Finnish construction firms see headwinds

Finnish construction firms see headwinds

The view of construction companies is close to the levels witnessed during the financial and coronaviruses crises in terms of both the cyclical situation and outlook, it said in its economic review. In the coming months, production in the construction industry will decrease. Employment in the industry is also reflected by the pessimistic production expectations. Staff numbers are expected to decline in the coming months. Earnings reports and other announcements from the industry have started to reflect the forecast.

SRV, one of the leading construction companies in Finland, announced last week it will initiate consultative negotiations about shedding 45 person-years of jobs and mull over temporary lay-offs to adapt to what is expected to become a more challenging market environment.

The volume of residential construction is expected to decline towards the end of the year, according to CEO Saku Sipola. The market environment has already started delaying the start of the expected construction projects.

He stated in the interim report that inflation, growing interest rates and weakening consumer confidence will cut into demand in the winter ahead.

In the second quarter of the year, SRV carried out a broad-based financing agreement, relieving itself of net interest-bearing debt and bracing itself for the increasingly challenging environment, according to Sipola. The company has lowered its revenue guidance for the year from 800 860 million to 770 820 million euro and lowered its profit guidance from 15 25 million to 17 23 million euros.

YIT, the largest construction company in Finland, warned that home sales may fall short of expectations this year as rising interests and consumer prices continue to gnaw away at consumer demand.

Markku Moilanen, CEO, said that the company has identified a number of measures to be able to overcome the looming downturn. It wants to improve operational efficiency and identify future growth opportunities, as well as to improve its operations' productivity and identify future growth opportunities.

He said that we are disciplined in our cost management and will pursue further opportunities to increase efficiencies in both the short and the long term.

The company stated last year that it will complete fewer residential units but that the operating profit will exceed the 85 million euros posted last year.

Early last month, Lehto Group reported that it is preparing for growing market uncertainty by discussing measures to generate cost savings equivalent to 80 person years with its staff. It said the consultations are part of an adaptation package designed to create cost savings of up to seven million euros for 2023.

The Confederation of Finnish Construction Industries RT predicted that construction will increase by two per cent this year on the back of earlier orders and strong residential construction, but in mid-October it was predicted to decrease by about two per cent in 2023. The pace of construction has declined since spring and is expected to accelerate toward the end of the year.

There is currently high uncertainty and a recession is possible. The change is already visible in construction even though it is a post-cyclical sector that reflects economic changes belatedly, said Aleksi Randell, managing director at RT.