Q2 2021 Corporacion America Airports SA Earnings Call

Good morning, and welcome to the Corporacion America airports second quarter 2021 earnings Conference call a slide presentation accompanies today's webcast and is available in the investors section of our corporate America airports Investor Relations website. As a reminder, all participants will be in Buffalo.

There'll be an opportunity to ask questions at the end the presentation.

At this time I would like to turn the call over to Patricio Nokia is nello.

Head of Investor Relations.

Sure.

Thank you good morning, everyone and thank you for joining us today.

Speaking during today's call will be Martin M again, our Chief Executive Officer and of course, our Chief Financial Officer, both 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 I refer you to the forward looking statement section of our earnings release and recent filings with U S. D C.

We assume no obligation to update or revise any forward looking statements to reflect new or change events or circumstances.

No the problem by some work with us for a better understanding of the underlying performance in our presentation. Today, we will be discussing results excluding type of inflation accounting in Argentina, which became effective in July 2018.

Additional information in connection with the application of rule Ias 29 can be found no earnings report now let me turn the call all the door seal might've been element GAAP.

Thank you Keith Hello, everyone and welcome to do that before we start I wish to welcome Yankee. So when you head of Investor Relations.

Comes to us with significant experience in Investor relations for them once they necessarily let them new yoga stomach, Jason Newsted company and a strong background in grade as the former Moody's analyst.

I also want to thank humana for her contributions and setting up and moving forward, our Investor Relations program since our IPO.

Ensuring a smooth transition.

You May now has been promoted to head of financial planning for and what it means.

Our legislative session.

Sure Great success in her new road.

Over the last year and a half we have.

Managing through an unprecedented go like the many which have significantly impacted our industry.

I am extremely proud of how the entire team has pulled together to move us forward and ensure that we are a stronger company coming out of the pandemic.

Then we were going into it.

Although we are experiencing different dynamics across our operations, we began to see a recovery in total traffic starting in may.

Following the impact of the second wave will mimic that affected passenger traffic trends.

Operations early in the year.

In Britain.

But I think reached nearly 6 million passengers in the second quarter.

Up over 11 times from the year ago levels, but over three times well below the 20 million passengers posted in the second quarter.

Gotta Guava pvt intern bolstered the strong recovery and rich Williams that were just 20% below pre but they mcnellis with your weight and easily outpacing.

The Netherlands.

Back to the Boston data traffic.

We are pleased with the significant recovery observed in Ecuador.

And at the latest quarter.

BBVA, Argentina, however remains heavily impacted by severe women travel restrictions.

On a positive note we are encouraged by the advent of relocation program in most countries of operations, but particularly with the accelerated rollout in Argentina and convenient basically Britain.

Yeah.

Moving on to our financial performance revenue more than doubled year on year to slightly over $120 million, although still remain 60% below the second quarter can be they can be leveraged these.

These together with our sustained focus on cash preservation and tight cost controls contributed to income.

Adjusted EBITDA of $7 million, an improvement of $40 million from the adjusted EBITDA loss posted in the year ago quarter.

On the balance sheet front.

Net debt remained stable.

Finally, we remain focused on advancing the process of obtaining long term economic re equilibrium obergurgl insertion in womens and that'd be great as well as in the revision of the concession agreement in Uruguay to drive long term value creation I will discuss this in more detail shortly.

Turning to slide four.

We are seeing a gradual lifting of government that others aren't.

All operations allowed our gross all countries of operation.

Although hydrous picture for international travel remain in place, you know, Argentina, Italy, and Uruguay, which are indicated in the yellow box system is like.

Dinner with domestic traffic remains open borders remain closed to foreigners until October 1st.

No you shouldn't since the end of March.

And to contain the spike in Covid cases, the government has seen boats limits on the number of international passengers are iris.

Each student at 2000 passengers per day during the most part of the water and wall stress 600 doesn't just go away by the end of June.

As a result passengers, but I think remain 84% below second quarter levels.

Despite improving 19 times year on year.

The acceleration in basic observation this daily limit most recently relaxed to 1700 international arriving passengers.

But I think you need any increase over three times sequentially by contract.

It was 86% below second quarter up 10 different endeavors.

The restrictions for travelers coming from or the brands are at southern power just better apply until August 30th.

However, more recently no restrictions apply detracted from the Xinjiang area, and then I think from the U S.

Throughout the quarter. However, there I think improved from a 95% drop in April.

75% in June both compared to respective month, often United team.

Your wife passenger traffic increased over five times year on year.

It was 90% below second quarter couldn't be that'd be levels, reflecting the sustained closure of borders Nonetheless, even foreigners.

I've been extensions and weak demand.

Government has recently announced that starting November 1st well, what others will reopen two floaters is sending a flu vaccination. So if he gets in the negative Covid test.

I think there's nothing in Brazil increased sequentially, the sanitary situation in group and reached 47%.

Second quarter, often benign prepay.

Mcnellis.

Domestic travel is not restricted while the main requirement for nonresident corridors and putting the country. He said they got the PCR test.

International travel is also open with limited exceptions.

You know what I mean, you did I think continue to show a bunch of people sequential trend reaching 67%.

