HOCHTIEF Aktiengesellschaft (HOT) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the OCI Full Year 2023 Results Conference Call. I'm the Chorus Call operator. [Operator Instructions] The conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Michael Pinkney.

Thanks, operator. Good afternoon to everyone, and thank you for joining us for this HOCHTIEF 2023 results call. I'm Mike Pinkney, Head of Corporate Strategy, and I'm here with our CEO, Juan Santamaria and our CFO, Peter Sassenfeld; as well as our Head of Capital Markets, Tobias Loskamp and other colleagues from the senior management team of HOT. We look forward to taking your questions. But to kick off, our CEO is going to run us through this strong set of numbers. Juan, all yours.

Thank you, Mike and team. Good afternoon to everyone, and thanks for joining us. Otis, delivered a strong performance in 2023.

[Operator Instructions]

Thank you, operator. Apologies, we had a problem on the line there.

Yes. Thank you, Mike. So I was talking about the sales and the fact that they increased 10% on an FX-adjusted basis to EUR 27.8 billion. And then I mentioned that the operational net profit rose by 11%, FX adjusted to EUR 553 million at the top end of guidance range. The nominal net profit of EUR 523 million compared with EUR 482 million in 2022, showing an 8% increase or 14% FX adjusted. Optiv's cash generation was outstanding in 2023, with underlying cash flow from operating activities at EUR 1.45 billion. As a consequence, the group ended the year with a strong net cash position of EUR 872 million, an increase of $519 million compared with December 2022. The group's order book stands at EUR 553.3 billion and is up by $3.9 billion or 11% FX-adjusted year-on-year, record new orders in 2023, of 36.7 billion, up 27% in local currency terms have driven this strong increase in the order backlog. Looking at the cash flow performance in more detail. Underlying cash flow from operating activities, of EUR 1.45 billion, implies an excellent level of cash generation, driven in particular by Americas and Europe. Furthermore, these figures is over $235 million higher than the 2022 level, which already showed a strong cash generation performance. As shown in the figures, the fourth quarter showed its characteristic seasonal strength. Net operating CapEx ramped up to EUR 193 million in 2023 due to increased purchases of job-costed tunneling equipment at CIMIC as well as one-off development CapEx for a major renewable project. On Slide 6, we can look at the cash development from a balance sheet perspective. Optiv ended 2023 with a net cash position of EUR 872 million. This is an increase of well over EUR 500 million versus the beginning of the year and is after distributing a total dividend to shareholders of $301 million in July 2023. I would note that $470 million cash received from the Penta disposal has been balanced by the other non-operating effects, principally around $180 million cash out for final CCPP settlement, EUR 110 million of equity investments, including PPs and FX impact of close to EUR 120 million. During the year, rating agency S&P reaffirmed its investment-grade rating for the group. The next 2 slides in our presentation provide an insight in the development of the group's orders. Optiv, record new orders in 2023 of $36.7 billion, an increase on year of 27% in local currency terms and equivalent to 1.2x work done in the period. Demand has been solid across the group's divisions, with particular strength in high-tech infrastructure markets where HOCHTIEF secured important project wins in areas such as data centers and energy transition. The group's order book now stands at EUR 55.3 billion and is up by $3.9 billion or 11% FX adjusted compared with December 2022. The consequence of our strategy to further improve the group's risk profile, lower risk contracts, which incorporate enhanced risk sharing mechanisms now account for around 85% of our order book compared with approximately 65% 6 years ago. In terms of divisional performance, let me just mention some of the highlights. On sales of over EUR 18 billion, 7% higher year-on-year in U.S. dollar terms, the Americas division delivered 14% operational EBIT growth to EUR 422 million, above the top end of the guidance range of $380 million to $420 million. Margins expanded 20 basis points to 2.3%, with a strong fourth quarter and positive momentum. Outstanding cash flow from operations of over EUR 1.1 billion was driven by both Turner and Flatiron, with EUR 300 million increase versus an already strong 2022. For 2024, we anticipate continued growth in operational activity to $440 million to EUR 480 million. CIMIC generated a 20% rise in revenues TWD 3.3 billion and a solid NPAT of 4034lasrel, up slightly year-on-year, in line with guidance, operating cash flow refactoring of $640 million benefited from a strong fourth quarter. Year-on-year variation, reflects lower client funded mobilization payments due to a further increase in our risk and alliance style projects. For 204, we're aligning the guidance metric for CIMIC with that of our other operating visions. We expect operational EBT or PEN 490 million to PLN 530 million compared with a figure adjusted for the eventual disposal of PLN 487 million in 2023. In Europe, operational it of EUR 64 million was stable year-on-year at the top end of the $55 million to $65 million guidance range with a strong cash flow result, which showed a EUR 75 million rise year-on-year at the operating level. We expect operational PBT in 2024 between EUR 60 million and EUR 70 million. And at Abertis, we expect a similar level of net profit contribution in 2024 as in 2023. Let me update you on the progress we have made in delivering our strategy. Of these objectives are to generate sustainable cash back profits, achieve attractive shareholder remuneration and create value for all stakeholders. Our water to meet these targets is focused on, number one, consolidating our core market positions and significantly reducing the group's risk profile; two, further developing active presence in rapidly expanding high-growth markets by harnessing our strong existing infrastructure skill set and local presence in key developed markets. To support this, we're working on extracting untapped synergies in the group. And third, during the year, we started to deploy the next phase of our strategy in relation to investing equity in the next-generation infra growth markets we have identified. We do run through these elements