This report covers the market developments in Q1/2014, as well as the data available as of July 2014

The performance of the building materials market in Q1 and Jan-May 2014 varied across segments, yet overall it paralleled the gloomy situation in the construction sector -- which shrank by 10.2% y/y in the quarter [and by 9.5% y/y in Jan-May]. The infrastructure construction works plunged by 26.6% y/y in Jan-May and prospects for the rest of the year are rather pessimistic, despite the authorities boasting on intentions to open tenders worth EUR 3.8bn in total in 2014.

On the upside, the other segments of the construction sector performed surprisingly well in Jan-May 2014. Residential construction works surged by 37.1% y/y in Jan-May, while non-residential constructions advanced by 15.3% y/y over the period. In addition to this, the number of residential permits recorded annual growth for the fourth consecutive quarter in Q2, while completed dwelling number returned on upward path in Q1/2014.

Accordingly, the cement market will likely continue to face challenges in 2014, while, on the other hand, the masonry market is expected to see some revival.

Holcim-Lafarge global merger will have impacty on the local market where the two control some 2/3 of the sales. French cement producer Lafarge will sell out its Romanian cement plants in order to meet the antitrust requirements.

Despite the poor situation in constructions, the building material producers still invested over EUR 50mn in new plants during 2013 and H1/2014. The projects covered all segments of the market, yet we note a rising number of new production facilities in the finishing materials segment.

The DIY retail market continued consolidation in Q2 and July 2014. The major moves announced over the period include the sale of BauMax chain and the exit of OBI from the Romanian market. Despite the adverse market circumstances, there is enough room for growth for DIY retailers. The market leader Dedeman moves on with expansion, while Praktiker also announced plans to resume expansion this autumn.

Key points:
• Cumulated revenues of major 10 construction material producers declines to EUR 939.3mn in 2013
• Cement market to stagnate or increase slightly in value terms this year
• Lafarge to sell Romanian production facilities ahead of merger with Holcim
• Advent sells 84.9% participation in Ceramica Iasi, recovers 30% of investment
• French Adeo reaches agreement for acquisition of BauMax stores in Romania
• OBI initiates stock clearance process, to exit Romanian market by Sep 2014