Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?

Earlier this year, Croatia’s construction industry at last seemed on track for recovery after many dismal years of negative growth. 2015 saw a number of construction sectors moving into positive figures for the first time since 2009, but the recovery really took hold last year with all construction sectors likely to show positive growth once complete data for the year are available. Now, though, the Agrokor crisis has thrown this rosy picture into doubt.

Written by Michael Glazer, SEE Regional Advisors and Tatjana Halapija, Nada Projekt – EECFA Croatia

agrokor_1
Illustration of Agrokor HQ (Croatia) photo by Zeljko Hladika, source: http://www.24sata.hr

First, some background. The Agrokor Group is by far ex-Yugoslavia’s largest business conglomerate, with EUR6.4 billion in sales in 2015. Indeed, it is one of Central Europe’s largest companies (11th, according to Deloitte’s Central Europe’s Top 500 2016) and its second largest retailer (behind Poland’s Jeronimo Martins Polska, also according to Deloitte). Among other things, Agrokor owns the biggest retail grocery chains in Croatia, Slovenia, Serbia and Bosnia-Herzegovina (BiH), several large Croatian agricultural producers, important Croatian resort projects, significant travel agencies and major distribution companies for the wholesale and HoReCa sectors in Croatia and BiH.

Agrokor is now in serious trouble. It is having difficulty finding liquidity, a government administrator has been appointed for it by the Croatian government, the Slovenian and Serbian governments are considering similar measures and it is making only limited payments to its suppliers, on its taxes and to its lenders.

In theory, the consequences of an Agrokor Group collapse could be grave for all of the economies in which the Group operates, particularly Croatia, Continue reading Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?

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Small is beautiful – and has the potential to grow!

The Slovenian economy has strongly rebounded after the recession. This is finally improving the construction industry – and might even result in the implementation of some large construction projects

Written by Ales Pustovrh, Bogatin, EECFA Slovenia

Dragon Bridge, Ljubljana -source: http://www.visitljubljana.com

GDP is forecasted to grow by 3.6 % in 2017 – its fastest growth in the last decade. However, Slovenia’s GDP has been growing steadily for three years without lifting the construction industry. This time, it might also lead to an increase in construction output in Slovenia.

Construction output has been steadily decreasing since its peak of EUR 4.6bln in 2008 to EUR 2.3bln in 2016. However, it is almost certain that construction bottomed out in 2016 and has already begun to rise. The vibrant economic growth has increased demand for residential housing, especially since the credit flows started to go up last year following several years of a severe credit crunch. At Bogatin, EECFA Slovenia, we are forecasting the increase of residential construction by 30% until 2018, but the latest growth in credit to households hints that growth might even be faster!

Continue reading Small is beautiful – and has the potential to grow!

2016 Permit-Completion results of EECFA countries

See this summary table on how construction permit ended up in 2016 in the

  • 8 EECFA Countries where we have members
  • and in Hungary (as Buildecon is the Hungarian member to EUROCONSTRUCT)

T12+

and here you can follow the development of both permit and completion on interactive charts:

  1. Residential permit-completion (number of dwellings)
  2. Non-residential permit-completion (floor area and number of buildings)

On the residential graphs, the number of dwellings is displayed, and you can choose the countries and the data type. Besides these options, on non-residential graphs you can also choose the indicator type (floor area or number of buildings)

Beyond market feeling: 3 indicators we created for understanding better what is happening on the construction market

This post of mine appeared first on the EUROCONSTRUCT blog in mid-February and introduced one of our researches in Hungary. This research is about creating such aggregates from the data of individual construction projects which carry new, up-to-date information on the current performance of construction market segments. Since then, however, we have published our first findings for the EECFA member Romania as well. Most of the original text stands for Romania too, but there are some differences so these are included in brackets.

1_intro_normal
Thanks to The National Bank of England for the fan chart and Cosgrove Hall Films for Jamie and the Magic Torch

The regular fan-chart of The Bank of England’s GDP forecast is perfectly honest about the challenge we all face while putting together historical construction data and forecast. Uncertainty is there, not only on the right, but on the left of the dotted line as well, thanks to revisions. This post is focusing on how uncertainty surrounding the present and some months ahead in the future could be eased with aggregated construction project data. These are Hungarian and Romanian examples.

Continue reading Beyond market feeling: 3 indicators we created for understanding better what is happening on the construction market

EECFA 2016 Winter Forecast

EECFA has released its winter construction forecast reports on 2 December 2016. In this post you will find the concise summary on our expectations for the 8 construction markets we are dealing with: Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Turkey and Ukraine. You can also find us and our reports on eecfa.com.

eecfa_pressgraph

 

Regional outlook

South-East Europe is very optimistic. After the transitory 2016, when shrinkage in the civil engineering market in the EU countries of the region dragged down the region’s total performance, high growth is expected to characterize the total construction market in the upcoming years. Each EECFA country of the region predicts an expansion beyond 5% for 2017 and a further increase for 2018. Building construction, coming back from low levels, is predicted to expand faster than civil engineering in 2017.

