Q3 2021 Corporacion America Airports SA Earnings Call

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Good morning, and welcome to the Corporacion America airports third quarter 2021 earnings Conference call a slide presentation accompanies today's webcast and is available in the investors section of Corporacion America airports Investor Relations website.

As a reminder, all participants will be in a listen only mode. There will be an opportunity to ask questions at the end of the presentation.

Please also note this event is being recorded.

At this time I would now let's turn the call over to Patricio and Yoki S. NOLA head of Investor Relations. Please go ahead.

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

Speaking during today's call will be about a pinot and again, our chief Executive officer, Autocad or with our Chief Financial Officer.

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 statements section of our earnings release and recent filings with the S E T.

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

Note that for comparison purposes and for a better understanding of the underlying performance in our presentation. Today, we will be discussing results, excluding hyperinflation accounting in Argentina.

Which became effective in July 2018.

Additionally formation in connection with the application of rule Ias 29 can be found in our earnings report.

Now, let me turn the call over to our CEO Martine earn again.

Thank you Hello, everyone and welcome to today's call.

I am pleased to report that the initiatives, we have been focusing on she's just done.

Great.

Contributed again this quarter to deliver a significantly better business and financial performance, while further enhancing the equity value or weakness.

Traffic across our operations continued to recover during the quarter, reaching 10 5 million passengers up 90%.

Person on a sequential basis.

Compared to pre pandemic levels traffic reached 46% of the nearly 23 million passengers reported in the third quarter of 2019.

This better performance was mainly driven by the sustained recovery observed in Armenia, Brazil, Ecuador and Italy.

By contrast, Argentina, and Uruguay remained heavily impacted by severe government travel restrictions to contain the spread of the COVID-19 virus during the quarter.

However borders in these two countries were fully open starting November 1st on the back of your advanced rollout of the vaccination campaigns and warmer weather as we approach the summer season in Latin America.

At the same time kind of activity remained strong reaching 82% of pre pandemic levels contributing to partially mitigate softer traffic volumes.

Again this quarter your way in Italy, outpaced 2019 cargo volume levels.

These positive trends follow through our financial results.

Revenues ex I predict.

More than doubling year on year to nearly $170 million and up 38% sequentially, reaching 55% over the third quarter of 2019 levels.

The successful cost reduction program implemented at the onset of the pandemic.

Together with our continued focus on strict expense controls and cash preservation also contributed to higher profitability.

Comparable adjusted EBITDA improved to $38 million from.

From the $7 million reported in the prior quarter and the $19 million loss reported in the third quarter of 2020.

Importantly, we achieved positive adjusted EBITDA in all countries of operations with the exception of Purdue.

We have also achieved two important milestones of our strategy.

First.

We've taken we've taken important steps to strengthen the company's liquidity position and improve the debt profile.

Between September and November in Argentina, and Uruguay, we refinanced a combined $425 million in existing debt.

We also opened a new funding for a total of $179 million in these two countries.

Second.

We obtained a 20 year extension of work Alaska International Airport concession in Uruguay.

Which also included the addition of six regional airports.

This not only reinforces our leadership position in Uruguay, but also creates value and it strengthens our business Jorge.

Jorge would you go over these advanced in more detail shortly.

Moving onto slide four governments continue to gradually lowered global banks across most markets.

Yeah.

While commercial operations, what are now across our airports.

Total traffic for the quarter was still impacted by high restrictions for international travel in Argentina, Uruguay and Italy.

Beginning this month more Argentina, and Uruguay open their borders to international travel with certain requirements as reflected by the green boxes on this slide.

By contrast, Italy increased travel restrictions for certain countries given a spike in Covid cases after the summer season.

Looking at performance and restrictions by country during the third quarter.

Starting with Argentina domestic traffic remained open throughout the quarter, while orders remain close to foreigners through October 31st.

In addition, the daily quota for international arriving passengers established by the government to contain the spread of the virus remains capped at 1700 for almost the entire quarter constant, causing passenger traffic to be 70% below the third quarter of 2019 levels.

