Construction companies in Ukraine are one of the largest public sector industries of strategic importance for the development of the national economy and the country’s social infrastructure. Construction has a significant impact on other sectors of the economy. Capital construction requires a significant amount of labor and is a consumer of a large number of sectors of the national economy, while creating jobs for the population. The economic effect of business development is the multiplier effect of capital invested in construction projects. The following segments are developing along with the construction industry
There are many different factors that directly affect the formation of an economic security system for the construction sector, and they are exacerbated during martial law. Among them are the technical complexity of construction processes and quality control, geographical remoteness of materials, risks of movement and loss of material assets, long construction time, difficulty in organizing the coverage of the company’s financial needs, which may change during the construction process, in particular, rising prices for materials.
Construction companies: current situation
The situation in the construction industry is quite complex and unstable. In the spring and early summer of 2022, the industry’s peacetime standards did not apply. Due to the volatility of cash flows, a significant number of contracts did not receive prepayments, and payments were postponed indefinitely.
However, in early fall 2022, the business began to demand full prepayment due to significant risks. Gradually, logistics was restored and stabilized, and new supply routes were established.
Today, construction is directly linked to military factors. Only Ukraine’s victory can lead to dramatic changes in the market. Despite all the difficulties, there are several ways to reduce losses in the sector. To develop, the construction industry needs to attract significant and rapid investments from investors. At the same time, the process of attracting investments requires a positive assessment of the companies’ business activity.
Construction companies continue to operate in an environment of high risks and ongoing challenges. The market is withstanding the pressure of external circumstances at the expense of citizens and investors, who continue to pay their dues using installment programs from developers.
The main factors that pose challenges to business in the construction segment include:
During the hostilities, the domestic market for materials shrank significantly, due to the need to suspend or limit production at the relevant enterprises, which had a significant impact on construction in general. At the same time, import opportunities were limited.
The cost of construction has increased significantly, due to several factors at once. In addition, the cost is also rising due to increased civil protection requirements, which include the construction of shelters and related shelters at facilities.
The structure and volume of demand in the construction and real estate sectors have undergone significant changes. Work in the areas remote from the frontline and in the de-occupied territories began to resume only in the second half of 2022. Undoubtedly, construction volumes have declined significantly due to market uncertainty and investment problems.
There are several areas of construction that remain relevant even during the war and continue to develop. These include the restoration of damaged facilities and various types of buildings, residential construction, including housing for internally displaced persons, industrial construction and re-equipment of enterprises due to relocation and changes in logistics processes, civil defense and military facilities, defensive structures and protection of infrastructure.
Much of this work is commissioned by military administrations and financed by budgetary or donor funds. Construction companies operating in the residential real estate sector are currently focused mainly on completing ongoing projects, but developers are gradually launching new projects.
The majority of projects are being implemented in the western and central regions, with the worst situation in the southern and eastern regions. Construction is also being stimulated in the resort and tourism sector, namely in the western regions.
The nature of major buyers has also changed. On the one hand, purchasing power has significantly decreased, and even if they have available funds, buyers rarely decide to invest in real estate and take a wait-and-see attitude. At the same time, internal migration factors are driving demand for certain categories of residential real estate. The market was slightly affected by the launch of the government program “eHouse”.
The war forced people to change their approach to real estate investment. For the most part, buyers prefer ready-made apartments or residential properties with a high degree of completion directly in the western or central regions of Ukraine or in the capital. A significant number of buyers are considering installment plans.
The criteria for selecting properties have also changed. Now buyers and investors pay attention to the following factors: the availability of autonomous or backup infrastructure of the engineering type, the availability of shelters in buildings, and the lower floors are in greater demand.
When looking at the construction market, it is also worth considering changes in the legislation governing urban planning standards. Since the start of the full-scale invasion, many regulations have been adopted, some of which will continue to be in effect after the war. The main priorities are to rebuild the state, simplify the procedures for issuing permits, and deepen digitalization processes.
It is also worth noting the preparations for the post-war reconstruction of the state, which have already begun. A “Recovery Plan for Ukraine” has been developed, which defines a list of national programs to achieve key results. The post-war reconstruction of Ukraine involves not only urban planning and architecture, but also the economic and social modernization of the country.
Given the current state of the industry, various procedures require a systematic analysis of the financial condition of construction companies.
Assessment of the financial condition of an enterprise in the construction sector
The financial condition of an enterprise is a complex concept that is the result of the interaction of elements of the systems of relations of enterprises in the financial sphere, is determined by a number of different factors of production and economic nature and is characterized by indicators covering the availability, allocation and use of financial resources.
The financial condition of an enterprise depends on the current results of its production, commercial, financial and economic activities. All these activities influence the final indicator.
Assessment of the financial condition of an enterprise is an urgent issue for the company’s management, especially when it comes to adjusting the overall strategy of the enterprise, transforming operations or modernizing equipment, in crisis situations or sudden changes in the market environment. An audit of your own activities allows you to prevent possible risks associated with various factors in time and choose the right development vector.
The purpose of assessing the financial condition of the company in the case of crisis management includes the development and implementation of measures that allow for the rapid restoration of solvency, a sufficient level of financial stability and preserve the company’s ability to continue operations and further development, ensure profits and increase production potential.
An assessment of the company’s financial condition can also be carried out when looking for partners and during competitive analysis. When establishing partnership agreements, it is important to make sure that the company is reliable and able to provide the financial side of future cooperation. Competitive analysis should also take into account a comparison of the company’s capabilities with potential competitors to further determine the strategy. Financial analysis is also needed when attracting investors to assess the profitability of a company.
The financial condition includes the following elements:
The analysis of the financial condition is performed using various methods, using the company’s financial statements. However, there is currently no single methodology for conducting the calculation. The procedure includes an assessment of the company’s property status, liquidity, financial stability, business activity, and profitability.
There are several methods of analyzing financial statements.
The most popular and effective tools for analyzing the financial condition are the study of coefficients. Such analysis makes it possible to identify the symptoms of various hidden phenomena in the company’s activities and outline the main problems that require detailed study.
Data and reports of the company can be collected using internal documents when it comes to assessing the state of the company, including its individual structural units. When analyzing future partners, competitors in the selected market segment, customers or contractors, it is advisable to use the latest analytical tools for market analysis.
Modern solutions allow you to quickly obtain the necessary information about the activities of certain companies, conduct a detailed analysis of their work and draw appropriate conclusions.
A preliminary assessment of the financial condition of construction companies will significantly reduce the risks in the implementation of projects, avoid unscrupulous contractors or partners, preserve investors’ capital and create conditions for making a profit.
Source: https://blog.youcontrol.market
