Tecnicas Reunidas Sa Ord

Good afternoon, everyone, and welcome to TR's first half 2026 results presentation. It's going to be conducted, as usual, by our chairman, Juan Yadó, and our CEO, Eduardo San Miguel. It's going to last approximately 25 minutes, and you will be able to post your questions after the final remarks. Now I leave the floor to our chairman, Juan Yadó.

Thank you, thank you very much, Antonio, and good afternoon to everyone. It is a pleasure to have you all here and being able to start with this very important, you know, second quarter presentation. Allow me now to quickly walk you through today's agenda. I will start, as most of the time, with the main highlights for these first six months, and then I'll walk you through Two very important awards have taken place this last quarter. Eduardo then will step in to talk about our company, TS Power, and its remarkable first step in our North American momentum, which is very important, our services, safety utilizations, IE, and robotics. I will finally close with some remarks. and our guidance. So let me start with the key highlights. And in this case, the key highlight, I guess the most important one is this segment for performance. And I like to be very brief. I mean, the important number here is 73. 73 EBITS signifies a 5% oversell. A decent level of sales of $1,478,000 and a net cash of $344,000. And very important here, zero provisions. So this is the important message here. The fact that we have a decent cash, no provisions, and at decent levels of sales also shows how the Middle East Projects are moving and progressively moving back to normal. But if we want to analyze the full semester, both quarters, it has to be compared with the same period last year. And now what you see that sales semester against semester have grown by 12%. Andres Alonso-Muñoyerro Andres Alonso-Muñoyerro Finally, some messages that goes together with the numbers. Middle East execution is moving to normal.

That's one message.

It is moving to normal. It is very well understood as payments from our customers are unchanged and on time. That's a message. And the third message, and that this is very important, It is that we're managing a very robust ordinary intake of 6 billion euros and a high probability to end the year with 8 billion plus. And 8 billion plus driven by the Middle East investment mood, the power strategy, and North America. Three places, three businesses that I guess are very important within our strategy and our future growth. So now let's follow with the two most important awards that have taken place this quarter that covers part of what I've said before. The first one is the big one. You know, it's a $5 billion job by ourselves. It is the opposite job. We have two customers, two very important customers, AdNord and Exxon. And here, quantity is important. Obviously, $5 billion is important, but quality is very important. And it's very important if we want to be part of this big investment momentum that is taking place in the Middle East. It is important because we need to have, and we are having, the trust In this case, it's Exxon and Network. Both, they know, differentiate well our capabilities. They understand very well our engineering capacity and our engineering quality. They understand extremely well our modularization capacity and technology very much needed to take this job to us. And they understand very well our capacity and quality to manage the construction on islands or very complex sites. So the quality and the quantity of the job are very important. And we're very proud, extremely proud of this job. And we're extremely proud that both customers have entrusted TR as a sole contractor. And the next job, size is different, but in terms of our strategy, as important as the previous one. It's a power job. We're doing the engineering and procurement. It is Alberta, it is Canada, and it's the power. And we work here with Siemens Turbines. This project very much validates Our power strategy that we have presented to you on several occasions, it validates our North America strategy, and it validates our strategy, power strategy, which is very much driven by the nervous demand of the hyperscalers as Meta happens to be this case. You might be wondering why TR? Well, we have a strategy that you have to know that BINA is an old customer of us. and understands well the quality of TR services and engineering capacities. Siemens as well, this is not going to be the first nor the second or the third project that we do with them. And you all know that we are well positioned now, not only in the United States but as well as in Canada. So this job is good news. You know, you have to be optimistic. You'll see more to come. There'll be more to come. So only with this talking about power, I'll let the floor to Eduardo, who will definitely add some color to this.

