Earnings Call: Q4 2013

Feb 28, 2014

Bueno. Buenos días. Good morning, everyone. Thank you for attending this presentation of ACS' results, our yearly result presentation. Now I'm going to review the main highlights of the year, then, as usual, we'll have a Q&A session. During the year, we have been able to maintain a leading position in our core markets, which are, as you know, mostly North America, Australia, Southeast Asia, and also the European Union. These are our three markets where we have almost all of our turnover, which means that we have a highly competitive position in the global infrastructure sector. As a result of our activities, we are posting excellent results this year with net profit of over EUR 700 million. In the year, as well as the investments made, we have reinforced our financial structure by significantly reducing our net debt and diversifying our funding sources further as we will see later, increasing our presence in bond markets, and reducing our dependence on banking loans. I'd also like to mention what I think has been the successful restructuring of Hochtief in 2013. I think we've been able to substantially modify the company's profile. It is now operationally a lot more efficient, financially a lot more solid, and certainly much more profitable. Our turnover in 2013 was EUR 38.37 billion, which is 0.1% less than our turnover in 2012. But we should point out that in 2013, there has been a significant depreciation of the currencies in the countries in which we operate versus the euro, particularly the Australian dollar, although also the American dollar. If we subtracted the effect of the exchange rate effect, our turnover would have increased by 6.1%. In like for like terms, our backlog, as well as because of this depreciation of the currencies I've just mentioned, was also impacted by the divestment of some of our businesses, particularly our service business in Germany, our telecommunications business, which was very significant in Australia, and also our divestment of the construction business in Greece. Our backlog is currently at EUR 63.4 billion, which in like for like terms is a 15% reduction in nominal terms, but would only be a 2% reduction in like for like terms. With this figure, with our turnover and our backlog, we are once again a leading company in construction and concession business globally, and that gives us a very significant competitive edge in order to face the challenges of the coming years. In 2013, our results were good. I have mentioned turnover, but I should also add that our EBITDA was EUR 3.002 billion, which is also 2.8% down from 2012, but that is because of the exchange rate effect. In like-for-like terms, as you can see, it would have increased by 3.1%. Our EBIT is up 10.5% at EUR 1.75 billion after divesting certain capital intensive assets and reducing the PPA amortization. In like-for-like terms, ex the exchange rate effect, it would have risen by 16.9%. Our recurrent net profit in 2013 rose to EUR 580 million, which is 0.3% down on 2012, but would have been 7% higher without the exchange rate effect. Finally, I would also like to mention our cash flow in the year with EUR 1.9 billion in cash flow, which is 30.1% more than in 2012. In 2013, the group net profit, as I said, was EUR 702 million. I would like to point out the difference between ordinary recurrent profit and one-offs. Our businesses have had a very good performance. Construction earned EUR 261 million, which is more than it had earned the previous year because of the improvements in Hochtief's profit after the restructuring process, offsetting falling volumes in Spain. Industrial services grew slightly up to EUR 418 million, boosted clearly by our strong internationalization strategy, which has offset falling volumes in Spain. The environment has obtained a net profit of EUR 79 million. That is up versus 2012 because of lower structural costs as well as lower financial costs. I think that these results demonstrate once more our solid recurrent business, our ability to adapt, flexibility, and our ability to generate recurrent profit, which we hope to increase during the coming years. The group's net recurrent profit was EUR 518 million. That is 0.3% lower than in 2012, but without the exchange rate effect, it would be 6.8% higher. In 2013, we have had net extraordinary profit of EUR 122 million. Mostly that is the Iberdrola dividends, as well as the adjustments for the valuation of the derivatives, which had a positive impact. We also provisioned, and that is a negative impact, and in combination, both effects brought net profit up to EUR 702 million. In 2013, we have continued our efforts to reduce our net debt. By year-end, it was EUR 4.2 billion. I would like to point out that in these last two years, we have continued to deleverage by EUR 5.9 billion, which is a 55% reduction, as you can see, specifically 47% last year and 14.5% this last year, 2013. In this year, 2013, we have sold the Hochtief Airport business, the German service business, and Leighton's telecommunications company. All the deleveraging involves the debt from the businesses, which is currently at EUR 3.5 billion. That means 1.4 times the EBITDA of our operating businesses. Ratio is 2.5 times, as we will see later, when we add project finance, including the EUR 685 million, which are in our net debt, as well as the EUR 2.97 billion, which are connected to assets available for sale. As I said, later, we will give you more detail on these aspects. As you know, from the end of 2012, Hochtief began a restructuring process, which has enabled the company to achieve its strategic objectives for 2013, as shown by our share price, which has risen to almost EUR 60. That is double the listed price. I also wanted to point out, as far as