Q4 2019 Earnings Call

Please standby.

Good day, ladies and gentlemen, and welcome to <unk> fourth quarter 2019 results conference call.

My name is Lauren and I'll be your operator.

This time, all participants are any listen only mode. We will conduct a question and answer session toward the end of today's conference. If you would like to ask a question. Please press star followed by one you may withdraw your question any time by pressing star I would like to.

If you are using a speaker phones to split the handset before making your selection.

Reminder, today's call is being recorded.

Now I'd like to turn this call over to Mr., Adam full cost through.

Chief Executive Officer. Please go ahead.

Thank you northern and good morning, everybody thinks you will join us.

I would go physical foods goes through the fourth quarter, calling thinking peninsula numbers individuals.

As a reminder, please note that certain statements made during the course word discussion today may constitute forward looking statements, which are basically towards management expertise or some views are softer door number risk and uncertainties.

Cool aren't where you'll forgive me for materially.

Factors that maybe the young company controlled.

What makes the nature of these results these we'd bring <unk> filings with the securities.

Mr In Mexico, So could change.

As you read news from around the World.

Days is geared to many quarters going fees are thinking.

Options challenges I mean, certainly these goals we're pleased to meet sports talk resource you in the fourth quarter.

Sure.

I've ever sports aboard your airports driving our who's Gonna individuals would show up 6.3% increase due beverage can be construction in the quarter driven by strong performance you bought a pretty cool <unk> like longer now let me walk you through.

Jumbled visibility because for the quarter.

Total passenger traffic or extended rated to 7.1% year over year.

Quarter up from 4.1 year over year grew in the prior quarter.

<unk> 40 million passengers revenue grows or where.

These broke the double drugs to be your nearly GBP six needed at 6.5 cents increase.

Like the 18.

The good performance during the quarter, what do you think green actually just trying to year over year, you know, we're thinking he matters key markets, which I follow.

No. This of course, we need movie, starting with Mexico, which accounted for 60% of bookings Africans water.

Was up nearly 3.6% year over year, driven mainly by domestic traffic, which rose.

4.7%.

Ignored we still would you try to which you drove incremental dropping slightly over 2.3 becomes you would you convert to a similar to give you ended probably before.

The national topic wasn't big during the quarter exit bankruptcy. So much leukemic cells. There. We did you make it can be impacted dropping from Europe.

Dropping from the U.S. remain the.

For the full year kind of a hosted the tenders and year over year in PC traffic.

By the South America drama that will still be good sense, a euro to <unk> more than offsetting that 4% decline the U.S. dropping.

We have secured Twentytwenty young PC based.

Then you have to weaker dropping from your will continue to wait doesn't diminish they'll driving through the year.

The second example, twentytwenty was because he and <unk>.

The negative either one can best be them instead of three different married with the U.S. dropping improving year over year.

He would have been pretty cool Genco Didnt move is 17% go do drop what I would strongly performing market during the quarter.

Good they live eat into 18, because then you were a year from 6% in this quarter with traffic requiring proving that it was observed be board, you're getting ready yet he wouldn't illegal in September 27.

This was mainly driven by the Mexican traffic would.

19 constraints doubling EBITDA. So that's a group we picked him as the drug could grow to normalize threw up yes.

Finally in Colombia Tropic once it opens blindly overnight present your your these have been waiting bloody even from the pool groups and great experience, even with the water and accounted for 20% of food booking traffic in the quarter.

Traffic was.

The drug to grow.

Wes bulk nitrogen your your international drug to be between 11%.

Now turning to the buttons would be so for the quarter.

Consolidated revenues fixed with girlfriend were.

He sees boosting gearing yet to be point 8 billion basis.

Mexico kinds of 68% the residents expense structure.

Equal nearly 20%.

Hello, Good Glover, who was the since Threeq was that you were the strongest growth.

There will be deemed to send well wait Colombian 9% in Mexico.

Or does that.