of our strategy in more detail. We're enforcing our strong core market positions and the risk in the business with construction management, Alliance style and other collaborative type contracts, such as one, in Texas, Bator JV was awarded a contract to lead a USD 1.2 billion redevelopment and expansion of the Austin mentioned center. Projects won by [ Flatiron ] to build out broadband fiber networks in California to provide access to underserved populations as well as the category Greenline like transit project in Canada. At the end of last year, CPV contractor JP, was confirmed for Victoria's $3.6 billion of suburban rail loop east. CBB has a 40% share of the project, which includes the construction of a 16-kilometer section of the project's 26 kilometers of 3 panels. As CPV JV has also been selected to be the major construction partner for ATAM wall replacement in Queensland to provide long-term water security and store solution. And in Germany, the consortium includes HOCHTIEF Infrastructure, won a EUR 426 million on for the second part of a new bridge across the river Rhine between Colon and Leverkusen. Overall, we are significantly derisking the group order book with lower risk projects now accounting for around 85% of the group order book at the end of 2023, as I mentioned earlier. In terms of high-growth markets, we have continued to expand our presence and geographical reach. Furthermore, with our clarity for services nature, these projects further enhance the risk in drive. We are seeing a rapid expansion in data centers driven by the ongoing growth in cloud computing and the exponential option of artificial intelligence. During the year, Turners awarded orders for new data centers worth USD 2.6 billion. Additionally, 2024, a use campaign was selected by Meta to build USD 800 million data center in Indiana, which will be fully powered by green energy. In addition, CIMIC has won several data center contracts in Hong Kong, the Philippines and Malaysia this year worth over PLN 400 million. In Europe, the group was awarded a data center contract in Warsaw and started construction of a sustainable edge data center in Germany. Optiv infrastructure supported by Turner has also been awarded a further data center project in Europe. We are strongly positioned in the energy transition market. CIMIC's subsidiary UGL was awarded an order for the expansion of a battery storage energy system for NEE, one of the world's leading producers of ere energy. This is the third project of this type, we have been awarded in 2023. As a leading designer and contractor of sustainable electricity generation and storage assets, UGL has already delivered 17 major renewable energy generation, storage and transmission line projects. Along with CPB Contractors, UGL will construct the $1.4 billion Aussie HumeLink West transmission project, which will significantly increase the capacity of the electricity network as well as Eastern states. As go on, we announced plans at the end of November last year to underwrite 32 gigawatts of renewable energy generation and energy stewards capacity in an attempt to super chart the country's energy transition. Further, huge investments will be required in transmission line capacity at a time when battery energies to systems, which provides with stability are still in the process of catching up on the renewable energy capacity built up in recent years. GL is uniquely well positioned in the Australian renewables market with a product experience. For example, the solar market as well as in the installation of battery energy store systems and grid connections that we expect to continue growing strongly for many years ago. In the U.S., meanwhile, we're a leading electric vehicle Patricia factory builder via term. During 2023, we secured new orders of USD 2.6 billion and had an EV battery order book of USD 2.0 billion at the end of December, including projects such as Panasonic Energy's EV battery production facility in cancers and an electric vehicle battery plant for Honda and LD Energy in Ohio. Lithium and other metals are key to support the global energy transition in relation to electric vehicles. UGL has been awarded a EUR 300 million OCI project in Western Australia for the provision of construction services as a lithium hydroxide plant, another element that is essential for energy transition is nickel. Our company has been awarded a $240 million as nickel mining contract, marking the company's second successful venture in Indonesia nickel market in 2023. Project underlines the company's strategic target to significantly increase the proportion of business with commodities needed for the energy transition in the coming years. The group benefits from its excellent reputation as a service provider to the natural resources industry and the full integration of MACA, which it acquired during 2022. The infrastructure associated with sustainable mobility and smart cities is a long-term extractor growth market as well. In North America, Flatiron has been selected as Lionstactor for Phase 1 of the dynamic personal micro transit project in San Francisco, project is intended to provide an alternative transportation option through remissions, autonomous vehicles operating in dedicated guidance. Social Infrastructure is another secular growth market for optics. In August and [ FLTseetitem ], announced that Econorte, including Terna and an Acom subsidiary will build its new stating project, which has an expected value of USD 2.1 billion. And in Asali, CPB has been selected by the Consendament for Stage 1 of the new $1.2 billion Oseberg Astec, while Stoneridng health care facility pillar in the U.S. broke ground for a $550 million U.S. hospital project in Texas. To maximize the benefit of the growth opportunities, Activis pursuing, we're working to extract synergies across the world. An example of this relates to supply chain and logistics, which are critical to success for our clients in data center, EV battery and other high-tech infrastructure markets we're pursuing. To meet these challenges, we have developed Source, which is Turner supply chain specialist. In order to expand for Blue labilities, OCD is developing its presence in the Asia Pacific region with the creation of a logistics hub to accelerate the group's digital delivery capabilities. Capital allocation plays an increasingly important role in this podidevelopment of our company in terms of potential transformational M&A, both on acquisitions, the deployment of equity capital in