Q1 2020 Earnings Call

Good morning, and welcome to GAAP first quarter 2020 conference call.

Well these have been please UN mute to prevent any background noise.

After the presentation well open the floor for questions.

I'm instructions will be given if he would like to ask a question.

Now my pleasure to try to go over to my everyone else I had my corporate Communications. Please go ahead.

Thank you and welcome to the loop auto portfolio and I see because first quarter 2020 conference call today from the company. We welcome Mr. was older went down Katz, Chief Executive Officer, and Mr., So we'll be a.

Chief Financial Officer.

Please be advised its forward looking statements may be made during this conference call.

He did not accounted for future economic circumstances industry condition, the company's future performance or financial results.

As such statements made are based on several assumptions and factors that could change, causing actual results to materially differ from the current expectation.

Our complete note on forward looking statements. Please refer to the quarterly reports issued yesterday.

Please note that unless otherwise stated all comparisons in this call our versus GAAP results for the comparable period that's 2019.

Good point I'd like to turn the call over to Mr., If I went down for his opening remarks.

Thank you might do you think your terrific too it's time to join us on todays call for school.

[laughter] due under funding for healthcare sales during these challenging but.

Today, I was talking about addressing be back a bit cobiz aldridge and on our operation after that I will discuss smoking initiative, we are taking to put the both passengers on imports.

Oh, we also these schools the measures, we hope you're getting in to listen to financially operationally, but.

Then need to know were business.

I will briefly review financial highlights for the first part of this year.

As you all know.

Destined to me some extraordinary should tradition I wonder you involving rapidly its does.

So we must remain flexible and helping to making changes to all operations, taking on new measures loosening orders.

Like any other held prices seem to bust.

Sure in industries, how cheap.

We have seemed pretty cool.

Longer done other investors to recover.

Do you feel steadily and be new large groups of people offend lived together.

But that's.

Well the medium to do you know were park, not only listen to split them pick and place from passengers.

But once abrasives really shouldn't most notably to ensure that we are full we did book for both the goal sudden guidelines for the poor shelf outdoors.

I see this time no. That's a company industry, we have no clear picture of the Super duty and do you still get a mid week, how where we're trying to mitigate the impact as much as we've done.

Well take something there are you familiar issue consultants on financial exposure seems to me. The kids foot note that we are unlikely to really shows doorbell tropical pretty show before that so far is well 2012.

Oh I'm wondering if I look at that time prediction is the market those specific factors that could delay or traffic for <unk>.

So we sold up the effect of call. It International Monetary fund estimate GDP reduction of minus 6.6% for Mexico, five minus 5.9% for the U.S. in 2020 would you start where many international destination.

Hi, unemployment will be one of the must detrimental variables affecting the maybe a long term recovery of diesel credits.

I think the Mexican Jamaica helps you to reduce.

Because the picture, we like to but early me.

They were starting to operate shows will be the lease.

Correct.

Maybe first feature I'm pleased on fuel indulge me in both countries.

These impacts me do either from their druthers spending for both being first to leisure travelers based on two factors disposable income and probably will computers.

Oh, well below the strongly suspect it was to enter more rapidly.

They are not expected to come back at the same with right sounds before.

Let's see if you tend to be lower capacity, so even the scrapping older products.

Yeah, well suspected to be only bringing back some of their currencies around the planes.

These are slowing down the rejecting delivery of new aircraft, they're pretty easily.

In orders.

Period, because if they meet a need 20 west shifting over to be one of the strong as you receiver.

If we take a look at the first quarter, we sold to kind of still see the positive traffic trend, but we how do you must be if you don't do their 15 days before the quarter in <unk>.

Well it depends I mean really began to affect GAAP.

So for the first quarter, which rose 11.7 million passengers throughout our 14 airports December on purpose and that totaled three so.

And it was 1.44 since June or July.

So the performance and did it was really airports well the her perfect decreased 2.1% during this quarter.

The most affected domestic who is we're going through the corner, which both so a decrease of more than 65%.

International routes well ahead of two.

Okay, Okay sounds quite see school refused to the most significant degree.

Why not.

So if you're supposed to go where did work that they must be grow during the first part.

