Ladies and gentlemen, welcome to the HOCHTIEF full year 2023 results conference call. I'm the Chorus Call operator. I would like to remind you that all participants will be in listen only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mike Pinkney. Please go ahead, sir.
Thanks, operator. Good afternoon to everyone, and thank you for joining us for this HOCHTIEF 2023 results call. I'm Mike Pinkney, Head of Corporate Strategy, and I'm here with our CEO, Juan Santamaría, and our CFO, Peter Sassenfeld, as well as our Head of Capital Markets, Tobias Loskamp, and other colleagues from the senior management team of HOCHTIEF. We look forward to taking your questions, but to kick off, our CEO is gonna run us through this strong set of numbers. Juan, all yours.
Thank you, Mike and team. Good afternoon to everyone, and thanks for joining us. HOCHTIEF delivered a strong performance in 2023.
Ladies and gentlemen, please hold the line. The conference will resume shortly. Ladies and gentlemen, please hold the line. The conference will resume shortly. Gentlemen, your line is open.
Okay. Thank you, operator. Apologies, we had a problem on the line there, Juan.
Yes, thank you, Mike. So I was talking about the sales and the fact that they increased 10% on a FX adjusted basis to EUR 27.8 billion. And then I mentioned that the operational net profit rose by 11%, FX adjusted to EUR 553 million at the top end of guidance range. The nominal net profit of EUR 523 million, compared with EUR 482 million in 2022, showing an 8% increase or 14% FX adjusted. HOCHTIEF's cash generation was outstanding in 2023, with underlying cash flow from operating activities at EUR 1.45 billion. As a consequence, the group ended the year with a strong net cash position of EUR 872 million, an increase of EUR 519 million compared with December 2022.
The group's order book stands at EUR 55.3 billion and is up by EUR 3.9 billion or 11% FX adjusted year-on-year. Record new orders in 2023 of EUR 36.7 billion, up 27% in local currency terms, have driven this strong increase in the order backlog. Looking at the cash flow performance in more detail, underlying cash flow from operating activities of EUR 1.45 billion implies an excellent level of cash generation, driven in particular by Americas and Europe. Furthermore, this figure is over EUR 235 million higher than the 2022 level, which already showed a strong cash generation performance. As shown in the figures, the fourth quarter showed its characteristic seasonal strength.
Net operating CapEx ramped up to EUR 193 million in 2023 due to increased purchases of job- costed tunnelling equipment at CIMIC, as well as one-off development CapEx for a major renewable project. On slide six, we can look at the cash development from a balancing perspective. HOCHTIEF ended 2023 with a net cash position of EUR 873 million. This is an increase of well over EUR 500 million versus the beginning of the year, and is after distributing a total dividend to shareholders of EUR 301 million in July 2023.
I would note that EUR 470 million cash received from the Ventia disposal has been balanced by the other non-operating effects, principally around EUR 180 million cash out for final CPB settlement, EUR 110 million of equity investments, including PPPs, and FX impacts of close to EUR 120 million. During the year, the rating agency S&P reaffirmed its Investment Grade rating for the group. The next two slides in our presentation provide an insight into the development of the group's orders. HOCHTIEF has record new orders in 2023 of EUR 36.7 billion, an increase year-on-year of 27% in local currency terms, and equivalent to 1.2x work done in the period.
Demand has been solid across the group's divisions, with particular strength in high-tech infrastructure markets, where HOCHTIEF secured important project wins in areas such as data centers and energy transition. The group's order book now stands at EUR 55.3 billion and is up by EUR 3.9 billion or 11% FX adjusted compared with December 2022. As a consequence of our strategy to further improve the group's risk profile, lower risk contracts, which incorporate enhanced risk-sharing mechanisms, now account for around 85% of our order book, compared with approximately 65% six years ago. In terms of divisional performance, let me just mention some of the highlights.
On sales of over EUR 18 billion, 7% higher year-on-year in US dollar terms, the Americas division delivered 14% operational PBT growth to EUR 422 million, above the top end of the guidance range of EUR 380 million-EUR 420 million. Margins expanded 20 basis points to 2.3%, with a strong fourth quarter in positive momentum. Outstanding cash flow from operations of over EUR 1.1 billion was driven by both Turner and Flatiron, with EUR 300 million increase versus an already strong 2022. For 2024, we anticipate continued growth in operational PBT to EUR 440 million-EUR 480 million.
CIMIC generated a 20% rise in revenues to AUD 13.3 billion, and a solid NPAT of AUD 403.4 million, up slightly year-on-year in line with guidance. Operating cash flow pre-factoring of AUD 640 million, benefited from a strong fourth quarter. Year-on-year variations reflects lower client funding mobilization payments due to a further increase in lower risk and alliance style projects. For 2024, we're aligning the guidance metric for CIMIC with that of our other operating divisions. We expect operational PBT of AUD 490-530 million, compared with a figure adjusted for the Ventia disposal of AUD 487 million in 2023.
In Europe, operational PBT of EUR 64 million was stable year on year, at the top end of the 55 million-65 million guidance range, with a strong cash flow result, which showed a EUR 75 million rise year on year at the operating level. We expect operational PBT in 2024 between EUR 60 million and EUR 70 million. At Abertis, we expect a similar level of net profit contribution in 2024 as in 2023. Let me update you on the progress we have made in delivering on our strategy. HOCHTIEF's objectives are to generate sustainable cash back profits, achieve attractive shareholder remuneration, and create value for all stakeholders. Our strategy to meet these targets is focused on, number one, consolidating our core market positions and significantly reducing the group's risk profile.
Two, further developing HOCHTIEF's presence in the rapidly expanding high growth markets by harnessing our strong existing infrastructure skill set and local presence in key developed markets. To support this, we're working on extracting untapped synergies in the group. And third, during the year, we started to deploy the next phase of our strategy in relation to investing equity in the next generation infra growth markets we have identified. Let me run through this element of our strategy in more detail. We're reinforcing our strong core market positions and de-risking the business with construction management, alliance-style, and other collaborative type contracts, such as our one in Texas, where Turner JV was awarded a contract to lead a $1.2 billion redevelopment and expansion of the Austin Convention Center.
