Q4 2021 Corporacion America Airports SA Earnings Call
Well those in 2019 or several months ago.
Sure.
Passenger traffic in Italy reached over 60% of the pandemic levels posting a strong sequential improvement despite.
Experiencing some impact from the emergence of the omicron bottomed in December .
Finally traffic in Argentina, and Uruguay, which are newer throw lung government imposed travel restrictions stood at 53, and 50% of fourth quarter 2019 levels respectively.
Perfect. However, posted a significant sequential improvement, reflecting the reopening of orders at the start of November .
Looking at traffic performance in the first two months of 2022, we saw a slight slowdown in January reflecting the impact of volume growth with the recovery assuming priority <unk>.
In Brazil for example, some airlines.
Were forced to cancel a number of flights due to positive COVID-19 cases within their group.
Turning to slide six cargo operations continued to perform well, reaching 80% of fourth quarter 2019 levels.
While growth was driven by all countries of operations, we saw strong contributions from Argentina, Brazil, and Uruguay, which together.
Accounted for over 80% of cargo activity, Italy, and Norway also note with kind of activity above fourth quarter of the DD&A levels.
I will now hand off the call to Kurt will review our financial results. Please Jorge go ahead.
Thank you Martin and good day everyone.
Starting with our top line on slide seven total revenues ex <unk> 12, continuing the steady recovery, reaching 70% of pre pandemic levels in the fourth quarter of 2021 aeronautical revenues increased over one five times year on year, mainly.
Driven by higher passenger you fees, which more than tripled, reflecting improved operations across all segments, particularly in Argentina, Armenia and Italy.
Commercial revenues grew 66% year on year and reached over 90% of 2019 levels with strong contributions from Argentina in Armenia.
Notably cargo revenues increased by 23% versus 2019, mainly driven by tariffs adjustments in Argentina.
Now turning to profitability on slide eight in addition to sustained revenue growth. We continued to benefit from a linear operation, reflecting the cost reduction plan implemented at the beginning of the pandemic when compared to 2019 cash operating costs and expenses declined this quarter.
By 26% remember this excludes concession fees and construction costs.
As we anticipated in previous quarters.
Expect to see some increases in certain cost lines as our operations gradually returned to pre pandemic levels.
At the same time, we also expect to benefit from a more efficient cost structure.
Now moving onto the P&L, we achieved comparable adjusted EBITA of $91 million up from $44 million recorded in the same quarter last year and slightly below pre pandemic levels.
Importantly, this quarter, we achieved positive adjusted EBITDA in all countries of operation in Brazil, adjusted EBITDA benefit from the $26 million economic compensation received in connection with the weakening of the Brazilian concession for the full year of 2021.
Recorded in the fourth quarter result in Italy were also positively impacted by the $9 5 million Euro Grant also accounted in the fourth quarter 2021.
Now turning to slide nine we continued to achieve significant milestones in the process of obtaining economically.
Of our concession agreements.
Following the successful negotiations.
Tina, Italy, and Brazil that we executed during the first year of the pandemic in 2021, we have advanced in the following fronts.
As noted earlier in Brazil, we obtained a $26 million of compensation in connection with the economics with the leader of the Brazilian concession from the impact of COVID-19 in 2021.
In Argentina, following the 12% increase in international tariffs that took place in March 2021, we recently obtained a 250% increasing domestic tariffs from 195 to 614 Argentine pesos effective March 1st 20.
22. This also includes the commitment to adjusted domestic tariffs over time to a reference value equivalent to $5.
In the corridor last July we successfully completed the economic re labeling process to compensate the impact of the COVID-19 for the quarter <unk> concession, which among other things included a two year extension of the concession terms and a reduction in the concession fee.
Worldwide in November we signed an agreement with the government to amend existing put together some concession which included the extension of the concession terms for an additional 20 year period from November 2033 to November 2053 days.
The addition of six regional airports and a capex plan of $67 million to be deployed by 2028, and finally, Italy in August 2021 week test in 10 million Euro grant to compensate for the COVID-19 impact in 2020 and more recently in December .
