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1. Company Snapshot

1.a. Company Description

Fomento de Construcciones y Contratas, S.A., together with its subsidiaries, engages in the environmental services, water management, and infrastructure development businesses in Europe and internationally.The company offers services related to urban sanitation, industrial waste treatment and waste recycling, street cleansing, conservation of green areas, maintenance of sewerage networks, recovery of contaminated soils, and facility management.It also provides end-to-end water management services relating to the integrated water cycle, such as collection, purification and distribution of water for human consumption; sewage collection, filtration and purification; design, construction, and operation and maintenance of water infrastructure for municipal, industrial, agricultural services, etc.


In addition, the company undertakes infrastructure works and building construction, such as motorways, roads, tunnels, bridges, hydraulic works, ports, airports, housing estates, housing, non-residential building, lighting, industrial climate control installations, environmental restoration, etc.Further, it is involved in the operation of quarries and mineral deposits; production of cement, limestone, plaster, and prefabricated by-products; and production of concrete.The company was founded in 1900 and is headquartered in Madrid, Spain.


Fomento de Construcciones y Contratas, S.A. is a subsidiary of Control Empresarial de Capitales, S.A. de C.V.

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1.b. Last Insights on FCC

Fomento de Construcciones y Contratas, S.A.'s recent performance was bolstered by the securing of a significant contract for the Yonge North Subway Extension, a design-build-finance project involving the construction of twin 6.3km tunnels. This contract, awarded under IO's P3 framework, underscores the company's expertise in complex infrastructure projects and its ability to secure high-profile contracts. The project's scope and magnitude are expected to drive revenue growth and contribute to the company's expanding presence in the North American market.

1.c. Company Highlights

2. Earnings Report Analysis: Mixed Performance with Growth Prospects

The company's financial performance was marked by a one-time gain of EUR 148.6 million from the partial carve-out of Inmocemento Group in November 2024, making the current year's results non-comparable. Revenue growth was observed across various units, with the Environment unit's turnover increasing by 11.5% to EUR 3.4 billion. Aqualia's turnover grew by 8.7% to EUR 1.5 billion, while Construction turnover turned positive to over EUR 2 billion. However, the EPS came out at -0.0063, missing estimates at -0.00266. EBITDA margins remained stable across units, with the Environment unit at 15.6% and Aqualia at 23.8%.

Publication Date: Nov -10

📋 Highlights
  • Carve-out gain: One-time EUR 148.6M gain from Inmocemento Group partial carve-out in Nov 2024, non-comparable to current year results.
  • Environment unit growth: Turnover rose 11.5% to EUR 3.4B, driven by Spain (+7%), UK (double digits), and US (+24%), with EBITDA up 11% at stable 15.6% margin.
  • Aqualia performance: Turnover increased 8.7% to EUR 1.5B, EBITDA up 5.2% to EUR 319.2M, maintaining 23.8% margin due to growth in Spain and Americas.
  • Construction recovery: Turnover reached EUR 2.0B (+4.9% in Spain, +5% in Europe), with stable 5.6% EBITDA margin despite market complexity.
  • Concessions surge: Turnover jumped 38% to EUR 81.4M, EBITDA rose 8.3% to EUR 44.6M, reflecting strong operational performance.

Segment-wise Performance

The Environment unit's growth was driven by new contracts in Spain and the US, and acquisitions in the UK. Geographies-wise, the Atlantic platform grew by 7% to EUR 1.7 billion, while the UK platform rose by double digits to over EUR 700 million. Aqualia's growth was driven by Spain, Central and Eastern Europe, and the Americas. Construction turnover grew by 4.9% in Spain and 5% in other European countries, with a stable EBITDA margin of 5.6%. Concessions turnover reached EUR 81.4 million, growing by 38%.

Portfolio Growth and Investment Plans

The company's portfolio grew by 46.8% to EUR 9.3 billion, driven by international contracts, providing reassurance for future prospects. The company aims to optimize the use of invested capital and expects to invest similar levels of CapEx in 2025 and 2026, mainly in environment and water treatment. The proceeds from the sale of Inmocemento Group will be used to decide on the best investment opportunities.

Valuation and Outlook

The company's valuation metrics indicate a P/E Ratio of 21.24, P/B Ratio of 1.81, and EV/EBITDA of 6.64. Analysts estimate next year's revenue growth at 5.2%. The increase in the portfolio and expected growth in construction by the end of 2025 provide a positive outlook. The company's high visibility of its portfolio, with long-term contracts, allows for greater collaboration with customers, making the company feel comfortable despite the complexity of contracts.

Financial Health

Regarding working capital, the evolution over the first 9 months has been homogeneous, with a recovery expected by the end of the year. The company's Net Debt / EBITDA ratio stands at 2.58, indicating a manageable debt level. The ROIC (%) is 4.03, and ROE (%) is 8.49, indicating a decent return on equity.

3. NewsRoom

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.86%)

6. Segments

Environmental Services

Expected Growth: 2.5%

Fomento de Construcciones y Contratas' Environmental Services segment growth of 2.5% is driven by increasing demand for sustainable infrastructure, government initiatives promoting eco-friendly practices, and the company's strategic expansion into waste management and renewable energy services.