Second quarter couldn't be 19 level.

Reflecting the opening of Russian border, some Florida nurses earlier in the year and benefiting from their restrictions in countries, where Armenia competes for tourism.

Finally in Ecuador traffic improved sequentially and reached 45% of the second quarter levels.

With routes to the U S environment with higher traffic levels that he couldn't get anything.

No restrictions apply to domestic to international travel.

Those subject to certain requirements of whenever I believe.

Please turn to slide five where we show monthly passenger traffic trends in January.

King.

As anticipated passenger traffic began to recover in may this year.

The conviction that had started in February.

Second COVID-19 weighed eat our operation and let them.

The positive trend of Saturday May continued into June and July the vaccination rollout advances across all market and travel demand recovers.

But I think in May June and July improved gradually to 74%, 69% and 60% below their expected month, well Glenn did indeed.

But she didn't were the strongest performer driving this gradual recovery.

We expect this momentum to strengthen towards the second half of the year.

Our main let the market after the vaccination rollout continues to advance and government governments relax probably guidance.

Turning to slide six.

Gogo operations posted a strong performance with volumes, reaching nearly 80% of pre pandemic levels in the second quarter of them doing anything.

The growth was driven by all countries celebration, we saw a particularly strong week already in Uruguay with cargo volumes, beating second quarter of 'twenty then delivers.

India also stands out we've gotta go volume's, just 20% below the levels achieved in the second quarter upon billing team.

The good performance in Qatar with D V D in Argentina, and Uruguay has mitigated the impact from weaker passenger traffic in both countries.

Let's turn to our financial results on slide seven.

Starting with our top line.

And I don't think our revenue increased over four times in the quarter, but remained significantly below pre pandemic levels.

Compared to the first quarter of this year and I don't think I'll really well.

The news.

Were 6% higher reflecting improved operations, and Romania, Italy and England.

Commercial revenues achieved over 60% of something that would be nellis, mainly driven by higher cargo activity, which continues to recover at a faster pace.

Notably.

Consolidated cargo revenue beat the second quarter.

By nearly 4% driven by stronger Williams as discussed above together with that is increasing margins here.

Now moving down to the P&L as we so as we show on slide eight.

We continue to deliver significant savings in our cost structure as a result of the cost control and Brad Casper Salvation initiatives implemented at the beginning of this crisis.

When compared to 29.

Cash operating costs declined this quarter by 34% equivalent to savings of $52 million.

Remember this excludes concession fees on construction costs.

Year on year cost increases below revenue growth led to a positive adjusted EBITDA of $7 million compared to negative adjusted EBITDA of 33.

In the second quarter 'twenty guidance.

Looking into the coming quarters, well cost controls remain a key priority, we expect to continue benefiting from a leaner operation.

Also anticipate to see some increases in certain costs.

And operations continue to recover.

Now turning to slide nine.

We continue to advance in the process of obtaining economic re equilibrium about concession new units.

And you Might've Stone Armstrong was successfully obtaining last few light vehicles I mean, you could even for the voya kidney concession in quite a bit.

This includes a long term compensation mechanism.

A two year concession extension.

Action in the concession fee.

We remain focused on two fronts, starting with the airport last may we find out our request for the long term economic re equilibrium beyond the compensation already obtained for 'twenty one.

We are also advancing on the process to return or an adult concession and expect to receive the corresponding indemnification payments during don't get them to do.

We also remain in active discussions with the government of Armenia.

These concession agreement includes a conduct an internal rate of return of 20% in U S dollars.

Norway, we continued to advance negotiations with the government to review the concession agreements.

Finally in Italy.

The concession to obtain additional resources from the fund established by the Italian budget law.

Both of the entire the entire Italian airports sector in this year.

Note that this fund, which has not been allocated yet whilst we can expand it to 800 million euros from the original 500 million amount.

Moving on to our debt and liquidity on slide 10.

We ended the quarter with a total liquidity position of $287 million.

Total debt remained stable at $1.3 billion.

Our net debt to last 12 month, adjusted EBITDA ratio remains above historical levels solely driven by the impact of the pandemic on adjusted EBITDA was net debt has remained fairly stable over the past quarters.

All of our subsidiaries remain in compliance with the debt covenants and remember that GAAP itself has no direct indebtedness.

Turning to our debt management initiatives.

From April to July.

Right, we financed a total of $50 million in Greensburg make payments you know Argentine operations, and we obtained a $10 million loan in Uruguay.

Finally, I am very proud of the cost control in gastric cash preservation initiatives executed since day, one that allowed us to deliver three consecutive quarters of positive operating cash flow across most of our operations.

Please turn to slide 11 for closing remarks.

Over a year and a half into a dynamic we have demonstrated our flexibility to rapidly respond to the changing market conditions.

We remain fully focused on consistently advancing in the execution of the litigation blend established at the start of the guidance, which includes three key objectives.

First continued economic recovery room processes to restore the value of our business.

Keep a focus on preserving liquidity and strengthening our balance sheet.

And finally maintain a lean cost structure and strict cost controls.

Level of activity continues to gradually increase.