I don't know pick up revenues you'd be 8% year on year with Mexico up nearly 5% wasn't very good show at 23% you'll be seeing though not to go good news when could you give those two things that.

When we show revenue towards low workable slightly over 3% year on year, reaching 1.3 billion deserting the border whenever bessinger basis, but what's your revenues were down 3% to 92.3. This is exactly they didn't change in passenger mix, particularly the dropping participant European traffic in Mexico.

No I would revert committee review commercial already but just.

Starting with Mexico with with the sense of 70% of a suitable Mitchell Greg.

<unk> increased low single digits below dystrophy, cool whatever passenger beaches commercials traffic declined 2.5%.

100, it may be this was despite the opening of seven you go into spaces over that two months.

These parties like partially reflects the 60 basis points mix she'd do domestic traffic from demands on the streets in the quarter and then to some degree and you'd be at <unk> P.M. dropping pretty Glenn you degree and foreign exchange ideas.

Lord duty free revenues also reflect the impact from Brazil, that's what position, where we still difficult comps in advertising driven as the year ago quarter benefited from a recovery next <unk> valuables opened 70 lupus.

Nick split for equal, we'll just completed.

Which will support so commercial revenues grew up nearly 2%. Despite an 18% give me some doesn't just dropping an opening of 16, new commercial spaces in the.

Well I've heard that seemed really has continued to show a strong performance. This quarter I know, we've read deliberations advances with vision. So the claims that you would be incremental abrasions or the progressive the basis for much of that means declined 14% went from to them, but that's just that's that we sold on how your Muses book like June Didnt.

Doubles.

Well I need Columbia again boost this drunkards really is.

Hopefully severances and year on year and 17% when it comes back into bids with reaching 41, thus we open.

Digital new commissions doors during the quarter for a total of 36, new store opened during 2018.

We also saw some things don't grow revenue growth, most blames, particularly rebuild Carolyn boost sparky looked revenues. This quarter. It also gives the impact from beauty green.

Upwards as of June last September.

Moving on to group that we did grow this quarter was impacted like nonrecurring insurance recovery of course to them, then 4 million pencils bulk water three D. Dean in connection with you're getting ready.

Ladies we Cody you could you you would have increased but could seem to 2.4 billion best as there's just a report to the trained people one person you every year.

He brings to ended up taking into account insurance recoveries for what it does the team I. Just you can get margin declined 90 basis points to see the 3.7 this quarter from the board seats in the year ago water.

No that these with me due to a 22% degrees you know Britain goes and expenses.

Good adoption this quarter as what it was good in terms of schools, including certain items that were a benefit to the goal for a total of 200 than maybe one he would best.

Obese one quicker than they were reported in Mexico, good mixing with its actually blunt I think when there and the real simple from eastern bad that.

78 medium duty good related to adult dream, but we're going to meet the asbury you'd be globe.

I 95 million Columbia do do everywhere, so that the for leisure.

I, probably shouldn't go to future, replacing that big Sun to ask or are you for slope I'd be deal because the nature of these items can be found in the remains bullish.

For what it's like 18 also benefited from several items, including had an adverse effects, we formed reduction due diligence and they didn't serves us, but you'd breed among others, including lead to specific items operating cost and expenses Green construction book, what it does seem to be would have increased but.

Just a year on year yielded decreasing year on year increase in revenues excluding function.

I agree junior starting with Mexico were let's just go people to operational EBITDA was down 30, or 45% year on year and the margin. Excluding if you bring blow declined 299 basis points. However, excluding the risk Oh provision for uncollectible accounts and the asset actually pull into better.

<unk> full quarter drinking game consoles for built on the 108 million. That's what I just would be a margin would have increased 70 basis points to 73% from 69, you book why don't you mean.

40, cookie would be a decline would be that UBS and your NIM.

The 400 million business, where the margins given the big Blue.

And to be booked doesn't you book, what it or do they deem compared to the 84 in that book what do you deem.

