Prefab - declining business, growing profit

The construction materials producer Prefab Bucharest (PREH) reported preliminary operating income of 96.2 million lei, 20.2% below those in 2023, while operating profit increased by 6.6%, to almost 3.5 million lei, according to the issuer's report published on Friday on the Bucharest Stock Exchange (BVB) website.

"The national economy continued to face multiple challenges in 2024, related to stability, volatility and predictability. Romania recorded the highest budget deficit/GDP level in 2020, being the weakest evolution of the annual GDP dynamics - according to the National Institute of Statistics. In 2024, the deterioration of the annual pace of economic activity was recorded in the context of political events, as well as the significant deterioration of public finances, resulting in an intensification of the perception of investment risk, confirmed by the reduction in the volume of industrial production and the decrease in the volume of construction works", the report states.

According to the document, last year the blockage in the construction materials market caused by the lack of liquidity and the decrease in the purchasing power of consumers was maintained. "Regarding the market for reinforced and prestressed concrete precasts, electric poles, highway elements, prefabricated parts, road bridge beams, the cause is the cumbersome settlement of the works executed against the background of financial blockages in the national investment field, the reduced volume or stagnation of large projects for the national infrastructure as well as the lack of qualified labor. Although investments from European funds are vital for the Romanian economy, their absorption is below the optimal level. The implementation of the PNRR and the absorption of European funds should be a major objective for Romania. At the same time. the accessibility and versatility of artificial intelligence will have a major impact in all sectors of the economy", according to the report.

The Prefab management also complains about excessive and changing taxation, the risk of increasing taxes and fees to finance public spending, cumbersome legislation, exaggerated bureaucracy in terms of obtaining the necessary approvals and authorizations and the currency risk that influences the price of some raw materials and materials.

For last year, Prefab reported a preliminary turnover of 86.5 million lei, 21.5% below that of 2023, a decrease caused by insufficient demand for construction materials. Operating expenses amounted to 92.7 million lei, 20.1% below that of the previous year, those for raw materials and consumables being 39.2 million lei, down 16.2%, while personnel expenses were 22.6 million lei, 6.2% lower than those for the previous year. From financial activities, Prefab reported a negative result of 2.2 million lei, so that the company's preliminary net profit for last year amounted to 0.92 million lei, slightly above that of 2023, of 0.9 million lei.

In the fall of last year, Prefab absorbed the company Romerica International. At the end of November 2024, Marian Miluţ owned 52% of the construction materials producer, while the Constanta-based Celco company had a 30.5% stake in the company, whose stock market valuation is around 130 million lei.