Hochtief AG

Thanks, operator. Good afternoon to everyone, and thank you for joining the HOCHTIEF Results Call for the First Nine Months of '21.

I'm Mike Pinkney, Head of Corporate Strategy, and I'm here with our Chief Executive, Marcelino Fernández; our CFO, Peter Sassenfeld; and our Head of Capital Markets, Tobias Loskamp; along with other colleagues from the senior management team of HOCHTIEF. We look forward to taking your questions.

But to begin with, our CEO will run us through the key highlights of the numbers. Marcelino, all yours.

Thank you, Mike, and the team. Good afternoon to everyone, and thanks for joining us.

During the first nine months of 2021, HOCHTIEF has delivered a resilient performance despite the different impacts of COVID in our core markets, with solid increases in profits, cash flow and new orders. The group ended the period with a net cash position and had an order backlog of €51.2 billion, which now stands well above the pre-COVID December 2019 level.

Highlights -- key highlights. In the nine months period, HOCHTIEF has delivered a nominal net profit of €294 million.

This represents a 19% increase on a like-for-like basis, adjusting for the divestment of 50% of Thiess. Nominal earnings per share were 22% higher.

Operational net profit of €322 million rose year-on-year by 13% like-for-like. Margins remain firm across our operating divisions, with a group operational PBT margin up slightly at 2.9% pre-Abertis.

The €43 million profit contribution from our stake in Abertis compares with the €4 million loss in the corresponding period of 2020. HOCHTIEF's cash generation improved during the first nine months of 2021.

Net cash from operating activities increased by €47 million year-on-year, pre-factoring, driven by an improved working capital performance. The group ended September 2021 with a net cash position of €28 million, ahead of the seasonally strong fourth quarter.

New orders increased by 40% year-on-year to €22.5 billion, already exceeding the total for 2020, whilst maintaining a disciplined bidding approach. As a consequence, the group's order book of €51.2 billion is up €5.4 billion or 12% since December 2020 and now stands well above the pre-COVID December '19 level of €48.3 billion.

Cash flow details. Net cash from operating activities increased by €47 million year-on-year pre-factoring to €79 million, driven by an improved working capital performance.

The third quarter year-on-year variation reflects temporary project timing effects at Americas. Looking at the last 12 months, to adjust for seasonality factors, the group achieved over €800 million in net cash from underlying operating activities, pre-factoring, or €736 million at the free cash flow level from operations after CapEx.

After accounting for net CapEx of €40 million, free cash flow pre-factoring was an inflow of €39 million compared with an outflow of €58 million last year, and the last 12 months figure stands at €736 million. Looking forward, management is confident that the fourth quarter will see HOCHTIEF deliver a seasonally strong generation performance as is characteristic of the final three months of the year.

Let's take a look at the balance sheet. HOCHTIEF ended the period with a net cash position of €28 million.

Considering the variation year-to-date, I would highlight that if we adjust for the change in factoring, reduced by €300 million since December, the net cash position would stand at €328 million. In terms of liquidity, the group's position remains strong at €5.1 billion, with a further €2.6 billion of unused credit facility.

So ahead of the seasonally strong fourth quarter, our balance sheet remains sound and we are well positioned for the remainder of 2021 and beyond. Now we're going to show some of our major recent project wins, such as for -- in Americas, Turner joint venture will build a new veterans medical center in Kentucky for a total contract value of $840 billion.

In Berkeley, California, Turner will construct a new building, which will house the university's computer and data science center. And as a part of a joint venture, Flatiron secured a $430 million project for the widening and rehabilitation of the I-95 highway in North Carolina.

In Europe, as part of a joint venture, HOCHTIEF will reconvert and refurbish a building complex in Berlin at the city's Alexanderplatz. CIMIC has announced significant project wins, including CPB Contractors is leading a joint venture which has been chosen for AUD1.2 billion Warringah Freeway project to improve the Northern approach to the Sydney Harbor Bridge.

This incentivized target cost style contract allows for the extensive collaboration between the contractors and the New South Wales government supporting better outcomes for all parties. UGL services business, as a part of a joint venture, has been awarded a NZD 600 million contract over an initial term of eight years to operate Auckland's passenger rail network.

Back in Australia, a CPB joint venture was selected by Inland Rail to execute civil works worth around AUD1 billion for over 300 kilometers of new track formation and a collaborative framework agreement. Then let's analyze group orders and the trend, and we'll consider -- that had continued a trend in a very positive fashion.

