Half Year 2017 Salini Impregilo SpA Earnings Call

Jul 26, 2017 AM EDT
SAL.MI - Salini Impregilo SpA
Half Year 2017 Salini Impregilo SpA Earnings Call
Jul 26, 2017 / 04:30PM GMT 

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Corporate Participants
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   *  Fabrizio Rossini
   *  Massimo Ferrari
      Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate
   *  Pietro Salini
      Salini Impregilo S.p.A. - CEO, President & Director

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Conference Call Participants
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   *  Alessandro Poggi
      Banca Aletti & C. S.p.A, Research Division - Research Analyst
   *  Alessandro Tortora
      Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst
   *  Andrea Balloni
      Fidentiis Equities S.V.S.A., Research Division - Analyst
   *  Bruno Permutti
      Banca IMI SpA, Research Division - Research Analyst
   *  Giuseppe Mapelli
      Equita SIM Spa, Research Division - Analyst
   *  Gregoire Thibault
      Natixis S.A., Research Division - Analyst

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Presentation
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Operator   [1]
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 Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the First Half 2017 Financial Results Conference Call. (Operator Instructions)

 At this time, I would like to turn the conference over to Mr. Fabrizio Rossini, Head of Investor Relations of Salini Impregilo. Please go ahead, sir.

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 Fabrizio Rossini,    [2]
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 Thank you, Julie. Good afternoon and good morning, everyone. And welcome to Salini Impregilo first semester 2017's earnings conference call.

 Our call today is hosted by Pietro Salini, Chief Executive Officer. Joining him for the presentation are also Massimo Ferrari, CFO and General Manager; and Alessandro De Rosa, Deputy General Manager.

 Before we start our call, let me remind you of the usual housekeeping safe harbor notice. Any forward-looking statements embedded in today's presentation and conference call remarks are based on our current expectations and planning assumptions subject to risks and uncertainties. The actual results may differ materially due to factors mentioned in the press release issued today and discussed in this call.

 Let me also remind you that the recording file of today's presentation will be available shortly after and can be accessed through the Investor Relations section of our website.

 After this brief introduction, I would like to turn the call over to Pietro Salini, CEO, for his presentation. Thank you.

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 Pietro Salini,  Salini Impregilo S.p.A. - CEO, President & Director   [3]
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 Good evening, everyone. And good morning to those who are dialing in from the other side of the Atlantic. Thank you for taking the time to participate in this conference call on our results for the first half of the year 2017.

 Slide 3. The infrastructure market continues to remain solid and to provide plenty of business opportunities. We can rely on our very strong pipeline of commercial activity with more than EUR 40 billion between tenders awaiting outcome, tenders preparation and prequalification. However, simply growing is not enough. We decided to carefully select where we want to grow. And we are committed to reduce the overall risk profile of the company by employing a rigorous process of project selection by expanding in lower risk areas such like the U.S. and by reducing the incidence of the top 10 projects on total revenues.

 Once again, our group has proven its ability to win contracts, deliver on its projects and meet its targets. It has also demonstrated its knowledge of the market, taking key strategic decision at the right moment. Our first semester results showed good process across all metrics. New order year-to-date, including variation orders, is almost EUR 4 billion, half of which was made by Lane, which showed an increase at almost 60% year-on-year on a stand-alone basis. Lane entered the Salini Impregilo perimeter only 0.5 year ago, but since then we have been able to increase our backlog by 40%, passing the EUR 3 billion threshold.

 Consolidated revenues increased double digit year-on-year, making us confident to reach the 10% target set for 2017. Lane revenues grew an outstanding 27% and now represents 26% of total group sales, on course to hit the 30% level by the end of the year, which initially represented our goal for 2019. But in the first half, we grew not only in revenues but also EBITDA and EBIT progressed very well, growing, respectively, by 14% and 12% versus first half 2016; and showing the operating results we set to build up progressively as the business develops. Our bottom line grew a healthy 48% year-on-year.

