Earnings Call: Q4 2014

Feb 27, 2015

Bueno. Okay, good morning. Good morning, everyone. As usual, it is a pleasure to be here with all of you to share with you what happened the previous year, in this case, 2014. As usual, I will be going through some slides and I will review the different figures, then we will open a Q&A session in which Ángel and I will try and answer any questions which you may have. I would like to start by mentioning four aspects that I believe are the most relevant in the 2014 results. First, I would like to mention that the group, for the fourth year running, has remained global leader in infrastructure development, particularly in the markets that we consider developed, such as the U.S., Australia, and Europe. Their strong international presence enables us to compete in the main infrastructure investment processes in the world. Secondly, and most importantly for us, our results show that we have met our targets in a macroeconomic context, which was a little complex. Particularly, our net profit was EUR 717 million, which is 2.2% more than in 2013. Thirdly, I would like to also mention our ability to generate free cash flow, through two drivers. First, our operational or operating businesses, as well as decisive divestment policy, which has always been with us for non-strategic, non-core assets. This is how we have, one more year, managed to reduce our net debt, which is at EUR 3.7 billion, which is 2.3% less than at the end of 2013. Before I review the main lines of our P&L, I would like to mention that as a result of the divestment of John Holland and the Leighton Services business last December, we have reclassified their accounts as run-off activities in 2013 and 2014, subtracting their contribution to sales and profit. Having made these adjustments, our turnover in 2014 was EUR 34.8 billion, which is 0.8% less than in 2013. As I have mentioned, our activities take place mostly in Asia Pacific, where we have 34% of our turnover, followed very closely by North America, with also 34% of the total. Europe brings in 26% of our turnover. Then South America with 5% of the total, and Africa with 1%. By countries, the biggest contributors to our turnover were the U.S., Australia, Mexico, Germany, Canada, the U.K., and Spain. I would like to point out that Spain represents 16% of our total turnover. If you remember, last year it was 14%, this year it is 16%, mostly because we have subtracted from our consolidated accounts, John Holland and the services business from Leighton. Our backlog has grown 6.7% up to EUR 63.3 billion, and by geographies, Asia Pacific with EUR 21.7 billion is 34% of the total, including both the revenues from mining projects, which are very capital intensive and of long duration, as well as infrastructure development projects, as well as industrial projects in Australia, Hong Kong, Macau, and the Middle East. Secondly comes Europe with EUR 19.5 billion, 31% of our backlog or order book. Third, we have North America with EUR 16.6 billion and 27% of our backlog. Fourthly, South America with 7% of our order book, with EUR 4.6 billion after signing some major contracts, as you know, in Peru, Colombia, and Brazil. Finally, Africa brings in 1% of our backlog. In 2014, we obtained good results. Our EBITDA was at EUR 2.4 billion, which is 12.9% less than in 2013. This is, amongst other things, due to Forex effects, as we will see later, perimeter effects and the establishment of Fleetco at Leighton, which is the Leighton company holding all the mining machinery in a single company, where we replaced financial leases with operational rent. Without these impacts, our EBITDA would have gone down 3.9% as a result of Leighton's mining business, as well as the delays in some of the projects in our industrial services division. Our EBIT is at EUR 1.6 billion. That is down 2.6%, although also impacted by the same effects I just mentioned, without which it would have gone up 3.1%. Net attributable profit for the group in 2014 was EUR 717 million. That is 2.2% more than in 2013, also affected by Forex fluctuations. Without them, profit would have risen 4.3%. Finally, I would like to mention that our solid cash flow generation has enabled us to reduce our net debt by 2.3%, down to EUR 3.72 billion. Net profit in all of our activities has gone up in 2014. In construction, we earned EUR 223 million. That is 18.1% more than the previous year. In industrial services, up 0.5% to EUR 420 million. Environment, net profit was EUR 72 million, up 24.4%. Here, as I will explain later, we have consolidated Clece in the last semester, and that is why it is up 24.4%. Finally, net profit for the corporation has gone down, and here mostly we have a negative impact due to changes in our tax rate. Some of the tax breaks we had. That has had a significant impact on the group of approximately, I think, yes, EUR 127 million, simply because of this change in the tax rate. Overall, I think all the business areas have had good performance, and we find ourselves in a solid position to continue to grow these earnings in coming years. As I mentioned earlier, in 2014, we had very solid free cash flow generation as a result of the funds generated by our businesses as well as from divestments. We here generated EUR 824 million in the businesses, and the divestments made last year brought in EUR 2.62 billion, and these include, of course, the John Holland divestments, the services business, Leighton, the partial repayment of the Iberdrola exchangeable bonds, and the sale of some of our infrastructure and energy concessions. In the 2 months of 2014, we have continued our ambitious divestment program as well as. Last year, we continued with our ambitious investment program. We had investments up to EUR 2.3 billion, which, apart from investments in the business, we have also used up a lot of resources, increasing our stake in Hochtief, Leighton, as well as in many concession projects we have contracted all over the world. Therefore, the funds generated from net divestments from investments in 2014 are EUR 313 million. The sum of these, EUR 313 million, as we will see in more detail, plus the money coming in from our businesses, add up to EUR 1.137 billion in 2014, which is almost double the figure we had in 2013. With this figure in 2014, we have continued our effort to reduce the group's net debt, which at the end of the year was EUR 3.72 billion. I'd like to point out that since 2011, we've reduced our net debt by 60%, that is, by over EUR 5.6 billion, thanks to, again, cash flow generation in our businesses as well as through the divestment of non-strategic assets. This debt level puts us at an EBITDA ratio of 1.5 times, which is in accordance with our target, and which we feel is the right leverage level at this point, although we intend to continue to reduce it. This trend, reducing our net debt, we've maintained during these first months of 2015, as shown by our recent sale of renewable energy assets through