Good morning, everyone, and welcome to TR's first quarter results presentation of the year. It's going to be conducted and led by our Chairman, Juan Lladó, and our CEO, Eduardo San Miguel. It's gonna last about 20, 25 minutes approximately, and you will be able to pose your questions after the final remarks. I now leave the floor to our Chairman, Juan Lladó.
Thank you very much. Thank you, Antonio. Good morning, everyone, and thank you for joining us today. As you can see in this slide, we have the structure of presentation in a bit complex, but I think very understandable. First, I will start giving you, as always, a glance of the key highlights of our performance this first quarter. Afterwards, Eduardo will step in explaining the ongoing Middle East situation and how TR is managing it. He will first drive you through the very short-term commercial outlook and the very relevant expected awards. He will explain the disruptions suffered in some projects that are under execution in this area and how they're being managed. To finalize this second section, I will explain.
I will come back to give you what we see the midterm opportunities that we consider this current situation will bring to the sector and to TR. As always, Eduardo will go to the financial section of the quarter. Finally, I will give you the final remarks before the Q&A. Eduardo. I don't know. It's my time. Let me I thought I had finished. Oh, no. Let me start with the key highlights, which is quite important for the quarter. If you look at this slide, this first quarter has demonstrated TR's solid business performance. A solid business performance reflected in the growth of revenue, cash generation, and underlying EBIT. Sales reached EUR 1.6 billion, which implies a 21% growth versus one year ago.
The net cash figure has significantly improved up to EUR 360 million, or better said, a solid EUR 112 million cash generation compared with the first quarter of 2025. This level of sales and cash responds to the underlying EBIT. We have a strong underlying EBIT, which reflects TR's performance with a number of EUR 76 million, implying a 36% growth year-on-year. On the other hand, we have to be, and we are being prudent and realistic. Our execution performance has been delivered in the context of disruption of some projects in the Middle East. The disruption and impact that we have estimated in EUR 45 million, for which we have decided to make a provision in our accounts. Again, we have to be prudent and realistic.
In this sense, after such provision taking, the first quarter EBIT stayed at EUR 31 million. Our strong performance is also reflected in the very relevant awards expected in the very short term. Eduardo will just bring some color to these awards, which will confirm our full confidence that we have in the short and midterm outlook confidence and fully aligned with our strategic plan. Eduardo, your turn.
Now it's my turn. Okay. Thank you, Juan. Good morning, everyone. Before proceeding to this Middle East conflict section, let me first express our solidarity and firm support to all our clients, subcontractors, and suppliers in the region. In the actual circumstances, they all are not only our business partners, but also our friends. This section will cover both the impact and the opportunities the conflict is generating in the Gulf countries. Moreover, how the reshaping of the energy landscape that this conflict is likely to trigger helps to create opportunities for TR across multiple geographies. We have three topics to speak about: opportunities, project disruptions, and global impacts and opportunities. Let's start to be positive. Let's start with the short-term opportunities. Middle East was, is, and will be our main market.
The commercial activity in the region remains solid and strong since there is not a glimpse of doubt from our clients to continue as planned with their upcoming development. If we go to the figures, our commercial pipeline in the region is close to EUR 40 billion. Out of which we are expecting in the very short term awards in the range of EUR 4 billion-EUR 8 billion. Four to eight . As you can understand, I cannot provide today further disclosure than what you see in the slide. We are talking about three projects in three different countries. One is an oil field project, another one is an offshore development, and the third one is a power generation facility. The three projects, and that's very, very important, we expect will be awarded most likely before June 13. We are talking in the forthcoming 45 days.
You may say, and you are right, the range of EUR 4 billion-EUR 8 billion is a bit too wide. Let me translate that range into words. Anything below EUR 4 billion would be fully unexpected, and we have a very high chance of being awarded around EUR 6 billion. EUR 8 billion is the perfect scenario and cannot be disregarded. Also, as you can imagine, the current conflict has tightened our relationships with our clients more than ever. We do not only keep executing our ongoing projects strictly in coordination with them, but also we are assisting and analyzing how to restart damaged facilities. Our clients in the Middle East are strong and reliable, and the message we have received from them is clear: We want you to complete the existing projects as fast as feasible and to launch together a massive volume of new investment.