next-generation infrastructure and PPP investments. At the same time, shareholder remuneration remains a priority for HOCHTIEF. During the year, we also started to deliver on the next phase of our strategy in relation to investing equity in high tech and energy transition growth sectors. In 2023, Otis committed or invested a total of around $150 million in this area as well as EUR 43 million in train of EPS. We have identified a significant pipeline of data centers and good investment opportunities in Europe and Asia Pacific. In Germany, for example, Optiv and an infrastructure product are jointly building and operating a sustainable age data center near decile. The consortium to repurchase a further plot for a second project at this time and is in the process of securing a 1/3 and intend to obligate the model at other locations in metropolitan areas in the next few months. In a significant milestone for the business, a HOPTI joint venture has been awarded a contract to finance, plan, build and operate a fast charging network for electric vehicles by the German Ministry of Transport. Total investments amount to EUR 250 million, which will include an equity investment of over EUR 50 million. Simmons are expected to be replicated in several other European countries to meet the increasing demand of EV chargers, and we're well prepared for the opportunities as will emerge. In early transition, at end of 2023, the clonal solar farm in Australia combats operations. Pacific has developed, invested Equity and is managing the solar farm with its service [ obsidies ] UGL, undertaking construction, operations and maintenance work. During the year, Pacific has also acquired the development rights for the 300 megawatts Hokanson farm in Hunan, a second large-scale solar project beyond and developed by the company. 2023 has also witnessed a role significant PV project wins for the group, including a 3-year PV contract worth several hundred million to expand the new Frankfurt and main Judiciary center. OPT PP solutions will construct new buildings and subsequently operate them in an eco-friendly manner for a period of 30 years. The company also won a major BP building contract in Bali, where the group will refurbish and building offices for the Institute for federal real estate and subsequently operate and maintain them over a 30-year period with a reduced carbon footprint. In the U.K., we are preferred bidder for a university stand housing PPV project. While in Australia, CPB Pacific and UGL, as part of the Canberra Metro sort will final design, build and operate the next stage of Canberra world-class live well system. This collaborative contract will achieve significant carbon reduction benefits when the first state is already operating on 100% renewable electricity. We also continue to allocate capital to boost our engineering know-how by a bolt-on acquisitions such as that of the Canadian company op with its strong know-how lithium processing technology. In addition, UTL reached an agreement in 2023, to bite communications service arm of a swell installation and maintenance contracting company, Skyros. Let me move on and mention the key highlights of the year in relation to Abertis, where we hold a 20% stake. In July 2023, OCT, ACS and Mondes reached a new state collaboration agreement for Abertis with the objective of strengthening the toll-road operator's global leadership in transport infrastructure concessions. As part of the agreement, Abertis acquired 56.96% interest in the 288 manage-led Highway Houston of USD 1.53 billion, which has a remaining lifetime of 45 years. In October, Abertis announced that it had won a tender in Puerto Rico for 4 total roads with its USD 2.85 billion for a period of 40 years. In early 2024, the shareholders contributed EUR 1.3 billion in equity to support the financing of these transactions and the company's growth strategy with HOCHTIEF, subscribing is 260 million share. Abertis will thereby maintain an optimal capital structure accordance with its commitment to maintain its investment rate. Environmental social environment remains a steady priority for management. In 2022, Optiv made the commitment to become time-neutral or net 0 by 2045 and publish its sustainable plan 2025. In the last 12 months, international working groups have continued to develop and implement measures to advance on short- and long-term ESG targets. For example, the group has developed a decarbonization road map, published a statement of principle and human rights and updated its leading wage analysis. [ Ardlership ] is widely recognized in 2023, HOCHTIEF was again listed NeoCons sustainability next for the 18th year in a row, and we achieved top positions in the ranking compiled by S&P loan. In addition, MSCI graded its ESG rating for the group to AA from AA, making it the highest rated amongst its peers with an improved safety performance side as one of the drivers of the pro. So a new wrap up as follows: OptiFi delivering for its shareholders in terms of profits, cash generation, shareholder remuneration and corporate it. Due to its local developed market presence, regional diversification and global footprint, Optimis very well positioned for dynamics, opportunities that lie ahead of us as a global infrastructure solutions provider. This sale our engineering know-how and complemented by our logistics and systems capabilities. In 2023, a further derisking for order book was accompanied by strong growth in new orders, particularly in the faster-growing market related to the utilization and transition and sustainable infrastructure. Operational net profit increased 11% FX adjusted and was backed by an outstanding level of customer operations, resulting in year-end net cash of $872 million. And we started to deliver on the next phase of our strategy with $150 million of security committed or invested in high-growth areas, where we see very significant value creation opportunities going forward. As a consequence of this high performance, we will be proposing an active dividend of EUR 4.5, or 4.4 per share, a 10% increase on the previous year and consistent with our dividend policy, which is a payout of 65% of nominal net profit. Our guidance for 2024, is to achieve an operational net profit of between $560 million and $610 million, which represents an increase of up to 10% compared with last year. So let me stop here, and I will welcome any questions you may have.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Graham Hunt with Jefferies.