The orders have increased year-on-year by over €6 billion to €22.5 billion, up by 40% compared with last year and led by strong growth in the Asia Pacific division. The value of group project wins in the nine months period already exceeds that for the whole of 2020.

As a consequence, our backlog now stands at over €51 million, up 10% year-on-year, and about €3 billion higher than the last pre-COVID figure €48.3 billion reported for December 2019. All our divisions show significant increases, both since September 2020 and also year-to-date.

Almost half of our order book has been generated in North America with a further 43% in the Asia Pacific region and 8% in Europe. Now let's look at Americas.

HOCHTIEF Americas achieved a solid performance during the first nine months of the year, with stable profits accompanied by further order book growth. Sales year-to-date of €10.1 billion were 5% lower than the corresponding period of 2020 on an FX-adjusted basis, with work done stable, reflecting the completion of several large joint venture projects.

Operational PBT was steady at €242 million, up slightly in local currency terms, with a robust margin of 2.4%, supported by the solid nature of the construction management activities, which account for the majority of the division's business. Additional net cash from operating activities pre-factoring stood at €69 million for the nine-month period of 2021.

The year-on-year variation reflects some temporary project timing effects. Looking at the last 12 months, to adjust for seasonality effects, net cash from operating activities remained strong at close to €400 million pre-factoring despite the impact of the pandemic.

Americas' robust balance sheet showed a net cash position of over €1.4 billion at the end of September, up by €44 million year-on-year. At the end of the period, the order backlog stood at €24.9 billion, up 7% year-on-year and has risen by €2.3 billion so far in 2021.

New orders of €11 billion in the nine months maintained a high level and a stable year-on-year in local currency with work secured in the last 12 months, representing 1.1x work done. Looking forward, the market fundamentals for our key segments are moving in the right direction.

The U.S. nonresidential market is expected to finish the year with significant growth with the commercial segment recovery.

Office-using industries in New York, for example, have regained almost 100% employment levels, and office occupancy is expected to continue rising as many companies have defined return-to-work dates for this autumn. Even as a hybrid work models and remote work become common, technology firms have significantly expanded their commercial footprints across metro urban areas over the course of the last year.

Turner is currently building Google's new $2 billion St. John's Terminal office in New York.

New trends in office space design, such as higher layout flexibility, touchless technology, better air filtration and video chat rooms have emerged to accommodate the expected blend of remote and office work while ensuring safety and social distancing. All of these changes will require construction or modernization activity.

In the meantime, growth continues in the healthcare and life sciences segments, and the data center market also continues to thrive, with Turner well positioned to benefit from its strong technology client base. In August, the U.S.

Senate passed the Infrastructure Investment and Jobs Act with an amendment that would provide nearly $1 trillion over five years from 2022 through 2026. The bill will be voted by the House of Representatives in the next few days.

The $1 trillion bill includes incremental funds to improve the nation's roads, bridges, broadband Internet, water pipes and various public work systems, which could generate additional opportunities for both Flatiron and Turner. So in conclusion, we can confirm our operational PBT guidance at Americas business for 2021 of €320 million to €350 million as well as the positive outlook for the business in 2022 and beyond.

And now Asia Pacific. The Asia Pacific division with CIMIC results published last week.

Revenues increased by 7% year-on-year to AUD7.1 billion in the nine months of 2021, driven by growth in Australian construction and services and despite Q3 lockdowns in New South Wales, Victoria and New Zealand. Net profit after tax impact of AUD303 million compares with AUD306 million in the prior year period.

Operating cash flow pre-factoring improved by AUD351 million year-on-year in nine months 2021. CIMIC is building positive cash flow momentum with the award of new projects and expects the characteristic seasonal fourth quarter improvement.

Cash conversion in the last 12 months would have been 73% versus the 40% reported if adjusted for the Leighton Asia performance, which is expected to recover from Q4 onwards. Net debt ended the period at AUD754 million with the year-to-date movement, including the unwinding of AUD481 million of factoring -- or AUD81 million of factoring during the period and AUD187 million of dividends to shareholders in July.

New work of AUD16 billion was awarded to CIMIC during the first nine months of 2021, and project win momentum remains strong. This is well above the pre-COVID and nine months '19 figure of AUD11.5 billion.

