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Fomento de Construcciones y Contratas SA ( FCC (BME:FCC)) reported a mixed set of financial results for the fourth quarter of 2024, with revenues climbing by 10.4% to €9.07 billion, while net profit fell by 27% to €130 million. The company maintains impressive gross profit margins of 59.05% and a healthy current ratio of 1.88, according to InvestingPro data. Despite strong revenue and EBITDA growth, the company’s stock price dipped by 0.75% during the open market session, reflecting cautious investor sentiment.
Key Takeaways
- FCC’s revenue increased by 10.4% to €9.07 billion.
- Consolidated EBITDA grew by 11.7% to €1.4 billion.
- Net profit declined by 27% to €130 million.
- Stock price decreased by 0.75% in the latest trading session.
- Expansion in the environment and water sectors continues.
Company Performance
FCC’s overall performance in Q4 2024 showcased robust revenue and EBITDA growth. The company has made significant strides in expanding its operations, particularly in the environment and water sectors, with strategic acquisitions in the UK and France. However, the decline in net profit highlights challenges in maintaining profitability amidst rising costs and investments.
Financial Highlights
- Revenue: €9.07 billion, up 10.4% year-over-year.
- EBITDA: €1.4 billion, up 11.7% year-over-year.
- Net profit: €130 million, down 27% year-over-year.
- Operational margin: 5.8%.
- Net financial debt: Slightly over €5 billion.
Market Reaction
FCC’s stock price saw a slight decline of 0.75%, with a change of -0.08 from the last close of 10.68. According to InvestingPro analysis, the stock is currently trading near its Fair Value, offering a competitive dividend yield of 4.98%. The stock has shown strong momentum with a 19.14% year-to-date return, while maintaining relatively low price volatility. This movement suggests a cautious response from investors, likely due to the mixed financial results and increased debt levels. The stock remains within its 52-week range of €8.75-€15.97, indicating no significant deviation from recent trading patterns.
Outlook & Guidance
Looking forward, FCC expects stable working capital levels in 2025-2026 and continues to focus on utilities and infrastructure. With an overall financial health score of "GOOD" from InvestingPro, which offers 8 additional key insights about FCC’s potential, the company appears well-positioned for growth. The company plans to pursue new projects in Saudi Arabia and the Americas, with maintenance capital expenditures estimated at around 7% of total revenues.
Executive Commentary
"We had a significant increase in revenues across all business areas," remarked a financial executive, highlighting the company’s growth in various sectors. Another executive noted, "The increase in EBITDA and revenues has been double-digit," underscoring the strong operational performance. Despite these gains, the decline in net profit remains a concern, as reflected in investor sentiment.
Risks and Challenges
- Profitability concerns due to a 27% decrease in net profit.
- Rising net financial debt, now slightly over €5 billion, may impact financial flexibility.
- Potential market saturation in key sectors could limit growth.
- Macroeconomic pressures and regulatory changes in international markets pose risks.
Q&A
During the earnings call, analysts inquired about FCC’s corporate services contribution, working capital expectations, and dividend policy flexibility. The company clarified its maintenance capital expenditure plans and expressed confidence in maintaining stable working capital levels moving forward.
Full transcript - Fomento de Construcciones y Contratas SA (FCC) Q4 2024:
Financial Executive/CFO: But not the balance sheet for 2023, which shows a reduction in different headings, which at the end of 2023 was reported as such. It hasn’t undergone any changes. So, please take into account this fact. And as we will see, that is the main factor in the evolution that you may have seen, in terms of our profits. So I will first of all deal with the consolidated income statements and then I will go into the different business areas.
In terms of the consolidated income statements, the revenues increased by 10.4% to EUR 9,070,000,000.00. Here, the evolution has been good and we’ve seen it in previous quarters, all the business areas were positive. And the one that increased the most was concessions and then of course in terms of proportional contribution in terms of their size, environment and water should be mentioned. But here there was a combination of organic growth and inorganic growth because of the takeovers that we completed during the year. The consolidated EBITDA reached EUR 1,400,000,000.0, which is slightly higher increase than that of revenues, in this case, 11.7%.
And here, like for revenues, everything was very stable, a good evolution of operational margins. The evolution quarter after quarter was also very sequential. And the slight increase over revenues has to do with a higher contribution from concession. So the operational margin was 5.8% overall. Now the attributable net profit of the group did go down by 27% for EUR130 million.
