Q4 2020 Corporacion America Airports SA Earnings Call
Good morning, and welcome to the corporate a few on America airports fourth quarter fiscal year 2020 earnings conference call for.
Slide presentation accompanies today's webcast and is available on the investors section of the Corporacion America airports Investor Relations website at http. Colon investors Dot corporate I see on America airports Dot com.
As a reminder, all participants are in a listen only mode. There will be an opportunity to ask questions at the end of the presentation and as a reminder, this conference is being recorded at this time I'd like to turn the call every day. He may not all be nephew of Investor Relations. Please go ahead. Thank.
Thank you good morning, everyone and thank you for joining yesterday.
During today's call when he might be on Mackenzie, Our Chief Executive Officer also did escalate on it.
Brian Goff, our Chief Financial Officer. Unfortunately, we lost sales finance and M&A well it will be available for the Q&A session.
Before we proceed I would like to make the following safe Harbor statement.
Today's call will contain forward looking statements and I refer you to the forward looking statement section for earnings release on recent filings with the SEC yesterday.
Yes, you'll know obligations do I pay for revise any forward looking statements to reflect new or changed events or circumstances.
Note that for comparison for the piece on for a bit on understanding the underlying performance in our business.
Hey.
Discussing with pulse excluding pay for inflation that got me thinking in Argentina, which became effective on July 2018.
From the information and connecting moving application with whom I yesterday in line can be found in our earnings report.
Now, let me turn back on over to our CEO Martine on them again.
Thank you for Humana.
Hello, everyone and welcome to today's call.
Hope you and your loved ones remain safe.
One day Gunby has undoubtedly been the most challenging year ever faced by the travel industry worldwide.
I wish to thank.
Our team for their dedication and commitment to rapidly establishing and executing our strategic plan to protect the company's financial position.
All while continuing to ensure the highest health and safety standards for our passengers and employees.
During the year, we made significant strides in libra filing and in strengthening our balance sheet, while succeeding in making substantially favorable progress in extending or enhancing our concessions in Argentina and Brazil.
Despite experiencing a 70% decline in passenger traffic in 'twenty 'twenty as a result of the severe impact on the.
Mimic on travel demand our decisive actions focused on cost containment and economic communications allows us to achieve comparable to adjusted EBITDA of 78 million non exiting 'twenty compared to 447 million posted in the.
Prior to live on that day.
This mainly excludes non cash impairment losses.
Yeah.
In both years and the bad debt charge in Argentina in 2019.
Yeah.
Fourth quarter comparable on adjusted EBITDA was 43 million motorists nearly regarding the losses of 19 million and 33 million net are supposed to in the second and third quarters of last year, respectively.
Note that the fourth quarter figures benefited from economic compensations of nearly $37 million from Brazil.
Sales in Italy applicable for the full year.
We didn't don't they don't do we also successfully refinanced a significant part of our principal on interest payments in key countries and we remain focused on making for brokers on this shrunk in Argentina.
We also have been negotiating with regulatory bodies and governments across other concessions to obtain compensation for the impact of this health crisis.
But then you have an extension of the 2000 and transition you know Argentina obtained in the fourth quarter was a significant milestone for our company.
Forcing these subsidiaries long term interest they never use it.
I will discuss these multi day shortly.
In Brazil, and other key markets during the quarter, we obtained an economic compensation I'd say.
Mentioned.
Finally cash and agree went on at year end increased to $281 million from 180 million minutes in the third quarter supported by a strict focus on cost reductions.
And additional financing obtained during the quarter.
More details on our fourth quarter and fiscal year 'twenty. One results can be found at you know on earnings report filed yesterday and the activity of this presentation, both of which are available on our website.
Please turn to slide four.
We have been seeing varying levels of travel restrictions as countries adapt to the evolution of the spread on the COVID-19.
And the changing health conditions. This includes requirements on PCR, that's up on our right well together with some level of quarantine at most of other countries of operations.
You know Argentina passenger traffic posted a significant sequential recovery of certain government restrictions on travel the world relaxed.
Still negative year on year.
Bans on domestic travel were lifted by the end of October and international travel remain open on their special day regimen.
Starting on November four and a nurse from neighboring countries were allowed to enter the country.
However in late December in light of the new COVID-19 balance the government reenacted the button on entry for oil for a nurse until April nine 2021.
Given the recent spike in.
Covid cases.
Earlier this month the government other additional draws about garments for national it's up on a REIT world and last week price from Brazil, Chile, and Mexico Whereabout IND.
