Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Earnings call: Técnicas Reunidas boasts strong 2023 results, eyes future growth

EditorAhmed Abdulazez Abdulkadir
Published 02/03/2024, 13:22
Updated 02/03/2024, 13:22
© Reuters.

Técnicas Reunidas (TR) has reported a robust financial performance for the year 2023, with sales surpassing €4 billion, an EBIT of €157 million, and a net profit of €60 million. The company's backlog increased significantly to €11.4 billion, buoyed by new project awards such as the Riyas project for Saudi Aramco (TADAWUL:2222).

TR's shift towards natural gas, petrochemicals, and low-carbon technologies has positioned it as a technological leader in the sector, securing over 50 service contracts. The firm also successfully completed major projects, including a joint venture with GE in the United Arab Emirates and an ExxonMobil (NYSE:XOM) refinery expansion in Singapore.

Looking ahead, TR aims for €4.5 billion in sales and a 4% EBIT margin in 2024 and plans to host a Capital Markets Day in May 2024 to outline further strategies.

Key Takeaways

  • TR's sales exceeded €4 billion in 2023, with a net profit of €60 million.
  • The company's net cash position grew to €348 million.
  • A significant backlog of €11.4 billion was reported, with €6 billion in new awards.
  • TR is focusing on natural gas, petrochemicals, and low-carbon technologies.
  • The company has formed a strategic alliance with Sinopec (OTC:SHIIY) and is exploring opportunities in Africa.

Company Outlook

  • TR expects sales to reach €4.5 billion in 2024 with a 4% EBIT margin.
  • A Capital Markets Day is scheduled for May 2024 to provide insights into future strategies.

Bearish Highlights

  • A drop in sales was experienced in Q4 due to project delays.
  • Potential surprises in cash flow are anticipated due to a concentration of down payments by year's end.
3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Bullish Highlights

  • TR has successfully delivered key projects, including a joint venture with GE and an expansion project for ExxonMobil.
  • The company's track business unit has achieved milestones in low-carbon technologies, securing over €600 million in engineering services.


  • There was no detailed breakdown provided for the backlog in terms of engineering, procurement, and construction phases.

Q&A Highlights

  • TR aims to prioritize cash generation, expand engineering services, and maintain leadership in the energy transition.
  • The company is optimistic about future opportunities, particularly in the US market.
  • TR's backlog consists largely of service contracts and engineering projects, indicating a strategic shift.
  • The strategic alliance with Sinopec is expected to open up new opportunities, especially in Africa.

In summary, Técnicas Reunidas (TR) has demonstrated a strong financial performance in 2023 and is strategically positioning itself for growth in the energy sector. The company's focus on technology and service contracts, along with its expansion into new markets, particularly in Africa, indicates a forward-looking approach to business. TR is also committed to converting its robust backlog into cash while managing potential cash flow surprises. With a clear set of goals and a strategic partnership with Sinopec, TR is poised to capitalize on the opportunities in the energy transition and petrochemicals. Investors and stakeholders can expect to receive more detailed information on the company's strategies during the Capital Markets Day in May 2024.

Full transcript - None (TNISF) Q4 2023:

