PORR on track to success
The global economy continues to be under pressure. Key uncertainties remain, such as the persistently high level of interest rates, the resulting slowdown in consumer spending, and geopolitical risks in connection with the wars in Ukraine and the Middle East. The IMF is forecasting global economic growth of 3.1% for 2024. From the start of the summer, experts forecast the first interest rate cuts by the major central banks and the end of the strict financing policy. Nevertheless, the current decline in high global inflation rates is likely to accelerate over the course of the year – overall, global inflation is estimated to reach 5.8% in 2024.
Economic growth in Europe
In Europe, high inflation rates have recently fallen faster than expected. Reasons for this include the ECB’s current key interest rate of 4.5%, as well as falling energy prices in particular. As a result, the first steps towards lowering interest rates are expected as early as the second quarter of 2024. In addition to lower interest for borrowers, rising real incomes and a resilient labour market are likely to support consumer spending. Experts from The European Commission expect economic growth in the eurozone to accelerate to 0.8% overall over the course of the year. At the same time, inflation is likely to fall to 2.7%.
Increase in volume in civil engineering
In the short to medium term, civil engineering is set to remain the construction industry’s growth driver. The European Recovery and Resilience Facility and the multiannual NextGenerationEU budget will ensure continuous demand in the infrastructure sector. This should lead to a 2.5% increase in construction activity in civil engineering. In contrast, residential construction remains under pressure due to the current interest rate level and the associated strict financing environment. Euroconstruct experts forecast European construction volumes to fall by 5.4%. In non-residential building construction, the healthcare sector is providing particularly positive momentum – not least due to demographic change. In industrial construction, the desired digital transformation and the regionalisation of procurement and production options are boosting demand. Experts therefore expect that construction activity in non-residential building construction will remain stable.
Based on an order backlog of EUR 8.5bn (+3.0% against the previous year), the Executive Board expects a moderate increase in output for 2024. At the same time, it expects a rise in EBIT. In the medium term, the Executive Board anticipates an increase in the EBT margin and an EBIT margin of 3.0%.
In Austria as well, rising real incomes are providing positive impetus for consumer spending. The good performance of foreign trading partners is also providing support and leading to an economic growth forecast of 0.8% in 2024. The picture is similar in Germany, with the ifo Institute predicting growth of 0.2%. For PORR’s Eastern European home markets, the European Commission is forecasting economic growth of between 1.1% (Czech Republic) and 2.9% (Romania).
The four Ds continue to shape the long-term trends in the European construction industry. Demographic change, with increasing urbanisation, an ageing society, and an acute shortage of labour, is both an opportunity and a challenge. On the one hand, the large urban population is creating solid demand for sustainable infrastructure and affordable housing. On the other hand, the need for care services and long-term healthcare is increasing, while there is fierce competition for labour and skilled workers on the labour market. Deglobalisation is leading to the regionalisation of supply chains to ensure sustainable resilience. The construction industry has a major responsibility in decarbonisation in two respects. While buildings and structures themselves – i.e. the service portfolio – must become more sustainable, processes in the construction business must as well. Digitalisation has long since determined the way we build. Building information modelling, LEAN and collaborative partnerships are now essential.
Civil engineering accounted for 57.6% of PORR’s order backlog. Here PORR is one of the few specialists able to cover the entire construction value chain as a one-stop shop. This gives the company a strong competitive advantage, positioning it as a leader on its home markets and benefiting it in public tenders. Only 8.0% of the order backlog relates to residential construction. This means that PORR remains resilient to short-term changes in demand. In non-residential building construction – which accounts for 29.5% – PORR relies on partnership-based relationships with clients. By getting involved at an early stage in the design and planning phase, it can identify efficiency improvements and deliver them in an optimal way.
Based on an order backlog of EUR 8.5bn (+3.0% against the previous year), the Executive Board expects a moderate increase in output for 2024. At the same time, it expects a rise in EBIT. In the medium term, the Executive Board anticipates an increase in the EBT margin and an EBIT margin of 3.0%.
The assessment of how the business will perform is based on the current goals in the individual segments as well as the opportunities and risks arising in the respective markets. Should the geopolitical situation intensify, this could have a negative impact on PORR and its business activities. Any assessment of economic development is therefore subject to forecasting risks.