Mota-Engil, SGPS, S.A. (EGL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to Mota-Engil Full Year 2024 Results Presentation. [Operator Instructions] I would now like to hand over to Pedro Arrais. Please go ahead, sir.

Thank you very much, and good afternoon to you all for attending this call where we will present the full year 2024 results. With me, I have, as usual, the Chairman and CEO, Mr. Carlos dos Santos; and the CFO of the group, Jose Carlos Nogueira. As usual, the CEO will start the presentation with some key highlights. Please, Carlos, the floor is yours.

Thank you, Pedro. So welcome all. Thank you for attending the call where we'll disclose the full year 2024 results. As key highlights in the beginning of the presentation, we start by the Slide #5. And as a snapshot, I would like to highlight the strong performance that we achieved last year that is represented not only by a record backlog, it was an increase year-on-year of 21%. We closed the year with a record backlog of EUR 15.6 billion that represented the order intake during the year of EUR 8 billion, so a record also of contracting during the year. We had a growth in line with our expectations, so a growth of 7%, and we achieved by the end of the year a record turnover of EUR 5.951 billion. And most importantly, we increased -- we grew 14% in terms of EBITDA. So we reached EBITDA margin of 16%, achieving over EUR 950 million. That was also a record operational profitability. And also like to stress that we have reached 2 years ahead the goal that we have established for 2026. Also to remark net profit -- record net profit of EUR 123 million. That means 8% growth year-on-year and also in line with our targets that we have stipulated for 2026. Looking into the financial figures, we continue to comply with the goals that we committed ourselves in terms of net debt over EBITDA below 2x. So last year, we closed the year with 1.81x net debt over EBITDA, but also in terms of gross debt below the 4x target of a gross debt over EBITDA of 3.12 x. This was a commitment -- just to remember, we committed of every exercise to comply with these 2 financial KPIs. And once again, in 2024, we did so. In terms of CapEx, we have a CapEx of EUR 511 million. That was more or less exactly the same CapEx that we had in 2023. But it's important to highlight that more than 75% of this CapEx was committed was driven to business units with higher margins that we have and also in long-term contracts such as industrial engineering in Africa, just to make a remark that we reached last year a 30% margin EBITDA on this segment. And also, in EGF in our environmental unit that we reached last year a 22% EBITDA margin. Also, in terms of cash flow generation, we achieved EUR 725 million of operational cash flow. That was an increase of almost EUR 40 million year-on-year. And in terms of equity, we reached almost EUR 850 million of equity. This was organic growth. And that allow us to increase our financial autonomy, our equity over ratios to 11%. Just to remind you that we have established to reach on 2026 by the end of 2026 financial autonomy of over 15%. So, moving to Slide #5, just some of the main events on the second half of the year. Commercially speaking, just to stress some major contracts that have been awarded in several regions, Latin America, in Africa with a big impact coming from the industrial engineering, where we have established new contracts with several different clients. Also to stress that we've been awarded the second phase of the new international airport in Rwanda for the client of Qatar Airways. And also here in Portugal, just to stress, the award of the first stretch of the high-speed train, which is not yet accountable in our backlog, but we are foreseeing that during the beginning of second half of this year, we will sign the contract and then the works will begin early next year. Also to stress some relevant deals that we made financially speaking, namely with multilaterals and other financial institutions that is a recognition of our increasing relevance of Mota-Engil in the several regions that we operate. Moving to Slide #6, just to make some updates on the strategic plan. We can see not only the positive evolution in some of the main performance indicators, but also that we already achieved 2 years ahead some of the targets that we have established for 2026. I would like to announce that not only because we are anticipating some of the goals that we established for 2026, but also because of the increasing changes in the world and the constant dynamic that we have within the group that we are now thinking about the new strategic plan and working on a new strategic plan with new goals and more ambitious goals towards 2030, in which I can already disclose that the main driver is going to be profitability once again. Moving to Slide #7 and talking a little bit about sustainability, just 2 important remarks. First of all, it was the first year that we complied and replied to CDP survey. We have achieved a B-. That is a very positive result, and we think with a big margin to improve in the next few years. Also, on the S&P Global ESG score, we achieved a better result than last year. Last year, we have 42 points. This year already 51 points. But as important or more importantly, when we compare with the peers within the industry average, we can see that Mota-Engil performs better in all the 3 dimensions of the ESG, environmental, social and also in terms of governance. So this was a snapshot and overview of what happened last year with the group. And now I'll pass again to Pedro Arrais that is going to do the results overview, and I'll close the presentation with the final remarks and the outlook for 2025. Thank you.