Operator: Good afternoon, everyone and welcome to Técnicas Reunidas 2023 Results Presentation. It will be conducted by our Chairman, Juan Lladó; and our CEO, Eduardo San Miguel. It will last approximately 30 minutes, and you will be able to post your questions after the final remarks. I now leave the floor to our Chairman, Mr. Juan Lladó.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Juan Lladó: Hi, hello, everyone. In today’s presentation, I will guide you through a summary of the most relevant aspects of 2023, the full year, which I do believe has been an extremely important year for TR. I will start with the quick glance of the main figures that we have achieved this year and then follow with very important issues that have taken place this year, having to do with awards and backlog. And then Eduardo will follow with a financial review for 2023, to finally conclude with our next steps, and I’ll give you the guidance for 2024. So let’s start with the quick look at 2023 main figures. If you take a quick glance at this slide, we have 6 indicators: net revenues; EBIT; net income; net cash; year-to-date backlog; and very important, awards year-to-date. In 2023, sales were again above €4 billion. And I do believe, €4 billion volume is important, no doubt, having reached the €4 billion. The efficiency and profit is far more important. So we move to the last number. This €4 billion – €4.1 billion have resulted in an EBIT of €157 million, with a 4% EBIT level in the second semester of the year. And net profit has returned to positive to €60 million, along with the net cash position that has increased to €348 million. And finally, last two numbers. TR’s year-to-date backlog has grown to €11.4 billion, thanks to awards of €6 billion year-to-date, most of it to the last quarter of the year. So we’ll work through all these numbers, backlog and sales through the presentation. But allow me first to take a minute and talk about the latest award that has been announced in January, the Riyas project for Saudi Aramco, which I believe is important. This project, as I said, was formally signed in January 2024. We launched it at the end of November after receiving the letter of intent with a very clear mandate to launch the project. Every day counts. Our venue was signed and contracted into force in January. The total investment of these two contracts, in fact, they are two contracts, amount to more than $3.3 billion, of which TR’s scope is worth $2.2 billion, which represents 65% of the overall contract value. As these contracts, as you know well, were awarded to a joint venture of TR and Sinopec, with a mandate, the scope to develop new natural gas fractionation facilities to increase the capacity by 510,000 barrels per day. This project, it is very important to note, we will have to devote more than 575 engineers, of which 75% of those engineers will come from TR. It’s also important to highlight that this is the first successful award – the first successful outcome of the strategic alliance that we have signed with Sinopec last September. And let me finalize that we’re extremely proud to work with Aramco in such a strategic investment. And with this job, we continue – we keep consolidating a very fruitful relationship that we started back in 2003 – August 2003 to be precise. And let’s now dive into 2023 business performance. Here, we have slide with 2 parts. As we begin in 2023 on the first presentations, we discussed about the super investment cycle, that was ahead of us. We announced there was a year of a lot of bidding and most likely important awards. Today, as you can see on the left-hand side of the slide, we closed the year-to-date figure with a backlog of more than €11 billion. And it’s not the number, whether you have the logos, a €6 billion awards from the right customers, the right sectors and very important, all of them with high technological value. So let’s focus on the – let’s focus on the right hand side. On the very top, you see our very large national companies, our customers, Saudi Aramco, ADNOC and Qatargas with whom we work on the natural gas development. Then it’s important to say that we have been awarded, and we’re retaining successfully petrochemical jobs like fertilized opportunities, fertilizer projects. And at the same time, we’ve taken important strides on key, very important, decarbonization projects as the one we start – just early examples with Cepsa, Repsol (OTC:REPYY) and Atlas (NYSE:ATCO) Agro. But I also think it’s important to note in this slide, there is two projects in Germany, the LNG terminal and the combined cycle for Hanseatic and RWE are both hydrogen ready. And what do I mean by that? That now more than ever, quality of process engineers are more important than ever. Engineering is a must. So related with engineering, let’s move to the next slide. We see today that we’re becoming and we have become a technological player for our customers. Our customers engage with TR in the early investment decision stages where the projects are shipped and defined from a very technological process point of view. The clients have seen how TR delivers the projects that we’re going to see together. We’re going to see 4 examples for many years. And now they’re increasingly entrusting us – entrusting TR with front-end engineering designs and very early engineering works, and this is important to note. As you can see in this slide, and this is quite impressive. Over the last 2 years, it’s a clear demonstration of this large – this change of perception about what TR can offer. TR has been awarded with more than 50 service contracts, all of them value-added. This is a clear sign that we are on a huge investment way. It’s a clear sign of investments coming in the future years and is very much in light with the strategy we have already announced, TR’s strategy of devoting at least 30% of its engineering capacity to high technological service contracts. And having talked about engineering and technology, let’s do an analysis of the backlog. So let’s take just a minute with the backlog broken down into business segment. In this slide, you can see how TR business is evolving during the last 3 years. There is a clear and some shift from refining to natural gas and petrochemical, and you see at the end, to low-carbon technologies. We have been talking about these investment waves throughout the whole year. And now as we have anticipated, they’re becoming a reality. We are currently in the middle of the natural gas wave as confirmed by the 2023 awards, which more than 90% are part of this natural gas segment, which are needed and very much needed if we want to move into our petrochemicals. It is the feedstock. Step by step, the petrochemicals are also coming. We’re working very much service contracts and lump sum petrochemical contracts. But you will see and we are convinced because as the pipeline we’re bidding on, that we’ll be gaining weight through 2024 and 2025. And very important, low carbon technologies, awards are increasing year-over-year, and they are increasing faster than we had expected. But as previously discussed, major investment decisions will take place in 2025. Today, we’re working with our customers on front-end designs. We have announced recently competitive fits with developing fits. And in some cases, in Spain, we are ready into full detailed engineering jobs. But nevertheless, has little weight on the backlog that is taking a large percentage of our technology and engineering capacity. Our truck division is, therefore, consolidation its decision with extremely large list of opportunity which is they’re all coming up, and we’ll see how they translate into solid jobs in 2024 and 2025. So this is very good news. And let me now spend a little time about our operations with four jobs because beyond our successful commercial activity, I am proud and the whole team is very proud of the achievements accomplished by operations team. It has been an extremely difficult for years. And I