Webuild S.p.A. (WBD) Earnings Call Transcript

Good morning, and welcome to the Webuild First Half 2026 Results Conference Call. On today's call, we will have Pietro Salini, Chief Executive Officer; and Massimo Ferrari, General Manager, Corporate and Finance. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Pietro Salini, to begin today's conference. Please go ahead, sir.

Thank you, Zach. Good morning, everyone, and thank you for joining our conference call on our group first half results. Let me start with headline. We are proud to present a very strong first half results that keep us firmly on our industrial trajectory. The environment was demanding, inflation, high interest rates, geopolitical uncertainty and supply chain pressure. On top of that, the 2 NEOM contracts in Saudi Arabia were canceled, yet we did deliver. The scale and diversification of our backlog absorbed the cancellation in full, and our 2023 guidance already reflects it. Let me talk to the numbers. Revenues held at EUR 6.7 billion, in line with the record first half of last year. Profitability improved further. EBITDA margin rose to 10% and EBIT margin to 7%, continuing on the improvement path we recorded in the last years. Our financial position remains strong, a net cash of EUR 110 million with gross leverage broadly unchanged at 2.67x. The order backlog stands at a robust EUR 47 billion, fully covering our 2026 revenue guidance. New orders reached EUR 7.7 billion. We see a strong momentum moving forward into the second half of the order intake. The book-to-bill stood at 1.2x. To summarize, Webuild is diversified and disciplined. No single project or market can affect our ability to create value. We have reached scale and market leadership. Now our priority is to turn that scale into additional value. That is the direction of the new 2026-2029 business plan we will present at the end of September. Deeper vertical integration, technological innovation and profitable growth with one clear aim, stable and predictable cash generation. And we are not waiting to start. Yesterday, we announced a voluntary tender offer for Trevi, the first tangible step of that plan. By acquiring Trevi, we will bring critical high-value expertise in-house, gaining greater control over execution and improving competitiveness in tenders involving complex geotechnical challenges. We will discuss the strategic rationale in details later. So we look to the coming years with confidence. In Slide 5, we show some of our major operational milestone in Italy and abroad for the 6 months. In Italy, we made significant progress on ongoing high-speed rail, Napoli-Bari, Messina-Catania and Salerno-Reggio Calabria and on the new breakwater Fortezza-Ponte Gardena. Abroad, we opened 11 kilometers of new highway lanes in Florida ahead of schedule and inaugurated the Senqu Bridge in Lesotho. Two further milestones confirm our credibility and financial discipline. The 2026 Sustainability Report Award and the successful EUR 500 million bond issued in May, a clear sign of investor confidence. Our track record is recognized internationally. We are #1 in water, #1 in Italy and #6 in Europe. Australia continued to be one of the most important growth markets, and we are the third player there. I now leave the floor to Massimo for a full overview of the financial results.

