Hochtief Ag

Gentlemen, welcome to the Hochthief Half-Year 2025 Results Conference Call. I am Moritz, the call's call operator. I would like to remind you that all participants will be in a listen-only mode and the conference has been recorded. The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. 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, everyone, and thanks very much for joining this HAWCTIF first half 25 results call. I'm Mike Pinckney, head of capital market strategy, and I'm here with our CEO, Juan Santamaria, and our CFO, Chris Zandreschi, as well as the head of IR, Tobias Loskamp, and other colleagues from the senior management team of HAWCTIF. We're looking forward to your questions, but to start off with, as is traditional, our CEO will run us through the details of another strong set of HoCTIV numbers and provide you with an update on the group strategy. Juan, all yours.

Thank you, Mike and Adim, and welcome to everyone joining us for this results call. HoCTIV has delivered an excellent performance during the first six months of 2025 with significant growth in revenues, profits, and orders, as well as a solid cash flow result. In addition to achieving a strong financial performance during the period, we have made further important progress on the strategic front. We are increasingly harnessing our geographic footprint and engineering know-how on a group-wide basis to achieve additional growth in value creation for all our stakeholders as we continue to deliver on HoCTIV's growth strategy. And our growth trajectory is supported by a solid balance sheet, a strong order book, and a strongly cast generative business. So let me give you an overview of the key highlights of Octee's performance during the first six months of the year. The group has seen an acceleration in its top line. Group sales increased by 25% year-on-year to 18.4 billion euros or 29% if it's adjusted. This is mainly driven by strong organic revenue growth and was accompanied by solid margins. Operational net profit rose by 18% to 355 million at the top end of our guidance range for 2025, of an increase of up to 17%. And if we adjust for Forex headwinds, the underlying profit growth rate was even higher at 22%. Nominal net profit of 481 million includes net 126 million euros in one-off gains, mainly reflecting the non-cash Q1 2025 flat iron evaluation impact. The quality of our profits, is underlined by solid cash generation performance. Looking at cash flow during the last 12 months, the strong performance is driven by a sustained high level of cash conversion with net operating cash flow of 1.3 billion euros. The first half of the year incorporates the characteristic impact of society during the first quarter, but shows an increase in net operating cash flow year-on-year adjusted for factoring. The movement in the group's net debt position since December 2024 was driven by strategic investment decisions and their consolidation effects as well as FX impacts. Considering the last 12 months and adjusting for capital allocation, dividends and FX, net cash would show a strong 1 billion year-on-year increase. The new order's level of 26.1 billion euros represents a very substantial rise of 26% year-on-year adjusted for FX movements. with all operating segments reporting increases. The work includes important project wins in our strategy growth markets, such as data centers, critical metals, energy, as well as other core infrastructure markets. At the end of June 2025, the group's order book stood at 69 billion euros, up by 15% year-on-year effects adjusted. Let's take a brief look at our performance at the segment level. In terms of order growth and indeed other metrics, Turner has had another standout performance. Very strong sales growth of 41% to 12.2 billion euros was organically driven, 37% effects adjusted, with operational ability nearly 60% higher at 392 million. This remarkable rise in profits was also a consequence of the positive margin evolution, which increased by 30 basis points activity level to 3.2%, driven by Turner's successful strategy of focusing on advanced technology projects. New orders were another highlight, with a 23% rise to 16 billion euros, including a doubling in the level of data center work. We expect Turner will continue its strong growth driven by, firstly, its strong position in advanced tech, including a rapidly expanding data center market globally, with Turner growing in Europe. Secondly, further margin progression as the share of advanced tech projects steadily increases and aided by source blue supply chain services of offering. And thirdly, the structural long-term growth in several of its key markets, such as healthcare, education, airports, and sports stadiums. We reaffirm our guidance of $660 to $750 million operational activity for Turner in 2025, an increase of between 16% and 32%. Moving on to CIMIC, revenues were stable, adjusting for the timing effects of the disconsolidation since Q2 2024. The business achieved solid growth in strategic market segments, particularly across the data center, social infrastructure, and energy transition markets, upsetting the winding down of large transport projects. Operational ability was 4% higher on a comparable basis at $232 million. Cash flow exhibits the effects of seasonality, the ongoing