Técnicas Reunidas, S.A. (TRE) Earnings Call Transcript

Hello, and good morning, everyone. Welcome to the presentation of TR's results for the full year 2025. As always, our Chairman, Juan Lladó, and our CEO, Eduardo San Miguel, will be conducting it. The session should run for roughly 25 minutes, and once our Chairman has delivered his closing remarks, you'll have the chance to ask your questions. At this point I'll hand things over to our Chairman, Juan Lladó.

Hey there, everyone. As usual, as Antonio mentioned, Eduardo San Miguel and I will be guiding you through the key points we'll be covering in today's presentation. First, I'll take you through the main financial and commercial milestones we achieved during this 2025 year. Eduardo will then add a great deal more detail and color to all of this. Eduardo will also carry on with the financial section of the presentation, and finally, I'll wrap up with some financial remarks. Okay. Here, this one is different from other presentations. Let's begin, which I think is a genuine highlight, with TR's financial performance. Financial performance in 2025, which has been extremely solid, and has definitely beaten all initial expectations from the very start of the year. As these slides show, 2025 sales reached €6.5 billion, representing a 45% increase compared with 2024, and therefore exceeding the guidance set for the year. Moving to the EBIT level, 2025 reached €291 million, which is 61% above 2024, resulting in an EBIT margin of 4.5%, very much in line with the guidance established for the year. Nevertheless, and that's important to note as well, we gained in nominal terms €57 million above our initial goal, which is due to the sales increase.

To wrap up, net profit came in at €156 million, which marks a 75% rise versus the prior year. Following these results — this performance — it has led, as all of you are well aware, to the early repayment of our SEPI loan, which ultimately happened last December 1st. By repaying that loan, we've gained the financial flexibility needed to reinstate the shareholder remuneration policy, with dividend payments picking back up again in these 2026 year results. This is something new, since we never begin with guidance, but given these solid financial foundations, I'd like to get ahead of it and share our guidance for 2026. We do expect sales to surpass €6.5 billion, with an EBIT margin over 5%, which works out to more than €325 million. For net profit, our guidance projects a figure in the neighborhood of €200 million. It's worth noting that EBIT grows by over 10%, moving from €291 to more than €325. It also matters to see that net profit rises by over 20% as well. That said, 2025 hasn't just been a year of outstanding financial results along with very good execution and performance — but probably, and I think this matters more, that 2025, it's important to state and to explain to all of you, has been a year of quality of positioning and has been a year of a genuine inflection point.

By 2025, we've succeeded in getting TR to the position we envisioned for it. Let me walk you through the reasoning. To start, we've established TR as a significantly stronger player in the Middle East. Next, through leadership in the power business. Third, affirming TR's role as a dependable engineered service partner. Fourth — and this matters a great deal — a really solid foundation in North America. Before Eduardo walks you through the specifics, here are a few examples. On March 25, with plenty of fanfare, we secured the Lower Zakum project award at €3.1 billion. We've had a presence in the Middle East for over 20 years, yet as of today, I can state with confidence that our positioning has never been better. This year we've reinforced our leadership in the power business. Our backlog is strong, and with the combined cycle expansion in Saudi Arabia, along with the new job for RWE in Germany — we're talking Saudi Arabia and we're talking Germany — that confirms we're well placed in this business to grow. Our engineering service wrapped up 2025 with awards totaling €333 million. That's remarkable. It's a remarkable milestone, one that was set just 2 years ago.

What matters most — and this is really significant — is that out of that €33 million, over 70 has come from North America, and that validates our quality and, without question, our room to grow. That's all I wanted to cover in this intro on the financials, our guidance, and where we stand, and at this point I'll hand things over to Eduardo to carry on with the presentation.

Thank you, Juan. Good morning, everyone. As Juan explained, 2025 has been a year with plenty of solid achievements: repayment to SEPI, best-ever EBIT, and refilling the backlog with strategic new projects. There's also a deep transformation process underway inside TR that supports those achievements and is gradually reshaping what Técnicas Reunidas will look like going forward. Several drivers underpin this transformation, but I'd like to highlight four of them. First, growing our services business line. Second, the new strategy for the power division. Third, the leadership position we're establishing in digital, artificial intelligence, and robotics. Fourth, our footprint in the geographic regions where future investments will be most concentrated. In the slides that follow, I'll walk through where we stand on those four drivers, but let me first use this slide to explain why this is a genuine game changer. Expanding the services business line clearly brings a stream of profitable projects with lower risk, yet it's also the route into the US market and a way to remain active in energy transition. The new power strategy — tied to the spinoff of our power unit, which we expect to wrap up before summer — well, it serves a purpose: maximizing opportunities in this sector through more resources devoted and greater focus.

