Ferrovial N.V. (FER) Earnings Call Transcript & Summary

Good afternoon, everybody. This is Silvia Ruiz speaking. First of all, sorry for the slight delay. We had some technical problems, but we are now ready to welcome you to Ferrovial's conference call to discuss the financial results for the first half of 2023. Just as a reminder, both the results report and presentation are available to you on our website. I am joined here today by Ernesto Lopez Mozo, our CFO; and by the CFOs of the different business divisions. If you have any questions, you may ask them through the form included in the webcast. During the Q&A session at the end of this call, we will be reading out your questions and who they are from. With this, I will hand over to Ernesto. Ernesto, the floor is yours.

Thank you, Silvia, and good afternoon, good morning to you all from Amsterdam today. So if we move to the overview of the first half of the year in Ferrovial results, the highlight is that we continue to see a strong growth in our main infrastructure assets. Toll Roads, the 407 ETR traffic increased versus the first half of 2022. We see improved mobility trends. And also we see that in the managed lanes in Dallas-Fort Worth and the rest of the U.S. posting a strong revenue growth. In airports also, we see very good traffic recovery ahead of the peak summer season. Construction profitability has been impacted by completion works in large projects in the U.S. Otherwise, the division is performing very healthily. In terms of cash, the net cash position at the end of the first half is EUR 819 million. And this is a combination of a strong dividends we received from infrastructure projects. And of course, we had the repayment or repurchase of the hybrid bond that we announced in combination with the reverse merger. We have also invested in equity in the projects and had some shareholder remuneration. In terms of the strategic developments, the dual listing was completed. Ferrovial shares are now listed in Amsterdam and Spain. This happened on June 16, 2023. And then the hybrid bonds, we had 94.3% acceptance as the remainder will be bought back this summer. Also, the First Scrip dividend was announced and we have concluded that in July and the amount is now EUR 0.2871 per share. In terms of ESG, probably the highlight the news is the inclusion for the 20th consecutive year in the FTSE4Good and Global Index, okay? So if we move on to discuss operations, starting with Toll Roads. The highlight, the distribution of the 35 West after opening ahead of schedule and being able to distribute the cash that was accumulated after some years of operations of 3A and 3B. And really, the U.S. assets are the bulk of all these numbers. They provided 2% of revenues, that's 2% of EBITDA. And the like-for-like growth in revenues and EBITDA is 38% and 40%. The 35 West segment 3C is adding 6.7 miles and we'll discuss performance in a minute. This has implied an EUR 81 million investment, of which EUR 14 million are pending. The concession goes all the way to 2061. In terms of dividends of only 35 West, solid dividends from NTE and LBJ, USD 123 million at 100%. Also the NTE ultimate configuration is advancing. I mean, this was part of the contract. It has been anticipating due to the outperformance and it will be adding a managed lane in Segment 2, and general-purpose lane in Segment 1. Given the growth in the region, this added capacity will be very helpful in the later years. In terms of construction period for this is from 2023 through 2027 is fully debt finance and this financing is expecting to close in August. Also talking about IRB, new projects are coming and supposed to traffic risk a very attractive terms. Really, the infrastructure plan in India is getting delivered. If we move on to the next slide, we can have a look at the performance of the 407 ETR. This is something that has been for some days in the market, but we think it's understanding how the mobility trends are recovering. In terms of financial performance, you see that we have more than 22% growth in revenues and EBITDA. And this is allowing for dividends. I mean, dividends were distributed in the first half of 2023 CAD 150 million, but also another dividend was approved at the July Board meeting of CAD 150 million. So the performance is very healthy. We see really mobility trends going up. Performance has kept improving across the quarter. It's also true that June is probably flattered by more workdays. If we take that out that would be like a drop of 3.4%, it also had some additional trip length compared to other months. But I mean, clearly, the trend is very good and solid. And I mean, we usually carry out polls with consumers and drivers across the regions here in Canada as well as in America and in Spain. We see people seeing increased mobility for the coming months and next year. So in terms of the performance in workday trips, the average workday trips, in June, it was close to 12% versus 2019. Also there's rehabilitation works in the Highway 401. This is something that usually happens with different intensity pretty much every year, but I mean, probably more intense this year and with favorable weather conditions also helping. But the main message here is that the mobility trends keep improving. If we move to the next slide, we can see that mobility is improving across the board. We also see that urban transit is improving. We see that presence in the office keeps improving. And also employers are kind of investing in their offices to make them more attractive. So we see clearly, like, another year in terms of workforce coming back to the office with the employers asking for that. If we move on to the next slide, here we look at the Dallas-Fort Worth managed lanes and here, I mean, the pricing power is clearly evident from the top part of the slide. We see NT-LBJ and 35 West clearly increasing the average revenue per transaction, well above the inflation of the region that leaves the soft cap in 2023. Traffic performance is also growing healthily. So NT keeps the strong performance. LBJ keeps improving. It's still below June 2019, still affected by works in some connecting roads, but clearly with a very positive trend. And then 3C that was affected by construction works. I mean. now -- well, 35 West was affected by construction works in 3C, now has some days of 3C that don't weigh, but -- I mean, clearly, it will add to the performance of the asset. If we move to the following slide, please, we also have other managed lanes in the U.S. that are even growing faster than those we discussed before, right? So, I-77 is growing revenue per transaction at more than 37% and revenues and EBITDA are growing at an amazing rate, more than 60% and more than 100%. And also the latest addition to the portfolio is clearly improving the ramp-up. You can see the monthly transactions in June were more than 30% higher than in January and revenue per transaction more than 70% higher in June versus January, okay? So very solid performance. And if we look into the next slide, how the prospects of the