Q4 2019 Earnings Call

Since we're not at all when they fourth quarter 2019 earnings conference call. At this time, all participants are not listen only mode. A question that your social follow the formal presentation. The <unk> operators. That's just on their conference. Please press star zero under telephone keypad.

Please note. This conference is being recorded I would now let's turn the conference over to host Emmanuel Camacho. Thank you you may begin.

[music].

Good morning, everyone.

We're standing by welcome to almost fourth quarter 2019 earnings Conference call.

Got it.

Well, most chief Executive Officer.

Chief Financial Officer will be joining this morning, we'll discuss fourth quarter two tonineteen results.

Please be reminded that certain statements made during the course of our discussion today may constitute forward looking statements, which are based on grid management expects expectations or beliefs and are subject to a number of risks and uncertainties that could cause actual results could differ materially including factors that may be beyond our control.

Oh no.

Now turning the call lower recoveries.

Thank you hi, good morning.

Everyone I will review, our fourth quarter operational performance.

Well my delivered another solid financial and operating performance into fourth quarter of 2019 and record results for the full year.

Adjusted EBITDA grew 15.2% in the quarter, an adjusted EBITDA margin reached 73.2% largely as a result of the increasing both aeronautical and non aeronautical revenues as well as cost efficiencies.

For the full year, well my generated record levels of revenue and adjusted EBITDA as well as adjusted EBITDA margin of 73.5%.

What are the key store performance besides additional passenger traffic, what keeping a tight rein on cost and expenses.

For the fiscal year cost of airport services, a G.N. aid decreased 2.3%, where they could you just some basic services payroll and contracted services.

The main initiative that contributed most to savings during the year well.

Our electricity contract with our renewables energy supplier, which became fully operational in first quarter of 2019 and allows for the supply up over 55% of our consumption.

Also corporate overhead reductions implemented in 2018 and with full effect in 2019.

And improve cost I think books controls third party contracts.

Our cash flow generation was strong with 12 month cash flow from operation, reaching 3.7 billion passes.

This enabled us to fund our Master development program, that's true teaching investments as well the payment of dividends out of funds from operations.

Well my has now delivered 40 consecutive quarters of growth in aeronautical and bought aeronautical revenues and 34 quarters of adjusted EBITDA growth.

[laughter] passenger traffic reach four or 5.9 million passengers in the fourth quarter up 7.6%.

Seven airlines increase passenger volumes the largest contributions to growth came from me right away or somebody.

[laughter] total available seat increased 8%.

On our five most important routes in terms of passenger contribution Monterrey to Mexico City Monterrey to kind of caught Monterrey dwell on how to collect Kentucky whatnot at you want to Mexico City. The total available seats grew at combine 2% <unk> fourth quarter of 2018.

For the full year. These same routes increased that combined 5% versus 2018.

Additionally, 22 routes were opened in the quarter well six close.

On the commercial front, we implemented 24 initiatives in the quarter, including car rental back services and restaurants among others.

Commercial revenue grew 10.2% and the occupancy rate for commercial space in our terminals was 97.2%.

Diversification activities delivered a solid performance with revenue growth of 7% driven primarily by higher revenues from all my cargo and the industrial Park.

Recently, we signed three lease contracts and the Monterrey Industrial Park with expected annualized revenues of approximately $830000.

We expect this contrasts contracts to start generating revenues in the third and fourth quarter of this year.

Total investment in the quarter included including MDP investments major maintenance as strategic investments were 491 million passengers.

Our projects underway include the expansion of the public area in the Monterrey Airport terminal a.

Expansion of terminal C in Monterrey.

Expansion and remodeling of the Tampico terminal building.

Modernization of they see what the network terminal building.

New passenger terminal building anybody knows.

And work on runways taxi waste and aviation platforms in several airports.

I am pleased to announce during the that during the fourth quarter 19, we started a major expansion project at the Monterrey International Airport, we expect to invest 4.2 billion pesos between 2019, and do that 2025 of which 500 million passengers correspond to work right.

MDP commitments.

Major highlights of this project include a phase one consisting of the expansion of the public and check in areas of permanently and the construction of when number one.

As a result.

Total incremental space, we will increase in over 15000 square meters, approximately 25% of greater than existing terminals space.

Certain areas of phase one well become operational by the end of 2021, I need and is expected to be fully operational by 2022.

A phase two consisting of the construction a win number two representing new terminal space open additional 16000 square meters.

Phase two is expected to be completed by 2024.

