Q1 2022 Grupo Aeroportuario del Pacifico SAB de CV Earnings Call

Good morning, and welcome to Gap's first quarter 2022 conference call all lines have been placed on mute to prevent any background noise. After the presentation. We will open the floor for questions and at that time instructions will be given if you would like to ask a question. It is now my pleasure to turn the call over to <unk> Investor Relations team. Please go ahead.

Thank you and welcome to the Blue part of portfolio and Pacific All first quarter 2020 to conference call presenting from the company today, We welcome Mr. Walter <unk>, Chief Executive Officer, and Mr. Sal Villarreal Chief Financial Officer. Please be advised that forward looking statements may be made during this conference call.

These do not account for future economic circumstances industry conditions, 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 expectations for a complete note on the forward looking statements.

Please refer to the quarterly report issued earlier this week at this point I'd like to turn the call over to Mr. <unk> for his opening remarks, please begin sir.

Thank you Bob.

Good morning, everyone and thank you for joining us today.

GAAP experienced solid results during the first quarter of 2022.

Reflecting the recovery that has been prevailing throughout the Mexican traveling industry.

We reached almost 30 million passengers are recovering to almost 70% compared to 2021, and an increase of 6% versus 2019.

DSO stomach result was mainly driven by growth of 51 outlets culture.

Our strongest performing airports for the June 2021.

No.

So did well for the first time field.

Experienced positive passenger traffic numbers during March.

So extraordinarily proud.

Rather than market.

As a result that will now take our revenues increased by 47% compared to the 2019 driven by the passenger traffic recovery throughout Gap's network.

As well as an increase in the maximum tariff, reaching 97% of that probably a maximum tariff.

On the commercial revenues rose by 33% compared to 29.

Most of the increase came from food and beverage.

Retail operation as well as duty free.

Discounts that we have discussed previously continuously however, given the passengers' traffic recovery MOSFET and adult opinion their revenue share.

Okay.

We mentioned in the previous call, we're ready to share it.

Terms of several contracts.

With result, Afghan financial conditions that were more positive for the company.

Sure.

We have been more square meters bulk reflected extraordinary breadth of 87%, which we can see the total commercial revenues compared to 2021.

The only business.

That continues to lock is subject.

We got minus 48% versus 2019.

There are however, several strategies that we are working on to mitigate the impact including.

The development of digital advertising <unk>.

<unk> Airport is expected to enhance brand experience for instance, the use of Mcafee showrooms.

Maybe that reached $3 7 billion pesos for the acquired.

Got it thank you very much.

<unk> of around 74%.

This was a result of the outstanding portfolio of traffic recovery, how do your maximum tariff and solid commercial revenues.

Were partially offset by the 26% increase in cost of service by 2019.

All the 15% increase excluding the consolidation of Kingston Airport seems to get sharper did not enter our port Arthur.

October of 2019.

We're going to work hard to maintain our cost control policy, but we do expect a higher cost.

In accordance with our expansions.

Inflationary effects.

Moving on to the non shopper four months Gotcha Gotcha, you've all AC grief by 15%, reaching a total of 16.9.

Yes.

The debt front.

This figure reached $31 2 billion pesos.

The new issuance of another tranche of debt bulge in the Mexican market for a total of 5 billion.

A portion of these proceeds were just debate that got 17 Bon <unk>.

During March 2022 for one 5 billion pesos.

The remaining portion will be allocated towards mandatory capex for this year as well as all of our commercial investment.

It is important to mention that the rating agencies S&P and Moody's book These bought a AAA rating.

Color scale due to the gas solid result of the strong fundamentals.

You've got going on with these figures.

Can you, we healthy labor levels, Richard Nesbitt, though where EBITDA Rachel for trailing 12 months of one one times complying with all our debt covenants.

Moving on to the Capex in the quarter the construction of the third processor of beauty.

Got it.

Our gap day 2022.

We're able to see that first got almost finished project.

Thanks, a lot of work has been finalized yet.

We are scheduled for the official opening in May 2020.

Given your building.

Around 40000 square meters.

We'll be ready to start.

If you could better serve international markets complementing the great functionality of the cross border Bridge.

And then one of her airport.

With the construction of the second wrongly.

Our new commercial mixed use building, we expect that these deals will be completed during 2023.