would like to focus on four projects, three of them have been delivered to our customers in Saudi Arabia, United Arab Emirates and Oman and another is under execution in Singapore. So let me start with the Saudi Arabian project, Saudi Aramco, the Haradh project. TR is extremely proud to be part of Aramco upstream ambition to double the gas production. This is a very strategic project, the one we have delivered. We want to double by 2030, the gas production. And this project which is located in Saudi Arabia, Eastern desert region in a very remote location will allow Aramco to raise the Kingdom’s daily gas production by 1.4 billion standard cubic feet per day and we also expect to add 20 production years – 10, 20 years to three non-associated gathered awards, lined within the world’s biggest onshore oil fields and 15 surrounding fields. We’re very proud to be part of Saudi Aramco strategic investments. And by the way, this project has also served to train a team of 15 young, self-driven project engineers for future leadership roles in upcoming projects. It has been a very important project for Saudi Aramco and very important partnership for TR. This project, extremely challenging, as you – this is the composition of 9 different compression stations, 9 different sites, separated by hundreds of kilometers that are, despite all the logistic challenges, the best to challenge because we know what we are really good at. We have to go through the years 2020 and 2021. And I guess all of you know what that means. And the project on 2023 was very successfully delivered to our customer, Saudi Aramco to full satisfaction. And now let’s move to Oman. And this is important. In Duqm project was awarded to our sales, the consumption of TR and Daewoo in 2018. Again, it was a project that had to be developed, designed and constructed through 2020 and 2021. Again, you know what that means. Here, the good news is we’re working for the national oil company of Kuwait, the national oil company of Oman, both together under the name of OQ8. And I have – and I’m happy to say that during 2023, the Duqm refinery started its initial operations in last February 7. I was very happy to attend the opening ceremony of the refinery. It has been a pleasure and it’s a pleasure to continue working with that Oman national oil company and Kuwait national oil company in Oman. Then let’s move to another very emblematic project and very important for us. In this case, in the United Arab Emirates, it is called the Sewa project. The project was signed in May 2019, again, a hint, we signed right before COVID. And after successful management through the 2 difficult years, we received in May 2023, a commercial operations certificate. The project was successfully delivered. The full size of this job was about €1 billion, and it was executed in joint venture construction with GE, a long-term strategic partner. So here is an example of a successful project in a good country with a good customer and with a very reliable long-term partner, GE. Let me finalize with ExxonMobil, with ExxonMobil refinery in Singapore. And we have informed in previous webcast, this project is an expansion of Exxon Singapore Refinery and it was converted into EPC lump sum early 2019 after about a year of competitive fit. And one of the biggest challenges of this job that we have successfully achieved is the fact that it has been constructed in models, in two different yards in Thailand. And then those processed models, not simple models, had to be shipped to the final site in Singapore where they have to be assembled and we have to say, there are 20 models and 19 of those shipments have already taken place. Furthermore, one of those models, and this is important to highlight, is the heaviest model ever built by TR. This is the biggest 4,200 tons. And yes. Let me talk about safety, because this project is a very good example of our continuous efforts on improving our safety standards in our operations having already reached 30 million safe man hours at both yards and 10 million at the site. So here, I have to thank everyone TR, customer, construction partners, job managers, everyone. It is a success story. And now after these four jobs, let me leave the floor to Eduardo.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Eduardo San Miguel: Okay. Thank you, Juan, and good afternoon, everyone. Year 2023 has been a year of delivery. Juan has been talking about project delivery, and I will elaborate later on about our margin delivery as well. But above anything else, I believe 2023 has been a year in which TR has built solid foundations that will contribute to growth and profitability in the short future. Let me now review the five key strategic milestones TR has achieved throughout this year. The first milestone is the outstanding evolution of track, our business unit for low-carbon technologies. TR has been working very hard in decarbonization this year, and I would like to share with you a number of landmarks that I have described in this slide. Starting with the left side, track has been awarded in 2023, more than €600 million in engineering services. We are talking about strategic projects where TR has assisted its clients in shaping and defining their decarbonization development. Also, track has built a comprehensive network of partnerships with licensors and technology providers in the products where track is focused: hydrogens; biofuels; carbon capture; steel; and cement. Track has launched this year new platforms for growth in selected geographies. In this sense, TR has opened its Houston office. We wanted to capture the U.S. market and have signed an agreement with IFC to provide financial support to decarbonized projects in Western Europe. And eventually, on the right side, track has widened its range of services by offering project from scratch development services to our clients and integral carbon management solutions. As I said before, it’s been a hard year, but with very good results. The second key milestone is the strategic partnership signed between TR and Sinopec at the end of 2023. Sinopec is one of the most relevant players in our sector worldwide, not only because of its technical competence, but also because of its availability of human resources. This alliance has a strong benefit for both parties due to our complementary capabilities and the extraordinary joint EPC player that we become together. We have jointly identified more than 20 bps in different parts of the world. The first – the very first successful outcome from this alliance has been the award of the Riyas development for Saudi Aramco announced this past January. This project worth more than $3.3 billion, is the first of many that will come in the future. In fact, since we signed this alliance, we have jointly submitted six bids and we are progressing in five additional bids during 2024. We are certain that this alliance will bring us important additional achievements in the upcoming years. The third milestone has to do with the risk mitigation in new awards. TR has deepened its strategy to be very focused on construction risk management during the commercial stage. You are more than aware, but let me remind you once again, the four strategies that we are striving to always implement to mitigate the risk in our backlog. First, increase the number and volume of service contracts. Our goal has been to allocate 30% of our engineering capacity to this type of contract. Second, to pursue projects with no construction scope, such as EPs or EPCM contracts, in which we undertake the role of construction management. Third, to contract EPCs in which TR previously carried out early engineering activities such as the front-end engineering design fits. And fourth, to partner in JVs with experienced local construction companies or with other engineering companies to share the risk. If you analyze our results, they have been quite remarkable. You can see in the lower part of the slide that in 2023, 90%, 90% of