We accounted for an additional amount of $9 5 million euros in government support.
Turning to slide 10, following the successful execution of the debt refinancing in 2020 due in 2021, we could get to the series of transactions.
Further strengthen our balance sheet, starting with Argentina in September 2020, 182000, and successfully placed 30 and a half million dollar linked bond in the local market at an annual interest rate of 4% and a two year maturity in November we completed the exchange offer or proportion of.
The <unk> 17, 2020 notes with the issuance of $290 million series 2021 notes due 2031.
And we also raised $126 million in new money also in November we refinanced $95 million in bank loans, extending the final maturity of these loans until November 2024 from February 2023, with a 15 month Grace.
Figure it.
More recently last February we successfully completed a local offering of $174 million linked notes in two tranches $138 million with an annual interest rate of five 5% on a five year Grace period.
Quarterly amortization to start in late 2027, and $36 million with an interest rate of 2% maturing in February 2025.
Receipts from this offering will be used to fund infrastructure works, we've seen the national Airport system and to redeem a portion of the preferred shares equivalent to $100 million in accordance with the terms of the executive decree, which provided for the 10 years extension of the 2000 concession agreement.
Note that the amount redeemed under the preferred shares will be counted towards our capex obligations under the concession agreement.
In Uruguay last November we completed the exchange offer and issued $246 million of six 875% senior secured notes due 2034 in exchange of the series 2015, and see as 2020 notes with a grace period until.
May 2025.
Also raised $52 $9 million of new money with the issuance of additional notes due 2034 under the same terms.
Moving on to total indebtedness and liquidity on slide 11.
We ended the quarter with a total liquidity position of $451 million, while total debt stood at $1 4 billion.
Our net debt to last 12 months adjusted EBITDA ratio remains above historical levels, but improving quarter over quarter was reflecting a recovery in adjusted EBITDA.
That has remained fairly stable over the past quarters.
All of our subsidiaries remain in compliance with their debt covenants and remember that kept itself has no directing that.
As a result of all the liability management initiatives executed over the last 24 months.
Able to improve our debt maturity profile, which allowed us to strengthen our balance sheet and liquidity position as well as comply requirement of 30 Capex program, notably we delivered five consecutive quarters of positive operating cash flow across across most of our segments.
The scoring and our financial discipline.
I will now hand back the call to Martin who will present, our closing remarks on slide 12.
Looking ahead, we expect to see a sustained recovery in passenger traffic trends driven by pent up demand and lower travel restrictions.
While we have service slowdown in passenger traffic in early 2022 on the back of concerns about the omicron Marion.
We already saw signs of improvement.
In the near term we are closely monitoring the impact of Wilmington, and remain vigilant of the geopolitical environment in Europe and its potential impacts.
In the meantime, we remain fully committed to advancing our action plan, which has proven to deliver solid results, even with passenger traffic levels have not fully recovered yet.
<unk>.
First.
Finalizing the economic re equilibrium processes in Brazil, and Romania to fully restore the equity value of our business.
Secondly.
Terminating the <unk> pretty consistent and collecting the corresponding indemnification payment.
Third preserving liquidity and further strengthening our balance sheet remains a key priority for us.
As reflected in the ongoing management initiatives that have demonstrated financial discipline and improved our debt profile.
Import.
We will continue to maintain a strict control of our cost structure to benefit from the efficiencies and operating leverage we have built over the past two years.
The demand resumes.
In addition to advancing our action plan. We are also actively developing additional value creation opportunities and expanding capabilities.
For example.
Given the small nature of the Peruvian operations and lack of long term sustained growth prospects last December we exited our 50 50 joint venture in that country.
This is part of our long term strategic plan that seeks to concentrate efforts and resources toward the core and relevant assets in regions with long term meaningful growth opportunities.
Recall that our Peruvian operations were not consolidated in GAAP results.
We have consolidated our real estate Master plan in our rest of the airport.
This year three large scale real estate project, we begin construction, calling for a total investment of approximately $700 million Brazilian reais.
