Técnicas Reunidas, S.A.

Good morning, everyone, and welcome to TR's First Quarter Results Presentation of the year. It's going to be conducted and led by our Chairman, Juan Lladó; and our CEO, Eduardo San Miguel.

It's going to last about 20, 25 minutes approximately, and you will be able to post your questions after the final remarks. I now leave the floor to our Chairman, Juan Lladó.

Thank you very much. Thank you, Antonio.

Good morning, everyone, and thank you for joining us today. As you can see in this slide, we have structured our presentation in a bit complex, but I think very understandable.

First, I will start giving you, as always, a glance of the key highlights of our performance in this first quarter. Afterwards, Eduardo will step in explaining the ongoing Middle East situation and how TR is managing it.

He will first drive you through the very short-term commercial outlook and the very relevant expected awards. Then he will explain the disruptions suffering some projects are under execution in this area and how they are being managed.

And to finalize this second section, I will explain -- sorry, I will come back to give you what we see the midterm opportunities that we consider this current situation will bring to the sector and to TR. As always, Eduardo will go through the financial section of the quarter.

And finally, I will give you the final remarks before the Q&A. Eduardo?

I don't know, it's my time. So let me -- I thought I had finished -- let me start with the key highlights, which is quite important for the quarter.

If you look at this slide, this first quarter has demonstrated TR's solid business performance. A solid business performance reflected in the growth of revenue, cash generation and underlying EBIT.

Sales reached EUR 1.6 billion, which implies a 21% growth versus 1 year ago. And the net cash figure has significantly improved up to EUR 360 million or better said, a solid EUR 112 million cash generation compared with the first quarter of 2025.

This level of sales and cash responds to the underlying EBIT. We have a strong underlying EBIT, which reflects TR's performance with a number of EUR 76 million, implying a 36% growth year-on-year.

On the other hand, we have to be and we are being prudent and realistic. Our execution performance has been delivered in the context of the disruption of some projects in the Middle East.

The eruptions and impact that we have estimated in EUR 45 million, for which we have decided to make a provision in our accounts. Again, we have to be prudent and realistic.

In this sense, after such provision taken, the first quarter EBIT stays at EUR 31 million. Our strong performance is also reflected in the very relevant awards expected in the very short term, and Eduardo will just bring some color to these awards, which will confirm our full confidence that we have in the short and midterm outlook confidence and fully aligned with our strategic plan.

Eduardo, you turn.

Okay. Thank you, Juan.

Good morning, everyone. Before proceeding to this Middle East conflict section, let me first express our solidarity and firm support to all our clients, subcontractors and suppliers in the region.

In the actual circumstances, they all are not only our business partners, but also our friends. This section will cover both the impact and the opportunities the conflict is generating in the Gulf countries.

And moreover, how the reshaping of the energy landscape that this conflict is likely to trigger helps to create opportunities for TR across multiple geographies. So we have 3 topics to speak about: opportunities, project disruptions, and global impacts and opportunities.

Let's start with the opportunities. Let's start with the short-term opportunities.

Middle East was, is and will be our main market. The commercial activity in the region remains solid and strong since there is not a glimpse of doubt from our clients to continue as planned with their upcoming development.

If we go to the figures, our commercial pipeline in the region is close to EUR 40 billion, out of which we are expecting in the very short term awards in the range of EUR 4 billion to EUR 8 billion. As you can understand, I cannot provide today further disclosure than what you see in the slide.

We are talking about 3 projects in 3 different countries. One is an oilfield project, another one is an offshore development and the third one is a power generation facility.

3 projects that's very, very important, we expect will be awarded most likely before June 13. So we are talking in the forthcoming 45 days.

You may say you're right, the range of EUR 4 billion to EUR 8 billion is a bit too wide, but let me translate that range into words. Anything below EUR 4 billion would be fully unexpected, and we have a very high chance of being awarded around EUR 6 billion.

