Vinci SA
PAR:DG

Watchlist Manager
Vinci SA Logo
Vinci SA
PAR:DG
Watchlist
Price: 100.7 EUR 0.05% Market Closed
Market Cap: 57.4B EUR
Have any thoughts about
Vinci SA?
Write Note

Earnings Call Transcript

Earnings Call Transcript
2021-Q3

from 0
Operator

Ladies and gentlemen, welcome to the VINCI Conference Call. I will now hand over to Mr. Christian Labeyrie, CFO of VINCI. Sir, please go ahead.

Christian Labeyrie
CFO & Executive VP

Yes. Good evening, and thanks, everybody, for attending this conference call. So I am, today, as usual, with Gregoire Thibault and [ Marianne Mediafolk ]. And we will be brief to have more time for the Q&A. So what are the key takeaways of this publication. First, the momentum continued to be good in most of our business lines in the third quarter of the year. For VINCI Energies and VINCI Construction, the revenue was in excess of 2019 levels. For VINCI Autoroutes, the traffic was strong, above levels seen before the health crisis during the Q3. And this good trend continued in the first half of October 2021. For VINCI Airports, we saw the beginning of a recovery in passenger numbers in the Americas and in Europe. So in the first 9 months, 2021, revenue was EUR 35.8 billion, up 3% versus 2019 and up 16% versus 2020. France, accounting for 54% of the total, was stable versus 2019 and up 19% year-on-year. International, accounting for 46% of the total, was up 6% versus 2019 and plus 14% year-on-year. Two, the order intake at VINCI Energies and VINCI Construction in the first 9 months of the year was almost unchanged year-on-year, only down 2% despite the high base of comparison caused by major contracts win by the group last year. I will give you more granularity by division later in my presentation. As a consequence, the order book remained solid at EUR 45.4 billion, up 6% year-on-year, providing us with a good visibility, serenity and cherry-pick capacity. International accounts for 62% of the order book.Three, in terms of financial position, the net financial debt of the group at end of September amounted to EUR 16.9 billion, down EUR 3.9 billion over 12 months, down EUR 1.1 billion since the start of the year and down EUR 1.7 billion since the end of June. It shows that the cash flow generation remained very well oriented during the quarter. In addition, VINCI's liquidity is very high at EUR 19.5 billion at the end of September. It comprised managed net cash of EUR 11.5 billion, almost double of the level of last year, the same period, resulting from the good operating cash flow I just mentioned; and also an unused confirmed syndicated bank credit facility of EUR 8 billion due to mature in November 2025 for almost all of that amount. As a result, VINCI is well prepared to continue dealing with the unexpected and continue its development, notably with the upcoming acquisition of ACS IS, though it's closing is expected around the end of the year.Let's now have a look -- a closer look at the main divisions. So VINCI Autoroutes. In the Q3 2021, the traffic continued to rise, up 9% year-on-year. Traffic is now back above its precrisis level, up 4% versus Q3 2019, both for heavy vehicles, plus 3%, due to firm economic activity in France and the growth of e-commerce; and light vehicle, plus 4%. This performance reflects a strong and rapid rebound in traffic levels after the lifting of travel restrictions. As a result, in the first 9 months of 2021, traffic posted a strong rebound relative to 2029, plus 19%, and showed a limited decline of 6% compared with the last period of 2019, of which minus 8% for light vehicles and plus 2% for trucks. VINCI Autoroutes' 9 months revenue was EUR 4.2 billion, minus 3% versus 2019, plus 18% versus 2020. Airports, VINCI Airports. You have already seen the traffic figures published last week. As you noticed, VINCI Airports' passenger numbers in the Q3 2021 were almost 59% lower than in the Q3 2019, which represents an improvement on previous quarter. I remember you, we were at minus 82% in Q1 and minus 79% in Q2. But trends varied between geographic areas. In Portugal and France, passenger numbers benefited from the introduction of the health pass and positive developments in intra-European markets. Passenger numbers at some airports in the Americas, particularly in Dominican Republic, are now back at their precrisis levels. In the U.K., however, ongoing restrictions on foreign travel have prevented passenger numbers from recovering. Passenger numbers remain very low in Japan, limited by the decision to close the country's borders, and did not recover in Cambodia because of travel restrictions imposed by other countries in the region, especially China. As a result, in the first 9 months of the year, passenger numbers fell by 72.5% compared with the same period in 2019. And 9 months 2021 revenue was down 60% relative to 2019. But the easing of travel restrictions announced by several countries recently, mainly the U.S. and the U.K., should help international passenger numbers to recover gradually. VINCI Energies. Following on from its very good performance in the first half of the year, VINCI Energies achieved revenue growth of 8% in Q3 2021 compared with the Q3 2019. 