Técnicas Reunidas, S.A.

Hello. Good afternoon.

This is Eduardo San Miguel. Welcome to this Nine Months 2019 Results Presentation.

It will be conducted by Juan Lladó, CEO of the group and will take 20 minutes. As always you can pose your questions after the speech.

And now I give the floor to Mr. Juan Lladó.

Hi. Hello, everyone.

As always, let me start with the analysis of the new awards and the backlog. I could talk about the pipeline with our numbers and then we can spend a few minutes talking about the market outlook and how do I see the business.

With the awards we've announced yesterday I don't know what is well understood or not, a very large front-end design and basic design award to TI -- to TR. This is a joint venture of Rosneft and Pertamina, both of them new customers.

Pertamina has been an old customer of TR, perhaps with three years ago. So, I take it as a new customer.

This is a very important investment. This is a big investment in the Island of Tuban where we have been awarded the basic design.

We have to work with all the technologies and the front end of a highly qualified refining units as well as petrochemical units. We have to work with, as I said here, state-of-the-art most advanced licenses.

As you know the petrochemical business [indiscernible] and most forward. So, you have to be -- this allows us to state-of-the-art of the new petrochemical products.

And this is very important for us. This shows our very well-positioned which was part of our strategy in Asia-Pacific.

We started in Asia-Pacific with a very important job which was for PETRONAS which right now is done, it's finished. We still -- in some of the units, we still -- because the feedstock is changing, working on what we call the test runs with different feedstocks.

It's a fantastic job. We did very well.

We had a good customer with a good country and we were doing our best which is refining. After that we worked with -- in Asia-Pacific for Exxon that we worked for a whole year on a front-end design.

They had happened to be competitive. And then Exxon decided to [Indiscernible] and we've been started to launch a very large project in Singapore and this is the 31.

This is important for us. We have to deploy an average of 500 engineers designing all these units for the customer.

So, after that the customer Pertamina and Rosneft can go for EPC offers. EPC offers that is important to say we also qualified in this case to the units that we are good at.

In some of those units, we're very good at. So, this is important for us because of the size because of price because the trust the Pertamina and Rosneft has given to us important to us because of the region.

This is -- for TR, this is a success story. I'm very, very proud that Rosneft and Pertamina, it's trust in TR for this very important investment.

And the single one is Canada. And in Canada is Suncor.

A lot of people the investors as we had years ago bad experience in Canada could worry saying TR is back in Canada. And we've never abandoned Canada.

That is the message. We've delivered to Suncor about a year ago with cogeneration plant and we delivered Suncor which is quite nicely.

We were very hard to them, hand-to-hand further to holder for the complex delivery in Canada in Alberta cogeneration plan. And today Suncor is trusting TR with TR's partner which is probably in that region one of the strongest construction companies to deliver to them again another cogeneration plan quite big, $200 million is our stake give or take the 50% of the whole investment.

Having a construction company has led grew as a partner. It allow us to manage construction, obviously, much better always to manage construction risk in Alberta much better but also the contract we've signed with our customers.

Suncor is very much the risk. We have found schemes with Suncor to share some of the construction risks.

So, again, it's something we're very good at. We're repeating business with Suncor and we -- and it’s a customer that would like to retain.

So, again, we're extremely proud that Suncor once again trust on TR for this important job for them. And after those two awards have here more creative slight and this is the $7.5 billion is how much has been awarded to us over the last 12 months.

That's fall against our 2018 2019. And as I will review that I said okay let's put on shade the jobs that customers are repeating with us.

And to our surprise with the exception of a new customer, a very important one, which is Pertamina and Rosneft with all of them, we are repeating business. And we're not only repeated business with most of them.

We are today -- I mean starting up -- I'm not even going to say delivering, starting up major jobs in Saudi Arabia, in Abu Dhabi, in Malaysia, we repeated business with them. At the same time, we're starting up all jobs which is good business.

And here I have to -- I'd like to send two messages. Very good delivery and that very good delivery in a good market.

You have to have a good market and we have a good market. We have a recovery market.

It's translating in very good quality and solid awards. I mean both -- one thing goes after the other.

You have to deliver first, but at the same time, and then retain customer trust and we have. So, what you see here in this picture is prime customer, solid product, the things that we're very good at and solid regions, Asia-Pacific and very important the Middle East.