the new awards includes at least one of the four measures I have listed, almost double the figure we had in the 2015, 2020 period. The four milestone is related to the growth of TR’s resources. As Juan has explained, it has been the first year of solid delivery after COVID, but it has also been a very challenging year since we have been able to recover the ordinary size in terms of manpower, while keeping the costs under control. As we outlined in previous webcasts, we reacted to the pandemic by preserving our core engineering capacity criteria metric but cutting down our construction supervision staff. Once we realized early in 2023, the super cycle was coming, we took several actions. First, we expanded our engineering resources, both in our technological hub in Spain and in our satellite offices abroad, mainly in India. Second, we recovered the supervision staff needed to complete the projects under construction. And third, we contained our overhead costs despite our staff, our revenues, our commercial activity is in the middle of a very expansive phase. In the slide, you can see the outcome of these decisions. In the last 2 years, we have increased our engineering capacity more than 25%. And at the same time, we have managed to decrease 5% our overhead costs. And the last milestone has been the strengthening of our financial profile. After the successful €150 million capital increase carried out in the second quarter of the year and with a €92 million of organic generation of equity derived from the positive results reported, TR equity stands now at €325 million. If we include the hybrid loan, our long-term equity equivalent resources are far above our pre-pandemic levels. Moreover, the balance sheet leverage is being progressively reduced in 2023, decreased 14%, and new reductions will come in 2024. Finally, our net cash position is steadily improving, not only through the capital increase, but most important, from the better payment conditions, we are agreeing with our clients in the new awards. By far, our financials are the finally stronger one than the financials we had 1 and 2 years ago. Let’s now move to the financial figures – figures of the period. In terms of sales, TR figures remain above the minimum threshold of €4 billion per year that allows the company to deliver solid margins. The slight reduction of revenues compared to the previous year has mainly to do with the late awards of the MERAM and Riyas projects that have contributed less than expected to the 2023 figures. In the EBIT, which is €157 million, this figure continues to grow on a quarterly basis and already stands at 4% in the second half of the year. The net cash position as of December 31, stands at a healthy €348 million, and the gross debt has decreased in €116 million compared to the year before. Let me remark that this is the sixth quarter in a row that EBIT margin grows versus the preceding quarter. We are confirming TR’s positive trend. There are several reasons behind this positive recovery, but let me highlight three of them that we have already covered in this presentation: first, the proactive risk mitigation strategy; second, the successful delivery of projects to our clients; and last, the strong cost efficiency mindset TR has landed throughout the whole company. Okay. In this slide, we show the P&L over the last 2 years. We have already elaborated about revenues and EBIT. The financial results we saw in the slide has been adjusted to exclude the extraordinary item of €15.9 million related to a subsidiary liquidation during 2023. It is a non-cash item with no equity impact. So going back to the €36.9 million of financial costs, €8 million out of this €36.9 million has to do with the impact of hyperinflation accounting rules for Argentina and Turkey. And then the remaining €29 million is consistent with the agreed cost of our financial debt. Regarding income taxes, the effective tax rate is 36%, and is a consequence of the mix of tax rates of different countries applied on the profits or sometimes the losses obtained in those countries. Moving to the balance sheet figures. As you can see in the slide, the net cash position stands at €348 million, implying a 120% increase versus the same figure of 2022. To give some additional color, the improvement of the net cash is the result of both an 8% increase in gross cash and a 14% reduction in the gross debt figure. Regarding the repayments of the loans, ordinary and hybrids, granted by SEPI through the program FASEE in 2022, there was no repayments scheduled in 2023. The first tranche of the ordinary loan has been repaid in February 2024 amounting €33 million. Okay. Now we are moving to the final part of the presentation, I will introduce you the next steps of TR for the forthcoming future, while Juan will conclude with the guidance for 2024. Okay. Over the last 2 years, we have established a clear strategy to recover TR’s operation and set the foundation for the future. And I am sure this presentation shows the market we have been quite successful in those two tasks. For 2024, we don’t want to need a focus in the business, but we are aware we need to make an extra effort in translating a good performance into value creation for our shareholders. Obviously, a solid delivery of margin is needed but we also want to emphasize we are setting three goals. The first one, prioritize the cash generation in our balance sheet. There are obvious limitations to this policy since our suppliers cannot suffer cash constraints to fulfill their obligations. But the full normalization of the business should deliver solid improvement in cash generation. The second one, expand our engineering services activity. In the past, TR has been involved mainly in EPC projects. But today, we realize clients also perceive Técnicas Reunidas as a solid provider of purely engineering services. We have to take advantage of this new scenario and consolidate a derisked and profitable business line of this activity. And third, to remain leaders of the energy transition is a must. It is not only a great business opportunity, but it also makes the company attractive for good professionals, financial investors, lenders and public institutions. As I said, we will be very focused in these three goals. And now I pass the floor to Juan to finalize the presentation.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Juan Lladó: Thank you very much, Eduardo. And as usual, let me conclude today’s presentation with our 2024 guidance. We have always considered and we have always said that 2023 and also 2024 should represent two important years of recovery, 2 years in which we had to display will and we have done so, strengthened the company and adjusting and adapting to the new current market needs and we have done so. In this sense, our guidance for 2024 contemplates a level of €4.5 billion of sales and a solid and we underline that, 4% EBIT margin. Some people may think that, that means that we don’t want to grow in sales and we have a solid margin. And it’s not true, we want to grow, and we will grow as long as the market allows us to grow. So let me tell you, we’ll grow, as always, as Eduardo has said, within the acceptable risk, cash generation and healthy margins. And let me finalize, reminding you that we’ll be hosting a Capital Markets Day from the 22nd to the 24th of May in Abu Dhabi. And I think it will be a very good opportunity – a very unique, it is going to be unique and very good opportunity to give you additional insights and color and all the strategies and tactics and strengthening of TR that we’re working to prepare ourselves for the future. So we really hope to see you all there. And now I’m done. So I’ll be more than happy, all of us, to answer any questions that you may want to post. Thank you very much.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Operator: [Operator Instructions] Your first question comes from Mick Pickup with Barclays. Please go ahead. Mick Pickup, your line is open.