9 months revenue of VINCI Energies at EUR 10.9 billion was up 11% versus 2019 and plus 13% versus 2020. This growth is quite homogeneous between France, minus 45% of the total, up 10% versus 2019; and international, which represents 55% of the total, up 12% versus 2019. Order intake was also strong in the first 9 months, up 14% year-on-year. Homogeneous as well between France, order intake slightly above 14% and a growth slightly below 14%, particularly sustained by international outside Europe with a contract of almost EUR 300 million to build 1,500 kilometers of electrical lines in Benin, the largest contract ever won by VINCI Energies. All in all, this performance reflects VINCI Energies' buoyant markets, its wide geographical foothold and range of expertise as well as the impact of acquisitions. VINCI Energies has completed 27 bolt-on acquisitions so far in 2021, which represents a full year revenue of around EUR 150 million, essentially in Europe, France, Germany, mainly in ICT industry and building solutions but as well one acquisition in the Northeast of the U.S. called Outbound Technologies, which is active in the industrial automation business. VINCI Construction. VINCI Construction now including Eurovia since the beginning of the year. VINCI Construction's revenue was higher than its precrisis level in the Q3 2021, plus 3% versus Q3 2019. Growth was particularly strong outside France, driven by the ramp-up of several large projects that have been won in the recent past. 9 months revenue of VINCI Construction was EUR 19.2 billion, up 6% versus 2019 and plus 18% versus 2020. In France, which represents 49% of the total, business levels remained firm. But revenue was slightly lower than in 2019, down 4% because of a high base of comparison. Outside France, which represents 51% of the total, revenue was up 16% versus 2019, driven by the ramp-up of several large projects obtained recently, including 2 works packages on High Speed 2 in the United Kingdom. Revenue rose sharply in road and rail works as well as earthworks. VINCI Construction order intake fell 10% year-on-year in the first 9 months of the year. It is due to high comps. Recall that the business line has won a number of major projects in the U.K., France, Canada and Oceania last year. In addition, given current market trends and its historically large order book, please note that VINCI Construction maintain a particularly selective approach to taking on new business. Priority is to improve margins rather than growing the volume. Regarding the order intake for small and medium-sized projects, the trend is positive, both in 9 months and in Q3 versus last year but still slightly down versus 2019. Regarding specifically the road building activity in France, the trend is similar, up year-on-year, slightly down versus 2019. VINCI Immobilier, the real estate development business of VINCI. 9 months revenue of EUR 1.1 billion rose 23% versus 2019 and plus 44% versus 2020. If we exclude Urbat Promotion, a newly acquired company, which we acquired 100% in January this year versus 49.9% owned previously, revenue was up 21% versus 2019, thanks to a strong production level for nonresidential programs launched previously and the good number of signings of notarial deeds for residential programs. The number of homes reserved in France rose 3% over the period from its level in 2019, which represents almost 5,000 units, including Urbat. But this was a level -- excuse me, 4,977 was the number of reserved units in 2019, and we reached 5,118 new units in 2021, driven by strong demand. The continuation of this trend will depend on the time required to obtain building permits. In conclusion, we confirm and specify our 2021 outlook. VINCI Energies, which is well positioned in buoyant markets, expects to see growth in revenue and operating margin relative to 2019. For the record, the revenue of VINCI Energies in 2019 was EUR 13.7 billion for an EBIT margin of 6%. VINCI Construction, which benefits from a very strong order book, is expected to extend its recovery and anticipates an increase in revenue and operating margin compared with 2019. For the record, revenue of VINCI Construction in 2019 was EUR 25.1 billion for an EBIT margin of 3.3% if we recalculate the addition of the previous -- the old VINCI Construction and Eurovia. Given the good trend in traffic levels observed in recent weeks and following on from the increase in the third quarter, VINCI Autoroutes now anticipates revenue in 2021 close to that of 2019, which stood at EUR 5.6 billion. For VINCI Airports, passenger numbers in 2021 should be broadly similar to those seen in 2020. On this basis, VINCI's 2021 earnings -- net earnings should rise sharply relative to 2020 while remaining lower than the 2019 level. VINCI has strengths that will enable it to get back rapidly onto a trajectory of sustainable growth since with its energy services, construction and mobility businesses, the group is playing a central role in green growth. We would like to thank you for your attention, and we are now ready to take your questions with my colleagues here present.

