Tough times for engineering and construction CEOs



    TORONTO, Feb. 9 /CNW/ - CEOs in the engineering & construction (E&C)
industry are significantly less confident about growth prospects, according to
PricewaterhouseCoopers latest global CEO survey. Only 18% of E&C company
leaders are very confident that they can increase revenues over the next 12
months, compared with 56% in PwC's CEO survey last year. Only 15% of the 80
E&C CEOs interviewed are very confident about revenue growth across the sector
over the next three years.
    The sharp drop in confidence stems in large part from the current
financial crisis, with over 40% of chief executives extremely concerned that
the disruption of the capital markets will impact growth. More than
three-quarters of E&C CEOs anticipate that the difficulties in the global
banking system will increase the cost of finance and restrict access to
finance, and around two-thirds also expect it to delay investment plans and
curb their growth expectations.
    The E&C sector has always experienced significant seasonal and
project-related headcount variations, and 29% of E&C CEOs anticipate reducing
headcount this year. Low-cost competition is also a key concern now that some
companies are pricing work more aggressively, despite existing low margins,
based on the assumption that material prices will fall. The end effect could
be more cut-throat competition in some segments as many CEOs focus on
short-term wins, possibly at the cost of long-term profitability.
    As the sector becomes increasingly financially constrained, contract
disputes are also likely to become more common. CEOs who are looking to
maintain long-term success need to ensure that contracts are carefully
assessed for risk factors throughout the supply chain; careful selection and
monitoring of subcontractors who will be able to deliver on their obligations
can help reduce the need for costly litigation and risk of financial failure.
    "Realistically, many E&C companies will struggle over the next year or
two," says Michael Clifford, Leader of the PwC Canada, Engineering and
Construction Practice. "Some companies in the residential market may fail in
the US, Canada, Spain, Ireland and UK. Land and house prices still have
further to fall and banks will need to manage work-outs for debt-laden
companies.
    Further, notes Clifford, "Companies more reliant on infrastructure and
public sector projects are currently cushioned by longer term order books and
are consequently less affected to date. Many major projects in the sector are
long-term ones and as those that are near completion, or as initial cash
advances dry up, cash-flow issues could arise. However, as recently announced
in the Canadian Federal Budget, infrastructure spending is a priority with an
estimated $12 billion earmarked for infrastructure over the next two years. In
addition several recent provincial budgets have also emphasized infrastructure
spending as a key priority.
    Notwithstanding the hope that the infrastructure stimulus will provide to
the sector, the marketplace is certainly challenging and E&C CEOs will need to
make tough decisions about what actions are required to ensure his or her
company's short-term survival. However retaining the right skills to deliver
long-term business growth is important too, and companies that cut back too
far now may struggle to take advantage of the economic recovery, when it
occurs."

    For more details or a copy of the report please visit
www.pwc.com/ceosurvey. For more information on PwC's E&C practice please visit
www.pwc.com/ca/ec.

    PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 155,000 people in 153 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP
(www.pwc.com/ca) and its related entities have more than 5,200 partners and
staff in offices across the country. "PricewaterhouseCoopers" refers to
PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as
the context requires, the PricewaterhouseCoopers global network or other
member firms of the network, each of which is a separate and independent legal
entity.





For further information:

For further information: Carolyn Forest, PricewaterhouseCoopers LLP,
(416) 814-5730, carolyn.forest@ca.pwc.com; Nina Godard, PricewaterhouseCoopers
LLP, (416) 941-8383 x 13520, nina.godard@ca.pwc.com

Organization Profile

PwC

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890