We look forward to sharing updates with you in the future communications.

The international thermal building and establish continuous expansion.

20000 additional square meters, which also includes commercial spaces.

I want to mention that the construction project reaches 50% broker right.

We are currently working under the Sun for the second and third building in Portugal.

Which is already in the first stage of construction.

To conclude I want to mention that our argue an extraordinary shareholder meeting took place last week and.

I noticed proposed solving that you end up with successfully approved.

Yes.

82, 9% for the ordinary shareholders' meeting and 86% for the extraordinary shareholders' meeting.

As I mentioned, we're talking about very successfully gap in the near term emphasis are building at the corner last month.

I just wanted to say a special thank you to all those who attend.

As well as our incorporated together.

At this point.

That's it for my remarks, I will ask the operator to please open the floor for your questions.

Thank you and at this time, if you would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the queue at any time by pressing the pouchy once again Thats star one to ask a question.

And the first question comes from Guichet Mendez with J P. Morgan Your line is now open.

Hey, guys good morning, how so.

I have two questions. The first question is just regarding the margin.

How sustainable you see margins going forward.

You just mentioned about cost pressures going forward, but what can we expect in terms of the margins over the coming quarters and the second question is in terms of traffic performance.

What is your outlook for traffic in 2022.

<unk>.

Jeremy This is Howard.

I will say that.

With the all the pressure of that we will have on costs.

For one day.

Influential night is happening around the world.

In the second part.

The square meters that we are putting into our portfolio with expansion of Tijuana Airport for instance travel airports.

This year.

I have some additional pressure on the cost.

I will say that you're talking around margins.

Ally would at 70% to 72% will be something that.

That could be sustainable on time, but again we are in.

I would say really shaky moment, when we are talking about inflation. So I will say that that would be the one of the.

For Eylea for.

The pressure for this year.

About the outlook for profit in 2022.

<unk>.

Our guidance, we are expecting going.

From the Rancho.

14% of increase to 20% of increase.

Again, we also talk about this guidance.

Assuming that there is no <unk>.

Additionally.

The problem with.

With pandemic or all the or the.

The library.

A blank or additional planes at their fleets of the Mexican.

The airlines of course.

But we are we are aligned on that.

A guidance of traffic.

Very clear thanks.

Yeah.

Okay.

And the next question question comes from Alejandro stomach owner with Credit Suisse. Your line is now open.

Yes, Hello, and thank you for taking my questions.

Question on Greenfield BD, Inc.

Thank you.

So you end up doing.

10 five.

Hum.

Sure.

Okay.

Gotcha.

Even though we didn't when again and how should we think going.

Thank you.

Yes, Hi, Alex this is <unk>.

Well.

As we have mentioned before in the previous quarters.

We'll try to normalize our dividend payment.

We just recently announced that the shareholders' meeting approved the payment of $14 four pesos per share for this year. Indeed, we are planning to make to the thinking today into two tranches.

During the year.

We would like to see that normalization of that of that of the dividend as we have in the previous two to the pandemic. So a 2020, while the OLED gear that we didn't pay any any any dividend, but we are considering to continuing normalized for that for the coming years.

Okay. Thank you. So I guess my second question if I may.

In terms of legal cost.

Yeah.

This is Kevin Lyons with hiring new staff.

Bonds are quite good.

Hum.

The terminal expansions.

So we've done this.

This could be pretty interesting.

That's really helpful.

Hum.

Just curious on that.

Yes.

Hi, Rob this is al.

I mean it just.

We're talking to them.

<unk> conference call is it's important to.

Remember that old Air Force works with some kind of some ways economies of scale. So always the cost derived first that the passengers.

Because at the end of the day, when we put in place a new facility.

Yes.

Ladies design for gas or oil.

Or or expand the D D.

The possibility of a downturn.

<unk> for at least five to six years, so I will say that for sure.

We put in place or would put in operations.

Different terminals, we will have to see.

Sometimes rallies jumps on the cost the first one would happen in the coming weeks that we will begin operation of the <unk>.

<expletive> one airport and you'll be able to.

And then of the day, we are increasing more than 80%.

Square meters of the airport with these new termite.

Absolutely.

So, yes, we're going to see a jump in costs.

Because for example, we would have.

And in addition on cleaning services.

Our security services energy Consumptions.