Mick Pickup: Yes. Hello, I’m back here now. Hello, it’s Mick here from Barclays. A couple of questions, if I may. So Juan, can you just talk about that drop in revenues in 4Q? I think you took a few people by surprise today. I know you talked about delays to projects have started up. But obviously, you’ve been running at €1 billion rate and then you fell down to €900 million. So that’s question one. And question two is on the U.S. and track. Can you just talk about what you’re seeing in the U.S. and what type of projects you’re involved in? Thank you.

Eduardo San Miguel: Hi, Mick, thanks. Yes, the fourth quarter, we have a drop in sales. To be honest, for us, it’s not a major issue. The fact is that on two big projects, we expect that should be awarded by the end of – not by the end – the second quarter – the second half year 2023, the reality has been that they have been awarded in the last 2 months of 2023 and the first month of 2024. So it’s – I think there are some good news behind that because probably, we believe that this delay has to do with the fact that the client and all the staff of the client is full. They are launching so many products simultaneously that they have been forced to delay a bit the awards. So, I think this is the good news. The bad news, obviously, is that well, we couldn’t track any relevant revenue coming for – on those two projects in the last quarter. If I can elaborate a bit more the answer, those two projects have been awarded in consortium, one with [indiscernible] company and the other one with Sinopec. And when you launch the project, how long, it’s very easy to launch them in a very fast track. When you have to share with your partners decisions, it takes a bit more time. So, I think this is what has happened. Basically, a delay because clients were full of job to do and it has taken more time than usual to launch the project, but we are confident that the problem here, what is that, what it should be, if we don’t have the project, then we have the project and now we have to deliver them. And I think that’s all I can say.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Mick Pickup: Okay. Fair enough.

