Commentary by Artur Popko, President of the Management Board of Budimex SA, on the financial data of the Budimex Group for the three quarters of 2022

The Budimex Group generated an operating profit of PLN 417 million with a margin of 6.5%, while in the first quarter of this year the operating profitability reached 3.6%, and in the second and third quarters it was already 7.4% and 7.7%, respectively.

The gross profit of the Budimex Group amounted to PLN 466 million with a margin of 7.3%. Profitability at the level of gross profit was supported by a significant improvement in the result on financing activities, especially in the second and third quarters, which is the result of an increase in the average interest rate on cash deposited by the Budimex Group.

The Budimex Group records an increase in the Group’s sales revenues at the level of 15.1%, mainly due to the larger scale of sales in the construction segment, in  particular in the area of cubature construction and in Mostostal Kraków. In the service part, revenues were similar to the previous year.  

Construction and assembly production in Poland for the first three quarters of 2022 (in current prices) increased by 22.2% year-on-year from PLN 77.4 billion in 2021 to PLN 94.5 billion in 2022. In the buildings segment, sold production increased by as much as 30.2%, while in the infrastructure area the increase was 14.3%.

Sales of the construction segment of the Budimex Group amounted to PLN 5 billion 809 million.

Despite market difficulties resulting from disrupted supply chains, sales in the first three quarters of 2022 in the construction segment were noticeably higher than in the corresponding period of the previous year. A high order book at the beginning of 2022, a well-thought-out purchasing policy and favorable weather conditions allowed us to increase revenues by over 13%.

In the last quarter, we observed a stabilization of prices of key assortments, and in some cases (m.in. steel) a decrease in prices, compared to the levels recorded a few weeks after the outbreak of the war. A responsible contracting strategy and a tailored purchasing strategy allowed us to reduce losses related  to the current market situation to a minimum. The budgets of all our projects are updated on an ongoing basis, and  thanks to the good profitability of contracts at the last stages of implementation, the profitability of the portfolio remains stable.

During the first three quarters of 2022, we obtained contracts worth PLN 4.6 billion. The Budimex Group’s order book at the end of September 2022 amounted to PLN 12.5 billion and secures the work front until the end of 2023.

Intensive work on the acquisition of new projects meant that the value of projects signed in October 2022 and awaiting signing amounted to over PLN 3 billion, which should ensure the stability of the order portfolio. These contracts include m.in. construction of such facilities as the S17 Piaski-Hrebenne expressway (2 sections with a total value of PLN 845 million), the D1 Bratislava-Triblavina motorway in Slovakia (PLN 519 million), the Military Hospital in Kraków (PLN 368 million) or the 104 Chabówka-Nowy Sącz railway line (PLN 366 million).

The Budimex Group ended the third quarter of 2022 with a net cash position of PLN 2.2 billion. In June 2022, we paid the remaining dividend for 2021 in the amount of PLN 23.47 per share. Thus, the total dividend for 2021 per share amounted to a record PLN 38.37.

After three quarters, the FBSerwis Group maintained a high level of sales revenues while maintaining good profitability.

The revenues of the FBSerwis Group, which is a key asset in the service segment (the results of the service part also include the activities of several smaller companies, including Budimex Parking Wrocław), amounted to PLN 573 million and were slightly higher than in the corresponding period of the previous year. The operating profit of the FBSerwis Group amounted to PLN 64 million with a margin of 11.2% compared to 13.8% in  the corresponding period of the previous year, while in the third quarter alone the profitability improved and was higher than in the third quarter of the previous year.

Intensive work on acquiring new orders, especially in the infrastructure maintenance segment, allowed us to significantly expand the order portfolio, which should translate into an increase in revenues in the coming quarters. We continue the investments we have started in the expansion of existing waste processing installations and landfills. At the same time, we are integrating the entity acquired a few months ago within the Group’s structure, thus strengthening our position in the environmental services segment.

Market forecast

In the coming quarters, we will closely observe further developments in the macroeconomic situation.

The current portfolio of orders of the Budimex Group fully secures the work front until the end of 2023, and the newly acquired contracts (in particular orders in the “design and build” formula) build strong foundations for operations for 2024-2025. This is particularly important in the perspective of the economic slowdown and the planned limitation of new projects decided by some of our Contracting Authorities, i.e. local governments and PKP PLK. 

Inflation rates remain high and most forecasts for the coming quarters are being revised upwards. We are closely monitoring the prices of energy and fuels, which are of key importance for the construction industry and the entire economy. That is why it is so important to continue working on mechanisms for valorization of long-term orders.

We are preparing for the implementation of the first important projects abroad. The largest of them is the construction of the D1 Bratislava-Triblavina motorway in the “design and build” formula. Recently, we have also won first place in the tender for the reconstruction of railway infrastructure on the Czech market with a total value of approx. PLN 66 million.

Innovation

Budimex, in cooperation with the Krakow Technology Park, has joined the Poland Prize acceleration programme for foreign start-ups, co-financed by the Polish Agency for Enterprise Development.

We continue our cooperation with startups that were awarded in the first edition of the Budimex Startup Challenge. The leading topics in the area of innovation continue to be: solutions for the energy sector, renewable energy sources and ecological technologies for the construction industry.

CSR activities

July 26, 2022 the ceremonial finale of the House from the Heart 2 campaign took place in Brusy in Pomerania, as  part of which the construction of a house for a family of 8 was completed to a turnkey state. Thanks to the support of all Partners of the campaign, the dream of Iwona, Krzysztof and their six children came true. Build 41. and 42. Parent Zone in hospitals in Ełk and Bydgoszcz.

In the third quarter, our construction sites won several valuable industry awards: 7 awards in the “Construction of the Year 2021” competition, commonly known as the Construction Oscars, and two “Modernization of the Year” awards. Among the awarded investments were, m.in, the PKN Orlen Research and Development Centre in Płock, the PKP S.A. railway station in Białystok and Rother’s Mills in Bydgoszcz.

Budimex’s CSR strategy assumes m.in. being a good neighbor, guest and partner for local communities.  During the three quarters of 2022. we have charitably supported the surroundings of construction sites as part of 41 projects in: Ełk, Szczecin, Bydgoszcz, Szczecin, Kraków, Warsaw, Dolice near Szczecin. Szczecin, Białystok, Narewka near Szczecin.  Hajnówka, Czechowice – Dziedzice, Suwałki, Marki near Dziedzice. Warsaw, Słupca near Warsaw. Konin and Strachocin. The total value of the aid amounted to over PLN 1 million.