Construction

Expected Growth: 3.5%

FCC's 3.5% growth in Construction is driven by increasing infrastructure investments in Europe, particularly in Spain and the UK. Strong demand for residential and commercial buildings, coupled with a solid backlog of projects, supports revenue growth. Additionally, FCC's diversification into concessions and services, such as water management and waste treatment, contributes to its growth momentum.

Comprehensive Water Management

Expected Growth: 2.8%

Comprehensive Water Management from Fomento de Construcciones y Contratas, S.A. growth of 2.8% driven by increasing water scarcity, urbanization, and infrastructure development, coupled with stringent regulations and rising demand for efficient water management solutions.

Cement

Expected Growth: 2.2%

Fomento de Construcciones y Contratas, S.A.'s cement segment growth of 2.2% is driven by increasing infrastructure development, government-backed construction projects, and rising demand for sustainable building materials. Additionally, the company's strategic expansion into emerging markets and cost-saving initiatives contribute to its growth momentum.

Real Estate

Expected Growth: 3.2%

FCC's Real Estate segment growth of 3.2% is driven by increasing demand for residential and commercial properties in Spain, fueled by economic recovery and low interest rates. Additionally, FCC's strategic focus on developing high-quality, sustainable projects and its strong brand reputation contribute to its growth momentum.

Concessions

Expected Growth: 3.8%

Fomento de Construcciones y Contratas' concessions segment growth of 3.8% is driven by increasing infrastructure investments in Europe, particularly in Spain and the UK, as well as the company's successful bidding process for new projects. Additionally, the segment benefits from the growing trend of public-private partnerships and the company's expertise in managing and operating infrastructure assets.

Corporation

Expected Growth: 2.9%

FCC's 2.9% growth is driven by its diversified business model, strong presence in European markets, and increasing demand for infrastructure development. The company's focus on sustainable construction, water management, and environmental services also contributes to its growth. Additionally, FCC's strategic acquisitions and partnerships have expanded its service offerings and geographic reach, further supporting its growth momentum.

7. Detailed Products

Construction

Fomento de Construcciones y Contratas, S.A. provides construction services for buildings, infrastructure, and industrial projects.

Civil Engineering

The company offers civil engineering services for infrastructure projects, including roads, highways, bridges, and railways.

Industrial Services

Fomento de Construcciones y Contratas, S.A. provides industrial services, including maintenance, repair, and operation of industrial facilities.

Concessions

The company participates in concession projects, managing and operating infrastructure assets such as toll roads, airports, and ports.

Energy and Services

Fomento de Construcciones y Contratas, S.A. offers energy and services, including energy efficiency solutions and facility management.

Water Management

The company provides water management services, including water treatment, distribution, and wastewater management.

8. Fomento de Construcciones y Contratas, S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Fomento de Construcciones y Contratas, S.A. is medium due to the presence of alternative construction companies and infrastructure development firms.

Bargaining Power Of Customers

The bargaining power of customers for Fomento de Construcciones y Contratas, S.A. is low due to the company's strong brand reputation and diversified customer base.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Fomento de Construcciones y Contratas, S.A. is medium due to the company's dependence on a few key suppliers for raw materials and equipment.

Threat Of New Entrants

The threat of new entrants for Fomento de Construcciones y Contratas, S.A. is low due to the high barriers to entry in the construction industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for Fomento de Construcciones y Contratas, S.A. is high due to the competitive nature of the construction industry, with many established players vying for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 52.37%
Debt Cost 4.90%
Equity Weight 47.63%
Equity Cost 9.36%
WACC 7.02%
Leverage 109.96%

11. Quality Control: Fomento de Construcciones y Contratas, S.A. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Logista

A-Score: 7.4/10

Value: 7.0

Growth: 5.9

Quality: 5.8

Yield: 10.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Strabag

A-Score: 6.6/10

Value: 8.1

Growth: 4.7

Quality: 6.2

Yield: 8.1

Momentum: 10.0

Volatility: 2.7

1-Year Total Return ->

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Stock-Card
Mo-BRUK

A-Score: 6.3/10

Value: 3.0

Growth: 6.7

Quality: 7.0

Yield: 8.1

Momentum: 6.5

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
Wallenius Wilhelmsen

A-Score: 5.8/10

Value: 9.2

Growth: 8.2

Quality: 7.9

Yield: 6.2

Momentum: 1.0

Volatility: 2.3

1-Year Total Return ->

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Stock-Card
Secure Energy Services

A-Score: 5.8/10

Value: 4.9

Growth: 8.4

Quality: 4.2

Yield: 2.0

Momentum: 8.5

Volatility: 6.7

1-Year Total Return ->

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Stock-Card
FCC

A-Score: 4.9/10

Value: 5.9

Growth: 2.7

Quality: 3.5

Yield: 7.5

Momentum: 3.0

Volatility: 6.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

11.5$

Current Price

11.5$

Potential

-0.00%

Expected Cash-Flows