Operator

[Operator Instructions] Your first question comes from Jean-Christophe Lefèvre-Moulenq from CIC.

Jean-Christophe Lefèvre-Moulenq

I have 2 specific questions. The first one, VINCI Airports. To come back to the guidance, the EBITDA was in slight loss over the first half year. Can we anticipate a recovery to positive EBITDA over the second half? And a specific question on VINCI Construction. Could we have a split of the growth between the former Eurovia and the former VINCI Construction?

Christian Labeyrie
CFO & Executive VP

Jean-Christophe, I'm sorry, but we don't -- we made a release on the activity of the group in the fourth quarter. We don't comment on EBITDA of VINCI Airports and our other business lines. And as for the split between the former Eurovia and VINCI Construction, I remember, I think that in last release in July, we said that we will not provide it any longer since the organization has been completely reshaped. We have now some business lines which remains more or less unchanged, VINCI Construction Grands Projets, major project division or Soletanche Bachy. But we have also changed the organization in France -- both in France and in some other markets where the 2 former activities which used to be separate are now put together. That applies to Europe, Africa, France and America. So we will not provide anymore the split between the road business, railway business and construction business from now on. I'm sorry.

Operator

The next question comes from Luis Prieto from Kepler, Kepler Cheuvreux.

L
Luis Prieto
Head of Construction and Building Materials

Luis Prieto from Kepler. I had a couple of questions. The first one is regarding the elephant in the room, cost inflation. And I know you're focusing obviously on sales at the moment. But is there anything you can give us in terms of flavor where cost inflation would be at the moment versus what the trends have been over the last 3 months? If there's been a worsening of the situation. And in particular, if we could look at labor, if labor costs are going up meaningfully, meaning that, that could affect at some point order intake over the following quarters. And the second question, and again, I know I'm going deeper into sort of full year results territory. But is there any light you could provide us regarding where working capital -- the working capital contribution has been to the good performance of net debt in the quarter?

Christian Labeyrie
CFO & Executive VP

About the cost and availability of materials and labor, you will not be surprised if I say that it has not improved. It's the previous release of information we made in July. It's a matter of -- considering our organization, as you know, VINCI is very decentralized, which is handled at the local level by the people in charge of the business units and obviously taking into account the contractual terms of our commitments vis-a-vis the customers.What is maybe a little bit new is this issue regarding availability of labor, which in some areas, especially at VINCI Energies, could result in moving forward some activity. Since we lack of labor, we might be tempted to execute the work when we are able to do it, so -- which could result in some activity push forward in 2022 instead of doing it in 2021 without any negative impact on the bottom line.What else can I say? If we look at the order intake, also the consequence of the situation is maybe reinforce selectivity in the way we enter new orders, especially at VINCI Construction. And again, VINCI Construction, the priority is clearly not to grow too much but to be more profitable we consider with a revenue which is in the area of EUR 25 billion altogether. We are big enough. So we don't really look for more volume, but maybe we look for better orders, more -- better-quality orders in order to continue to improve our profit margin. That's for the first question.And as we precise our guidance for 2021, you understood that we are rather slightly more positive on this guidance that we used to be than when we were previously. So it means that the situation I described has no negative impact on our bottom line.Now the second question was about the working capital. No, we cannot go into too many details. You know that we have quite a significant seasonality in our activity level, in our cash flow generation, in our working capital evolution during the year. So it's true and it's a fact that the indebtedness is quite better than expected, if I can say so, at the end of September, which means that clearly, the profitability is improving and the working capital management is doing well.But don't forget that a large part of the free cash flow of the year is generated in the last quarter and sometime in the very last month of the year. So we prefer to be still a bit prudent in any forecast that we could make about the level of free cash flow or working capital level for the rest of the year, even if we are rather more optimistic than what we could be -- rather more positive than what we were a few months ago.

