Investor presentation 2011 financial results

www.budimex.com.pl

Budimex Group Preface

Construction segment

Developer segment

Group Segments Perspectives WSE

© Strategic Analyses Office

2

Other activities

Budimex Group history Preface

ElektromontazPoznan stake purchase

Budimex is established

Group

1968…

1995

1999

Budimex Danwood acquisition

2000

Full control over Budimex Nr.

2002

2009

Segments Perspectives

WSE debut

Strategic investor enters Company

WSE

© Strategic Analyses Office

3

Budimex & Budimex Dromex merger

PNI acquisition

…2011

Key events in 2011 Construction market Preface


National Roads Construction Programme for years ’11-’15 is approved (72 bn PLN for

1Q


Augustow bypass (536 M PLN)
Budimex becomes highest-cap company

road projects in years ’11-’13) Group

in WIG-Budownictwo index (1 953 M PLN
’14-’20 EU budget draft is announced

2Q

at end-2011)

(80 bn EUR for Poland) Segments


LCS Ilawa (698 M PLN)
First tenders are decided on industrial market (Opole power plant tender worth 9,4 bn PLN net)


New hydrotechnical contracts

3Q

Perspectives


S8 Roza-Wroclaw (689 M PLN)


Business conditions index in Dec.: -23 pts.


Acquisition of Przedsiębiorstwo Napraw

(lowest December reading since 2003)

WSE


Record-high GDDKiA expenditures in 2011:

Infrastruktury Sp. z o.o. (225 M PLN)

4Q

26,4 bn PLN, significant drop in tenders

significantly exceed planned 4Q sales

decided © Strategic Analyses Office


Favorable weather conditions allowed to

4

2011 results (M PLN) Preface

Sales

Operating profit

Net profit

Group

+25%

-4%

y-o-y

-2%

Contracts signed

Net cash

y-o-y

y-o-y

Segments Perspectives

Backlog (as of 31.12’11)

WSE

+24%

(as of 31.12’11)

-1%

y-o-y

© Strategic Analyses Office

5

y-o-y

-10%

y-o-y

Net cash (M PLN) Preface Group

1 776

1745

Dividend

PNI

232 M PLN

225 M PLN

1 576

1 688

Cash 1 052

Segments

1022

964 696

889

Debt

645

Net cash

Perspectives

-31

12 '10

-30

03'11

-51

-75

06'11

09'11

WSE

© Strategic Analyses Office

6

-112

12'11

Record year in construction segment Construction segment results (M PLN) Preface

y-o-y dynamics

2011 Sales Operating profit

5 193

36%

284

32%

Group

% sales

Net profit

5,5%

-0,2 pp.

and profit from construction segment


Despite increased competition and materials

28%

235 % sales


Company achieved historical level of sales

4,5%

prices growth high profitability has been

-0,3 pp.

maintained Segments

Sales in construction segment


Company increased sales (+27% y-o-y) and profit (+77% y-o-y) on German market

Perspectives

35%

Infrastructure


Favorable weather conditions allowed to General constr.

significantly exceed planned 4Q sales

65%

WSE

© Strategic Analyses Office

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Historical level of order backlog (M PLN) Preface

8 567 2 004

6 896 Group

5 267

23%

39

1%

1 775

26%

2 435 1 517

28%

900

29%

Segments

1 700

74% 71%

5 082

≈5 100

48%

4 128

3 750

Perspectives

2 500 Share

12'09

WSE

Road infrastructure

© Strategic Analyses Office

12'10

12'11

General construction

8

Railway

To be carried out Wykonanie w '12 in 2012

Over 5 bn PLN of contracts signed Preface

On top of that Company obtained contracts worth ca. 1,3 bn PLN through PNI acquisition

5 376 39

1%

5 297 13%

Group

4 501

35%

Client

698

1 876 28%

1 270

46%

33%

35%

Segments

2 410

Perspectives

3 231

3 461

32%

64%

72%

2 188

41%

Share

Private GDDKiA Public (excl. GDDKiA)

