黑洞社区

The European construction league table

is a lot like the Premiership. Like the English football league鈥檚 top tier, a few names simply obliterate the opposition and then jostle with each other for the top spot.

For Manchester United, Arsenal and Chelsea read the slightly less glamorous names of Vinci, Skanska, Bouygues and Hochtief. Two years ago 黑洞社区 wrote of these hegemons in the European table: 鈥淭here seems to be no end in sight to the domination of the big four.鈥�

This is also the case in the materials producers league, where French firms Saint-Gobain and Lafarge have been trailed by the UK鈥檚 own Wolseley to fill first, second and third place respectively for the past three years.

So can any rival companies break into European construction鈥檚 elite? The traditional power bases of France, the UK and Germany should be casting nervous glances at their Spanish contemporaries.

Only one Spanish contractor, Dragados, has been in the top 10 during the past two years.

The tables are ranked by turnover but some City sources believe this may be hiding an underlying trend: 鈥淲here the Spanish move up is in terms of profitability,鈥� says one analyst.

If Spanish companies are already on parity with their greatest foreign rivals in terms of profit, it may not be long until they catch up in turnover. Spain鈥檚 construction market is consolidating heavily. Last month Dragados and ACS 鈥� placed 10th and 19th in 2003 鈥� merged to form the country鈥檚 biggest contractor. The enlarged group has already been awarded a 鈧�952m [拢670m] contract as part of the TP Ferro consortium to build and operate a high-speed railway line between Figueras, in North-east Spain, and Perpignan, in France. And the merged company鈥檚 chairman, Florentino Perez, clearly enjoys the big time 鈥� he is also chairman of the world鈥檚 most successful football club, Real Madrid.

Hungry Spanish contractors are not just looking to their own market. Who in the

UK industry can forget Ferrovial鈥檚 拢81m swoop for Amey in the middle of last year? This did not just represent a geographical diversification, but also a move into a new market 鈥� the PFI. Spanish contractors are looking to spread their wings by emulating the successful strategy used by the likes of Hochtief. The German contractor鈥檚 impressive record has largely been built by diversifying its business as the construction market has contracted in the past decade or so 鈥� its construction business is one-third of what it was a few years ago, with the cash flow used for other areas of growth.

Besides the PFI, the likeliest market of growth for Spain is considered to be toll roads. These mostly publicly funded projects offer not

only construction opportunities but also the inevitable maintenance and operating contract spin-offs. Spanish firms are looking to gain expertise in support services work to be able to properly run these contracts.

France, the UK and Germany should be casting nervous glances at their Spanish contemporaries

 

Their French counterparts may suffer by comparison: 2003鈥檚 biggest European contractor, Vinci, has been hoping to move into concessions, but just last month the government decided to delay, at the very least, any privatisation.

Toll roads, however, are just one part of a much wider investment picture in Spain. A quarter of the country鈥檚 major infrastructure programme is funded by the European Union. Sources in Spain believe this funding will maintain the country鈥檚 recent construction boom: 鈥淪ix or seven big companies will dominate in Spain for the next three to four years until the European funding dries up,鈥� says one Spanish analyst.

It is expected that Spain鈥檚 EU funding will run out in 2007. At that time, the EU will have been enlarged to incorporate several Eastern European states. Spain is unlikely to still be one of the poor boys of the EU, and funding will probably be shifted to the new member states. By which point the Spanish players should be sufficiently match fit to take on the biggest European contracts.

The top end of the materials league may be harder to edge in to. Mike Betts, a materials analyst with JP Morgan Chase, says the market has been too stable in recent years for any

major changes in the leagues to take place:

鈥淣ot a lot has happened in terms of corporate activity, such as major takeovers and mergers, since 1999 to 2000. Most acquisitions have been small 鈥� Wolseley, for example, has done several tuck-in acquisitions.鈥�

The materials firms have largely concentrated on refocusing their businesses to core activities

in tough market conditions. Lafarge, for example, has spent nearly 鈧�3bn [拢2.1bn] in divestments between 2001and 2003, largely clearing its debt. This trend seems likely to continue as materials markets remain tough and firms concentrate on maintaining their position rather than seeking major growth.

Barring any serious injuries, it seems the top materials players will remain largely the same

for years to come. The construction top dogs

are slightly less secure. Their Premiership-style dominance could be broken by the Spanish contracting equivalents of Newcastle United or Liverpool. Or will the likes of ACS and Ferrovial