Thank you, Carlos. So, moving to Slide 9, very briefly, I would like to highlight, as mentioned before, that both indicators of turnover and EBITDA was achieved 2 years ahead. And it's important to mention that the set of results shows that the company is delivering a higher profitability and showing, as we will detail further on, that the company is improving the operational performance in each business unit that together as a group allows the company to achieve the EUR 123 million of net profit. Important to mention in this slide, as we comment in the last calls that we made a capital gain here that includes the sale of the Polish operation and the 2 roads concessions in Mexico. Move to Slide 10. We can see here that the company, as I mentioned, increased in all the business units turnover with 8% increase in Engineering & Construction, 10% in Environment and 5% in Mota-Engil Capital and Mext. And very important to comment the details that you can see here, a solid growth of 15% in Africa in turnover and an impressive 41% in EBITDA and considering the increase of 77% in the second half of '24 in the African division with the industrial engineering segment showing an increase from 25% to 30% EBITDA margin and the environment, as Carlos mentioned, the improvement to 22% in EBITDA margin. These higher contributions from the African division proves that the group is investing in the last 2 years in the segments with higher margins, and we are fully convinced that we have consistently this positive trend we will maintain that to the upcoming years. So, moving to Slide 11. It's important to highlight here the very successful year regarding new awards with a record level in a unique year, EUR 8 billion, with a commercial strategy focused on core markets that represented 73% of total backlog, the contract of larger size that allows to have a comfortable order book to the next 3 years, a focus on the segments of higher margin, such as industrial engineering that represents 25% already of the engineering construction backlog. And already in 2025, we will have here a very strong increase in turnover from these segments that will put Mota-Engil as one of the biggest players in mining worldwide. Important also to mention that here in this backlog in December is not included the expected revenues from the concession like EGF and the road concessions and also the first stretch of the high-speed train in Portugal, already awarded, as you know, but not yet signed. Move to Slide 12. We can see here that the company made a total CapEx of EUR 511 million with growth and long-term contracts representing 76%, mainly channeled to Africa that represents 63% of total CapEx and focused on industrial engineering and also with EUR 74 million in EGF, the Portuguese waste treatment company. In a nutshell, it's important to mention that the investment made for the company in the last quarters have been focused in segments that will support the healthy margin of 16% EBITDA margin ahead and putting Mota-Engil as one of the best operational performances in the industry. Also important to mention here, the ratio of maintenance CapEx by sales that is around 1%, reflecting a higher efficiency in heavy equipment management and internal procurement procedures that was implemented, allowing a higher capacity to allocate investment in growth and long-term contracts. Moving to Slide 13, very briefly. We can see here a positive trend in the financial autonomy ratio, improving to 11% and aligned with the strategic targets as mentioned by our CEO that we want to achieve 15%. Moving to Slide 14. Here, we can see the increase of 5% of the operating cash flow to EUR 725 million. To explain in each caption in the waterfall graphic that you can see here in this slide, we can begin from the left to the right from the outstanding performance in EBITDA level, almost EUR 1 billion. As you can see here, the capital allocation made to the corporate tax, an effective rate of 32%, the change of working capital aligned with the payment terms. And at your right, a very specific movement that is very simple to explain that is related with the cost invoiced in the last days of the year in a milestone contract that was only possible to issue the invoice and to receive in February. And in this sense, it's important to mention that this caption is already monetized and eliminated from the cash flow statement since the beginning of 2025. At your right, you can see what we comment in detail the CapEx of EUR 511 million and the net investment in concessions. And here, we have investments in Mexico in Lobito corridor and small amount in Portugal discounted with the sale of the 2 concessions in Mexico. And of course, the final interest assuming here, the EUR 240 million here and the normal caption that we always put here regarding dividends. In conclusion, we can see here that the cash flow generation is being reinvested in business units with higher margins and with higher capacity to generate added value in the upcoming years and with the debt as controlled levels as established in the strategic plan. Moving to Slide 15 and looking to with more detail the debt evolution. It's important to mention that this evolution is aligned with the strategy of value creation reflected in the maintenance of both ratios, net debt to EBITDA and gross debt to EBITDA better than the target established in the strategic plan that I remember that is 2x and 4x, respectively. Moving to Slide 16. Here, you can see the liquidity position, a very solid figure regarding this indicator, where with EUR 1.1 billion we surpassed the nonrevolving financial installments for the next 3 years. And from the debt with maturities with less than 1 year, important to mention that 70% equal to almost EUR 600 million is already refinanced or to be refinanced shortly. Also worthwhile highlight the increase of the debt