Hochtief, that its profit has also improved, and net profit was EUR 171 million, which is 10.3% higher than 2012, with net recurrent profit EUR 208 million, which is more than double what was posted last year. In order to achieve these results, we have undertaken a profound restructuring effort in the last month, simplifying the organization in Europe, reducing our structural costs in Germany, and standardizing our risk system, which we believe is one of our main assets at ACS. In parallel to this restructuring effort, the company has focused on its core construction business, divesting of the non-strategic assets it owned in Australia with its telecommunication companies, and also in Germany with services, airports, and the recent Aurelis divestment. That was a real estate company, the three that we own, and this was the first step in the complete divestment of our real estate business. In this period, Hochtief has also increased its stake in Leighton by 6%, bringing it up to almost 59%. As a result, there has been a significant reduction of its net debt, down to the current EUR 401 million. That's a 66% reduction versus the figures of 2012 for Hochtief. Turnover in this period was, as I've mentioned, EUR 38.37 billion. That's 0.1% down versus 2012, although it's 6.1% higher if we subtract the exchange rate effect. In construction, this area, construction, represents 77% of the group's turnover with EUR 29.56 billion. In like for like terms, volumes grew 6.7%. The exchange rate effect on the construction business was basically due to the depreciation of the Australian dollar, although also of the American dollar. Industrial services turnover was EUR 7.07 billion. That's 18% of the group sales. This is a figure which is 2.9% higher than that of the previous year, also in like for like terms. Finally, environment brought in EUR 1.78 billion. That's 5.3% higher than in 2012 and is now 5% of the group's total turnover. The combined international activity of the group can be seen in this slide. It's showing strong diversification of our revenue streams. Europe brings in 26% of our total. That's Spain and the other European countries. America brings in 34% of the group's turnover, mostly North America, where ACS already has 29% of its turnover. That's more than the whole of Europe, including Spain. South America brought in 5%. Asia-Pacific, 31%. That's thanks to Leighton's business. Asia, specifically 8% of the group sales, mostly Hong Kong, Macau, Taiwan, Indonesia, and Middle East. Africa was 1% of our total turnover. Overall, in 2013, ACS had a turnover outside of Spain of EUR 33.13 billion. That's 86% of the total. Our backlog has shrunk in this last year by 15%. That's due to three reasons. First of all, changes in our perimeter. As I've said, because of our divestment of the service business in Germany, telecommunications company in Australia, and Dragados business in Greece, that has now reduced our perimeter by EUR 2.8 billion. Of course, the biggest effect was the exchange rate effect, with EUR 6.88 billion. Finally, the fall in activity in Spain and fewer mining contracts, which in like-for-like terms are responsible for this fall. Without the exchange rate effect and the perimeter effect, our backlog would have shrunk by only 2%. Our current backlog is equivalent to 18 months of activity. By areas, our construction backlog is EUR 47.56 billion. That's 75% of the total and 2.7% down versus 2012 in like-for-like terms. Industrial services finished the year with its backlog at EUR 7.4 billion. That's 12% of our total backlog, 5.6% higher than the previous year in like-for-like terms. Environment has a backlog of EUR 8.4 billion. That's 3.3% down versus 2012 in like-for-like terms, and it's 13% of the total. As in the case of our turnover, our backlog is mostly composed of international contracts. The figure is EUR 53.24 billion or 84% of the total. Asia-Pacific, with 43% of our total backlog, is our main source. Backlog also because of the Leighton mining contracts, which have a longer duration than most of the other infrastructure development contracts. North America is already 22% of our backlog, thanks to growth in Canada and Mexico, and South America represents 4% of our total backlog. Europe is 14% of our backlog, mostly Germany, the U.K., Poland, and France. Our backlog in Spain has fallen by 11.1% as a consequence of the current economic downturn and is down to only 16% of our total backlog. In construction, sales in 2013 or turnover in 2013 was of EUR 29.56 billion. That's 6.7% higher than in 2012 in like-for-like terms. The exchange rate effect was very significant, as I said earlier, since on average in this year, the Australian dollar depreciated by 9.1% and the American dollar by 3%. Also, the divestment of our telecommunication businesses in Australia and our service business in Germany also impacted our turnover. Finally, we have continued to experience falls in activity in Spain, down 23.1% in the year to EUR 1.39 billion. By geographies, construction turnover comes mostly from Australia, and Asia-Pacific represents already 50% of our turnover, and America, mostly North America, which represents 33% of our total turnover. Europe, that's basically Germany, the U.K., and Poland, is 12% of our turnover, and Spain is now down to only 5% of our construction turnover. The contracted projects under construction, it's a backlog of EUR 47.56 billion. That's 17 months of activity. The fall in the year is due, as I said earlier, to the perimeter effect, but also the strong impact of exchange rates, which year-end also had more marked depreciations than the average in the year. Backlog in Spain fell by 6.8%, down to EUR 3.35 billion. That's 7% of our total backlog, and it's showing signs of stabilization. By