This investment will be funded by our operating partners.
These projects, which are expected to be delivered in basis, starting towards the end of 2023 with completion scheduled for the first half of 'twenty before comprised at 250, plus stores lifestyle center as well as an entertainment center and logistics conflicts.
This initiative.
Bring additional revenues.
Revenues in America, and will contribute to tourism and the local economy.
In addition, we have established a multi disciplinary team composed by employees and best in class partners focused on everyone and mobility and new concept of air transportation based on electric vertical takeoff and landing.
I am pleased to announce that we have recently signed a memorandum of understanding with MRI and mbas with several other strategic.
Strategic partners.
The purpose of analyzing and refining our business model and the morbidity ecosystem.
The service and support the entry of <unk>.
Europe , and South America, particularly.
In some major cities in Italy, Argentina and Uruguay.
On the ESG front.
We published our inaugural sustainability report.
Mid last year.
Building on our commitment to sustainability in November we signed the world Economic Forum's clean Sky Sport Tomorrow 'twenty therapy mission statement.
That aims to accelerate the supply of news of sustainable aviation fuel technologies to reach 10%.
Jet aviation fuel supply by 2030.
This is an important first step in our long term plan to lower carbon emissions and their impact on the planet.
In closing I would like to take this opportunity to thank all of our stakeholders for their continued support.
With this I would like to thank you for your participation.
We are now ready to answer your questions.
Operator, please open the lines for questions.
Thank you.
If you would like to ask a question. Please press star followed by one on your telephone keypad.
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As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question and we kindly request that you ask one question and one follow up.
Our first question today comes from Alejandro Demichelis from now Securities. Alejandro. Please go ahead. Your line is now open.
Good morning, guys. Thank you very much for taking my questions. So one question and one follow up question is how are you seeing the recovery in traffic in Argentina, particularly thinking about some loss of connectivity in both.
Domestic market, but also in the market abroad.
And then as a follow up.
We've got kind of <unk>.
How are you thinking about cash flows topics for <unk>.
Our next year, particularly thinking about the.
The redemption of the refresh at NIH.
Yeah.
Thank you Alejandro.
This is Martin here.
Regarding traffic in Argentina.
We're seeing a continued recovery.
The major restrictions.
Argentina had for such a long time.
And so far we in international traffic, we are close to 50% of pre pandemic levels.
In domestic.
Going closer to 80% of pre pandemic levels.
And we see those trends continue.
In 2022, and hopefully it doesn't get industry.
To go back to pre pandemic levels how fast.
How are we going to get there will depend on a lot of things.
And a lot of decisions by different.
Airlines regarding the connectivity questions question that you ask but we see.
Our sustained interest and sustained.
<unk> by Airlines that are discussing with us slots and airports sorry, the ability to come back and restore service to Argentina.
So yes.
We see a sustained.
Recovery to go back to pre pandemic levels.
So.
That would be the answer of course.
There are always challenges too.
The airline environment, but.
So far we see a continuous recovery.
And regarding cash flows.
Jorge can.
Jump in there.
But with the recent.
Restructuring or exchange of the of the bonds that we had in Argentina.
In.
And the new issues.
We have made the company.
On the call.
But he's ready to face all of its obligations them. So.
Capex.
Preferred share redemptions and.
And debt obligations as well so.
We're really happy about the work of the work that the company and the financial team has done.
To strengthen the company.
Cash flow and cash.
So no.
The campaign, but we can say that we can place all of the challenges ahead of us and continue with our Capex program and the.
The preferred shares to redemption, which.
According to <unk>.
To a contract.
The preferred share redemption accounts.
Capex.
The capex obligations because of because of the money that we will pay for the redemption of the shafts. When you go to trust funds that will then be used to do capex in the airports. So.
All of that goes into.
The completion of our obligation in the concession agreement.
Yeah.
Okay.
As a follow up thank you might think of as a follow up I think we.
We have completed our financial plan, which was designed roughly a year ago.
Taking into consideration that last year late last year in the fourth quarter, we have completed an exchange offer.
