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

Good morning, everyone. I'm Manuel Manrique, Executive Chairman of Sacyr. Joining me today are Pedro Siguenza, Chief Executive Officer; and Carlos Mijangos, Chief Financial Officer of the company. Thank you all, analysts, investors and members of the media for joining us today for Sacyr's presentation of our financial results for the first half of 2026. Before I begin my presentation, I would like to express our solidarity with everyone affected by the recent severe storms in Chile and the wildfires in Spain. Our thoughts are with all of you. I would also like to express my sincere appreciation and gratitude to our Sacyr employees who, as always, have gone above and beyond to support the communities affected during these difficult times. Our heartfelt thoughts are with you all as well. At Sacyr, we continue to make a steady progress in executing our 2024-2027 strategic plan, further strengthening a business model that is increasingly resilient, profitable and cash generative. The key financial highlights for the first half underscore the strong performance. Revenue increased 9% to EUR 2.437 billion. EBITDA also grew 9%, reaching EUR 708 million. Operating cash flow increased 18% on a comparable basis to EUR 631 million. The EBITDA margin improved to 29.1% and net profit attributable to shareholders reached EUR 78 million, up 157% from EUR 31 million in the same period last year following the accounting impact of the Colombia divestment. In addition, we remain committed to our financial discipline, maintaining a recourse net debt ratio below 1x. Shareholder returns remain a top priority for Sacyr. During the first half of the year, we took a significant step forward by increasing our cash dividend to EUR 0.10 per share compared to EUR 0.045 per share distributed a year ago. This accounts for a 122% increase in the cash dividend. If we also include the scrip dividend distributed in January, total shareholder distributions amount to EUR 0.149 per share, representing a 21% increase compared with the prior year. We believe this reflects the value Sacyr continues to create and our commitment to sharing that value with our shareholders. Another key strength that sets Sacyr apart is our unwavering commitment to sustainability. During the first half of the year, we received several prestigious international recognitions that validate the progress we have made. For the fifth consecutive year, CDP has awarded us its highest rating for our supply chain engagement on climate change. In addition, FTSE Russell awarded us its highest score for corporate governance, while the financial clients recognized Sacyr as one of Europe's leading companies in emissions reduction. These recognitions reinforce our conviction that sustainability is a key driver of long-term value creation. However, another key strength of our business model is the continued performance of our concession assets. The value of our concession portfolio has now reached more than EUR 4.601 billion, representing a 16% increase compared with 2025, excluding the impact of the divestments completed during the period. While Carlos Mijangos will provide more detail on the valuation later in the presentation, I would like to emphasize that the continued appreciation of our assets confirms that our strategy is delivering tangible results and that we remain fully on track to achieve the targets we have communicated to the market. We continue to target a portfolio valuation of EUR 5.1 billion by 2027, excluding divestments and an estimated valuation of between EUR 9 billion to EUR 10 billion by 2033. This value creation is underpinned by the strong cash-generating capacity of our assets. The concession portfolio is now expected to generate total distributions of nearly EUR 20 billion, up 17% year-on-year. This performance underscores the quality of our portfolio, the strength of the assets we have developed and brought into operation and the high visibility we have over future cash flows. The combination of value creation and cash distributions is one of Sacyr's key competitive strengths. With that, let me now hand the call over to Carlos Mijangos, who will walk you through the financial performance for the first half of 2026.

