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Tuesday, 17 July 2012

Another one bites the dust in the Dutch building and construction (B&C) industry

And another one gone, and another one gone
Another one bites the dust

The enduring misery at the overcrowded Dutch market for newly built housing continues to take names in the building and construction industry.

Last weekend I wrote about the financial setbacks and the (near) bankruptcy of the building companies Ballast Nedam and Moes. Today, the news was published that another middle-large building company has defaulted. Here are the pertinent snips from the article in Het Financieele Dagblad (  

Tubbergen, The Netherlands-based building company Groothuis Woningbouw has filed for bankruptcy on Tuesday July 17, 2012.

This was stated by labor union FNV Bouw and some local media. Due to the bankruptcy more than hundred workers are currently without a job. Groothuis, a company which focused completely at The Netherlands and was almost fully dependent of housebuilding activities, came into trouble as a consequence of the slump in the newly built housing market.

Groothuis already went through two previous reorganizations in 2009 and 2011, in order to set itself free from the housing crisis, but that didn’t work out. At the end of last year, already 70 workers had been fired and 30 temporary workers had to leave the company too.

Chairman Jan Rolewes of the Employees Council states in regional newspaper Tubantia that he still hopes for a second beginning. Other insiders also don’t exclude a follow-up. Last Friday, the banks decided to withdraw their credit lines, which made a bankruptcy file inevitable.

In 2009 Groothuis suffered a loss of €4.4 mln with €45 mln in sales revenues. In 2010, the company wrote black figures again (albeit minimal) with €49 mln in sales revenues and a profit of €409,000. The annual data for 2011 has not been disclosed yet.

This was exactly the reason that I wrote this afternoon:

What is worrisome about the current peak in company defaults, is that these are not the weakest companies, like in 2008. To the contrary, these were (in general) strong companies that survived the first four years of the credit crisis, but have to give up after all as a result of (in many cases) four continuous years with red figures.

This is exactly such a company. It clung onto life by the skin of its teeth, but now that the banks withdrew their credit lines, a default could not be avoided anymore.

Personally, I am quite pessimistic on the chances of Groothuis to survive this default with a second beginning.

The misery at the Dutch newly built housing market will continue for a number of years and the current shakeout in the B&C industry is the inevitable and logical consequence of this continuing misery.

Although I feel in my heart that this is a necessary revitalization process, I really feel sorry for the people involved in this process.

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