Passenger traffic in Italy decline sequentially volume.
In the end of the summer season.
Commercial operations remain open with restrictions for certain travelers coming from or that translated certain countries Lockdowns and travel once in several countries in Europe also impacted traffic in the fourth quarter.
Your line.
Air travel restarted the first week of July borders remain close for.
Non resident foreigners with certain exemptions and requirements up on them.
In Brazil.
Passenger traffic doubled sequentially.
Continuing the positive trends observed since mid 'twenty 'twenty through January.
In February however, we saw a drop in demand.
You wouldn't even concerns are rising from a spike in the virus spread throughout the country.
You know what media topic has been increasing sequentially is the elimination of restrictions on air travel last September and more recently, the opening of Russian borders too for a nurse.
Some requirements apply up on entry.
Finally, I'm thinking like weather more than doubled sequentially with commercial operations to remain open subject to certain requirements.
Page five shows preliminary monthly.
For the traffic and category trends since last April 'twenty one day.
The graduate on Monday recovery trend.
That started last June continued into early this year.
I think it was down nearly 69% year on year in December and improve further to a drop of 64.
Bus engine last January.
This was mainly driven by Argentina, and Brazil, while traffic, Italy deteriorated sequentially I'd say I'd say just explained.
Passenger demand remained at low levels in Uruguay, Ecuador and Armenia.
Traffic deteriorated again in February impacted by low.
For Saturday, mainly driven by Brazil, and to a lesser extent other countries of operations given the concerns over on a spike in COVID-19 cases.
Our new strains of the virus.
In terms of cargo, we experienced a sustained recovery throughout the year declining year on year.
Only 30% in December compared with 41% in November.
For four months in January was weaker mainly due to lower activity in Argentina, Ecuador, and Uruguay recovering again in February with a decrease of only 25% from the lows.
59% posted in May.
Cargo operations are playing a key role in the vaccination program for Argentina.
In Brazil.
Turning to slide six.
Rapidly adapted our airport network to ensure the maximum has on safety standards for employees and passengers.
Sure.
Airports in Uruguay, and I keep on in Peru joined assays on airports.
In Argentina alone without airports in Virginia, where again.
Abating Aci's airports how's that greater patient.
It works in pizza and towards what are the first day in Italy to receive independent has.
For simplification.
Now moving to slide seven.
Ported positive comparable adjusted EBITDA of $78 million intended on do we exceeded our cost reduction targets posting three consecutive quarters of cash flow, but 18 costs and expenses excluding concession fees declined.
Declining by 46% or more.
For the full year, we achieved savings of over 240 million loans, primarily in maintaining and maintenance expenses.
N a other operating costs and labor costs, including nearly $12 million in government assistance in Argentina.
19 out to cover a portion of salaries.
Currency depreciation in the main markets also contributed to these savings.
In addition, in Brazil, and Italy.
We obtained government economic compensations to mitigate the impact of the crisis, which benefited 21 day.
Adjusted EBITDA by nearly 47 million low dose.
As the year progresses, we will maintain a strict focus on cost control, but do we expect to see some increases in labor maintenance and other operating costs as traffic continues to recover overtime and government support declines.
As shown on slide eight.
Since the onset of this health crisis.
We have made significant strides in the negotiation with the regulators and governments.
Since our last earnings call, we continued to make progress on this front in Brazil and Argentina.
In Brazil.
Last November we obtained a refinancing or 50% of the agile concession fee payment.
That was due in December.
With payments deferred to the six final yourself for construction.
Argentina last February we signed an agreement with a local airline to recover $38 million of past due amounts.
Now moving on to the low near term review on the concession agreements on slide nine.
Most importantly, the 10 year extension for the 80000 concession in Argentina, along with an increasingly international study was a key milestone for the company.
In Brazil less.
December we obtain a significant economic compensation for the impact of COVID-19 in 'twenty 'twenty on all of our senior and adult airports.
Discussed earlier.
We are also moving our hub.
In the request for long term compensation.
In Ecuador, we continue in negotiations.
On to obtain economic compensation for the way until airports concession.
Finally in Uruguay, we are moving forward income in conversations with your authority to review the Conoco.
That's the concession agreement to compensate for the impact of the pandemic.
Moving on to page 10.
And take a deeper look.
The 10 year extension of the 80000 concession until 2038.
Importantly, the agreement preserves the economic equilibrium of 16 point, 45% internal rate of return in real terms on level until 2038.