Good morning to everybody, and thank you, Pietro. Before I go through the results, let me remind you that we are presenting the recurring performance of the business. You can find details of the adjustments in the presentation appendix. Let me start with Slide 7. At the top line, we maintained the same record level of first half 2025. At EUR 6.7 billion, the group shows how it can maintain production levels and absorb the impact of the 2 very important NEOM contracts being canceled by the client, an impact of around EUR 250 million in the first half and more than EUR 550 million for the full year. The strength and diversification of our backlog protect our volumes and margin. Margins improved. EBITDA was EUR 673 million, up 14% year-on-year. EBIT was EUR 464 million, up 15%. EBITDA margin increased by 120 basis points to 10.1%, and EBIT margin by 90 basis points to 7%, both versus first half of 2025. The improvement reflects strict cost discipline and the effectiveness of the contractual and operational solutions we have adopted. Turning to Slide 8. More than 90% of revenues were generated in low-risk countries with Italy, North America and Australia, the biggest contributors. More than 60% comes from international markets with revenues well balanced by geography. First half production was driven by our largest projects, already mentioned by Pietro, in Italy, in Australia and also some other in U.S. The revenue contribution of the top 10 projects down to 53% shows our market diversification matters. It reduces exposure to local shocks, mitigates project-specific risk and makes the group's revenue profile more balanced and resilient. By business area, sustainable mobility and clean hydro energy are the largest contributors, representing together around 90% of the revenues for the period. Let's see in detail some lines of the P&L in Slide 9. Financial income was EUR 49 million, down EUR 11 million, mainly due to a reduction in average balances of bank deposits. Financial expenses increased by EUR 93 million, this increase is non-cash. The larger part is a deliberate trade-off in favor of cash by waiving interest on some receivables under settlement agreements. We accelerated collections, added new work to our backlog and reduced our claim exposure. The remaining part is a genuine one-off write-down of certain financial receivables. The net exchange result was positive for EUR 32 million, impacted by the performance of U.S. and Australian dollar and the Colombian peso against the euro. These effects tend to end up being neutral over the course of the year and most of them are nonmonetary. Proactive decision to derisk the portfolio and protect future profitability on certain projects completed or nearing completion in North America and Australia had an impact on investment results. Disposal is now closed with no further losses expected. In short, the underlying quality of our results is intact. Net income stood at EUR 113 million. Moving to Slide 10. We highlight our continued financial discipline. We maintained a positive net cash position of EUR 110 million. It's the eighth semester in a row that we achieved a positive net cash. This marks a structural change. It stood at EUR 363 million at year-end 2025. The decrease reflects the typical seasonal absorption of working capital that we normally see in the first half of the year. The decrease also reflects around EUR 210 million of CapEx in the first half. For the full year, we expect a total CapEx of around EUR 700 million. At the same time, we preserved a disciplined leverage profile. Gross debt was EUR 3.3 billion at the end of June 2026. The increase versus end 2025 reflects the impact of the new bond issue. We also assumed the Panama Canal bank debt, which was previously accounted for at equity. What matter most is the gross leverage that remained almost unchanged at 2.67x. In fact, the increase in gross debt should be seen as an opportunistic prefunding transaction. We tapped favorable market windows to give greater flexibility and create additional liquidity while keeping the net position under control. You can see on Slide 11 on how the recent bond issuance has further strengthened our financial profile. The EUR 500 million bond issued in May and maturing in 2032 attracted orders exceeding 5x the offer size, generating record demand of approximately EUR 2.5 billion. Around 75% of investors were from outside Italy, mainly from U.K., France and Germany. The issue helped us extend the maturity of our debt. We will have the first expiration date material in 2028. Today, more than 90% of our corporate debt maturities start from the fourth quarter of 2028 onwards. This also gives us greater long-term financial flexibility. Our structure is predictable with 95% of debt at fixed rate. The average cost of debt remains at 5.1%. On liquidity, we have a very strong position, supported by EUR 2.4 billion of cash and around EUR 1 billion of fully undrawn revolving credit facilities. This financial strength is recognized by the rating agency, as you know, both Fitch and Standard & Poor's confirm Webuild with a BB+ rating and stable outlook. I thank you for your time. And Pietro, over to you.

