To estimate the Net Debt / EBITDA ratio for Ferrovial SA for the year 2022 (period ending 2023-01-01) based on S&P methodology, we need to calculate two components: Adjusted Net Debt and Adjusted EBITDA. **1. Calculate Adjusted EBITDA** S&P typically defines EBITDA as Profit from Operations before Impairment and Disposals plus Depreciation and Amortization. We look for the "Profit From Operations Before Impairment And Disposals Of Non Current Assets" and add back non-cash charges like amortization if not already included, or simply use the operating profit metric that aligns with EBITDA definitions. From the data: * "Profit From Operations Before Impairment And Disposals Of Non Current Assets" (2022-01-01 - 2023-01-01): 429,000,000 EUR. * Note: The line item "Profit Loss From Operating Activities" is 423,000,000 EUR. The difference is the impairment/gains on disposal (-6,000,000 EUR). S&P usually starts with EBIT or Operating Profit. * Let's check the composition of "Profit From Operations Before Impairment...". * Revenue: 7,551,000,000 * Operating Expense: 6,825,000,000 (includes Raw Materials, Employee Benefits, Misc Other, Amortization). * Gross Profit: 728,000,000. * Gross Profit - Operating Expenses (excluding amortization?) No, Operating Expense includes Amortization (299,000,000). * Let's verify: Revenue (7,551) - OpEx (6,825) = 726. This doesn't match Gross Profit (728) exactly due to "Other Income" (2). 728 + 2 - 6,825 is not right. * Let's look at "Profit From Operations Before Impairment...": 429,000,000. * Usually, EBITDA = Operating Profit + Depreciation + Amortization. * The item "Profit From Operations Before Impairment And Disposals Of Non Current Assets" is often equivalent to EBITDA if depreciation/amortization hasn't been deducted, or EBIT if it has. * Let's check the math: * Revenue: 7,551 * Raw Materials: 1,197 * Employee Benefits: 1,446 * Misc Other Op Ex: 4,182 * Amortization: 299 * Total Op Ex listed separately: 1,197 + 1,446 + 4,182 + 299 = 7,124. * The reported "Operating Expense" is 6,825. There is a discrepancy. Let's look closer. * "Miscellaneous Other Operating Expense" is 4,182. * Maybe "Operating Expense" (6,825) is the sum of Raw Materials (1,197) + Employee (1,446) + Misc (4,182) = 6,825. Yes, 1,197 + 1,446 + 4,182 = 6,825. * So, "Operating Expense" *excludes* Amortization? * If OpEx (6,825) excludes Amortization, then: * Revenue (7,551) + Other Income (2) - OpEx (6,825) = 728. This matches "Gross Profit" (728). * Then subtract Amortization (299): 728 - 299 = 429. * This matches "Profit From Operations Before Impairment And Disposals Of Non Current Assets" (429). * Therefore, the line item "Profit From Operations Before Impairment And Disposals Of Non Current Assets" (429,000,000) is actually **EBIT** (Earnings Before Interest and Taxes), because Amortization has already been deducted. * To get **EBITDA**, we must add back Amortization. * EBITDA = 429,000,000 + 299,000,000 = **728,000,000 EUR**. * *Self-Correction/Refinement*: S&P often makes adjustments for leases (adding back lease depreciation/interest) and other non-recurring items. However, based strictly on the provided facts, we use the standard derivation. * Wait, does "Profit From Operations..." include share of associates? Usually, operating profit is before associates. The line "Share Of Profit Loss Of Associates..." is listed below Finance Income/Cost. So the 429M is core operating profit. * So, **EBITDA = 728,000,000 EUR**. **2. Calculate Adjusted Net Debt** S&P Net Debt generally equals Total Debt minus Cash and Cash Equivalents. Adjustments may include lease liabilities, pension deficits, etc. * **Total Debt Components:** * Noncurrent Portion Of Other Noncurrent Borrowings: 10,776,000,000 * Current Borrowings And Current Portion Of Noncurrent Borrowings: 877,000,000 * *Note*: The breakdown shows "Noncurrent Debt Securities... Infrastructure" (7,893) and "Excluding Infrastructure" (2,883). Sum = 10,776. This matches the total noncurrent borrowings. * Similarly, Current Debt Infrastructure (74) + Current Debt Excluding Infrastructure (803) = 877. This matches total current borrowings. * So, Total Interest-Bearing Debt = 10,776,000,000 + 877,000,000 = **11,653,000,000 EUR**. * **Lease Liabilities:** * S&P typically treats lease liabilities as debt. * Noncurrent Lease Liabilities: 120,000,000 * Current Lease Liabilities: 64,000,000 * Total Lease Liabilities = 120 + 64 = **184,000,000 EUR**. * **Other Debt-like Items:** * "Other Noncurrent Financial Liabilities": 838,000,000. S&P may include certain financial liabilities in debt. Without specific notes, we might exclude or include. Standard "Net Debt" usually focuses on interest-bearing