And what -- and there is no creativity either on customers or regions. We didn't need that.

We need to focus on the customer we're good at and the customers that we can grow with them in this I say more in our recovery market. And I've been say that is how much we've got as backlog.

We have already been a – you've already seen it. And after – getting an after sales we see this quarter that our backlog, if you compare with the last one we have quarter against quarter, we have improved from €8.7 billion to €10.9 billion.

So that in a product delivery and fresh new healthy awards with customers that we know allows me to say that, today a year later, third quarter of 2019 are far more comfortable than that was a year ago far more. I was optimistic a year ago.

And today as I'm going to say before I'm guessing, I'm going to say later on, I'm comfortable. Again as I said before this is a solid backlog, it has nothing of to be active backlog and difficult customers and unknown regions.

Again, there is always – how is this backlog is spilt it. And here probably, the important message is that are more than 85% of the backlog 86% to precise – I am being criticized here.

It's to be precise. Well, let's say 85% of the backlog has been awarded to us over the last two years.

And I have to repeat, because I always like to send a message to my team. Over the last two years, it has been peak years also in delivery.

The number of delivery highlights, let me stress on that. I mean, today we are at the very final stage.

Some of the units we do in the last – test runs. Some of the other units we do in the test runs of the utility and finalize the process units, but we are delivering to our customers say more than I would in to us more than $15 billion in projects, upstream, gas and refined as well as power.

So that's I feel – once you see the reality, we want to see the big jobs starting up and there is you're gaining the trust of the customer again allows me to – allows me my team, my production team, my commercial team, my control team to feel comfortable about the strength of our franchise. And this translates obviously into awards.

And obviously, we've had a pipeline that will not be awards. But again, you have to have a strong franchise to retain part of this pipeline.

And after the $7 billion awards, we've talked before, our pipeline, if you compare with last year with 12 months ago is a bit stronger. I mean, it's difficult to measure, what is $41 million versus $39 million.

Let's not get into details, but as the investments being sanctioned projects that we're bidding, projects that we've been invited to be bid, and projects that we've already bid, and we're waiting for our customers decisions today it's bigger than it was a year ago and after being quite successful with more than $7 billion of awards. So it's a positive market.

Probably, I don't want to get into detail why is this pipeline make, because probably you guys are better analysts than I am. I have to focus of having the best production team really – I mean and deliver.

And if I do that, this pipeline that you probably better than market – reasons of market – of the market you probably better analyzing will translate into new jobs. There is obviously having to do – have replacement issues, demand growth issues, upgrading issues, environmental issues, many reasons that support the increase of the pipeline.

But you have to have a strong franchise and having been able to deliver mega jobs than we have and we're doing it to retain part of these markets and we are doing it. So that's the reason that, I'm not only optimistic, but very confident.

And now we see the financial results. And some of you may ask me on, if you're so optimistic and so confident, why such a humble margins?

Well, I was – our target for this quarter we miss the target – I don't know the neighborhood somewhere in between €3 million to €5 million, I mean in this quarter and we missed it. But it is also true that in this quarter and the next quarter we are starting up not only delivering it, starting up big jobs very big jobs.

We're doing the test runs of big units for activity. We're doing the test runs of the refinery unit for Jizan in Saudi Arabia.

We're doing the last 12 months of the last unit with different feed stocks for us so far. We're doing the last test runs of the last units with – again with different test runs for PETRONAS.

So -- and we – and those are the numbers. And sometimes and the message here and the message to my team as those stages there is no negotiation.

I mean, we have to run and start up. And being the volume as it is missing for €3 million or €4 million can happen and it happens, but it doesn't change at all.

And I'd like to underline that it doesn't change at all my message of optimism and confidence. It doesn't change our message and guidance that we are in the trend of margin recovery and a stable margin recovery.

I mean, the last million when we are starting up a job with your prime customer goes for him. I mean, here, if it's time to put the job into revenue.

The money will come afterward with new jobs or even when you settle the final numbers. But everything is coming at the same time, and the message is a very positive message.

It's true that we have humble margins, but it's true that we bundled the risk by delivering the jobs correctly our risk despite the size of our jobs is very much limited. The quality of our delivery is very good and very important.

