Tecnicas Reunidas Sa Ord

everyone, and welcome to TNR's first quarter results presentation of the year. It's going to be conducted and led by our chairman, Juan Lladó, and our CEO, Eduardo Sanmiguel. It's going to last about 20-25 minutes, approximately, and you will be able to pose your questions after the final remarks. And now, I'll give the floor to our chairman, Juan Lladó.

Thank you very much. Thank you, Antonio. Good morning, everyone, and thank you for joining us today. As you can see in this slide, we have this, you know, we have this structure, our presentation, you know, in a bit complex, but I think very understandable. First, I will start giving you, as always, you know, a glance of the key highlights Afterwards, Eduardo will step in explaining the ongoing Middle East situation and how TR is managing it. He will first drive you through the very short-term commercial outlook and the very relevant expected awards. Then he will explain the disruptions suffered from projects that are under execution in this area and how they are being managed. And to finalize this second section, I will come back to give you what we see the mid-term opportunities that we consider this current situation will bring to the sector and to TR. As always, Eduardo will go to the financial section of the quarter. Apparently, I will give you the final remarks before the Q&A. Eduardo? I don't know. It might be my time. So let me, let me, let me. I thought I had finished. Let me start with a key highlight, which is quite important for this quarter. If you look at this slide, each quarter has demonstrated a tiered solid business performance. Solid business performance reflected in the growth of revenue, tax generation, and underlying evidence. Sales reached 1.6 billion euros, which implies a 21% growth versus one year ago. And the net cash figure has significantly improved up to 360 million euros. Or better said, a solid 112 million cash generation compared with the first quarter of 2025. This level of sales and cash responds to the underlying evidence. strong and alive EBIT, which reflects GR's performance, with a number of 76 million euros implying a 36% growth year on year. On the other hand, we have to be and we are being prudent and realistic. Our execution performance has been delivered in the context of the eruption of some projects in the Middle East. interruptions and impacts that we have estimated in 45 million euros, for which we have decided to make the provision in our accounts. Again, we have to be prudent and realistic. In this sense, after that provision taken, the first quarter ended the state at 31 million euros. Our strong performance is also reflected in the very relevant awards expected in the very short term. And Eduardo will just bring some color to these awards, which will confirm our full confidence that we have in the short and mid-term outlook, confidence, and fully aligned with our strategic plan.

Eduardo, your turn. Thank you, Juan. Good morning, everyone. Before proceeding to this Middle East conflict section, let me first express our solidarity and firm support to all our clients, subcontractors, and suppliers in the region. In the actual circumstances, they all are not only our business partners, but also our friends. This section will cover both the impacts and the opportunities the conflict is generating in the Gulf countries. And moreover, how the reshaping of the energy landscape that this conflict is likely to trigger helps to create opportunities for TR across multiple principal geographies. So, we have three topics to speak about. Opportunities, project disruptions, and global impacts and opportunities. Let's start with the short-term opportunities. Middle East was, is, and will be our main market. The commercial activity in the region remains solid and strong, since there is not a glimpse of doubt from our clients to continue as planned with their upcoming development. If we go to the figures, our commercial pipeline in the region is close to 40 billion euros, out of which we are expecting in the very short term awards in the range of 4 to 8 billion euros. 4 to 8. As you can understand, I cannot provide today further disclosure than what you see in the slide. We are talking about three projects in three different countries. One is an oil field project, another one is an offshore development, and the third one is a power generation facility. The three projects, and that's very, very important, we expect will be awarded most likely before June 13th. So we are talking in the forthcoming 45 days. You may say, right, the range of $4 to $8 billion is a bit too wide, but let me translate that range into words. Anything below four would be fully unexpected, and we have a very high chance of being awarded around six. A billion is a perfect scenario and cannot be disregarded. But also, as you can imagine, The current conflict has tightened our relationships with our clients more than ever. We do not only keep executing our ongoing projects, especially in coordination with them, but also we are assisting and analyzing how to restart damaged facilities. Our clients in the Middle East are strong and reliable, and the message we have received from them is clear. We want you to complete the existing projects as fast as possible and to launch together a massive volume of new investments. Let's now move to the second topic. Impact in the existing projects. It is a fact that two-thirds of our current backlog is in the Middle East, and somehow all the projects in the region are being affected. But it is a fact as well that only a limited number of projects, and I would say just four, which are deep inside the construction phase are significantly impacted. The amount of these four projects in our backlog is around 1.5 billion euros. Many impacts obviously have to do with safety, logistics, and site disruptions. First, safety. We have impacts because our own workforce in the area is close to 4,000 people, and we have implemented all available measures to protect Delma. Second, logistics. The impacts come because the closure of all moves has blocked the arrival of equipment and bulk material, and has forced us to divert the transportation to alternative routes when possible. As of today, 1,061 shipments have already been, have already or are bound to be affected, and some equipment which impact in the critical part of the construction is not in the sites. And third, Disruptions on sites because the difficulties to mobilize large construction teams to make them work efficiently under this scenario and the delay of arrival of equipment and work have slowed down the rhythm of execution. Since the conflict started, clients have been collaborative and supportive. But above all, they have insisted in the need to accelerate the execution in the future to minimize its general impact. Although the conflict is not over yet, we are analyzing together with clients how to accelerate. And I wish to remind you now this kind of acceleration plans are not so unusual And they were widely implemented by chair last year in the region. But we have to be prudent. We have to be prudent. And we have analyzed the potential final impact of the conflict in the four projects effect. Assuming hostilities will not resume and the strait is open within this second quarter, before June, before the end of June, We estimate the global impact will be in the range of 40 to 50 million euros. And we have booked a one-shot provision of 45 million euros in our first quarter account. Now Juan will analyze how the project is giving us new opportunities all around the world.

