Tecnicas Reunidas Sa Ord

Good morning, everybody, and welcome to TR's nine-month 2025 results presentation. It is going to be conducted, as usual, by our Executive Chairman, Juan Yadó, and our CEO, Eduardo San Miguel. It's going to last approximately 20, 25 minutes, and afterwards, you will be able to post your questions after our Chairman's final remarks. And now, I leave the floor to our Chairman, Juan Yadó.

Hi. Hi. Hello, everyone. And thank you, Antonio, and good morning. And thank you for joining us today on our nine-month result presentation for this 2025. And as always, Eduardo San Miguel and I will guide you through the most relevant issue that's taking place in the first nine months of the year. First, Eduardo will summarize the main highlights from our very recent yesterday. And second, I will dive a little bit into our current commercial pipeline. And I will be followed by Eduardo, who will guide you through our financial results. And as always, again, I will wrap up the presentation with some financial remarks and our financial guidance. And now, Eduardo, you have the floor.

Thank you, Juan. Good morning, everyone. I know well most of you are aware of the content we covered in our October Investor's Day. But for all those that could not attend the meetings, let me devote now a couple of slides to summarize the key messages. Let's start with services and power. Regarding our new business line of engineering services, we are already halfway towards our 2028 target of 500 million euros of revenues. In fact, we expect this year to have around 230 million euros in revenues and over 600 million euros of awards. We are prioritizing our engineering service business line because of two reasons. First, because it delivers higher margins and has a lower execution risk. The 30% margin we announced in Abu Dhabi when we launched our Salta strategy is aligned with our actual results. And second, because through value-added engineering services, we are repositioning in the market. Clients perceive us as long-term partners that contribute to design, together with them, their future investments. In the Power Business Unit, we have significantly raised our ambition. Between 2020 and 2024, annual revenues averaged around 300 million euros. Now, looking ahead for the next four years, we are targeting over one billion euros per year. This shift is driven by a combination of secure contracts, the backlog, and a strong commercial pipeline. There is a huge demand for electrification. Both artificial intelligence and governments seeking for a clearer, cleaner energy are pushing this demand. Our expertise, our track record, the geographical footprint, and the close relationships we have with the EOMs are solid reasons to believe our one billion target of revenues per year shouldn't be a major challenge. If we move to North America, my message is we are making solid progress in the region. A key milestone achieved has been the signature of an strategic alliance with Zachary. This partnership with a company that highly complements our capabilities will unlock opportunities in the LNG and power segments in the United States. And also, we have signed engineering framework agreements with most of the major US oil and gas players. Through those frame agreements, plus the project co-development we are already involved in, and the feed conversions, we expect our first big projects to come in the US late 2026 or early 2027. When it comes to decarbonization, Técnica de Ronillas is more than ready for the future. Very few projects have been launched this year, but if there is one that deserves A very special attention is the Jambu Green Hydrogen Cluster that will feed the green corridor of hydrogen between Saudi Arabia and Europe. This project will require the construction of the largest ammonia plant in the world, and the feed and potential rollover to EPC has been awarded by ACWA to Técnicas Reunidas together with our partner, Sinopec. Through artificial intelligence, digitalization, and robotics, we are unlocking a new source of revenues and also improving our competitiveness. Our goal is 1% of cost savings by 2028. I'm confident that this goal will be achieved thanks to over 150 professionals with extensive engineering, procurement, and construction experience that today integrates the digital team. And now Juan will analyze our current pipeline.

