We are very pleased with the results of the Budimex Group in the first half of 2021. Despite difficult market conditions, we recorded a significant increase in the Group’s gross profit in continuing operations (i.e. construction and services) from PLN 91 million in the first half of 2020 to PLN 260 million in the first half of 2021, with a simultaneous increase in the profitability from 2.6% to 8.0% – says Artur Popko – President of the Management Board of Budimex SA.
Such a good result is the result of an improvement in the result of the construction and service segments, as well as the settlement of the result on transactions between the construction and development segments in the amount of PLN 68 million in connection with the sale of Budimex Nieruchomości. The transaction, finalised at the end of May, closes the process of reviewing strategic options for the development segment in the Budimex Group. The final sale price did not change compared to the original assumptions, and the total impact of the transaction on the Group’s net profit amounted to PLN 542 million.
We recorded a slight decrease in the Group’s sales revenues, with revenues in the services segment increasing by 29.9% and in the construction area decreasing by 10.4%.
In the 1. Half of 2021 construction and assembly production (in current prices) amounted to PLN 45.4 billion and was at the level of the previous year. In the buildings segment, sold production decreased by 2.8%, while in the residential construction area an increase of 3.8% was recorded, and in the non-residential part a decrease by 6.7%. In the infrastructure area, construction and assembly production increased by 3.2%.
Sales of the construction segment of the Budimex Group amounted to PLN 3,029 million (-10.4% y/y), while recording a significant improvement in profitability.
The scale of sales revenues in the first half of the year is slightly lower than in the corresponding period of the previous year, and the dynamics of decline is below the market indicator. This is due to the fact that several important orders in the road area are currently in the design phase or we are waiting for a permit for the implementation of the road investment. This means that production on such contracts is relatively small. In addition, we are observing a decline in volumes in the general construction segment, where, taking into account the current portfolio and contracts in the waiting room, we are counting on growth in the second half of the year.
The gross margin of the construction segment amounted to 4.8% and was noticeably higher than in the first half of 2020, when it amounted to 2.2%. We are experiencing a significant increase in the prices of materials. However, thanks to the mechanisms of partial indexation,
as well as our policy of hedging the prices of key assortments and a prudent approach to bidding, we are able to maintain the originally planned contract margin on most projects. In addition, due to the completion of difficult energy contracts, we assume that the return on the order book will remain well profitable for at least several quarters.
In the first half of 2021, we obtained contracts worth PLN 2,923 million, while in the “waiting room” we have further orders worth over PLN 3 billion. This is a lower level than a year ago, but our priority, invariably, is to take care of the profitability of the order portfolio. The largest projects with a chance of being signed are the E75 Białystok – Ełk railway line (PLN 587 million, selection of the most advantageous offer) and the S6 Leśnice – Bożepole Wielkie expressway (PLN 584 million, selection of the most advantageous offer).
In recent days, we have concluded an important contract for the construction of the Frito Lay Plant in Poland, worth PLN 343 million, which will allow us to fully use our potential in this area.
At the end of June 2021, the value of the order book reached PLN 12,973 million. This level gives us operational comfort and ensures full use of resources this year. After taking into account the contracts in the waiting room, which we plan to sign in the coming months, we have a largely secured work front until the end of 2022. That is why we are selective about new offers, reliably
and responsibly calculating cost estimates, especially in the environment of dynamically changing prices.
The Budimex Group ended the 1st half of 2021 with a net cash position of PLN 2.8 billion. In June, for the 13th year in a row, we paid a dividend of PLN 426 million, which gave PLN 16.70 converted into
Share. We are planning to pay an interim dividend for 2021. The standalone net profit of Budimex SA for the first half of the year amounted to PLN 762 million. We intend to pay out a maximum of half of this amount, i.e. no more than PLN 381 million.
In the 1. In the first half of 2021, the FBSerwis Group continued its upward trends, significantly increasing sales revenues and gross profit.
The dynamics of sales revenues in the service segment amounted to 29.9%. The revenues of the FBSerwis Group, which is a key asset in the services area, amounted to PLN 359 million and increased by 29.8% compared to the previous year. This is the result of higher volumes in the waste management segment. Gross profit amounted to PLN 53 million compared to PLN 35 million in the first half of last year.
We are optimistic about the result potential and development prospects of the FBSerwis Group in the near future. The Group systematically improves profitability and increases the level of sales revenues.
Our goal is for the FBSerwis Group to achieve revenues of one billion PLN m.in by 2025. thanks to acquisitions. We are currently analysing several projects, mainly those increasing the company’s potential in the area of waste management. It is possible that by the end of this year we will carry out one of such acquisitions.
We are entering the construction season with an order book of PLN 13 billion and we are optimistic about the coming quarters. Analyzing the current portfolio, orders with a chance of signing and our work schedule, we expect that the second half of the year will bring an improvement in the annual dynamics of sales revenues. The further course of the pandemic and its impact on the functioning of the economy, including the availability of staff and continuity of supplies, is still a big unknown. That is why we are constantly monitoring the situation and verifying our operational assumptions on an ongoing basis. In the face of significant fluctuations in material prices, we will focus on cost control and optimisation to minimise the impact of negative market factors and, consequently, to achieve profitability above market indicators.
The next quarters should also bring an intensification of offerings, especially in the infrastructure segment. According to PKP PLK’s announcements, tenders worth over PLN 10 billion will be announced by the end of 2021, and in the longer term, expenditures on the construction and modernization of railway routes are expected to reach about PLN 10 billion per year. For several years, the Budimex Group has been consistently building its position and competence in the area of railway contract performance. Thanks to the knowledge and experience we have gained, we are currently among the largest general contractors in this segment, achieving nearly twenty percent share in the tender market for PKP PLK. In recent years, we have invested over PLN 120 million in a modern base of track and traction equipment, which provides us with the ability to effectively implement the most demanding contracts.
The high balance of the cash position, taking into account the funds obtained from the sale of Budimex Nieruchomości, encourages us to analyse the possibility of entering new ventures, including photovoltaic and wind farm projects, where we already have experience as a general contractor. We are analysing the first such projects looking at the required capital commitment, profitability, risks and potential synergies that they would bring to the Budimex Group. We are consistently working on obtaining the first contracts on neighboring markets, and the first submitted offers are behind us. We focus primarily on road and rail contracts, and we submit offers in the first place in Slovakia, the Czech Republic and Germany. We are striving to implement investments worth several hundred million zlotys per year, which will allow us to expand and diversify our portfolio in the construction area.
