Ferrovial S.A.

Overview Key strengths Key risks Diversified geographic and sector exposure due to presence in construction and transportation infrastructure segments. Volatility of earnings linked to reduced, although recovering, toll roads and airport traffic following the pandemic and its effect on assets? dividends. Historically stable and solid contributions from toll-road and airport-infrastructure assets. Exposure to the cyclical construction industry increasing potential earnings volatility over economic cycles. Healthy construction order book at a high €13 billion. Earnings sensitivity to cost inflation potentially leading to cost overruns and underperformance in construction. High standing in credit markets and solid balance sheet in net cash position, with exceptional liquidity. Ambitious growth strategy leading to potentially high investments as part of the asset rotation strategy. Weighted average

...The construction division's profitability is performing below our expectations as inflation is weighing heavily on margins. Ferrovial S.A. (Ferrovial) continues to target a 3.5% EBIT margin by 2024, but its performance in 2022 was largely hit by cost inflation. Construction sales were up by about 2.9% in the first nine months of 2022. This was helped by a portfolio churn in the Budimex subdivision, which more than offset the negative effect of disposals and progressive withdrawal of nonresidential construction activity in the Webber subdivision. However, the construction division's cash flows were substantially reduced by price increases of inputs such as steel, materials and supplies, labor, and energy, which, alongside disposals, greatly affected profitability. Profitability was down to a 0.8% EBIT margin in the first nine months of 2022 from 2.5% in the same period in 2021. The group is implementing mitigating measures such as collecting claims and enforcing indexation formulas, which...

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