Okay, let's move into the next slide, pipeline. This slide has a lot of information, numbers, maps, sparse. Let's see if we can make good sense out of it. The first and important message is that we have a very strong pipeline, 36 billion. I mean, 86 billion, sorry. And 86 billion is split into 84, which is EPC or EPC-related, and that can be clarified, and 2 billion on pure services. Okay, that's one tranche of the pipeline. And we have to remember that pipelines are what we're bidding, what we're going to bid, but we have been selected or invited to bid, or even a rollover from FITs that will become EPCs or similar EPCs in the near future. Those are jobs on which we're participating and we're close with the customer, which is important. But let me start with North America, because North America, I do believe, is a star. And why do I say it's a star? Because we would have been in this slide two years ago. So the fact that we have 32% of the pipeline in North America, I think it very much reflects TR's strategy, transformation, and repositioning, which is very important. And reflects focus and a clear mind and a clear strategy. But we need some classification as well, because when we're talking about 33% of 86 billion, don't think that it's pure EPC lump sum. That's not the way we do work, and that's not the way the North American market works. It's going to be a mix of engineering services or engineering and procurement lump sum with construction management services. So it's going to be a mix that in any case would not be a pure lump sum EPC as we have understood or you may understand that we do in other parts of the world, more so in the Middle East. That is very important. That's why I wanted to start by North America. We have opportunities, as Eduardo has said, in all the fields. Opportunities in LNG, opportunities in power, and opportunities in important jobs related with decarbonization. And now let's move into the Middle East. Middle East, this is where we're strong. This is where we have a strong presence and this is a place that we like to be. We like to be because our quality and our presence allow us to be selective and allow us to be selective and focus on the jobs and on the customers with whom we want to work for. And what you have seen on the awards of the last year, we have been successful, very successful, with very important customers on the upstream offshore business that we wanted to be. We have been extremely successful, as Eduardo has just reflected, on transition energy, you know, green ammonia plants. And we have recently been very successful with which very much reflects our successful strategy on services. So in the Middle East, the pipeline is strong, is resilient, and is growing. So it gives us a level of comfort for the near future. And Europe has been always less important to us. Today, it continues to be important. It's very much important on power. We'll talk about that later on. and obviously on energy transitions where we have a very important presence. So this slide, I think, there is a lot of information, but it is very important. It is where we are today and what is going to be our new future on 2026 and 2027. And let's move to the next slide. It is in the pipeline, but not in the backlog, some of the jobs that have been awarded to us, which are related to us. Services that have been contracted on pre-fit and fit, they have a natural, and that's what we have agreed with the customers, they have a natural rollover as the project progresses into detail engineering, procurement services, and construction supervision. And that is going to happen. That's very important in North America. but also in other parts of the world and in the Middle East. Our repositioning into services translates, and again, it's not in the backlog, that is in the pipeline, into natural growth into more than $400 million on services, on jobs that we already work in. And we'll have to slowly roll over into, you know, detailed engineering into real projects. And Empower, same story. And Empower, and very specifically, the best example is, you know, would be Power, although there are other products, is Power Europe, and more specifically, Germany and RWE. We have signed, and the last one has been recently announced, three contracts with RWE, you know, the main generation company. power generation company in Germany. The contracts are signed, and the contracts, that means they have been signed by ourselves and by our partner. The first two is Ansaldo, and the last one, we'll talk about that later on, is GE. That means that we have a contract signed. Early activities have to start. Early engineering has to start as well. Engineering has to do you know, for the balance of plants and the coordination and pre-engineering has to be done with our partner Ansaldo in some of the cases and GE in the last one. And eventually when the full contract comes into force, it will become, will have the backlog, now it's pipeline, larger than 1.4 billion. So that's better clarified on this slide because we have just announced it last week with the last award. And this last award that I just talked about a little before, it is Regene. We have been selected, again, by RWE for a hydrogen-ready combined cycle. What does it mean? It means that it will be a combined cycle that initially could operate on a 50-50 mix of natural gas and hydrogen. and then move forward, if needed, to 100% hydrogen. The contract has been awarded. Again, we have already started to work with them and with the GE on early activities and early engineering. It's not included in the backlog, and it will be included in the backlog when the contract comes fully into force. So this, again, shows both the good strategy, the successful strategy on the service and power that Eduardo has introduced to you a few slides ago. And now, you know, allow me to pass the floor to Eduardo with the financial results.

