To estimate the Net Debt / EBITDA ratio for Ferrovial SA for the year 2022 (period 2022-01-01 to 2023-01-01) using the S&P methodology, we need to calculate two components: Adjusted EBITDA and Net Debt. **1. Calculate Adjusted EBITDA** S&P typically defines EBITDA as Earnings Before Interest, Taxes, Depreciation, and Amortization. We start with the Profit/Loss from Continuing Operations or Operating Profit and add back the relevant items. From the data provided for the period 2022-01-01 to 2023-01-01: * **Profit Loss From Operating Activities**: 423,000,000 EUR * **Amortisation Expense**: 299,000,000 EUR * **Depreciation**: The data lists "Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion" (Adjustments to result for Depreciation and Amortization expenses) as 299,000,000 EUR. However, looking at the breakdown, "Amortisation Expense" is explicitly listed as 299,000,000 EUR. In infrastructure companies, a significant portion of non-cash charges is amortization of intangible assets (concessions). Let's look for explicit Depreciation. The line "Investments In Property Plant And Equipment And Intangible Assets" is capex. The P&L doesn't explicitly separate Depreciation from Amortization in a single "Depreciation" line item distinct from the amortization line, but often "Amortisation Expense" in this context covers the amortization of intangibles. Let's look at the "Profit From Operations Before Impairment And Disposals Of Non Current Assets" which is 429,000,000 EUR. * Revenue: 7,551,000,000 EUR * Operating Expense: 6,825,000,000 EUR * Gross Profit: 728,000,000 EUR * Operating Profit (before impairment/disposals): 429,000,000 EUR. * The difference between Gross Profit (728M) and Operating Profit before impairment (429M) is roughly 299M. This matches the "Amortisation Expense" of 299,000,000 EUR. This suggests that the primary non-cash charge deducted to reach operating profit is amortization. There is no separate "Depreciation" line item added back in the cash flow adjustments other than the combined or specific amortization. Let's assume EBITDA = Operating Profit + Amortization + Depreciation. If Depreciation is negligible or included in operating expenses without a specific add-back line distinct from the 299M, we use the available data. * However, standard EBITDA calculation: * Start with **Profit Loss From Operating Activities**: 423,000,000 EUR. * Add back **Amortisation Expense**: 299,000,000 EUR. * Add back **Impairment And Gains Or Losses On Disposal Of Non Current Assets**: The value is -6,000,000 EUR (a gain/positive impact on profit, so we subtract it to normalize, or simply add back the expense if it were an expense. Since it's negative, it increased profit. To get to EBITDA, we usually add back non-operating/non-cash items. Impairment is non-cash. A gain of 6M means we subtract 6M). * Wait, the line is "Impairment And Gains Or Losses...": -6,000,000 EUR. This is a net gain. * Let's check the reconciliation: Operating Profit before impairment (429M) - Impairment/Gains (-6M) = 423M? No, 429 - (-6) = 435. The math: 429 + (-6) = 423. Yes. So the -6M is a net gain included in the 423M. * EBITDA is generally pre-impairment. So we take **Profit From Operations Before Impairment And Disposals**: 429,000,000 EUR. * Add back **Amortisation**: 299,000,000 EUR. * Are there Depreciation costs? The cash flow statement shows "Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion" as 299,000,000 EUR. This implies the total D&A is 299M. Since Amortization is 299M, Depreciation is likely 0 or negligible in this specific reporting line, or the 299M is the total. Given the nature of Ferrovial (concessions), amortization is the dominant charge. * So, **EBITDA** = 429,000,000 + 299,000,000 = **728,000,000 EUR**. * *Self-Correction/Refinement*: S&P often uses "Adjusted EBITDA". We should check for other adjustments like share of profit of associates. The "Share Of Profit Loss Of Associates" is 165,000,000 EUR. This is included in the Profit Before Tax but usually excluded from EBITDA in strict operational terms, or added back if starting from Net Income. However, starting from Operating Profit (which usually excludes equity income unless specified), we need to check if the 429M includes it. "Profit From Operations" typically excludes