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

Good morning. Welcome you to the Mota-Engil First Half 2026 Results Conference Call. [Operator Instructions] I'll now hand the conference over to Mr. Pedro Arrais, the Head of IR of Mota-Engil. Please go ahead, sir.

Thank you. Thank you very much. Good afternoon to all. Thank you for attending this call where we will present the first half 2026 results, the first half year results after our first Capital Markets Day, where we will present our new strategic plan for the next 5 years. With me, I have here Mr. Carlos Mota Santos, the Chairman and CEO of the company; and also -- as usual, Mr. Jose Carlos Nogueira, Board member and CFO of the company. Please, Carlos.

Thank you, Pedro. So welcome to the first half of 2026 results from Mota-Engil. It's good to be here. It's good to have this call with you. Starting by Slide #4, in which we have the highlights for the first semester. I'd like to stress the turnover in which we reached around EUR [ 2 ] billion. That's an increase of 6% when compared with the same period of last year. But more important than that was the growth that we have in terms of profitability, not only in terms of EBIT in which we grew year-on-year, 10% reached an EBITDA margin of 17%. So we are maintaining the 70% that we reach in the end of 2025 with almost EUR 500 million. But as important as the EBITDA, the net profit after minorities in which we reached EUR 74 million. That is an increase of 24% when compared with the first half of 2025 and that reaches -- we [ achieved ] with this 2.6% margin in order in the goal of the [ 3% ] that we established in the previous business plan of 2020 -- for the year of 2026. Concerning the backlog, I want to stress that we reached by the end of June, a very solid backlog of almost EUR [ 80 ] billion of backlog. That represents an increase year-on-year of 10% [ and ] represents also more than 3x annual turnover at least the turnover of last 12 months. I also want to stress two things. One, about the backlog that this backlog does not account with several contracts that, in the meantime, have been signed between the end of first half of the year and today. And if we did account with that new contract signed, our backlog would over past EUR 20 billion. So I think it's achieving mark that we reached in terms of backlog. Also in terms of the net profit, I would like to stress that these net profits of this first half of the year is 2.5x bigger than the same net profit that we present in the first half of 2023. So this is a growth of over 2.5x in just 3 years. So I think it illustrates the effort and the commitment that the company has been made in achieving bigger margins in terms of profitability, not only in terms of operational profitability but also in terms of net profit. Looking into the financial figures. Looking at the debt, we can see that we reached a net debt of EUR 1.99 billion. complying with the net debt over EBITDA that we have the commitment to comply with to be below 2x. And if we compare with last year, we can see that net debt increased year-on-year -- increased from the end of 2025 to the end of first half of 2026 in EUR 20 million. So the increase was EUR 20 million. But also if we exclude the debt that comes from the investments in concessions, we would have a decrease of EUR 61 million. So the increase that we had of EUR 20 million were mainly due to the investment that we did in terms of concessions and that we are going to look in details in the next slide. Also, I would like to