geographies, Asia-Pacific is now 56% of our backlog, America 25% of our backlog, and Europe 12% of our total backlog. Among the projects for 2013, I'd like to point to the most significant. You have it on screen as well. First of all, the great tourist complex of over 450,000 sq m in Macau, with a budget of EUR 2.1 billion. Also, Leighton is obtaining good contracts in Hong Kong, especially railway. For example, in 2013, it was awarded the connection between Sha Tin and Hong Kong Central Station for EUR 500 million. Recently we've announced the construction of a tunnel between the Central Station and Wan Chai for 453 million Australian dollars. I'd also like to point out, especially in Australia, to the cooperation between Leighton and Dragados for the railway connection in the northwest of Sydney, which is a project to build 15 kilometers of double tunnels, five metro stations, and several annex facilities, and a budget amounting to EUR 671 million. I'd also like to point to awarded projects, such as the construction of the metro in Ottawa, the metro enlargement in New York, or the construction of a railway tunnel in Eglinton in Toronto. The building of the Bank Metro Station in London is good because it confirms our presence in the U.K. and has made us specialists in subways, metros. We're present in London, Ottawa, New York, Sydney, Hong Kong, almost everywhere in the world. Our experience here in Spain has enabled us to make very good bids in other places around the world. In industrial services, we've registered practically the same sales as 12 months ago, amounting to EUR 7 billion. This would have increased by 2.9% because of the international activity of industrial services, with sales of EUR 4.32 billion, growing at 5.2%, and it already amounts to over 61% of total sales. America amounts to 42% of the sales and is clearly the greatest area for growth in coming years, especially North America and Mexico. On the other hand, the sales amount to EUR 7.4 million, amounting to 13 months of activity, the backlog, and it's 5.6 more than 2012 in like-to-like terms. This growth is primarily from several integrated projects in Saudi Arabia and South America, which clearly offset the drop of the backlog in Spain, which now only amounts to 31% of the overall figure. Among the main contracts awarded, we have the contract to build the thermosolar plant in Ilanga in South Africa, 100 megawatts for EUR 491 million. The contract to develop the coastline platform in the Gulf of Mexico is a project that Dragados Offshore is developing from its shipyard in Tampico, amounting to over EUR 315 million. In South America, we've obtained major contracts, which either underscore the development of water treatment in city of Lima in Peru and the two wind farms in Chile. Then we have our activity in Saudi Arabia, which is growing significantly, among which a fertilizer plant for EUR 155 million, the construction of a plastic production plant for approximately EUR 300 million, and the installation of ten reactor in energy generation plants for over EUR 199 million. In Spain, we've obtained contracts, been awarded contract for development and maintenance of control systems for the city of Madrid, EUR 101 million. A national contract to support the Endesa's commercial network, EUR 47 million. In environment, the turnover amounted to EUR 1.7 billion, which amounts in like-to-like terms to a growth of 8.7% thanks to international expansion of Urbaser, principally in the U.K., France, and the waste treatment business in Chile. The environment is already acquiring great presence in Spain, but it supplements its activity with presence in other countries, essentially in treatment plants. Thus, activity in the U.K., France, and the rest of Europe, it grows in 2015 by over 50%, but in Spain, it drops by 8.5% because of the restructuring of some contracts. The backlog in environment at the end of 2013 was of EUR 8.4 million. That's 3.3% less than 2012 in like-to-like terms. That's because of the reduction in Spain, where the backlog drops by 15.2. By geographical area, Spain amounts to 53%, Europe to 34%, America to 12, and Africa to one. To give you examples of projects in this area from last year, we have the incinerating plant in Gloucester in the U.K., EUR 300 million. Two important street cleaning contracts in London and in Paris for the approximate amount of EUR 110 million. Street cleaning contracts in Spain amounting to EUR 100 million, and the Malaga treatment plant for EUR 46 million. The consolidated EBITDA of the group, as we saw earlier, was above EUR 3 billion, exactly EUR 3.2 billion, which is a growth of 3.1% in like-to-like terms, and the margin is at 7.8%. The annual evolution shows the impact I already mentioned of the exchange rate effect and the drop of construction in Spain. Industrial Services, on the contrary, international growth and 50 of integrated projects, and the improvement of margins for maintenance contribute EUR 33 million more to the consolidated figure of our EBITDA. And environment grows by 14% with EUR 34 million more to the overall figures. The total EBITDA from construction is at EUR 1.8 billion, which adjusted because of the exchange rate effect, means a drop by 0.5%, the margin being at 6.2%. Industrial Services offer an EBITDA of EUR 937 million, which in like-to-like terms is 5.3% more than 2012. The margin grows up to 13.3 because of the greater weight of integrated projects that have a greater added value. But the contribution in 2013 of renewable energy assets to the EBITDA of Industrial Services has dropped by 8.6, down to EUR 230 million. This drop is due to the regulatory changes in Spain during the last two years, which has made us provide for the value of these assets in an amount of EUR 300 million in the financial