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EUROPEAN CONSTRUCTION
MARKETS

Chris Sleight
Editor
International Construction

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CONTENTS
Europe in a global context
Economic forecasts for European construction
markets
European contractors
Other indicators
Construction equipment market

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EUROPE IN A GLOBAL CONTEXT

Growth trends and relative size compared to
other markets

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GLOBAL ECONOMIC GROWTH IN 2013

CIS 3.4%
EU 0%

US 1.9%

MENA 3.1%

RoA 7.1%

JP 1.6%

LAm 3.4%
S Af 5.6%

WORLD 3.3%
SOURCE: IMF
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CONSTRUCTION GROWTH IN 2013

-2.5%

+4.5%

+5.5%

+6.0%

+7.5%

+4.0%

+5.0%
+6.0%

+5.0%

WORLD +4.5%
Various sources
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RELATIVE MARKET SIZE

4%
24%

18%

3%

33%

7%

8%
1%

Various sources

2%

WORLD ~ US$ 7,500 billion

EUROPE ~ US$ 1,800 billion

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EUROPE IN A GLOBAL CONTEXT

Only regional global construction market still in
recession
Still a very large market

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EUROPEAN MARKETS IN DEPTH

Many sources & forecasts (FIEC, Euroconstruct,
IHS Global Insight++)
Exact numbers may differ
Some specific differences of opinion
Trends & outlook similar

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MAJOR MARKETS IN 2013

Big 5 (Big
4.5)
~ 70% of
European
construction
output
~ -3% growth
in 2013

UK -2.8%

DE +1.9%
FR -3.3%
ES -10%

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IT -3.8%

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THE GOOD
Little growth
within EU
Germany is
biggest &
best
Most
promising
regional
markets are
EU
neighbours

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NO +5.8%
RUS +6%

BE +0.1%
DE +1.9%
AT +0.6%
CH +0.2%
TK +12% (?)

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THE BAD
0% to -5%
trend in
countries
representing
~55% of
European
construction
output

FI -2.1%
SE -0.2%

UK -2.8%

DK -0.5%
NL -4.8% PO -4.0%
FR -3.3%

CZ -1.9%

IT -3.8%

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THE UGLY
Peripheral
markets still
deeply
distressed
6-7 years of
recession
Spanish
market 40%
of pre-crash
size

IRE -8%

PT -15%
ES -10%

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SL -9% RO -18%
BU -9%
GR -30%

CY -20%

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LONG TERM CONSTRUCTION GROWTH

6%

4%

2%

0%
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013*

2014*

2015*

-2%

-4%

-6%

-8%

-10%

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CONSTRUCTION OUTPUT ( BILLION)

1250

1200

1150

1100

1050

1000

950

900
2004

2005

2006

2007

2008

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2009

2010

2011

2012

2013*

2014*

2015*

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LONG TERM GROWTH TRENDS

2011 recovery stalled now in second dip
Triggered by threat of Greek default
Recession flattening out in 2014/15?
Market value has fallen back to late-1990s levels
When it returns, growth will be weak in global terms
The boom year of 2006 saw +4.5% growth
European policy focussed on austerity, not growth
No quick solution to Euro Zone debt crisis
Long-term construction market weakness
Europe is still a big market ~24% of global output

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EUROPEAN CONTRACTORS
Revenue & profitability trends
Strategies in the face of weak home markets

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EUROPEAN CONTRACTORS THE CE-100

450

8%
7,19%

400

7%
6,92%

350

5,66%

6%

5,97%
5,75%

300

5,28%

5,01%

5,02%

5%
4,40%

250

4,18%
439
200

384

407

378

379

406
3%

334
150

4%

297
246

265
2%

100

1%

50
0

0%
2003

2004

2005

2006

2007

Revenues ( billion)

2008

2009

2010

2011

2012

Operating margin (%)

SOURCE: Construction Europe

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EUROPEAN CONTRACTORS
Revenues climbing
Profitability at all-time low of 4.18% operating
margin
(Global average 4.3%)
Increased competition over work
Large contractors chasing smaller contracts

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EUROPEAN INTERNATIONAL REVENUES

160

140

120

100

80

60

40

20

2002

2003

2004

2005

2006

Developed world

2007

2008

2009

2010

2011

Emerging markets

SOURCE: EIC/International Construction

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EMERGING MARKET FOCUS

Large European contractors generate ~25% of
their revenues outside their home (national)
market
International revenues by European contractors
have doubled in 10 years
Total revenues up ~70% in same period
~40% of international revenues from emerging
markets
~25% 10 years ago
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OTHER INDICATORS
Market sentiment
Share prices

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CE BAROMETER - MARKET SENTIMENT

2007

2008

2009

2010

2011

2012

2013 H1

SOURCE: Construction Europe

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MARKET SENTIMENT
No clear month-on-month trend in 2013
Indicates flat market/turning point
Results in Q3 have been better
Survey positive on future sentiment
Expect return to growth within 12 months
But historically over-optimistic

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SHARE PRICES
160%

2010

2011

2012

2013 TD

150%

140%

130%

120%

110%

100%

90%

80%

Dow

CET

SOURCE: Construction Europe

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SHARE PRICES
Construction shares are cyclical
Greatest growth among aggregates/cement
producers
Weak profitability remains for contractors &
equipment
Construction shares have missed-out on 2013 rally
Does construction reflect the true economic
picture?
Is the Dow the new safe haven?
Gold declining, low bond yields

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EUROPEAN CONSTRUCTION EQUIPMENT

MARKETS

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CE MARKET WESTERN EUROPE

250.000

200.000

150.000

100.000

50.000

0
1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014

SOURCE: Off-Highway Research

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WEAK RECOVERY
Rebound of 2010/2011 stalled
Euro crisis damaged confidence again
Banks lending less than in pre-crisis years
Many young machines on market
Lower construction output = less demand for
equipment
But volumes still feel unnaturally low

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CE MARKET SPLIT Q1 2013

Total volume ~ 32,500 units

DE; 21%
Others; 24%
IT; 3%

RUS; 15%

FR; 12%

UK; 12%

TK; 13%

SOURCE: CECE

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CE MARKET IN 2013
Historically low volumes (similar to mid 1990s levels)
Market will fall -5% to -15% in 2013
~ 28% of European sales in lesser regulated
markets
Recovery in 2014/15?
Growth could be high, but volumes historically low
Will take time to get back to full health
Pent-up demand in Europe (?), especially as fleets
age

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OVERVIEW
Most indicators point to recovery in 2014/15
Growth in EU likely to be weak in the long-term
Europe remains a major construction market
~24% of global output
Increasing opportunities in lesser regulated
European markets (CE manufacturers and
contractors)
Emergence/maturation of new players?
Chinese manufacturers seeking European
markets
Handful of Turkish & Russian manufacturers

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THANK YOU
Questions, comments, feedback, more
information
www.khl.com
chris.sleight@khl.com
Tel: +44 (0)1892 786205

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