Commentary of the President of Budimex SA on the annual results

We are achieving historic results, while improving profitability. In 2023, the Budimex Group generated an operating profit of PLN 781 million. The improvement in the financial result is mainly due to more effective cost management, the use of synergy effects in the Group and a larger portfolio of construction contracts. The result was also supported by the first revenues from operations on foreign markets,” says Artur Popko, President of the Budimex Group.

Bearing in mind the record level of projects waiting to be signed, we are confident about the level of utilization of our production capacity in the next 2 years.

It was not an easy year, but at the Budimex Group we are ending it with a sense of a job well done. Such good results are mainly the result of the hard work of our employees and the adopted strategy of effective cost control, responsible bidding and construction risk management, combined with diversification of operations. The foundation of Budimex’s business remains construction in Poland, but our offer is much more comprehensive.

The Budimex Group’s order book at the end of 2023 amounted to PLN 13.1 billion. The value of contracts waiting to be signed, where our company’s offer took first place in tender procedures, is currently nearly PLN 13  billion, of which over PLN 7 billion is for contracts on foreign markets: the Czech Republic and Latvia.

We also recorded a double-digit increase (year-on-year) in the Group’s sales revenues, both in the construction part (+13.8%) and in the service part (+13.5%).

Construction and assembly production in 2023 (at current prices) increased 15.4% year-on-year from PLN 140 billion to PLN 162 billion. In the buildings segment, sold production increased by 6.5%, while in the  infrastructure area the increase was as much as 24.1%.

The sales of the construction segment of the Budimex Group in  2023 amounted  to PLN 8,902 million (+13.8% y/y), while recording an increase in both operating profitability (from 6.0% to 8.0%) and gross profitability (from  7.1% to 9.7%).

The scale of sales revenues generated in 2023 in the construction segment was noticeably higher than in the previous year. The high level of the order book and its diversification, combined with favorable weather conditions, allowed for an increase in revenues by over 13.8%. We recorded an increase in sales in most areas of construction activity on the domestic market. The sales of the Budimex Group were also supported by the recognition of the first significant revenues from operations on foreign markets.

The operating profitability of the construction segment in the period under discussion amounted to 8.0% and was higher by 2.0 percentage points compared to 2022. The improvement in operating profitability compared to the previous year was possible, among other things, thanks to a diversified order book and stabilization of prices of key construction materials, such as steel, as well as thanks to the hedging of bitumen prices. Profitability at the level of gross profit was supported by a positive result on financing activities due to interest earned on bank deposits.

New contracts and order book

In 2023, we acquired contracts worth PLN 8.3 billion. They included such investments as: Zabierzów bypass within DK 79, Railway line 104 Chabówka – Rabka Zaryte, Renovation of the A1 motorway Rusocin-Czerniewice, S8 Wrocław-Kłodzko task 3 Jordanów Śląski or a railway contract for the implementation of comprehensive construction works covering rail and road infrastructure on the Tychy – Vistula Bridge section.

In December 2023, a consortium consisting of: Eiffage Genie Civil, Rizzani de Eccher S.p.A. and Budimex SA signed a contract for the implementation of the first stage of works for the construction of the main railway line „Rail Baltica” in Latvia. Budimex SA holds over 30% of the shares in the above-mentioned consortium. The value of the work to be carried out by the consortium under the first order is approximately EUR 200 million, and the budget of the entire contract is estimated at nearly EUR 3.7 billion. The entire project will be carried out over the next few years, which should further support the maintenance of the Group’s high and geographically diversified order portfolio.

The Budimex Group’s order book at the end of 2023 exceeded PLN 13 billion, which secures the work front for the next two years. The intensification of work on acquiring new projects in Poland and abroad has resulted in the fact that the value of projects awaiting signing, and those where the offer of Budimex or Group companies has been rated the highest, or occupies the best bargaining position, is currently nearly PLN 13 billion. Over PLN 7 billion of this amount is for contracts on foreign markets – the Czech Republic and Latvia.

The Budimex Group ended 2023 with a high net cash position, exceeding PLN 3.7 billion. In June, for the 15th year in a row, we paid a dividend of PLN 459 million, which is PLN 17.99 per share. The stable margins achieved on construction contracts in recent quarters, combined with effective management of working capital and meticulous control of fixed costs, allow the Budimex Group to maintain a safe level of cash that may be invested in new areas of activity in the future.

Sales in the services segment amounted to PLN 932 million.

The revenues of the FBSerwis Group, which is a key asset in the services segment (the results of the service part also include the activities of companies from the RES area and Budimex Parking Wrocław), amounted to PLN 924.1 million and were 13% higher than in the corresponding period of the previous year. The increase in the value of sales was achieved in each of the business segments and was higher than our internal plans.