We're launching with those customers most of them all customers extremely well the new backlog which again happen to be mega projects. Our position in cash stays more or less stable slightly above €200 million.

We have to take into account that some of our very good customers and I have to underline again very good and trustable customers having got the best payment terms. They have a lot of retentions and complex milestones in order to have positive cash flow.

So despite of that, we've been able to maintain the balance sheet with a net cash of our €200 million slightly above. And now quick the outlook because somehow through this presentation have anticipated the outlook.

I've said before that in many presentations through these bid crisis I was trying to send an optimistic message to the market. I was optimistic, more than optimistic, optimistic of market recovery, optimistic about delivery.

So – and I don't want to use the term optimistic anymore. I think because I've already shown that in delivery and have shown the market that I'm able to retain this and repeat with the same customers even bigger jobs.

Today the message is and edges of confidence. And I'm very strong and I'm very confident about the future because of our backlog, because of the pipeline that I do believe that we're going to be able to retain substantial part and very important because now that we are doing good.

And I have to that we’re doing good. We have put together a very strong cost and efficiency plan.

I did want to do it before. Before I have to manage prices, now I have to manage growth.

And to manage growth you have to revise or your cost structure and efficiency and production. And with the help of consultants we're putting together a very strong cost inefficiency plans that are from the first engineer to the senior management everyone in TR is motivated and happy with it.

And the result of that I do believe we're going to be growing. If the market allows to grow.

We're going to grow and I do believe the pipeline is going to allow us to grow. But we have to grow with operating margins.

And thus operating margins will start to see an improvement for quarter 2019 to stabilized during 2020. And that’s I derived a few math, some of the jobs have been delivered and some other have just started.

And on average, 2020 is going to be -- I mean I'll say, a healthy year. In a healthy year, what I'm optimistic -- because I'm comfortable.

I don't want to use optimistic. It shows I'm comfortable that today TR is one of the strongest franchises in this market having to do with our onshore oil and gas refining and petrochemical and some particular power jobs.

So all of that together, there's a message, confidence and margin -- stable margin for 2020. Thank you very much.

And now you can post me any question you may want.

Juan, when you talk about normalized margin, could you give us an idea of what is the figure that you are thinking for next year? The second question is on capacity.

Because after such a big increase on backlog. Can you tell us how the capacity is?

And how much do you need to increase in order to tackle with -- to cope with this increase in backlog? And last you have commented on this cost-reduction plan.

But if we look at the corporate center or the central services cost, it has continued to grow and growing almost 10% year-over-year. So could you give us an idea on why these costs are still increasing?

Thank you.

I mean, normalized margin I mean, I think, this business deserves and that's what we're targeting for. I mean, to be way above 3% and have a stable 4% and that's what we're aiming for.

And that's taking into account ups and downs. I mean, that's what do believe our plans or jobs the way we get in the jobs awarded they were being delivered, we can normalize.

We're above 3% and in the neighborhood of 4%. Difficult to be precise that's the objective.

Capacity of engineers there is always initial capacity of engineers that having grown and having very strong specification are on the science. We're very good at it, having had the experience of working in joint ventures with Sinopec with them with GS, with Samsung with Technip.

I do believe that the capacity of engineers of this time is not an issue. I mean something that we can grow.

We can grow in India. We can grow in Spain.

We can grow in Oman. We can grow in Chile.

We can grow in Saudi Arabia that we have strong presence. There is solid for me and there's a message that I say yes, there is -- I mean the -- I don't want to run into a shortage of capacity of good managers.

And we are in continuing internal training more than hiring internal training of all the young engineers which some of them are very good. They have already done two or three projects to move into a project engineer, deputy project manager to project manager same of construction managers.

In this business the risk is not lacking capacity of engineering it's lacking capacity of management, a good team to manage say the excellent job. And -- but I think over the last years, we've done quite well.

I'm not going to say it's not an issue because it has to be an issue in this business and well service business. But I think we're managing quite well.

I think the quality of our managers some of them quite young already -- they're very good. They're extremely good.

And cost disciplined, it's true then on growth, awards, delays of jobs having to retain people for jobs have been delayed, we have run into inefficiencies. It's true.