Sure.

Everything for annual billing, so I will say that for sure hold on a few some guidance.

On jump in the cost of operation.

Jumping off the quarter.

For sure for Dana the junior debt.

We will end up being.

The expansion of the two.

And <unk> also have some some somewhat challenging but I will say for this year. This will be the two all the facilities that we will begin to two operated.

Got to have some kind of impact in the in the in the customer preferred answer I will say for the size of the of the of the management.

These are more clear effects that we would have seen in the coming months.

But for sure we also know that being flattish or negative effect.

Will give us some additional pressure.

For sure we will try to.

Boy as possible all this impact with the negotiation of our different contractors, but what is that is something that is happening around the world. So it will be difficult to say that gap will be 19 net withdrawals to these two specific.

Okay. Thank you very much.

And the next question comes from Colin Muster with GBM. Your line is now open.

Hi, Thanks for the color and congrats on the report, but my question is regarding Capex, we saw a slightly weak deployment for the quarter considering your guidance for the year.

Could you give us some color on a possible timeline do you have for the full deployment of the Capex.

Hi, Juan yes.

Yes. It is in the first quarter of the year. It is complicated because we have to conclude some projects.

Two we are advancing <unk> in the year, we will.

Make and deploy into high gear.

And how you are please.

The capex not only for the mandatory capex, which is the MTBE, but also 44 the commercial breaks we have sent out a project like a second wrong way in Guadalajara, which is already underway.

Wei.

We have the construction of the mixed use building in Guadalajara, which is already a.

On the way also.

We are finished and the capex for the 20 airports.

And we are also finishing the expansion of the Los Cabos.

Two the expansion so.

He will be facilitated in the following months. So we are pretty confident to reach the level of capex that we announced in our guidance.

Okay, great. Thanks for the color and congrats on the results.

And the next question comes from Bruno Amorim with Goldman Sachs. Your line is now open.

Thank you. Thank you for taking my question I have a question on your traffic growth guidance for the year.

If we just multiply your first quarter traffic by four.

Way to simplify the forecast for the full year this implies 17% growth year on year.

Which is pretty much in doing to meet point of your guided range and you know to the extent that there could be additional growth during the year.

Don't you think the guidance is kind of conservative easy to fair assumption to make thank you very much.

Okay.

Yeah for sure we are being somewhat scattershot, because less unless theme for a second that.

Different changes with the pandemic is happening that in Mexico for instance.

What used to be the biggest airline in terms of domestic traffic that they used to be they get stop operations for the pandemic. So we know that in Mexico.

We are having.

I lack of capacity in terms of the domestic brands. So for sure we know that the demand is there.

But in some way we know just seeing the load factors of the different airlines.

This space before he's done and be back.

Or varieties.

Getting in a really higher.

Hello, factoring their planes so well.

What I'm trying to say.

To say is that okay.

Sort of our fleet.

Atlanta also known unknowns for.

For sure will give us.

Some additional jump or even give us some more positive as we saw on the traffic.

At the end of the day depends more.

And their capacity to bring additional fleet.

And in that area one of the older additional big question that everybody in the market in some way asking is for new claims.

There is some parts.

That in some way or dropped our deicing birthday.

Dave World.

Okay.

Some of the Daniel parts of the plays for instance.

Sure.

Sharpness, if theres something that theyre in the diaries.

So I don't know.

I see some kind of risk.

I mean for the additional fleet.

But in general terms, <unk> said that if the Mexican airlines.

A full field there are regional plans are there plans that have been out for sure we could be more in the positive side.

Of the guidance or even higher but for sure.

Same with Bruno that.

Our numbers as well as always.

Sean.

And taking that count differ reef that we are seeing them there on the horizon.

For sure.

If this risk.

We will not guide.

For sure we would have in a more positive.

Results for the year.

Thank you very much very clear and if I may just a follow up question you know interest rates. The 10 year rates in Mexico are on the rise there are now near multiyear highs and they are an important component of the tariff adjustment process every five years do.

Do you think you know, let's say, let's assume for the sake of simplicity that 10 year rates remain where they are near 9% easy straightforward for you to see that being reflected into the allowed returns during the MTB proceeds or is there any sort of subjectivity around it.

Hi, Bruno this is Sal, yes, youre right. The interest rates are high it right now and obviously.