4.2% increase Cdx continues to be an essential component of our airport growth.

32% America shirt and 5% growth.

The first quarter was pretty quick.

Words, such as you pointed to was [laughter] to Quicken optimistic we'll see experienced significant declines in terms of passengers and have yes, you're moving breeze this quarter.

Yeah, Scott was an important.

I'm not sure Rafiq live to decline due to their strong international Bussinger school position with Magnus them pulling people, saying I'm minus 13.6% respectively.

It is not surprised I did juicing Canadian market made the most significant impact to decline, especially as international travel bonds were put in place well do and domestic markets grew during the first part.

In Jamaica.

Well so were most effect airport, reaching minus 15.3%.

Caesars traffic, so resourceful flight cancellations, but leaving or lets included American airlines they'll start, whereas you just do under kinda.

I want to take a little about some of the initiatives. We have there been lumpy in airports to provide for passenger side at least 50.

Well, especially <unk> of the business.

Regarding your first initiative.

People have been pretty sure political stupid to their health well being of our passengers I didn't please.

Most of our employees you say working from home however for the essential stuff that is still working on location, we have provided protective equipment.

We also put in place or specific measures to issue actually shows between shifts.

Our second initiative, you think that's going from a.

Approximately 85% of all were cost of services fixed. Therefore, we are temporarily closing or put areas. There are no didn't give us just ignore it into reduce utilities bumping into security and cleaning services.

Well, we still think well get stylists to provide Texas, So we store passengers.

We also put in place I didn't see is.

It's significant cuts to noncritical, let's do you mean like maybe just some professional services.

We estimate that these measures will contribute to a decrease in the cost of service to around 40%.

For the money, but our airports are operating at minimum passenger traffic live.

Oh, we're Turkey shut the if you're supposed to be sure most liquidity.

We go to defer square with 10.9 billion pesos, he gosh an acute.

You may prove the companies do though a cradling from Scotiabank for 1 billion of business that will be used for corporate BOPUS. GAAP also has access to free up with great lands for.

2.5 billion peso seemed a bit if you just need it.

Well I couldn't be analyzed seemed to be assumptions to finance the company forwarder your data becomes because.

If only because she's been so I'm, probably founder medium businesses, we also see capital expenditures.

Well you don't do that balance sheet I've done in 2019 shortened Dan reached 2.2 billion business did well so really paying the square.

Additionally in February we should all 50 feet dates in Mexico for previously a business that double dip as of March 31.

Well, just 18.3 really impressive we strip since I've noticed that if he's got ritual of suitable insulins you treat balance.

No I mean should know didn't to preserve liquidity, we spent all shareholder distributions.

Also gotten so no mandatory kept telling business I was we've had begun discussions with the Mexico the Jamaican authorities.

Turning to replace the first for the business committed under the Master developer real for did you do need to either to the six months you 2021.

At this time well we are at the beginning of this process I. We we put that didn't have this day because nobody else.

It's important to me it shouldn't that around 600 media businesses were already best into their first part of this year, including expansions books I meant Damian skeptics.

Yes, but nothing that Mexican consistent agreements on life that'd be if the Mexican GDP, where decreased by 50% more deboo has the option will be on opening their diet and <unk> and values determination.

Those remained 100% definitions considering the Mexican type.

Yeah, Mike that's not the publishing and he got maybe living business and they did you wouldn't <unk> dense necessary.

Let's move on to their loans, Oh God is trying to help our most follow Tonight.

You know can do you have to somebody leaves GAAP wave payments for Lundy Barking on overnight aircraft charges, a more news flow through most of it I missed a.

Additionally, we will run for L.C. payments to some of our cloud in something that's no wonder do felt emperor soap liquid he until they reach and operational activity.

You know then to support our tenants we held offered them just goes over Dominion were rental fees.

Relieved that pardon me with them during times of prices boost or not we're relationships built goodwill both killed him do too. So they are better prefer to be all I'm lucky.

I just want to mention though we are confident in the underlying fundamentals for business and we believe dot com zipper it didn't get biomet returns to more stable Liberals.

<unk> been a bird policies your Threed third to this I'm not sure what we were up or anything.

