globe construction

Analysis

2018 global construction industry overview

Insight into strategies, trends, and market size

What challenges and opportunities are impacting the global construction industry? See the current economic situation, examine the performance of the world’s top construction companies, and explore the global construction industry trends that will shape the future.

Global construction industry: A positive outlook

The construction market continues to grow at a moderate pace in the context of a global economy that is showing signs of a slight deceleration. The overall long-term outlook for the global construction industry is particularly positive and the industry is expected to grow above global gross domestic product (GDP) growth over the next decade.

Factors influencing growth include population increases in emerging countries, necessary upgrades to infrastructure in developed countries, the trend toward increased residential development, and expected investments in renewables and telecommunications.

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Let’s take a closer look at some global construction industry statistics and trends:

As in prior years, Chinese companies dominate the top 100 ranking in terms of revenue, representing 41 percent of the total. Other Asian players—mainly from Japan and South Korea—and companies from the US, the UK, France, and Spain have a significant presence in the industry ranking.

Aggregate sales of the top 100 global construction companies rose by 10 percent in 2018. China state Construction Engineering, with more than USD 180 billion in total revenue, leads the ranking in 2018. Two other Chinese companies, China Railway Group and China Railway Construction, complete the top three.

As in prior years, Chinese, Japanese, US, and French companies dominate the top 100 list in terms of revenues. The predominant presence of Chinese companies in the sales ranking is mainly due to the size of the Chinese market, as international sales of Asian companies as a percentage of sales is lower than other companies in the report.

The aggregate market capitalization of our top 30 global construction companies at the end of 2018 was USD 428,622 million, down eight percent on the 2017 figure.

As for the geographical distribution of our ranking, Japan has the most companies on the list (seven), while both the US and China are represented with five companies each. Nine European groups are also included in this ranking.

In the last decade, major global construction companies have sought growth opportunities abroad. Today, the companies in our report obtain 21 percent of total revenue outside of their respective domestic markets. By geographical area, the most internationalized companies are European groups (57 percent) followed by the US (24 percent).

As in 2017, ACS is the largest international contractor among our top companies. Other European groups such as Vinci, Bouygues, Strabag, and Skanska complete the top five.

Over the past several years, five trends have shaped global construction companies and are expected to have an impact on the future of the industry.

1. Innovation. Advances in the sector are not only driven by traditional and well established construction companies, but by new disruptors as well. Materials represent an important innovation opportunity since they can have a big impact on construction costs, quality, and sustainability.

2. Competitive dynamics and margin improvement. The traditional low margins in the industry—combined with increasing project complexity, competition from Asian companies, and supply chain constraints—put extra pressure on the sector’s profitability.

3. Internationalism. Although construction companies tend to obtain higher margins in their domestic markets, the international expansion of the industry continues to be a dominant trend.

4. Compliance, regulation, and transparency. Past and recent corruption incidents, together with company failings, have clearly affected the construction industry’s reputation. There is an urgent need to enhance compliance practices at construction companies, reshape regulation, and increase transparency across the board.

5. Sustainability. Sustainable construction is becoming a requirement rather than just an extra, and firms must be able to introduce improvements in a cost efficient way.

In 2018, international sales and nonconstruction revenue of the companies in our report represented 21 percent and 22 percent, respectively. European groups appear to be the most internationalized, while Japanese and American groups are the most diversified.

A combination of favorable demographic trends and the implementation of legislative reforms are generating a wide range of infrastructure investment opportunities. Total infrastructure spending is projected to reach USD 142.5 billion in 2019 and USD 175.8 billion in 2020.

• EBIT. On average, EBIT from construction activities is 6.4 percent of sales (0.4 percentage points above 2017), while EBIT from non-construction activities averaged 12 percent (in line with 2017), resulting in a combined average EBIT margin of 6.9 percent. Thirteen groups recorded above average margins in 2018.

• Net indebtedness. Aggregate net debt to equity ratios continued to increase (a two percentage point increase compared with 2016). Debt levels of less diversified companies remain low and most diversified companies show higher indebtness ratios. On the other hand, average net debt/market cap decreased from x0.41 to x0.31 times.

• Dividend yield. In 2018, the top 30 companies reported an average dividend yield of 4.5 percent, significantly higher than in 2017 (3.4 percent).

• Return on equity (ROE). The average ROE for the top 30 companies improved, increasing from 11.6 percent in 2017 to 12.4 percent in 2018.

The bottom line?

Overall, the long-term outlook for the global construction industry is positive. We hope that the information in the report helps you understand and assess the challenges and opportunities facing the construction industry today, and in the coming years.

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