Thank you, Massimo. Let's move to Slide 13. Our strength lies in the quality and visibility of our order book. As shown at the top of the slide, the total order backlog stands at EUR 53.7 billion, including EUR 47 billion for construction and EUR 7 billion related to concession and operation and maintenance activities. If we include the projects awarded after June 2026 and the best offers already secured, construction alone rises to approximately EUR 49 billion. This means that despite the termination of the 2 NEOM contracts, which reduced it by around EUR 3.8 billion, the overall backlog remains at a very significant level, almost in line with last year. It continues to provide substantial visibility on future revenues. 2026 target revenues are fully covered and large part of our business plan. Beyond this size, quality matters just as much. It is a high quality, supported by contracts with price adjustment mechanisms that provide protection against inflation. It therefore, offers not only coverage, but also greater predictability in project execution and profitability. Turning to Slide 14. What keeps this backlog replenished is our commercial momentum. In the first half, we already secured EUR 7.7 billion of new orders. It represents a book-to-bill of 1.2x over the 6 months. The majority of the new orders came from our core markets. Italy contributed EUR 3.6 billion; North America, EUR 2.6 billion; and Oceania, EUR 1.2 billion. Among the projects awarded, there are Rome Metro Line C extension in Italy, Ohio River Tunnel project in the United States, Kwinana gas power plant in Australia. And we ranked the New Zealand market with an award of Christchurch Men's Prison. The pipeline ahead remains strong, as I'll show you on the next slide. Let's move on Slide 15. The megatrends determining investment in infrastructure remain unchanged. This includes climate and energy transition, water security, urbanization, defense and digital infrastructure. Webuild is well positioned to address them all. Let me add some color by region. In Italy, our home market demand remains strong, supported by national new transport programs and growing investment in hospitals and sports facility. Across the rest of Europe, infrastructure renewal, rail modernization and higher defense spending are driving demand. In North America, large public programs and PPPs are funding transport and water. Australia offers strong opportunities in the energy transition and transport, while Saudi Arabia continue to build out an integrated urban system, connectivity and social infrastructure. Beyond these core markets, we monitor other geographies where our local experience can deliver the right risk return balance. Our commercial pipeline stands at over EUR 108 billion. Of this amount, we have EUR 19.6 billion of tenders already submitted and awaiting announcement. While a further EUR 14.2 billion relates to tenders we are submitting. Importantly, the pipeline includes a number of major contracts where we are already strongly positioned to win. There are projects where we build is already well positioned for the work. Other where the tender has already been won and the project is progressing through the design phase. These contracts will be included in the backlog once the design activities are completed. Lastly, on Slide 16, you will find our 2026 guidance. We expect revenues at more than EUR 13.6 billion, in line with the record level obtained in 2025. EBITDA is expected at more than EUR 1.2 billion and a net cash position at more than EUR 300 million. Let me put this outlook in perspective. Early this year, around EUR 3.8 billion of backlog was canceled and yet our performance and our guidance remains strong. That is the real message. The scale we have reached and the diversification of our backlog allow us to absorb even extraordinary events without changing course. Our outlook is not based on optimistic scenarios of future upside, but on a solid foundation of existing backlog, visible commercial opportunities and operational initiatives that are already underway. We have built something solid and hard to replicate. Now our focus is clear, turning that scale into additional value with the same discipline that brought us here. We are finalizing our 2026-2029 industrial plan, which we will present to the financial community at the end of September. It will pursue the priority of a stable and predictable cash generation also through vertical integration, technological innovation and profitable growth. And in line with the direction of that plan, yesterday, we announced to launch a voluntary tender offer for all the ordinary share of Trevi. Let me be clear, any impact from this offer are excluded from our guidance for the full year 2026. Let's now look at the strategic rationale of the offer on Trevi. Slide 18. Trevi is one of the leading global specialist in underground engineering and special foundation with a unique vertically integrated business model, combining engineering services and equipment manufacturing through Soilmec. This model has been built over more than 60 years and established Trevi as one of the few truly global operators in the sector. The industrial logic of this transaction is straightforward. Special foundation and underground engineering and critical activities in nearly every major infrastructure project and directly influence schedule, cost and delivery risk. Today, these services are outsourced by Webuild. By bringing Trevi's capability inside the group, we would acquire competencies in a highly specialized and a strategically important segment of the construction value chain. It would also secure greater control over execution in terms of process, quality and delivery risk across the group's order backlog. And for Trevi, this EUR 54 billion of backlog is not an abstract number. It's immediate reality. The acquisition would allow us also to be more competitive in tenders involving complex geotechnical challenges. It would enable us to offer clients a more