Operator

The next question comes from Elodie Rall from JPMorgan.

E
Elodie Rall
Research Analyst

[Foreign Language] Sorry, I should have done it in English. I'm really sorry. So the first question was on ACS closing. And the second question is on tariffs in airports, if you're seeing some -- if you're having some discussions with the regulators and the airlines in general to potentially raise tariffs. I mean we're seeing a lot of that. [ VINCI Airports ], for example, more recently, but in other airports to try to compensate for the COVID situation. So any of that happening at your airports? I'm sorry for the French part.

Christian Labeyrie
CFO & Executive VP

On the ACS, the process is under course. We are not able to say whether the closing can take place or not before year-end. But in any case, if it takes longer than expected, which is not yet true, then we will take the decision probably end of November, something like that, to delay until beginning of 2022. We don't want to pollute the end of the year. It's been an important period for all companies for closing the accounts in particular. So if we feel capable of closing the deal, we should know it by the end of November, and then we do it. If we feel it might take longer, we will not take the risk to precipitate the closing before year-end. So I am not able to answer the question precisely at this stage, but we will have a clearer view, especially when the European Union authorities will give their opinion about the deal, which is expected by the end of October. But they might also decide to ask more questions, which will delay the process.As for the compensation on the tariffs, maybe you noticed that we recently obtained an approval from the [ IATA ] here in France to increase our tariff in Lyon by, I think, around 3%. And in other places, obviously, each case is specific, but it's a country-by-country analysis to be made. We have already obtained some COVID compensations in countries like Japan, Brazil, the U.S., the U.K., Costa Rica. And we are still trying to get more from other place -- from other authorities in other countries, but we cannot provide too many details about those compensations.

Operator

The next question comes from Nabil Ahmed from Barclays.

N
Nabil Ahmed

I had 2 actually. The first one is on the guidance regarding motorway traffic. If I do my math correctly, that implies a relatively significant growth in the fourth quarter in terms of traffic, if you want to be close to '19 level for the full year. And I'm a bit surprised by that because from memory, I thought that Q4 '19 were relatively elevated comps. I think you benefited from railway strikes at that point. So could you clarify a little bit, what are the drivers for your expectation of a very significant growth in Q4 or whether my math are wrong?And the second question on free cash flow. I mean you're giving us very, very good numbers in terms of your net debt position at the end of September. And I remember last year, the difference between the end of December net debt and the end of September was about EUR 2.8 billion. Could you help us understand whether that significant decrease in the fourth quarter was exceptional or whether we have to keep something in mind when we do our forecast for the end of the year.

Christian Labeyrie
CFO & Executive VP

About the Autoroutes, you probably misunderstood my comment. I didn't say that the level of traffic should be broadly similar to 2019. I said the level of revenue should be broadly in line with 2019. It's not the same. We will be obviously -- I don't know, but we should be below the traffic numbers on a full year basis this year compared to 2019, even if we have a very good, so far, October -- month of October. But you are right to remember -- to remind that at the end of 2019, we benefited from the transfer of traffic coming from the train passengers.As for the cash flow, remember, we had a very strong cash flow generation last year, I think something around EUR 2 billion in the month of December, which was really unexpected. I don't know if it's exceptional, but it was at least unexpected. If we look back in the last 10 years, we have never reached such a high level of cash flow generation in December even if December has always been a good month for us, let's say, around EUR 1 billion as an average.Something else which has to be highlighted is the fact that we have resumed the share buyback, which had been stopped last year in March. So this will impact, obviously, the net debt level at the end of the year. But apart from that, I don't have any other particular elements in mind to make any comment on the cash flow generation between now and the end of the year. That's true that we are a little bit ahead at the end of September even versus 2019 in terms of cash flow generation. It doesn't mean that we will reach by year-end the level of 2019, which was above EUR 4 billion. I would be pleased if we do it, but it's too early to say.