EUR 8 billion is the perfect scenario and cannot be disregarded. But also, as you can imagine, the current conflict has tightened our relationships with our clients more than ever.

We do not only keep executing our ongoing projects, especially in coordination with them, but also we are assisting and analyzing how to restart damaged facilities. Our clients in the Middle East are strong and reliable, and the message we have received from them is clear.

We want to complete the existing projects as fast as feasible and to launch together a massive volume of new investments. Let's now move to the second topic, impact in the existing project.

It is a fact that 2/3 of our current backlog is in the Middle East and somehow all the projects in the region are being affected. But it is a fact as well that only a limited number of projects, and I would say just 4, which are deep inside the construction phase are significantly impacted.

The amount of these 4 projects in our backlog is around EUR 1.5 billion. Main impacts obviously has to do with safety, logistics and site disruptions.

First, safety. We have impact because our own workforce in the area is close to 4,000 people, and we have implemented all available measures to protect them.

Second, logistics. Impacts come because the closure of Hormuz, has blocked the arrival of equipment and bulk material and has forced us to divert the transportation to alternative routes when possible.

As of today, 1,061 shipments have already been -- have already were about to be affected and some equipment, which impact in the critical path of the construction is not in the sites. And third, disruptions on sites because the difficulties to mobilize large construction teams to make them work efficiently under this scenario and the delay of arrival of equipment and work have slowed down the rhythm of execution.

Since the conflict started, clients have been collaborative and supportive. But above all, they have insisted in the need to accelerate the execution in the future to minimize schedule impact.

Although the conflict is not over yet, we are analyzing together with clients how to accelerate. And I wish to remind you now this kind of acceleration plans are not so unusual, and they were widely implemented by TR last year in the region.

But we have to be prudent. We have to be prudent.

And we have analyzed the potential final impact of the conflict in the 4 projects affected. Assuming hostilities will not resume and the Strait is open within this second quarter before June, before the end of June, we estimate the global impact will be in the range of EUR 40 million to EUR 50 million.

And we have booked a wide shot provision of EUR 45 million in our first quarter accounts. Now Juan will analyze how the project is giving us new opportunities for all around the world.

Okay. This current situation in the Middle East is somehow in fact, is accelerating all the structural trends in the energy sector, in our sector and accelerating some of the investments planned in some of the regions.

And I'm going to focus on 3 areas of business and regions. I'm going to focus on America, Power and Europe.

America, which you will see there are opportunities and they have to accelerate the oil and gas, LNG, power and midstream. Everything has to be accelerated and they're doing so.

Power, as there is a compulsory need to electrification. And Europe, because Europe more than ever is focused to reduce energy dependency, sustainability of fuels, focus on electrification and obviously, focus on decarbonization.

Let's start with America. This is one of the more visible trends of pipeline.

We're seeing new opportunities in multiple countries, including Canada, the United States, Panama, Venezuela and Argentina. And all of this translates into a very significant pipeline of about EUR 36 billion only in that region.

We focus in the United States. I think it's important to note that we just landed only 2 years ago -- and today, we're facing extremely important pipeline.

In the United States, we have something to offer. So talking about the United States, let me give you some more details for North America, which is, again, clearly becoming one of the most strategic and with growth opportunity regions for Técnicas Reunidas.

Let me start from the top, working on a FEED awarded for a gas terminal and transportation and transportation facilities, I cannot disclose the customer. We're not allowed, but I can tell you that it's a Tier 1 operator in the U.S.

It's a midstream operator. What's extremely relevant in that client that it has subsequently awarded other phases in this huge development to TR.

Today, we're working on Phase 4, and we do in addition to that 4 improving, looking -- working very hard on that Phase 4, which is a reflection of the quality of TR capacity on delivery. We do have something to offer.

The second one, the second job is the Coastal link that we are ready on Phase 2. When we started with them, we were not even on Phase 1.

We were just -- we've been being tested. This is another very clear example.