As a result, the September order book stands at AUD35.1 billion, a 17% increase year-on-year. CIMIC confirmed its NPAT guidance for 2021 of AUD400 million to AUD430 million subject to market conditions and excluding any one-off items such as the potential Ventia IPO.

And now Europe. HOCHTIEF Europe continues to perform well.

Sales were stable at €940 million, whilst maintaining the division's disciplined bidding approach. Operational PBT of €40 million was also in line with the comparable period of 2020 and with a solid margin level.

Net cash from operating activities improved by €55 million year-on-year, driven by the infrastructure business, with a particularly strong Q3 results. At the end of September, the division's balance sheet maintained a strong net cash position of €570 million, an increase of over €220 million compared with a year ago.

New orders in the period of €1.35 billion show an increase year-on-year of almost €300 million, with an LTM figure of €2.2 billion, equivalent to 1.4x work done. The divisional order backlog of €4.5 billion is now 18% higher than 12 months ago.

And for 2021, we expect operational PBT for Europe of €40 million to €60 million. Now let's summarize the performance of Abertis on the next slide, which shows a strong improvement.

Traffic levels at Abertis have continued to improve, and in Q3 were consistently above those registered in 2019 pre-COVID. Operating revenues rose 16% year-on-year in the third quarter to €1.4 billion, with EBITDA 21% higher at almost €980 million.

On a like-for-like basis, including the full consolidation of RCO Mexico, and ERC USA, acquired during 2020, nine months EBITDA was 27% higher at €2.5 million. Net profit pre-PPA of €516 million year-to-date increased by 60%.

The Abertis profit contribution to HOCHTIEF for our 20% stake was €43 million during the period, which represents a €47 million improvement from last year, with the third quarter more than double the Q3 2020 level. The dividend payment of €601 million was made in April 2021, of which HOCHTIEF received its share of €119 million.

The proposed dividend policy for 2022 is €600 million. The strategy at Abertis to invest in perpetuating the duration of its concession portfolio continues to advance.

Earlier this month, the company announced an agreement with the Chilean government to invest over €300 million in increasing the capacity of Autopista Central, the 62-kilometer toll road, which is a critical transport link running through the capital, Santiago de Chile. As part of the deal, the concession will be extended beyond its current 2032 expiry date.

And now let's finish up with a summary. HOCHTIEF's business outlook is steadily improving following the varied impacts of the pandemic across our group over the last 18 months or so.

Our guidance for 2021 of operational net profit between €410 million and €460 million is confirmed, and this implies an increase of €50 million to €100 million year-on-year. Management expects a strong cash flow performance in Q4 due to improving underlying fundamentals as well as seasonality.

And looking further ahead, the risk profile of our order book is evolving in a positive manner as the nature and structure of our project contracts has steadily moved towards more collaborative models. We're seeing strong new orders -- new order growth and have positive long-term prospects based on our significant pipeline of opportunities and the stimulus packages in our core markets.

Furthermore, Abertis traffic levels are rising, and this bodes well for the concession company's current and future performance. I also like to underline HOCHTIEF's focus efforts on the ESG front.

All business units are working on the group's 2021 to 2025 sustainability plan, which will be finalized in the coming weeks. The new framework includes the setting of specific carbon reduction targets in order to support the goals of the price agreement on climate change.

To promote the sustainable transformation of our industry, HOCHTIEF is focusing in particular on digital solutions. Our innovation subsidiary, Nexplore, has already developed several applications which help identify potential energy efficiencies as well as streamlining processes and cutting costs at our construction sites.

So to summarize, we see a positive outlook for HOCHTIEF given the improving trends in our order book, cash flow and profit performance, which are supportive for our central objective of continuing to create sustainable long-term value for all our stakeholders. Thank you very much then to everyone for listening, and I now welcome your questions.

Operator, we're ready for questions. Thank you.

I had two questions, if I could. The first one is, I would like to explore a little bit more the cost inflation situation, particularly in Asia Pacific, given that I assume that in the U.S., you're very well protected given the nature of your business.

But if you could shed some light on how you're dealing with it, what's the contract nature at the moment and how it deals with cost inflation, that'd be extremely useful. And then the second question would be also trying to explore HOCHTIEF's position or role in the context of the other two Abertis shareholders having significant cash proceeds in due course as a result of their respective agreed transactions.

In other words, what I mean is, what is HOCHTIEF's stance if the other two shareholders in Abertis agreed to recapitalize the company in order to lower debt and, most importantly, invest in new projects? Would you be happy seeing your stake dilute?

