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Commentary by Artur Popko, President of the Management Board of Budimex SA, on the Budimex Group’s financial data for the first three quarters of 2022

News date: October 26, 2022
Commentary by Artur Popko, President of the Management Board of Budimex SA, on the Budimex Group’s financial data for the first three quarters of 2022

The Budimex Group generated an operating profit of PLN 417 million with a profitability of 6.5%, whereas in the first quarter of this year, the operating profitability reached 3.6%, and in the second and third quarters, it reached 7.4% and 7.7%, respectively.

 

Budimex Group’s gross profit was PLN 466 million, with a profitability of 7.3%. Profitability at the gross profit level was supported by a significant improvement in the result of financing activities, especially in the second and third quarters, as a result of an increase in the average level of interest on cash invested by the Budimex Group.

 

Budimex Group (PLN million)

Profit and loss account

Q1-3 2022

Q1-3 2021

y/y

Sales

6 368

5 534

15.1%

Operating profit

417

416

0.1%

% of sales

6.5%

7.5%

-1.0% pp.

Gross profit

466

389

19.8%

% of sales

7.3%

7.0%

0.3% pp.

Net profit*


from continued operations

359

302

18.8%

% of sales

5.6%

5.5%

0.2% pp.

* attributed to the shareholders of the Parent Company

 

 

 

discontinued operations

0

521

n/a

 

The Budimex Group recorded a 15.1% increase in the Group’s sales revenue, mainly due to a larger scale of sales in the construction segment, in particular in Mostostal Kraków and in the areas of residential, office and industrial construction. In the service segment, revenues were similar to the previous year.

 

 

Construction and assembly production in Poland for the first three quarters of 2022 (at current prices)increased by 22.2% year-on-year from PLN 77.4 billion in 2021 to PLN 94.5 billion in 2022. In the buildings segment, the sold production increased by 30.2%, while in the infrastructure segment, the increase was 14.3%.

 

Construction segment

Statistical data (PLN billion)

1-9 2022

1-9 2021

y/y

Sold production

94.5

77.4

22.2%

Buildings

49.9

38.3

30.2%

share

52.8%

49.5%

3.2 p.p

Engineering

44.7

39.1

14.3%

of which: roads

16.4

13.2

23.9%

of which: railways

5.4

5.1

5.0%

share

47.2%

50.5%

-3.2 p.p

 

The Budimex Group’s construction segment sales amounted to PLN 5 billion 809 million.

 

Construction segment (PLN million)

Profit and loss account

Q1-3 2022

Q1-3 2021

y/y

Sales

5 809

5 118

13.5%

Operating profit

353

278

26.7%

% of sales

6.1%

5.4%

0.6% pp.

Gross profit

398

251

58.6%

% of sales

6.9%

4.9%

1.9% pp.

Order portfolio

12 466

14 021

-11.1%

Contracting

4 609

5 879

-21.6%

 

Despite market difficulties due to disrupted supply chains, sales in the construction segment in the first three quarters of 2022 were noticeably higher than in the same period of the previous year. The high order backlog at the beginning of 2022, a well-considered purchasing policy and favourable weather conditions allowed revenue to increase by more than 13%.

 

In the last quarter, we saw a stabilisation in the prices of key materials and, in some cases (including steel), a reduction in prices compared to the levels recorded a few weeks after the outbreak of the war. A responsible contracting strategy and a tailored purchasing strategy have allowed us to reduce the losses associated with the current market situation to a minimum. The budgets of all our ongoing projects are kept up to date, while the profitability of the portfolio remains stable in the final stages of execution thanks to good contract profitability.

 

In the first three quarters of 2022, we secured contracts worth PLN 4.6 billion. The order backlog of the Budimex Group at the end of September 2022 amounted to PLN 12.5 billion and secures projects until the end of 2023.

 

Intense work on the acquisition of new projects has resulted in over PLN 3 billion worth of projects signed in October 2022 and awaiting signature, which should ensure the stability of the order backlog. These contracts include the construction of facilities such as the S17 Piaski-Hrebenne expressway (2 sections with a total value of PLN 845 million), the D1 Bratislava-Triblavina motorway in Slovakia (PLN 519 million), the Military Hospital in Kraków (PLN 368 million) or the 104 Chabówka-Nowy Sącz railway line (PLN 366 million).

