Grupo Ferrovial, S.A. History

Company Perspectives:

Ferrovial feels a connection with its clients. Obtaining their satisfaction and contributing to society's development are the basis of Ferrovial's activities. Its management is defined by principles of profitability and growth. Key Dates:

Key Dates:

1952:

Rafael del Pino y Moreno founds Grupo Ferrovial, S.A.

1955:

Hydroelectric plant construction begins.

1966:

Company enters road construction.

1968:

Company wins Bilbao-Behobia highway concession.

1981:

Rafael del Pino y Calvo-Sotelo, eldest son of the founder, joins company.

1986:

Company begins Olympics construction projects.

1991:

Construction of high-speed train projects begins.

1995:

Company acquires Agromán S.A.; launches Ferrovial Servicios.

1996:

Ferrovial Agromán Internacional S.A. is formed.

1997:

Guggenheim Museum in Bilbao is completed; company acquires Ferogasa.

1998:

Company launches Cintra concessions subsidiary.

1999:

Public offering is made.

2000:

Company acquires majority stake in Budimex (Poland); wins Scut highway (Portugal) concession.

Company History:

Grupo Ferrovial, S.A. is the second largest construction group in terms of market capitalization in Spain, behind Fomento de Construcciones y Contratas (FCC). Ferrovial is active in nearly every branch of the construction business, from civil and public works projects, engineering to residential construction, with a strong background in large-scale works--such as the construction of Chile's tallest office tower and the construction of the new Guggenheim Museum in Bilbao, Spain--and highway, bridge, and road construction. Construction continues to account for more than 80 percent of Ferrovial's annual revenues; the company has embarked, however, on a diversification program intended to increase the contribution of diversified operations to at least 50 percent by 2004. The company's diversification remains nonetheless closely linked to its core construction business, with operations in toll road, parking, and airport management concessions; real estate; and services, such as waste disposal. Real estate is handled chiefly by Ferrovial Inmobiliaria, which accounted for 9 percent of company revenues in 2000 and in that year became Spain's leading real estate construction and management company. Concessions fall under subsidiary Cintra (Concesiones de Infraestructuras de Transportes, S.A.), created in 1998 to take advantage of synergies with Ferrovial's toll road construction activities. Cintra has rapidly built up a strong portfolio of toll road concessions, in Spain, Portugal (including the Scut highway concession awarded in 2000), Latin America, and North America, with a stake in the H-407 toll road concession in Toronto, Canada. Cintra is also a fast-growing airport management company, owning nine airports in Mexico, the Bristol Airport outside of London, England, and the 99-year concession for Niagara Airport in Niagara Falls. Concessions accounted for just 7 percent of Ferrovial's total revenues in 2000, but is expected to be among the company's fastest-growing revenue sources. The company's Ferroser services subsidiary is active in public services, such as street cleaning and waste management, and maintenance and facilities management service. That division added another 3 percent to the company's sales in 2000. The company also has taken an interest in constructing the information superhighway, acquiring minority shareholdings in Spanish telecommunications and internet services companies Cableuropa/ONO and Uni2. Based in Madrid, and still majority owned by the founding del Pino family, Ferrovial posted sales of EUR 3.6 billion in 2000. Spain continues to account for more than 80 percent of the company's total sales. Nonetheless, the company has been involved in international activities almost from its start, and foreign sales represent an increasingly strong source of revenue growth for the company.

Working on the Spanish Railroad in the 1950s

Born in 1920, Rafael del Pino y Morena became one of Spain's leading industrialists. At the conclusion of the Spanish Civil War, del Pino entered the country's prestigious Universitaria de Ingenieria de Caminos, Canales y Puertos (Road, Canal, and Port Engineering), receiving a doctorate in 1947. Del Pino's university career was also to help him establish important political contacts that became essential for the company he was to found. Upon completing his doctorate, Del Pino joined Vias y Construcciones S.A., where, within a short time, he rose to a director's position.

Del Pino left Vias y Construcciones in 1952 to spend the summer traveling across Europe and plotting out his next career move. Returning to Spain, del Pino launched his own construction company. Called Ferrovial--literally, "railroad"--del Pino's company initially specialized in construction of railroad ties but quickly extended itself to the construction of railroads themselves. Del Pino's initial holding in his company was just 50 percent, with the remainder held by members of his family. Through the 1950s, however, del Pino steadily bought out the other family members' shares, gaining 100 percent control by the beginning of the 1960s.