the Saeta Yield placement in the stock market and the agreement with GIP. The transaction brings in net cash for approximately EUR 500 million. The results we're posting today confirm the profound transformation the ACS Group has undergone in the last few years, which still continues. You have here eight years, just before the downturn, which began in 2006, when construction was booming in Spain. ACS was the main construction company in the country. It still is. But its turnover then was EUR 14 billion, of which over EUR 12 billion came from Spain. Our EBITDA was EUR 1.27 billion, and we employed over 123,000 people. As a result of our internationalization strategy, back then, rather, the group was beginning to internationalize our activities. We were number 17 globally in this sector, thanks to our presence in Latin America and also the acquisition of some small companies in the U.S. by Dragados. In 2006, we'd also invested in Unión Fenosa and Iberdrola and had a significant stake in Abertis and Urbis. To fund these investments, our debt was, as you can see, EUR 8.75 billion. Today, ACS is a leading global infrastructure company with turnover of almost EUR 35 billion, of which less than EUR 6 billion generated in Spain. Our EBITDA is close to EUR 2.5 billion. That's double the EBITDA of 2006, and we have over 210,000 employees. Today, ACS is a strongly diversified industrial group, particularly in terms of geographical diversification. We're present in the main developed economies, and we are one of the global leaders in civil works and industrial services. Over these years, we've divested a lot of our non-core businesses in order to continue our deleveraging strategy, but also in order to be able to invest in things that we felt were of greater strategic interest for our core business, including, of course, the acquisitions of Hochtief and Leighton. As you all know, we are currently continuing with major integration process at Hochtief and Leighton. I think we are in the final stages of that integration, but during 2014, we have significantly increased our stake in the company. We've invested EUR 212 million to acquire a total of 61.4% of the equity, and Hochtief has announced a purchase program of 10% of treasury stock, which it will implement throughout the year based on valuation. Hochtief has also invested over EUR 617 million in Leighton, and we now have a 70% stake. In the last two years, as well as increasing our stake in these companies, we have worked very hard to deploy our culture, our ACS culture, appointing our own experienced management team. We've made various decisions that have enabled us to simplify Hochtief's and Leighton's corporate structures, and we've created specialized divisions that will promote greater competitiveness in their activities. In 2014, we have continued our strategy, divesting non-core assets, thus continuing with our deleveraging. We are also implementing what we think is one of our strengths, which are improved risk control systems in order to improve our operating income and cash flow generation. I am now going to go into the main lines of our P&L. Income, as I said, in the period, EUR 34.8 billion. Construction is 74% of the group's turnover, with EUR 25.82 billion. That is 2.1% lower than in 2013. Industrial services, turnover of EUR 6.75 billion, which is 19% of the group's turnover, and it is 4.5% less than the previous year's. Finally, environment brings in EUR 2.338 billion, which is 31.3% more than in 2013 and is now 7% of the group's total turnover. As for our backlog, we closed the year at EUR 63.32 billion. That is up 6.7%. That is 20 months of activity, which is a very significant backlog. By divisions, construction is EUR 45.14 billion, or 71% of the total, and 3.7% higher than in 2013. Industrial services ended the year with a very significant backlog because of those delays in some of the projects that I mentioned earlier. A backlog of EUR 8.02 billion, that is 13% of the total, and 8.2% more than the previous year. Environment, EUR 10.16 billion. That is 20.4% more than in 2013 and is 16% of the total. Construction turnover in 2014 was EUR 25.82 billion. That is 2.1% less than in 2013 as a result of fall in our mining activity and the restructuring of our backlog in Germany. We have to say that in construction, business in Spain has stabilized. By geographies, our construction turnover is generated mostly in Asia Pacific with 45% of the total, and North America with 39% of the total. Europe, mostly Germany, Poland, and the U.K., represent 10% of the turnover, and Spain in construction is now only 5% of our total turnover. By activities, civil works represent 54% of the total, while building, which is mostly our American company, Turner, brings in 35% of the total. The mine management business, Leighton, represents 10% of our construction turnover. The construction backlog is at EUR 45.14 billion. That is 19 months of activity, which is also a very significant number for our construction business. This number is up 3.7% versus the previous year as a result of growing activity in North and South America. Amongst the main projects contracted in 2014, I would like to mention the Northwest Rail Link project in Sydney with over EUR 1.85 billion to build 36 kilometers of commuter railways in a 15-year concession. The Lima Underground Line 2 contract for over EUR 900 million. The new orbital highway in Doha, Qatar, EUR 684 million. The new international terminal at Hong Kong Airport with EUR 607 million. The Transmission Gully highway in New Zealand, and its operation for 25 years for EUR 560 million. Construction and operation for 39 years of the Portsmouth Bypass in Ohio for over EUR 475 million. In Colombia, the Conexión Pacífico 1 highway with $453. In Dubai, several projects. I should also mention the first section of the high-speed railway in California with 100 kilometers and a budget of EUR 357 million. Moving on to Industrial Services, turnover was EUR 6.75 billion. That is 4.5% less than in 2013. These falls are mostly due to Forex fluctuations. Our country was the main source of business, still with 36% of the total, mostly from maintenance tasks. Business in North America, particularly Mexico, was 28% of the total, up 10.9%, even in spite of the depreciation of the Mexican peso. South America, mostly Peru, Chile, Brazil, and Colombia, bring in 19% of the total. By activities, integrated projects grew 1.8% because of our business in Mexico and Middle East, with 43% of total turnover. Specialized installations, which bring in 29% of the total, down 18% as a result of the completion of many projects that we had close to completion. The renewable energy business grew 18.5% in the year as a result of coming online of a thermosolar plant and various wind farms. The Industrial Services backlog is at EUR 8.02 billion. That is 14 months of activity and is up 8.2%. In this type of business, 14 months of activity is a lot. It is a big backlog. Mexico is