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A full order-book, but profits down

Eurobuild CEE 15 May 2018
A full order-book, but profits down
Budmiex is not planning to add to its order portfolio, says group CEO Dariusz Blocher
POLAND Budimex Group enjoyed a good Q1 2018 in terms of revenues, which were 27 pct higher y-o-y , while its net profit fell to PLN 63 mln (down from PLN 85.25 mln a year earlier).

The increases in revenues were in the construction (17 pct) and the residential development segment (106 pct). In the latter 688 apartments were sold over the quarter, compared to 409 in Q1 of last year. Revenues from construction contracts grew by 17 pct y-o-y to the highest historically recorded level for Q1. Construction and assembly production grew by 28.2 pct at the same time.

“The company’s current order portfolio allows us to look at our future revenue optimistically, therefore we expect to maintain our dynamism over the next few quarters,” declares Dariusz Blocher, the CEO of Budimex. “The increase in Budimex Group’s revenue in Q1 was, however accompanied by a decline in its profitability. The group’s profitability before tax was around 6 pct, while in the construction segment it was 4.4 pct. But we still regard this performance as very good, in particular when compared to the current profitability of the entire construction sector,” argues Dariusz Blocher. By the end of March the order portfolio of the Budimex Group had reached PLN 10.4 bln – close to its level of December 2017. During the first three months of 2018, the company secured PLN 1.1 bln worth of contracts.

“Due to the increasingly difficult situation on the market, we have been approaching new contracts selectively and are not planning any further additions to our order portfolio,” reveals the head of Budimex. “There has been a visible change in the approach to new offers from most contractors. We are seeing more and more situations on the market, in particular in the railway segment, where the lowest prices significantly exceed the budget of the ordering party. The market is becoming increasingly saturated and the risk of further cost pressure has been leading the industry to take a much more cautious and prudent approach as regards calculating new cost estimates,” comments the CEO of Budimex.

The company’s management board has recommended a record dividend of PLN 17.61 gross per share. A general shareholders’ meeting is to take the final decision on this matter on May 17th. Budimex has regularly paid out dividends since 2009.

“We have entered 2018 with a record order portfolio, which should ensure that our positive sales revenue dynamics are maintained over the next few quarters,” claims Dariusz Blocher. “This year we will have to contend with the continuing increase in the prices of materials and subcontractors;’ services. Therefore we are minimising the risk in the new contracts we sign and reducing our exposure to segments characterised by the high volatility of their labour prices and subcontracting services. We will also focus on optimisation and will pay special attention to costs from the contracts we carry out in order to maintain stable profitability over the next few months,” he adds.

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