Despite improving.

The eight times year on year.

With 78% of the population with at least one dose and 59% fully vaccinated.

And improve any vertical nations since November 1st borders are open.

All fully vaccinated passengers, who also per cent negative Pcr test.

Well, Uruguay posted a traffic increase of over four times year on year. This was still 75% below third quarter of 2019 that was impacted by the closure of borders to nonresident foreigners stopping.

Stopping November borders reopen to what it is presenting a full vaccination certificate and the negative Covid test.

Passenger traffic in Italy was up over 85% year on year, reaching 50% of the third quarter of 2019 levels and boasting a significant sequential improvement boosted by the summer season with domestic traffic, reaching nearly 86% of pre pandemic levels.

In Brazil traffic more than doubled year on year, I says conditions improve reaching 74% of the passenger levels.

Of the corresponding quarter in 2019.

Domestic travel is not restricted while international travel is now fully open only subject to presenting and they got to go with desk prior to boarding.

But I figured Armenia continued to post strong performance up nearly nine times year on year, reaching over 84% of the third quarter of 2019 lovers.

Anything from the opening of the Russian borders to foreigners earlier in the year.

Lastly, Ecuador maintained their growth trend with passenger traffic improving four one times year on year.

And reaching 67% of the third quarter of 'twenty.

It was supported mainly by the U S. In Panama would you sexually above 2019 traffic levels.

Domestic and international travel and not subject to any restrictions, although certain requirement supply for international passengers upon arrival.

Taking a deeper look at passenger traffic trends on slide five the recovery that started last may on Nevada.

Advances in the vaccination rollout and lower travel restrictions continued throughout the quarter.

But I think in July August and September improved to 40%, 47% and 52% of the traffic levels achieved in their respective months of 2019 by country of operations Armenia delivered the fastest recovery I guess pre pandemic levels.

Brazil, and Ecuador posted a significant rebound, while Italy benefited from the boost in demand during the summer season.

By contrast, Argentina, and Uruguay, which remain affected by the prolonged government restrictions in place.

Through October showed the slowest recovery, although posting a consistent pick up month over month.

The recovery continued into October with passenger traffic, reaching 58% of the corresponding one.

Oh 2019.

This momentum is anticipated to strengthen you know our main Latam markets as we enter the summer season on the back of the recently relaxed traveled one better sanitary conditions and pent up demand.

Now turning to slide six.

[laughter].

Cargo operations continued the recovery trend across the water with volumes, reaching 18, 81% of third quarter of 2019 levels musical.

This good performance was driven by the majority of our countries of operations.

Youre right in Italy standout this quarter with volumes exceeding the levels achieved in the third quarter of 2019, when Argentina, and Ecuador reached 80% of pre pandemic levels.

I will now hand off the call to Jorge.

We will review our financial results.

Please go ahead.

Thank you Martine and good day to everyone.

Starting with our top line on slide seven or the optical revenues increased over two times year over a year.

In the quarter, reaching 39% of pre pandemic levels compared to the second quarter of this year aeronautical revenues increased 65%, reflecting improved operations across all segments, particularly in Italy and Armenia.

Commercial revenues reached 70% of 2019 levels, notably cargo revenues increased by 10% versus 2019, mainly driven by tariff adjustments in Argentina.

Now moving onto expenses on slide eight we continue to benefit from our strict cost reduction program implemented at the onset of the crisis.

When compared to 2019 cash operating cost declined this quarter by 43% or 34%, excluding a noncash $23 $1 million onetime bad debt charge recorded in the third quarter of 2019.

Remember this includes excludes concession fees and construction costs.

As we gradually returned to normal operations, we anticipate seeing some increases in certain cost lines, yes traffic and operations continue to recover. However, we also expect to continue benefiting from the efficiencies of a leaner operation.

Recovery in revenue above cost increases led by our positive comparable adjusted EBITDA of $38 million up.

From $7 million recorded in the prior quarter.

