Good afternoon, everyone, and welcome to the Tubacex 2024 half-year results presentation. We have Jesús Esmorís, the CEO, and Guillermo Ruiz-Longarte, the CFO. We will start with the presentation, and then we will have the Q&A session. You can only ask questions in writing, and it's through the app that it's enabled through the webcast. I would like to give the floor to Jesús.
Gracias, Raquel. Thank you, Raquel. Good morning, everyone, and thank you for participating at this webcast on results presentation. These results require an explanation, and it can lead to misinterpretation. We have closed with sales of EUR 398 million, with an EBITDA of EUR 50.1 million, which is a margin of 12.6%. Within the objectives that we have set in the strategic plan to be around 12%-15% in the EBITDA margin. It's obvious that, depending on the quarter and what we manufacture and the projects and the mix that we have, we can be moving around this margin without any major drama.
Bueno, estos resultados. These results require the explanation because they're very much influenced by the initiation of our ADNOC project. We have got our first orders that are started to be manufactured in our plants in the Basque Country, the steel mill, as well as the pipe manufacturing, and then they are sent to the Abu Dhabi plant so that then the pipes are finished and to then the thread machining phase. It's very good news that the project, the ADNOC project, has started. That allows us that to anticipate that next year, considering the forecast for this year, next year will be a very important year in terms of the sales by the new factory that will start with the first phase, which is the machining phase in the Q3 and Q4.
We will start to sell these products at the end of this year so that then during or over the next year, we will increase the deliveries of the products. So, this leads to the fact that these orders, we need to have the commodities and raw materials, we need to manufacture steels, and we have to lead to costs or incur in costs in the product manufacturing. And we still have, we still don't have sales of this product. We will see this effect, a double effect over this year. On the one hand, we will see an effect on the margin that we will have it when we sell the products, and it will have an impact on the working capital, and it will affect debt.
So the third consequence in terms of affecting debt is that a new plant is being manufactured and/or building, and that requires investment, and it's under progress. And we have invested around EUR 38 million in this factory. So this has led to an increase of the working capital and a significant increase in the working capital and the net financial debt. This is not concerning. This is one of consequence for two reasons. Once we start to destock, this will be corrected. And the second reason is since we have announced that we have an agreement with the Mubadala company that has a 49% stake and which is purposed to build these OCTG products. And this will mean a revenue that will happen between the Q3 and Q4 of this year that it will be around $195 million. And this will correct the increase in debt.
The good news is that the company is still, we're still keeping very important backlog, very important portfolio. We are reaching very important orders, both in the OCTG or umbilical products and in the nuclear world as well. And this makes us being very optimistic for the evolution in the years to come. This is all framed within the strategic plan that we presented at the Capital Markets Day. We are following the plan very, we are sticking to the plan, and we are very much aligned with everything that we have said. We've insisted that the result will maybe a little bit lower than what we expected, but it's the second highest in the group's history. So the result has been somewhat influenced by the impacts that I have mentioned, and I'm sure that Guillermo will go into further detail. I'm going to hand over to Guillermo so that he can go through the financial figures.
Thank you very much, Jesús and Raquel. Well, now I'm going to try and break down the message given by Jesús, especially with regards to the income statement. Then we're going to stop in terms to talk a little bit about the sales and the operating profit. And going to talk about the working capital and the net financial debt. The main message is there is the fact that we are preparing, we're in a commissioning phase, and to make a number of investments to create working capital that is completely needed to generate the results that we'll be seeing that are going to go up over the second half of the year and over 2025.
I'm going to try and add different things to what we have been talking about up until now. If we compare quarters or half years, we will see that regardless of the fact that the strategic target is to be above 14% in the second half of 2023, we're at 16.7%, then 14.8%, and we are at 12.6%. For a number of reasons, there is a mix of product in terms of building and commodities, or the fact that we have complex projects that we still need to invoice. We are at the same levels in the book-to-bill. We have the same levels in terms of order capital and the mix. Although it hasn't been manufactured to date, this mix will be getting richer and richer over months and over years thanks to the ADNOC plant.
