/properties/medium sized
been necessary, stopped the new projects and the companies and cheap workforce;
ongoing ones were left on hold; market culture will
change positively;
Some slowdown in construction of buildings is Limited financing from banks, both The effect of the economic crisis on
expected, which will lead to bankruptcy of some for investors and for end construction sector can be diminished
small companies, but this will not have tremendous customers, with strict conditions by more investments in large
effect on the sector. for providing bank loans. infrastructure projects.
Some foreign investors have postponed or even Withdraw of foreign investors due Development of large infrastructure
cancelled their investment plans in Bulgaria - mainly to difficulties on Western markets. projects - highways, railways - as well
Bulgaria shopping malls, office buildings and holiday Financial issues - more as energy projects in nuclear and hydro
developments. requirements for developers power.
Slowdown in construction will continue for about 2 Uncertainty in future demand. Renovation of old buildings and shift to
years. In 2010 the market will start growing again Slow administrative procedures in infra projects.
but not as rapidly as 3-5 years ago. Decrease in Bulgaria.
demand for office and retail spaces in Bulgaria Shift from construction of shopping
leading to change in investment plans. malls and office developments to
industrial projects.
© Finpro ry / 2009

8. 3. Major comments from the region
Country Sector performance Major problem in the Major opportunity in your
sector sector
Sharp decline in local market - Postponement of most of new Energy related projects-railways -
financial cries - 2009 is lost - private project - huge housing stock - road construction more opportunity
sector stopped - public investment unbalance supply and for public investments
are waiting demand
The prevailing economic difficulty is
In spite of the growing internal and The global recession expected to continue in 2009 to
external market opportunities, exports dominating national cause a further slowdown in national
will be again important for cement economies, has also seriously demand. Producers will continue
sector because of increasing costs affected the Turkish economy, their efforts to grow in export markets
and low domestic prices. consequently facing with slow if the current potential does not
Turkey growing rates in the coming deteriorate. In the course of 2009, it
It is estimated that, sector will shrink years. is envisaged that Middle-East and
between 5-10% in 2009 African markets will continue to be
Finance needed …no new
30-40 % decrease in new projects- the most important potential for the
two digit decline in whole sector-we investment -all major project exporters.
will see real damage in first 4months postponed
Decrease in energy and raw material
price - decrease in real estate price-
opportunity for mergers ands
acquisition M&A
© Finpro ry / 2009