Projects won by Flatiron to build out broadband fiber networks in California to provide access to underserved populations, as well as the Calgary Green Line light rail transit project in Canada. At the end of last year, a CPB Contractors JV was confirmed for Victoria's AUD 3.6 billion Suburban Rail Loop East. CPB has a 40% share of the project, which includes the construction of a 16 km section of the project's 26 km of twin tunnels. The JV has also been selected to be the major construction partner for a dam wall replacement in Queensland, to provide long-term water security and storage solution. In Germany, a consortium, including HOCHTIEF Infrastructure, won a EUR 426 million contract for the second part of a new bridge across the River Rhine between Cologne and Leverkusen.
Overall, we have significantly de-risked the group order book with lower risk projects, now accounting for around 85% of the group order book at the end of 2023, as I mentioned earlier. In terms of high growth markets, we have continued to expand our presence and geographical reach. Furthermore, with our collaborative or services nature, these projects further enhance order risk and drive. We are seeing a rapid expansion in data centers, driven by the ongoing growth in cloud computing and the exponential adoption of artificial intelligence. During the year, Turner was awarded orders for new data centers worth $2.6 billion. Additionally, in 2024, a US company was selected by Meta to build an $800 million data center in Indiana, which will be fully powered by green energy.
In addition, CIMIC has won several data center contracts in Hong Kong, the Philippines, and Malaysia this year, worth over AUD 400 million. In Europe, the group was awarded a data center contract in Warsaw, and it started construction of a sustainable edge data center in Germany. HOCHTIEF Infrastructure, supported by Turner, has also been awarded a further data center project in Europe. We're strongly positioned in the energy transition market. CIMIC's subsidiary, UGL, was awarded an order for the expansion of a battery storage energy system for Neoen, one of the world's leading producers of renewable energy. This is the third project of this type we have been awarded in 2023. As a leading designer and contractor of sustainable electricity generation and storage assets, UGL has already delivered 17 major renewable energy generation, storage, and transmission line projects.
Along with CPB Contractors, UGL will construct the AUD 1.4 billion HumeLink Transmission Project, which will significantly increase the capacity of the electricity network in Australia's eastern states. The Australian government announced plans at the end of November last year to underwrite 32 GW of renewable energy generation and energy storage capacity in an attempt to supercharge the country's energy transition. Further, huge investments will be required in transmission line capacity at a time when battery energy storage systems, which provide grid stability, are still in the process of catching up on the renewable energy capacity built- up in recent years. UGL is uniquely well positioned in the Australian renewables market, with unparalleled experience, for example, in the solar market, as well as in installation of battery energy storage systems and grid connections that we expect to continue growing strongly for many years to come.
In the U.S., meanwhile, we're a leading electric vehicle battery factory builder via Turner. During 2023, we secured new orders of $2.6 billion, and had an EV battery order book of $2.0 billion at the end of December, including projects such as Panasonic Energy's EV battery production facility in Kansas, and an electric vehicle battery plant for Honda and LG Energy in Ohio. Lithium and other metals are key to support the global energy transition in relation to electric vehicles. UGL has been awarded a AUD 300 million project in Western Australia for the provision of construction services at a lithium hydroxide plant. Another element that is essential for energy transition is nickel.
Our company, Thiess, has been awarded a AUD 240 million nickel mining contract, marking the company's second successful venture in the Indonesian nickel market in 2023. The project underlines the company's strategic target to significantly increase the proportion of business and commodities needed for the energy transition in the coming years. The group benefits from its excellent reputation as a service provider to the natural resources industry and the full integration of MACA, which it acquired during 2022. The infrastructure associated with sustainable mobility and smart cities is a long-term structural growth market as well. In North America, Flatiron has been selected as lead contractor for phase I of the dynamic personal microtransit project in San Francisco. The project is intended to provide an alternative transportation option through zero emissions, autonomous vehicles operating in dedicated guideways. Social infrastructure is another secular growth market for HOCHTIEF.
In August, NFL team, the Tennessee Titans, announced that a consortium, including Turner and an AECOM subsidiary, will build its new stadium project, which has an expected value of $2.1 billion. In Australia, CPB has been selected by the Queensland Government for stage one of the new AUD 1.2 billion Bundaberg Hospital. While Turner, the leading healthcare facility builder in the U.S., broke ground on a $550 million hospital project in Texas. To maximize the benefit of the growth opportunities HOCHTIEF is pursuing, we're working to extract synergies across the board. An example of this relates to supply chain and logistics, which are critical to success for our clients in data center, EV, battery, and other high tech infrastructure markets we are pursuing. To meet these challenges, we have developed SourceBlue, which is Turner's supply chain specialist.
In order to expand SourceBlue's capabilities, HOCHTIEF is developing its presence in the Asia Pacific region with the creation of a logistics hub to accelerate the group's digital delivery capabilities. Capital allocation plays an increasingly important role in the strategic development of our company in terms of potential transformational M&A, both on acquisitions, the deployment of equity capital in next generation infrastructure and PPP investments. At the same time, shareholder remuneration remains a priority for HOCHTIEF. During the year, we also started to deliver on the next phase of our strategy in relation to investing equity in high tech and energy transition growth sectors. In 2023, HOCHTIEF committed or invested a total of around EUR 150 million in these areas, as well as EUR 43 million in traditional PPPs.
We have identified a significant pipeline of data centers with investment opportunities in Europe and Asia Pacific. In Germany, for example, HOCHTIEF and an infrastructure partner are jointly building and operating a sustainable edge data center near Düsseldorf. The consortium has already purchased a further plot for a second project of this type, and is in the process of securing a third, and intends to replicate the model at other locations in metropolitan areas in the next few months. In a significant milestone for the business, a HOCHTIEF joint venture has been awarded a contract to finance, plan, build and operate a fast charging network for electric vehicles by the German Ministry of Transport. Total investments amount to EUR 250 million, which will include an equity investment of over EUR 50 million.