equity income. The line "Share Of Profit Loss Of Associates..." appears below Operating Profit in the P&L structure (after Finance Income/Cost). Let's verify the P&L structure: * Profit Loss From Operating Activities: 423M * Financial Result...: -365M (Infra) + 45M (Excl Infra) = -320M (Finance Income Cost matches -320M). * Share of Associates: 165M. * Profit Before Tax: 268M. * Check: 423 (Op) - 320 (Fin) + 165 (Assoc) = 268. Correct. * So Operating Profit (423M) does *not* include Associate income. * Therefore, EBITDA based on Operating Profit is 429M (Pre-impairment Op Profit) + 299M (D&A) = 728M. * S&P methodology often adds back the share of profits from associates to EBITDA if they are considered part of the core operating cash flow generation capacity, or treats them separately. However, a common standard definition is EBITDA = Operating Income + D&A. Let's stick to **728,000,000 EUR** as the base EBITDA. Some definitions might add the 165M, making it 893M. Given Ferrovial's structure, associates are significant. However, without explicit "Adjusted EBITDA" guidance, the standard operational EBITDA is safer. Let's look at the "Gross Profit" line: 728M. It is a coincidence that Gross Profit equals our calculated EBITDA? * Revenue: 7551 * Op Ex: 6825 * Gross Profit (as defined in report?): 728. * Wait, Revenue - Op Ex = 7551 - 6825 = 726. The report says Gross Profit is 728. The difference is 2M (Other Income). * If Gross Profit is 728M, and Operating Profit is 429M (before impairment), the difference is 299M. This confirms that the 299M Amortization is the only difference between Gross Profit and Operating Profit (before impairment). * Thus, **EBITDA = Gross Profit + Other Income?** No, EBITDA = Operating Profit + D&A. * Operating Profit (pre-impairment) = 429M. * D&A = 299M. * EBITDA = 728M. **2. Calculate Net Debt** S&P Net Debt typically includes: * Total Debt (Short-term + Long-term borrowings) * Less: Cash and Cash Equivalents * Plus/Minus: Adjustments for leases, restricted cash, etc. S&P often treats restricted cash as part of debt or excludes it from cash depending on availability. S&P usually deducts unrestricted cash. Let's identify the components from the Balance Sheet (2023-01-01, which represents the end of 2022): **Debt Components:** * **Noncurrent Portion Of Other Noncurrent Borrowings**: 10,776,000,000 EUR * Breakdown: * Noncurrent Debt Securities And Bank Borrowings Of Infrastructure Projects: 7,893,000,000 EUR * Noncurrent Debt Securities And Bank Borrowings Excluding Infrastructure Projects: 2,883,000,000 EUR * Sum: 7,893 + 2,883 = 10,776. Matches. * **Current Borrowings And Current Portion Of Noncurrent Borrowings**: 877,000,000 EUR * Breakdown: * Current Debt Securities And Bank Borrowings Of Infrastructure Projects: 74,000,000 EUR * Current Debt Securities And Bank Borrowings Excluding Infrastructure Projects: 803,000,000 EUR * Sum: 74 + 803 = 877. Matches. * **Lease Liabilities**: * Noncurrent Lease Liabilities: 120,000,000 EUR * Current Lease Liabilities: 64,000,000 EUR * Total Leases: 184,000,000 EUR. S&P typically includes lease liabilities in debt. **Total Gross Debt** = 10,776M + 877M + 184M = **11,837,000,000 EUR**. **Cash Components:** * **Cash And Cash Equivalents**: 5,130,000,000 EUR * **Restricted Cash**: * Restricted Cash Relating To Infrastructure Projects And Other Financial Assets (Noncurrent): 597,000,000 EUR * Current Restricted Cash And Cash Equivalents Infrastructure Projects: 38,000,000 EUR * Total Restricted Cash: 635,000,000 EUR. S&P Methodology for Cash: * S&P generally deducts **unrestricted** cash and cash equivalents. * Restricted cash is often not deducted from debt (i.e., treated as zero cash for net debt purposes) unless it is available to service general corporate debt. Infrastructure project restricted cash is typically ring-fenced. * The line "Cash And Cash Equivalents" (5,130M) likely includes both restricted and unrestricted? * Let's check the breakdown: * Cash And Cash Equivalents Infrastructure Projects: 168,000,000 EUR * Cash And Cash Equivalents Excluding Infrastructure Projects: 4,962,000,000 EUR * Sum: 168 + 4,962 = 5,130. Matches. * The "Restricted Cash" lines are separate assets: "Restricted Cash Relating To Infrastructure Projects..." (597M Noncurrent) and "Current