We are confident you know we're diversified noted were w. help us to recover once all the restructure no lift.

No I don't goodwill brief recap of the first quarter results.

Got grew 13%, reaching 2.8 billion pesos.

Merging those 68.2%, but the revenue rose by 17%, mostly driven by a stunning drop you put so much in do first two months of this year and applications. The new starts up religion December to doesn't that.

Things generally first married to any Uh Huh, we sold the excellent performance of the commercial opened a larger.

'cause subsurface increased by 12% driven mainly by an increase you said can you do it goes security and that they know suspense is mainly due to the additional square meters internal being their belief or how you are in there you've probably seen Keith.

That concludes my remarks, I know I still pretty is to do something to fill for questions.

Thank you.

Well open the floor for your questions first well take questions from the conference call.

That's a question.

Good question Starkey.

He touched on now.

You bet anytime you would like to remove yourself a question. Thank you just <unk>.

Our webcast participants.

On the question box.

<unk>.

We know well up here and then simply type your questions.

Okay.

Well we can.

Your first question comes from.

<unk>.

Go ahead.

Hello, Good morning, Yeah, Olin tolling. Thanks, Thanks for taking my question.

Well My first question he saw on on on the cost from.

And I just want its going for him. If you said that the monthly burn rate that you did you said was 500 million basis.

Just wanted to confirm that number.

Hi, My recent thank you for your cool hold recall in the question.

Yes, the money it's correct. It is it the response to the costs of operation.

14 air burst, including a financial cost and Texas.

And and she's already you can see three the cost.

Right well that [laughter] the initiatives put in place for guts containment.

Yes. It does include a with the new vision of those off of version.

Great and and also as well regarding the rents and and them even guaranteed rent.

Yeah.

Maybe if you can give us more color on did you agreements you have reached with your then ends.

And and how much do you think these days is minimum guarantees rents.

Yeah, it would be.

Where did that they didnt. None are now it's got revenues that we just saw these water.

Okay, Hey, suddenly we shouldn't see as always.

In terms of the commercial revenues for we we offered the tenants depending on different business lines.

Our discounts for a pretty on me that goes from there 50% to disclose this code and even to the 75% of discount it depends so they kind of Oh.

Oh business lines some of them that are more affected with <unk>, we do the latter international passengers.

So in terms, how how we are seeing <unk> their future today is really difficulty in terms of coal the bullet do they do how far are view about what I've been hopping on what's going to be there finally impact on the are they coming gears for for Ford American same dot or received.

In some of the cases, we should renegotiate they some of them.

Commercial revenues contracts.

Because I feel good the we will have probably a completely different market already for the coming for the coming here. So it today. We we just sold for these two months of discount but for sure depending how how could be the performance of traffic for the coming pretty coming.

Month disclose could be take longer or even we should we negotiated so most of the contract.

Perfect that's your things.

Next question comes from.

Now with credit Suisse. Please go ahead.

Okay.

Hello.

Thank you for the globe.

Two questions on our side.

Thank you very well.

Yeah.

So what you get search reaction that the government.

I didn't know that.

Sure.

Yeah.

<unk>.

No.

Yeah.

<unk>.

Yeah I know.

See you.

No been.

The teacher and they need the or do you see in chance to quit that didn't show up.

There's no that's my first question.

Okay.

I think you're kind of <unk>, Oh said that you tariffs. So do you currently with investments.

You know the Mexican government, how it's hard to flourish enough emergency.

I don't know close to two to two constructive on this and be Stein for the moment. These this emergency declaration go some people may tell you one so it but to go terms we will.

I lose more than 80 days and on the under construction also fall reimbursements. So do you do the fact that they submit your first.

Asking for delay no fees.

These investments for four for her to come in here.

Yeah, so so far possible, we view, our five or four footwear masterplan.

Superficially no we have one of the girl so so far worse.

Sure like women says that indicates that the GDP of Mexico decrease for more down 5%.

In the last 12 month.

How thielke shown for review they must support.

It means that we shouldn't real everything they're focusing of passengers differ casino opex there for casino of topics. So it'll be a completely new review or a new master Master plan.

