Webuild S.p.A. (WBD) Earnings Call Transcript & Summary

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Webuild Full Year 2023 Financial Results Conference Call. Our call today is hosted by Pietro Salini, Chief Executive Officer; together with Massimo Ferrari, General Manager of Corporate and Finance. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pietro Salini, Chief Executive Officer. Please go ahead, sir.

Good morning, everyone, and welcome to our conference call focused on Webuild full year 2023 results. I'm Pietro Salini, Chief Executive of the group; and with me is Massimo Ferrari, our General Manager. Today, we celebrate another year of excellent results. Before we comment our 2023 performance on Slide 4, you will see a snapshot of our business in numbers representing the journey we made. The group enjoys in its track record 14,000 kilometers of railways and metro lines, over 80,000 kilometers of roads, highways and bridges as well as 313 tons in hydro plants on every continent of the world. Our dams and hydroelectric plant provides water and electricity to millions of people. The infrastructure we built supports the development of countries and regions, helping to improve lives of millions. Turning to Slide 5. In 2023, we further consolidated development trajectory began into 2012, posting record results. The 2023 results are the effect of the strategy we started some years ago, shared with all of our stakeholders. Notwithstanding the challenges that we have all faced these years, like COVID-19, inflation, and we have stayed the course and met our goals time and again. We now have a group with a scale, a sizable backlog of quality orders, sound financial discipline and risk management and a more efficient organization. This makes us ready to keep building on the momentum and to seize the opportunities presented by current market trends. So when it comes to momentum, allow me to talk about what we have achieved since 2012 when it all started for us as a listed company. In a little more than 10 years, we have gone from a company of 11,000 people to a global champion with 87,000 people. With more than EUR 100 billion of new orders acquired since the 2012. Our consolidated backdrop has reached, in 2023, an all-time high of EUR 64 billion. This amount, which is among the largest in the industry, fully covers our current business plan and provide our group with visibility and certainty for the next industrial plan. In the last 10 years, our revenues increased more than 4x, reaching EUR 10 billion in 2023. And this is not all, we have derisked our business, shifting our focus to low-risk countries. These countries now account for 90% of our revenues. We demonstrated our ability to generate cash from our activities, achieving an outstanding net cash position of EUR 1.4 billion in 2023. This compares with a net debt position of EUR 300 million in 2012. We completed more than 270 strategic infrastructure projects worldwide. Projects that changes the life of present and future generation. This include: the Panama Canal; the bridge of the Danube River in Romania; San Giorgio Bridge in Genoa has also become a model of efficiency and collaboration; Cityringen Metro in Denmark; and in Australia, the latest one is the Forrestfield-Airport Link; the Al Bayt Stadium that hosted the World Cup games in Qatar; in Ethiopia, there is Gibe III, the first dam on the Omo river that is supporting the country development. These results were made possible by a clear and consistent strategy we have pursued since 2012. Our strategy is supported by global mega trends that given us strong boost to infrastructure investment. A winning strategy that consists in 3 pillars: focus on building high complex and innovative infrastructure and becoming a reference partner for our clients worldwide; consolidate our leadership position in core countries, such as Europe and Italy, Australia, United States and Middle East continuing the policy of risk mitigation; gain scale so we can invest in different strategic projects. Scale is fundamental in our industry. Scale has allowed us to invest in innovation and health and safety. It has made us a trusted partner for our clients to solve the most complex challenges in building strategic infrastructure. Scale has allowed us to attract people with skills and expertise. We have successfully managed challenges that come from the dramatic changes into the environment in 2 years. For instance, the worker shortage and the supply chain bottlenecks. Scale has allowed us to invest in processes to successfully reduce risks and improve margins. This includes a more selective bidding process, a successfully contract management, the cost efficiency program, efficient working capital measures and the reorganization of our subsidiaries. During the presentation, Massimo and I would like to tell you more on each of these initiatives. Turning to Slide 7. I would like to illustrate some of the reasons for which we are a trusted partner for our clients in building strategic infrastructure. We invest in innovation. Today, we boast a stronger organizational structure with more than 4,000 engineers worldwide. We deliver innovative solution to high complex engineering challenges. That contribute to efficiency improvement and reduction of lead times. At the same, we uphold the high standards in sustainability, quality and safety. This know-how makes us an international reference in the infrastructure sector. To give you an example, in 2023, we opened Webuild Innovations, a research hub in Southern Italy, which design and develop solutions to make product and process more efficient. This will have reduced the technology gap that characterize the construction sector. We also inaugurated in Sicily, a robotic factory to produce precast concrete for tunnels. It employs highly efficient technology to reduce the