Restricted Cash..." (38M Current). * So, the 5,130M is likely *unrestricted* or broadly available cash, while the 635M is *additional* restricted cash classified separately. * However, usually "Cash and Cash Equivalents" on the balance sheet includes all cash. The fact that there are separate lines for "Restricted Cash" suggests they are classified as "Other Financial Assets" or similar, not as "Cash and Cash Equivalents". * Therefore, Total Cash reported as "Cash And Cash Equivalents" is 5,130,000,000 EUR. * Is this cash unrestricted? The breakdown shows "Infrastructure Projects" cash of 168M. This cash might be restricted in use but classified as cash. The separate "Restricted Cash" lines (597M + 38M) are likely long-term deposits or similar. * S&P usually deducts cash that is available to repay debt. Cash in infrastructure projects is often ring-fenced. * Let's look at the "Net Debt" calculation convention. If we assume the 5,130M is the cash balance, we must decide how much to deduct. * Conservative S&P approach: Deduct only unrestricted cash. * Cash Excluding Infrastructure Projects: 4,962,000,000 EUR. This is likely the unrestricted portion available to the parent/general corporate. * Cash Including Infrastructure Projects: 5,130,000,000 EUR. * Restricted Cash (separate line): 635,000,000 EUR. This is definitely not deductible. * What about the 168M "Cash And Cash Equivalents Infrastructure Projects"? This is part of the 5,130M. It is likely ring-fenced. * So, Deductible Cash ≈ Cash Excluding Infrastructure Projects = 4,962,000,000 EUR. * Alternatively, some analysts deduct total cash and add back restricted. * Let's calculate Net Debt using the most standard S&P adjustment: **Gross Debt - Unrestricted Cash**. * Gross Debt = 11,837,000,000 EUR. * Unrestricted Cash = 4,962,000,000 EUR (Cash Excl Infra). * Net Debt = 11,837 - 4,962 = **6,875,000,000 EUR**. * *Alternative Check*: If we deduct all "Cash and Cash Equivalents" (5,130M): * Net Debt = 11,837 - 5,130 = 6,707,000,000 EUR. * *Alternative Check 2*: If we include Lease Liabilities in Debt (which we did) but also capitalize operating leases (already done via IFRS 16 Right-of-Use assets and Lease Liabilities). The Lease Liabilities are 184M. Let's refine the Debt definition. S&P often adjusts for "Hybrid" debt or perpetuals. * "Perpetual Subordinated Bonds" are mentioned in Equity changes. They are likely classified as Equity (Other Equity Securities). If they are treated as equity for accounting, S&P might reclassify them as debt if they have mandatory coupons or redemption features. However, without specific terms, we stick to the reported borrowings. * The "Noncurrent Portion Of Other Noncurrent Borrowings" includes "Debt Securities". * Let's assume the reported borrowings are the correct debt base. Let's refine the EBITDA definition. * S&P Adjusted EBITDA often adds back "Share of profit of associates" if it's a significant part of the business model (like Ferrovial). * If we add Share of Associates (165M) to EBITDA: * EBITDA = 728M + 165M = 893,000,000 EUR. * Ferrovial is a holding company for infrastructure assets, often accounted for via equity method or consolidation. The "Investments In Associates" is 1,892M. The share of profit is 165M. * Standard S&P for diversified industrials: EBITDA includes equity income? Usually, S&P calculates "EBITDA" from consolidated operations. If the associates are equity-accounted, their EBITDA is not in the consolidated EBITDA. S&P often adds the *distributable* cash flow from associates or the equity income back to get a "Group EBITDA" proxy, or simply uses Consolidated EBITDA. * However, a strict "Net Debt / EBITDA" ratio usually uses Consolidated EBITDA. * Let's calculate both ratios. 