Would you contribute -- try to contribute also a potential theoretical capital increase? Any help would be very appreciated.

Luis, it's Mike Pinkney here. Thanks for your questions.

I'll take the first one there on cost inflation. So as you sort of rightly point out, around 60% of our revenues originate from cost-plus-fee type contracts in the Americas where the -- essentially cost increases are passed on to the client.

For the remainder of our sort of construction and services activities, we've got various risk mitigation tools as part of our risk management approach. And these include, for example, price escalation clauses.

In Australia, in particular, they use a lot of enterprise bargaining agreements, where essentially you fix with the unions the pay structure over the life of a project for the workers. And also, there's a lot of pre-purchasing of materials and subcontractor capacity, which is also prepurchased at the time of sort of project award stage.

In addition, we've also shifted our contract portfolio on the construction side away from the typical lump sum type contract toward more alliance collaboration and partnering projects. Marcelino mentioned some of the projects that we won in Q3 in Australia, the Warringah Freeway project of AUD1.2 billion has been agreed under what's called an incentivized target cost style contract, which allows for extensive collaboration.

And also the Inland Rail project, the AUD1 billion project also in Australia, which was agreed under this collaborative framework agreement. So we're quite well positioned.

We think we're very well positioned there, both in all our key markets that you asked about, Australia specifically. So there as well, yes.

And Luis, Mike is right, this collaborative framework agreement for new projects, that this is the way that currently the different clients are doing in Australia. They are very close to us.

They are very close to the day-to-day problems. They understand that some problems are not coming because of us and then they're helping us on looking for what is the best solution for each of the potential problems then.

The situation obviously is a challenging situation, but it is a challenging situation that, together with our clients, is easy to solve, apart from the different clauses included at the project level. Your second question, you know that, for us, Abertis is a very important asset.

It's a very well - a very good investment. And obviously, we are always just looking at what is the best capital allocation for our interest.

We will see in the future. We cannot say in advance ourselves what is going on with our partners.

You realize that there a lot of things that they have to be clarified in the future. And once this is clear, then we will analyze correspondingly to us what is the most convenient position for HOCHTIEF.

My first question is you reported a strong growth in the order intake, and the order backlog is now well above two years of sales again. I just wanted to ask how this order backlog splits over the future years?

Like how much is for 2022? How much is for 2023 and so on?

My second question is on the cash position on the balance sheet and the net cash position, and what do you think is the optimal level of cash and net cash for the group with this order backlog that you currently have. So do you think you will need more cash on the balance sheet than in the past, about the same or maybe less?

And my third question is how will future prepayments from these new orders will influence the cash position. So should we expect more cash inflows from prepayments in the next few years leading to higher cash position on the balance sheet or not?

Christian, it's Mike Pinkney again. Thanks for your questions.

I mean the first one in terms of the order backlog, obviously, a large proportion of that order backlog will be executed during 2022. But we also have several multiyear projects that can be two, three, four years in length.

In addition, we have PPPs that as -- I don't know if you've seen this morning that CIMIC has done the financial close on the North East Link PPP, which is a massive project, of which AUD4 billion is going to be executed by CIMIC companies. And that is a project that goes on for several years, 20, 25 years, something like that.

So obviously, there's a mix there. We can try and look at a bit more detail for you and get back to you.

But broadly speaking, I think those would be the main issues. In terms of -- you mentioned prepayments, what the trend might look like going forward.

I mean, obviously, you've got several factors there. But on the one hand, you've got a recovery from the impact of COVID, you've seen that the group's new orders in €22.5 billion in the first nine months of the year, that's already in excess of the full year 2020 figure, 12 months.

So there's clearly a strong momentum there. And that order book, as you saw, of over €51 billion is up by 12% year-to-date.

On the other hand, as we were saying, the risk profile, particularly, for example, in Australia, they've been moving more towards these alliance style contracts, these collaborative contracts that Marcelino was just highlighting as well, where the working capital profile is different. So there's less of the sort of big lump sum upfront payments, but it's more a smoother, should we say, payment calendar.

So I think those are the sort of key issues to bear in mind when you're thinking about that.

Christian, I'll say, to give to you the kind of complementary view that Mike was giving to you. The book-to-bill ratio, nine months in 2021, is 1.2 for the whole company.