But we have a multi-year contract, which arises up to 30 contracts. These results are very structurally significant for the future, but it's one-off in terms of 12.6% or in that sales figure, which is 8.5% lower than last year. We are not concerned with regards to the compliance with the strategic plan. What is obvious here is that we are doing our homework for the future in terms of working capital and debt. Although I'll give further details later on, it's quite simple. We have EUR 38 million in terms of investment at the Abu Dhabi plant, and we are adding to working capital by EUR 86.5 million. This will give more details in terms of stocks, customers, and suppliers so that we understand what happens.
If you see a 3.6 in terms of debt in the EBITDA , you might wonder that this is very high and that is not in line with what we are saying. That's not the case. In our strategic target is still to be at the end of the year 2x under that level. Just a reminder, although we are increasing working capital and we're investing, that was within the Tubacex income statement. We don't have the incoming from the Mubadala, which will take place around October and November. So if we did a debt pro forma, we will be 2x under the expected level. So I would love to talk a little bit about sales and EBITDA. We are under the 23% level with a different price margin, which is important in order to qualify sales.
We have increased by EUR 30 million in the finished product and ongoing product, which hasn't been invoiced, which has a, a high invoice and which will be invoiced over the next quarters. What we can't see is the consumption of raw material and the variations in stocks, which is very much related to the commissioning of the Abu Dhabi project. So it's easy to understand that if we have to invoice important amounts in the beginning of 2025, all this material is already ready, and we have the raw material consumption, which will lead to a higher profitability of around, EUR 30 million, which hasn't been invoiced. This is a, a consequence, that has led to that 12.6% in EBITDA margin. There are sometimes that things have to be read in a different manner. In the like-to-like basis, vis-à-vis last year, it's less.
But if we consider what we are not invoicing and the effort that we are making in profitability in material consumption and ongoing product, what we can see is that in a cycle where we have intensive production and low invoicing, company's current profitability is 13%. In a company that has been said that it's volatile or having problems when presenting results, we are showing financial stability, resilience, and commitment with the 15% target commitment, and we are following a cycle. If we go into the detail of the income statement on the balance sheet, I'm going to give you very clear messages. We are around 39.4% in working capital over sales, and we have high figures in working capital. The target is to contain it to 30% over sales, but it will depend on the quantity of manufacturing that we have.
We, in the ramp-up project for Abu Dhabi, we will see quarters where that ratio, depending on the billing at that time, can go up. But we, there's no question that as we convert that into a cash of that project, that ratio will come back to the, to 30% levels. The stock inter-annual increase is around EUR 30 million, and it shows the management effort carried out by plants, and it's very easy to go to skyrocket in some stock levels in some plants. Despite being in the middle of a production process and the different projects, and I think that this is very well contained. You will see in the presentation something that we don't tend to talk about, which is the mathematical effect that is affecting our balance, our income statement.
We are seeing that over the stock creation process, a lot of stockpiling that we did in the raw of raw material, we need to hedge these materials. These orders, these raw material orders that have been billed have been paid to suppliers. So basically, we are seeing the reduction of suppliers prior to the consumption of the material. The combination between the reduction of stock and in terms of the accounts payable creates an inflation of the working capital up to 39%, which is a working capital that in average is not the one that we expect to keep considering all the projects that we have. When those projects are no longer in ramp-up and at a cruising speed, we will come back to a 30% ratios. So at the end of the day, it affects debt.
That 3.6 ratio level, it's a one-off situation in terms of preparing what's coming ahead. The real company's ratio, October, November, and after that, will be around two or under a two or below two. And we will be able to amplify activities and prepare the years to come with revenue and turnover levels, which will be higher than the ones we've had so far. But starting from an end of year, which will be below two. So this has been usual during the in the company to do an expansion with a debt level which is completely hedged or protected. So the stocks evolution will adapt progressively to the turnover levels. The strategic targets, you know, you know them, and we want to have stable raw material between EUR 1.2 billion and EUR 1.4 billion for 2027.
