Ferrovial SE Q2 FY2026 earnings call

Overall Performance

• Ferrovial delivered a strong H1 2026 performance, led by outstanding revenue growth at North American highways and stable profitability growth at the construction division.
• Ex-debt cash position (excluding infrastructure projects) was 1.3 billion euros at end-H1. Key cash inflows included 329 million euros in construction operating cash flow, 378 million euros in project dividends, and 96 million euros from divestments. Key cash outflows included 63 million euros in final NTO equity injection, 398 million euros in dividends and treasury share purchases.

Recent Business Developments

• Submitted bids for two U.S. managed lanes projects: I-24 (Tennessee) and I-285 (Georgia), with award results expected in Q3 2026. The firm's bid for a highway availability project in the Czech Republic was ranked most cost-effective, with technical evaluation ongoing.
• Sold two non-core assets: Silvertown Tunnel (UK) and a Chilean transmission line, generating 96 million euros in divestment proceeds.
• Purchased two land parcels for initial data center development: one in Alcobendas (Madrid, Spain) and one in Warsaw (Poland). The Madrid project's first phase will deliver ~45 MW of IT capacity, with plans to bring in partners and recycle capital once assets are mature.

Asset Updates

• The completion remedial plan for JFK Terminal 1 Phase A sets a new beneficial occupancy date of March 2027, with remaining work focused on systems integration, testing, and commissioning. Liquidated damages of 500,000 euros per day apply to the contractor for delays after the original June 2026 completion date.
• Targeted promotional pricing at 407 ETR has successfully reduced Schedule 22 provision costs, and promotions will remain a core long-term yield management tool to maximize EBITDA, attract customers, and manage congestion, beyond just Schedule 22 compliance. The company is testing new promotional structures and loyalty programs to refine user segmentation.

1. Highways:
   • 407 ETR: Revenue grew 18.7% YoY, toll revenue grew 20.2% driven by 2026 January toll rate increases; H1 2026 traffic grew 1.8% from targeted promotions, while Q2 2026 traffic was 2.7% lower YoY due to softer economic activity, delayed construction on alternative highways, and adverse weather. EBITDA increased 24.4% YoY, with a 5.5 million CAD Schedule 22 provision (down from 45.2 million CAD in H1 2025). Dividends paid of 500 million CAD in H1, with an additional 550 million CAD approved for Q3 distribution.
   • Dallas-Fort Worth Managed Lanes: Combined double-digit revenue per transaction growth above inflation driven by improved vehicle classification technology, higher mandatory mode events, and toll adjustments. NTE: H1 traffic declined 2% (Q2 -0.6%) due to capacity construction; adjusted EBITDA grew 14.7% after a 6.5 million USD revenue share impact, distributed 118 million USD (100% level) dividends. LBJ: H1 transactions grew 2.9% (Q2 traffic +6.9%) as I-635 East construction nears completion; adjusted EBITDA grew 15.2%, distributed 61 million USD (100% level) dividends. NTE35 West: H1 transactions grew 0.4% (Q2 -0.2%) due to construction-related bottlenecks; adjusted EBITDA grew 18.6% after a 15.8 million USD revenue share impact, distributed 143 million USD (100% level) dividends.
   • I-66: H1 traffic grew 8.5%, revenue per transaction grew 8.7%, total revenue grew 17.9%, adjusted EBITDA up 24% driven by higher toll rates; distributed 80 million USD (100% level) dividends.
   • I-77: H1 traffic declined 5.2% (Q2 -4.8%) due to lower corridor congestion, tough 2025 comparison post-Hurricane Helene, and adverse weather. Revenue per transaction grew 11.8% from higher toll rates, but adjusted EBITDA declined 5.4% after the revenue share step-up from 25% to 50% (15.6 million USD accrual in H1, expected to normalize over time). Distributed 18 million USD dividends.
2. Airports:
   • JFK New Terminal 1 (NTO): 92% construction complete as of H1 2026; total Ferrovial investment reached 1,041 million euros after the final 63 million euros equity injection. 32 airlines have committed (24 executed agreements, 8 letters of intent).
   • Dalaman Airport: H1 total passengers declined 8.1% YoY to 1.8 million due to the Middle East conflict; adjusted EBITDA was 13.7% lower YoY.
3. Construction:
   • H1 reported revenue grew 7.1% YoY, 9.7% on a like-for-like basis, with a stable 3.5% adjusted EBIT margin (long-term target). Budimex delivered 6.9% adjusted EBIT margin and higher like-for-like revenue. Weber achieved 24.2% like-for-like revenue growth with a 3.4% adjusted EBIT margin from positive operating leverage. Ferrovial Construction delivered 4% like-for-like revenue growth with stable margins. The order book stood at an all-time high of 18 billion euros (up 2.8% like-for-like vs December 2025), with an additional 2.6 billion euros in pre-awarded contracts pending financial close. H1 operating cash flow was 329 million euros, up from negative operating cash flow in H1 2025 driven by prepayments and compensations in North America.

• The construction division's long-term average adjusted EBIT margin guidance is maintained at 3.5%

• Completion delays at JFK Terminal 1 Phase A have pushed the opening date to March 2027, with uncertainty over whether all remaining work will be completed on the new timeline, and potential disputes over liquidated damages with the contractor

Q: The JFK Terminal 1 completion was delayed to March 2027. How much contingency is in this timeline, is there compensation for the delay, and can you comment on H1 construction margins meeting the 3.5% target? / A: The March 2027 timeline is the base case developed with the contractor based on current information. Liquidated damages of 500,000 euros per day apply starting after the original June 2026 completion date, though the contractor may challenge portions of the delay. H1 2026 margins include bidding costs for the I-24 and I-285 projects; expected bidding costs will be lower in the second half, and the 3.5% long-term average margin guidance remains unchanged.

Q: What is your outlook for LBJ traffic growth now that construction is nearly complete, and are mandatory modes imminent? Are you planning to enter the data center sector, and what is the update on the Washington Airport P3 project? / A: LBJ traffic has already improved as construction wraps up, with the full benefit expected in Q1 2027 once all construction in the area is complete. Only minor, non-impactful mandatory modes have been triggered to date, with no significant impact expected in coming years. The firm purchased land for two initial data center projects, with no plans to commit large amounts of long-term capital; it will develop the projects, bring in partners, and recycle capital once assets are mature. The Washington Airport project will no longer be delivered as a P3, so the firm is only considering it as a potential construction contract opportunity.

Q: What is the update on the delayed I-77 South managed lane project, and can you comment on 407 ETR's Q2 financial expense increase and higher Q3 dividend? / A: I-77 South is currently delayed, and the firm is waiting for the North Carolina DOT to release a new timeline and request for proposals. 407 ETR's higher Q2 financial expenses came from additional debt issuance and inflation impacts on inflation-linked bonds, and the inflation effect is not a sustained run rate. No guidance is provided on 407 ETR's future dividend levels.

Q: What are the main drivers of strong revenue growth at Texas managed lanes, and how impactful was new vehicle classification technology? Will 407 ETR toll increases in 2027 be impacted by Q2 traffic declines? / A: Improved heavy vehicle classification technology (implemented across all three assets in 2025) was the largest driver of revenue growth, as correctly identifying higher-weight vehicles increases average revenue per transaction. Additional drivers include more mandatory mode events at NTE and NTE35 West, and annual inflation-driven toll increases. No guidance is provided on 2027 407 ETR toll changes; Q2 2026 traffic declines were driven by temporary factors including slower economic activity, delayed construction on alternative highways, and adverse weather.