Similar models are expected to be replicated in several other European countries to meet the increasing demand of EV chargers, and we are well prepared for the opportunities that will emerge. In energy transition, at the end of 2023, the Glenrowan Solar Farm in Australia commenced operations. Pacific has developed, invested equity in, and is managing the solar farm with its services subsidiary, UGL, undertaking construction, operations and maintenance work. During the year, Pacific has also acquired the development right for the 300 MW Hopeland Solar Farm in Queensland, the second large-scale solar project to be owned and developed by the company. 2023 has also witnessed several significant PV project wins for the group, including a 30-year PV contract worth several hundred million euros to expand the new Frankfurt am Main Judiciary Center.
HOCHTIEF PPP Solutions will construct new buildings and subsequently operate them in an eco-friendly manner for a period of 30 years. The company also won a major PPP building contract in Berlin, where the group will refurbish and build new offices for the Institute for Federal Real Estate and subsequently operate and maintain them over a 30-year period with a reduced carbon footprint. In the UK, we are preferred bidder for a university student housing PPP project. While in Australia, CPB, Pacific and UGL, as part of the Canberra Metro Consortium, will finance, design, build and operate the next stage of Canberra's world-class light rail system. This collaborative contract will achieve significant carbon reduction benefits, with the first stage already operating on 100% renewable electricity.
We'll also continue to allocate capital to boost our engineering know-how via bolt-on acquisitions, such as that of the Canadian company Novopro, with its strong know-how in lithium processing technology. In addition, UGL reached an agreement in 2023 to buy a telecommunications service arm of an Australian installation and maintenance contracting company, Skybridge. Let me move on and mention the key highlights of the year in relation to Abertis, where we hold a 20% stake. In July 2023, HOCHTIEF, ACS and Mundys, reached a new strategic collaboration agreement for Abertis with the objective of strengthening the toll road operator's global leadership in transport, infrastructure and concessions. As part of the agreement, Abertis acquired a 56.76% interest in the 288 managed lanes highway in Houston for $1.53 billion, which has a remaining lifetime of 45 years.
In October, Abertis announced that it had won a tender in Puerto Rico for four toll roads with its $2.85 billion bid for a period of 40 years. In early 2024, the shareholders contributed EUR 1.3 billion in equity to support the financing of these transactions and the company's growth strategy, with HOCHTIEF subscribing its EUR 260 million share. Abertis will thereby maintain an optimal capital structure in accordance with its commitment to maintain its investment-grade rating. Environmental, social and governance for management. In 2022, HOCHTIEF made the commitment to become climate neutral or net zero by 2045, and publish its Sustainable Plan 2025. In the last 12 months, international working groups have continued to develop and implement measures to advance on short- and long-term ESG targets.
For example, the group has developed a decarbonization roadmap, published a Statement of Principle on Human Rights, and updated its living wage analysis. Our leadership is widely recognized. In 2023, HOCHTIEF was again listed in the Dow Jones Sustainability Index for the eighteenth year in a row, and we achieved top positions in the ranking compiled by S&P Global. In addition, MSCI graded its ESG rating for the group to AAA from A A, making it the highest rated among its peers, with an improved safety performance considered as one of the drivers of the upgrade. So let me wrap up as follows: HOCHTIEF is delivering for its shareholders in terms of profits, cash generation, shareholder remuneration, and corporate strategy.
Due to its locally developed market presence, regional diversification and global footprint, HOCHTIEF is very well positioned for the enormous opportunities that lie ahead of us as a global infrastructure solutions provider. This is underpinned by our engineering know-how and complemented by our logistics and systems capabilities. In 2023, the further de-risking of our order book was accompanied by a strong growth in new orders, particularly the faster growing markets related to digitalization, energy transition, and sustainable infrastructure. Operational profit increased 11% if it's adjusted, and was backed by an outstanding level of customer operations, resulting in year-end net cash of EUR 872 million. We started to deliver on the next phase of our strategy with EUR 150 million of equity committed or invested in high growth areas, where we see very significant value creation opportunities going forward.
As a consequence of this high performance, we will be proposing a HOCHTIEF dividend of EUR 4.4 per share, a 10% increase on the previous year, and consistent with our dividend policy, which is a payout of 65% of nominal net profit. Our guidance for 2024 is to achieve an operational profit of between EUR 560 million and EUR 610 million, which represent an increase of up to 10% compared with last year. So let me stop here, and I will welcome any questions you may have.
We're ready for questions, operator. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking questions. Anyone who has a question may press star and one at this time. The first question is from Graham Hunt with Jefferies. Please go ahead.
Thanks very much for the questions. I've got three. Could I start with U.S. construction outlook? The book to build in Q4 looked a little bit softer than what we've been seeing. I just wonder how... where you see the order book trending in 2024. Second question on net cash. Just wondered if you could talk through some of the moving parts there. You've got the Thiess potential payments, Abertis contribution and potential equity investments through the year. So just wondering where you expect net cash to land in 2024. And then third question, just related to that, could you speak to the strategic rationale for the 20% stake in Abertis?
Why does it make sense for HOCHTIEF, given the strength of its portfolio in construction and the opportunities it sees that you've sort of just stepped through, why does it need 20% of Abertis within its portfolio? Thanks.
Okay, thank you so much, Graham. Let me start with the America outlook. So I mean, we've seen in the U.S. a very strong pipeline in general and certainly in data centers. Probably I mean largest market in the world, especially because of the artificial intelligence. And if you look at the forecast, pretty much the power demand in computing is going to increase more than I mean around 400x in 2030 versus 2020. So this is driving a huge investment. Right now, in 2023, we had new orders in that sector of $2.6 billion, and we ended up order book at $3.6 billion.
And more related Tu rner's, current showing the US market around 10%. We're expecting that 10% to increase between 15%-20% in the next two to three years. So we are very bullish when it comes to our potential contribution in data centers. And the more sustainable they become, and the more complex when it comes to the connection to energy sources and fiber connection, which has been the case in the U.S., the more we can provide value. When it comes to electric vehicle battery manufacturing and recycling facilities, I mean, there's a global demand, and we're looking at a global strategy of 250 additional gigafactories by 2030.