Let's now move to the second topic, impact in the existing projects. It is a fact that two-thirds of our current backlog is in the Middle East, and somehow all the projects in the region are being affected. It is a fact as well that only a limited number of projects, and I would say just four, which are deep inside the construction phase, are significantly impacted. The amount of these four projects in our backlog is around EUR 1.5 billion. Main impact obviously has to do with safety, logistics, and site disruptions. First, safety. We have impacts because our own workforce in the area is close to 4,000 people, and we have implemented all available measures to protect them. Second, logistics.
Impacts can be because the closure of Hormuz has blocked the arrival of equipment and bulk material and has forced us to divert the transportation to alternative routes when possible. As of today, 1,061 shipments have already or are about to be affected, and some equipment which impact in the critical path of the construction is not in the sites. Third, disruptions on sites because the difficulties to mobilize large construction teams to make them work efficiently under this scenario and the delay of arrival of equipment and bulk have slowed down the rhythm of execution. Since the conflict started, clients have been collaborative and supportive. Above all, they have insisted in the need to accelerate the execution in the future to minimize a scheduled impact.
Although the conflict is not over yet, we are analyzing together with clients how to accelerate. I wish to remind you now this kind of acceleration plans are not so unusual, and they were widely implemented by TR last year in the region. We have to be prudent. We have to be prudent. We have analyzed the potential final impact of the conflict in the four projects affected. Assuming hostilities will not resume and the strait is open within this second quarter, before June, before the end of June, we estimate the global impact will be in the range of EUR 40 million-EUR 50 million. We have booked a one-shot provision of EUR 45 million in our first quarter account. Now, Juan will analyze how the project is giving us new opportunities all around the world.
Okay. This current situation in the Middle East is somehow or in fact is accelerating all the structural trends in our sector and accelerating some of the investments planned in some of the regions. I'm gonna focus on three areas of business and two regions. I'm gonna focus on America, Power and Europe, you will see there are opportunities that they have to accelerate their oil and gas, LNG, power, and midstream. Everything has to be accelerated, and they're doing so. Power has a very compulsory need for electrification. Europe, because Europe more than ever is focused to reduce energy dependency, sustainability of fuels, focus on electrification, and obviously focus on decarbonization. Let's start with America. This is, you know, this is one of the more visible trends in our pipeline.
We're seeing new opportunities in multiple countries, including Canada, the United States, Panama, Venezuela, and Argentina. All of this translates into a very significant pipeline of about EUR 36 billion only in that region. We focus in the United States I think it's important to note that we just landed only two years ago, today we're facing extremely important pipeline. In the United States, we have something to offer. Talking about the United States, let me give you some more details for North America, which is again, clearly becoming one of the most strategic and with growth opportunity regions for Técnicas Reunidas. Let me start from the top. Working on a FEED awarded for a gas terminal and a transportation. Transportation facilities cannot disclose the customer. We're not allowed. I can tell you that it is a Tier 1 operator in the U.S.
It's a midstream operator. What's extremely relevant in that client, that he has subsequently awarded further phases in this huge development to TR. Today, we're working on Phase 4, and we do in additions to that Phase 4, you know, improving, looking, you know, working very hard on that Phase 4, which is a reflection of the quality of TR, you know, capacity on delivery. We do have something to offer. The second one, the second job is a Coastal GasLink that we are ready on Phase 2. When we started with them, we were not even on Phase 1. We were just being tested. This is another very clear example. This is the LNG Canada job that we have to support them in transporting, you know, the gas from Alberta to the Pacific.