Okay.

We are seeing the market.

Yes, it will be important MOCVD dot, India, India to acquire Oh third quarter or even tougher acquirer of did your who's been Dave.

Assumption of their 5% of the iteration of the GDP. So in Dot Dot Dot case, we will be ready for filed a where I work I wear.

He.

Asking for for for a review of the Masterbatch.

Okay. Thank you and my second question regarding discounts.

So right now.

Nope.

Just wanted to confirm that.

Well, it's not like will endure.

For the last night.

That's correct, it's only four Oh rugs got services on C., the long term parking.

You know all around the basis not only Mexican toward there's a lot. The older fleet are stuck in the wrong. So we view this especially school unfolded the their long term parking for for for differently.

Okay.

On the no no no upside.

Goats.

70%.

You just mentioned.

So first and say that the minimum.

Right Yeah.

I mean, you find really commercial expenses.

Hi, good.

[noise] I mean, I I think that didn't disclose what would happen for Dave for do you see there for May and maybe a part of June.

Again, it today will be really difficult to say, how we'd Lucas old you're just seeing that got male.

It's a a great probability that we will face a completely different and marketing <unk> in the coming into coming months. So I will say that we will keep really flexibility not where you know were come trucks, we've got the Oh skis in some cases relief to our tenants because <unk>.

They're not to say, yes, as you briefly as you know I'm part of the Philadelphia copies that we want 10, I'm stuck made business because if they're those tenants make a correct because there's GAAP will make a really current business. So we seem to be used the time to to give you some came up.

<unk> fun support 'em be ready for 444 phase they knew the new reality.

Okay. Thank you very much.

[music].

Thank you.

[noise] next question comes from Bob.

With Barclays. Please go ahead.

Hi, those Halloween themed thanks for taking my questions or I have two quick questions. I know this is too early to to tell but regarding your teaming up with I think what did you quantify what are your initial views on that project or you see laying just crosses with you as how parties or or.

How are you seeing there on my second question is just.

That's doing 2019, what is the percentage of your number because revenues that could be going to either a big.

Thanks.

Okay. It there so few corn no pre it couldn't do their persist for building.

I mean, even saying that this is difficult to to say how good of either new market.

Taking a counted the Pos I will say that the beautiful market to be should say relative some friends market.

So is the first one dot com box.

So we are seeing at the moment.

The money that this would be a first who sends to Mexico.

The first sure will decrease in the coming.

Month.

We expect some kind of recoveries due to the fact that they.

The financial support fiscal support to the U.S. government could putting it into market in some way, we'll help them for 444 for for keeping even their their their employment in that case were seeing does appear for Americans will be there first went up will recover.

And we continue seeing you know where main assumption that the the one airport could continue.

Taking a bank that shows the south, California market and it trying to two to two to two choose these catchment area of South, California, bringing passengers to old mix.

And the second part of our assumption would be diet.

He is the the depreciation of pay soak, you've got some additional bumped us in thermal surprise 41 airport. So we really think that the performance of the one that will be a really.

Interesting go some of their prices I will have the best I'm quickly recover in that way, we continue thinking God. They persist other building will happen.

We see that these high game changer on Dell will give us the the chance to attract new new markets that today, we don't hop. So yes for the case uptick why not I listen disperse view of the thinking on all the bullet deals that is that having India Stan.

We think that these specific new best men will continue in terms of their original plan.

Thank you and my second question on their own revenue share.

I mean, it [laughter] again it is people if you go into remote Oh, sorry, because even the I will now take a wheel. We're also they have a a big decreased but in general terms I will said that it. It will men team is really close to run.

Wrapping <unk> indeed in the last 12 months.

They don't they have today.

It will be really similar to one year ago in dose for sure.

We do not come around to correct.

On the none other than that because the the part that he speaks what percentage is roughly.

I mean on they only on the last year was.

Under the 30, she was around 27% so I will say it up in our awfully wait to see how how could be they know to go.

And just to complement the only view allow me a.

They are a about it for five minutes in person that voting.

Okay I buy they no one ever revenue the person to fix you said around 80 person. So it means that the with the minimum guarantee that reach charge to the tenants.