After this expansion the month three airport will have an annual capacity of 16.5 million passengers up from 11.6 million passengers currently.

Strengthening its that was the most important connections centre in the northern Mexico.

Finally, I would like to point out we have started the process for the 2021 2025 Master development program negotiation.

The first two months of the year, where we'll be presenting be investment passport each airport to our airline customers in order to receive their feedback in upcoming weeks.

Next steps will be used to submit the master development program by June to the Civil Aviation Agency.

We expect the negotiation process with the authority to take place in the third third third and fourth quarters of Twentytwenty.

I would I'd like to turn the call over to walk through folks who will discuss our financial highlights for the quarter.

Thank you because no one morning, everyone I will briefly review our financial results then we'll open the Clover basket.

Turning to almost port Arthur financial results.

I don't know that go revenues increased 10% written by 7.6% growth in passengers.

I don't know school revenue per passenger rose 2.2% departure.

No I don't know that the revenues increased 9.8% weve commercial revenues, making the largest contributions.

Commercial revenues increased 10.2%.

The terrorists weren't car parking restaurants currently <unk> a VIP lounges.

Okay revenue was up mostly because of growth number of users an increase in long stay operations, mainly in the Missouri. So that's what it let's see what airports.

Restaurant revenue grew 18% you sort of startup operations, you restaurants, you airports with new or when used commercial areas.

2019, such as to why weapons I misspoke, we'll see as well as when you all suite that surplus controlled terms in several airports.

Kind of rental revenues rose, 11% as a result of implementation of 15 ships during 2019.

VIP lounges route 30% the rights from a high penetration rate passenger traffic growth.

So first of all commercial revenues per passenger increased 2.4% to force s. as compared to the same quarter of lucky or.

Diversification revenues grew 7.0%, mostly driven by almost got a revenues from these so called.

Total everyone else is coming on I Love Conrad and just reached 2 billion pests.

No structural revenue increased 24.7%.

She's a noncash I says that these required under applicable accounting standards. This equates to about structural cost looking for best of luck session. The assets. So no effect on earnings.

Fourth quarter results continued to reflect our efforts to control overhead expenses.

The cost of airport services, and Gianni expense decreased 3.4%.

During this quarter payroll decreased nine [laughter] as we had lower close the basic service services, such as electricity and water, which countries that most of the sport first performance.

The impact of implementation.

Our 16 in a reduction in rather spend.

Fortunately seen versus Fourq, you 18 of 9.1 billion peasants, who coding caused the hotel surfaces.

Almost fourth quarter adjusted D.A. increased 15.2%.

1.4 billion vessels and the adjusted EBITDA margin was 73.2% up 330 baseball's.

During the quarter, our financing expense was.

100, an 18 million.

We recorded an exchange loss of 64 million.

Yes, the result of our cash position denominated in U.S. Nandra.

At the end of December 2018.

Because it will never be taught us amounted to 79 million.

[noise], primarily the result of the aforementioned consolidated net income decreased 7.1% to 761 feels to us.

Total cash from operating activities rose, 1% to treat point 7 billion vessels during 2019 <unk>.

These principally reflects an increase in working capital needs as well as a strong operating performance of the company.

This concludes our prepared remarks.

However, please open the call for questions.

Absolutely at this time, we will be conducted a question and answer session. If you would like US question. Please press star one on your telephone keypad a confirmation till indicate your line is in the question Q.

First start to people like to remove your question from the Q.

Participants using speaker equipment, I mean, that's sort of pick up your heads liberal for customer Starkey one moment, please as we pull for questions.

Our first question comes a lot of out of them, let's use with bank of America. Please proceed with your question.

Hi, good morning, and thank you for the call.

Just.

One question on on the level of adjusted EBITDA margin that you're expecting this year.

If there is room for expansion and what are what would be the drivers for this.

Do you have a long term.

Target for before the margin. Thank you.

Sure. Thank you Oh, you have noticed over the last two or three years, we have expanded significantly a word EA margins are we reached 73.5%.

When you 19.

The objective is to maintain that level on obviously, we continue to identify ways to running that were airports more efficiently and timing.

Another cost cutting he should be well at this time, we were goal for this year, it's one thing that level and it's going well watch a tool which it slightly.

Thank you.

Our next question comes from a lot of Josh Milberg with Morgan Stanley. Please see with your question.

Good morning, everybody. Thank you for the call.

Your commentary.

Some of the major projects in the pipeline, but I was hoping you could update us on your your expectations for the overall level of interest <unk> in the next <unk> and also you know what they'll likely tariff adjustment could be.