And you have to realize that over the last six, seven months, we have launched tremendous jobs, which has not allowed us to move. We have launched the -- we have to deliver and launch before getting into cost reduction and efficiency.

But I'm pretty sure that I won't be stabilize this plan we'll see a reduction in an overhead for sure. And you get…

Just a follow-up. Could you quantify on the savings of this plan?

I mean, I cannot -- I mean, let's not -- I don't like to start playing around with that. There is a number without TR.

There is a plan within TR that everybody knows. But I mean publicly I don't want to start quantifying and been measuring begins the numbers that I've said, but I will be embedded in all those steps as margin for us contingency obviously, which is what you do when you manage a business like better to make ourselves comfortable with our margin objectives.

Okay. Thank you very much.

Good afternoon. Thank you very much for taking my question.

Just really wanted to ask you around the guidance. I mean on your prepared remarks, you've given us what I think is a very optimistic very bullish outlook which is good to hear.

When I look at consensus it's currently calling revenue growth for around about 5% 6% year-on-year which is €300 million something like that. Should I be reading into your outlook statement that that is just too conservative at this point in time?

Hi, James. The answer is, yes.

It is conservative, but it is conservative. I understand even ourselves when we make sales with ejection we have to be dependent on awards you have to be conservative.

That being conservative you see growth. And I do believe we're going to do better.

Okay. Okay.

That's helpful. And then just sort of following up.

I mean obviously, you now sound very confident in the recovery in margins. Just two points there.

One is maybe short term just in terms of what is the effect of not having the sort of Jizan overhang in the fourth quarter I guess it's kind of a material step-up just from that? And then secondly just what's the latest in terms of the dividend, obviously you've taken a more conservative step there, but it looks increasingly clear that you're going to be generating good profits in 2020.

What -- how should we be thinking about plans for the dividend and the return of that in the near term? Thanks.

I mean delivering Jizan, obviously is -- it'll be a big relief for us. And we very much focus TR and Aramco team in having first the refinery deliver and then the utilities for the GICC which is going to be delivered refinery now and the utilities first two months of next year that's I do believe final test once and everything.

I kind of start talking about our numbers, but it's going to be let's say a big relief in terms of focus and headache. I mean it definitely will be like taking a full bottle of pain relief.

But I do believe that despite of the pain, we've focused on the job. We're doing well and that's why Aramco has trusted us with more jobs.

And having finished those jobs will definitely help to consolidate our margins. Because there is -- they're very big.

They're costly. And if one month is $1 million here and next month is another $1 million there.

So it would help us to consolidate margins. Of course.

And then I move into dividends. And let me repeat the term margin consolidation.

I mean if there is someone that wants to have dividends, it's -- I don't know myself as I do part of the shareholders. But being confident I'll have to say that I'm confident that we're going to be back on the dividend trend, but we have to see profits first.

I mean I don't want to start saying dividend as a sign of our recovery. But I'd like to propose dividends when we have recovered.

So we'll have to wait next quarter and one or two more in order to make sure that investors, customers, banks everyone feels comfortable that we pay dividends with profit and we don't pay dividends ahead of profits which I do believe is not a good manager. A lot of people are saying in this market everybody pays dividends.

It doesn't matter whether you make money or not. And a will all be great that have been each shareholder and manager.

I don't think it's good style and good business practice to pay dividends and not making money. So we will pay dividends.

We'll make money, that's the second and we will. We'll pay dividends and we will, but we'll have to wait a couple of quarters with solid -- that have to be solid with real money to go back to our dividend trend.

Okay. That's great.

I mean, we're a dividend paying company. So be sure that wants in business and we are very close to bidding business.

We'll pay dividends and we'll pay dividend with a much stronger obviously balance sheet.

Thanks, Juan. That's very good.

Thank you.

Hi. Good afternoon.

Two questions if I may. The first one regarding the margin.

I think that you've always said that you were targeting of 4% as a normalized EBIT margin. And this time you seem to mention that you want to reach a stable 4% in the neighborhood of 4%.

I don't know maybe it's just a matter of wording, but I believe that you are being a bit more conservative in your message. Is that correct?

And my other question is regarding the awards. I believe that in the last conference call, you mentioned that obtaining between $5 billion to $7 billion awards this year was not challenging.

How do you feel about that now?

