Market situation in the construction industry:
- Construction and assembly production increased by 21% in 2018 , reaching a record level of PLN 102 billion
- The year 2018 brought a build-up of problems in the sector, including terminated contracts and bankruptcies of large companies
- The industry’s appeals for the introduction of contract valorisation have not solved the problems with contracts in progress – the changes will apply to new projects
- After 9 months of 2018, the gross profit margin of the construction industry fell to 3.6%
- Market difficulties affected mainly large companies (over 250 employees), where gross profitability after the first half of 2018 fell below zero
Budimex Group results:
- The Group’s sales in 2018 increased by 16% and reached a record level of PLN 7.4 billion
- Gross profit margin was 5.5% compared to 9.1% in 2017
- Market difficulties resulted in a significant decline in the profitability of the construction segment. The Group’s results were supported byRecord profits of the real estate development segment
- During the year, in accordance with the assumed strategy, Elektromontaż-Poznań S.A. was sold.
Cash position of the Budimex Group:
- At the end of Q4, the Budimex Group’s net cash amounted to PLN 1,145 million
- Net cash balance fell m.in. as a result of a significant decrease in contractual advances and the payment of a record dividend. During the year, investments in the machine park consumed over PLN 100 million , and expenditures on the purchase of land for development projects exceeded PLN 200 million
- We are constantly observing delays on the part of investors in the process of accepting and invoicing the works performed
Market conditions encourage us to maintain the policy of financing subcontractors through early payments and frequent invoicing of the works carried out.
Results of the construction segment of the Budimex Group:
- Sales of the construction segment increased by 16%
compared to the same period of the previous year
- Despite very demanding market conditions, the gross profit margin of the construction part stabilized at 3.7%, significantly above the profitability ratio of companies employing more than 250 employees
- The Budimex Group’s order book remained at the level of over PLN 10 billion and was slightly lower than at the end of the previous year
- A responsible approach to new offers translated into a decrease in the value of contracts signed year on year
to PLN 6.6 billion
- Cost inflation in the sector results in a significant increase in the prices offered, which translates into regular overruns of investor budgets
- Due to protracted tender procedures, contractors often resign from signing the contract
Results of the development segment of the Budimex Group:
- In 2018, Budimex Nieruchomości’s clients signed 1,672 notarial deedsin. as part of the next stages of the Wiślany Mokotów, Nowe Czyżyny, Osiedle przy Rolnej and Osiedle na Smolnej investments
- Revenue of the real estate development segment increased by 9%
and amounted to PLN 548 million , and gross profit
amounted to PLN 95 million with a margin of 17.3%
- Pre-sales in the property development segment reached 1,208 apartments (a decrease of 17%)
- Expenditures on land exceeded PLN 200 million and covered all key locations
The coming quarters through the eyes of the Budimex Group…
- The situation of the Budimex Group is stable, the current level of the order book is safe. The profitability of the portfolio is relatively good and should stabilize with the signing of new projects
- The introduced indexation solutions only partially solve the problem of rising costs. Difficult projects, signed 2-3 years ago, will not be valorised, which may translate into a further deterioration of the condition of entities operating in the industry. The availability
and retention of staff remains a challenge
- The continuing dynamic increase in construction prices makes the profitability of subsequent quarters in the industry and in the construction segment of the Budimex Group may remain under pressure. The goal for the coming quarters is to maintain profitability above market indicators
The Budimex Group…
- It is the largest payer of PIT and CIT taxes in the industry (over PLN 120 million paid in 2018)
- It supports local governments, sports teams and social projects. In 2018, we invested PLN 4.5 million in social programs, sponsorships and donations