area where we invest are. I mean, you can see that you have probably more big companies moving into these regions. Also employment growth is higher than the average of the U.S. And when we look into the economic activity, you see that these areas and others that are looking for managed lanes are outpacing the growth of other parts of the U.S. Okay. So moving to the next slide. Here, we have Heathrow performance. Also it had the results in the release yesterday and also the conference call. We can see that the demand is there and traffic is very close to the 2019 levels already. I mean, June was just close to 3% below 2019 and demand is driven by out of leisure, but you have recovery among all the lines and this business is also recovering international travel as well. It's important that the passenger experience is being included. I mean, we have had some industrial action or strikes in the past. I mean, there has been an agreement that Heathrow management has stretched themselves to keep customers satisfied and things flowing and well, the outlook for the summer is strong. In terms of regulation, the CMA appeal is going on with different adherence in the different concepts that are being appealed. We'll have to wait until October for the final decision. Very important matters are being appealed and discussed here. If we move to the next slide, here we have the performance of other airports in Aberdeen, Glasgow and Southampton. It's also growing up. I mean, it's not as close to others 2019 performance. I mean we need to remind everyone that Flybe was part of the airlines operating here and that means that the start of 2023 affected, but we have other airlines coming and looking for routes from these airports and also going forward. So I mean, looking forward to the summer season here to see how it performs. Dalaman has already outperformed 2019. Here, we can see that there is like a broader peak season. And clearly, domestic and U.K. travel are growing and that's helping the performance of a very attractive tourist destination. And then last but not least, in airports, we have the big project NTO, where, I mean, construction works keep progressing. It remains [indiscernible] and schedule and the ratings have been reaffirmed by Kroll and Moody's. The traffic of the airport keeps performing well. And we have advanced discussions with different airlines. In May 2023 also Korean airlines signed an agreement. So this is going as expected so far. We have also contributed equity here, I mean, as of June 30 this year, EUR 123 million have been invested in this attractive asset. If we move on, please. Okay. And here, we have construction. As I mentioned in the introduction performance from Budimex and Webber has been strong, but we have slipped in some projects that are just doing the completion works in the rest in Ferrovial construction. Here, basically in this completion works, we have faced 2 things we didn't expect. One of them was that all the actions that need to be done in general purpose lanes or frontage road -- the adjacent roads have been more out of sequence than expected. And what that means is that you have shorter times of operation and you need to keep the idle teams while you wait for the next time of intervention. This has been as I said, more stop and go that we -- what we could have expected. And also the punch list is way above the standard we've seen in other roles of this size that we've done in the U.S. Of course, we think that we are entitled to recover part of this cost. We have submitted claims, but I mean this could take some time. The good thing about this, I mean, this should be done this year. Our expectation is that for the remainder of the year, the good performance of the rest helped to overcome this impact, but as I said not expected. I'm happy about this, but we are turning the page here and looking forward to 2024. If we move on to the next slide. Here, we have the overall P&L with very solid growth vis-a-vis next -- last year, sorry, vis-a-vis 2022. Probably one of the things that I would like to highlight is the financial performance. In terms of financial results from infrastructure projects, remember that we have full consolidation of the I-66 this year, whereas in the first half of 2022 it was negligible, right? So we have all that interest aspects going on there, but we have in June '22, we have some inflation impacts in Autema. They are not there and the -- also the cash in the projects have been helping. And in particular, the one that probably was more overlooked by the market is the ex-infrastructure projects. I mean, in 2022, the positive amount was due to the unwinding of hedges for bond issuance. But here is just carry cost. I mean at the ex-infrastructure project level, the debt cost is like 2.4%, whereas cash is yielding now 4%, right? So this is adding to the solid results this quarter. Okay. Going down the line and just finishing the slide on results, you have the net profit from discontinued operations. The fact that we have a small positive here is that we close the final accounts on the sale of Amey and that was slightly better than we expected. That's hence the result, okay? So very solid results. If we go into the cash flow explanation, I mean, we see the strong performance of dividends. Then we have some working capital drainage. An important part of this is from construction. Then we have taxes, mainly in Budimex and withholding tax from cash from Canada. And then we have equity investments and other investment cash flows in the Construction division. In terms of shareholder remuneration, yes, we had a slow start to the year. Probably this program will be more back-ended, but I mean, we are looking forward to complete the shareholder remuneration with buybacks, not only dividends. In terms of the hybrid bond, I mean, this is the full repayment consider since we will squeeze out the kind of 5-plus percent that did not tender, and it also includes the coupon accrual. And then in other financing cash flows, you have the -- I mean, dividends to minorities, that is Budimex, but the rest you have the positive effect of the carry we were mentioning before, okay? So solid performance. If we move on to the last slide -- I mean, when looking ahead, it's clear that we have very solid mobility trends. This is the driver for cash generation dividends from our strong asset portfolio. I mean, pricing flexibility is clearly proven valuable in these growth areas where we are present. There's a very interesting pipeline. I mean, there's complex projects to come to the market and we're looking forward to that. And we keep delivering the corporate organization and we plan to apply for a listing later on the year. And of course, last but not least, we keep advancing our decarbonization road map. So, okay, we will open now the floor for questions. I would like to apologize again for the glitches on uploading the information. Happy -- I mean, I hope that my pace has been a little bit slower to allow for you guys to read things, but we open the Q&A session now. Thanks.