statements of 2012. Additionally, this we did in 2012, as we said, and now, as a result of the new proposal for remuneration, we've made a preliminary estimate until the final decision comes through with an endowment of EUR 200 million more in 2013. Therefore, the value of the assets has been provided for with EUR 500 million between 2012 and 2013. And this figure, adjusted by taxes, is equal to EUR 1.1 per share. The environment EBITDA grows by 17.5 in comparable terms, thanks to the treatment plants with an EBITDA greater than urban services, with a margin at 15.4%. In terms of investments, which we have also made this year, quite a few, in fact, I would like to underline that even in this environment of deleveraging, we've made an important investment effort, both in developing concessionary projects, together with the divestment in non-strategic assets. But overall investment has amounted to EUR 2.4 million, while divestments were of EUR 2 million. So net investment amounted to EUR 476 million. I would like to differentiate between the investments in our operational areas, for which we have disbursed EUR 1 billion, while divestment in machinery and equipment amounted to EUR 148 million, which leaves us with a net balance of EUR 941 million. On the other hand, financial investments and in projects amounted during the period to EUR 1.3 billion, while divestments amounted to EUR 1.8 billion. Net operational investment of EUR 941 million consist very essentially of construction amounting to EUR 851 million, of which EUR 761 million come from the procurement of machinery and equipment of Leighton in Australia, which are necessary for their mining activities, which, as you know, is one of our most important businesses there. The rest of companies in the construction business have not invested that much in the purchasing of specialized machinery and maintenance. Industrial Services has invested EUR 22 million in their operational investment and the environment in an amount of EUR 68 million. It is important to underline that these investments are very similar to the amounts depreciated in the different areas of activity, with the exception of PPA amortization, which amounted to EUR 194 million, and which will drop substantially in 2014. Operational investments in the activity areas have been stable in the last years, except for Industrial Services, because of the growth of integral projects and to the reduction of investments in renewables. Hochtief, including Leighton, is investing in machinery and equipment, especially mining, between EUR 800 million and EUR 900 million a year, while the remaining activities of ACS are in the vicinity EUR 150 million per annum. In financial and project investment, I would like to underscore the following. In construction, Iridium has invested EUR 124 million in building several highways, of which I would like to underline the contribution in EUR 74 million to the I-595 in Florida, in the last stretch of its development. In construction businesses in the U.S., they invested EUR 48 million in joint ventures. The other remaining amount is from the development of project with Leighton in Australia, India, and Hong Kong. In industrial services, we have invested in finalizing renewable energy plants in Spain and Peru with an approximate investment of EUR 100 million. In addition, other energy assets, such as the recent procurement of a for-sure package of energy management in Mexico and energy concession agreements, which have required an investment of over EUR 220 million. In the environment, we have invested EUR 121 million in treatment plants, especially in Essex, in the U.K. In financial investments, I would like to underline Hochtief's purchase of 6% of Leighton, fair amount of EUR 198 million, and of which approximately EUR 20 million have been invested in ACS too, buying more Hochtief shares. The main divestments this year have been in Hochtief and Leighton. As in Germany, we sold the airports for over EUR 1 billion, an operation that has been very profitable to the company because it has enabled us to sell the entire asset without having to segregate its different shares. Also this year, in Germany, Hochtief has sold its services facility management for EUR 236 million. In Australia, Leighton sold at the beginning of the year, most of its shares in NextGen, as you will recall, and other telecom assets for the amount of EUR 451 million. The working capital has suffered a variation of EUR 1 billion as a result of three differentiated impacts. First, the evolution of the operating circulating capital of Hochtief has reduced the amount owed to it by EUR 658 million, essentially because of some of the projects Leighton had in energy and gas companies in Australia, which we hope to recover in the coming quarters. After initiating a protocol for the efficient management of the working capital, is it advancing in this respect? Secondly, the remaining companies of ACS have seen a deterioration in what they owe by EUR 290 million as a result of the reduction of their activity in Spain, especially because also its lower activity in construction, reduction of advances and provisions in industrial services. In addition, the group evolved positively in 2012 by EUR 217 million. Because of adjustments, because of provisions and perimeter changes for consolidation, it is EUR 123 million deterioration in the working capital. During 2013, the group has continued emphasizing the sustainable generation of cash flow by its activities. ACS has generated EUR 1.9 billion, as I said earlier, 30.1% more than the previous year of the funds generated by our activities. Thanks to the gross profits of operations, EBITDA was of over EUR 3 billion. The net financial cost detracted barely EUR 500 million after deducting the