1. Consolidated EBITDA = 728M. Net Debt = 6,875M. Ratio = 9.4x. 2. Adjusted EBITDA (with Associates) = 893M. Net Debt = 6,875M. Ratio = 7.7x. Let's look at the "Profit Loss From Operating Activities" again. Revenue 7551 - OpEx 6825 = 726. + Other Income 2 = 728 Gross Profit. Gross Profit 728 - Amortization 299 = 429 Operating Profit (before impairment). So EBITDA = 728M. Is there any other EBITDA adjustment? "Miscellaneous Other Operating Expense" includes fair value adjustments? "Miscellaneous Other Operating Expense" Fair Value Adjustments Member: -1,000,000 EUR. This is negligible. Let's re-evaluate Net Debt. Total Liabilities: Noncurrent Liabilities: 13,142M Current Liabilities: 5,378M Total Liab: 18,520M. Debt Items: Noncurrent Borrowings: 10,776M Current Borrowings: 877M Lease Liabilities: 184M Total Interest Bearing Debt: 11,837M. Other Noncurrent Financial Liabilities: 838M. What is this? "Other Noncurrent Financial Liabilities". This could be derivatives or other debt-like instruments. Derivative Financial Liabilities (Noncurrent): 66M. Derivative Financial Liabilities (Current): 47M. These are likely included in the "Other Noncurrent Financial Liabilities" or separate? The sum of Noncurrent Liabilities components: 2 (Prov Emp) + 416 (Prov) + 120 (Lease) + 10,776 (Borrowings) + 838 (Other Fin) + 924 (Def Tax) + 66 (Deriv) = 13,142. Sum: 2+416+120+10776+838+924+66 = 13,142. Correct. So "Other Noncurrent Financial Liabilities" (838M) is distinct from Borrowings and Derivatives. S&P typically includes "Other Financial Liabilities" in debt if they are interest-bearing or mandatory redeemable. Without detail, it's safer to exclude unless known to be debt. However, 838M is significant. Let's check Current Liabilities: 64 (Lease) + 877 (Borrowings) + 47 (Deriv) + 30 (Tax) + 3430 (Payables) + 930 (Prov) = 5,378. Sum: 64+877+47+30+3430+930 = 5,378. Correct. So the debt-like items are: Borrowings: 11,653M (10,776 + 877) Leases: 184M Other Noncurrent Financial Liabilities: 838M. If we include "Other Noncurrent Financial Liabilities" as debt: Gross Debt = 11,653 + 184 + 838 = 12,675M. Cash to deduct: Cash & Cash Equivalents: 5,130M. Restricted Cash (Noncurrent): 597M. Restricted Cash (Current): 38M. If we deduct only Unrestricted Cash (4,962M): Net Debt = 12,675 - 4,962 = 7,713M. Ratio with EBITDA 728M: 7,713 / 728 = 10.6x. Ratio with EBITDA 893M: 7,713 / 893 = 8.6x. Let's consider the source. Ferrovial's reported Net Debt is often a key metric. In 2022, Ferrovial reported Net Debt. Common definition: Financial Debt - Cash. Financial Debt = Borrowings + Leases + Derivatives (sometimes) + Other Financial Liabs. Let's try a simpler S&P approximation: EBITDA = 728M. Net Debt = Gross Debt (11,837M) - Cash (5,130M) = 6,707M. Ratio = 6,707 / 728 = 9.21x. If we add back Associates to EBITDA (165M): EBITDA = 893M. Ratio = 6,707 / 893 = 7.51x. However, S&P Global Ratings often uses "Adjusted EBITDA" which includes equity income from associates for infrastructure firms. Also, S&P Net Debt usually excludes restricted cash from the cash deduction. Cash Deduction = 5,130M (Total CCE) - 168M (Infra CCE, likely restricted) = 4,962M. Net Debt = 11,837 - 4,962 = 6,875M. Let's check if "Other Noncurrent Financial Liabilities" (838M) is debt. In Ferrovial's reports, this often includes amounts related to put options on non-controlling interests or similar. S&P treats mandatory redeemable NCI puts as debt. If we add 838M to Debt: Net Debt = 6,875 + 838 = 7,713M. Let's look at the magnitude. EBITDA ~ 730M - 900M. Net Debt ~ 6.7B - 7.7B. Ratio ~ 7.5x - 10.5x. Let's refine the EBITDA. Operating Profit before impairment: 429M. Add D&A: 299M. EBITDA = 728M. Add Share of Associates: 165M. Adjusted EBITDA = 893M. S&P Methodology for Infrastructure: "We add back equity income from associates and joint ventures to EBITDA." So EBITDA = 893,000,000 EUR. Net Debt: Debt = Borrowings (11,653) + Leases (184) + Other Financial Liab (838)? S&P includes "mandatory redeemable noncontrolling interests" in debt. The "Other Noncurrent Financial Liabilities" of 838M is a strong candidate for this or similar debt-like instruments. Let's assume Gross Debt = 11,653 + 184 + 838 = 12,675M. Cash Deduction = Unrestricted Cash = 4,962M. Net Debt = 12,675 - 4,962 = 7,713M. Ratio = 7,713 / 893 = 8.63. Let's try without the 838M (if it's not debt): Net Debt = 11,837 - 4,962 = 6,875M. Ratio = 6,875 / 893 = 7.70. Let's try without Associate add-back (Consolidated EBITDA): Ratio = 6,875 / 728 = 9.44. Which is more "S&P"? S&P explicitly adjusts EBITDA for equity income in infrastructure. S&P explicitly adjusts Net Debt for restricted cash (doesn't deduct it). S&P explicitly adjusts Net Debt for hybrid capital/NCI puts (includes in debt). The 838M "Other Noncurrent Financial Liabilities" is large. In 2021 it was 72M. The jump to 838M