I've got 3. Could I start with our U.S. construction outlook. The book-to-bill in Q4 looked a little bit softer than what we've been seeing. Just wonder where you see the order book trending in 2024? Second question on net cash. Just wondered if you could talk through some of the moving parts there. You've got the TS potential payments, Abertis contribution and potential equity investments through the year. So just wondering where you expect net cash to land in 2024? And then third question, just related to that, could you speak to the strategic rationale for the 20% stake in Abertis, why does it make sense for HOCHTIEF, given the strength of its portfolio in construction and the opportunities at seas that you've sort of just stepped through, why does it need 20% of Abertis within its portfolio?

Thank you, Masa. Let me start with the America outlook. So I mean, we've seen in the U.S., a very strong pipeline in general, certainly in data centers, probably, I mean, largest market in the world, especially because of the artificial intelligence. And if you look at the forecast, pretty much the power demand in computing is going to increase more than around 400 x in 2030 versus 2020. So this is driving a huge investment. Right now, in 2023, we had new orders in that set of EUR 2.6 billion and we ended up order book at 3.6% and more or less the Turners current or in the U.S. market is around 10%. We're expecting that 10% increase between 15% to 20% in the next 2, 3 years. So we are very bullish when it comes to our potential contribution in data centers. And the more sustainable that we can and the more complex when it comes to a connection to energy sources and fiber connection, which has been the case in the U.S., the more we can provide Pali. When it comes to electric vehicle battery manufacturing and recycling facilities, there's a global demand that we're looking at a global strategy of 250 additional factories, so that means investments of around EUR 3 billion in projects around the U.S. and Europe. And these are in identified projects with associated brands behind them. We started working on these projects 2 years ago. So this is very new for us. And since then, we have won USD 2.6 billion in 2023, and we will start ramping up sales in 2024. And we do have very strong prospects in this sense because it was not included in our book, in our order book until very recently. And those projects will start the oven. Healthcare, which is a traditional market for Turner, but the fact that all these projects are getting to the next level when it comes to utilization, paperless, technology, biopharma, equipment, et cetera. And we expect that that turn is going to increase its order intake significantly. Just to give you an example, in 2023, the order intake was EUR 3 billion for Turner versus 2 pretty much recently a few years ago. And we expect that to grow probably by 5% per annum through the next years. It's not more, okay, being a little bit conservative. And nowadays, it's like 20% of Turner's order backlog when you look at the foreseen at December 23'. Education, our order intake in 2023 was 2.5%. That's pretty much like 13% of our current backlog, and we expect a very high level of investment in this area with a growth rate of 7% in 2024 in a market with a size of approximately THB 80 billion in the...

[Operator Instructions]

I'm back. Sorry for disconnects. I was talking about commercial, but I was saying this is very important. This used to be a huge market for turn. And it was a big part of its backlog. However, right now, it's only 13%. We are not expecting that to go any lower. It will remain flat probably for some time before it goes up. But eventually, it will ramp up again. And then we're getting to the rationale export facilities, which we told about. I mean it's pretty much right now 9% of our backlog of around EUR 2.5 billion. And we believe that that's going to remain steady or growing a little bit over the next years. But then there's a lot of sectors that Turner is not involved yet, but it starts to get prequalified. Examples are semiconductors, for example, so we can better fabs or other digital projects that will start getting involved. So we believe from a U.S. perspective that the pipeline is going to be big, but more important, we believe that we're going to be increasing margins in the Americas. So that's regarding the first question. I'm sorry that I took a long answer. Then we get into the net cash discussion. I mean, thinking allow, when it comes to cash flow performance, we expect that from 2024 as it's been 2023, in general terms. So we had a strong performance in Q2. We had a strong performance in '23. We expect a strong performance in place. When you talk specifically about these Abertis and some of put investments is, if at the end, we continue in our plans to potentially consolidate this, which, I mean, still in progress, and we haven't landed on anything. So it's a question mark. That will bring a EUR 1 billion net debt consolidation in our books, but it will also bring more than EUR 1 billion EBITDA in our books. And as I have said in the past, that debt is already adjusted in all our ratings and analysis of banks, et cetera. So it's a positive effect in our rating and financial strength because, the market always saw that as a debt transaction, not equity. So the debt is already adjusted while the EBITDA was not. So it will have a positive effect in our overall financial spend. When it comes to Abertis, we would need to take it back on the 20% of the EUR 1.3 billion capital raise. And when it comes to equity, it's pretty much the normal annual equity investments in our PEP is already reflected in our cash flow. In the same way that the EUR 150 million invested in 23 million, it's already embedded in our net cash performance. So I don't expect major differences in that sense. And then you're asking for HOCHTIEF, 20% participation in Abertis. Abertis is a very solid operator. And there's plenty of opportunities that is going to not only keep the dividend current EUR 600 million in the long term or in preparative but also bring additional opportunities in the long term. So that gives very solid and stable dividends to 20% of this, which, it's obviously very beneficial for the organization.

The next question is from Luis Prieto with Capital Chevron.

I had 3 questions, if I could. The first one is, how sticky will the operating margin jump at Turner be over coming quarters? We've seen a big jump in Q4, and I don't know if I can extrapolate that into the future. Could you provide us an idea of what sort of margin is baked into terms of order book? I guess that's my real question. The second question is regarding the equity and infrastructure projects take infrastructure projects that you've been talking about for a while now. I assume that those assets have shorter investment cycles and we're all very used to the long-term transport concessional projects, et cetera. So I'd like to get a better understanding of how long those projects are and what sort of returns do you have? And then the third and final question, you told us in January that Elliott seemed willing to exercise it with option in tranches. Is there any visibility on the timing you could provide us with? I'm thinking more about not only obviously the amounts you have to pay, but also the consolidation of the asset when we will have to consolidate that asset back into hacking.

