Ferrovial N.V.

Good afternoon, everybody. This is Silvia Ruiz speaking, and I would like to welcome you to FROBIAL's conference call to discuss the financial results for the nine months of 2023. Just as a reminder, both the results report and presentation are available to you on our website. I am joined here today by Ernesto López-Moto, our CFO, and by the CFOs of the different business divisions. If you have any questions, you may ask them through the forum included in the webcast. During the Q&A session at the end of this call, we will be reading out your questions and who they are from. With this, I will hand over to Ernesto. Ernesto, the floor is yours.

Thanks, Silvia, and welcome everybody to the first nine months of 2023 results from Ferrovial. Well, really, this was another strong quarter. I mean, our infrastructure assets performed really well, starting with the 407 ETR. We had distributions in the first nine months were higher than last year. And also another one was announced post-closing of the quarter. And this was done on the back of improved traffic performance. The managed lanes as well posted a strong revenue growth and additional dividends from 35 West. In airports, with a strong summer performance and improvement along the year, Heathrow was outstanding with September already above pre-pandemic levels. Construction, I mean, with a profitable quarter, the full nine months are affected by the first half year results with impact from completion of large projects in the U.S. In terms of net cash position, we closed the first nine months with a net cash of 635 million euro sex infrastructure level. And this cash evolution is driven by dividends from infrastructure projects close to 400 million, and in particular, the first one from NT35 West. The main cash outflow was the repayment of the, well, we said the buyback of the hybrid bond that implied a 511 million euro outflow. And then we invested in equity and also in shareholder remuneration, 338 million euros. Of course, these months were full of corporate events with the listing in Euronext Amsterdam. We are also progressing with the US listing that, of course, depends on SEC approval. And we announced the second script dividend expected to be paid at the end of this month. From an ESG perspective, probably I would like to highlight the issues of a sustainability link bond, our first one, 500 million euros. Okay, we move to the next slide. We start with the performance, the operating performance from toll roads. And here we see the growth, both in revenues and EBITDA. Really, the U.S. assets are contributing to these consolidated numbers, 83% of revenues and 93% of EBITDA. Segment 3C, that opened to traffic at the end of June, implies 66% additional length to the NT35W, It meant 81 million euros investment, our part, and it has a concession term that ends in 2061. and dividends from the managed lanes the main one was this 35 was that to 100 of shareholder base was 435 million us dollars but also we got regular dividends from ntn lbj and for 100 shareholder base it was 123 billion us dollars Also in NTE, I mean, the success of performance means the ultimate configuration has been brought forward. And here we're going to be building additional lanes, a managed lane in segment two and a general purpose lane in segment one. I mean, this additional capacity that was part of the concession, as I said, was brought forward, is much needed in a corridor that has more growth than expected. It's important to keep the appeal of the corridor for the long term. This ultimate configuration has been financed fully with debt. In August, we issued $414 million of private activity bonds. And of course, this construction will start soon and traffic will start to be affected since the start of 2024 next year. If we move on to the next slide, please. Here in the 407 ETR, dividends, as I mentioned in the introduction, are above the 2022 numbers. And, of course, you see that the operational performance has an important increase vis-à-vis 2022. Traffic in terms of VKTs is growing close to 17%, but also revenues at a BDA are close to 16% growth. Here we have the revenue per trip fairly stable with a little increase on average triplet. In terms of dividends, we do not only have the increase reflected in these numbers of 300 million versus 200, so 100 million Canadian dollars increase, but also there was an announcement of an additional 650 million Canadian dollars dividend. When you see the traffic, Performance, you see that we keep improving. We are closing the quarter close to a 4% drop vis-a-vis 2019 and 9.4% increase versus 2022. Clearly, we're seeing increased mobility and commuting patterns. And also, we've seen construction activities in Highway 401. I mean, this is usually done in terms of maintenance of the main alternative. If we move to the next slide, here we touch on the long-term drivers that we like to have a look at. And well, the mobility that you see is pretty much shared in comparable terms in terms of evolution between the main alternatives, the 407 and also urban transit. So you see mobility improving across the board. Toronto really is important. It keeps growing in terms of population at a high rate. It's the first of Canada's big three cities to hit a growth rate of 3% in terms of population. And, well, the Ontario population grew slightly above 3%, and you see that, in general, Canada is also growing well, and it was the highest growth rate recorded for a 12-month period since 1957. When we look into the return to the office statistics, we see that that keeps improving. Of course, the 54% is an average of peak days and low days, right? But clearly the trend is more presence in the office. If we moved on to the next one, please. Here we are. looking at the managed lanes in Dallas-Fort Worth, and we see that all the three of them grew revenue per transaction, the average revenue per transaction above inflation. That is