So that means investments of around $30 billion in projects around the U.S. and Europe. These are in identified projects with associated brands behind them. We started working on these projects two years ago, so this is brand new for us. And since then, we have won $2.6 billion in 2023. We will start ramping up sales in 2024. We do have very strong prospects in this sense, because it was not included in our book, in our order book until very recently. Those projects will start to grow very soon.
Healthcare, which is a traditional market for Turner, but the fact that all these projects are getting to the next level when it comes to digitalization, paperless technology, biopharma, equipment, et cetera, we expect that Turner is going to increase its order intake significantly. Just to give you an example, in 2023, the order intake was $3 billion for Turner versus $2 billion pretty much recently, a few years ago. We expect that to grow probably by 5% per annum through the next years, if not more, okay? Being a little bit conservative. Nowadays, it's like 20% of Turner's order backlog when you look at the Q4 at December 2023. Education, our order intake in 2023 was 2.5.
That's pretty much like 13% of our current backlog. We expect a very high level of investment in this area, with a growth rate of 10% in 2024, in a market with a size of approximately $80 billion in the U.S.
Ladies and gentlemen, please hold the line. The conference will resume shortly. Ladies and gentlemen, please hold the line. The conference will resume shortly. Thank you.
I'm back. Sorry for the disconnect. I was talking about commercial, but I was saying, and this is very important, this, this used to be a huge market for Turner, and it was big part of its backlog. However, right now it's only 13%. We are not expecting that to go any lower. It will remain flat, probably for some time before it goes up, but eventually, it will ramp- up again. And then we get into the other traditional sector, like sport facilities, which without a doubt, I mean, it's pretty much right now 9% of our backlog, of around EUR 2.5 billion. And we believe that, that's going to remain, I mean, steady or growing a little bit over the next years.
But then there's a lot of sectors that Turner is not involved yet, but it starts to get pre-qualified. Examples are semiconductors, for example, semiconductor fabs, or, or other digital projects that will start getting involved. So, so we believe from a US perspective, that the pipeline is going to be big, but more important, we believe that we're going to be increasing margins in the Americas. So that's regarding the first question. I'm sorry that I took a long answer. Then we get into to the net cash discussion. I mean, thinking aloud, when it comes to cash flow, cash flow performance, we expect a strong 2024 as it's been 2023, right? In general terms.
We had a strong performance in 2022, we had a strong performance in 2023. We expect a strong performance in 2024. When you talk specifically about these opportunities and some equity investments, Thiess, if at the end, we continue in our plans to potentially consolidate this, which I mean, is still in progress, and we haven't landed on anything, so it's a question mark, that will bring a EUR 1 billion net debt consolidation in our books, but it will also bring more than EUR 1 billion EBITDA in our books. And as I have said in the past, that debt is already adjusted in all our ratings and analysis of banks, et cetera.
So it's a positive effect in our rating and financial strength, because the market always saw that, as a debt transaction, not equity, so the debt is already adjusted while the EBITDA was not. So it will have a positive effect in our overall financial strength. When it comes to Abertis, we'll need to take into account the 20% of the EUR 1.3 billion capital raise. And when it comes to equity, it's pretty much the normal annual equity investment in our PEP is already reflected in our cash flow. In the same way that the EUR 150 million invested in 2023, it's already embedded in our net cash performance. So, I don't expect major differences in that sense.
Then you were asking for HOCHTIEF 20% participation in Abertis. Abertis is a very solid operator, and there's plenty of opportunities that is going to not only keep the dividend EUR 600 million, current EUR 600 million in the long- term or in perpetuity, but also bring additional opportunities in the long- term. So that gives very solid and stable dividends to the 20% of HOCHTIEF, which, I mean, it's obviously very beneficial for the organization.
Thank you very much for the, for the detail. I appreciate it.
The next question is from Luis Prieto with Kepler Cheuvreux. Please go ahead.
Hello, good afternoon. I had a few questions, if I could. Thanks for taking them. The first one is, how sticky will the operating margin jump at Turner be over coming quarters? We've seen a big jump in Q4, and I want to know if that's can extrapolate that into the future. Could you provide us an idea of what sort of margins baked into Turner's order book? I guess that's my real question. The second question is regarding this equity and infrastructure projects, the tech infrastructure projects that you've been talking about for a while now. I assume that those assets have shorter investment cycles, and we're all very used to the long-term transfer concessional projects, et cetera.
So I'd like to get a better understanding of how long those projects are and what sort of return do you have? And then the third and final question. You told us in January that Elliott seemed willing to exercise its put option in tranches. Is there any visibility on timing you could provide us with? I'm thinking more about not only obviously the amounts you have to pay, but also the consolidation of the asset, when we will have to consolidate that asset back into HOCHTIEF. Thank you.
Yeah, thank you, Luis. So starting with margins and Turner. So yes, no doubt, we are in a positive trend and positive momentum, and this is going to continue. I wouldn't like to give specific figures to make sure that I don't make any mistake or misguide. But it's positive, and we're expecting another increase in 2024 versus 2023. I mean, we are clearly looking a positive path in increasing margins in Americas, as we have been pretty much communicating over 2022 and 2023. When you look at the guidance or the PBT, you could see that there's a 14% year-on-year increase at the top end, right? So that also gives you a sense that we're expecting that positive increase.
In terms of these new projects and 2024, we're working on a few initiatives to create a lot of potential value in a lot of the projects that we're participating, such as data centers, such as the energy projects, including photovoltaic, wind, and storage, and also other opportunities in the energy transition and digital. And you're right, this is not civil. We're seeing one to two years construction, so we see the value very, very, very fast.
Data centers, what we're seeing in the market is as soon as a data center is built with a hyperscaler contract or a colocation agreement, the value, it comes to 20-30x EBITDA, and those are the transactions that we're seeing in the market. So, we have a very important pipeline. We will discuss more in the Capital Markets Day because we want to make sure that the, I mean, the pipeline that we reflect has the permits and it's pretty much negotiated before we give numbers. But clearly, there's a big opportunity for us in that sector as in other sectors. So we will be giving a lot of information on this in the Capital Markets Day . However, we're also working on traditional contracts.