It's again, another very clear example in how our service-driven strategy is paying off and how TR has acknowledged the client's philosophy to execute on a stage-by-stage basis. We're being successful, and we are ready to move from Phase 2 to Phase 3 and support our customer. We're doing well. Finally, the Coastal Bend LNG phase development, which was awarded to a joint venture of KBR and TR, which places TR, you know, as a front runner again on the LNG investments. In conclusion, these three projects is a straight, very clear that we have the quality to offer our clients, and we are reaffirming their confidence in TR by progressively awarding all the subsequent phases of the reinvestment plan. It's a successful story, and you have to remember that we only landed two years ago. There is opportunity of growth.
If we can quantify, we have to put into numbers what is the final investment of our stake in these jobs. It doesn't mean that it's gonna be EPC. It could be cost plus. It could be EPCM. It could be lump sum in some parts. The value to be awarded to TR across all these project rises up to EUR 7.7 billion. This is for the America, and this is for the U.S. Now let's move into power. You know, artificial intelligence is emerging, and everybody knows it's a dominant driver of future demand and electrification trends. We're there. We've announced a spin-off. That spin-off, some people got confused. The spin-off means focus. Focus and resources to capture this market. This market that is growing.
Which this AI dominant driver translate into new power generation capacity, which needs a reliable power supply. It could come out of many sources, but one of them has to be reliable, and that'll be combined cycles. This trend is clearly visible on our EUR 27 billion pipeline in only this segment. Today, we're better than ever positioned in this sector. If we take a closer look of this EUR 27 billion figure, which I think is important to break it down because it's a big number, we see a very diversified pipeline. In North America, clearly it stands out. Artificial intelligence, they want to take the lead, and they are going to take the lead. Accounts for more than EUR 15 billion of upcoming investments.
For instance, in Canada, we expect to be awarded the third quarter of the year, a combined cycle projected with a carbon capture feature for a part or stake for EUR 100 million. Second, we have Europe that we have identified around EUR 4 billion of new opportunities. Those are mainly linked to electrification and energy transition projects where we're moving forward very fast. Just as an example, all the combined cycles for RWE in Germany, which are expected to materialize as EPC progressively from the second half of 2026 onwards. This is the market, and this is the region, power that we were not there before. Again, it's a growth message. In the Middle East, also remains a very important contributor to this power business with around EUR 7 billion of opportunity.
As Eduardo has explained before, we're tracking a large combined cycle in the United Arab Emirates of around EUR 1.5 billion, whose financial investment decision is expected to take place very soon. Finally, let's consider opportunities in Europe. As we're seeing, there is a clear push for both government and industrial players to reduce dependency on external energy sources and to move towards a more secure and sustainable energy system. In this context, electrification is playing a key role. It allows countries to shift energy consumption towards more controllable and domestically sourced solutions while supporting decarbonization. This is Europe. This in Europe is creating a significant number of opportunities for the industry and very particularly in projects linked to power generation and energy infrastructure. We've talked about that before in the power section. At the same time, we all see very concrete development in very specific industrial sectors.
Besides the project that we already talked of RWE in the power business, we're working and we have been working for a while, but now we're really launching the job for ArcelorMittal on the decarbonization in the steel sector in one very specific. In the next slide, I will further explain this very important milestone and this very important award, which I think we have announced yesterday or the day before. It's also important to say that we're working and we expect the investment decisions very soon in Spain on sustainable fuels, SAF and e-methane. All of them, you know, have increased the probability and today's turbulence in the Middle East is increasing the probability to reach final and full financial investment decision soon, very soon. I think it's important to spend just a little time because there's been rumors.
We talked about people didn't know very well where we were. We've always said we were very well positioned and we wanted to position ourselves in Europe and in the world using our, you know, technology, our engineering capacity to transform and to support our customers in the steel industry to decarbonize. We have been working with them and very specifically in this case with ArcelorMittal in this business. We've announced two days ago that we are being awarded the EPCM, you know, for the decarbonization of a steel facility, a very important steel facility in Dunkirk, France. This project includes a new 2 million tons electric arc furnace with all the associated facilities, which enables production to be reduced 3x to, you know, with the CO2 3x lower compared with the traditional process. This is a very extremely important award for TR.