So we're always going to have the average stock growth that will be related to the future, sales and profitability. I would like to talk about current liquidity. Without having any cash incoming by a strategic partner, we are a liquidity of EUR 220 million with regards to EUR 140 million in cash. So we have authorized credit limits by that difference. And once we have the cash incoming in October and November, we'll have a liquidity which will be above EUR 400 million. And as a financial expert, I fully trust the market in terms of missions and bonds and all the banking system being a long-term leverage in terms of all the investments that we have a strategic level.
Within the evolution of the financial cost, given the interest rate reduction in the long-term or the midterm or the spreads that we are reducing, plus the cash incoming that will come from Mubadala will affect EUR 7 million or 8 million with regards to financial cost, inter-annually, year-by-year, will create a growth that will have a very low debt in terms that we will be in a good position to monetize the closing of the transaction. Considering that we have a strategic plan that is heading towards 2027 with over 30 projects and multi-yearly contract of EUR 1 billion in Abu Dhabi. So through these four slides, I wanted to give you a little bit of touches or color.
If we see it isolated, it can seem to be going back in terms of profitability and in terms of the activity of the group. But if you know the reasoning behind this strategy, you will see that it will be a success in order to ensure future results. I would like to hand over back to Jesús Esmorís, our CEO, who can give more details on the projects and all the framework agreements that we have on sales that are changing the entire profile of the company.
Guillermo, muy bien. Thank you, Guillermo. Bueno, vamos a desglosar un poco los datos. We are going to go into the detail of the sales of the first half year of 2024. Sales in gas have been around 24% in terms of gas extraction. This is OCTG products. In oil, it's 18%. We are increasing, we are growing, especially in nuclear up to 7%. The industrial mix is 32% of the sales and what we call new businesses, everything to do with aerospace and automotive. We've reached 18%. And so this mix is improving and it's evolving, according to what we have defined in our strategic plan. With regards to geographical sales, the geographical breakdown, 40% has been geared towards Asia and the Middle East, and a bit more than in previous quarters.
For U.S., 25%, it's a bit below last year, and this is due to some delays in the Petrobras deliveries that took place in the second half of the year. And for Europe, it takes up 32% of the pie. So it's a very diversified portfolio, and sales have been diversified and in sectors. So we keep that EUR 1.6 billion portfolio of around EUR 1.6 billion, and which is allowing us to, so the order incoming, it's at the same level of the sales level, 1:1 ratio. It's a very important portfolio that we had been working since 2023 and that we are able to work on and to keep. So these are very high-value products. It's a very good backlog in terms of margins, and it's a backlog that gives us a lot of visibility for the second half of the year and, and for the first half of the year for 2025.
So if we continue 1:1 in upstream, we have important ADNOC orders, as we have explained. We have had new orders or orders from Brazil that will take place in the second part of 2024 and during 2025. We are turning this into. We are becoming an OCTG leader for these kinds of products. As for drilling and machining business, we are very strong in the Middle East, but we've seen some drops in the U.S. because we had to amortize. And with regards to offshore and SURF and subsea, we have had very important umbilical orders that lead us to having a backlog in our Austrian plant that covers the entire next year and important orders from Norway for offshore vessels.
And with regards to the industrial sector, it's divided into different groups, and it's divided in different parts of the world. Tubacoat product where we apply ceramic treatment on the pipe and tube, sorry, it's still growing. And the weakest part of the product is the distribution has experienced a slight increase, and it's a very cyclical. Right now, the distribution is at a lower cycle. In the power generation, in terms of advanced boilers, and there's been an important increase in the nuclear. We have, we have EDF, which has become one of our most important customers. We've had some orders for Hinkley Point in the U.K and for EDF in France for all their nuclear power plants.
We are working in the co-design in what we call the Small Modular Reactors. These are small nuclear stations where we think we will see a growth, and we are working both with GE as well as with Rolls-Royce in the design of component of mechanical components. In terms of low carbon, in terms of carbon capture, it's some slowdown compared to where we expecting. There was a lot of dynamism last year, but this has slowed down a little bit. There has been some issues in the U.S. with the approval of the different projects. There are many decisions that have been accumulated. We hope this is freed up for next year where we have an important 2025 and 2026 in terms of carbon capture.