stress that we also comply with our goal in terms of gross debt to be below 4x in terms of gross debt over EBITDA. And also like to stress that as promised in the last calls, our CapEx is decreasing when compared with the same period of last year, and we are below what we established as the limit to be 7% of the turnover. So we reached a CapEx of 6.4% of the turnover. And as we are going to look ahead, the CapEx is mainly driven of the African unit. I would also like to highlight that we reached free cash flow of EUR 159 million in this period. That is 33% of free cash flow to EBITDA, reminding that our goal in 2030 that we established in our FOCUS 2030 strategic plan was to be around 25% of free cash flow to EBITDA. In terms of equity, we are above EUR 1 billion of equity that allow us to reach a financial autonomy of 11%, bearing in mind that in the first half of the year, we did the payment of the dividends to the shareholders. Moving to the second slide or to Slide #5, sorry. Just to remind the main events that we reached since the beginning of 2026. And looking into the split of the business that we established in the new strategic plan. We can look -- we can see in terms of engineering construction, several contracts that have been awarded. I would like to stress the contracts here in Portugal, but also new contracts in our main markets, namely in Mexico, in Peru and also an extension of our biggest contract in Nigeria as well as in concessions in which we finally signed the contract of the central tunnel in Brazil, but also a very important contract that we signed just yesterday in Congo that is the expansion of Lobito Corridor now in DRC that is the following infrastructure that connects to our infrastructure that we have 50% stake of the concessions of the corridor in Angola. In terms of natural resources, to stress oil and gas contracts that we've been awarded and we signed in Brazil for Petrobras, an important client of ours, the extension of our contract in Ethiopia for -- all gold and also the incorporation, the setup of a new company that is multi- mining service that is aligned with our intentions that were established in the FOCUS 2030 strategic plan. In terms of circularity, I'd like to stress the $100 million agreement we did with Trafigura that is a 40-year sustainability and carbon credits framework in which we are going to produce and to sell under these agreements, the production of credit carbons in our projects in Malawi and also several operations, several investments that we are making here in Portugal for biomethane facilities that are starting the operations in the last quarter of this year. In terms of our dimension in financing corporate, some of the main contracts and the main facilities that we signed during the first half. I'd like to stress the continuous partnership that we established already in the last year with the IFC from the Bank. And of course, the financial close, we reached the financial close with DFC in the Lobito corridor in the stretch of Angola. And also in terms of ESG, we continue to be recognized as an excellence in terms of excellence of our operations, and this has been achieved with the branding and the recognition of several institutions like Total and like Vulcan, one important player of ours and others. So now again -- I will pass again the presentation to Pedro Arrais in which we'll detail the results overview, and I'll come back for the final remarks and also for the guidance of 2026 before we can answer some questions that you might have. Thank you.