integrated end-to-end solution, improving pricing capability. On the financial side, the cash offer is already funded. The initial financial debt linked to the acquisition is around EUR 500 million, approximately EUR 300 million related to the equity investment that Webuild have and around EUR 200 million at Trevi level following the financial restructuring completed in the first half of 2026. Trevi's stand-alone business plan already envisages the full repayment of its debt over the plan period to 2029. At the same time, the industrial synergies that are expected to generate around EUR 200 million of cash in plan horizon. This, together with additional synergies to be quantified and we build stand-alone capacity to generate cash, will give ample coverage to reduce the leverage within plan. Let's move on Slide 19. Bringing Trevi into the Webuild Group, we generate significant industrial and commercial synergies on both the revenue and the cost side. Through Trevi, we build with internalized high value-added foundation and ground engineering activities that today are largely outsourced to third parties, while Trevi gains direct access to the group global leading platform, accelerating its own stand-alone plan. Overall, we have identified synergies of approximately EUR 80 million to EUR 90 million of additional EBITDA per year on a run rate basis. This estimate is highly visible. More than EUR 60 million of it is tied to work we have already in hand through our current backlog and our short-term pipeline. In practice, these are plug and play. The rest is a deliberately prudent estimates of cost synergies. Around EUR 10 million comes from joint procurement, equipment and fleet optimization and logistics plus a further EUR 20 million from leveraging shared service and standardization of central processes. Together with Trevi's own EBITDA, the transaction would bring to Webuild an incremental EBITDA contribution of around EUR 150 million to EUR 170 million and would be accretive to group's EBITDA margin. Importantly, the estimate does not include further expected benefit, which represent additional value creation potential. These are mainly financial and funding synergies, lower cost of debt and improved access to capital markets and bond financing, thanks to Webuild's standing and the strengthening of risk management, compliance and quality and safety controls through alignment with the group standards. On Slide 20, we show how this transaction creates value also for all Trevi stakeholders. For Trevi and its people, joining Webuild opens a new growth path. The company would gain access to a global platform, operating in around 50 countries with a backlog of EUR 54 billion, more than 85,000 people and decades of experience in delivering some of the world's most complex infrastructure projects. Trevi would plug directly to Webuild project pipeline, gaining volume from day 1 without the commercial cost of winning it. Trevi just completed its financial turnaround as a credible growth plan of its own. With Webuild that path would accelerate. The company would leverage Webuild's international footprint to access new geographies, for example, scaling up in markets such as Australia, where the group has a major industrial presence and to take part in larger and more complex projects. Let me be clear on one point. We do not intend to change Trevi's identity. We intend to protect it and build on it. Trevi would remain an Italian center of excellence with its headquarters, its people and its know-how firmly rooted in Italy, continuing to serve both third-party clients in Italy and internationally, and Webuild projects while benefiting from stronger risk management, compliance, governance and health and safety standards in line with Webuild. For Trevi shareholders, our offer means certainty in a meaningful premium. The consideration is entirely in cash, EUR 4.5 per share, representing a 29.8% premium to Trevi's the closing share price on June 26, 2026, delivering immediate certain value and full liquidity unlike the ICOP offer whose shares are not yet listed on a regulated market. Certainly, value is a key differentiator of our proposal. Let me finish on Slide 21. The transaction is structured as a voluntary all-cash tender offer for 100% of Trevi's share capital, aimed at acquiring control and delisting the company and fully integrating its capability into the group. The proposed minimum acceptance threshold is 66.7%, significantly lower than the 90% threshold contemplated by the ICOP offer. In economic terms, we are offering EUR 4.5 per share, valuing Trevi at approximately EUR 295 million of equity, a premium of 29.8% over Trevi's undisturbed share price and a 14.4% over the value implied by the ICOP offer. Unlike the ICOP proposal, our offer is not conditioned on Trevi's lending bank waiving change of control strikes. It is subject only to customary conditions, antitrust clearance, Golden Power clearances and a material adverse event condition. And as I said, it is based entirely on cash rather than shares whose final value depends on future market performance and liquidity. Put simply, our is a more compelling offer to the Trevi shareholders. Certain cash instead of variable paper, higher value, a lower acceptance threshold and a fewer condition. We expect to file the offer document after the summer, run the offer period in autumn and complete the transaction by year-end. We take this step and the one that we follow in our plan, confident in our ability to meet the challenges ahead in a market that increasingly demand a more integrated approach. Thank you for your attention. We are now ready for the Q&A session. To keep the discussion focused and efficient, we would encourage questions on strategy and the main initiatives supporting the group's current and future financial performance. For any follow-up question on figures, table or specific technical details from the presentation, the Investor Relations team will, of course, be available after the call.

