The construction industry is going through turbulent times. After years of boom, interest rate hikes and declining demand have hit the industry hard. Which metrics are typical, which are critical? A benchmark for analyzing construction companies.
Note: The benchmark values in this article are reference values for orientation. The specific metrics of a company must always be evaluated in the context of size, segment, and market position.
Market Overview
Germany - Main Construction Industry (Destatis 2024)
According to Federal Statistical Office:
| Metric |
Value 2024 |
| Revenue (nominal) |
EUR 114.8 billion (all-time high) |
| Order intake |
EUR 103.5 billion |
| Employees (companies with 20+ employees) |
534,200 |
| Companies (20+ employees) |
~9,500 |
Development:
- Order intake real -0.7% vs. previous year
- Residential construction real -3.5%
- Non-residential construction real -5.8%
Market Situation by Segment
| Segment |
Trend |
Background |
| Residential construction |
Sharply declining |
Interest rate reversal, construction costs |
| Commercial construction |
Weak |
Investment reluctance |
| Public construction |
Stable to positive |
Infrastructure programs |
| Renovation/existing buildings |
Growing |
Energy-efficient renovation |
Benchmark Metrics
| Company Size |
Weak |
Average |
Good |
| Small (<EUR 10 million) |
<10% |
15-25% |
>30% |
| Medium (EUR 10-100 million) |
<15% |
20-30% |
>35% |
| Large (>EUR 100 million) |
<20% |
25-35% |
>40% |
Industry characteristic: The construction industry is traditionally capital-intensive due to pre-financing and guarantees.
Return on Sales (ROS)
| Sector |
Weak |
Average |
Good |
| Building construction |
<1% |
2-4% |
>5% |
| Civil engineering |
<1.5% |
3-5% |
>6% |
| Specialized construction |
<2% |
4-6% |
>8% |
| Trade/crafts |
<2% |
3-5% |
>7% |
Liquidity Ratio III (Current Ratio)
| Rating |
Value |
| Critical |
<0.8 |
| Weak |
0.8-1.0 |
| Adequate |
1.0-1.3 |
| Good |
1.3-1.6 |
| Very good |
>1.6 |
Caution: High liquidity can also indicate lack of investments or missing projects.
Personnel Expense Ratio
| Sector |
Typical |
Critical when... |
| Main construction |
25-35% |
>40% |
| Finishing trades |
35-50% |
>55% |
| Project development |
10-20% |
>25% |
Material Expense Ratio
| Sector |
Typical |
Critical when... |
| Building construction |
45-55% |
>60% |
| Civil engineering |
35-45% |
>50% |
| Specialized construction |
30-45% |
>55% |
Construction-Specific Metrics
Order Backlog (in Months)
| Rating |
Months of Order Coverage |
| Critical |
<2 |
| Tight |
2-4 |
| Healthy |
4-8 |
| Good |
8-12 |
| Very good |
>12 |
Days Sales Outstanding (DSO)
| Rating |
Days |
| Very good |
<30 |
| Good |
30-45 |
| Average |
45-60 |
| Weak |
60-90 |
| Critical |
>90 |
Industry-typical: Longer payment terms than in other industries, but high DSO is a warning sign.
Days Payables Outstanding (DPO)
| Rating |
Days |
| Very good |
<30 |
| Good |
30-45 |
| Average |
45-60 |
| Critical |
>75 |
Caution: Significantly extended payment terms to suppliers can indicate liquidity problems.
Risk Indicators in the Construction Industry
| Signal |
Warning |
| Order backlog < 3 months |
Acute revenue risk |
| Equity ratio < 10% |
Over-indebtedness risk |
| DSO > 90 days |
Receivables default risk |
| Staff reduction > 10% |
Structural problems |
| Frequent management changes |
Instability |
| Delayed annual reports |
Possible concealment |
Yellow Flags
| Signal |
Monitor |
| Declining equity ratio |
Track development |
| Increasing material ratio |
Margin pressure |
| Growing liabilities |
Check financing structure |
| Concentration on one project |
Concentration risk |
Sub-Segment Benchmarks
Project Developers
| Metric |
Weak |
Normal |
Good |
| Equity ratio |
<20% |
25-35% |
>40% |
| Debt/EBITDA |
>5x |
3-5x |
<3x |
| LTV (Loan-to-Value) |
>80% |
60-75% |
<60% |
Property Developers
| Metric |
Weak |
Normal |
Good |
| Pre-sales ratio |
<30% |
50-70% |
>80% |
| Deposits/inventory |
<20% |
30-50% |
>50% |
General Contractors
| Metric |
Weak |
Normal |
Good |
| EBIT margin |
<2% |
3-5% |
>6% |
| Subcontractor ratio |
>80% |
50-70% |
<50% |
Trade Businesses
| Metric |
Weak |
Normal |
Good |
| Revenue per employee |
<EUR 80,000 |
EUR 100-150k |
>EUR 180,000 |
| Skilled worker ratio |
<60% |
70-80% |
>85% |
Industry-Specific Risks
Economic Dependency
The construction industry is highly cyclical:
- Early reaction to interest rate changes
- Delayed impact on employment
- Long project durations provide short-term buffer
Subcontractor Risk
Many construction projects work with subcontractors:
- Subcontractor insolvency = project delay
- Defect liability can backfire
- Black market labor risk
Warranty
5-year warranty in construction:
- Check provisions
- Analyze defect history
- Clarify insurance coverage
Skilled Labor Shortage
The shortage of skilled workers is structural:
- Limits growth
- Drives labor costs
- Quality problems possible
Conclusion
The construction industry differs significantly in its metrics from other industries. Lower equity ratios, longer payment terms, and higher material ratios are industry-typical.
For a sound analysis, you must:
1. Always consider the industry context
2. Choose the right sub-segment as benchmark
3. Look at trends over several years
4. Include project pipeline and order backlog
Analyze construction companies: Firmium provides annual reports and key metrics for your industry analysis.