Thank you, Luis. So starting with margins and turn. So yes, no doubt, we are in a positive trend and positive momentum, and this is going to continue. I wouldn't like to give specific figures to make sure that I don't make any mistake or this guy. But it's positive, and we're expecting another increase in 2024 versus 2023. We are clearly looking at a positive path in the increasing margins in Americas as we have been pretty much retain over 2022 and 2023. And when you look at the guidance or the PBT, you could see that there's a 14% year-on-year increase at the top end, right? So that also gives you a sense that we're expecting that positive increase. In terms of Disney projects and 2024, we're working on a few initiatives to create a lot of potential value in a lot of the projects that we are participating, such as data center, some of such as the energy projects, including photovaltic wind and storage and also other opportunities in the energy transition and digital. And you're right. This is not civil. We're seeing 1 to 2 years construction. So we see the value very, very, very fast. A data centers, what we're seeing in the market is as soon as a data center is built with a hyperscaler contract or a colocation agreement the value, it comes to 20 to 30x EBITDA. And those are the transactions that we're seeing in the market. So we have a very important pipeline. We will discuss more in the Capital Markets Day because we want to make sure that the pipeline that we reflect has the permits and it's pretty much negotiated before we give numbers. But clearly, there's a big opportunity for us in that sector as in other sectors. So we will be giving all of information on this in the Capital Markets Day. However, we are also working on traditional contracts. We have an abundant of the traditional BP. We're working in the U.S., and we are participating in 4, 5 projects. We are also participating in Chile, but work in the U.K. in a couple of PDPs. Optiv has recently won a few projects between the U.K., Germany and Asia. We look at Pacific right now in Australia. Not only we continue investing in course, not only we're investing in some of the island projects, we continue deploying equity. And there's plenty of projects that will finish construction soon and the value will materialize as well. So we will try to give a lot of men valuation in all these assets in the Capital Markets Day. When it comes to Elliot, a good question the timing. It's difficult to give a timing because it's very binary. We are just expecting the green light. So I prefer not to give a time line because it doesn't depend on me. But certainly, because this is something that has been on the table for a while, everything is pretty much prepared whenever the transaction is given in light.

The next question is from Marcin Wojtal Bank of America.

Firstly, if I can follow up on TS. Could you perhaps indicate what was the net profit of this for 100% of the company in 2023, so that we can make some estimates as to what that will do potentially to your net profit if you increase your stake from 50% to 100%. And I was also curious how are you going to fund that potential transaction? Is that going to come from available cash reserves or you're planning perhaps some debt issuance or any other funding structure? If you could give some clarity here. And my second question, could you comment a little bit about the outlook for your Asia Pacific division. You're guiding for some growth for 2024, but is it revenue recovery or profitability improving or both perhaps?

Marcin, my apologies. So I got the question around this. I got the question about Asia Pacific growth, but I think that I missed another one or those were the 2.

And also funding of the this transaction, please? How are you going to fund it?

So starting with this. So the contribution of this in 2023 was USD 110 million. In 2022, that was EUR 92.6 million. And this is having a very, very, very strong operational performance. However, the financing costs have increased so much that is unfortunately deteriorating this margin. From an EBIT perspective and an EBITDA perspective, the company is working very, very good. But unfortunately, and just to put in perspective, I'm not sure if it was 2019 or 2020. But I think that by 2019, this was at EUR 45 million net finance cost and now is at EUR 220 million. So in spite of that, the contribution to us has been EUR 11.3 million. So we expect as soon as the financing cost will start coming down, we expect that to improve. Now at 100%, I mean, because I gave you the position, I mean, the numbers and contribution to us to CIMIC. But at 100%, the profit was EUR 313 million positive, right? And this is this is after minority interest. So I mean, overall, very good performance and continue diversifying continuous transitioning environmentally speaking, so, I mean, very, very good performance. Asia Pacific growth, in light in Asia we see tremendous growth in the same area that Turnas, data centers, battery fabs, digital, tenor, et cetera. But Singles cross, we might see a big increase in Hong Kong once again as a lot of clients have pretty much prequalified and taken to the final stages like in the project, something that didn't happen since many, many, many years ago. So I mean, fingers crossed because we are in the final stages and nothing is secure, but just the fact of being able to be in the last short list in a few projects is very encouraging. So we will see growth in revenues and growth in sales again and hopefully, in cash in like Asia. And then in terms of funding, so a couple of things. We will talk more in the Capital Markets Day about this because we are working on it. But eventually, or basically, to give you an overview, even right now, we're expecting additional net debt coming from this and coming from the priorities increase, we do have noncore assets potentially, I mean, that we could offset. But the year investment in a lot of these infrastructure projects pretty much can be done with operational cash flow, right, within the free cash flow that we generate every year. So, obviously, as you can imagine, equity in all these projects is a commodity, right? Worse, we can just retain a small percentage of the equity, 20% to 30% and finance the rest. But our idea is pretty much to take positions up to 50% of the projects and recycle 10% to 20%, which would be more than enough to compensate for the injection of the equity to the 20%, 30% that we will keep, plus generating a profit. So this way, not only we will be generating value in the long term because we retain percentage of the projects, but also we are rotating equity and being able to continue investing in new projects. So we are working on a plan that we will give more clarity during the year.

The next question is from Victor Acitores with Societe Generale.

I have 3 questions, if I may. The third one is that you can provide the factoring level for the group to hod keep on the end of the year. The second one is that if you can provide the stake of EPS at the end of the year, I think that you provide the level of 13 on November 78.2% adjusted high treasure sensitive lead of the year? And finally, my question is on cash flows on CIMIC. You mentioned in the call that the migration of the derisking of the backlog to, let's say, alliances that contract lump sum. Is creating some, let's say, overhang on working capital on the lack of prepayments. When do you think one that this working capital is going to normalize? And then all the growth that you're expecting coming from EBITDA in CIMIC will be reflected on the cash on the subsidiary.