[Operator Instructions] The first question comes from the line of Michele Baldelli from BNP Paribas.

I have a question on the Trevi acquisition. If you can share at this current moment some details about the cost synergies or the top line synergies, just to give a little bit more color on these targets that you gave on the EBITDA, how much is cost, how much is revenues and so on? And the second question relates to the order intake. So basically, just an update on the outlook for the coming few months until the end of the year. If you can provide a sort of color on what could be the book-to-bill expected at the end of the year or what could be the large contracts still ahead that could be got until December? And lastly, the third question relates to the items below EBIT. You are referring to some write-downs of receivables and also interest from customers on the financial expenses. Can you elaborate how much of the total financial expenses was driven by these kind of one-offs, please?

I think that all of these questions were already answered by the presentation. Probably you arrived later. But let's say that starting from Trevi synergies that are with us. We just said that we have synergies that are firstly related to our portfolio, the one that is, let's say, linked to the around EUR 60 million of the synergies comes from the portfolio that we can share immediately with Trevi. It's given on the slides. The rest is deliberate prudent estimates of cost synergies, around EUR 10 million comes from the joint procurement equipment, the fleet optimization and logistics plus a further EUR 20 million from leveraging shared services and standardization of central processes. So this is around EUR 90 million, but we say from EUR 70 million to EUR 90 million. So that's it a prudent assumption of it. Of course, we didn't take into consideration what can happen to our portfolio in terms, of course, of products that significantly demand the role of a player like Trevi for us. So I think this transaction on Trevi, the synergies that we are seeing that bring us an accretive EUR 150 million, EUR 170 million to the group EBITDA is very prudent assumption. This is for Trevi.

Regarding the impact that you mentioned under the EBIT, we already mentioned it but at the level of the net profit that has been impacted by around EUR 190 million of one-off items, we already mentioned that are not monetary. The first part, EUR 90 million is within financial expenses. Most of this is a deliberate trade-off in favor of cash by waiving interest on some receivables under settlement agreements, we accelerated the collection. So we cashed in the money that we expected renouncing to something, but we added the new work to our backlog. You can imagine that we can refer, for instance, to the Metro C project. And we reduced significantly our claim exposure. The remaining part here is a one-off write-down of certain financial receivables. The second part around EUR 100 million is in losses on investments, which reflect the economic effects related to projects that are completed or nearing completion in North America and Australia. Decisive actions have been taken to contain the risk. Regarding the new order...

What order intake we expect to sign in 2026, we have already a very sound pipeline we said during the presentation of tender that have already been submitted in which we had the best offer, let's say, or the sole offer. This has already also happened. We already secured EUR 7.7 billion of new orders since the beginning of the year. We entered the second half with a very solid high-quality backlog of EUR 47 billion. We are very well positioned on several additional opportunities while other water projects are progressing through the design phase and will be added at the backlog once the relevant facilities are completed. As a result, we remain confident that book-to-bill above 1 is achievable.

The next question is from Matteo Bonizzoni of Kepler.