Thank you, Ernesto. The Q&A session will start shortly. Please stay tuned.

Okay. Starting with the first set of questions coming from Nicolo Pessina from Mediobanca. First question on 407 ETR, how much is the impact that positive extraordinary effects had on the second quarter traffic?

This is [indiscernible], CFO of the Business Division of Cintra. What we are seeing is an improvement in the trends, in the mobility trends basically, and the good weather started in Toronto in the second quarter. And in addition to that, we are -- with a weak weather, the construction work started in the quarter 1, creating some congestion that is helping to the traffic on the 407 ETR. So basically these are the reasons of the improvement in this quarter.

Next question from Nicolo on 407 ETR also, what is the level of peak traffic compared to 2019 levels?

We've seen a gradual improvement in peak hours during this first half of the year, especially in the second quarter for the reason that I mentioned before. We are still lagging compared to 2019, but the trend is positive. We think looking the mobility trends that we are seeing in this quarter that there is what we have seen in other cities in U.S., that there is -- in Canada, there is room of improvement.

Next question from Nicolo on NTE, is it reasonable to assume that revenue sharing mechanism is triggered within 5 years, given strong traffic growth and inflation?

As you know, the revenue share mechanism is part of our contracts in all managed lanes in Texas and in the West and the U.S. So in the case of the NTE, you have to keep in mind that with the ultimate configuration, we're going to start the construction works and this will create some impact in traffic. But for that reason, we think that the share mechanism is going to be delayed for a while, but we don't see any problem in the long-term because the corridor has a very powerful growth and stable growth and good perspectives in the future. So we see suppressed demand right now. This is one of the reasons that we are increasing capacity because there are suppressed demand. So we don't see any impact in the long-term.

Last question from Nicolo. Would you say that [ Fiona ] and Calcasieu winning the I-10 project in Alabama highlight increasing competition for greenfield projects in the U.S.?