financial expenses arising from our debt, the dividend received from Iberdrola and EUR 100 million, and also the subsidiaries, and which we consolidated through the equity method in an amount of EUR 275 million. The amounts paid and other adjustments, they reduced the cash flow in an amount of EUR 539 million. Once deducting the net operational investment, the free cash flow, recurring cash flow reached EUR 1 billion. In 2013, there have been a series of extraordinary impacts on this free cash flow. In addition to the deterioration of the working capital, to which I referred earlier, we received EUR 1.8 million for divestment, especially from the sale of airport services and telecoms, such as Hochtief and Leighton. I've also mentioned the investment of growth, which leaves us with the generated net cash flow of EUR 535 million at the end of 2013. I'd like to give you the details on the development of our debt this year. As you see, we've used EUR 496 million to pay our shareholders with the payment of dividends, both in ACS and its subsidiaries to minoritaries, and essentially Hochtief and Leighton, because of the sales of Iberdrola derivatives. We said that the exchangeable bond issuing of October last, we would cancel. We would partially cancel the equity swap, and we've spent EUR 398 million, and afterwards we've monetized the call spread, which has enabled us to receive EUR 856 million. Finally, other impact on the debt, especially the creating of the Fleetco company in Australia, leaves the debt at the end of the year at EUR 4.2 billion. As I said earlier, in these two years, we have made major efforts to deleverage by 55% overall, 47% in 2012 and 14.5% in 2013. So a total in the two years of 55%. Currently, our net debt to EBITDA ratio is at 1.4 times for the businesses. Nevertheless, we're going to continue to deleverage by divesting of non-strategic assets. We will also focus on reorganizing, making our financial structure more efficient. There, we think there is ample room for improvement. In 2013, we've also continued to reduce the rest of our financial liabilities, both the debt allocated to assets for sale, which is EUR 2.97 billion. Also, factoring and securitization for EUR 458 million. In the last two years, the total from these has gone down by 25%. Debt on assets available for sale, that is almost entirely project finance, is mostly composed of debt for renewable assets. That is EUR 2.07 billion. Also, there is the debt for other assets from industrial services, including our desalination plants or our transmission lines. That is EUR 232 million in debt, as well as the debt for the infrastructure concessions, which is EUR 593 million. Factoring has gone down significantly thanks to the supplier payment plans passed by the Spanish government and also by falling volumes in Spain. Basically, in these last two years, we have significantly reduced our leverage down to a total net debt, including in assets available for sale to 2.4 times the group's total EBITDA. Additionally, in the same period, we have increased our non-equity funding. This is a trend which we hope to continue to reinforce by going to the bond markets more frequently. Our intention medium term is to get the investment grade rating, which will enable us to replace our bank loans with corporate bond issues at competitive prices. In the last year, the group has been particularly active in the bond market. Hochtief issued last March a corporate bond issue of EUR 750 million with a seven-year maturity. Also in March, ACS established a short-term commercial paper program for a maximum amount of EUR 500 million. In October, as we announced, we issued the swappable bonds exchangeable for Iberdrola shares for a total of EUR 721 million with a five-year maturity. Overall, the group has a balance of EUR 3.2 billion in bonds and commercial paper issued in markets, which is 28% of our current debt structure. As we have seen, our operating profit was good in the year, which demonstrates the sustainable recurrent profitability of ACS's businesses. Our EBIT rose in 2013 by over 10% to approximately EUR 1.75 billion. Our recurring cash flow generation was of over EUR 1 billion in the year, as we have mentioned. We have also reinforced our financial structure by deleveraging by 14.5%, 55% in the last two years, continuing with our policy to divest of non-strategic assets, which has brought in EUR 1.86 billion in 2013, and over EUR 6.5 billion in two years. We have also carried out major investments for the future of the company, both in our infrastructure development businesses, in transport concessions, and in energy projects, as well as by acquiring a bigger Hochtief stake and a bigger Leighton stake by Hochtief. Both companies are a major part of our group and are an extremely important platform for our future growth and internationalization. At year-end, we owned, including our treasury stock, 56% of Hochtief and indirectly 58% of Leighton. In the next months, we will increase our stake in both companies. 