And let me start by being more conservative or less conservative. I'm not being more conservative at all.

But, yeah, I’m being realistic I'm being realistic. If we -- I'm showing to you today 1.3% in margin.

I cannot tell you that I'm going to have in two weeks 4% margin, because I would not be -- that would not be optimistic that would be very optimistic and realistic. I mean the message there, I mean, the level of comfort is that we're going to reach the 4%.

And that's true. I feel very comfortable of reaching a 4%, but it takes a quarter, next quarter and probably the following one and then we'll start reaching the 4% as we deliver and new jobs start-up and another jobs, because I mean we are the brink of getting new jobs, so not more conservative at all.

It's not even more prudent at all, which has been realistic. We are where we are.

But they are not being more conservative if that's the impression that I gave you is not what I have tried. I mean that 4% is very much embedded in the delivery and the awards that we've already have, another one that we think to come.

And you're asking me that I have said among the other lost that are having awards of $5 billion to $7 billion was challenging, but possible and today obviously to get awards within margin. I mean to get awards with our margin is not a real challenge in the big market.

They have to get awards with margins. There is always a challenge.

We have to bid well. You have to have the right cost structure.

You have to have -- we have to deliver having have customer being selected by the customer. But I think today $5 billion to $7 billion again this is obviously a challenge, but it's more possible today than it was a year ago.

I mean it's less challenging to speak. So, I mean, we've proven that we get in the awards and we're getting the right type of awards.

And so we're very close to the $5 billion. The year is not finished, wait and see.

But you do a moving average of awards, we're definitely above the $5 billion. Okay.

I don't know if I've answered, Patricia?

Yes. Yes.

Sure. Thank you very much.

Okay. Thanks Patricia.

Hello, everyone. I have two questions if I may.

The first one is actually a clarification regarding backlog evolution, because at nine months you reported a €4.4 billion intake, which is €1 billion above the reported revenues of nine months. Although since year end your backlog increased by more than this €1 billion.

The increase was roughly €1.9 billion. Can you explain the reason for these close to €900 million more backlog than the difference between intake and reported sales?

I'm wondering if this is related to the FX or any other adjustments in the amounts of your initial year, what are the projects? Second question is on working capital that reached roughly €330 million this quarter.

Do you expect any significant change until year end? Or should we do roughly the same amount?

I'm asking this because in the fourth quarter of last year there was a significant change in working capital of more than €200 million. Thank you.

Filipe, let me start to try to -- I try to -- I cannot get into details into the -- trying to match the backlog when you have a mismatch of data yet awards and you detect sales now. It is very difficult to answer right now, but there is an issue in all the jobs -- the job, I mean for stance Talara we have increased the size of that by -- agreement with the customer in the neighborhood of bigger.

I don't want to get into details because the customer has not made public. Some of the jobs sometimes seen as we used size of [ph] $1.3 million, a year later it get deducted to $1.5 million because one of the units these sites not to do.

Very often through the job, the size of the job increases by 5%, 6%, 7%. And out of that little by little it gets embedded into the backlog.

So that's why it's very difficult to have the mathematical match. It is also the impact by exchange rate.

I mean, our contracts are in dollars. So -- and they're measured in dollars.

And so backlog is not an accounting number, it's just a number that are very difficult to have a match. And usually to be honest with you, we are on the conservative side.

I mean most of our services and things that we sell and whatever we don't include into the backlog. And there's small jobs in feeds and whatever, they're never included into the backlog, which is pretty big chunks.

And then we add up with the changes of contracts. Some contracts increased by 5%, 6%, 7%, 8%, 9%, 10% because customers add up things, while you're doing the job and then has to be included because the contract changes.

So I don't know maybe if you wanted more detail you can talk to Marta, and he can explain to you the mismatches in backlog from one quarter to another. And your second question was working capital.

I don't know if I have to answer that. I'll let Eduardo to answer you, because probably Eduardo you can answer that.

I don't think it's going to be a drastic change, but Eduardo is more strict than I am.

I think working capital has not significantly changed from last quarter to the actual one. I think accounts receivables have grown €50 million more than what the accounts payroll have grown.

So working capital has deteriorated around €50 million. It's a fact that I think that's the most relevant trend that both accounts receivable and accounts payable are growing above the figures we have in the past.