Thank you so much, Victor. So starting with factoring, our level right now is EUR 900 million. So very stable versus the EUR 860 million last year. When it comes to the treasury shares, let me try because I don't have the ACS now with me. But let me give one second we see if we are around. Victor, we don't have that information with us. And there was also some discussions here with, it's relevant for this call. So allow us to follow up with the ACS department, and we will provide an employee at

Okay.

Then the winding of the working capital at Simi which was the next question. It's a good question. I mean on one hand at CIMIC, we do have a lot of potential settlement agreements that should come within Light and Asia throughout 2024 and 2025, right? So that will be a plus in cash flow. But at the same time, yes, we will have WelstGate finishing in 2025, but most of the peak of the work will be in 2024 this year and cross rail finishes as well pretty much the bulk of the world this year. I don't dare to say how much will be compensated one or the other, right? But probably in '24, 25', we do have upside, we have the final unwinding. Certainly, the winding finishes 24.25%, but also we do a lot of upside from Lighten Asia. So I mean, difficult to predict what will be the net. But certainly, we hope to be stable. And then the did I answer all the questions, Victor?

Yes. It's only to see in terms of looking for the midterm that are there any tell doing well, the conclusions you may mind, you are able to buy to refinance the debt, lowering the cost of financing and then your timing normalized your net debt net cash positions will materially increase or the other and the cash flows are going to materially increase going forward in terms to give you optionality on the capital.

Because I was just referring to a specific business of CIMIC today, right? And timing today doesn't have this. If we do incorporate this, the cash flows of these are liable. I mean in Aussie dollars, the operational cash flow of this is close to $2 billion right 1.6%, 1.7%. They do have a steady 100% cash flow conversion, which is very, very solid, right? So that obviously will be integrated into our numbers. At the same time, if we were even if the interest rates do not go down, just by being able to refinance part of this debt at CIMIC books, that will have a significant benefit on that. And of course, if interest rates go down, that will be a very big impact. In addition to what I've been explaining, so overall, I mean, the Asia Pacific region between the growth in the new areas that we're pursuing between the growth in energy and as well that is booming and the consolidation of this, we should be optimistic for the region.

And I have another follow-up question, if I may. In the case, you mentioned during the call, the tractive investment in renewables already with some plants already production of some rights already being in the backlog. How much of CapEx, let's say, or the net debt of CIMIC at the end of the year is reflecting the investments on equity and the project finance debt of these parks already in the balance sheet in terms of renewables.

So the EUR 150 million that I said, that specifically for the energy projects Australia. In addition to that, I think that it was around $45 million additional in pari sight? And these were more in. But when you when you look, for example, Clean Rowan and Hopeland. I mean, only those 2 jobs pre-month comes up to 460 megawatts of energy. We do have up to 1 gigawatt already awarded in other projects. So that will, generate good value to us. And we have identified projects for another gigawatt that we are in negotiation basis. So we're going to be very ambitious. And Australia, when it comes to renewables, is moving right now because basically, it's not as developed as the European market. But certainly, if you just follow the spon government announcements, predicted, and this was at the end of November 2023, that they are going to underwrite 3 gigawatts of renewable energy projects and energy storage capacity. So, there's a very bullish with the energy market in Australia. The wind power projects expect to increase like 30% in '24, but it will continue to increase. And we could go through a transmission network business that we are tendering for a couple of PP projects in that area, energy storage. I think that we do have like 6 projects identified in our pipeline. Some of them associated also with our projects. So I mean, it's a market that we can expect to grow significantly.

And only one thing more is that in years, you mentioned that the attributable net profit in Pola is EUR 100 million, that is equivalent to the dividends that you collect in the year? Or in order to put in reference with the 180 at the time of the relation with lot or no?

So no, I mean that was the net profit. But that was the net profit contribution to us at 100% level, it was EUR 313 million. And the only thing is that it's not that we get 50% of that because 180 goes rely and the remainder comes to us. And this is one of the challenges that we do have with the lead agreement.

So really, in terms of cash flows from PS, is linked also to the net profits or not cases that, for example, I have to understand how much of the cash flows you're receiving today from lot from 100%.

Yes. so this year, in 2023, we received THB 54 million in, right? And last year, we received $89.5 million. In 2024, we expect to increase that significantly, especially if we were able to consolate part of that because that temper we will need to 10% plus the improvement in the performance but answering your question, yes, it's linked to the impact. The problem is that the timing could be different. And remember that at the end of the process, by the end of June 26, there's a catch-up of all the dividends that we haven't obtained, right? So, it's a complex mechanism. But eventually, we will be able to catch up on the cash flows.

Because for some here in margin that nothing happens in that the situation today remains and nothing is coming from Eli for example, situation. For the 2026 the catch-up of the USD 180 million that you were entitled to collect that you are not receiving in the last year, that catchup means that the gap existing that is early around EUR 100 million per year is going to be recovered in 2026, that's correct?

No or before. So, because the performance of this is we believe that is going to increase and improve significantly. Anything about the 180 million from Eliot comes first to until catch-up on dividends. So if TC is able to deliver more than EUR 360 million after tax in 2024. And I'm not saying that it will go. I don't have the numbers right on but if you ask, anything about the 180 cost comes to us. If nothing happens, So we're Catching up on dividends before 2026.

