Ferrovial SE Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Robust performance across all business divisions in H1.
• Capital allocation included acquisition of additional stake in 407 ETR, divestment of AGS Airports and mining services business, and equity injection in New Terminal One.
• Key Q2 events: Acquisition of additional stake in 407 ETR, divestment of mining services business, sale of remaining Heathrow stake, and shortlisting for I-24 Southeast Choice Lanes bid.
• 407 ETR showed strong performance with revenue and EBITDA growth despite Schedule 22 provision.
• New Terminal One at JFK on schedule, secured airline commitments, and issued green bonds for refinancing.
• Construction had a record high order book of EUR 17.3B, with adjusted EBIT margin at 3.5%.

Segment Performance

• Highways: Revenues grew 14.9% in H1 with adjusted EBITDA up 17.1%. U.S. highways contributed 88% of total highways revenues and 97% of adjusted EBITDA. U.S. highways revenue grew 15.9% and adjusted EBITDA 14% in H1. 407 ETR saw revenue up 19.7%, EBITDA up 13%, with dividends paid and approved. U.S. Managed Lanes had varying performance with revenue per transaction growth despite some traffic declines due to weather and construction.
• Airports: New Terminal One at JFK on schedule and budget, secured 21 airline commitments, issued $1.4B green bonds. Dalaman Airport traffic down 0.3% in H1, but revenue up 10.4% and adjusted EBITDA up 10.9%.
• Construction: Revenues EUR 3,453M, up 2.6% y-o-y. Adjusted EBITDA EUR 191M, up 4.2%, adjusted EBIT EUR 119M, up 11.2%, with a 3.5% adjusted EBIT margin in line with target.

Guidance

• Continued confidence in long-term growth prospects of 407 ETR and Greater Toronto Area.
• Anticipate attractive pipeline of U.S. highways assets, including bids for I-24 Southeast Choice Lanes in 2026.
• Construction maintains a healthy order book and expects limited exposure to inflation.
• New Terminal One at JFK to continue with key milestones and system integrations.

Risks

• Schedule 22 provision impact on 407 ETR's operating expenses and future projections.
• Weather events negatively impacting U.S. Managed Lanes traffic and performance.
• Potential challenges in construction bidding with increased costs and competition.

Question and Answer

Q: Could you shed light on the strong growth in average revenue per transaction in I-77 and I-66?

A: Growth driven by metropolis economic activity, population growth, and ability to capture value through toll rate adjustments and dynamic pricing.

Q: Why did NTE have 13% average revenue per transaction increase despite 4% traffic decline?

A: Due to mix of peak hours, heavy traffic, and mandatory modes despite soft cap.

Q: Earnings from Ferrovial Construction grew in H1 but declined y-o-y in Q2. What drove this?

A: Related to additional costs from utilization, IT systems, and bidding overheads.

Q: Thoughts on TIFIA expansion and environmental impact on projects?

A: TIFIA expansion is positive for project financeability; no significant environmental impact seen yet.

Q: Impact of Ontario removing tolls on 407 ETR traffic?

A: Too early to tell, but past toll removals near 407 had positive evolution.

Q: Factors in determining 407 ETR dividends?

A: Related to asset performance, debt service coverage, and balancing volume growth and pricing.