 Finally, we strive always, preserve a balanced and fine-tuned financial structure. On this line, we managed to improve our financial position by EUR 51 million in respect of the same period at prior year; and to preserve our gross debt roughly at a comparable level, supporting the significant growth we reported in our revenues. We reconfirm our business plan target to generate cash this year, and we've got to bring down the gross debt.

 Slide 4. On the next slide, you will see some of the major projects currently we're undergoing. In Riyadh, we are building the longest line for what will become one of the biggest metro networks in the world. Work is half finished. Another metro line nearby Doha is nearly completed, and I must emphasize that our work is progressing without disruption despite the situation in the region. It will be completed next year. In Copenhagen, our biggest project in Europe, we are building a metro line that encircles the city center. It is also nearly finished at 89% and will be delivered to the customer next year. The Grand Ethiopian Renaissance Dam is progressing well, with 60% of the project complete. In California, a state where we're willing to further expand our business, construction of this replacement bridge in Long Beach is halfway to completion. Lastly, there is the Rogun dam in Tajikistan, which we started at the end of last year. It's a very interesting and complex project that may bring further [lots] from the Asian consumers.

 Slide 5, strong pipeline of commercial activity. Turning to Slide 5, I want to stress that we can count on a very strong pipeline of commercial activity spread out across the globe. The U.S. [resulted] the region where we acquired the largest share of contracts, while Europe showed the highest value of project awaiting outcome. Overall, we can boast an ample and balanced array of projects already in the tenders final or to be finalized. Basing on this business opportunity, we are confident to meet book-to-bill target of our business plan.

 Slide 6, first half new orders. In the next slide we'll report the list of new orders year-to-date. We have done outstanding performance so far this year, reaching already circa EUR 4 billion of new orders as today.

 Slide 7. Our strong backlog ensures business plan execution. Page 7 shows our solid backlog has remained a constant for the last couple of years. While Lane performance has been excellent so far, reaching a record backlog of EUR 3 billion during the first half of the year, and we expect it to more than double by 2019, the excellent backlog level we have been able to acquire over the years already granted more than 80% of the business plan revenues.

 Slide 8, improving risk profile. The figures on Page 8 show how the United States has become our single biggest market in terms of revenues. We expect to generate 30% out of our total revenues from this region by the end of this year. The expansion in the U.S. is helping us to reduce the overall risk profile, and it also help us to secure a better cash generation. We are also progressing in improving the risk profile by bringing down the share of our top 10 projects, which so far decreased from 66% that was in 2014 to 49% in the first half of 2017. We expect to decrease it further to 45% by the end of this year.

 Slide 9, Lane upside. On Slide 9, let's turn to consider Lane's performance. New orders rose nearly 60% year-on-year to EUR 1.9 billion, which is more than 80% of what was expected for the entire year. Lane order backlog has grown 20%, reaching a record high of EUR 3 billion by the end of the [June]. As for revenues, they increased by 27% to EUR 781 million from the same period in 2016. And we expect revenues for the second half of 2017 to accelerate due to seasonal factors, especially in plants and paving business for which the more productive periods is the second half of the year. You will remember that Lane is the largest privately owned producer of materials for road pavings. And they also acquired a new asphalt plant in Virginia.

 Slide 10, strategy evolution. The final slide of my presentation illustrates about our strategy going forward. The United States will remain our single biggest market, and we plan to keep expanding there. Now considering the U.S. administration plan to invest $1 trillion in infrastructure, their market is very promising, and it's growing. The FAST Act passed by the previous administration, consisting of $305 billion for transport infrastructure projects financing for 5 years, is starting to produce [its specs]. Most of the infrastructure investment, [will go to] at a state level. California has already approved a 5-year plan which has a budget of $43 billion for infrastructure for road, rail, air and sea travel. Virginia has recently launched the $18 billion in infrastructure investments, and this has been excellent news to us in [playing] at a strong position in the region.

