GROWTH DRIVERS AND GROWTH DRIVERS AND INVESTMENT OPPORTUNITIES IN INVESTMENT OPPORTUNITIES IN

EUROPEAN CONSTRUCTION TO 2016EUROPEAN CONSTRUCTION TO 2016

Michael Weingärtlermwc@michaelweingaertler.com

Metal Expert Europe Steel Trade Conference 2014

28 April 2014 - Stresa, Italy

OVERVIEW

Macro-economic Framework

Overall Trends in Construction

Construction Outlook by Sectors Housing Non-residential construction Civil Engineering

EUROCONSTRUCT NETWORKEUROPE (EC-19)Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Nether-lands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Czech & Slovak Republic, Hungary, Poland.

BIG 5 CountriesFrance, Germany, Italy, Spain, United Kingdom

Northern EuropeNorway, Sweden, Finland, Denmark, Ireland

Smaller European CountriesAustria, Belgium, Netherlands, Portugal, Switzerland

Eastern EuropeCzech Republic, Hungary,Slovak Republic, Poland

ES

FR

PT

IR

UK

FI

SE

NO

DEPL

DK

AT HUCH

CZSK

IT

NLBE

DOUBLE DIP IN CONSTRUCTION

-9,0

-5,2

-10

-5

0

5

10

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

GDP EC-19Total Construction EC-19

Source: EUROCONSTRUCT .

WHAT HAPPENED?

(1) INCREASING

WORLD TRADE

(2) DYNAMICEXPORTS

(3) MACHINERYINVESTMENTS

(4) CONSTRUCTION INVESTMENTSEUROPEAN EUROPEAN

PUBLIC PUBLIC DEBT DEBT CRISISCRISIS

THREE STEPS OF ECONOMIC RECOVERY

2008

2009

2010

2011

2012

2013

2014

GDP0.3 – 4.1 2.2 1.8 – 0.2 0.1 1.4

Exports1.4 –

11.210.5 6.0 2.4 1.4 4.2

Fixed Capital Investment – 0.9 –

12.00.7 2.1 – 2.2 – 2.7 2.5

Private Consumption0.2 –1.2 1.4 0.5 – 0.4 0.0 1.1

Public Consumption2.3 2.3 0.9 0.0 0.0 0.4 0.2

Construction– 3.9 – 9.0 – 3.4 0.3 – 5.2 – 3.0 0.9

Investments

Consumption

World Trade Exports

Construction

Time lag 2-4 quarters 2-4 quarters

Source: EUROCONSTRUCT .

HOW WILL IT GO ON?

-9,0

-5,2

-4

-2

0

2

4

'13 '14 '15 '16

GDP EC-19Total Construction EC-19

Source: EUROCONSTRUCT .

EUROPEAN CONSTRUCT ION 2014

low volume high volume

low

acti

vity

h

igh

acti

vity

low volume high volume

low

acti

vity

h

igh

acti

vity

Volume: construction output per capita in mill. Euro (horizontal axis)Activity: real annual average growth 2014 in % (vertical axis)

ATBE

DK

FIFR

DE

IR

IT NL

NO

PT

ES

SF

CHUK

CZ

HU

PL

SK

-8-6-4-202468

1012

0 2 4 6 8 10

average volume

ave

rag

e g

row

th

ave

rag

e g

row

th

RENOVATION DOMINATES WESTERN CIVIL ENGINEERING & NON-RESIDENTIAL EASTERN EUROPE

21%

18%

22%

30%

17%

BUILDING RENOVATION542 bill. €

16%

31%

45%

NEW HOUSING 215 bill. €

NEW NON-RESIDENTIAL196 bill. €

TOTAL CIVILENGINEERING263 bill. €

NEW HOUSING 12 Mrd. €

NEW NON-RESIDENTIAL21 bill. €

EC-15 EC-4

BUILDING RENOVATION16 bill. €

TOTAL CIVILENGINEERING21 bill. €

Source: EUROCONSTRUCT. – Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic.

European Construction – A 1.28 bn Euro Market (2013)

SLOW RECOVERY IN CONSTRUCTION

Source: EUROCONSTRUCT. – Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic.

