Earnings call transcript: Tecnicas Reunidas reports strong Q1 2025 growth

Tecnicas Reunidas, a key player in the oil & gas and energy transition sectors, reported robust financial results for Q1 2025, with net sales reaching €1.3 billion, marking a 30% increase year-over-year. The company’s earnings before interest and taxes (EBIT) surged by 40% to €56 million, reflecting a healthy EBIT margin of 4.3%. In response, the stock price rose by 6.82%, indicating positive investor sentiment.

Key Takeaways

• Net sales increased by 30% year-over-year, reaching €1.3 billion.
• EBIT grew by 40%, with a margin of 4.3%.
• Stock price surged 6.82% after the earnings announcement.
• Strategic expansions in the US market and energy transition sectors.
• Ambitious full-year guidance with sales targets of €5.2 billion.

Company Performance

Tecnicas Reunidas demonstrated strong performance in Q1 2025, with significant growth in net sales and EBIT. The company’s strategic focus on expanding its presence in the US market and energy transition sectors has contributed to its robust financial results. Compared to the previous year, the company’s financial health has improved, with an increased net cash position and equity. InvestingPro analysis reveals the stock is trading at attractive valuations with a low P/E ratio relative to its near-term earnings growth potential. For detailed valuation metrics and 8 additional ProTips, subscribers can access the comprehensive Pro Research Report.

Financial Highlights

• Revenue: €1.3 billion (+30% YoY, +6% QoQ)
• EBIT: €56 million (+40% YoY)
• EBIT Margin: 4.3%
• Net Cash Position: $423 million (up from $333 million last year)
• Equity Position: €626 million

Outlook & Guidance

Tecnicas Reunidas has set ambitious targets for the full year, aiming for sales of €5.2 billion and an EBIT margin of 4.5%. The company plans to increase its sales to €5.5 billion and target an EBIT margin above 5% in the future. Strategic initiatives include expanding engineering capacity, particularly in India, and exploring opportunities in the Middle East. The company’s strong momentum is reflected in its year-to-date return of 3.82%, and InvestingPro’s Financial Health Score of 2.46 indicates fair overall company health.

Executive Commentary

Juan Yado, a company executive, emphasized the focus on gas development projects, while Eduardo San Miguel highlighted the slow but steady progress of the energy transition. The company remains committed to its strategy, despite external challenges.

Risks and Challenges

• Political uncertainties in the US market could impact growth.
• The company is cautious about immediate revenue acceleration.
• Ongoing project disputes require careful management.
• Supply chain issues could affect operational efficiency.
• Macro-economic pressures may influence future performance.

Q&A

During the earnings call, analysts inquired about the company’s cautious revenue acceleration approach and its strategies to fast-track project schedules. Executives expressed confidence in US market opportunities and comfort with ongoing project disputes, despite political uncertainties.

Full transcript - Tecnicas Reunidas (TRE) Q1 2025:

Antonio, Moderator/Presenter: Good morning, everyone, and welcome to TR’s First Quarter twenty twenty five Results Presentation. It’s going to be conducted by our Chairman, Juan Yado and our CEO, Eduardo San Miguel. It’s going to last approximately twenty minutes, and you will be able to post your questions after the final remarks. And now we leave it forward

Eduardo San Miguel, CEO, TR: to our Chairman, Juan Gallo.

Juan Yado, Chairman, TR: Thank you, Antonio, and good morning to everyone. And as usual, Eduardo and I will be conducting this presentation. First of all, I will share with you the main key performance indicators that we have achieved this first quarter. Following with our most important awards this first quarter together, which is as important as how do we see our pipeline. Give some color to our pipeline.

And then afterwards Eduardo will continue with an update of the new areas of growth that we consider very relevant for TR in the upcoming years. And he, always, will drive you through all the relevant financial figures for this quarter. And finally, I will wrap up this presentation with closing remarks. So, let’s just start with highlights. We have six relevant numbers here, and have it easy this time.

Let’s start with the first one. We started this quarter with an order intake of $7,300,000,000 7 point 3 billion dollars that a very large percentage has to do with a very important job, which is lower than that we spent some minutes before afterwards. Very important, but it very much reflects TR’s capacity, quality, and delivery capacity to our customers. Obviously, these order intake translates into a very solid, diversified, and I don’t like to use records because this is not a race of records, but it’s a very solid $14,900,000 backlog, so that obviously it gives us comfort and visibility. Intake and backlog translating and that has to do to our delivery capacity and our strategy put in place over the last two years to EUR 1,300,000,000.0 of sales.

EUR 1,300,000,000.0 of sales, which give us a return of EUR 56,000,000 of EBIT, which translates that we had very much anticipated to an EBIT margin of 4.3%. All these five numbers ended up with the six highlights. We give some color to everything, which is the net cash position of $423,000,000. Those six very important numbers to start the presentation. And now let’s just move straight to the next slide, which is order intake and backlog.

