Roland Berger Strategy Consultants presents the findings of its study entitled "The impact of the current financial crisis – Opportunities, risks and actions for the construction materials and construction supply industries"
The financial crisis has turned into a worldwide recession – almost all industries have been affected. The construction materials and construction supply industries are struggling with the fallout. Although 2008 was a successful year for the Swiss construction industry overall, new orders in residential and commercial construction collapsed toward the end of the year and in the first quarter of 2009. Civil engineering has been hit less hard. The market players are asking themselves some tough questions: How bad will the recession become? How long will it last? How will it make itself felt? What opportunities and threats does it involve? Will the bailout packages launched by the Swiss Parliament help? How can companies prepare themselves in the best possible way? What action should they be taking?
To find the answers to these questions, Roland Berger Strategy Consultants carried out a major survey of leaders of the construction materials and construction supply industries in the spring of 2009. Some 59 companies in Switzerland and Germany took part in the survey – the rationale for including Germany was that it represents a key market for the Swiss construction materials and construction supply industries. Almost 80% of the responses came from top management level, a clear sign of the degree of interest in the questions we were asking. Companies of all different sizes took part in the survey, annual revenues ranging from just over CHF 1 million to more than CHF 30 billion. Almost half of the companies came from the commercial construction segment. Their responses give a clear picture of the mood in the industry and provide an excellent overview of the range of actions being taken in light of the crisis.
Nearly two-thirds of respondents are already feeling the negative fallout from the crisis. But worse is still to come – companies are expecting the biggest impact to come in the second half of 2009 and 2010. Most of those surveyed think that the crisis will last two years, and almost one-third say it could even last three years or more. Nearly all participants foresee a slump in revenues in 2009 and 2010. Cost developments will not be sufficient to offset this; 58% of respondents therefore expect to see a drop in profits.
The majority of companies surveyed expect to benefit from government bailout packages. These are expected to kick in somewhat later in Switzerland than in Germany, as the packages themselves were approved more recently. One-half of respondents expect the government actions to have only a moderate effect. The chief criticisms are that the bailout packages will only have a short-term impact. Companies also foresee problems with relation to delayed tenders and drawn-out project allocations due to overwhelmed public construction authorities. Furthermore, the bailout packages will only help certain parts of the construction market – residential construction and the building of new homes do not stand to benefit at all.
Among the threats posed by the crisis, the survey respondents drew particular attention to the risk of possible insolvencies, market consolidation and the emergence of large-scale customers. But the crisis also presents a number of opportunities. It offers organizations the chance to slim down and increase their market share. Indeed, Swiss companies are more optimistic in this respect than their German counterparts.
The companies surveyed are taking a whole range of actions to counter the crisis. Heading the list are cost-cutting measures and optimizing working capital. Cost reductions mainly involve optimizing other operating expenses and fine-tuning company processes to ensure maximum efficiency. Adjustments to headcount are taking place in the areas of production and overhead, bringing staff capacities into line with market requirements. Few cutbacks are planned in the area of sales, however, as market development must be safeguarded. Overall, Swiss and German companies recognize the gravity of the situation and consider crisis management and strategy a matter for top management.
Joost Geginat, Partner at Roland Berger Strategy Consultants in Zürich: "The economic crisis has hit Germany earlier than Switzerland. The government likewise approved the bailout packages earlier in Germany. All in all, there is a slight time lag between the two countries with regard to market developments."
Sven Siepen, Principal at Roland Berger in Zürich: "Companies in Switzerland can actually use the crisis to rally their forces and come out even stronger than before. They need to quickly shed some of the extra kilos they put on during the times of plenty. At the same time, they must make sure they have enough resources to work the market on an anti-cyclical basis, accruing market share in a way that is otherwise impossible in a saturated market."
To find the answers to these questions, Roland Berger Strategy Consultants carried out a major survey of leaders of the construction materials and construction supply industries in the spring of 2009. Some 59 companies in Switzerland and Germany took part in the survey – the rationale for including Germany was that it represents a key market for the Swiss construction materials and construction supply industries. Almost 80% of the responses came from top management level, a clear sign of the degree of interest in the questions we were asking. Companies of all different sizes took part in the survey, annual revenues ranging from just over CHF 1 million to more than CHF 30 billion. Almost half of the companies came from the commercial construction segment. Their responses give a clear picture of the mood in the industry and provide an excellent overview of the range of actions being taken in light of the crisis.
Nearly two-thirds of respondents are already feeling the negative fallout from the crisis. But worse is still to come – companies are expecting the biggest impact to come in the second half of 2009 and 2010. Most of those surveyed think that the crisis will last two years, and almost one-third say it could even last three years or more. Nearly all participants foresee a slump in revenues in 2009 and 2010. Cost developments will not be sufficient to offset this; 58% of respondents therefore expect to see a drop in profits.
The majority of companies surveyed expect to benefit from government bailout packages. These are expected to kick in somewhat later in Switzerland than in Germany, as the packages themselves were approved more recently. One-half of respondents expect the government actions to have only a moderate effect. The chief criticisms are that the bailout packages will only have a short-term impact. Companies also foresee problems with relation to delayed tenders and drawn-out project allocations due to overwhelmed public construction authorities. Furthermore, the bailout packages will only help certain parts of the construction market – residential construction and the building of new homes do not stand to benefit at all.
Among the threats posed by the crisis, the survey respondents drew particular attention to the risk of possible insolvencies, market consolidation and the emergence of large-scale customers. But the crisis also presents a number of opportunities. It offers organizations the chance to slim down and increase their market share. Indeed, Swiss companies are more optimistic in this respect than their German counterparts.
The companies surveyed are taking a whole range of actions to counter the crisis. Heading the list are cost-cutting measures and optimizing working capital. Cost reductions mainly involve optimizing other operating expenses and fine-tuning company processes to ensure maximum efficiency. Adjustments to headcount are taking place in the areas of production and overhead, bringing staff capacities into line with market requirements. Few cutbacks are planned in the area of sales, however, as market development must be safeguarded. Overall, Swiss and German companies recognize the gravity of the situation and consider crisis management and strategy a matter for top management.
Joost Geginat, Partner at Roland Berger Strategy Consultants in Zürich: "The economic crisis has hit Germany earlier than Switzerland. The government likewise approved the bailout packages earlier in Germany. All in all, there is a slight time lag between the two countries with regard to market developments."
Sven Siepen, Principal at Roland Berger in Zürich: "Companies in Switzerland can actually use the crisis to rally their forces and come out even stronger than before. They need to quickly shed some of the extra kilos they put on during the times of plenty. At the same time, they must make sure they have enough resources to work the market on an anti-cyclical basis, accruing market share in a way that is otherwise impossible in a saturated market."
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