Eastern Europe is at a standstill as a whole. In Russia, we expect a prolonged decline. The total construction market is not predicted to expand before 2018, and we believe that the growth of civil engineering sub-market can only alleviate the loss awaited in building construction in 2017. In Turkey, our stories for the upcoming years is rather similar to that of Russia, slight optimism in civil engineering, slight pessimism in building construction leads to a total market which is not predicted to grow until 2018. In Ukraine, all-round recovery is forecasted. From the very low levels, we expect relatively high growth rates for 2017 and 2018.

eecfa-_presstable

Continue reading EECFA 2016 Winter Forecast

EBI Építésaktivitási Jelentés

  • Hány darab irodaprojekt építése kezdődött meg 2016 1. félévben az országban?
  • 114 darab
  • De ebből mennyi az új építés, és mekkora a volumene?
  • 33 darab és az összes becsült építési érték 66 milliárd forint.
  • És mennyi felújítási projekt indult el oktatási épületeken?
  • 80
  • Milyen értékben?
  • 14.9 milliárd forintnyi, ami 20%-kal kevesebb, mint 2015 1.  félévében.

Az összes magas és mélyépítési szegmensre ilyen és ehhez hasonló adatokat állítunk elő egy kutatás keretében, melynek első kézzel fogható összegzése szeptemberben készült el. Az összes az jelenti, hogy a lakásépítést külön, a nem-lakáscélú magasépítést 9, a mélyépítést 8 szegmensbe kategorizálva aggregáljuk az egyedi építési projektadatokat.

Ezt a posztot egyfajta kézikönyvnek szánjuk, hogy bemutassuk milyen adatok kerültek az EBI Építésaktivitási jelentésbe.

A sajtóanyag itt elérhető: .zip (egy pdf és néhány kép)

A teljes anyag az ibuild.info oldalán olvasható (regisztáció után)

1. A fenti példát folytatva, azon kívül, hogy 114 irodaprojekt kivitelezési munkái indultak el az országban 2016 1. félévében, azt mutajuk még be, hogy ezek várt építési értéke 88 milliárd forint, és hogy ez háromszor annyi mint az előző év hasonló időszakában elindult irodaprojektek építési értéke.

aktivitas_1

Continue reading EBI Építésaktivitási Jelentés

Q2 2016 Permit – Completion results of EECFA countries

In Q2 2016 the number of permits issued in the latest 4 quarters for residential homes increased by 14% in the Balkan EECFA countries together, compared to the same period last year. Turkey registered a 10% growth in this term, while Ukraine’s Q1 2016 (latest available) figures are almost 30% up.

In case of non-residential buildings, permitted floor area remained at the same level in the Balkan as recorded a year ago, while Turkey saw a drop of 1% in Q2 2016, and Ukraine ended up 20% positive in Q4 2015 (latest available).

In Russia, residential completion of the latest 4 quarters decreased by 2% in Q2 2016 and non-residential completion stood at 1% in comparison with a year ago. (Russia-wide permit data is not available)

The updated interactive permit-completion graphs of EECFA countries are available here:

  1. Residential permit-completion (number of dwellings)
  2. Non-residential permit-completion (floor area and number of buildings)

On the residential graphs, the number of dwellings is displayed, and you can choose the countries and the data type. Besides these options, on non-residential graphs you can also choose the indicator type (floor area or number of buildings)

As we regularly issue forecasts, for us the most important question of this compilation is whether the newly incoming data are in line with our latest (short-term) forecast or not. So below we have highlighted some countries and tried to put the figures into this perspective.

  • Residential permit– Biggest growth rates: Serbia

Almost 13 thousand permitted dwellings in the Q2 2015 – Q2 2016 period translate to a 44% growth on comparable basis. This is supporting our view that completion could start increasing this year.

residential-serbia

 

  • Residential permit– Biggest growth rates: Ukraine

Permit reached an estimated 178 thousand in the last 4 reported quarters together, which is a 29% increase, while completion was above 110 thousand. It does not contradict our view that completion in 2016 will remain at around its 2015 level.

residential-ukraine

  • Residential completion – Biggest markets: Russia

In the Q2 2015 – Q2 2016 period 1 170 thousand dwellings were completed, a 2% drop on comparable basis. Data so far are in line with our expectations.

residential-russia

  • Residential permit – Biggest markets: Turkey

Almost 960 thousand dwellings were permitted in the last 4 quarters including Q2 2016, meaning a 10% increase compared to a year ago. Completion stood at around 725 thousand, 3% more than in Q2 2015. These are in line with our predictions.

residential-turkey


  • Non-residential permit – Biggest growth rates: Serbia

In Q2 2015 – Q2 2016, surpassing well its 2007-2008 level, 1.5 million m2 non-residential floor area was permitted, meaning an almost 100% jump from a year ago. This is supporting our optimistic outlook.

non-residential-serbia

  • Non-residential permit – Biggest growth rates: Slovenia

Slovenia is coming back from very low levels, in the Q2 2015 – Q2 2016 period altogether 735 thousand m2 non-residential floor area got permit, an increase of almost 60% over a year earlier. This is also in line with our positive outlook.

