Good evening. This is Joaquin Perez Ayala. Welcome to these results presentations of the Q3 of 2022 that will be conducted by our Chairman, Juan Laddon and our CEO, Eduardo San Miguel. It will take around 15 minutes and you can ask your questions after that. And now I give the floor to Mr.
Juan Llado.
Hi. Hello, everyone. This time I promise it's not going to take more than 15 minutes. So let's get to the point. Let me start this presentation with a quick summary of what are going to be the initial remarks, which I'll summarize right afterwards, the quarter highlight following with an update, which I think is necessary of TR's engineering And capabilities as well pipeline opportunities.
Let's continue to start. After I finish, Eduardo will brief see you on our financial results. The financial results of this Q1 and it can also be brief you with our guidance before opening the floor, obviously, like every quarter to questions and answers. I'd like to start with this slide With the unprecedented volume of investments, therefore, coming, you may think that I'm optimistic. I'm not being realistic.
If you analyze the market, all vectors are pointing to the same direction. We have a growing energy demand, fast decarbonization plans of the main energy companies or even a strong interest In diversifying supplies in Europe, everything points to that direction. That direction Chinese investment, investment and investment. Where do we think that investment is taking place and is going to take place? We do expect the Middle East is going to be leading this upcoming investment, let's call it, super cycle.
And I do believe and I'm convinced and I do expect ATR is going to be extremely well positioned to take advantage of this very positive scenario. Moving to financial results, let me do a brief introduction and Eduardo will explain in more detail later on, I'm very happy to highlight the quarterly sales add back to the EUR 1,000,000,000 approaching already pre COVID levels. With quarterly EBIT, EBIT margins reached 2.3% indicating the revision to normalized times. We're talking about super cycle and we're talking about unprecedented investment. There are 4 corners.
So let's get down to business. And let's analyze this slide based on data from McKinsey that summarizes the global investment trends of our industry. 1st, on the one hand, we have a very sizable investment still needed only just only need to address the depletion of current oil and gas wells in the market. 2, Secondly, this is not only depletion where the investment has to take place in traditional energy, but also the volume of growth. And finally, but in parallel, we're facing an enormous investment effort in the acceleration of the deployment of low carbon technologies as it already been issued by the investment plans of major industrial and both industrial and financial players.
If we follow the slides and we add up these three investment reasons together, we estimate an addressable market for TR, the stocks currently on more than $600,000,000,000 and is expected to grow close to $1,000,000,000,000 by the end of the decade. In this huge amount of investment, I think you all will agree this already creating is going to create different bottlenecks. Bottlenecks that in our case we have to anticipate. As one of the big bottlenecks we do believe as we're already facing it, it's going to be a of the market. The scarce engineering capacity to cope with other projects that are going to be announced.
And we get ready and we already anticipating that issue. In this context, TR over the last month so when I say the last month, it's not the last 2 months, closer to over the last year. He's been working hard preparing details to give the best response for this investment load expected already in the coming years. We have more than 4,000 engineers, more than 4,300 engineers. We centralize in operations in Madrid as we've always done.
For Madrid, we do most of our engineering initiatives from Madrid where we managed risk and coordinate of the engineering centers. And with the support of all the engineering sectors all across the world, we're going to be able and we're already able to offer the best engineering expertise to our customers. We strengthened in Madrid. We're strengthening within Spain Cartagena, not that many of you know that we have a small or it was small, today is more than 200 engineering centered in Cartagena, Spain. We're strengthening India and we're growing in India.
We're strengthening very much the Middle East, our engineer offices in Saudi Arabia, Abu Dhabi and Oman. And obviously, we strengthened in Chile. You might be wondering why Chile, it might not be the center of action. But you have to remember as an investor or as an analyst that we're Spanish and we have a strong presence in Latin America. We have operations in Chile.
We have operations in recent awards in We operate in Peru. We operate in Dominican Republic. We operate in Colombia. And obviously, we have announced this year we're operating in Argentina. So we're also strengthening our engineering center in Chile.
