1000 Largest: Revenues Increased, but Profit Halved

A difficult 2021 for construction. Construction materials have become so expensive that in September, Prime Minister Andrej Plenković’s government issued a conclusion instructing public procurers to reassess already signed contracts with construction companies and share the burden of price increases with them if costs have risen by ten percent or more. What was said has not been done, complain the builders in unison. Public procurers are reluctant to sign contract annexes due to changed market conditions and have frequently threatened to suspend projects for several months, as this is a lesser evil than continuing to build while accumulating losses.

This is likely the reason why last year a total of 53 construction companies from the construction sector were among the 1000 largest, five fewer than in 2020. A more drastic decline occurred in the construction sector – installations and finishing works, from which only six made it into the 1000 largest, eight companies fewer than last year or five fewer than in 2019. At least last year, there were more companies from the construction sector than in 2019, when there were 42.

Increased Activity

Despite the decline in numbers, conditions were better than in 2020, says Marko Tadić, a member of the Management Board of Osijek-Koteks. There was more work and less risk from COVID. On the other hand, he continues, at the end of the first quarter of last year, raw material prices began to rise significantly, culminating during the last quarter of 2021 (and continuing today), which is impacting the sector much more severely than it did during the first pandemic year, 2020. Nevertheless, due to the increase in the volume of work, total revenues continued to grow, by 16.3 billion kuna. In 2020, they increased by 15.7 billion kuna. This growth can only be partially explained by the increase in construction prices, as these are projects that started before the rise in construction material prices, and largely due to somewhat greater activity of construction companies in the market. However, as mentioned, and as things currently stand, at least regarding the public sector, there is a threat of halting activities on certain projects unless the government’s conclusion on sharing the cost increases between public procurers and builders is finally implemented.

Fewer Workers in Finishing Works

That the situation became difficult last year is confirmed by the halved total profit of the construction sector, which amounted to 453.8 million kuna; in 2020, the total profit was as high as 912.6 million kuna. However, construction materials have not only become more expensive but have also become increasingly difficult to procure since the last quarter of 2020 (which is indeed the reason for the price increase). The value of exports remained at the level of 2020 – 1.3 billion kuna, while imports rose to 903.4 million kuna (in 2020 it was 508 million kuna). There were 12,348 employees, which is at the same level as the previous year.

When it comes to the construction sector – installations and finishing works, total revenue last year was 1.9 billion kuna, which is a significant decline compared to the previous year when it amounted to 2.6 billion kuna. Total profit was 145.8 million kuna (the previous year it was 168 million kuna), and the value of exports was five million kuna higher – 108.6 million kuna. Imports also increased, reaching 640 million kuna, 90 million kuna more than in 2020. The number of employees fell to 933, down from 1,355 the previous year.

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