The rating reflects Ortiz’ position as the eleventh largest player in the Spanish construction market with turnover of EUR 392m in 2013 (excluding non-controlled concessions). Due to its relatively small size, Ortiz is typically not the principal contractor in large construction projects.

Although its revenue diversity is improving in geographical terms, Ortiz is still very focused on the Spanish construction market, where it generated 63% of 2013 group sales. However, Scope Ratings recognizes that the company plans to boost the share of international sales to at least 45% of total group revenue in 2014 (2011: 10%). This increase will be driven by the group’s significant order backlog, which amounted to EUR 1,061m in December 2013 and represents 2.7x of Ortiz’ 2013 annual revenues. Sales from the backlog shall be generated by diversifying the existing customer base, thus reducing its currently relatively high customer concentration on the Spanish government.

Although the company has a solid track record for executing projects, there is an inherent – albeit limited – risk on international expansion, which has been factored into the rating.

Scope Ratings considers Ortiz’ financial leverage to be in line with the rating. Ortiz’ Net Debt to EBITDA stood at 3.7x at year-end 2013 (3.5x if tradeable securities are fully accounted for) and is expected by Scope Ratings to increase before dropping back to 2.9x in 2016. The increase in debt levels is due to a planned EUR 100m bond issue, which will be used to repay part of the existing bank debt and to finance further investments in concessions.

Ortiz’ liquidity is considered adequate for the rating. Ortiz’ short-term financial debt stood at EUR 73m at the end of 2013. Its cash and equivalents position of EUR 39m at year-end 2013, together with its projected funds from operations and existing liquidity facilities, should allow the company to cover expected liquidity needs for the next 12 months, assuming modest CAPEX, no major outflows for working capital and limited expansionary investments. Ortiz had considerable unused committed bank facilities of EUR 199m at year-end 2013.

The rating outlook is stable. A positive rating action could be warranted if Ortiz manages to deleverage as planned by 2016, after the bond issuance.

About Ortiz Construcciones y Proyectos S.A.U.
Ortiz Construcciones y Proyectos S.A.U. is a well established SME player in the Spanish construction market. Ortiz benefits from relatively good diversification across business lines with operations including Construction, Energy, Services, Concessions and Real Estate. Geographically, Ortiz is present in Spain, Latin America, Poland and Algeria, among others. Ortiz’s turnover stood at EUR 392 million in 2013.

For more information, please visit Scope´s website www.scoperatings.com.

REGULATORY DISCLOSURES

Important information
Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
The party responsible for the dissemination of the financial analysis is Scope Ratings GmbH, Berlin, District Court for Berlin (Charlottenburg) HRB 145472, directors: Thomas Morgenstern, Florian Schoeller.

The rating concerns an issuer which was evaluated for the first time by Scope Ratings GmbH.

The rating has been prepared by Rosana Pfaffe, Lead Analyst.
Responsible for approving the rating: Guillaume Jolivet, Committee Chair

Information on interests and conflicts of interest
The rating was prepared independently by Scope Ratings but for a fee based on a mandate of the rated entity.

As at the time of the analysis, neither Scope Ratings GmbH nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings GmbH or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, or any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating.

Key sources of information for the rating
Annual financial statements, annual reports/semi-annual reports of the rated entity/issuer, external market reports, external market reports, data provided by the issuer or/and external data providers, website of the rated entity/issuer, research Scope Group.
Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently.

Examination of the rating by the rated entity prior to publication
The rated entities have been given the opportunity to examine the rating action prior to publication. Following that examination, the rating was not modified.

Methodology
The methodology applicable for this rating (Corporate Rating Methodology published in March 2014) is available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency’s website.

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