maturity to 2.7 years and the 7.7% average cost of debt that reflects the global context of higher interest rate curves and also reflecting the mix of local currency debt in core markets in Africa and LatAm, as you know, is with higher rates comparing to Europe, but it's something that we expect to improve in 2025 with the expected reduction of the interest rates globally speaking. Moving now to the Slide 20 to make a brief overview and outlook for each business unit and starting by the European division. Here, you can see that the turnover decreased 12% year-on-year, but is a figure only impacted by the sale of the Polish operation, considering that the Portuguese market in turnover was stable and steady margins around 8%. Looking to the future here and considering only the Portuguese market, you can see here the increase year-on-year of 57% of the backlog impacted by the new works -- the new projects in Lisbon with the new hospital, the expansion of the existing airport, the metro line and very important the relevant projects that we expect to be successful in the upcoming years, namely the high-speed train and other transport projects here in Portugal. Moving to Slide 22. It's important to mention that Mota-Engil Africa has as main contributors, Nigeria and Angola, namely with -- supporting the 41% increase in EBITDA in the region that allows the company to achieve a very impressive margin of 26% at the full year of '24. To become possible, this performance is important to mention the contribution from the industrial engineering that increased to a 30% margin being a very relevant contributor to achieve the high performance of the group and proving the right decision from the business development teams to invest in this very important segment that already has 11 contracts and a significant backlog that represents more than EUR 3 billion, equal to 25% of total backlog in Engineering Construction. Also important to comment that the risk mitigation scheme is very robust in Africa, considering that 98% of total contracts are signed with Tier 1 clients or financed with multilaterals or public guaranteed and financing by financial institutions that are very recognized, and we put it in the main achievements in the second half as the important agreements for -- allowed this increase in the African division. At the end, it's important to comment the successful performance of the Lobito corridor in this full year, the first full year of operation in which we have a very positive perspectives for the increase of activity in the next years in one of the most relevant corridors for international trading in Africa. Moving now to the Slide 24 to LatAm. And here, you can see a growth of 8% year-on-year in turnover to roughly EUR 3 billion as the main contributor here for the turnover of the group, a new record in the region that showing growth to a company like Mota-Engil. That was important to mention with the figures of 2023, the second largest contractor in the region of Latin America. In this sense, Mota-Engil expects to the near future to increase the activity in other markets besides Mexico, with Peru, Brazil and Colombia as the main focus for business development in 2025, combined with the focus on the Mexican market with huge opportunities related with energetic transition and industrial construction. As you can see here in the Slide 25, the company complied in 2024 with the commitment made to the market to reinforce the asset rotation with the monetization of 2 concessions in Mexico, concluding the transaction with an implied price above 1.8x the book value, giving in this way, the visibility to show that Mota-Engil the capacity to obtain positive returns in line with the expected multiples and with this -- in this sense, confirming the existing hidden value in the road concession. Moving to Slide 27. In Environment, we can see here the turnover EBITDA. The turnover was up 10% year-on-year and the EBITDA increased 11% with the EBITDA margin improving to 22%, mostly impacted by the positive performance in the waste collection segment managed by SUMA and also with good performance from EGF. Important to mention that all the segments showed a positive trend of growth, more than compensating the business sold of industrial recycling with a very challenging new regulatory period for 2025, 2027 for EGF in which we've foreseen an increase in activity for the next 3 years. For last, to see all the business units, we can move to Slide 29. And here, you can see the contribution from Mota-Engil Capital and MEXT that achieved together EUR 141 million in turnover with a stable margin of 9%. Here, it's important to mention the investments that has been made for the diversification in new projects, namely in concessions, like the New Lisbon Hospital that is already -- we already start the construction and the project regarding the 2 first stretches of the high-speed train in Portugal, the studies that we made to study these 2 and to prepare the 2 standards and considering that with a successful achievement that the first stretch is already awarded to our consortium leaded by Mota-Engil, but with in a total of 6 companies, all Portuguese companies and considering that this contract is not included yet in our backlog. The real estate, we are in an early stage of development these projects, and we expect more visible revenues in 2026. And here, we put it also other long-term projects in forestry and carbon trade in Africa is a good example of MAMALAND. And finally, a new company, Mota-Engil Energia, in which we expect to develop several new projects starting already in 2025 with the main goal of capturing value from existing infrastructures with waste-to-value technologies. And here, with the conclusion of the brief results from all the business units, we will move to the final remarks and overview with our CEO, Carlos dos Santos.