And you might be asking or wondering where are the awards. It is true that we have not announced major awards over the last quarter. However, we continue to be and we are very optimistic over future evolution of the backlog. Our major clients are publicly announcing an increase and also an acceleration of their investment plan. Obviously, on a daily basis, monthly basis, we talk to our customers.
In those talks, They're keenly requesting us to keep engineering capacity available as they do think that this could be the SCOR resource once all these investment wave unfolds. We're very positive Also about timing, we already seen and we see how many of your projects are getting ready on the final investment decision. And we're seeing and I'm sure you as well are seeing how front end engineering signed contracts are already being sanctioned to speed up the investment plan and the investment decision. In the same slide on The right hand side, we see you can see we're working on a total pipeline of $48,000,000,000 just for the next month. Is not a 3 year pipeline, which is next month.
Within that pipeline, we're very much concentrating. We're focusing our efforts for more than $20,000,000,000 Those $20,000,000,000 is what we call key opportunities. And we are optimistic and we all think that we are very well placed for more than EUR 6,000,000,000 of awards. So you understand now why I'm positive. And obviously, you have to understand where we've been working over the last month to strengthen our capacity when we're doing So with this brief message and a positive message, let me now hand the floor to Eduardo for financials.
Thanks.
Okay. Thank you, Juan. Good evening, everyone. Let me move now to September figures. I will go briefly over the quarterly results.
My main headline to summarize those results is that they are fully aligned with the guidance we provided in July. With regard to sales, let me underline that we moved back above the EUR 1,000,000,000 threshold, regaining a volume of activity that we saw last time in the Q1 of 2020 when COVID started. Our quarterly EBIT is €27,000,000 the best one in the last 2 years and is due to 3 reasons. 1st, bigger sales due to the smoother execution of projects under less stress environment. 2nd, the operational leverage of the company as overhead spread up over the higher turnover.
And third, our continuous efforts devoted to contain our costs. I also want to highlight the positive evolution of the underlying cash generation. As you can see in the graph, we had a positive operating cash of €50,000,000 that compensated a big portion of the payment related to 2 adverse that took place at the beginning of July. Moving to our guidance. As guided in previous presentations, we expect to end the year with quarterly sales above EUR 1,000,000,000 and margins moving towards 3%.
With regard to 2023, it is still not easy to predict the timing and the speed execution of future major awards. Thus, we will provide formal guidance for 2023 in February when we expect to have more visibility. In the meanwhile, and I believe it's extremely relevant, let me anticipate that just only with our current backlog, we have already secured a level of revenues of EUR 4,000,000,000 in 2023 with an EBIT margin of 4%. And given these projections For 2023, we understand there should be little doubt about the fact that our midterm targets are highly achievable. Considering our engineering capabilities and the expected growth of demand in Reaching EUR 5,000,000,000 in awards and revenues does not look a very challenging task.
And the 3rd percent EBIT margin is a figure we will already see next year with only EUR 4,000,000,000 of revenues. I can assure you that we are working hard to reach those goals and that we will take all the necessary steps to get there and to stay there. So thank you very much. And now we will be happy to answer any questions you may
Thank you. The first question comes from Mick Pickup from Barclays. Please go ahead.
Good evening, everybody. It's Mick here. Couple of questions, if I may. So firstly, I think in your As you mentioned new ways of working and new business models. I wonder if you could elaborate on that.
I'm assuming that's the pre construction support agreements out of Abu Dhabi. So can you just talk about that and your clients? And secondly, you seem to be indicating a very, very strong market, which Looks like if I look at everything, that's going to become very tight. So can you talk about the terms and conditions that you're seeing on contracts? What clients are saying about cash?
How are you going to handle it on that? Because if it does get as busy as you're saying, it's going to be a better world.
Hi, Mick. And why am I going to be answering it to you? As I've always done for the last, I don't know,
15 years. I'm only 21.
When you say new ways of working in construction With clients in Abu Dhabi, I don't think it's just only in Abu Dhabi. I think it's worldwide. I think As market tightens and the quality of design, modelized design develops. I think, modernization in this business is taking a very important role. And in Abu Dhabi, we're already doing so.
