At the 95th EUROCONSTRUCT conference, which took place in June 2023, the forecast growth of the construction industry in the EUROCONSTRUCT countries for 2023 was adjusted. While growth in construction output was previously assumed, an expected decline of 1.1% was announced due to the continuous development and consolidation of the factors affecting the construction industry. The weaker momentum of global economic development, inflation and the sharp turnaround in monetary policy associated with the rise in interest rates contributed significantly to this. The reaction to the negative factors varied depending on the sector. Residential construction suffered the most from the changed conditions, as the high interest rates significantly worsened the affordability of residential construction projects. Accordingly, the June conference forecast that residential construction output would fall compared to the previous year. At the conference in November, the forecast for total construction output was again revised downwards by 0.6 percentage points to -1.7%. The correction affected both new construction of non-residential buildings and renovation, for which a decline was now also expected. According to a study by the European Central Bank (ECB), lending regulations tightened across all loan categories in the third quarter of 2023. As a result, demand for loans once again fell significantly for both households and companies. EUROCONSTRUCT's assessment is in line with the values for the Construction Activity Index (CAI), which is calculated by the Royal Institution of Chartered Surveyors (RICS) and was negative for Europe in December 2023, as in the five previous quarters. The main reason for this was the decline in the volume of work in the construction of residential and non-residential buildings.

The ifo Business Climate Index still showed positive momentum in the construction industry in the heartland of Germany at the start of the year. For example, the business expectations of participating companies in the building construction sector improved until May 2023. In contrast, the assessment of the business situation has been showing signs of a monthly deterioration since March, with the order backlog falling from 4.7 months in January 2023 to 3.4 months in December 2023. Capacity utilisation also fell sharply (from 78.1% in January 2023 to 66.3% in December 2023). The mood in residential construction brightened somewhat at the start of the year. While the business situation declined throughout the year, business expectations improved between March and May. Subsequently, however, business expectations deteriorated almost across the board, with the most negative assessment of the year being given in December with a value of -64.7. The commercial building construction segment performed better than public building construction and residential construction, although the values for the business situation and expectations in this segment also reached consistently negative values from May 2023. With regard to price trends, all building construction segments reported that prices fell from April compared to the previous month. At -21, the CAI calculated by the RICS fell in the fourth quarter to the lowest level recorded since the survey began in 2020. The negative development of the Ifo business climate index and the RICS CAI coincides with the decline in sales in the main construction sector, which totalled 5.5% according to the German Construction Industry Federation. The decline in residential construction was significantly higher at 12.0%, with only 270,000 flats completed instead of the 400,000 targeted by the German government. Turnover in the commercial construction sector fell by around 1.0%, while the number of building permits for factory and workshop buildings increased despite the weak economic conditions. This is explained by the lower interest rate sensitivity of commercial construction projects, the robust development of company profits and the continued high capacity utilisation in the manufacturing industry. Despite the investment backlog, there was a decline of 2.0% in public construction.

In the other core market of the Netherlands, households and companies were reluctant to invest in residential and commercial property. Since the beginning of the war in Ukraine, property prices in the Netherlands have risen due to high demand, population growth, low interest rates and high inflation. However, due to more expensive construction financing, this trend has been declining since mid-2022, with property prices reaching their lowest level in May 2023. Prices for existing properties subsequently rose by almost 3.0%. This was primarily due to interest rates remaining stable and the increase in household incomes. The turnover of general contractors, which had fallen sharply since the end of 2022, has also recorded slight increases since autumn 2023. The order backlog for construction companies, which has remained stable over the last two years despite all the difficulties, was still sufficient for 12.9 months. This was mainly due to renovations and energy-efficient refurbishments, which compensated for any orders for new buildings that may have been cancelled. The longer implementation time due to the increasing complexity of projects also contributed to the stabilisation of the order backlog. A total of around 73,000 new-build units were completed in 2023 and the Dutch construction sector shrank by 0.5 %.

According to the estimate published by the Swiss State Secretariat for Economic Affairs in mid-December 2023, construction investment in the heartland of Switzerland fell by 2.0 %. The Swiss Construction Index, which forecasts the trend for the coming quarters, had already indicated since the beginning of 2023 that the growth trajectory in the main construction sector would not be able to continue. Declines were expected in 2023, primarily due to the low number of building permits for flats in the previous year and companies' reluctance to plan new office space as a result of rising financing costs and the economic slowdown. The expansion index was stabilised by the continuing demand in the areas of conversion, expansion, renovation and energy-efficient refurbishment. This picture was confirmed during the year, with building construction being supported above all by expansion and major projects in public building construction. According to the price index of the Coordinating Body of the Federal Construction Industry, prices for building materials in building construction rose in the first quarter compared to the same month of the previous year, then fell between April and October (decline of between 0.7% and 3.0%) to end the year with a slight increase (between 0.6% and 1.3%). Prices for residential property rose by an average of 2.2% in 2023, with the increase in condominiums outpacing the rise in single-family homes. The strongest growth in condominium prices was seen in urban municipalities.

