Commentary to the financial statements of the Budimex Group for Q1 2011

In the first quarter of this year. Budimex Group realized sales of nearly 798 million zł, therefore 38.2% higher than the sales achieved in the same period of 2010.

It should be noted that the sales of the construction segment of the Budimex Group increased by as much as 83% in the comparable periods. This increase is attributable, to a large extent, to large road construction contracts whose implementation was commenced in the second half of the previous year.

In the first quarter of the current year, the Group’s operating profit amounted to PLN 57.9 million, whereas in the same period of 2010 it amounted to PLN 67.6 million. The decrease in profitability results from a lower share of real estate development activities, characterised by higher profitability, in the Budimex Group’s revenue and profits.

In the first quarter of 2011, Budimex Nieruchomości recorded a decrease in sales by 35%, as compared to the same period of 2010. As at the end of March 2011, the company managed to pre-sale 42% of the total number of flats in new development projects. However, the pre-sale of 300 flats in the fist quarter of 2011 will be reflected in financial results of Budimex Nieruchomości only in subsequent years, when the sales are finalised and the notarial deeds are signed.

I would like to highlight the increase in profitability of construction activities at the operating level to 5.5% from 4% in the same period of the previous year, as well as the decreased share of selling costs as well as general and administrative costs in total sales – from 4.64% to 5.65% in the first quarter of 2010.

In the first quarter of 2011, we signed contracts with the total value of PLN 800 million, whereas in the same period of 2010, new contracts amounted to PLN 1.4 billion. At the end of March 2011, the Group’s order book amounted to PLN 7.1 billion. At present, however, we are looking forward to signing new contracts worth PLN 1.3 billion.
It is worth stressing the fact that despite a considerably lower number of new tenders announced in the road construction segment in the first quarter of 2011, we managed to sign a similar number of contracts in this segment as in the first quarter of 2010.

In the first quarter of 2011, the net cash position of the Budimex Group, including own cash and short-term securities less external borrowings, decreased by PLN 700 million, but the proportion of this decline is similar to the one recoded in the first quarter of 2010.

I hope that in the entire 2011, the percentage rate of growth of the Budimex Group’s sales will reach a double-digit figure. I hope that, despite the pressure from the cost implementation costs, the Group’s net profit will be at least close to the one earned in the previous year.