Credit rating agency Fitch has forecast a stable environment for the construction industry during 2010, but has warned that execution of large projects by companies may lead to higher risks.
"Fitch Ratings expects the credit profile of construction companies to remain stable in 2010," the agency said in a statement. "Revenue growth is likely to remain strong due to comfortable order-book positions and expected increases in new orders," it added.
It said besides strong government and power sector spending, a revival of private capital expenditure is likely to aid companies gain new orders, while margins and material costs are likely to remain stable.
"The stability will also be driven by the trend for many companies to move away from fixed-price contracts to ones that incorporate price escalations," Fitch said.
However, the agency said various factors like increase in asset ownership through BOO/BOOT (build, own, operate, transfer) projects and execution of larger ones will add to risks.
It said construction companies have moved towards executing larger projects.
"Factors clouding the rating outlook include customer/project concentration risk and risks of increases in asset ownership through build, own, operate and transfer (BOO/BOOT) projects," Fitch said.
