Welcome to this results presentation of the full year of 2022, that will be conducted by our Chairman, Juan Lladó, and our CEO, Eduardo San Miguel. It will take around 20 minutes. You can pose your questions after the remarks.
Hi. Hello, everyone. In today's presentation, which is the year-end results for 2022, Eduardo and myself will drive you through a summary of the results first. A year that, as you know already, overall has been a successful year for Técnicas Reunidas. It is true that we have gone through difficult ups and downs. I will start my review with the commercial activity of Técnicas Reunidas and a review of our current pipeline, which is important. Then Eduardo will follow, and will explain to you in more detail the financial figures of the year. Very important, how are we mitigating the risk profile of our backlog. At the end, as usual, I will finish the presentation with the guidance for 2023. Let us start with the commercial activity of TR over this 2022.
Here we have a slide with three graphs: carbon steel, container freight, and Brent. The evolution of the three commodities, which somehow is a way to reflect how the market has behaved over this year. 2022 began as a highly promising year on the commercial front. However, all changed with the start of the war in Ukraine at the end of February, which has been, and still is, a humanitarian calamity. We analyze the market. In our market, price and supply effects from the commercial sanctions and trade restrictions has led to one of the most uncertain environments for the energy investment uncertainty that are difficult for any of us to remember.
Actually, at that time, it has been nearly impossible for our clients to take long-term investment decisions, as it was also nearly impossible for EPC companies like TR to set reasonable price tag to any major project. For a few months, we were under impossible scenario. Hence, over that period, final investment decisions were rationally put on hold. It has been long. It was not until the end of the year that a progressive normalization in commercial activity became apparent. We've seen a big change, as those graphs reflect towards the end of the year. If we go through this slide, I think it explains what happened over 2022 and the beginning of 2023 much better. We can separate this period in three different time zones. First, the year, as I said before, it started with several important awards.
We signed two separate EPC contracts for the development of four combined cycles in Mexico for Comisión Federal de Electricidad. Later on, with Qatargas, we secured the second project on the basis of our quality and good working relationship, which we have started a year earlier. In the second period, after the Ukrainian war, which is not a conflict, let's say here it's a war, it's the Ukrainian war, uncertainty prevailed and has led to a halt of any major awards, but on lump sum turnkey basis. However, luckily, unfortunately, clients kept pressing ahead with their investment planning. Nothing was canceled. It wasn't halt. Didn't want to incur into higher costs from price and volatility spike. Over that period, we still have, and we've been having a strong flow of front-end engineering design jobs and engineering services awards.
The best example is INEOS project. It's probably the best example how a customer with us pushed forward an investment without, at the very beginning, committing on price due to market uncertainty and volatility. At the very beginning of May, INEOS, today the world's leading private chemical company, awarded to TR on a pure service basis, the project management, engineering and procurement, and the construction management for a world scale ethylene cracker in Belgium. This is the largest petrochemical investment in Europe, where INEOS has committed more than EUR 3 billion. Furthermore, in this period of uncertainty, and more towards the end of the second half of the year, we kept securing additional work of projects on jobs, in many cases, that we had already been launched. Such a very large pipeline for Qatargas program, as well as new project options and additions of their previously awarded jobs.
As on the INEOS first cracker job, we added to that contract the waste treatment plant, an important part of the offsites and utilities. Due that time, all the relevant FIDs and early engagement activity jobs has been awarded to TR, and all together, we can add more than EUR 500 million to the initial awards. It was a period of uncertainty, but with that engineering front end and services awards. Finally, as the year went on, clients went back and started to request, and they are requesting today firm bids from us. Market is back. In the first two months of February, we're seeing the first results of this very far more optimistic mood. In January, we were awarded the KazAzot contract to develop the largest ammonia plant in Kazakhstan. This is a job that I will just describe in a few seconds.