impact on the environment and increase productivity. The robots will be able to produce a precast concrete segment every 4 minutes, down from an average of 10 minutes. We also invest in health and safety, which are a top priority at Webuild, and our investment has made a difference. In 2023, the average lost time injury frequency rate for Europe main industry players into 2022 stood at 6.5%. At Webuild, it was 2% in 2023. Our strong performance is recognized by many third-party institutions. Wherever we operate, we bring our expertise and best-in-class procedures. In Australia, the Northwest Link was recognized as among the best projects from a technical innovative point of view in the safety field. According to ESG rating provider MSCI, we have a strong safety performance relative to our figures. Around EUR 500 million were allocated to health and safety in 2023 on our projects worldwide. Over 2 million of health and safety training hours were provided in the last 4 years, involving both direct workers and subcontractors. We launched several programs. For example, 12,000 people were involved in our Safety Builders Programs. On Slide 8, you can see how we successfully managed the worker shortage and supply bottlenecks. In only 12 months in 2023, in a context of high demand, we added more than 12,000 workers. We have now a total of 87,000 direct and indirect employees working with us across the globe. These people bring skills, expertise and experience that makes us more competitive. We continue to invest in young people. More than 30 -- 40% of our workforce is under 35 years old. We are committed to equip our people with the necessary skills and competencies to become the leader we need. We give them the space to become ready for the future, and we are convinced our future CEOs are already among our talents. The growth of our full force -- workforce is thanks to several initiatives that we have undertaken, like: recruitment and training programs, with 1 million of training hours only in 2023; scholarship and collaboration with Italian international university. For example, in Italy, we plan to hire 10,000 people within 2026. In order to meet the increased needs for resources in the market, we launched in November 2023 Cantiere Lavoro Italia, a training hub aimed at attracting people to the industry and ensuring that they are prepared to work on site. Thanks to our centralized supply chain management and procurement strategies, we have been very effective in dealing with supply chain bottlenecks, an issue that arose after the COVID-19 pandemic. We promoted innovation along the entire value chain, investing in automation and many digital tools. To promote collaboration, engagement and strengthen the relationship with the supply base, we have organized various events during the year. In addition, we are looking understanding our value chain to specialized companies that work in some specific sectors crucial to our business. I'm talking about procurement of steel structures, foundation and MEPs, mechanical, electrical and plumbing. For these type of activities, we expect a substantial growth in need coming from increased expansion in production. Those specialized companies could be both captive and work for different sectors. Turning to Slide 9. I would like to give a brief overview of the initiatives we have undertaken to increase margins. Since several years, we have adopted a selective and disciplined bidding approach based on a deep analysis of the projects with the most advanced tools before deciding on submitting a bid. Competition is now more on technical aspects rather than price. More than 90% of the new orders in the last 2 years have been acquired because of a better technical offers, not price. They lead to better marginality at project level. As described in our last calls, we are experiencing a paradigm shift in the sector. The main goal of our clients is now to deliver products needed to face ongoing mega trends. In this collaborative environment, we have successfully managed our contract introducing new contract formulas, which imply lower operational risk. Just to make you some example, we are talking about the incentivized target cost introduced in Australia, a model like a cost plus with a benefit mechanism linked to specific time and cost targets. In Canada, we recently signed a new contract based on so-called progressive design and build. This is an innovative model that involves less execution of risk into the construction phases, being the budget defined on a first study phase in collaboration with the client. As many of you remember, the vast majority of our order backlog has price revision formulas to take into account inflation risk. The third level for marginality improvement is the cost efficiency plan we launched a few years ago. Massimo will go more into details. Turning to Slide 10. 2023 is the third year in a row that we have a record order intake, totaling more than EUR 22 billion. This amount more than doubled our book-to-bill target for the year. In just 1 year and few months, we have already secured about 80% of new orders that we were forecasting for the 2023-2025 business plan. Out of the total, EUR 11.6 billion comes from Italy and EUR 10.8 billion outside of Italy, in countries like Australia, United States and Saudi Arabia. They are related to projects such as NEOM and the biggest urea plant in Australia being built for Perdaman Chemicals and Fertilizers. And these extraordinary results does not include Messina Strait bridge, for which we are waiting approval of the final project expected in the coming months. The work will then be able to start immediately after approval. The strong commercial momentum is continuing in 2024 with 2 strategic projects having been acquired: one in Saudi Arabia, also related to NEOM; one in Canada; and some others in U.S. And more is to