This is the LNG Canada job that we have to support them in transporting the gas from the Alberta to the Pacific. And it's again another very clear example in our service-driven strategy is paying off and how TR has acknowledged the client philosophy to execute on a stage-by-stage basis.

We're being successful, and we are ready to move from Phase 2 to Phase 3 and support our customers. We're doing well.

And finally, the Coastal Bend LNG phase development, which was awarded to a joint venture of KBR and TR, which places TR as a frontrunner again on the LNG investments. In conclusion, these 3 projects is straight, very clear that we have a quality to offer our clients, and we are reaffirming their confidence in TR by progressively awarding all the subsequent phases of the investment plan.

It's a successful story, and you have to remember that we only landed 2 years ago with this opportunity of growth. If we can quantify, we have to put into numbers what is the final investment of our stake in these jobs.

It doesn't mean that it's going to be EPC, it could be cost plus, it could be EPCm. It could be lump sum and some parts.

The value to be awarded to TR across all the project rises up to EUR 7.7 billion. So this is for the America and this is for the U.S.

And now let's move into Power. Artificial intelligence is emerging and everybody knows is a dominant driver of future demand and electrification trends.

We're there. We've announced a spin-off and that is spin-off, some people got confused in the spin-off means focus, focus and resources to capture this market.

This market that is growing, which this i.e., dominant driver translate into new power generation capacity, which needs a reliable power supply. It could come out of many sources, but one of them has to be reliable, and that will be combined cycles.

This trend is clearly visible on our EUR 27 billion pipeline in only the segment. Today, we're better than ever positioned in this sector.

If we take a closer look of this EUR 27 billion figure, which I think is important to break it down because it's a big number. We see a very diversified pipeline.

In North America, clearly stands out. Artificial intelligence, they want to take the lead, and they are going to take the lead, accounts for more than EUR 15 billion of upcoming investments.

For instance, in Canada, we expect to be awarded the third quarter of the year, combined cycle projected with a carbon capture feature for our part or stake for EUR 100 million. Second, we have Europe that we have identified around EUR 4 billion of new opportunities.

Those are mainly linked to electrification and energy transition projects where we're moving forward very fast. Just as an example, all the combined cycles for RWE in Germany, which are expected to materialize as EPC progressively from the second half of '26 onwards.

This is a market, and this is the region that we were not there before. Again, it's a growth message.

And in the Middle East, also remains a very important contributor to this power business with around EUR 7 billion of opportunity. As Eduardo has explained before, we're tracking a large combined cycle in the United Arab Emirates of around EUR 1.5 billion, whose financial investment decision is expected to take place very soon.

And finally, let's consider opportunities in Europe. As we are seeing, there is a clear push for both government and industrial players to reduce dependency on external energy sources and to move towards a more secure and sustainable energy system.

In this context, electrification is playing a key role. It allows countries to shift energy consumption to more controllable and domestically sourced solution while supporting decarbonization business Europe.

This Europe is creating a significant number of opportunities for the industry and very particularly in projects linked to power generation and energy infrastructure. We've talked about that before in the power section.

At the same time, we're all seeing very concrete development in very specific industrial sector. Besides the projects that we already talked of RWE in the power business, we're working and we have been working for a while, but now we've really launched the job for ArcelorMittal on the decarbonization in the steel sector and one very specifically.

In the next slide, I will further explain this very important milestone and a very important award, which I think we have announced yesterday or the day before. And it's important to say that we're working and we expect investment decisions very soon in Spain on sustainable fuel, fuels, SAF and e-methanol.

All of them have increased the probability and today's turbulence in the Middle East is increasing the probability to reach final and full financial investment decision soon, very soon. I think it's important to spend just a little time because it's been rumors.

We talked about people didn't know very well where we were. We've always said we were very well positioned, and we wanted to position ourselves in Europe and in the world using our technology, our engineering capacity to transform and to support our customers in the steel industry to decarbonize.

