The company has fallen 20% in the stock market since its latest setback in the conflict over the great engineering work was announced, but analysts are optimistic about its future
A small earthquake shook Sacyr on September 25 the day that the Miami International Court ICC issued an award for claims of cost overruns incurred by the company during the works of the Panama Canal expansion
It was a slap with a stone name basalt The company and its partners grouped in the Gupc consortium had been in dispute for a decade because the properties of the basalt of the work the main source with which the concrete a mixture of cement sand and gravel had to be elaborated for the construction of the third set of canal locks did not provide the necessary quality level due to alleged bad data provided by its client the Panama Canal Authority
A previous award of the Dispute Arbitration Board gave the reason to the consortium in which Sacyr participated with 41 of the weight they received 265 million dollars in compensation but last day 25 the ball fell on the other side and Gupc will be forced to return 240 million
Although the sum of the two awards is positive for Sacyr it sets a precedent and so the market has read that could affect the rest of the claims that the company expects to see fulfilled one for labor overruns as a result of a change in legislation and another as a result of being forced to stop the works
The punishment in the Stock Market has been important the capitalization has fallen since that day by 250 million euros But the experts do not seem to share the sentiment of the park of the 12 analysts who follow the value nine recommend buying and another two keeping the titles
Although it is true that it is now much less likely to receive income from the rest of the claims we believe that charges for the more than 4000 million dollars that still remain to be settled and whose resolution could be extended until 2025 should not be ruled out either Banco Sabadell points out in a report which changed its advice from selling to buying
The impact of the award according to Bankinter analysts was about 10 of the total market capitalization but the punishment has been much higher despite the fact that in the medium term the analysts vision does not change The impact of the sentence can be considered specific
In recent times Sacyr has also been the protagonist of other news outside its business such as the wiretapping of Villarejo commissioned by BBVA to stop the construction company from taking control of the bank 15 years ago
But outside the covers his activity has undergone an important transformation With more than 43000 employees in the world more than 29000 in Europe it has taken steps to become a concession company supported by two arms a construction company and a service firm 77 of the current operating profit of 348 million comes from the concessions
With a turnover until June of 2079 million euros 4170 million in all of 2019 its project portfolio at the moment does not stop growing and is close to 40000 million of which 27600 are in concessions
Some contracts they say in the company that have formulas to mitigate the risks of falling traffic or demand in 90 of cases and that give them stability at a turbulent time for companies around the world
Since 2014 the company chaired by Manuel Manrique has improved its profitability from 87 in 2014 to 167 in this first semester is more international and has seen its operating profit skyrocket
It has also improved the quality of its debt reducing recourse debt to 840 million and linking the rest to concession projects and invests between 150 and 200 million in new concession businesses each year
The question is whether the virus will affect them given that they have swung towards a model dependent on public procurement with a good part of their business in Latin America and the budgets of governments especially in that continent have been strongly pressured by the covid It is not foreseeable that any signed contract will be renegotiated or canceled quite the contrary
Nor do they think that the situation will impact their construction branch Partly because 50 of the work it carries out is for the infrastructures that Sacyr itself will later operate as a concessionaire be they hospitals roads bridges or any other asset
At the end of this year in addition the company will add to its activity the Italian highway A3 that connects the towns of Naples Pompeii and Salerno with a daily traffic of around 170000 vehicles
The award which took place at the end of last year entails an improvement and exploitation contract that requires 390 million euros in works and will mean longterm income of 2700 million euros for the consortium where Sacyr participates with 49
The services branch has been more affected by the situation and specifically its restoration company that serves hospitals or public buildings but it barely accounts for 1 of the companys turnover
What eaten for what was served
Another stone in the backpack has been the deterioration of its 8 in Repsol a stake that forced it to record losses in 2019 of almost 300 million
Until June of this year the group had a profit of 70 million and Repsols contribution subtracted 18 The company says that it has completely covered the risk of drops in the price of the oil companys share but in exchange it has to dedicate the dividends it collects from the company to cover its backs
With low rates and a structure like the current one expectations should be promising Lets forget Panama insists the analysis of Sabadell Despite the success of the work itself Sacyr has paid dearly for the reputational cost of everything that has surrounded the canal project
Perhaps there is no other challenge as great as that of building the expansion of one of the greatest engineering gems in the world but with highways hospitals or trains under concession in diverse markets Sacyr should breathe easy