Operator

The next question comes from Gregor Kuglitsch from UBS.

G
Gregor Kuglitsch

Actually, only one left for me. So specifically, can I push you a little bit on margins? I mean I think I sort of heard -- I think you were implying, I think, that you became a little bit more optimistic perhaps sequentially on margin. Is that correct? And could you help us out a little bit perhaps on the quantum that you expect versus, I think, the 2 segments combined contracting, talking with 4.3% margin? Do you think this -- I mean are we talking 20 or 50 basis points? Just to give us a directional feel where margins are heading, if that's -- that would be great.

Christian Labeyrie
CFO & Executive VP

I cannot be more precise than what I have already been. So I just remind that VINCI Energies had a margin of 6% in 2019, and we should do better. And I remind that VINCI Construction, including Eurovia, generated in 2019 a margin [Foreign Language] -- an average margin altogether of 3.3%, and we should do better this year. That's all what I can say at this stage.

G
Gregor Kuglitsch

Okay.

Christian Labeyrie
CFO & Executive VP

Okay. The improvement for VINCI Construction new look should mainly come from construction, the old construction division, which was not performing very well, if you remember, especially VINCI Construction France, [ but not only ] the major division as well in 2019. So the recovery of VINCI Construction major project including Entrepose, which is now part of the major project division, and the recovery, the turnaround and the restructuring of VINCI Construction France are the 2 main drivers of the improvement of margin between 2019 and 2021 for the new division.

Operator

The next question comes from Tobias Woerner from Stifel.

T
Tobias Alfred Woerner
Research Analyst

Number one, just very quickly, the order intake in France according to the FNTP, still struggling quite a bit. Maybe you can give us a little bit more color on that. That would be helpful. Secondly, obviously, international is an important part of your construction business as well. So it'd be interesting to hear what you make of your developments in the U.K., where we are versus 2019, and also in the U.S., what you're seeing there at this point in time. And then maybe just with regard to cost inflation, which was discussed earlier, can you just remind us what your fixed contracts to variable contracts were in the first 9 months?

Christian Labeyrie
CFO & Executive VP

Okay. I am unable to answer the second question since we have hundreds of thousands of contracts, projects every year, and we don't make a statistics among those contracts between the fixed price project and the variable price projects. In the U.K., we are making a profit. Now the U.K. is under a single management for both former Eurovia and Construction. But both parts are profitable. In the past, remember, we had some problem in the U.K. in Construction. Now we are profitable in Construction as well and not only at Eurovia. In the U.S., we clearly have a strategy of growth because our presence remains limited even if we make almost EUR 2 billion of revenue altogether in the U.S. in contracting. We clearly have a strategy of growth through acquisitions, the best way to grow because then we don't put pressure on prices. The only point is that we need to find the right targets. And generally, in the U.S., what we observed is that the prices for acquisitions -- potential acquisitions are relatively higher than in Europe. But we are really motivated. And I think I mentioned an acquisition, which was made by Eurovia -- VINCI Energies, excuse me, by VINCI Energies. It could have been Eurovia, but it was VINCI Energies in the U.S. in the recent period. So we continue to look actively at opportunities in the road business, in the railway business, not so much in construction except for specialty, technological activities of Soletanche Freyssinet. What was the other question about -- the small order intake are rather well oriented. We were, remember, a bit anxious at the end of last year after the local elections about renewing the order book for small orders. We were quite successful last year about big orders. So we were bit anxious about small order because we had the elections, and in some cases, the mayors in place where removed and replaced by, in particular, green guys, which is never good for our business, especially at the beginning of their mandate because they tend to freeze the potential awards. But now this is a bit behind us. And in fact, the beginning of the year so far has been quite better than expected in terms of order intake for the small or medium-sized order for both Eurovia and VINCI Construction France. But now the issue, as I mentioned it, is more are we capable -- do we have the means, especially in terms of labor and manpower, to execute more orders. So we have to be careful because if we sign orders and we do not have the capacity to execute them properly, then we can have some problems. So we prefer to -- even if it results in a slowing down of the order intake, we prefer to remain cautious in the present period because the business is there. The business is there. The stimulus packages have not so far impacted us. We are, for the moment, studying potential orders, especially in renovation, building, et cetera. But so far, nothing significant. It will probably not be the case next year, but so far, not very significant. So the issue is not the business which is available. It's rather our capacity to execute properly, and we prefer to be cautious and not sign too many orders if we don't feel comfortable about the execution.