Thank you, Mr. Chairman. First, let me walk you through the evolution of the valuation of our concession assets. As you can see from the chart, it once again confirms Sacyr's ability to consistently create value through its concession platform. The 2026 valuation reached EUR 4.601 billion, representing an increase of EUR 644 million over the 2025 valuation, a 16% growth in just 1 year. This year-on-year increase was driven by a combination of factors. First, the natural progression of our operating assets, what we refer to as a rolling forward effect continue to enhance the value of the portfolio, contributing EUR 383 million. Second, the effects of inflation and foreign exchange movements largely offset each other, resulting in a net positive contribution of EUR 23 million. I would also like to highlight the operational management of our assets, improvement achieved through operational optimization, efficiency initiatives and negotiations with our clients to develop additional investments contributing EUR 94 million in value. And finally, the addition of new projects which generated a further EUR 144 million of value driven by projects such as the Pedemontana-Veneta highway and the Coquimbo desalination plant in Chile, the Novara City of Health and Science in Italy and Ontario Science Center in Canada. These additions more than offset the impact of the divestment completed in Colombia and Barbanza in 2025 as well as the sale of our 4 parking assets in 2026, resulting in a final concession at a valuation of EUR 4.601 billion. If we take our 2024 Investor Day as a rightness point, the progress has been equally remarkable. The valuation has increased from EUR 3.551 billion to EUR 4.601 billion in 2026, demonstrating that our concession platform has not only preserved its value, but has also continued to grow, further strengthening its position as the cornerstone of the growth strategy. From a technical standpoint, the methodology used to calculate this valuation remains unchanged. No changes have been made to the discount rates applied or has any additional future growth been incorporated into the valuation. Looking more closely at the key value creation drivers, the valuation of our concession assets has grown by 30% over the past 2 years. And the largest contributor to this growth has been the rolling forward effect, which accounted for EUR 694 million. This reflects the way concession assets naturally create value over time as construction risks are progressively eliminated, operations become fully established and cash distributions begin to be generated. In addition, the combined impact of inflation and foreign exchange movements has largely offset each other over the 2-year period, demonstrating the resilience of our concession assets in a challenging macroeconomic environment. And this has been complemented by the operational management of our assets, improvements achieved through operational optimization, efficiency initiatives and negotiations with our clients to develop additional investments contributed EUR 94 million in value. Meanwhile, newly awarded contracts generated an additional EUR 261 million of value over the period. For example, the Itata Highway Route 68 and Antofagasta water reuse plant in Chile, Asunción highway in Paraguay and the New City of Health in Italy and in 2026 of the Pedemontana-Veneta highway and the Coquimbo desalination plant in Chile, the Novara City of Health and Science and Ontario Science Center in Canada. Finally, our divestments provide further validation of the internal valuation of our assets, the assets sold in 2025 that is our assets in Colombia and the Barbanza highway in Spain and the parking assets divested in 2026 were internally valued at approximately EUR 270 million and EUR 7 million, respectively. These transactions were completed at sales price 11% above our internal valuations, demonstrating our ability to unlock value through a selective and disciplined asset rotation strategy. The strength of our concession assets is clearly reflected in their future cash distributions. As you can see on the chart, Sacyr's concession assets are expected to generate EUR 19.9 billion in total distributions over the life of the concessions, up 17% compared with our Investor Day projections and with an average distribution of EUR 484 million. You can also see that there has been a meaningful improvement across every period analyzed. This trend is particularly significant because it confirms that the growth in the value of our