Commentary by Artur Popko, President of the Management Board of Budimex SA, on the financial data of the Budimex Group for the second quarter of 2024

The Group’s very good condition enables us to responsibly pursue the goals we set for ourselves.
Operating profitability and net result for the second quarter are better than in the first quarter of 2024 – we assess the entire first half of 2024 as very good.
Despite the challenges, the industry is looking to the future with moderate optimism.
Effective cost management, digitization and automation of processes will be crucial for the Group.

The gross profit of the Budimex Group amounted to PLN 366 million with a profitability of 9.1% compared to 8.3% in the first half of last year.
As in the corresponding period of the previous year, profitability at the level of gross profit was supported by financing activities, which consisted mainly of interest earned on cash.

Construction and assembly production in the first half of 2024 (current prices) fell by 2.5% year-on-year from PLN 65.3 billion to PLN 63.6 billion.
In the buildings segment, sold production decreased by 2.8%, while in the infrastructure area a decrease of 2.1% was recorded.

Sales of the construction segment of the Budimex Group in the first half of 2024 amounted to PLN 3,590 million (-7.6% y/y), while recording an increase in both operating profitability (from 5.9% to 7.2%) and gross profitability (from 8.0% to 9.1%).

The scale of sales revenues generated in the first half of 2024 in the construction segment was noticeably lower than in the corresponding period of the previous year.
The decline in sales was mainly due to the investment cycle of the largest contracting authorities, in particular in the railway area.
In addition, several important contracts were completed, which last year had a large share in sales revenues.

The operating margin of the construction segment amounted to 7.2% and was significantly higher compared to the corresponding period of the previous year, when it amounted to 5.9%.
The recorded increase was due to several factors.
On the one hand, we are observing stabilization of prices and greater availability of construction materials and subcontractors’ services.
On the other hand, we are constantly working on cost control and  process efficiency at every level of the organization.
The improvement in profitability on  an annual basis is also due to the effect of the completion and settlement of several large and financially difficult contracts last year, which improved the average profitability of the entire order portfolio.

The gross margin of the construction segment in the period under review amounted to 9.1%
and was higher than in the first half of 2023, when it amounted to 8.0%.
In the first half of 2024, in addition to an increase in profitability at the operating level, profitability at the level of gross profit was supported by a positive result generated on financing activities due to interest on deposits.

In the first half of 2024, we obtained contracts worth almost PLN 5.7 billion.
The Budimex Group’s order book at the end of June 2024 amounted to PLN 15.3 billion, of which over PLN 1 billion was attributable to construction contracts acquired outside Poland.
Such a high value of the order book secures the Group’s work front for the entire current year and most of 2025.
Intensive work on the acquisition of new projects has resulted in the fact that the value of projects awaiting signing, and those where the offer of Budimex or Group companies has been rated the highest (as of 30 June) is currently almost PLN 10 billion.
In  the perspective of the coming quarters, this should translate into maintaining a high value of the order book and will allow for responsible bidding in upcoming tenders.

The Budimex Group ended the first half of 2024 with a net cash position of nearly PLN 2.6 billion.
In June 2024, in order to comply with the assumptions of the adopted dividend policy, Budimex SA paid a dividend from the profit generated for 2023 in the amount of PLN 749.6 million and retained earnings from previous years in the amount of PLN 161.6 million, which gives a total of PLN 35.69 per share.

In the first half of 2024.
The FBSerwis Group recorded a year-on-year increase in sales revenues by PLN 18.2 million, while maintaining good profitability.

The revenues of the FBSerwis Group, which is a key asset in the services segment (the results of the service part also include the activities of companies from the RES area, Budimex Mobility and Budimex Parking Wrocław) amounted to PLN 456 million and were 4.2% higher than in the corresponding period of the previous year.

Market outlook

We are ending the first half of 2024 with a record order backlog of more than PLN 15 billion. This level fully secures the work front until the end of this year and most of 2025. In addition, more than 1/4 of the portfolio value are projects whose implementation ends in 2027-2028, which already provides the foundation for operations for the next 4 years. The current portfolio also offers the prospect of a stable margin – most of the orders are relatively new projects, which were offered at current prices and contain indexation clauses.

On the local market, we are constantly observing an aggressive fight for orders for both
in the road, rail and cubature areas. On the one hand, this is a consequence of the lower supply of tenders, on the other hand, we are observing a tightening of the level of competition from foreign entities. When taking part in tenders outside Poland, we usually have to go through an arduous certification process – we would like to feel that construction companies from abroad are verified and undergo a real certification process in Poland in terms of personal, technical and financial potential, just like Budimex on foreign markets.

We are consistently implementing the internally set directions of development of the Budimex Group.
We hope that segment diversification by strengthening our position in the  hydrotechnical segment, entering the market of energy transmission infrastructure, as well as expansion into foreign markets will allow us to maintain the long-term growth trend of the construction segment.
Already today, sales carried out on foreign markets are an important part of the construction business.
We expect that with  each quarter, revenues in neighboring markets will increase.
In May, together with our partners, we officially launched the Rail Baltica project in Latvia.
The total estimated value of this contract is EUR 3.7 billion.
A month earlier, the D35 contract worth CZK 3.4 billion (approx. PLN 600 million) was officially launched on the Czech market.

Looking at the next quarters, challenges related to effective human resources management are looming on the horizon, taking into account the insufficient number of qualified employees and a record order portfolio, especially in  the infrastructure part.
We analyse and implement solutions for the digitisation and automation of processes on an ongoing basis, also with the use of artificial intelligence, which partially helps to solve the issue of staff shortages.
From the business side, the challenge is still to rebuild the order book in the  railway and energy areas.

In the first half of the year, Budimex entered the WIG-20 index of the largest listed companies. We also received the Bulls and Bears award of the Parkiet stock exchange newspaper and the Forbes Diamond for our financial results. In June, Budimex was awarded the title of the Construction Brand of the Year based on the results of surveys of over 2 thousand subcontractors in Poland.

Budimex and Mostostal Kraków received the Top Builder award of the Builder monthly for the construction of the Integrated Communication Centre in Lublin.
We have carried out nineteen Hello ICE educational campaigns to raise awareness of road safety among the youngest.
Over 3,000 children took part in them.
Among them, we organized the first Hello ICE campaign outside of Poland – in the vicinity of the D1/D4 contract in Slovakia.
As part of the third stage of the Green Stop, we planted 130 trees and 50 shrubs in Warsaw along the construction of the tram route to Wilanów. In total, 410 trees and 50 shrubs were planted during the Przystanek Zieleń campaign.

In the first half of 2024, Budimex completed two Parent Zones: in the hospital in Bielsko-Biała and in the local activity zone in Bratislava.