Del Pino's political connections helped his company secure a number of important railroad construction contracts. The company also branched out in the early 1960s into other public works projects, notably with the construction of the Salto 2 hydroelectric plant on the Sil River. International operations were also an early feature of Ferrovial, such as the award for the contract for Libya's Hedjaz railroad in the early 1960s.

Government contracts remained the most important source of revenues for the fast growing Ferrovial. The beginning of massive infrastructure investments by the Spanish government under Francisco Franco marked a period of strong growth for Ferrovial as the company extended its operations to include highway and roadway construction. The inauguration of the National Toll Highway Program in the mid-1960s gave Ferrovial a number of important contracts to build the country's toll road system. The company also joined with Europistas to win the concession to operate Bilbao-Behobia toll road in 1968.

Into the 1970s, Ferrovial began to branch out, creating a number of new subsidiaries to operate its diversifying interests. By 1975, the company had created its Ibervial S.A. real estate subsidiary, which later was to become Ferrovial Immobiliaria. The company also established Cadagua S.A. as it entered public services operations, such as waste management and street cleaning services. Ferrovial's expanding interests in concessions led it to form Eurovias, which was granted the concession to operate the highway between Burgos and Arminon. Del Pino himself was gaining prominence among Spain's industrial community. In 1972, he was named president of the management committee overseeing the Empresa Nacional del Gas (National Gas Company), charged with creating the new Enagas company. Del Pino subsequently was named president of Enagas, a position he held until 1974. The Enagas position helped del Pino win new friends among Spain's energy industry, such as Claudius Boada, who later was to become president of the American Hispanic Bank.

In 1976, Ferrovial began construction of its first large-scale housing development, the Covibar development in Madrid. That development, which was to reach more than 4,400 homes, gave the company an important boost toward becoming a leader in the Spanish residential development sector. Meanwhile, as the Spanish construction market entered a slump following the death of Franco, Ferrovial found increasing heavy construction clients in such countries as Libya, Mexico, Paraguay, and Kuwait. As the Spanish construction crisis deepened, international contracts came to represent a larger proportion of the company's revenues. At the height of the slump, which lasted from 1979 to 1984, more than a third of Ferrovial's construction revenues came from its foreign operations.

Construction Boom in the 1980s

Joining del Pino in 1981 was eldest son Rafael del Pino y Calvo-Sotelo, a fellow graduate of the Ingenieria de Caminos, Canales y Puertos university, who also received an M.B.A. from the Massachusetts Institute of Technology. The younger del Pino started his career at the company's Libyan operations, learning the business from the ground up, before taking on increasingly central positions in the company in the late 1980s.

The Spanish construction industry entered a new boom phase in the middle of the 1980s and Ferrovial's Spanish construction operations once again generated the largest share of its growing business. By then, the company had begun to formulate its strategy for becoming one of Spain's leading construction companies. After winning the concession for the Sant-Cugat-Terrassa-Manresa highway, Ferrovial captured a strong share of the building boom sparked by the approach of Barcelona's hosting of the 1992 Olympic Games.

Diversified Construction and Concessions Leader for the 21st Century

If Spain had long been Western Europe's poor cousin, the beginning of the 1990s marked a period of new economic growth for that country. Ferrovial was by then in primary place to capture a strong share of the booming construction market. The privatization of much of Spain's industrial base also presented a variety of opportunities for the company in the early 1990s. During this first half of the decade, Ferrovial established several new subsidiaries as it again began to diversify its operations. Ferrovial Conservacion S.A. was established to spearhead the company's entry into infrastructure and facility maintenance and conservation services. The company coupled the creation of Ferrovial Immobiliaria with the launch of its first foreign real estate developments, notably in neighboring Portugal. Ferrovial also played a major role in the construction of Spain's high-speed train railroad network.

In 1995, Ferrovial took a giant step forward in its quest to become Spain's leading construction firm when it acquired a majority shareholding in struggling, publicly traded rival Agromán S.A. While Ferrovial itself had long resisted a public offering, preferring to maintain its family-owned status, the Agromán acquisition was to lead to a public offering by Ferrovial in 1999 as the company moved to acquire the remaining shares of Agromán. The Agromán acquisition helped Ferrovial's sales jump to nearly EUR 1.6 billion in 1996. The company's strong growth through the second half of the decade was to enable it to nearly double its revenues in less than five years.