Extending the maturity of the then existing bonds and we have borrowed additional $126 million at west dollars.
As part of the overall transactions, we have done in the fourth quarter and in addition.
In the first quarter.
A couple of weeks ago, we have completed the new volumes of $175 million approximately two notes.
Following completion of the local market. They were public offering. So you may have seen that 138 million plus he modes.
Interest rate 10 year fully amortizing, a five year, Grace, which 'twenty, possibly amortization and 36 million of our solar plus six months, 2% interest rate and triggered a bullet maturity we ended the year.
In 2000 out of the year with roughly $180 million. This additional funding.
Funding plus cash flow.
Plus some bits and pieces that we have raised.
Or anticipated in terms of revenues. So we are pretty much fully funded for the capex obligation of 406 million wastewater. It's your question.
Regarding.
The preferred shares we will be very soon redeem our $100 million preferred shares this amount as it was presented during our.
Script.
Is gonna comps towards the $460 million Capex program.
And it will be using capex, but to the trust.
So if I, if there's any pending question or doubt let me know.
Okay.
That's great.
And a quick follow up kind of a three to put up the first one.
How are your discussions with regulators after the regarding the rebalancing of the contract because obviously youre. Your passenger flow has been weak now we are kind of you know each of these flexibility on the capex with the with the preferred share. So maybe you can give us.
Any insight on that and then second part to that how is the situation regarding the payments from either linear type of Indiana into into into 2000. Please.
Sure.
Well.
Uh huh.
And the discussions with the regulator a long and complex we are coming out of the crisis.
So we have to wait and see the revisions.
Extra regions.
The regulatory.
Accounts too.
To understand how will how will that evolve and how are we going to set up the discussions with.
With the regulators.
Uh huh.
Regarding the either yes, or it can be in a situation.
So far we are in a good standing in terms of.
Of collection with them, although we had always.
We are always very aware on their financial situation and trying to.
Understand.
The financial health and their ability to pay their accounts.
Okay. Thank you very much.
[noise]. Thank you as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
The next question today comes from Bruno Amorim from Goldman Sachs. Bruno. Please go ahead. Your line is now open.
Hi, Good morning, everybody. Thank you for taking my question.
Have a couple of questions here, which are related to each other so the first one is what do you think it's reasonable to assume that you know to the extent that traffic when changes to recover the current space.
Next year in 2023, EBITDA should be able to cover Capex financial expenses and there could be even some.
It was slightly positive free cash flow generation and if that's the case what should we expect from next year onwards.
Does the company intend to start pay.
Paying dividends on that happens or do you have any expected destination for the positive free cash flow.
Regardless if its starts happening from next year of 24 onwards, do you intend to.
Pay dividends or.
Would you be looking for new investment opportunities and also related to that you know what are the most likely opportunities would you be looking for would those be airports globally any specific assets you would be considering thank you very much.
Okay.
Thank you very much.
Yeah.
We are.
On a consolidated basis, we expect to be cash flow positive.
In terms of the free cash flow into the holding company.
I think for for the.
The next couple of fears.
We will preserve liquidity within the company and start looking more aggressively.
Two new acquisitions in terms of.
Geographies, we don't have any preference.
The trend is true.
Look at.
Latin America and by Latin America It includes Caribbean.
Given our presence in.
Italy and.
Europe in general.
We are looking at Africa as.
Well.
We have to be careful on the regulatory environment.
Generally speaking, but asking the huge countries are huge continent.
Good countries and that countries that yes. So the answer to your question is that we will start primarily with the free cash flow into cap, primarily looking more aggressively to acquisitions.
Thank you very much.
Thank you as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
There are no additional questions waiting at this time, so I'd like to pass the call over Tomorrow team and Nick Young for closing remarks. Please go ahead.
I would like to thank everybody for joining us today.
Thank you for your interest in the company and we remain all the team remains at your exposure to answer any questions you might have.
I hope to see you on our next earnings call. Thank you very much.
That concludes today's conference call. Thank you very much for your participation you may now disconnect your lines.
Yeah.
Yeah.
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