concessions portfolio is bolstered by highly visible future cash flows. This is not simply an increase in valuation. It also reflects a stronger ability to generate cash distributions, providing a solid foundation for both future growth and shareholder returns. Over the 2026-2033 period, let's say, the time horizon under our strategic plan, our concession assets are expected to generate EUR 3.44 billion in distributions. And against this, the equity commitments associated with our current projects amount to EUR 1.52 billion. And the difference between these 2 figures result in EUR 1.92 billion of net cash available. This is a key metric for understanding Sacyr's growth capacity. Our existing concession assets generate sufficient cash to fully fund the equity commitments already in place but also freeing up cash to invest in new projects. In other words, our current platform is self-funding its future growth. And this strong cash flow visibility provides greater financial flexibility and reinforces the group's ability to continue seizing opportunities in strategic markets while maintaining a disciplined approach to recourse debt. Turning now to our key financial metrics. The first half of 2026 delivered another strong and well-balanced performance. Revenue reached EUR 2.437 billion, representing 9% year-on-year growth compared with the first half of 2025. EBITDA totaled EUR 708 million, also up 9%, while maintaining a solid 21% EBITDA margin. Concessions continue to account for the vast majority of EBITDA, accounting for more than 91% of the total. This shows the group's transformation towards a more recurring profitable and predictable business model. And this performance is also reflected in a significant improvement in net profit attributable to shareholders, which reached EUR 78 million, an increase of 157% compared with the same period last year. Operating cash flow amounted to EUR 631 million, accounting for 18% comparable growth after excluding the cash contribution from the assets divested in Colombia in 2025. This level of cash generation highlights the strength of the group's operations and the ability of our assets to convert EBITDA into cash. Finally, our recourse net debt ratio remained below 1x, in line with the financial commitment we have consistently maintained. Overall, the first half combined growth, profitability, strong cash generation and disciplined financial management. Consolidated net debt stood at EUR 6.788 billion at the end of June 2026 compared to EUR 6.359 billion at the end of 2025. The EUR 429 million increase during the first half primarily reflects the combination of strong operating cash flow generation and investment effort associated with the continued expansion of our concession portfolio. Funds from operations contributed EUR 631 million during the period and this cash generation was offset by net investments totaling EUR 691 million and financial expenses of EUR 284 million and other smaller adjustments recorded during the first half. Therefore, the increase in net debt should be viewed in context of the group's continued growth. So it continues to generate strong operating cash flow while investing in concession assets and projects that will further strengthen future value creation and distributions. Turning now to reported net debt. The trend during the second quarter was encouraging. Reported net debt declined from EUR 289 million at the end of March 2026 to EUR 264 million at the end of June 2026, in line with or below the threshold established in our strategic plan. Funds from operations contributed EUR 85 million during the quarter, supported by strong operating cash generation and concessions distributions totaling EUR 74 million, and this cash inflow was sufficient to offset net financial expenses, net investments and other movements during the period. Net investment for the quarter amounted to EUR 38 million, including EUR 12 million of equity invested in infrastructure concessions, EUR 14 million of equity invested in water. In addition, the divestment of our parking assets in Spain generated EUR 9 million, further demonstrating the disciplined asset rotation strategy I referred to earlier. Overall, recourse net debt remains firmly under control, declining by EUR 25 million during the quarter. The recourse net debt ratio also remains below 1x, confirming the group's financial strength and its ability to continue growing while maintaining strict financial discipline. With that, I will now hand the call over to our Chairman.