working capital profile adjustment, and higher factoring during the first half of 24. On a comparable basis in adjusting for factoring variations, net operating cash flow shows a 101 million improvement year-on-year. CEMIC ended the period with a robust order backlog of 23.2 billion, which is 5% higher year-on-year on an effects-adjusted basis. Operational PVT guidance for CIMIC of 480 to 510 million implies an increase 7 to 13% for 2025. At our engineering and construction segment, sales of 800 million euros were 14% higher year-on-year on a comparable basis, adjusting for the impact of the deconsolidation of our North American serial business following the Flatiron drug house transaction. Operational PVT showed an 18% comparable increase to 40 million euro, and cash flow also improved on the same basis. A key highlight here was the strong rise in the orders to 3.4 billion euros, 64% higher year on year. Our engineering and construction guidance range for operational pivot in 2024, five of 85 to 95 million implies sustained strong growth of up to 24% on a comparable basis. Looking at Abertis, the Torwood company continues to perform in a solid manner. Operating revenues rose 6% on a comparable basis to 3 billion euros, with EBITDA similarly higher at 2.1 billion euros. Operational net profit pre-PPA of 383 million compares with 402 million in the first half of 24 and includes the adverse foreign tax impact. The operational contribution to Cocteau for the six-month period of 36 million included positive second quarter growth. As a consequence of its solid cash flow performance, Abertis distributed a total dividend of 600 million euros in the second quarter of 25, in line with the previous year. And we anticipate Abertis will deliver a similar operational result in 25 to 81 million of 2024. Let me provide you with an update on HoCTIV's strategic development. As a global infrastructure leader, Octiv's strategic delivery has continued in the first six months of 2025. It gains a background of unprecedented multi-year demand for infrastructure investments driven by the mega trends of digitalization, graphics, defense, deglobalization, and demand for energy. From a strategy perspective, the best way to look at the group is on a global sector basis. Octiv has positioned itself as a leading global digital advanced tech infrastructure and services solution provider. to meet the strongly rising demand. This is being achieved by expanding our presence in the value chain with our construction engineering know-how complemented by the group's equity investment and O&M expertise. We're one of the world's leading providers for development and construction of data centers with around 60 a watt of successfully implemented projects. The group's approach combines comprehensive expertise in planning, enhancing construction operation. According to several sources, the global data center CapEx market could grow at close to 20% annually until at least 2030. Octiv has secured several notable project wins in data centers during the period. Turner has doubled the value of new orders booked, underlining the group's strong presence in this rapidly expanding market. In the Asia-Pacific region, a similar joint venture is delivering the first tranche of a multi-phase data center development project in Philippines and has recently delivered projects in Malaysia and Singapore, whilst in Germany with loans. As developers, contractors and operators, our fifth Edge Data Center project, this time near Munich. And earlier this week, CoreWeave, the AI hyperscaler, announced its intent to commit more than $6 billion to equip a new state-of-the-art data center in Pennsylvania. purpose-built to power the most cutting-edge AI ES cases. The initial 100 megawatt data center with potential to expand to 300 megawatts represents one of the first large-scale data centers of its kind in the region and will be constructed by Aterna JV. As part of the group's broader strategy to establish a pan-European network of sustainable decentralized edge data centers, Octivi is looking to expand the businesses into other European countries, including Austria, Switzerland, and the UK. We previously created a joint venture, Jorison, which enhances Hocktee's Jixia data center with innovative cloud computing solutions that support digital sub-ranging. The first data center will open in Germany this summer, and sites for several additional centers are being developed. The group is also advancing in the semiconductor area, where strong demand for artificial intelligence and increasing digitalization is boosting investment level. Global sector sales in this market are expected to reach $700 billion in 2025, with double the growth expectations going forward. Together, with a reshoring trend, this is driving a rapid increase in semiconductor-related construction work. This is a strategic growth market for HoCTIF, and we're actively analyzing a very sizable pipeline of potential projects. Recent project awards include a significant construction contract for the expansion of an assembly and test facility for cheap photography machines in the US, an important semiconductor project in Malaysia, and a semiconductor-related construction facility in Germany using clean room technology. Another priority for HoCTIV is this radically vital critical