The three posted EUR185 million revenue together in 2011. Euroconstruct will be liquidated, while Confort and N.M. Construct are trying to reorganize.
Four years after the start of decline on the construction market, companies are still being affected. This is particularly true for those in the infrastructure business like businessman Georgica Cornu’s Confort and for civil engineering companies like Euroconstruct and N.M. Construct.
Confort is one of the largest Romanian builders, with about EUR124 million in revenue last year. However, it filed for insolvency and the Timis Court approved it on September 20. It is part of the Izometal Confort group owned by businessman Georgica Cornu, and filed for insolvency because of arrearage. At the time news about its insolvency surfaced in October, Cornu said his company had about EUR45 million in receivables to collect.
According to Finance Ministry’s data Confort’s debt amounted to EUR99 million at the end of 2011.
N.M. Construct, owned by businessman Mircea Moldovan (41) in Timisoara, according to the Trade Registry data, built a number of shopping centers for developer BelRom group in various cities throughout the country such as Botosani, Severin and Craiova.
The company’s revenue stood at almost EUR38 million and net profit amounted to more than EUR2 million last year, while this year the company found itself having to file for insolvency, which the Timis Court of Law granted at the end of September.
The officials of the Timis branch of insolvency specialist Management Reorganizare Lichidare SPRL, which the court appointed as administrator, say they will devise a reorganization plan. They blame the situation of the company on the difficulties of the business, as some beneficiaries do not pay and builders in turn cannot pay their suppliers, which prevents them from continuing to operate.
According to Finance Ministry data, N.M. Construct had about EUR22.7 million in debt at the end of 2011.
This particular problem is what the liquidators of Euroconstruct, part of Italy’s Euroholding group, are talking about, too. Euroconstruct remodeled Romania’s biggest bank BCR’s headquarters in the Bucharest Financial Plazza building in the center of the city and built the five-star Grand Hotel Italia in Cluj last year. Past work also includes a number of logistics and industrial projects, as well as a number of Kaufland hypermarkets.
“The situation of Euroconstruct SA Timisoara is the same as many other companies’. We are talking here about a vicious circle, which starts from the operating losses of the last few years. The losses caused the company to run out of cash and made it impossible for fulfill the current contracts on time,” said Rudolf Vizental, managing partner with insolvency specialist Casa de Insolventa Transilvania (CITR).
“As a result, collecting receivables has become difficult either as a result of legal disputes or as a result of the creditworthiness of the contractor, which generated the incapability to make current payments and get new contracts. The high indebtedness sped up the financial deterioration process.”
The total receivables registered amount to over EUR27 million, Vizental says, and the main creditors are six banks and leasing companies. Euroholding group also has textile and concrete products businesses in Romania, and the CITR official says the liquidation of the construction company might save other companies in the group.
“Although the company went straight to bankruptcy, the decision to choose one solution or another has to take into account and be evaluated with the group in mind. A decision was made to save those companies in the group that can realistically recover. The evaluation is in progress, and the asset liquidation will begin this year (…),” Vizental said.
Finance Ministry data show Euroconstruct had EUR19.6 million in debt at the end of 2011.
This year turned out to be extremely tough to the businesses in the construction industry, causing the insolvency or bankruptcy of other companies like Lufin Construct, Cominco and Concefa. The number of investors still active on the real estate market is low and most of the companies taking on infrastructure projects complain about payment delays.
There are other builders in Timis County, as well, such as Constructim SA, NGF Construct, Saif-Tim and Werk MB Construct, but their revenue ranged EUR3.5 million to EUR11 million last year, much lower than the revenue of the insolvent builders.
(English version by Loredana Fratila-Cristescu)