come with more than EUR 13 billion of contract for which we have already presented a bid and are awaiting assets. As you can see on Slide 11, this strong momentum comes to a total order backlog of EUR 64 billion, already exceeding the target we set for the end of 2025 business plan. Our order backlog mainly comprises long-term contracts and is diversified across multiple geographic areas. This enables the group to remain stable throughout regional economic sites. Out of the total, EUR 55 billion are related to construction projects, of which more than 85% is related to low-risk countries. Italy takes the biggest share of 48%, followed by Australia with 19%. The current order backdrop covers 100% of revenues and EBITDA targets under the current business plan. It gives us high visibility for the next plan. True to our commitment to sustainable development, nearly all of our backlog is dedicated to achieving United Nations goals. Nearly 75% is related to sustainable mobility projects. On Slide 12, 2023, marked a year of significant progress for our ESG ambitions. In addition to the recent confirmation of a world leader in climate change action by CDP, former Carbon Disclosure Project, Webuild was upgraded to A -- AA by MSCI ESG Ratings in acknowledgment of our commitment to corporate governance and health and safety. We also maintain a top rating from other ESG rating agency, as ISS ESG with B- Prime level and Moody's ESG- ex Vigeo Eiris with Advanced level. Our sustainability strategy embodied in the ESG plan, which was defined in 2021, this 3-year plan was completed in 2023. We successfully achieved our goals and consolidated our position in terms of sustainability. As already discussed, our performance in health and safety has been extraordinary, and we are among the best-in-class in the sector. The injury rate recorded a reduction of 41% compared to the 2017 baseline with a target of minus 40% in 2022. The emission intensity rate recorded a reduction of 67% compared to the 2017 baseline versus a target of minus 50%. It has been an incredible result if you consider the significant amount of projects we started in these years. The share of women included into the succession plan of key position, reaching the target of 25%. Additional investments in innovative projects amounted to more than EUR 57 million with a target of EUR 30 million by 2023. Let me remind you that 2022, we also obtained the approval from science-based target initiative for our CO2 emission reduction in actual terms. We aim to reduce them by nearly 500,000 tons by 2030 versus 2019 baseline. Let's move on Slide 13. Confirming our cost and commitment, we'll further invest in sustainability, setting ambitious targets with a new ESG planned for 2024-2025. The plan is based on the same 3 main pillars we guided out successfully in the last years: Green, safety and inclusion, innovation. With the new plan, we want to continue to contribute towards the low emission economy: investing in clean technology, improving the environmental sustainability of our construction site and infrastructure that we built. We want to continue to represent the sector benchmark in terms of health and safety, skill development, inclusion and efficiency through investment in innovation and digitalization. We are targeting to further reduce our carbon intensity by 10% in 2025 from the level registered in 2022. Among the efficiency initiatives, we are going to implement the result -- the continuous investment in green TBMs, machines capable of reducing energy and water consumption and increasing safety. From the first simulation carried out, this well appears a 15% reduction in energy consumed per cubic meters of tunnel excavated compared to traditional TBMs. On health and safety, we aim a reduction of our injury rate by a further 6% to be reached in 2025. To achieve this growth, we continue to educate people, providing training plans and monitoring work areas, as also thanks to the use of technological tools. For example, one of our highly innovative device is Infinity Neural, which applies artificial intelligence to monitor various safety risks associated with tunneling works. This solution recognize noncompliant behaviors, communicate them with the instant messaging to supervisor while, at the same time, sending acoustic signals to the workers involved and generating periodic reports. On gender inclusion and diversity, our goal is to improve the gender mix at our top line management through inclusion-oriented processes,and mentoring projects. We further set targets in order to increase at least 20% the number of women managers by 2025. We are finally committed to reinforcing our leadership in this sector through innovation, by investing no less than EUR 430 million in clean-tech high potential innovative projects. Before letting Massimo go into further details, let me give you a quick overview of our main 2023 results on Slide 14. 2023 was a record-breaking year, both in terms of financial and operating results. We have largely exceeded the guidance for the year. With EUR 22 billion, we have consolidated an all-time high backlog of EUR 64 billion. Revenues grew by 22% to EUR 10 billion and EBITDA by more than 40% to EUR 819 million. We have drastically improved our credit spending, reducing gross leverage and improving our cash conversion cycle. We registered an outstanding net cash position of EUR 1.4 billion, improving by EUR 1.2 billion versus 2022. We ended the year with an adjusted net profit of more than EUR 200 million, for which we are proposing a dividend per ordinary shares of EUR 0.071, increasing by 25% in respect of the 2022 level. Since 2020, our dividend policy is becoming more and more attractive with a dividend more than double, starting from a level of EUR 0.03 per share. I will now leave the floor to Massimo to explain to you the details of it.

