Risk factors

In the course of its activities, Budimex Group is exposed to various financial risks, such as currency risk, interest rate risk, price risk, credit risk or loss of liquidity risk.

The inherent risk of any business activity is the credit risk of business partners. Despite implementing restrictive debt control procedures at the Group, the risk of investor insolvency has not been eliminated. Delays in timely repayment of debt may have adverse effects on the financial results of the Group and may require that receivables impairment write-downs be recognised or that current business be financed through external borrowings.

Information concerning the financial risk management objectives and policies adopted by the Group is presented in the consolidated financial statements for the year ended 31 December 2016 (note 3).

Construction contracts are executed under specific technical and economic conditions which have an effect on the level of realised margin.  The Budimex Group companies rendering construction services monitor technical, organisational, legal and financial risks related to the planning and progress of contract work. Despite control and preventive measures undertaken with respect to general risks (credit, currency and third party liability risks), it is possible that certain factors occur due to which contracts will be performed with lower margins than initially planned. Such factors may include:

• increases in prices of construction materials, energy and oil derivatives,
• increases in costs of subcontractor services,
• increases in employment costs,
• delays in timely performance or insufficient quality of subcontracted works,
• delays in obtaining relevant administrative decisions,
• changes in the scope of work or technologies as agreed in the contracts,
• unfavourable weather or land conditions.

Evaluation of investment project feasibility

In 2017, the Budimex Group plans to incur capital expenditure of approx. PLN 100 million, of which more than PLN 90 million will be incurred by Budimex SA. The outlays will be made mainly on construction machines and IT solutions.

Capital expenditure will be financed from own funds and from external sources of finance.