Thank you, Pedro. So, for the final remarks ending this presentation, I would like to stress that we achieved the best results ever, not only in terms of net results, EUR 123 million, but also, we achieved a record turnover, a record EBITDA and also a record backlog. I want to stress that our backlog is quite unique in terms of dimension, but more important than the dimension is the quality of the backlog. So it's a backlog that has within its qualities good profitability, good margins and good cash flow profile. That is essential for our next years that we have a very sound position in which we can be even more selective in our commercial activity, picking the projects that will create and will enforce this cycle of optimization in terms of the profitability and in terms of the generation of cash flow. So we can expect for this year and the months to come and for the years to come for the company to be even more cautious in its commercial activities, taking the advantage of this important backlog that we have. In terms of that, we are completely aligned with the commitments that we've been delivering each year that is within our strategic plan and that we once again say that we are going to comply every exercise with the 2 criteria of net debt over EBITDA below 2x and gross debt over EBITDA below 4x. We achieved in 2024, some of the strategic targets that we established for the strategic plan of 2026. And therefore, as I announced previously, we are now working in a new strategic framework that will be materialized in a new strategic plan and a new business plan with more ambitious goals for 2030, in which these goals will be even more ambitious in terms of profitability that will be the key driver for the new strategic plan. As always, ESG sustainability is one of our strategic pillars and will continue to be an enhancer and enabler of our growth and our commitment with environmental, with social best practice and also with governance best practice. So for this year, moving to Slide #32, we can expect in 2024, a single-digit turnover growth with Africa being the main driver, not only in terms of activity but mainly in terms of profitability for 2025 and years to come with a very important contribution in terms of this profitability of Industrial Engineering. Just to recall that we achieved this year a margin of 30% of EBITDA with a turnover of EUR 400 million, slightly over EUR 400 million in 2025. For sure, this turnover will grow at least 100%, and we expect to achieve the same levels of profitability, therefore, having a very important contribution towards the profitability of those groups. So we can expect EBITDA in line with the 16% that we already achieved in 2024. And once again, we want to maintain this high-quality backlog, so we can be very, very cautious in our commercial activity and be even more selective in order to have a backlog that can support our strategy of profitability. Also to reinforce that we are doing an efficiency program during 2025 and also during 2026. It's called the OPEX 50. And why it's called OPEX 50 because within these 2 years, we want to cut EUR 50 million of OpEx in each year. So EUR 50 million in 2025 and EUR 50 million in 2026. So this is one very important goal that we established ourselves in the beginning of this year and that we want to deliver by the end of this year 2025 with the first phase of this program of cutting EUR 50 million in OpEx within the group. We are continuing to focus on the cash flow generation. So we can expect a lower level of CapEx during 2025. It's important to stress that we did more than 76% of the CapEx during this year, was aimed for the main drivers of profitability being the most important contribution in industrial engineering. And the fact is today, we have a very strong backlog in industrial engineering, and therefore, we can expect not to have such a big CapEx during the year, namely for this area. So we can expect CapEx around 7% of the turnover. We commit once again to maintain ourselves within the parameters that we established of net debt over EBITDA, gross debt over EBITDA. And continuing to grow our financial autonomy in order to achieve the target of 15% at least by the end of 2026, above 15%. Also, we are continuing to proceed with our ongoing asset strategy rotation. So what happened last year in Mexico with the selling assets of the Mexican concession will continue to be delivered during the year. And as we've been doing for the last few years that will positively impact our net profit, a recurring impact every year. And also, just to finalize, we just approved in last Board of Directors to propose a dividend in the next general meeting of EUR 0.1497 per share that is more or less EUR 45 million of total dividends. And as always, the group is totally committed with sustainable growth and this sustainability will also be a key driver of the next strategic plan. So thank you all for attending the call for listening to the presentation. And now we are fully available to answer some of -- to all the questions that you might have.