And we have been working with them and very specifically in this case, with ArcelorMittal in this business. And we've announced 2 days ago that we are being awarded the EPCm for the decarbonization of the steel facility, a very important steel facility in Dunkirk, France.

This project includes a new 2 million-ton electric arc furnace with other associated facilities, which enables production to be reduced 3x -- with CO2 3x lower compared with the traditional process. This is a very extremely important award for TR.

We're very keen to start. We've been working with the customer, and we're proud to have been working with the customer for the last close to 2 years, finding ways how to improve and develop this very important investment.

And it confirms our company's role as a key player in this industry, and it's fully aligned with the strategic plan that we have announced to the market in several occasions that we have to promote our services contract and our decarbonization activities. And this is at the bottom line is clear to conclude that the current conflict is going to reshape -- is already reshaping the energy investment strategy in many regions.

Therefore, high investments are for sure going to take place in all major players on the oil and gas and power sector. And we have to say anything today, TR is best positioned to capture this growth.

And now is Eduardo to turn for financial figures.

For financial figures. As both Juan and we have said before, we have booked a EUR 45 million provision to cover what we expect will be the total impact of the Middle East conflict, assuming the Hormuz of Strait opens this quarter.

And this provision reduces the EBIT of the quarter to EUR 31 million. But I don't want to miss the focus on our performance.

Our revenues, underlying EBIT without debt provision, cash and equity have improved again. Quarter after quarter, throughout the last 4 years, we are beating the figures we delivered the year before.

As you can see, revenues are 21% higher than a year ago, and the underlying EBIT improves 32%. And what is absolutely, absolutely relevant to me is our sales and our underlying EBIT are absolutely aligned with the guidance we provided to the market.

That's why this quarter, our EBIT margin is already at 4.8%, very, very close to the 5% we forecasted for the whole year 2026. And the cash and the equity figures reflects the good health of the company.

We have our highest ever equity, amounting EUR 191 million, and the net cash is solidly above the EUR 300 million where we have fixed a threshold below which we don't want to be. So it's a fact, we are facing an extraordinary event, the conflict in the Middle East.

We have tried to encapsulate and evaluate all the consequences of this conflict in a provision that has already been booked in full in our accounts. And we are still delivering a EUR 15 million net profit in the quarter, while improving our cash and equity.

I don't want to look nice. And I also want to stay humble, but -- and I cannot be happy with the figures we delivered, but the performance of the company has been solid and will go on being solid this year and the forthcoming years.

And maybe Juan...

Okay. Let me go with final remarks.

Just one second for you to look into this slide because this is not a message of justification, justification on provisions by anything else. It's a message of growth.

It's a message of growth because we have performance on revenue, cash and underlying EBIT. It's a message of growth because we have been able to best manage Middle East disruption.

Managing Middle East disruption has given us an opportunity. That opportunity has been working together with our best customers, with the customers with whom we want to be in the short, medium and long-term future.

We have strengthened our customers' relationship with our partners and our friends. And this allow us and positions ourselves extremely well to capture the very short-term and midterm opportunities.

If you look into our metrics, today, we're stronger than ever. And with that message, thank you very much for listening to us.

And now we're ready to take any questions you want to post.

Nice to see business going well. A couple of questions, if I may.

First, on the outlook for new awards. So if I'm correct, you're saying EUR 4 billion to EUR 8 billion in the Middle East and then possibly another couple of billion elsewhere later on in the year.

So is that correct? And the follow-up on that is, how do you price Middle East contracts today, EUR 4 billion to EUR 8 billion is a big, big number, and there's clearly some uncertainties around.

I prefer to start with the second one because the first one is simple to answer. I cannot disclose today what is my strategy with my clients' pricing right.

So we have to be careful with the answer to this question. But I want to tell you something, and that's relevant.