Thank you, Carlos. I will -- now Mr. Pedro Siguenza will provide you with an update on the performance of Sacyr's business during the first half of the year.

Thank you, Mr. Chairman. I will now walk you through the performance of our 3 business areas. Among the key milestones achieved during the first half of the year, I would like to highlight the following: the start of construction on the I-10 highway project in the state of Louisiana with first transportation infrastructure concession in the U.S., representing $2.3 million investment. Next, the submission in July of our bids for 2 major managed lane projects, I-24 in Nashville, Tennessee and I-285 in Atlanta, Georgia. As you know, they are 2 highly complex projects from both a technical and financial standpoint. And this shows that we are ready to compete for the largest concession projects in the U.S. market. In our water business, we successfully reached financial close on the Antofagasta water reuse plant, securing $460 million in project financing. This is a landmark project that will represent a major step forward for our water business both because of its scale and because of the strategic positioning in water reuse solutions for the mining industry. Finally, we further expanded our concessions portfolio during the first half of the year by signing several contracts, including the Ontario Science Center in Toronto in Canada, the Coquimbo desalination plant and the Pedemontana highway in Chile. And the New Novara hospital in Italy. Therefore, the group's total backlog reached EUR 73.307 billion at the end of the first half, up 8.7% compared with December last year. The opportunities highlighted on this map, including the most relevant bids we have submitted demonstrate that we continue to make steady progress in delivering our strategic plan. We are increasing the share of our portfolio in English-speaking markets while continuing to strengthen our footprint in our core European and Chilean markets. Some of the most significant opportunities include the previously mentioned I-285 and 124 managed lanes in the United States as well as the West I-285 project in Atlanta, the I-65 in Tennessee, the I-77 in North Carolina, where we are already prequalified and the I-499 in Virginia. In Canada, we have been prequalified for the Windsor Hospital concession, a major social infrastructure project represent an investment of more than EUR 2 billion which includes 30 years of operations and maintenance. In Chile, we will submit a bid for Route 57 connecting Santiago and Los Andes while continuing to pursue other opportunities, including the Caldera-Antofagasta highway concessions. In Ireland, we have submitted our prequalification application for the M500 MetroLink concession, a new metro line that will connect Dublin with its international airport. In Italy, we continue to monitor the procurement processes for the A-22 motorway, the A-4 Brescia-Padua motorway and the A-4 Torino-Milan motorway. In Portugal, we have submitted our bid for another section of the high-speed rail line between Porto and Lisbon. This is a 30-year availability-based concession with an investment of more than EUR 2 billion. We are competing against another consortium. Pending final evaluation, our bid has received the highest economic score. In Spain, we are actively evaluating a bid for several integrated water. And in Australia, we have submitted bids for the Adelaide desalination plant and the Wyaralong water treatment plant. We are competing against another bidder as well as in the Brisbane Olympic Stadium. These major contract awards are expected to be decided later this year. This pipeline of opportunities provides us with a solid foundation for continued growth in the years ahead and reinforces the robustness of our technical, commercial and financial capabilities to compete successfully in the world's leading markets. Now let me refer to Sacyr Concesiones, which continued to deliver strong growth during the first half of the year, the revenue reaching EUR 977 million, up 20% compared with the first half of 2025. Operating revenue totaled EUR 642 million, driven mainly by the increasing contribution from our Chilean assets, including Route 68, the Itata Highway and Camino de la Fruta. This more than offset the impact of the Colombian roads that were divested in 2025 and further reinforces the quality and resilience of our concessions business model. Construction revenue increased 37%, up to EUR 335 million, driven by the start of construction on the Ontario Science Center project in Canada as well as a strong pace of execution across 4 projects in Chile, Paraguay and Colombia. The division generated EBITDA of EUR 402 million, up 15% from the prior year, representing an EBITDA margin of 62.6% on operating revenue. During the first half of the year, our concession assets distributed EUR 94 million in cash, we invested an additional EUR 28 million of equity. As a result, total equity invested across the assets in this division increased to EUR 1.735 billion. As for the key milestones during the period, as I mentioned before, they include the signing of the contract of our first concession in Canada, the Ontario Science Center, where construction began in May as well as the bids submitted in July for the managed lanes projects in the United States. In our Engineering and Infrastructure division, revenue grew 10% to EUR 1.584 billion, driven by the start of construction in our concession projects in the U.S., Canada Paraguay and Chile. EBITDA climbed 4% to EUR 270 million. And looking exclusively at our construction activities, the construction margin remained stable at 5%. The division's backlog increased 4% compared with December last year, reaching EUR 13.019 billion. But more importantly, the quality of this backlog continues to strengthen. Today, 76% is linked to our own concession projects, significantly reducing our exposure to the execution risks typically associated with third-party construction contracts lending ourselves with a concession strategy. The key milestones during the period include our selection to deliver the new Frimley Park Hospital in the United Kingdom, a project with an estimated investment of more than GBP 1.5 billion, the award of the Peel Health Campus redevelopment project in Australia with a contract value of [ AUD 766 million ], the completion of our 13 highway project in the U.S. in Vanderbilt, Florida as well as the Ontario Science Center in Toronto and the I-10 highway project in Louisiana. Finally, Sacyr Water continues to establish itself as a strategic growth platform for the group, delivering strong growth in both revenue and EBITDA. Revenue grew 33% to EUR 185 million, while operating revenue rose 7% to EUR 150 million. EBITDA reached EUR 35 million, representing an EBITDA margin of 23.3% on operating revenue. Backlog stood at EUR 8.2 billion, up 18% from the previous year following the addition of the Coquimbo desalination concession in Chile. In addition to the award of this project and several new operations and maintenance contracts in Spain, we also reached another milestone, and that is the financial close on the Antofagasta water reuse plant in Chile, securing a 35-year concession for the largest water reuse plant in Latin America, which will supply reclaimed water to the mining industry. During the first half of the year, we invested EUR 23 million of equity in this division, bringing total equity invested in our water concessions to EUR 151 million. Overall, all 3 business areas delivered a very strong performance during the first half of the year, bolstered by a robust commercial activity and outstanding technical effort in pursuing new opportunities, solid operational execution and a highly quality project pipeline that positions us well for the next phase of growth. Now I will turn the call back to our Chairman for his closing remarks.