suggests a specific transaction, possibly related to the Heathrow or other infrastructure stakes, or NCI puts. Given the context of Ferrovial, this is likely debt-like. So, Net Debt = 7,713M. EBITDA = 893M. Ratio = 8.63. Let's double check the Cash. Cash And Cash Equivalents: 5,130M. Less: Restricted Cash included in CCE? The note "Cash And Cash Equivalents Infrastructure Projects" is 168M. The note "Current Restricted Cash..." is 38M. The note "Restricted Cash Relating To Infrastructure Projects..." (Noncurrent) is 597M. Usually, "Cash and Cash Equivalents" on the balance sheet is the liquid asset. The "Restricted Cash" lines are separate assets. So Total Cash Assets = 5,130 + 597 + 38 = 5,765M. Unrestricted Cash = Total Cash - Restricted. Restricted = 597 + 38 + (portion of 168?). The 168M is "Cash And Cash Equivalents Infrastructure Projects". It is classified as Cash. Is it restricted? Usually, project cash is restricted. If we assume all "Infrastructure Projects" cash (168M + 38M + 597M) is restricted: Total Restricted = 803M. Unrestricted = 5,765 - 803 = 4,962M. This matches the "Cash And Cash Equivalents Excluding Infrastructure Projects" line exactly (4,962M). So, Unrestricted Cash = 4,962M. Gross Debt: Borrowings: 11,653M. Leases: 184M. Other Financial Liab: 838M. Total Gross Debt = 12,675M. Net Debt = 12,675 - 4,962 = 7,713M. EBITDA: Op Profit (pre-impairment): 429M. D&A: 299M. Equity Income: 165M. Adjusted EBITDA = 429 + 299 + 165 = 893M. Ratio = 7,713 / 893 = 8.637. Rounding to two decimal places: 8.64. Let's consider if "Other Noncurrent Financial Liabilities" should be excluded. If excluded: Net Debt = 6,875M. Ratio = 6,875 / 893 = 7.70. Ferrovial's reported net debt/EBITDA is often in the 7x-9x range. In 2022, Ferrovial's leverage was a key metric. If I use the strict "Borrowings + Leases" definition: Net Debt = 6,875M. EBITDA = 893M. Ratio = 7.7. If I use Consolidated EBITDA (no equity income): Ratio = 6,875 / 728 = 9.4. S&P Infrastructure Methodology: "EBITDA includes equity income from unconsolidated affiliates." "Net debt includes all interest-bearing debt, lease liabilities, and mandatory redeemable noncontrolling interests." The 838M increase in Other Financial Liabilities is suspicious. In 2021 it was 72M. Looking at Ferrovial's 2022 annual report, "Other non-current financial liabilities" often includes derivatives and put options. Derivatives are listed separately (66M). So 838 - 66 = 772M of other items. If these are put options on NCI, S&P includes them. I will proceed with the inclusion of the 838M as debt-like, and the inclusion of equity income in EBITDA. Calculation: Net Debt = 7,713,000,000 EBITDA = 893,000,000 Ratio = 8.637 If the 838M is NOT debt: Net Debt = 6,875,000,000 EBITDA = 893,000,000 Ratio = 7.698 Given the ambiguity of "Other Financial Liabilities", and that S&P is conservative, including potential debt-like instruments is standard. However, 8.6x vs 7.7x is a significant difference. Let's check the "Noncurrent Derivative Financial Liabilities" (66M). These are included in the 838M? The sum of Noncurrent Liabilities components was: 2+416+120+10776+838+924+66 = 13,142. The 66M is listed *separately* in the data provided ("Noncurrent Derivative Financial Liabilities"). So the 838M is *excluding* derivatives. I will provide the ratio based on the most robust S&P adjustments: EBITDA = 893M. Net Debt = 7,713M. Ratio = 8.64. However, if I stick to the most explicit "Borrowings" lines: Net Debt = 6,875M. Ratio = 7.70. Let's look at the "Net Debt" definition in Ferrovial's own reports. They usually define Net Financial Debt as Borrowings + Derivatives + Leases - Cash. Borrowings: 11,653. Leases: 184. Derivatives: 66 (Noncurrent) + 47 (Current) = 113. Total Debt = 11,950. Cash: 5,130. Net Debt (Reported) = 6,820. If we use Reported Net Debt (6,820M) and Adjusted EBITDA (893M): Ratio = 6,820 / 893 = 7.63. If we use Reported Net Debt (6,820M) and Consolidated EBITDA (728M): Ratio = 6,820 / 728 = 9.37. S&P typically uses Adjusted EBITDA. So 7.63 is a strong candidate. Let's refine the Cash deduction for S&P. S&P deducts unrestricted cash. Unrestricted Cash = 4,962M. Debt = 11,950M (Borrowings + Leases + Derivatives). Net Debt = 11,950 - 4,962 = 6,988M. Ratio = 6,988 / 893 = 7.82. I will use 7.82. 7.82