T
Tobias Alfred Woerner
Research Analyst

Can I just follow up on the U.K. and the U.S., the question? Thanks for the strategic answers. But the question also was aimed at understanding where we are versus 2019 in these markets and how you see that progressing.

Christian Labeyrie
CFO & Executive VP

I'll ask my colleagues. One moment. The volume of activity is clearly increasing in the U.K., just talking about HS2, which is at the very beginning and which will last for 4 years. So volume is there. And the margin, I would say, are there as well. They are positive altogether. But we don't want to tell you about the margin at this stage. And we have a very good guy, [ Scott Woodward ], which is in charge of managing the 2 activities now in the U.K. It's a Scottish guy. So he's very -- putting a lot of attention on money.

Operator

[Operator Instructions] We have a new question from Nabil Ahmed from Barclays.

N
Nabil Ahmed

Yes, Nabil Ahmed again. I'm using this opportunity to ask a follow-up. I was wondering if you would expect any change to the market situation, especially for VINCI Energies and especially in France related to the disposal of Equans. Do you think it's going to have an impact on pricing or market competition dynamics? Or that's really the issue, everyone is short labor these days, so pricing is not really the concern?

Christian Labeyrie
CFO & Executive VP

Usually, we don't like to make comments about the competition. You know we are not interested in Equans because it's a very big piece of the cake, EUR 12 billion, with a large presence in France, Belgium and Netherlands, where we are already well established. You know also that the profitability of Equans is much lower than ours. So we don't see the benefit for us. We wouldn't see the benefit for us to try to get involved in such a deal. Now whatever, the one who will win the competition, Bain Capital or Eiffage, I don't think it will make much -- it will not make much difference with the present market situation, except that the guy who will win will have to spend a lot of energy turning around this operation. That's sort of what I can say because the profitability of Equans at present is not satisfactory. But it will take some time before -- to get closer to our level of profitability. We're the winner. It's a people business. It's a people business. It's a management business. So you need to have the management capacity, expertise and availability to get into the details of the different business units. Not just one guy can turn around the operation. It's not the way we see this business. For us, to do that, you need a lot of people, a lot of good managers in the different business units, in France, outside of France. It's a very cumbersome process. It's not impossible, but it will take a lot of time to turn around Equans into a very profitable activity. The ingredients are there, but you need time and management's energy.

N
Nabil Ahmed

Okay. May I ask you as well, if the acquirer was to dispose some subsidiaries, I'm thinking about North America, for instance, is that something that VINCI could look at?

Christian Labeyrie
CFO & Executive VP

It's too early to say because we don't know whether it will be the case or not. So we'll see on due time. In the meantime -- first, we don't rely on that for the execution of our strategy. As I mentioned it, we already acquired more than 25 different new businesses in the beginning of the year. We are -- it's a permanent process at VINCI Energies to look at potential acquisitions. We recently looked at 2 ones, 2 acquisitions, 2 potential acquisitions in Europe. We finally decided not to pursue the process for -- because we considered that it was not reasonable. So we permanently look at new opportunities in the different markets where we are interested in mainly Europe and North America. So whatever happens on Equans, it will not change the way we execute our strategy and our criteria of decision for pursuing an acquisition.

Operator

The next question comes from [ Sara Molind ] from [indiscernible].

