To estimate the FFO / Net Debt ratio for Ferrovial SA for the year 2022, we need to calculate two components: Funds From Operations (FFO) and Net Debt. **1. Calculate Funds From Operations (FFO)** FFO is typically calculated as Net Income + Depreciation & Amortization + Other Non-Cash Items. In the context of real estate or infrastructure companies like Ferrovial, it is often derived from Operating Profit or EBITDA adjusted for specific items. A common proxy for FFO in this context, given the available data, is: FFO = Profit from Continuing Operations + Amortization & Depreciation + Adjustments for non-cash items included in operating profit. However, a more standard definition for FFO in infrastructure/construction often starts with Net Income and adds back depreciation/amortization and impairment/gains on disposals. Let's look at the provided data for the period 2022-01-01 to 2023-01-01 (which represents the fiscal year 2022). * **Profit Loss From Continuing Operations**: 238,000,000 EUR * **Amortisation Expense**: 299,000,000 EUR * **Impairment And Gains Or Losses On Disposal Of Non Current Assets**: -6,000,000 EUR (This is a net loss, so we add it back if it was subtracted to get profit, or simply note it. The line item "Profit Loss From Operating Activities" is 423,000,000. "Profit From Operations Before Impairment..." is 429,000,000. The difference is -6,000,000. So impairment/gains reduced operating profit. To get cash flow from ops, we add back non-cash charges. Impairment is non-cash. Gains are non-cash inflows in operating profit but investing in cash flow. Here it is a net loss of 6M, likely impairment. We add it back.) * **Share Of Profit Loss Of Associates**: 165,000,000 EUR. This is included in the profit. FFO usually adjusts for the share of associates if it's not cash-distributed, but often FFO definitions vary. Let's stick to a simpler operating cash flow proxy or EBITDA-based FFO. * Another common FFO definition: Net Income + Depreciation + Amortization. * Net Income (Profit Loss): 302,000,000 EUR. * Add: Amortisation Expense: 299,000,000 EUR. * Add: Depreciation (included in Operating Expense? The data lists "Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion" as 299,000,000. It seems Depreciation and Amortization are combined or just Amortization is listed. Let's assume the 299M covers the D&A add-back). * Adjust for Impairment/Gains: The "Impairment And Gains Or Losses..." is -6,000,000. Since this reduced profit, we add it back to get cash generation from operations. * Adjust for Deferred Tax? Usually not for FFO. * Adjust for Interest? FFO is pre-interest in some definitions (like AFFO), but standard FFO is post-interest. Let's use Net Income + D&A. * FFO Estimate 1 = Net Income (302M) + Amortization (299M) + Impairment/Loss on disposal (6M) = 607,000,000 EUR. Let's check if there is a better "Cash Flow from Operations" number. * Cash Flows From Used In Operating Activities: 1,002,000,000 EUR. * This includes changes in working capital. FFO is generally before working capital changes. * Let's try calculating EBITDA and using that as a proxy for FFO, or adjusting CFO. * CFO = 1,002,000,000. * Change in Working Capital = 83,000,000 (Increase/Decrease in Working Capital). The sign is positive in the list "Increase Decrease In Working Capital 2022... 83,000,000". In cash flow statements, an increase in WC is a use of cash (negative), a decrease is a source (positive). If the line item is "Increase Decrease...", and it's positive 83M, it likely means a net *source* of cash (decrease in WC) or it's the adjustment value added to profit. * Let's look at the reconciliation: * Profit Loss: 302,000,000 * Adjustments for reconcile profit loss: -697,000,000 (This seems large and negative, likely includes the huge gain/loss from previous year or specific non-cash items). * Actually, let's look at "Cash Flows From Used In Operating Activities": 1,002,000,000 EUR. * FFO is often defined as CFO + Interest Paid + Taxes Paid (if you want a pre-interest/pre-tax operating cash flow) or just CFO + changes in working capital. * A very common definition for REITs/Infra: FFO = Net Income + Depreciation/Amortization - Gains on Sales + Losses on Sales. * Net Income: 302,000,000 * Depreciation/Amortization: 299,000,000 * Loss on disposal/Impairment: 6,000,000 (Add back) * Gain on disposal: 0 (Net is -6M, so it's a loss/impairment). * FFO = 302 + 299 + 6 = 607,000,000 EUR. Let's consider if "Share of profit of associates" needs adjustment. It is 165M. If this is equity accounted, it's non-cash unless dividends are received. Dividends received from associates are often in Investing or Operating. "Dividends Received Classified As Operating Activities" is 284,000,000. This likely includes dividends from associates. The equity income is 165M. The cash