A few days ago, we have been selected as preferred bidder. We have been sign a letter for the execution of a major LNG project in Europe. This is a client that still we cannot disclose as the contract is not fully signed. Just in the last two months of this 2023, we have secured more than EUR 1.5 billion of order intake. Let's now move forward how well and how we position ourselves in the low carbon technologies: hydrogen, circular economy, carbon capture, and methane. We have seen a much steady progression and even acceleration in this low carbon sector over 2022, despite the uncertainty, as project in this sector mostly entail engineering services at the stage of early development.
In fact, I think this 2022 has confirmed to you as investors, what we kept saying all along the last two years. The strong positioning of all engineering companies such as Técnicas Reunidas in these low carbon technologies and project development. As you see in this slide, we have helped large investors in defining the low carbon investment, as I said before, in the four main products that we happen to be very strong: hydrogen value chain, circular economy, carbon capture, and methane. We are talking about future large investments. We're talking of big names. We're talking of very big investors in very diversified geographies. We can already quantify the numbers, which start to be very sizable.
The main opportunity that altogether we've seen, putting the numbers of the investment ahead of it, in which we do believe we're very well positioned with front-end engineering designs, sum up to close to EUR 2 billion, EUR 1.8 billion, we have put in here in these presentations of EPC value. EPC value of EUR 1.8 billion, which we do believe are going to be launched in 2023 and 2024. After having talked about low carbon opportunities, I'd like to take the opportunity to announce that on Monday the 6th, at 1:00 PM Madrid time, we will host an official presentation of Track. Track is TR dedicated energy transition business unit. It's a very focused answer to this very important market, a very important opportunity.
The event will be available on TR's website, will serve to further transmit and explain the strategy of Técnicas Reunidas in the energy transition business, and to review with customers and the stakeholders the achievements throughout the recent years in the low carbon technology segment, which we have grown tremendously. Having dealt with 2022, let me now enter more in detail in the awards of 2023, and then our pipeline, which is what are we seeing ahead of us. As I said before, we started 2023 with a good, very good news of KazAzot. KazAzot is the leading company in the fertilizer industry of Kazakhstan, which selected TR to develop a new ammonia, urea, nitric ammonium nitrate complex under a front-end design-open book contract, FEPCO. Let me share with you what this very important project means for us.
First of all, it's large and sizable. It will be about converted above EUR 1 billion. Secondly, it's a new customer, KazAzot. Third, very important, a promising country in terms of the forthcoming investment. It's a country, Kazakhstan, where you all know that we had limited presence in the past. Third, this is a sector of great future, where TR has a specific good technology, very specific in everything. You know, we have patented technologies applied here on nitric and nitric acid plants. As I wrote in our result notes and I said before, we expect to share with you shortly for the good news. This time it's going to be LNG. It's going to be LNG project in Europe. You know, with this announcement, which is still the customer over there, we cannot make public.
The 2023 awards to date are north of EUR 1.5 billion, which is practically the same level of awards that we have reached over the whole 2022. We started the year with tremendous strength. That allows me to move into the pipeline. Let me stress the features that characterizes this pipeline. It is sizable. Obviously, you've seen here is we're talking about EUR 69 billion. It is solid. It's not just a big number. It's a solid big number. It's still growing, which, as I'll say at the end, it will need strength and focus. In terms of size, it is the biggest pipeline that we have ever faced. We're talking about EUR 69 billion of very concrete projects planned by our clients for next two years, 2023 and 2024. It's definitely very solid.
Let's look first to the pie chart on top of the presentation. We can see that more than two-thirds are focused on petrochemicals, natural gas, and also low carbon technologies. All these jobs are strategic projects that are key for the regions, and they will be key for the people in those regions and where they're located. They do enjoy strong public support. Finally, it is a growing pipeline. We flagged in November EUR 48 billion, and now we're moving to almost EUR 70 billion. With this very huge figure, we have to focus, and we have to focus the jobs that we do believe we have more capacity to deliver and to win. We very much focus on key opportunities of EUR 22 billion.