I'm not going to put it here, but I was Watching this week, a little short movie, which shows how huge 10 store building models are going into the vessels and from the vessels to the island of Bohat. And I think we're very good at that. If you analyze not only Abu Dhabi, we're working with models. In Singapore, we're working with models and the big huge job that we're doing on a service basis for Aeneas in the heart of Europe is going to be modelized. So models is important.
And I think today, we're very strong. It has to do also with quality of engineering. It's not the same way you'd have to design a plan if it's going to be models. There is also a way to derisk construction and is also a good way to derisk project execution. So we have to say we're good at that.
And I must have to say that there is room for improvement, but I was very good at that. The second question, terms and conditions on contract. Obviously, most of the jobs that in 2020 were practically stopped. In the first half of twenty twenty two, it has been to reschedule, restart and sometimes rewritten in many cases. Our customers today, they need to accelerate execution.
Our customers today, they have ambitious target for us to finish and to make money. In that, in a good agreement with our customers, I think it put us back where the market was before 2014, where time time conditions, I'm not going to be optimistic, but they're fair. They're very fair. Payment terms are much fair and contract conditions are better. We're not negotiating in the middle of the oil price.
And we're negotiating with customers really into their benefit for us to run and to deliver.
Okay. Thank you.
Thank you very much. To enter the queue. Thank you. Your next question comes from James Thompson from JPMorgan. Please go ahead.
Good evening, gents. Thank you very much for the brief presentation this evening after market close. Much appreciated that. Just in terms of the 2023 guidance, You seem particularly confident obviously now in terms of the $4,000,000,000 revenue level. I mean, I think obviously what we can see in 3Q now is And as you guided us, the progress through the projects has improved pretty significantly.
But I wondered if you could maybe talk a little bit about Some of the kind of risks around that 4% EBIT margin. Again, it feels like you've sort of struck a more positive tone about achieving that, which is notably above, I think, probably where consensus is thinking right now for Probably above, I think, probably where consensus is thinking right now for EBIT for 2023. So just some color about the confidence there and maybe some of the kind of Risks associated with that 4% margin target would be helpful. Thank you.
Hi, James. It's Eduardo now. It's been a difficult time, this period of post COVID. We have been working very hard with the clients trying to define the scopes, the price, the rhythm of execution The schedules and I honestly believe that we have a very deep knowledge of the cost base of the projects, And we have also agreed with the client how they are going to compensate us in most of the cases on the relevant costs. So when we say 4% margin, we are quite confident that is, as I said, quite I don't want to say quite easy to achieve.
But I think it's not a really challenging target. I think 4% is quite consolidated. That's my feeling.
Okay, okay. Thanks. Well, interesting to see the confidence there in terms of discussions. Secondly, This year has been, I think, a year of much higher activity in terms of tendering levels from a number of your clients and it feels like they're gearing up. I mean, obviously, there's been a lot of volatility.
However,
we look
at it, Raw materials or just geopolitics in general, what gives you the confidence your clients are now Kind of ready to move forward. Is there a window of opportunity now in the Q4 and the 1st part of 2023 that actually going to mean Some of this pipeline, which has been slipping to the right, can materialize or crystallize for you.
I mean, if you go through the analysis, you saw that it was a huge trend of awards before the war. I think the war was closer to sort of an inflection point. Any war, obviously, I mean, it's been an expected word. It scares investors for a while, and that has happen. Yes, it is true.
But none of our customers has stopped that investment, none of it has been delayed, it has been deeply analyzed and we do really expect that our customers And that's why the message that I sent before that we have to anticipate and get ready, our customers are launching, are going to be launching this year in Wolfsea awards by the end of the year. And if by the end of the year, Q1 next So we're going to be seeing that market is moving, replacing bids and we're getting already and These Q and A questions on the bids show up, we see a positive market. And that's why I started my presentation saying that which is a message for you and for our customers, both. When I make this presentation, I think on the investors and in parallel I speak on our customers that we have strengthened and we continue to strengthen our capabilities because in our capacities of engineering Quality and quantity because we do believe we're convinced as we pause the market and the bids that our investments are going to take
Very clear. Thanks, guys. I'll pass it over.