The next question is from Marco Limite with Barclays.

One is on your guidance for next America. I was curious to what extent you're already reflecting some margin increase already in 2024? And the second question is on Abertis, given that, this is the first call after the AP-7 court ruling. And I think I did mention the intention of Abertis to keep the dividend flat to EUR 600 million. So just curious what is the strategy there to keep the dividends despite, let's say, some pressure also from a credit rating perspective.

Okay. So with the terminal guidance or with the HOCHTIEF Americas guidance, we are expecting, and I think we mentioned that an operational EBIT of EUR 442 million 480 million. So yes, that reflects the increase in 2024, okay, in 2024. You remind that a lot of these big projects, all the initial phases are engineering, right? And because there are collaborative and destruction management, you don't really start ramping up in traction until engineering process is fine. So it's not that a is that even a project or even projects want 6, 7, 8 months ago are already ramping up. They are not. We are still in entering phase with our company projects, especially when it comes to the big hubs, et cetera, you will need to collaborate on the design. You only get into the contract at the end of that period. And depending on where you are in the negotiations, you include that in your backlog or not. So there's a lot of work on announced that is not in our work in hand for term because we are in early stages in engineering. Only when you have a minimum construction to be done if you start reflecting, that doesn't mean that engineering is finished. It means that you have signed a contract for a piece to be starting at someone. So anyway, all what I'm trying to say is that it's reflected in 2024, but that will continue growing and as those big projects come into place. And the timing for it is not mathematical. When it comes to Abertis, so there's 2 strategies, Abertis aortic...

[Operator Instructions]

Sorry again for this. So I was thinking about Abertis. So that on one hand. On the other hand, there's opportunities right now that we are...

Sorry to interrupt you, but I think we all miss the whole answer on Abertis. So if you could repeat for us, please, would be...

So we'll start with Abertis. So Abertis, when you look at Abertis right now, okay? First, there's a few opportunities that we are negotiating with clients out of Europe in existing projects that will pretty much increase significantly the life of the concessions, potentially increasing fares, obviously, in exchange of additional CapEx on those projects, and that will increase the EBITDA significantly and for a longer period. That will not require any capital increase. Those are organic, but that will we shape the EBITDA significantly in the future. We will provide more details as we get how we advance in negotiations. So that's an opportunity but there's a lot of other opportunities within the current business you will see during the year, and we are preparing, as I mentioned, the financial modeling for the Capital Markets Day, you will see and will be able to look at the numbers and assumptions on the long-term dividend or aborities with the current spot, about that, we're looking for opportunities. We are bidding and tendering as well. And as you know, they were tendering to other opportunities, but so far they are confidential, but there's an important pipeline. That pipeline comes from pay potential platforms that could come to the attention of authorities and the discussions and the greenfield projects like was within the 288, from a Optiv and ACS perspective. We do have a huge pipeline of PPP traditional PPs besides all these high-growth areas. We do have a very big creating pipeline in traditional. And those could eventually end up in abates at the right time. But on top of that, and I know that everyone is assuming that the French contract comes to an end and nothing else happens. But the base case or at least what the government is saying is that there is likely potential situation where they will be tender, right? They will get back to the government, all these concessions. They will readdress or reorganize or the geographical zones, and they will return, if that's the case, beta in a good position to be competitive in those tenders. And so there's other opportunities in that sense, right, on top of what I have explained. But I think that we will be much more visible in the Capital Markets Day when it comes to Abertis, and we're going to invite management, CEO and CFO of Abertis to dedicate quality time on the Abertis model on the 7th paper.

And if I may just ask one follow-up question on this topic. I appreciate the argument about extending concession with CapEx commitment. But let's say you are still confident that whether it's more investments or CapEx, you can still keep the current credit rating

Yes, because that whatever we do with the model and the dividends, it's always based on investment rate, right? All our modeling, all our assumptions or our sensitivities are always with an investment-grade restrictions. We are committed to it.

The next question is from Dario Maglione with BNP Paribas.

Actually, if I can follow up on Abertis discussion with the French government on Sanef. Maybe if you can give us more color. And then second question on Asia Pacific. If I look at the adjusted EBIT and they exclude associates, so Tecan the others, the margin seems to be down year-on-year from 4.4%, I believe to 3.9%. I just wonder why margins or the underlying business has gone down. And then the third question on pace. Of course, we all know that it's a good business in the long term and understand the demand outlook and so on. My understanding is the short term, there is some in oversupply in the mining market, excluding copper. So I just wonder if you could give us some indication of the outlook for this and how revenue are linked to production and so on.

