Técnicas Reunidas, the Spanish engineering firm dedicated to the design and delivery of chemical, refining or natural gas plants, suffered last year the consequences of the stoppage imposed by covid-19. Oil prices were sinking – they reached $ 22 a barrel in April 2020 – and their main clients, the oil companies, were turning off new projects and some that were already underway were postponing sine die.
A blow to the fall in fuel consumption in the world that occurs in a context of transition towards green energy, with an expiration date in many countries for, for example, combustion cars. Engineering managed, however, to close the year with a net profit of 13 million euros and a turnover of 3,521 million, 30% less than expected.
Miguel Paradinas, corporate general manager of Técnicas Reunidas, points out that oil still has many years to go: “It will be difficult to completely displace oil in road, sea or air transport. In addition, before totally green energies we are going to see a development of clean fuels and a transition towards natural gas, in which we are very active. And there is also the petrochemical industry, which will have strong growth and whose products range from aspirin components to textile articles ”, he explains.
In the first six months of 2021, the situation has changed for fossil fuels and oil companies: the price of crude oil has multiplied almost by four from the lows of 2020, the consumption of gasoline in the United States is at pre-pandemic levels and the Natural gas has also doubled in cost. As a consequence of this new context, the 4,500 engineers on Técnicas Reunidas’ staff – out of a total of 7,500 employees – have seen a new workload arrive. The company has achieved 2,100 million for five awards ranging from a petrochemical plant in Turkey, another in the Netherlands to transform waste into methanol, another petrochemical plant in Poland and the Russian Gazprom Neft awarded a unit to increase its production of clean fuels, in addition to the Expansion of work at facilities in Indonesia.
Paradinas indicates that 98% of the company’s turnover is made outside of Spain with workers of 70 nationalities in 16 countries and “has a drag effect on the Spanish industrial sector, from which we make annual purchases of around 700 million euros ”. And he adds: “We trust that the European Funds (Next Generation EU) will also allow us to increase our sales in Spain, which are now very small.” The company expects to reach a number of awards in the world after the good start of the year of 7,500 million euros.
The director of institutional analysis of Renta 4, César Sánchez-Grande, explains that the company is taking the appropriate steps and its Transforma Plan has allowed savings of 40 million euros that could have been higher with greater activity. “In the medium term, the company presents very good prospects after the paralysis suffered by COVID-19 with a client such as the oil tanker who, in times of crisis, prioritizes the payment of the dividend to the shareholder over investments”, Sánchez-Grande argues. Of course, this expert warns of the sharp fall in cash, which at the end of March reached 63.2 million euros, compared to the 196.5 with which it closed 2020. The reason for the decrease in its net cash position (discounting the debt) is that Técnicas Reunidas decided to provision 100% (103 million euros) due to the unilateral resolution of the British MGT Teesside of a biomass project awarded in 2016, which negatively impacted the results of the first quarter.
The liquidity of the company is estimated at just over 800 million euros, with a financial debt of 738.7 million. According to Joaquín Pérez de Ayala, director of corporate development, by the nature of the company “we do not need to invest, but we do need lines of guarantees to access the projects on offer.” In this new stage of growth, its objective is “to strengthen ourselves financially and also with greater human resources and with our suppliers, with whom we have shared difficulties”. And he adds: “Recently, we have chosen to diversify our financing channels towards promissory notes and bonds.”
He is also confident that the improvement in the business will be reflected in a growth in the margin on adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). “Now it is around 3% and should reach 4%, which is normal in this business,” explains Pérez de Ayala.
The intention of the company is to pay dividend again when the results allow it. In July 2018, it made the last payment for this concept, which has been accompanied by a strong depreciation of the value of its shares. Thus, Técnicas Reunidas was worth 1,192 million euros on the stock market three years ago and is now at 589 million.
Antonio Martos, an analyst at Banco Sabadell, points out that Técnicas Reunidas is turning towards decarbonization projects. “A good example of this is the recent agreement signed with Repsol for new technologies focused on decarbonisation,” says Martos. As the corporate CEO of the company recalls, this new path allows them to “share research centers in order to create their own solutions both for ourselves and for third parties.”
Hydrogen, biofuels or CO2 capture are opening up as new lines of business not only for the oil industry, but also for other highly polluting ones such as cement or steel companies. “Today hydrogen is produced with oil and gas, and we are working to obtain it from water with energy from renewable sources. Gas is also a key element in decarbonisation, with projects in the world that exceed 18,000 million euros, or the creation of green ammonia, which could be used in maritime transport or to produce fertilizers. The idea is to replace the contamination at the beginning of the industrial process or later to capture that contamination and bury it ”, concludes Paradinas.