Juan Lladó: Hi Mick, you are asking about on – I am Juan. Nice talking to you. Let’s talk about the U.S. We have been there with Eduardo and the whole team a couple of times recently. We have done road shows. We have visited customers. We have already shared the story with some very good customers. We are already working for them there and especially here. And I think now more than ever is the opportunity for TR, and the number of investments are huge, and the scarcity of resources of quality and new resources is also huge. And that is the scheme of being close to our customers, developing with them there, the front loading of the jobs. And if we move forward doing the detailed engineering here, as we have done with Canadian, Exxon, and many other customers, American customers, I think it’s a feasible and very good strategy. So, let me tell you that we are very optimistic. We are – I am personally extremely optimistic. We have sat down with our customers, and we have been repaying some of them in the – quite rapidly. So, is good news, and I do believe that we have a very good near future, 2024, and a very good future in 2025, another one of the business go further than that, so optimistic. And most of those projects let me tell you, you are also telling, many of those projects have to do with transition. Transition is a big part as well as gas. But our transition is important. I mean the number of investments and engineering resources needed to develop those investments is huge. And the – I am going to say quality, because the U.S. has a good quality of engineering, the quantity of engineering is quite scarce. It is very much – there is definitely a mismatch.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Mick Pickup: Okay. Thank you very much.

