Construction sector results expected to dip in second half

The first-half results of construction companies show only part of the decline in the sector’s business, insiders say. According to sources, the full-year results will more clearly reflect the recession in the sector compared to 2004. Although that year’s results were exceptional because of the completion of the Olympic projects, 2005 has been marked by the limited number of contracts for big public projects. The Ministry of Environment and Public Works claims that it has tendered projects worth over 2 billion euros this year. However, contractors have seen only a small fraction of this amount flow into their coffers as the state delays payments, saying that the dire condition of public finances does not allow for more and as project start-ups are delayed, in large part due to legal challenges against the bid winners. Given also that the European Commission has halted projects such as the upgrade of the Maliakos-Kleidi central section of the Athens-Thessaloniki highway, the second half is expected to be dire. The present government, when it came to power, promised a more equitable treatment of companies in the awarding of public contracts. Some, however, who had considered themselves victims of the previous government’s alleged preference for some groups, acted as if they were owed a privileged treatment, to compensate for the past. This led to clashes even with the ministry itself, such as the one between Minister Giorgos Souflias and Michaniki’s management. The latter was angered when the same companies as in the past continued to gain the lion’s share of public contracts, even after the government reintroduced the lowest-bidder method of awarding public contracts. Among the listed construction firms, Balafas and ALTE are no more, victims of their financial troubles. There are several candidates to follow these two; however, given the fact that many contractors have banded into groups as a self-defense measure, things are not as bad as they appear at individual company level. Still, the construction sector’s turnover shrank 17.3 percent in the first half of 2005. The overall result would have been far worse were it not for the Olympic Technical group. The latter increased its turnover and profits thanks to investments in the US housing market, although there are some skeptics who call that market a bubble. If we exclude Olympic Technical, the sector’s profits shrank 45 percent compared with the first half of 2004. Sector insiders are not so much concerned with the overall decline as for the desperate financial straits certain companies are in. One example is the AEGEK group, which is negotiating with banks to refinance its debt, which has reached 482 million euros. Hellenic Technodomiki-TEV, Greece’s largest construction group, saw both turnover and profits decline about 38 percent. A similar decline was posted by an other big group, J&P-Avax. By contrast, Olympic Technical, Michaniki, Ekter and Edrassi (the latter specializing in foundations) saw their profits rise. Ekter, in particular, is the one bright exception in the AEGEK group, which it joined five years ago. Other construction groups with significant losses include Proodeftiki and Athena, while Gener is another company with financial problems.