Yeah.
It also established a capex program of approximately $500 million to be undertaken in two places.
The first phase includes investments of our own.
$340 million to take place for everybody.
During 'twenty 'twenty, two and then the 23.
The second.
Second phase consists of a total capex of nearly $165 million broken down into annual investments for $41 million between 'twenty 'twenty, four and 'twenty 'twenty seven.
We believe these additional investments are manageable and will allow us to continue enhancing airports infrastructure.
And the overall passenger experience in Argentina, as we have been doing during the past 20 years.
Last January within the framework of disagreement on the Argentine regulation the greater also approved.
Six there are adjustments in the 80000 international passenger fees.
Pete.
Using the free to $57 effective this month.
Finally, while domestic passenger fees will remain unchanged. This year, we are in conversations with orsa to obtain adjustments next year.
Turning to slide 11.
So.
Protecting our liquidity and strengthening our financial position has been a key priority since the beginning of this exceptionally challenging crisis.
I am very proud of the remarkable achievements we've made on this front.
First we successfully refinanced our debt in Argentina and Uruguay.
For two exchange offers with very high levels of participation from our bondholders.
That together with the refinancing of bank debt in Argentina, and local ones in Uruguay allowed us to be for $126 million in principal and interest.
We also renegotiated debt maintenance.
Let's go in in both countries and being November 2021.
In addition, we obtained at 12 month payment deferral of interest and principal from other debt in Brazil for a total of $27 million and.
On the fourth quarter of 2020.
Extended our syndicated facility in Romania.
18 months from December 22 to June.
Got it on before deferred.
$36 million in principal amount.
Going on she's Armenia, where wave until December 'twenty, 'twenty, one and renegotiated too.
We are going to 'twenty three.
Subsequent to year end, we renegotiated debt maturing in the first quarter of 2021 in Argentina defending a total of $13 million for an average over a year and a half.
In Italy, we obtain that.
For for the debt leverage ratio covenant in connection with the 60 million Euro notes due 'twenty than before for the periods ending June and December 'twenty 'twenty.
Second we secured on additional financing in Argentina, Italy, and Ecuador, amounting to nearly 156 million.
The way on your credit facilities.
Third.
Thanks to our ongoing negotiations with the regulators, we negotiated that they put out a concession fee and mandatory payments in Argentina, Brazil, Uruguay, and Italy for a total amount of $106 million of which 31 million have already been paid.
Fourth we they negotiated payment terms with our suppliers across all countries of operations to limit additional cash outflows.
Finally, we canceled all non mandatory capital investments on deferred non priority projects, achieving a 62% year on year Capex reduction in 2020.
As importantly, it on day, one we will limit capital investments maintenance of security standards and airports safety as well as to comply with regulatory requirements.
Next moving on to our balance sheet and liquidity on slide 12.
We closed the year with 200.
$81 million in cash and equivalents and $74 million interest reviews and time deposits.
Total liquidity increased to $355 million at the end of December compared to $253 million at the end of last September mainly due to.
For the financing on thing in the quarter as well as our strict cost control.
This financial discipline allowed us to achieve operating cash flow breakeven in Argentina, and Uruguay since the second quarter of 'twenty 'twenty on in Ecuador, and Armenia since the third quarter ended one day.
In addition.
Additionally, during the fourth quarter of 220, GAAP achieved positive operating cash flow across most of our countries of operation.
As a result of new financing obtained in the quarter total debt increased by 12% sequentially or $148 million to $1 three.
Yeah.
While net debt remained relatively stable at one $1 million.
So while net debt levels remained flat lower profitability since the start of the COVID-19 significantly impacted our net debt to last 12 months adjusted EBITDA ratio.
As a result, the ratio, which excludes the impact of non cash impairments increased to 14 times.
From seven point for them.
For times in the third quarter.
As a reminder, we are not subject to debt covenants at the consolidated level.
I know you.
We are working closely with the financial community in Argentina to renegotiate the principal payments of bank loans that mature during the rest of 2021.
Turning to slide 13.
This month, we resumed operations at robotic airports in water.
Yes.
This included the renovation and expansion of the runway to improve performance for our regional flight and enhance operational safety.
Also expanded and modernized the international arrivals and departures Hall, our head of the reinstatement of international Air traffic at about a day.
This resulted in a total investment of approximately $60 million funded by the Argentine government and eight thousands.
Element trusts with no impact on this subsidiary discussion.
Now to wrap up turn to slide 14.