This reduction was due if you look at the results coming from discontinued activities which went down by 4848% and this includes the contribution until the carve out of the carved out areas in Imel Cement, which had a clearly lower contribution in 2024 as compared with 2023. If you remember, this is because in 2023, there is a base effect because in the real estate area, they recorded an exceptional result because of the change in the consolidation criteria for Metro Vassessas. So the activities that abandoned us in November had a lower contribution at the level of that discontinued activities heading and that is the main reason for this reduction of 27% of our attributable net profit. Now for the same reason, and you may have observed this, the net assets was slightly over EUR 3,700,000,000.0, slightly lower than the figure in the balance sheet of December 2023. And this, as you may understand, is results from the partial carve out.
A part of the assets, well are affected by this and this is why you have this figure. Now if you look at these results in the light of the evolution of cash flows and starting by the operating figures in the year, a significant amount was generated, a significant increase of EUR 500,000,000 with respect to 2023 was recorded. There was a lower need for operational current capital, which had a positive difference in the area of construction and environment. And so the application of funds for working capital was of EUR 177,000,000 in 2024 as compared with over EUR 700,000,000 working capital in 2023. And this made it possible for the operating cash flow to improve significantly in 2024 for generated resources.
Now I should also mention that the tax on profits, well, was more normalized because in 2023, we had a positive regularization of the tax accrued in 2022. And this resulted in an outflow in taxes that was lower than normal or than it was to be expected. And that’s the only thing that can be said to explain this. Also in terms of operating cash flow, in other flows, well, other flows includes the contribution until November of the activities that have been carved out. So that’s why you have that EUR $218,000,000 included in the contribution of those activities that have abandoned us.
The investment cash flow, I would like to mention it and draw your attention to it because net net collections minus payments, well, included EUR1.295 billion, 20 4 point 6 percent higher. And here, the main reason for this is a payment for investments that you may have seen throughout the year grew to reach EUR 1,600,000,000.0, a figure which I think is highly significant for our group and is indicative of the trust that this increase in activity is having in this regard. Now the culprits for this have been environment because of the acquisition of The UK Herbaser business in The UK for environment, focusing in water treatment activities. And then there’s the ingress in France of municipal waste collection activities. And finally, environment also overnight nine 29,000,000 health recycling, which is a treatment plant located in North Florida, which is complementary to the different activities which we have been developing throughout the whole of the state of Florida in the last few years.
And again, in this year, there have been no significant divestitures given the size of our group. So as you can see, the application of the almost EUR 1,300,000,000.0 in payments of investments is very closely related with the payments of investment of almost EUR 1,600,000,000.0. Finally, the financing cash flow here, there was an inflow of over €200,000,000 an increase of 11.6 and here there’s two essential sections. First of all, you have the payment of interest to serve the debts that we have in use with an outflow of EUR $2.00 5,000,000 and growth with respect to the previous year. And this is a logical consequence of the increase in the base interest rates because when you have the renewals of the different instruments and financial structures, then it is applied consequently.
And on the other hand, we have payments and collections for financial liability instruments. And here, there was an increase in contracting of debt for €579,000,000 related with the investments I mentioned previously. Also, other financing cash flows, well here, they see close payments to shareholders, both the menial and minority shareholders. And so this all led to an increase in cash flow of EUR $239,000,000 and the balance of final balance was nearly EUR 1,850,000,000.00. Right.
So with this cash flow and with the evolution I’ve just described with the increase in our treasury position, I just want to give a few brush strokes before I go into the different business areas. As you may have seen in the information we have sent to you, net growth financial debt has increased, but it was not too significant, €131,000,000 slightly above EUR 5,000,000,000 in total. Here, we are keeping the structure used in terms of alternative sources of capital. You know that the group’s position is very comfortable in this respect and it is structured in a way that is in keeping with our traditional way of doing things, basically trying to support the water and environment areas. So the net financial debt discounting those amounts I mentioned before stayed very stable stayed very stable.
It closed below €3,000,000,000 2 point 9 9 billion euros a reduction of 3.5%. And here, well, we should mention the role of the financial carve out which allowed us to exclude the perimeter of the different areas that have abandoned us and also serve without increasing the net debt the significant investments we have made in the group which I mentioned before, the cash flow of investments. So at a consolidated level, this I think is the most important thing in terms of the figures of the group. To give you more clarity about our four business areas, In the case of the environment here, the revenues increased by 12.8%, reaching €4,300,000,000 Waste collection and street cleaning, which go hand in hand, had a very positive evolution. I would mention, if you allow me, the Iberian and French market at an organic level, particularly Spain, with the evolution of contracts.
