Ferrovial SE Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Results: Strong results across segments. Received dividends from infrastructure assets (€490 million in first 9 months of 2024), proceeds from asset sales (€211 million from IRB stake, €176 million from Amey Vendor loan, €40 million from Serveo), and focused on shareholder distributions (€749 million buybacks) and investments (€652 million in IRB Infrastructure Trust, €319 million in NTO equity).
• Toll Roads Details: U.S. Toll Roads growth, 407 traffic and revenue breakdown, Dallas Fort Worth managed lanes revenue per transaction growth, I-77 revenue growth and hurricane impact, I-66 traffic stabilization.
• Airports Details: Heathrow passenger numbers, AGS and Dalaman growth, new Terminal 1 progress.
• Construction: Profitability improvement and healthy backlog with no material projects transferred affecting margins.

Segment Performance

• Toll Roads: The division had strong double-digit revenue and EBITDA growth. U.S. Toll Roads saw revenues and EBITDA grow over 20%. Dividends from North American assets in the first nine months of 2024 were €444 million vs. €393 million in the same period last year. The 407 had a 16.1% growth in total revenue, with toll revenues outpacing other quarters. Dividends paid in the first half and third quarter of CAD 175 million and CAD 225 million, with a proposed dividend for the last quarter of CAD 700 million. Dallas Fort Worth managed lanes had solid revenue per transaction growth. I-77 had revenue growth but was affected by hurricanes, while I-66 saw traffic stabilization.
• Airports: Heathrow had record passenger numbers but revenue and EBITDA affected by aeronautical tariff gliding path. AGS had high-single digit revenue growth and adjusted EBITDA above 20%, led by Glasgow. Dalaman had the busiest 9 months ever with 7.4% revenue growth, and new Terminal 1 is on track.
• Construction: Had a 3.9% EBIT margin in the first 9 months of 2024, with profitability improving and a healthy backlog.

Guidance

• Ferrovial provided a 3.5% guidance for 2024 and is on track to meet it.
• Focus on growth investments combined with shareholder distributions, with a sizable pipeline ahead.

Risks

• Weather Impact: Hurricanes Debbie and Helene negatively affected traffic on I-77 and I-66 in Q3.
• Comparison Effects: Weather and construction works affected traffic comparisons in certain assets, such as NTE traffic impacted by capacity improvement works.

Question and Answer

Q: How do you put yourself in the best position to compete for Express Lanes in the U.S. and thoughts on other investments like data centers?

A: Compete with designed solutions and financial discipline. Looking at other investment opportunities across divisions but no immediate large tickets in data centers.

Q: Impact of construction works on NTE traffic and Schedule 22 on 407?

A: NTE traffic impacted by capacity improvement works, expected to continue until early 2027. Schedule 22 provisions to start in 2025, with loyalty activities playing a role next year.

Q: JV with Interogo Holding and traffic impact on I-66/I-77?

A: JV created to rotate mature assets. Weather had adverse impact on I-66 and I-77 in Q3 but size of impact not quantifiable.

Q: Capital allocation and special dividend scenario?

A: Focus on investment, remuneration, and buybacks, with decision on special dividend likely in February 2025 full year results.

Q: NTO airline agreements and construction segment evolution?

A: NTO above 30% revenues for traffic by 2027. Construction segment has lower weighting of design-and-build contracts, no visibility on average contract size.

Q: 407 ETR pricing and next year's strategy?

A: Pricing affected by various factors, loyalty activities to play a role next year.

Q: Ferrovial construction business evolution?

A: Backlog down 10% year-on-year due to completion of big projects, but order book remains high overall.