We're very keen to start. We've been working with the customer and we're proud to have been working with the customer for the last close to three years, finding ways how to improve and develop this very important investment. It confirms our company's role as a key player in this industry. It's fully aligned with the strategic plan that we have announced to the market in several occasions that we have to promote our service contract and our decarbonization activities. This is it. At the bottom line is clear to conclude that the current conflict is already reshaping the energy investment strategy in many regions. Therefore, high investments are for sure going to take place in all major players on the oil and gas and power sector. If I have to say anything, today, TR is best positioned to capture this growth.
Now is Eduardo's turn for.
For financial figures.
Financial figures.
Financial figures. As both Juan and me, we have said before, we have booked a EUR 45 million provision to cover what we expect will be the total impact of the Hormuz Strait conflict, assuming the Hormuz Strait opens this quarter. This provision reduces the EBIT of the quarter to EUR 31 million. I don't want to miss the focus on our performance. Our revenues, underlying EBIT without the provision, cash and equity have improved again. Quarter- after- quarter. Throughout the last four years, we are beating the figures we delivered the year before. As you can see, revenues are 21% higher than a year ago, and the underlying EBIT improves 32%. What is absolutely relevant to me is our sales. Our underlying EBIT are absolutely aligned with the guidance we provided to the market.
That's why this quarter, our EBIT margin is already at 4.8%. Very, very close to the 5% we forecasted for the whole year 2026. The cash and the equity figures reflect the good health of the company. We have our highest ever equity amounting EUR 191 million. The net cash is solidly above EUR 300 million, where we have fixed a threshold below which we don't want to be. It's a fact. We are facing an extraordinary event, the conflict in the Middle East. We have tried to encapsulate and evaluate all the consequences of this conflict in a provision that has already been booked in full in our accounts. We are still delivering a EUR 15 million net profit in the quarter while improving our cash and equity.
Believe me, I don't want to look naive, and I also want to stay humble. I cannot be happy with the figures we deliver. The performance of the company has been solid, and will go on being solid this year and the forthcoming years. Maybe, Juan, final remarks.
Okay. Let me go final, my final remarks. Just is one second for you to look into this slide, because this is not a message of justification on provisions or anything else. It's a message of growth. It's a message of growth because we have performance on revenue, cash, and underlying EBIT. It's a message of growth because we have been able to best manage Middle East disruption. Managing Middle East disruption has given us an opportunity. That opportunity has been of working together with our best customers, with the customers with whom we want to be in the short, medium, and long-term future. We have strengthened our customers' relationship. They're our partners and our friends. This allow us and positions ourselves extremely well to capture the very short-term and midterms opportunities. If you look in your metrics, today we're stronger than ever.
With that message, thank you very much for listening to us. Now we're ready to take any question you want to pose.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star one on your telephone keypad. First question comes from Mick Pickup from Barclays. Please go ahead.
Yeah, good morning, everybody. Nice to see business going well. Couple of questions, if I may. First, on the outlook for new awards. If I'm correct, you're saying EUR 4 billion-EUR 8 billion in the Middle East, and then possibly another EUR 2 billion elsewhere later on in the year. Is that correct? The follow-up on that is, how do you price Middle East contracts today? EUR 4 billion-EUR 8 billion is a big number, and there's clearly some uncertainties around that.
Maybe. Thank you. Thank you. You don't mind, I prefer to start with the second one because the first one is simple to answer. I cannot disclose today which is my strategy with my clients pricing project. We have to be careful with the answer to this question. I want to tell you something, and that's relevant. The impact of the conflict are today. When you launch a project, you take at least one year to develop the engineering of the project, and then you start procuring equipment. Very few things happen in the sites of construction until at least 15-18 months have passed.
