The outlook for 2018 remains subdued and the already low profit margins of many construction businesses are expected to deteriorate further in H1 of 2018.
- 2017 was a difficult year for the Mexican construction industry as the public construction segment suffered from low investment, while private investment in residential and commercial construction remained stable at least. Overall construction output value contracted 3.8% year-on-year in Q3 of 2017. A the same time the construction materials segment has been negatively impacted by increased price volatility (mainly steel and cement).
- The outlook for 2018 remains subdued and the (already low) profit margins of many construction businesses are expected to deteriorate further in H1 of 2018, mainly due to ongoing low building investment by the government and lower market activity ahead of the July 2018 presidential and general elections. Additionally, uncertainty over the outcome of the ongoing NAFTA renegotiations has an impact on building investments in Mexico.
- In general banks are not restrictive in providing loans to the construction sector. However, the currently high interest rates are an issue for lenders.
- On average, payments in the construction industry take 45-120 days. It is common for buyers in this sector to pay slowly, especially in the public infrastructure segment. Due to the subdued demand situation it is expected that non-payment notifications will increase in 2018.
- While keeping a neutral underwriting stance for businesses active in the residential and commercial construction segments, we are restrictive on public construction and construction materials.