By putting money into artificial intelligence, digitalization, and robotics, we'll achieve cost efficiencies, boost our competitiveness, and create opportunities for delivering digital services. Above all, it will help reshape how our clients see us. In the end, completing our footprint with a solid presence in the US was essential last year if we wanted to capture immediate future investments. We've succeeded in consolidating our presence in the States. Along with the Middle East, we are where we want to be. Let's take them one by one. First, the engineering services business line. The 2025 figures are good and also promising: €333 million in awards, more than 40 new contracts signed, a total of 11 frame agreements signed with major clients, 23 new clients we have started to work with through this business line. Revenues amounted to €254 million, halfway to our 2028 ambition of €500 million of revenues. Margins are in the range from 25% to 30%. It has definitely been a very, very good year. Second, artificial intelligence, digitalization, and robotics. We launched months ago a project called Reimagine TR, and our conviction is we can fully transform the way of doing projects. It will take time, but in the meantime, it's an unlimited source of cost efficiencies.

What's clear to us at this point is that the moment to invest has arrived, and we're going to do it. That's the reason we've chosen to raise our investment to as much as €35 million annually starting in 2026 and continuing thereafter. That's also why we intend to more than double the personnel dedicated to developing our programs. By the close of 2026, over 400 people will be working on digitalization and robotics. On top of that, clients will cover part of this investment, since digitalization is turning into a source of services contracts with our clients. As a matter of fact, we already hold contracts worth €65 million, with another €50 million currently under negotiation. Whether or not clients pay for it, digitalization and robotics are unquestionably a game changer in our sector. From civil works, structures, electromechanics, procurement, site, and project control — everything, absolutely everything, can be digitalized. As a matter of fact, roughly 60% of the man-hours in our sector can be automated using today's technology. Our internal estimate is that we can capture €200 million per year in cost efficiencies, which will translate into better margins or greater competitiveness, depending on how the market situation unfolds. Either way, we will invest. We have to be ready for the future.

The power sector is our third driver. Our clients are expected to invest $100 billion, $100 billion annually over the next decade. We have a business unit that over the last 20 years has installed 25 gigawatts, which has built a unique relationship with the four existing turbine suppliers: GE, Mitsubishi, Siemens, and Ansaldo. At our Investor Day in October, we set a target of €1 billion per year in revenues. Given the size of the market, that is not a major challenge. To secure achievement of this target, last December we launched the spinoff of this business unit and created TR Power. The new logo is up there in the slide. With more resources, with a sole focus on constructing combined cycles driven by gas turbines, with fully separated financial accounts, with an identity distinct from TR that lets clients better identify the TR Power management team, we firmly believe our target is closer to achievement. Finally, the fourth driver is consolidating our presence in the most promising markets. You have some numbers in the slide. McKinsey provided them in its Global Energy Perspective. They may be slightly obsolete, since they come from 2024, but it is an undisputed fact that a very relevant portion of global investment will take place in North America, mainly in the US, and in the Middle East.

On the Middle East side, over the past 2 years TR has reinforced a position that was already significant in its own right. We're building up engineering capabilities locally. We buy equipment that gets exported worldwide. We put up workshops for manufacturing robotic solutions. We rely on its yards to fabricate modules that are used in other regions. Beyond that, we're carrying out projects that are massive in scale and among the most sophisticated anywhere in the energy transition space. Every one of those factors gives strong grounds for optimism about the Middle East. A pipeline of roughly €35 billion in opportunities lies in front of us over the coming 18 months. Turning to North America, 2025 was a year of consolidation. Strategic framework agreements with the various energy players are already producing meaningful results, with services awards exceeding €70 million in 2025. In addition, these engineering services open the door for us to EPCs, where the opportunity pipeline over the next 18 months is above €24 billion. There's no question that the alliance recently signed with Zachry will let us expand more quickly and on a solid footing. And clearly, the scale of investment in power generation that artificial intelligence is driving will hand us a range of attractive opportunities this year.

Those are the four primary drivers. Let me now go into more detail on the year's financial figures, even though Juan has already offered a quick look at them. We finished this final quarter of the year with sales of €1.9 billion. That marks a 52% rise relative to the fourth quarter of 2024. This robust sales result reflects a healthy delivery of our backlog, the acceleration plans currently being implemented across our Middle East projects, and the continued growth of the power business. EBIT for the last quarter came in at €86.6 million. That is a 74% increase versus the fourth quarter of 2024, and EBIT margin reached 4.6%, making the 13th consecutive quarter of margin expansion. EBIT margin clearly is being driven both by the healthy backlog I mentioned before and the expansion of our services business line. Finally, let's now take a quick look at two key figures of our balance sheet. The net cash position at the end of 2025 amounted to €332 million, reflecting the impact of the early repayment to SEPI. Without this repayment, the year-end net cash position would have totaled €507 million compared to €427 million we had the year before. Regarding equity levels, we ended 2025 with €564 million, a very, very robust figure.