still growing with 24% of the total, while South America is already 21% of the total. Our Asian backlog has grown 48% and is now 16% of the total. Overall, our international backlog grew 19.6% and is now 76% of the total, whilst our backlog in Spain fell 16.8% down to EUR 1.94 billion, which is 24% of the total. Amongst the main projects in 2014, I would like to mention also the most significant, such as the extension, refurbishment, and improvement of a refinery in Mexico, in Tula, over EUR 284 million. Construction of two photovoltaic plants in Brazil, EUR 385 million. The refurbishment of a combined cycle plant in Mexico with almost EUR 266 million. Refurbishment of several industrial plants for a company, Pro-Agroindustria, in Mexico. Also, the management contract for urban control systems in Madrid, EUR 171 million. Saudi Arabia, a fertilizer plant, EUR 162 million. The construction of an offshore platform in the Gulf of Mexico for EUR 104 million. Finally, Environment. Our turnover last year was EUR 2.34 billion, which is 31.3% more than 2013. As I have said, this is thanks to the incorporation of Clece, which we started consolidating on July 1st, 2014. Without this effect or the Forex impact, Our turnover would have gone down 1.1%. Spain represents 74% of the total. Business in France and the U.K. contribute 13%, and South America, basically Chile, 12%. In terms of divisions, Servicios Urbanos, 44% of turnover was the contribution of six months of Clece has represented 28% of the total. The treatment of waste, 22%, and logistics 6%. In terms of backlog at December the 31st, it was EUR 10.164 billion, which is 20.4% more if we include the Clece business. The main project in the area are cleaning contracts in Spain and also several contracts of home assistance from Clece. If we look at the group's EBITDA, as I said earlier, it was EUR 2.466 billion, which in absolute terms, if we compare to last year, is a reduction of 12.9%. This figure is distorted by the variations in the perimeter, as you can see on the graph, as well as by the exchange rate, the impact of the different currencies, and the impact also of the Fleet Co, the company that we have created to include the mining machinery. Without all these impacts, the group's EBITDA would have fallen, as you can see there, by 3.9%. Let me now give you further details on the extraordinary impact on the EBITDA, which explain this 3.9% reduction. The variations in the perimeter, which include basically the contributions of John Holland and services of Leighton, reclassified as run-off activities, represent EUR 100 million in 2013, whilst in 2014, it is EUR 208 million. Also, the impact of the exchange rate is EUR 77 million and the setting up of Fleet Co, EUR 66 million. As a whole, the adjusted EBITDA for 2014 is of EUR 2.817 billion, which compares to EUR 2.933 billion in 2013. This difference can be explained by the impact of the fall of mining activity at Leighton and the reduction in industrial services activity because of those projects that have slowed down. The level of debt gives us a ratio over EBITDA 1.5 times, which we think is a moderate leverage for our fund generation capacity. The EBIT grows 3.1% in like-to-like terms once we have eliminated all the impacts of the selling of John Holland and services and Leighton as well as perimeter variations and falls in the exchange rate. If we look now at the flows generated by investment activities. Of the gross investments in this period, I would like to underline the most important items. In operating business, Hochtief has invested most of the construction figures in machinery and equipment in mining, more than EUR 400 million. Without that impact, the other companies of the group would have only needed EUR 280 million in investment in maintenance and development, adding up to the EUR 777 million in operational investments. In concessional assets, we have invested EUR 512 million, which are broken down into EUR 222 million for infrastructure projects, EUR 183 million in renewable assets and other energy concessions, and EUR 107 million in municipal waste treatment plants, basically in the U.K. Lastly, the group has spent EUR 1.020 billion investing in financial investment, increasing the acquisition of Leighton with a public offering for which we reached a 70% stake in the Australian company. The investment in the year is of EUR 617 million. The direct acquisition of Hochtief shares for EUR 212 million. The acquisition of 25% of Clece, which was owned by our partner, for which we paid EUR 121 million. The acquisition of small companies, two companies in the U.S., to increase our presence in the areas of Boston and Florida for EUR 62 million. With regards to divestments and applying the same breakdown criteria, we can see that in operational business, we have sold machinery and equipment for EUR 167 million, basically in construction, more specifically in Leighton, which has a high degree of turnover, particularly in mining equipment. Sales of concessional assets have generated EUR 453 million, where I should point out the disposals of highways and other infrastructure concessions in Spain from our Iridium, for which we have obtained EUR 213 million. With regards to financial divestments, we've sold several non-core assets for an amount of EUR 2.003 billion, which as you can see there, we have included the delivery of 100 million shares of Iberdrola worth EUR 594 million. As you will remember, this was a partial cancellation of the exchangeable bonds that we had issued a year ago, and also the sale of the companies of Leighton Services and John Holland on December, for a value of more than EUR 1.1 billion. The sales of several real estate assets in Europe by Hochtief, generating funds of more than EUR 300 million. All in all, funds generated by investment activities in the group have entailed an inflow of EUR 313 million in the year 2014, which is a result of operational net investments of EUR 611 million, net investments in concessional assets of EUR 59 million, financial divestments which have reached EUR 983 million. I would also like to mention the recent transaction by which we sold our renewable energy assets in February. As you know, the ACS Group has sold 75.4% of the company's Saeta Yield with an IPO in the Madrid Stock Exchange, where we placed 51% among institutional investors and 20.4% to the GIP Specialized Infrastructure Fund. This deal has allowed us to gain EUR 361 million and remain as a reference industrial partner. We are the natural ally of Saeta Yield to promote its profitable growth. At the same time, we have reached an agreement with GIP to set up a development company where we have included the development assets on which Iridium has a first option right with the objective of investing in future energy projects. Both deals will allow us to include in our accounts this year EUR 500 million, and also to strengthen our strategy of turnover of mature assets developed by the group. As