If you see the order intake, you know, the left side graph, quarter by quarter, it is, for the business, and difficult to predict. Probably for the managers, we don’t see it as chunker because we see where we are and we cannot announce or book jobs until they are signed or we are allowed to. It is chunky. It is chunky and I do remember last year when we were making this presentation, you were asking me how do you see the end of the year? Are you going to be able to replace sales?

How you see the awards, etcetera, etcetera, etcetera. But if you see them all together, last year was a very successful year in terms of awards quarter after quarter, with quality, diversification, and customers and regions. It was a very good year. And this year, some of the queries and anxiety that was reflected last year has disappeared because we had started two very important awards. Two very important awards, the business that we want to be, which is the Upstream business, oil and gas Upstream.

Both Vaca Muerta that we have already talked about before, and it’s truly important, Loris Dacoom, that I’m going to devote some minutes to you on the next slide. These awards allow us to present the market backlog. It’s a very smooth growth in the backlog that put us at a very strong position. We reached 14,900,000,000.0 plus to $15,000,000,000 backlog. This is a solid growth that allows to put us to give visibility to the market, to tell the market and to tell you that we work here in the products and with the customers that we want to work with.

And if you see the quality of the awards, it’s not very difficult to anticipate that we’re gonna have more. I mean, it’s backlog, what it gives to the market, it’s present and future. So we are very proud to show you this backlog. We are with whom we want to be and in the markets that we want to grow. And let’s move to the next slide, which is Lower Zac.

I think this is, there is a lot of information on this slide. If you remember a year ago, we had our Capital Markets Day in Abu Dhabi. And we decided to do it in Abu Dhabi because we thought that in that country, in that region, in the heart of The Emirates, you could see the best of TR. And it was there that we presented to you our four year strategy, our strategy. It’s there, where TR was performing at its best.

We took you on a helicopter. Some people thought that we were maybe showing off. We were not. We wanted to show you how we were performing in the islands. You have to learn how to perform in the big islands in Abu Dhabi.

We show you the Dash Islands, which is a brown field, very difficult to work on, where we were working in two projects. And we also show you, and we flew through a huge model yard. And in this case, with the models that we were designing and constructing to be delivered to the Port Of Anworth. And today, those models are the largest models ever built and they have never gone to that port, Antwerp. They are being successful, being ensemble and construction in Antwerp is working at very good place.

It was TR at its best. I think with this job, Laura Zakum, where the customer is asking, is asking again TR at its best. They want to work with us and we want to work with them, with ADNOC Offshore, with whom we’ve only worked on FEEDS, on engineering. We’ve never done with that division of ADNOC, which is the upstream off shore division, the most sophisticated division we had never worked before, and what they ask for us is TR at its best. This is a big job.

We want to be by ourselves. It’s a five year job and we’re fully committed with the customer to try to shorten the schedule. This is a job that we have to design and deploy more than a medium man hours in our home office with the support of obviously our satellite engineering offices. For a customer who has to come to Madrid and work together on that home office engineer to design models that have to be transported to an island which is 100 kilometers away, which is the Al Omyra Island. This is a green field, this is not Dutch Island.

It’s not very far from the one you have seen, some of you, through those helicopters. And on this job, you will see as we prosper the best of TR, by yourself, for ADNOC, to whom I would like to thank on this presentation. You see the best of TR, models design, offshore business, oil and gas at stream development, and big logistic efforts to reduce those five years by a few months and make this job as profitable as we can Very important job. And so I think we can move to the next slide.

And with that slide, can, you know, after that, Suk’s story, which is that I would just move us where we are in terms of our commercial front or pipeline. The momentum, as I said in my notes, is extremely solid. Obviously there are macro uncertainties in the market, but our customers are asking us to bid and we’re very actively bidding for more than €66,000,000,000 of our pipeline. The pipeline very much diversified, very much diversifying customers and geographies. It is surprising that almost 30% of that pipeline comes out of North America, which is I like to start because geographically it is there.

None of it, I mean not everything will be EPC. So maybe, you know, as you know, in North America we’ll be working EP construction management, engineering construction and procurement services. We’re going to be partnership construction schemes, but then North America includes Canada where we are already working there, doing engineering with important customer, includes The United States, includes Mexico and includes Panama where we are already working there with an American customer, which is part of our strategy. So this is the extended North America, not only The United States. This is very important that we very much focus on that region.