Okay, the current situation in the Middle East is somehow accelerating all the structural trends in our energy sector, in our sector. And accelerating some of the investments planned in some of the regions. And I'm going to focus on three, on three areas of business and three regions. I'm going to focus on America, power, and Europe. America, which you will see there are opportunities that they have to accelerate with oil and gas, energy, power, and everything has to be accelerated, and they're doing so. Power has a compulsory need for electrification, and Europe, because Europe more than ever is focused to reduce energy dependency, sustainability of fuels, focus on electrification, and obviously focus on the representation. Let's start with America. This is, you know, this is one of the more visible trends in the pipeline. We see new opportunities in multiple countries, including Canada, United States, Panama, Venezuela, and Argentina. And all of this translates into a very significant pipeline of about 36 billion, only in that region. We focus in the United States. I think it's important to note that we just landed only two years ago, and today we're facing an extremely important pipeline. In the United States, we have something to offer. So talking about the United States, let me give you some more details for North America, which is, again, clearly becoming one of the most strategic and with growth opportunity regions for thermogas. Let me start from the top. Working on a fleet awarded for a gas terminal and transportation facilities cannot disclose the customer, we're not allowed, but I can tell you there is a tier one operator in the U.S. It's a midstream operator. But it's super relevant in that client that he has subsequently awarded all the phases in this huge development to TR. Today, we're working on phase four, and we're doing additions to that phase four, improving, looking, You know, working very hard on that phase four, which is a reflection of the quality of PR, you know, capacity of delivery. We do have something to offer. The second one, the second job is a constant link that we are ready on first two. When we started there, we were not even on first one. We were just, we were being tested. This is another very clear example. This is the LNG Canada job that we have to support them in transporting the gas from the Alberta to the Pacific. And it's, again, another very clear example in how service-driven strategy is paying off and how TR has acknowledged the client's philosophy to execute on a stage-by-stage basis. we're being successful and we're ready to move from phase two to phase three and support our customers. We do it well. And finally, the cost of blend LNG phase development, which was awarded to the joint venture of KVR and TR, which places TR, you know, as a front runner, again, on the LNG investment. In conclusion, this new project illustrates very clear that we have the quality to offer our clients, and we are reaffirming their confidence in TR, but progressively avoiding all the specific phases of the investment plan. It's a successful story, and you have to remember that we only landed three years ago this opportunity of growth. If we quantify, we have to put into numbers what is the final investment of our stake in these jobs. It doesn't mean that it's going to be EBT. It could be cost plus. It could be EBCM. It could be some part. The value to be awarded to TRCross all this is the project rises up to 7.7 million euros. So this is for America and this is for the U.S. And now let's move into power. You know, artificial intelligence is emerging and everybody knows it's the dominant driver of future demand and electrification trends. We're there. We've announced the spin-off. And that spin-off, some people got confused. The spin-off means focus. Focus and resources to capture this market, this market that is growing, which this IE dominant driver translates into new power generation capacity, which needs reliable power supply. It can come out of many sources, but one of them has to be reliable, and that will be combined cycles. The strength in only this segment. Today, we're better than ever positioned in this sector. If we take a closer look of this 27 billion figure, which I think is important to break it down, because it's a big number, we see a very diversified pipeline. In North America, yearly stands out. Artificially intelligent, they want to take the lead, and they are going to take the lead. Accounts for more than 15 billion euros of upcoming investments. For instance, in Canada, we expect to be awarded the third quarter of the year combined cycle projected with a carbon capture feature for a part or state for 100 million euros. Second, we have Europe that we have identified around 4 billion euros of new opportunities. Those are mainly linked to the electrification and energy transition projects. We will move it forward very fast. Just as an example, all the combined cycles for RWE in Germany, which are expected to materialize as EPC progressively from the second half of 2020, all of them. the market, and this is the region power that we were not there before. Again, it's a growth message. And in the Middle East, also remains a very important contributor to this power business with around 7 billion euros of opportunity. As Eduardo has explained before, we're tracking a large online cycle in the United Arab Emirates of around 1.5 billion euros, which financial investment decision is expected to take place very soon. And finally, let's consider opportunities in Europe. As we are seeing, it is a clear push for both government and industrial players to reduce dependency on external energy sources and to move towards a more secure and sustainable energy system. In this context, electrification is playing a key role. It allows countries to shoot energy consumption through a more controllable and domestically sourced solution while supporting decarbonization. This is Europe. This Europe is creating a significant number of opportunities for the industry and very particularly in projects linked to power generation and energy infrastructure. in the power section. At the same time, we also see very concrete development in very specific industrial sectors. Besides the project that we already talked of, RWE, in the power business, we're working, and we have been working for a while, but now we're really launching the job for Arsenal Metals on the steel corporation in the steel sector in one very specific It is like I was told that Spain is a very important milestone and a very important award, which I think we have announced yesterday or the day before. Anyhow, it's important to say that we're working and we expect the investment decisions very soon in Spain on Sustainable 12, wheels, SAS, and e-methanol. All of them, you know, happen. increase the probability and today's turbulence in the Middle East is increasing the probability to reach final and full financial investment decision very soon. I think it's important to spend just a little time because there's been rumors we talked about people didn't know very well where we were We've all said we were very well positioned, and we wanted to position ourselves in Europe and in the world using our technology, our engineering capacity to transform and to support our customers in the steel industry to depopulize. And we have been working with them, and very specifically in this case, Roussastelor Mittal, in this business. And we've announced two days ago that we are being awarded the EBCM for the accommodation of a steel facility, a very important steel facility in Belgium, France. This project includes a new 2 million ton alleged arc furnace with all the associated facilities which enables production to be reduced three times to, you know, with the CO2 three times lower compared with the traditional process. This is a very extremely important award for TR. We're very keen to start. We've been working with the customers, and we're proud to have been working with the customers for the last close to three years, finding ways how to improve and develop this very important investment. And it confirms our company's role as a key player in this industry, and it's fully aligned with the strategic plan that we have announced to the market in several occasions that we have to promote a service contract and our decompetition activity. And this is it. The bottom line is clear to conclude. that the current conflict is going to reshape, it's already reshaping the energy investment strategy in many regions. Therefore, high investments are for sure going to take place in all major players on the oil and gas and power sector. And we have to say anything to date, ER is best positioned to capture And now it's Eduardo's turn for an analogy.