01-12'09 WSE

Road infrastructure

© Strategic Analyses Office

01-12'10

01-12'11

General construction

9

Railway

PNI acquisition: impact on Budimex Group Impact on Budimex Group results Preface


Company’s main assets:


Acquisition price: 225 M PLN (cash)


Production potential


Net cash:


Qualified technical staff

Group

 At acquisition:

-64 M PLN

 As of 12’11:


Machinery:

31 M PLN

Segments


Backlog as of 12’11:

1 292 M PLN


Impact on 2011 results:

Perspectives

 Sales:

≈ 63 M PLN

 Operating profit:

≈ 3 M PLN


2012 Sales:


Locomotives

(14)


Rolling stock

(1 439)


Ballast cleaners

(17)


Tamping machines

(47)


Properties (also for sale)
Transport license

≈ 600 M PLN

WSE


Potential to execute maintenance works

© Strategic Analyses Office

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Developer segment in 2011 Developer segment results (M PLN) Preface

y-o-y dynamics

2011 Sales Operating profit % sales

Group

Net profit

248

-50%

28

-60%

11,5%

Presales

flats stock sale out in 2010 (drop in notary sales in 2011)

-2,7 pp.

-47%

27 % sales


Sales drop in 2011 was an effect of finished

10,7%

+0,7 pp.


High net presales (682 flats) will assure solid revenues in forthcoming years

-11%

682

Segments

Projects in offer*


In 2011 Company purchased 2 plots for the total of 39 M PLN (in Warsaw and Poznan)

Wolczynska

Perspectives

Goclawska

Inflancka


Construction of 3 new projects totaling 649

Poznan

flats has started

Warsaw Smolna

WSE

Cracow


Company plans to geographically diversify its land bank (Tricity, Wroclaw)

Mysliwska

*excluding projects with last flats in offer

© Strategic Analyses Office

11

Budimex Nieruchomosci projects Preface

02’14

11’12

11’12

12’13

05’12

11’12

Notary sales start

1 628

Group

1 558 686 872 Presold

323

320

Segments

46

249

157

324

Presales started in January 2012

217

178

149

Perspectives

164

Wolczynska

Inflancka III

Warsaw

61 Czyzyny E1a

Mysliwska I, II

Cracow

WSE

Projects under construction

© Strategic Analyses Office

887 Offer

107

100 Goclawska

70 55

117

277 163

741

12

Smolna 13A

Poznan

15 Stock

Total

Presales and notary sales Net presales (number of flats)

Notary sales (number of flats)

Preface

946 765 682

471 388

Group

47 '09

'10

'11

'09

'10

'11

Segments

In construction: 1 558 flats

Land bank: 7 222 flats

Perspectives

2 553 1 115

178

Warsaw

Poznan

Poznan

892

Warsaw

3 554 488

WSE

Cracow

© Strategic Analyses Office

Cracow

13

Other activities in 2011 Other activities (M PLN) Preface

y-o-y dynamics

2011 Sales

261

63%

4

-50%

Operating profit Group

% sales

Net profit

1,4%

% sales


Company noted record high sales level

-3,2 pp.

3

-255%

-1,2%

-2,4 pp.


After excluding financial instruments valuation

Segments

effect**

operating

profit

amounted

to

10 M PLN


Company*

went

through

Perspectives

reorganization

deep


At end-2011 Company had a historical level

Shareholder structure 0,3%

of order backlog (743 prefabricated houses)

State Treasury

19,9% Budimex

WSE

49,0% Bank Handlowy 30,8% Employees

*Elektromontaz-Poznan is consolidated with equity method

© Strategic Analyses Office

**related to next periods (not year 2011)

14

Backlog & contracts signed (houses) 743 Preface

597 711

-476

Group -89

Segments

12'10

Perspectives

Resignations

Signed

-421

-82

669

-45

-6

34

-8

-1

8

-2

-

-

WSE

Sales

© Strategic Analyses Office

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12'11

Construction market in 2011 (bn PLN) Preface

36,2%

*

28,6% 17,6%

3,6%

Market

3,3%

Group

IBnGR** forecasts:

