L. Karzinauskas: crisis is not about us


The drama of manufacturers of building materials: waiting for the end of the crisis

Manufacturers of building materials do not dispute that the real estate sector in Lithuania and Northern Europe is stuck in a crisis. But they are looking for solutions and rely on the mood of the customers that the situation is not tragic.

Data from the State Data Agency show that cement production has fallen by almost a fifth (24%) over the past year. Akmenės cementas, the country’s only cement producer, refuses to comment on the situation. The production of silicate bricks and blocks shrank by a little more than a third (33.4%), the production of corrugated sheets decreased by 36.1%, and so on.

A crisis is not for us

Linas Karžinauskas, general manager of KG Constructions Group, which produces aluminum and glass constructions, unitised facade design, and production, does not hide that the stagnation of real estate is felt in many countries. In 2022, started in Sweden, and later it spread through many countries, it also affected Lithuania.

“Producers feel and see this. Even looking at the city of Vilnius, you can count on the fingers the cranes of the constructions that interest us. But this does not scare – it is not so, that construction has stopped all over the country. Scandinavia is big, we need little, there are few competitors. Therefore, we have our own sales route”, explains the interviewer.

In 2023 KG Constructions Group’s consolidated figures show a 33% increase in sales (to 80 million. Eur, data preliminary, unaudited).

Profitability indicators are better than in 2022. – EBITDA increased 4 times compared to 2022. This is what a businessman explains by pricing.

“Due to the huge inflation of raw materials in 2022, the costs we incurred in the implementation of the projects, were reflected in 2022, and even in 2023 the result. However new projects appear, and the prices of materials such as aluminum, glass, and other assembly materials are already different. With new projects come new pricing. Therefore, we believe that the profitability should be higher this year”, calculates L. Karžinauskas.

According to him, the new product – a unique bespoke timber UCW system is currently being tested in the company – has not yet had a greater impact. Today, it is difficult to sell such facades, even in Scandinavia, where the green direction is established, due to their relatively high price.

Although the concept of sustainability was very relevant before the war started by Russia in Ukraine, now life has somewhat pushed it into the background. It is limited to some wooden details in the exterior finish or some wooden structures, but for sustainable timber buildings to be designed – so far these are isolated cases.

The general manager of KG Constructions Group predicts that this year the growth of the group will be slower, and the turnover should reach 85 million. Eur. More attention will be paid to better regulation of processes at the new factory launched last year, it is planned to optimize some departments and group companies and to make production more efficient.

Creates products, looks for new niches

Aleksandras Toropčinas, director of UAB “Sakret LT” dry construction mixes of Latvian capital, says that times are such that it is necessary to review not only the costs – this is done constantly, but also the product range and adapt it to new needs.

“Sometimes it seems that our products are where they shouldn’t be. But they are there. I mean, for example, historical plaster in the reconstruction of heritage sites. Since there was no cement in ancient times, we produce without it. Or plasters that ensure acoustics and save energy”, says A. Toropčinas.

Sakret LT almost does not export its products, after 2014 sales to the Kaliningrad region were discontinued. And the costs of exporting to Sweden, Finland or Norway are carefully evaluated, because transportation is quite expensive.

“Last year, we had to increase the price of production, so although sales fell in tons, in monetary terms they did not decrease much. But at the same time, the expenses also increased. It is true that even though energy prices went down, wages went up. In addition, electricity is becoming more expensive again,” says the director.

That the sales of silicate brick and block production AB Silikato in 2023 were similar to 2022 Mindaugas Sinkevičius, a member of the company’s board, also speaks about the results. And although the results are still being audited, it is already clear that the profit will be small. in 2022 the company finished with 0.4 million EUR loss.

The problem, according to the entrepreneur, is that the supply chain has changed, because previously “Silicatas” brought the raw material – lime – from eastern countries. Now they are transported over much longer distances and cost much more.

Profitability was also affected by expensive gas, which is consumed in large quantities in production, and last year the price of gas was high.

“We compensated most of the increased cost costs ourselves, we did not transfer them to the final price. However, there was such a surge in prices that we could hardly control it,” recalls M. Sinkevičius.

He refrains from predicting when sales of construction materials may pick up. And urges to wait at least until the end of March, when the construction season should begin.

Sold the company

Arūnas Mažonis, the manager and owner of the “Arlanga” group of companies, emphasizes that when the sector stopped both in Europe and in Lithuania, the prices also went down sharply.

“Especially in Scandinavia, we feel enormous price pressure. But if you don’t want to stop, you have to think. Our goal is to do more, working in this direction and filling the order basket”, explains A. Mažonis.

