Ferrovial SE Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Growth in all business divisions, strong revenue in North American highways. Construction had adjusted EBIT margin of 3.3%. Net cash position of €1.9 billion due to divestment of AGS, equity injections in NTO, and buyback program. Announced acquisition of up to 5.06% stake in 407 ETR and opening of Silvertown Tunnel. Detailed performance of 407 ETR, including toll and fee revenue growth, traffic considerations, and dividend details. JFK development progress and Dalaman's traffic performance. Construction order book at peak level with focus on local markets.

Segment Performance

• Highways: Revenue growth of 14.1% driven by U.S. managed lanes, with U.S. highways revenue growing 19.1% vs Q1 2024, making up close to 98% of highways revenue. Adjusted EBITDA for U.S. highways represents 98% of total highways adjusted EBITDA and grew 14.6%. The 407 ETR had double EBITDA growth, toll revenue up 23.6%, fee revenue with higher growth. Dallas Fort Worth manage lanes had strong revenue per transaction despite weather impact. I-66 and I-77 also showed solid performance.
• Airports: JFK had 6% physical progress, 18 airlines with agreements (13 executed, 5 letters of intent). Dalaman's traffic was higher than expected but not representative of full tourist season.
• Construction: Steady profitability with Budimex, Webber, and Ferrovial Construction showing solid margins. Order book at peak level, concentrated in U.S., Canada, and Poland, with lower weight of large design and build projects.

Guidance

• Long-term target of 3.5% adjusted EBIT margin. Strong start to the year with 7.4% revenue growth, 19.1% adjusted EBITDA growth, and 28.3% adjusted EBIT growth. Expectations for pipeline projects like I-24, I-285, etc., to be in the first half of 2026. Confidence in order book with limited exposure to macroeconomic uncertainty due to price protection and indexation in various regions.

Risks

• Macroeconomic uncertainty affecting construction performance. Weather impact on traffic comparisons. Potential political backlash on toll increases in some assets. Labor availability issues in construction due to changing immigration policies.

Question and Answer

Q: Could you help with the math of Schedule 22 and interpret Webber's double-digit revenue growth versus the construction industry?

A: Regarding Schedule 22, there's wide variance in consensus estimates. Webber's strong performance is due to its focus on typical road and civil construction contracts with less complexity.

Q: Dig into strong pricing in Q1 across 407 and managed lanes, and elasticity of assets?

A: Customer segmentation with tailored promotions in 407 and differentiated heavy traffic components in managed lanes. Elasticity is low as trips are necessary. U.S. investors like the business and pricing dynamics.

Q: Comment on I-77 revenue growth in March vs 1Q average and labor availability in construction?

A: I-77 benefited from early reopening of I-40, but labor availability issues in construction are not currently pressing with validated workforce.

Q: Expectations for 407 traffic to 2019 levels, consolidation of 407, and NASDAQ listing liquidity?

A: No guidance on traffic to 2019 levels. No specific appetite for consolidating 407 for cosmetic reasons. Liquidity in U.S. is above NASDAQ minimum, with focus on dividend guidance.

Q: Acquisition of 5% stake in 407 ETR, governance, and equity IRR?

A: Transaction details to be confirmed upon closure. Confidence in double-digit equity IRR for new projects, though higher for brownfield vs greenfield.

Q: Sensitivity of U.S. managed lane traffic to GDP, user profile, political backlash on 407 tolls, and airport project IRR vs managed lanes?

A: Traffic positively correlated with regional GDP. User profiles vary by managed lane. No current political backlash on 407 tolls. Airport project IRR depends on capacity and demand dynamics vs managed lanes.

Q: U.S. managed lane traffic sensitivity to GDP, user profile of managed lanes, political backlash on 407, and 407 acquisition steps?

A: Traffic positively correlated with regional GDP. User profiles vary by managed lane. No current political backlash. Acquisition of 407 stake is a two-step process with incentives to close earlier.

Q: Big picture on North American motorways pricing, dividend stream refinancing?

A: Pricing dynamics tied to mandatory modes and underlying population/business growth. No specific comment on dividend stream refinancing at this time.

Q: Mandatory pricing expansion, 407 average revenue per trip, Schedule 22 development?

A: No guidance on mandatory pricing expansion. 22% revenue growth not extrapolatable. Schedule 22 expected to continue as it's needed to maintain quality product.

Q: Pipeline details for new assets?

A: Public pipeline includes projects like I-285 East/West, I-24, I-77, I-495 in U.S. managed lanes; JFK development in airports, with bespoke opportunities commented on when public.