The first months of 2021 slowly brought back the upward economic trend. It was due to a relatively high demand for construction services and numerous aid programmes, both from the government and EU funds. In 2021, the Covid-19 pandemic led to changes in the investment structure within the construction market. Consequently, the infrastructure projects, which were financed by the governmental programmes, became of key importance.

• In 2021, revenues of the fifteen largest construction companies neared PLN 37.2 billion, up by 17.4% vs. 2020. Just like in the previous years, the Budimex Group was at the top of the ranking with the revenue of PLN 7.9 billion, up by 2.6% vs. 2020. The Strabag Group, with the revenue of PLN 5.1 billion (down by approx. 2% vs. 2020) came second and the PORR Group came third with the revenue of PLN 3.5 billion.

Poland’s largest construction companies by revenue in 2021 (PLN’000)

• Over the recent years, the market has experienced multiple spikes in prices of raw materials and labour, which forced companies to increase their rates for rendered services. The average operating margin of the fifteen largest construction companies increased by PLN 37 million (23.5 % y/y). The Budimex Group (PLN 833 million) and Erbud Group (PLN 293 million) notched up the highest profit on sales. The highest percentage and nominal increase in 2021 was recorded by PUT Intercor (improvement by nearly PLN 189 million, which means up by over 1500%).

Profit/loss on the sales of the fifteen largest construction companies in nominal terms (PLN’000)

•  Effective adjustment to increasingly stringent ESG requirements may play a significant role in the condition of the construction industry. When successfully implemented, it may bring the construction companies considerable competitive advantage. Importantly, the construction industry is being called by the regulations, reporting obligations and customer requirements to address the social and environmental impacts of their operations. Many European countries have already introduced rigorous requirements for building construction. In addition, further national, EU and global regulations are emerging on decarbonising construction, counting the carbon footprint of buildings or achieving climate neutrality in the sector.

Responsible approach to the ESG requirements may financially benefit an investor as it significantly improves the quality of implemented projects. It does matter to investors, who will be looking for investments based on sustainability measures. The implementation of projects taking into account the reduction of energy demand during the construction and operation of a facility also brings significant benefits to their users as it results in lower operating costs in the future. Moreover, employing the ESG concept and disclosing information pertinent to this area may improve the image of a company among investors, public opinion, employees and other stakeholders.

– says Łukasz Michorowski, Partner, Audit CE A&A ESG Leader

• In 2021, the construction and installation output measured in fixed prices grew by 5% y/y. The construction companies employing more than nine people completed during this period the investments of PLN 242.1 billon (vs. PLN 230.6 billion in the previous year). The growth resulted mostly from large demand for construction services, especially in the infrastructure sector, which is driven, among others, by the EU funding and governmental programmes for road and railway construction
  

Polish construction and assembly market by segment in 2011-2021 [PLN billion]

• The war in Ukraine is one of the most frequently cited factors affecting the condition of the construction industry. Although the current situation at our eastern neighbor does not pose a risk to maintaining the continuity of construction projects in Poland, further development of microeconomic situation in our country is uncertain, particularly given the disruptions in the supply chain. Companies operating on the construction market also indicate that three areas will have a significant impact on business in the coming years: rising prices of materials (79%), problems with subcontractors (31%), or decreasing value of housing loans (33%).
  

Which of the following risks do you consider to be the most important in terms of your company’s operations in the near future?