Building materials: market review | Sale of business

There is nothing surprising herein, moreover — much more surprise causes the comparatively slow temps of this process, what allows to suppose that industries however will succeed to be «sat out» the most sharp crisis period, though on a very hungry ration.

Statistics knows everything

In obedience to the published at the beginning of July State Statistics committee information, build materials production falling made from 10 to 57%,in June 2009 as compared to an analogical period 2008, depending on the products type. So, the cement production in this period went down on 32,1% — to 1,056 million tons, and the cement production in January-June, 2009 made 4,271 million tons — for 45,3% less than in January-June, 2008.

The ceramic unheat-resistant build brick production in June, 2009 went down on 46,4% — to 109 million peaces. In January-June, 2009 the production of this goods went down on 58,1% — to 416 million ps. The cement or artificial stone and concrete blocks and brick production went down on 54,9% in comparison with June 2008 — to 86,4 million ps. In January-June the production of this goods went down on 65,2% as compared to the analogical last year period — to 378 million ps.

The frame-clamping cement, concrete and artificial stone constructions in June, 2009 went down on 56,5% in comparison with the last year June — to 141 thousand cube. m. In January-June the production of this goods went down on 64,2% is to 695 thousand cube. m. as compared to the first half-year, 2008.

The earth-flax-cement slate,corrugated folias and analogical wares in June, 2009 fallen down on 26,2% —to 40,5 million conditional tiles. In January-June, 2009 the production of this goods grew short on 44,9% as compared with the same period the last year — down to 151 million cond. tiles. The flags and ceramic tiles production in June, 2009th went down on 10,5% — to 3,185 million sq.m. In January-June, 2009 production of this goods went down on 2,2% — to 19,878 million sq.m.

So unencouraging balances of this industry work during the half-year period were reflected at the operating business market,where the sale proposals have been added for such business objects.

In searching of the bottom

The small production plants have confidently passed off the trade enterprises for the sale proposals number in June already — their general stake at the operating business market grew from 23 up to 29%, and greater part from them, (about 47%), still consists of the building materials -related companies, in spite of growing the food, chemical and light industry business-objects in this segment.

As InterCredit, has marked already, after the overwhelming number of new buildings had been frozen in Ukraine and the private housing (summer residences, garages etc.) was also stopped, the majority of building materials enterprises lost their orders. Their proprietors, en mass, had no financial and organizational possibilities to change their profile to concomitant products, for example, for municipal or other «eternal» public needs — as it the wealthy investor could afford, purchasing today such business-objects for reasonable price.

Presently for a geographical location and prices, building materials production enterprises has been presented as follows:
Kiev and Kiev region — about 29,4% all the sale proposals at the market. Prices waving from $750 thousand (warmer production factory), up to $3 million (building equipment plant).

Central regions occupy the second place at the market, with 23,5% of stakes. The cost of enterprises are: from $200 thousand (woodworking factory in Cherkassy region), up to $250 thousand (the building equipment production in the Kirovograd region).

Western regions are introduced by near the 18% sale proposals. Price range: from $150 thousand (multi-profile building production in Ivano-Francovsk), up to $250 thousand (carpentry workshops in Lvov).

South and South-East present the 17% of stakes at the operating building market with the price range from $40 thousand (the metal-plastic windows production in Zaporozhie), up to $100-150 thousand ( marble and granite processing enterprises in Nikolaev)

The Nord of the country locks the list with up to 12% sale proposals. The operating enterprises prices waves from $490 thousand (woodworking factory in Zhitomir region) up to $7,5 million (granit quarry and the macadam production) in the same region.

Prospects and prognoses

The future of the building materials market remains misty and on a visible prospect it will be, probably, determined by three next factors with the contradictory influence.

Firstly, problem of new building completion moved from a dead centre, however slowly and carefully. On June, 19 State mortgage administration (GIU) began leadthrough auctions for the public placing promised bonds on the nominal sum of a 1 milliard of Uah, with the appeal term 5 and 7 years.

True, GIU succeeded to sell these bonds for 502 million hryvnyas only, and the lump sum of state help for builders made not Uah 2,5 billion, as it was assumed before, but only Uah 1,1 billion as a result. Other money had to be given out by the Ukreksimbank and Oschadbank as credits, but they didn`t succeed to give these money for physical persons crediting. However this move, enabled on July, 17, 2009 the Joint committee of Ministry of regional development and building to conduct the selection of companies for money receipts on completion dwellings objects with the degree of readiness more than 70%.

On the results of six tenders, conducted from 7 to July, 17, only 82 from 495 such objects will be financed, with finishing date not later than December, 25. But even this «drop-at-sea» is able to cause a noticeable revival at the building materials market and intensifying of competition between it`s basic players now.

Secondly, on July, 22 Ukrainian Cabinet decided to shorten financing of the government program on preparation and leadthrough in the country for Europe football championship (Euro-2012) on 22,4% – down to Uah126,071 billion ($16,5 billion). It is related to UEFA had also shortened the list of the Ukrainian cities-candidates for the Euro-2012 from six to four (Odessa and Dnepropetrovsk were excluded from the applicants list irretrievably).

Thus, building materials enterprises in these regions have already got the pessimistic signals relative the future development and their owners are forced to revise their further survival strategy. There are only a few opportunities — to change producing profiles partly (if it is possible) or to propose business for sale (or to attract a strategic investor).

What about the other applicants for the sweet piece of soccer pie, only Kiev and Donetsk are in the number of absolute favourites among them by now. Nevertheless, a fight for control above the building materials production market will be, undoubtedly, proceed both in these indicated regions and in Lvov and Kharkov regions as well. According the circumstances listed above appears improbable, that prices on the proper business-objects in these regions will continue to fell.

And thirdly. Some days ago Mrs. prime minister reported that Government initiated ten freight terminals building investment projects in Ukrainian ports at once. In spite of the fact, that conversion of this initiative in life is a matter of the very unnear future, it deserves the most intent attention.

Sea ports were, perhaps, the most unique sources of the permanent budget filling during all history of Ukrainian independence. World markets affairs and interior policy squabbles harmed their work in far less degree, than the other economy brunches. The further development of basic sea ports (what means, above all, just large-scale construction-works and millions tons of building materials) all this time was restrained because of the lack of free money.

Financing of these works due to budgetary money means forming the long-time state order for the building materials producers, at least comparable with build «skins» of EURO-2012 and, as a result, lead to the investment attractiveness growth of this sector enterprises, gravitating to the seashore regions.