Sacyr, S.A. (SCYR) Earnings Call Transcript & Summary

Good morning. I'm Manuel Manrique, President and CEO of Sacyr. With me, as usual, we have Carlos Mijangos, financial -- CFO of the company. Thank you very much for being here, analysts, media, investors for attending the presentation of the results of Sacyr for the first quarter 2025. At Sacyr, we keep on advancing, decidedly towards our objectives of growth in the concession sector. During the first quarter 2025 cash generation has kept on growing solidly and we have increased the pace of investment in assets, thanks to our success in tenders achieved in 2024 with new -- with 5 new concessional assets. All the key figures of the first quarter are behaving according to our forecast that can be found in our Strategic Plan 2024-2027, keeping recourse net debt in the low level that we committed to. Operative cash flow. Operating cash flow has increased by 8% and has gone up to EUR 240 million. And concessions have reached EUR 135 million this year with a total of almost EUR 2 billion of net invested capital. If you remember, the dividends coming from our concessions reach over EUR 17 billion which is 6.5x the market value of a company. Consolidated turnover of the company has increased by 7% all the way up to EUR 1.059 billion and net profit has increased by 5% up to EUR 27 million. Most important milestones for the first quarter, the new contract that we have signed in Paraguay to build and exploit for 28 years network of motorways to increase the connectivity of the capital, Asuncion, with an investment that's above EUR 160 million. We started operating the Atacama Airport in Chile. Also, the signature and commissioning of the Ruta del Itata concession, also in Chile, with an investment of over EUR 500 million and estimated income of around EUR 1.2 billion. Only just a few days ago we also signed a contract for the concession of the City of Health in Turin with an investment of EUR 500 million for 25 years. Also, the divestment of the operations in Colombia that we hope will be closed in the next few weeks and the very important impact on -- an improvement on corporate governance with proposals we will take to the next Annual General Meeting. Amongst these proposals that we'll take to the next meeting -- General Meeting, I would like to highlight a cash payment of a dividend as we committed in the previous Investment Day for EUR 0.045 gross per share. We will also propose a scrip dividend, as we normally do. In January we already executed the second dividend approved in the previous General Meeting in which 87% of our shareholders chose once again a new Sacyr shares. But besides that, their proposals that will be taken to the next General Meeting include 3 new directors, one executive director and 2 independent directors, that will allow us to separate the functions of a chairman and chief executive officer and reach over 40% of gender diversity in the Board. After these appointments, 50% of the Board will be made up by independent directors. In sustainability, I am extremely happy to say that we keep on improving our positioning the best indexes and rankings which show the commitment with the environment, society and good governance of all of our teams and projects. In this slide that you can see on screen, you can see the main magnitudes I mentioned, the increase in revenues had reached EUR 1.059 billion; EBITDA, EUR 301 million; and net profit EUR 27 million. Operating cash flow is EUR 240 million and the operating cash flow EBITDA ratio is 80%. As we mentioned in the previous Investor Day, operational -- operating cash flow is the factor that best describes the evolution of our growth. In the first quarter, this operating cash flow has grown by 8% up to EUR 240 million. The conversion factor of EBITDA and the cash flow is 80% in this quarter compared to 65% in the same period last year. Over 90% of our EBITDA comes from concessions with demand/risk mitigation mechanisms that can that are classified from a contract perspective as financial assets. So EBITDA decreases the moment these assets are commissioned and put into operations, while cash flow increases progressively, which is the reason behind the evolution of EBITDA this quarter. To finish my intervention, I'd like to insist on the consistence of our growth and generation of operating cash flow in the investment in concessions and on the fact that we are meeting our commitments in corporate governance. Next, Carlos Mijangos will provide more detail and specific data on the results of Sacyr and each of the business lines.

