The FINANCIAL -- NEW YORK, NY, 11 September 2018–The world’s 100 largest listed construction companies generated revenues of nearly EUR €1.1 trillion in 2017, an increase of six percent from the year prior, according to Global Powers of Construction (GPoC), a new report by Deloitte Global. The report analyzes the worldwide construction industry and examines the strategies and performance of the top listed global construction companies in 2017.
Chinese companies dominate the Top 100 ranking in terms of revenue, while other Asian players, mainly from Japan and South Korea, along with companies from the US, the UK, France, and Spain also have a significant presence in the industry ranking.
The predominance of Chinese companies is mainly due to the size of the Chinese Construction market, as international sales by Asian companies are lower than other top companies, as a percentage of sales. European Construction companies are the most international construction players, with six European companies in the Top 10 international sales ranking.
Competitive dynamics have maintained industry margins at low levels over the last few years, but net indebtedness ratios continued to decrease in 2017 and average dividend yields and return on equity showed an increase over previous levels. Broadly, the financial health of these companies continues to improve.
Additional key findings of the report include key financial indicators of the top 30 construction companies and strategies construction companies have undertaken to differentiate themselves in a fiercely competitive market:
Top-ranked companies: All but two of the top 30 companies increased total revenues in 2017, and 21 recorded market capitalization growth. By geography, the largest construction companies were based in China (40 percent of total revenues), Europe (27 percent), Japan (14 percent), the US (8 percent), and South Korea (6 percent).
Market capitalization growth:
The aggregate market capitalization of the top 30 companies at the end of 2017 was EUR €381 billion, three percent higher than in 2016 and 50 percent higher than when the financial crisis started in 2007. Despite the fact that aggregate market capitalization grew in 2017, performance across geographical areas has been uneven. While Chinese companies recorded a 26 percent decrease in market value, the market capitalization of US and European companies increased by 25 percent and 24 percent respectively.
Many companies within the construction industry are diversifying their portfolio of business services to achieve sustainable growth and to increase the typically narrow margins of construction projects. In 2017, the top 30 companies recorded 23 percent of revenue generated from non-construction activity. Real estate development, industrial & services, and concessions were the most common diversification strategies by construction companies.
The top construction companies range across five continents, with many looking abroad for growth opportunities. The top 30 companies obtained around 23 percent of total revenue outside of their domestic markets in 2017. However, internationalization strategies introduce additional risks that could negatively affect the traditionally narrow margins of construction activity, as well as the cash flows obtained from operating activities. Based on an analysis of the level of internationalization and construction margins achieved by the top 30 companies, there is an inverse correlation between the two figures: most of the companies who have a significant portion of sales coming from construction activities performed abroad reported lower average construction earnings in 2017 than the companies who focused primarily on their domestic markets. Internationalization is higher among European companies (55 percent of sales) than among others from Asia and the US.