received is 284M. The difference might be from other investments or timing. Standard FFO adds back the equity income and subtracts the dividends? No, usually you just take Net Income. If we want to be precise, FFO aims to reflect operating performance. Let's stick with **FFO = 607,000,000 EUR**. **2. Calculate Net Debt** Net Debt = Total Debt - Cash and Cash Equivalents. We need the values for the end of 2022 (2023-01-01). * **Total Debt**: * Noncurrent Portion Of Other Noncurrent Borrowings: 10,776,000,000 EUR * 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 * *Check*: 7,893 + 2,883 = 10,776. So "Noncurrent Portion Of Other Noncurrent Borrowings" is the sum of the two infrastructure/ex-infra lines. We should not double count. We will use the subtotal 10,776,000,000. * Current Borrowings And Current Portion Of Noncurrent Borrowings: 877,000,000 EUR * 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 * *Check*: 74 + 803 = 877. So "Current Borrowings..." is the sum. We use 877,000,000. * Are there other debt items? * Noncurrent Lease Liabilities: 120,000,000 EUR * Current Lease Liabilities: 64,000,000 EUR * Lease liabilities are often included in Net Debt calculations, especially for infrastructure companies with significant concessions. Let's include them. * Other Noncurrent Financial Liabilities: 838,000,000 EUR. This might include derivatives or other instruments. "Noncurrent Derivative Financial Liabilities" is 66,000,000. The rest might be other debt-like instruments. However, standard Net Debt usually focuses on interest-bearing borrowings. Let's look at the composition. "Other Noncurrent Financial Liabilities" is quite large. Without a breakdown, it's safer to stick to explicit "Borrowings" and "Debt Securities". However, lease liabilities are definitely debt-like. * Let's calculate Net Debt with Borrowings + Leases. * Total Borrowings (Noncurrent) = 10,776,000,000 EUR * Total Borrowings (Current) = 877,000,000 EUR * Total Lease Liabilities (Noncurrent) = 120,000,000 EUR * Total Lease Liabilities (Current) = 64,000,000 EUR * **Total Debt** = 10,776 + 877 + 120 + 64 = 11,837,000,000 EUR. * **Cash and Cash Equivalents**: * Cash And Cash Equivalents: 5,130,000,000 EUR * 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 * Note: The line "Cash And Cash Equivalents" (5,130M) usually excludes restricted cash if listed separately. The breakdown shows: * Cash And Cash Equivalents Infrastructure Projects: 168,000,000 * Cash And Cash Equivalents Excluding Infrastructure Projects: 4,962,000,000 * Sum: 168 + 4,962 = 5,130. * Restricted cash (Current): 38,000,000. * Restricted cash (Noncurrent): 597,000,000. * Net Debt calculations often deduct *all* cash and cash equivalents, including restricted cash if it's not strictly trapped for long-term debt service that matches the debt. However, "Restricted Cash Relating To Infrastructure Projects" is often matched against the "Infrastructure Projects Debt". * Let's calculate Net Debt in two ways: 1. **Gross Debt - Unrestricted Cash**: * Debt: 11,837,000,000 * Cash (Unrestricted): 5,130,000,000 * Net Debt = 11,837 - 5,130 = 6,707,000,000 EUR. 2. **Gross Debt - Total Cash (including restricted)**: * Total Cash = 5,130 + 38 + 597 = 5,765,000,000 EUR. * Net Debt = 11,837 - 5,765 = 6,072,000,000 EUR. Given the nature of infrastructure projects, the restricted cash is often considered part of the project's liquidity and netted against project debt. The "Net Debt" metric reported by companies usually nets all cash and cash equivalents (including restricted) against total debt. Let's assume the broader definition: **Net Debt = 6,072,000,000 EUR**. Let's re-evaluate the Debt component. Does "Other Noncurrent Financial Liabilities" (838M) contain debt? It likely contains derivatives (66M) and potentially other items. If we exclude it, we might understate debt. However, without explicit "borrowing" label, it's risky. But wait, "Noncurrent Financial Assets" is 1,095M. "Noncurrent Derivative Financial Assets" is 148M. Let's look at the "Net Debt" definition commonly used by Ferrovial. Ferrovial typically reports "Net Debt" as Financial Debt (Borrowings + Leases + Derivatives?) minus Cash. If we include Derivatives in Debt (if liability position): Noncurrent Derivative Liab: 66M Current Derivative Liab: 47M Total Deriv Liab: 113M. If we include these in Debt: Total Debt = 11,837 + 113 = 11,950,000,000 EUR. Net Debt = 11,950 - 5,765 = 6,185,000,000 EUR. Let's check the FFO again. FFO = 607,000,000 EUR. Ratio = 607 / 6,185 ≈ 0.098. Let's try a different FFO calculation. Sometimes FFO is approximated by EBITDA. Revenue: 7,551,000,000 Operating Expense: 6,825,000,000 Operating Profit (EBIT): 7,551 - 6,825 = 726,000,000? Wait, "Gross Profit" is 728,000,000. "Profit From Operations Before Impairment..." is 429,000,000. This