And maybe that's the main trend we are facing now. And it has to do with the fact that working in the Middle East, it's very difficult to invoice as fast as we wish.

We need to wait till the milestones arise and then we can invoice. The point is that if you have a concentration of procurement in the Middle East and that's the case today both in Fadilia [ph] and Herat.

What you do is you pile large amounts of services rendered that you cannot invoice. So you need to reach the milestone and that's what it is currently doing.

And that's why we have such a big amount of accounts receivable. And well probably we have less cash than expected.

What can we expect from now until the end of the year? I think that -- well we will see some projects basically in the Middle East in Kuwait and also in America in South America and in Peru where we will be allowed to invoice large amounts that can be invoiced now once we have signed the attendees to certain contracts.

So what we will say is that amounts to be invoiced hopefully a large part of these new invoices will be collected and what you will see significant reductions of amounts to be collected for the clients or accounts receivable. Consequently we will be paying our suppliers and we will see also a reduction of accounts payable.

So the figures we currently have are very big. They will become a smaller idea end of the year.

But the overall, I mean the working capital, it always depends if I have to advance some money to my suppliers or if I can't collect something quicker from my clients. But I think – well, we haven't seen major changes.

It's stable from the last quarter to third quarter. It's not a major difference.

And I think the point is and where we are very focused on that is how to reduce this amount of accounts receivable and of accounts payable. I think that's the target.

Okay. Thank you.

Okay, thank you. Thank you, Filipe for questions.

Hi, thanks for taking my questions. I had two.

But first, if we can take a look at the guidance for 2019. You were guiding for flat sales and margins approaching 4% towards Q4.

I understand that the margin approaching 4% in Q4 is out of the question, probably not going to happen. But I wanted to know if the sales guidance of flat year-on-year would remain, which would imply a significant decline quarter-on-quarter in terms of revenues?

Okay. Alvaro, I mean, we're sorry to delay on the answer.

I was just getting a bit confused. But, I mean, the message is sales are going to increase a little bit.

Obviously, we're delivering, but we are starting new jobs and not a lot that we're going to grow in sales, just a little bit. Obviously, the 4% for the -- as the job has started late and it has taken some -- a little more to deliver the 4% for the -- as I said, for this year.

It is challenging. I mean, we're going to see an improvement in margins for sure.

I mean, that's a fact. But I had growing in sales and delivering the old jobs makes it very difficult and starting our new jobs -- not only delivering, starting our new jobs but that are -- only have just marginal cost and practically no margins and our sales makes it very difficult to reach in a very comfortable fourth quarter, but it's going to be better for sure.

I mean, there is -- I don't feel -- I don't have any level of uncomfort about next quarter. And we're going to see a consistent margin improvement.

So you have to understand, it's very difficult to start. This is shooting quarter after quarter where you're launching 8 billion jobs at a time and your delivery is starting up close to 14 billion jobs at a time.

It's very difficult to get the right targets. I mean -- so that's why I wanted to stress level of comfort, a very high level of comfort that we are in the right track and we are confident that margins are full recovery.

Thank you. Thanks a lot.

And if I may follow-up. Just on the net cash position, if I look the €215 million implies a €42 million reduction in net cash from the figures you had in December.

And over this period, you have generated €50 million EBITDA excluding the IFRS 16 impact. And assuming the €9 million financial expenses and €10 million taxes and the fact that you have not given any -- you have not distributed any dividends and working capital is flat versus December.

This makes a difference of €78 million in cash consumption that I would like to know, if you could provide some color on where does this come from? I don't know if it's higher CapEx or FX impact, hedging derivatives, or if you could provide some information on that thing, please?

Thanks.

Okay. No -- I mean, let me start by the end.

I mean, no higher CapEx. We have no CapEx.

No FX impact. The way we manage our FX is very moderate, no FX impact.

I mean, for such a -- but you have to realize in this business, I mean, it's not very smooth. I mean, every quarter we have to pay and receive more than $400 million every quarter -- every month more than $400 million.

Just to bill and I know one, but I don't want to say names. Just a couple of deals that have come on the 28 of September and/or on the 3 of October changed the whole picture.

It's just got -- it has to do with the nature of our business. And it's not very smooth.

