Commentary of the President of the Management Board of Budimex SA, Dariusz Blocher, regarding financial data from the financial statements of the Budimex Group for Q1 2018

News date: April 27, 2018
Commentary of the President of the Management Board of Budimex SA, Dariusz Blocher, regarding financial data from the financial statements of the Budimex Group for Q1 2018

Budimex Group has ended Q1 2018 with good results, i.e. with 27% higher year–to–year sales, satisfactory profitability and a net result at the level of PLN 63 million.


Sales increases were recorded in both the construction segment (17%) and the property developer segment (106%). The significant sales increase in the property developer segment arose from the delivery of 688 flats in relation to 409 flats in Q1 of the previous year. Sales revenues in the construction segment increased by 17% in relation to the analogical period of the previous year and were at the historically highest level in Q1. At the same time, construction and assembly production increased by 28.2%. Our current order portfolio allows us to look optimistically at the sales. Therefore, we expect that the positive dynamics will remain the same over the next quarters.


The increase in the revenues of the Budimex Group in Q1 2018 was accompanied by a decrease in profitability. The Group reached profitability of the gross income before tax at the level of 6.0%, while it amounted to 4.4% in the construction segment. We perceive this result as a very good one, in particular in relation to the profitability of the whole construction segment. According to the data of the Central Statistical Office, the segment reported a decrease in the profitability of the gross result to 3.8% in 2017 in comparison with 5.0% in 2016. This is a consequence of the growing price pressure on the part of subcontractors, which has been visible for a few quarters, and of a significant increase in payments and the prices of materials. Indexation rates included in current contract provisions do not reflect reality, therefore, the entire cost risk is borne by the general contractors. Thus, we are starting negotiations with investors regarding updating of remunerations, the aim of which is to cover losses arising from extraordinary increases in the prices of key materials. Due to the ambitious investment plans of key investors, there will probably not be any stabilisation in the year 2018. Despite this fact, in the next quarter, we will work on maintaining stable profitability above market indicators.


At the end of March 2018, the order portfolio of Budimex Group amounted to PLN 10.4 billion and was close to the level achieved in December 2017. During the first three months of 2018 ,we signed contracts with a total value of PLN 1.1 billion. Due to the increasingly difficult market situation, we are taking a selective approach towards new contracts and are not planning any further expansion of the order portfolio. This change concerning the approach towards new offers is visible in the case of the majority of contractors. We can observe a situation in which the lowest offers significantly exceed the orderer’s budget, particularly in the railway segment, more and more often. The market is getting increasingly saturated and the risk of further cost pressure is contributing to the fact that the segment is particularly careful and prudent when it comes to the calculation of future costs.


In Q1 2018, we recorded a decrease in our level of cash reserves characteristic for this period. Despite this fact, at the end of Q1 2018, Budimex Group maintained a net cash position at the satisfactory level of PLN 1.55 billion.


In Q1 2018, the pre–sale of flats in the property developer segment achieved the level of 270 flats in comparison with 392 flats in the analogical period of the previous year. 3000 flats are being built now and there are still 957 flats which are waiting for clients.


In 2018, Budimex Nieruchomości is planning to expand its offer by another approx. 3000 flats, which should result in acceleration of pre–sales in the second half of the year. Currently, our possessed land bank allows us to build the next 7600 flats.


The cumulation of signed notarial deeds in Q1 2018 translated into a significant increase of sales revenues. We delivered 688 flats to our clients, first and foremost, as part of the next stages of Wiślany Mokotów, Nowe Czyżyny and Osiedle przy Rolnej investments. The operating profit of the property developer segment amounted to PLN 27 million, which is higher than in the analogical period of the previous year by 128%. At the same time, operating profitability improved and achieved the level of 12.7%.


In relation to the good results in 2017 and a safe level of cash, the Management Board recommended payment of a record dividend amounting to PLN 17.61 gross per share. The General Meeting of Shareholders will take a final decision regarding this case on 17 May 2018. Budimex SA is a component of the WIGdiv index, which comprises companies that have been regularly paying dividends over the last 5 years. Budimex SA has been continuously paying dividends since 2009.


We have been consistently increasing our number of employed manual labourers, continuing the approach relating to minimisation of the risk relating to the lack of labour force. In Q1 2018, employment in Budimex Group increased by more than 300 workers on the domestic market (out of whom 200 workers were manual labourers) and the total number of workers employed in the Group exceeded 6900.


We are commencing the year 2018 with a record order portfolio, which should translate into maintenance of the positive dynamics of sales in the next quarters. During 2018, we will have to face the observed dynamic increase of prices of materials and costs of the subcontractors’ services. Therefore, we are minimising risks relating to newly signed contracts and are decreasing exposure to segments which characterise themselves with high changeability of the prices of labour and subcontractors’ services. At the same time, we will focus on optimisation and particular care about costs relating to the performed contracts, so that we are able to maintain stable profitability in the coming months.


We are a company which, despite difficult market conditions, meets its contractual obligations and performs the tasks entrusted to it in accordance with relevant provisions, maintaining the highest quality standards. However, we believe that without solving the problem of the real price indexation and introduction of certain facilitations concerning the employment of foreign workers, the implementation of the investment program based on European Union financing could be threatened.






Selected financial data from the consolidated financial statements of Budimex Group prepared in accordance with the International Financial Reporting Standards (IFRS) for Q1 2018 and comparable data for Q1 2017.


Results of the reportable segments for Q1 2018 (in PLN thousand):


 Construction segmentReal estate development segmentOther activityDerecognitionConsolidated data
Net revenue from sales of products, goods and raw materials1 159 465210 78137 187(68 602)

1 338 831

Gross profit on sales

99 13437 320

6 242

(2 455)

140 241

Selling costs

(2 376)

(3 608)

(1 378)-

(7 362)

General and administrative costs

(49 554)(6 807)(1 569)4 327

(53 603)

Operating profit / (loss)

51 90426 7903 3261 897

83 917

Profit / (loss) before tax

50 70527 557


1 813

80 899

Net profit / (loss)

39 37222 2662371 468

63 343

Gain (loss) attributable to shareholders of the Holding Entity

39 37222 2652111 472

63 320


Results of the reportable segments for Q1 2017 (in PLN thousand):


 Construction segmentReal estate development segmentOther activityDerecognitionConsolidated data
Net revenue from sales of products, goods and raw materials990 566102 29840 259(80 383)1 052 740

Gross profit on sales

140 11720 1274 786(2 020)

163 010

Selling costs

(2 447)

(3 967)

(1 224)


(7 624)

General and administrative costs

(49 003)

(4 933)

(1 410)

2 579

(52 767)

Operating profit / (loss)

95 45911 7312 587573

110 350

Profit / (loss) before tax

93 61712 561112573

106 863

Net profit / (loss)

75 00510 169(385)464

85 253

Gain (loss) attributable to shareholders of the Holding Entity

75 00510 129(495)519

85 158