IBISWorld’s winners were coal seam gas extraction, online grocery sales, fast fashion, hydroponic crop farming and private equity investments, while its predicted losers were petroleum exploration, tobacco production, electricity distribution, mining and construction machinery manufacturing and motion picture and video distribution.
It’s mixed news for the construction sector, but overall probably contains net positives, with the expectation that service companies will still be able to pick up new work, and that money will flow into new building works.
Private equity, which enjoyed a strong 2014, is expected to achieve similar prosperity in 2015, potentially by investing in big building concerns and infrastructure projects.
IBISWorld expects to see merger and acquisition activity to rise this year, something the sector has already seen with the divestment of John Holland to the Chinese, the investment by US fund Apollo Global Management into the Leighton Contractors Services business, and smaller deals such as Mastermyne Group buying up Diversified Mining Services or Resource Equipment being taken over by US-based Pump Services.
And, of course, Transfield Services in in play, even if Spain’s Ferrovial has walked away from its takeover bid.
“Growth in M&A activity in Australia coincides with greater global interest in M&A, as Europe and particularly the United States are emerging from a prolonged period of crisis and subdued growth,” IBISWorld’s David Whytcross said.
The boom in CSG production should help contractors such as Decmil. CSG industry revenue is forecast to rise by 148% over the next year to reach $1.83 billion, largely off the back of new LNG exports, even if prices have taken a battering in recent weeks.
Those export projects will require new wellheads, pipelines and compression, a boom for associated services companies.
But IBISWorld suggests that new mines and mine expansions will slow, leading to forecast revenue decline of 6.1% over 2015 for the companies that make specialised mine machinery and the associated civil kit.
A roundtable in Sydney last week, moderated by Global Capital – that drew together developers and asset management concerns – heard that the transition of the Australian economy away from its dependence on resources should continue to see an increasing support, fiscally and at a policy level, for the construction, engineering and contracting sectors.
The meeting heard that financiers and investors are particularly keen to see the so-called “asset recycling” infrastructure sales processes planned by the New South Wales and Queensland governments over the next two years that should generate a significant amount of money for the government to recycle capital into the development of new infrastructure assets.
They were also open to new public-private partnerships, assuming the settings are correct to allow returns.