We haven't abandoned the traditional PPPs. I mean, we're working in the U.S., we're participating in four or five projects. We are also participating in Chile. We're working in the U.K. in a couple of PPPs. HOCHTIEF has recently won a few projects in the U.K., Germany, and Austria. I mean, we look at Pacific right now in Australia, not only we continue investing in Cross River Rail, not only we're investing in some of the new solar projects, we continue deploying equity. And, and there's plenty of projects that will finish construction soon, and the value will materialize as well. So, we will try to give a lot of, I mean, valuation, all these assets in the Capital Markets Day . When it comes to Elliott, a good question, the timing.
It's difficult to give a timing because it's very binary. We are just expecting the green light. So, I prefer not to give a timeline because it doesn't depend on me. But certainly, because this is something that has been on the table for a while, everything is pretty much prepared whenever the transaction is given a green light.
Thank you very much.
The next question is from Marcin Wojtal with Bank of America. Please go ahead.
Yes, good afternoon. Thank you for taking my questions. Firstly, if I can follow- up on Thiess. Could you perhaps indicate what was the net profit of Thiess for 100% of the company in 2023, so that we can make some estimate as to what that will do potentially to your net profit if you increase your stake from 50%- 100%? And I was also curious how are you going to fund that potential transaction? Is that going to come from available cash reserves, or you're planning perhaps some debt issuance or any other funding structure? If you could give some clarity here.
My second question, could you comment a little bit about the outlook for your Asia Pacific division? You're guiding for some growth for 2024, but is it revenue recovery or profitability improving or both, perhaps? Thank you.
Martin, my apologies. So I got the question around Thiess. I got the question about Asia Pacific growth, but I think that I missed another one, or those were the two?
Also funding of the Thiess transaction, please. How are you going to fund it?
Okay, okay. So starting with Thiess. So the contribution of Thiess in 2023 was AUD 110 million. In 2022, that was AUD 92.6 million. And Thiess is having a very, very, very strong operational performance. However, the financing costs have increased so much that it's unfortunately deteriorating these margins. From an EBIT perspective and EBITDA perspective, the company is working very, very good. But unfortunately and just to put in perspective, Thiess, and I'm not sure if it was 2019 or 2020, but I think that by 2019 or 2020, Thiess was at AUD 45 million net finance cost, and now it's at AUD 220 million.
So in spite of that, the contribution to us has been EUR 110.3 million. So we expect, I mean, as soon as the financing cost will start coming down, we expect that to improve. Now, at that at 100%, I mean, because I gave you the position, I mean the numbers, the contribution to us to CIMIC. But at 100%, the profit was EUR 313 million positive, right? And this is after minority interest. So I mean, overall, very good performance, and continue diversifying, continuous transitioning environmentally speaking. So I mean, very, very good performance. Asia Pacific growth, Leighton Asia. Leighton Asia is looking...
I mean, it's seeing tremendous growth in the same areas that Turner is seeing, data centers, battery fabs, digital technology, et cetera. But fingers crossed, we might see a big increase in Hong Kong once again, as a lot of clients have pretty much pre-qualified and taken to the final stages, Leighton Asia in their projects. Something that didn't happen since many, many, many years ago. So I mean, fingers crossed, because we are in the final stages and nothing is secure, but just the fact of being able to be in the last short list of two in a few projects is very encouraging. So we will see growth in revenues and growth in sales again, and hopefully in cash in Leighton Asia. And then in terms of funding, couple of things.
We will talk more in the Capital Markets Day about Thiess, because we are working on it. But eventually, I mean, basically to give you an overview, even right now, we're expecting additional net debt coming from Thiess and coming from the opportunities to increase. We do have non-core assets, I mean, that we could offset. But the investment in a lot of these infrastructure projects pretty much can be done with the operational cash flow, right? Within the free cash flow that we generate every year. So, I mean, obviously, I mean, as you can imagine, equity in all these projects is a commodity, right?
Worst case, we could just retain a small percentage of the equity, 20%-30%, and finance the rest. But our idea is pretty much to take positions up to 50% of the projects and recycle 10%-20%, which will be more than enough to compensate for the injection of the equity for the 20%-30% that we will keep, plus generating a profit. So this way, not only we will be generating value in the long- term because we retain percentage on the projects, but also we are rotating equity and being able to continue investing in new projects. So, we are working on a plan that we will give more clarity during the year.
The next question is from Victor Acitores with Société Générale CIB. Please go ahead.
Hi, good afternoon, Juan, and the team. I have three questions, if I may. The first one is that if you can provide a factoring level for the group, the HOCHTIEF at the end of the year. The second one is that if you can provide the stake of ACS at the end of the year. I think that you provided level of 13 November, 78.2 adjusted own treasury shares, but is the level at the end of the year? And finally, my question is on cash flows of CIMIC. You mentioned in the call that the migration of the risking of the backlog to, let's say, alliance contracts lump sum, is creating some overhang on working capital, on the lack of payments.
When do you think, Juan, that Thiess working capital is going to normalize, and then all the growth that you're expecting coming from the EBITDA in CIMIC will be reflected on the cash on the subsidiary? Thank you.
Thank you so much, Victor. So starting with factoring, our level right now is EUR 900 million, so very stable versus the EUR 860 million last year. When it comes to the treasury shares, let me, let me try, I mean, because I don't have the, the ACS info right now with me. But let me, let me. Give me just one second. Let me see if we, we, we have around. Victor, I mean, we don't have that information with us, and there was also some discussions here whether I, I, I mean, it's relevant for, for this call. So, allow us to follow- up with, with the ACS department, and we will provide that info, if, if that's okay.
No, no problem.