Okay, thanks again. Okay, we closed the third quarter with 1.8 billion euros of sales, 29% higher than the second quarter. This massive increase, as announced in our investor day, due to the acceleration plans we are currently implementing all across our portfolio in the Middle East, plus the growth of our revenues linked to the power division. EBIT of the period closed at 84 million euros, with an EBIT margin of 4.5%. It is the 12th quarter in a row that EBIT margin keeps growing. Moreover, this third quarter EBIT, 84 million euros, is 78% higher than the EBIT we had a year ago. I'm proud to repeat it, 78% higher than the EBIT we had one year ago. We're not blind. We're not blind. Existing market is giving us good opportunities to improve our margins. And I would like to emphasize also, this strong performance is the result of two key factors. an outstanding project execution across our backlog, and second, the implementation of solid risk mitigation policies. Overall, these results reinforce our confidence in the trajectory we've set for Tecnica Roneras. We are not growing for the sake of growing. We are growing with clear targets and efficiently. And let me repeat today my investors' day message. The best is yet to come. And eventually, these are our balance sheet figures. Our net cash remains at 427 million euros, a level that has proven to be more than enough to allow us growing and manage efficiently our business. You are well aware our policy is to channel as much liquidity as possible to our suppliers and subcontractors. Regarding equity levels, we ended September in a robust position of 698 million euros. So, both equity and cash figures allow us to repay in advance the full CPPPL and the ordinary loan next December the 1st. as announced a month ago. And now let me give the floor back to Juan.

Okay, my final remarks. Okay, I do believe it has been a short presentation, but a very important presentation. Our pipeline and, obviously, our year-to-date results, it fully reflects the success of a TR strategy, the strategy of transformation and the strategy of repositioning. As the doctor has said, we're growing. That is a quality growth. We're not growing for the sake of growing. The growing is a focus and world target growth, and very important, equality growth. Equality growth that allows me, allows TR, allows TR's team to present to you a guidance for 2025 with revenues above 6,025 billion euros, keeping a 4.5% margin which will result in an EBIT number in the neighborhood of 2,280 million euros. And for 2026, which is next year, again, our revenues will be north of 6,500 with a margin above 5%. And with these numbers, with this presentation, We open the floor now to any questions you may want to pose. And thank you very much for listening.

Thank you. Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star 1 on your telephone keypad. If you're using a speakerphone, please lift the handset before pressing any keys. Once again, that is star and 1 to ask a question. Thank you. And your first question comes from the line of Kevin Roger from Kepler Chevroo. Please go ahead.

Yes, good morning. Thanks for taking the questions. I have two if I may. The first one is related maybe to the phasing of the backlog. You increased implicitly once again the top-line guidance while a month ago it was already massive, thinking about the midpoint, plus 17%. So can you just... Give us a bit of more detail on why the top line is once again accelerating for the full year, now seen as 6.25 billion versus 6.1 billion a month ago, just to understand the dynamics here. And the second one is more broadly, and tell me if I'm wrong, but I have the feeling that in the press release and in the comment that you made today, you are even more optimistic than a month ago with quite some strong quotes in the press release, in the presentation that you provided today. So just also first, am I wrong saying that you are even more optimistic today than a month ago? And if it's true, What has in a way maybe changed? Is it the official awards for RWE that are coming? Just to understand also the tones that you have today in my view. Thanks.

