Earnings Call: Q1 2021

May 6, 2021

Good morning. I'm Manuel Manrique, Chairman and Chief Executive Officer of SACIR. Joining me today at this presentation is Carlos Mihangos, the company's CFO. Thank you very much, dear analysts, media representatives and investors for attending this financial results presentation of CIR for Q1 2021. We started out this New Year and our strategic cycle for 2021 2025, which I had the opportunity to timely present to shareholders at the AGM last week. And we started this out Indu Kors and Manor with a growing strength of our concession operations that are coming increasingly more mature by selecting our markets and opportunities very well while minimizing risk and also by increasing gradually the company's value. With this presentation, we have reported 3 consecutive quarters of growing profitability, thanks to an accurate strategic approach to our business plan. With regards to the key financials for this quarter, I could like to underscore, first of all, the distribution of 1 scrip dividend, the first one for 2021 charged to the previous fiscal year and the approval by the AGM of 2 new script dividends to be paid out in the next 12 months. Our aim continues to be that the shareholder remuneration stands at around 5% on a yearly basis, of course. Secondly, I would like to underscore our strict and sincere commitment to reducing the recourse net debt. To the extent of whitening off the current strategic plan. As foreseen in this quarter, there has been a specific increase of such net debt due to the payment of the reimbursement of prepayments as a result of the award in 2020 of the Panama contract that you all know and the traditional seasonal effect of our sector in the Q1 of this fiscal year. However, we are working on different formula and transactions, which compounded by the group's Cash Flow Generation to reduce this net debt course, we will be able to therefore reduce it significantly. We hope that very shortly, we will be able to announce a significant green financing facility with this goal. This will bring the debt concerning environmental service projects to the revenue generated by the activity, allocating any resources obtained as a result of this to reducing the curves recourse debt. And we are also considering other similar formula in order to render the financial structure of all of our businesses more effective, especially in the case of the Service division. In addition, we shall also allocate surplus dividends flows from concessions to reduce debt once we cover all the concessions that we have included in our growth plan as well as any positive flows earned from our active participation En Repsol, as we did in the past, as well as any operating flows from our engineering division and that the Service Division. Therefore, our outlook is that we want to reduce the RecourseNet Debt by year end in over €300,000,000 visavis the figure that we presented in the current quarter. With regards to our position in Repsol, as you very well know, the first derivatives that we have in place to hedge our balance sheet and P and L account Against Share Price Ructations will expire. I would like to underscore that these derivatives, as you can see, fulfilled their purpose effectively. And I underline as I did last week at the AGM, as these maturities take place, the Board of Directors of SACIR will take the most convenient decisions that may apply, but always taking into account SASIR's balance sheet softness. OXXO at a global level, I would like to underscore the social bond issued by our concessionaire, Ciner Montes de Maria in Colombia in the amount of $209,000,000 aimed at refinancing this asset through a formula that shows the social nature of this infrastructure. At an operational level, I believe that the key highlight is and will continue to be in the forthcoming quarters our progress in cutting out major concessional projects, which are already ongoing and they're commissioning. The increase of concession revenue and dividend coming from these projects stand at the Foundation of Our Future High Profitability and Growth. And now speaking about the key financials of Q1, our revenue increased by 7% compared to 2020. We reached 1 point 0 €57,000,000,000 EBITDA growing by 17%, reaching €194,000,000 Therefore, based on this EBITDA, we already obtained or already 81% of this EBITDA comes from concessional assets. Last year, we stood at 77%, but the EBITDA margin continues to grow 18.3%, Dare to say 150 basis points more compared to 2020. As for net profit, it came down in absolute terms by 21% because last year, we had some extraordinary profit due to some corporate transactions. So if we consider these homogeneous figures, profit would have grown between EBITA growth and operational flow. You know that our operating cash flow is one of our priorities, and it has increased by 31 Sand Region, €117 in Q1 2021. Finally, our total backlog amounts to EUR 40.189. And I could like to mention something which I believe is quite illustrative. About 80% of this backlog approximately comes from concession. Our concession is about €32,000,000,000 So if we consider the average EBITDA of the past 10 years in the concession sector, We are talking about 65%. Therefore, this means that in our concessions, we would have more than €20,000,000,000 already in terms of Dormant Edita. In fact, more than €20,000,000,000 in what we call dormant Edita. Serna Carlos Mijangos will provide you with further details about the Krebs' results and the results reported by each the Crops Divisions and the holding in general. Thank you very much, Mr. Chairman. FOKA. So as for the group's performance, we can see the operational strength of all of