As for hydrogen, we are involved in significant projects at a European level, and in fertilizers and ammonia, we have developed our own materials, and these are being sold and marketed in the market. And with regards to new businesses, important growth in aerospace and space exploration sectors, and which is turning into a more significant sector for us, especially in the U.S. We are going exploring the defense world. We have signed a technological collaboration agreement for the Future Combat Air System, for the European Future Combat Air System. It won't be significant in the years to come, but it will be in the future after that. In terms of semiconductors, it's we forecast an important growth both in the U.S. and in Europe. New plants are being built for microchips, and we are getting the first orders from India.
For I&C, the instrumentation and control hydraulic and instrumentation segment is behaving in a very good way. With regards to ESG, we have very firm commitments for 2030, something that we have been announcing so far. We are ahead of these targets, both for environment as a circular economy and people and health and safety. We are meeting the targets that we had set. In terms of stock information, after the capital market day in November, where the stock reached EUR 3.70, we have dropped to EUR 3.24 at the end of May. Right now, we are under three. We hope that this is something is a one-off situation and that these results are understood correctly. So we've had a capitalized market cap of EUR 410 million. With regards to the market consensus, so the target price is EUR 4.87, which we agree with considering the forecasts in the mid and long run.
We have signed a strategic agreement with Mubadala. We carried out the signing, and now there are a number of topics that we need to deal with before the closing. The closing is forecasted to happen in October, November at the latest. There is an action plan which has started, and everything is on track. We see no topics that it's concerning before the actual signing. This agreement is a carve-out of business of OCTG business units where Mubadala comes in with 49%. It's a partner that has a lot of influence in the Middle East and with the biggest customer there, ADNOC. We think it's the right partner in terms of the positioning that we are taking up in the Middle East. This consolidates our position as one of the OCTG players. If everything goes as planned, next year we will be the first OCTG manufacturer.
This is very good news. We have long-term relations and stable projects and agreements with partners that will ensure a lot of our activity in the future. This is the agreement. We will receive $195 million at the closing day, and it will, of course, affect our balance for the end of the year. These are the growth prospects over the coming quarters. We are still committed with the strategic plan that we presented last year. We are fully aligned with the strategic plan with the ADNOC project still running. The plant is evolving correctly so that we can have phase one completed, the machining phase by; we'll have this completed by September. We still have an important order backlog, and we are still getting very important orders to keep that backlog level. We are signing important strategic agreements with our customers, which allows us to have a higher visibility in the future.
So, we have the commitment with NTS, the 2027 targets, and with our financial commitments to reach EUR 1.2 billion or 1.4 billion in revenue with an EBITDA of over EUR 200 million and an NFD of times two. So these are the results of Tubacex, and we'll be more than happy to answer any questions that there may be.
Thank you, Jesús. And Guillermo, we've got some many questions. We're going to group them by topics. First, with regards to the results that we have presented today for the Q1 and the Q2, the question is about the effect that we are seeing in margins, given the ADNOC kickoff. They ask to give more clarification of whether that reduction in margin is its reduction on high-value products or whether we are having costs, additional costs given these sales.
Well, through the presentations, I think that we've said this, the margin is a one-off situation. Our target is still around 14%. There's a double effect. It's on the ongoing products and the finished products. Just the stock variations is another EUR 11 million, and this is an, is impacting working capital, which hasn't been invoiced that we, we have, we don't have it in stocks and it's in invoicing. We have said in this presentation and the previous presentation, there are a number of projects that have been delayed. So we're not only talking about ADNOC, but also Petrobras and other projects that will materialize in the second half of the year and in 2025.
Just to reiterate the fact that this is a one-off situation in terms of sales figures as in margin that is, affected by a mixed effect or by the fact that the product hasn't been marketed and a product that will come out, later. A one-off situation because on a like-to-like basis in 2023 where we saw a significant amount of OCTG and with high margins and that we hope that these happen in the future quarters. In terms of structural level, there's been no changes, but we see changes if you compare exactly the semesters as such as a silo. There's another question related to extraordinary factors that we mentioned at the results, if we can quantify the impact on the EBITDA.