We have limited information just the press release of the DLT. What we can say here is that the competition in the U.S. is not bad in itself. We need competition just to boost these big projects in U.S. In the case in this particular project, the I-10, what we can say is how we see the project. It's a project which revenue is linked to the GDP, with some local exposure to the local economy. And we have seen some construction risk, considering that we don't have a local presence there, we put our best offers in this bidding process, considering the growth of the revenue and the risk associated to the project.

Next set of questions coming from Elodie Yvonne Rall from JPMorgan. First question, what is the traffic trend on the 407 ETR in July?

Hi, Elodie, you know that we cannot disclose specific data about July. But in general, we are seeing that the traffic is consolidating the recovery that we've seen in the first half of 2023.

Next question from Elodie. What traffic performance do you need to see at the 407 ETR before increasing tariffs?

I think that the traffic performance is pointing in the right direction, but we cannot commit to a specific date at this moment of the year.

Last question from Elodie. Do you agree that it would make more economic sense to increase tariffs on the 407 ETR on January 1, 2024, rather than during the remaining of 2023, given it would delay the enforcement of Schedule 22 payment?

Elodie, yes, you're right. So according to the Schedule 22 and the first major letter, if we want to raise it all, we need to communicate to the DOT 1 month in advance. So that would mean right sales in the next month. So we only have a couple of months to obtaining this revenue. So for that reason, it's more interesting economically speaking to raise the toll hypothetically in the 1 January, 2024, instead of August or October in 2023.

Next set of questions coming from Luis Prieto from Kepler Cheuvreux. First question. When should we expect the company to increase tariffs in the 407 ETR, this or next year? For how long will it be reasonable to expect the payment of Schedule 22 payments?

As I say in the previous -- as I said in the previous question, the good thing is that the performance is -- or traffic performance is pointing in the right direction. But at this moment, we cannot commit to a specific date. And the second part of your question, the Schedule 22 payment is part of our business plan as we released in 2018 is nothing extraordinary and we need to get used to that.

Next question from Luis. Given the reiteration of the 2024 profitability target for the Construction division, could you please shed some light on the sequential evolution of EBIT margin over the next quarters? In other words, should there be a material improvement in the second half of 2023 or mostly in 2024?

Thank you, Luis, for your question. This is Inaki Garcia from Construction. We cannot give guidance for 2023. But what we can say with you is that we are estimating that we will close this year with the current assumptions of the large projects in the U.S. that are already included in the financial statement as of June. And in the recurring -- and a recurring run rate level of the rest of the business, I mean, Budimex and Webber. So improvement in the second half, but we cannot commit with a percentage of EBIT. For 2024 is what you said, I mean, we give guidance of 3.5 EBIT basically based in 3 pillars. I mean, the healthy backlog that we have in this moment that is well protected against inflation. These large, big projects in the U.S. that have caused travel in the past will finish in 2023. And also, I mean, there are very good profitable projects that are starting in this moment. So they are progressing well and we will see profitability in 2024. I'm talking, for example, about 35 next or Ontario. Thank you.

Last question from Luis. When should we expect the U.S. listing to be live and the Capital Markets Day to happen?

Well, this is really for the SEC to determine, right? I mean we will be probably filing the 20-F in the fall. And then the approval process could be shorter or longer, depending on the CCA requirements, right? So we are really looking forward to this listing. The Capital Markets Day should be shortly after the listing, unless it's a peak earnings season that you don't have the undivided attention of the public, right? So we look forward to that, maybe early next year, but we'll keep you posted as the approval process of the CCA works.

Next set of questions coming from Robert Joynson from BNP Exane. First question, since the most recent 472 toll increase in February 2020, to what extent has the Schedule 22 traffic threshold increased?

Hi Robert. This is [indiscernible] from Cintra. As you know, because we have all the documents on the website, the traffic threshold increased depending on the segment between 1% and 3%. So we cannot disclose more information than that.

Next question from Robert. With respect to the Toronto Office Occupancy Index, you have any estimate as to the level at which this data is likely to stabilize?

We are following this index, as you do. And what we are seeing is that the trend is positive. When we go to Toronto and we discuss with local people and we are seeing that there is some motivation to make more enforcement to come back to the office. So -- and according to all data in other city -- in U.S. cities, we consider that there is one-off improvement. So we think that the trend is positive, it could continue in that way in the following months.

Last question from Robert. Roughly, how much revenue segments we see contribute to NT 35 West during the second quarter?