As we do believe that of those $22 billion, we're very well placed for more than $8 billion of awards. It's sizable, it's solid, it's growing, which needs focusing. We're very much focused in successfully managing this very important pipeline. Therefore, we're focusing in strengthening all our capacities. We have very little doubt that what lies ahead of us is a multiyear super cycle, as I said in my previous presentation. A super cycle in the whole energy sector, both in the traditional and the low carbon area. This is not just a regional cycle. It's very well spread all around the world. Again, we need to focus. With this optimistic note, this optimistic presentation of our commercial front, let me stop here for a while and leave the floor to Eduardo.
Okay. Thank you. Thank you, Juan. Good afternoon, everyone. Let me move now to the financial section. First, I will go over the quarterly results. With regard to sales, the normalization of the operations throughout 2022 allow us to move back above the EUR 1 billion euro threshold since the third quarter. In the fourth quarter, we clearly surpassed that level and reached EUR 1.4 billion in sales. This figure, however, somehow exaggerates our quarterly ordinary revenues since it includes some change of scope and claims agreed with our clients during the quarter that add smaller margins or no margins at all. In any case, let me stress the main idea. Even without this extraordinary impact, the fourth quarter sales were clearly above the EUR 1 billion, a level that is absolutely key for the operating profitability of the company.
Moving to the full year, we see in the slide that total sales reached EUR 4.2 billion, increasing by more than 50% the figures of 2021. This growth rate is the best indicator of the strong recovery of operations despite the highly volatile scenario experienced from March onwards. Moving to the operating profitability, the good news is the EBIT of the fourth quarter reached EUR 39 million, which implies a 2.7% margin and shows the steady recovery of underlying margins quarter after quarter. This margin growth was a result of three reasons. First, the volume of revenues that is returning to pre-pandemic levels. Second, more importantly, it is a result of the underlying project profitability. Third, it is the consequence of our continuous hard work in terms of cost control.
Let me highlight that not all cost efficiency measures implemented are fully visible for you. Some of them allow us to optimize processes within a project and increase its profitability, and some others are focused on shortening the delivery schedule and consequently allow us a smoother execution. On the contrary, there are a number of measures that are very easy to visualize. As you can see in our annual accounts, our corporate costs were EUR 93 million in 2022, falling about 10% from the previous year, despite the increase of the volume of activity. Moving to the net cash, I have to highlight the positive evolution of the underlying cash generation in the year. As you can see in the slide, net cash has improved by EUR 214 million. There have been 2 one-offs during the year with different signs.
The TOUAT GAZ bond execution and the PPL disposal, the SEPI PPL disposal. The most important explanatory factor for the net cash improvement was the operating cash generation that reached almost EUR 140 million during the year. Once I've covered the financial issues, let me move now and give you some color on the execution of one of the main strategic lines of TR in the last two years. This line is the mitigation of the construction risk. As you know, when executing an EPC project, the construction stage is where most deviations appear. We have been focused on implementing a number of construction risk mitigant strategies.
If we analyze 2021 and 2022 awards, that amount around EUR 6 billion, the results of these strategies are: 4% of total awards above EUR 250 million have been contracted on a pure service basis. This is a number that has been increasing very fast over the last few years. Our aim is to further increase it with the goal to end up supplying 30% of our engineering man-hours to clients under this type of contract. 11% of those awards, more than EUR 650 million, were in projects with no construction risk, such as EP contracts or EPCMs, where we only take the role of construction managers. 32% of the awards, around EUR 2 billion, were EPCs in which TR previously carried out the FID.
As you can understand, by entering earlier and carry out the initial engineering, we can anticipate potential risks and have a better understanding of possible deviations and consequently do a better pricing and starting the EPCs correctly. Finally, 28% of the awards over the period were related to projects in which we either partner with a local construction company which have a much direct experience in the construction country, or alternatively, with other engineering companies to share the risks. If I have to summarize this slide, I would say almost EUR 4.5 billion out of the EUR 6 billion awarded in the last two years are contracted in a way that the construction risk is somehow mitigated. Now let me give the floor back to Juan for the 2023 guidance.