But when you split this to the different regions, you have different impacts. For instance, Europe is 1.1, Asia Pacific is 1.4 and Americas is 1.1, meaning that you can realize that with this, we are covered, we are significantly covered.

And the thing is the discontinuity. There's been a significant increase in new orders.

And this significant increase in the orders, obviously, is being influenced as well for the COVID. Because if you look at the previous year, the previous year, new orders were significantly lower.

And what's the cause? You remember there were a lot of new bids or bids that were postponed because of the COVID.

Then we are in a recovery process. And I think and in the next year once COVID is over, we will go to a normalization of this, meaning that we expect, let's say, obviously, to recover and to continue growing or to -- we expect, for instance, '22 to be a significant year in regard of revenues increase if the COVID is not continue impacting us severely.

This is very, very important. I think I can give to you a different view.

More cash on the balance sheet, future prepayments influence the balance sheet. But, look, we are very sensitive to the variation of the sales market, et cetera.

Then cash is coming in and coming out exactly because of that. Our expectation for the future, I'm telling you that we believe that we're expecting growth, better growth than in the previous year.

Obviously, recovering, let's say, the previous impact coming from COVID. It's clear that there is nothing to do with prepayments.

It's clear that the business itself, it will give us, let's say, a better cash position. And obviously, it's going to be much more positive to us.

This, what you say, future prepayments or whatever, it's not very significant. Mike was explaining previously that in the last years, and we've been doing this for the last three to four years depending on the markets, we've been changing the risk profile of our contracts.

And most of the contracts right now are not having this kind of big prepayments. They are more kind of PPPs projects or something like that.

But you realize that the risk profile now is significantly lower. And obviously, this is affecting as well this kind of prepayment.

Then we believe that we are going to be to a more normalized cash collection apart from this kind of, say, variation that when you finish or you stop projects, usually, you need, let's say, to spend more money for the mobilization or you need, let's say -- or you have the final payments when you end the process. And depending on this, depending on how many projects that you finish, depending on the quarter, depending on the moment, then you can have some variations.

But in the end, we expect our cash position to improve.

Three questions, if I may. Number one, with regard to factoring.

You've reduced your factoring now quite a bit, but you still leave it, if I'm not mistaken, at roughly €750 million. The question here really is, why don't you reduce this further going forward in time?

I think it would simplify things for looking at your accounts. The second question, just to double check, when I look at here the order backlog in Asia Pacific, up 5% year-to-date, plus 17% FX adjusted.

Just can you confirm that there's no scope impact in there, so this is pure like-for-like as we would look at it adjusted for FX? And the third question relates to, again, Asia Pacific in as far as I think you've also stopped your credit financing with third parties, are you going to stop this for the long term?

Tobias, Mike Pinkney here. Thanks for your questions.

To maybe start with your second question, you were asking about the order book or as the Australians call it, the work in hand at the end of September was -- at CIMIC it was AUD35.1 billion. That is up, as you said, 17% year-to-date.

And that's on a completely comparable basis, yes. So it's also up 17% year-on-year as it happens on a comparable basis.

So there's nothing unusual there. You asked about factoring.

Yes, we ended September with just under €800 million of factoring, that's down about €300 million. Well, it's down exactly I think €300 million year-to-date.

And the majority of factoring is held by CIMIC, and they have indicated that they expect it to remain fairly stable going forward. So it's one of the operational or financial tools that the group uses when it's convenient to do so.

And the third question...

Supply chain financing.

Was about supply chain financing. And yes, you've seen that basically that's been eliminated by CIMIC.

And yes, we can confirm that's at zero, that's no longer being used. And yes, that's correct, yes.

Sorry, Tobias, CIMIC was declaring that they thought that keeping AUD500 million, AUD500 million factoring level was something that could be, how can I say, sensible for the next years. Because taking into account the size of the business and everything, they believe that this is the right way to do it.

That's why they prefer, let's say, to keep this stable level than to go to zero. That it's not what they consider this would be in the best interest of the company.

And then you can, say, analyze things, you have a stable factoring amount because the business is having a stable revenues and growing steadily, meaning that you can very easy, let's say, analyze every detail. The second thing in regard of the supply chain financing is like you know that depending on the market, for instance, we don't have any supply chain financing here in Europe, very, very small and practically meaningless.

And in Americas, meaningless. And in Asia Pacific, it was a little bit higher.