55%, and we’ve always said, we like to be there and we want to be there and we’re going to grow there, it is The Middle East. And it is The Middle East in petrochemicals, it is The Middle East in gas. It is The Middle East in transition energy, big time. And it’s The Middle East where we’re very well known and we know how to deliver and we know how to perform and our customers know so. And obviously, the rest, Europe, which is Europe, it’s Germany, obviously we continue, we have expectations of growing in Germany, we’re growing in the rest of Europe.

And obviously, Latin America, it’s always a land that gives us opportunities here and there, and we always very well remember, you have seen Vaca Muerta, you have seen that we work in Peru, you have seen that we work in Chile, and we have strong and solid opportunities in America. So, this is something we shouldn’t forget. That’s the geography split, but I think let’s not forget about decarbonization. On this slide, which has a lot of information, it is very relevant that we have split on regions 15,000,000,000 of future extremely tangible opportunities, which are very closely related to decarbonization. And that of which 2,000,000,000 correspond to opportunities which are pure service project, which is 2,000,000,000 in pure service project.

It is a lot, don’t compare it with EPC. Focus purely focus on truck and services business unit, very much aligned with our SALTRA strategy that we are presenting quarter after quarter. And after this presentation highlights, awards, lorazacum and pipeline, I leave the floor to Eduardo, which will continue with the presentation.

Eduardo San Miguel, CEO, TR: Thank you, Juan. Good morning, everyone. Juan has outlined the opportunities that we foresee in the coming years. A EUR 66,000,000,000 pipeline is a number that brings us a high level of comfort for the short future. But in here, we all believe there are three areas that demand a bit more dedicated analysis to understand well its full potential.

We are talking about The USA, the power unit, and the energy transition. First, the US market. For a company like ours, the new energy policy implemented by the US government can only be considered as a unique opportunity. Traditional energy sources, and more specifically, oil and LNG will be the primary investment drivers during the next five years. Power generation linked to artificial intelligence and data centers will be the other driver.

All those areas where we have a solid expertise recognized by Tier one clients outside and inside The U. S. Also, you are aware, we move our headquarters in North America from Calgary to Houston when we did it. The purpose was to our primary strategy was to focus in the carbonization projects. In this sense, we still see blue ammonia will play an important role in the medium term.

We will leverage our commercial effort on the proven track record and a strong recognition from our U. S. Customers. We are also closing alliances with construction partners that consolidate our proposal for the American market. We currently have a €10,000,000,000 pipeline in The U.

It is a very solid pipeline, and we are confident we will capture a part of it. In fact, we are already involved in a number of feeds and prefeeds that could potentially be converted into larger projects. To summarize, I would say, the volume of opportunities we are facing now exceeds by far our original expectations. Second, the Power Business Unit. Last year, when we were in Abu Dhabi in our Capital Markets Day, we devoted an entire section to explain the importance of this business unit to us.

But in the past year, has always considered power generation and specifically the construction of gas combined cycles as a solid and reliable activity that delivers consistent margins, but without a significant growth ahead. But today, in a water demand electrification for environmental and artificial intelligence purposes, this view has became absolutely obsolete. There is and there will be a huge demand for our power services because of three reasons. First, Thier has more than fifty years of experience in the execution of power plants. No one else has this track record.

Second, Tier has strategic partnerships and works today at the same time with the four turbine suppliers in the sector, GE Vernova, Mitsubishi, Ansaldo and Siemens. And third, PR already has a strong presence in all regions of the world where we believe the demand for electrification is going to grow, S, Middle East and Europe. The pipeline we have identified for the upcoming 18 amounts EUR 12,000,000,000. Again, we are confident that we will be successful capturing a part of this pipeline.

The power unit will finally be a very relevant part of our P and L and our margin in the next decade. Concert the energy transition. We believe there is an excess of pessimism regarding decarbonization. It is a fact that there are delays regarding the final investment decision of many projects. And it is also true that the time needed to obtain a final investment decision from our energy transition clients is much longer than the time required by our traditional clients.

But aligning all the drivers of this huge new business cannot happen overnight. Semicaronias and Trac are already well positioned to become a major player in decarbonization with expertise already in place in three areas, blue and green ammonia, carbon capture and sustainable aviation fuels. In those three areas, we see clients with a profitable business plan trying to find the right momentum to launch their investments. And again, like in power generation, all these investments will mainly happen in three regions where we already have a solid experience executing projects, Europe, North America and The Middle East. As I said before, the energy transition is progressing slowly, but it is here to stay.

I am quite sure that these projects will be an important part of our backlog in the coming years as we are already working with a pipeline of more than EUR 15,000,000,000. Regarding the energy transition, I would like to highlight the recent agreement that TRAC has signed with BBVA. As announced a month ago, GR and BBVA have signed a memorandum of understanding with the aim of promoting the development of initiatives and projects linked to the energy transition and the decarbonization of the economy. This agreement establishes establishes a collaboration framework to strengthen the business of track by identifying additional growth opportunities and to search ways of financing this growth. And why the BBVA?

