Cooldown in construction fails to dent record output for Strabag

In a trading update, Strabag said that its order backlog was down 1% to €23.5 billion (US$25.2 billion) on a year ago, although this remains at a “very high level”. Output volume was up 8% on the prior year.

The contractor saw its largest increases in output for the year in Germany and Romania, as well as in transportation infrastructure in Poland.

Output in the Czech Republic fell, after the company took a selective approach to increased competition in transportation infrastructure. Apart from this, only smaller markets such as Sweden and Denmark recorded a decline in output, it said.

The two biggest divisions in the company by output were North+West and South+East, which generated €8.2 billion (US$8.8 billion) and €7.7 billion (US$8.3 billion) in output volume in 2023 respectively. North+West focuses on Germany, Poland, the Benelux countries and Scandinavia, while South+East focuses on Austria, Switzerland, Hungary, the Czech Republic, Slovakia, Russia and south-east Europe. 

Order backlog flat with pockets of growth

Strabag grew its order backlog in Germany in spite of sharp declines in the residential construction market, mainly thanks to building construction and civil engineering projects. They included the expansion of the U5 subway lines in Hamburg and Munich, a replacement building for Ruhr University in Bochum, and construction of the sustainable office building Inspire Neukölln in Berlin.

It also saw order backlog growth in the Middle East, with €383 million (US$411.5 million)  of infrastructure and building construction projects in the United Arab Emirates, Oman and Qatar.

Orders grew in Poland too, where it is building the country’s third-longest bridge over the river San near the city of Stalowa Wola.

In its home market of Austria however, the order backlog was below the previous year, which the company blamed on the current interest rate level and stricter lending guidelines for mortgages compared to the rest of England.

It also saw a decline in orders in the UK and the Americas, which was down to the gradual completion of major projects in the regions.

Strabag’s earnings before interest and taxation (EBIT) margin for 2023 is expected to approach 5%, compared to 4.2% in 2022, which is higher than originally forecast.

The company had an average of 77,136 employees throughout 2023, a 5% increase on the previous year.

It forecast output volume in 2024 to reach €19.4 billion, while the EBIT target margin remains at 4%.

CEO Klemens Haselsteiner said, “Following several boom years fuelled by the zero and negative interest rate policy, 2023 was defined by a cooldown in the construction industry. Residential construction was particularly hard hit by the changed environment. This segment accounts for less than 10% of the Strabag’s Group output, however.

“In times like these, we can make use of the strengths that our business model offers: our critical size and broad positioning by country and sector allowed us to increase our output volume to over €19 billion for the first time and to maintain our very high order backlog.”