That's the reason why, once the SEPI loans have been repaid, TR will bring back its remuneration policy, with a commitment to a 30% dividend payout against fiscal year 2026 results. A final decision on a possible interim dividend is going to be taken after summer. Now let me hand the floor back to Juan for his closing remarks. Okay.

Thanks, Eduardo. Let's wrap up by saying that 2025 has without a doubt been an extremely solid year. As Eduardo and I have both put it, our transformation has hit a genuine inflection point over this year. We've laid the groundwork for profitability and growth. As things stand, we've got the product, we've got the quality, and we've strengthened considerably across regions and markets, plus — crucially — very capable people. On that note, and this is what I mentioned earlier, for 2026 we're able to project revenues above €6.5 billion and, as I said before, EBIT surpassing €325 million, with a margin over 5%. I'd also like to point out that finishing 2026 with €6 billion in new awards ought not to be much of a stretch. It isn't a big stretch, though it is still a challenge — just not a big one. €7 billion of new awards. Did I say six? That was a Freudian slip. Six, six, €6 billion... No, no, seven, €7 billion, €7 billion, €7 billion. That probably tells you six is very, very easy. Our target is seven, and normally we always get that question, so before you ask it, we chose to let you know that we're aiming for €7 billion of new awards.

To wrap up, I want to say that the TR transformation is genuinely gaining momentum. I feel optimistic — extremely optimistic — since our future has never been, and has never appeared, more full of promise. Many thanks, and at this point we're here and glad to take whatever questions you'd like to ask.

Thank you. Ladies and gentlemen, we’re now starting the question-and-answer portion. Should you want to ask a question by audio, kindly press star one on your telephone keypad. If you’d like to take your question back, you can do that by pressing star two to cancel it. As a reminder, that’s star one to sign up for a question. Our first question is from Ignacio Doménech at JB Capital. Please go ahead.

Morning, and thanks to Juan and Eduardo for the presentation — congratulations on these results. Two questions from me. First, regarding that €7 billion of awards you expect in 2026: I imagine your visibility there is quite strong, so could you give us some color on how those awards break down, perhaps the weighting between services and EPC? Looking at how 2025 played out, with certain clients asking to speed up some of these projects, and given that €7 billion figure, do you think 2026 might track along a similar path — the same trajectory as 2025 — and is it possible the guidance you've set for 2026 ends up being revised as the year goes on? My second question concerns Teeside. From the annual report, I saw that the final decision is anticipated in 2026 — do you have any visibility on that, or any details you can share? Okay, thank you. Thanks a lot.

It's reassuring to hear that you now see it as €7 billion. To be candid with you, I believe our visibility across that entire €7 billion is quite solid and clear. The main reason is that anything tied to power is booming right now. We're engaged in quite a few projects. In fact, we've already been awarded certain projects that now need to be converted into EPCs, and that will likely take place by the end of this year or in early 2027. A meaningful share of that €7 billion is going to come from the power division, and there's little serious question about reaching that target. As for the traditional businesses — oil, gas, petchem, LNG — once again, I'd say visibility is quite high. We're already involved; in fact, we're already bidding on some very significant large projects, primarily in the Middle East. The outlook is very favorable. We genuinely think our pricing is competitive, we're executing the types of projects where we're the experts, and we have the client's recognition. To be honest, turning all our expectations into reality is always a challenge, but frankly, we think visibility on the €7 billion is very clear.

Obviously, it has to get done. As for 2025, that guidance is low... I have to acknowledge that in giving guidance this year, we might appear somewhat conservative, since we've exceeded our prior guidance three times running, but we're attempting to be honest about the figure we're providing for next year. I think to hit €6.5 billion of revenues — well, we might be a touch above that if everything goes right, but for your estimates, your models, 6.5 is the right number. We didn't address the last question because we think you're asking about dividends. Is that right?

No, no. It concerns the ruling on Teeside in that litigation — I believe the date falls in the first semester of 2026. I'm just wondering whether you have any visibility on that, or anything you could share, okay, any potential upside there or...

We feel good about how this arbitration will ultimately resolve. We've been telling the market that for quite a while, but at this point the only visibility we have is that a final outcome is expected next — I believe at the end of March. That matter is highly confidential. I'm not able to go into further detail.

Got it, thanks. I really appreciate the questions.

Thank you.