Berenberg sees slowdown for builders in 2023 as costs rise

Titan SA

10/06/2022 10:41

** Berenberg sees the construction sector's growth slowing
to 0% in Europe and the United States next year due to macro
pressures, higher interest rates and rising costs 
    ** While it doesn't envisage a more "severe" recession like
in 2007, the broker points to balance sheets as a key investor
focus 
    ** Berenberg cuts average 2023 profit forecasts for its
European and British coverage by 5%, implying 1% profit growth
for both, and says consensus estimates – 5% average growth for
European stocks, 7% for UK – are too optimistic
    ** "The simple reality is that the total cost of
construction – whether that is financing costs for customers or
build costs for developers – is rising," the broker says 
    ** It sees downward pressure on demand, which it says some
firms may absorb but "the marginal buyer" may not 
    ** It cuts CEMEX  CX.N  to "hold" from "buy" and Belgium's
Titan Cement  TITC.BR  to "sell" from "hold", citing their
higher-than-average balance sheet leverage
    ** It downgrades UK's Travis Perkins  TPK.L  to "hold" from
"buy" on demanding consensus, lower margins and balance sheet
optionality versus peers
    ** It says strong balance sheets present M&A and share
buyback optionality for London-listed CRH  CRH.L  and Ferguson
 FERG.L , Germany's HeidelbergCement  HEIG.DE , Ireland's
Kingspan  KSP.I  and Austria's Wienerberger  WBSV.VI , all rated
"buy"
    ** Berenberg sees GDP growing through 2023 and inflation
returning to more normalised levels, with unemployment decline
driving the sector's return to growth in 2024

 (Reporting by Olivier Sorgho)
 ((Olivier.sorgho@thomsonreuters.com))