12 months ago, we published our strategic targets for 2013-2015. We believe that we are on schedule with that strategy. Our plan was to consolidate our leadership in developed markets, and we are currently already the largest construction company in the U.S. and Asia Pacific, and the second largest in Latin America. In order to increase our profitability, we have carried out a significant restructuring of Hochtief's business, which we expect will bring in the results starting in 2014 already. We are also standardizing our risk management systems globally, already deployed fully in Germany and underway in the U.S. and Australia, and we have also undertaken structural cost reductions in all of our geographies. Finally, we have continued to deleverage, as I mentioned, through divestments in the period, but also through cash flow generated in our businesses, whilst maintaining our investments. We would like to continue to pursue these goals, since we believe they will enable us to continue to grow sustainably and profitably. In the coming years, we will continue to grow in our core developed markets, North America and Asia Pacific, taking advantage of opportunities from our competitive position in Latin America, whilst maintaining our position in Europe, in those countries in which we are leaders. We will continue to invest in infrastructure development projects, rotating our backlog in order to bring in new projects, which is an essential part of our activity as global contractors. We will also be implementing more measures to improve the profitability of our businesses, standardizing our risk management system, and promoting the growth of some of our high-value activities in new markets, such as industrial services in Asia and Australia and North America, mining in South America, and treatment plants in the U.S. and Canada. As I've mentioned, we believe that we can improve our financial efficiency as well, not just by appropriately managing our working capital, avoiding unnecessary cash requirements, as well as by increasing ACS's recourse to the markets in order to replace our current bank loans by bonds and commercial paper, which will enable us to reduce our financial costs. I'd like to conclude by repeating the strategic objectives that we are working on for the near future. First of all, we believe in the group's ability to grow profitably. Our current net profit should grow every year by at least 10%. As I pointed out before, we would like to remain with a moderate debt level. We would like our net debt to fall from the current 1.4 times EBITDA, and we will maintain a stable payout policy, which will match our business performance and be attractive for our shareholders. We have always seen our mission as creating sustainable value. With these targets, we think we will fulfill this mission. Thank you very much for your attention, and now we will be glad to answer any questions that you may have. Yes, good morning. My name is Daniel Gandoy from JB Capital Markets. My first question is, could you give us a bit more visibility on cash flow forecasts for 2014, particularly your operating CapEx and your operating working capital? Secondly, I'd also like you to bring us up to date on your divestment processes, particularly ACS assets, particularly renewable assets, given the new ministerial order that has just been passed. Thirdly, I'd like to know what your plans are with regards to your treasury stock in 2014, and should we expect that you will continue to repay debt to reduce the number of shares to offset the effect of the scrip dividend? Finally, are you planning to buy additional Hochtief shares? Okay, starting with your last question, I did say that we intend to continue to buy Hochtief shares. As for our treasury stock strategy, it's true that so far we have amortized shares to offset the scrip dividend. We'll continue to do that. Between now and June, we will continue to do that to reduce the number of shares to offset the impact of the scrip dividend we pay in shares to our shareholders. You know that our shareholders are interested in getting shares because they derive great benefits from them, but we do not want to see a dilution, which would impact those who want their dividend paid in cash. As for renewable assets for sale, as you know, there is still some time to go until the draft ministerial order becomes law. But as required, we have provisioned an additional EUR 200 million. We think that with the current EUR 500 million we have provisioned, we feel rather comfortable in that position. In the coming months, we will decide whether to sell those assets or transfer the debt to our balance sheet. But that is a decision that we will make once the final draft is in force. But we have already made a significant provision of EUR 500 million, which I believe with our current data should be sufficient. As for cash flow forecast for 2014, well, one more thing, Daniel. We did make an announcement yesterday about a relevant event. We said that we would cancel our treasury stock. In fact, right now, we are down to a negligible amount, really very small. The board approved yesterday that we reduce capital. Yes, that we reduce shares, same number that we had given a scrip dividend. As for our operating working capital, this year, there has been an impairment of some EUR 300 million. But the biggest part of that, which is a one-off, was due mostly to the large energy projects in Australia. Because traditionally, you would get paid by project milestone, and if it is a very big project or if there are significant contract changes, there is a settlement at the end of the project, which is acceptable in smaller projects which are fairly short term. But we currently have some very large contracts there where the scope has been changed, and the amount is now double the original amount. We cannot be financing these customers who have plenty of cash, like the Gorgon project, where Chevron is the main shareholder. It does not make any sense for us to wait to be paid until the project is completed. We are negotiating with them to get this to change. It has happened quite often in Australia when you change the scope of a project. That means that contracts cannot continue with final settlement. You have to be paid on receivables because you cannot act as a bank for the project. But once we finish negotiating that, which should happen in the next few months, both Leighton and the consortium involved in this project is actively involved in that. The rest of our operating working capital has