Because the bank has set a target for its sustainable business pipeline of $700,000,000,000 for the next four years. Dollars seven hundred billion for the next four years. A figure that more than doubles its previous target of $300,000,000,000 for the period twenty eighteen-twenty twenty five. We firmly believe this mode will provide us solid support for the expansion of energy transition activities. And now let’s move to the financial chapter of the presentation.

Net sales of the first quarter reached 1,300,000,000.0, 30 percent higher than in the first quarter of twenty twenty four and six percent higher than in the previous quarter. It is not a surprise. The current backlog enabled PR to achieve one of its highest quarterly sales ever and provide strong revenue visibility for the coming quarters. EBIT in the first quarter has grown up to €56,000,000 an increase of 40% compared to the first quarter twenty twenty four. And more relevant, EBIT margin versus sales is already up 4.3%, moving towards the 4.5% we expect as an average for the year.

I would also like to point out that we did an analysis of the impact that tariffs imposed by The U. S. Could have in our backlog. And the outcome of this analysis is that there shouldn’t be a relevant impact in our costs due to this fact. To summarize, the first quarter has finally been a quarter of significant growth, both in terms of sales and margins, aligned with our guidance for the full year 2025.

And balance sheet figures are improving as well. The net cash position at the March 2025 increased to EUR $423,000,000, a level that compares to $333,000,000 1 year ago. Cash conversion of profits and the improvement of payment terms contribute to this growth. But once again, and I am extremely sorry for being so repetitive, I would like to emphasize that in the current market scenario where customers are asking us to execute fast track projects, the smartest use of cash is not to accumulate it in our balance sheet, but to transfer it to suppliers and enable them to accelerate their work as much as possible. Regarding our equity, we continue to strengthen it, and we ended this first quarter of twenty twenty five with a sound position of EUR $626,000,000, including CEPI’s PPL.

If we don’t consider it, we already have reached a figure above EUR $450,000,000. So we are solidly back to pre pandemic levels. As a summary, financial figures reflect well the healthy operations of the company. And now, let me give the back to Juan for the final remarks.

Juan Yado, Chairman, TR: Hello, everyone, again. I think this presentation I like to send to messages. This is a good presentation. It is thanks to the effort made by all TR professionals or TR employees that has allowed us to have today a very solid backlog of EUR 15,000,000,000. At EUR 15,000,000,000 with the strong risk mitigation measures that we have put in place, which give us visibility for the upcoming next months, very much aligned with our SALT strategy.

And it’s also a message of good and solid delivery of our projects, which translates into a good and solid profitability growth. This is allowing us to increase our operating margins and again, meeting our targets very much in line with the Solta strategies, which with these two messages, I feel very comfortable to reaffirm first our 2025 guidance of sales of more than EUR 5,200,000,000.0 and an EBIT margin in the range of 4.5%, as Eduardo has said. And second, we have an ambition, which is more consultancy term, but we have an objective, full objective of increasing our sales levels above EUR 5,500,000,000.0 and an EBIT margin above 5% in 2025 and a very firm commitment of returning to our dividend paying policy. So this is a solid margin. And as we’ve talked before, you remember well that about a year ago we had a Capital Markets Day in Abu Dhabi and this is a save the date.

I mean, we are planning, we have already decided to organize a short Capital Markets Day, getting together here our promises in Madrid to have a simplified version of a Capital Markets Day where we could revise the status of our SALTRA strategy. I think it will be a very good opportunity to sit here for a few hours in our premises and to really understand who we are, where we are and who we are working for, and where are, what are our ambitions to be in the very near future. And with this message, very important, with this saving the date, David, please, I’ll open the floor to any questions that you may want to post. Thank you very much.

David, Q&A Moderator: Thank you. And ladies and gentlemen, the Q and A session starts And your first question comes from the line of Ignacio Dominique with JB Capital. Please go ahead.

Ignacio Dominique, Analyst, JB Capital: Hi, guys. Good morning. Thank you for taking my questions. The first one is on the 2025 outlook. You reiterated the the guidance, but if we simply analyze the first quarter revenue figure, you appear to be comfortably on track or even there’s a tendency you could exceed these targets.

So if you could elaborate on the key drivers you see supporting the space of execution, especially taking into account that in the last nine months, I think you’ve been awarded somewhere north of €8,000,000,000 in projects. So I would assume that some of these would start to accelerate in the coming months. And then my second question is related with the macro outlook. I see, Juan, you mentioned a twenty four months commercial pipeline of €66,000,000, which is slightly below what you presented in Abu Dhabi last year. But, of course, there’s been a significant amount of awards since then.

