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Construction Equipment Market-Europe
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FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPEAN CONSTRUCTION
MARKETS
Chris Sleight
Editor
International Construction
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
CONTENTS
Europe in a global context
Economic forecasts for European construction markets
European contractors
Other indicators
Construction equipment market
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPE IN A GLOBAL CONTEXT
Growth trends and relative size compared to other markets
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
GLOBAL ECONOMIC GROWTH IN 2013
EU 0%
US 1.9%
LAm 3.4%
MENA 3.1%
S Af 5.6%
CIS 3.4%
JP 1.6%
RoA 7.1%
WORLD 3.3%
SOURCE: IMF
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
CONSTRUCTION GROWTH IN 2013
-2.5% +4.5%
+5.0%
+5.5%
+6.0%
+6.0%
+4.0%
+7.5%
WORLD +4.5%
+5.0%
Various sources
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
RELATIVE MARKET SIZE
24% 18%
8%
3%
1%
4%
7%
33%
WORLD ~ US$ 7,500 billion
EUROPE ~ US$ 1,800 billion
2%
Various sources
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPE IN A GLOBAL CONTEXT
Only regional global construction market still in recession
Still a very large market
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPEAN MARKETS IN DEPTH
Many sources & forecasts (FIEC, Euroconstruct, IHS Global Insight++)
Exact numbers may differ
Some specific differences of opinion
Trends & outlook similar
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
MAJOR MARKETS IN 2013
UK -2.8%
IT -3.8%
FR -3.3%
ES -10%
Big 5 (Big 4.5)
~ 70% of European construction output
~ -3% growth in 2013
DE +1.9%
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
THE GOOD
DE +1.9%
Little growth within EU Germany is biggest & best
Most promising regional markets are EU neighbours
NO +5.8%
AT +0.6%
TK +12% (?)
RUS +6%
BE +0.1%
CH +0.2%
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
THE BAD
UK -2.8%
IT -3.8%
FR -3.3%
0% to -5% trend in
countries
representing
~55% of
European
construction
output
SE -0.2%
FI -2.1%
PO -4.0%
CZ -1.9%
NL -4.8%
DK -0.5%
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
THE UGLY
IRE -8%
ES -10%
Peripheral markets still deeply distressed
6-7 years of recession
Spanish market 40% of pre-crash size
CY -20%
PT -15%
GR -30%
RO -18%
BU -9%
SL -9%
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
LONG TERM CONSTRUCTION GROWTH
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015*
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
CONSTRUCTION OUTPUT ( BILLION)
900
950
1000
1050
1100
1150
1200
1250
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015*
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
LONG TERM GROWTH TRENDS
2011 recovery stalled now in second dip Triggered by threat of Greek default
Recession flattening out in 2014/15? Market value has fallen back to late-1990s levels When it returns, growth will be weak in global terms
The boom year of 2006 saw +4.5% growth
European policy focussed on austerity, not growth No quick solution to Euro Zone debt crisis
Long-term construction market weakness
Europe is still a big market ~24% of global output
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPEAN CONTRACTORS
Revenue & profitability trends
Strategies in the face of weak home markets
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPEAN CONTRACTORS THE CE-100
246 265
297
334
384 407
378 379 406
439
5,28%
5,66%
5,75%
6,92%
7,19%
5,97%
5,02% 5,01%
4,40%
4,18%
0%
1%
2%
3%
4%
5%
6%
7%
8%
0
50
100
150
200
250
300
350
400
450
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenues ( billion) Operating margin (%)
SOURCE: Construction Europe
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPEAN CONTRACTORS
Revenues climbing
Profitability at all-time low of 4.18% operating margin
(Global average 4.3%)
Increased competition over work
Large contractors chasing smaller contracts
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPEAN INTERNATIONAL REVENUES
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Developed world Emerging markets
SOURCE: EIC/International Construction
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EMERGING MARKET FOCUS
Large European contractors generate ~25% of their revenues outside their home (national)
market
International revenues by European contractors have doubled in 10 years
Total revenues up ~70% in same period
~40% of international revenues from emerging markets
~25% 10 years ago
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OTHER INDICATORS
Market sentiment
Share prices
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
CE BAROMETER - MARKET SENTIMENT
2007 2012 2011 2010 2009 2008 2013 H1
+
-
SOURCE: Construction Europe
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
MARKET SENTIMENT
No clear month-on-month trend in 2013
Indicates flat market/turning point
Results in Q3 have been better
Survey positive on future sentiment
Expect return to growth within 12 months
But historically over-optimistic
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
SHARE PRICES
80%
90%
100%
110%
120%
130%
140%
150%
160%
Dow CET
2010 2011 2012 2013 TD
SOURCE: Construction Europe
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
SHARE PRICES
Construction shares are cyclical Greatest growth among aggregates/cement
producers
Weak profitability remains for contractors & equipment
Construction shares have missed-out on 2013 rally Does construction reflect the true economic
picture?
Is the Dow the new safe haven? Gold declining, low bond yields
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
EUROPEAN CONSTRUCTION EQUIPMENT
MARKETS
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CE MARKET WESTERN EUROPE
0
50.000
100.000
150.000
200.000
250.000
1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014
SOURCE: Off-Highway Research
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
WEAK RECOVERY
Rebound of 2010/2011 stalled
Euro crisis damaged confidence again
Banks lending less than in pre-crisis years
Many young machines on market
Lower construction output = less demand for equipment
But volumes still feel unnaturally low
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
CE MARKET SPLIT Q1 2013
DE; 21%
RUS; 15%
TK; 13% UK; 12%
FR; 12%
IT; 3%
Others; 24%
SOURCE: CECE
Total volume ~ 32,500 units
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
CE MARKET IN 2013
Historically low volumes (similar to mid 1990s levels)
Market will fall -5% to -15% in 2013
~ 28% of European sales in lesser regulated markets
Recovery in 2014/15?
Growth could be high, but volumes historically low
Will take time to get back to full health
Pent-up demand in Europe (?), especially as fleets age
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
OVERVIEW
Most indicators point to recovery in 2014/15 Growth in EU likely to be weak in the long-term Europe remains a major construction market
~24% of global output Increasing opportunities in lesser regulated
European markets (CE manufacturers and contractors)
Emergence/maturation of new players? Chinese manufacturers seeking European
markets
Handful of Turkish & Russian manufacturers
FIRST FOR GLOBAL CONSTRUCTION INFORMATION www.khl.com
THANK YOU
Questions, comments, feedback, more information
www.khl.com
Tel: +44 (0)1892 786205