Juan Lladó: Thank you, Mick.

Operator: Your next question comes from Ignacio Doménech with JB Capital. Please go ahead.

Ignacio Doménech: Yes. Good afternoon. Thank you for taking my questions. So, the first one is on the 2024 outlook. I was wondering on your margins, given the improvement we have seen in the previous quarters, okay, if this 4% could be a little bit conservative on that end? Then my second question is related with the Capital Markets Day, okay. I do appreciate we must be patient, but if you could give us some color on any areas you plan to give us more visibility? This plan, do you expect this to be a continuous signal on the company’s current strategy? And my last question is related with the entrance of the SEPI on your shareholder structure in the upcoming years. I believe in the past, you have mentioned the positives that this might entail. So, if you can also give us a sense now on the benefits that this would entail? Thanks so much.

Juan Lladó: Eduardo?

Eduardo San Miguel: Ignacio and I want to say it’s conservative at the moment. It has been a long time. We have been observing difficulties that have little to do with Técnicas Reunidas, and we have learned in the past. I think we are doing things correctly. Obviously, there is room for improving the guidance, but we have to be prudent, and we want all of you to follow our advice, that we feel that 4% is a very solid margin. And we believe it’s the right guidance to be honest. Regarding with the markets day – the Capital Markets Day, I think it’s a good strategy for us to disclose now what we are going to talk about. Obviously, as you can imagine, we will talk about organization, we will talk about targets and geographies. We will talk about energy transition, all of those topics that we have to speak about it and update. Regarding SEPI, the benefits of becoming shareholders, SEPI has been the best partner of us in this period. We know that here in Spain, probably, this kind of support from SEPI is not well perceived. That is not the case of our clients. Most of our clients believe that Técnicas Reunidas is stronger if we have SEPI by our side. So, the idea is let’s expand. Let’s obtain new big relevant technological profitable projects. With SEPI, it’s easier task. So, let’s stay with SEPI at least for a while. Probably, I don’t know, maybe next year, we can analyze again that question. But for the time being, we believe that SEPI is the perfect partner for Técnicas Reunidas for this year 2024 for sure.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Ignacio Doménech: Okay. Thank you.

Operator: Your next question comes from Filipe Leite with CaixaBank. Please go ahead.

Filipe Leite: Hi. Hello everyone. I have just one additional question, if I may, regarding cash flow. And considering that the net cash position at year-end still does not include any down payment from the recent project award from Saudi Aramco, how is your expectations regarding net cash evolution for this year? Should we expect a similar trend when compared with last year, or should we expect a better performance? Thank you.

Eduardo San Miguel: Hi Filipe, sorry. Give me one second, I am writing down the answer. Okay. Now, I want to elaborate a bit that answer. The method we gave you 2.5 months ago was the business is not still fully normalized. Most of our projects are still in a phase of engineering or in the last stages of construction. It is the two stages where the business delivers little cash. So, I would say the opposite, it consumes cash. So, we need to reach a stage where the full business has normalized with some engineering – some projects in the engineering phase, some projects in the procurement phase and some projects in the construction phase. We believe we will reach that stage in the second half of the year, and we will see a more normalized figure of cash in the second half. That’s the answer we gave you months ago. Now, probably you are all wondering where we are going to finish by the end of the year. And when I was telling about, we have the compromise to be a little more focused in the cash side, our idea is, at least our proposal this year 2024 is to convert the results into cash. That’s an obvious target we have. But we have two – there are two relevant facts we have to have in mind. The first one, there is a concentration of awards by the end of the year and by the end of the year 2024. So probably, we will see a relevant amount of down payments in our balance sheet figure by December 31st. So, it’s very difficult to predict where the cash is going because of that fact. And second, and that’s important for me as well, the priority always has to be to deliver the project, and we have to pay suppliers, because if you allow that money flow in the full chain, the projects move smoother and you can deliver on-time everything. So, we have to be careful and find the right balance, but it’s our purpose to focus on cash, to convert the result into profit – sorry, to convert the profit into cash by the end of the year. But we will probably see surprises because of the large amount of down payments, we expect to receive by the end of the year.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Operator: Your next question comes from Robert Jackson with Banco Santander (BME:SAN). Please go ahead.