In his opinion, those who have accumulated funds from better years will survive this period. And who does not have accumulated profits, it will be very difficult.

This week, one of the companies of the “Arlanga” group – wooden window production UAB “Arlanga Wood” – was sold to Latvian wooden window manufacturers “Arbo Windows”. True, the crisis did not affect it. However, according to the entrepreneur, only brave people can plan to expand at such a time. Probably, in difficult times, Latvian entrepreneurs see future benefits in the future.

“The sales process lasted maybe a year and a half, the preliminary contract was signed in March of last year. Buyers are young, energetic, unhesitating people. The period was changing and I suggested to them, maybe it’s worth stopping and rethinking, maybe it’s not the time. I said I would understand. But this, I think, is a feature of Eastern Europe – they are hungry for business, they are energetic”, – the businessman describes buyers from Latvia.

He reminds that after 2008 crisis was a sharp rise. So if that happens – Or Windows will be a step up.

Arūnas Mažonis, founder of Arlanga group, and Janis Lasmanis, chairman of the board of Arbo Windows. Company photo

Although the green direction is becoming more and more established and “Arlanga Wood” is promising, A. Mažonis says that he sold the company because the time has come. In addition, he was left with Arlanga, Arlanga alu and Arlanga PVC, which produce aluminum and PVC windows.

Currently, according to him, sales of plastic windows produced by Arlanga PVC in Denmark have fallen drastically. By the way, in Denmark, plastic windows make up 3.7% of all windows, and the most popular are aluminum, wooden, wood forged with aluminum, etc. A few years ago, windows with PVC profiles accounted for 8%. Therefore, the company is currently actively looking for new export markets.

UAB “Arlanga alu”, which until now has worked mainly for Lithuanian buyers, is also focused on export.

According to Mažonis, the prices of raw materials are currently favorable for manufacturers – wood and glass are significantly cheaper. Plastic profiles, which became expensive during the pandemic, are also gradually becoming more expensive, although not very quickly. Therefore, it is a paradox, but currently the prices of plastic windows have equaled or even exceeded the price of wooden windows.

By the way, January 30 the shareholder of UAB “Aliteka” also changed. The bankrupt Matuizai village brick house for 10 million. The Estonian family company “Yaico”, which purchased Eur, transferred “Aliteka” to another of its companies – the construction material production and supply company “Bauroc”. Bauroc operates two aerated concrete factories in Estonia and Latvia and sells its products in the Baltic and Nordic countries. About forecasts

KG Constructions Group in 2024 higher growth of the real estate sector would not be expected. From the requests received or the projects involved, it can be seen that the clients’ decisions are very cautious, some started projects are postponed.

“Unfortunately, the situation in Scandinavia and Lithuania is unlikely to improve this year”, doubts L. Karžinauskas.

According to him, they avoid the impact of the crisis due to widely diversified exports. Sales in 2024 Norway will decrease from 47% to 14%, while the United Kingdom will increase from 9 to 18%, Sweden from 2 to 24%, and so on.

The director of “Sakret LT” hopes that recovery will begin in the real estate sector this year, and that the planned three elections will not turn into instability of the business environment. Perhaps the renovation of residential houses will accelerate.

“Let there be more consistency and logic in the rulings’ decisions.” We have survived more than one crisis, we will survive this one as well”, the company manager wishes to himself and others.

In Lithuania, part of the manufacturers of building materials sell their products in Scandinavia, so the economic situation of these countries is relevant for them.

Having visited several final buyers of production in Denmark in autumn, A. Mažonis remembers their words that the situation is not good, but, according to them, “it is possible to live”.

“After all, producers in Lithuania speak similarly. Yes, it will reduce the fat for someone, but it’s normal that you have to survive both legacies and recessions”, concludes the owner of “Arlanga”.

Compared to the construction companies of other countries, Lithuanian construction companies in 2023 performed better: avoided a wave of bankruptcies, maintained order volume. However, the managers interviewed by VŽ do not express great optimism.

“There is no shortage of current events in the sector, so just as we have never expected a quiet year until now, we do not expect them this year either.” But we are calm, because we know that the year 2024 will be successful and we are ready for challenges”, explains Romas Paliulis, manager of Gilesta UAB.

“I would say that 2024 will be the same as 2023,” believes Tomas Stukas, CEO of AB Panevėžys statybos tresto.

“We believe that project financing costs will remain high, unfortunately, this will further reduce those under development

Source: https://www.vz.lt/pramone/2024/02/29/statybiniu-medziagu-gamintoju-drama-islaukti-krizes-pabaigos#ixzz8T7PUQkZ0