16 November 2018

The commentary of Leszek Gołąbiecki, the President of the Management Board of Unibep SA, to the results for the third quarter of 2018

The Unibep Group has completed the third quarter of 2018 with the sales revenue of PLN 1,227 million (+15% year-on-year) and a net profit of PLN 26.9 million (+15% year-on-year).

At the same time, it should be stressed that since many previous quarters the construction industry has to deal with many problems that significantly affect the financial results of enterprises. Although construction and assembly production is growing dynamically (at a rate of several percent year-on-year); nonetheless, unfavourable trends - higher material prices, problems with labour shortages, growing price pressure from subcontractors and employees - have a negative impact on the entire construction industry. Unfortunately, this trend has been steady in all segments of the industry, and what is worse, the lack of employees and subcontractors does not allow us to believe that this situation might change quickly.

Therefore, to counteract this difficult market situation, including the increase in materials and services costs, we develop our own resources, especially in the infrastructural and production segments, and we maintain and strengthen good relationships, which have been built with the subcontractors and suppliers over many years. The employment in the Unibep Group at the end of September 2018 amounted to 1,476 people. In addition, we maintain and consistently develop our expertise in every construction segment to be competitive on an increasingly demanding market.

Our domestic general contractorship is still working on the implementation of difficult agreements signed in 2016-2017, however, at the end of this year most of these agreements will be finalized, and the projects acquired in 2018 consider the current market situation. It is important to emphasize that our long-time partners - private investors - show great understanding of the difficult situation in the industry and agree to valorise the remuneration for our services. We work mainly in the residential segment in Warsaw and we will maintain such a policy, however, the situation encourages us to greater diversification, both in geographical terms (apart from Warsaw and Poznan, we work in Krakow, Łódź and the surrounding area) and in terms of the product (several industrial projects).

We are developing our export activities - we are starting a construction project on the next market, in Ukraine. In Kiev, we are going to build a shopping and recreation complex. The implementation for Unibep SA will be secure in financial terms - the investor is to obtain financing from Bank Gospodarstwa Krajowego SA. In Belarus, there still are three constructions we have been leading in accordance with the assumed parameters.

Another segment of the Unibep Group, the development segment run by Unidevelopment SA, consistently implements and sells investments, as well as prepares subsequent development projects based on a built-up land bank. On the Warsaw and Poznań markets, Unidevelopment S.A. is working on several projects, in the coming years it will have to offer, together with business partners, over 3700 apartments. It has also signed a contract with CPD SA, following the hitherto cooperation, for the implementation of subsequent stages of housing estates in the Ursus district in Warsaw. In total, a complex of multi-family residential buildings with commercial premises will be built in this location together with the accompanying infrastructure of a total commercial/residential usable floor area of over 40,000 m2. So far, together with CPD SA, we have completed approx. 740 apartments. Under the new investment agreement, there will be another 742 apartments. In the case of this project, Unidevelopment SA provides the services of investor's representation and commercialisation services.

Unihouse Branch Unibep SA together with Unidevelopment SA implements and sells in Bielsk Podlaski apartment in the first development project in Poland based on ecological wooden prefabricated construction technology. Unihouse is the producer and general contractor of the investment.

In September, Unihouse Branch Unibep SA during the trade fair in Nadarzyn officially presented its modular prefabricated product to be launched on the Polish market. In my opinion, there is a great potential in Poland for constructing in this technology, especially where short time of implementation, high quality of the building (product manufactured in the factory) and later lower operating costs are important. This offer is also attractive when there is a shortage of employees in the construction industry.

Unihouse is also active on the Norwegian and Swedish markets: it conducts acquisition among private investors as well as participates in local government projects.

The Infrastructure Branch of Unibep SA, together with the consortium, in September 2018, successfully completed a 16-kilometer section of the S8 expressway. In the coming years, the company will benefit from the investment boom in Eastern Poland: it is or will be implementing many significant infrastructure projects mainly in the Podlaskie and Masovian province. We report on signing contracts in this segment on an ongoing basis. I would like to emphasize that the concluded contracts are signed based on market performance rates and in the current reality they are safe in financial terms and realistic for implementation in the assumed schedules.

The order portfolio of the Unibep Group at the end of September 2018 is PLN 2.1 billion for subsequent periods. Only in III Q 2018 we have signed agreements of approx. PLN 390 million in value, and from the beginning of 2018, by the day of publication of the report, our portfolio of orders has increased by PLN 1.5 billion. Bearing in mind the safe level of the order portfolio and the demanding market situation, we selectively approach new contracts. Already at the offering stage, we try to limit the potential risks. This applies to all construction segments.

We pay particular attention to the financial security of the Unibep Group. We care about effective management of current operations in individual segments and we plan to develop the Unibep Group in the coming years.

I invite you to read the report for the third quarter of 2018.

Leszek Gołąbiecki, the President of the Management Board of Unibep SA

Link to the report for III Q of 2018.

Link to the report for III Q of 2018


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