Thank you, Carlos. We will move now to the Slide 7. And here, you can see that we achieved in the first half of '26, a very successful period when we achieved a record level of the turnover and EBITDA and showing also an improvement in the net financials with a reduction of in the first semester of the year, also a positive evolution in associated that combined allow us to achieve an improvement of 24% year-on-year in the net profit of the company. As Carlos said, we want to go even higher in the liquid margin, in the net margin to achieve during the first half of '26 and in the full year of '26, a net margin of 3%. Moving to Slide 8 and detailing the performance here by each business unit, we can highlight the resilient margin in Europe despite the reduction of activity, the positive growth of -- in Africa with 11% year-on-year, impacted by two positive factors, a better efficiency in the DFC business and the continued increase of the contribution in the industrial engineering, leading the EBITDA margin in Africa to 25%, a very impressive margin in the region. Also looking to LatAm and the performance is mainly explained by a positive contribution from Mexico and with Brazil more than double the contribution for the turnover, sustaining the operational margins in line with historical performance in the region. And finally, with the positive performance of the environmental businesses, especially with the improvement of the EBITDA margin in the business of 2% year-on-year. Moving to Slide 9. Here, you can see the backlog of the company. not only the evolution, but detailed information by geographies and also by segments of the EC backlog. And the first highlight that I would like to mention is the increase of the backlog by EUR 4.1 billion, an achievement that represents the most successful semester in new awards in our company, something that allows Mota-Engil to achieve a new record level of EUR 17.7 billion. Also important to consider that in this EUR 17.7 billion is not included the EUR 2.5 billion of new contracts signed after June. As you can see here in this slide, we maintain our commercial strategy focused on the core markets that represents nowadays 75% of the total of EC backlog. And in this sense, we are guaranteeing a visible and positive outlook for the next 3 to 4 years and preparing the future to accomplish the targets that the company presented last March in the strategic plan. Move to Slide 10. We will not elaborate on that. You can see here the major contracts of EC projects, and we listed only the contracts above EUR 200 million. And we can see that commercial strategy allow us to be awarded in markets very important for the company like Mexico, Angola, Nigeria and Brazil as the most relevant in this list. Moving to Slide 11. We can see here the evolution of the CapEx. And in the first half of '26, Mota-Engil made an investment of EUR 185 million, representing less than 7% of the turnover and allowing the company to promote growth with a very selective criteria for the new investments and focused in the segments of higher margins like such as the industrial engineering as the most relevant example, representing here 63% of the total CapEx allocated during the first half of '26. Moving to Slide 12, and we can see here regarding the financial CapEx, so dedicated to the concessions, as Carlos mentioned before, we invested EUR 81 million and balanced in several projects with the majority in concessional assets in Mexico, in which the company expects to promote the asset rotation in the next years beginning in 2027 and considering the life cycle of each project. Moving to Slide 13. And in firsthand, we can see here the net debt broadly stable with EUR 20 million increase. As Carlos mentioned, we were focused in investing in new opportunities in concessions. If we exclude the financial CapEx, we reduced the EUR 61 million. But as you can see here in the balance sheet, in our left, the financial investment evolution reflects the buildup stage in the concessions portfolio and the asset maturation phase that will deliver in the future capital gains we delivered in the recent years, mainly in Mexico. Moving to Slide 14. We can see here the waterfall graphic when you can see in this slide, the positive evolution in terms of the free cash flow. And I would like to highlight here the ratio of free cash flow over EBITDA of 33%. That represents 3x more than the average of free cash flow that we deliver during the period of 2021 in 2025. You can see here that the company are very focused not only in generating more -- higher operational profitability, but converting EBITDA cash conversion, and this first half of '26 is a very good example of that. Moving to Slide 15. As Carlos mentioned very briefly, a slight improvement on the rates of net debt to EBITDA and gross debt to EBITDA, in line with our strategic plan, very disciplined and in line with what will be the target for the next 5 years that is below 2x net debt-to-EBITDA and 4x the gross debt EBITDA. Moving to Slide 16. Here, I would like to highlight the very comfortable figure in terms of the liquidity position of EUR 1.4 billion when we compare to the EUR 895 million that we presented in the first half of '25 with maturities with less than 1 year, the