confusion Finland’s construction industry suffered its biggest casualty yet on Tuesday.
Helsinki Stock Exchange-listed construction conglomerate Lehto Group has announced the bankruptcy filing of its commercial and residential construction subsidiaries Lehto Asnot, Lehto Tirat and Lehto Korjauslakentaminen.
The conglomerate admitted that its subsidiaries do not have the funds to continue operations. Subsidiaries accounted for most of the group’s 2022 reported sales of 345 million euros, but had debts of more than 66 million euros, Helsingin Sanomat said.
Trading in Rate Group shares was suspended on the Helsinki Stock Exchange on Tuesday.
Helsingin Sanomat pointed out on Tuesday that Rate Group has experienced a dramatic decline in both revenue and operating profit in recent years. The group reported an operating profit of 37 million euros on revenue of 720 million euros in 2018, but in the first three quarters of last year, revenue totaled only 154.5 million euros, with an operating result of 23.5 million euros. The euro fell into the red.
Still, according to Rakennuslehti’s analysis, Lehto Group was the 11th largest company in the domestic construction industry by revenue.
The conglomerate said it is considering options to sell, restructure or continue operating both the parent company and its remaining subsidiaries. CEO Thirteen-year-old seed garden In an interview with Helsingin Sanomat on Tuesday, he declined to name which option was more likely than another.
“There are so many parts in play that I can’t say anything about probabilities. All options are on the table,” he said.
Rate Group has been pursuing a variety of ownership and structure-related solutions over the past year to weather the construction industry downturn.
In October, the company put on paper a letter of intent to sell the subsidiary to an unnamed investor. The sale collapsed in December, with the conglomerate warning it would not be able to meet its financial obligations in the first quarter of this year without additional funding.
juhana brothersSuomen Irittajet’s chief economist told Helsingin Sanomat on Wednesday that the construction industry is unlikely to see any respite in the near term, and bankruptcies are likely to remain high at least until the second half of the year.
“The near-term outlook for construction remains very difficult. Whether you look at it through the number of building permits, industry confidence or just about any other indicator, this is very difficult,” he said.
According to Statistics Finland, the volume of new construction permits between September and November was 17% lower than a year ago. Meanwhile, the Confederation of Finnish Industry (EK) reported that the confidence index for the construction industry in January was -39, well below the long-term average of -7.
Sami PakarinenThe EK director stressed that the situation in new home construction is as bad as it was in the 1940s, with demand for new homes decreasing due to increased supply and rapidly rising interest rates.
“The construction industry is in the most serious situation of any major industry,” he summarized.
“Things could become even more difficult for companies in the winter and spring as some ongoing projects are completed and companies are not preparing new workplaces. ” warned Brothers in an interview with Helsingin Sanomat.
However, there are some bright spots.
“With lower interest rates, conditions in the construction industry will start to ease quickly, because the structure of the loan stock is such that lower interest rates will pass through quickly, and the construction industry is very sensitive to interest rates.” explained Brothers.
Blasz said Finland should recover quickly because there was no “unnecessary construction”. Therefore, tenants for new homes and offices that remain vacant need to be found sooner rather than later.
“The growth center population growth last year was unusually large, if not historic, so the need for construction still exists,” he added. “The market is gradually starting to reflect the fact that there are no projects in the pipeline that will be completed soon. At that time, the balance of demand and supply will shift to a different position than it is now, but primarily it will be It’s going to be a phenomenon in 2020.”
Aleksi Teivainen – HT