Thank you, Pietro. Good morning, everybody. Before I go through the results, let me remind you that as it is customary, we are presenting adjusting -- adjusted figures to represent the recurring performance of the business. You can find the piece of the adjustments that we made in the appendix. Let's start from Slide 16. Here, you can see how strong our operating results were in 2023. As we said on previous occasions, Webuild proved to be anticyclical. We have beaten GDP growth in all the countries where we operate. The group closed the year with revenues and margins growing by more than 20% and more than 40%, respectively. Revenues reached EUR 10 billion and EBITDA came up at EUR 819 million, largely beating guidance. EBIT reached the EUR 475 million with the margin reaching 4.8%. As described by Pietro, the good level of marginality is a result of a strong quality order book with better marginality at project level, contract management with new formulas for less operational risk and the coverage on inflation we enjoy in most of our contracts and, finally, a cost efficiency plan, which I will go into more detail with. In the last 10 years, the world sector has performed well with an average growth rate of revenues of around 40% for European player. In this context, we have had a strong growth outperforming our peers, as Pietro was saying early, with revenues increasing more than 4x since 2012. Going to Slide 17, let's take a look at revenue distribution. Our activities were balanced with approximately 90% of revenues in low-risk countries. We worked a lot over the last years to improve the quality of where our revenues come from, shifting our focus towards markets that are low risk. By low risk, we mean developed economies with clear rules, political stability and faster payment cycles, such as Europe, Australia, the U.S. and the Middle East, in particular, with Saudi. These are the countries where the group enjoys a leadership position. Italy represents the main market with 34% of revenues. It's a fact that Italy, in the last years, has changed a lot. Many investments in infrastructure projects have been unlocked with a clear approach shift from clients and government support with the approval of the new procurement code. After our acquisition of Clough, Australia has come to represent our second biggest market with 20% of revenues coming from the country. On Slide 18, we have the P&L below EBIT line. We posted a net income of EUR 236 million, doubling the 2022 result. Financial income was EUR 119 million, in line with the previous year. Financial expenses were EUR 245 million, an increase of EUR 32 million versus 2022, and the rise in net financing costs is mostly due to the higher cost of debt as a result of the reference interest rate performance, which affects the group's variable rate debt and the reversal of financial income on delayed payments by Ethiopian client following the settlement of contract amendments. Taxes amounted to EUR 143 million with a reduction in the rate from 43% to 36%. At the bottom of the slide, you can also see a bridge from reported net profit that amounted to EUR 124 million to the adjusted one. The adjustments refer to the accounting nonmonetary items, such as: EUR 43 million for the amortization for -- of the positive bargain we registered relating to Astaldi acquisition, netted by EUR 36 million bargain coming from Clough acquisition. This gain, as it was for Astaldi acquisition, comes as a result of the purchase price allocation calculated with the support of the leading independent advisers; EUR 106 million related to the final resolution in the proceedings of -- for some damages related to the construction of the expanded Panama Canal's locked gates. On the next slide, we show our main balance sheet items at the end of the year. The financial discipline applied to our activities in the last years allowed us to drastically improve our credit standing. As we have said many times, cash generation is a key part of our business plan. We exceeded market expectation, consolidated an outstanding net cash position of EUR 1.4 billion. We continued our path of reducing gross leverage. We stand now at 3.2x, which compares to an average of 4x of a benchmark of European peers for 2022. With additional increase in profits, leverage should decrease further in next years. In addition to strong operating results, working capital is one of our levers for cash generation. We successfully maintained it negative at EUR 2.1 billion, improving from the previous year. This comes thanks to a strong commercial activity, but