our activities at the company. In terms of concessions, EBITDA was €104,000,000 with an EBITDA margin of 55%. If we consider engineering and infrastructure, EBITDA stood at €75,000,000 with a 12% EBITDA margin and services reached 21%. EUR 21,000,000 in EBITDA with an EBITDA margin of 8.5%. Therefore, we are talking about EBITDA margin of 18.3 percent or an EBITDA of BRL 194,000,000. We have therefore been able to report a 2 digit growth compared to last year. With regards to the contribution by activity, Engineered Infrastructure contributed 54 Sand Concessions, 25% and Services, 21%. As for Editall, Concessions is the one making the main contribution with 52% engineering infrastructure, 38% and services, 10%. With regards to the backlog, I'd like to say 80% comes Front Concessions, Engineering Infrastructure provide 50% and Service is 6%. But if we consider EBITDA of all three Divisions. In connection to concession assets, we obtained €157,000,000 in terms of concession Santibaytusay, 81%. We have concessions, services and engineering infrastructure and also Well, all this shows, therefore, the EBITDA by type of asset. As for the backlog in the amount of €40,000,000,000 here we see 3 main areas in Southern Europe, for example, Italy, Spain and Portugal respectively, Latin America. During this period, there were some awards in Peru and Chile. And in the case of the United States and Canada, we were also able to fulfill one of our key milestones on our strategic plan. As for net debt evolution, we started out at 5.212 and we closed at 5.606. This net debt was therefore reduced due TOSAN positive operating flows in the amount of EUR 117,000,000 that should be included in financial expenses with a very active net investment of the company in concessional projects also due to the payment of the award in Panama and also due to some variations in amount of EUR 85,000,000 coming from financing flows. If we now speak about the recourse net debt evolution, we started out with BRL 836,000,000. But as a result of the seasonal effects, we we're at EUR 1,000,000 after paying all the taxes. Therefore, we invested EUR 16 BRL 10,000,000 in concessions. We should mention that the main projects that we're about to complete have already DAN and they are being complemented with other new awards that are already in the pipeline. And this has also increased due to the Panama Award and therefore, we reached this amount that you can see at the end of the quarter, but we are working in this quarter in order to close our financing facility in order to reduce this net debt 2 similar amounts compared to the beginning of the year in order to move into the next half of the year and work with other alternatives that we have on the table in order to reduce or to focus on our recourse net debt reduction this year and next year. As for the performance by business area. As for the Concessions, revenue went up by 23% as we Tigna to complete some construction projects in the concession sector and as new sections or tranches are commissioned. Construction Concessions and Water Concessions have gone up by 23% 24%, respectively. It is true that construction revenue came down by 16% due to the completion of several projects. For example, the Claguak Hospital in Colombia and the Puerto Hiero Highway also in Colombia. But some new projects will be put into operation shortly. As for EBITDA, there was a significant increase of 24%. Infrastructure concessions went up by 21% and water concessions were twofolded. We should bear in mind, however, that in July, we closed the acquisition of a water concession portfolio in Chile that is already making a contribution in this quarter's Renaissance. So the margins are quite stable, 63% in the case of infrastructure concessions and 18% in the case of border Concessions. The backlog is about EUR 32,000,000,000 growing by 2% vis a vis last CHIERS for Invested Equity. We are already standing at EUR1.177 billion including the amounts this quarter. €1,83,000,000 corresponds to infrastructure and concessions and €94,000,000 corresponds to water. As for awards, we have already signed an agreement in Chile. This is an investment in the amount of €100,000,000 for the Huen Paine Hospital. And this is a 15 year concession project and there are 2 other spending award in Chile also. In Brazil, the RC287 Motorway and the A3 Naples Alona Motorway in Italy. We are about to finalize all the legal details. So we belief that these agreements will be signed this quarter. As for the performance Concessions in Italy. We have already completed 94% of the Pedimentana Veneta project. So we just have to set the final official opening. Then we are talking about the next opening in May of the Bassano Rubelstol section to the 32 kilometer Montebelluna toll. And So again, we hope that this will be already operational by December 20 the 1. In Chile, we have the Americo Vespuso Oriente project that is completed by 72%. In March, we completed 44 beams of the El Salto Viaduct. And this viaduct goes all the way to Las Piramides. And we have already completed the construction of the La Piramide tunnel, which is one of the areas causing the greatest amount of traffic jams in Chile. With regards to concessions in Colombia, the Puerto del Hierro Cruz del Vissamotorway has been fully completed. It has the last functional units have already been made operational. And we also did some refinancing through the social bond. Then we have the Barun project going to El Cauca. This has already been completed by 85%. We're talking about the motorway. As for Romicha Capaso, this is a connection with the Ecuador border. This was a very rainy season, so we were able to make some progress and were able 