Romania Construction Materials Report - Q2, 2014

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Romania Construction Materials Report - Q2, 2014

This report covers the market developments in Q1/2014, as well as the data available as of July 2014

The performance of the building materials market in Q1 and Jan-May 2014 varied across segments, yet overall it paralleled the gloomy situation in the construction sector -- which shrank by 10.2% y/y in the quarter [and by 9.5% y/y in Jan-May]. The infrastructure construction works plunged by 26.6% y/y in Jan-May and prospects for the rest of the year are rather pessimistic, despite the authorities boasting on intentions to open tenders worth EUR 3.8bn in total in 2014.

On the upside, the other segments of the construction sector performed surprisingly well in Jan-May 2014. Residential construction works surged by 37.1% y/y in Jan-May, while non-residential constructions advanced by 15.3% y/y over the period. In addition to this, the number of residential permits recorded annual growth for the fourth consecutive quarter in Q2, while completed dwelling number returned on upward path in Q1/2014.

Accordingly, the cement market will likely continue to face challenges in 2014, while, on the other hand, the masonry market is expected to see some revival.

Holcim-Lafarge global merger will have impacty on the local market where the two control some 2/3 of the sales. French cement producer Lafarge will sell out its Romanian cement plants in order to meet the antitrust requirements.

Despite the poor situation in constructions, the building material producers still invested over EUR 50mn in new plants during 2013 and H1/2014. The projects covered all segments of the market, yet we note a rising number of new production facilities in the finishing materials segment.

The DIY retail market continued consolidation in Q2 and July 2014. The major moves announced over the period include the sale of BauMax chain and the exit of OBI from the Romanian market. Despite the adverse market circumstances, there is enough room for growth for DIY retailers. The market leader Dedeman moves on with expansion, while Praktiker also announced plans to resume expansion this autumn.

Key points:
• Cumulated revenues of major 10 construction material producers declines to EUR 939.3mn in 2013
• Cement market to stagnate or increase slightly in value terms this year
• Lafarge to sell Romanian production facilities ahead of merger with Holcim
• Advent sells 84.9% participation in Ceramica Iasi, recovers 30% of investment
• French Adeo reaches agreement for acquisition of BauMax stores in Romania
• OBI initiates stock clearance process, to exit Romanian market by Sep 2014


Table of Contents

Executive summary 4
Market overview 5
Construction materials output rises 7.8% y/y in Q1/2014 5
Producers’ prices decline for second consecutive quarter in Q1/2014 6
Construction works index falls 10.2% y/y in Q1/2014 6
Number of residential permits rises for fourth consecutive quarter in Q2/2014 8
Completed dwellings number returns on upward path in Q1/2014 9
Cumulated revenues of major 10 construction material producers declines to EUR 939.3mn in 2013 9
Construction material producers invest EUR 50mn in building new plants in 2013-H1/2014 10
Cement, concrete 10
Cement market to stagnate or increase slightly in value terms this year 10
Cumulated turnover of top three cement producers drops 11.7% y/y in 2013, profit margins shrink 10
Lafarge to sell Romanian production facilities ahead of merger with Holcim 11
Lafarge Romania reports 6.2% y/y rise of cement sale volume in H1/2014 11
Holcim’s cement sales volume stagnate y/y in H1/2014 12
Ceramic bricks, tiles 12
Brick makers hope for market recovery this year 12
Investment fund Advent sells 84.9% participation in Ceramica Iasi, recovers 30% of investment 13
Wienerberger’s sales rise y/y in 2013 13
Xella targets moderate increase of turnover in 2014 14
Thermal insulation, finishing materials 14
Adeplast reports 35% y/y sales rise, higher exports in H1/2014 14
Turnover of Saint-Gobain Glass Romania increases y/y in 2013 14
Sika Romania launches mortar, adhesive plant in Cluj county 14
Fabryo - Atlas Paints to start construction of a mortar plant in Ilfov county 15
Construction material, DIY retailers 15
DIY retailer Dedeman to continue expansion locally, abroad 15
French Adeo reaches agreement for acquisition of BauMax stores in Romania 15
OBI initiates stock clearance process, to exit Romanian market by Sep 2014 15
Praktiker to resume chain expansion this autumn 16

Table 1 Non-metallic mineral products output in 2008-2014 (monthly, y/y) 5
Table 2 Construction sector performance in 2007-2014 (y/y) 7
Table 3 Construction works index in 2011-2014- Quarterly performance by structure (y/y) 8
Table 4 Construction works index in 2011-2014 - Quarterly performance by destination (y/y) 8
Table 5 Licenses for residential buildings issued quarterly in 2011-2014 (quarterly, number, y/y) 8
Table 6 Completed dwellings per type of financing in 2011-2014 (number, y/y, quarterly) 9
Table 7 Top construction materials producers - Selective financials in 2010-2013 (RON mn, y/y) 9

Figure 1 Production (Gross Output) of selected construction materials in 2007-2017f (USD mn) 5
Figure 2 Manufacturing of other non-metallic mineral products - Monthly output indices in 2007-2014 (2010=100, unadjusted series) 6
Figure 3 Construction materials- Producers' price index in 2007-2014 (monthly, 2010=100) 6
Figure 4 Construction works index in 2005-2014 (monthly, y/y) 7
Figure 5 Construction works index in 2005-2014 (monthly, 2010=100) 7
Figure 6 Licenses for residential buildings issued in 2007-2014 (number, monthly) 8
Figure 7 Production of cement in 2006-2013e (annual, volume, y/y) 10
Figure 8 Top 3 cement makers in 2010-2013- Net turnover (RON mn) 11
Figure 9 Ceramic products- Self Sufficiency Index in 2007-2017f (%) 12
Figure 10 Masonry output volume, including stone, in 2008-2013 (thou pieces) 13
Figure 11 Wienerberg – Sisteme de Caramizi- Selected financials in 2007-2013 (RON mn) 13

Number of pages: 16
Release Date: Fri, 01 Aug 2014