We don't disclose our information for particular segments, just the whole project. But what I can say about the 3C, that is it's early days, but we are seeing a very positive -- a positive initial performance of this section. We are in a career that is growing fast and healthy, and we're perceiving a positive impact of -- in the construction works in the area with the normalization in the traffic flow.

Next question coming from Fernando Lafuente from Alantra. Should we expect any cash outflow at construction in 2024?

Hi, Fernando, this is Inaki again. As we said, EBITDA for 2024 is going to be positive. I mean, so we expect positive cash flow on this, but now it's very soon to give guidance on the working capital movements that will depend very much on what you know happens in the construction business. Advance payments in new contracting and also advance payments also at the end of the year. But generally we can say that we're not expecting cash consumption in 2024. Thank you.

Sorry, I missed another question from Fernando Lafuente. What is the estimate of dividends from associates by year-end and the expectation for 2024?

Hi, Fernando, we are sorry, we don't give this specific details. I mean, you can work out with the performance what could be the generation of these assets, but we don't provide a specific guidance, apologies for that.

Next set of questions coming from Marcin Wojtal from Bank of America. Have you seen a meaningful improvement in 407 ETR peak hours traffic in the second quarter, which is relevant, sorry, for Schedule 22 calculations?

This is [indiscernible] again. What we are seeing in the peak hours is a gradual increase in the second quarter, especially in the second quarter and they're performing better than 2022. So that, yes, we are seeing a meaningful improvement.

Question from Marcin, do you expect the U.S. listing to be finalized before the year-end of 2023?

Well, this is really the SEC's call, right? I mean, to take time and even to approve the transaction, right? So we are working, as I say, hard to file in the fall and do the fastest process possible, but it's their prerogative. So it could go into 2024 [indiscernible] they approve us.

Next question from Marcin. Do you believe the tariff hike at the 407 ETR could happen in the 2024 or 2025?

This is [ Tim ] again. I think that I already answered this question. So basically the traffic is pointing in the right direction and -- but we cannot commit any date at this moment of time.

Last question from Marcin. Are you monitoring any potential external growth opportunities outside of North America?

Yes, we are monitoring selective investments in Latin America and Europe and we are working to grow in India as you know, it's a country that is booming with a huge infra pipeline that we feel comfortable with our partner IRB. It's another country that we are monitoring so closely.

Next set of questions from Sathish Sivakumar from Citi. First question, what is your expectations on construction activity in the second half of the year? Do you see further inflationary pressures?

Thank you. Sorry. I think the first question has been already answered. We expect the same run rate trend for the rest of the business and probably for infrastructure with no more losses as all the costs in these large projects have been already included. Regarding inflationary pressures, we are not expecting inflationary pressures in the second half of the year. But on the other hand, as we mentioned, our backlog in this moment is well-protected against inflation. Thank you.

Next question. What is your expectation on tariff at Heathrow? Can you elaborate on the time line?

This is Laura Lopez, CFO of Ferrovial Airports. We have to wait for the CMA final decision that will report by the 17 of October. We are confident that the point rise by Heathrow will be fully considered by the CMA. There are a number of areas in which the CA has made Ferrovial and will undermine the investment needed to deliver the airport service and resilient consumer wants. So we have to wait and see. Thank you.

Next set of questions coming from Augustin Cendre from Stifel. First question, could you please comment on the evolution of traffic on the 407 ETR? Was there any one-offs after considering the strong unit traffic back at 2019 levels?

As I said before we think that -- sorry, we think that the traffic performance is improving in second quarter due to many reasons, no nothing extraordinary. An improvement in the mobility, as Ernesto commented before, the [indiscernible] came to Toronto in the second quarter and this is positive for the mobility as well. And with this weather start something that is coming in a normal course of business, that is the rehabilitation, the 401. So in June, it's really is the most important month in terms of traffic in the 407 ETR and this following the positive trend that we are experiencing in the whole quarter.

Another question from Augustin. Budimex had a very strong performance in the first quarter and a weaker second quarter. It looks quite different from the usual seasonality. Could you please detail what happened?

Thank you. We don't see a second Q weaker in Budimex. Profitability is 6.8%, and it was 5.1% in the first Q. Probably, you are comparing with the previous year, but remember that previous year had a shift between the first Q and the second Q because it was just a time that the Ukraine war started. So there was a lot of uncertainty. Profitability in the first Q was very poor. And in the second quarter, it had a recovery based on new contracts started again. And also, I mean, some measures for inflation were established. So we don't see this weaker within as in Q2. And for sure, I mean, we expect profitability or good profitability for the year in 2023.