borrowings and leases. However, "Other Noncurrent Financial Liabilities" can contain debt-like instruments. Given the magnitude, let's look at standard S&P definitions. S&P often adjusts for "hybrid" debt. Without explicit classification, we will stick to Borrowings + Leases as the core debt, but check if "Other Noncurrent Financial Liabilities" is significant. It is 838M. Often, these are derivatives or other items. The derivative liabilities are listed separately (66M Noncurrent, 47M Current). So the 838M is likely other financial obligations. To be conservative and aligned with broad "Net Debt" definitions which often capture all interest-bearing liabilities, we should check if these bear interest. In the absence of detail, standard Net Debt calculations often use Total Borrowings + Leases. Let's calculate with Borrowings + Leases first. If we look at "Noncurrent Financial Assets" (1,095) and "Current Derivative Financial Assets" (184), there are offsets. * Let's stick to the most robust definition: **Gross Debt = Borrowings + Lease Liabilities**. * Gross Debt = 11,653,000,000 + 184,000,000 = **11,837,000,000 EUR**. * **Cash and Cash Equivalents:** * "Cash And Cash Equivalents": 5,130,000,000 EUR. * S&P may deduct "restricted cash" only if it is available to service debt. The report lists "Restricted Cash Relating To Infrastructure Projects" (597M Noncurrent) and "Current Restricted Cash... Infrastructure" (38M). * Total Cash reported is 5,130M. This likely includes the restricted cash components or they are separate? * Let's check the sum of cash components: * Cash Excluding Infrastructure: 4,962,000,000 * Cash Infrastructure: 168,000,000 * Sum: 5,130,000,000. * The "Restricted Cash" (597M Noncurrent + 38M Current + 130M Other?) seems to be part of the balance sheet assets but might be included in the "Cash And Cash Equivalents" line or separate. * Looking at Assets: * Current Assets: 7,419. * Cash & Cash Equiv: 5,130. * Restricted Cash (Noncurrent): 597. * Usually, "Cash and Cash Equivalents" in the cash flow statement and balance sheet line item excludes long-term restricted cash. The 597M is "Noncurrent", so it is likely *not* in the 5,130M "Cash And Cash Equivalents" line which is typically current. * However, S&P Net Debt deducts *unrestricted* cash. Restricted cash related to infrastructure projects is often not available to service corporate debt. * Let's assume the 5,130M is the liquid cash. * Is any of the 5,130M restricted? The line "Current Restricted Cash And Cash Equivalents Infrastructure Projects" is 38,000,000. This is likely part of the 5,130M. * So, Unrestricted Cash ≈ 5,130,000,000 - 38,000,000 (current restricted) = 5,092,000,000. * The Noncurrent Restricted Cash (597M) is not in the Cash & Cash Equivalents line, so it's not deducted. * Let's use **Cash = 5,130,000,000 EUR** as a starting point, but S&P might adjust for restricted cash. If we deduct the 38M current restricted, Cash = 5,092M. * Let's look at the "Net Debt" calculation often used: Total Debt - Cash. * Net Debt = 11,837,000,000 - 5,130,000,000 = **6,707,000,000 EUR**. * *Alternative Check*: Does S&P include "Other Noncurrent Financial Liabilities" (838M) in debt? If yes, Gross Debt = 11,837 + 838 = 12,675. Net Debt = 12,675 - 5,130 = 7,545. * Does S&P include "Noncurrent Derivative Financial Liabilities" (66M) and "Current Derivative Financial Liabilities" (47M)? Usually, derivatives are marked-to-market and not treated as principal debt, but the liability exists. S&P often excludes derivatives from Net Debt unless they are synthetic debt. * Let's stick to Borrowings + Leases. * *Refinement on EBITDA*: * We calculated EBITDA as 728M. * Are there other add-backs? "Share Of Profit Loss Of Associates" is 165M. This is equity income, not operating cash flow from core operations in the same way. S&P EBITDA usually excludes equity income. Our derivation from Revenue - OpEx + Amortization did not include associate income, so 728M is correct for core operations. * However, Ferrovial is a holding company with significant infrastructure assets. The "Profit From Operations" might be low relative to the asset base due to high depreciation/amortization in infrastructure (concession assets). * Let's re-verify the EBITDA number. * Revenue: 7,551 * OpEx (cash): 6,825 * EBITDA = 7,551 - 6,825 + 2 (Other Income) = 728. * This seems low for a company with 26B in assets. But the "Investments In Infrastructure Projects" are largely intangible (concessions) which are amortized. The amortization (299M) is added back. * Wait, is "Miscellaneous Other Operating Expense" (4,182) purely cash? It likely includes some non-cash items, but without details, we assume it's cash. * So