6. Economic panorama
The flexible reaction of a company to the economic changes and market incidences in a rapidly changing environment is of great importance.
Thanks to the high quality of services of Duna–Dráva Cement Kft., the environment-friendly and innovative production technologies and circumspect management, the company could survive the last crisis successfully. In line with our professional conviction, the company is spearheading the European production making efforts to save its leading role in Hungary.
Change since 2013
After the relief in 2013, the industry witnessed a boom again with a growth of an additional 5% in the construction industry market. The Central Statistical Office’s (KSH) estimation sets it even higher, to 14%. Although the decisive engines of this growth are the infrastructural projects, there are developments in the retail sector and the commercial sectors as well. In 2014, EU-financing in quantities never seen before were available having influenced the cement and ready-mixed concrete consumption.
The growth of the construction industry market was convincing in 2015 as well, it was characterised by an intensive growth in the structural and civil engineering sectors completed with the surplus provided by the retail and corporate sectors. The market of the ready-mixed concrete and aggregates suffered from stagnation.
2016 was a complicated year for the construction industry with a setback of nearly 19% (18.8%) (KSH 2016). While the retail and corporate sectors performed well, the structural and civil engineering projects suffered a decrease of 3.5%. After the modest growth realised in the previous year, the demand for cement grew by 6% in 2016. The construction material producers had to face heavy competition in the construction market due to the large capacity surplus.
Accelerating boom with contradictions
2017, however, with a growth of 25.5%, was a good year for the construction industry (according to the data published by the Central Statistical Office (2017), the growth was 29.7%), composed of the higher production, the further growth in the retail consumption as well as the infrastructural projects. Following the growth in the previous year, the domestic demand on cement, ready-mixed concrete and aggregates showed a further growth.
Similarly to 2017, in general terms, 2018 was again a very good year for the Hungarian construction industry.
The engines of this growth were still the governmental investments and developments financed jointly by the Hungarian State and the European Union. As compared to 2017, quantitative growth was seen in the first 9 months of the year in the cement and concrete market. The effects of the incentives introduced by the government earlier (CSOK, preferential VAT for new flats) were perceptible. As a result of the sudden growth in demand, certain building materials had to be entered on longer and longer waiting list. A further challenge for the sector is (even today) the shortage in workforce endangering the completion of the actual investments on schedule.
In the market, widened significantly in the past few years, the two domestic cement companies of DDC covered some 40% of the country’s demand in 2018. At the same time, the exploitage of the capacities lags significantly behind the values measured in the period 2005–2008.
The effect of the economic crisis having occurred 10 years ago revealed itself firstly in the construction material and construction sectors in the world. This situation was clearly seen in DDC’s performance as well: in 2009, the volume of the cement sold fell by 20% as compared to the previous year and the profit after tax was halved. This tendency prevailed also in 2010 influencing the operation of the company significantly. This situation was aggravated by the Hungarian speciality originating from the high share of the projects financed by the EU. The Hungarian government prefers vigorously the EU-financed projects; in fact, these are the ones moving the performance of the construction industry influencing the demands on building materials. In the years of the crisis our capacity exploitage fell dramatically. There were years when it fell below 50% remaining below the half of the value measured in 2008.
By 2018, in harmony with the advantageous macro-economical processes, the level providing comfortingly profitable operation could be stabilised and this tendency seems to be sustainable for 2019 as well.
With the high quality of our products and technical consulting services, the up-to-date, environment-conscious and innovative production technologies our company is a front-ranker in the European production industry.
In the course of the production, the application of additives influencing the modern cement’s properties is unavoidable. The types of cement containing soot, slag or limestone flour are the best ones to satisfy the various investments’ demands. Presently, 11 types of cement are being produced in the two domestic plants at Beremend (South-Transdanubia) and Vác (Pest County). With their different properties these products satisfy virtually all possible demands on construction and base materials, as guaranteed constant quality being a key factor for an investment. Using these modern types of cement, spectacular concrete constructions can be built. The Palace of Arts, the Kőröshegy-Viaduct, the expansion of the Liszt Ferenc International Airport and the restoration of the historical turbe of Gülbaba were implemented by using our products. Beside the well known projects, thousands of new homes were built or restored with our products.
Production of concrete
The concrete, as building material and the unbound designs composed of it, as well as the simplicity and plasticity preferred by the architects were always very popular.