 Besides improving the risk profiling and choose [an healthy] expansion of our business, the other important commitment of our business plan is that of improving our cash flow generation that will grow, thanks to the operational improvement and the better efficiency below the EBIT line. Expansion in new business segments and continuing the asset optimization process while keeping a strict control on the financial structure will contribute towards the goal that we set.

 And thank you for listening to my presentation. I would now let Massimo Ferrari, our Chief Financial Officer, to review our results in further detail with you.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [4]
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 Thank you very much, Pietro. And good afternoon or good morning, everybody.

 We closed another 6-month results in line with our expectation and the business plan, slightly better than the consensus, which shows the engagement of our people and the commitment of top management towards the target that we set for this year.

 Let us take a look, first, at our key financials for the first half of 2017.

 On Slide 12, you can have a look at the P&L, where we reported very good growth exceeding 12% versus 2016 first half figures, resulting in line with our expectation and, as I mentioned before, slightly above market consensus. This rate of growth will probably result higher than that of our major competitors. Our main projects are running according to schedule, with the contribution expected by the management and in our budget.

 Our EBITDA, which closed at EUR 284 million, grew by 14% versus the first half 2016, while the EBITDA margin resulted at 9.3%, comparing favorably to the 9.1% reached on the same period last year. EBIT amounted to EUR 137 million, increasing 12% vis-à-vis the 2016 results, in line with first half revenues growth. EBIT margin reached 4.5%, the same level reported for the same period last year, coherently with the typical seasonality, which sees a stronger second half due essentially to seasonal patterns and climatic reason mainly referred to plants and paving business of Lane.

 Going down to P&L. Net financing costs excluding ForEx effect were EUR 37 million, resulting lower by 21% than the corresponding period last year. In the first half of 2017, we accounted for ForEx losses amounting to EUR 49 million, around, as a consequence of the progressive weakening of the U.S. dollar and the Ethiopian currency. These ForEx losses refers to evaluation of asset, both current and fixed; and as such had no impact on group's cash flow. More specifically, as you can see in the slide, a portion of these losses refer to long-term receivables denominated in dollars or in the Ethiopian currency that have not been cashed in during the first half of the year but were valued at the lower amount due to the depreciation of the denomination currency. On the other end, another portion related to payments received in this currency, mainly in the Ethiopian one, that, however, have not been translated into euros.

 The tax rate was 39%, which showed an improvement versus the rate of the corresponding period last year. Minorities interest amounted to EUR 15 million, also resulting lower than the amount in the first half of 2016; and refers mainly to Lane, Riyadh metro and the Red Line project.

 As a result of these elements, in addition to operational improvement, group's net income results, resulted at EUR 17 million, showing an increase of around 50% versus first half 2016. Going forward, we are actually focusing on operational improvement to become more evident and to benefit our results.

 On Slide 13, you can see our debt maturity profile, which shows the first relevant maturity in 2018, when the receivable portion of our old bond Salini will come to expire, we are considering and we have on the table several options to refinance and extend the maturity of the financial debt in the second part of the year. Over the years, we worked to change significantly the composition of our debt facilities, increasing the fixed portion which today represent over 2/3 of the corporate debt. Our commitment remains to lower progressively the gross debt and improve the gross debt-EBITDA ratio, which will greatly improve our chances to become investment grade at the end of the business plan.

 On Slide 14, you can see also the progress that we made in our asset optimization, as we made also last year when we bought the paving unit arm for Lane in Virginia Beach. We also -- we are also considering to optimize our asset structure by disposing units of our business that are not strategic for the group. Along this line, we have already realized, after the end of the first half, 2 -- the sale of 2 concessions business located in U.K. That will impact our P&L in the second half of the year, realizing a gain of EUR 6 million and improving the net financial position by EUR 23 million. The asset optimization process part of our long-term strategy will continue impacting positively our P&L, with share of contracts and concession already in second half of the year and over the coming years.