So if you could give us some color on what you are currently seeing in the market, particularly from a client activity and bidding perspective And also in terms of of your activity, okay, being more downstream focus, if this should help mitigate a bit the impact on the on the reasonable price volatility that that we are seeing. Thank you.

Eduardo San Miguel, CEO, TR: Hi, It’s Eduardo. Thanks for the question. First of all, when we are predicting 5,200,000,000.0 for the year, I think this is something like a 15% increase compared to last year. So it’s first, we are already predicting a very material growth for the year. Second, are Spanish, you will understand the joke.

I want to go much by much, quarter by quarter. And it’s fifteenth of June sorry, it’s May 15. I already know what’s going to be the volume of sales of this quarter, of the second quarter, and it will be again $1,300 give or take. It will be around that figure. So it’s not good to predict.

Since you have grown in the last quarter, you will grow again next quarter. No, it doesn’t work in that way. But I will give you something that is important for me and for all of us. There are no lists of three big projects in our backlog where the clients are demanding to construct the projects under fast track schedules. And we need to sit with them and analyze if potentially this could impact in the delivery of revenues within this year, 2024, because we need to accelerate somehow.

But we need to sit with the clients. For the time being, our guidance is 5.2 and I think it’s a fair number. And the second question, will leave Juan to answer you.

Juan Yado, Chairman, TR: Yeah. I’ll try to answer the question the best I can. I don’t know if I get a full feeling of what I have to answer to you. But I mean, if you compare five plans against five plans, it is very difficult. Obviously, take into account that of the saving to reduce ourselves, we have taken a chunk of $9,000,000,000 in sales, I mean, in awards.

So that has been taken out. But it is growing. It is moving target. Pipelines is a measure of where we are and who we are. Some of the pipelines are EPC, some models are services.

Our service bidding is growing and it is growing very fast. So it’s a variable. I mean, six is big. It is solid. It is two years of the jobs which reflect the opportunities that we are ready to engage with customers.

This is not market size. These are the real opportunities that are which most of them were fully engaged with the customers. We’re pre qualifying, being pre qualified, bidding, costing, so it’s $66,000,000,000 very good. After a year, I lost the feeling of what it meant at 72 of a year ago. All I can tell you is that we have been successful and we have taken a chunk of 9,000,000,000 from that date that we were presenting that number, which is good.

If we’re focused downstream to protect ourselves, I’m not sure what we have to be protected off. I’m a bit lost. What I’m saying and what I can tell you what we focus on, we’re very much focused, which we continue being demanded of gas developing jobs. Gas continued to grow from conventional gas and unconventional gas in The Middle East, big time, and because it’s needed for the downstream. It is needed for the petrochemicals on which we are already focused and you have seen some very important awards this year.

And you will continue seeing awards as we move forward, as fully downstream petrochemicals. And also gas is needed for power. There is a big need of power for both countries, you know, for the need, The Middle East, and also for the growth of the data centers. This is a shortage of power. And that power is very closely related to gas developments.

And obviously we’re growing and as Eduardo has said, quarter to quarter, month after month, customers have come on transition, energy transition in general. We’re moving very much on decarbonization and different source of biofield. So this is what we focus on. We have not lost track and I don’t understand what you mean by protecting ourselves, but, but, we are happy on what we very much focus. I mean, we have we’re much demanded.

David, Q&A Moderator: And, Ignacio, do you have any follow-up?

Ignacio Dominique, Analyst, JB Capital: No. Thank you. Thank you very much. I just mean protected on on the CapEx flexibility in upstream, okay, which, I would assume you are a bit more protected, you know, given the the nature of your of your pipeline. That’s that’s thank you.

Juan Yado, Chairman, TR: Yeah. If you mean if you were protected from upstream or whatever, you have to realize that the pure upstream, which is drilling and production, we are not in. If you mean that, yes, we’re better protected. We’re more resilient to the market in that sense.

Robert Jackson, Analyst, Bankos and Thunder: Thank you.

David, Q&A Moderator: And your next question comes from the line of Kevin Roger with Kepler Cheuvreux. Please go ahead.

Kevin Roger, Analyst, Kepler Cheuvreux: Yes. Good morning. Thanks for taking the time. The first one was also related in the sense on the phasing of the top line because I understand that many things can happen, etcetera. But mechanically, on the paper, should we agree that when the backlog is increasing and providing record visibility, it will mean that sequentially, the quarterly revenue will increase.

And so that in that sense, you when you say that the top line will be at $5,200,000,000 you remain cautious on the projection that you are arguing for 2025. It’s maybe to try to understand a bit more if there is some cautiousness or whatever in the numbers that you provide. And the second one is maybe just if I missed it, sorry for that, but just on the financial expense that were relatively high this quarter compared to, let’s say, the past year. So to understand if there is a kind of one off and what we should consider for the full year as a financial expense, please?