The defense at the moment.

Allusion of that review.

<unk> of the MVP in India, and the new tariff approval from from therefore reduced at all we are going to consider.

Okay.

The new at that moment, the new rates so.

Is something in our favor yes, absolutely because this is it.

A moment that we have in some way a defensive position because we have 78% of our interest rates.

<unk> we.

We have an average cost of finance of around 7%, which is a very good. According to the circumstances that for that tariff negotiations, we will consider the last 24 months.

Of the average of the interest.

Interest rates. So it implies that in case that we are in the middle of the negotiation, we will consider a higher level of rate. So you are correct.

Thank you very much.

And the next question comes from Philippe Nelson with Citibank. Your line is now open.

Hello, everyone.

Thinking quickly. Thank you for taking my question.

Uh huh.

Two questions.

The first one is regarding <unk>.

Classic recovery.

Hubby CDMA Jamaican traffic recovery in the coming quarters versus Mexico recovery.

And how do you see a building up like.

Stealing some some tourism traffic from sulfur in Mexico.

And how do you see this.

Tourism in Jamaica building up.

Compared to the to the Mexican stories, that's the first one and then I'll I'll ask the second one.

Right.

Okay. Thank you.

The recovery of the profit in Jamaica.

<unk>.

Let's remember that the Jamaican authority has been more in the past have been more aggressive in the way that they might have recovered.

Some time in the last year.

Those completely the driveline.

What is important also to remember is that big time for the peak season for the travel nursing and Jamaica Ross from November .

Through March.

No.

Most of the restrictions that the Jamaican government put in place.

Of course.

Deutsche Bank.

Part of the of the of the winter season in the last year and part of this year. So.

I will say that we are really positive.

The results that you might have.

For the next winter season.

The next November .

We are seeing that.

The most part.

I'd say the structural change for our leisure destinations is happening.

That is the expansion of key rooms, and one gigawatt days develop is right now.

In the area of debate.

Big is happening that enormous growth of each of our key rooms. So I will say that we are positive.

The.

Mid 11.

Of Jamaica, because that direction of new hotels.

For the case of Cabo San Diego that is also happening the same we are see here.

Huge.

Instruction of our roof and I'll get rooms in the case of I guess.

One example of that project.

So you can just delay of a group that he's putting.

Put it in place.

Really part that project for the coming years.

Yeah.

The first stage of this project will be open and in aggregate on November of this year.

Also in Cabos, He's got interesting booming real estate that you.

Give us the sense.

The future will be also really.

Excellent.

Carlos I will say that we are assuming we are seeing that.

In all our leisure destination established.

Okay.

Important growth of key rooms, I'll hop off.

Development of real estate that we will that give us in some way.

Of that.

Really optimistic future for coming years, So and also when does is makes it a blended with the change in some of the trends of traffic in the world.

The long.

Long haul is not working.

As good as in the path that we are seeing.

Some kind of threat of.

People going in for vacation in a more closer area that in the past.

Also seeing that.

U S will be.

Market.

For sure also reiterated that result.

Lesser estimates show that the carloads by just over a month ago.

Yeah.

Thank you for the question the answer and then I have a second question anything.

Do you see any new projects a site or by this date here he's interested in.

And how are the negotiations of our studies for our new airports in the future.

For the moment the only product that we are seeing is that about us.

We are as you know, we're really careful about and disciplined about it.

Oh allow all the monies credit strategies.

For the moment I will say that the only break that we are seeing is it seems like.

Yes.

Great. Thanks very much.

And the next question comes from Timothy Lugo with Compass Group. Your line is now open.

Hi, Thank you for taking my question, so I have two questions.

First on the beach and much do you feel confident on your.

If the current maximum target that you've had in place and are you maybe.

Maybe I'm looking more weight on the coming months.

According to to reach area.

100% and my other question would be in the commercial side do you currently have any discounts.

That's helped increase the for example on the restaurants I'm sorry to to help them out during the pandemic are no longer getting any any more discounts.

And when.

Hi, Sheila this is helpful. Thank.

Thank you for your questions, Yes, we feel confident about the maximum tariff right now we are in the 11, 97% of fulfillment and we just see just some of the passenger charges from April so in some of our bigger airports.