also several measures to manage efficiently working capital and the cash-ins of the slow-moving items. We have put in place hundreds of initiatives to optimize working capital, aiming to accelerate work performance billing also by eliminating any inefficiencies and slow-moving collection. We substantially reduced the exposure balance sheet risk, settling a large number of outstanding claims in 2023 with a net reduction of EUR 400 million. A further boost on cash flow come from noncore asset disposals. In 2023, we successfully sold the concession related to Milan Metro Line 4 for about EUR 140 million. The divestment agreement signed in the final stage of the work demonstrates the group's extraordinary ability to deliver highly complex infrastructure. Moving to Slide 20. There is progress being made on cost efficiency. We presented the plan in our 2023-'25 business plan. At corporate at project level, we targeted EUR 180 million of accumulated savings for the business plan period. Up to now, we have implemented initiatives for EUR 90 million. An important part of the savings come from the reorganization of staff and optimization of external spend, including, for instance, consultancy and several third-party services. Optimizations are also linked to our continuous effort in back office automation with the use of the latest technology to automate low-value, time-consuming activities. We have achieved a successful results in domestic and international projects, and now we are also optimizing activities at our subsidiaries, extracting synergies, for example, from Clough. On Slide 21, we want to give you an update on the reorganization process of our subsidiaries. We aim to improve their efficiency and profitability, seizing most market opportunities and identifying potential divestment options. In Australia, we are working as a single company, Clough together with Webuild. We have completed the integration of the 2 companies, aligning the organizational model and the processes. Thanks to our combined skills, we have placed among top 5 players in the country. The same approach has been followed in the U.S. Webuild is well positioned to address markets' needs, thanks to the local subsidiary, Lane. Currently, Webuild is working our shipping lane by derisk [Technical Difficulty] a new strategy focused on core projects and market is being applied. Discipline is the key word for this turnaround plan, which aims to bring back Lane to positive margin already for 2024. Regarding the concessions we have in our portfolio, we are looking at potential divestment as was the case for the Metro Line 4 in Milan. We have in our portfolio other concessions for potential sale with a residual book value of about EUR 300 million, and we are looking for potential partnerships with infrastructure funds for new greenfield projects. It's important to point out that the strategic management of our subsidiaries portfolio represent a value-added activity. It allows us to develop specific know-how in different sectors and core markets, combining the benefit of business diversification with the competitive advantage of a local presence. For this reason, we are proceeding with a structural reorganizational of Seli Overseas, Cossi, NBI, CSC and Fisia. This process is based on the alignment and organization governance and processes with our best practice while integrating specific tools. On Slide 22, we show the main numbers of our corporate debt and the liquidity profile. The next relevant maturity date relates to the bond maturing in October 2024, which has been already partially addressed with the liability management operation completed in September 2023. We successfully refinanced the EUR 450 million maturing in '24 and '25, placing new notes for an equal amount maturing in 2024. In September 2023, Standard and Poor upgraded us. It reflected the strong improvement of credit metrics in '22 and the expected progress in '23, '24,as a result of our consistent derisking strategies. S&P also appreciated our strong expertise in executing and delivering complex construction projects, improved operational processes and qualified management team, which translates into better risk management and a better working capital trend. We closed 2023 with a comfortable liquidity position of almost EUR 4 billion, including more than EUR 900 million of undrawn RCF lines. Nearly 90% of our corporate debt is at fixed rate. This relates to the bond debt. The cost of the corporate debt is about 5%. I will now leave the floor to Pietro for a review on the outlook and some closing remarks.