96

107

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Western Europe EC-15

GDP

Total Construction

113

102

8680

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Eastern Europe EC-4

GDP

Total Construction

gdp and construction outputindex 2010 = 100

without Poland

SLOW RECOVERY IN CONSTRUCTION

Source: EUROCONSTRUCT. – Northern Europe: Denmark, Finland, Ireland, Norway, Sweden. Smaller Countries: Belgium, Netherlands, Austria, Portugal, Switzerland.

gdp and construction outputindex 2010 = 100

113

112

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Northern Europe

GDP

Total Construction

107

102

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Smaller Countries

GDP

Total Construction

RECOVERY OF NEW HOUSING IN EUROPE

90

95

100

105

110

115

13 14 15 16

00 0102 0304 0506 0708 09 10 11 12 13

NEW HOUSING

TOTAL

HOUSING RENOVATION

Source: EUROCONSTRUCT .

housing outputindex 2013 = 100

500

550

600

650

700

750

800

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

LONG TERM HOUSING IN EC-19total housing outputin billion Euro at 2012 prices

– – 3434%%

+ + 6%6%

Source: EUROCONSTRUCT .

500

550

600

650

700

750

800

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

BACK TO 2010 total housing outputin billion Euro at 2012 prices

Source: EUROCONSTRUCT .

TOTAL HOUSING IN BIG-5 COUNTRIES

-30

-25

-20

-15

-10

-5

0

5

10

15

France Germany Italy Spain United Kingdom

bn E

uro

10-13 13-16volume change in billion Euro

Source: EUROCONSTRUCT .

20

30

40

50

60

70

80

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

HOUSING TRENDS – NORTHERN EUROPE

– – 2828%%

+ + 17%17%

total housing outputin billion Euro at 2012 prices

Source: EUROCONSTRUCT. – Northern Europe: Denmark, Finland, Ireland, Norway, Sweden.

30

40

50

60

70

80

90

100

110

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

HOUSING TRENDS - Smaller Countries

– – 1010%%

+ + 4%4%

Source: EUROCONSTRUCT. – Northern Europe: Denmark, Finland, Ireland, Norway, Sweden. Smaller Countries: Belgium, Netherlands, Austria, Portugal, Switzerland.

total housing outputin billion Euro at 2012 prices

TOTAL HOUSING - SMALLER COUNTRIES

-4

-3

-2

-1

0

1

2

3

4

Austria Belgium Netherlands Portugal Switzerland

bn E

uro

10-13 13-16volume change in billion Euro

Source: EUROCONSTRUCT .

0

5

10

15

20

25

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

HOUSING TRENDS – EASTERN EUROPE

– – 2121%%

+ + 9%9%

Source: EUROCONSTRUCT. – Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic.

total housing outputin billion Euro at 2012 prices

TOTAL HOUSING – EASTERN EUROPE

-2

-1

0

1

2

Czech Republic Hungary Poland Slovak Republic

bn E

uro

10-13 13-16volume change in billion Euro

Source: EUROCONSTRUCT .

SIGNIFICANT GROWTH DIFFERENCESaverage housing permits per 1000 inhabitants 2013-2016

Source: EUROCONSTRUCT .

RENOVATION DOMINATES HOUSING OUTPUT IN WESTERN EUROPE

8576 76 72

62

33

1524 24 28

38

67

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Denmark Ireland Italy Germany EC-15 EC-4

HousingRenovation

New Housing

share of new construction and renovation in european housing markets in 2013 in %

Source: EUROCONSTRUCT .

TOTAL HOUSING PRODUCTION

ES

FR

PT

IR

UK

FI

SE

NO

DEPL

DK

AT HUCH

CZSK

IT

NLBE

average growth 2013-2016: 2.0%

4% and above

2% to less than 4% 1% to less than 2%below 1%

shrinking market

Western Europe: 1.1%Eastern Europe: 2.6%

Source: EUROCONSTRUCT .

MINOR RECOVERY IN EUROPEAN NON-RESIDENTIAL CONSTRUCTION

00 01020304 0506 070809 10 11 12 13 14 15 16

90

95

100

105

110

13 14 15 16

Renovation

Total

New

non-residential construction outputindex 2013 = 100

Source: EUROCONSTRUCT .

BEST OUTLOOK:NEW INDUSTRIAL CONSTRUCTION

Source: EUROCONSTRUCT .

new non-residential construction outputindex 2013 = 100

95,0

105,0

115,0

125,0

2010 2011 2012 2013 2014 2015 2016

Industry

Office

Public

Total

Commercial

95

107

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Western Europe EC-15

GDP

Non-Residential

113

109

96

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Eastern Europe EC-4

GDP

Non-Residential

POOR NON-RESIDENTIAL PERFORMANCE

Poland,excluded

gdp & non-residential construction Outputindex 2010 = 100

Source: EUROCONSTRUCT. – Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic.

BIG-5 EUROPEAN COUNTRIES STAGNATION IN NON-RESIDENTIAL CONSTRUCTION

GermanyUnited KingdomItaly

FranceSpain

BIG-5

90

95

100

105

110

115

120

10 11 12 13 14 15 16

France22%

Germany28%Italy

17%

Spain8%

United Kingdom

25%

new non-residential construction outputindex 2013=100

Source: EUROCONSTRUCT .