Thank you, Mr. President. Next, we will analyze in detail the operating and financial performance of this quarter. We are going to start with the financial evolution. This quarter, we'd like to highlight the investment effort made in our concessional business, mainly in the 2024 tenders we have invested around EUR 135 million, which is almost 4x as much as in -- as the average over the past few years. So we have made an investment of over EUR 1.9 billion total equity invested in our concession projects, which pushes growth. So we will be able to add and generate more value. In terms of the evolution of a net debt, consolidated net debt is basically stable. It has grown just around EUR 35 million. We must highlight the flow that we have generated -- the cash flow generated, which is EUR 220 million. And result has been EUR 27 million which is -- I would like to highlight here that we've also -- that's also EUR 19 million below the previous quarter. And net investment in our asset has been EUR 204 million. Financial results EUR 157 million and due to reach EUR 6,926 million. In terms of recourse net debt, it has increased by EUR 130 million, which is basically the investments we have done in the equity of our assets. If we see the different components of the evolution of debt, we have generated EUR 15 million in operations. I would like to mention that, well, there's a system of billing to it. So working capital has a worse behavior, but in this case, the impact has been quite moderate, EUR 70 million. Financial expenses, EUR 13 million. We have invested EUR 140 million. EUR 135 million in our equity and EUR 5 million in equipment. We received EUR 20 million from the Barbanza divestment. We have paid EUR 8 million in cash for the scrip carried out in January and also adjustments due to ForEx and financing flow bring us to [ EUR 266 million ]. We still commit with the ratio we committed to in the Investor's Day. So recourse net debt divided by recourse EBITDA plus a distribution among different projects is below 1x. And in fact, we are at 0.8x in the past 12 months. And if we take a look at growth opportunities that we have detected and the ones we are working on, we take a look at the road map from east to west. We can start in Australia. We're working around 4 water projects, big activity here. And with all sorts of plants, we are talking on a desalinating plant, water treatment plant and reuse plants and 2 treatment plants. We have been prequalified in 3 of these tenders and the last one will probably be announced in the next few weeks. So the teams -- the tender teams are already working on the offers and they're getting ready for the different bets for these tenders. In Italy, the Novara Hospital, we -- they just opened the -- well, we've been approved. So we are just waiting for them to open the financial bet to be able to win that tender. The 2 sections of the A4 highway, which are Brescia-Padova and the one to Milan, where we expect the prequalification to be open before the summer. And in the A22 highway, we're getting all the documentation ready to be presented May 31. In Canada, we have been -- we are prequalified in the Ontario Science Museum and the prequalification of the Trans-Canada Highway will be published shortly. It's one section of the highway. In the next few weeks on the Windsor Hospital is expected to be -- well, the prequalification is expected to be published in the second quarter this year. So technical teams and the tender teams are also working hard on these projects. If we go to the United States now, we have 5 highway projects that have been published or are going to be published. That's what we call managed lanes. In the I-228 (sic) [ I-285 ] in Georgia, the East Express Lane, we've been qualified. The West Express Lane is going to be published before the summer. In I-24, we already presented all the documentation 2 months ago, and it's expected and the winners are expected or the shortlist is expected to be published in a matter of days or weeks. The I-77 and the I-495 in North Carolina and Virginia, prequalification will probably be published in the next few months. We're also working on different opportunities in universities, similar to the one to the control we've got in Idaho. And in Chile, we are working on a section of Ruta 5, section that goes from Caldera to Antofagasta. It's a private initiative that was presented by Sacyr some years ago. And we've got several water projects, desalinating plant of Coquimbo presented in the middle of the year; 2 reuse plants like one in Antofagasta and other plant maintenance plants, both desalinating and water treatment plants. So a lot of work around water as well in the different countries, so where we are present. In terms of business areas, the first one is Sacyr Concesiones. Well, revenues been constant, a drop of EUR 2 million, but we have to -- there's a difference between construction income and operating income. Construction income increased by 88% with an increase and it goes up to EUR 105 million. That's due to the Velindre Hospital and the Buga-Buenaventura highway. However, operating income have decreased by 16% precisely due to the accounting impact of the evolution of financial assets that are in operation that the President just mentioned. This brings us to a drop of EBITDA of 21%, and we reached EUR 172 million. Most relevant data, we've got EUR 135 million that we have contributed to the equity invested and that's how we got a total investment equity of almost EUR 1.8 billion, water not included and distribution from concessions been EUR 35 million. And the most important highlights, we've got this signing of the Ruta del Itata and Turin Hospital, also starting operation of the Atacama Airport. And we've been shortlisted in the I-224 (sic) [ I-285 ] in Georgia, and we're expecting within next few days to be chosen as well or be shortlisted for the Tennessee project as well. If we take a look at the Sacyr Engineering and Infrastructures, an important growth, 24% increase in revenues. We also have 2 different types of activities. We've got a Italian concessional activity, and it's compulsory and it's by Italian law has been included in construction. And it has gone from EUR 94 million to EUR 164 million, basically due to the start-up operations of the A-21. So this year, and there's no comparison with the previous year. But in terms of pure construction, an increase of 13%, reaching EUR 527 million. So activity both of work trial, concessions on other projects, especially in Chile have kept a high level of execution. EBITDA reached EUR 118 million. Italian concessional assets went from EUR 78 million to EUR 92 million and construction from EUR 23 million to EUR 26 million, keeping stable margin of 4.9%, which is the same one as the one we had in the last quarter last year. And while, the backlog is almost reaching EUR 11 billion, out of which 71% is for concessions. Important milestones, well, we got an award in Andalusia, the best public works due to the high-speed train works we carry out Almeria. And also the tunneling machine in Sao Paulo in the construction of the subway, we are completing with -- on time and with the expected quality. In terms of water, Sacyr Water, we can see that how the contracts won in 2024 can be seen in the results of the company. Important growth, 11% growth in revenues and 13% in revenues, and we have a good margin, above 20%. We are already the first company in desalination capacity in operation in Spain, and we supply over 16 million inhabitants in those countries in which we're present. The backlog is reaching almost EUR 5 million and total invested equity a bit above EUR 120 million. Main milestones of this quarter, we won new contracts like in Badajoz, the first contract in Catalonia, which is drainage and wastewater treatment in Tordera or the renovation of the Vitoria sewer system. And we're also working to transform more the -- well, the sludge generated in one of those water in Chile into fertilizer, promoting environmental sustainability and circular economy. So conclusions of this quarter, solid cash flow generation over 8% higher than the previous quarter. We're still boosting concession growth with higher investment in the quarter. And so we are adding value. We continue with the sale process of the Colombian assets. And we are also -- we also made our commitment to the recourse net debt ratio below 1x. And having said that, Mr. President, you've got the floor.