Who the guarantee the 80% of the non.

Ever revenue, however, because of circumstances and to the Daddy's, Kansas, We will provide and I don't know everybody's plane, we probably will <unk> I decreased in these in these numbers so.

He is something that we will have to finalize because obviously with the.

Differing size of market the level of the minimal minimal guarantee should be adjusted.

Perfect. Thank you very much stickier.

Next question from <unk>.

Please go ahead.

Yeah, Hi, gentlemen, thanks, so much for the opportunity a couple of follow ups here. The first one is you don't use on the vast and then so we noted that in the first krwtwenty about 10% of them be requirements for this year was concluded.

And so my question is even if there is no guarantee that government and we were accepted delay of the vast amounts.

Does they pose it the restrictions.

Also east Bligh bad it's gonna be very difficult to do the best month anyway does your.

At so regardless off with the government decision, we should expect lower capex.

Versus the what was expected to be the mandatory Catholics and then maybe that's my first question. Thank you.

Thank you very good all right, yes, you're right.

We have almost 10% okay. Okay capex.

Scheduled for this or did you.

Okay, So where we will need to love.

Talks with the both governments in Mexico in Jamaica.

We will try to.

For.

Some of the investment, but he's been wedding they.

Probably difficult to do know now a oh, how much would be before I go into these and mobility restrictions in both countries anyhow, we land is they situation. So.

Well, we kinda stake is it is a lower topics absolutely. According to the form of communications with the with the government is they are very receptive and they are a willing to provide these is it fair.

The other thing is what we mentioned before and we will explain the beginning of that are of that Jenny <unk> about the and the negotiation that's different we right now how in front of us a deferral of that up and determine what he's pretty sure if youve habit.

They were very clear. Thank him. So my second question is regarding a provision that was made up 46 million Mexican business.

As far far doubtful accounts use these related to try Mexican airlines.

Yes. He did you referred to I mean, I'm actually care.

Hey airline yes. He is not interjet, if it's hard to say it indicates convene during a in mm.

Committed with the payments and they have been a they don't have doing due dates.

We are in the process off negotiating with the different airlines about that.

And regarding the provision of a.

Sorry.

And regarding a another very small airline in Mexico, when she's got Lafayette, and which is up within a 1% apologies.

Nothing less than one person and some of their a financing can match appliance.

Okay are clear thanks, so much.

Next question from Gabriel.

With Scotiabank.

Hi, Thanks for the call on my question is related to previous one we see well.

The balance sheet and increasing accounts receivable for about 48.5% does it relate suite or carriers like for example, interjet.

Hey, Thank you can rail.

Yes in your guidance again regarding alive.

Got to be by anger got in Mexico, and all the the U.S. Airlines, but we have in our portfolio are going to.

Well one thing that we have we do airlines.

They stop doing payment.

He and I lost a 15 days of March.

Therefore, we saw a significant increase in the India receivables, but isn't it a although they're all in all the airlines that are working.

In our network 14 airports.

The thing that thing do you.

Still payment onto it you know how how long Oh, how old D. These integration.

Right now we are working with them about is on a specific arrangements and newish it and so on the phone and payments a fortunately in the U.S.A. Airlines. They have some financing from the U.S. government. So they will be able to a continued.

With that the opinions different case or for a Mexican airlines that they they'll have some.

So I paid line saw dish, okay likes to support that come in payments.

Okay.

Thank you.

Next question comes from.

Please go ahead.

Hi.

Good morning, Thanks, political I personally someday that's profile.

You don't have anymore.

Artificially each year, but im trying to tell you why do you have somebody on conversations so firstly rights and always do some of these actions are oh, well most of them are at the beginning of a year on year hops anytime you want to generate some cash.

To pay them towards the end of year.

I mean, you can give you have some that's based work for neighborhoods, but I mean, how do you how do you need occasional flipping shall be mine for important each line. So what did you have any palm Beach Gazit markets are not there. Thanks.

Thank you right.

For your questions.

Regarding the first one yes, indeed, we have it's all maturities in the beginning of 2021, which is on the that that that we have from that because he shouldn't off a montego Bay airport in 2015. It is with Scotiabank N. V. Eight we have been a in talks.