At airports at the start of the pandemic, we have demonstrated our capacity and flexibility to rapidly respond to the newest vitamin and changing market conditions.
We remain fully focused on further executing against.
The strategic action plan put in place at the start of the crisis.
Protecting liquidity.
Keeping a strong focus on cost controls.
Negotiations to obtain long term, we agree with them of our concessions, while refinancing bank debt in Argentina.
Looking at total demand for the year.
During the first quarter on passenger traffic trends have been choppy, reflecting.
Lapping lower demand in Brazil, given concerns over the newest strain on the lightest on the spiking cases.
Hello restrictions in Europe also impacted the month most countries of operations.
At the Northern Hemisphere continues to make headway with the vaccination programs we.
We expect.
This leads to lead to.
To some improvements in traffic towards the second half of the year.
In the medium term, while disability in Latin America remains so high.
I mean liabilities.
Vaccines and the progressive lifting of government travel restrictions on dissipated to help drive better passenger.
Passenger dynamics.
Before opening the floor for questions as recently announced core Corona head of finance on M&A.
Assumed the role of CFO effective may 1st succeeding we.
Franco who will stay on that day to ensure an orderly kind of take the ball.
All of a 2000.
I wish to take this opportunity to thank our current course for his many contributions and having the financial road. Okay. I E 2000 since 2003.
And since 2017 meeting caps IPO.
On the development of other strategic financial.
The initial initiatives during this pandemic.
I also wish to congratulate Jorge for this appointment he has 20 years experience in investment banking and capital markets have been essential and implementation of our strategic initiatives to successfully navigate the pandemic.
Jorge has been instrumental.
No other recent successful designating locations as well as negotiating concession agreements regulations.
We are now ready to take questions. Operator, please open the line for questions.
[noise]. Thank you everyone now begin the question and answer session.
To ask a question you May Press Star then one on you touched on for Aaron.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
We kindly ask that you. Please limit yourself to one question and one follow up and at this time on a pause momentarily to assemble the roster.
And our first question today will come from Ian Zaffino with Oppenheimer. Please go ahead.
Hey, great. Thanks. Good morning, everyone does this mark on for Ian Thanks for taking our questions. So I guess like our question is on the 500 million Capex spending with a 2000 can you just give a sense of what type of investments we can expect.
That's gonna spend I guess, just specifically with the street on 36 million over the next two years is that expansionary investments to add run way for terminals on certain airports or how should we think about that thanks.
Okay.
Well Mike. This is my team. Thank you for your question.
On the B B.
Capex for that we I expect it to on their thinking Argentina pursuant to the agreement with the government I'm still in phase.
Basis.
Programming and decision making.
And although we have a.
Strong input into the program.
On the regulator is the one that.
That finally these sites.
Whereas the capex, but it will eventually.
Basically a.
Now I want to continue.
On the required Capex program to expand the safety runways maintenance.
And on me as Dod will start with previous meeting in Argentina. So.
You should expect.
Our maintenance capex for for runways.
He knows and there the continuing all for many of the works that reward on where were started before the pandemic.
Okay got it that's very helpful. And then just a follow up given.
See you know volatility you guys are seeing in the first quarter can you maybe just give a sense of what trends are you on what trends youre seeing in traffic activity for March how does that trend our compared sequentially with February. Thanks.
Sure.
So we.
We have different realities in a day.
Countries of operations most of this reality.
Built on a link.
The health conditions.
Is there anything on emissions and in the number of cases in hospitalizations.
In each country regarding.
The COVID-19 crisis, so actually was so before we had a.
Most of the recovery is linked to the easing or the strengthening on the restrictions put by by different countries.
So we do not have a.
Unique trend.
Debt, it's been a downward trend in Brazil due to EBITDA.
Basis.
Europe is expected to.
To have a better summer because so the vaccination Glenn.
The same I said I think towards the U S.
But we are seeing mixed results.
And in debt.
Total linked with.
The restrictions put in place in each of the different countries of operation.
Okay. Thank you very much working.
And once again.
If you'd like to ask a question. Please press Star then one.
Okay.
And this will conclude the question and answer session I would like to turn the conference back over to Mark <unk> for any closing remarks.
Thank you.
I'd like to thank everybody for gaining yesterday.
I appreciate your interest in on a company, we look forward to providing updates on our business and you should do sensitivity come on.
I mean the deal.
<unk> remained Toledo was go on sort of any questions that you may have.
Thank you.
Bye bye everyone.
For the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
[music].
[music].