Okay. Then, the unwinding of the working capital at CIMIC, which was the next question. It's a good question. It's a good question. I mean, on one hand, at CIMIC, we do have a lot of potential settlement agreements that should come within Leighton Asia throughout 2024 and 2025, right? So that will be a plus in cash flow. But at the same time, yes, we do we will have West Gate finishing in 2025, but most of the peak of the work will be in 2024, this year. And Cross River Rail finishes as well, pretty much the bulk of the work this year. I mean, I don't dare to say how much will be compensated one or the other, right?
But probably better in 2024, 2025, we do have upside. We have the final unwinding. Certainly, the unwinding finishes 2024, 2025, but also we do have a lot of upside from Leighton Asia. So, I mean, difficult to predict what will be the net, but certainly we hope to be stable. And then the... Did I answer all the questions, Victor?
Yes, yes. It's only to see in terms of looking for the midterm, no, is that at the end of Elliott, if I'm doing well, the conclusions in my mind, no, you're able to buy Elliott, you refinance the debt, lowering the cost of financing, and then your CIMIC normalized, your net debt, let's say, net cash positions will materially increase or in the other sense, the cash flows are going to materially increase going forward in terms to give you options on the cash allocation.
I mean, because I was just referring to the, to a specific business of CIMIC today, right? CIMIC today doesn't have this. If we do incorporate Thiess, the cash flows of Thiess are unbelievable. I mean, in Aussie dollars, the operational cash flow of Thiess is close to AUD 2 billion, right? AUD 1.6 billion-AUD 1.7 billion. They do have a—I mean, a steady 100% cash flow conversion, which is very, very, very solid... So that obviously will be integrated into our numbers.
At the same time, if we were even if the interest rates do not go down, just by being able to refinance part of this debt at CIMIC books, I mean, that it will have a significant benefit on that. And of course, if interest rates go down, that will be a very big impact in addition to what I've been explaining. So overall, I mean, the Asia Pacific region, between the growth in the new areas that we're pursuing, between the growth in energy in Australia, that is booming, and the consolidation of this, we should be—I mean, we are, I mean, we're optimistic for the region.
And I have another follow-up question, if I may. In the case you mentioned during the call, the strategic investment in renewables already with some plants already operational, some rights already being in the backlog, how much of CapEx, let's say, or the net debt of CIMIC at the end of the year is reflecting the investment on equity and the project finance debt of these parks already in the balance sheets in terms of renewables?
So, the EUR 150 million that I said.
Mm-hmm.
That specifically for the energy projects in Australia. In addition to that, there's, I think, that it was around $45 million additional in traditional, right? And these were more in U.S.
Okay.
But when you look, for example, at Glenrowan and Hopeland, I mean-
Mm-hmm.
Only those two jobs pretty much comes up to 460 MW of energy. We do have up to 1 GW already awarded in other projects. So that will, I mean, generate good value to, to us. And we have identified projects for another 1 GW, that we are in, in negotiation phases. So we, we are being very, we're gonna be very ambitious. And, and Australia, when it comes to renewables, I mean, is, is, is booming right now, because obviously it's, it's not as, as developed as the European, European market. But certainly, I mean, the... I mean, if you just saw the Australian government announcements, pretty much they said, and this was at the end of November 2023, that they are going to underwrite 30 GW of renewable energy projects and energy storage capacity.
I mean, we are very, very bullish with the energy market in Australia. The wind power projects expect to increase like 30% in 2024, but it will continue to increase.
Mm-hmm.
We could go, I mean, through a transmission network business that we are tendering for a couple of PPP projects in that area. Energy storage, I think that we do have, like, six projects identified in our pipeline. Some of them associated also with our projects. So, I mean, it's a market that we can expect to grow significantly.
And only one thing more is that in Thiess, you mentioned that the attributable net profit in Aussie dollar is AUD 110 million. That's equivalent to the dividends that you collect in a year or in order to put in reference with the 180 attributable at the time of the CIMIC net profit, the relation with Elliott, or no?
So no, that, I mean, that was the net profit. But that was the net profit contribution to us. At 100% level.
Mm-hmm.
It was EUR 313. The only thing is that, it's not that we get 50% of that, because EUR 180 goes to Elliott, and the remainder comes to us. This is one of the challenges that we do have with the Elliott agreement.
Okay. So really, in terms of cash flows from Thiess, is linked also to net profits or not the case? Is that, for example, in order to understand how much on the cash flows you're receiving today from Elliott, from Thiess-
Oh, yes.
Is this the 100, no?
Yes. I mean, so well, but this year, in 2023, we received AUD 54 million, right? And last year we received AUD 89.5 million.
Yeah.
In 2024, we expect to increase that significantly, especially we are able to negotiate part of that, because that 10%, we will need to add 10%, plus the improvement in the performance of Thiess.
Mm-hmm.
But answering your question, yes, it's linked to the impact. The problem is that the timing could be different. And remember that at the end of the process, by the end of 2026, there's a catch-up of all the dividends that we haven't obtained, right? So-
Mm-hmm.
I mean, so yes, it's a complex mechanism, but eventually we will be able to catch- up on the cash flows.
Because here, imagine that nothing happens, that the situation today remains, and nothing is coming from Elliott, for example, a situation. For the 2026 in the catch-up of the AUD 180 million that you were entitled to collect, that you are not receiving in the last year, that catch-up means that the gap existing, that is yearly, around AUD 100 million per year, is going to be recovered in 2026. Is that correct?
No, or before. So-
Or before.
Because the performance of Thiess is-
Mm-hmm.
We believe that it's going to increase and improve significantly. Anything above the EUR 180 from Elliott comes first to us until we catch- up on dividends.
Mm-hmm.
Right? So if HOCHTIEF is able to deliver more than EUR 360 million after tax in 2024, and I'm not saying that it will or it won't, I don't have the numbers right now.
Mm-hmm.
If it does, anything above the EUR 180 goes to, comes to us, if nothing happens.
Okay.
We will be catching up on dividends before 2026.
Okay, super. Thank you, Juan.
The next question is from Marco Limite with Barclays. Please go ahead.