2 commission, 2 other functional units representing 23 kilometers in this quarter. And as for the Pamplona Cocotal, which is another project that was awarded afterwards is making progress as expected, and it has been completed by 39% already. And we also expect to include the 2 fronts of the Bamplona tunnel during this quarter. In the case of Uruguay, we have the CerroCaribil Central. This is a contract that we are now carrying out. It's making progress as expected and it has being completed by 37% already. In Paraguay, in Rotas del Este, 45% of this project has already been completed and another twenty Kilometer 4th section has already been opened, running from east to west crossing the country Tru Asuncion. With regards to the weight of each country in the Concessions division, it's mainly concentrated in Spain, Chile and Colombia. Other countries that are also making an increase in contributions such as Paraguayo, the United States with the Idaho University contract that we signed at the end of December 2020. With regards to the backlog, we have 46 Assets and Operations, 13 assets under construction. You can see where they are located, mainly in Southern Spain, Southern Europe, Spain, Italy, Portugal and the U. K. Mainly. In this case, we're talking about Ireland. We also have some desalination plants in Oman and Algeria. ANI Latin America. The key countries are Chile, Uruguay, Paraguay, Peru and Colombia. Then we have Mexico and the United States, respectively. With regards to the Engineering Infrastructure and Infrastructure division, again, this division also performed very strongly over the period. We shall highlight so there was an increase of 12%. EBITDA, however, went up by 15%. We continue to hand PIK, our projects, all the tenders that we want to be in. And we want to make sure that half the backlog should be aimed at our concession assets, lowering the risks and obtaining more profit. Construction. Therefore, as you can see here, obtains a 4.9% growth, which is very important. In Canada, we have been awarded 2 projects, which have been very significant in Toronto specifically. And then we also have other significant awards, like for example, the maintenance and Energy Enhancements at the University of Idaho. And also, we have a project in amount of €91,000,000 in the case of Hirona for the logistics storage ship. If we now consider construction and concession sales for the Pedemontana financial assets from a concessional viewpoint has contributed €104,000,000 in revenue and 49,000,000 in terms of EBITDA, euros 524,000,000 was the total and we obtained a 4.9% margin, as we mentioned before, 83%, therefore, of this backlog is of an international nature and we have been 20 Edmunds Rainey. As for services, it has shrunk in terms of revenue and EBITDA, respectively. This happened in the multi Service Division. This division has been affected by COVID-nineteen mainly. Some of its contracts are not reporting as much profit as expected. However, we can see how this has been offset by the increase in business operations in Environmental Division, where we have seen an increase of both revenue and EBITDA contributing to international activity and the full variation also of our waste treatment plant as well as the repair of some damages caused by the Store Filomena in Madrid and also the Clean and Collection of Urban Sonic Waste in Cozalobos Sanroque and Moje del Valle. Pekabinsan Key Awards, mainly in the Basque Country for the urban waste collection services as well as home accession services in Catalonia as well as in Borgos. These are some of the main contract awards that we have been given. And that's all. Thank you very much, Carlos, for this overview. And now we shall be at your disposal in order to address any questions that the analysts may have. Ladies and gentlemen, next we will open the Q and A session. The first question comes from Luiz Prieto from Kepler. Please go ahead with your question. Hello. Good afternoon, everybody. I have 2 very short questions. The first question is about this new Green Financing Facility that you are negotiating. Could you provide us with some information as to the cost this would imply to the company? And the second question also along these lines is a follow. Based on what the Chairman said, we might expect the same trend in the case of the Services division. So what about the net debt and the target EBITDA and net debt of this division. In order to understand how far you're planning to go with your leveraging and do you think that there's any other division that may have to also bear this debt. Well, we're talking about a similar cost level. We are analyzing other transactions that will be less relevant compared to the ones we described. But it would be too early to make any announcement at this point in this regard in the forthcoming presentations. I'm sure that we will be able to be more Pacific. Thank you. The next question is by Fernando La Fuente from Alantra. Please go ahead. Good morning, everybody. With regards to what the Chairman said, as for the new net debt structure, I would like further clarification since this will be requesting a debt, I believe that she will be using certain flows that will now be nonrecourse flows. Therefore, I would like to know What which will be the amount of such flows to hedge these debt flows in the face of the forthcoming quarters. And then I also have a question about the corporate debt. If I understood you right, you said that it was going to be reduced by €300,000,000 like to say around 109,000,000 down to 700,000,000. So is that what you said? Could you please confirm that? And then one final question. As for the construction margin, it's holding very