07 October 2020

Can investments in infrastructure lead to the economic growth?

BUSINESS ACTIVITIES OF INSTITUT IGH IN LINE WITH EXPECTATIONS

Despite challenges faced by all business entities, Institut IGH successfully completed the second quarter of 2020 with revenue of HRK 118,9 million and costs amounting to HRK  97,03 million.

This resulted in an EBITDA of HRK 21,8 million, which is a 79% increase compared to the same period last year. Results for 2019 show that the business activities of the company have been on an upward trajectory for some time. Last year, the company had HRK 10,9 million revenue before taxation, which is a significant improvement compared to 2018, when a loss of over four million Kuna was generated. When it comes to the current year, in its first half,  Institut IGH had net revenue of  HRK 1,1 million.

The projects the company has been working on before the start of the so-called „ COVID-19 crises have not come to a halt, only slowed down somewhat, but are still being implemented at a good pace.  New projects are also being contracted; only in the past three months several significant contracts in Croatia and B&H, worth over HRK 67 million have been signed with HC, HAC, JP Autoceste F BiH d.o.o. , HŽ Infrastruktura and others.

New management and record value of share               

Even if observed only since the beginning of August, the market capitalization of Institut IGH has increased by 36,4 percent, and only during August, the daily volume was twice over one million Kuna. The  HRK1,6 million revenue, achieved near the end of August, is the highest since the end of 2017, and on that same day, the value of the share was concluded at HRK 146, the highest value since September last year. The cause of increased interest can probably be found in the number of concluded business deals as well as excellent last year’s results.

Great results are expected from new members of the Management. With the aim of strengthening business on existing markets and expanding to new ones, Vedrana Tudor, former CEO of the Institut IGH Regional Centre in Split, and Miroslav Pauzar, former CEO of the Osijek Regional Centre were appointed members of Management, while the former CEO of Institut IGH, Robert Petrosian, was appointed President of the Management Board. Petrosian was appointed CEO of Institut IGH in February 2020, and was a member of Management since 2019. Petrosian started his career in IGH back in 2012. In 2016 he became CEO of IGH’s Branch Office in Russia, and worked as CEO of IGH’s Branch Office in Georgia since 2017. Vedrana Tudor started her career in Institut IGH in 2007 as project manager, then Head of Laboratory in IGH Split and then, in 2016, she took over her former role as CEO of RC Split. Miroslav Pauzar has been building his successful career in Institut IGH since 1986, starting as a designer, project manager and then leading supervising engineer on various projects throughout Slavonia in all sectors of the economy ( civil engineering, building construction, water engineering, energy, etc.). He was CEO of RC Osijek since 2013.

    

Investing in infrastructure for a higher GDP

The crisis caused by the current COVID-19 pandemic has affected all branches of the economy, including civil engineering. Therefore, the State should now use its fiscal power to support the economy and minimise damages. One of the ways to help is to prioritise investments in roads, bridges, airports, transit systems, electricity, telecommunications and other long planned civil engineering projects. This is the conclusion of a study conducted by  Business Roundtable claiming that infrastructure investments are unique in their ability to stimulate productivity growth and, consequently, the long-run productive capacity of the economy. Conducted for US territory, the study showed the effects of 737 billion dollars of public spending on infrastructure over 10 years and showed that the investment would generate an additional 5,9 billion dollars of additional GDP over 20 years, and each additional dollar invested would drive roughly 3,70 dollars of additional economic growth. This investment would also generate millions of additional jobs and increase salaries, catalysing an additional 1,9 billion dollars for private sector investments.  The authors conclude that increased infrastructure investments would quickly create jobs, attract additional employees to the labor market, stimulate demand and initiate temporarily increased spending and business investments.

      

If we are to trust newspaper headlines when it comes to statements made by Croatian government officials, state investments in infrastructure and civil engineering will continue in the following period. Minister Butković recently stressed that, aside from completing the construction of the Pelješac Bridge, railway projects and port rehabilitation will be a priority during his mandate. These are precisely the Institute’s areas of activity. We are supervising works on the currently most famous construction site in Croatia, the Pelješac Bridge, as well as on the project of rehabilitation of the railway line Zagreb- Zapadni railway station – Savski Marof.  A contract worth HRK  5,3 million was signed with HŽ Infrastruktura, mostly funded by a loan provided by the International Bank for Reconstruction and Development (IBRD). This is a project concerning a 17,8 km long double track line situated on the RH1 Corridor, an extremely important corridor for international freight and urban-suburban transport, with over 160 trains passing each day. When it comes to naval structures, the Ferry Port Gaženica, and the main terminal building. represent a  „flag ship“ reference for IGH. The entire terminal building design (conceptual design, detailed design, working design and design supervision) was set up and developed by a team of architects from Institut IGH. Thus, the newly constructed Gaženica Terminal became the center of national and international ferry transport, but also a homeport for international cruise ship transport.

    

International ambitions

Institut IGH has a 70 year long tradition and there is almost no structure, road, tunnel or bridge in Croatia whose design or supervision, quality control, study development, expert appraisals were not done by IGH. IGH currently has approximately a thousand active contracts for a wide range of services it offers, making it a leading engineering company in the civil engineering sector in the region.  Also, in the last year, IGH employed over 100 new colleagues, exceeding 500 employees. Some of them have been engaged on projects outside Croatia. Designing sections of Georgian state roads is extremely challenging and special because these are sections expanding mostly through mountainous regions of Georgia. The Sno-Omalo project is ongoing, namely 236 kilometers of roads designed by IGH experts. Projects on other international markets are being prepared with special emphasis on those including renewable energy sources.

   

 

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