Hi, good afternoon, thanks for taking my questions. I've got two. One is on your guidance for North America. I was curious to what extent you're already reflecting some margin increase already in 2024? And the second question is on Abertis, given that yeah, this is the first call after the AP-7 court ruling, and I think Adrian mentioned the intention of Abertis to keep the dividend flat to EUR 600 million. So yeah, just curious what is the strategy there to keep the dividends despite, let's say, some pressure also from a credit rating perspective? Thank you.
Okay. So, with the outlook guidance, or with the Americas guidance, we are expecting, and I think we mentioned that, an operational EBITDA of EUR 442 for AP. So yes, that reflects the increase in 2024, okay? In 2024. Bear in mind that a lot of these big projects, all the initial phases are engineering, right? And because they are collaborative and construction management, you don't really start ramping up the construction until engineering process is finished. So it's not that obvious that you win a project or even projects won six, seven, eight months ago are already ramping up. They are not. We are still in engineering phase because our complex projects, especially when it comes to the big fabs, et cetera, you will need to collaborate on the design.
You only get into the contract at the end of that period. Depending on where you are in the negotiations, you include that in your backlog or not. So there's a lot of work won announced that is not in our work in hand for Turner because you are in early stages in engineering. Only when you have a minimum construction to be done, and you start reflecting, that doesn't mean that engineering is finished. It means that you have signed a contract for a piece to be starting at some point. So anyway, all what I'm trying to say is that it's reflected in 2024, but that will continue growing, and as those big projects come into place, and the timing for it is not mathematical.
When it comes to Abertis, so there's two strategies. I mean, Abertis, Abertis-
Ladies and gentlemen, please hold the line. The conference will resume shortly.
Sorry again for the disconnect. So I was thinking about Abertis, so that on one hand. On the other hand, there's opportunities right now that we are, that we-
Sorry, sorry to interrupt you, but I think we all missed the whole answer on Abertis. So if you could repeat for us, please, would be great.
Yeah. So I will start with Abertis.
Yeah.
So, so Abertis, when you look at Abertis right now, okay? First, there's a few opportunities that we're negotiating with clients out of Europe in existing projects that will pretty much increase significantly the life of the concessions, potentially increasing fares, obviously in exchange of additional CapEx on those projects, and that will increase the, the EBITDA significantly and, and for a longer period. That will not require any capital increase. Those are organic, but that will shape the EBITDA significantly in the future. We will provide more details as we get, as we advance in the negotiations. So that's an opportunity per se.
But there's other, a lot of other opportunities within the current business, that and you will see, I mean, during the year, and, and we are preparing, as I mentioned, the financial modeling for the Capital Markets Day . You will see the... A nd you will be able to, to look at the numbers and assumptions on the long- term, dividend for Abertis with the current, with the current structure. On top of that, we're looking for opportunities. We are bidding and tendering as well, as, as you know, and we're tendering to other opportunities, but so far they are confidential, but there's an important pipeline. That pipeline comes from, A, potential platforms that could come to the attention of Abertis, and there's discussions, and B, greenfield projects like what within the 288-
I mean, from a PPP perspective, we are, we do have a huge pipeline of PPPs, traditional PPPs, besides all these high growth areas. We do have a very big greenfield pipeline in traditional, and those could eventually end up within PPPs at the right time. But on top of that, and I know that, I mean, everyone is assuming that the French contract comes to an end, and nothing else, nothing else happens. But the base case, or at least what the government is saying, is that there's likely potential situation where they will re-tender, right? They will get back to the government all these concessions, they will readdress or reorganize all these geographical zones, and they will re-tender.
If that's the case, Abertis should be in a good position to be competitive in those tenders. And so there's other opportunities in that sense, right? On top of what I have explained. But I think that we will give much more visibility in the Capital Markets Day when it comes to Abertis, and we're going to invite management, CEO and CFO of Abertis, to dedicate quality time on Abertis and the Abertis model on the seventeenth of April.
If I may just ask one follow-up question on Thiess topic. I appreciate the argument about extending concession with CapEx commitment, but let's say you're still confident that whether it's more investments or CapEx, you can still keep the current credit rating, and yeah.
Yeah, because that's whatever we do with the model and the dividends, it's always based on Investment Grade, right? All our modeling, all our assumptions, all our sensitivities are always with the Investment Grade restrictions. We are committed to it.
Okay, thank you very much.
The next question is from Dario Maglione, with BNP Paribas Exane. Please go ahead.
Hello, good afternoon. Actually, if I can follow- up on Abertis discussion with the French government on Sanef. Maybe if you can give us more color. Then second question on Asia Pacific. If I look at the adjusted EBIT and they exclude associates, so Thiess and the others, the margins seems to be down year-on-year from 4.4, I believe, to 3.9. I just wonder why margins for the underlying business is going down? And then the third question on Thiess. Of course, you know, we all know that it's a good business in the long- term, and we understand the demand outlook and so on. But my understanding in the short- term, there is some kind of oversupply in the mining market, excluding copper.
So yeah, I just want you could give us some indication of, you know, the outlook for Thiess, and how revenue are linked to production and so on. Thanks.
Okay. Thank you. Thank you so much, Dario. So let me start with Abertis. So the conversations around Sanef they are ongoing. They're ongoing. I mean, not much to mention at this stage, but of course, as soon as those evolves in a way or the other, we will let you know. Okay? The second question regarding the margins. So there's a few things that have contributed to the margins low in Asia Pacific this year. The first one is starting with EBITDA. Brazil rail has increased approximately AUD 650 million, the revenues at zero margin, and those are protection for hyperinflation that we had under the contract.
Unfortunately, they cover, and if you look at the increase in revenues in Asia Pacific, you see a big jump, and that has to do with that at zero margin, so it dilutes the EBITDA. West Gate versus last year, AUD 150 million at zero margin. And then the amortization depreciation changes versus last year. When it comes to PBT, you need to add EUR 37 million net finance cost in addition to last year, right? So I mean, it's, w e're talking about more than AUD 100 million affecting those margins, okay? So I mean, something to be mindful. So I mean, it's a specific situation, right? Don't look at this in a long-term trend.