Okay, so thank you. Good morning, everyone. And finally, as Juan says, many other power projects are to come. So let me first elaborate about TR and the power generation business. During the first half of the year, we successfully completed the spin-off of TR Power, our power unit. This was a critical milestone that provided TR Power with a dedicated and focused structure to capture a huge A huge opportunity of growth. Because the key message I would like to emphasize today is the size of the opportunity ahead of us. Historically, our power business generated a few hundred million euros of revenues per year. More recently, at our investor day held in Madrid last October, We were targeting this business to deliver around 1 billion of annual revenues. Today, however, the outlook is significantly stronger. If we continue securing awards at the pace we are currently doing, 2 billion euros revenues per year should not be a great challenge. In other words, We are potentially looking at a business that could double the size we forecasted only a year ago. This is why we are investing heavily in capabilities and talent. We are going to double our power workforce by the end of the year, ensuring that we have the engineering resources required to support this growth. As of June 30th, TR Power's backlog stood at approximately 2.2 billion euros. But in addition, we have a strong visibility on projects that have not yet been incorporated into the backlog. First, there's a 1.1 billion power project in the Emirates, where we are already executing early works. and where we expect the final notice to proceed by October. And second, the three combined cycles we were awarded by RWE in Germany represented around 1.5 billion euros. Hopefully, the final notice to proceed will be received throughout the next 12 months. Artificial intelligence in the US, electrification in Europe, and industrialization in the Middle East are the three drivers that will support the massive growth cycle we are already facing. And rest assured, we are more than ready to be one of the main players to take advantage of this momentum. Let's now move to North America. North America is becoming one of the most strategic growth regions for Técnicas Reunidas. In 2025, we secure around 70 million euro of early engineering services awards. And just in the first half of 2026, We have already reached 52 million euros. But what is more relevant to me is to observe how our projects awarded a year ago are already transitioning from the pre-fit and fit stage to the engineering stage. And we also expect some of these projects to enter in the EPC phase soon. A first project will be transformed into an EPMCM before year end if everything evolves as expected. Contract value will be around 200 million euros. I would like to emphasize we are talking about an engineering, procurement management, and construction management project because our policy is to minimize the risk of construction in America. Other ongoing early engineering services have the potential to evolve into approximately 8 billion euro of EPCM awards during 2027 and 2028, providing us obviously a good visibility for future growth. And eventually, I would like to emphasize the strong relationships we are building with many of the clients shown on this slide. Clients that allow us to capture opportunities in the US, but also in many other countries across America. US is, together with the Middle East, the largest investor in the future energy infrastructure. And we honestly believe we have been able to build Let's now turn to services, digitalization, artificial intelligence, and robotics. Services and digitalization slash robotics slash AI are tools that contribute to increase our efficiency and profitability, but also contribute to improve our market positioning since they strengthen our relationship with the top management of our clients. Starting with engineering services, momentum remains very strong. During the first half of the year we secure 130 million Euro of awards and we expect to close 2026 at approximately 375 million. A significant portion of this figure will come from North America as we explained in the previous slide. This performance gives us increased confidence in achieving our objective of 500 million euros of annual revenues by 2028, while maintaining gross margins around 30%. Regarding to digitalization, artificial intelligence and robotics, we are also making significant progress. We believe that digitalization and robotics will be transformational for our industry, but in the meantime, It is an unlimited source of productivity improvements and cost efficiencies that can potentially be converted into a competitive advantage or better margins. Two years ago, we fixed our target for cost savings in 1.5% of our revenues. And according to our actual understanding, this is not a major challenge at all. That is why we expect to invest around 40 million euros in 2026 and increase the dedicated workforce up to 400 professionals by year end. And before entering into the financial figures, allow me one last message from my side about our operation. We are our Middle East Power Generation in America. This is a unique opportunity to grow, but we do not plan to grow for the sake of growing. We remain committed to increase our profitability. Services and digitalization will definitely contribute to improve our margins and our efficiency, but our traditional PPC activity will not miss its focus in delivering solid margins. And now the financial results. Juan has talked about revenues at the very beginning of the presentation, and I would like to focus now on margins. This chart illustrates one of the most important achievements over the last 18 months. I would also like to emphasize this improvement has always been fully aligned to our guidance. Budget improvement is the result of a structural improvement in the quality of our business, driven by a more strict project selection during the commercial stages. The fulfillment of our SALTA strategy and a disciplined execution with increasing operational efficiency. In this context, we are navigating the consequences of the conflict in the Middle East. We made an exhaustive analysis in the first quarter, and we concluded the 45 million euros provision was our best estimation of the impact of the war. and we transparently communicated this impact to the market. Last week we have revisited our analysis and based on the premise that the conflict ends in this third quarter, we consider the 45 million euros provision is still correct and consequently there is no need to modify the figure. And now let me finish with one of the clearly skipped APIs of TR's transformation in the last two years, the strength and the strength of our balance sheet. Our financial figures goes on improving. TR net cash reached 344 million euros in the first half of 2026, compared with 332 a year ago. and Equity has followed the same positive trend, increasing from $564 to $622 million, the highest level ever reached in TR's history. Eventually, as announced in previous quarters, we'll remain committed to our 30% payout policy. First dividend will be paid from our 2026 results and the payment date will be communicated after summer. And now Juan, I pass you back the floor. Thank you.

