Budimex builder expects downturn on Polish construction market in 2024 - 2025 (interview)

Listed builder Budimex expects that years 2024 to 2025 will probably be a downturn period for the Polish construction market and period of an aggressive competition for available orders. A significant renewal of the construction and assembly can be expected in years 2027 to 2028, the company's CEO Artur Popko PAP Biznes.


"The key period for Polish construction market will be years 2027 to 2028. Investments connected to the road and railway markets plus the completion of two big investment programmes - the start of construction of the nuclear power plant and advanced works connected with the CPK airport construction together with the rail component, can lead to a cumulation of construction work between 2027 and 2028, and the construction sector will need to be well prepared for that," the CEO said.

"Considering that we are losing workers from the East, personnel problems can also be expected, as well as, higher wages expectations in the construction sector," he added.

According to Popko, 2024 to 2025 will probably be a downturn period, before the expected renewal in 2026.

"We were counting on our main contracting authorities, GDDKiA and PKP PLK, to accelerate the process of announcing tender proceedings which would allow to sign contracts later this year. However, the announcements made by the contracting authorities show that the main part of the proceedings will be announced as late as the fourth quarter of 2024," Popko said.

"This makes it so, that the signing of the contracts will happen in the middle of next year the earliest and the contracts will be realised in 2026, since the first stage in the 'design and build' formula is the designing phase," he added.

According to Budimex's CEO, the coming years might bring a fierce competition for orders on the market.

"The years 2024 to 2025 might be hard for companies operating mainly in the infrastructure and housing sectors, because of the lack in tenders. Significant investments realised by the builders are gradually nearing their end," Popko said.

"Even if new tender proceedings will be announced at the end of the year, it will be months from the start of construction. This means stagnation and keeping the personnel and hardware resources without a production commitments, which will lead to a fierce competition for orders and lowering the margins, which will impact the profitability of the companies," he added.

Budimex itself is not worried about the competition period, because of their current order backlog.

"Knowing that a shift from one EU perspective to another is happening, we were expecting the number of tender proceedings to be lower. That's why we focused on acquiring the highest number of contracts possible and diversifying the group's operating activities in years 2022 to 2023," Popko said.

"This provides us with stability, but it does not mean that we are indifferent to the challenges we face as the industry," he added.

Budimex's order backlog amounted to PLN 15.34 billion (EUR 3.6 bln) at the end of June versus PLN 12.22 billion (EUR 2.8 bln) a year prior.

"Expanding our activities to neighbouring markets was also a good decision. The share of foreign markets in Budimex portfolio is already significant, it is at around PLN 5 billion currently," the CEO pointed out.

Budimex operates in Germany, Czechia, Slovakia and Latvia. It sees the Czech market as one of the most promising, where the company signed two contracts for development of hydro-technical and infrastructural investments in the last half year, while not expecting significant revenue from the German market.

"We still see a recession in the German market and the forecasts are not promising, so we will be watching it closely for the next two years, but we do not expect a significant revenue to come from it," Popko said.

"However, on the Czech market, we do - there are many investment projects planned there in which development we would like to take part. We hope that the first projects completed in the Czech Republic will help us win more contracts," he added.

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