After merging its own construction operations with those of Agromán's to form the new subsidiary Ferrovial Agromán Internacional S.A., Ferrovial continued to boost its other operations. In 1996, the company turned to the South America market, where it was awarded highway concessions in Chile. That year, the company also completed construction of the headquarters building for Compania de Telecomunicaciones de Chile (CT), the country's tallest building and one of the tallest on the South American continent.

Another high-prestige Ferrovial project was completed the following year, when the Guggenheim Museum in Bilbao became one of the decade's architectural highlights. Meanwhile, Ferrovial continued to build up its concessions operations, acquiring urban services group Ferogasa in 1997. By 1998, Ferrovial tagged its concessions operations for further growth, creating a new subsidiary, Cintra, to hold its operations in that sector. Cintra immediately began its own expansion, launching into airports facilities ownership and management with the acquisition of nine airports in Mexico. Cintra also stepped into the car park market with a number of key acquisitions, including those of Dornier, Reinrod, Femet, and ESSA. By the end of 1999, the company's parking concessions topped 110,000 spaces.

Ferrovial went public in 1999, selling nearly 35 percent of its shares in what was Spain's largest public offering to date. The del Pino family nonetheless retained their majority control of the company, with more than 57 percent of outstanding shares. The public offering enabled the company to make a number of new moves, notably in the concessions market. By 2000, it had increased its number of airport concessions to 12, including the purchases of the Bristol Airport in England, and the winning of concessions contracts for the Cerromoreno Airport in Antofagasta, Chile, and a 99-year contract to operate the Niagara Falls airport. The company also achieved a number of new highway concessions contracts, including the H-407 toll road in Canada.

Rafael del Pino y Moreno retired from the company he had founded, giving up his chairman's position to son Rafael del Pino y Calvo-Sotelo. The younger del Pino had been one of the driving forces behind the company's diversification, leading the company into such areas as telecommunications--with the mid-1990s purchases of stakes in Cableuropa/ONO and Uni2. Ferrovial, which had nearly achieved its goal of becoming Spain's leading construction company (only rival FCC had a larger market capitalization), now adopted a new goal of boosting its diversified operations to account for at least 50 percent of total sales by 2004. Yet the company was far from neglecting its core construction business. Those operations took on a new international vigor when the company announced its acquisition of 58.5 percent of Budimex, Poland's leading construction company, opening new markets for the company in Eastern Europe and Germany.

Principal Subsidiaries: Agromán Gibraltar, Limitada; Agro-Rutas, S.A.; Aplicacion Recursos Naturales, S.A.; Cintra, Concesiones de Infraestructuras de Transportes, S.A. (68%); Compañía de Obras Castillejos, S.A.; Constructora Agromán-Ferrovial Limitada; Ditecpesa, S.A.; Ferroconservación, S.A.; Ferrovial Construç, Gestao y Manuten&ccedil, S.A.; Ferrovial Agromán, S.A.; Ferrovial Agromán Chile, S.A. (78%); Ferrovial Agromán Colombia, S.A.; Ferrovial Agromán Internacional, S.A.; Ferrovial Agromán Puerto Rico, S.A.; Ferrovial Agromán Uruguay, S.A.; Ferrovial Bélgica, B.V.; Ferrovial Inmobiliaria, S.A.; Ferrovial Inmobiliaria Chile, S.A.; Ferrovial Servicios, S.A.; Ferrovial Telecomunicaciones, S.A.; Gijonesa de Cementerios, S.A. (90%); Lar 2.000, S.A.; Sitkol, S.A.; Tecpresa, S.A.; Urbaoeste, S.A.

Principal Competitors: Acciona, S.A.; ACS, Actividades de Construcción y Servicios, S.A.; Balfour Beatty Plc.; Bechtel Group Inc.; Grupo Dragados SA; Fomento de Construcciones y Contratas, S.A.; Hyundai Engineering & Construction Co., Ltd.; Kvaerner ASA; Odebrecht S.A.; VINCI SA.

Further Reading:

• "Construction Lifts Ferrovial Profits," Financial Times, November 3, 2000.
• "Ferrovial Buys Canadian Highway Concession," Reuters, May 11, 1999.
• "Grupo Ferrovial Does Not Rule Out Growth Through Acquisitions," AFX Europe, April 19, 1999.
• Kozlowski, Pawel, "Ferrovial Wants Budimext to Diversify into Telecoms," Reuters, May 31, 2000.
• Parsons, Claudia, "Ferrovial Rises After Spain's Biggest Private IPO," Reuters, May 5, 1999.

Source: International Directory of Company Histories, Vol. 40. St. James Press, 2001.

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