In an ideal world, where we wouldn't be making a stockpiling effort of raw materials and those EUR 30 million or 40 million that happened in the Q1, we had to invoice those, or we could have invoiced; the minimum effect would be around EUR 6 million- 7 million in an isolated invoicing. From there, we hope to compare the exact mix between 2023 and 2024. But I would keep it to two effects. One, that EUR 6 million-7 million in EBITDA we're not considering. And then secondly, we, I think that the working capital situation reverts in a financial cost, which is too high over time.
So when we are able to monetize the contribution of a strategic partner and stabilize debt under 2x, and we are able to correlate the stock and sales effect, we would be talking around EUR 6 million-7 million. So, if we add everything together, it's an important effect that structural we're not concerned about, but in this situation right now has a significant effect.
Next question, a question with regards to 2024 global year and what are the expectations for this year. The question is that when we talk about EBITDA level 2024, which is similar to 2023, do you include the ADNOC contribution to the results or not? Are you including the ADNOC or not?
So we don't tend to give guidelines for the end of the year, but we believe that the second half of the year can lead us to similar results or close to what we saw in 2023. We do expect ADNOC revenues at the end of 2024. There may increase. The significant increase will happen next year.
With regards to expected CapEx for this year, what is the CapEx figure that we can see in 2024 and whether we can break it down into ops and maintenance?
Just to give you the exact figures, let me just allow me two seconds to check this up. So while you look this up, the CapEx that we tend to have, it's around EUR 30million-35 million, which is a CapEx including maintenance and growth and improvement or productive improvements. Apart from that, the OCTG plant, we have invested EUR 38 million, and I don't know exactly the figure expected for this year. In terms of Abu Dhabi CapEx, what we expect for this year is to complete an investment of up to EUR 90 million, which will still have EUR 66 million. Investment in maintenance globally will be under EUR 30 million in terms of recurring, range between EUR 20million-25 million in maintenance.
`Remember that there can be additional smaller investments in growth related to machine commissioning in NTS, Amega West, but the main figures in terms of CapEx is to finish off Abu Dhabi, EUR 66 million in 2024, EUR 66 million and EUR 30 million in maintenance investment, which are under the average levels that we have had in previous years.
Moving on to CapEx, can we assume that once we complete the Abu Dhabi plant in 2025, we will see a significant reduction in CapEx?
Well, I think this is very clear for the following reasons. The figures that we're seeing in terms of yearly maintenance, we quote 30 and we are under a 30. We're more around 25. There are no major movements in growth. Given the plant typology that we are seeing in Abu Dhabi, which is a very automatized plant, state-of-the-art technology, we are seeing recurring CapEx around EUR 1 million or 1.5 million. We take that 2020-2025 range million that I mentioned before will be around the same CapEx ratio for maintenance, before Mubadala, before Abu Dhabi. So this is something that we said before in other meetings.
We're not investing in volume or capacity or production. We are investing in added value or in country of value, as like in Abu Dhabi, these cold rolling and threading plants or machining lines. And if we talk about a nuclear or offshore military, it will be exactly the same concept. The heavy things of the project or the heavy part has been invested already. The lion's share has been invested and amortized. So that the main hotspot for investment is the Abu Dhabi investment, which is EUR 90 million that was happened between the end of the last year and the end of this year.
To conclude the questions around this year, what's the backlog expectation for the end of the year and what's the factoring expectation at the end of this year?
For the backlog expectation is to keep the current sales level. I think that there is second half where we expect growth over this year, but to keep a EUR 1.6 billion backlog is doing very well already. So we the idea is to keep this backlog level, although with something that we are consuming part of it, especially with the ADNOC project. That's the target. The next question?
Factoring, it's a monetization based on the invoicing within with a risk hedge credit. And related to the turnover level, the level is EUR 80 million- 90 million. And the figure is very stable, compared to the previous year, 2023. So there are no expected variations in the factoring. In one or two years, and we are above EUR 1 billion in turnover, that figure, which is around EUR 80 million- 90 million, will jump to EUR 100 million, but it's completely stable in terms of factoring profile. I would now, we're going to talk about the Abu Dhabi project and the ADNOC agreement. The new first orders are being manufactured.
