Executive Commentary of Dariusz Blocher, President of the Management Board of Budimex S.A., on selected data for 2017

News date: March 1, 2018
Executive Commentary of Dariusz Blocher, President of the Management Board of Budimex S.A., on selected data for 2017

Executive Commentary of Dariusz Blocher, President of the Management Board of Budimex S.A., on selected data from the consolidated financial statements of the Budimex Group for 2017.


The 2017 was another very good year for the Budimex Group. We have recorded the best sales level and the highest net profit, which again made us rank on the first place among the largest construction companies in Poland. Despite intense competition, we have signed new contracts with the value amounting to PLN 7.3 billion and our order book at the start of 2018 – year of the 50th anniversary of the company – exceeds PLN 10 billion.


In 2017, the construction and assembly production increased by 12.9%, making this the highest dynamics since 2011. In the same time, the Group increased its sales by 14.3% compared to the previous year and generated a net profit of PLN 464 million. Increase of Group’s sales in the construction segment matched the market growth rate and amounted to 12.6%, however an increase of the handover scale in the development business resulted in 42.6% increase of sales.


A significant expansion of the performed projects in the construction industry caused raw material and subcontractor service prices to grow further. The decrease in the workforce availability is becoming a growing issue for the industry. Despite unfavourable conditions, the Budimex Group achieved a satisfying operating profitability (9.2%).


After a difficult 2016, during the last months the largest infrastructure investors have awarded a significantly higher number of contracts. In 2017, the value of bids submitted by Budimex increased by more than 80% compared to the previous year. The number of submitted bids was driven by the road construction segment, first and foremost by the General Directorate for National Roads and Motorways. The value of bids for road constructions tripled in 2017 in comparison to 2016 and attained the level of PLN 24.4 billion.


A favourable infrastructure tender market along with maintaining high bidding effectiveness in the general construction market made it possible to conclude new orders for a record amount of PLN 7.3 billion. As at the end of December 2017, the value of the order book reached a level of PLN 10.3 billion. With a selective approach to road tenders and a strong activity in the railway and hydraulic engineering segments, we have managed to achieve the goal of diversifying the backlog structure. Currently, the leading segment of road infrastructure constitutes 45% of the order book in comparison to 57% in the previous year. Winning PLN 1.3 billion in contracts from PKP PLK resulted in the increase of the railway segment from 2% in December 2016 to 12% at the end of 2017. Moreover, with signing of a contract for finishing off the construction of the Racibórz Dolny dry polder, hydraulic engineering activities currently contribute to 7% of the order book.


At the end of the 2017, the net cash position of the Budimex Group amounted to PLN 2.2 billion. This is PLN 359 million less than as of 31 December 2016. To support further growth of waste management and road maintenance segments, in 2017 the Budimex Group increased its involvement in FBSerwis — by more than PLN 50 million. We have also invested PLN 80 million in expanding and upgrading the machine park as well as over PLN 150 million for land purchases for the real estate development segment. One of the significant factors negatively affecting our cash balance was the deteriorating financial position of subcontracting companies, caused, among other reasons, by changes in VAT legislation. We strive to support our subcontractors by offering early payments and allowing for frequent and efficient invoicing of the works performed.


In 2017, the number of flats purchased under the pre-sale procedure, in the development segment, amounted to 1,457 – a decrease of 10% (158 flats) compared to the previous year. The decrease in the number of flats sold under the pre-sale procedure is mainly due to the very attractive “New Czyżyny” project having come to an end (number of pre-sold flats decreased by 667).


We continue expanding our land bank. In 2017, we have purchased land plots in Warsaw, Poznań, and Tricity as well as the first land plot in Wrocław – for over 1,000 flats. As a result, for another year, we managed to develop the portfolio of projects ready to be initiated – at present, it includes almost 8,000 flats. In subsequent years, maintaining pre-sales at the level of 1,500 flats annually will require a continuous level of approximately 4,000 flats under construction.


In 2017, customers of Budimex Nieruchomości signed 1,914 notarial deeds. This number was 61% greater than in 2016 and was due mostly to commencing notarial handovers in the “New Czyżyny” project. The sales amounted to PLN 499 million, increasing by 43% year-on-year. The net profit increased from 41 million in 2016 to a record PLN 54 million in 2017. Despite significant spending on land plots and payment of the dividend, Budimex Nieruchomości maintained a strong, positive cash position.


The largest public investors, namely General Directorate for National Roads and Motorways and PKP PLK, plan a substantial increase of spending for the coming years. A period of extensive work is ahead of us and we are ready for it, both in terms of personnel and equipment.

In 2017, employment in the Budimex Group, including FBSerwis Group, increased by over 1,200 people and exceeded 7,500 employees at the end of the year. According to the personnel development direction adopted we increase employment not only of white-collar workers but we are also looking for blue-collar workers so that to strengthen our in-house team. Moreover, considering the expected growth of the infrastructure projects scale, during the last 2 years we have spent over PLN 150 million for retrofitting the machine park and purchasing the equipment required for implementation of railway projects.


An increase of infrastructure projects scale and gradual growth of the general construction market can result in more and more significant pressure to increase wages and in an increase of subcontractor service prices. Therefore, particular care for costs on contracts performed and responsible approach to calculating new bids will be of utmost importance. We commence the 2018 with a record order book. Such an ambitious level of orders to be implemented allows us to selectively decide on bidding. We try to minimize the risk on the newly concluded contracts and limit exposure to the segments characterized by high fluctuations of workmanship and subcontractor costs.


Both the subsequent quarters and the entire 2018 should bring us positive sales dynamics. We are focused on implementing the awarded projects, dedicating ourselves especially to timely completion and high quality of our work.




Financial highlights from the consolidated financial statements of the Budimex Group prepared in compliance with the International Financial Reporting Standards (IFRS) for 2017 and the comparable figures for 2016.


Reported segment results for 2017 (in PLN thousand):


 Construction segmentReal estate development segmentOther activityDerecognitionConsolidated data
Net revenue from sales of products, goods and raw materials6 069 677498 651153 871(352 890)

6 369 309

Gross profit on sales

689 035

102 038

21 227

(2 476)

809 824

Selling costs

(10 551)

(18 147)

(5 333)15

(34 016)

General and administrative costs

(200 453)(22 822)(5 699)12 347

(216 627)

Operating profit / (loss)

506 43264 63312 1005 153

588 318

Profit / (loss) before tax

498 07767 989

9 483

4 883

580 432

Net profit / (loss)

399 20354 3907 0433 958

464 594

Gain (loss) attributable to shareholders of the Holding Entity

399 20354 3906 7934 022

464 408


Reported segment results for 2016 (in PLN thousand):


 Construction segmentReal estate development segmentOther activityDerecognitionConsolidated data
Net revenue from sales of products, goods and raw materials5 391 453349 586163 015(331 764)5 572 290

Gross profit on sales


662 98681 90820 718(14 347)

751 265

Selling costs

(11 680)

(15 809)

(5 235)


(32 671)

General and administrative costs

(184 238)

(18 364)

(5 657)

9 493

(198 766)

Operating profit / (loss)

452 88546 73510 288(4 801)

505 107

Profit / (loss) before tax

454 79451 02310 389(4 801)

511 405

Net profit / (loss)

364 81141 2858 268(3 888)

410 476

Gain (loss) attributable to shareholders of the Holding Entity

364 81141 2857 698(3 943)

409 851