However, if you exclude the known bigger insurance coverage last year you'd be able to some degree.

But he didn't you friendly Columbia reported that's going to 67 year on year, increasing eight with adjusted EBITDA margin excluding threeq.

10 to 38 from Red Dean.

In the year ago water.

But what it does and the team has just been impeded from higher maintenance deletion theirs is the same degree is doing in Dean and you big public changing how we complete depreciation.

Well into the bottom line majority of net income was.

1.3 billion, that's just down 15% year over year. However, excluding the benefit from the insurance, we covered lives year Madrid and net income for the what do we have declined 5%, mainly reflecting the specific items adjusted to schools as well as it fixed loans this quarter versus FX gain in disappeared.

Yeah.

Now looking at the balance sheet.

That was 20.

Let's now 25% year over year 7.5 billion business with a net that last 12 months from D.A. of so your 0.7 times and if there's a coverage ratio of 10.8 times.

We remain committed to making the rebranding investment position.

Oh for our long term goals and success.

And we invested over 1.7 billion best of your fourth quarter, two and you know dean of the beads over.

1.4 billion does is were allocated to match the bundling program New Mexico.

Particular expansion maybe that airport.

This is for deposits actually went to the secularly going with that.

And the good sequential the most important than going there.

He shouldn't we invested 200 to me quicker than 38 million business in Puerto Rico for major meet those words on things he was.

70 million vessels in Colombia to finalize the cargo in the Liberal Arab Gulf.

Bill computing could mean words that'd be country.

During the full year, we've made camp doesn't business was supposed to be live oak ridge to be new were located domestic little program over where puts in Mexico, nearly 200 than the speaker than 18 million in Puerto Rico, and 170 seats, where you've been pretty equivalent.

Looking into 20 bleak via our Master development plan message to quote.

Investments of approximately 4.3 billion best was the most relevant project this year or the continuation of the barn and actually we have the second only up there will never.

The meaning of the drifts expansion and therefore, we plan to conclude the phase one of the expansion of the Marriott 10, we know.

And begin to seconds the here.

Second and third faces up these airports are expected to be concluded the 2021.

As we have come to people can consistently stated the Dick and long term view of our business and we can do you have to be will position for the long term cool.

This concludes my brief remarks, Lauren you open the broker questions.

Thank you again to the audience. It is star then one for questions and again. Please make sure. Your mute function is turned off or the handset is picked up before pressing the corresponding digits.

Well take our first question from Mauricio Martinez with G B M.

Good morning, L. for a thanks for taking my question.

My first question would be on commercial on the commercial or run as fronts in Mexico, and Colombia. So you're from March to set the did just celebration or dropping in commercial revenues in Mexico comes from a tension that makes.

And in passengers. So maybe you can elaborate a little bit smarter and I know so.

Yeah, what are your expectation this now well.

Starting for 2020.

For this brackets in Mexico, Colombia.

That's great.

Hi, Good morning movies you.

That's what that's what he has said before the passenger needs watts affecting the supposed to be toward the potentially being a commercial living as the passenger for the kids in Mexico, you into yet or if you see or was that the ginnies, 48% wants domestic <unk> Dean I know more than feed.

The synergies domestic.

All show and we had an impact during the fourth quarter due to the bankruptcy.

Scoop XL Airways, which are kinda need absolutely be can impact when I would try to become Europe with a decline of them to stake.

So I have said during the initial remarks, what to expect from here is a continuation of the effect from their European traffic.

And it probably is like the improvement indicates of the U.S. traffic.

As a combined effect of these two things when these deals have some pressure on our commercial revenues, but the passenger during the third or at least during the first half of the year.

Well I will I believe we will see better second half.

Perfect. Thanks.

If I may a a second question on the on Colombia.

Yeah.

Well first Gee, how how commercial reminisce shouldn't should the farm going ahead. There I also on the Cup front, what do you view well now does.

That you finish the committed embezzlement is there or what the what should we expect in terms of topics in Colombia.