implies Operating Expenses (excluding D&A?) are higher. Let's look at "Operating Expense" 6,825,000,000. Revenue 7,551,000,000 - OpEx 6,825,000,000 = 726,000,000. This matches closely with Gross Profit 728,000,000 (difference due to Other Income 2M). So EBITDA = Operating Profit + D&A. Operating Profit (Profit Loss From Operating Activities) = 423,000,000. Add back D&A (299,000,000) and Impairment (6,000,000). EBITDA = 423 + 299 + 6 = 728,000,000 EUR. This matches the Gross Profit figure essentially. So EBITDA ≈ 728,000,000 EUR. FFO is usually lower than EBITDA because it subtracts interest and taxes? No, FFO is *after* interest and taxes in some definitions (like REITs), but *before* in others (like Credit Analysis "Funds From Operations" sometimes refers to Operating Cash Flow). However, the standard NAREIT FFO is Net Income + D&A - Gains. Net Income = 302,000,000. FFO = 302 + 299 + 6 = 607,000,000 EUR. Let's check if there is a "Maintenance CAPEX" adjustment for AFFO? The question asks for FFO. Let's refine the Net Debt. Total Financial Debt reported by Ferrovial often includes: - Non-current borrowings - Current borrowings - Lease liabilities - Derivative financial liabilities (netted against assets? or gross?) If we use the explicit Borrowings + Leases: Debt = 11,837,000,000. Cash = 5,765,000,000. Net Debt = 6,072,000,000. Ratio = FFO / Net Debt = 607,000,000 / 6,072,000,000 = 0.0999... ≈ 0.10. Let's consider if "Other Noncurrent Financial Liabilities" (838M) should be included. If included: Debt increases by ~838M (minus derivatives 66M if already in there? No, derivatives are separate line item 66M. So 838-66 = 772M of other liabilities). If we add 772M to Debt: Debt = 11,837 + 772 = 12,609,000,000. Net Debt = 12,609 - 5,765 = 6,844,000,000. Ratio = 607 / 6,844 = 0.088. However, "Other Noncurrent Financial Liabilities" often includes deferred consideration or similar, which might not be interest-bearing debt in the strict "Net Debt" sense used for leverage ratios. Leverage ratios usually use "Net Financial Debt". Ferrovial's own definition of Net Debt typically comprises: - Non-current and current borrowings (including infrastructure and non-infrastructure) - Lease liabilities - Less: Cash and cash equivalents (including restricted) - Less: Current and non-current derivative financial assets (netted against liabilities?) Let's look at Derivatives. Noncurrent Derivative Assets: 148M Current Derivative Assets: 184M Total Deriv Assets: 332M Noncurrent Derivative Liab: 66M Current Derivative Liab: 47M Total Deriv Liab: 113M Net Derivative Position: Asset of 219M. If Net Debt nets derivatives: Net Debt = (Borrowings + Leases) - Cash - Net Derivative Assets? Or usually: Net Debt = Gross Debt - Cash. Derivatives are often treated separately or netted if they are hedges. Let's stick to the core Borrowings + Leases - Cash. Net Debt = 6,072,000,000 EUR. FFO = 607,000,000 EUR. Ratio = 0.10. Let's double check the FFO. Is "Profit Loss From Continuing Operations" the right starting point? Yes. Is "Amortisation Expense" the only D&A? The line "Ajustes Al Resultado Por Gastos Por Depreciacion YAmortizacion" is 299,000,000. This suggests Depreciation AND Amortization are combined in this adjustment figure. So D&A = 299,000,000. Impairment/Loss on disposal = 6,000,000 (added back). FFO = 302 + 299 + 6 = 607,000,000. One alternative: Some definitions of FFO for infrastructure firms add back "Share of profit of associates" because it's non-cash, and subtract dividends received? If we adjust for Associates: Net Income includes 165M share of profit. Cash flow from associates is in "Dividends Received" (284M, but this includes other investments). If we remove the 165M non-cash income and add the cash dividends? This gets complicated. Standard FFO is simpler. Let's check the magnitude. FFO/Net Debt of 10% is a reasonable leverage ratio indicator (inverse of 10x leverage). Net Debt / EBITDA = 6,072 / 728 = 8.3x. FFO is lower than EBITDA (607 vs 728) because of Interest and Tax. Interest (Finance Income Cost) = -320,000,000. Tax = 30,000,000. EBITDA (728) - Interest (320) - Tax (30) = 378? Wait. EBITDA = 728. Interest = 320. Tax = 30. Net Income should be roughly 728 - 320 - 30 = 378. But Net Income is 302. Difference is 76M. This difference comes from: - Share of associates (165M profit added). - Discontinued operations (64M profit added). - Other items? Let's trace: Operating Profit: 423 Finance Cost: -320 Share of Associates: 165 Profit Before Tax from Continuing Ops: 423 - 320 + 165 = 268. Tax: 30. Profit from Continuing Ops: 268 - 30 = 238. Discontinued Ops: 64. Net Income: 238 + 64 = 302. Matches perfectly. So, FFO (Net Income + D&A + Impairment) = 302 + 299 + 6 = 607. Net Debt = 6,072. Ratio = 607 / 6,072 = 0.09996. Rounding to two decimal places: 0.10. 0.10