And depending on the market, the market reaction when you have these kind of tools, they can't consider that they prefer not to have this on the balance sheet. And CIMIC made the decision 1.5 years ago, let's say, to go to a zero position in the supply chain financing, and they reached this position in this quarter.

If I may follow up with one question, gentlemen, please. Ventia, maybe you can give us a time line when this is happening.

I saw something on Bloomberg yesterday in terms of further details and also the pricing. Is it imminent?

Is it next week? Or when should we expect this?

Yes. It's Peter here.

I mean with regard to Ventia, they are doing a road show, we understand, until the mid of November. And I think the earliest time they would go in to the ASX or New Zealand stock market is something around the 19th of November.

This might take a week or two longer depending on the feedback we get from investors. But at the moment, this is the intended timing.

And the article alluded to you and your partners keeping a share each of 22%, is that so? Is -- can you confirm this?

This is -- give or take a couple of percent, we and the partners are all holding about half of our current shareholding. That's the intention.

The first one is on your business in the U.S. What are your expectations for revenue growth going forward considering your backlog is, I think, up at 7%, do you expect to return to positive growth already in Q4?

And perhaps for 2022, can you make some high-level comments about your revenue growth expectations for the U.S.? And if I may, I have some questions on Abertis as well.

The first one, is there any update on the AP-7 guarantee dispute in Spain, considering that the ACESA concession has now expired? Do you expect this to be resolved through courts or maybe there is scope for this to be still settled with the government?

And lastly, also on Abertis, if I may. When could we receive some update on Abertis dividend policy?

I believe they committed to pay a dividend of €600 million in 2022. But when could we hear about more medium-term dividend, let's say, aspirations of Abertis?

Marcin, it's Mike here. I'll take your first question.

You were asking about the Americas. As you rightly point out, the order backlog has been very firm.

It's up 7% year-on-year and a similar proportion year-to-date. And it is -- yes, it is trending in a very positive fashion.

You've seen the new orders in the last 12 months are around the €11 billion level. They're stable year-on-year FX adjusted, but it's 1.1x the work done.

So we're going into Q4, and I think particularly thinking about 2022, with the expectations that after you've seen the impacts of COVID on the level of activity during basically more '21 even than 2020, that you should -- that we would expect to return to a growth track in 2022. Definitely, yes.

Okay. Marcin, in regard of Abertis, AP-7 update, was the liquidation with the final number, with the final traffic numbers, I think was presented September, at the end of September, meaning that now we need to wait for the necessary time.

There is a period of time that the client has to analyze the claim in-depth with the final numbers. And they have time, I think, to the next year, I don't know, by February, something like that.

Then we need to wait. We don't have right now any extra information.

The ministry is analyzing the updating of the claim and then we'll see. Regarding dividend policy, your question, the Abertis team is currently analyzing what is the business plan for the next three years.

And I guess, once the business plan is finished and the business plan is agreed and approved by the Board, then we will know something about the dividend policy for the future. As you said, for 2022, it's clear that the dividend is going to be -- and I think I said this in my speech, €600 million, and then we will have for the next year a clear dividend policy.

But we need to wait for that.

Just a couple from me. First one on -- coming back on the U.S., your Swedish peer, Skanska, this morning hinted to margins firming up in the market, and we see this as well in -- I mean, throughout the year at -- especially at Turner.

Is this something you're seeing as well, putting aside the fears around cost inflation, supply of materials and so on? Are you seeing fundamentally an improvement in underlying tender pricing and your ability to drive margins to maybe a dream of 3%, the [EBIT] level?

And second question, more short term on cash flow. You have -- we've seen a trend of Q4 net working capital at HOCHTIEF between, let's say, €650 million to €800 million inflows.

Is this ballpark figure the range you are expecting for Q4 this year and which would drive an improvement of net cash that you've talked about? These would be my two questions.

Nicolas, it's Mike Pinkney here again. So on your first question on the U.S.

business, I mean, as you've seen, our Americas division has reported very firm operating margins. They were up slightly year-on-year.

I wouldn't -- I think that they are clearly dealing with cost inflation issues very effectively, and that's in no small degree due to the construction management model, which is used by Turner and which has -- is very effective and is very low risk. I think that going forward, we would expect margins to remain firm, but I wouldn't be any more optimistic than that necessarily.

And secondly, you were asking us about cash flow. I mean, as you said, we flagged on various occasions over the past few years that over 80% of our net cash from operating activities is in the second half of the year, and that's particularly -- well, that's really almost entirely in the fourth quarter.