Okay, and because of course of living as you are seeing very close to be numbers displaying the huge global passenger traffic, which will last year.

What I believe.

For the future East that we will continue improving those in terms of commercial readiness for passenger.

It is important to say that we saw an 11% Colombian peso that because you're not able to me Mexican peso. So he viewability Ddos inc., although again, that's what you're gonna have these 11% to then to become parcels in terms of the Catholic.

What Ah I have said, you're getting show remarks is that the ones. We completed the getting the cargo to emulate astrium that go airport each concludes than committed <unk> capex for the kids will be sequencing.

For the future what a one should expect the basic <unk> major maintenance capex.

Perfect. Thank you very much stuff.

You're welcome.

Our next question comes from Alejandro somewhat corner with credit Suisse.

Hi, there were four French vertical and just a follow up question on commercial revenues per passenger these timing pretty cool, we saw a 14% decline.

And passenger bases. So could you please give more color on what was behind not throw up.

Yes of course, you in that fourth quarter, and we saw very important increased investment just traffic.

The shopping is a traffic that when he.

At night.

And of course passengers are not a big spenders.

Those types of that the.

Sure.

What we and need to do is to try to find helped to improve sales. We these ah. We these passengers that now that person.

15% of our total passenger if you're in the water.

Yeah.

It's hard to say how are we will be able to couldn't be them to do buying because let's say said before these.

He's a flight times.

Our very difficult.

It does that situation.

I just would have a context.

To that 15%.

Passengers flying during the night.

What was that number.

Before these does change.

It wasn't on six buttons.

Okay. Thank you.

You're welcome.

Our next question comes from Gulf overall, most with Bradesco.

Good morning are helpful. Thank you for taking my question.

My question is regarding cost I mean, what can you talk a little bit about your expectation you saw very very muted growth a this fourth quarter in terms of cost in Mexico. I can you talk a little bit about your expectations for for cost in Mexico, and and perhaps a you know how how how this capex plan that you have.

So how could that pushed out outboards. Thank you.

Okay.

I have a local the body was indicative of course.

Do you read the who will give you will be that ER.

There was no major impact in cost during the quarter and I do not just picked him as your prices during the year.

In terms of what would be buying back the opinion Catholics in terms of course.

Once these competed I would say, we probably will be something like go you call for the keys many that airport.

One thing that wasn't the ones that phase one goes live Tim rail expansion is completed.

So I believe will be completed.

During the month of July.

The thing engendered and these will be a very very minor effecting yodle thing Mexico. So we do not expect any major.

No surprises or through the whole year.

I don't think of and if I may have follow up.

No I don't know if I Miss stopped but can you remind us on Puerto Rico, what are your or what is your expected capex for how does here.

We do not have any guidance in terms of the amount would basically be what we're doing today.

As a major maintenance repairs and basically in taxiway.

We will have some minor.

Spending to be modeling for a piece of the young beam.

So that's it.

Thank you out of home.

You're welcome.

And once again as a reminder that is star wanted to ask your question.

Our next question comes from Stephen trends with Citi.

Good morning, Adolfo and thanks for taking my questions I have.

Two for you first off when we think about Toronto virus and some of the major network carriers for killing capacity out of Asia.

Any indication, whether you've seen any of that capacity come into your airports.

Yeah, Hi, Steve Good morning, we do look that they need Derrick like from Asia.

The most of the people that comes from Asia basically connecting Adelaide.

So we do know the we have not seen any impact from some of these.

Oh I appreciate it I, probably didnt say phrase my question very well, but I was curious it and if you're seeing any of the <unk>. The U.S. Airlines. For example, you know taking some of their transpacific capacity out of that market and and selling it you know U.S. domestic all have you.

Maybe seen any about trends like that at all or or or so I haven't so.

These are two different markets are people that travels from the U.S. to China, you know people that travels over the weekend too because we feel once again I do not see I mean, but families.

Okay appreciate that.