non-residential-slovenia

  • Non-residential permit – Biggest markets: Turkey

Permits for around 48 million m2 of non-residential floor area were issued in the latest 4 quarters until Q2 2016, which is virtually the same level than a year ago. This does not contradict with our soft-landing scenario. Completion is 11% in the positive territory in the Q2 2015 – Q2 2016 period against the corresponding period a year ago, but in case of non-residential sub-sector, the connection between output and completion is not as strong as in case of residential.

non-residential-turkey

  • Non-residential completion – Biggest markets: Russia

Coming down very slightly from the peak, in Q2 2015 – Q2 2016 around 30 million m2 non-residential floor areas were competed. Investment into non-residential construction has been shrinking recently, so this does not contradict our pessimistic outlook.

non-residential-russia


The interactive graphs are updated half-yearly, in between 2 report issuance. If you would like to have the row data in xls, feel free to contact us.

Data are from national statistical offices: NSI, Crostat, KSH, Insse, Rosstat, SURS, SORS, Tuik, Ukrstat

New manufacturing is coming: Europe or China will be the new China?

JAPAN-SCIENCE-TECHNOLOGY-ROBOT ELDERLY

Robear is helping to revolutionize the manufacturing industry: do robears prefer China or Europe? (source: HuffingtonPost)

Adidas has announced that it will open its first all-robot factory in Germany, and many will follow in rich countries. Foxconn, the manufacturer of Apple products fired 60,000 employees and employed robots instead of them. It seems this is the beginning of the end.

The way we manufacture products is about to change dramatically in the next decade. There are two intertwined trends that have already started to revolutionize the industry: the digitisation of industry (or the “takeover of robots”) and that global economic growth is less and less energy and machinery-intensive (more and more value added comes from services). None of these are new; however, both of these trends are in front of a new era of growth. Developments in big data and machine learning are increasing the capabilities of robots and global value chains are becoming seamless. Economic growth is coming increasingly from services, as opposed to manufacturing. Moreover, growing concerns about climate change and the ongoing shift away from heavy machinery in state-of-the-art manufacturing are leading to the growing use of lighter materials instead of metals. Continue reading New manufacturing is coming: Europe or China will be the new China?

The Do-It-Yourself guide to success in Central Eastern Europe

Are you a motivated social engineer in CEE? Do you want to change the country you live in? Or you are just interested, what could be the most successful strategy on the periphery of Europe? You are at the right place. Please, welcome the D-I-Y Guide to CEE!

In this post, we first define success in CEE. Second, using the Global Competitiveness Report, we analyze what aspects could help a country achieving that success. And third, we present you the ultimate D-I-Y Success Guide to CEE. Continue reading The Do-It-Yourself guide to success in Central Eastern Europe

EECFA countries in the European Commission (EC) 2016 Spring Macro forecast

The Spring Forecast of the European Commission has been released, and it covers EECFA member countries: Russia, Turkey, Romania, Serbia, Slovenia, Croatia, and Bulgaria, it only lacks Ukraine from the EECFA’s coverage. The EC forecast is intensively used in the EECFA reports for assembling the macro-economic environment, and also as a demand driver in specific segments. For example, consumption leads the demand for commercial buildings in the long run, or office sector’s employment drives the need for office buildings.

In this short note we are presenting the key facts about the EECFA countries in the Commission’s report, looking at how macro forecasts have changed since 2015 Autumn.

GDP

Chart 1 GDP growth forecast of EECFA countries and the EU (average 2015-2016-2017) Source: EC

Chart 1 presents the general economic outlook in the relevant countries – GDP growth from 2015 until 2017. Turkey leads the group with a close to 4% growth, even better prospects than in autumn. Romania and Bulgaria perform better than the EU average. Serbia and Croatia are lagging behind, while Russia is in a serious recession period in the forecast horizon.

In most of the countries of the region, economic outlook has improved since the latest forecast in Autumn 2015. The biggest change in the expectation was in Bulgaria, where forecasted GDP growth increased from 1.7 to 2.5 percent between Autumn 2015 and Spring 2016. Despite the positive outlook of EECFA, we can’t be optimistic regarding Russia where GDP is likely to shrink in the next 2 years; moreover, the rate of decrease has surged since Autumn 2015.

GFCF

Chart 2 The Gross fixed capital formation growth, and if available the building construction growth (average 2015-2016-2017) Source: EC

As it can be seen on chart 2, gross fixed capital formation growth is high in EECFA, which can be explained by the GFCF’s pro-cyclical characteristic. Serbia and Romania have the biggest GFCF growth rate among the examined countries, where GFCF is set to go up between 6.8-7.8 percent. In Turkey and Croatia the estimated growth is between 2.5-3.8 percent; in Slovenia and Bulgaria growth can be between 0-2 percent. The only country where GFCF declines is Russia; the expected shrinkage is near 4 percent.

Written by Aron Horvath, PhD, Head of Research, EECFA, ELTINGA