Commentary on results for Q3 2015

Executive Commentary of the Chairman of the Management Board of Budimex S.A., Dariusz Blocher, on financial data from the consolidated financial statements of the Budimex Group for three quarters of 2015

During the period from January until September 2015, the Budimex Group performed sales at a level comparable to the analogical period of the previous year.

Sales in the construction segment for 9 months of this year were by 3.7% higher compared to sales
in the comparable period in the year before. The growth of building and assembly production in this period amounted to 1.6% compared to the 9 months of the last year.

Taking into account the formula of currently awarded infrastructural contracts, the majority of which are “design and build” contracts, we anticipate higher sales growth and growth of the entire construction market in 2017 in spite of the current record level of the order book.

Over the period of three quarters of this year, Budimex Nieruchomości sold 23% fewer apartments in the form of notarial deeds than over the period of 9 months of the previous year. Due to the current stage of construction of the majority of development projects, their sale in the form of notarial deeds will be carried out in 2016–2017. In 2015 as a whole, we are expecting sales in the real estate development segment at the level comparable to the year before.

The Budimex Group has improved financial results and profitability at every level of its activity. Profitability for 9 months of the current year amounted to 5.3% at the operating level and 5.4% at the level of result before tax and increased, in relation to the analogical period of the previous year, by 11.8% and 17.1%, respectively.

Improvement in the Group’s profitability is primarily the result of high profitability in the construction segment, in particular in the third quarter. As a result of continuation of the advantageous trend in prices of construction materials and constant work on efficient management of every contract, sales margins in both segments of activity — infrastructural and general construction segments — are higher than those earned both last year and in previous quarters of this year.

Until the end of September 2015, the Budimex Group signed contracts with total value of over PLN 4.8 billion, i.e. 30% higher than in the analogical period of the previous year. In October, we signed contracts for PLN 1.8 billion, including a contract on construction of a section of the S7 road from Koszwały to Elbląg (the contract value is PLN 1.3 billion). We are awaiting signature of subsequent contracts for approximately PLN 0.5 billion, for which Budimex submitted bids with the most advantageous prices. Assuming that the aforementioned contracts are signed, the Budimex Group’s awarded contracts in 2015 will exceed PLN 7 billion.

The value of the order book of the Budimex Group at the end of September 2015 amounted to PLN 7.4 billion, while at the end of September last year, it amounted to PLN 4.7 billion.

In over 9 months of 2015, Budimex Nieruchomości pre-sold 1,437 apartments, i.e. 39% more than in the analogical period of the previous year. The continuous fast pace of pre-sale enabled the Company to retain its position as one of the first three development companies that recorded the highest pre-sale of apartments in Poland.

In the third quarter, we commenced new development projects in Warsaw, Poznań and Krakow. Thanks to this, our offer expanded, and we currently have over 4,000 apartments under construction, of which 1,509 are available to customers.

We continue the process of increasing the land bank for development investments. In the third quarter, we purchased land for construction of 400 more apartments. In the whole year 2015, we have expanded the land bank with land on which 2,500 apartments can be constructed.

Thanks to received advances for implementation of construction contracts and dynamic pre-sale of apartments, the Budimex Group maintains a high level of the net cash position. At the end of September this year, it amounted to PLN 1.81 billion and was 53.7% higher compared to the analogical period of the previous year.

In the fourth quarter of this year, we are planning to focus on preparing for implementation of the already signed infrastructural contracts. We are intensively working on contracting supplies of materials, works of subcontractors, as well as on hiring qualified engineers. In October alone, we hired more than 120 people, and we created 400 new jobs throughout the whole 2015. Currently, the Budimex employs more than 5,700 people — all of them based on contracts of employment.

We are constantly working on development of activity in the energy segment. Next to the railway market, it is our key area for diversification of activity. We are also investing — through activity of FBSerwis — in municipal waste management. We are signing subsequent contracts on infrastructure maintenance and are observing the appearing PPP (public and private partnership) projects.

Next year, we are expecting increased growth of sales. However, one should bear in mind that the major portion of the design stage of the signed infrastructural contracts will take place in 2016. For this reason, we are expecting construction works to intensify in 2017. Our task next year is to maintain profitability at a level comparable to the current one.

Budimex is a company which enjoys a great degree of confidence of the market and investors — both public and private ones. This is demonstrated by Budimex’s continuous inclusion, since 2011, in the RESPECT Index of companies which conduct their business activity in a responsible manner. In 2015 alone, the Budimex Group paid a total of PLN 276 million in tax to the State Treasury and PLN 87 million in social insurance contributions. In over 9 months of this year, the value of Budimex increased by more than 40%. This represents a stable growth, resulting from the long-term development strategy adopted by the company.

BUDIMEX Group

Financial highlights from the consolidated financial statements of the Budimex Group prepared in compliance with the International Financial Reporting Standards (IFRS) for three quarters of 2015 and comparable data for three quarters of 2014.

Results of reporting segments for three quarters of 2015 (in PLN thousand):

Results of reporting segments for three quarters of 2014 (in PLN thousand):