Hello again. I mean, guidance is simple because there are only two numbers. Let's work through this slowly. I don't want to sound repetitive, but the reality on our commercial side is that we are very much on top at the very beginning of an investment super cycle. That investment super cycle is getting very close. Is here. You have seen in the awards, I think you know how our customers are announcing their investment cycles.
Our main strategic goal is to make available to TR the right resources to take full advantage of this very unique opportunity. We're gonna grow, and we're gonna grow with it, and we're gonna grow with profit. This applies not only to traditional business, but even more important, the energy transition industry, which we do really believe that is our long-term future. On the operational side, Técnicas Reunidas, TR is working extremely actively and with the de-determination into fronts. On the one hand, we continue implementing efficiency programs that we have talked to you before the last two, three years. Efficiency programs that kept the pressure throughout the company to optimize operations and with the real objective of delivering higher margins. On the other hand, as Eduardo has just explained, we're fully committed in reducing the risk in our projects by all available means.
Reducing risk is executing better, which is to the interest of both our customers and our shareholders. With this very strategic focus, and given our current backlog, we think that I can very prudently provide a guidance for 2023, a guidance of EUR 4 billion in sales for this year, 2023, with a 4% EBIT margin. Having said that, I'm done with this presentation, and I have to thank you very much for listening to both of us. Now we are happy to answer any questions that you want to pose. Thank you very much.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star one one on your telephone keypad. Thank you. The first question comes from Kevin Roger from Kepler Cheuvreux. Please go ahead, sir.
Yes, good afternoon, gents. Thanks for taking the time. Hope you are doing well. I have three questions, if I may. The 1st one is related to the strong acceleration that we have seen in Q4. EUR 1.4 billion is relatively well above what you were anticipated. Can you come back on the reason for such acceleration in Q4? Is it a trend that we could see in the coming quarters? That's the 1st question. The 2nd question, sorry, because you cannot, in a way, really communicate on it, but the LNG project that you mentioned, is it fair to assume that this is a regas or it means that Técnicas Reunidas will now be also exposed to the liquefaction business? You mentioned LNG.
Just to be sure if it's liquefaction, something new for you, or if it's regas, where you had kind of experience. The third one is, I was looking at the new reporting division in the annual report. The other businesses, they report losses of more than EUR 100 million. Can you give us more color on the reason for that? Is it related to the Bu Hasa project that you have in the backlog? This is the only project that you have for other businesses right now. To understand the huge loss that you had in this division this year, please.
Oh, yeah. Sorry. Sorry. Sorry, Kevin. I will start with question one. Maybe Juan can answer the second, and I will go back to the number three. 1.4 billion shares has nothing to do with acceleration. As I have tried to explain in the presentation, the reason of this extraordinary growth has to do with the fact that we have closed with a client a relevant volume of change orders and claims. The accounting impact of this close up of change order is that we have to book a large volume of revenues, a large volume of costs that are linked to those revenues, and little margin.
If you want a figure, around EUR 200 million of the revenues we have booked in this quarter, in this fourth quarter has to do with those extraordinary change orders and claims. You have to remove from your analysis these EUR 200 million because, you know, since they do not deliver any margin, you know, they're distorting the analysis.
That's first.
If I know answer that.
The second one is simple. It's Central Europe. It's not liquefaction, and it's a regas. I don't think you need any further few regards with some color on it, I cannot get into more details.
Okay. regarding the third question, do you know, in the others, we have booked all those projects which have been terminated against our voluntary. I mean, those that have been terminated by the clients through executing bond warranties or, you know, it's this kind of project. That's the reason why year after year, you see that the results that we are delivering this, in this line, both in 2021 and 2022 are negative. You know, because we are not talking about ordinary projects, we're only talking about those projects that, well, they have been terminated because there has been a execution of bonds. You know, that's the explanation.
Okay. No, that's fair. Very clear. Thanks a lot for that.
Thank you very much. The next question comes from Ignacio Domenech from JB Capital Markets.
Thank you for accepting my question.
Go ahead.
