Segment Report

segment-n-w

Segment North + West

The North + West segment executes construction services of nearly any kind and size with a focus on Germany, Switzerland, the Benelux countries and Scandinavia. Ground engineering can also be found in this segment.

€ mn	6M/2024	6M/2023	Δ %	Δ absolute
Output volume	3,589.32	3,628.35	-1	-39
Revenue	3,097.48	3,217.06	-4	-120
Order backlog	12,035.28	10,529.54	14	1,506
EBIT	65.52	63.45	3	2
EBIT margin (% of revenue)	2.1	2.0
Employees (FTE)	22,050	21,787	1	263

Output, revenue and EBIT

The North + West segment recorded a slight decrease of 1% in output volume to € 3,589.32 million in the first half of 2024. In the home market of Germany, growth was generated in civil engineering and in transportation infrastructures. Building construction continued to be affected by a weak residential construction sector. Apart from an expected decline in the Benelux countries, attributable to selective market cultivation, output in the segment’s other markets remained roughly at the previous year’s level. As large projects are increasingly being performed under joint venture arrangements, particularly in Germany, revenue fell by 4%. This decline is stronger than the decline in output. The EBIT continued to improve slightly at a high level, rising by 3% to € 65.52 million, due primarily to the good performance in Germany.

Output volume

Order backlog

The order backlog as at 30 June 2024 increased significantly, gaining 14% from an already high level to € 12,035.28 million, primarily due to the positive development of the home market of Germany, both in building construction and civil engineering as well as in transportation infrastructures. Notable additions to the order backlog include the construction of a shipping lock near Kriegenbrunn in Bavaria and the SuedOstLink grid expansion project. Sweden, Switzerland and the Benelux countries also made positive contributions to the order backlog, albeit to a lesser extent.

Employees

The number of employees grew slightly by 1% to 22,050 (FTE). This development is in line with growth in Germany, the segment’s largest market.

Outlook

Based on the continuing high order backlog, STRABAG expects minor growth of the output volume in the North + West segment in 2024 despite the challenging conditions.

In Germany, the situation in 2024 is varied. Building construction is expected to continue to be affected by the downward trend in residential construction. Declines in this sector should be offset by growth in public building construction and private industrial construction, however. An increase in large-volume tenders can be seen in transportation infrastructures, although price competition has recently intensified. Civil engineering is benefiting from the multi-year investment offensive in railway and cable line construction. Increased demand and new projects are also being observed in projects relating to the energy transition, particularly for transmission line projects.

Predatory pricing remains a serious concern in the Benelux countries. Here the Group will continue to pursue its chosen path of consolidation combined with a selective bidding strategy. In the Netherlands and Belgium, opportunities are likely to arise in industrial construction, particularly in projects relating to the energy transition.

The consolidation and stabilisation that was initiated in Scandinavia is continuing here as well and is showing first positive results. The focus is on medium-sized projects, primarily in residential, commercial and industrial construction.

Demand for construction services in Switzerland is expected to remain stable for the year as a whole. The growth path will be continued and supported with the necessary investments.

segment-s-o

Segment South + East

The geographic focus of the segment South + East is on Austria, Poland, the Czech Republic, Slovakia, Hungary as well as on the region South-East Europe. The environmental technology and construction materials activities are also handled within this segment.

The construction materials business, previously reported as part of International + Special Divisions, was integrated into the South + East segment with retroactive effect from 1 January 2023. The previous year’s figures have been adjusted accordingly.

€ mn	6M/2024	6M/2023	Δ %	Δ absolute
Output volume	3,143.96	3,171.41	-1	-27
Revenue	2,984.69	2,966.80	1	18
Order backlog	8,078.81	8,513.15	-5	-434
EBIT	-45.23	-7.35	>-100	-38
EBIT margin (% of revenue)	-1.5	-0.2
Employees (FTE)	26,159	26,310	-1	-151

Output, revenue and EBIT

The South + East segment recorded a slight 1% decline in output volume to € 3,143.96 million in the first half of 2024. Significant growth was registered in Poland and in transportation infrastructures in Romania. In contrast, output declined especially in Austria and the Czech Republic. In Austria, residential construction continued to decline significantly due to the stricter lending guidelines compared to other European countries and because of the current interest rate situation. In the Czech Republic, STRABAG continued to adopt a selective approach in response to increased competition in transportation infrastructures.