From a loss of 19 million in the same quarter of last year Importantly, this quarter, we achieved positive adjusted EBITDA in all countries of operations, except the rule, while delivering adjusted EBITDA margins above 2019 levels in Ecuador and Armenia.

We consummated excuse of transaction that further is transferred all our balance sheet in Argentina, we have concluded the following transactions.

Last September we issued 35 million dollar link bond in the local market at an annual interest rate of 4% in a two year maturity.

In October we should 10 year note for an aggregate principal amount of 290 million U S dollars to repurchase in exchange $24, 61% of the total or regional principal amount of the 2070 nodes and $66, 83% of do original pre small amount of 2020 nodes.

We have a four year Grace period.

In November we raised 126 million U S dollars of new money to trenches $64 million in additional 10 year notes and $62 million in new senior secure notes to 2028 with a three year Grace period.

We also refinanced $95 million in bank loans, extending the final maturity of these loans until November 2024 from February 2023, with a 15 month Grace period.

All the while this month, we completed and exchange offer of an aggregate principal amount of $194 million in outstanding please pull him out of the.

2015, and 2020 notes do 2032, four new notes do 2034 with a Grace period, then till May 2025, we also raised $52.9 million of new money with nations of additional nodes I'll also do 2034 as a result.

Salt.

Of all of the foregoing, we reduce total debt service payments in our bond transaction by $75 million in Argentina, and 28 million U S dollars right in each case for the next few years.

Moving on to total indebtedness and liquidity on slide 11.

We ended the quarter with a total liquidity position of $297 million [noise].

<unk> total debt remained stable at $1.3 billion, our net debt to last 12 months adjusted EBITDA ratio remains above historical level, but improving sequentially, reflecting the recovery in adjusted EBITDA net debt has remained fairly stable over the past quarters, our subsidiaries remaining.

Compliance with their debt covenants and remember that cap itself is not a wrecking deafness. Finally, we deliver four consecutive quarters of positive operating cash flow across most of our segments, which is a testament off the financial discipline, we have been keeping since the beginning of the pandemic.

I will now hand back the call to Martine, who will presents are closing remarks on slide number 12.

Looking ahead, we expect passenger dynamics to continue improving as we have into the summer season, South America supported by lower traffic restrictions and pent up demand Airlines have also announced and increasingly flight and this nations considering the expected.

Tourism activity.

While we are closely monitoring the rise in COVID-19 cases in some European countries, we remain vigilant of new virus strains at the situation remains fluid.

And the recovery is speedy nonlinear.

Long term, we expect to see sustained traffic growth as the desire to travel remains unchanged.

We have continued to successfully execute on our key objectives of the mitigation plan established at the onset of the pandemic first we have made great progress to date on advancing on economic librium processes across many of our concessions to restore the equity value of our business.

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Terminated nathalia Perkins concession to allow the collection of the indemnification payment third.

Through their various debt management exercises recently completed we have preserved dignity and strengthen our balance sheet, which remains a key priority for us.

And finally.

We continue to carefully manage costs to ensure we can benefit from an efficient and cost structure as activity continues to improve.

Beyond advancing on our COVID-19 mitigation Glen we're looking ahead and seeking to develop additional value creation opportunities and disrespect, we have been introducing an agile operational model with various multidisciplinary teams.

We recently created at that analytics team to rather than process that from our activities with a view to support our strategy to maximize revenues and try and services. We also remain vigilant on new business opportunities to further strengthen our airport portfolio.

I would like to take this opportunity to thank our teams for the continued commitment to.

The execution of our strategic initiatives all their efforts and enthusiasm.

Finally, our team and I are fully committed to maintaining open and brought people communications with the investment community as we continue our journey of building shareholder value. We look forward to meeting many of you as well as other shareholders potential investors and analysts in there.

Coming months with this let me open the call for questions and answers.

We will now begin the question and answer session.

If you would like to ask a question press Star then one on a touchtone phone.

If you're using a speaker phone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star 19, we.

We ask that in the interest of time limit yourself to one question and one follow up and re queue. If you would like to ask additional questions Nemo pause momentarily to assemble the roster.