company is having here surpassing the nonrevolving financial installments over the next 3 years and with a debt maturity to 2.8 years. And of course, important to highlight here the work done by our financial team when we reduced the average cost that improved from 7.6% in the first half of '25 to 7.1% in the first half of '26. And this figure reflects the mix of the local currency debt. Nowadays, with roughly 13% of the total debt denominated in soft currency. And as you know, this currency, of course, has always higher rates comparing to Europe. Moving to Slide 20, when we can see here the information regarding the business units and starting by the European division of Engineering Construction. You can see here the negative impact is mainly related with the delays of the project [ configurations ] that we are considering to begin in execution this year. But even with this impact, the company maintain the capacity to be aligned with historical margins of 8%. Looking to the future, where you can see here the last bullet of this slide. We expect new tenders in the Portuguese markets considering the public announcements in the recent months that creates a pipeline of EUR 60 billion in projects with the dimension that fits with Mota-Engil. Moving to Slide 22, moving to Africa. And as I mentioned before, with the growth of 11% year-on-year in turnover and 12% in EBITDA. Here, it's important to mention the positive, very solid performance in core markets like Nigeria and Angola. As the most relevant markets for the positive performance in this first half of '26 in Africa and also in the industrial engineering showing a very important contribution, namely the sustainable margin of 29% in EBITDA margin that allow the region as an all to achieve an impressive margin of 25%. Also important to mention the recent contracts signed, namely the extension of the Kano-Maradi in Nigeria, $655 million and the contract signed yesterday by our Vice President and Deputy CEO, Manuel Mota to operate PPP for 30 years the extension of the Lobito Corridor in DRC, a very relevant milestone to operate the most important logistics corridor in the continent. For last -- also important involvement in recognition of several financial institutions being the North American DIC as the most recent example supporting the financial close to such an important project in the Sub-Saharan region that is the Lobito Corridor. In Slide 23, we can see and moving to a slide dedicated to the contract mining. We can see here the list of the 10 contracts that are at full capacity with recent renovation Ethiopia, guaranteeing the expected growth in this specific area that will have in this third quarter of '26, the starting production of the contract in Armenia. And of course, with a higher and visible figure of the turnover in 2027 with the contribution from the contract with [ Austar ] in Armenia. Moving to Slide 25 in LatAm. We can see here an increase of turnover in 7% year-on-year impacted, as I mentioned, with a positive performance in Mexico and the increase of 89% year-on-year of the other markets in the South American region, highlighting the performance in Brazil that more than double the turnover in a market where Mota-Engil group expect to build relevant markets with dimension supported in the EUR 2 billion of recent contracts awarded in this market and with local partnerships to consider new opportunities regarding the huge potential of PPP in the market. In this sense, the strategy is simple, continue to identify new opportunities in Mexican markets that has been the most important markets in the region and for the group in the last 3 years in engineering and construction, but having a more balanced contribution from each market in the region, starting with the new cycle of development in Brazil. Moving to Slide 27, moving to the environmental business. We can see here that the performance is aligned with the expectations with EBITDA margin increasing 2% to 21% accumulated in the first 6 months of the year and impacted by the positive performance in all the segments between waste collection treatment and also the international companies. Important to mention that in this area, the waste-to-value strategy will start to have the first visible activity with the beginning of the biomethane production in Portugal already in 2026. For last and moving to the Slide 29. We can see here the contribution from Mota-Engil [ Capital ] and beginning for the -- from the turnover, we have here a flat evolution year-on-year and with a stable margins, executing the backlog of each company here in the energy mobility, real estate. Important to highlight here that the most relevant impact and positive impact in these areas should start in the medium term, considering the execution stage where we are at this moment with the construction of the new Lisbon Hospital and the beginning in the second half of '26 with the works of the first stretch of the high-speed train in Portugal. In pipeline, as you can see here and considering the recent announcements in Portugal, Mota-Engil will be, as usual, very active in the markets and in all major PPP projects that will be launched in Portugal in the upcoming years. And now final moving to the final remarks and guidance, please, Carlos.

