At its June 28, 2018, Annual Meeting, shareholders of Madrid-based FCC were presented with the company’s 2017 results, which showed 118 million euros in attributable profit. The company says 2017 marked the culmination of the recovery process that began December 2014 with the first of two capital increases at the FCC Group that strengthened its ownership structure and played an essential role in achieving its current position.
The meeting discussed the steps taken to date, as reflected in the financial results. Those actions arose out of a plan the company began implementing in 2015 with the support of the new shareholder structure, underpinned by Grupo Carso of Mexico. The plan had three main thrusts: operations, structure and finance.
In the area of operations, the goal was to regain FCC's position as a specialist in developing and managing infrastructure and environmental services (water and waste), focusing selectively on the various geographies where it operates. This was aimed at generating operating profit and driving cash conversion, improving risk management systems and increasing the ethical commitment in all projects, according to FCC. The company says it pursued synergies and enhanced the value of its corporate brand to increase returns on operations and boost client satisfaction.
Regarding structure, FCC sought to eliminate duplication and excess costs by aggregating service and bidding capabilities companywide in certain areas while enhancing control in other areas within each business unit. This increased profitability and operating cash flow by reducing structural and corporate costs, making the group more competitive to meet client demands. The EBITDA (earnings before interest, taxes, depreciation and amortization) margin increased to 14.1 percent in 2017 from 12.7 percent in 2014, and structural costs were reduced in cumulative terms by 150.5 million euro, or by 42.1 percent, in the same period, FCC says.
As for finance, Grupo Carso provided two capital increases in December 2014 and March 2016, totaling 1,709 million euros, which enabled the group to restructure its interest-bearing debt, reducing it by 2,943 million euros (62.8 percent) between the date of the first capital increase and December 2017, while the average cost of debt fell to 2.4 percent (from 5.1 percent) in the same period. The debt maturity was extended to five years.
FCC says these actions turned the company around, “leaving it with a solid financial structure in which debt plays an appropriate role underpinning operations that are more profitable, more integrated and more synergistic, all supported by a leaner corporate structure.” The results in the first quarter of 2018 confirmed these achievements, as the FCC Group reported its highest-ever level of operating profitability at 15 percent, coupled with a substantial 135 percent increase in net attributable profit, according to the company.
International expansion is a vital goal of the FCC Group's business areas, and the company says it has the experience and is positioned to achieve this objective.
The circular economy, new technologies, transport connectivity in urban areas, waste recovery and treatment, a quality water supply and the need for infrastructure are opportunities FCC says it is equipped to act on to expand while contributing to sustainable improvement of life on Earth.
In the area of environmental services, the group says it retained its share in its long-standing markets and activities while identifying new growth regions, such as the U.S. Following steady growth in the number of waste treatment and recycling plants, FCC had more than 300 worldwide at the end of 2017. Government targets for higher waste recovery and reuse offer extensive opportunities for expanding the municipal services backlog, the company adds.
FCC achieved a high renewal rate and service level in its water segment. The company says it is confident government clients will make increasing use of public-private partnerships, in which it can apply its expertise and best practices to optimize service delivery and guarantee the supply and quality of this vital resource. In this context, the agreement in March for a financial partner to buy into Aqualia offers major support to the strategy of selective profitable growth in this area, FCC says.
As for the businesses related to infrastructure, construction and cement, the pursuit of efficiency and adapting to the bottom of the investment cycle were keys, with a structure that is now more appropriate to the level of demand. Supported by its design and technology capabilities, the company’s construction segment focused on civil engineering contracts, such as railways, and it is working on subway systems in six capital cities throughout the world. In cement, the search for alternative markets via exports coupled with greater operating efficiency in the production plants enabled this business to be very competitive to cater for projected demand growth. The Group also has a large portfolio of transport infrastructure concessions (17 in five countries), of which 15 are operational, and a range of real estate assets for development with a book value of more than 300 million euro at the end of 2017, plus the 36.9 percent stake in Realia (worth more than 250 million euro at market prices).
“Overall, the 2017 results presented to shareholders [June 28] reflect a new cycle for a renewed FCC Group, which is financially strong and positioned to face the future due to its efficiency and operating profitability combined with its more distinctive and traditional values and strengths,” according to the company.