Construction material producers chase bigger piece of shrinking pie

Producers couple up to consolidate market share
Mapei group, the international construction materials producer active locally through its subsidiary Mapei Romania, recently announced it had acquired the Italian company Polyglass. Vasile Brad, general manager of Mapei Romania, thinks that the move will help the company enlarge its product portfolio and develop internationally, in the hope of attaining a global turnover of EUR 2 billion by 2010.
It's not the only firm making such moves. Last week, Swedish Investment fund Oresa Ventures announced it would relaunch the Somaco brand, by merging the construction materials producer's three plants into a sole company by August. Oresa acquired the plants last year through subsidiary Sonriso Investments at a cost of EUR 32.5 million. The three generated a turnover of EUR 20 million, according to the fund's representative in Romania. For the next four years, the fund plans to put EUR 8 to 10 million into Somaco, to help the firm triple its turnover.
Cornel Marian, the fund's GM in Romania, said, “After an estimated decrease of about 10- 20 percent this year, we expect the market to recover within two to three years. This will definitely be a difficult year but we hope investments in commercial spaces, industrial, residential and especially infrastructure will allow interesting growth in this sector.”
An optimistic focus on infrastructure was also voiced by Holcim Romania's GM, Markus Wirth. He recently told Business Review that he hoped infrastructure projects would deliver contracts for the company: “It is not that I'm relying on infrastructure contracts for this year, but the country greatly needs these projects and there are European and structural funds available for such projects,” said Wirth.
The Romanian Contractors Association (ARACO) estimates a drop of 10 percent for the local construction market, its president Laurentiu Plosceanu said recently. “Companies are now talking about survival this year,” he added. Construction firms began to feel the pinch in H2 2008, when the financial shortage started to hit the whole market and payments were delayed. H2 2008 also saw investors delaying and canceling projects on the local real estate market. In this context, the construction market, estimated by ARACO at EUR 14 billion, was 6 percent smaller than in 2007.
But some players remain bullish. Ruukki Romania, a provider of construction materials on the local market, is planning a growth of up to 30 percent against the current market downturn. The optimistic expectations follow its strategy of entering on two new markets, one of which is thermo-insulating panels, a market estimated at EUR 136 million, according to company representatives, of which Ruukki is aiming for 7 percent. Through its division Ruukki Metals, the firms also plans to gain a market share of 10 percent from an overall metallic structures segment of EUR 200 million.
“Local acquisitions are not likely this year and it is more important to gain market share from the small competitors on such fragmented markets as the roof segment,” Madalina Dumitru, country marketing manager Ruukki Romania and Bulgaria, told Business Review.
Ruukki is involved in ongoing projects including Oradea-based Era Shopping Center 1 and 2, Tiago Mall and the Olimpic Pool. It has also worked on logistic center Pepsi Bucharest and the Arcadia Mall.

Leasing companies switch focus to safer segments than construction
Impuls Leasing Romania, part of the Swiss holding Impuls Leasing International and controlled by Raiffeisen Landesbank Oberosterreich AG, recently announced its plans to achieve a turnover of EUR 200 million in 2009, similar to this year's figure. With the value and number of contracts signed for construction equipment leasing in 2009 set to plunge, the company's strategy is to focus on more dynamic segments such as medical and agriculture. According to the firm, lack of activity on the construction market is hitting equipment leasing operations.
In 2009, Impuls Leasing plans to develop the nine units it announced last year it would open. The firm intends reach EUR 200 million of financed assets, down from previous estimates of EUR 270 million. The EUR 70 million shortfall reflects real estate leasing, according to the company, which is hoping the property market will rebound in H2 2009.
As leasing companies switch focus, equipment leasing operations (including for construction) are also expected to change. According to the yearly report from the Association of Financial Companies in Romania (ALB Romania), at the end of 2008, financing for equipment represented EUR 1.08 billion of a total of EUR 4.81 billion of leasing financing all year. Construction equipment made up half of this sum. Medical machinery, by comparison, barely reaches 3 percent, but the segment is expected to grow this year.
Equipment leasing almost tripled in 2008 versus 2007, representing 42 percent of total leasing on the market last year, compared with a slice of 16 percent gained in 2007. “From a construction market valued at EUR 10.2 billion in 2008, construction materials represented a wedge of EUR 4.5 billion. Cement makes up EUR 800 million, bricks EUR 250 million, while the roofing segment was estimated at EUR 200 million in 2008,” said Claudiu Georgescu, president of the Association of Building Materials in Romania (APMCR).

By Magda Purice