Commentary by the President of the Management Board of Budimex SA – Dariusz Blocher on the financial data from the consolidated financial statements of the Budimex Group for three quarters of 2015

In the period from January to September 2015, the Budimex Group generated sales at a level comparable to the corresponding period of the previous year.

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

Taking into account the formula of currently pending infrastructure contracts, most of which are “design and build” contracts, we expect higher sales dynamics and growth of the entire construction market in 2017, despite the current record level of the order portfolio.

In the first three quarters of this year, Budimex Nieruchomości sold 23% fewer apartments than in the first 9 months of the previous year. The construction stage, in which most of the development projects are currently located, means that their notarial sale will be carried out in the years 2016-2017. For the entire year 2015, we expect sales in the property development segment to be at a level comparable to the previous year.

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

The improvement in the Group’s profitability is primarily the result of high profitability generated in the construction segment, in particular in the third quarter. As a result of the continuing favourable trend in the prices of construction materials and constant work on the effective management of each contract, sales margins in both segments of operations – infrastructure and general construction – are higher than those generated both last year and in previous quarters of this year.

By the end of September 2015, the Budimex Group signed contracts with a total value of PLN 4.8 billion, i.e.: 30% more than in the same period of the previous year. In October, we signed contracts worth PLN 1.8 billion, including a contract for the construction of the S7 Koszwały – Elbląg road section (the contract value is PLN 1.3 billion). We are waiting for the signing of further contracts worth about PLN 0.5 billion, for which Budimex has submitted the most advantageous price offers. Assuming that the above-mentioned contracts will be signed, the contracting of the Budimex Group in 2015 will exceed PLN 7 billion.

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

Budimex Nieruchomości pre-sold 1,437 apartments in the first 9 months of 2015, which is 39% more than in the same period last year. The consistently high pace of pre-sales allowed the Company to maintain its position among the top three developers with the highest pre-sales of apartments in Poland.

In the third quarter, we started new development projects in Warsaw, Poznań and Kraków. As a result, our offer has expanded and we currently have over 4000 apartments under construction, of which 1509 are available to customers.

We are continuing the process of expanding the land bank for development investments. In the third quarter, we purchased land for the construction of another 400 apartments. Throughout 2015, we expanded the land bank with land on which 2500 apartments can be built.

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

In the fourth quarter of this year, we plan to focus on preparing for the implementation of the already signed infrastructure contracts. We are working intensively on contracting the supply of materials, subcontractors, as well as employing qualified engineers. In October alone, we hired over 120 people, and in the whole of 2015 we created over 400 new jobs. Currently, the Budimex Group employs over 5700 people, all of whom are employed under an employment contract.

We are constantly working on the development of our business in the energy segment. In addition to the railway market, this is a key area of diversification of our business. We also invest, through the activities of FBSerwis, in municipal waste management. We sign further infrastructure maintenance contracts and look at emerging PPP (public-private partnership) projects.

Next year, we expect an increase in sales dynamics. However, it should be remembered that a significant part of the work in the design phase of the signed infrastructure contracts falls on 2016. Therefore, we expect the intensification of construction works in 2017. Our task is to maintain profitability next year at a level comparable to the current one.

Budimex is a company that enjoys great trust from the market and investors – both public and private. This is evidenced by Budimex’s uninterrupted participation in the RESPECT Index since 2011, which covers companies conducting business in a responsible manner. In 2015 alone, the Budimex Group paid a total of PLN 276 million in taxes to the State Treasury and PLN 87 million in social security contributions. During the 9 months of this year, the value of Budimex increased by over 40%. This is a stable growth, resulting from the long-term development strategy adopted by the company.

BUDIMEX Group

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

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

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