 

Budimex Group ended Q3 2022 with a net cash position of PLN 2.2 billion. In June 2022, we paid the remaining dividend for 2021 of PLN 23.47 per share. This brings the total dividend for 2021 per share to a record-breaking PLN 38.37.

 

After the first three quarters, the FBSerwis Group maintained a high level of sales revenue while maintaining good profitability.

 

Service segment (PLN million)

Profit and loss account

Q1-3 2022

Q1-3 2021

y/y

Sales

576

564

13.5%

Operating profit

64

78

-17.7%

% of sales

11.2%

13.9%

-2.7% pp.

Gross profit

69

78

-11.5%

% of sales

12.0%

13.9%

1.8% pp.

 

Revenues of the FBSerwis Group, which is a key asset within the service segment (the results of the service segment also include the operations of several smaller companies, including Budimex Parking Wrocław), amounted to PLN 573 million and were slightly higher than in the same period of the previous year. The FBSerwis Group’s operating profit amounted to PLN 64 million with profitability of 11.2% compared to 13.8% in the same period of the previous year, with profitability improving in the third quarter and being higher than in the third quarter of the previous year.

 

Intense work on winning further orders, particularly in the infrastructure maintenance segment, has allowed us to significantly expand our order backlog, which should translate into revenue growth in the coming quarters. We are continuing to invest in the expansion of existing waste processing facilities and landfills. At the same time, we are integrating the entity acquired a few months ago into the Group structure, thereby strengthening our position in the environmental services segment.

 

Market forecast

 

In the following quarters, we will closely monitor further macroeconomic developments.

 

The Budimex Group’s current order backlog fully secures projects until the end of 2023, and the newly acquired contracts (in particular, design and build orders) create strong business foundations for 2024-2025. This is particularly important in view of the economic slowdown and the planned reduction in new projects awarded by some of our Contracting Authorities, i.e. local governments and PKP PLK.

 

Inflation rates remain high, and most forecasts for the coming quarters are being revised upwards. We are keeping a close eye on energy and fuel prices, which are of key importance for the construction industry and the economy as a whole. Therefore, it is important to continue to work on the mechanisms used to valorise long-term orders.

 

We are preparing for the first significant projects outside Poland. The largest of these is the construction of the D1 Bratislava-Triblavina motorway in the ‘design and build’ formula. We also recently won first place in a tender for the reconstruction of railway infrastructure in the Czech market, with a total value of approximately PLN 66 million.

 

Innovations

 

Budimex, in cooperation with the Kraków Technology Park, joined the acceleration programme for foreign startups – Poland Prize – subsidised by the Polish Agency for Enterprise Development.

 

We are continuing our cooperation with startups that were awarded in the first edition of the Budimex Startup Challenge. The leading topics in the area of innovation remain: solutions for the energy sector, renewable energy sources and green technologies for the construction industry.

 

CSR activities

 

26 July 2022 marked the ceremonial finale of the House of the Heart 2 campaign in Brusy, Pomerania, which involved the construction of a turnkey house for a family of 8. Thanks to the support of all campaign Partners, the dream of Iwona, Krzysztof and their six children came true. We are building the 41st and 42nd Parent Zone in hospitals in Ełk and Bydgoszcz.

 

In the third quarter, our construction sites won several valuable industry awards: 7 awards in the ‘Construction of the Year 2021’ competition, commonly referred to as the construction Oscars, and two ‘Modernisation of the Year’ awards. Among the awarded investments were: PKN Orlen Research and Development Centre in Płock, PKP S.A. railway station in Białystok and Rothera Mills in Bydgoszcz.

 

Budimex’s CSR strategy includes being a good neighbour, guest and partner for local communities. During Q3 2022, we charitably supported the surroundings of construction sites within 41 projects in: Ełk, Szczecin, Bydgoszcz, Szczecin, Kraków, Warsaw, Dolice near Szczecin, Białystok, Narewka near Hajnówka, Czechowice – Dziedzice, Suwałki, Marki near Warsaw, Słupiec near Konin and Strachocin. The total value of the aid was over PLN 1 million.