If that's something that you're giving some level of disclosure on.

Oh sure Josh we continue to work on the review all the M. D. A investments at this time, we expect to have a total investment for the five year period of between 14 and 15 billion Pasos.

However, as a as we mentioned during the call. We are presenting the plans to airlines and modifications met me your career and in the coming months, that's where the terrorists or there's many variables involved and I believe you said, it's still too early to say.

Okay. That's that's.

That's very helpful has.

Have doubts the outcome from last year in any way to shifted your expectations.

I think the Capex amount that you mentioned, there's a good deal higher than what you had talked about.

Around mid last year is that correct.

Oh, yes. It is slightly higher that's a that has been result of the projections that we haven't traffic and we believe that's a that's there that the amount that will be need in the next few years.

Okay. That's helpful. And then my second question, but if you could just touch on the issue of the Mexico City.

The Mexico City Airport cat capacity constrained.

You guys in 2017 happy it's true of of.

A temporary shift in the rules for slot usage hurting your traffic.

And some analysis that we did recently showed that there there's very limited space for new flights today <unk> airport such that it seemed as if most of the the growth would have to come from upturn.

So just wanted to get your perspective on that and and you don't to what extent, you're seeing you know limit limited capacity in Mexico City as as a potential constraint on your growth in the next several years.

I mean, let us as we all read a there's there's a saturation problem and the and the center of of Mexico, or the Mexico City Airport is it's running at most capacity, but full capacity or the current government. It's currently comes in construction of the new airport and in sometimes you have that will work.

In conjunction with the Mexico City Airport and to look at airport. So we believe there will be expansion in the mid to long term and the short term the the most of the growth in the Mexico City Airport will be through larger planes, and maybe a higher occupancy factor and but we believe that it's an opportunity for our air.

14, Monterrey as airlines will start to look for alternatives.

For traffic in Mexico City, a they will start developing we believe a point to point routes and and shifting some of the traffic to other airports such as Monterrey, which is strategically located in the northern part of Mexico City, we have a we have enough capacity to absorb that the man and much more no.

Okay that was very clear thank you.

Our next question comes on line of Edgewater Dod He's only with GBM. Please proceed with your question.

Hi, guys. Thank you for the goal. My question is regarding the beam what are your expectations regarding the negotiations and the maximum that reef now that your cost structure is much lower than than five years ago.

Thank you Todd in terms of time, whereas the why do I thing, it's still too early to say, there's a lot of mirabilis involved what we can tell you is we're working on a capex that will be between 14, and 15 billion barrels that would obviously be very as we as we advance into conversations with airlines and the authorities.

But at this point in the process, it's still too early to give some indication can tariffs.

Okay. Thank you [laughter] regarding the cost savings that we have achieved a in recent years.

We do not think it's going to be a major factor is the discussion in previous some degree of easily not all of the cost structure. A whole my was recognized in two Atari So I believe know what will be nice these will not be closer to our actual oh operations.

Great. That's helpful. Thank you.

Our next question comes a lot of Diego's actually owner with credit Suisse. Please proceed with your question.

Hi, Good morning thing for the goal.

My question is regarding.

Oh, it's changed from the long weekends do you have any estimate or color.

But you might have in the traffic.

Oh, yes.

There are three little weekends, well today. The yearning method will jointly Oh, you know are of course, not or not that's exposed to a leased we're tracking.

We believe that impacts to the marginal.

Okay. Thank you.

Our next question comes on line of Stephen Trent with Citi. Please proceed with your question.

Yes, Thanks for taking my call, it's actually Brian Roberts on for Steve.

Can you tell me about situation. What's your host airline have you had to take any special majerus slipping near them in order to ensure a timely Kane.

Can you repeat the question there was some notion tonight.

Yeah sure just asking about the situation with your hosts airlines have you had to take any special measures or with any of those carriers and work to ensure a timely payments.

Thank you.

Oh hi.

We have a the current a payment terms toward a deeper into Ireland or some of them are under a prepayment.

Their operations and at this time, we do not.

Any issues with any of them.

Okay. Thank you.

Sorry, no further questions left in the queue I would like to turn the call back over to management for any closing remarks.

[noise] [noise] I want to thank you all again for participating in this call a rumor Manuel and I are always available to answer your questions and we hope to see you soon at our offices. Thank you and have a good day.

This concludes todays teleconference. You may now disconnect your lines at this time thinking your participation and have a wonderful day.

[laughter].