I mentioned at the beginning, the net debt of the group has decreased 2.3% this year. This was possible because we have a solid capacity to generate cash. As I said earlier, because of the current operations as well as because of our divestment policy as a whole, both sources have allowed us to generate more than EUR 1.7 billion before remunerating our shareholders and before variations in working capital, which this year have been particularly negative, reaching EUR 571 million as a result, basically of a delay in collecting some projects. As you can see, we've used EUR 676 million to remunerate shareholders through the payment of dividends of ACS and its subsidiaries, basically Hochtief and Leighton, as well as the repurchase of our own shares. The final net debt is of EUR 3.722 billion, 1.5 times the EBITDA, which is a moderate ratio. I wouldn't like to end this presentation without giving you some figures on our corporate activities and summarizing the steps that we will take in the future. Firstly, our objective is to complete the operational transformation of Hochtief, which started 18 months ago by applying measures to increase the profitability of all the divisions. Secondly, we think that we can continue to improve the quality of our balance sheet in line with what we have been doing in the past few months, by measures of rationalization and refinancing that will allow us to reduce financial costs and make further progress in our financial deleveraging process. Thirdly, we are going to take advantage of growth opportunities offered to us in developed countries, particularly in markets where we have a strong presence, such as the U.S., Canada, Australia, Mexico, and the European Union. Lastly, we try to maximize free cash flow generation and strengthen our measures to allocate capital efficiently, maintaining our high standard in terms of remuneration to our shareholders. In Hochtief and Leighton, as I said earlier, we have developed a set of changes that are giving rise to significant operational improvement in terms of profitability. We changed the management teams in both companies and the strategy of these companies. We have also paid restructuring costs that were necessary and very significant. We have also significantly reduced the leveraging, and we have improved the quality of their balance sheets. We still need to rationalize the structure, particularly in Leighton, as well as the selling of assets, including real estate companies that we still own in Germany and Australia. Lastly, we continue with our efforts to improve risk management systems in terms of collection and execution of works to foster additional improvements in our profitability and management of working capital. This will be complemented by a significant reduction of financial cost thanks to the refinancing processes that we are completing in different areas of the company. The recent refinancing of the syndicated loan, ACS, for an amount of EUR 2.35 billion, with an important reduction of the financial cost, is an example of this strategy. Likewise, the selling of renewable assets, very recently, will entail a reduction in 2015 of EUR 500 million and the divestments that we will do of some assets, and that will also allow us to further reduce our debt. In the next few years, we are going to be facing important business opportunities in our main markets. In fact, more than 85% of our turnover comes from countries of the European Union or of the OECD, developed economies that have recurrent needs for infrastructure, markets that need companies that are technically sound, with a capacity to develop complex projects with transparent tender processes. These countries have stable financial markets, and that allows us to develop concessional projects in an efficient manner. Our midterm objective is to keep our leadership in the U.S. and Canada, Mexico, Europe, and Australia. In the U.S. and Canada, we are witnessing a significant increase in development activities in the field of infrastructures, strong state investments to improve obsolete assets or to develop new efficient initiatives in their traditional format, as well as using private-public collaboration schemes. In Mexico, even among the uncertainty on oil prices, we also have significant business opportunities. It has an investment plan, the capacity and the resources to develop it, the support of an industry where our industrial activity has a lot to say. Europe has several infrastructure development plans, including fostering improvements in competitiveness in the area. The European Commission has published its investment plans for the next few years, where it will be investing in infrastructure, energy, and equipment. Lastly, Australia will continue to develop its investment plan, combining public investment with PPP projects, with healthy accounts and a strong demand of its population for civil infrastructures, which are key for the country's development. I think that we find ourselves in an excellent situation to take advantage of these business opportunities, and I think that with them, we can grow in the next few years. That is why, once again, I would like to repeat our objectives for next year, 2015. We will continue to dispose of those non-core assets, which together with our capacity to generate cash flow, will allow us to significantly bring down our net debt again. We are not going to cease to invest in our businesses to promote the growth of our businesses and thus take advantage of opportunities that we have as world leader in the development of infrastructures, particularly in these developed countries. In brief, our main objective will be to increase profitability for our shareholders, whether through a political dividend payout policy or by increasing the fundamental value of our shares. The measures of operational restructuring, corporate rationalization, and the reduction of financial risk are going to allow us to achieve this objective. Thank you. Now, of course, we are at your disposal to answer your questions. Good morning. Alejandra Pereda from Morgan Stanley. I have two questions for you. My first question is the EUR 571 million impairment of working capital this year. If we compare to past years, most of it comes from ACS, if we exclude Hochtief. I would like to know what is the cause of that, and do you think that you need to make further provisions for that? My second question is, by how much do you think you can bring down the financial cost, not the debt bite, the financial cost of the company through all these disposals or divestments in the current interest rate environment? The EUR 571 million, it is divided into two parts, the industrial business and Dragados. In Dragados, we carried out a transformation because most of it we did in Spain, but now we are doing things abroad as well. Although things have stabilized in Spain, most of the business comes from abroad. The payment periods have changed significantly, the payment terms. Since