And that sort of fourth quarter bias this year should not -- there shouldn't be any exception. And the key driver, obviously, for the cash flow is the seasonality of our working capital.

And although there's been impacts from COVID, we think that the broad direction of a strong inflow should clearly remain.

Yes, Nicolas, regarding, again, U.S. The company in the U.S., Turner, for instance, that you were referring to, is having a special way of approaching to all these kind of potential issues, and they are playing a micro management approach to each project.

And then they are very close to the clients that they can say well advanced all the potential issues that they have. One of the things that is important on the time is like you need some kind of, let's say, supplies.

So to ask for them well with -- enough time in advance, this is what I call micro management. They've been very close to what is needed in the next months and then to ask for them.

And then for that, you need, let's say, even, let's say, to have this kind of relationship with your suppliers, with your clients. And then altogether, you can avoid a significant cost increase.

And this is what exactly the clients are really appreciating from us in the U.S., and that's why Turner is very successful in getting such a big amount of new contracts. Cash flow.

The cash flow, as Mike was saying, that in a standard year, not taking into account any impact, any extraordinary impact, like we can consider COVID impacts in the last years, well, Q4 should be usually the extraordinary quarter for cash collection. And we expect this year to be, as well, a very good cash collection quarter, mainly for the reason that in the markets that we are working on, practically, we cannot say that the crisis is over, but the normality in many of the places and many of the contracts is coming back, and we are really positive on that.

And for next year that we expect this even to improve better. And I said before that even we consider that we can, say, improve in our sales, what in the end is improving also in our cash collection, cash flow, et cetera.

If I may just -- just a couple of follow-ups. On the margins, I mean, '21 -- in 2021, we talked a lot about cost inflation, but mostly from materials.

I mean you are not afraid, actually both in the U.S. and Australia, that the issue will move in '22 on wages.

That's the first question. And then just a follow-up.

The cash flow in HOCHTIEF Americas has been pretty weak throughout the year. You talked about phasing.

Anything peculiar or specific you would like to mention just to explain a bit of the softness there?

Maybe, Nicolas, just to start with the second question there on Americas. I mean you've got a Q3 variation in cash flows at Americas that is mainly driven by Turner.

There's several factors there. The first is that the second quarter was an extremely strong cash flow quarter for the Americas business, particularly for Turner.

So you've seen a bit of a reversal of that. So that's part of the reasoning.

Secondly, you've got some sort of temporary COVID-related impact in terms of the execution of new orders. But probably, overall, more importantly, is that you've got, let's call it, a normalization of a very strong working capital trends that you've seen in the last four years when cash conversion of the division, and particularly Turner, has exceeded 100% or well over 100%.

In fact, if you look at 2019, you're looking at a sort of 180% cash conversion. In 2020, almost 150% EBITDA cash conversion.

So in other words, you've sort of generated more than three years of cash flow in two years, in '19 and '20. So those, I think, are really the main drivers.

Looking forward to 2022, as I think I was saying earlier, we're expecting a rebound in sales as these temporary effects really phase out and we execute on that strong order book, which, as I was saying, is up 7% year-on-year at Americas.

And cash flow is up.

And obviously, and therefore, the cash flow is up as well, yes. Exactly.

Exactly. And the other question was about cost increases, particularly wages, I think you were talking about, yes?

Yes, a bit of a switch and focus from -- between this year and next year.

Yes. So I think, as we've said, the controlling costs in the Americas division and specifically Turner is very much aided by the fact that they use this construction management model.

So you're basically putting the client and the subcontractors together. It's cost plus fee.

So there is not really an issue at all. And in Australia, one of the tools that they have and I think we mentioned earlier is these enterprise bargaining agreements, which is for the life of a project they agree with the unions, the workforce, what the wage increases are going to be over the life of that project.

And therefore, you can manage that sort of wage risk there. So I think, overall, we're -- yes, I think we have a sound situation.

And of course, overall, you've got a derisking of the projects because of the risk profile as you move more towards these alliance style contracts, more collaborative framework, et cetera. So all of those movements help you to manage that sort of risk.

Okay, operator, if we have no more questions, is that right?

Okay. Well, look, thank you very much, operator, and thanks to everyone for listening to the call.

Yes. Thank you very much all of you for being with us.

And then we will see, we will have the chance, let's say, to speak again when we finish the year and we can close the numbers. Thank you.