"The brakes have been applied in certain segments of the construction industry"

Reporter: The National Institute of Statistics (INS) has published the construction permit situation for the first half of the year, with the number of permits decreasing by almost 25%. How is this trend affecting the construction materials market?

Dragoş Vlagali: By comparing the statistics provided by INS to the reality in the construction market, we have noticed a decrease in demand from real estate developers since the beginning of this year. Observing the trend at the end of 2022, we adapted our sales policy and expanded our online division by launching the www.platformadeconstructii.ro store in February this year, reaching out to household consumers, small craftsmen, designers, architects, etc. We have also invested heavily in diversifying our B2B customers, attracting those in the construction and architecture field who have projects in retail, schools, hospitals, hotels, wineries, etc. However, we should not forget that residential projects initiated in previous years have continued, still representing an important segment for us that we hope will regain its strength from previous years.

Reporter: Do you consider this the beginning of a crisis in the industry?

Dragoş Vlagali: We cannot talk about a crisis in the real estate sector, at least not one similar to that of 2008. The brakes have been applied to certain segments of the construction industry, but I believe that the capabilities of the players in this field will save it from a collapse. It is true that the taxes mentioned by the government, the difficult access to real estate loans, fluctuations in construction material prices, and, last but not least, social instability, partly due to the border conflict, are factors affecting our industry at BAUINDUSTRY DC. We are very cautious with expenses, trying to retain our customers and partners. Furthermore, we constantly invest in new private-label products that provide us with versatility and a secure position in the market in which we operate. I do not want to believe that all the other areas that are still investing will not be able to keep this construction sector afloat, which has a significant role in Romania's economy on all fronts.

Reporter: How have prices in the construction materials sector evolved in the first seven months of this year?

Dragoş Vlagali: The year started with price increases for all types of construction materials. This led to market contraction and a decrease in sales, especially in a residential sector that was already weakened. Seeing the impact of price increases, construction material manufacturers reevaluated their pricing policies and began reducing prices for certain products and launching promotional campaigns to retain customers. As for us, we tried to keep prices as low as possible and negotiated with partners in a way that wouldn't put too much pressure on our customers' budgets, especially in the B2B segment, where we have loyal customers with whom we've been working since the beginning and whom we want to support, as this industry cannot exist without all players (designer/architect-investor-builder/craftsman-construction material distributor).

Reporter: Which segments are generating the most requests (office, residential, industrial, commercial)?

Dragoş Vlagali: If we were to make a ranking of sales for BAUINDUSTRY DC in 2023, in the first eight months, it would look like this:

1st place - the retail sector;

2nd place - the residential sector (residential complexes started in previous years);

3rd place - the construction sector for individuals (through our online store www.platformadeconstructii.ro);

4th place - the rehabilitation sector (schools, kindergartens, hospitals, roads, etc.);

5th place - the industrial sector.

Reporter: How have sales evolved during this period, and what trends are present in the market, both in terms of demand and supply?

Dragoş Vlagali: For BAUINDUSTRY DC, the first eight months of 2023 brought a 35% increase in sales compared to 2022. Regarding trends, we invest heavily in innovation, and that's why we continually enhance our product range with new, innovative materials designed to make the work of Romanian builders easier. For example, at the beginning of the year, we imported a stretch/fixed foil called BAUProtekt from Germany, available as a private-label product. This foil keeps surfaces clean during painting, serving as an alternative to plastic foil taped with adhesive tape, which leaves traces when removed, causing inconvenience for both builders and customers. Following the same business direction, we continually expand our product range, study European manufacturers to bring revolutionary products, and are open to partnerships, which is our competitive advantage. We've also noticed that Romanian consumers prefer and choose products that are easier to use, even if they sometimes pay more. Furthermore, we see the online sales segment for household consumers (individuals, craftsmen) developing interestingly.

Reporter: What are the prospects for the industry?

Dragoş Vlagali: If the government continues in the direction of tax changes that will impact the construction industry, then the end of the year will not look very promising. I expect panic among industry players and, consequently, price increases and probably the postponement of certain projects, which will not help the Romanian economy. However, I believe that whatever happens in terms of taxes, we entrepreneurs will manage to overcome this challenge and continue the development that began in the pre-pandemic years. In a scenario where these taxes do not come into effect, I expect no price increases for construction materials until the end of the year, and demand to rise.

Reporter: Thank you!