With them about a.

Refinancing of these two to close a in any case, a we are expecting too.

They are not resources to do that they Medicaid we don't have.

Hey, there or continue with just a refinancing.

But we don't want to cite any any problem in that line and that you are right. It's at the beginning of the here we have another.

I know there too much with you in July since you're going to be one.

And we will try to have into into the thing to try to refinance that.

According to the level of leverage a we are trying to continue with that will help you cannot show held according to the circumstances and in case, we have identified all [noise].

The underground and engage we have a negotiation of the M.B. being Mexico in Jamaica, They always need that needs all investments will be nowhere, we expect to have lower a coming up in business for the coming years. Therefore, the level of leverage would be lower yields.

So it's it's in or not and it for now is what weve, having in mind, a obviously, we want to continue we've got where strategy about to finance, 100% up the other topics and we have also.

In the pipeline according to that.

And you've got big the issuance of Oh.

Thank god that market in Mexico.

Pretty clear thank you.

Well now.

Last question.

Okay. Thank you Hey, without question from my because what I thought from C. D and the question is what starts and they shopped you're mixing the traffic comes from Interjet.

And the answer it is around 80, 80% and he was decreasing in you don't do it appears quite at all of these year.

I don't know what else you want to complement something.

Okay.

There.

The only thing important to to say is that.

I know you February the second number for February referred to there and then B plus 7% of our market, but what are you seeing parked on two to two good no no. There's no. One is known competitive roots duck has been operated bye bye bye into it in their weight to say it alderwoods.

Today has in it or does it used to be operated by eat or just in the comps net loss older airline competing there. So there was enough room in terms. So there's no factors to upsell of all the pull siebel older people she will be.

Recent feedstock could interjet bring to the to the market.

Okay. Next question is approximately how many different airlines have flights a our airports in Mexico in Jamaica, well I can tell you Marcos Dod and a number of satellite that we have four commercial planes or commercial flow.

In Mexico is around 25% 25, a airlines and cargo airlines are around sway wealth and indicate Oh My God you reach around a 12 airlines in commercial flights.

In in directly in regular season.

And next question is a I know there's been a long time, a buddy what is a their role of a group of Mexico into our board of that of the company I didn't know if you want to answer yes.

I will sit today is Super Mexico have one Riley hotspot.

Board member.

He affecting I mean us all did the rest of their board members and GAAP acting 14th there is hope the company. So I would say that these really I know my list Thunder is.

Well see show no Oh people Miss equally nowhere day by day on the on the board of directors.

[noise] perfect.

Your next question is.

Hey phone proposal.

In the course, rather put it on the from Bradesco.

And the question is why did the level of monthly operating expenses that we are expecting after that cost control plan that is fully implemented.

And I would say that we have a I'd be funny is one is you operate a minimum levels and they did in the month that we will have a almost tropics your role.

Well, it's important these different views that that there.

The operation of the airports in the first part of about 2020.

Well it will be the operation in the second quarter.

With D.A., two months' off almost she'll passengers and what will be the new be sharing of the operation for the coming months.

And a during this month of the answer to your I see a choppy is around a 40% of increased in the cost of operation and we are expecting this in a happy meal.

It may and June obviously, we cannot assure that we wouldn't a rich. This is the amount we are in middle of the negotiation with the current suppliers with a service provider and he is complicated to have it obviously, we are close in some areas.

Yeah that caused all energy he will be increasing but they will have to consider that a it's complicated issue, but are way up our target is to rich. This is 40 person.

After he situation and according to the.

Opening a different.

The level of me all the airports and according to the increase into the man we aspect in the cost of operation a regular basis, who have a 10 to 15 person decreased the indicus off operation that is out there how they had roughly number that we are a fine in mine, a but we will have to see.

It is that the level of recovery up the topic in that the following one.

And that's the final question from there.

[noise] operator.

And I would like to turned up are going back to me.

<unk>.

Thank you everyone for your time money into some GAAP lieske scale keepitsafe half a grid weaken good morning.

Today's conference you may disconnect your lines at any time.

[music].