Yes. My first question is on the order book. You have announced a significant increase in the company's pipeline up to 2024, and we saw a positive evolution on your sales in the fourth quarter. My question is, do you see any upside risks to your 2023 guidance with the sales guidance at EUR 4 billion? My second question is on the completed work pending certifications. It would be useful if you could provide a feedback on the negotiations with clients to close past contracts, and based on these negotiations, if we should expect a relevant impact on margins going forward. My third question is on low carbon technology. You have now disclosed the financial details according to the new segmentation.
It would also be useful if you could provide an indication on the required EBIT margin for this division. My last question is on tax credits. Could you provide us an indication on, or how should we be thinking on the tax credits throughout 2023? Thank you.
You see in the presentation I've said, which is true and detailed, that we have a very solid pipeline. Out of that solid pipeline, we focus on EUR 20 billion. Sometimes it doesn't mean we would not focus on the other, sometimes focus can move to one project to another. We have also said that we have a strong likelihood that we do believe that out of that we could have the awards of over the next two years of EUR 8.5 billion. Those are the jobs of the projects that we feel more comfortable. That's the reasons we don't want to give a pre-very precise guidance for awards of 2023.
It is true at the same time that it's not really challenging to have a sales figure of EUR 4 billion in 2023. That's very much what we've got already in the backlog. It's also true in this business, and we've gone through three difficult years, that we do believe that jobs to be award, they're gonna be a bunch of jobs, not only to us, to everyone. They're going to be a award in the before summer. From being award to have the contract signed and then start, it may take a while. That's why it may be a risk, as you call it, of a slightly upside on sales figures. We have to be, as I said before, prudent with the guidance and not, you know, give a guidance anything above EUR 4 billion.
Okay.
You know, true that you have seen that 2022 has, you know, because uncertainties, because of the war or whatever, you know, the number of awards was low. That means that we have the accrual for 2023 will also be as low as well. Local, but you're asking about is. The second question was about low carbon technologies margin. We do believe it's got to be the margin business. It's the margin business because the role of TR is working with customers to escalate new technologies. And let me tell you, there are not that many companies that understand these technologies. We need to deploy resources, we deploy engineering. We starting by doing engineering, not EPCs. Therefore, it's got to be by definition a margin business.
A margin business with a lot of value added to the investor, customer, and the market.
Regarding the other two questions and the negotiations, the pending negotiations with the clients, first of all, we've been able to close within this year, 2022, all the negotiations. I want to mention the countries, Oman, Bahrain, Arabia, Poland, Singapore, Emirates. You know, it's been extremely successful. We have done an extraordinary job. There's only one country pending. We believe that the figure we are finally going to obtain is absolutely aligned with the figure we have in our books. We do not expect any impact. No profit, no additional profits or no deterioration of margins. I mean, we will just convert this asset into cash probably in the next two, three months, and we will have the opportunity to forget all the spending negotiations regarding COVID.
If we talk about tax credits in 2023, okay. Well, the tax credit, you know, that's one of the toughest part of self-auditing every year, because what we have to do is to provide to us with comfort that we can recover the tax credits in the forthcoming 10 years. That's what the rule of accounting says, 10 years to fully recover. You know, with the volume of revenues and margins we are expecting to capture in the short term, we feel quite comfortable. These tax credits will be recovered in this period. If we are lucky, we can even shorten the period of recovery.
Theoretically speaking, it's proved that it can be recovered in the forthcoming 10 years.
Thank you, Ignacio. We want to thank you.
Thank you.
Thank you very much. The next question comes from Robert Jackson from Banco Santander. Please go ahead.
Hi, good afternoon, gentlemen. Well, first question is, when I look at the energy transition projects you're working on, which you have described very well in your press release, they all or mostly seem to be from new clients or potential new clients. The question is, how do you see the potential to leverage off your current client base, such as the larger clients in the Middle East or to be able to diversify into the energy transition activity over the midterm? That would be the first question.
