Fog in the spring

If you had imagined a few weeks ago that the central banks were actually considering lowering monetary policy and raising interest rates instead of tightening them, then you would have ended up rather disappointed. The lack of clarity from forward indices and the official statements of central banks (which, in the case of the biggest of them all, the US Fed, comprise announcements of stern decisions to come) have demonstrated that monetary policy can wreck the mood on stock markets. At the beginning of May, US interest rates rose to the highest they have been since 2007 and the accompanying statements left little doubt that the world’s most important central bank intended to continue its battle against inflation, thus clearing the way for other financial institutions to do the same.

The Polish economy was also sending out mixed signals. It appears that industrial production has bottomed out (in April, total production fell by 6.4 pct – the biggest drop since May 2020 during the pandemic). Retail sales had another negative month in terms of growth rates, but not as weak as economists had expected. It seems that consumer spending has also hit rock bottom, so some kind of rebound should be on its way soon. Construction, however, saw a modest rise of 1.2 pct y-o-y, but after adjusting the results for calendar days, the real figure turned out to be closer to 4 pct and was even an improvement on March. The data shows a partial recovery in infrastructure investment (including a rise in sites being prepared for construction and in the number of ongoing civil engineering projects). This is a result of the 2014–2020 EU budget coming to an end, although according to economists the figures also reflect investments in energy efficiency. However, for the sixth month in a row, housing construction showed a negative year-on-year growth. But even here help should soon be on its way. At the end of May, the Sejm passed a bill to provide cheaper mortgages, which if these are made available over the summer the effects could become evident in the third or fourth quarter. When it comes to the Polish Central Bank, there’s little chance of it reducing interest rates in response to the predicted recovery in consumer spending mentioned earlier, which should result from the strong labour market and falling inflation. However, for the moment the April housing data show a slump of almost 40 pct in construction launches and figures 30 pct down in comparison to the first four months of the year.

Quite a lot is happening for residential developers. Echo Investment intends to concentrate its housing construction and sales activities in Archicom (which it acquired two years ago) in order to increase its transparency for investors, while leaving its commercial activities and its PRS platform with Echo itself. Archicom is thus to become its base from which it is to expand into residential development and further takeovers haven’t been ruled out. But for the time being, a big difference can be seen in the housing sales figures. In the first quarter, sales fell by 47 pct y-o-y, while in comparison to Q4 2022, they were down by almost 20 pct. Nonetheless, the gross margins are still impressive and remain above 30 pct, while for Archicom they are even as high as 40 pct. High margins also feature in Atal’s results for the first quarter, and although its sales were also down by over 40 pct y-o-y, they have actually risen in comparison to Q4 2022. According to Atal, for the rest of the year we are going to see higher demand, so it should end with similar figures to last year. To complete the good news from the company, it has announced that it is going to pay out a dividend. Develia also enjoyed margins of over 30 pct and a rise in sales of 30 pct on the final quarter of 2022. The company is preparing for the market to rebound and wants to use more than PLN 320 mln generated from its sales of commercial properties for expansion in the residential sector. Dom Development, the market leader, saw higher sales both year-on-year and quarter-on-quarter, which appears to confirm the rumours of a market rebound. The company claims that this is due to the loosening of the rules for granting mortgages as well as interest rates stabilising. To add to the good news, the company has recommended a dividend payment of PLN 11 per share. The greater access to mortgages should result in a lower share of home purchases for cash. The chairman of Robyg’s supervisory board, in a recent interview with ‘Parkiet’, has predicted that by Q3 2022 this share could fall to 50 pct from 85 pct the same time last year.

Unlike many stock market listed developers who share their profits with their shareholders, GTC has decided to keep the PLN 109 mln profit that it made in 2022 and could buy back some of its own shares, which it says would be a more attractive option than a dividend for its shareholders.

Budimex has been having a run of good results in the construction sector. Rising revenues and an improved order book (worth almost PLN 13 bln, over half of which are road and rail contracts) as well as the good weather have all resulted in a rise in both gross and net profits (although to be honest some of this was generated by interest on deposits, since the company holds over PLN 3 bln in cash). The company is also in a generous mood towards its shareholders, having announced a dividend worth PLN 17.99 per share. Finally, it’s worth mentioning the planned withdrawal of Capital Park from the WSE, while also noting that the majority shareholder wanted to take the PLN 1 bln valued company off the stock exchange several years ago. (Mir)