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Financial results of the Budimex Group after the first three quarters of 2019

News date: October 29, 2019
Financial results of the Budimex Group after the first three quarters of 2019

Market situation:

  • Construction and assembly production rose by 9% in the first three quarters of 2019 and reached PLN 73 billion.
  • According to the Central Statistical Office (GUS) data, the profitability of the gross profit of large entities improved: in the first half of 2019 the gross profit margin amounted to 1.4% as compared to -0.4% in the first half of 2018. Smaller entities benefitted from market growth, they achieved a gross profit margin of 10%.
  • A slight improvement in profitability is visible; however, numerous infrastructure contracts have been terminated and a further deterioration of the financial standing of some entities can be observed.

 

Results of the Budimex Group:

  • After the first three quarters of 2019, the Group's sales were close to the level of last year, and reached PLN 5.38 billion.
  • The gross profit margin for the Budimex Group amounted to 4.0%. In the third quarter alone, profitability reached 4.9% due to the change of the strategic support contract (reduction of remuneration from 0.5% to 0.33% of sales revenues) and one-time increase to PLN 34.8 million.
  • The construction segment was relatively good, with gross profit margin amounting to 2.7% (as compared to 3.8% in the same period of 2018).
  • The property development segment achieved a gross profit margin of 17.3%.
  • In July in the service segment, Budimex started the consolidation of the results of the FBSerwis Group. In the third quarter, the FBSerwis Group generated PLN 131 million in sales and PLN 17 million in operating profit.

 

Cash position of the Budimex Group:

 

  • At the end of September, the net cash balance of the Budimex Group amounted to PLN 570 million and was close to the level at the end of the third quarter of last year.
  • In the third quarter, despite the expenditure on the purchase of FBSerwis, the net cash balance improved by PLN 306 million compared to the end of the second quarter.
  • The tendency persists among investors to be late in the process of accepting and invoicing completed works.

 

 

Results of the construction segment of the Budimex Group:

 

  • Sales in the construction segment increased by 1%, achieving a slightly lower increase than in the industry as a whole - we are focussing on building a profitable order portfolio.
  • The gross profit margin in the construction segment amounted to 2.7%, significantly higher than the market benchmark.
  • The portfolio of orders of the Budimex Group was maintained at the PLN 10.7 billion level.
  • Due to the signing of a contract for the execution of construction works on the Most Wisła junction post – Czechowice-Dziedzice – Zabrzeg section, Budimex became one of the leaders in this area. New hydrotechnical contracts have been signed for the realization of the construction of the Racibórz Dolny flood protection reservoir and of a tailings storage facility for KGHM.
  • The rate of contracting in the following quarters may slow due to underestimated investor budgets and protracted tender processes.

 

Results of the property development segment of the Budimex Group:

  • In the first three quarters of the year, the customers of Budimex Nieruchomości signed 1 229 notarial deeds.
  • The extension of our offer allowed us to achieve the pre-sale of 1,286 apartments.
  • Revenues in the developer segment rose by 3% and stood at PLN 422 million, while gross profit reached PLN 73 million with a profit margin of 17.3%.
  • Budimex Nieruchomości now offers more than 1700 apartments in 5 locations.

 

 

The Budimex Group’s look on the upcoming quarters

 

  • The situation of the Budimex Group is stable and the record level of order portfolio allows for fully effective use of resources and secures the work front for the next few quarters.
  • The average profitability of the portfolio is relatively good, and the implementation of most of the difficult contracts in the area of infrastructure and general construction, signed several years ago, has been completed. The profitability of the energy segment remains under pressure from contracts in Turow and Vilnius.
  • Identified losses on projects under implementation are included in the results, which is why we do not expect significant changes in portfolio profitability. Budimex also filed the first court claims for excessive pricing involving the ‘rebus sic stantibus’ clause.
  • Prices of petroleum materials, steel and aggregate are similar to the levels from last year. The market environment remains difficult, especially in terms of the availability and maintenance of personnel and the prices of materials and subcontractors.
  • The aggressive behaviour of the competitors, whose offers are submitted without any local experience, and frequently not verified by the contractors themselves, makes it difficult to complete innovations. Contract conditions are not improving, therefore equitable allocation of risks among parties remains a challenge for the coming quarters.
  • The situation on the labour market is improving, staff shortages are lower. However, the availability of qualified employees from the railway sector still remains a problem.

 

Complete information with financial data can be downloaded here.

 


 
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