[Operator Instructions] And our first question comes from the line of Miguel González from JB Capital.

Three from me, please. First, sorry if I missed it, but on your CapEx guidance, you assume a ratio below 7%, which is below the 9% delivered this year, excluding concessions. So I just wanted to clarify if you could explain the drivers for this decline, whether this is related with some synergies from previous contracts or this is due to a slowdown on the sales growth maybe? And related to this, could you explain out of the EUR 172 million concession CapEx, how much is equity and related to the concessions in Mexico? And how much concession CapEx would you expect for 2025? And secondly, margins in Africa were very high, especially during the second half of the year. So I don't know if this could be related to the start of the new contracts or is there any positive one-offs? So do you expect these margins are sustainable in the future? And finally, my last question is on the contract for the second section of the high-speed train. I read in the press that your bid could be finally excluded. So any update on this project could be helpful.

Thank you, Miguel. Thank you for your questions. I'm going to answer from the last one to the first one with some help from Jose Carlos on the concession question. So starting from the last question about the second stretch of high-speed train. What we know is that our bid, the bid that we presented was proposed to be disqualified. We are not going to contest. It was important for us to present the bid because it was a possibility or was opportunity to show our commitment towards the project, but also our capacity to deliver a proposal within the maximum value that was established even though it was with the optimization of the design solutions. What we can expect is that the government will launch a new tender that we hope to be as fast as possible because it's important for the process of the whole project. And also, what can be expected is that our consortium that is composed by the 6 Portuguese companies will be again in the tender and will present a very competitive offer. Moving to the third question, the margin in Africa. As you can see from the results, they are very sound margins, not only in Engineering & Construction, but especially in the industrial engineering. So being able not only to do a turnover of over EUR 400 million but more important to achieve a 30% EBITDA margins is the result that our strategy that we've been pursuing in the last 5 years of this commercial activity within the industrial engineering has been the right one. And what we can expect for 2025 and the years to come is a bigger contribution in terms of volume of this activity, industrial engineering and therefore, a positive impact in the overall EBITDA of the region of Africa. So to answer straight to your question, yes, this is a sustainable margin that will be delivered. It was not one-off last year, but will be sustainable towards this year and also the next years to come within our African activities. So Africa will be, as we've been saying, one of the main drivers of our activity, not only in terms of turnover but also especially in terms of profitability. Moving to the first question that is very related with the industrial activity. We say that for this year, we have an expected CapEx of 7% of the turnover. Why we are going to have a decrease from 9% to 7%, especially related with the industrial engineering. So this is not a sign that we are going to diminish our activity. No. It is the fact that we do not expect to have the same levels of CapEx because we are not initiating so many contracts this year as we did in 2024 and in 2023. As you know, the CapEx of these contracts are very demanding, and they are always done at the beginning of the contract. So when we win a contract during the mobilization phase that is during the first year, we have a very high demand in terms of CapEx, not only CapEx in acquiring equipment, but also the CapEx that is relating by all the activities that we need to do, namely to do the investments in the main yard and all the infrastructure that are needed to sustain the project during -- usually 5 years of duration of these contracts. Just to remind you that usually, these contracts are between 5 to 7 years and that is during the second to third year that we start to gain efficiencies and synergies and therefore, is when our profitability arises. That will happen this year of 2025 as I said but also already happened partially in 2024. So this is the main explanation of what we have as a guideline for the CapEx being 7% of the turnover. Moving on to the question that you did about EUR 172 million investment in concessions. And I'm going to ask also Jose Carlos to help me answering on this one. But I can say to you that this is not only related to Mexican concessions, but also is basically in 3 dimensions: Mexican concessions, Lobito corridor in Africa that is, in my opinion, I've been seeing this for the last few calls that is the most valuable asset the Mota-Engil has and also some investment in minor and smaller projects here in Portugal, namely [indiscernible] and also some real estate projects. But Jose Carlos, can you complete this question.