In Mexico. So we believe if we continue with this trend and the passenger traffic continues so we will reach the total.

The maximum that we have to consider in taking in account the exchange rate would affect.

In favor Aye.

The fulfillment of the maximum studies and we have to consider also the inflation high inflation is more complicated to reach a higher or the 100% of the of the maximum tariff. So it depends of these two external factors, but for now we are pretty confident to reach the 100 <unk>.

<unk>.

In terms of the commercial side, we have been given some discounts I go into our <unk>.

The program off incentives supporting some of our tenants in our airports.

However, due to our passenger traffic trend and recovery. We are the the effect is very key.

Very irrelevant, we did not see that we will continue providing.

We have to take into account that the discounts are offer their minimum rent out and most of our clients.

Clients are paying already the royalty fee, which is higher than the minimum rent and so the effect of the discounts are not relevant at this moment.

Perfect. Thank you.

And as a reminder, if you'd like to ask a question over the phone. Please press star and one you may also submit a question via the webcast.

The next question comes from Pablo months Levi's with Barclays. Your line is now open.

Hi, Thanks for taking my question I have a quick one I recall that you said.

At the beginning of the call that you renegotiated some contracts.

Commercial contracting at your airports.

Please.

Some color on what is your expectations on the <unk> I don't know because the revenue per passenger growth and.

Because we have seen an improvement over the last few quarters.

But I wanted to see if there is a chance that we should see that number increasing I don't know.

568, or 10% or it's just going to be lot age or flooring and inflation.

A little bit more detail on that would be great. Thank you.

Thank you Pablo.

I will say that there is the risk box.

He's helping us two or three parts are helping us to 222 to get a better result on commercial revenues.

First for sure.

Passengers. So the key part there for sure is that volume, but also if we see a better even a better recovery.

Passengers even by that travels.

Travels.

We will see some additional jump on the on the on the commercial revenues.

The second is related in the U S places well he's talking about you know everyone knows that would start for us.

One of the biggest.

The ratio of revenue per payer commercial commercial revenue per passengers Mexico.

So we have the new.

<unk>.

Building on the expansion of the building with goggles.

Time for November .

Or are the new systems for passenger and cargo without somebody should I'll jump.

On the on the results.

I will say last some of the contracts that we have.

Yeah.

We renegotiated.

Related made mainly in Baghdad.

What's happening back at that.

Everybody knows who have.

Began the construction of the new terminal building.

Dow will be apparent to you.

Two more years are important.

The last quarter of 'twenty 'twenty four.

In the midterm.

We have at least two or three years at IHOP.

In the short term that we need to take some a bandpass of the recovery of the passengers. So we.

Begin some negotiation of really short time of school years, and a half contract to get some additional revenues.

For for the case of <unk>.

So I will say that in general terms.

We are optimistic too.

Understand.

Great.

Our results under Rancho commercial buses commercial revenues.

And we have daily almost 85 vessels there their passengers in the first quarter, but I will say that we will continue that trend.

<unk> for the for the end of the of this year.

Perfect. Thank you very much.

Yeah.

And once again, that's star and wanted to ask a question you may also submit a question via the webcast.

And do you have a follow up question from Keisha Amendment. This with J P. Morgan Your line is now open.

Hi, everybody quick follow up question in Jamaica.

As many of the negotiation regarding a potential a rebalance on the contract.

Hi, Helane.

Great.

We have been.

Working with the <unk>.

The government of Jamaica regarding this.

The authorities are.

A hiring.

Somewhat biased series.

In terms of a begin with the negotiation.

Our perception is that we will finalize at the end of the year, even though we have a very good relationship with the government.

It is important that is.

The negotiation would be.

B.

<unk> will be done by the special team integrated by different ministers from from from the government. So we.

We have to wait until these E is fully integrated and the advisors are ready to begin with any precision.

We're base estimate is.

To begin in June into in order to finalize at the end of the year.

Okay very clear thanks.

And there are no further questions over the phone at this time.

And at this time I would like to hand.

On the call over to the team for any closing remarks.

Thank you everyone again for joining us today in our first quarter results conference.

We want to remind you that we are always open and available to answer any question on behalf of gap, we wish you a great day.

Right.

Thank you and this does conclude today's call. Thank you for your participation you may now disconnect.

Yeah.

[music].

Okay.