And in France, as I said before, when I spoke about acquisition, we had the takeover of ESG. Now in terms of waste treatment, we also had significant growth because the plants we had hired got more traction in Spain and also because as the inorganic effect of UK Erboceras as mentioned before in The United Kingdom (TADAWUL:4280). So this also allowed us to have a good evolution in waste treatment. And then if you look at the platforms we have in the part that we would call the Atlantic front, fundamentally, Spain, France, and Portugal on the one hand, just to take them jointly, Spain is still the most significant market. The evolution was plus 9.8%, two point two billion euros in revenues and this is mainly because of the developments we have in the treatment and recovery plants in Cadiz (NASDAQ:CDZI), in Gerasila, Frontera and Valle De Lel, where we are carrying out extension works and this has had a positive effect.
And also some others such as the one in L’Oaches in Madrid, which has a very similar nature for treatment and recovery linked to the circular economy. Now also talking about France and Portugal, there’s €100,000,000 all found. And as you know, this is mainly because ESG. But in Portugal, even if our presence is reduced, the growth has been quite positive in terms of the contracts in the country which has stayed very stable. The second country, the European Union, is The UK revenues increased by more than 18% reaching €923,000,000 Here, of course, there’s been an impact of the incorporation in June 2024 of UK Herbicides.
As I said before, it is true that there has been a reduction in the collections of the taxes for the waste that we take to landfills. This has no effect on EBITDA, but we act as a collector on behalf of the Indian Revenue Service of the UK. And the organic recovery activity in terms of contribution to revenues stayed quite stable, excluding what we call the landfill tax of the previous year. Now in The UK, there was an increase and The UK is a third market, an increase of over EUR 300,000,000 in revenues, over 9% more. And here, we have kept growing in revenues and we have opened up new markets, if I’m not mistaken.
I think in North Carolina, also apart from increasing our presence, the presence in the states where we are already present. And then there’s also the acquisition, the takeover that we made in June of the Health Group in the North Of Florida, the Health Recycling Holding. And the fourth market, where we also operate in the European Union, as you know, is Central Europe. We have a cluster of seven different countries. And here, the evolution was also harmonious and very positive.
And this is something that makes us very happy, 7.8% in revenue growth, EUR $654,000,000 more. And here, I would mention the activity in The Czech Republic where we are a very important operator. We are number two in the market. Systematically, we have been number two in terms of a market share, municipal collections. And this is a market that is showing very healthy growth, but we’re very selective and prudent in Poland.
So the EBITDA increased to over EUR 700,000,000 in this area, 13% more. To be honest, in general, there’s been very uniform contribution across all the different markets where we are present. And if you allow me, I would like to mention here that there’s provision that we have endowed of over EUR 10,000,000 because of a claim that we had with respect to the landfill tax in The UK. But the operating margin, as you know, as you can see, recorded very similar figures to the previous year, 16.8%. In terms of water, water cycles, here the turnover increased by 12%.
We reached a very significant figure over DKK600 million for the growth has basically focused on the integrated cycle activities. We also have activities in technology and networks, which is some complementary work we do linked to our network, which is being operated both partially or generally. And here, I would like to mention the contribution inorganic contribution of the acquisition we made of MDS, Municipal Dispute Service, in Texas, in Houston, in The United States. But and I will I will I will talk about this in a minute. But if you look at the main sections in the Spanish market, revenues increased by 2.7%, EUR nine forty four million more.
Here we had a positive impact in the integrated cycle activities, which is the dominant activity. But technology networks, you know, in technology networks revenues were really very significant. And, I think that if you remember, there were certain restrictions which affected demand and volumes and the performance of our and the behavior of our end users because of drought in the Iberian market, if you remember particularly in Catalonia and and Ellucian. So all in all, the evolution was satisfactory, although the exogenous environment was not really very favorable, particularly in last summer. Now in Central And Eastern Europe, you will remember that this includes the business in that we own, integrated cycles in The Czech Republic and Georgia, there was a growth of 9.5%.
We had €255,000,000 here. There was an effect resulting from tariff reviews based on the multi annual plans we have according to the regulated system in operation. And this was really good. And this, in spite of the fact, well, and here I should mention that the effect of the exchange rate of the, Georgian currency and the Czech krona had a slightly negative effect of around 4 percent in both currencies against the euro. When we when you consolidate things, well, you you you obtained this 4% difference.