So financial figures. As both Juan and me have said before, we have booked a 45 million euro provision to cover what we expect will be the total impact of the Middle East conflict, assuming the Ormuz Strait opens this quarter. And this provision reduces the EBIT of the quarter to 31 million euros. But I don't want to miss the focus on our performance, our revenues, underlying EBIT without the provision. Cash and equity have improved again. Quarter after quarter, throughout the last four years, we are beating the figures we delivered the year before. As you can see, revenues are 21% higher than a year ago, and the underlying EBIT improves 32%. And what is absolutely, absolutely relevant to me is our sales. And our underlying EBITs are absolutely aligned with the guidance we provided to the market. That's why this quarter, our EBIT margin is already at 4.8%, very, very close to the 5% we forecasted for the whole year 2026. And the cash and equity figures reflect the good health of the company. We have our highest ever equity, amounting at 191 million euros. and the net cash is solidly above the 300 million euros, where we have fixed a threshold below which we don't want to be. So, we are facing an extraordinary event, the conflict in the Middle East. We have tried to encapsulate and evaluate all the consequences of this conflict in a provision that has already been booked in full in our accounts. And we are still delivering a 15 million euros net profit in the quarter, while improving our cash and equity. Believe me, I don't want to look nice. And I also want to stay humble. And I cannot be happy with the figures we deliver. But the performance of the company has been solid. And will go on being solid this year and the forthcoming years. Okay, let's go to the final remark.