Juan Yado, Chairman, TR: Okay, Karim.

Eduardo San Miguel, CEO, TR: You are right. Backlog is growing. But as I said before, the guidance is growing as well. I mean, last year, we’re closing 4.8, if I’m not wrong, and now we’re predicting 5.2. That’s a growth of 15%.

And it’s true, so that the backlog has grown above this 15%. I don’t think we are being too conservative. I mean, we make our numbers. And to be honest, I think you for the time being, you should follow our advice, 5.2% represents what we’re expecting for the year. But again, and I think that’s my main concern because I’m sending Mark that message today.

But there are two projects three huge projects in The Middle East that we are sitting or we are about to sit with the clients trying to find how to save time because clients are how desperate to accelerate their prayers because they want the prayers to start delivering. And probably it can impact, but it is something that we cannot tell you now because unfortunately, we do not still see a clear picture of what they want and about what can be done. But obviously, are trying always to be conservative because we don’t want to make mistakes, but please don’t believe that there is a hidden volume of revenues now that we don’t want to anticipate. Once we know where the new projects or these new projects accelerate will end, we will be telling the market what is the correct number for the year, okay? That’s the only thing I can tell you now.

And regarding financial expense, I think there is not a one off. We have a problem there. There are two there is a one off regarding the hyperinflation in Argentina, I think, but this is I don’t know how relevant this is, but it’s around €5,000,000 this quarter. It has more to do with the cost of the PPL we have with the Spanish government. This hybrid loan has a cost now of around 8.5%.

It’s extremely expensive. And that’s why we have told the market many times that we personally understand that it’s very convenient for us to have the government by our side because clients see us as a more reliable company. That’s a fact. But simultaneously, we understand that the cost is too high and we need to find the right moment to repay it. And the message was clear one month ago, two months ago when we were closing the figures of of December, last February.

And the message was, next September, we will be telling you exactly when we are going to repay the the the bill. K? That’s the idea. But we want to analyze everything carefully. Please, are managing a backlog of EUR 15,000,000,000.

There are very big opportunities ahead of us. And it’s complex how to manage the cash, how to manage the PPL, the revenues that we we need 50,000 people to deliver this backlog. We’re managing very significant figures, and we have to be careful. But regarding your question, the problem here or the impact the big impact here has to do with the PPL. That in the worst scenario will be repaid next June 2026.

So it will last another twelve months. That’s the worst scenario.

Kevin Roger, Analyst, Kepler Cheuvreux: Okay. Perfect. Understood. Thanks for that.

David, Q&A Moderator: Thank you. Your next question comes from the line of Robert Jackson with Bankos and Thunder. Please go ahead.

Robert Jackson, Analyst, Bankos and Thunder: Hi. Hi. Good good morning, everybody. My my question is related to to you, Eduardo. What I know it’s related to the North American backlog.

Right? It represents 30%, and that’s very surprising, positive surprise. I know you’ve been traveling, and doing a lot of work in in The US, looking for opportunities. That was pre pre Trump. I don’t know if if, what you saw in The US then and what’s in the backlog now, if there’s any risks that things could change.

And then what’s your strategy for the next, twelve months in terms of doing more commercial activity in the North American market? So we can better understand where the North American market is heading in your pipeline. That will be my main question.

Eduardo San Miguel, CEO, TR: Hi, Robert. Good question. First of all, I think we need to split the pipeline between a number of countries. Because when we talk about North America, as Juan has explained, we’re talking about Canada, United States, Panama and Mexico. Twenty Eight Percent of EUR 15,000,000,000 is around €18,000,000 half of this amount comes from The States, but the other €8,000,000,000 has to do basically with rates in Panama, Mexico, Canada.

The good news regarding those three countries, except in Mexico, is that we’re talking about projects that have been launched by American customers. So it is the result of our activity in The States that we can obtain new products, win new products in the surrounding countries. If we go to The United States, where I believe where your question is going to, It’s a fact. Who who can deny that mister Trump has an impact in the in the economy and and in the strategies of the companies around the world? It’s a it’s it’s a fact.

The the the energy transition world, the energy transition world, the feeling we have or the feeling we had that everything could be booming soon, obviously, has been postponed. But it’s also a fact that there plenty of European players or American players that are willing to export blue ammonia from The States to Europe. And because of the IRA’s support, it makes a lot of financial sense to keep on investing in those activities. So it’s true that everything seems to move slower in The United States. But I see the European clients and the American partners being very firm in their investment decisions.