Good afternoon, everyone. First of all, this is Jose Carlos. Thank you for being here. Just to clarify a little bit more regarding the CapEx, like-for-like, we can say that we can compare the 7% with the 9% that we've done in 2024. But it's important to disclose as well that the 7%, it doesn't consider the investment that we predict to do during 2025 in concessions. And regarding the EUR 172 million of net investment in concessions, I can tell you that this represents an investment of EUR 230 million, first of all. And then we had the positive effect of the capital gains. The Mexican concessions, they represent EUR 141 million of investment, plus EUR 50 million regarding Lobito corridor plus circa EUR 10 million regarding MAMALAND and then EUR 20-something million regarding the small concessions that we have here in Portugal. So in resume, we can say that it's EUR 230 million of investment minus the capital gain that we achieved with the sale of Autopista Cardel and Autopista Tuxpan during 2024. Regarding the driver for 2025 and namely in Mexican concessions, we predict to invest around EUR 150 million based on Puerto Escondido based on Guadalajara GDL4 and based on small concessions here in Portugal as well, it will represent EUR 150 million for 2025. And the same concessions adding Pirámides Tultepec in Mexico, it will represent more EUR 355 million from '26 and onwards, and it will represent a total investment of EUR 500 million roughly.

Have we answered your question?

Yes, yes, very clear.

Our next question comes from the line of Pedro Antunes from CaixaBank.

First of all, congratulations on the results. I only have a single question to you. You talked a lot in this presentation about the goal of increasing profitability. So do you have any plan to help reduce the weight of noncontrolling interests in terms of total net profit?

Thank you, Pedro. Thank you for your question. Straight answer, no, we don't have more. We think and the history has been giving us reason that the fact that we have partners in several business, namely in Nigeria, Mexico and Angola in the environment are a strong factor of our success. So we don't have any plan to diminish the minorities. We are very happy with the partners. What we have is to increase the profitability in all the business, having minorities or not. So our aim, just to recall, for 2026 was 3% of net income. By 2026, we are paving the way towards that goal. Nevertheless, like I said, we can expect to have a new strategic plan towards 2030. And of course, that the goal that we'll establish for 2030 has to be more demanding, more ambitious than the one that we have established for 2026.

The next question comes from the line of João Vermelho from Bestinver. Due to no response, I'm going to the move to the next question. The next question comes from the line of Filipe Martins from CaixaBank.

I have 4 questions on my side. So first one, when do you expect to announce or to present the strategic plan that you mentioned during the presentation? Second one, related with your exposure to Mexico? And how do you see the current situation, the intention of the U.S. administration to impose heavy tariffs on Mexican imports that I believe will start already next month. If you are seeing any delays in the planned investment from private or public entities? Third question on Duro Felguera, and how do you see the current situation of the group and probably more important, if we can see Mota-Engil actively participating in the restructure process of the group with additional funds? And last one, I think that it was in a recent interview or in a recent intervention that Carlos mentioned the need of a consolidation movement in the Portuguese construction sector. Do you believe that Mota-Engil can make part of this consolidation movement in the future in Portugal?