things have stabilized, I think it is EUR 200 million that can be explained by that. The other EUR 300 million that come from the industrial activity, or less than that, because another part also comes from the environmental business, where the average collection period has also gotten worse. But in the industrial projects, basically, most of it in Mexico. But we are certain that we will collect. You were asking also about the reduction of financial expenses. Several things are happening there. First of all, the absolute reduction of debt, but also lower rates, which is very obvious. Then thirdly, the change in the type of debt. As we have mentioned in the past, with the support of this debt reduction, we have been resorting more to capital markets. So our mix will change. I think that all new financing processes will have 100 basis points less in cost than we have now. That will happen gradually throughout the year. But a decrease of 100 basis points in the cost of debt. Last year, it went down 40 basis points, and I think that this year we will achieve a reduction of our financing cost of 100 basis points. Santiago Molina from CaixaBank. I have two questions. One is with regards to the target that you announced in the last AGM. A net profit you said of EUR 2 billion in 2016. With all these divestments, do you still have that net profit objective? If so, where do you think that you will grow more to achieve that? The second question is on the operational cash flow of the fourth quarter of ACS. It has fallen significantly. I think you've grown by 15 or 16 million euros only. Can you explain the reasons why? Our objective is in 2016, because of the restructuring that we did in 2014 and the one we're going to do in 2015, we can reach EUR 1 billion in net profit. We still believe that we can do that. We worked very hard in Hochtief and Leighton. We will continue to do that. We will have reduced the perimeter. With a smaller perimeter, we will get a higher return, undoubtedly. It was a very large company. We have made it more efficient now. Their culture was different to our culture. We changed, as I said, the management team. The Chairman and the CEO of both companies are Spaniards now. We are applying our procedures, and we have no doubt whatsoever that in Hochtief and Leighton, we're going to get a better profit with a lower turnover. That is where we need to bring up that difference to EUR 1 billion, because our industrial group has also, of course, suffered a transformation like Dragados, where 90% of the business was in Spain, and now that has changed. Where we're going to see a qualitative and quantitative change in terms of profit is going to be in Australia and in Hochtief. What was your second question, please? Operating cash flow. Dragados in the fourth quarter, it was the industrial side that suffered most, and it has capitalized that impact in the last quarter. As the Chairman said, we have a very important client in Mexico that has very ambitious projects, and we are their partner. We're partner of them in their first privatization. The payments have been delayed a little bit, and that has generated cash flow problems. There is no other problem. Opening up the hydrocarbon market to Mexico to foreign initiatives, the idea was to speed up the process by which they extracted their reserves. Just when they started, oil prices fell in the world, and that slowed down things a bit. The project continues to be the same, and we have a strong presence there. We have set up a company in Mexico, which is called Avanzia, which is the number one company in building oil and gas infrastructure. By far, it is the company that is succeeding in that market. As the Chairman said, the transformation that we've seen in the industrial area is not only from the geographical point of view. We also see a change in our clients. In generation and transport, the utilities in Spain are investing very little now. What we do basically is maintenance. We have changed from that type of client in the Spanish market to the oil and gas market, which is the sector that is investing the most. We made that change very easily. What happened this year is that when you complete a very large project and begin another one, sometimes there are some overlapping problems. These markets where we have a presence, we are sure that we are there to stay. We still have businesses here. We built a huge plant of renewable energies in Nevada, lots of wind parks in South Africa. What we used to do here in the field of energy, we are doing abroad now, too. We are also concentrating more on hydrocarbons, which I think is going to be a very important part of our business in the future. Good morning. I am Victor from Societe Generale. I would like to go back to slide number 30, if possible, where you can see the company debt and your financial expenses. Looking at the maturities you have this year and over the next 15 months, there is the renewable part, there is the Iberdrola, the under claims, I guess that is Leighton and the Mexico recovery. Net debt over and above the business operations, do you think you can bring it down below $30 billion in a year or 18 months? Below one times EBITDA would be nice. I am saying that because if you have $500 million coming in from the renewables, $500 million from Iberdrola, under claims from Leighton and Mexico, that is already $2 billion. Yeah, but we are still investing at the same time. This year, we have invested EUR 2.3 billion. We are reducing our debt, but we are still investing in what we think are our two core pillars, and specifically in concessions. You know that you have to invest resources, and so we will try and grow by maybe acquiring some company or by increasing our stake in Hochtief. So I think the approach that we followed in 2014 is basically going to be the same in 2015. We still have a lot of assets for sale, which are not core, and we will be focusing definitely on our core assets. Okay. Since you are here, I wonder if you could give us some guidance about your industrial services unit, because it is a concern for a lot of people. How do you think it is going to evolve in the future in terms of growth, investment? Because of the negative trend we saw this year with working capital, is that just a temporary issue? Can you give us a sort of outlook or some guidance for this? Well, that is what I tried to explain before. The industrial services business for us is a crucial pillar of our activity, and it is very solid. It has undergone a major transformation, as we have said, but it is still focused on its usual core business, development of energy infrastructures. It used to be only electrical, now it is fossil fuels as well. Plus, as we did in construction, when we thought that there were opportunities, we did our own developments. What we did in Spain with renewable energy, in Spain now, there are not opportunities for renewable energy projects with the current regulations, but we are doing projects