This is about a year. Now, going to the commodities, right? And the market. I mean, certainly we would need to go, commodity, I mean, to each one of the commodities. In general, what we're seeing is that the volumes in general, we see an increase, and we can share with you some of the forecast. But we're expecting growth, even there's a decrease in the commodity price, we're seeing an increase in the export volume.
So when you look at the export volumes, we are looking in the 2023 to 2028 period, 11% increase in met coal, 4% increase in thermal coal, 18% in gold, 13% in copper, 50% in nickel, and 17% in iron ore. We can pretty much go through each one of them. You're right, when it comes to global price in terms of US dollars per tonne, met coal is going down, thermal coal is going down. Gold, the expectation is slightly steady or going down, increase in copper, little increase in nickel, and in iron ore, a little bit down. But at the end of the day, what drives our production as is, is volume.
It's not, we're not traders, so we are not really moving forward by the commodity price, but by the volume, which is what drives our business. I can follow- up with more detail on any of the commodities that I mentioned. I think that those were the questions, are you?
Thank you. Thank you, Juan.
The next question is from Nicolas Mora with Morgan Stanley. Please go ahead.
Yes, good afternoon, gentlemen. So just, just two quick ones. First one on, on the U.S. When we, when we look at the margin you reported in, in the fourth quarter, it's very impressive. I don't think we've seen a, a PBT margin above 3% for, for a very long time. What's... Can you help us understand what's, what's in there in terms of, potentially just the, I mean, the step up from rest of the year to Q4 is so high. There must be a few, a few one-offs. Is there, or is, is it the new way of recognizing profits on especially the more IT-ish contracts in, in construction? That would be the, the first question.
Second, when we look at the cash flow, there's a very big amount now, which is restated in non-cash components of income. Can you help us understand a little bit what this is made- up of? I mean, usually it was just traditionally a bit of Abertis's dividend and a little bit of fees, but it seems the numbers don't quite add up this year. If you can help with that, it would be great. Thank you.
Okay. Thank you, Nicolas. So a couple of things on the U.S., and well, starting for the question, it's seasonal. It's just, I mean, things are not mathematical when it comes to construction revenues and margins associated. Sometimes, especially when you are getting to collaborative contracts, there's a reconciliation relationship with clients. It's not... I mean, so there's always a lot of seasonality, and you can see that at the end of the project. We come back to the client, I mean, saying, "Please, we are finishing the year. Pay me what you owe me for the year." Right? I mean, you- we try to keep a relationship, especially in collaborative.
But one thing that I would like to mention in the U.S., and that's why I, I believe that, is probably misleading a lot of potential numbers, right? But there will be full clarity this year. We always report HOCHTIEF Americas, but bear in mind that HOCHTIEF Americas is Turner and Flatiron, right? And that's why you, you don't see Turner margin growing that fast. But bear in mind that you have Flatiron attached, and Flatiron has been for two consecutive years working in collaborative contracts, and 100% of the jobs, 100% of the jobs from Flatiron are collaborative alliances or target price. But there has been an unwinding of past projects, and that has affected the margin that using HOCHTIEF Americas.
Okay, so just bear with me, because you will see in the Capital Markets Day full transparency on Turner numbers. When it comes to cash flow, I think that the non-cash impact, but we will follow- up with you, because right now, I mean, I think that it's just the equity accounted company, JVs, consortiums, et cetera, but we will follow- up with you to make sure that I would clarify the question.
Okay. Just on... Just coming back on the U.S., what you're saying is basically at Flatiron over the past couple of years, there's been zero margin?
Uh, basically.
Yeah. Okay. So that, that means that we're getting close to the, again, a 3%, 3% EBIT margin and Turner on a standalone basis?
Yeah, but we believe that we're gonna be able to grow that. Yeah.
Okay. But from here and considering again where you stand in terms of, you know, the higher margin businesses, the data centers, the EV batteries, and so on, which are continuing to ramp- up into 2024, 2025, is the kind of pace of margin improvement we've seen underlying most likely, which is around 20, 30 basis points per year, something that is realistic or now getting to a bit of a stretch? Because you are already on quite a high level compared to peers more focused on project management.
So what, what number have you given, Nicolas? What-
Well, I mean, sustainably 20-30 basis points of margin increase per year, so that would give you 10% growth in PBT per year, supported by margins, and then the rest would come from, will come from revenues, which is kind of what's embedded in your- the high end of your margins in 2024.
I mean, Okay, it's difficult because I don't want to give numbers or guidance that I shouldn't. Obviously, the challenge is two things. The first one is that revenues continue growing a lot in Turner, right? So obviously, there's going to be a big increase, or continues being a significant increase in profit and absolute terms, just even if you keep the margins on the revenues. The challenge also is the project mix, right? And this is why it's so difficult, because obviously, the less commercial residential projects Turner does, which is pretty low margins, the better. The more data centers, battery packs, et cetera, that increases. So and when you look at the work in hand on the backlog, it's going certainly in that direction.
Now, if you look at margins in some of the new construction mining projects, it's. I mean, we're looking at 5%-6% gross margin per project, and increasing that in the more sophisticated projects. When you look at residential building, et cetera, and the low sophistication construction management, some of them have 2%, right? How much we are gonna be end up through the mix and the average is difficult, because it depends on the timing, on the number of projects and the revenue. So, I mean, I don't certainly it's going to it's going up because that's the nature. I mean, Turner is becoming more industrial, more high tech, more digital every year, and the objective is to really get into the areas.
The objective is to bring Turner into hydrogen projects, methane projects. There's a plan for it. I mean, we are also working on SourceBlue, which is the main supply company of the group on a global basis. We're incorporating to that supply chain a logistics company, lot of industrial and these components with, I mean, and that logistics business has higher margins. I mean, it should grow, but it's difficult for me to give a guidance, and I don't want to take the risk.
Gentlemen, there are no more questions registered at this time.
Okay. Thank you. Thank you so much, everyone. Look forward to answer any questions, within the next days if you, if you need. Thanks a lot.
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