And the first question comes from Bruno Amari with Goldman Sachs. Please go ahead.

Thank you good morning, everybody. So I have two questions. The first one is on the worldwide confession extension you know can you provide more color on what will be the traffic revenues they'd be die or or Capex contribution for corporate us in America from the new airports to be incorporated into the confession.

And in fact on the a more structural question you know looking past the COVID-19 crowded of course, we're going through a cyclical recovery. As you mentioned you know traffic should continue to to recover but you know what should we expect from the company posed the cyclical recovery should we expect a significant increase in David in payment for.

Rather a focus on investments in new concessions in the upcoming years. Thank you very much.

Stinker is this is the operator of your speaking right now your line may be muted on your end and we cannot hear Ya.

Thank you for your question is just about being as far as when I was doing your your wasn't a wasn't regarding our expected X pregnancy for a topic revenues of.

Once.

The agreement, we made with your wife and your government requires hostile immersed in in these airports, bringing them up to two certification level is to be able to bring in Ah, Arizona, bringing in traffic and to work on any better mantelpiece traffic weeks, which today, it's it's almost nonexistent in terms.

A commercial drastic each other general aviation. So we haven't done in place to start working at first in the in the investments and then on on.

On that topic promotion plan.

But it is a long term plan and.

Montevideo Airport is the one that's going to be supporting all of these with the extension with your recent expansion of 20 years, and then went there you have a congestion.

I hope that that answers your question and.

And regarding possible too.

Sorry, I'm sorry to interrupt you is it possible to give an idea of how much you are going to invest in those airports.

Yes, it's it's under pressure knees, we are going we've done to invest on a on a.

Four year plan.

$67 million, which the.

The first part is in the next three years and then there's a a small investment England. It on D. Eight till he made.

But that's the amount of capex going to this six new airports.

Thank you.

And Ah regarding your second question, where students in you know.

And you know look out most of do understand when the passenger I haven't dynamics are going to eat in the next in the next year.

You're in the next few years regarding the pandemic. We are confident that we are seeing the end of the pandemic, but we're still not reacting to it as if it's over because we still need to eat computers do not to see a consistent number numbers growing and Ah.

And the feeling that up on them it gives behind us a worldwide.

But once we come back into normality.

We are probably going to start looking for new opportunities in the market as we are today, but as we always say you know an unapologetic minor we're going to look for new opportunities for growing our business.

Thank you and and what about the outlook for dividends on the Covid crisis is hopefully behind us.

That is probably too early to say, but because we're a party going back to a breakaway an idea of of a policy for all the reasons.

[noise]. Thank you very much.

We currently have no one cute for questions again, if you would like to ask that question a star that one to join the queue.

We have a question from Roberto <unk> with Citibank. Please go ahead.

Hi, Thanks for the colleges.

One could you could you give us more detail.

The company name is.

I expected to be in the coming wirelessly.

Thank you.

Can you please repeat the call we would not the song is not perfect. Then we go okay.

Oh, sorry.

Did you hear me now.

Can you hear me now.

Yes go ahead.

Okay, sorry time for that I, just would like to understand why you review for the card dynamic in the coming patterns. When would you expect them to normalize just.

Just whatever it whenever detail you could give me would be very helpful. Thank you.

Sure what during the pandemic, where we work really hard on reality T V too.

August two separate gosh.

A lot of those efforts are going to do remain once I forget what it is to go up and all that but of course asked traffic picks up we are going to have a higher opec's due to.

Do they require dynamics of of of the traffic in the airports, but we definitely expect.

To come out of this pandemic, we'd have better cost base, then we enter it.

That's great. Thank you.

We have no further questions. So this concludes our question and answer session I'll turn the conference back over to Martine any closing remarks.

Oh, thank god, thank everybody for joining us today, we really appreciate your interest in our company. We look forward to providing updates on army says you should use as they become available in the meantime, the diem remains available to answer any questions that you may have again, thank you everybody and have a nice day.

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

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