Here's one second for you to look into this slide, because this is not a message of justification, justification of provisions or anything else. It's a message of growth. It's a message of growth because we have reforms on revenue, cash, and underlying evidence. The message of growth because we have been able to best manage Middle East disruption. Managing Middle East disruption has given us an opportunity. That opportunity has been of working together with our best customers. With the customers with whom we want to be in the short, medium, and long-term future. We have strengthened our customers' relationship with our partners and our friends. And this allows us and positions ourselves extremely well to capture the very short-term and mid-term opportunities. If you look in your metrics, today, we're stronger than ever. And with that message, thank you very much for listening to us, and now we're ready to take the next one to post.

Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star 1 on your telephone keypad. First question comes from Nick Pickup from Barclays. Please go ahead.

Good morning, everybody. Nice to see business going well. Couple of questions, if I may. First on the outlook for new awards. So if I'm correct, you're saying $4 to $8 billion in the Middle East and then possibly another couple of billion elsewhere later on in the year. So is that correct? And the follow-up on that is how do you price Middle East contracts today? $4 to $8 billion is a big, big number and there's clearly some uncertainties around it. Thank you.

I prefer to start with a second one because the first one is simple to answer. I cannot disclose today what is my strategy with my clients pricing for it, so we have to be careful with the answer to this question. But I want to tell you something, and that's relevant. The impact of the conflict today When you launch a project, you take at least one year to develop the engineering of the project, and then you start procuring equipment. So very few things happen in the sites of construction until at least 15 to 18 months have passed. So do not be afraid if we are properly pricing the potential impacts of the war in the new project, because being very honest, those impacts are going to be extremely limited. But as you can imagine, we have good margins. Aligned with the margins we were expecting a few months ago before the conflict started. And we have good cushions, contingencies. You know, we are doing the things in the right way as we were doing months ago. So we feel quite comfortable with the pricing of the price. And we still believe, you know, this... expected margins we are announcing for the future are well-secured, even in the actual scenario. And regarding the first question, 4 to 8 billion euros, yes, that's my estimation. Four is very clear. Six is quite solid. And eight is the best scenario. And also, we have opportunities outside the Middle East. So if everything goes right and everything is perfect, we could be beating our expectations, our guidance at the very beginning of the year or when we finish the year before. But let's wait. Let's wait. I don't want to be aggressive today telling you that we are going to have an extraordinary year in terms of awards, although... we believe that the market opportunities are increasing and we have a good chance of having an extraordinary good year in terms of follow-up.

Can I just follow up on a second question then on your guidance? You've obviously taken a 45 million euro provision. You're telling me that four of the Middle East projects have logistic challenges which are more critical to them. How come revenue guidance is still at 6.5 billion if four projects are likely to face some form of delay? How do you keep up with those milestones and percentage of completions?

Very right. First, we follow the project on a daily basis. I mean, we're very close to the clients, analyzing how to recover and how to accelerate the project. So, By the year end, we expect to be able to recover the rhythm of execution, to accelerate, and to be not as far from the original expectation of €6.5 billion. That's my first answer. Probably the second answer is I had some room when I gave you my guidance at the very beginning of the year, and potentially revenues could be above this €6.5 billion. Now, I do really believe that's very tight. We will be doing 6.5, but I have not any caution.

Okay, perfect. Thank you.

The next question comes from Ignacio Dominic from Jimmy Capital. Please go ahead.

Hello. Thank you for taking my questions. I have three. The first one is related with the 45 million. provision you have booked in the quarter and if you could give us the assumptions okay that behind this provision i believe you've mentioned that you expect or you assume in this provision that the straight would would open a this quarter but just wanted to you could provide some more detail you know on the price that have been affected and more importantly what mechanisms you have in place in order to, in the future, okay, to negotiate with the clients to offset, you know, potentially this impact. That's my first question.

Hi, Ignacio.

Thanks for the question. Again, you're posing very complicated questions to me, not because I have not the answer, but because you are asking me to show you my strategy, my client. If I tell you today I have a book assuming that I'm going to recover 60% of the amount, I'm telling my client that I am willing to accept a reduction of my rights in 40%, so I cannot enter into such a level of detail. As I told you, the main assumptions basically are, yes, Strait of Ormuth open in June, no regime of hostilities. But what is clear for us is what we have defined, which is the final expected cost of this conflict. I'm not talking about interior cost. I'm also talking about what we expect to happen in June and onwards, because a few impacts still which come due to the closure of the strait this period. And we know, give or take, how our clients will react. First, because we're talking to them, as I told you, in a daily basis. And also because we have a track record negotiating with them recovery plans, acceleration plans. You know, we know how they behave. So, the next value of all those impact-less money we do really believe we are going to recover from the client is around this 40 to 50 million euros, this 45 million euros per issue. That's Unfortunately, I cannot tell you anything else. I think you were asking about the contracts. I think we have a good protection in the contracts. For sure, we are protected in terms of extension of time, for sure. And we also believe that there are room for obtaining significant amount of money to be recovered from the extra cost incurred.

