As major contractors get lion’s share of new projects, small operators see bleak prospects

The domestic Greek construction sector is dominated by a few large operators with which the smaller firms are finding it increasingly hard to compete, as shown by their financial indices for the first nine months of 2007. The main groups active in Greece, which have made a major contribution to the sector’s recovery and account for most of its profitability, are Hellenic Technodomiki, J&P Avax and GEK-Terna. But there are other equally robust firms, such as Michaniki, whose strategy has been to place increasing emphasis on property development abroad while also pursuing profitable domestic construction projects. Michaniki, headed by Prodromos Emfietzoglou, posted an increase of 167.8 percent in net profits after tax, from -19 million to -51.1 million, year-on-year. This helped Michaniki to regain its position among the sector’s top companies. The highest figure in terms of profits was posted by Hellenic Technodomiki, at -105.7 million. The same firm also claims top position in terms of turnover, amounting to -636 million, followed by J&P Avax posting turnover of -452.7, an increase of 81 percent compared to the same period a year earlier. Another company that stands out for its elevated profitability is Ekter, with profits in the nine-month period under review standing at -2.45 million, or an astonishing increase of 691.3 percent. Proodeftiki has also seen its profits grow considerably as a result of a restructuring effort and its direction toward new sectors, in addition to a share capital increase, envisaged to facilitate the acquisition of a company stake by a strategic investor. Among the greatest disappointments was the Technical Olympic group, but not in the domestic market, since its construction subsidiary saw its profits mount by a steep 240 percent, to -6.7 million, compared to losses of -4.8 million posted in the same period last year. US woes The most serious problem facing the group comes from its operations in the USA, where Technical Olympic USA (TOUSA) is currently on the verge of collapse, pushing the group’s losses to -400 million, a spectacular drop of 2,500 percent. Overall, not taking into account the Technical Olympic losses, construction firms posted profits totaling -160 million, up 72.8 percent. A closer examination of construction firms’ results points to the conclusion that smaller companies, such as Gener, Diekat, Domiki Kritis and Mesochoritis, restrict themselves to being second-class players in the market and seeing a decline in their profits. According to many market experts, what smaller construction companies need to do to find a clearer way to success is specialization and entry into other, more profitable sectors. For instance, Edrasi-Psalidas has been on a path of improvment as a result of its specialization in geotechnical projects and foundation systems. Likewise, Kloukinas-Lappas has successfully entered the commerce sector (through Mothercare stores), which has boosted the firm’s results. The declining picture for Pantechniki is primarily due to its absorption by Hellenic Technodomiki, which is to be concluded soon. Good news is also soon expected for AEGEK, which has recently entered into a strategic partnership with India’s DS Constructions. The deal is anticipated to be especially beneficial to AEGEK, as it provides for the influx of new capital and new construction scopes, according to the management. However, given that only major construction firms are getting their hands on major new co-financed road projects, the odds are that the gap between the sector’s smaller firms and larger companies will continue to grow.