 On Slide 15, you can see the cash flow comparison between the first half 2017 and the first half 2016. The operating free cash flow before dividends and acquisition for the first semester 2017 was better than what we generated in the first semester 2016 by EUR 185 million as a result of better operational leverage by EUR 44 million, less cash absorption by working capital of EUR 113 million and lower CapEx of EUR 37 million. Notwithstanding the accomplished double-digit growth, we were able to slightly improve the net financial position and Pietro mentioned before.

 I close my speech confirming the guidance for 2017, giving the floor to the Q&A section. Thank you.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) The first question is from Alessandro Tortora from Mediobanca.

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 Alessandro Tortora,  Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst   [2]
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 I have 3 question, if I may. The first one is on, let's say, the cash generation that we see in, we saw in this first part of the year. What I would like to understand, looking at the lower CapEx that you mentioned, but also the higher cash generation from working capital, if -- what levels of CapEx and also net working capital we can basically project for, let's say, the full year. So if you can give us an update on the CapEx level that you expect, for instance, for this year; and if you also confirm the idea to have a net working capital overall unchanged or a touch better than last year level. The second question is on the financial strategies. I saw a level a bit better than last year, so if you can also update. What's your forecast for the full year around this line? The last point is on the negative impact that we see in the line of the ForEx. I also see in the presentation some impact from Venezuela. Is these -- are these receivable in U.S. dollar denominated? Are these in local currency? Just to have an idea of basically what is happening there because actually these, I will say, are problematic receivables.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [3]
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 Thank you, Alessandro. Starting from the CapEx: We expect to have a CapEx for 2017, just to give you a range, around EUR 250 million to EUR 300 million for the year. We benefited in the first half also from some disposals that come from the efficient management of CapEx that started in 2016. We confirm the target in terms of net working capital maintaining around the same level that we had for the full year 2016. For the financial charges, we expect around EUR 70 million of financial charges for the full year, net, for sure.

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 Pietro Salini,  Salini Impregilo S.p.A. - CEO, President & Director   [4]
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 Net EUR 70 million, okay?

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [5]
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 Regarding the ForEx effects coming from Venezuela, these came from receivables denominated in dollars.

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 Alessandro Tortora,  Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst   [6]
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 Okay. And then just, if I may, a clarification, so assuming basically lower CapEx than your expectation and working capital overall unchanged, the -- minus the impacts of the noncore assets that we should see in the second part, basically why the company is confirming the net debt indication for this year. Because doing the sum of these aspects, you should do, let's say, better, for sure, over last year in the debt level.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [7]
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 We are. Yes, we are still committed to reduce the gross debt for the full year.

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 Alessandro Tortora,  Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst   [8]
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 But -- yes, but also, let's say, with all these factors, you should also, say, improve the net debt picture.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [9]
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 Yes, yes.

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Operator   [10]
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 (Operator Instructions) The next question is from Giuseppe Mapelli with Equita SIM.

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 Giuseppe Mapelli,  Equita SIM Spa, Research Division - Analyst   [11]
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 Just 2 question. The first one is on EBIT margin. I saw that you reached 4.5% in the first half. I would love to understand, what are the projection for 2017? We know that, also on '18, you should consider an improvement to reach the '19. So some flavor on the projection on that front. And then the second question is on minorities. I saw that minorities were lower than in first part of 2016. If I remember well, you were projecting minorities for '17 in a region of EUR 56 million. Can you confirm that figure?

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [12]
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 Thank you, Giuseppe. Regarding the minorities, probably we could end the year in the lower range that we disclosed, so probably more close to EUR 50 million. Regarding the EBIT margin, we confirm what we disclosed and we stated as target for '17 and also as a projection for '18 and '19. As you know, there are so many components on the EBIT. Most of them are under our responsibility, for instance the general expenses, the CapEx management, the working capital also. Other effect comes from the business development and the operations, but we confirm the path that we had in our projections and also for '18 and '19.

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Operator   [13]
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 (Operator Instructions) The next question is a follow-up from Alessandro Tortora with Mediobanca.