Okay, very clear. And my second question. related or we've seen how consultants have done some estimates on the rebuilt CAPEX in the Middle East. I was wondering if you extend higher works or rebuild CAPEX from some of the of the infrastructure that has been damaged, and I think this also goes well with my third question, which is related with the high level of awards that we are expecting, okay, in the event, you know, that you have a strong pickup or acceleration of activity in 2027. I was wondering if you have enough capacity, okay, to accelerate materially that level of activity. Thank you.

Hi, Ignacio. This is Juan. I'm going to answer this question. We don't like to talk, and I think we should not talk about damage facilities expected capex and expected opportunity. I think, I mean, it's not a question to relax once because in fact, it's not a real question. I mean, there's no such a big damage and the opportunity is not to rebuild what has been damaged. The opportunity is the relationship that we have created these weeks with our customer in working at a fantastic pace an extremely disruptive situation. Opportunity are the awards and the continuity on the awards, on the investments that our customers in the region are even accelerating. That's a real opportunity, is not to rebuild or fix damages. That's obviously something that when we are asked to do, You know, in addition to that, we'll support them. But we don't see them as an opportunity. Our opportunity is a relationship that we have built and the investments that in that region with our customers are taking place. And if you're asking us about capacity, the answer is very simple. Yes, we do have the capacity. We're probably one of the companies in the region best placed and with more capacity and more experience to take and to undertake the investments, the new investments that we are already bidding and that we are already negotiating.

Thank you. Your next question comes from Juan Canovas from Elantra. Please go ahead.

Good morning. Thank you for taking my questions. I have to The first one is regards to your power business. You've highlighted significant opportunities in terms of pipeline, but normally those projects require substantial capital. So I was wondering what your plans are with your TR power unit, whether you are planning to open it to external capital, be in the form of an IPO or maybe... taking in a partner the second question regards to working capital dynamics I wonder whether you could explain to us how working capital has held up so well even in the circumstances in the Middle East where you seem to have suffered very little and notwithstanding you have got very few new orders so I don't know whether you can shed some light into that thank you

Juan, let me start with a couple of questions because I think I need to say that. I have to express the gratitude of $10,000 to all the clients in the Middle East. You cannot imagine how they are paying, how they are attending their obligations. It's unbelievable. So How is going to evolve the working capital? If everything goes as of today, I can tell you no problem at all. Everything will be very smooth this year. As you will see, I'm not only talking about working capital. I won't talk about pure net cash here. You will see a clear improvement for the next few years because the new careers that are coming will bring relevant stock payments and good payment conditions. So that's regarding the working capital. Regarding the power business, we invest nothing at all. I mean, we just construct the plan. The investment is done by someone else. And when we talk about a specific project, all of them are projects that already have the money available. The investment has already been decided, and the money is available. So no reason to be concerned. This year, we expect good news in the Middle East, good news in America, Hopefully somewhere else, but for the time being, let's focus on those two projects. And if any problem may arise, it has nothing to do with the availability of capital. I don't expect any problem, but nothing to do with capital.

No, sorry, I was not asking in a way that would be problematic. I was referring to the bonding requirements, which normally require a level of equity that you might not have in that subsidiary.

Oh, yeah, that's a complicated question. Yeah, yeah, you're right. It will take a couple of years to fully decouple TR Power from TR Group. I mean, in the meantime, all the statutes. We will be supporting them, and we will provide them bonds if needed. If needed. I'm not sure that we need it, but if they need it, we will be there. But again, the question is, then it's a big one. I understand it now.

Thank you so much.

Your next question comes from Felipe Leite from CaixaBank. Please go ahead.

Yes, hi. Good morning, everyone. I have two quick questions. First one regarding T-Side and if you have any novelty or when should we expect the final decision. And last one on power business, if you can give us the contribution of this unit to quarterly results, namely top line and debit margin. Thank you.

Thanks for the question.

Besides, no news. The only news we have is probably we will have a final reading from the Ambitro, maybe July. That's the best scenario. And we are not yet disclosing the figures of the power business. From next quarter, we will have this figure available. Thank you.

There are no further questions. Please continue.

Okay. Thank you very much for attending this session. And I do believe that we'll talk to each other on the next core presentation, which I think will be at the end of July. I'm not sure exactly which date, but through the end of July, we'll have the first half of the year full results presentation. So thank you very much again, and looking forward talking to you