Just one other for me was there anything.

The major maintenance, that's a trailing in Puerto Rico was any of that at all related to any minor damage from the earthquakes that occurred earlier this year.

Good question, Steve the Air Squeak basically once of the south of the islands several important because exactly I didn't north piece of the island's rule.

And you are we would think about it we didn't have any impact at all and so far in Puerto Rico because of the earthquakes.

Okay. That's very helpful. I'll leave it there thanks Adolfo.

You're welcome.

And as a reminder, that a star one to ask a question.

Our next question from Gabriel Hilmoe far with Scotiabank.

Hi, Good morning things for the call My question is.

About the commercial revenue.

Yeah.

We're seeing today in your and your muscles that there's like a.

Decline in Mexicos revenue from duty free and banking and currency exchange services can you give us a bit of color what.

Ran the what's what's happening in the sector. Thanks.

And kind of company and good morning.

I have said during the remarks that fits that we're seeing is because of the passenger makes or more domestically internationally.

And that's exactly what you're saying.

Internationals are the ones that by Buda Green and all show the ones that have ER.

FX exchange so it's the of the two main lines that are more.

Our more effective there are those because of things.

Okay. Thanks.

And once again as a reminder, that a star one to ask a question.

I think our next question from Alan Let's see Us with Bank of America.

Hi.

Good morning.

Just one quick question at this point do you have any insight in two of 'em sargassum season would it be oh, lower or higher versus last year.

Any insight into that thank you.

Well, what I have seen those are going to be boards.

And there's just there's one from there.

And when University itself will either.

But were seeing it I love led Sargassum, England bars, and what we're going to preview here. So my expectation for the year eat them so that.

The it would be at significantly lower than code wasn't the best.

<unk>.

Thank you.

The weather.

Once again at a star one to ask a question. Our next question comes from Eddie Jones with AMC capital.

Oh.

Oh, good though that's a good morning second question.

I'm personally can you comment on.

The degree of guaranteed dozens of is going to minimum guarantees among some of the duty free.

Exchange contracts have with my marketing for the balance of list and secondly, how youre thinking about citizens.

Sorry, but I cannot hear you very well.

Sorry, My first question was around the big did the level of minimum guarantees within some of the commercial contracts I was there any protection on litigation clear downside from further declines and secondly, how youre thinking about the dividend policy.

Okay show into each of 'em minimum guarantee payment the passenger.

Well Oh look all the contracts we have indicates a Mexican grill.

And have the number as to the protection.

Today the indicate some due to three would saw the most important.

Like TV deemed himself up revenue.

They're not getting those minimum guarantee payment that passengers are there.

In the is it goes there should be.

Payment.

So your second question is what.

The second question's around what are your current thoughts on the dividend policy.

Given the serves over here, but could I just follow up on the second one they can you comment on how far from the minimum guaranteed levels, we might be in that duty free control.

I don't believe along the way or children.

No no I don't remember exactly how how.

Finally up from there I mean, where anything but definitely but.

Should be.

We are let's say not charging them that that amount. It gives us even importantly, we do not have that we can do the important thing and ER. We review. These every every year.

The beginning of the result of the year the tax position, we had been that everything bezel projects, we haven't trumped.

Remember as I have said during the initial remarks or do you have 5.3 billion passes do best in Mexico is you choose or the highest ever.

For you in.

Almost 12 years.

Nevertheless.

We will the proposed something next week to the board of directors in them, so well be thing payment.

Okay. Thank you very much.

You're welcome.

And as a reminder, that a star one ask your question well pause for just a moment to allow everyone an opportunity to signal.

[noise] [noise]. Thank you and that concludes the question and answer portion of today's conference call I would like to turn it back over to Mr. Castro for closing remarks.

Thank you Laurie. Thank you again for everybody for participating in our fourth quarter missiles conference call on behalf of Russ do we should be good bye.

That does conclude todays conference. We thank you for your participation you may now disconnect.

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