Thank you, Massimo. Moving to Slide 24, where we can see our guidance for 2024. We are giving the following guidance: a book-to-bill of more than 1x; revenues higher than EUR 11 billion with a growth of 10%, reaching 2025 targets with a year ahead of schedule; EBITDA higher than EUR 900 million, approaching 2025 target; and finally, we aim to maintain a positive solid net cash position higher than EUR 400 million. In addition to a lower level of advanced payments versus 2023, the target for net cash position reflects an estimated CapEx of around EUR 500 million to EUR 700 million linked to growth. However, there is room for efficiency. For example, the refurbishment of [ some ] TBMs, the management of timing for new machinery acquisition or the disposal could lead to a lower level of net CapEx. We remain committed to our gross debt reduction target of EUR 220 million -- EUR 250 million within 2025 and to distributing a stable dividend to our shareholders for accumulated amount of EUR 160 million, EUR 170 million in '23-'25. To achieve these targets is all in our hands. 100% covered by the orders already acquired in our backlog. Let me remind you that these targets do not include the bridge over the Strait of Messina. That project is an upside to the plan, and every day, the start of the work comes nearer and nearer. On Slide 25 and 26, we look what else is in the store for the future, beyond our plan. We have in front of us a very promising market with trillions of investment in infrastructure powered by global mega trends of the century. Climate change, energy transition, water scarcity and the urbanization are the key catalysts. We can leverage on our solid leadership position, demonstrated by years of successes. Thanks to our ability to moving people in every region of the world, our technical know-how and our capacity to invest in innovative solutions, we are in pole position to address these market needs. In Australia, as Massimo told you, we have created a high-value asset. Following Clough acquisition completed in 2023, which is among the top 5 players, backlog doubled versus 2021 to EUR 11 billion in 2023 with cost-plus type of contracts. As of last year, EUR 2 billion of our revenues are generated in Australia, and we expect this number to increase to over EUR 3.5 billion in 2025 with mid-high single-digit margins. We are operating in the country as a company with no debt and no claims. The synergies that Clough and Webuild will bring to the engineering and construction industry in Australia are unparalleled. We are investing many resources there to see the market value of more than EUR 400 billion. Opportunity will be driven by investment in traditional segment, mainly road and rails, in the short term but a higher boost in the medium term will come from energy sector. For example, the Powering Australia Plan foresees more than AUD 40 billion of investments in climate and energy transition with the aim to make the country a leader in clean energy production. Thanks to Clough expertise, we can address new business segments where demand is growing on a global scale. We are referring to green ammonia plants and transmission lines. Finally, another sector to explore further is defense, where the government has committed to a major upgrade of its facilities. If we value the Australian franchise, which, of course, these numbers are not reflected in our balance sheet and we use the multipliers that are using in the market, we can have an asset that the value of which exceed EUR 2 billion. In Italy, we are committed to deliver. Turning to Slide [indiscernible] -- sorry, let's have a look at the other core markets. In Italy, we are committed to delivering time the project financed by the PNRR, but many other initiatives are on the horizon. In the coming years, there will be projects not only for the completion of railway such as the Cantiere Lavoro Italia, but also investment in Metro Line 4 stadium, hospitals and hydroelectric plant. And there is as well the Messina bridge, which we are committed to build. The railway with Italy alone has announced a plan of EUR 100 billion of investments in the next 5 years. Europe is also notably increasing public investment aimed to accelerate the climate and energy transition. The new plan is to invest EUR 208 billion by 2027 with the repower view program to increase energy security, clean energy investment and energy savings measures, additional EUR 600 billion are committed to be spent to fight climate change. In the Middle East, the market is expected to almost reach EUR 800 billion in the coming years. Here, we have a historical presence with local branches. And particularly, Saudi Arabia is attracting many investors to an ambitious investment program, the Saudi Vision 2030 aimed at diversifying the country's economy in order to reduce its dependence on oil. The program includes mega projects such as NEOM and Diriyah in which Webuild recently acquired major orders. Further opportunities will come from the 2 future events, the World acquisition and the FIFA World Cup, to be held in 2030 and '34, respectively. In North America, we are working on a new hub with an integrated approach towards the American and Canadian markets, which are totaling more than EUR 5 trillion of new orders. On U.S. markets will be driven by several government initiatives, including plan, like the infrastructure investment and drop back and the inflation reduction. We are among the world leaders in tunneling sectors. We bored 10 kilometers of tunnels per year, and we have started a project with the refurbishment of TBM components for which the first TBM will be inaugurated in June this year. For example, we are boring the longest tunnel in Italy for the Milan-Genoa high speed. Approximately 27 kilometers in mountainous terrain with different rock layers, where high-speed trains will pass. To escalate this tunnels 5 highly specialized TBMs were used specifically for this project. TBMs are extraordinary, highly technological machines, each TBM is between 75 and 115 meters long, with a head up to 20 meters in diameter, which can accommodate over 20 specialized workers inside, who pilot the machines. Mechanized excavation through TBM to a single machine does everything, not only bored but also installed the prefabricated segments. In some context, special machines are needed to avoid the risk of building and surface routes collapse. For example, in the Metro 4 of Milano, we worked with machines that dug 20 kilometers of tunnels in the city centers. Another area of business, which high growth potential comes from the water market, estimated at approximately EUR 400 billion worldwide. Our subsidiary, Fisia has a long history and great track records and the construction of the water treatment, the desalination of plants all over the world. In the past decades, Fisia contributed to the development of [indiscernible] countries realizing some of the biggest desalination plants in the region. We want to bring that expertise to new markets such as Italy. Today, desalinated water production in our domestic country represents only 4% of the total consumption, compared to 56% in Spain. To address this gap, the Italian government has declared a strategic interest in contracting water scarcity and enhancing water infrastructure, potentially attracting the interest of international investors. Finally, on Slide 27, we give you some takeaways from this call. Thanks to a clear and consistent strategy, we have delivered solid results in the past years crowned with the record-breaking results in '23. We are set to reach 2025 targets early, thanks to our robust order backlog that fully covers '23, '25 plants and proves ample visibility for the next plant. We are actively in booming markets driven by global megatrends, which we are seizing, thanks to local presence and structural organization we have built in the past years. Thank you for your attention. We are now ready for the Q&A session. So as not to slow things down too much, we encourage you to focus on the group's strategy and other broad initiatives that underline its current and future financial performance. For any questions you may have of a more detailed measure on one figure or another represented in the tables or some technical details mentioned during the presentation, the Investor Relations team will be available and willing to answer them after the call. Thank you to all of you.