Thank you very much, Pedro. Well, after so many figures, let me recap the key takeaways from the first half of the year, 6 key takeaways. First of all, the continued value creation of our concession assets, whose valuation has increased by EUR 644 million over the last 12 months. Next, the soundness of our portfolio that will reach EUR 20 billion. Thirdly, the significant growth of our net profit that went up by 157%. Fourth, the 33% increase in revenue generated by our water business. Fifth, the major opportunities that we continue to unlock in our strategic markets, such as the U.S. managed lanes segment. And finally, the enhanced returns delivered to our shareholders reflected in a 122% increase in the cash dividend. Together these achievements demonstrate that we continue to execute our 2024-2027 strategic plan successfully and strengthening the company's cash-generating capacity while creating sustainable long-term value for our shareholders. With that, we would be happy to take your questions.

Good morning, everybody. As usual, we are now going to open the floor for questions. First, we are going to answer the questions received over the phone. And next, we are going to read out the questions received through the webcast. Now let me give the floor to Miguel González from JB Capital.

Congratulations for these results. I have 3 questions for you. First, I would like to ask about growth in terms of FFO during this period. Were there any one-offs or any collections that may cause a fall in the second half of the year? Next, as regards working capital, there was a cash outflow during the quarter. I thought that this was going to be a recovery quarter. Could you give us some color in this respect? And do you think that you could offset this cash outflow in the second part of the year? As for managed lanes to be commissioned in the upcoming months, you have already submitted the relevant bids. And I would like to know in case you are awarded the I-24 and since you might be awarded another section of another highway in Portugal, do you think that you could be awarded the I-285 as well? Would that be all the projects that you would be tendering for?

Okay. We are going to answer in a minute.

Okay, Miguel. Let me answer the first question. There was no specific one-off reported during this quarter. Since most of our assets are payment upon availability, sometimes payments are made twice a year. In Q2 and in Q4, there are several contracts that are paid for. This is, however, a seasonal development. There is no one-off. As for working capital, it is true that there were some impairments, but this is due to the huge efforts that we made in order to submit tenders in the United States. The Engineering division had to bear many costs in order to submit the relevant tenders and the different technical aspects that had to be priced in, and this had an impact. However, this is going to be offset during the year due to the business' natural seasonal capacity or characteristics. As for the third question concerning managed lanes, that's a very interesting question. And let me give you some context in this regard. This company has always met concession requirements no matter whether we underwent financial situation or the financial crisis that affected our country or the global financial crisis. We're not going to, therefore, do that this time either. Managed lanes are already a success story for us. It's already an achievement, taking into account where we are coming from the fact that we have been qualified for 3 managed lanes, 3 out of 3. That's already a success. Then we will have to see whether we're eventually awarded 1 or 2 of these projects. Equity is not something that happens instantly. And risk hedging for such an investment has already been arranged. Therefore, we are not worried about this nor afraid either.

The next question is by Luis Prieto from Kepler Cheuvreux.