Erbud views backlog building with optimism; active in industrial construction segment

Listed builder Erbud views backlog building with optimism, but takes a restrictive approach to profitability. The group is active in, among other areas, the industrial construction segment, where margins are better than, for example, residential construction, management representatives said during a video conference.

"We assumed that the number of tenders would be definitely higher, but this is not the case. The number of tenders is declining, resulting in tenders where there used to be a few bidders currently there are a dozen or so," Erbud deputy CEO Jacek Leczkowski said.

"Again, there are single ones where prices are disturbing and give the appearance of a price war (...). We are high in many tenders, but there will always be someone who quotes a low price, and we put great effort into not succumbing to pressure and taking contracts for contracts," he added.

He emphasised that for now, Erbud's portfolio is very healthy, and the company does not have contaminated contracts.

"We take a strict approach to margins and do not bid aggressively. We are very optimistic about expanding our portfolio in the private sector, but we are also waiting for investment decisions because of the cost of money investors are holding back, also the geopolitical situation worries them," he said.

"We are waiting and if the avalanche of tenders starts, we are in an excellent position and will sign interesting contracts later this year," he added.

The value of Erbud Group's order backlog was PLN 3.7 billion (EUR 862.8 mln) at the end of June 2024, compared to PLN 3.4 billion (EUR 792.9 mln) at the end of December 2023.

In the first half of 2024, the value of contracts won amounted to PLN 1.7 billion (EUR 396.4 mln), up 29 percent year on year.

The order backlog from July 1 to the end of 2024 is PLN 1.5 billion (EUR 349.8 mln).

When asked about the value of the contracts, Erbud is working on in the industrial construction segment, Leczkowski said it is more than PLN 2 billion (EUR 466.4 mln).

"Erbud has never been as active in the industrial market as it is at the moment. (...) This is a segment that has a higher entry barrier for competitors," the deputy CEO said.

"In order to exist we can only compete with large companies that have the right procedures, here small companies don't compete with us so it's automatically better in terms of margins than residential construction," he added.

Leczkowski added that Erbud is optimistic about building its portfolio, but is not focused on increasing revenues without increasing profits.

“For us, that's the main goal, and that's what we're spending most of our time on (...) - increasing profitability,” he said.

“The years 2022-23 were difficult because of high inflation and uncertainty abroad. No one knows when the war will end, but I think it's close. So there is an investment boom ahead. (...) It seems that good times are coming,” CEO Dariusz Grzeszczak added.

doa/ han/ nl/