Thank you. Thank you. The next question comes from Mick Pickup from Barclays. Please go ahead.
Hi, everyone again. Sorry, I'll jump back in if there's chance. A couple of questions, if I may. You mentioned the INEOS project of $4,000,000,000 of investments on a service basis. Can I just assume that's the reason why you're confident on margins, Assuming that comes through with low revenues and much higher margins than the rest of the portfolio?
That's the first question. And secondly, on the Twat, Twat, whatever it's called, project where you've had to pay out your EUR 80,000,000 Where do you stand on that? Are you going to arbitration? Are you trying to recover it? Or is it gone and dusted?
Inelos, As you know, it was announced by them, it's a big investment in the heart of Europe, it's in Anubrook. And it's an ethylene plant. In the S and M plant by which we started with the ethylene plant and we're moving forward together with them to do the water plant, so to speak. And now we're trying to expand our services. It is, As I said in my note, it's a cost plus.
It's not an EPC. So had it been an EPC or not or Sales volume awards will be out of this world. But it is in fact, we're not. We walk into that where we have way up to 300 engineers teaming up with Enel's team here in Madrid in extremely good terms to focus in the design of the engineering, the models, the supervision of the models, the trans push and the construction. But everything is going to be together with Eneos with an ambition schedule with an ambition investment that is customers.
So margin Felinish. Algeria. Algeria. Algeria, we are in we have conversations with the customer. We have not broken conversations.
We travel back and forth, and we travel back and forth with the objective of reaching an agreement. It is a customer with whom we had worked together with ups and downs like in this business, that always happened for the last 25 years. And I'm convinced that is the and that is my opinion. I'm convinced and I do hope our customers is as convinced I am that sooner or later we reach an agreement.
Okay. Thank you.
Thank you. There are no more questions. We do have just a second please. The next question comes from Kevin Roger from Kepler Cheuvreux. Please go ahead.
Yes, good evening. Two questions on my side, please. The first one is related to the net cash position. So we have a net cash position that declined a bit Quarter on quarter, can you explain us the driver for that? And the second question is related to the order intake.
You mentioned EUR 6,500,000,000 compared to EUR 4,000,000,000 in average. If we take 22,000,000,000 on that, please.
Sorry, Kevin, there is a problem with the line. We cannot clearly hear you. The second question, yes. Can you repeat it, please?
Yes, absolutely. It's related sorry for the line, it's related to you were securing maybe €4,000,000,000 plus Number that you are giving us.
I mean, I think I can only answer the first question because us, it's impossible to understand the second one because of the line. So if you don't mind, you can pose a question to the relations department, Investor department and I will answer you later. But now let's talk about cash. You said that there is a reduction of cash in the balance sheet And it's a fact, this is slightly smaller than it was 3 months ago. But you have to bear in mind that we have paid towards gas an amount of EUR 80,000,000 because of the execution of the bank warranties.
So if you deduct With that, this money from the evolution, what has happened is we have seen an increase of €15,000,000 in the ordinary operations of the company. So I think the picture is just the opposite. We are improving our cash situation, And it's a reflection of how the market behaves. I mean, this message about the global improvement and moving towards a more ordinary situation, we can see that as well in the treasury side. I mean, we see it in the cash.
So I think it's my message for you is cash is improving, not deteriorating. That's my mission.
No, yes, understood. Thanks for that and sorry for the quality of the line. Sorry for that.
That's okay. Thank you.
Thanks. Thanks, Kevin.
Thank you very much. There are no further questions
Okay. Thank you. Thank you all of you. Yes, as you know this time I promised it was going to be 15 minutes and I think I was watching my watch has been only 14. Thank you for being there.
This is late. It was just the reason why we had this meeting is late. It had to do with travel And both, if you start to fill up, I have to excuse myself for that. So always better to have it in the morning. But again, thanks a lot.
Thanks for being here, and thanks for posting all these questions. I'll see you up on the next quarter, which has been going to be on the February results.
Thanks.