Last question from Augustin. The others division lost minus EUR 22 million EBIT in the second quarter. What is this driven by? Are these one-offs?

Yes. Hi, Augustin. Ernesto here. Yes, I mean, the bulk of that is one-offs related to the corporate restructuring transaction and listing in the Netherlands.

Next question coming from Victor Acitores from Societe Generale. The Texas Managed Lanes NTE LBJ and NTE 35 West, what was the second quarter traffic versus 2019 levels?

Thank you for your question. So the specific data is in the note that they we released in our webpage. But what I can say is that NTE and 35 West is above 2019 levels. And the LBJ is close, is being around minus 5%, is lagging 2019 in 5%. But you have to consider that the LBJ is affected by the construction works in the 65 East, so it's something to keep in mind. In general, the trend is very positive with a strong growth in all the corridor.

Next set of questions coming from Jose Manuel Arroyas from Santander. First question, I-66. Could you please outline the main factors for the rise in the revenue per transactions to USD 6 in June? Is it general congestion, more heavy vehicles?

Thank you for your question, Jose Manuel. We are seeing different factors in this improving in the revenue of transactions. The mobility in general is improving in all the U.S. cities for the return to the office and for the better economic prospects. But in the case of the I-66, we are seeing that the users are experience a lot of [indiscernible] savings in peak hours and we are seeing more percentage of heavy vehicles than we expected in our highway. So that's affecting positively to our revenues as well.

Next question from Jose Manuel, New York-JFK, we have learned today that Korean Airlines has been onboarded. Have there been more airlines onboarded since 2022?

Jose Manuel, this is Laura again. The agreement with Korean Airlines is additional to the agreements already signed with Air France, Etihad, [indiscernible] and TLM. So really good signal that NTO value proposition has been validated by the airlines who are willing to commit very ahead of the construction and with long-term contracts. And let me add that there are ongoing discussion with this [indiscernible] international carriers and there is advanced negotiation with some of them.

Last questions from Jose Manuel, 407 ETR. What are the key factors for the increased average distances traveled and how sustainable are they?

Thank you. This is Tim again. The key factor is that the leisure trips has [indiscernible] than the commuting and the increase of percentage of these trips are affecting to this increase in the ADR.

There's another question from Elodie Rall from JPMorgan. Could you quantify the impact of the construction works in the second quarter? And if you expect the impact to impact the second half of the year?

Excluding Budimex and Webber, the impact of -- in the second Q of Ferrovial Construction is minus EUR 63 million. Most of this is coming from the contracts or the last contracts in the U.S. that are finishing. As we said, we are provisioning here for losses, I mean, not all the cost is incurred and we are estimating which are the total cost till the end of the contract, including [ bank lease ] and other requirements from the clients. So all the cost is incurred. So no impact on these contracts in H2. Thank you.

Next question coming from Patrick Creuset from Goldman Sachs. On the I-66, it looks like traffic is ramping up nicely throughout the second quarter. Can you please share your perspective on how the asset is performing relative to your expectations and the continued ramp up from here?

Thank you. This is Tim again. Just to say that the traffic is performing according to our expectation and continue the ramp up. It's performing well. Thank you.

Next question from Mariana Gonzalez from Toro Partners. Can you please talk about JFK and TO is doing? Can you talk about any advancements?

Thanks, Mariana, for your question. Happy to share details on the advance of the project. Project is in good progress. During the second quarter, the comprehensive design plan has been approved jointly with the safety plan. We are working towards having 100% of the final design packages approval while construction continues. So currently, the final design is 90% achieved. The commencement of the reversion of the [indiscernible] altitudes being activated, which is key to a low construction progress, I'm very happy to announce that yesterday, the commencement of the steel erection of the household structures took place. They are turning closer and the [ T2 ] demolition are ongoing expected to be finished by the end of the year. So we can say all the milestone in critical parts have been achieved as expected, and the rest of activities continue to focus on piling, production of pile, caps and steel erection.

Next set of questions coming from Nicolas Mora from Morgan Stanley. First question, you have fully provisioned U.S. contracts in the first half of 2023, but how much cash consumption should still be seen in the second half of the year?