elsewhere, building plants in Brazil, in Uruguay, Mexico, and South Africa. So that same approach is still in place. So that is a transformation that has taken place this year. That is why we have created Saeta, too, so that it will become a really important customer. Cobra, which will demand from Cobra that farms and plants be built as long-term investments. The volatility we have had in the second half of this year is temporary, circumstantial, and customers Cobra works with are very solvent. Our top customer, Pemex, is an extraordinary customer with huge potential in its investment program. We have a strong relationship with them. We do not think that there will be significant risk in terms of volumes or performance in that business, because Cobra is also very present in all the countries that are strong in fossil fuels, as well as in renewable energies, as our chairman told you. We are working in Mexico, in the Nordics, in the Middle East, in energy projects. I think the advantage of our industrial services model is that it is definitely multi-country and with four or five strong business areas which adapt to demand. The volatility of earnings, if you notice in the last 6, 7 years, earnings have not been volatile at all, even though markets and customers were changing a great deal. That is why you want to have geographical diversification and product diversification, and you speed up certain areas when there is demand. It is quite a unique business model. I do not think there are many other companies that have it, and we are very pleased with it, and we think it is a model that works very well. I would like to add something and also recognize the huge effort made by people in this area when the downturn began in construction for Dragados and in our industrial business, which is Cobra. Both businesses had 90% of their revenues coming from Spain, and only 10% were international. When the crisis deepened, particularly in 2012, Dragados, even though we had been doing business in the U.S., was unable to maintain its turnover in Spain because it was impossible, because not that it fell, it just crashed. It is not that they were not awarding new contracts, it is just that they stopped the contracts that were already underway. Dragados made a huge effort, but still to date has not recovered the turnover it had in 2011, say. There we have had to grow by acquiring. Of course, we had a stake of Hochtief, 30%, but we had to go for a huge effort to buy more of that company and other companies in other countries with other cultures, which required a lot of effort. We have managed to once again become global leaders in construction. The Cobra group has not actually acquired any companies. They have gone through this whole transformation from 90% Spanish revenues to only a third without actually going through any M&A activity and growing organically, as Juan has explained. I think what that demonstrates is how bright a future it has ahead of it after the success of this huge transformation in terms of geographies and even businesses. I think it is definitely one of the strongest and best companies we own, and it has, during the crisis, given us a great deal of stability and will bring in a lot more in the future. Danielle. Yes, good morning. I am Daniel Gandoy from JB Capital Markets. I have three questions. First is, can you give us an indication of your growth targets, turnover, EBITDA, net profit 2015, or at least some guidance? Second, could you talk about trends, working capital also for 2015? Thirdly, a few weeks ago, there was some talk in the press about an IPO in Mexico for your ACS Mexico business. I wonder if there is any basis to that or it is something that you might consider or not. Thank you. I will answer the first part, and then you answer the rest. Okay. We have budgets for 2015 which predict growth in all of our businesses. Turnover and all of our lines. Turnover or income, EBITDA, and profit of around 5%-10%. The most important thing we will be doing this year is not yet to focus on growth, but to continue restructuring our businesses, particularly Hochtief and Leighton, so that they will be more profitable. We will divest of some things which are still for sale, and there will not be a problem there. We want to complete the restructuring and integration we began two years ago, three years ago now. Marcelino has been in Germany for two years now and a year in Sydney. To complete that in 2015, this year. That is going to be, I think, our focus. Consolidation of this great group we are building globally in markets and areas that are mostly developed. In Mexico, it is true that within our industrial business, we had a lot of different activities, and they recommended in Mexico that we created a company, which is ACS Industrial Mexico. Just to give you a number, it is about $2 billion, more or less. We did that because we thought it was a good idea to continue with our implementation in that market and with thousands of employees. We thought it was a good idea to create a Mexican company, and that is all we have done. Whether in the future we might want to list a small part, maybe, but it is not an immediate objective. Plus, what we want is to have a Mexican company, which is what we have and which started operating January 1st this year. I think it has been an important step. Mexico, they feel that it is more of a Mexican company now, and we have been there for many years. We have many customers, and I think we have done the right thing. As for working capital, there are three main elements to that. Leighton and those under claims, which as Chairman explained yesterday, 2015 is the year in which they will reduce those under claims. By the way, what the Chairman was saying just now, the effort that we are making is to change the Leighton model, which was a growth-focused company. All it wanted to do was to gain market share and grow. When you are doing that, when that is your priority, you are not so concerned with the efficiency in cost income. But now, the focus is exactly the opposite. We are going to try and rationalize. Of course, it is really important how you manage working capital and customer contracts. Under claims were generated for many reasons, but amongst others, we had contracts connected with milestones in terms of collections, and changes in the scope of the contract and so on, meant that they were collected at completion. That is not something that we accept in our procedures. It is like we are funding Chevron in some projects. That just does not make sense at all. I think that is the first goal, and we will do it this year. As for Dragados, as Florentino was saying, in Spain we had that arbitration, as you know. We had confirming agreements for the whole market, so our suppliers got paid the day after sending in their bills, and we only received it six months later. In Spain, that just happened. But it does not elsewhere. When you change your business mix, you are having to pay as