well, standing at 5%. Which is your target or your goal for the overall fiscal year? Do you think that, that 5% is sustainable over You think that it could go up, down. Could you please provide more details in that respect? Well, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] With regards to the first question, a portion of the Valoriza environmental services flows will be used in order to pay this green financing facility. The second question, I said EUR 300,000,000. And I always Z, that is going to be around 6, or we will start at 6. It's, however, too early to tell. We want to, however, set ourselves the goal of 6. And of course, the lower the number, eventually the better. And thirdly, we understand that right now, data at the close end of the year will be about 5% as shown in the Q1. Okay. Thank you for the answer. The next question is by Alejandro Vigil from Timber Securities. Alejandro, you have the floor. Good morning, everybody. Thank you very much for taking my question. The first question is about the company's strategy, taking into account what the Chairman said about the long term 0 net debt target you have. How are you planning to reach that target of reducing the debt 20. You spoke about cash flows coming from concessions, but we should also consider other corporate transactions like, for example, the entry of minority shareholders into the company in order to reduce the company's debt down to 0? And the second question is concerned with the 2021 guidance. You reported a great quarter growing by 17%. This kind of growth, I believe, is according to the consensus, a 10 percent growth in terms of EBITDA. Do you think this can be sustained in the forthcoming quarters? Or do you think that this is just a good kickoff, but should not be extrapolated to the rest of the year. Well, talking about how we are going to write off the debt in the next 5 years is not an easy task. This is our ultimate goal, of course, and we will focus on 2021 2020 2 in order to pave the pathway. And this pathway has to do With how we are planning to reduce the debt. That is through the current green Financing Facility. Also the flows coming from Engineering and Services, the surplus dividend flows coming from the concession division, the active management of our stake in Repsol and some other transactions concerning Green Financing that we are now exploring, mainly in the service sector. So we are speaking about 5 different drivers that we would use to this end. So between 2021 2022, we expect to cut half debt very significantly. I believe that speaking about giving other details at this point would make no sense. Course, we are always exploring new transactions and opportunities that could be beneficial to Seceir. And as for the debt reduction, we'll have to wait and see. Going back to the second question, in 2021, growth reached 17%. Well, according to our budget, It's actually slightly above that figure, but we could speak of about that EBITDA growth approximately. The next question is by Joao Safara from Bantel Santander. Please go ahead. Good morning. I have three questions. The first question and going back to the net debt. You spoke about surplus dividends coming from Concessions. Actually, I thought that this year contributions would be similar to dividends coming from concessions in prior years. Could you please clarify that further? And could you please specify the surplus you are expecting? The second question is concerned with the timing of the Pedimentana concession launching. I thought that actually the time line was April, March 2022. But according to your presentation, you're speaking about the closing of 20 21. So could you please confirm this time line, which is the timing that you are planning to have? And another question. I would like to actually better understand what you expect from your shadow tolls in Spain. I read some news stating that the national administration is expecting to finance concessions On the toll systems, so how could that affect your shadow toll systems? Are you planning to obtain some kind of compensation, should that be the case? Or should tools be open on the motorways that you already have operational? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Okay. In answering the first question, it is true that at the beginning of the year, the concessions contributions were supposed to be enough in order to undertake all of our equity obligations. We are talking about EUR 20,000,000 to EUR 30,000,000 in positive cash flows. Faso, the Pedal Montana project, It's gone 98% will be opened by year end for sure because the Del Malo tunnel is the only section pending. Usually, tunnels pose geotechnical difficulties depending on the material you work in. So perhaps the El Malo tunnel will condition about 2% only of the Pedemontana project. So we We expect this to be ready by the Q2 of 2022 at 100%. And as for what the national administration has just announced, we will have to explore that thoroughly. We will have to T, which corridors will be charged with tariffs. But in our case, users do not pay in our shadow toll systems. So Well, actually, the point I'm trying to make is what happens if users begin to pay in those new concession systems and how that could impact your overall volumes? Well, that would be like doing some guesswork. It's actually totally unknown. Well, perhaps if you could tell us how much they will be paying, we could actually carry out some calculations, but there's a lot of uncertainty at this point. Actually, when this actually happens, we'll, of course, do the math and of Hello, good morning. I have two questions. The first question is concerned with Slide 12 in your presentation. When you Pika