The impact of the conflict today -- when you launch a project, you take at least 1 year to develop the engineering of the project and then you start procuring equipment. So very few things happen in the sites of construction until at least 15 to 18 months have passed.

So do not be afraid if we are properly pricing the potential impacts of the war in the new project because being very honest, those impacts are going to be extremely limited. But as you can imagine, we have good margins aligned with the margins we were expecting a few months ago before the conflict started, and we have cushions, contingencies.

We are doing the things in the right way as we were doing months ago. So we feel quite comfortable with the pricing of the projects, and we still believe this expected margins we are announcing for the future are well secured even in the actual scenario.

And regarding the first question, EUR 4 billion to EUR 8 billion, yes, that's my estimation. EUR 4 billion is very clear, EUR 6 billion is quite solid and EUR 8 billion is the vessel scenario.

And also, we have opportunities outside the Middle East. So if everything goes right and everything is perfect, we could be beating what our expectations, our guidance at the very beginning of the year or we finishing the year before.

But we -- let's wait. Let's wait.

I don't want to be aggressive today telling you that we are going to have an extraordinary year in terms of awards, although we believe that the market opportunities are increasing, and we have a good chance of having an extraordinary good year in terms of awards.

Can I just follow up on the second question then on your guidance. You've obviously taken a EUR 45 million provision.

You're telling me that 4 of the Middle East projects have logistic challenges, which are, say, more critical to them. How come revenue guidance is still at EUR 6.5 billion if 4 projects are likely to face some form of delay?

How do you keep up with those milestones and percentage of completions?

Right. Well, first, we follow the projects on a daily basis.

I mean we are very close to the clients, analyzing how to recover and how to accelerate the projects. So by the year-end, we expect to be able to recover the rhythm of execution to accelerate and to be not that far from the original expectation of EUR 6.5 billion.

That's my first answer. Probably the second answer is I had some room when I give you my guidance at the very beginning of the year and potentially revenues could be above this EUR 6.5 billion.

Now I do really believe that's very tight. We will be doing EUR 6.5 billion, but I have not any caution.

I have 3. The first one is related with the EUR 45 million provision you have booked in the quarter.

If you could give us the assumptions behind this provision. I believe you've mentioned that you expect or you assume in this provision that the Strait would open this quarter, but just wanted to -- if you could provide some more detail on the projects that have been affected.

And more importantly, what mechanisms you have in place in order to -- in the future, to negotiate with the clients to offset potentially this impact? That's my first question.

Thanks for the question. Sorry, again, you are posing very complicated questions to me, not because I have not the answer, but because you are asking me to show you my strategy of my clients.

If I tell you today, I have book assuming that I'm going to recover 60% of the amount, I'm telling my clients that I am willing to accept a reduction of my rights in 40%. So I cannot enter into such a level of details.

As I told you, the main assumptions basically are, yes, Strait of Hormuz opening in June, no resume of hostilities. But what is clear for us is what we have defined, which is the final expected cost of this conflict.

I'm not talking about incur cost. I'm also talking about what we expect to happen since June and onwards because a few impacts still will come due to the closure of the trade this period.

And we know, give or take, how our clients will react first, because we're talking to them, as I told you, in a daily basis, but also because we have a track record negotiating with them recovery plans, acceleration plans. We know how they behave.

So the net value of all those impacts less money we really believe we are going to recover from the client is around this EUR 40 million to EUR 50 million, this EUR 45 million provision. That's Unfortunately, I cannot tell you anything else.

I think you were asking about the contracts. I think we have a good protection in the contracts.

For sure, we are protected in terms of extension of time for sure. And we also believe that there are room for obtaining significant amount of money to be recovered from the extra cost incurred.

Okay. Very clear.

And my second question is related or we've seen how consultants have done some estimates on the rebuild CapEx in the Middle East. So I was wondering if you expect higher works or rebuild CapEx from some of the infrastructure that has been damaged.