Revenue increased slightly by 1% year-on-year. As the share of transportation infrastructure projects in Eastern Europe is traditionally higher, the segment’s EBIT is usually negative in the first half of the year. In the first half of 2024, the EBIT amounted to € -45.23 million (6M/2023: € -7.35 million). Of note is that it was not possible to repeat the comparatively good result of the previous year in Austria.

Output volume

Order backlog

The order backlog, at € 8,078.81 million, was down 5% compared to 30 June 2023. The largest growth was recorded in Poland, the Czech Republic and Slovakia, while Austria and Hungary in particular contributed to the overall reduction of the order backlog in the segment. In Austria, this development is mainly due to a decline in residential construction activities. In Hungary, on the other hand, the negative trend is due to withheld EU funds and a lack of public-sector investments.

Employees

The number of employees remained stable in the first half of 2024, totalling 26,159 FTE. Slight declines in individual countries were more or less offset by corresponding increases in other markets.

Outlook

Starting from an above-average level in the previous year, the output volume in the South + East segment is expected to decline in 2024. It can be assumed, however, that output will remain significantly higher than the comparable figure for 2022.

In Austria, building construction has been negatively impacted by the continued sharp decline in residential construction. This is due to the combination of elevated interest rates and stricter lending guidelines compared to the rest of Europe. It has become apparent that the Austrian government’s housing package will only have a delayed impact, meaning that positive effects are not expected until 2025 at the earliest. Despite a stable tendering situation, transportation infrastructures in Austria are facing greater price pressure. A stable to declining trend can be observed in material and subcontractor prices.

In Poland, tenders for transportation infrastructure projects were down following the change of government and the local elections. The release of EU funds from the Covid-19 recovery plan, which the new government has been able to obtain, should now provide positive momentum. In addition, government spending has been increased, above all in national defence. There are also signs of an upturn in railway construction. The private investment climate has improved significantly, and a positive dynamic can be expected in industrial construction. Large-scale investments have been announced for the coming years, for example in the areas of mobility and energy.

The situation in Hungary continues to be challenging. Withheld EU funds and a lack of public investment are reflected in a significant decline in construction volumes. A positive factor, however, are the orders from the automotive industry and from automotive suppliers manufacturing in the country.

In general, increasing tender volumes are being seen in Czech transportation infrastructures, including railway construction. Predatory pricing remains a serious issue among larger projects, however. The focus in building construction will be on public-sector contracts, for example in the areas of social infrastructure and national defence. The declining interest rates could lead to a revitalisation of the residential construction market starting in 2025. In addition to the modernisation of the Masaryk railway station, STRABAG was also recently commissioned to build the new headquarters of Česká spořitelna in Prague.

Following the formation of the new government in Slovakia, the number of projects put out to tender in transportation infrastructures and in civil engineering is again on the rise. In building construction, stagnation can be observed in residential and industrial construction due to the prevailing market environment. In May, STRABAG was awarded a major contract to extend the F.D. Roosevelt University Hospital in Banská Bystrica.

The development of demand in the markets of South-East Europe is mixed. While the focus in Croatia is currently on transportation infrastructures and industrial construction, Slovenia is concentrating on infrastructure projects. In July, STRABAG was awarded the contracts for three projects in Slovenia, including a building complex for the University of Veterinary Medicine in Ljubljana. In Romania, public tenders are expected to be delayed due to several upcoming elections in the country. Increased competition from outside Europe is also noticeable.

The building materials and environmental technology activities that are bundled in the South + East segment are showing a satisfactory trend overall. These activities are of key importance for the action areas of circularity and expertise in the energy sector in our Strategy 2030.

segment-i-s

Segment International + Special Divisions

The International + Special Divisions segment comprises the majority of STRABAG SE’s non-European business in addition to its global tunnelling activities. The segment also encompasses infrastructure development, real estate development, and property and facility services, irrespective of where these are performed.

