The economic uncertainty due to the conflicts in Ukraine and recently in the Middle East, followed by the subsequent energy crisis, mounting inflation, rising interest rates and lowered economic growth prospects continued. Caverion has no operations in the Middle East, Russia, Ukraine or Belarus. Therefore, the impact of the conflicts on Caverion is currently indirect.
Core inflation, despite signs of easing, remained high during January–December 2023. The cost inflation related to material prices continued to impact also the building technology market. Caverion continues to manage any increases in material prices and delays in the supply chain on a daily basis without them having a significant impact on the financial performance during January–December 2023. On the other hand, wage inflation has gradually increased in all of Caverion’s operating countries.
The economic sentiment indicators have continued to be volatile in the EU during January–December 2023, and the operating environment is still impacted by lower economic growth prospects and the recent interest rate hikes.
In Services, the market demand and general investment activity remained positive. Caverion has continued to see an increasing interest towards long-term and large-scale service agreements, driven by the demand for technical competencies and self-delivery capability. There has also been increasing demand for services supporting sustainability, such as energy management, digital solutions and advisory services, driven by
regulation and increased awareness. Growth has been limited by the availability of competent workforce.
The increasing interest rates have as much as stalled certain segments of the building construction market. Caverion is not immune to this development. The residential construction market, however, does not have a significant role in Caverion’s Projects business portfolio. On the other hand, the demand in certain other businesses, such as renewable energy related projects, has been strong. As such, for Caverion’s Projects
business as a whole, the market demand has remained mostly stable, however, with regional differences.
The Projects market was also impacted by increases in material prices, delays in decision-making and supply chain as well as uncertainty in the business environment, especially related to new construction.
Built environments are a major source of carbon emissions today. Buildings are responsible for 30% of Europe's CO2 emissions. By modernising and digitalising buildings we can reduce the CO2 emissions up to 20%. Also when industrial production facilities operate as planned, production disruptions, uncontrolled emissions and waste are eliminated. Our company is well positioned to help provide a sustainable, digital future for our customers.
The megatrends in our industry have developed in our favour in recent years and support our growth. We have seen a general increasing interest for services supporting sustainability, such as energy management and advisory services, driven by regulation and the expected governmental and EU stimulus packages supporting investments in green transition.