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 Alessandro Tortora,  Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst   [14]
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 Just, if I may, a question on, let's say, the commercial opportunity that the company sees in the U.S. If I understood well, in the past, you mentioned that there is the option to work a bit more on the maintenance of some bigger projects. I can easily refer to dams but even bridges. So what I would like to understand is this is something that we just have to remind is something that is the company consider short-term opportunity? Or is it basically just something that could materialize in next 2, 3, 4 years?

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 Pietro Salini,  Salini Impregilo S.p.A. - CEO, President & Director   [15]
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 It's Pietro Salini speaking. What we expect that the market growth will, of course, give the numbers that are necessary to accomplish to the business plan. What we also we look at is special opportunities. Let's say that the company that has experience and competence of Salini Impregilo, of course, can be an important resources to the U.S. market for doing what is necessary. If you have seen the 14,000 dams that are under risk of collapsing and need somebody which is capable to handle things like that. So I think that there is a huge market even beyond which has been looked at to draw the business plan a few years. So for the time being, we -- of course, we reconfirm the actual figures for Lane, which means doubling its size during the lifespan of the plan and so reaching around EUR 3 billion of turnover for the end of the plan. But of course, in case this special situation, I would call them, arise, well, this will -- of course will change the dimension of what is expected now, let's say. We do not put these into a hard calculation for the business plan, of course.

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Operator   [16]
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 The next question is from Bruno Permutti with Banca IMI.

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 Bruno Permutti,  Banca IMI SpA, Research Division - Research Analyst   [17]
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 I have some questions. Well, the first one is related to the noncore assets you are going to dispose. So I would like to understand if in your target for a net debt improvement by year-end you are already discounting the possible cash-in from these assets; and if looking at the second half of the year and for the other assets in Italy, we can imagine something similar to the -- in -- to the already disposed assets; or if there are substantial differences between the -- what you are going to sold and what you already told us in the presentation. So I mean what could be the -- without -- it is obvious that you probably can't say the amount but only to help to understand if it is something substantial or something similar to the already announced disposals. Then if it is possible, on the ForEx. You -- if for the second half of the year, you have an idea of if there could be other possible foreign exchange losses. So how do you see the dynamic of this item in the coming months? And the last one concern the Lane's joint ventures. I would like to understand. If I have, well, seen the contribution in the first half was lower than the first half of 2016, I would like to understand what could be the outlook for the second half of the year for the joint ventures.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [18]
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 Thank you, Bruno. So starting from the disposal and the optimization strategy: We expect to have some material effect in terms of capital gain from the assets that we are going to dispose. We just signed. And we will have the closing, we expect, on September on an asset related to the construction business. We are working on other assets abroad that could have a more significant effect, but I am not in a position to forecast when we will have an agreement. Of course, we already put the resources and the cash-in coming from the disposal in our target for the gross debt reduction for 2017. Regarding the [ForEx disposal], it's mainly -- it's not only due to the dollar-euro exchange rate. And moving to Lane: We have in the first half the same results that we had in 2016, where we are not far from the same results. We expect a significant improvement coming from the development of revenues, mainly from the plant and mall project business that is very, very seasonal.

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Operator   [19]
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 The next question is from Alessandro Poggi with Banca Aletti.

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 Alessandro Poggi,  Banca Aletti & C. S.p.A, Research Division - Research Analyst   [20]
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 Basically, I have only one, which has to do with the ForEx impact accounted for below the interest rates accrued line, but as you mentioned that there's no monetary impact but then you said that it's long-term receivables, I'm quoting you, which have not been cashed in yet, so I presume the impact will have to be taken at some time on your books. And I would also like to understand better, when you mentioned payments in Ethiopian currency, if such payments are current, so they refer to work which is ongoing; and in that case, if we are to expect further negative items on future payments that is in semester 2. The final question is the following one: That means that your currency risk is not covered on U.S. dollar payments from Venezuela, which you mentioned, nor on payments from Ethiopia regarding the works which have led to the booking of this ForEx impact. I hope I was clear, but I'm here if you need any clarification.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [21]
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 Okay, you understood very well on the long-term credit coming from Venezuela. We cannot hedge this kind of risk in terms of ForEx hedging. Otherwise, we are going to take a speculative position with a significant cost with a long-term credit that we have in the balance sheet. For the Ethiopian currency, it's very easy. We got the payment in local currency before the end of the first half. And we didn't use this amount of money, but we are going to use, and probably we already used in July, so we cannot have a recurrent effect on this amount that is closed -- higher than EUR 100 million equivalent. So you -- as you can imagine, the payments that we got are so significant that, if we got before the end of the period, then we can have a short-term accounting effect.