As a ready mix concrete production plant, our concrete branch offers wide range of products representing highest quality standards and embodying several thousand (!) recipes for the clients in every region of the country. The traditional and special, e.g. sulphate-proof, water-tight or wear-resistant types are produced in concrete plants complying with the challenges of our age using the most modern control systems and maintaining high quality standards.
The employees are trained to use the technologies yearly. In addition to our well trained regional managers, application technological advisors help our partners to select the base materials fitting optimally their goals and possibilities.
The development is continuous; we are looking for optimum solutions in the fields of design, production and logistics. Our results are analysed to improve and refine our production processes and our jobs concerning the economic supply and transport.
In favour of sustainability, paving materials are developed to provide even more durable pavings in Hungary. The types of concrete pavement called rolled pavements can be used to cover roads, bikeways, industrial areas, agricultural ways, etc. In the past years, we cooperated successfully in the implementation of some projects. Bikeways and a complete network of agricultural ways were yet built with this technology. In a short time, Standard Highway Specifications will be issued regulating the design and construction of the upper layer of the HBB road structures facilitating its application and spreading. Technical support will be offered to our products.
In the mines and premises of our gravel branch being full compliance with the challenges of our age, the gravel production and processing take place with the most modern machines and technologies. As a part of our quality assurance system, the international quality management system ISO 9001:2000 was introduced into the branch in 2002, then, in 2011, the environment management system ISO14001 also being integral parts of the company’s management system.
The five gravel mines operated presently by DDC provide base materials for concrete plants, asphalt plants, paving stone factories and the population.
Paving stone production
The paving stone, as outdoor covering material is made of concrete base material. As a result of the acquisition processes in the past few years, the range of activity of DDC was extended with this new business unit. “A Beton-Viacolor Térkő Zrt.”, using the experiences of more than a quarter century and following continuously the newest trends in the architecture, creates its offer composed of special and high quality products in its four plants. The company offers more than 300 types of paving stone divided in three product categories. The processing takes place in a closed plant, mechanised with human help. The activity itself can be divided into three main production processes: concrete mixing, pressing and heat treatment.
Our company is a determinative player in the domestic construction material market since the early 2000’s.
In the years preceding the crisis in 2009 the renovation of the furnace line at the Beremend Cement Plant was decided. Knowing the later situation, it proved to be forwardlooking move, because, in spite of the crisis, the project could be finished as planned in 2009. Beside the much better environmental parameters, it resulted also in the production of quality clinker cement at much lower cost level. This reduction, completed with other cost reduction measures made possible to repay our huge investment credits in the following years.
Unsurprisingly, the Beremend investment was a good example and the owners considered by 2015 that the time is ripe to execute a similar furnace modernisation at Vác as well. With the equipment commissioned in 2018, the consumption of fossile fuels could be lowered resulting not only in better environmental but also economic effects; furthermore, the environmental parameters were significantly improved, what, as a conscious conduct, harmonises with the directions set by the related regulations and laws.
Following a low-keyed investment period lasting for years, serious decisions were passed in 2015: beside the above mentioned investment at Vác, the acquisition of Readymix Hungária Kft. was started and the other investments were also promoted. This upswing lasts even today. Following the takeover of Readymix Hungária, the equipment was integrated and the modernisation (environmental) investment at Vác was finished in spring 2018. The project will be continued with the second section to be commissioned in 2020 increasing the share of the fuel substitution in favour of the alternative ones.
The acquisition of Readymix Hungária Kft. is a significant professional investment (at global level also). Bearing in mind that we are the largest cement producers owning the biggest market share in Hungary, we have nationwide network among the ready-mix concrete producers as well.
According to our medium-term ambitions we make efforts to be a market leading player in this branch, too.
It is an important point not only for the fact that the most important user of the cement is the concrete production, but also for the possibility to discover and serve the entire market thanks to the nationwide coverage. Our aggregates branch is not a determinative player. Our goal is to provide the most comprehensive support for our ready-mix concrete production using all available raw material resources of us.
We, as law-abiding and complying “citizens” make efforts to set real example in the branch in the daily operations as well. This relates not only to our taxation activities and budgetary relations, but also all regulations relating to labour safety, health protection, sponsorship and environmental supports. DDC and its member companies are important players in the local and nationwide economies. As a domestic large enterprise, enjoying the trust of our professional investors, we are proud of our actions to strengthen the Hungarian economy at Beremend for a period of hundred years and at Vác for more than half a century. Today, we operate with the most modern technologies providing competitive wages for our employees. Our market leading position is the result of persistent and hard work to be preserved in the future as well.