[Operator Instructions] First question is from Emanuele Gallazzi of Equita.

I have 2 questions. The first one is on your operating target for 2024. If I look at the low end, so EUR 11 billion of revenues and EUR 900 million of EBITDA, it implies a margin that is flat year-on-year. So it seems to me that there is room to do materially better from this perspective. But I just would like to understand a little bit more on your view on this. And the second one is on the U.S. business because you mentioned that for 2024, you already expect a positive EBIT margin. So I would like to understand a little bit better about the ongoing restructuring process of this business and if you expect an acceleration of orders from the U.S. market in 2024.

Okay. Thank you, Emanuele. So regarding the margins, you are right. We expect the same percentage marginality. Of course, we still keep the approach under promise and over deliver. So we have many actions in place in order to improve the marginality, but we believe that it's an ambitious target to achieve EUR 900 million also because you know very well, it's very important the commercial rate on cash regarding the EBITDA. The second question regards lane. We expect to achieve the breakeven in 2024 and then to start to have a positive marginality. But more than that, we are putting inside lane also the Canadian market and we would like to exploit also the large infrastructure business that we can pursue if we achieve discipline, and we achieve positive margins in lane that we expect for 2025.

If I may add something, we are, of course, thinking of expanding our franchise in U.S., the size that actually represents which is, let's say, a little bit shy of EUR 1 billion of turnover. It is not sufficient to tap on what is our main strength, which is say the larger product and more sophisticated products. I think that Webuild will invest of course into people, will bring some of our best managers to take care of the U.S. facility and also to look at different sized products in which our expertise it is, let's say, outstanding. This is the fact that we target our strategic plan to have a company in the U.S. that in the U.S. market, plus the Canadian market may envisage in the next coming years side of around EUR 5 billion to EUR 6 billion of turnover.

The next question is from Matteo Bonizzoni of Kepler Cheuvreux.

I have 3 questions. The first one relates to this, I would say, extraordinary results, which you achieved on the net cash of EUR 1.4 billion, up from like EUR 200 million last year. Looking at the bridge in your balance sheet, particularly, there is a big increase of the contract liabilities clearly related to your EUR 22 billion intake. Can you little bit provide -- a little bit more color on, I think, in Italy or maybe also Australia? Can you a little bit elaborate exactly where this strong increase of the contract liabilities came from? And also in relation to the target for the net cash for 2024, which seems to go down by around EUR 1 billion. But I think you could do better. Also in this case, can you indicate what kind of swing in your net working capital should we expect in order to be able to understand better the bridge for this year? The second question relates to delta between the network, your equity and the net profit. So the consolidated net profit was more than EUR 100 million, but the net worth net equity was down at a group level by around EUR 200 million. Looking about that is mostly driven by the minorities, which are down significantly the equity minorities. I mean, can you also in this case little bit, I'll past reconciliate the delta between the consolidated net profit and the evolution of the net equity? The last one is on CapEx. I have looked in the detail of the presentation and those press release, I don't think you have disclosed CapEx. If yes, pardon, but I don't think you said 2023. What it was -- you said that in '24 is going to be EUR 500 million, EUR 600 million, if I have -- correct? Just to have an idea of the evolution of the CapEx, '24 versus '23.

