study of the situation in the building materials and supply industry

• The crisis affects most of the building materials and supply industry
• 69 percent of the companies in this sector suffered drops in sales and earnings in 2009
• 64 percent don't expect to see a recovery until 2011 or later
• However, the majority also see opportunities in the crisis, especially to improve market share and consolidate their own company

The crisis affects most of the building materials and supply industry. 88 percent of the companies are feeling the effects of the crisis. Almost 50 percent assume that it will bottom out in the first half of 2010. This is the conclusion of a study conducted by Roland Berger Strategy Consultants on the effects of the economic situation on the building materials and supply industry. 64 percent of the companies surveyed don't expect to see a tangible recovery from the crisis until 2011 or later. Companies focusing on constructing new buildings are comparatively pessimistic, while many "renovators" expect the economy to start picking up steam in the second half of 2010.

"The crisis will keep a firm grip on the building materials and supply industry in the years to come," says Kai-Stefan Schober, Partner at Roland Berger Strategy Consultants and author of the study "Effects of the current economic situation – Opportunities, risks and action packages". 88 percent of the companies responding to the questionnaire say they feel the effects of the crisis within their own company, and 90 percent are of the opinion that the entire sector will continue to suffer from it for at least another two years. Just one year ago this figure was 10 percent lower. Almost 50 percent of the respondents think that the crisis will reach its low point in the first half of 2010. But still 64 percent don't expect a recovery to set in until 2011 or later. In their estimations the companies vary depending on their core field of activity: Whereas companies that build new buildings tend to be pessimistic with regard to the near future, 57 percent of "renovators" expect the economy to already regain momentum in the second half of 2010.

The industry is struggling with declining sales and earnings

69 percent of the companies surveyed suffered sales and earnings drops in 2009. One fifth of these had to come to terms with more than 20 percent downturns, and one third turned over 10 to 20 percent less than the previous year. In contrast, one in four companies was able to increase its earnings. One major problem for many companies is receivables: "64 percent are having to deal with delayed payments from customers. This is 40 percent more than in the previous year's study," says Roland Berger expert Schober.

It is also proving difficult to borrow money. While companies with strong sales can't seem to secure loans, smaller companies are struggling with liquidity bottlenecks. And the opinion of the economic rescue package has worsened considerably over the last year, with only 56 percent (2009: 70 percent) of respondents expecting it to have a positive effect on their business. Nonetheless, for around 60 percent of the responding companies the rescue package did take hold in 2009, and one third of them expect it to do so this year. However, 79 percent criticize the way that the package aids some segments and not others. Problems with tenders and the awarding of contracts are also mentioned in the questionnaire more frequently than in 2009.

Fear of insolvencies and developments at the customers

When asked about the risks of the economic crisis, 95 percent of the companies surveyed mentioned fears of their own insolvency and insecurity with regard to developments at their (key) customers. Among the further risks cited were consolidation (89 percent) and increasingly expensive raw materials (82 percent). But despite this, many companies also see opportunities in the crisis. For example 90 percent see the chance to improve their market share – just one year ago this figure was only 80 percent. All companies surveyed said they were working on actions to surmount the crisis, with cost-oriented activities playing a greater role than sales-based or strategic actions. Indeed, 81 percent of the respondents were already successfully applying cost-cutting actions, while only 45 percent had been able to improve their sales. The larger of the surveyed companies still see the consolidation of their own organization as an opportunity, just as they did last year, while only three quarters of the smaller ones consider the situation in the same way. Berger Partner Schober says: "Construction companies that want to emerge stronger from the crisis have to start specific action packages now if they haven't done so already."