Construction Today - December 2017 - 97

IN THIS SECTION
health. In Germany for instance, high employment rates, low interest rates and the recent influx of refugees and asylum seekers are increasing housing demand and accelerating construction growth. In
the United States, the sector's healthy growth over the last few years
has been aided by a burst of non-residential construction. Growth is
expected to continue expanding if the Trump administration makes
good on promises to invest heavily in infrastructure improvements.
However, political gridlock and shifting priorities mean this might
not come to fruition.
Two countries with poorly performing construction sectors due
to poor economic health are Italy and Saudi Arabia. Italy's barely existent GDP growth - only 0.8 percent in 2016 and even less
predicted for 2017 - has caused the construction sector to contract.
Investments in the sector are expected to decrease 1.2 percent by
the end of this year, with new housing investments down 3 percent
and public works investments down 3.5 percent. In Saudi Arabia,
tanking oil prices have deteriorated the larger economy. Because the
Saudi government is the largest sponsor of construction activities, the
construction sector has keenly felt the squeeze.
Payment practices and the rate of insolvencies offer another way to
gauge the health of a particular area's construction sector. Slow payment is a common issue in construction worldwide, putting a strain
on suppliers' liquidity. In Italy, for instance, payment can take as long
as 5.5 months, the problem exacerbated by tight lending conditions
and habitual late payments from public entities. Saudi Arabia doesn't
fare any better by this measure - here, average payment duration is
120 to 180 days, and non-payment notification and insolvencies have
recently been on the rise.
Even Germany, which has one of the most stable construction
sectors globally, isn't immune to these risks. Average payment time is
as high as 45 to 50 days, putting pressure on smaller firms. Although
insolvencies have decreased in recent years, the proportion is higher
than in other German trade sectors, accounting for about 16 percent
of all business failures.

Evaluating Micro Risks
To evaluate risk on a granular level, payment practices and length
of time in business should be scrutinized. In terms of the former,
trading experiences of at least a year can provide valuable insight,
as can the payment experiences of peers. End buyers can also reveal
a lot about a company's payment practices. Just one poor end buyer
can have a trickle-up effect, negatively impacting the entire supply
chain. And while newer companies don't automatically pose a high
risk, businesses should put extra precautions in place before trading with them. These precautions can include requiring financial
insight and supplier-friendly terms and obtaining bank or parent
company guarantees.

Conti Enterprises
Inc. - I-295 p.104

Conti nears completion
on phase two of a major
Interstate project.

Conti Enterprises
- Newark Airport

p.106
The airport's fuel pipeline
is being upgraded.
Company Profiles
98
100
104
106

Drill King International
BarrelMover 5000
Conti Enterprises - I-295
Conti Enterprises - Newark Airport Fuel Pipeline Modification
108 BRB Contractors Inc.
110 Boudreau Pipeline

The size of the firm can matter, too. In general, larger companies tend to be more stable
than small- and medium-sized businesses.
They also benefit from high margins in
private-public projects and are more able to
look for business opportunities abroad. Small
construction companies, on the other hand,
traditionally have weak equity ratios and
limited financial scope, and are especially
vulnerable to payment delays and defaults.
Trade credit insurers can protect businesses against payment risks, but they also
can provide analysis and guidance on the
front-end of any new business venture and
alert companies of any uptick in instability
on both a micro and macro level.
Kristopher Stahle is a risk underwriter analyzing the construction/construction
materials sector for Atradius' Risk Services-Americas division. He can be reached
at Kris.Stahle@atradius.com.

97

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Table of Contents for the Digital Edition of Construction Today - December 2017

Contents
Construction Today - December 2017 - Cover1
Construction Today - December 2017 - Cover2
Construction Today - December 2017 - 1
Construction Today - December 2017 - Contents
Construction Today - December 2017 - 3
Construction Today - December 2017 - 4
Construction Today - December 2017 - 5
Construction Today - December 2017 - 6
Construction Today - December 2017 - 7
Construction Today - December 2017 - 8
Construction Today - December 2017 - 9
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Construction Today - December 2017 - Cover3
Construction Today - December 2017 - Cover4
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