Can we venture, how is this going to impact sales, and the EBITDA for 2025? Well, the working capital that we are generating at this time is geared towards that, basically. There are specific orders that we are receiving since March, and we are manufacturing in a significant manner. We will start to sell at the end of the year. But in a more continuous manner in Q1 or Q2 2025, we hope to have a very strong 2025 for this project.
And since there is this impact on EBITDA and sales, how should you see the increase in EBITDA margin? How could margin, EBITDA margin increase compared to 2025 to 2024? How can the margin increase?
So what we are saying is that we are around 12 and 15s, and I think that this level is significant for the company. But depending on the mix that we can go above 15, of course. For Q2 last year was 16.7% in EBITDA. But these might be one of; we will see a growth in sales of products with a high margin, and we will keep these ratios but with higher sales.
Another question is that given the ADNOC news and the forecast to increase CapEx, do you think that this could improve expectations of Tubacex in the region?
Of course, and without a doubt, since we got the order, ADNOC has announced a number of projects that influence directly on the quantity of tubes that will be required for next year and in the future, the $1 billion order is the minimum. What we think is that the actual figure in consumption will be way above that figure. So next year, without being over-optimistic, we should be around EUR 100 million-125 million in sales.
And to conclude the Abu Dhabi topic, a question is whether the project will affect the plants in the Basque Country in any way.
Well, it should have a positive impact because steel is to be manufactured here and the extruded tube will happen here. This is how we have thought. So it will have a positive impact in the Basque plants. We have two finished product plants, and it's very clear what to do in each location and if everything is on track. We move on to the Mubadala project. A very specific question we are asked whether the cash income will have an extraordinary effect on the group or whether this is done through the capital increase.
With regards to the cash inflow, there's going to be a direct income on the Abu Dhabi plant, cash of $45 million and $150 million in the product in the global OCTG production area. In marketing and industrialization, it will be a minority income of that amount that will have a rate of 49% in both cases.
Changing a topic and talking about another customer, we asked to talk about the exposure with Petrobras. How do you see changes in management and can we be affected by this and what are the forecasts?
Petrobras has become a very important customer. We started to get direct orders in 2022 and we have continued over 2023 with important orders. In 2023, it became a main customer. In 2024, we are experiencing some delays. They're having some delays in their facilities. I don't know whether it has to do with changes in management, but what's very clear to me is that projects are still running and they haven't been canceled. They are just about to be completed and we hope to start to deliver in the second half of the year and over 2025. We are about to win another order and for 2025 and 2026, we expect that Petrobras will continue being an important customer for us.
And the last two questions that we have received. The first one is what is our forecast in terms of the nickel evolution price? If you have any forecast,
it's very difficult to, if you get that answer right, you become millionaire. I've seen nickel at 5,000 or 50,000. So, it's a very volatile and fluctuating raw material. So if it's a 20 or above a 20, it's okay. And it's a place it should be always above 17, between 17 and 25 would be the most, but it's impossible to do a, to do a prediction. With regards to the dividend, do we expect to review the dividend policy that we announced in the capital markets to distribute 30%-40% of the net profits?
Well, this will be decided every year, but our general policy is to keep that ratio of 30 or 40, which we believe is reasonable for the company payouts. And apart from that, some years we have bought back shares, and we will see how things evolve in terms of how the share is doing and behaving and what's the most recommendable. But the full commitment is fully with the payout.
So, we have concluded the questions. Thank you, Jesús, and thank you, Guillermo. I don't know if you want to add anything else.
No, just I would like to thank all those who are listening to this results presentation. Secondly, I would like to convey reassurance. We know what we are doing. We know very well what we are doing. We know that the results that you are seeing, you need to just understand them. Nothing strange is happening. We are fully aligned with the plan and we hope, and with a little bit of luck at the end of the year, we will start to, invoice to ADNOC and that we'll go back to other, ratio levels and EBITDA figures which are similar to the ones that we reached last year.
So that's it from us. Thank you very much and bye-bye.