The only problem is they need some time because under the actual uncertain scenario, they need more time to be sure about the outcome of the price they are going to invest in. But they are firm, believe me. They are very, very firm. That’s regarding the energy transition. And regarding the other potential investments and activities, it’s true that everyone is a bit concerned about what’s going to happen because of the charge.

The policy of Mr. Trump has been a bit aggressive. But they are taking their time, but they are willing to invest. What is extremely clear is that the power comes very soon. In fact, we are already bidding for a large project for one of the major oil companies in The States.

And the project will be awarded within this year. And well, it will be awarded the FEED phase. And probably it will be a competitive fee, we see the power already coming. It’s here. There are many projects of carbon capture also and projects of LNG on the table.

And again, the feeling we have is that the projects are there and the clients are willing to construct the plans. The problem is they need some time to be sure about everything is properly fixed in the macroeconomic and to launch a project. But honestly speaking, we haven’t modified our strategy. We are very focused in the energy transition world. But also we have had the chance to talk to many clients and they have had the opportunity to learn about our expertise in oil, in gas, in petchem, and they want to be with us.

So we haven’t changed the strategy, but it’s the fact that the volume of opportunities is higher than it was when we’re talking just about pure energy transition. We are very optimistic. When we see the yesterday we were analyzing with the Board of Directors not the potential awards of 2025, but the potential awards. I’m talking about not EPCs, but big projects next year, 2026. And the states had a presence.

It was relevant, the volume of opportunities. We believe we have a good chance to be awarded next year. So we are more than happy with The United States now.

Juan Yado, Chairman, TR: Let me ask me ask something. If you were here, if somebody made the effort to take a chair and sit in our office here at the entrance where we have a big screen where we welcome our customers when they come to visit us, you’ll be seeing it didn’t happen before. That’s a good sign that it’s very rarely the week that we haven’t got here in our premises. A new US customer that some of them we have never worked before and we are already working on pre FEEDs or via, you know, or FEED studies. We’re talking to the big ones that that that come here.

They see with their premises. They launch the jobs. They audit us, which is good news. They visit us. I mean, the activity of The US, which is I mean, let’s be honest with you, it’s a new market for us.

We landed there only in reality two years ago. And and and and in full fledged just only a year ago. And, we are being, and let me tell you, extremely successful. I mean, we are we are we have contracts. We have customers.

We’re bidding, we have strong partners, construction partners and a lot of opportunities. And that’s why we have put North America and The US, what are we seeing in terms of our pipeline, which is big.

Robert Jackson, Analyst, Bankos and Thunder: Think Eduardo, you answered my question by saying that talking to the Board next year ’26, the U. S. Potential awards looks higher. So that looks encouraging. Thank you very much.

Eduardo San Miguel, CEO, TR: Now I feel the pressure. Okay.

David, Q&A Moderator: And your next question comes from the line of Juan Canova with Elantra. Please go ahead.

Juan Canova, Analyst, Elantra: Hi there. I’ve got a couple of questions. The first one is on those Middle Eastern projects that your customers are asking you to deliver earlier, Can you give us a timeline for your decision on whether that will be possible? Also, I would like to know whether you could give us an update on on your project disputes, the ones in Finland and the others, whether there is anything new on that side of things. And finally, given the huge order backlog that you have and the massive potential new backlog, how are you thinking about capacity?

I mean, are you constrained? Could you really execute those projects if you got a high level of awards? That’s it. Thank you.

Juan Yado, Chairman, TR: Juan, I’ll focus on the first two questions and about capacity constraints, know, Eduardo is gonna answer you. If you ask your question, it’s not an issue of we don’t when you sit with the customer and you have billions of dollar jobs, you don’t say okay, let’s give us three months whether we could reduce or not the schedule. It is, this is, jobs have started, kickoff meeting has taken place. You have to pause with the long lead items, I mean the equipment that has to be placed and see whether you can negotiate with them to deliver a few months earlier. If that’s the case, you have to negotiate and find out whether all the bulk material hack can be on time so construction, pure detail construction can take place.

And then you have to find out and negotiate whether construction companies have enough resources to accelerate. So it’s an ongoing business. So I cannot tell you whether in two months we have making a reaching agreement or not. It’s, you know, you’re together with the customer policy whether you can deliver or finish the job as the market is following suppliers’ reaction. So the message is that, and the good message, it’s a better message to see to have customers that want to run, that customers that do not want to run.

And that’s an important message that we like to launch here. But I can answer you whether we can make a decision, as we don’t have to make a decision in the next two, three, four months. But as soon as we call through the customers that we can reduce, we’ll be more than happy to reduce the schedule, obviously. That’s what we get paid for. And it’s good news.

That’s the message. Disputes, let me tell you, we feel comfortable with our disputes. We do believe that this year is gonna be a good year to finalize some of our major disputes that we very much focus on. But obviously, this is not the place in public to talk about disputes and I don’t like to do so. As in many cases, I have to talk about customers and I don’t think it’s correct.