I have 2 questions. The first one relates to the strong EBITDA margin, which you have posted, which is above 10%, which is above, let's say, the usual range, which in the past you were flagging sort of 8%, 9%. So I would like to know what is the midterm sustainability of this 10% plus EBITDA margin? And also if you can explain a little bit more the reason and the origin, let's say, of this very high margin. The second question relates to the offer on Trevi and the rationale. So just to elaborate with you, Trevi is currently an independent special foundation player as it is Keller or Bauer. We have a case of Soletanche, which is below VINCI. But in general, I would say that in the industry, most players are independent. So I can understand that they will gain more opportunity with you, but I wonder if they will lose maybe commercial opportunities outside the Webuild Group because from now on, they will see as a captive player of Webuild. What are your consideration about that? And also, I would like to know the funding. So if you look at the enterprise value of the deal is in the region of EUR 0.4 billion, EUR 0.3 billion, slightly below equity value and then Trevi has slightly below EUR 100 million of net debt. So overall, close to EUR 0.4 billion, which for you in terms of ratio on the EBITDA is 0.3, so not much, but still, I would say, a midsized move. So what are the options which you are considering for the funding of this deal?

Let's start with question on Trevi. It's not the only case of a player of special foundation that is owned by a group that works for the rest of the market. There is VINCI, there is ICS that also in Australia is a specialist. So there are other example of it, very successful for the group, they work for and for the market. So we think that this model is something that gives exactly to Trevi a good benefit to enjoy our platform, which is much larger, of course, than the one they have alone and the fact that they can benefit from our project pipeline, which is quite large. We are one of the largest operator in the world for infrastructure, where, of course, the special foundation market is one of the key factor for success, for competing, for advantages in terms of synergies that can be had together. So I think that the strategy on Trevi is exactly what we need now. I would say also that this idea of investing in the competence line that we will explain further into the business plan presentation, it is, of course, something that is very important for us, not only in the sector of special foundation, but also in the other segments that are important to our clients and important to the projects we work with. We have a very important internal market, internal demand for these specialties that we now have to outsource because we don't have the resources internally. So we will develop this capability internally, not only as an investment on the market of purchasing company, but also creating these specialties internally and dedicating part of our specialized companies to master this competence line. This you will find in more details, of course, in September. So this is for Trevi. For the other question, Massimo, what was--

Margin. How can...

Funding, Massimo. Funding for Trevi.

The funding right now is, of course, debt with a very, let me say, reasonable cost in line with the average cost that we have on the gross debt. And at the end, we expect to finance the acquisition through a capital market source. Is it okay?

Bond?

Bond, right.

Equity -- Okay.

Not convertible, not equity bond.

Because I received a question from some investors. I'm asking because I was receiving this money...

Yes, for sure. It will depend, as Pietro mentioned before, from -- of course, we cannot anticipate which will be the total amount of Trevi shares that we can receive from the actual shareholders. And then we can have also to view from inside the opportunity to reduce to optimize the total leverage of Trevi and the entire group, including Trevi.

The next question is from Enrico Coco.

My question is on the guidance. The guidance on EBITDA looks really conservative because it implies an EBITDA in the second half below EUR 530 million. You did above EUR 670 million in the first half. And usually, in the second half, you have higher values. So the EBITDA is higher compared to the first half. So it seems to me that I'm missing around EUR 100 million on EBITDA on the guidance side. So I would like to understand if there are particular reasons why you are so conservative on the EBITDA.

Yes. The first thing that you have to take into account is when we say EUR 1.2 billion of EBITDA at the end of the year is not negligible if you see as a marginality. And the fact that the second half is less than what is in the first half, depends on the job mix, which is normal related to seasonality and the project that are done by the company and the schedule of this project. The strong 10.1% EBITDA margin achieved in the first half reflects, as I said, a particularly favorable mix, including contribution for projects with higher profitable profiles. We continue to execute the initiatives embedded in our strategy, aimed at increasing profitability, including greater selectivity in new order intake, tighter project execution control and continued focus on cost optimization. As a result, we still expect full year 2026 profitability to improve compared to full year 2025, confirming the structural progress achieved by the group in recent years. Is it okay for you? You further details?

It's okay.