Do not be afraid if we are properly pricing the potential impacts of the war in the new projects, because being very honest, those impacts are going to be extremely limited. As you can imagine, we have good margins aligned with the margins we were expecting a few months ago before the conflict started, and we have cushions, contingencies. You know, we are doing the things in the right way as we were doing months ago. We're still quite comfortable with the pricing of the projects, and we still believe, you know, these expected margins we are announcing for the future are well secured even in the actual scenario. Regarding the first question, EUR 4 billion-EUR 8 billion, yes, that's my estimation.
Four is very clear, six is quite solid, and eight is a best scenario. We also have opportunities outside the Middle East. If everything goes right and everything is perfect, we could be beating what our expectations, our guidance at the very beginning of the year or when we finish in the year before. Let's wait. Let's wait. I don't want to be aggressive today telling you that we are going to have an extraordinary year in terms of awards, although we believe that the market opportunities are increasing, and we have a good chance of having an extraordinarily good year in terms of awards.
Okay. Can I just follow up on a second question then on your guidance? You've obviously taken a EUR 45 million provision. You're telling me that four of the Middle East projects have logistic challenges, which are, say, more critical to them. How come revenue guidance is still at EUR 6.5 billion if four projects are likely to face some form of delay? How do you keep up with those milestones and percentage of completions?
You're right. First, we follow the projects on a daily basis. I mean, we are very close to the clients analyzing how to recover and how to accelerate the projects. By the year end, we expect to be able to recover the rhythm of execution to accelerate and to be not that far from the original expectation of EUR 6.5 billion. That's my first answer. Probably the second answer is I had some room when I give you my guidance at the very beginning of the year, and potentially revenues could be above this EUR 6.5 billion. I do really believe that's very tight. We will be doing EUR 6.5 billion, but I have not any caution.
Okay. Perfect. Thank you.
Your next question comes from Ignacio Doménech from JB Capital. Please go ahead.
Hello. Thank you for taking my questions. I have three. The first one is related with the EUR 45 million provision you have booked in the quarter. If you could give us the assumptions, okay, behind this provision. I believe you've mentioned that you expect or you assume in this provision that the strait would open this quarter, but just wanted to If you could provide some more detail, you know, on the projects that have been affected. More importantly, what mechanisms you have in place in order to in the future, okay, to negotiate with the clients to offset, you know, potentially this impact. That's my first question.
Hi, Ignacio. Thanks for the question. Sorry. Again, you're posing very complicated questions to me, not because I have not the answer, but because you are asking me to show you my strategy with my clients. If I tell you today, I have booked, assuming that I'm going to recover 60% of the amount, you know, I'm telling my clients that I am willing to accept a reduction of my rights in 40%. I cannot enter into such a level of details. As I told you, the main assumptions basically are, yes, Strait of Hormuz open in June, no resume of hostilities. What is clear for us is what we have defined, which is the final expected cost of this conflict. I'm not talking about incurred cost.
I'm also talking about what we expect to happen since June and onwards because a few impacts still will come due to the closure of the Strait this period. We know people check how our clients will react first because we're talking to them, as I told you, in a daily basis, but also because we have a track record negotiating with them recovery plans, acceleration plans. You know, we know how they behave. The next value of all those impacts less money we do really believe we are going to recover from the client is around this EUR 40 million-EUR 50 million, this EUR 45 million provision. That's, unfortunately, I cannot tell you anything else. I think you were asking about the contract. I think we have a good potential pro-protection in the contract.
For sure, we are protected in terms of extension of time, for sure. We also believe that there are room for obtaining significant amount of money to be recovered from the extra cost incurred.
Okay, very clear. My second question is related or we've seen, you know, how consultants have done some estimates, you know, on the rebuild CapEx in the Middle East. I was wondering if you expect higher works, you know, or rebuild CapEx from some of the infrastructure that has been damaged? I think this also bodes well with my third question, which is related with the high level of awards that you are expecting, okay? In the event, you know, that you have a strong pickup or acceleration of activity in 2027, I was wondering if you have enough capacity, okay, to accelerate materially that level of activity? Thank you.