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 Alessandro Poggi,  Banca Aletti & C. S.p.A, Research Division - Research Analyst   [22]
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 Okay, it's still not clear for me. I mean you got this payment in Ethiopian currency. And you said you haven't spent it yet, so that means that you intend to use that currency for your local costs. Is that correct?

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [23]
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 Right. We have to use according to...

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 Alessandro Poggi,  Banca Aletti & C. S.p.A, Research Division - Research Analyst   [24]
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 Okay, so your profit is in the Ethiopian currency, or not? So you -- at the end of the day, when you have to book all costs and all revenues, what you're left with is in birr. Or is it in euros?

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [25]
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 Our profit is in euro. So according to the contract, we have to use the local currency for costs, in local currency. So as we mentioned many times, we are pretty well hedged in terms of local currency, okay?

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 Alessandro Poggi,  Banca Aletti & C. S.p.A, Research Division - Research Analyst   [26]
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 Okay. So that should mean that, if we -- and I hope I understood well, but if you look at a longer period of time, this negative effect should not be there, whereas the one from Venezuela will always be there, so long as the U.S. dollar depreciates.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [27]
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 That's right. The -- if you look at our balance sheet and...

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 Alessandro Poggi,  Banca Aletti & C. S.p.A, Research Division - Research Analyst   [28]
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 Okay, so would you say that the permanent negative item, potentially negative item, on your P&L is the exposure to Venezuela, which is something you show with other players in the sector, by the way?

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [29]
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 That's right. Because the most important part of our long-term and [slow-rotation] credit come from Venezuela.

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 Alessandro Poggi,  Banca Aletti & C. S.p.A, Research Division - Research Analyst   [30]
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 Okay, okay. And can you please remind the total amount of long-term and short-term receivables that you have on your books from that country?

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [31]
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 We have around, at the latest currency rate, 240 million.

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Operator   [32]
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 The next question is from Andrea Balloni with Fidentiis.

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 Andrea Balloni,  Fidentiis Equities S.V.S.A., Research Division - Analyst   [33]
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 I -- just one question from my side. If I look at your Slide #15, I see that your free cash flow absorption is to the tune of EUR 300 million, but your net debt, it worsened compared to the end of last year by around EUR 430 million. I guess that a part of this difference can be explained by dividend distribution, which should be to a tune of [EUR 30 million], if I'm not wrong, but maybe you can help me explaining which is the remaining part of the difference.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [34]
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 Sorry, Alessandro (sic) [Andrea], I didn't get your point. Can you repeat, please?

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 Andrea Balloni,  Fidentiis Equities S.V.S.A., Research Division - Analyst   [35]
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 So your net debt increased by around EUR 430 million compared to the end of last year, okay? In the Slide #15, you have mentioned a free cash flow absorption which is to a tune of EUR 300 million. So there is a difference of around EUR 130 million in term of cash absorption of worsening of debt. And part of this, I guess, is -- can be explained by dividend distribution, which increased compared to last year, but I don't get the remaining part of this difference.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [36]
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 Meaning the difference of the EUR 301 million...

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 Andrea Balloni,  Fidentiis Equities S.V.S.A., Research Division - Analyst   [37]
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 Compared to EUR 430 million.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [38]
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 So you mean the explanation of the bridge that we made.