Thank you very much. So starting from the contract liabilities, the color that you asked, most of them come from Italy, but of course, also from the settlement we made in some other contracts. The reduction of claims. These are the sources in general, but in terms of advanced payment most of them come -- came from Italy, but there are some other advanced payments that came at the beginning of 2024, and will come in 2024 from Italy and of course, from -- for instance, from Middle East, as you can imagine, from the large projects we won and also from the other projects that we will be happy to announce in the coming days also in the coming days from other low-risk countries. Regarding the working capital, we put in the assumption that bring us to the target of net financial position higher than EUR 400 million, the highest CapEx that we should be EUR 700 million. But we have many levers in order to improve the release of cash coming from the CapEx because what happened in 2023 is that the action put in place in '22 and '23. Thanks to the scale generated a much larger benefit than expected also by us. Also when we closed the 9 months results, we didn't expect the target that we achieved. And these are the benefits, that Pietro mentioned at the beginning, coming from the size because all the actions put in place improved significantly the capability to manage the working capital from the corporate level from the center. Regarding the net equity, we have the in Italian [indiscernible], the net effect from the exchange rate that is not a monetary.

Accounting method.

Accounting -- it's just an accounting method and then the change of the perimeter of consolidation. Regarding the CapEx, you already answered to your question, we expect a range between EUR 500 million and EUR 700 million, why the range? Because we have the financial effects that probably started already in '23. We have some cash out in '24 and it depends from the start from -- of the production in each job site.

But Matteo, if I can add something here, of course, let's say, related to the magnitude of our order intake. If you see the order intake in the last couple of years, we are talking about EUR 40 billion. So of course, we need to perform this contract is -- it's not only a matter of collecting advanced payments and just sit on the cash. This would be, let's say, not very efficient and will not bring to the company any EBITDA. So I would say that we have to make these investments. Of course, the investments are related to cash disbursement in the year you make, but they are also creating cash for the future. So let's say, these companies do not want to close its activities in 2024 and thinks about the future, thinks about the fact what we should do in the future. So we have to invest money for purchasing the equipment to perform the plan. This money will come back, of course, with EBITDA and cash into the future. The guidance we gave on 400 -- more than 400, let's say. I think that is, let's say, a clear indication of the fact that the company will remain absolutely cash positive. But at the same time, already takes into consideration all those factors. So the -- say, the extraordinary conditions that brought advanced payments in 2023 will not be repeated in 2024. This -- we take into consideration this fact. We take into consideration the expenditures we have already envisaged. We can better some of those, as Massimo was saying, with some savings, some refurbishment for instance of the refurbishment plan into the machinery will, of course, better and lower the CapEx that is expected. So that -- so we can make better than that. But let's say, all those considerations brought up to be conservative into the assumption of the cash at the end of the 2024.

Next question is from Alessandro Tortora of Mediobanca.

I have 1, 2, 3 -- 4 questions, okay, very, very brief. The first question is on Australia. But also on the Clough business, Massimo, can you give us an idea of the contribution of Clough in 2020 in terms of contribution in terms of sales and EBIT from Clough. That's the first question. I don't know if you want me to go one by one?

Okay. We can answer to the question.

Regarding the -- not only Clough, I would say -- don't talk only about Clough, but talk about the Australian franchise, which, for us, it's a single business as we told the Australian franchise now collects all our activities in Australia. I would say that these things we have had order intake from around EUR 6.2 billion in 2023. We have a backdrop in execution of EUR 11 billion in 2023, doubling our backlog size since 2021. And there is.

[indiscernible] of revenues, EUR 460 million, okay?

Coming from Clough. Yes, 2020 were EUR 2 billion. EUR 2 billion in Australia. So coming from Australia is -- 2023 is EUR 2 billion total. So that don't make the difference because it's not different. Then we will have a growth, which is significant as we commented during the presentation, we are going to target EUR 3.5 billion, not Australian dollars, in 2025 with an expected growth of EBIT significant that goes from the EUR 113 million this year to around EUR 270 million into the 2025. That's why I was talking about an asset which is, let's say, a hidden value that is not stressed into the balance sheet. It's not a significant amount.

And then the second question is on the contract management side, a topic you discussed before, can you just perhaps understand the impact of contract assets like [indiscernible], we had, let's say, last year. I understand the [indiscernible] recognized over the project life. But these assets is in line with your budget margin better lower. So just to understand the impact of this contract [versus], we say at the EBIT level? And are there any other major contracts reset this year, we should be aware of?

I don't -- if I understand clearly, we made a statement on that and was announced that previously [indiscernible] that was an issue, let's say, that many of you were after details about the risk that was [indiscernible] contract in the past -- for price escalation and other things that were related to that contract in the past, has been completely changing -- new contracts that is a target -- incentivized target cost plus basis. So there is no risk in event to the contract. And that's it. I mean that it's very simple.