U
Unknown Analyst

I was wondering if you could give us some more detail on the impact of energy prices and steel prices as well on your projects and also how you're planning to deal with costs going forward.

Christian Labeyrie
CFO & Executive VP

I am not very -- I am Christian. I am not the CEO. I'm the CFO. So your question relates about cost, if I understand well.

U
Unknown Analyst

Yes, the -- yes, energy prices and steel prices.

Christian Labeyrie
CFO & Executive VP

Steel prices, excuse me. What can I say, that the steel prices are the same for all the players. So whenever we have to price a potential order, we take into account the cost of steel as it is or as we expect as it could evolve in the future. And then what can happen is a characteristic of the contract can differ from one case to the other. When we are in, for instance, a contract with a -- potential contract with a public client in France, usually, the contracts states that the prices can be adjusted depending on the evolution of the cost of materials, including steel, through some specific index, which are evolving month after month. So we -- in such case, we would adjust the price. In some other cases, it's not possible because it's a fixed price contract. In such case, we make an estimation of what could be the cost -- evolution of the cost of materials. And we include in our pricing -- in our price list the provisions to face potential increase of cost. In some other cases, we negotiate the cash payment in advance so that we can cover the cost of materials. So we have certain ways to protect ourselves in order not to suffer at the very end the impact -- the negative impact of inflation of costs. It's not a scientific approach, but it's a pragmatical approach. And we are pragmatical people, and we are decentralized. And generally, the people in the field are in a much better position to take the right decision, to protect themselves, to protect their P&L on which they are judged than the people at the head office. At least it's a way we see the most efficient way to deal with this issue.

U
Unknown Analyst

Are you delaying any projects to wait for a time when the prices will be lower or you just generally across the board...

Christian Labeyrie
CFO & Executive VP

This can happen. In some cases, if we consider that some components, not only steel but some specific components, are presently suffering significant inflation because of the condition of the market presently and if it can make sense to expect a decrease in the coming period, then yes, we can take this type of decision. But again, the people who are the best positioned to take the decision are not ourselves at the head office but the people in the field, in charge of their customers, their people, their supplies, their P&L.

U
Unknown Analyst

Just a quick follow-up. Are there any projects you're currently delaying because of this?

Christian Labeyrie
CFO & Executive VP

We take care of thousands of projects. So if I answer no, I would probably not say the truth. So probably, there are some which are delayed, but nothing significant which has been reported to us.

U
Unknown Analyst

I guess it would be a small amount.

Christian Labeyrie
CFO & Executive VP

I suppose so.

Operator

The next question comes from Jean-Christophe Lefèvre-Moulenq from CIC.

Jean-Christophe Lefèvre-Moulenq

Yes. Two follow-up questions. First one, in contracting at VINCI Construction, you had some difficult contracts which were impacting your margin. Is that now completely over, first? And secondly, a follow-up question regarding the price versus cost for a lump sum building contract in France. Do you, however, have the possibility to introduce some pass-through clauses?

Christian Labeyrie
CFO & Executive VP

The second question is clearly a case-by-case issue to deal with. There is no general rule. But for new contracts -- for new potential contracts, clearly, and we are not the only one to do that, we look for ways of protecting us as [indiscernible] either, as you mentioned, producing -- passing through clauses in the contracts or putting in place any particular scheme, protecting us. As for the loss-making contracts, I think I mentioned it before. That's one of the reasons why the margin in VINCI Construction France are now positive. We are negative 2 years ago, precisely the fact that some loss-making projects are now behind us. They have been delivered. We have accounted for the losses. In some cases, we have got some claims to reduce the loss, but that's behind us.

Jean-Christophe Lefèvre-Moulenq

Okay. So no claims over the second half.

Christian Labeyrie
CFO & Executive VP

Again, we manage thousands of projects. So normal course of business, get some claims. Nothing very significant to my knowledge.

Operator

The next question comes from Mr. Maynadier from Kempen.

C
Charles Maynadier
Analyst

This is Charles Maynadier from Kempen. I just have one quick question. Could you give us an update on your concession pipeline?