Thank you, Pedro. So looking to Slide #31. For the final remarks. As already mentioned, we announced our new strategic plan, Focus 2030 back in March of this year that established the path towards the year 2030 and the goals that we want to reach there. And we established in that strategic plan, three main pillars to sustain our strategy. The first pillar that is growth. And we can see that in terms of this first half of the year, we had a profitable growth in this period. Our turnover increased 6%. Our EBIT margin increased 10%, maintaining same level of 17% that we [ will ] reach in the end of last year. And as important of that as that we grew our net profit after minorities almost 25% when compared with the same period of last year. We achieved a record backlog of EUR 17.7 billion so we are today supported in a very robust, very sound, very profitable backlog that gives us the visibility for next years and the capacity to execute the plan that we established our strategic plan according with our best expectations. But at the same time, and as I saw as the [ contract ] that we signed in these last 2 months, we are leaving a very strong commercial momentum. And not only here in Portugal, as Pedro has mentioned, but I would say in every market that operate not only in Africa, not only in Latin America, but we are leaving this in terms of infrastructure, in terms of engineering [ constructure ] in terms of circularity, in terms of natural resources. So we are living today and studying several opportunities that will further enhance our backlog, but always with the same commercial policy and the same commercial strategy, long-term contracts with higher margins with the profile in terms of generation of cash flow according with our [ inc ]. The second pillar is diversification. So the second strategic pillar is aimed at the industrial engineering that is one of our main focus. And now in terms of contract mining, we are aiming to stabilize our operation in terms of volume last year, we will almost reach EUR 800 million of turnover. This first half of the year, we overpassed the EUR 400 million. So we are going to stabilize with our pipeline, with our portfolio of contracts, 11 contracts. And now our focus is to improve even more the efficiency of the contracts so that we increase the profitability. At the same time, we want to give more visibility to this activity, and therefore, the creation of Mota-Engil mining services that we already mentioned. Concessions are increasingly reinforcing the group's long-term value creation. So this is one of the key highlights in our strategic plan so that we are more and more focused in several concessions in our main markets, in our strategic markets. Latin America, Mexico and Brazil, mainly here in Portugal, of course, but also in Africa and that the example of the signing of Lobito Corridor stretching DRC yesterday, is the best example that we could give. And at the same time, we are investing in new circularity investments, namely the biomethane and that was mentioned by Pedro in our waste-to-value strategy, but also in our agroforestry the projects in Africa that will further broaden our portfolio of long-term cash generation activities. Last but not least, in terms of the strategic pillars, the financial discipline in which we establish very concrete and very, very sound objectives in 2030 and which we will maintain our leverage discipline complying with the net debt over EBITDA ratio of being below 2x. The gross debt over EBITDA ratio below 4x, and [ we ] supported by active debt portfolio management, focusing on increasing the maturities and reducing the financial costs. Our free cash flow of almost EUR 160 million that we generated during the first 6 months of the year represented 33% of the EBITDA and it demonstrates the strong underlying cash generation that is underneath our operations. And also it's important to stress that is 3x higher than the average of the last 5 years. So if we compare [ '21 ] to '25, you'll see that the generation of free cash flow is 3x lower than the ONE that we presented in the first half of this year. Always with a reverse liquidity. So as you seen in the previous slide, we have today a very sound and a very secure position in terms of liquidity that will provide us the financial flexibility and support our growth strategy and the future investment requirements that we have in order to fulfill that strategy. Always with same disciplined capital allocation that we've been delivering in the last quarters, in the last years, in which our CapEx will be always below 7% of the turnover in order to fulfill the FOCUS 2030 targets that we established. Moving to the last slide before we can go to the q-and-a session, the guidance for the end of this year. So what can we expect for the end of 2026? As we -- as we said in the presentation of the year of 2025, we are going to have a growth this year unlike 2025 that we didn't grow in 2026, we will have a double-digit growth. So we'll expect above 10%, supported by the backlog that I just mentioned. The EBITDA levels will remain at 17% level. So we established role comply to be equal above 17% in terms of EBITDA margins. But in terms of net profit, we will increase when compared with 2025. So we will be around 3%. That -- as a reminder, it was the goal that we established in the previous strategic plan, building '26 to reach 3% of net profits by the end of this year of 2026. Always with this strong operational cash generation and the discipline in terms of finance and the leverage of our debt and as well as a disciplined and return-driven capital allocation with CapEx below 7%. That was mainly done with CapEx this first half of the year in this last mine of Armenia like was mentioned previously. At the same time, to finalize, we will continue to have an active management of our concession portfolio. It is part of our strategy to continue to have the rotation of our concession portfolio. At the same time that we start to build a new long-term platform for the future and for this is important, some of the projects that [ they ] are in the commercial stage. So thank you for your attention, and we are now ready for your questions. Thank you.