Kevin, it's Eduardo. Thank you for the two questions. Very good questions, both of them. The first one, I don't know if you're asking about the numbers. We had a backlog. It was 3.5, I think. We have delivered 1.8. And we had to add to that backlog a volume. I don't know exactly the number. I think it was around 0.6. That has to do with those acceleration plans, accretion of times. We were talking in the Capital Markets Day or Investor Day here in Madrid. But I think your question is good. Why you are delivering more revenues than expected one month later? My answer for you is I have to tell you about my last two travels, one to Abu Dhabi and the other one to Saudi. I went to Saudi three weeks ago and to Abu Dhabi four weeks ago. And the message in both cases where the clients have been, there are another two projects we want to accelerate. And those projects that are already accelerating have to move faster. So we will see, it's a bit difficult for me to predict now the immediate figures because the pressure we are suffering from our clients to accelerate and to finish the project is huge. It's huge. it wouldn't be crazy to see again the fourth quarter being very similar to the third quarter in terms of revenues. And also you have to bear in mind that the U.S. dollar is stronger than it was 30 months ago. So it will have an impact both in the revenues and in the cost side. But it will finally increase the volume of revenues as well. So, you know, this business is alive. Every week things are changing. And I have to be very honest to you. I feel a huge pressure from my clients to accelerate more than feasible in many cases. I mean, we are doing the best to achieve very strong targets, very hard targets. So we will see how the figures, the revenue figure will evolve in the forthcoming three, six months. And regarding the optimism, maybe Juan, you want to... I think it's true.

I've tried on the couple of slides that I presented to transmit optimism. And probably more than I have done before. And probably more than I have done before because it's true that we're traveling a lot as we do... Our presence in North America starts to consolidate the conversations, the frame agreements, the invitations to bid, the success of the pre-fits. We are ready. We are ready of finishing and moving into fits. The fits that we are finishing with our customers, they're moving into Real projects, we'll be moving into real projects, which means detailed engineering, procurement, and construction, one by one. I'm talking about North America. Power business, our invitations to bid, the size of the market, the strong relationship that we have with our customers, the market that we have to face in front of us. Our position in a very important area that sometimes was criticized because some people would say that we had too much risk. Once you are well positioned, I'm talking the Middle East, our capacity to grow in the Middle East with whom we want to grow, to move and to grow in services and to grow in transition is very important that we have gotten in transition and power in the Middle East. And again, with whom we want to grow and allow us, everything is fair enough and allow us to be optimistic. We see 2020, end of 2025 is here, but we see 2025, 2026 and 2027 with far more optimism than we had, I'm not going to say two years ago, definitely two years ago. I'm saying that even three months ago.

Okay. Thanks a lot for the call. Thanks.

Thank you.

And your next question... And your next question comes from the line of Juan Canovas from Alantra. Please go ahead.

Hi, good morning. I have two questions. The first one is how do you manage to carry out those project acceleration? How does it affect your costs? If you could give us some detail about that. And then just to make sure... Is this contract in Germany with RWE and perhaps also some of the services pipeline expected to be signed into contract and add to the backlog during the fourth quarter of this year? Thank you.

Regarding the acceleration of the project, Basically, where we can really accelerate is in the procurement phase and in the construction phase. In the procurement phase, we have been doing a lot of work in the last six months to be ready for the moment that the client finally decides to go ahead with the acceleration plan and compensates it. So that's the reason why you see such a quick acceleration in such a short timing. Because we have done a lot of jobs previously that now it is paying off. I'll give you an example. If I have fully designed a specific equipment and I put it in the market in one day, the job has already been done. But the effect that has this design in the progress of execution of a project is very relevant. So we have a lot of job possibilities. that you couldn't see before, but now it is being reflected in our accounts. So the acceleration cost has to do with accelerating procurement. So you also have to pay your suppliers to construct the equipment faster. And obviously, they need more resources. They need to procure the raw materials faster. So you need to advance them a lot of money also. But it is the way it works. And when we talk about construction, basically the idea is what is being done by 1,000 people doubles what can be done by 500 people. So what you need is more people. So the idea is we are talking with all our contractors. We are telling them to increase as much as they can the human resources available at the sites. And when they don't have the capacity, we are talking to other contractors that will add up the needed capacity. So we are splitting the scopes of the original contractors into different new contractors. So, you know, it's the way it works. I mean, we have also to multiply the size of people from Tecnica Ronera supervising the construction. You know, everything has a significant cost, and that's what the clients are paying for. I mean, that direct cost for Jenny Caronea and for our contractors and suppliers. Regarding Germany, I know the service providers are going to be signing for Q2025. No, no, no. Definitely not. It would be in the second, third quarter of 2026. Okay.

