Commentary by the President of the Management Board, Dariusz Blocher, on the financial data from the consolidated financial statements of the Budimex Group for the 3. Quarter 2012

During this time, the Group generated an operating profit of PLN 53 million, a gross profit of PLN 76 million and a net profit of nearly PLN 55 million, while in the corresponding period of 2011 the operating profit of PLN 92 million, a gross profit of
PLN 92 million and net profit of PLN 74 million.

Impact on the Group’s results in the third quarter of this year due to the consolidation of PNI means a decrease in operating profit, gross and net profit by over PLN  19 million (in the corresponding period of 2011, this company did not yet belong to the Budimex Group). The lower profitability of expiring motorway contracts, resulting from a significant increase in the costs of road investments (an increase in the prices of construction materials, which was unpredictable at the time of signing the contracts, by approx. 40%).

The amount of gross and net profits in the third quarter of this year. The Group had a positive impact on higher interest on overdue payments and court cases than in the corresponding period of 2011.

In the third quarter of this year. The Budimex Group signed contracts worth PLN 1,041 million, while in the corresponding quarter of 2011 it was PLN 1,284 million, which results from a clear decrease in the value of tenders announced on the market and from our care to maintain a “healthy” portfolio and a selective approach to bidding in a very competitive, decreasing market.

The Group’s order backlog at the end of September 2011 amounted to PLN 6.4 billion, compared to PLN 7.7 billion at the end of the third quarter of 2011. At the  moment, however, we are waiting for the signing of further contracts worth PLN 270 million (on the basis of tenders in which the bids of the Budimex Group companies were awarded first places).

Currently, we submit 40% more offers than in the same period of 2011, but for contracts of much lower value and shorter implementation period. Thus, we reduce the risk of inflation affecting the results, but we compete with other, smaller companies.

In the third quarter of this year. The real estate development segment recorded a nearly 53% increase in sales compared to the corresponding period of 2011. In the quarter in question, Budimex Nieruchomości sold 130 flats by notary, while in the same period of 2011 it sold 46 flats. The lower dynamics of sales revenues in relation to the dynamics of the number of apartments sold is due to the large share of smaller and cheaper apartments in the sales of this year.

In the third quarter of this year. Budimex Nieruchomości pre-sold 112 apartments (excluding reservations), while in the same period last year 145 units.

The net cash position of the Budimex Group, including own cash and short-term securities less external sources of financing, amounted to PLN 718 million at the end of September 2012, while at the end of the third quarter of 2011 it amounted to PLN 889 million. This decrease is mainly due to the purchase of PNI in November 2011 and the payment of a dividend in the amount of PLN 280 million this year.

After three quarters:

In the first three quarters of this year. The Budimex Group generated sales of  PLN 4,580 million, i.e. 20% higher than the sales achieved in the corresponding period of 2011. Construction and assembly production increased by 1.4% in the analysed period.

At the end of the third quarter of this year. The Group generated an operating profit of over PLN 109 million, a gross profit of PLN 134 million and a net profit of nearly PLN 77 million, while in the corresponding period of 2011 it was PLN 237 million, PLN 241 million and PLN 194 million, respectively.

After three quarters of this year. as a result of PNI’s consolidation, the operating profit, gross profit and net profit of the Budimex Group decreased by nearly PLN 137 million. The decrease in results compared to the corresponding period of 2011 was also influenced by losses on some of Budimex’s motorway contracts. However, we have already created provisions for these losses, and since the implementation of motorway contracts is coming to an end, I do not expect any more cash or accounting losses on this account.

Excluding the negative impact of PNI, the results after three quarters of this year. We assess it as good and comparable at all levels with the results obtained in the corresponding period of 2011.

After three quarters of this year. The real estate development segment recorded a nearly 40% drop in sales compared to the same period of 2011, despite the fact that Budimex Nieruchomości sold 373 flats by notary public this year, while in the same period of 2011 it sold 313 flats.

In the first three quarters of this year. Budimex Nieruchomości pre-sold 322 apartments (excluding reservations), while in the same period last year 550 units. In the whole of 2012, I expect pre-sales of apartments at a level up to 30% lower than in 2011, but at the same time higher sales revenues than last year. The decline in pre-sales is caused by the uncertain market situation, the amendment of the Developer Act, the restrictive lending policy of banks and the reduction in the offer of ready-made apartments from Budimex Nieruchomości.

Thanks to the good results, the activities of Budimex Danwood, a 100% subsidiary of Budimex SA, which manufactures and assembles timber frame houses, are becoming increasingly important in the Budimex Group. The German market is also noteworthy, where Budimex achieves higher margins than on the domestic market.