you do generally within 30 days, yet here are paying within 6 months. We are modifying that, and I think that when you have a clear procedure, things should stabilize. We will get back to the usual working capital level for the business, which this part of the year was abnormally high, but we will recover that throughout the year 2015. I cannot tell you how many days because it depends on the type of customers, but we will go back to business as usual. That is the plan. Good morning. I am from Caisse des Dépôts. You have told us that you already own 61.4% of Hochtief, that you will complete the restructuring this year, that you plan to continue to increase your stake. I wonder, where does all of this end? Will it make sense for it to remain a listed company? Will it still be a listed company 18 months from now? As I said for Mexico, we have a goal now, which is to restructure, reorganize Leighton and Hochtief and make them more efficient and increase our stake gradually. We would feel comfortable with between 70% or 75% of the equity, and I am sure that they feel comfortable owning between 70% and 71% of Leighton. Since we are now focused on that, we are not thinking about anything else. We will see when the time comes. In 2015, luckily we can brag great effort we made when in 2012, the group circumstances changed so drastically. We have reacted successfully and have become a huge global infrastructure group, have moved our people everywhere. Our Americas head is one who was the Brazil head at Dragados, Ricardo Martín de Bustamante. The Australia guy with Marcelino used to. We have really moved our people around. He was the guy who was in the U.S. before. We have a culture now that we think is what really made the difference in Dragados in construction. It is what we are now taking to all these countries without any trouble. We have moved in these people. We are changing the culture. I always say that it is like a bank. You have to manage risks. That is the most important thing. The top risk is a country risk for us. There are countries where we will not go because you need to have certainty in those countries, and that is why we like and prefer, quite frankly, because that is where we feel comfortable, developed markets. We try and avoid country risk, and second major risk is the project risk. You cannot have a project of such size that if it fails, it will endanger the company. We never go for projects with more than 10% or 15% of our turnover, where if we had an issue, they would never endanger the company. Then collection risk, that is really important. We try and get companies that, as customers, we know they will be paying. Then the project construction risk or execution risk, which is really our business. We complete projects every day. We go over the performance, and we make sure that time does not pass so that we may get unexpected claims or queries. These, I know, are different processes that people follow in other companies. We have our daily financial information system, which we use for project management so that risk, which is also real, can be monitored and minimized. That is something that we have had to do in a very short time. In just two years, we have had to develop this with huge effort from many people in all these places in the world that I have mentioned. I think that is really going to be the key to our success in the future when we complete the reorganization. Then, of course, I am sure you all think that all the Hochtief and ACS stock we have or Dragados business we have in America could be combined within a single company. Of course, everybody has an opinion, but what I can tell you is that right now we are focused only on the restructuring, completing this very ambitious but fascinating project we have to implement or to deploy our culture and our procedures in all the developed markets where we operate as the world's top infrastructure company. There is a couple of questions coming in from the web. Industrial Services is the most sought-after topic. There is one from Tobias Loskamp from HSBC, who says, "After the 10% fall in Spain Industrial Services, do we think we have touched bottom and that it will now recover?" The turnover fall in Spain. Industrial Services in Spain, turnover fell 10% in 2014. What is your outlook for 2015? Well, we do not know because, as I said earlier, in Spain, I do believe that in construction, for instance, we are already well into recovery. In Industrial Services, well, it depends on our customers. As we heard from Javier, the big utilities and the big companies in this country are not investing right now because they have excess capacity. They are focusing on maintenance, and that is why we have had this big fall. But we have not minded in Industrial Services offsetting that fall in Spain with business elsewhere. We could be doing a lot more outside Spain. But the problem is that, as Ángel said, you have to do this while carefully monitoring everything that we do. So we have a backlog, which is very big for our Industrial Services business, and over the next months, we have actually a lot more coming in. So our Industrial Services activity is an area where we are quite satisfied that we will be maintaining our total turnover. If it falls in Spain, which I do not think it is going to fall much more, because once it has fallen that much, it cannot really fall much more. It will be offset by growth elsewhere. So I think it has been, and it will be always one of our core drivers for the future. Bank of America Merrill Lynch is asking two things. One about Iridium. In 2014, we sold several concessions. He is asking if in 2015 we will be selling any. Probably, because what we do with our concessions is first to get the contract, build them, operate them for some time, and then we like to turn them over, sell them, because you know we are leaders in concessions globally after so many years, and that is our business. Our business is not to operate those concessions forever, but to build them. I am sure that we have some highways in America that maybe we could consider mature for divestment or in Canada. I am sure that we will be selling some Iridium assets. Finally, the same person is asking whether we have bought any shares in 2015. What is our exact stake now, today, in Hochtief? No, we have not bought anything yet. In 2015, what has happened is Hochtief has had a program to buy up to 10%. I think it is a buyback program. They have bought maybe 2% because that is a program that they are running to buy shares cheaply. That was not Hochtief's case because they grew a lot and their share price went up. They do have a buyback program with up to 10%. We ourselves have not bought anything yet this year. Someone over there? Good afternoon. I am Nicolás Mora from Paribas. Going back to working capital and construction, if Spain stabilizes in 2015, and with the growth you expect in the U.S. and Latin America, might we expect an improvement of your working capital