Commentary of the President of the Management Board Dariusz Blocher on selected financial data from the consolidated financial statements of the Budimex Group for 2012

At the end of 2012, the Group generated an operating profit of over PLN 182 million, a gross profit of PLN 203 million and a net profit of nearly PLN 186 million, while in the corresponding period of 2011 it was PLN 135 million, PLN 142 million and PLN 76 million, respectively (in June 2012 the results of 2011 were adjusted due to the write-off of the value of PNI’s shares).

The impact of the impairment of the Group’s PNI-related assets on the operating profit and gross profit of the Budimex Group in 2012 amounted to minus PLN 151 million.

The results of 2012 were also adversely affected by losses on some motorway contracts, resulting from a significant increase in the costs of road investments (an increase in the prices of construction materials by approx. 40%, which was unpredictable at the time of signing the contracts). However, we have already created provisions for these losses, and since the implementation of motorway contracts is coming to an end, I do not expect any more cash or accounting losses on this account.

Excluding the negative impact of GNI, we assess the results achieved in 2012 as good
comparable at all levels to the results obtained in the corresponding period of 2011.
In addition to development activities, the Group’s results in 2012 were positively influenced by the very good results of Budimex Danwood, a 100% subsidiary of Budimex SA, which manufactures and assembles timber frame houses, and the results of operations on the German market, where Budimex achieves higher margins than on the domestic market.

In 2012, Budimex Nieruchomości sold 740 flats by notary, while in 2011 it sold 388 flats, while recording a nearly 30% increase in the value of sales. The lower dynamics of sales revenues in relation to the dynamics of the number of apartments sold results from a large share of smaller and cheaper apartments in sales in 2012.

In 2012, Budimex Nieruchomości pre-sold 515 flats (excluding reservations), while in the corresponding period of 2011 it sold 682 flats. The decline in pre-sales is caused by the uncertain market situation, the amendment of the Developer Act, the restrictive lending policy of banks and the reduction in the offer of ready-made apartments from Budimex Nieruchomości.

The Group’s order backlog at the end of December 2012 amounted to PLN 4.9 billion, compared to PLN 8.6 billion at the end of 2011 (PLN 7.3 billion excluding PNI).

In 2012, the Budimex Group signed contracts worth PLN 2.8 billion, while in 2011
PLN 5.3 billion, which results from a clear decline in the value of tenders announced on the market, but also from our care to maintain a “healthy” portfolio and a selective approach to bidding in a very competitive, declining market. In the new year 2013, the Budimex Group has already signed contracts with a total net value of PLN 270 million.

In 2012, the Budimex Group submitted over 17% more bids than in the corresponding period of 2011, but for contracts of much lower value and shorter implementation period. Thus, we reduce the risk of inflation affecting the results, but we compete with other, smaller companies. The average value of the offer submitted in 2012 amounted to PLN 40 million compared to PLN 70 million in 2011. The average value of a contract signed in 2012 amounted to PLN 39 million compared to PLN 78 million in 2011.

The net cash position of the Budimex Group, including own cash and short-term securities less external sources of financing, amounted to PLN 1,188 million at the end of December 2012, while at the end of 2011 it was PLN 1,576 million. This decrease is mainly due to the payment of a dividend in the amount of PLN 280 million in 2012 and the investment in PNI.

Results of the reporting segments for 2012 (in PLN thousand):

Results of the reporting segments for 2011 (in PLN thousand):

*comparable data for 2011 have changed due to modifications of the provisionally determined fair value of net assets of Przedsiębiorstwo Napraw Infrastruktury Sp.  z o.o. and the introduced impairment loss on goodwill. The change did not affect previous reporting periods.

**comparable data for 2011 published in the consolidated financial statements for 2011 (before the above-mentioned amendments)