And technology networks here had a lower contribution where some of the projects that we had came to an end. Now with respect to the rest of Europe, which includes Portugal plus France, which is evolving very positively. Revenues exceeded EUR 100,000,000. We grew organically in France with new contracts in 2023. We acquired a new platform.
Now we are very satisfactory. Lastly, I want to mention in The Americas, there’s certain factors to be mentioned because revenues reached almost 200,000,000, double the previous year and this was because of the acquisition of MDS in Texas, which has to do with the operation of integrated cycles. But it is a very similar activity to the activities we carry out for private residents in Spain, Portugal, or Italy. Also, in the rest of The Americas, there was also a good evolution in the Colombia market, in the Colombian market. And in technology networks, we did have more activity in markets such as than in markets such as Central Europe or Spain, which were markets that shrank a little now in the MENA area, Middle East and West Africa.
We had double digit growth, 24.5%. The contracts we have in the so called clusters are evolving very helpfully. These are these are contracts granted by the Saudi Arabian government for advisory and management of the network structures. And we’ve also moved forward with other contracts that we have in operation in Egypt and Northern Algeria. But the EBITDA of this area, the Aqualia subsidiary, well, progressed very similarly to revenues 10.2% over €400,000,000 and here there’s no really very significant effect to be mentioned.
So the operating margin, as you will have seen, is very similar around 25.5% in line with the previous year. Now with respect to construction, here revenues increased by 6% over €2,000,000,000 As usual, this is an activity based on projects a %. We had a turnover of projects. I would just like to mention the industrial projects, which had a heavier weight, especially those linked with energy transition towards renewable energies. We had a higher demand and also some projects to do with rail infrastructures.
But this, of course, is all very dynamic and there’s progressive replacement of some contracts for others. So to give you an idea in Spain, which is a market that’s very important, although it’s a minority market, it has been minority for quite some time, we had, in spite of this, we had EUR 1,100,000,000.0 revenues. And here, the projects both to do with installation and energy infrastructures and rail projects had a greater contribution and they largely compensated for the completion of a project that we had in Spain, which was the project of Santiago Bernabeu. Now for the rest of the European continent, here the revenues increased by 27%. This was remarkable to EUR188 million, particularly because we’re still doing very well in our infrastructure work in The UK, The Netherlands and some others in the energy area such as in Germany and in some rail projects in Romania, which are also noteworthy.
In The Americas, the turnover here, we had a reduction of 17% in turnover, and this is a temporary effect because we had a very large project that has been completed, the mayor train in Mexico. This project made a huge contribution in the previous year, and this has not yet been compensated for. But there is there are some significant facts that we have submitted in the management report, which have to do with the contract, which has to do with the early involvement of the contract tool. And here, we have awards for very significant projects, both in The Americas and also in Saudi Arabia. These projects are not yet in our portfolio and so they have not they did not make any contribution in 2024.
But in The Americas, I should mention that when they are incorporated to our portfolio in the next phase, which is the execution phase, they will certainly be very important. And I will also connect this with the last area that we are reporting, which is MENA, Middle East and Africa, where we would add a growing presence in Australia, where we had a growth of 29.4% to EUR $260,000,000. Here, the project that was more most important in 2024 was Shirdadneh in Northwest Saudi Arabia. But as I was saying, here, we also have a project in a preliminary at a preliminary stage, which we hope is going to progress healthily, which is that of a stadium in Riyadh, in Saudi Arabia. With all of this, the EBITDA for this area had more modest growth, EUR 167 more EUR 169,000,000, 5 point 7 percent higher.
But here, there was no project or special provision or specific provision that explains this reduction with respect to twenty twenty three in the margin. But of course, you should mention that the industrial works related with installations have been more prominent in 2024. And this is this may perhaps explain why there’s been this slight reduction with respect to 2023. And lastly, the last area I would like to mention, the last business area is concessions. Here, revenues in this area experienced a significant growth.
As I said at the beginning, we reached almost €78,000,000 and here there were two effects. One was the increase in road traffic and passengers. We have both concessions for roads and also for city transport and tramways, basically, for urban users in different cities, in this case, in Spain. And we also had the incorporation, a %, because of the incorporation of the whole of the Parla tram system in the Madrid region, which also helped this growth of just 26%. The area is concentrated essentially in Spain, and here, this is where there’s been the greatest contribution in absolute terms and also relative terms, particularly the Cuenca Motorway and the Murcia tram, which is one of the urban tramways I was talking about.