-7,5%

97,1

2012: +10,1% y-o-y 2013: +7,5% y-o-y

82,6

Segments

80,0

38,8

Perspectives WSE

33,3

33,6

46,6

49,0

'09

'10

Infrastructure

58,3

'11

General construction

*construction segment **IBnGR Macroeconomic Forecasts number 73 (February 2012), construction and assembly production dynamics in constant prices

© Strategic Analyses Office

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Material prices evolution* Reinforcement steel (1Q’10 = 100)

Concrete (1Q’10 = 100) Preface

140

140 134 130

Group

130

130

120

120

110

110

100

100

90

90

Segments

1Q'10

2Q'10

3Q'10

4Q'10

1Q'11

2Q'11

3Q'11

4Q'11

1Q'10

2Q'10

3Q'10

4Q'10

1Q'11

2Q'11

3Q'11

4Q'11

Diesel oil (1Q’10 = 100)

Asphalt (1Q’10 = 100) 140

139

140

Perspectives

130

130

126

120

120

110

110

100

100

WSE

90

90 1Q'10

2Q'10

3Q'10

4Q'10

1Q'11

2Q'11

3Q'11

1Q'10

4Q'11

*based on Budimex internal data, diesel oil prices according to Lotos SA data

© Strategic Analyses Office

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2Q'10

3Q'10

4Q'10

1Q'11

2Q'11

3Q'11

4Q'11

Road & railway market perspectives Preface

Roads

Railways


2012-2013 will be especially challenging in

 2011 noted record high expenditures, Ministry of Infrastructure expects further growth of

terms of signing new contracts with GDDKiA

funds dedicated to railway infrastructure:


In 2013-2014 GDDKiA expenditures are expected to Group

drop significantly:

Expenditures

10,4

'13f

'14-'15f*

Budget (bn PLN)

Expenditures

34,0 31,4

6,0

Budget GDDKiA plan

29,3 26,4

Segments

9,8

26,2

3,7

(bn PLN)

2,5

12,3

'10

19,9

Perspectives

? '10

'11

'12f

'11

'12f

*expenditures on projects started till 2013

 Through PNI acquisition Budimex Group became

'13f

a leader in terms of order backlog and technical

 Company plans to expand its activity on voivodship

capabilities

roads market (ca. 2,7 bn PLN in 2010)

 New EU budget should be good for railway: for years

WSE

 New projects may be announced in 2014. GDDKiA

’14-’20 PKP PLK prepared projects totaling

has already prepared list of projects for years ’14-’20

30 bn PLN. In ’07-’13 allocation ca. 20 bn PLN was

worth ca. 65 bn PLN

envisaged for railway (within POIiS) Sources: Ministry of Infrastructure, press information, Budimex SA

© Strategic Analyses Office

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General construction & developer market Preface

General construction

Developer market

 2011 noted a record level of production

 2011 was good in terms of volume of flats sold – value of mortgage loans granted was similar to

sold in general construction segment: Residential

Group

33,3

+1%

year 2010

Non-residential (bn PLN)

+15%

38,8


Market uncertainty and change in bank policy in relation

33,6 12,0

11,5

to mortgage loans (KNF Recommendation) may

10,5

negatively impact demand while supply is relatively high: Segments

21,9

26,7

23,1

Number of flats started by developer companies (ths.)

42,2%

'09

'10

2,7%

64,7

'11

Industrial & warehouses

Perspectives

Entertainment, sport, education

63,0

44,3

11% 11%

30%

Wholesale & retail Offices

24%

Other

24%

'09

 Company has solid order backlog for year 2012,

WSE

challenging

sales growth (recognized in developer segment P&L) in 2012


Public expenditures cuts may be a significant threat

© Strategic Analyses Office

'11

 Good presales in 2011 should assure relevant notary

building the backlog for next years may be

to general construction segment

'10

Sources: CSO, Reas

19

Industrial market, other Budimex markets Preface

Industrial market

Hydrotechnical market

 Market value till year 2020 may reach

 Hydrotechnical market value (costal

140 bn PLN (excl. nuclear power plant)

structures, river constructions) in 2011 amounted to 1,8 bn PLN (over 50% y-o-y growth)

