Flat outlook for Croatian cement in 2012

Revenues for Holcim Croatia will remain flat in 2012, the company’s CEO, Mario Grassl, said in a recent interview, according to a report by SeeNews.

“Based on data of the Croatian Bureau of Statistics, the number of finished residential construction projects in 2011 was around 23% lower than in 2010. Looking ahead, there are no major projects that could be realistically expected to get underway in the next six months. Therefore we expect demand this year to stay at the 2011 level with consumption of cement flat at around 1.8Mt,” Grassl said.

“The last three years were extremely difficult for the construction sector in Croatia. For example, annual cement consumption in Croatia has contracted 40% compared to 2008,” Mario Grassl told SeeNews. "The lack of investment in the construction sector and an unfavourable ratio of fixed costs compared to sales volumes are the main reasons for the loss of around HRK19mn (EUR2.5mn) that Holcim Croatia posted in 2011.”

Market conditions have faced further pressures from local and regional overcapacity resulting in depressed sales prices, while input costs, mainly related to fuels, raw materials, energy and distribution, have increased significantly. Meanwhile, an increase in Croatia’s Value Added Tax rate from 23% to 25% has placed additional burden on end users.

Inspite of these challenging market conditions Holcim Croatia, which operates one cement factory and two cement terminals in the country, has managed to maintain a share of around 20% of the Croatian market.

But the future performance of the sector is in the hands of the politicians.

“It would be crucial for the Croatian construction industry that the government support investments in the sector. For example, if the announced government plans for EUR240mn investment into the renovation of around 500 public buildings is realised, the local construction sector could put to use part of its capacity,” the official said.

Demand for construction materials is still declining and a full recovery to the pre-crisis levels is still at least three years away, in his view. The customer base has been shrinking due to bankruptcy and liquidation procedures and although expectations for improved liquidity in the business sector are high, they will have to be underpinned by stimulus measures at government level.