metals in natural resources sector, where we have been developing a leading global position in recent years via a combination of organic growth and M&A. Global megatrends are driving strong demand growth for metals such as copper, aluminum, and nickel, but also critical new economy and battery minerals, including lithium, cobalt, and rare earth. The global metals and mining market, currently worth $1.2 trillion, is expected to reach over $1.7 trillion by 2033. Octif, through Setsman, is a leader in engineering for critical minerals and mineral processing with expertise in copper, high purity alumina, vanadium, lithium, cobalt, rare earth, uranium and nickel. In the period, we have started work on a new innovative critical minerals processing plant in Queensland from vanadium and other rare earth metals, and has also been awarded a five-year gold project contract extension in Western Australia, as well as another gold project in the region. These latest awards come in addition to several important projects we're executing in this sector, including a major lithium extraction plant in Germany, the process design and product implementation for a copper sink plant in Western Australia, a three-year nickel and copper full-service mining project in Ontario, Canada, a four-year contract to deliver underground services at a copper mine in Queensland, and the provisions of mineral processing services as part of a major Australian iron ore contract. Furthermore, we are currently working on a number of lithium projects in Portugal, Brazil, and Canada. In addition to our engineering expertise, Octivi is also a leader in the natural resources sector via TIS, which provides a full suite of mining, asset, and rehabilitation services across Australia, Asia, and the Americas. The company is steadily expanding its metal and minerals capabilities via its strategy to continue to diversify its commodity portfolio and geographic footprint, as well as expanding its services offering. Last month, TIS won a $2.3 billion contract extension in Queensland to continue providing full mining services at Lake Vermont, where it has been working since 2007. This project win highlights the recurrent nature of the business, which supports this solid cash generation. Looking forward, this is very well positioned for sustainable growth within the evolving global resource sector. As you will be aware, Octave has been a global leader in transport, infrastructure, and sustainable mobility for several decades. The outlook for the sector is very positive due to several infrastructure stimulus packages in key geographies. In Germany, for instance, the 500 billion infrastructure investment package approved by the Bundestag Parliament offers enormous opportunities to accelerate the modernization of the country. The plan is focused on transport, energy, and social sectors, including healthcare education, R&D, and utilization, with 400 billion euros federal and 100 billion state-level investment. Octiva is well-positioned to benefit due to the scalability of its business model and its core expertise in bridges, tunnels, and rail. But even before we see the benefits from this infrastructure investment boost, already in the last few years, order book for German projects has doubled to over 5.3 billion euros. During the first six months of 2025, HOCTIV was awarded a 170 million rail infrastructure contract to modernize a section for Deutsche Bahn as part of the integrated plan to upgrade the country's rail network. The HOCTIV Dream Venture was also recently awarded a major contract for the construction of the second mainline of the southbound rail network in Munich. Another significant European transport project win was secured during the second quarter with a DAS highway project worth initially 1.2 billion euros. In addition to the planning and construction, the BP contract also provides for the financing, operation, and maintenance of the road until 2051. In North America, a Flatiron Dragado JV was awarded a one billion contract for Long Bridge North Rail infrastructure project, which will modernize critical transportation links between Washington DC and Virginia. And in Australia, a Simic JV has been selected to build a Logan and Gold Coast faster rail project with work scheduled for completion ahead of the Brisbane 2032 Olympics. OPTIV continues to command a leading position in the biopharma, health, and education infrastructure sectors. Driven by demographics, including urbanization, as well as digitalization megatrends, significant structural demand growth for healthcare and education infrastructure is anticipated. OCTIV has a strong record and industry leading expertise in the healthcare sector, where, for example, in the U.S., Turner renewed its bold position in healthcare, being once again named the number one construction manager. And the group has delivered award-winning major hospital facilities across the Asia-Pacific region. In the first half of 25, CIMIC signed a letter of intent to construct the new Dunedin Hospital in Patients Building in New Zealand. In the education sector, where Turner is a leader, The company is building the college of veterinary medicine in South Carolina with completion plan for 2026. And in Germany, Octiv secured a contract to build a new research building at the University of