And now we are open to the questions from the analysts.

Good morning, everybody. Next, we will start the Q&A session. As usual, we will start with the questions that we get from the phone and then the questions asked through the chat. First question, Miguel Gonzalez from JB Capital.

I have 3 questions. First is on the divestment in Colombia. I guess, there isn't much you can mention, but we've seen in the press that you were negotiating with Actis for your stake in the 4 concessions. I'm not going to ask you to confirm those piece of news, but I just wanted to know if you see -- if there are upholding offers to sell your participation instead of 49% as it was mentioned before. And if you can please update your internal valuation of these highways. Then my second question is about the evolution of recourse net debt, EUR 26 million of lease and ForEx and investment flow compared to the EUR 5 negative million you had last year. So I just wanted to know if you can explain what's behind this change. And then a dividend payment to shareholders, you're going to take to the Annual General Meeting that dividend, but also another scrip dividend. So it's going to be a cash dividend and a scrip dividend. So I would like to know how the dividend structure is going to be like if you're going to blend cash and scrip or is it going to be just cash or if there can be a buyback of shares due to that scrip. So if -- it will be great if you can clarify anything about it.

Well, Miguel, just give it a second and we'll answer. Yes. Well, first question, the divestment in Colombia, as you mentioned, please let us -- we've already mentioned that we expect that to be closed in the next few weeks. But of course, in this type of process -- well, this question is important. We shouldn't say anything. Internal valuation that we already mentioned in the Investor Day is around EUR 300 million. We have always mentioned and we are happy to say it again that we -- and at any time we sell, we will do so in conditions that are good for Sacyr. We are not going to sell at any price. So if we do, well, conditions must be right. We are not in a hurry. We don't need it, but we expect to do so in the next few weeks. Yes. On the second question, there's a bit of higher impact of listing in -- well, this quarter compared to the previous year and also some other financing that we've done on the equity, but it's just those adjustments, but the figures are quite small. In terms of our shareholders, we -- as we mentioned in our shareholder remuneration, well, we're still having our first dividend payment in cash. And in case it's needed, we're also going to take to the Annual General Meeting the possibility of having a scrip dividend as well, both dividends that we normally propose, it's actually the Board, the one who decides how to do it. We mentioned that and we want to meet that in 2024, 2027, we will be paying around EUR 225 million, and that's what we'll do.

And I had 3 questions. First, if you could please clarify the status of the negotiation with -- on the Pedemontana project. Second, the right window to launch Voreantis take into account all third parties and your sales in Colombia. And third one, it's a matter of curiosity. We have seen some progress in the construction and operations of airports and Ferrovial is in JFK. So there's been some noise about a possible concession of Terminal B. And I'd just like to know if that is a segment and a type of asset that could be interesting for Sacyr?

Thank you very much, Luis. Just give us a second, and we will answer.

First, in Pedemontana, we are in the normal process of any concession. We come forward with frequent meetings, and this is what's normally done in any concession, additional investment to rebalance it immediately. And second, you mentioned timing of Voreantis. As you said, this is a similar process. The same company of funds could be interested, same process, same process as the one in Colombia. We're still working on it. And the pace is normal. And timing is normal and what could be expected. We've always mentioned that this couldn't be forecasted, but early 2026 or the sooner end of 2025, and that's still the scenario. And the last question about airports in the United States, we are not in that business today, but that means nothing, because we have many infrastructure concessions. And for the moment being, it's not in our radar.

