Construction Industry: The Fastest Growing Sector in the 'Real World,' Booming with Projects but Plummeting on the Stock Market

Construction Industry: The Fastest Growing Sector in the ‘Real World,’ Booming with Projects but Plummeting on the Stock Market

Written by Roberta Souza

Published on 11/01/2022 at 11:38

Updated on 11/01/2022 at 13:12

Foto: Reprodução Google

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With Increasing Interest Rates And The Price Of Materials For Civil Construction, Investors Have Been Showing Concerns About The Sector

According to estimates from the Brazilian Chamber of Construction Industry (CBIC), the civil construction sector is close to declaring one of the most active years in recent history. The increase in revenue for the sector in 2021 is expected to be 7.6%, which means the best result in ten years, mainly due to the real estate market.

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Between January and September, the civil construction segment saw a 37.6% increase in launches and a 22.5% increase in sales, according to CBIC itself. However, while the numbers reflect the current reality, this is a scenario that is gradually becoming part of the past.

The causes of this are diverse: the increase in interest rates, as well as the rising prices of materials for civil construction, drive the lack of investment in the sector. Additionally, the tighter budget of the Brazilian population and fears about the economy, which is in a technical recession after a 0.1% drop in the third quarter, are also causes of this situation.

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Cost Pressure

Eduardo Fischer, one of the presidents of MRV, one of the largest companies in the civil construction sector in the country, also shares this view. He remains optimistic but agrees that cost pressures, which affected the company’s margin, made the situation more complicated this year. “We thought that this price imbalance would dissipate in the first half and it didn’t happen. In 28 years in the industry, I’ve never seen such a strong explosion of costs in such a short period of time,” said Fischer, who noted that MRV’s shares fell by almost 35% in 2021.

The executive states that there is not much to change in 2022, but maintains the premise that there is more supply than demand. “And we are looking at this for 2023, 2024, and 2025,” he says.

Economy In Recovery

In 2022, market expectations for the real estate sector are not high. According to José Carlos Martins, president of CBIC, the civil construction industry will see an increase of no more than 2%.

In the opinion of Waldir Morgado, partner at Nexgen Capital, inflation in costs will persist, as well as the income deficit among lower-income classes, a condition that should affect companies in the construction sector, such as Plano&Plano and MRV.

“In our understanding, companies focusing more on the high-income segment should suffer less,” says Morgado.

Construction Industry: The Fastest Growing Sector in the ‘Real World,’ Booming with Projects but Plummeting on the Stock Market

With Increasing Interest Rates And The Price Of Materials For Civil Construction, Investors Have Been Showing Concerns About The Sector

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Cost Pressure

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Construction Industry: The Fastest Growing Sector in the ‘Real World,’ Booming with Projects but Plummeting on the Stock Market

With Increasing Interest Rates And The Price Of Materials For Civil Construction, Investors Have Been Showing Concerns About The Sector

Read Also:

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Family without running water in the interior of Ceará takes out a loan to drill an artesian well and discovers possible oil, but cannot use it, cannot sell it, and is left with a debt of R$ 15,000.

On the Greek island of Ithaca, archaeologists have found what may be a sanctuary dedicated to the legendary Odysseus, with inscriptions bearing his name and votive offerings that span from the Mycenaean to the Hellenistic era.

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