Thank you so much.

Thank you. And your next question comes from the line of Robert Jackson from Santander. Please go ahead.

Good morning, gentlemen. A question related to the North American market. Are you seeing any signs of changes in sentiment regarding investments related to the energy transition projects compared with the last six months? I mean, you've been talking about acceleration, especially in the Middle East, of your more traditional projects. Is there any significant change or are things the same as, say, beginning of this year in North America? Because there's still concerns about the impact of the tariffs on certain investments. I don't know. Can you just give us more visibility on the North American market?

Thank you. Hi, Robert.

This is Joaquín. Let me say, in the look-up on business, you know that we have always said that the opportunities that we are following have very good fundamentals and are being supported by strong partners. The first message would be that the opportunities that we are following are still being ahead. I would say even reinforce it, because in the last weeks we have seen, I would say, a strengthening of the message of the partners that we work with. That would be the main ideas. It is also true that some of the recent developments in the regulations are going to be clarified in the coming weeks, and this is going to give, from our point of view, additional support to the projects that we are following.

What about the timing of your services activity and your potential opportunities in North America? Could we expect the first half of next year or more towards the second half of next year in terms of your pipeline in the U.S.?

I would say that we will see good developments of our projects by the second half of next year for sure.

Okay. Thank you very much.

Regarding the tariffs and... Let me, I mean, it's obviously, I mean, the tariff business here is, you know, one day is one thing and next day is another. So, I mean, I cannot do a very intelligent analysis of what's going to happen with the tariffs, but I can give you some feedback of what our customers have said to us Eduardo and I, we were in the U.S. Houston last week, and we were working on some projects, and we were studying with the customers some projects. Those projects have to be modelized, and they were saying that despite tariffs, which they're uncertain, the jobs are going to go through, and models are going to be done, very large part of them outside the U.S., And even with tariffs, even if they happen with tariffs, it will be more competitive. So the message is with or without tariffs, the jobs will go ahead. That was the feedback that we got with the three customers that we sought last week in Houston.

Interesting. Thank you very much.

Thank you.

And your next question comes from the line of Mick Pickup from Barclays. Please go ahead.

Good morning, everybody. A couple of questions, if I may. Just on the acceleration of projects, how do you get paid for that? Is that bonuses if you get these done on new accelerated timeframes? You can just talk us through that. And secondly, you're talking about growth in the Middle East. Obviously, I've just come back from Adipec, and it's the first time in five years I've not seen an E&C contract signed I can see one bidding in Abu Dhabi and not much in Saudi Arabia. So can you just talk about the growth in the Middle East over the next 12 months, what we should be looking at there, please? Thank you.

How do they pay us as they used to? I mean, they have put a lot of pressure on us trying to accelerate. We have agreed. the compensation, but they are not that generous in terms of schedule of payments. But it's a fact that in every case we are receiving a kind of a down payment. I mean, they are advancing some money because the only way to accelerate is to put the money on the table to our suppliers and contractors. But being honest to you, I mean, this is not going to be very personal. Antonio is suggesting me to tell you that it's going to be a Paris-Basuc, but I do not agree with him. I'm afraid we are going to advance some money to our suppliers, and then we will collect the money from our clients. But that's common. I mean, the whole business is working that way. There's nothing extraordinary in those acceleration plans.

Regarding the... Can I just... So when a project's late, your client... holds your feet to the fire and it costs you money, when you accelerate a project for a client, they don't end up paying you bonuses if you do it early.

Sorry, I couldn't understand the question, now I understand it. In some cases, what we have negotiated with the clients is that there would be an extraordinary compensation in case we achieve certain milestones in certain moments. But give or take, the overall agreement has more to do with, OK, we need to complete that in this period of time. And this would be a global compensation that has to be add up to the original value of the contract. So there are no significant differences in the way they treat the payments. OK.