So the EBITDA was EUR 55,400,000.0. There was a 21.2% growth and the margin you know, was very standard, 71.2%, which is very standard for this type of activity. So I don’t have much else to share with you with respect to what we consider has been most relevant. I just want to say, I want to draw your attention to the volume of investment, this amount that we have executed throughout the year, which has entailed significant effort. And with this, a level of debt has stayed, you know, below 3,600,000,000.0 with a, you know, significant reduction.
And the increase in EBITDA and revenues has been double digit. And as a result of the financial carve out that took place last year, well, we have been able to divide things up into groups in a more homogeneous way. And so the areas to do with utilities, as you will have seen, are now more striking than in the past. If you add water plus the environment plus concessions, you what you see is, you know, huge stability and the growth last year was above expectation. So this is all I wanted to share with you.
Thank you very much for joining us and I would like now to open the floor for questions on the platform. First question, there’s been a significant significant increase in the contribution of corporate services, fifty fifty three versus the 31,000,000. What is this increase due to? Well, corporate services responds to a series of services rendered from the parent company to the different business areas, which generate the operational flow proper. It is true that also at the level of the parent company, sometimes we may have or we that we have to make certain payments that may be due.
In 1993, I think that this was the case. It was not really very striking, but we did have to make some minor provisions from the parent company because of some responsibility that we may have had historically. But this is not really very important in terms of the amount involved. But in general, generally speaking, the this results for the parent company would just be the tip of the iceberg of the services rendered to the different areas. But, of course, in consolidated terms, it’s just we’re just a single unit and it’s all interchangeable because the EBITDA corresponds to everybody.
But there’s no very significant or specific factor in 2023 or in 2024. And if there was, Felipe, I think that you are the one asking this question. We might give you further details about this. Next (LON:NXT) question. After the significant movements in the last few years, what levels of working capital do you contemplate, do you expect for 2025 and 2026?
Well, this year we had a significant outflow of working capital less of less than EUR 200,000,000. And to be honest, the working capital is one of those magnitudes that I think, yeah, that I understand that it might be interesting for you, but it is not really very immediate because it doesn’t only depend on the diligent management that we always want to exercise from the company. This is something that is also linked to revenues and collections. But I would say that our activities operate with working capital as a whole that is slightly positive. And therefore, I think that if we refer to what we have seen in 2024, it is normal that there should be a certain expansion of the working capital.
For 2025 and 2026, We should stand at figures around and this should be taken with a pinch of salt because every year is different, but it should be very similar to 2024. We are not going to generate working capital because of the expansion of the business given the profile of our activities, which is utilities, but it shouldn’t be too significant with respect to what you have seen in the in the flow of 2024. Next question. Could you provide us with some idea of the dividends expected to be paid out this year? Thank you for this question.
As you know, in terms of dividend policy, the group has not defined a threshold for the payout or an absolute value. It is true that since, 2019, if I’m not mistaken, if my memory is not betraying me, there has been a very sustained dividend payout policy. But this is a prerogative that the that resides with the board. The board is free to decide what the what the dividend will be every year. So far, it’s been flexible.
Some if you wanted your dividend in cash, you could get it. And every year, I say the same thing. We need to talk about a % of the group’s capital. I’m not distinguishing between different types of shareholders. And since 2019, year on year, the percentage of shareholders choosing to be paid in shares has been very significant.
So shareholders prefer, you know, to keep a free cash flow and to invest it back in whatever the board might decide to invest it. But in a few weeks, we will have more information about this. Next question. What has been the invested capital in concessions in 2024? And what is your vision?
What is the idea for 2025? I don’t know this by the I don’t I can’t answer you off the top of my head. But in terms of the cash flow investment and concessions in 2024, let me read the information. Payments made We had an investment of about €100,000,000. Next question.
What is the level of maintenance KPIs of your activities? Well, at present, we are, well, what is the maintenance CapEx CapEx? What is the CapEx? Well, the figure of the CapEx should be around, I would say, CapEx over total revenues of around 7%, I would say. Last financial year, the CapEx, you should always be careful about maintenance CapEx because it’s a simplification because every investment cycle or renewals cycle for assets or a fleet or renewals, even in, you know, water treatment, because we are a very large company in terms of our contracts and our customers.
But last year, the maintenance CapEx, you need to take into account the investments and the assets that we have incorporated, but in the also in environment and water, but it was around the CapEx €600,000,000. There’s no further questions. Okay. If there’s no further questions, I would just like to thank you for your attention and repeat that you have you can access the full information both on our website or on the CNMV’s website. And we are always at your disposal in case you want to ask us question.
You in case you want to ask us questions, you can access us in different through different
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