Artur Popko, President of Budimex Group, comments on the financial results after three quarters of 2021.

News date: October 27, 2021
Artur Popko, President of Budimex Group, comments on the financial results after three quarters of 2021.

We are satisfied with the results achieved after three quarters. Despite difficult market conditions, we recorded an increase in the Group's gross profit as part of continuing operations (i.e. construction and services) from PLN 230 million for three quarters of 2020 to PLN 389 million in three quarters of 2021, with a simultaneous improvement in profitability from 4.1% to 7.0%. Such a good result is the effect of the improvements of the results of the construction segment, the services segment, as well as the settlement of the result on transactions between the construction and development segments to the amount of PLN 68 million in connection with the sale of Budimex Nieruchomości.



We saw a slight decrease in the Group's sales revenue and the construction segment decreased by 7.1%, although revenue in the service segment increased by 30.8%. Several significant road orders are currently in the design phase or we are awaiting the issuance of a road project permit, which means that production on such contracts is relatively low.


Construction and assembly production for the three quarters of 2021 (at current prices) increased year-on-year by 4.9% from PLN 73.7 billion in 2020 to PLN 77.4 billion in 2021. In the buildings segment, the sold production increased by 3.4%, while in the infrastructure segment the increase was 6.4%.



Sales of the Budimex Group's construction segment amounted to PLN 5,118 million (-7.1% y/y), showing an improvement in gross profitability from 3.5% to 4.9%.



The scale of realised sales revenues for nine months of 2021 is 7.1% lower than in the corresponding period of the previous year. It is worth noting that the dynamics of the decline in the third quarter was only -1.9% compared to the third quarter of the previous year. The dynamics of the change is below the market indicator, which is currently at 4.9%.


Gross profitability of the construction segment amounted to 4.9% and was higher than in the corresponding period of the previous year, when it amounted to 3.5%. As in the two previous quarters, we experienced a significant increase in the price of materials, but thanks to the mechanisms of partial indexation, as well as our policy of securing the prices of key assortments, we were able to maintain the original contract margin for most projects.


From January to September 2021 we won contracts worth PLN 5,879 million, and we have further orders worth over PLN 1 billion waiting for implementation. The largest of them is the construction of the Bydgoszcz-Toruń S10 motorway section worth PLN 333 million. This is a lower level than a year ago, but our priority, invariably, is to maintain the profitability of our order portfolio. At the end of September 2021, the value of the order portfolio reached PLN 14,021 million.


The Budimex Group ended the third quarter 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 per share. On 18 October 2021, we also paid an advance dividend for 2021 to the amount of PLN 14.90 per share (over PLN 380 million).


In the period January-September 2021, the FBSerwis Group significantly increased its sales revenues and gross profit. 



The dynamics of sales revenue of the service segment amounted to 30.8%. Revenues of the FBSerwis Group, a key asset within the segment, amounted to PLN 561 million, up 30.6% year-on-year, driven by higher volumes in the waste management segment. Gross profit was PLN 75 million compared to PLN 52 million in the same period last year.


In September 2021, companies from the FBSerwis Group won another tender for waste management from the city of Warsaw. We continue to increase the economic potential of the FBSerwis Group, for example by investing in the expansion of existing waste processing facilities and landfills. Separately, we are also pursuing acquisition projects that will increase the scale of the Group's operations. At the moment we are looking for companies that will help us realise and increase our sales, to reach 1 billion in 2025, while maintaining the margin level.


We are ending the third quarter of 2021 with a portfolio of orders at a record level of PLN 14 billion. Analysing the current portfolio and our schedule of works, we have a chance to end the year with better sales revenue dynamics as compared to the results of the first three quarters.


Taking into account the contracts “awaiting” which we plan to sign in the coming months, we have, to a large extent, secured the front of works until the end of 2023, which is why we approach new offers selectively, calculating cost estimates reliably and responsibly, especially in the environment of dynamically changing prices.


We are carefully monitoring developments in the area of EU funds, which are crucial for construction investments. We believe that talks on the allocation of Reconstruction Funds will be successful and we will be able to continue to participate in the implementation of construction projects in Poland co-financed by EU funds.


Recent quarters have brought significant increases in material prices, which the construction market has to cope with. We therefore focus on cost control, which allows us to minimise the impact of negative market factors and consequently to achieve profitability above market indicators. We assess as positive the impact of the valorisation clauses, which at least partially compensate for the increase in material prices. This can save many smaller companies from bankruptcy.


In the third quarter, we met the internally adopted targets for expansion into neighbouring foreign markets, i.e. Germany, Slovakia and the Czech Republic. In the German, Czech and Slovak markets we have established special purpose vehicles. We are in first place for one of the tender procedures in the German market and we are waiting for our offer to be accepted. We expect the first contracts to be signed in 2022.


We are analysing opportunities to enter new ventures, including photovoltaic and wind farm projects, where we already have experience as a general contractor. At present, we are negotiating with several companies which we would like to enter into cooperation with by entering ready projects, and also by purchasing projects at certain stages, which would allow us to enter the green energy market as an investor.


Budimex Group also invests in innovative technologies, including green technologies, i.e. reduction of carbon footprint, effective waste management, short-term and long-term energy storage, generation of electricity and heat from RES. We are exploring the use of artificial intelligence in image recognition and analysis to completely eliminate near misses in construction and machine operations. In October, we are launched the Budimex Startup Challenge programme. We are looking for young companies that share values similar to ours and that want to modernise the construction industry. 


Despite the difficult environment, we keep our contractual obligations and carry out the tasks entrusted to us in accordance with the provisions, while ensuring quality and maintaining the highest environmental and social standards. Recently, our efforts have been acknowledged with an award in the Sustainable Economy Diamonds competition in the Sustainable Construction Leader category. We also won five Construction of the Year 2020 awards, the most among all general contractors.