The economic uncertainty increased since February 2022 due to the Ukraine conflict, followed by subsequent energy crisis, mounting inflation, rising interest rates and lowered economic growth prospects. Caverion has no operations in Russia, Ukraine or Belarus. Therefore, the impact of the Ukraine war on Caverion is currently indirect.
Inflation has remained on an elevated level even during the first half of 2023. This can still be seen in
the cost inflation related to material prices, which continued to impact also the building technology market. Caverion has continued to manage any increases in material prices and delays in the supply chain on a daily basis without them having a significant impact on financial performance during the second quarter and the first half of 2023. On the other hand, wage inflation has gradually increased.
The recent drop in sentiment indicators has stabilised in the EU during the first half of 2023, but the operating environment is still impacted by lower economic growth prospects and the recent interest rate hikes. Also the corona pandemic still continued to have some impact on the operating environment through higher sick leaves than pre-corona.
In Services, the market demand and general investment activity remained positive. Caverion has continued to see a general increasing interest for services supporting sustainability, such as energy management and advisory services, driven by regulation and by the expected governmental and EU stimulus packages supporting investments in green growth. There has also been increasing interest towards long-term and large-scale service agreements. Growth has been limited by the availability of competent workforce and delays in the supply chain.
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.
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.