 Currently Budimex is engaged in Turow power plant Group

tender, Company has already placed an offer as

 Market is prospective, competition is less fierce than

a subcontractor in Wloclawek (for SNC-Lavalin)

 In 2012 Company plans to focus on lower-value

on the roads / railways market

 In 2011 Company signed 3 contracts (53,5 M PLN)

Segments

tenders

Public-Private-Partnership

 Budimex plans to acquire engineering company / design office

 Estimated value of planned PPP projects exceeds

Perspectives

10 bn PLN

Waste incinerators

 Company has created PPP team:  Market value is estimated at ca. 5 bn PLN


Currently Budimex finalizes car park in Wroclaw project

WSE

 In the nearest future Company will place final offers


Applications for tenders worth ca. 1 bn PLN are being

for the construction of incinerator in Bialystok and

prepared (road in Dabrowa Gor., car parks in Warsaw,

Konin

Gdansk and Cracow) Sources: Ministry of Environment, CSO, PPP Institute, Budimex SA

© Strategic Analyses Office

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Services, roads & railways maintenance Preface

Facility management

Roads maintenance

 Facility management comprises i.a.:


Market is fragmented, mainly dominated

Group




Technical maintenance




Cleaning




Security

by local companies

 Market value exceeds 5 bn PLN annually  Main investors are GDDKiA and municipalities:

 Market is fragmented and has huge potential,




consolidation is expected. Company plans an acquisition in this segment yet in 2012 Segments

Gradual expansion of expressway and motorway network should contribute to significant growth of current maintenance expenditures

Waste management

Railway maintenance

 Market value is estimated at ca. 5 bn PLN


Market is fragmented, part of repairs is executed on

Perspectives

one-off basis

 According to amendment to „waste law” communities will be responsible for organizing waste collection

 PKP PLK plans to implement long-term railway

and operators will be elected through public tender

maintenance agreements

 Budimex and Ferrovial Services will establish WSE

company, which is going to operate on facility

 Thanks to PNI acquisition Budimex Group has

management, waste management and roads

sufficient capabilities to carry out such contracts

maintenance market Sources: Ministry of Environment, Budimex SA

© Strategic Analyses Office

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Construction companies capitalization Shareholder structure (as of 31.12’11) Preface

WSE symbol

BDX

Grupo Ferrovial

35,3%

Group

Number of shares

25 530 098

52 week min/max

64 / 109 PLN

Average volume

15,7 ths. shares

59,1%

OFE PZU Other

5,7%

Segments

Capitalization as of 31.12’11 (M PLN) -15%

-66%

-58%

-73%

-56%

-74%

-83%

-74%

return on investment*

1 953 Perspectives

1 015

865 320

WSE Budimex

PBG

PolimexMostostal

Mostostal Warszawa

*in 2011, including dividends paid

© Strategic Analyses Office

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191

186

158

126

Mostostal Zabrze

Erbud

Trakcja-Tiltra

Pol-Aqua

Budimex shares performance in 2011 Budimex vs. market Preface

120

100 WIG20 78

80

Group

77

Budimex WIG-Bud.

60

31.12’10 = 100

45

40

Segments

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Budimex vs. biggest construction companies 120

Perspectives

100 77

80 60

Budimex Polimex-M.

WSE

42

40

PBG 33

31.12’10 = 100 20 Jan

Feb

Mar

Apr

© Strategic Analyses Office

May

Jun

Jul

Aug

23

Sep

Oct

Nov

Dec

Results better than expectations… Sales in 4Q (M PLN)

Operating profit in 4Q (M PLN)

Preface

1 694 13%

Net profit in 4Q (M PLN)

82 67

1 495

23% 16%

58

Consensus

Real

Consensus

Group

67

Segments

Real

Consensus

Real

280,1*

… and attractive dividend policy

Perspectives

Dividend (M PLN)

231,8

Dividend per share (PLN)

10,97

173,6

9,08

149,1 WSE

6,80

5,84 *recommended by Management Board

'08

© Strategic Analyses Office

'09

'10

24

'11

Budimex SA Stawki 40, 01-040 Warszawa www.budimex.com.pl

e-mail: [email protected]