Next question comes from Alvaro Lenze from Alantra.

Just a first question about the evolution of your working capital. Last year, most of your construction portfolio was in concessions. And last year, we saw a lot of use of working capital for third parties. So I know the first quarter is the one in which you use most of the working capital, but you can give us some guideline on what that should figure be by the end of the year?

Well, Alvaro, as you've seen, the impact of this quarter has been quite moderate, so we expect a recovery in the next quarters. And we already mentioned last year, last year, we did have a bigger impact. But basically because we had reduced our construction activity, this year it's more stable, over 70% is working for our concession already -- for our concessions. And this is just due to the seasonal nature.

No more questions from the phone, and we can now start with the questions from the webcast. First one comes from Filipe Leite from CaixaBank. Filipe, you were asking about the financial rebalance of Pedemontana that's been answered already. For the I-10, the status of the project and when do you expect to start the construction? And then recourse net debt, when we expect to invest in equity and concessions for this year and what the recourse net debt figure should be by the end of the year. And we'll answer. Give us a second.

In terms of the I-10, we are following with the expected timing. We have provided designs. That's what you need to do, and we start construction to start first quarter 2026 according to the initial forecast. In terms of -- well, we had expected to invest EUR 380 million. But the timing of -- on the contract signed, well, it means that this year, we'll probably invest around EUR 300 million and EUR 80 million or EUR 90 million will go to 2026. And in terms of the evolution of recourse net debt, well, there are so many factors involved such as the divestment of Colombia, well, the [ 11th ] of the year, I mean, it's just too soon. But what is actually important is to highlight that we are -- we would like to keep our ratio. The things can move due to seasonable aspects, but the recourse net debt ratio -- and because net debt is going to be kept under control.

Next question is from Julius Nickelsen from Bank of America. He was asking about the process in Colombia. I believe that's the President already answered. And if we could give him some figures of how much these assets could contribute to EBITDA and cash flow. He's asking, just in case our targets or the targets provided in the Investor Day are going to be kept. It is also true, and Julius I would like to remind you that we have won several projects that were not included, but we'll answer in just a second.

Well, the weight of Colombia in the company is relevant. And of course, the objectives we provided in Investors Day, we mentioned that was without the divestments. If these divestments actually happen, we will need to adapt the objectives to the new reality of the company. And given that we have been quite successful in the tenders last year, our focus is to update the valuation of assets probably in July, in the presentation of results of the first half of the year, to give some clues to the market on what these relevant aspects are.

Next question asked by Miguel here, and had to do with the Barbanza divestment. You mentioned that was -- you mentioned EUR 20 million. So how -- if that was fitting our internal valuation. And on CapEx and operating cash flow, Carlos already mentioned which is the equity that's going to be invested and how that's going to be distributed.

Well, in terms of Barbanza, well, it's exactly 2% of what we had in the Investor Day valuation. It's perfectly well aligned with our forecast. We already tell the markets -- told the markets that we are -- I mean, we try to be careful with our valuations. But in this case, they tend to be above.

No more questions from the webcast, but there's one more from -- on the phone. So Fernando from Alantra.

Thank you for allowing me the ask this is last question. I have more of a general question, understanding that Colombia, Colombia looks well and could work and the cash improvement you have forecasted for the end of the year. In the concession pipeline, is there any other alternative that you could invest in organically, not inorganically. But any possible tender, any yellow fee, anything that could make the investment in concessions to accelerate in the next 12 to 18 months compared to the plan you've got today? Or we need to be -- or are all the new projects going to be -- will have a different equity, but -- in the midterm. I just wanted to understand how you see that and how sure you are about the fact that you -- about -- well, the pace you have with winning concessions in the past few months, if you think you're going to be able to keep that up.

Yes, Fernando. Well, a question that's a bit general, as you mentioned. But we do have possibilities to increase investments in Italy in the projects in Italy. Those are the projects that we -- that are just starting. In terms of growth, we are just as excited, and we have the same objective as the one we mentioned in the 2024-2027 period, 4 concessions a year. I mean, last year, we had 5 and this year, we already have 2.

Next question, Luis Prieto from Kepler.

Should we expect Sacyr to be in all the shortlist in the in the 5 projects you've got in the presentation?

Yes, give us a second and we'll answer.

Yes, Luis. Well, anytime we go to tender, our objective is to be shortlisted. Otherwise, you just waste of money. And of course, we aspire to all of them. I don't know if that's answering all your question. But yes, clearly, yes.

No more questions. And I would now like to give the floor to the President, the Chairman.

If there are no more questions, we'd like to thank you for your attendance and your interest, and we hope to see you next time. Have a good day. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]