I mean, we work in energy transition. I mean, we already proven to the market and to our customers through energy services that are very focused and we have the means, I mean, the resources to work with them. Everybody thinks, we do think that this is a, you know, United States and Europe business. I can assure you that all the traditional energy companies, national oil companies, they're following huge investments. They wanna compensate their traditional energy business with transitional energy. They have the means. They're probably gonna be the ones that are gonna escalate more aggressively new technologies. We're gonna be seeing as well in the region, in the Middle East, very large investments very soon related to energy transition, and very specifically hydrogen and carbon capture.
It's not that difficult for them, and they're very focused on it.
No-
Okay. The second question related to what you mentioned, the U.S., with the Inflation Reduction Act. I believe that you could be looking to move towards that better, that part of the world to look for opportunities. Can you give us any comments regarding that potential?
I think we're putting together a very solid strategy. We do believe, and we do believe because our experience of working in U.S., when you do engineering and when you have quality engineering, you have to remember that we have worked with many traditional energy oil and gas companies, and they do love coming to Madrid to develop engineering that they get, then is constructed or developed in other parts of the world. Our strategy is to move there and work with our customer. On Monday, we'll get into details, Monday the 6th. We have a strategy together with McKinsey to introduce TR-track into the U.S. We're working on it. We are very much ahead on our project. We see as a great opportunity for TR.
We really believe on it. My final question is, the increase that of new expected awards that you highlighted EUR 8.4 billion-EUR 8.5 billion, in the nine months it was EUR 6.5 billion. Just interested to know, where that increase, if you can give us any idea where that increase is coming from EUR 6.5 billion to EUR 8.5 billion. Thank you very much.
Obviously, Robert, you know that we have a very strong presence and a strong franchise in the Middle East. Not everything comes from the Middle East. You have seen already we have opened new markets in Kazakhstan. You have seen that we have developed large FIDs in Asia-Pacific. You have seen quite recently that we have had awards in Latin America. We have a franchise and presence, Mexico, DBA countries, south of South America. That's why I like to stress in the presentation that this is not a regional cycle. This is a worldwide cycle. We need to focus, so we have to focus not in the world. We have to focus on project and customers, and not all of them are gonna come from the Middle East for sure, you know.
We're surprised when we get awarded a big job in Kazakhstan. We may come with surprises as well over 2023, but I cannot be more transparent. Sorry for that, Robert.
Okay. Thank you very much indeed.
Thank you very much. The next question comes from Francisco Ruiz from BNP Paribas Exane. Please go ahead.
Hello, Eduardo.
Hi, Francisco.
Okay, thank you. I have two questions. The first one is regarding the margin and the operating leverage, taking into account the sharp increase in sales, I think that the operating leverage has not been as big as expected. In fact, a big part of the improvement has come on the other cost. I mean, not assigned to projects. If we exclude this, the margin of this year on a normalized basis looks even for this year, I mean, 2022, looks worse than in 2021. It's just a matter of calendar effect or could we infer that there are some projects with lower margin than initially expected? The second question is on the growth.
I mean, you have highlighted the strong pipeline and the strong awards that you're gonna have in the next two years. It's true that your cash position has improved terrifically in the last, let's say two quarters. Do you think that you will need some help in the kind of an equity issue in the coming months in order to finance the growth that is coming, or with your own resources will be enough? Thank you.
Okay. Let me start with the first question. I think our message is clear. If we analyze the quarters, I mean, if you remove the extraordinary impact we saw in the second quarter of the year, first quarter we are in euros, second quarter was EUR 11, in the third EUR 27, and the fourth EUR 39. Our profitability is growing and is growing parallel to the growth of revenues. It is a fact that this fourth quarter includes something extraordinary that makes a bit difficult the comparison.