Some other quarters you see that all of the sudden you have according to projections $50 million or $60 million more cash. So, I mean, there is no -- the reason there is a mismatch on new projections, but cash has nothing to do with investment or CapEx or FX.

It has to do with the inflow and outflow of our -- from a payments to provide to our construction companies, our suppliers and payments from our customers. It makes it very difficult.

Okay. Thank you very much.

Thank you very much Alvaro.

Hi. Good afternoon.

Two question from my side. You have referred to the RAPID refinery.

It's been two years, almost already in mechanical completion. I would like to know if also you have expressed that you are very positive on the test plant and so on.

If you expect a quick delivery and if it's having a significant negative impact on profitability? I would also like -- sorry

Which project are you mentioning?

It's the RAPID refinery for PETRONAS PIC. And the second question would be, a confirmation of it that you have successfully executed there, Westlake enquiry process.

So it seems like you're trading off margins for new awards? No I have the impression that you're gaining contracts on -- with customers in which you've been more sensible to margins.

I would like to know, if contracts with some of the clients which you have only had one at the moment, you're having higher margins, although I know it's very complex questions, but I would like to see that maybe in the future and considering that you are opting for reimbursable projects, lower risk that if you're happy trading off margins for risk and volume? Thanks.

Okay. Let me tell you where we are in RAPID, which is for PETRONAS.

In RAPID, we have settled everything. We're done.

We're doing the running tests in all the units in most of the running test of the unit has -- are okay. And that is just one unit, that we have to do with the customer and that's not different running tests because the feedstock.

I mean, the product and I don't want to name other contractors. It's not getting.

So, we have to find ways of testing with other products. So that has nothing to do with our units.

I mean, our -- it has been a very successful project. I think it's been a fantastic project.

We have zero risk in that project. And we have settled everything with that project and we may have had now some very marginal.

When I say marginal cost because, we're still supporting the project, I mean the customer in the best runs one of the units that customer is not able to provide the correct feedstock because some of the contractors have had problems upstreamed ahead of us, so not an issue with them. I mean it's a pleasure.

It has been on a very good customer and a very good project challenging, but very successful. And probably that has been a very good start of our success with Exxon and today, our success with Pertamina and Rosneft.

So that's good. If we are going to be trading less risk for margins, I mean, it's a mix.

I mean, I think we're moving -- this is not a strategy. I mean we're gaining credibility in doing jobs in a more front-end and more engineering and that has to be -- and it's always a trade-off.

There has -- I mean we are a very good company to do fits. And as you have seen over the last two years, we have done, awarded and delivered a lot of fits.

Now, we have been awarded a huge one that we have to do more than one million man-hours of engineering. But that's netted trade-offs.

That's decision of ourselves in the real market. And so today we're going to be working in that market.

And probably in two years, we're going to be bidding for the customer one of the units, as we think we know how to run that risk. So the healthy thing is to be built.

To be able to do EPC, if this is a market that you realized construction is too risky, it's not going to be a trade-off. It's going to be a no.

I mean -- I'm not going to do construction if I have already talked that it's impossible to do construction in a market for example Canada. I'm not going to do construction in Louisiana, for example casf out.

So I'm going to do EP and support him under construction. I'm going to do construction in Kuwait and I'm doing it quite well.

So it's understanding the customer, understanding the market, understanding the risk and trying to have a healthy mix. But I will not -- there is not a strategic trade-off move on PR.

I think we're a better company, a stronger franchise. We are getting more demanded for deep fit engineering and we have to pull to analyze.

And if we like it, we can make money, we'll do it. I don't know if that answered.

No, no, absolutely. Maybe the follow-up on Sasol.

The project in Louisiana has been delivered already?

Yes. I mean that's -- I mean that job was a job for Sasol with some alcohol plants and whatever it was it's not very big.

There was no construction with engineering and procurement lump sum. And then, once we finish, we've been supporting.

We still sometimes are supporting the customer, renting them services on construction management. But we never ended to construction risk and our job is finished.

Okay. Thank you very much Juan.

Sure.

Okay. There is no more questions.

I was forgetting to say goodbye and I'll be talking to you probably February next year with year-end results. Thank you, very much for listening.

Thank you very much for posting questions and looking forward to you next.