VIENNA (Reuters) - A lack of bank financing, not demand, is the main factor holding back construction projects in emerging Europe at the moment, the region’s biggest builder Strabag told the Reuters Central European Investment Summit.
Board member Thomas Birtel, who oversees Strabag’s building and civil engineering business, said that a lot of its customers in Poland had promising plans that they could not realize because of a lack of bank funding.
“We have a lot of customers who have convincing ideas because the deficit in the CEE countries - for instance Poland - in private infrastructure is so obvious,” Birtel said, citing shopping malls in medium-sized cities as example.
“It is convincing that they believe such a project could become successful also these days but what they are saying to us is that they are having a problem to get the financing means from the banks,” he said.
His remarks contrasted with those of the region’s top banks speaking earlier at the Reuters Summit, including Unicredit (CRDI.MI), Raiffeisen International RIBH.VI and OTP OTPB.BU, which all said that the reason for stagnant loan books was weak demand, rather than restrictive credit policies.
Birtel said the only country for which the situation was different was Russia. Russian banks including Sberbank SBER03.MM and Bank VTB (VTBR.MM) have slowly started to grow loan volumes again in return for state aid they received.
“We see (financing picking up) for Russia. There are certain banks which have certain links to the Russian Federation who seem to be more ready to finance projects than before,” he said.
“But in all countries where the banking sector is privately driven we see that they are still very, very cautious.”
RUSSIAN HOPES RE-EMERGE
Strabag, which has some 4 billion euros ($5.9 billion) in output per year in emerging Europe, once hoped to double its output in Russia every year after Russian magnate Oleg Deripaska bought a 25 percent stake in the company in 2007.
But the financial crisis scuppered those plans and it now expects its annual output there to remain flat at around 400 million euros per year. Instead, Poland rose to become the company’s second-biggest area, overtaking Austria.
However, Strabag has now become more optimistic about its chances of work on projects related to the 2014 Winter Olympics in the southern Russian city of Sochi.
Birtel confirmed Strabag expected this year’s output and operating profit to be largely unchanged from 2008. For 2010, he said he expected “no dramatic changes” in either direction.
Strabag, which had gone on a spree of acquisitions until the end of last year, is not in a buying mood at the moment, but is digesting the deals it had done in the past, Birtel said. That would not rule out selective deals if opportunities arose.
Writing by Boris Groendahl; Editing by Rupert Winchester and Erica Billingham