Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tecnicas Reunidas SA (TNISY, Financial) has introduced a new strategic plan called SALTA, aiming to double operating margins to 8% by 2028.
- The company reported a solid financial performance with a revenue of EUR 2.1 billion and an EBIT of EUR 84 million for the first half of 2024, maintaining a 4% margin.
- Tecnicas Reunidas SA (TNISY) has secured significant contracts, including a EUR 100 million service project in North America and a EUR 1.2 billion share in a joint venture with Sinopec for Saudi Aramco.
- The company is expanding its presence in North America and focusing on decarbonization, particularly in hydrogen and carbon capture, aligning with global energy transition trends.
- Tecnicas Reunidas SA (TNISY) has a strong order backlog close to EUR 11 billion, indicating a healthy pipeline of future projects.
Negative Points
- The company faces challenges with manpower shortages, particularly in less complex engineering roles, although it is addressing this with global branches.
- There are concerns about delays in investment decisions in sectors like steel decarbonization, which could impact project timelines.
- Hyperinflation in countries like Argentina and Turkey has negatively impacted financial charges by EUR 6.6 million.
- The refining division reported a negative EBIT margin of -1%, attributed to increased costs in the final stages of project delivery.
- Despite a strong pipeline, the pace of project execution and investment decisions in new technologies like blue ammonia is slower than expected.
Q & A Highlights
Q: Can you discuss the EUR100 million engineering services contract and its impact on working capital? Also, what other projects are in the pipeline?
A: Juan Lladó, Executive Chairman, explained that the contract is similar to a previous one with INEOS, focusing on home office engineering for about two years. It is a cost-plus contract, meaning no significant working capital impact. The company is also working on early-stage projects in the US and signing framework agreements with clients, indicating a positive outlook for future projects.
Q: Can you provide a breakdown of the backlog and comment on industry capacity issues?
A: Eduardo San Miguel, CEO, estimated that 35% of the backlog is in the engineering phase, 40% in procurement, and 25% in construction. He noted that while there is a scarcity of manpower, the company has mitigated this by opening branches, particularly in India, and through its alliance with Sinopec, which helps address manpower needs.
Q: What is the status of the dispute with Sonatrach in Algeria and the Hassi project?
A: Juan Lladó stated that the company maintains a good relationship with Sonatrach and is positive about re-launching the Hassi refinery. However, he refrained from commenting on the Touat Gas dispute due to ongoing litigation.
Q: Can you provide insights into the steel sector's decarbonization progress and the outlook for carbon capture and hydrogen projects in North America?
A: Eduardo San Miguel mentioned that while there are some delays in the steel sector, projects are progressing as expected. In North America, there is significant interest in blue ammonia projects, with many early engagements and framework agreements in place, although final investment decisions are taking time.
Q: Can you comment on the EBIT margin by division, particularly the high margin in petrochemicals and the negative margin in refining?
A: Eduardo San Miguel explained that the negative margin in refining is due to costs incurred to meet project deadlines. The high margin in petrochemicals is attributed to specific projects, and the company expects the margin to remain solidly above 20% for the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