€ mn	6M/2024	6M/2023	Δ %	Δ absolute
Output volume	1,481.03	1,345.93	10	135
Revenue	1,369.68	1,469.29	-7	-100
Order backlog	5,053.19	5,197.35	-3	-144
EBIT	66.62	42.36	57	24
EBIT margin (% of revenue)	4.9	2.9
Employees (FTE)	21,532	19,889	8	1,643

Output, revenue and EBIT

The International + Special Divisions segment generated a 10% higher output volume of € 1,481.03 million in the first half of 2024. The strongest growth was registered in Germany following an acquisition in the property and facility services portfolio, specifically in mechanical and electrical (M&E) services and energy management, and due to the realisation of tunnelling projects. The gradual fulfilment of major projects in the United Kingdom and an acquisition in M&E and energy management in Luxembourg also contributed to the increased output. In contrast to the output volume, revenue fell by 7% to € 1,369.68 million, reflecting the change in the revenue-to-output ratio from 109% to 92%. This is mainly because in real estate project developments revenue is only recognized once an investor is secured. The segment is subject to regular fluctuations due to the presence of large-scale and mega-sized projects. All of this contributed to an increased EBIT, which grew by 57% to € 66.62 million, following a decline in the previous year. This development is primarily due to the absence of negative impacts on earnings in the international project and tunnelling business.

Output volume

Order backlog

The order backlog as at 30 June 2024 fell to € 5,053.19 million, which is down 3% in a year-on-year comparison but only slightly below the multi-year average. In Germany, notable additions to the order backlog were made with the extension works for the U5 underground lines in Hamburg and Munich. Growth was also recorded in Italy, particularly in building construction and road maintenance. These developments were more than offset by declines in the United Kingdom and the Americas, however, where major and mega projects are currently in the process of being fulfilled.

Employees

Given the relative size of the individual projects within the International + Special Divisions segment, the number of employees generally fluctuates greatly. In the first half of 2024, this figure increased significantly by 8% to 21,532 (FTE). In line with the performance trend and as a result of enterprise acquisitions, more staff were employed in Germany and the Benelux region in particular.

Outlook

For 2024 as a whole, the International + Special Divisions segment is expected to achieve a noticeably higher output volume than in the previous year, supported especially by the order situation in tunnelling.

Due to the size of the projects, the tunnelling business is subject to constant volatility. Several major projects are currently being fulfilled in the United Kingdom and in Canada. In Canada, STRABAG has also been commissioned with the expansion of a rapid transit line, including the construction of a 500-metre-long tunnel. Following successful acquisitions in Chile, further opportunities could arise in the business field of mining in the second half of the year.

The international business, with its focus on established markets in the Middle East, India and Chile, is showing signs of significant output growth. Decarbonisation and energy transition are opening up new opportunities in the international business as well. The increased resilience of the global economy has also led to an improvement in the supply chain situation.

Stable development, combined with opportunities for organic growth, is expected in the property and facility services business in 2024. The expansion of M&E and energy management expertise is progressing as planned through the enterprise acquisitions in Austria, Germany and Luxembourg. The goal here is to establish a service portfolio for the decarbonisation of existing properties.

In infrastructure development, important major projects were delayed or cancelled in the first half of the year. In the second half of the year, new infrastructure tenders are expected in several of the core markets and in South America. In line with the Strategy 2030, STRABAG is focusing more strongly on the development of renewable energy projects in its core markets.

Real estate development is being adversely affected in particular by the interest rate development and the bleak economic environment. At the same time, there are signs of a supply gap, particularly for sustainable properties. Possible further interest rate cuts could gradually stabilise the environment for property developers. Still, a noticeable increase in transaction activity, especially in the commercial sector, is not expected until 2025 at the earliest. Possible opportunities arising from consolidation in the real estate sector are being actively evaluated.

Segment Other

This segment encompasses the Group’s internal central divisions and central staff divisions.

€ mn	6M/2024	6M/2023	Δ %	Δ absolute
Output volume	114.98	112.93	2	2
Revenue	10.54	31.22	-66	-21
Order backlog	24.61	80.44	-69	-56
EBIT	2.67	-3.02	n.a.	6
EBIT margin (% of revenue)	25.3	-9.7
Employees (FTE)	7,596	7,565	0	31