Thank you, Filipe. Thank you for your questions. Starting from the first question, we can expect to have a new strategic plan by early 2025 -- sorry, early 2026, so early next year. So we are going to do the strategic exercise that we already started during this year. Then that will be materialized in a strategic plan and a business plan. And as you might know, next year will be our 80th anniversary, so 80 years since its foundation. So I think it's a good year to launch a new strategic plan with more ambitious goals towards 2030. So we can expect that to be happening beginning 2026. Exposure to Mexico and the impact that can have. Look, I think that many times I say my opinion. And I think that what is happening between this tariff war is part of a negotiation process that we already saw in the past during the first administration of President Trump. So what actually is happening on the ground is that more and more, we can see that the industrial investment that is happening within this near-shoring phenomenon is being increased year-on-year. So every year, there is opening 1 million square meters of new industrial facilities. And in order to accommodate this industrialization of the economical block of North America that compels the 3 countries, Canada, United States and Mexico. In order for that to happen in Mexico, it's necessary also to have a strong investment in terms of infrastructure, namely logistics, railway and ports is expected to be launching even during the first half of this first semester, a big package of railway infrastructure through public works in Mexico. So, Ms. President Claudia Sheinbaum is going to announce this new package during this first half of the year. And also, it's important to accommodate all this industrial investment to reinforce the energy capacity production and also capacity of transmission lines and the grid in order to accommodate this energy increasing -- production capacity. Therefore, what we see on the ground is a big investment in these 3 dimensions in this near-shoring phenomenon that is basically a movement in order for the North American block to be decoupling more and more from Asia, especially on China to be more independent in terms of its capacity of raw materials and also processing capacity. And what we see on the ground also is more and more presence of American investors, not only in the industrial sector, but also in the infrastructure sector where we are present. What we see is that investment funds from United States more and more are interesting and are committing equity and financing to the Mexican infrastructure project. So what I think is going to happen is that in the end, this is a negotiation tactic. The Trump administration, as we all know, has a transactional way of doing business of negotiating. And therefore, what they want is, in fact, to have better conditions to invest and to reach an agreement within the 3 countries that is a fair agreement to all, but more important than fair that in the end, that does not harm the North American economy, United States economy and imposing tariff will be exactly the other way around. This is how I see it. Duro Felguera, to be completely clear. We will not do any additional funding to the Duro Felguera investment. As I recall you, we did this investment through our subsidiary, Mota-Engil Mexico alongside with our partner in Mota-Engil Mexico that is prodi. The investment that we did gave us today an indirect exposure of around 14% in Duro Felguera. But more importantly, it is for us to understand that this was an instrumental investment. Why? Exactly because of the near-shoring phenomenon. We, Mota-Engil Mexico needed the capacity of having the technical capabilities, the curriculum and know-how in order to compete in this new industrial sector, not only in the industrial facilities but also in the dimension of energy. And therefore, that was the main reason why we did this investment. And what we can conclude for the time being is that the investment already paid off and the fact that we've been awarded the first contract that was the fertilizer plants that we show here in the presentation. Answering the final question of the consolidation process. We are not going to take part of any consolidation process to be completely clear. We are not going to acquire, to merge nothing. What we would like to see happen here in the infrastructure sector in Portugal, in the construction sector is that it would be very positive for the sector and therefore, for Mota-Engil to have bigger companies with bigger capacity. So we would like to see companies with similar sizes to Mota-Engil. Therefore, I think that a movement of concentration in the sector will be very important, not only for the competition of the sector as a whole but also the capacity that the sector would have to internalize themselves. Just look what happened in Spain, they are a good example. They did add the capacity to gain scale through mergers. That is what I defined here in Portugal, and that was what Mota-Engil did more than 20 years ago.

The next question comes from the line of João Vermelho from Bestinver.