suffered minor impairment, but similar to what we had last year. Just to summarize, I would say that this year, 2014, we do not expect any additional impairment. In Spain, for instance, we do not expect volumes to fall any further, so that should not mean any further impairment. Abroad, we do not expect any further impairment of our working capital. As for our CapEx, I should separate between capital investments in engineering and equipment in Australia, which is about EUR 900 million a year. That we manage as follows. First, last year, there was a major investment because we had some new very large contracts which required strong investments in that area. As you will have seen, Leighton has established a company, Fleetco, where the standard mining equipment for Australia will be purchased through that company, which is currently 100% owned by Leighton. They want to bring in financial partners so that they will not have to consolidate the results of that company, so that the strong capital investment efforts will be done by that company under market conditions and not by Leighton. Our capital investments for equipment should fall significantly. For maintenance, it is at a fairly similar level to our amortizations, and it is quite reasonable. Apart from that, you then have investments in our core business. That is to develop new concessions, to work on new tenders, new projects. That investment has its own life cycle, and in growth areas, we will continue to invest. I think you were referring to operating capital investments. That is basically Leighton. From HSBC, through the internet, we are receiving three questions. One has already been made, so it is actually two. With regard to the recent announcement of the reform of the Mexican energy market, where their intention is to change the regulation and increase liberalization. I wonder whether we are considering an increase there. We have been in Mexico for a long time now, and the two shipyards, as we mentioned earlier, Tampico, and we are one of the companies that is best prepared to tackle the new projects that are going to arise as a result of the energy reform in Mexico. What is more, we have bought from partners for $190 million, I think I mentioned it earlier, a company that we had with them, and we have done so precisely to benefit from this energy reform in Mexico. We have very good possibilities to improve in Mexico, yes. The next question is about the environment business. There has been a substantial fall of the backlog in the last year, and so they are asking whether we expect our waste treatment activity, which has grown, to continue to offset the fall in the traditional business in Spain, which was garbage collection and street cleaning. What is our forecast for this business, for the environment business? We expect to grow more outside Spain than in Spain, and we plan to restructure our customer portfolio in Spain based on the experiences that we have had in the last years, with the difficulties we have had to be paid, as you all know. We want to have less risk in Spain in certain places, and we will be offsetting that by making new acquisitions and getting new contracts like we have done in Paris and London and treatment plants in France. The ones we have should offset the restructuring in Spain for these new contracts abroad. Finally, a very specific question with regard to the dividend. What dividend are we going to be proposing for this year, is the question. We will agree this on March 26th at the board meeting. We will be making the accounts and approving the supplementary dividend. As mentioned up to now, I thought everybody knew we did this yesterday, that we amortized the part corresponding to those shareholders who wanted their dividend paid out in shares. As we said earlier, very many want it to be this way, but others don't. We will continue working both ways until the next dividend payout. I'm Victor from Societe Generale. I have two very simple questions. On page 39, where you have your target for 2014, 2016. The first about the dividend. It's not so much about this year, 2014, but the group has been paying just over EUR 2 per share, until recently. Growing the way you expect our net profit to grow, could we expect you to pay a dividend of around that amount 2 or 3 years from now? That's my first question. The second question is more about what you were saying during your presentation when you spoke about the group wanting to get an investment grade rating so you can go to the market and reduce your financial expenses. This 10% growth, well, over 10% growth, do you think it could be a conservative estimate if you were able to truly reduce your financial costs that much? Well, as we all know, the last few years have been difficult, especially for our sector, for the construction sector in Spain. As you all know, and as you all realize, the priority these last few years was to follow the European guidelines. In 2012, there were all those rumors about whether we were going to have to leave the euro and so on. As a result, there were huge cuts in every area in Spain. We, of course, had to also make every effort to reduce our costs. We continue to do so, and that's why we also reduced our payout. At the time, of course, our profit was over EUR 1 billion because of some capital gains and some other one-offs, which are no longer available to us. In order to be prudent, we decided to cut the dividend down to about 50% of our usual payout level. Because we are prudent, we believe that the strategy we need to follow is the one that I have described here. In Spain, we still have to make some minor adjustments. A business that has gone from a very large volume down to practically nothing. We decided to manage the company outside Spain, Hochtief, to improve its profitability. 