Looking at travel demand, we expect that the continued recovery in button topic posted in July will further strengthen towards the end of the year after the summer season approaches.

The markets and the vaccination rollout further accelerates in a convenient and continuous in Brazil as well as from the majority of countries of operations.

Garments and anticipated to gradually lift travel bans and restrictions of sanitary conditions continue to improve.

While we remain.

Vigilant of the new right of streams, we are confident.

The local and global travel is a three part of the future.

With pent up demand and they decided to travel unchanged, we expect sustained revenue growth in the long run.

The future of our business remains strong.

And while the pace of recovery still on linear our near term goals include building, a leaner and stronger company.

Finally.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Remember, we ask that you ask one question and one follow up to that.

Our first question today will come from Alex.

Michelle Us, but now securities. Please go ahead.

Yeah. Good morning. Thank you very much for taking my question and the question relates to Europe shrunk to a buy out deep refresh has shrunk from the government, how you're thinking about that how that could impact your cash flow. So so so trying to think how how how how you are approaching that.

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Okay.

Thank you very much for your question Martin here.

When did this option of buying your preferred share has been therefore for quite a while and.

Hum.

Now.

In deal, but only those patients who have been with the government because the proceeds are buying their shares are.

I counted.

Topics and would go into Capex.

And to a Capex plan of the company. So we are now in conversations with the government given the current restrictions on traffic on a on the timing of the Capex program and of course at the same time they prefer.

Sure it's a redemption.

So.

Near future, we will you will present the market with a financial strategy for 2000 and that will probably include the redemption of the preferred shares.

The timing of distribution of our Capex.

Okay. Thank you, Jeff as a follow up so when you're talking about these discussions with the government.

Are you also including the amounts owed by casinos or is that separate.

And that is a separate discussion we are running as a convener.

But we're going we're having very productive discussions with them as well.

Okay. Thank you very much.

Yeah.

Our next question will come from Peter Bally with Bank of America. Please go ahead.

Jean Jorge Patricio. Thank you for the call and taking my questions I have two on the cost side could you share an update on the status of the government support for salaries and social security payments and what we could expect for second half 2021 and just as a follow up do you have any expectations for capex.

That would be funded by a 2000 and as opposed to the trust for strengthening for the second half of 2020 one given.

Given the works at let's say sorry, everybody loves Jay Thank you.

Can you. Please repeat the last part of the question, which are the sound was not good.

Oh, sorry, yes, I was just wondering if there was an expectation for capex in the second half of 2021.

So regarding capex as we as we mentioned in the in the next question.

M. A C. The severe restrictions for international traffic in Argentina, and we have been having discussions with the government in terms of.

Reestablishing the Capex program timing.

So the young the energy that you just mentioned we will withdraw the.

The rest of the Capex and put it in these discussions to come up with a new scheduled rent on that and rigs.

Regarding to the government support.

Give me one second.

Yeah.

We do a we do have.

Uh huh.

And Richie.

The government's taking palatable.

The <unk>.

The salary so well.

The increase of the company.

Argentina and it was a.

To support this.

Catalyst during 'twenty, glenview, which will be which will receive that.

The programs are finished and now it's been replaced by another one.

Which is a smaller in size are.

Right around the corner.

But we're still receiving Dennis.

And Ah in Uruguay with the lifting of the restrictions to garner these lifting merger, but because he would have a battle.

By the end of September.

Yeah.

Thank you.

Again, if you'd like to ask a question Star then one star then one to ask your question.

Our next question today will come from Nicholas.

Bianchi with Jefferies. Please go ahead.

Hi, good morning, Thanks for the call, let's say encouraging improvement here across most segments.

Just just a question on the Argentine segment, where we still see a bit of pressure when I'm looking at the liquidity and debt maturity profile at the consolidated level healthy, but we have started to see some concerns around the opco and particularly Argentina, where the.

The reported cash and cash equivalents number from last week is now below the next six to 12 month amortization.

Could you please give us your perspective from the Holdco cap level on liquidity management.

Potential parent support and any additional levers you can pull a that would maybe leave us a little bit more comfortable thank you.

Okay.

Okay.

George Thanks for your question.

We are.

Working in our financial plan for 2000, and we expect to be able to make certain announcements in the next 45 to 60 days.

But there is definitely some congrats we're working on in connection with our maturity profile.

One thing and can highlight at this point in time is that we continue to have strong support from our lenders are taking into consideration.

The characteristics.

Strong characteristics of this concession that we have the whole airport system is a single two regime. We have the cargo revenues, we basically control close to a 100% of international passengers to the country. There are processes profit for all of our infrastructure.

Given these characteristics and the importance of this concession we continue to have very strong support from our lenders and again in approximately 45.60 days, we expect to make somebody else much.

Yeah.

Ladies and gentlemen, this will conclude our question and answer session I would like to turn the conference back over to Marty in your eye Pan for any closing remarks.

I would like to thank everybody for joining us today, we really appreciate your interest in our company, we look forward to providing updates on our business initiatives and to become more relevant in the meantime, the team remains available to answer any questions that you may have thank you everybody.

Yeah.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.