So first of all, congratulations for the record results. It's always a pleasure to be here as you know. Most of my questions have been answered, but I still have a couple of them. So on one hand, I would like you to clarify why you have break down the change in working capital between what I would assume is the normal change in working capital and the one that is related to milestone-based impact, if you can clarify that on one hand. And then I noticed as well that the margin in Latin America decreased a little bit as compared to last year. Maybe the reason is because last year's EBITDA margin was maybe above average, I don't know. But I mean, 10.8% still seems a very decent margin for the region, if I remember correctly. But if you could clarify that, I would be thankful. Congratulations again.

João, good to hear from you. I hope you are okay. So, 2 questions, starting from the last one. No, basically, the margin that we achieved in Latin America it's a very good margin, a very sound margin. Last year, we had a bigger contribution from Maya Tren that was a very important project. This year's contribution was not so big. But basically, this is according with our trends and what we had established in our strategic plan. I'm glad you did the first question about the working capital and why we did that breakdown. That is very -- we can explain that in a very detailed way because this is related with one project, one, let's say, very special project that we have. And for this detailed explanation, I'm going to pass the word here to Jose Carlos.

Thank you, João, for your question. And for your patience because I'm going to ask you for 2 minutes for me to explain you. It's, I believe, very clear. It's true like Carlos was saying, it's regarding a specific project. It's a project of supply and installation of rolling stock trains. It's complementary to the railway project that we have in Nigeria. It's a EUR 900 million project. Our commitment was to find a supplier to produce the trains. And then we have the responsibility to put it on the ground and to install all the facilities. So the contract it's like that. The project involves that supply of rolling stock, the trains, and it's very specific. And it's very specific in terms of revenue recognition matters and why? On the contrary, to the typical EPC contracts where we can recognize the revenue in a monthly basis then we can invoice and then receive, here, the recognition of the revenue. It's just possible to do to recognize and to be invoiced when specific milestones, meaning that level of completion are met. This means the supplier may complete part of the works, but the correspondent revenue is only recognized when once the agreed milestone contractually, there's a specific scope of work is reached. So what's the impact of this revenue recognition method in our working capital. Since the revenue is only recognized when the milestones are achieved, cash flow is not aligned with the incurred costs that I already had from my supplier. Costs are recognized and paid monthly, but the revenues only when the milestones are achieved, creating this, I would say, mismatch. This can create, of course, a peak in terms of working capital, especially during the periods when the milestones have not been met as the revenue is not being recognized proportionately to the cost. So in summary, the effect on working capital, it's not a sign of financial mismanagement, of course, but it's normal as a result of the specific contracts bearing in mind that revenue recognition matters. The time difference in revenue recognition temporarily impacts our working capital. But since we achieved the milestone like we've done now in February, we can invoice and we can collect and that's why we are saying that it's already monetized. It's a specific characteristic of this specific contract, producing first, then achieving milestones and then having the right to recognize, invoice and collect then. Of course, during the cutoff, we were on that time line where there was that mismatch between the supplier cash out and the client cash in.

João, is it clear?

Clear. If I may, I have a very last question, and I'm sure that you were expecting that question from me, is how advanced payments have evolved last year as compared to the previous one. The reason I asked this question is really is to have a better sense on how advanced payments affected cash flow.

We were to answer that question even if you didn't ask because this is a tradition that is ongoing every year. So down payments, Jose Carlos can you answer...

Yes, the evolution of the advanced payment was minus EUR 482 million, meaning that the advanced payments from clients, they diminished EUR 425 million, and we increased the advanced payments to the suppliers in circa EUR 57 million. So, there was, I would say, an extra effort here regarding the working capital management. So unlike the previous year, this year, we had a different rotation of the down payments.

[Operator Instructions] There are no further questions from the conference call at this time. So, I hand back to the management team. Thank you.

So once again, Carlos speaking, I want to thank you all for attending the call. This was a very positive year, but we are very excited about 2025, and we are even more excited with this new strategic exercise that we are doing in order to have a more ambitious plans for the 2030 year and also that is a good way to commemorate our 80th anniversary. So thank you all for attending the call. Thank you for the questions. Our Investor Relations team is always available to answer any doubts or any questions that you might have. Thank you all. Have a good afternoon.

Thank you very much.