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Investing.com -- Fitch Ratings has raised the Long-Term Issuer Default Ratings (IDR) of Webuild S.p.A. to ’BB+’ from ’BB’, maintaining a stable outlook. The upgrade reflects expectations of Webuild’s solid business profile, strong revenue visibility, and improved contract structures that allow for incremental cost pass-through, supporting margins.
The rating upgrade also takes into account Webuild’s improved financial structure, with net EBITDA leverage expected to stay under 1.5x for the period of 2025-2028, and gross EBITDA leverage projected to be less than 2.5x for 2026-2028. The key drivers for this are strong EBITDA growth from high-margin contracts, especially in Italy and Australia.
Fitch forecasts Webuild’s EBITDA net leverage to remain at 0.5x-0.7x, well below the previous positive sensitivity of 1.5x, driven by improved profitability from high-margin contracts, primarily in Italy and Australia. Gross leverage is anticipated to fall below 2.5x from 2026 due to significant improvements in EBITDA margins.
Webuild’s business profile is supported by leading market positions across various sub-sectors, a robust order backlog, and solid geographical diversification. The company is well-positioned to take advantage of rising government infrastructure investments in major markets such as central and northern Europe, Australia, the US, and the Middle East.
Nearly 90% of Webuild’s contracts incorporate pass-through mechanisms or cost-plus agreements. Over 90% of revenue for 2025-2026 is expected to come from low-risk countries, largely due to an increased presence in Australia following the acquisition of Clough, where around 25%-30% of revenues are projected for 2025-2028, and a strong market position in Italy.
Fitch expects Webuild’s EBITDA margins to stabilize at 8% in 2025, before rising to 9.8%-10.3% for 2026-2028. This increase will be driven by cost-reduction initiatives and high-margin contracts secured over the past 12 to 15 months, particularly in Italy, where the company is the largest engineering and construction (E&C) company.
Webuild’s working capital volatility is expected to decrease during 2025-2028, leading to a cumulative inflow of around EUR150 million, a significant improvement on the previously forecast outflow of EUR555 million for 2024-2027. This improvement is driven by anticipated higher orders with associated advance mobilization payments, which offset the unwinding of negative working capital through increased execution.
Fitch expects Webuild to have a higher capex of around EUR2.4 billion for 2025-2026, with 65% allocated to Italy for new equipment to support high-margin projects. This will be funded by operational cash flow and existing cash reserves. Capex intensity should normalize after 2026 as the equipment will be used for five to 10 years.
Webuild’s business profile is slightly better than Kier Group (LON:KIE) Plc’s (BB+/Stable), due to improvements in its working capital position. However, Webuild’s business profile remains weaker than Ferrovial SE’s (BBB/Stable) due to the former’s limited presence in mature concessions. Webuild’s financial profile is comparatively weaker than Kier’s and Ferrovial’s, as both have positive FCF margins, while Webuild has more volatile FCF through the cycle and higher leverage.
Fitch’s key assumptions include a revenue of about EUR12 billion in 2025, before increasing by 5%-6% in 2026-2028 on a strong order backlog. EBITDA margins are expected to stabilize at 8% in 2025, before improving to 9.8%-10.3% in 2026-2028, driven by the execution of high margin orders, especially in Italy and Australia.
Working capital inflow is expected to be 1.5%-1.8% of revenue in 2025-2026 and then working capital outflow of 1% in 2027-2028. Capex is expected to remain high at 9%-11% of revenue in 2025-2026, before stabilizing at 5.5% in 2027-2028. Annual dividend is expected to be around EUR80 million-90 million during 2025-2028. Restricted cash is expected to be around EUR400 million in 2025, increasing to EUR600 million to 2028 primarily for Fitch- adjusted working capital swings throughout the year.
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