And I think this also bodes well with my third question, which is related with the high level of awards that you are expecting, okay, in the event that you have a strong pickup or acceleration of activity in 2027. I was wondering if you have enough capacity to accelerate materially that level of activity.

Ignacio, this is Juan. I'm going to answer this question.

We don't like to talk, and I think we should not talk about damaged facilities, expected CapEx and expected opportunity. I think -- I mean, it's not a question that you like to answer because, in fact, it's not a real question.

I mean, there's not such a big damage. And the opportunity is not to rebuild what has been damaged.

The opportunity is the relationship that we have created these weeks with our customer in working at a fantastic pace and extremely disruptive situation. Our opportunity are the awards and the continuity on the awards, on the investments that our customers in the region are being -- are even accelerating.

That's the real opportunity. It's not the rebuild of fixed damages.

That's obviously something that when we are asked to do, in addition to that, we'll support them. But we don't see them as an opportunity.

Our opportunity is the relationship that we have built and the investments that in that region with our customers are taking place. And if you're asking us about capacity, the answer is very simple.

Yes, we do have the capacity. We're probably one of the companies in the region, best placed and with more capacity and more experience to take and to undertake the investments, the new investments that we are already bidding and that we are already negotiating.

I have 2. The first one is regards to your Power business.

You've highlighted significant opportunities in terms of pipeline, but normally, those projects require substantial capital. So I was wondering what your plans are with your TR power unit, whether you are planning to open it to external capital, be in the form of an IPO or maybe taking in a partner.

The second question regards to working capital dynamics. I wonder whether you could explain to us how working capital has held up so well even in the circumstances in the Middle East, where you seem to have suffered very little and notwithstanding you have got very few new orders.

So I don't know whether you can shed some light into that.

Let me start with the second question because I think I need to say that. I have to express the gratitude of Técnicas Reunidas to all the clients in the Middle East.

You cannot imagine how they are paying, how they are attending their obligations. It's unbelievable.

So how it's going to evolve the working capital, if everything goes as of today, I can tell you no problems at all. Everything will be very smooth this year.

And you will see -- I'm not only talking about working capital, I won't talk about pure net cash figure. You will see a clear improvement for the -- throughout the years because the new projects that are coming will bring relevant down payments and good payment conditions.

So that's regarding the working capital. And regarding the Power business, we invest nothing at all.

I mean it's -- we just construct the plant. The investment is done by someone else.

And when we talk about specific projects, all of them are projects that already have the money available. The investment has already been decided and the money is available.

So no reason to be concerned. This year, we expect good news in Middle East, good news in America, hopefully somewhere else.

But for the time being, yes, let's focus on those 2 projects. And if any problem may arise has nothing to do with the availability of capital.

I don't expect any problem, but nothing to do with the capital.

No, sorry, I was not asking in a way that will be problematic. I was referring to the bonding requirements, which normally require a level of equity that you might not have in that subsidiary.

That's a complicated question. Yes, yes.

No, you're right. It will take a couple of years to fully decouple TR Power from TR Group.

I mean, in the meantime, we will be supporting them and we will provide them bonds if needed. I'm not sure they will need it.

But if they need it, we will be there. But you're right, the question is then it's a good one.

I understand it.

I have 2 quick questions. First one regarding Teesside and if you have any novelty or when should we expect the final decision?

And last one on Power business, if you can give us the contribution of this unit to the quarterly results, namely top line and EBIT margin?

Thanks for the question. Teesside, no news.

And the only news we have is probably we will have a final ruling from the arbitrator maybe July. That's the best scenario.

And we are not yet disclosing the figures of the Power business. From next quarter, we will have this figure available.

Okay.

Okay. Thank you very much for attending this session.

And I do believe that we'll talk to each other on the next quarter presentation, which I think will be the end of July. I'm not sure exactly which date, but towards the end of July, we'll have the first half of the year full results presentation.

So thank you very much again and looking forward to talking to you in a few -- just a few months. Thanks a lot.