According to the Office for National Statistics, construction output in the UK growth market increased by 2.0%, marking the third consecutive year of growth. Refurbishments and renovations were the main contributors to this (growth of 8.3%), while new construction output fell (-2.1%) and recorded a decline over 10 months. Overall, growth was achieved in seven out of nine sectors, with particularly strong growth in the renovation and refurbishment sector for both residential and non-residential buildings. Property prices fell by 1.4% in 2023. Compared to countries such as Canada or Sweden, property prices only fell slightly thanks to the predominantly fixed interest rates on mortgage loans.

In contrast to Europe, the USA, which is one of our growth markets, also had a positive value for the CAI calculated by the RICS at the end of 2023, performing only slightly worse than the Middle East and Africa region. The positive picture is in line with the results presented by the consulting firm FMI in the First Quarter Edition 2024 of the North American Engineering and Construction Industry Overview. Overall, turnover in the construction and engineering sector rose by 10.0% in 2023. The majority of the increase came from non-residential buildings and infrastructure measures that do not include building investments. In many segments of building construction, an increase of more than 5.0% was achieved. Multi-family houses, for example, recorded an increase of 21.0%, mainly in favour of single-family houses (-14.0%). The strongest percentage growth in the building construction sector was in construction investment in the manufacturing industry, with an increase of 78.0%. The record growth rate resulted from a combination of government subsidies such as the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the Inflation Reduction Act. According to a study by the Institute for Supply Management, there would have been a negative record for construction investment in the manufacturing sector without the extensive government subsidies. Despite the overall positive picture, 59.0% of companies participating in the CAI survey reported towards the end of the year that difficulties in financing projects were having a negative impact on construction activity. The values that provide information on credit conditions also deteriorated accordingly. In addition, more than two thirds of the participating companies stated that the shortage of labour and skilled workers is a problem.

Alongside the USA and the UK, France is one of our growth markets. The French construction industry was unable to achieve growth in 2023 due to the many economic pressure points, such as high interest rates and falling investor confidence. This picture is also confirmed by the S&P Global France Construction PMI, which declined throughout 2023 and fell for the 19th consecutive month in December. As companies purchased fewer construction materials due to the drop in construction activity, activity in material procurement decreased from May 2023. Employment already decreased from March 2023. The CAI calculated by the RICS was also in negative territory at the end of 2023.

The sales markets in our core and growth countries were very challenging in 2023. Construction output declined in all core countries and in the growth country of France. The markets in the US and UK growth countries met expectations and recorded growth despite the difficult economic conditions. In the first quarter, Group sales increased by 4.2% compared to the previous year despite the difficult circumstances.

Due to the market environment, it was subsequently no longer possible to match the previous year´s sales, which meant that sales fell by -1.6% year-on-year (increase of 10.7%) and totalled EUR 479,337 thousand ( 487,134 ).

As in the previous year, the Uzin Utz share reached its high at the beginning of the year. Following the announcement of the figures for the first quarter, the share price fell and the low for the year was reached at the beginning of October. At this time, geopolitical crises briefly weighed on the stock market. After falling to the low for the year, the share recovered thanks to the positive earnings performance in the third quarter, but still lost 13.9% of its value in the reporting year - over the past five years, the share has lost 13.3% of its value as at the reporting date.

The decline in sales, increased personnel costs, exchange rate effects and higher depreciation had an impact on the Group's EBIT, which amounted to EUR 34,505 thousand (36,341), a decrease of aroung -5.1% compared to the previous year. More detailed information on this can be found in the chapter "Earnings situation".

We are proud that our employees are actively working to achieve our ambitious goals despite the ongoing challenges. This enables us to continue to guarantee the high quality of our products and services. We see ourselves as an innovator and one of the leading suppliers within our industry. There is therefore great interest in expanding growth potential in order to continue to operate successfully and sustainably worldwide. It is important for us to focus on sustainable and healthy growth in order to steadily realise new market shares in the defined core and growth markets. An essential part of this strategy, in addition to our dedicated employees, is the investment in research and development activities at our global locations.

We are a traditional family business, which is why we focus on sustainable action and have anchored it in our long-standing corporate culture. In addition to economic and ecological aspects, social aspects also play a role for us. The values we live by allow us to sustainably secure jobs and create new jobs as needed, even in difficult economic conditions. The focus is always on a trusting relationship with customers and partners in order to generate relevant added value for them. More information about our commitment to sustainability can be found in our sustainability report.

The Management Board of Uzin Utz SE assesses the developments in the reporting year 2023 as positive against the background of the challenging economic conditions. Despite the declining growth of the construction industry in all core countries and the growth country France, the Group was able to generate sales revenues that matched the strong level of the previous year. Despite the decline in sales, an EBIT margin of 7.2 (7.5) was achieved, thus exceeding the forecast for the development of the EBIT margin (moderate reduction) made in the 2022 annual report.