EBITDA = 728,000,000 EUR. * *Refinement on Net Debt*: * Debt: 11,653 (Borrowings) + 184 (Leases) = 11,837. * Cash: 5,130. * Net Debt = 6,707. * **Ratio Calculation**: * Net Debt / EBITDA = 6,707,000,000 / 728,000,000 * Ratio ≈ 9.21 * *Consideration of "Other Noncurrent Financial Liabilities"*: * If we include the 838M in debt: * Net Debt = 6,707 + 838 = 7,545. * Ratio = 7,545 / 728 ≈ 10.36. * *Consideration of S&P Specific Adjustments*: * S&P often adds back "Rent Expense" if leases are capitalized (already done by adding lease liabilities to debt, but EBITDA should be pre-rent). Since we used Operating Profit which includes lease depreciation (in PPE/Right-of-use amortization? No, amortization is 299M. Lease liabilities are separate. The expense in P&L for leases is depreciation of ROU assets and interest on lease liabilities. Depreciation of ROU is likely in the 299M Amortization/Depreciation. Interest on leases is in Finance Cost. * Our EBITDA (728M) is before interest and tax. It includes the depreciation of ROU assets (added back via Amortization line? The line is "Amortisation Expense". ROU depreciation is often "Depreciation". The report only lists "Amortisation Expense" (299M). It does not list a separate "Depreciation Expense" for PPE. * Let's check PPE. PPE 2023: 479, PPE 2022: 354. * Right-of-use Assets 2023: 183, 2022: 176. * If there is no explicit "Depreciation" line, it might be included in "Miscellaneous Other Operating Expense" or the "Amortisation" line covers both. Given the nature of Ferrovial (infrastructure), most assets are intangible concessions. PPE is small. It is highly likely the 299M covers all D&A. * So EBITDA = 728M is robust. * *Check on Cash*: * S&P deducts "unrestricted cash". * Total Cash = 5,130. * Restricted Cash (Current) = 38. * Restricted Cash (Noncurrent) = 597. * If Noncurrent restricted cash is not in the 5,130 figure, we don't deduct it. * If Current restricted cash (38) is in the 5,130 figure, we should deduct it. * Adjusted Cash = 5,092. * Net Debt = 11,837 - 5,092 = 6,745. * Ratio = 6,745 / 728 = 9.26. * *Check on Debt*: * Did we miss any debt? * "Noncurrent Portion Of Other Noncurrent Borrowings" (10,776) + "Current Borrowings..." (877) = 11,653. * Leases: 184. * Total Debt = 11,837. * *One major check*: Is the EBITDA really only 728M? * Revenue 7.5B. OpEx 6.8B. * This implies a very low margin. * However, Ferrovial's construction business has low margins. The infrastructure business generates stable cash flows but high amortization. * The "Profit From Operations Before Impairment" is 429M. * Add back Amortization 299M. * EBITDA 728M. * This seems correct based on the provided lines. * *S&P Methodology Nuance*: S&P often uses "Funds From Operations" (FFO) or adjusts EBITDA for dividends from associates. * Dividends Received Classified As Operating Activities: 284M. * Share of Profit of Associates: 165M. * S&P might add the difference or treat associates differently. But standard Net Debt/EBITDA uses EBITDA. * If we use the standard definition: * Net Debt = 6,707M (approx). * EBITDA = 728M. * Ratio = 9.2. Let's double check if "Other Noncurrent Financial Liabilities" (838M) should be included. In many credit analyses, "Other Financial Liabilities" are scrutinized. If they are interest-bearing, they are debt. If not, they are not. Without info, excluding them is safer for a "Net Debt" definition which strictly tracks borrowings. However, S&P's "Debt" definition is broad. It includes "all interest-bearing obligations". If we assume the 838M is not interest-bearing (e.g., trade payables classified as financial, or deferred consideration), we exclude it. Given "Trade And Other Current Payables" is 3,430M, the 838M noncurrent is likely distinct. It could be long-term payables. I will exclude it to stick to explicit borrowings and leases, which is the core of Net Debt. Final Calculation: Net Debt = (10,776 + 877 + 120 + 64) - 5,130 = 11,837 - 5,130 = 6,707. EBITDA = 429 + 299 = 728. Ratio = 6,707 / 728 = 9.2129... Let's check if there are any other EBITDA add-backs. "Impairment And Gains Or Losses On Disposal Of Non Current Assets": -6M. This is already excluded from the 429M figure (which is *before* impairment). So we don't add it back. "Share Of Profit Loss Of Associates": 165M. This is below the operating profit line. So it's not in EBITDA. Correct. What about "Other Income"? 2M. Included in Revenue/Op Income. Is it possible EBITDA is higher? Sometimes "EBITDA" for infrastructure companies adds back "Amortization of Intangible Assets" which is done. Let's consider if "Net Debt" should include the "Noncurrent Deferred Income" (1,410M)? No, that's a liability but not debt. Result: ~9.2. 9.21