NORTHERN COUNTRIESaverage growth 2013-2016: +4.3%

90

100

110

120

130

140

10 11 12 13 14 15 16

Denmark15%

Norway38%

Sweden17% Finland

23%

Ireland7%

Denmark

Ireland

FinlandSwedenNorway

new non-residential construction outputindex 2013=100

Source: EUROCONSTRUCT .

SMALLER WESTERN EUROPEAN COUNTRIESaverage growth 2013-2016: +1.5%

Netherlands

AustriaSwitzerland,BelgiumPortugal

90

100

110

120

10 11 12 13 14 15 16

Austria20%

Belgium26%

Netherlands24%

Switzerland22%

Portugal8%

new non-residential construction outputindex 2013=100

Source: EUROCONSTRUCT .

CENTRAL EASTERN EUROPEAN COUNTRIESaverage growth 2013-2016: +2.5%

Hungary

Poland

Czech RepublicSlovak Republic

Czech25%

Hungary9%

Poland60%

Slovak Republic

6%

90

100

110

120

10 11 12 13 14 15 16

new non-residential construction outputindex 2013=100

Source: EUROCONSTRUCT .

NON-RESIDENTIAL OUTLOOK

ES

FR

PT

IR

UK

FI

SE

NO

DEPL

DK

AT HUCH

CZSK

IT

NLBE

average growth

2013-2016: 1.2%

3% and above

1.2% to less than 3% 0.6% to less than 1.2%below 0.6%

shrinking market

Western Europe: 1.1%Eastern Europe: 2.6%

Source: EUROCONSTRUCT .

CIVIL ENGINEERING OUTLOOK

89

107

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Western Europe EC-15

GDP

Civil Engineering

113

97

8270

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Eastern Europe EC-4

GDP

Civil Engineering

gdp and civil engineering outputindex 2010 = 100

Poland,excluded

Source: EUROCONSTRUCT. – Western Europe: Belgium, Denmark, Germany, Finland, France, Ireland, Italy, Great Britain, Netherlands, Norway, Austria, Portugal, Sweden, Switzerland, Spain. Eastern Europe: Czech Republic, Hungary, Poland, Slovak Republic.

CIVIL ENGINEERING OUTLOOKgdp and civil engineering outputindex 2010 = 100

112

112

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Northern Countries

GDP

Civil Engineering

107

98

70

80

90

100

110

120

'10 '11 '12 '13 '14 '15 '16

Smaller Countries

GDP

Civil Engineering

Source: EUROCONSTRUCT. – Northern Europe: Denmark, Finland, Ireland, Norway, Sweden. Smaller Countries: Belgium, Netherlands, Austria, Portugal, Switzerland.

40

11515

18

11

ROAD SECTOR DOMINATES CE

ENERGY 43 bn. €

STRUCTURE IN CIVIL ENGINEERING PRODUCTION OUTPUT 2013

ROADS 94 bn. €

RAILWAY45 bn. €

EC-19 EC-4

OTHERTRAFFIC22 bn. €

ROADS 8.5 bn. €

RAILWAY2 bn. €

TELECOM & OTHER CE2 bn. €

OTHER TRAFFIC1 bn. €

WATER36 bn. €

ENERGY 3 bn. €

WATER4 bn. €

TELECOM & OTHER CE45 bn. € 33

16815

13

16

Source: EUROCONSTRUCT .

ENERGY SECTOR AS GROWTH DRIVERtotal civil engineering outputindex 2010 = 100

Source: EUROCONSTRUCT.

90,0

100,0

110,0

120,0

130,0

2010 2011 2012 2013 2014 2015 2016

Energy

Road

Total

Telecom

Rail

Water

CIVIL ENGINEERING OUTLOOK IN BIG-5 EUROPEAN COUNTRIES total civil engineering outputindex 2013 = 100

80

85

90

95

100

105

110

2013 2014 2015 2016

United Kingdom

Germany

BIG-5

France

Italy

Spain

Source: EUROCONSTRUCT .

CIVIL ENGINEERING OUTLOOK

ES

FR

PT

IR

UK

FI

SE

NO

DEPL

DK

AT HUCH

CZSK

IT

NLBE

average growth 2013-2016: 1.5%

4.2% and above2% to less than 4.2% 0.5% to less than 2%below 0.5%

shrinking market

Western Europe: 1.3%Eastern Europe: 4.5%

Source: EUROCONSTRUCT .

SUMMARY

Economic recovery is mainly drivingEuropean Housing

Civil Engineering

HIGHEST RISKSLOW AND UNSTABLE OVERALLECONOMIC DEVELOPMENT