What I can tell you is that if you remove that extraordinary effect from the revenues and the margins in the fourth quarter, we are solidly above a 3% margin of EBIT related to the size of revenues. This is a trend. I mean, we are saying next year we will be in the 4% margin and, well, probably the first quarter we will be closer than this 4% than we currently are. We will move close to 3.x%. I'm talking about a very, very robust and solid 3+%. Okay. That's the expected evolution of the margins and the revenues. Regarding the second question, I think Juan maybe.
let's talk about it. I mean, as in on my presentation and both notes, now I'm getting lost whether I wrote it or said it. I was talking that we've seen the tip of the iceberg. We are presenting now, already presenting now and being pre-qualified for a large number of bids. We're seeing a massive volume of investments that are going to be sanctioned in the very near future as well. Our message have always been that we will doing anything to capture this potential growth. We have the franchise, and we have the mean and the credibility to do it. Our priority have always been and will be to maximize our future profits. We have to maximize our future profits to deliver value to shareholders.
We currently today, you know, involved in significant tenders that we do believe they're going to be awarded before summer. We're gonna have now, today, we have to pulse, and we're pulsing with our clients what they're really demanding. We don't know. We have to see what do we really demand. If we need it, so we have to react accordingly because we cannot miss this opportunity. It has to be a mix of both. You know, we have to pulse the market, we have to pulse our customers, and then react accordingly. There are the important thing is we're gonna capture the market and we're gonna capture growth.
Yeah. Thank you very much, Juan. Very clear.
Thank you. Ladies and gentlemen, let me remind you, if you have any comments or questions, please press star one one on your telephone keypad to enter a queue. Thank you. The next question comes from Álvaro Lenze from Alantra Equities. Please go ahead, sir.
Hi. Thanks for taking my questions. I have three if I may. The first one is on the evolution of backlog. You have improved in 2022 your backlog slightly, and in fact in Q4 it has also increased slightly despite the fact that order intake has been significantly less than revenue. I wanted to explain what makes up for that difference. The second question is regarding revenues and the guidance for 2023. If I exclude the extraordinary impact on sales in Q4, you have about EUR 1.2 billion revenues in Q4 and in Q3 2022. Why do you expect a slowdown to an average of EUR 1 billion revenues per quarter implicit in your EUR 4 billion guidance for the year?
If that is the case, without operating leverage, how is margin expected to increase from the current levels to 4%? The last question will be on cash flow generation. If I look at your cash flow statement, we see that working capital has seen an inflow of cash in the year, which is to be expected as activity recovers. However, what we have seen is that the accounts receivable continue to increase. It's just that the accounts payable increase by an even larger amount. When should we expect the recovery and activity to translate in a overall reduction in the gross amounts of receivables and payables? Thanks.
Let's go. Thank you for the, for these questions, Álvaro. Yeah. The backlog evolution. Yeah, it is a bit tricky because there are a couple of issues which are extremely relevant and it's not difficult to realize they are there. The first one has to do with the massive volumes, volume of change orders we have been able to consolidate within the year. I have mentioned the countries before, but we are talking about more than EUR 1 billion of change orders. It's, you know, this. We have consumed them as revenues, but you have not, you haven't seen the movement in the backlog but it is there because we have to add up these change orders to the initial backlog and then we reduce them by delivering the revenues.
That's the first factor. Second factor we are missing probably has to do with the US dollar. The US dollar has been, we started the year, the US dollar was 1.13, I think, and by the end of the year it's 1.06. Again, it has hundreds of millions of EUR of impact, you know. You cannot make an easy bridge between the backlog by the year-end one year ago and today, you know, because it's a bit complicated because there are a number of issues which have an impact. That's regarding the first question. Regarding the second one, why 1,000 per quarter? Why 1,000 per quarter, knowing that we are now in 1.2? Well, I have to be very honest with you.
You know, we plan carefully what's going to happen in the next 4 quarters because we know perfectly what is the existing backlog and how it delivers quarter by quarter because, you know, we know how we are going to perform. My number for the forthcoming 2 quarters clearly is around EUR 1 billion. If this quarter we have been a bit more successful in terms of revenues, probably has to do with we have done some works that have an extraordinary impact in revenues because, well, there are certain activities. Imagine, for example, how relevant is the procurement if you compare it to engineering. You can do a lot of engineering but deliver with the revenues, while doing small procurement can have a huge impact in revenues.