Hi, Ignacio. This is Juan. I'm gonna answer this question. We don't like to talk, I think we should not talk about damage facilities, expected CapEx, and expected opportunity. I think I mean, it's not, it's not a question we like to answer because in fact it's not a real question. I mean, there's no such a big damage, the opportunity is not to rebuild what has been damaged. The opportunity is the re-relationship that we have created these weeks with our customer in working at a fantastic pace in extremely disruptive situation. Opportunity are the awards and the continuity on the awards, you know, on the investments that our customers in the region are being are even accelerating. That's the real opportunity is not the rebuild of big damages.
That's obviously something that, when we are asked to do, in addition to that, we'll support them. We don't see them as an opportunity. Our opportunity is the relationship that we have built and the investments that in that region with our customers are taking place. If you talk, if you asking us about capacity, the answer is very simple. Yes, we do have the capacity. We're probably one of the companies in the region best placed and with more capacity and more experience to take and to undertake the investments, the new investments that we are already bidding and that we are already negotiating.
Thank you. Thank you very much, Juan.
Your next question comes from Juan Cánovas from Alantra. Please go ahead.
Good morning. Thank you for taking my questions. I have two. The first one is regards to your power business. You've highlighted significant opportunities in terms of pipeline, but normally those projects require substantial capital. I was wondering what your plans are with your TR Power unit, whether you are planning to open it to external capital, be in the form of an IPO or maybe taking in a partner. The second question regards to working capital dynamics. I wonder whether you could explain to us how working capital has held up so well, even in the circumstances in the Middle East, where you seem to have suffered very little, notwithstanding you have got very few new orders. I don't know whether you can shed some light into that. Thank you.
Hi, Juan. Eduardo. Let me start with the second question because I think I need to say that I have to express the gratitude of Técnicas Reunidas to all the clients in the Middle East. You cannot imagine how they are paying, how they are attending their obligations. It's unbelievable. How is going to evolve the working capital? If everything goes as of today, I can tell you no problems at all. Everything will be very smooth this year. You will see I'm not only talking about working capital, I will talk about pure net cash figure. You will see a clear improve throughout the years because the new projects that are coming will bring relevant down payments and good payment conditions. That's regarding the working capital.
Regarding the power business, we invest nothing at all. I mean, we just construct the plant. Investment is done by someone else. When we talk about a specific project, all of them are projects that already have the money available. The investment has already been decided, and money is available, no reason to be concerned. This year we expect good news in Middle East, good news in America. Hopefully somewhere else, for the time being, yeah, let's focus on those two projects. If any problem may arise, has nothing to do with availability of capital. I don't expect any problem, nothing to do with capital.
No, sorry, I was not asking in a way that would be problematic. I was referring to the bonding requirements, which normally require a level of equity that you might not have in that subsidiary.
Yeah, yeah. That's a complicated question. Yeah, yeah. No, you're right. It will take a couple of years to fully decouple TR Power from TR Group. I mean, in the meantime, obviously we will be supporting them, and we will providing them bonds if needed. If needed. I'm not sure they will need it, but if they need it, we will be there. You're right. The question is, that is a good one. I understand it now. Yeah.
Thank you so much.
Your next question comes from Filipe Leite from CaixaBank. Please go ahead.
Yes. Hi, good morning, everyone. I have two quick questions. First one regarding Teesside, and if you have any novelty or when should we expect a final decision? Last one on power business, if you can give us the contribution of this unit to the quarterly results, namely top line and EBIT margin. Thank you.
Filipe, hello. Thanks for the question. Teesside, no news. The only news we have is probably we will have a final ruling from the arbiter, maybe July. That's the best scenario. We are not yet disclosing the figures of the power business. From next quarter, you will have this figure available. Okay?
There are no further questions. Please continue.
Okay. Okay. Thank you very much for attending this session. I do believe that we'll talk to each other on the next quarter presentation, which I think will be the end of July. I'm not sure exactly which date, but towards the end of July, we'll have the first half of the year full results presentation. Thank you very much again, and looking forward talking to you in just a few months. Thanks a lot.