Duisburg, Essen. Investment in defense is expected to strongly increase in our key markets. Octiv is well positioned globally for higher defense spending given our sector presence in Europe, U.S., and Australia, supported by our key security credentials. At the end of June, the group had around 2 billion euros of defense-related work in its order book. During the period, CIMIC was awarded a $317 million OC contract to upgrade of infrastructure and facilities for the Royal Australian Air Force in Queensland. In the U.S., a flat-iron drug allergy inventory is in the construction of a dry dock at Pearl Harbor. The project is part of the U.S. Navy Shipyard Infrastructure Optimization Program to modernize government-owned unoperated shipyards. And we're very well-placed to participate in major multi-year defense investment plans in Germany with opportunities in defense-related capital works, new or renovation projects, infrastructure buildings, et cetera, and potentially via the PPP model. In energy infrastructure, OCTIV is playing a key role globally. For example, in Australia's energy transition, by leveraging our global expertise in local capability and footprint to deliver significant projects. A strong growth is being driven by the increasing demand for energy in general and, in particular, for clean energy. UGL and Setsman are pioneers in delivering engineering-led integrated solutions for clients' energy, mobility, and natural resources. During the period, CIMIC won several contracts to expand electricity infrastructure in Western Australia, as well as a major project in the LNG sector. And in Germany, Hochtief Engineering has been awarded a planning contract for four high-performance onshore 2 gigawatt converter stations, which will be key to bring wind power generated energy to the Ruhr area. Elsewhere, it is worth underlining Hochtief's longstanding leading position in the commercial and general building sector. including airports, sports stadiums, and offices. In the second quarter, Turner was named the lead builder for Republic FC's new 12,000-seat stadiums in downtown Sacramento. In addition, a Turner joint venture was selected for the first phase of a $3.7 billion convention center project as part of a multi-billion dollar investment in the future of downtown Dallas. Let me now briefly turn into capital allocation. A key pillar of the group's strategy. In January, Hochtief closed the approximately 400 million euros per day acquisition of Dornan, the rapidly growing advanced tech engineering business headquartered in Orlan. This acquisition is a major milestone which will enable the group to accelerate Dornan's European expansion strategy. Apertis, where Hochtief holds a 20% stake, announced earlier this year that it would acquire a majority stake of the A63 highway in France as for the corridor between Spain and Northern Europe. Investment in a concession with 26 years of remaining life enhances Avertis' portfolio duration in financial strength. And we continue to develop and invest equity in greenfield infrastructure projects in Australia growth markets where we see significant value creation opportunities. In Australia, for example, We're further leveraging the group's capability and leadership position in data centers after the acquisition last year of a site to develop a data center with 200 megawatt capacity. CIMIC also is investing in and developing renewable assets, transmission lines, grid enablement infrastructure, and battery energy storage systems. And in Europe, we continue investing in core infrastructure via PAPs, as highlighted by the Dutch Highway Project win I mentioned earlier. Overall, at the end of June 25, we had committed equity investments of close to 800 million euros, of which over 400 million are in strategic growth markets, including data centers, renewables, battery energy storage systems, electric vehicle charge networks, and critical metals. The group's focus on environmental, social, and governance priorities remain on track. On this front, it is notable that HoCTIF has been awarded primary status for its ESG performance and achievements by the ISS International ESG Consultant and Rating Agency. So let me wrap up. OCTIV's H125 results show an excellent performance with an 18% increase in operational net profit at the top end of our guidance and backed by strong gas conversion. New orders have a strong increase of 26% effects adjusted to over 26 billion with a period and order book 69 billion up to 15% year-on-year, and with over 85% of this backlog lower risk in nature. And we're increasingly harnessing our geographical footprint and engineering know-how on a group-wide basis to continue leveraging our competitive strengths and delivering on Hoogtieff's group strategy, with our growth trajectory underpinned by a solid balance sheet. Looking forward, we continue to deliver on our strategy by focusing on the spotting growth markets we have identified. Octave is increasing its presence in the value chains by equity investments, and we're expanding our opportunities to create value in market where we have leading positions. We reaffirmed our 25 guidance to achieve an operational net profit of between 680 and 730 million euros, an increase of up to 17% year-on-year. Thanks, everyone, for listening, and happy now to take questions.