Christian Labeyrie
CFO & Executive VP

No, because generally, we don't comment on our pipeline. We can only comment on the one we lost, and we lost recently 2 deals. One in France. You probably noticed that we lost Castres-Toulouse, a new section of the motorway in the Southwest, which was won by NGE, the local [ delta ] probably because they are based in -- not very far from Toulouse. And probably VINCI is considered as big enough in the motorway construction business in France. And the second we lost, which is not really a very big deal, was the délégation de service public for managing the airport of Papeete. I would have been pleased to win these projects because I could have made some nice field trips. Unfortunately, we missed this deal. We lost it against Egis, and I think the local guys, Caisse des Dépôts.

C
Charles Maynadier
Analyst

Okay. And do you see any activity in the U.S. on the concession side, managed lanes, airports?

Christian Labeyrie
CFO & Executive VP

Nothing -- I would say not big, but nothing achievable to us presently. But we are actively trying to pursue our commercial efforts. We are maybe more active not on the pure concession business but on the managing of tolls. We have a specific operation in the U.S. which has won several contracts for managing tolls, electronic tolling in Texas, in California, which has been quite successful recently. But that's not concession. It's more service type of contracts on behalf of either a public operator or a private operator, which has not the technology in order to manage the tolls and prefer to subcontract it to people like us. And we also want -- but it's not new. We also are starting an operation in Dublin, in Ireland for managing the toll collection of the motorway around the city.

C
Charles Maynadier
Analyst

And if I may add a follow-up actually. Do you confirm you're not interested in ADT?

Christian Labeyrie
CFO & Executive VP

ADP, to my knowledge, is not for sale. And what is for sale is the participation -- the shares of the Schiphol, the 8% stake of Schiphol. And my understanding is that -- well, I don't know all the details, but I suppose that the French state and ADP and Schiphol have already arranged a way to monetize those 8% between them or on the market. But we are not part of such a potential deal.

C
Charles Maynadier
Analyst

All right. And so what is the rationale now at this stage for you to keep your 8% stake? If there's no...

Christian Labeyrie
CFO & Executive VP

The rationale is very simple. We believe that the share price of ADP can continue to raise -- to rise, and it already did compared to the end of last year. So when the recovery will be confirmed -- recovery of traffic numbers will be confirmed, I'm pretty sure that many shares of airport operators will rise. So ADP, Aena, Fraport, VINCI, etcetera. So it's not the right moment to sell in my opinion.

C
Charles Maynadier
Analyst

But you will consider selling once there's a recovery and then traffic...

Christian Labeyrie
CFO & Executive VP

We don't consider anything for the moment. We are putting our attention on managing our operation and try to keep the level of cost at the lowest level possible and pray for the recovery of the traffic and the restrictions implemented by the different governments to be levied rapidly, like in the U.S. or in the U.K. and potentially in Asia.

Operator

The next question comes from Eric Lemarié from Bryan Garnier.

E
Eric A. Lemarié
Research Analyst

Just one question from my side. Would it be a concern for you if the raw material energy inflation continues beyond 2021, in 2022, for instance? Would you be concerned by that?

Christian Labeyrie
CFO & Executive VP

As long as we factor in such inflation -- potential inflation in our cost and price it properly to our customer, in theory, the answer is no. Now I think this could have consequences on the market. If the inflation is not sustainable for the client at one point, we'll have a problem of volume activity. But that's not the scenario that we factor in at present. We think that the things will stabilize over a certain period of time when the different factors of production worldwide, especially in China or in other countries, will find an equilibrium -- point of equilibrium.

E
Eric A. Lemarié
Research Analyst

Okay. That's clear.

Christian Labeyrie
CFO & Executive VP

That's the scenario that we -- which is one of the big guys, both [ Mondial, SME ], et cetera. I'm just repeating what I read in the press every day.

Operator

No, we don't have any further questions.

Christian Labeyrie
CFO & Executive VP

We can have a drink now with my colleagues. Thank you very much for attending this conference, and we keep at your disposal especially Gregoire and his team for answering further questions that we might have -- you might have. Thank you. Have a good night.

Operator

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.

All Transcripts

Back to Top