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 Andrea Balloni,  Fidentiis Equities S.V.S.A., Research Division - Analyst   [39]
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 Yes. Basically, yes, but -- so my point is that your first half free cash flow absorption is around EUR 300 million, as you've mentioned in the slide, but [year-on-year] debt increased by EUR 400 million.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [40]
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 Okay, okay. No, I got the point now. All right, this -- sorry, sorry. I got the point. There are dividends, as you mentioned, dividends to minorities; equity investment; other net equity variations that are around (inaudible).

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 Andrea Balloni,  Fidentiis Equities S.V.S.A., Research Division - Analyst   [41]
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 Okay, so which is the amount of equity investments?

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [42]
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 29. 26, dividend to shareholders; and to minorities, 23. And other net equity variation.

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Operator   [43]
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 The next question is from Gregoire Thibault with Natixis.

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 Gregoire Thibault,  Natixis S.A., Research Division - Analyst   [44]
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 Three remaining questions. The first one is to come back on Lane. You acquired [IP] with the activity and the order intake. Could you be a bit more specific regarding the total profitability of Lane? Were you able to increase in H1 the profitability? And what about in terms of free cash flow generation? I think that's a big target for you coming from Lane. Sort of the [soft points], maybe more profitability and free cash flow under the Lane angle. The second question is regarding the total order intake of the group. You have EUR 4 billion in H1 '17, EUR 2 billion excluding Lane. Last year, in FY '16, you had EUR 7 billion of order intake, EUR 6 billion excluding Lane. So finally, you had EUR 6 billion last year, only EUR 2 billion this year. I just wanted to understand if it's (inaudible) path from your side. Is it to be more specific, to be more selective in your order intake? And finally, the last question, I could read in some French newspaper that you are interested in bidding for the Grand Paris project. Could you just let us know maybe which kind of profitability you expect on this big contract of Grand Paris project? And what makes you comfortable to think you'll be able to win some projects in quite, let's say, closed markets?

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 Pietro Salini,  Salini Impregilo S.p.A. - CEO, President & Director   [45]
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 Well, Massimo makes all the calculation on these very different questions you put forward at the same time. I will answer probably before on the Grand Paris that I understand is something that is close to you. And the metro Paris, of course, is a very important market for us. It is a limited market in the sense that, when it will be over, there will be no other very important works in the area, so the magnitude of the Grand Paris, it is now something that we have in process. We submitted a lot of offers in -- all of the offers, so far, that were floated by the client. As you say, France is a very, very closed market, but we are insisting. And perseverance, at the end, pays. So we are one of the most knowledgeable builders of metro lines, and we think that at the end also our difficult clients will recognize this capability. And we need this capability because the world got so huge that the local capability will be exhausted very quickly. Then I will put the floor to Massimo to answer to all the questions.

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 Massimo Ferrari,  Salini Impregilo S.p.A. - Group CFO and GM of Group Finance & Corporate   [46]
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 Okay, Gregoire, regarding the new orders. And we got probably less than 2016 ex Lane, as Salini ex Lane, but as you know, we are bidding for so large projects [apart] the Grand Paris metro. But also, around the world we are bidding for very large projects. And if we got some of that, we can achieve very rapidly the target that we have. In the past 4 years, we always got the target in terms of new orders. And of course, we are working very hard also in terms of selection, risk management in terms of the new bidding order process. So we can be also selective because we covered 100% the revenues for 2017, and we are close to cover 80% of the remaining accumulated revenues for 2018 and '19. Moving to Lane: We expect an overall EBIT margin around 2.5% for 2017, but of course, we have to take in consideration the great and significant increase of new orders that ask for investment in people and knowledge. And we have to follow the commercial growth for Lane. Lane is free cash flow positive. We have a net financial position around EUR 122 million equivalent. We expect the cash -- free cash flow generation around 30 million in -- in a range between 30 million, 50 million in 2017.

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Operator   [47]
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 (Operator Instructions) Gentlemen, there are no more questions registered at this time.

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 Fabrizio Rossini,    [48]
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 Thank you, Julie. That concludes our call for today. We thank everybody for your participation and wish you all a pleasant evening. Thank you.

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Operator   [49]
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 Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.




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