Robert Jackson: Hi. Good afternoon gentlemen. I have got three questions and I will take them one-by-one. So, the first question is, can you give us an idea of the breakdown of the current backlog in terms of the different phases, so that is engineering procurement construction? And how is the construction phase? Has it been de-risked with JVs or outsourcing the – so basically, how much of the construction phase of the backlog may have been de-risked to JVs or outsourcing, so that would be my first question.

Juan Lladó: Let me see if I can answer that question correctly, because we don’t do – we don’t break the backlog in terms of engineering, procurement and construction. Project has been started with engineering. A few months later, procurement took place to finalize with construction. It is true that if you look at our backlog right now, we have a large percentage of our service contracts we have been awarded, front end, and we have big chunk of engineering. And also, it’s a new fresh backlog. We have €6 billion of new awards. And that translates that backlog has been big, it’s – a very large percentage of it is on our engineering space. Because of the contract itself, it’s on engineering, and because the EPC is on the early stage, and it’s on the engineering phase. If I have to give you a value of the backlog, I think it’s rather fresh, new, that’s why it’s engineering stage. And in terms of customers and de-risking strategy, it’s quite healthy.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Robert Jackson: Okay. I have a question – sorry, do you want me to continue?

Juan Lladó: Go on.

Robert Jackson: The de-risking of the construction phase, so how much is with – obviously JVs and outsourcing, it sounds an example of JV and de-risking the construction phase. Could you give us any idea of the current backlog, how much is with JVs or outsourced so that we have an idea of how much is de-risked?

Juan Lladó: I mean if you look into the last words, again, we have not done the background, but I am just talking from the top of my mind. So, if you look into the last 18 months award, most of it, 80% has to do with that one way of another JVs.

Robert Jackson: Okay. Second question, regarding your commercial pipeline for 2024, I have a couple of questions. So, first of all, how confident are you with the returns of the investment cycle? And what level of tangible opportunities have you identified for this year for 2024?

Juan Lladó: I mean in most of the webcast presentation, we talk about pipelines and we talk how the pipeline has been brought down, resetting. This presentation was more a review of the performance of the year. But if we were to – I haven’t got the numbers in front of me, but our pipeline is above €30 billion. This is despite having been successful in more than €6 billion and many service contracts, the pipelines continue to grow. I mean the pipelines continue to grow and a very large percentage now we can tell you is moving towards petchem.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

Robert Jackson: Okay. And the third question, finally, regarding your strategic alliance with Sinopec, do you expect to see opportunities in new geographical markets, which could also help to support additional growth?

Juan Lladó: I mean when we sit with Sinopec and even by ourselves, we explore markets where we are both comfortable working together and also opportunities in other regions. And one of them, a very important one that we work in, and I think there are opportunities there. And I guess not sooner than later, we announced the starting of one is Africa. So, I do believe that Africa is the place that there are opportunities, and we are – China Sinopec in particular, and Chinese construction companies in general had a strong footprint. And we do have good engineering know-how. So, I think for that region, we are – and we will – let me underline, we will become a good partnership.

Robert Jackson: Okay. Thank you very much for the detail. Thanks.

Juan Lladó: Thank you. You are welcome. Okay. Thank you very much. This was a good review of the year. And I hope to see you, most of you, if not all, in Abu Dhabi this coming May. Thank you very much.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.