2013 was, I thought, a spectacular year in the transformation of Hochtief. You only have to look at the share price, the market cap, and we have to now complete that adjustment in America with Hochtief and in Australia. I think that once we have made all of these adjustments, when we complete Spain, and exporting our greatest asset, which I think is our risk management system, which was always the biggest asset for us, for instance, in Dragados. Of course, you always have the country risk. You should never go to a country where conditions are not favorable for our activity. Our second biggest risk is the size of the project. We should never get involved in a project whose size is disproportionate given our turnover, say, 10% or 15% of our total turnover, because if there's an accident in one of these projects, it can bring down the company. So the country risk, the project size risk, and the next one, of course, is the payment risk. You should never go anywhere where you're not 100% certain of getting paid. It all seems pretty common sense. We specialize particularly in project execution risk management. We have our system, a daily financial information system, which enables us to know exactly where we are on any given day. We are never caught unawares. We're never caught by surprise. We know that the solution is a lot more difficult if time goes by than if you act promptly. This is a system that we have been deploying at Hochtief, and Serena Fernandez, who is really the biggest expert in this field, is now going to deploy it at Leighton and in America. So we are optimistic in terms of the payout for the future, but we also have to be realistic about the efforts that we've had to make to turn things around in Spain and, for the first time, manage things at Hochtief directly. We're working so that the next years, things will improve. The other question, Victor, you were asking is whether we are too conservative with that 10% profit growth. We hope to be over 10%. The investment grade rating is one of our objectives, but we don't want to make it an obsession. It's something you have to request when the right conditions are in place so you can get a good rating and reduce your financial costs that way. As our chairman has explained, we've already had bond issues, which have helped us restructure our debt, switching from bank loans to non-equity debt, which will have an impact on our income statement, certainly, and the better the rating, the bigger the impact, of course. But it is not an obsession. It is not something that we need to achieve as soon as possible because we are already managing to swap our bank loans by non-equity issues. We believe that our current profit, where it says over 10%, we believe that it will be well over 10%. We think it's quite achievable, and we hope it will be a conservative estimate. I'm sorry, I can't hear this comment. [Foreign language] Yes. I'm sorry, if I may. On slide 36, you say that you have a 36%. Is that before canceling the treasury stock? It will increase more and more. It will be done gradually. [Foreign language] José Tamayo, de Cafinas. Laura. Good morning. José Tamayo. My question may be similar, maybe not that easy. Regarding the financing and the banking debt to the fixed income with treasury stocks, would you exclude derivatives and so forth in 2013? How much do you think you could save on interest rates? How do you see the markets? You've also talked about the interest or possibility of buying more Hochtief shares. I think they financed stock at 3 treasury stock, 3.8. Are we talking about financing in fixed income? Only on the national market or through some subsidiaries as well, reducing interest rates for the group. This leads me to my last question. You've talked about the possibility of increasing Hochtief and Leighton stock in the coming months, but my question is more strategic. What is the idea for the coming years? Is it more of an operational nature? Where do you see your company among other listed companies? I didn't say Leighton, because that Leighton is up to Hochtief. Hochtief was asked yesterday, and they said that they would increase their shares. I'm going to answer this, and Enrique will answer the other part. We're, I think, contributing to improving the profitability of our companies, and that's where I think our future lies. At what pace? As we go, we will determine that because we need to make operational industrial investments because that's our business, and we need the time to improve, and we may not be in such a great hurry as you may think. Debt ways as well. If anything, if there's any accident, it would be a good moment, wouldn't it? As for the rating Oh, sorry, the interest rates are fixed. I'm not going to teach you a lesson, am I? Markets are looking very attractive. The bonds we've issued, both commercial paper and swaps, especially long-term bonds have been issued outside Spain. Even commercial paper, we have 25% foreign investors. The fixed income market is becoming quite global. There's a big demand for paper, and even if your rating isn't explicit, your implicit rating, at which your assets gives you attractive rates. 5-year placements below 3 and low 2. We don't know when the opportunity rises, but we use it when it crops up because we wouldn't let an opportunity like that go by. It's not easy for rates to go below where they are now. There isn't much room. We will do it steadily, but we're in absolutely no hurry. We do place the swap up at 2-point-something, don't we? There's a possibility of options, but the rates without enhancement are below 3 right now for an acceptable rating, and that's an opportunity. Well, if there are no further questions, of course, I'll be glad to chat with any one of you whilst we have a drink.