This is the kind of issues that could have an impact in the absolute figure that will deliver quarter after quarter. As I have told you, my estimations are clear. I know my backlog, I know how I'm going to deliver, and for the forthcoming two quarters, do not expect much more than EUR 1,000, maybe EUR 1,050 million per quarter. That's my estimation. When we should expect a recovery in the gross figure of payables and receivables? It shouldn't take a long time to see that. You know, when you have a look to our account receivables and account payables are linked. You know, we try to pay when we collect, everything goes together.
Why we have such a big volume of accounts receivable today, well, basically because of two reasons. The first one has to do with the work in progress in certain countries, basically Saudi Arabia. We are buying the equipment, the procurement for Aramco in one of our projects. We can only invoice this procurement to Aramco once the equipment arrives to the plant. We expect this equipment arrive throughout 2024. The first, let's say, half, six months of the... No, not 2024, 2023. In the first half of 2023, we will be able to invoice and consequently to collect the money. We will see how this figure will dramatically go down by half of next year.
Also, the change orders that we have closed by the year-end of 2022 are going to reinvoice it now, and we will be collected probably in the next 2-3 months. Again, that's a reason to believe that by half of 2023, we will see a reduction of accounts receivable and consequently and immediately you will see a reductions of accounts payable as well.
Thanks. That's very helpful.
Thanks, Álvaro.
You're welcome.
Thank you very much. The next question comes from Baptiste Lebacq from ODDO BHF. Please go ahead.
Yes. Yeah. Good afternoon, everybody. Two question from my side. The first one is regarding North America and your comments on the country. Some of your competitors, European competitors, used to say that it's a risky country when you sign a turnkey contract. Do you have the same view? In that case, how would you curb, let's say, the construction risk? The second one is regarding the EBIT margin. Now you are, let's say, targeting 4% of EBIT margin. If we have a look at the past, for example, 2006, 2013, you were able to be at 5% or 5% +.
I know it's maybe a little bit too soon to speak about it, do you think that you still have some room to increase the EBIT margin in the future and return to this level of margin that we have seen close to 15 years ago? Thanks a lot for your comments.
I'll answer the first question, Baptiste. Then Eduardo will go over the second one. I fully agree with you. I mean, 'cause doing construction North America is very risky for North American companies, it obviously should be very risky for us. We have worked in North America, I mean, the United States. We've done engineering, we've done EP, engineering and procurement, in the Gulf of Mexico, very successful. The fact that I said is that we very much have to focus, especially in the energy transition in North America, it doesn't mean that we're gonna go there and become a construction company. We will not. I can guarantee you that. That's why we would like to stress today all the different schemes and ways to de-risk our backlog and to de-risk our construction schemes.
Here, you know, nevertheless, we have worked in the United States and outside the United States, developing engineering and then developing jobs with American companies. I can tell you, when you do engineering and you work with them, they probably the best companies in the world to work for. You have both. We will not be doing construction, but we'll definitely see us working for many or some of the US customers or potential customers and majors. Regarding the second question, if 4% EBIT is a conservative margin, I think that's the question. First, I go back to.
Yes. Yes.
To a previous answer. You know, we make a very detailed analysis of our backlog to plan the results of the forthcoming years. To me, the existing backlog can deliver no more than this 4%. That's very realistic. The new wave of investments that are coming, I cannot predict exactly what's going to be the margin that the investments are going to deliver. You know, I think we have suffered the last three years. It's been tough years for us. We cannot be aggressive now. I think to declare that our expectation is at 4% is right. I don't want to say it's conservative. It's the right figure to make the numbers and to for...
That's what we foresee for the future. We don't want to go beyond that figure today. I mean, obviously, we will maximize our efforts trying to do it the best of us to improve these margins. For the time being, let's say 4% is the target.
Thank you very much.
Thank you. There are no further questions in today's conference. Dear speakers, back to you.
Okay. Thank you, Baptiste. At the end, we just say thank you to you. Thank you to all of you that listened to these presentations. Thank you for your questions. Thank you for being with us. We'll be talking to each other again within the next few months. Thanks again.