how the soft cap evolves every year, right? So with inflation of 6.5%, you had A double D in two of them and an 8.4% increase in NT. That has driven this growth in revenues and EBITDA, as I said, across the board with very solid EBITDA margins. I mean, NT clearly there's a strong performance ongoing with frequent mandatory modes. LBJ is still impacted by construction works in the area, the east entry point of that road. Well, an NT35 West is showing a positive performance in traffic. And independent of the additional segment 3C, right? I mean, it would have grown at 5.6%. But if we consider the increase in traffic from that segment, that is a 14.4% increase. NT and LBA also grew traffic nicely. Okay, so we move on, please, to the next slide. We first look at the I-77. That keeps beating our most optimistic expectations. Transactions growing close to 20%. Revenues more than 56%. And they beat the I-87%. So it's clearly... growing more than another. It's a fantastic asset where you see the revenue per transaction is growing at 31.8%. And on the right, we have the I-66 that is also ramping up. I mean, you have the quarterly revenue per transaction growing up. And the third quarter of the year had a 43.6% increase versus the first quarter of 2023. And traffic also going up close to 30%, the third quarter versus the first. the first quarter quarterly transaction so as we like to say cautiously optimistic but really a very strong ramp up and moving into airports we look at Heathrow well Heathrow results were released last week so probably you are aware of all these numbers but if we just stop on some of them I think that they are remarkable I mean we ended September above 2019 levels, but really it has been trading at those 2019 levels pretty close throughout the summer. Clearly demand is there and Heathrow has upgraded. the expected traffic for the end of the year to 79.3 million passengers. But it's not only leisure, inbound leisure that is experiencing a notable increase. I think that all the different segments are increasing, and it's good to see business travel reaching 27% of total traffic, and pre-pandemic this was 32%. as I mentioned, all sectors and nationalities are traveling out or through Heathrow. We look into the CMA appeal that finally came to a conclusion. The final determination didn't move much the needle. I mean, they corrected some things like the AK factor, cost of death and passenger forecast. So, to this uh i mean his expectation is that it doesn't it shouldn't have a meaningful impact and the message he through sent is that it's time to uh move on is disappointed with this time to uh to move on um and with the operation of the airport we move to the next slide please We see the remainder of the portfolio, all of it is growing. I mean, AGS is growing, not as much as Heathrow compared to 2019 levels, but it's still a very solid performance. looking for airlines to also come back or sign new flights in the area. I mean, making up for some of the airlines that left operations. If we look into that amount, that's... Much better in terms of comparison to 2019 and even 2022. So bidding in both years is close to 4% above 2019 levels and with a good showing of revenues and EBITDA. Last but not least is a new terminal one that keeps progressing and the project remains on by the schedule. I mean, there was a reaffirmation of the ratings that were done at financial close and then negotiations with international carriers are ongoing. We had the agreement with Korean Airlines previously. But, I mean, that negotiation with Airlines is in good shape. We have already contributed close to 200 million euros of the total equity. Remember that this project has investment concentrated in 2023, 2024 and 2025, 2024 being the peak of investment. And moving on to construction, as I mentioned, we had a profitable third quarter. I mean, Budimex keeps having a strong showing. Weber keeps EBIT margins stable. And then for real construction, I mean, the first six months were affected by COVID. And completion works in some large projects. Still, it's finalizing some of them, but I mean, the contribution is more in line with what we saw in a similar quarter last year. Well, order book keeps a strong showing, and you have the breakdown by geography on the slide. If we move on to the discussion of net cash, well, remember that in this quarterly information, we have the operational data. We don't have other lines of results that will come at year end. So in the net cash evolution, we have the different blocks here. And I would like to, again, underscore the dividends from projects here. block. Of course, we have equity investments and investments in other businesses. And this is basically to help self-performance in construction that helps in a stable environment. Then we have 110 million euros of shareholder remuneration. And as I mentioned in the introduction, the main cost of cash outflow is the repayment of the hybrid bond. In other financing cash flows, the main component here is the positive carry we have with the interest in the cash being higher than the interest we pay in debt. Okay, so if we move on to the last slide, clearly the portfolio is performing strongly. We have the increasing dividends helping the cash generation increase. And the pricing flexibility is providing to be very valuable in these assets. We are still looking to a very interesting investment pipeline ahead, in particular in the U.S. We are progressing with the U.S. listing application and, of course, advancing on the decarbonization roadmap. Okay, so thanks for bearing with us for the presentation, and now we open the floor to the Q&A session. Thank you.

Thank you very much, Ernesto. The Q&A session will begin shortly. Please stay tuned. Okay, so starting with the first set of questions from Nicoló Pessina from Mediobanca. First question, is 407 ETR's peak traffic strong enough to allow for a tariff increase in 2024?