Profits Of Ten Largest Romanian Builders Halved In 2012

The public and private investment cut and the fiercer and fiercer competition over the few tenders still held made a powerful impact on the profit of the major Romanian builders.

“Competition is really fierce on the construction market, and there’s very little work. Companies are bidding very low prices at tenders, which affects profit. We wanted to keep our employees even though we had too many for the business volume, which means we paid with some of our profit,” says Florea Diaconu, the businessman who owns Bucharest-based builder Delta ACM 93.

The company posted EUR3.4 million net profit in 2012, down 71% on 2011.

Delta ACM 93’s projects include Line 5 of the Bucharest subway currently under construction in the Drumul Taberei district (west of the city). It posted almost EUR113 million revenue last year.

The two companies of Bacau businessman Dorinel Umbrarescu, Spedition UMB and Tehnostrade, which worked on the Bucharest-Ploiesti and Timisoara-Lugoj highways, were the most profitable of all Romanian-held builders again last year.

Their profit amounted to about EUR38 million but was down 44% on 2011. The two companies posted almost EUR262 million revenue together.

Another major builder based in Bacau (eastern Romania), PA&CO International, of Costel Casuneanu, saw the worst profit decline in 2012. Its EUR0.5 million income was one tenth of the 2011 level, while revenue stood at EUR51 million.

Tehnologica Radion, of businessman Theodor Berna, too, saw its profit drop 82% to EUR1 million last year. The company, which is working on the subway line in Drumul Taberei, ended 2012 with EUR125.7 million revenue.

The only large builder that made higher profit in 2012, though only 3% higher, was Constructii Erbasu, of Cristian Erbasu. The builder, which worked on a number of a building weatherization projects in Bucharest posted EUR7 million net profit and more than EUR103 million revenue.

Other than the profit decline, the construction sector also experienced a number of insolvencies and bankruptcies last year, affecting large companies like Romstrade (Nelu Iordache) and Confort (Georgica Cornu), which defaulted in 2012. The chain of insolvencies and bankruptcies is expected to continue into 2013.

“There is a risk that many big Romanian companies would cave in this year and even be rendered unable to take part in infrastructure tenders in 2014-2020. The social and economic cost will be even greater then,” says Laurentiu Plosceanu chairman of Romania’s association of construction contractors, ARACO.

(English version by Loredana Fratila-Cristescu)

Profit and revenue figures are shown in million euros

Note: The ranking includes companies among the 1,000 largest companies in Romania by 2012 revenue.

Sources: Finance Ministry, Trade Registry, ZF calculations