[Operator Instructions] Our first question comes from Miguel González Toquero from JB Capital.

Three on my side, please. First of all, on your newly incorporated mining division. My question here is now that it's established and it seems all the mines are reaching their ramp-up period, whether you could consider to spin off this division or bring a minority partner. Also, you mentioned the renewal of Kurmuk gold mine. I believe you have three mining contracts expiring between this year and next. So maybe you can have some visibility on how negotiations are evolving. Secondly, on Bamin project in Brazil, it seems you are closer to reaching an agreement. So maybe you could provide some visibility also on this and how these negotiations are going, whether you are bidding for the whole project or you could bring any other partner in board and maybe your expectations on how you will finance all these works? And lastly, on your guidance for the year, sales grew by only 6% in the first half, implying that to reach your growth guidance, sales will increase by at least 15% in the second half. Maybe you could elaborate a little bit on this, in which geographies or activities we should see such an acceleration? And how likely is that you reach the top end of this guidance and whether achieving this depends on the reactivation of works in Portugal...

So thank you very much for your questions. So let me -- first of all, starting by the guidance for 2026. I was making -- I had, I was saying a mistake because we are going to reach the end of 2026 with 18 -- at least 18% EBITDA margin. So we reached 17% in the first half. So last year, in the end of 2025 was 18% and will maintain over past 18%. Concerning your question, yes, it's true that we only grew 6% year-on-year on the second half -- on the first half of 2026. So we can expect a very strong second half of this year, that is sustained in the backlog that we presented. And we've reinforced our expectations for the end of this year in terms of growth above the 10% that is expressed here in our guidance. Concerning the questions that you did about the mining activity and starting by Bamin. Let me be very clear with Bamin because a lot of people make questions about Bamin. Bamin, alongside with several projects that we are looking and studying our pipeline it's just one more project. Of course, that is a very big project. And yes, it's true that we are starting a project because it's public that we had meetings with the authorities. So it doesn't -- we need to say what is true and the truth is that we are studying to the project. Of course, this is a big project and therefore, we are looking in a very disciplined way to the projects, studying the engineering of the project, the investment that needs to be making the process and the feasibility of the project. That being said, of course, that if we go ahead with the project, that is a decision still to be made because we are in the middle of the studying process. A lot of things has to be done until we reach a conclusion. But if we conclude, of course, that conclusion, if positive, has to have several dimensions fulfilled, namely in terms of the quality of the project. Secondly, in terms of the profitability of the project. Third, in terms of the generation of the cash flow of the project and fourth and probably the most important, the feasibility of financing the projects, and therefore, to finance that project, certain dimension, of course, that we need to have a partnerships. A partnerships in terms of financing partnerships, in terms of equity and partnerships in terms of suppliers and also the visibility of having the clients for the product. So this is a very complex project. It's true. It's a very big project. It's true, but also it's a very interesting project because it reaches several of the activities that we are best-in-class, namely engineering constructure, infrastructure development, infrastructure, maintenance and operation and of course, contract mining. So this is a very complete project in which we are studying very careful with a lot of interest. That being said, we are in a very early stage. So I hope that I was completely clear on Bamin. Concerning the two other questions, the mining division. The mining division is the, I would say, the first step that we -- the creation of the mining division or the mining company is the first step of the spinoff of our mining activity. That is actually expressed in our strategic plan in FOCUS 2030. The first reason that we want to do that is to be -- to give more visibility to our mining -- contract mining activities. So that the investors, the markets can understand [ to ] what is our strategy, but most important, what is our performance. Concerning your question, if we are going to open or not the capital, that is a possibility. I cannot tell you that we are going to do or not because we are still finalizing the first step that is the spin-off of the activities and the creation of this new company. The second question that you made me, I have to -- I have to ask you to repeat again because I'm not really sure if I understood correctly about Kurmuk.

Yes. Yes. Thank you. It was very clear. I was just wanted to know, I believe you have three different mining contracts expiring one this year and two next year, I believe. So maybe you can add some visibility on how you...

Kurmuk, that is the last contract. We already started the operations. And the last one that is in Armenia, the operations are already being started. So it will be in full ramp-up by the end of 2026.

Yes. And I believe there were two different mining contracts. One was called [ Moatize ] mine and TRA as well, gold mines. I believe they were aspiring this year and this year. I don't know you are starting negotiating renovation of these contracts.

Yes. None of the contract is going to end this year. So all the contracts will continue to the following years. All of them are being renovated.

Our next question comes from Filipe Leite from CaixaBank BPI.