Dec. 16 (Bloomberg) — Spanish building materials producers spanning cement to steel may cut twice as many jobs this year as forecast earlier and face “catastrophe” if cash flow doesn’t improve, an industry group said.
Companies may fire 75,000 workers, or 15 percent of the total, compared with an April figure of 35,000, Rafael Fernandez, chairman of construction products trade group CEPCO, said in an interview in Madrid today. Annual sales may fall by as much as 25 percent from 46 billion euros ($63 billion) in 2007.
“We knew there was going to be a drop in activity, but it’s been steeper than expected,” Fernandez said at CEPCO’s offices. “The whole credit structure has seized up. Cash-flow is our members’ main anxiety and if measures aren’t taken to resolve that, we’re headed for catastrophe.”
Residential construction in Spain will drop 23 percent this year and 26 percent in 2009 after a 10-year construction boom ended last year, Merrill Lynch & Co. estimates. A lack of financing and longer payment terms are hampering cash flow, while demand is lackluster as companies and householders pare spending, Fernandez said.
The previous system of loans from banks and credit- guarantee policies, which helped construction companies secure cash to pay labor and other costs, no longer functions, he said. Banks have become less willing to give credit on the basis of payments owed to the building materials companies, which have stretched to an average of 210 days.
Exports, particularly light steel, plumbing and ceramics, may help mitigate the slowdown in Spain, although the construction industry in markets including the Middle East and Russia is also slowing, he added.
Economy Slides
Spanish Finance Minister Pedro Solbes said today that the nation’s economic slowdown will bottom out in the second half of next year, paving the way for a recovery. The International Monetary Fund forecasts Spain’s economy will shrink at least 1 percent next year. Spain will probably slip into its first recession since 1993 this year.
The slowdown will probably last one or two years, Fernandez added. Demand from immigrants and foreigners buying second homes in Spain will help absorb the excess housing stock generated from three or four years of building 700,000 homes annually, which Fernandez estimates at about 200,000 too many each year, he said.
CEPCO, based in Madrid, represents 22 national groups of construction-products makers comprised of 5,000 member companies, according to the trade group’s Web site. Revenue next year may fall by as much as 50 percent next year compared with 2007, the executive said.
To contact the reporter on this story: Brian McGee in Madrid at [email protected]
Last Updated: December 16, 2008 11:01 EST
By Brian McGee
Source: Bloomberg