Thank you, Eduardo. So let me do a brief wrap-up. In this brief wrap-up messages I think we have tried to... Made here on these presentations. 8 billion euros awards for 2026 is not a challenge. That's a message. There's another message is Middle East projects are moving forward. And we've been executing well. Third, profitability, very much leveraged on service division and digitalizations. It's extremely well-focused. Those have been important messages. But as we manage the business, there is a key message here that I like to transmit here. As investors, as an analyst, the message is that we're extremely well-positioned, very well-positioned in three very important business cycles, extraordinary business cycles. Thank you very much. is important, and I wanted to make it very clear in my final remarks. In terms of guidance, I guess these quarter results and maintaining the 2026 underlying, the underlying guidance shows that we're doing, we're having a good performance. If it's a good performance, obviously it needs to be adjusted as we did on the first quarter by the 45 million euros provision Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone.

You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Mick Pickup with Barclays. Your line is now open.

Good evening, gents. Nice set of results. A couple of questions, if I may. Firstly, just on the power side, you talk about doubling the headcount. What sort of numbers are we talking about on power? And I just want to get the scale of that. And then secondly, obviously, big awards this year. You're talking of... Thank you, Mike, for the questions.

Power, we currently have around 800 people working in the power business and we need to double it so we need to move close to 1.5 thousand people. I mean that's the size of the operation and maybe you wonder where are we planning to recruit all that people because obviously here at home we do not have resources enough and the answer is simple, it's India. We are currently recruiting people specifically specialized in that business. Regarding the second question, the figure is absolutely obsolete. We have to revisit the guidance for 2028 and probably by the end of this year with full visibility of what is coming Probably we can tell you what's going to be the correct figure, but obviously it's not going to be 4.5.

On that, clearly it is the lower margin bit of the mix that's getting bigger versus the services element. So are you still confident in that medium-term margin of 8%?

No, we have to revisit that margin. I mean, what we told the market was So, if the percentage of growth of EPCs is higher and the growth of the volume of services, obviously the average margin will be smaller, but we should stick to the target of 10% coming from EPCs and something like 30% coming from services. The overall figure, I mean, the net growth on absolute margin will finally be much bigger. That's obvious.

Thank you.

Your next question comes from Kevin Roger with Kepler Cheverer. Your line is now open.

Yes, good evening. Thanks for taking the time. I have three if I may. The first one is on an interesting comment that you just made saying that if the situation normalized in the Middle East in Q3, the 45 million provision will be enough. But just as a kind of sensibility analysis, because some of your peers like Technip and Saipem gave some guidance assuming that the situation will last until the end of the year. If we place ourselves with this statement situation until the end of the year, What kind of, let's say, additional provision should we assume? The 45 million number that you took that assume in a sense Q2, Q3 divided by two or any color on the, let's say, potential additional cost that will, in a way, emerged from the Middle East. That would be the first question. The second question is related to the Maybe sequential improvement that you expect on the top line H2 versus H1 because we are still close to 1.5 billion something revenue in Q2. So is there any pickup that we should expect in H2? And the third one is related to working capital. Working capital has been quite negative in H1, triple digit number. What kind of dynamic do you expect for H2? Thanks a lot.

Hi, Kevin. Thanks for the three questions. You know, to talk about when the conflict in the Middle East is going to end, my answer is, one month ago, we all thought that the war was over. So it's It's very difficult for me to analyze. I don't know how my peers can say that the war is going to last six months instead of three or instead of nine. Unfortunately, I think none of us know about that. As I told you before, we have tried always to be very transparent and very accurate. We have made our numbers for the next three months. We have seen which are The extra cost you can, we have seen how we can recover that for the client. We have analyzed the dispute with our suppliers, with our clients. We've analyzed everything to come in the forthcoming three months, and our estimation has been this 45 is correct and enough. Frankly speaking, I cannot give you, if I could give you any kind of guidance about what could be the impact of the remaining three months of the year, I have to guess it, because the job we have done is exhaustive, is accurate, you know, it's a thorough analysis. It's what happens in the next three months. So, unfortunately, I cannot give you any additional information about what would be that impact if the war extends another three months. Regarding the second half of the year, you have the guidance, we plan to be around 6.5 billion euros of revenues, you know where we are, and this is what, I mean, this is math. I mean, this is something, it's not a judgment, it's a fact. So we are confident that this 3.5 billion euros for the second half is the right figure. And the working capital, you know, the working capital, I don't want to look naive today, you know, but today working capital, today, I mean, the 30th of July is not my main concern. And I'll tell you why. We are expecting another at least two additional billion euros of awards. We still have to collect. The down payments from all the projects that have been awarded in the second quarter of the year. So, you know, we are going to receive lots of cash from my clients. So my main concern is how to use this cash as wisely as I can. Because I have always told you that the best thing I can do is to pass this money to my suppliers to force them to accelerate. At the very beginning of the life of the project, it's not that easy to pass that money. But we will try to do it if we can. So the only thing I can tell you about cash is by the end of the year, the final figure is going to be by far better than the existing figure.