Renewable energy and electromobility

Last year was exceptional for us in terms of new business areas, namely renewable energy and electromobility. In September, our first wind farm started producing green energy. During the year, we established a new company, BXF Energia. The company’s goal is to develop renewable energy projects, their construction and operation. The company focuses on projects in the technology of photovoltaic and wind farms, the preparation of which has begun by securing further locations for potential power plants with a capacity of several hundred MW.

On the other hand, we are gradually building our potential in the area of electromobility. We are one of the largest players in the field of domestic electric vehicle charging infrastructure. Currently, Budimex Mobility has over 160 publicly available chargers, and internal plans assume 230 chargers by the end of 2024.

Market outlook

We are entering the new year with an order book exceeding PLN 13 billion and  a record level of contracts waiting to be signed. Our portfolio is healthy, built on contracts signed in the last 2 years, which were offered at current prices, and in addition, valorisation is planned for most projects. In the environment of high competition and the expected lower supply of tenders from the main contracting authorities, this gives us the prospect of a stable margin and, at the same time, the comfort of our operations and the certainty of using our production capacity for the next 2-3 years.

On the local market, we are constantly observing an aggressive fight for orders in the road, rail and cubature areas. In addition, we consistently face strong competition from foreign entities. When taking part in tenders outside Poland, we usually have to go through a certification process – we would like to feel that construction companies from abroad are verified and certified in Poland in the same way as Polish companies – such as Budimex – in other EU countries. On the local market, we already have the first cases of additional verification of bidders in terms of references obtained, but these are exceptions.

Last year was a time of intensification of activities on foreign markets for the Budimex Group. We have developed structures on the German, Slovak, Czech and Latvian markets. We have won the historic Rail Baltica contract, as well as the first contract on the Czech market – Polder Kutřin worth PLN 113 million. Bearing in mind the fierce competition on the local market, we are all the more positive that the decisions on segment diversification and expansion into foreign markets are the right directions. We have the right equipment, people, capital and experience to carry out such complex contracts in Poland and abroad – this is an opportunity for us to strengthen the position of the Budimex Group as a leading construction company in Central and Eastern Europe.

Social activities and awards

As every year, Budimex implemented its flagship social programmes: the road safety campaign: Hello ICE and support for children’s wards in hospitals: Parent Zone. In the aforementioned year, a total of over 20 thousand people took part in meetings with our educators, representatives of the police and fire brigade. children from school institutions.

In 2023, a new Parent Zone was created at the hospital in Ełk. We have also started the third edition of the House from the Heart campaign. As part of it, we are building a house for Mrs. Teresa from Wołomin near Warsaw. Earlier, we built such houses near Radomsko and in the Tuchola Forest for large families.

We have created a new educational room of the Technical School of Power Engineering in Bełchatów. This is an award in the competition for the best CSR project as part of the „Practice that will stay with you” campaign, which is an initiative of Budimex carried out in cooperation with the Zwolnieni z Teorii Foundation. The winners – a group of students from the Technical School of Power Engineering in Bełchatów – decided to use the construction skills acquired at school and renovated an apartment for a family from Ukraine. We supported the Second Breakfast campaign addressed to first-graders of primary schools in Ełk.

Over 30 housing communities and cooperatives joined two editions of the Przystanek Zieleń program in Warsaw. Budimex continues the apprenticeship programme for students of construction technicians. We have started internship cooperation with more than 40 technical schools and universities in the field of apprenticeships and joint research. We have provided local support to over 50 associations and foundations conducting aid and educational activities in the vicinity of our construction sites.

Budimex’s projects have won prestigious awards. The modernization of the Planetarium in Chorzów was awarded the title of Modernization of the Year 2023 in the 27. edition of the Modernization of the Year – Construction of the 21st Century competition. The contract carried out by Budimex in 2019-2022 was rated the highest by the jury in the category of public buildings. Over 500 investments were submitted to the competition. Only the best 20 of them were awarded. Budimex returns with 2 awards from this year’s edition of the „Construction of the Year” competition, organised by the Polish Association of Construction Engineers and Technicians. The investments awarded with Construction Oscars include the construction of the Łagiewnicka Route in  Krakow and the modernization of the Institute of Thermal Technology of the Warsaw University of Technology. Budimex has been ranked among the top ten construction companies in the world in the Financial Times – Diversity Leaders 2024 ranking. The Polish company scored 71.6 out of 100 possible points and overtook many leading players on the international market. The award is the result of a consistent policy of supporting diversity and systematic support for women’s professional development.