Bounds, your recourse net debt performance. You spoke about operations flows. I believe that there you having Cloudera, your working capital. Carlos, could you please specify the working capital for the Q1? And as for your Net Debt Targets, if I understood you well. Starting with Slide 6, I don't know whether you have set yourselves a target that can be quantified also for 2022 in order to reduce the net debt by €300,000,000 for this year and even further next year. Okay. With regards To the first question, working capital in Q1 was €35,000,000 and that's why the flow was or stood at net levels. So the EBITA margin was netted out by the working capital figures. And of course, this is normally the case. With regards to net debt in 2022, We also intend to carry out a significant net debt reduction, but please allow us some time in order to Actually provides you with the specific numbers, but it's going to be quite significant. I would like to underscore that. We have one more question Fraunfernando La Fuente from Elantra. Please go ahead. Sorry, it's me again. Carlos, could you please provide us with some information as to how EUR 150,000,000 corresponds To grid financing out of those 300,000,000 with regards to the net debt, do you have any other further estimates before R and D. And could you provide us with some estimated equity invested in concessions and dividends? If you could actually clarify that, it would be most useful. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Well, again, I repeat this. We have not quantified that debt. EUR 150,000,000, however, will come From the green bond or from the green financing facility, we have just explained also the Surplus Dividend Flows coming from the concession division. EBA Vertu. Carlos already mentioned that in the previous question. As for operating flows in the infrastructure and services sector. That's another driver. It will also come from our active management of our stake in Repsol. We will continue to do this as we have done systematically up until now. So we will continue to manage our stake in Repsol actively through our derivatives. I think it will also come from other lower amount transactions in the service areas. So if we include or if we consider all these 4, we are going to add another EUR 150,000,000 at least. Sorry, Fernando. And going back to your question, we our planning to have we are planning to invest EUR 120,000,000 in equity coming from those EUR 150,000,000 we mentioned before. Okay. Thank you very much. Thank you, Tameleon, we mentioned before. Okay. Thank you very much. Thank you very much. There are no further questions on the conference call. Now we are going to Please turn the questions coming in via webcast. Good morning. Okay. Via webcast, we have some questions that have have already been answered and therefore, we are going to skip them. Filipe Leite from CaixaBank. You asked about the different transactions that we are planning to carry out in order to reduce the recourse net debt. The Chairman has already addressed that question. You also asked about the green financing structure or facility and how this will impact, our recourse net debt. I believe that that has really been answered. And then there are some other questions that have not been answered, but I believe that the Chairman made it Clear already. We know exactly what we are planning to do with derivatives when the time comes. So that question has already been taken care of. And finally, access points to Madrid. Right now, there's a question whether we have any estimated date as to the court rulings. Well, we don't have the precise timings because it's very difficult to estimate core procedures. But we know that we have actually been awarded a positive ruling TWICE. So based on previous background on two occasions, we actually won the case. Right now, actually estimating the timings is rather impossible. And if you consider the current COVID-nineteen circumstances and the fact that we don't know whether the degree of the state of alarm will continue or not. It's very difficult to actually provide specific timing. And finally, Vittorio Carrelli from Alvento also asked us to the recourse flows that will become non recourse in order to finance those 150,000,000 with regards to this green financing facility. Well, in that case, we're talking about €45,000,000 remaining in Valloriza, but with certain hedging ratio with San Surpluses in order to make a contribution to the dividend payout. Okay. We are going to allow one additional question coming in Peru, the conference call from Joao from Santander. Joao, please you have an open line. Go ahead. Okay. Thank you. I have one final question for you. 2 weeks So ago, we heard about the A21 concession project in Italy. We had some news. What do you expect or what do you think will be the next steps? Do you have any visibility as to the timings that we could expect along this process. Well, as you have very well said, the other bidder, the Supreme Court in Italy decided to disregard that bidder and therefore only Sassi has remained as a bidder. So eventually, we will be the awardee. Now with regards to the timing, it's very difficult to predict, so we cannot provide you with any specific timing at this point. But actually, this award should take place shortly. That's what we could expect. Okay. Thank you. There are no further questions through the webcast, so let me hand it over to the Chairman once again. If there are no further questions, again, I would like to wish you all the best. Keep safe and healthy. And we look forward Trumilingu, again, at the next results presentation for the first half of twenty twenty one. Thank you very much and have a nice day.