in 2015, or is it still difficult to manage? That is my first question. The mix, mostly because Spain is stabilizing. To answer your question, in working capital, there are two components. One, that I have already mentioned, about how collections and payments work in Spain and elsewhere. There is another point, which is also very important, and that is depending on who the customer is. If you are doing a lot of construction for concessions that we are developing ourselves, or maybe by a third party even, there is clear advantage, because as you know, you get all the cash upfront. That type of customer is much better in terms of working capital because you get payments for milestones, and that is not so much of a problem because they have the funding available from the start. While if you are working for a ministry, a city council, or something, payments are not as easy to manage. It really depends on the mix. We think Dragados in Spain, definitely it has begun to turn around. Elsewhere, since the concession volume will be more and more significant in their customer mix, it should improve, but it will depend on what happens with contracts. Just to put your mind at ease, I do think it is stable, at least, with that percentage for Spain and rest of the world. Spain had that advantage that Ángel mentioned, which is that we collected sooner and paid late. When we had EUR 7 billion in construction, we gradually came down to EUR 1.5 billion. We lost that benefit because now payments come in, but collections come from other countries where you do not get paid as quickly or where you collect quickly, but you also have to pay quickly. Given our customers, I do not think we have any collection or default risk. Could you say something about your construction pipeline? You have just been awarded a contract in Texas. There is the Panama underground. There are some major contracts where you are bidding, and you are probably going to get the awards. That is a fact. That was awarded yesterday, in fact. Yes, I heard. The change we have had to make in our culture, for instance, we used to always build the Metro in Madrid and Barcelona and Seville and Bilbao, Valencia. Now we are building underground lines in New York, in London, in Sydney, Hong Kong, Ottawa. We are a construction company, and we are experts at that. It really does not matter whether you are building an underground line in Barcelona or in Sydney because the construction techniques are the same, and the people are the same. I am saying this because you were asking. Yes, plus in those markets, it's not that we. Your question was what, exactly? Just give us some more clear guidance on future potential awards. We're speaking about underground lines, and we do the same with concessions. We've been a concession company. We're not traditionally highway operators, but we've built a lot on the concession, many in Spain, also many in Chile. You may remember they had a major program. Now our biggest customer for concession work is the U.S. and Canada. It's the same business, and we have a lot of projects in the pipeline. What I can tell you, I don't like to brag, is that we will be awarded quite a lot of those bids in the U.S. and Canada because we have the bidding process down. We have the right partner. We have the right finance. We're familiar with those markets because we've been working there for a long time, from Vancouver to Montreal in Canada, and in the U.S. from L.A. to New York. Right now, I think we're very well positioned there, and we'll be able to collect the results of the effort of these years. For example, we've been awarded in California, the first section of the high-speed railway in New York, another section of the underground. In Miami, they gave us the I-595. It has become our biggest market, North America, U.S. and Canada, especially. I think we'll continue to thrive there. Our backlog and our targets indicate that we will continue to grow in all of our areas, particularly in construction and concessions, which is difficult because we're already at a pretty high level, as you know. There's another thing there, and that is that a market which wasn't traditionally very big for concession contracts was Australia. The new Australian government has a really ambitious plan for private concessions. Leighton, together with Iridium, a joint venture, are developing a plan to capture those opportunities and be quite aggressive in that market, where there hadn't been so many concession projects, and the ones had a traffic risk model and this one's an availability model. It's a market which hadn't awarded great contracts yet, but we think it has a lot of future. That's why, as I said, in these markets, it's not that we are going to just build the project, it's just that the top infrastructure company in those markets is ours, in Australia, in the U.S., in these markets where we want to invest long term because they're markets that are countries where you have legal certainty, where you can do long-term investment because there's full investment protection. So now Australia is coming online as well because they probably will pass this very attractive concession plan. There you go. Finally, it's ACS, not ACS and Contract Mining. Is there a future for these in the group medium term? Or is Contract Mining something that might be divested because of its capital-intensive nature? In mining, that's, of course, Leighton's field of expertise, and they had all that Thiess work. What they have done now in Australia is to bring everything together, all the construction business into a construction company and all the mining business into a mining company. It started in Australia because there were major projects for open cast mining. It is all about groundwork, big scale, and what Leighton has through Thiess now, because that is where they are focusing, is a huge capacity for mining. They are the top mining operations company in the world for third parties. There are great synergies with construction because the techniques are the same, and we are not thinking of divesting at all. It is a very major part of Leighton's development plans and strategic plans. No, we have never considered that. Plus, there is a good manager, Australian, who is excellent mining executive, and the profitability of that work is really high. The problem is that we do not often emphasize how profitable mining is versus construction because it is few customers, and you do not want to make things hard for yourselves. If you go around saying that you have great margins, you only have three customers, that does not help. But it is certainly a business that has longer term contracts, more stable, and with higher margins. Great investment machinery, of course, too. It is true it is very capital intensive. Okay. Any other questions? If not, well, thank you very much. Let us have a drink. Let us hope next year will be even better, and we will be here together, and also with the European Cup to brag about.