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UPDATE 1-Budimex signs $504 mln road building deal

Published 07/27/2009, 07:24 AM
Updated 07/27/2009, 07:56 AM

* Budimex, Mostostal Warszawa sign PLN 1.5 bln deal

* Budimex sees 3-4 percent net margin on the deal

* Budimex sees Q2 better qtr-on-qtr on all levels

* Budimex stock up 5 percent, Mostostal unchanged

(Wraps earlier stories, adds market reaction)

WARSAW/KATOWICE, Poland, July 27 (Reuters) - Polish building company Budimex signed a 1.5 billion zlotys ($504.2 million) road construction deal on Monday, part of Poland's push to update its ailing infrastructure, and said it sees a net margin of 3-4 percent from the project.

Budimex Dromex has a 90-percent share of the deal, with the rest going to Mostostal Warszawa. The contract is part of a plan to build the A1 north-south highway through Poland, part of the European route E75.

By 1048 GMT, shares in Budimex, controlled by Spain's Ferrovial, had risen 5.0 percent to 70.30 zlotys, valuing the company at $571 million. Shares in Mostostal, owned by Ferrovial's Spanish rival Acciona, stood unchanged at 62.0 zlotys.

Warsaw's broad-based WIG index gained 0.6 percent.

"Our A1 contract on the net margin level will be close to what the whole infrastructre sector has, that is 3-4 percent," Dariusz Blocher, head of Budimex Dromex, told Reuters.

Poland, European Union's largest ex-communist member, has signed road contracts worth 5.4 billion zlotys this year, as it strives to use EU funds to modernise its road system ahead of the 2012 European soccer championship it will co-host with Ukraine.

"We see pressure on prices, but the ongoing crisis makes costs fall," Marek Michalowski, the head of Budimex group, told TVN CNBC channel on Monday. "There is no pressure for higher wages and there is a chance to build cheaper."

He said second-quarter results at Budimex improved from the previous quarter. In the first three months of 2009, Budimex had a net profit of 30 million zlotys on sales of 648 million.

Michalowski added his company's backlog could grow to 5 billion zlotys this year from the current 4.5 billion.

($1=2.975 Zloty) (Reporting by Adrian Krajewski in Warsaw and Wojciech Zurawski in Katowic; editing by Simon Jessop)

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