Problems are piling up on OHLA

Much of the future of construction company OHLA (Obrascón Huarte Laín y Amodio) depends on what it can sell in the coming months. Not the best business card for A company with more than 100 years of history, which was the jewel that was set in the business empire of the Marquis de Villars MerAnd for two years (26% of the capital) it was controlled by the owners of the Mexican Capsa group, brothers Luis and Mauricio Amodio. But reality prevails. OHLA has to reduce debt to ensure financial support from the banks; It has to confirm the restoration of its core business, construction and franchises, and it has to contend with the management twist caused by the sudden departure of the ship’s former captain, Juan Antonio Fernandez Gallar, CEO of the company for the past five years.

Gallar’s departure for “personal reasons” was covered by the Amodio brothers as Presidency and Vice President. The daily life of the managing director remains, Tomás Ruiz, a man with experience in business and public administration, who was the finance minister of the Mexican state of Veracruz governed by Javier Duarte (PRI). Ruiz has important challenges, but there are two main challenges: the maturity of the contracted debt in 2025 and 2026 – 487 million euros against a liquidity of 469 million at the end of 2022 – and the opening of the resolution of the lawsuit with the Mohari Hospitality Ltd. fund. For the Canalejas project, a luxury mall next to the Puerta del Sol in Madrid, with a five-star gallery, shopping hotel and about 20 homes. parking. OHLA and Mohari are 50/50 partners in the complex and They have resorted to arbitration before the Court of Paris because they do not agree on the investments they have made and additional expenses. The lawsuit can last for as long as a year.

The row is hampering the company’s strategy focused on selling assets to reduce debt. General Manager Ruiz is clear that, in business as in war, effective actions have two levels: tactical and strategic. In the tactic, the group’s sources made it clear that the targets are to reach 3,500 million euros in sales, gross profits of 125 million, and additional signings of 3,500 million euros. It is about overcoming five years of difficulties and confirming an improvement that in 2022 has translated into a 17% increase in sales (3,260 million) and a contractual portfolio of over €7,000 million, the highest since 2015. Despite everything, the group lost 96.8 million last year.

Service department

The strategic level is more intense. It envisages improving business margins, but above all carrying out the sale of non-strategic assets in 2023 and 2024 to put the debt in 2025 at about 300 million euros. With OHLA’s obligation to pay off 50% of the debt due that year, the situation would be reasonably relaxed. The condition is that he sell, as soon as possible, the Ingson Services division – which contributes 10% of the group’s turnover, with 15,000 workers – and a 25% stake in the Montreal University Hospital Center (CHUM). In this case, it will be the second attempt. The first, at the end of 2022, was frustrated by the change in market conditions due to higher prices. The cancellation of the sale sent OHLA’s price down to 1996 levels. The titles, which reached more than €16 in 2003, are trading today at €0.45.

The other big planned sale – Canalega – is less mature. In theory, OHLA is free to sell its portion of the complex, but it wants to recoup at least part of the extraordinary expenses it says it has incurred ensuring the big luxury brands are on the project. With the sale of services and the Canadian hospital, the company will receive about 120 million euros, according to calculations in the fund manager Bestinver’s report for the first quarter of the year: 90 million for the Services division and about 30 million for the Montreal Center. Enough, perhaps, to put the debt this year at 3.5 times EBITDA and 2.5 times the following year; But not enough to clear the entire horizon.

Moody’s credit agency, in its latest review in March, maintained OHLA’s rating at B3 – less than half a dozen scores from the ideal risk level – but downgraded its outlook from positive to stable. A show of skepticism based, according to his report, on the discrete evolution of cash flows and the proximity of debt maturities to “2025.” For the agency, as for all the analysts consulted, selling Canalejas is key. The uniqueness, location and condition of the complex, whose renovation was completed in 2020, makes it an attractive asset. However, the value of the complex has undergone adjustments. PokerStars founder, Canadian-Israeli investor Mark Scheinberg, shelled out $225 million in 2017 to acquire 50% of Canalejas through Mohari Limited. Moody’s estimates that the 50% held by OHLA has a book value of $127 million, while Bestinver values ​​it at $182 million, including $54 million from a subordinated loan.

“The company’s treasury situation is complex,” says Alvaro Blanco, director of ATL Capital. “We believe that the future of the company is positive. The family [Amodio] He is well connected and the group is now able to attend more competitions. However, this is not the time for divestment operations in the real estate sector, but the situation can be compensated for through concessions.”

Ohla trust him. He hopes to maintain the pace of franchising in Spain and America. In 2022, it was awarded the Biobío Hospital Complex Concession in Chile – four hospitals and an investment of 400 million – and the Bogota (Colombia) Acceso Norte 2 highway for 29 years. This year it was awarded a concession for the implementation, preservation and exploitation of the National Cancer Institute of Santiago de Chile and Contract to expand the capacity of the Hospital del Nino Jesus in Madrid. In the Spanish capital, according to the contract, OHLA will build a hospital building of 9,000 square meters that will be offered as a fee in kind for the right to build and operate an underground car park of 808 spaces. There is a 40 million investment in a project that will be developed over a period of 39 years. But the path is not clear. High interest rates still weigh on business, although OHLA management thinks they have enough oxygen. “Efforts to strengthen the balance sheet and improve the transparency of the group are appreciated,” said Renta 4’s latest report on the group. On a positive note.

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