Okay. Thank you. Thanks, Dario. So let me start with Abertis. So the conversations around San there ongoing. I mean, not much to mention at this stage. But of course, as well as those evolve in a way or the other, we will let you know, okay? The second question regarding the margins. So there's a few things that have contributed to the margins low in Asia Pacific this year. The first one is starting with EBITDA. Proseal has increased approximately USD 650 million, the revenues at year margin, and those are protection for hyper escalation that we had under the contract. Unfortunately, they cover and you look at the increasing revenues in Asia Pacific, you see a big jump, and that has to do with your margin. So it dilutes the EBITDA West gain versus last year, EUR 150 million at 0 margin. And then the amortization and depreciation changes versus last year. When it comes to PBT, you need to add EUR 37 million net finance cost in addition to last year, right? So, we're talking about more than $100 million affecting those margins, okay? So, something to be mined. So it's a specific situation, right, don't look at this in a long-term trend. This is about is about a year. Now going to the commodities, right, and the market. I mean, certainly, we would need to go commodity, I mean, each one of the commodities. In general, what we're seeing is that the volumes in general, we see an increase, and we can share with you, some of the forecast. We're expecting growth, even there's a decrease in the commodity price, we're seeing an increase in the portfolio. So when you look at the export volumes, we are looking in the 20 to 28 period, 11% increase in met coal, 4% increase in thermal coal in gold, 13% in copper, 50% in week and 17% in Abono. We can pretty much go through each one of them. You're right. When it comes to global price in terms of U.S. dollars per ton, met coal is going down, thermal coal is going down. Gold the expectation is slightly steady or going down, increasing copper, a little increase in nickel and Aronora little bit down. But at the end of the day, what drives our production is falling. We're not traders. So we are not really going forward by the commodity price, but the volume, which is what bio business. I can follow up with more detail on any of the commodities that I mentioned. And I think that those were the questions are.

The next question is from Nicolas Mora with Morgan Stanley.

First one on the U.S. When we look at the margin you reported in the fourth quarter, it's very impressive. I don't think we've seen a PBT margin above 3% for a very long time. What's can you help us understand what's in there in terms of potentially just the step-up from rest of the year to Q4. So there must be a few one-offs. Is it the new way of recognizing profits on especially the more IT is contracts in construction? That will be the first question. Second, when we look at the cash flow, there is a very big amount now which is restated in noncash components of income. Can you help us understand a little bit what this is made up of. I mean usually, it was just traditionally a bit of Abertis dividend and a little bit of fees, but it seems that the numbers don't quite add up this year. If you can help with that, that would be great.

Thank you, Nicolas. So a couple of things on the U.S. well, starting for the question. It's seasonal. It's just things are not mathematical when it comes to construction revenues and margins associated. Sometimes, especially when you get into collaborative contracts, there's a conciliation relationship with clients. So there is always a lot of seasonality. And you can see that the proof we come back to the client. I mean same please, we are finishing the year, pay me what you the year, right? I mean we try to keep the relationship, especially in colorative. But one thing that I would like to mention the U.S. And that's why I believe that is probably misleading a lot of potential numbers, right? But there will be full clarity this year. We always report HOCHTIEF Americas. But bear in mind that HotfAmericas external flat, right? And that's why you don't see Turner margin growing that fast. But bear in mind that you have flat ion attached. And Flatiron has been for 2 consecutive years working in collaborative contracts and 100% of the jobs from Fairgate alliances or target price. But there has been unwinding of past projects, and that has affected the margin that using oilers, okay? So just bear with me because you will see in the Capital Markets Day, full transparency on term numbers. When it comes to cash flow, I think that the noncash impact, but we will follow up with you because right now, I mean, I think that it's just the equity accounted company, JVs, consortiums, et cetera. But we will follow up with you to make sure that that would clarify the question.

Just coming back on the U.S., what you're seeing is basically at Satara over the past couple of years, there's been 0 margin.

Basically.

Okay. So that means that we're getting close to the again, 3% EBIT margin and Turner on a stand-alone basis.

But we believe that we're going to be able to grow that

Okay. But and from here and considering again where you stand in terms of the kind of the higher-margin businesses, the data centers, the V batteries and so on, which are continuing to ramp up into '24, '25. Is the pace of margin improvement, and we've seen underlying most likely, which is around 20, 30 bps per year is something that is realistic or now getting to a bit of a stretch because you're already on a quite high level compared to peers more focused on project management.

So what number have you given, Nicolas? What...

Well, I mean, sustainably 20 to 30 bps of margin increase per year. So that would give you a 10% growth in PPT, you're supported by margins and then the rest will come from revenues, which is kind of what's embedded in your high end of your margins in '24.

okay, it's difficult because I don't want to give numbers or guidance that I see it. Obviously, the challenge is 2 things. The first one is that revenues continue growing a lot in to, right? So obviously, there's going to be a big increase in or continues being a significant increase in profit in absolute terms, just even if you keep the margins on the revenues. The change also is the project mix, right? And this is why it's so difficult because obviously, the less commercial residential projects on or that, which is pretty low margins, the better, the more data centers, butterfat, et cetera, that increases. So and when you look at the work in hand log it's going sort and in that direction. Now if you look at margins in some of the new construction mining projects, we're looking at 5%, 6% gross margin per project and increasing that in the more sophisticated projects when you look at residential building, et cetera, and the low sophistication construction management, some of them had 2%, right? How much we are going to be end up through the mix on the average is difficult because it depends on the timing on the number of projects and the revenue. So I don't certainly is going up because that's the nature. I mean, Turner is becoming more industrial, more high tech, more data every year. And the objective is to really get into the areas. The objective is to bring Turner into hydrogen projects, methane project here applying for it. I mean we are also working on source Blue, which is the main supply company of the group on a global basis. We're incorporating to that supply chain, a logistics company, a lot of industrial and it components with and the logistics business has higher margins. I mean, it should grow, but it's difficult for me to give a guidance, and I don't want to take the risk.

Gentlemen, there are no more questions registered at this time.

Okay. Thank you so much, everyone. I look forward to answer any questions within the next day if you need. Thanks a lot.

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