And the second question, Juan, maybe you want to... Yeah, let me talk about the second question. I mean, in the very short term, we have in some countries in the Middle East, we have presented bids and we have good expectations. In some other countries, we're getting ready and sitting with the customers to prepare bids within the next three, four months related to the upstream and even offshore business and where we have positioned ourselves quite strongly in some of those countries. In some other countries, again, the power bidding continues and positioning continues. I don't want to say the country, but in some other countries, what we call the growth in gas treatment out of non-conventional sources, again, is growing and is continuing growing, and they have big investments there. and they have to continue growing to provide gas for the development of the country. So, I mean, there is not a lot of noise of immediate bidding, but there is a lot of noise about big investments coming up in the very short term on both, on power, upstream, and gas. I mean offshore, I mean upstream oil and gas.

And let me tell you, we're better positioned than we have ever been. Thank you.

Thank you.

Thank you. Once again, should you have a question, please press start and the number one on your telephone keypad. And your next question comes from the line of Felipe Leite from CaixaBank. Please go ahead.

Hello, everyone. I have just two questions, if I may. The first one on working capital and if you can give us more visibility regarding the working capital consumption of this third quarter and how do you see working capital evolving in the next quarter. And last one also on cash flow. In this case, prepayments and if you can give us the amount of prepayments by TR on nine months.

Thank you.

Felipe, sorry, there are problems with the line, and we cannot hear you clearly, but we only send working capital and prepayment, so I can imagine the question. You know, if something has to do with everything that has to do with cash, that's the definition. And as you can imagine, being the CFO of this company for 20 years, the way I try to manage the company is with the highest discipline. Saying so, saying so. I know perfectly every euro is relevant for a company, but when you analyze the big picture that the company has grown its revenues compared to the year before, around, well, I told you, 80%, 78%, the total volume of revenues. When you see that our balance sheet, the balance sheet has grown, I mean, the account receivables and our accounts payable around 30% compared to the figures we had by the end of year 2024. And it amounts around 3.5 billion euros, I mean, of account receivables and of accounts payable. When you see how it works, the business, that milestones from time to time and for a specific project are very separate one from the other. So it takes a long time. to be invoicing your client and then collect the money once you have already delivered, sorry, not delivered, you have already incurred the cost and from time to time you have been forced to pay the contractor. I mean, it's a very difficult business and it's of a massive size. So when we analyze the working capital and quarterly and quarter basis, every little movement, I don't know how much reflects our performance. I have to be honest with you. I do really believe that the quality, the way we manage our cash is the best possible. We have a clear philosophy that the money has to be, if possible, in the hands of our suppliers and subcontractors. And obviously, it has an impact in the working capital quarter after quarter. But believe me, if there is anything here, it's discipline with the cash. That's very clear to me, I think. I asked something about prepayments. Well, last project awarded to TR was the project in Abu Dhabi seven months ago. So the inflows coming from prepayments this year have not been that relevant, and a large part has already been consumed. I don't have a figure with me now. But again, you used to ask me about prepayments, but you don't ask me about the withholdings of the client, the retentions they do and they pay at the end of the project. You don't ask me about the prepayments I do to my subcontractors. You are missing many questions, and probably we need to make a more complete analysis. But in terms of prepayments from our clients, it's a fact that there has been only one relevant prepayment this year. It happened six months ago, and a large part has been passed to our suppliers.

Thank you. Once again, should you have a question, please press star then the number one on your telephone keypad.

There are no further questions at this time. Please proceed.

Okay, there is no further questions, so we can finish these presentations. Thank you very much for listening. Thank you very much for posing questions. It clarifies many things to all of us. And we'll be talking again, I guess, with the final year-end results by February. So I'll see you all or talk to you all in February. Thanks again.