Yes, you're right. I mean, everything is very soon, but there will be cash consumption in the second half. As mentioned in the previous question, it's true that some of these costs are still estimation. So we are still under discussions with the set clients in these contracts. And as also Ernesto mentioned, the claims corresponding to a recovery of part of this cost that we estimate that we are entitled, I mean, to recover a big part of this, probably won't be in 2023. So an estimation of between EUR 50 million and EUR 90 million is our better estimation in this moment of cash consumption of this contracts. Thank you.

Next question from Nicolas. Use managed lanes, excellent traffic and tariffs despite headwinds for the U.S. consumer, what is the real driver of growth at above 2x the weight pool just per average weight?

Thank you for your question. This is Tim again. Basically, we are seeing that the congestion is growing in all our carriers and we are seeing less seasonality of working from home than the last year during summer. And that is because, as I said before, the mobility trends are improving.

Next question, leverage situation at U.S. managed lanes, what is the potential for re-leveraging an NTE or NTE 35 West over the next few years?

Thank you for your question again. So we all analyze every leverage in our assets depending on the macro situation and the interest rate, we need to see some stabilization in the interest rate because as you can see the Fed is raising interest and we'll see year after year.

Last question from Nicolas. Where would you feel comfortable to put leverage on I-77 in the medium-term?

Yes, we are analyzing all the assets and the optimal level of leverage. In the case of I-77, it's performing quite well. So depending what are the medium-term perspective in the market, considering the interest hiking in the Fed, we will make a decision.

Next set of questions coming from Graham Hunt from Jefferies. First question, can you give any guidance on the traffic update you expect from Segment 3C of the 35 West for the second half of the year? Do you expect any positive impact on Segment A and B after Segment C has opened?

Tim here. As I said before, it's early days to give any guidance, but we are positive with the initial performance of this section of the project and we are perceiving a positive impact thanks to the ending of the construction works in the area in the Segment B.

Second question, what are the latest developments related to the I-270 project in Maryland? Is that a project you would look at if it comes back?

We have no more news from the DOT since the cancellation. So let's not further comment about this.

Has there been a significant mix impact from heavy vehicles in the revenue transaction growth you've seen in the I-66, or is that pure pricing? Can you give any sense of the split between light and heavy vehicles in the corridor?

Yes. As I said before, there's multiple impacts in the revenue improvement. One is that the users seeing more time savings in peak hour. So it's performing well and more percentage of tracks.

Next question coming from Kenton Moorhead from DWS. What benefits will you see from the investments in the 407 ETR CRM and ERP systems?

Yes, Hi Kenton. Well, always when you get into a more sophisticated pricing and campaigns, you need an integrated ERP and CRM. That will be the main benefit of this. And as I said in particular, more for tailored campaigns and things like that. So more data segmentation that could be quite valuable in the years ahead.

Next set of questions coming from Tobias Woerner from Stifel. Are there any other bond maturities we should be aware of reducing your net cash position?

Hi. Tobias, okay. So basically the first thing I would like to mention is that, well, it would reduce the gross cash position, not the net cash position, but you're right. And now we are enjoying a fantastic carry. The next bond maturity is in July 2024. So I mean, close to a year from today and the other bonds maturing '25, '26 and '28. So still we have some distance to those maturities. Here I'm not considering the short-term financing of European commercial paper that is not helping with the carrier. Really, it's just pure liquidity. So yes, we should be able to keep enjoying this carry for some time.

Other question from Tobias. Can you give us the timing of the losses at Agroman? And what is the underlying margin of the business -- sorry, Ferrovial Construction, not Agroman. And what is the underlying margin of the business ex these losses? Or put another way, is the underlying Ferrovial Construction margin above or below your 3.5% margin target on a normalized basis?

Thank you, Tobias. The margin of Ferrovial Construction, please think about that is a priority of geographies. I mean, part in the U.S., except of Webber, also in LatAm, also in Spain. I mean, so the margins are quite different in each of them, no? But if in a compounded and what we are expecting for 2024 onwards, but more thinking in the final contract, not done because it will also depend on the progress of the contracts, when they are at the first phases, usually there are more contingencies in this space, but we expect something at below 3.5% and probably below 3%.

Okay. So it seems there are no further questions.

Okay. So thank you all, and I hope you enjoy a deserved summer break. Hope to see you soon. Thank you. Bye-bye.