Okay, I understand. Thanks a lot.

Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Alvaro Bernal with Elantra Equities. Your line is now open.

Hi, thank you for taking my question. Sorry to go back on the provision. I just want to have it clear to see what has changed for your previous assumption of $45 million being that the war lasted until June and now that it lasts until Q3. Is it the fact that cost recovery with clients has gone better than you initially expected? You can give some color there. Also, if you can give some color on the cash usage of this provision to date, it would be very helpful. And then the second question is just how your feelings on how negotiations with clients are going in general in the Middle Eastern region. Is it more based on... Enrique Ruben Alsina Massana

Hi, Alvaro.

Thanks for the two questions. The provision. The provision is an... I don't know how to describe it. It's an alive animal. New costs are coming. We are trying to reduce some of these costs by removing people from the countries to their geographies. We are recovering money from the clients. You know, it's a fact that this provision... It's just the net effect of all the extra costs, less the money we are going to recover from the clients. That is the philosophy behind the provision. And you are right, you are right. There are more costs than those we estimated three months ago, but we are recovering more money than originally expected. And that's why we believe this is the right figure. In terms of cash, it's a bit difficult for me to give you an answer because the idea is it is not there is a cost of 40 million euros, 45 million euros, and there will be a cash out of 45 million euros because it is not the case. We will collect money from the clients, we will pay our suppliers, and what is clear to me is that, well, give or take, most of this extra cost and most of this extra collections We have to solve the problems with the clients, with the suppliers, you know, and it has to be done now. It has to be done now. So that's, I'm sorry, I cannot give more color because, you know, and also I have to be honest to you, I don't want to give more tips to my clients and suppliers because I am negotiating with them, so... I cannot enter into a deeper analysis. And the failure of clients in the media list, you know, when we are talking about we are facing, we have not called it super cycle, but we are talking about a huge volume of investments are coming in the media list. This means that our clients... Are trying to be supportive. I think that this is the global message. Obviously, there are many different clients. The richest clients tend to help us as much as they can. Those that have more money, obviously, they are not that generous. It's a fact. But, I mean, the overall feeling is those guys want to invest. And here in Europe, everyone is talking about reconstruction, destruction. And when we travel to Saudi, to Emirates, yes, obviously we have to reconstruct something, but the main message is we want to invest and we want to do it as fast as possible. That's the message we see from them. So, you know, the immediate consequences, as I told you before, we have the feeling the clients are being supportive now. I mean the big main clients.

Understood. Thank you.

Your next question comes from Robert Jackson with Bank of St. Ted's here. Your line is now open.

Good afternoon, gentlemen. Just wondering if you can give us some more granularity regarding the breakdown of the project exposure you have in the Middle East and the level of execution of the three or four main projects you have in the Middle East, just to get a better understanding of where some of the risks may be in the second half of this year. I don't know if you may be able to give us those details. Thank you very much.

That was my only question.

I have to be careful. Again, I have to provide you a good answer, but I don't want to enter into many details if I can. One of the reasons why the provision is somehow limited to this 45 million euros has to do with the fact that most of the projects we have in the Middle East are in very early stages. or in the very last stages of construction or even in the final negotiation stages. So those projects where you are still in the engineering phase or you are procuring equipment and those projects that all the equipment has arrived to the site and your only pending activity is to construct are not significantly affected by the conflict. There are only two projects in two different countries, which are in a phase where we still have to enter big equipment into the countries. And we have the strike of four moves closed. It's a fact. So what we are working together with our clients is how to enter this equipment through different routes. I cannot give you more details. But only two big projects are being affected, but we are working together with a client how to solve the logistic difficulties to enter this equipment in the countries. This is the big, big problem we are facing there.

Thank you very much, Eduardo.

You're welcome. There are no further questions at this time. I will now turn the call over to management for closing remarks.

Okay, we are done. Thank you very much for all of you for listening to this second quarter presentation. Some of you can take some holidays, take it, because it's about time. And we'll be talking to you, I guess, on the third quarter, which is the second week of November. I do guess, right? So, Again, thank you very much. And if you have any further questions, you can call Antonio.