But other message is we are comfortable that a large percentage of our disputes will be very much finished this year. Then Eduardo answer the first question.

Eduardo San Miguel, CEO, TR: Regarding our capacity growing, my answer is first. For this year, 2025, we need very few additional people. We have already done the homeworks, the people we have at home can say no to deliver the existing backlog. But we are ambitious. We want to go on growing.

And as you are more than aware, the idea is we want to focus as much as we can in the service sector, and it is very intensive in terms of human resources. Last week I went to Abu Dhabi, for example. I had a meeting with a top manager of AMNUC. And I was visiting our premises. It was three months since the last since the last time I was there.

And three months ago, there were 250 people. I think it was 300. Now there are 500 people. So we are growing very fast in our satellite engineering offices around the world, Abu Dhabi, Saudi Arabia, Turkey. I mean, it’s not that difficult to grow in those engineering offices.

But the main answer to your question has to do with India. India. It’s incredible the way we are growing in India. We already have around slightly less of 2,000 people. I think it’s 1.6, one point seven, one point eight.

Don’t know exactly the number today. We have an affiliate in Bangalore. We have another one in Chennai. We are planning for the next year, probably, or the year after to open a third one in Mumbai. Here we already have all the disciplines, all the engineering disciplines available in those offices.

They are managed sometimes from Spanish managers that have been expatriate there. But in many cases, the management has already been done by locals that have been working for us for many years and now they can be the leaders of the different disciplines in this country. So if today we were willing to send a full unit to India, it could be done for sure. We have no concerns about that. It is a fact that we want to maintain always a mix between Spanish engineering and Indian engineering.

But the huge potential of growth is there by far. I don’t know exactly the numbers. Unfortunately, I don’t have them in my mind. But in the last two, three years, we have multiplied by four probably the number of professionals we have in India. And there is room for improvement.

There are other players in the market and other companies from other sectors. We see the volume of human resources they manage in India. And there is no limit for this market in India. So anything we need, we can get it from that country. Since so, the purpose is not to do everything in India.

I mean, we are Spanish, we are Europeans, and we want to maximize as much as we can the volume of resources here in Spain. And that’s our target. It’s a fact that we probably will be opening new branches. We currently have one in Madrid, another one Cartagena, the third one in Bilbao, and we are planning to open a new one in the short term. But if you want to capture Spanish professionals, you need to move to the cities where they are living.

So we will find our strategies, but we are confident that there will be not a bottleneck in our growth because of human resources. Resources.

Juan Canova, Analyst, Elantra: Thank you for your answers. May I have a very quick follow-up just asking what data you’re thinking about for the CMD update? Thank you.

Juan Yado, Chairman, TR: Sorry. I had it written down. That is going to be we’ll we’ll be more precise, but it’s going to be the week of the September 22. That is Monday. ’22 is on Monday.

Eduardo San Miguel, CEO, TR: Okay. Thank you. Okay. Thanks.

David, Q&A Moderator: And your next question comes from the line of Elivi Leith with Caixabank. Please go ahead.

Juan Yado, Chairman, TR: Yes. Good morning, everyone. I have just one final question regarding revenue split and if you can give us the contribution of service contract to both revenues and EBIT just to understand what part of margin expansion in this quarter is related with me. Thank you.

Eduardo San Miguel, CEO, TR: Hi, Felipe. Want to be cautious. I will provide you an accurate answer to your question and everything that has to do with the future of the Service Division next September in our Capital Markets Day. And to give you a hint of where we are today, for the year, we were planning services amounting around about EUR 200,000,000. And give or take, in the third quarter, we are aligned with those 200,000,000.

So we are in the range of the €50,000,000 of services. That’s a number. But let me be cautious because I don’t still have very detailed analysis. I prefer to share it with you once I have a deep understanding of where we are and where we are going to. But again, we are quite confident that shouldn’t be a major challenge to achieve the results we expect for this year, 2025.

Juan Yado, Chairman, TR: Okay. Thank you. Perfect.

David, Q&A Moderator: And we have no further questions at this time. I would like to turn it back to our presenters for closing remarks.

Juan Yado, Chairman, TR: Okay, thank you very much for listening to this presentation. Thank you very much for posting questions and participate actively. And I think we’ll be talking to, you know, all of us will be talking again on the July 31 with the, you know, first half of the year results. And then again, very soon after a quick rest in September, on the week of the twenty second, which is going to be our brief capital markets gathering. Thank you very much again.

David, Q&A Moderator: Thank you, presenters. And ladies and gentlemen, this concludes today’s conference call. Thank all for joining. You may now disconnect.

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