Q1 2023 Corporación América Airports SA Earnings Call

Yes.

Good morning, everyone and welcome to the compassion American airports first quarter 'twenty three earnings Conference call. My name is Carla and I will be your crew coordinator for today.

During the presentation. If you wish to ask a question you can register desk by pressing star followed by one on your telephone keypad.

I will now hand, you over to the management team.

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

It gives me todays call will be Mike Yeung, our Chief Executive Officer.

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.

I refer you to the falling to 76 of our earnings.

Our recent filings with the SEC.

We assume no obligation to update or revise any forward looking statement.

Okay you bet.

Okay.

Now, let me turn the call over to our CEO must be Eldon again.

Thank you Nikki.

Hello, everyone and welcome to our first quarter blended in the deep and its Glenn.

I will start today's call with a brief overview of our financial highlights followed by a quick review.

Traffic and cargo trends.

I will then hand over the call to quantity.

To discuss the first quarter financial results.

To begin please.

To have started the year with a robust quarter.

We delivered record high adjusted EBITDA $146 million.

20% above that of first quarter 2019.

EBITDA margin ex <unk> 12.

At 40% 150 basis points above the same quarter of 2019.

This was achieved with total passenger traffic steep at 90% or better.

Thanks.

Moreover, we delivered another quarter of positive adjusted EBITDA across all territories underpinned by a continued rebound in demand and our successful execution across all countries of operation.

Yeah.

Revenues ex <unk> 12.

We're up 16% against first quarter Coincidentally.

Supported by solid performance of both aeronautical and commercial revenues.

Total costs and expenses.

<unk> increased at a slower pace than revenue growth.

As we maintain our strong focus on cost controls.

This significant growth in adjusted EBITDA together with stable net debt resulted in an improvement in our leverage ratio.

221 times, providing us the flexibility to continue executing on it.

Strategic initiatives.

We are thrilled to announce the inauguration of the new departures terminal at the face airport.

Tina.

This state of the art facility.

If he can milestone and the demonstration of our ongoing commitment to improve passenger experience and enhance operational efficiency.

Staying with the question.

While seeking ways to create value to our shareholders.

Please turn to slide four for a deeper look at our passenger traffic trends.

As shown on the left chart travel demand continued to recover reaching 90% of first quarter ending balance.

From 88% in the preceding quarter.

This trend extended into April with the passenger traffic, reaching 95% of frequent moviegoers.

I'll now provide.

An overview for each individual country.

Our media.

Continued to lead the recovery with traffic up 51% against the first quarter of 'twenty.

Hosting levels above pre pandemic port fourth consecutive quarters.

The entrance of additional airlines and increased frequencies contributed to this good performance.

This upward trajectory extended into April with traffic, 87% above the same month in 2019.

Passenger traffic in Ecuador.

Pandemic levels by over 3% driven by growth in both domestic and international traffic.

This positive trend also continued into April surpassing continent in volumes by 11% a strong traffic with the U S Europe and Panama continues to support international performance.

Domestic travel also contributed to the recovery.

Passenger traffic in Argentina continued its steady recovery trend, reaching nearly 93% of pre pandemic levels.

Domestic travel.

Which accounted for 70% of total traffic was just about pre pandemic levels.

Traffic enabled improved to nearly 90% of 2019 Williams with domestic passengers above the.

11, 7% and international traffic at nearly 81%.

Uruguay, where traffic is 100% international experienced a weaker than anticipated summer season and can tell it.

Bringing passenger traffic back to 77% of first quarter of 2019 levels from 83% in the prior quarter.

However, this trend reversed in April with passenger traffic, reaching 91% of April's didn't didn't didn't volumes.

Italy, and Brazil, both saw a recovery in traffic volumes this quarter following weaker performance in the prior quarter.

In Italy.

Traffic reached 91% of 2019 levels up from 86% in the prior quarter.

With this good performance continuing into April .

Traffic improved to 98% of April rent in Netherlands.

Lastly, traffic in Brazil.

86% of pre pandemic levels during the quarter and improved to 89% in April .

Domestic traffic, which accounts for the lion's share of traffic in Brazil reached 96% of continental levels last month.

Moving on to cargo on slide five.

Volumes.

We're up mid single digit year on year to 81% of grip anemic levels, while cargo revenues increased 32% with strong contribution from Argentina.

Worthy cargo volumes in Romania, Italy, and Uruguay surpassed first quarter of 290 levels, reflecting the strong recovery in those markets.

Argentina imports.

Remain impacted by the increasingly challenging macro environment.

However, cargo volumes posted a slight sequential improvement, reaching 78% of <unk>.

Evans.

Caribbean Brazil.

Well, it's at 68, and 70% of pre pandemic levels respectively.

In sum we are optimistic about the sustained recovery, we are seeing in our cargo business.

As we move through 2023, we expect a sustained recovery.

And we will continue to support our customers with reliable and exceptional service.

I will now hand, the call to quota, Ken who will review our financial results.

Please go ahead.

Thank you Martina and good day, everyone, starting with our top line on slide six total revenues ex <unk> 12 continued strong performance in the first quarter of 2023 growing 43% year on year and back to pre pandemic levels by 60%.

Aeronautical revenues increased 56% year on year.

Reached pre pandemic levels for the first time. This was mainly driven by continued recovery in passenger traffic across our geographies Argentina contributed strongly to this performance boosted by solid traffic growth.

Aeronautical revenues in Armenia increased double digits year on year, and also compared to the first quarter 2019.

Commercial revenues, our key driver for top line growth.

29% year on year, and 40% AR growth refund delek levels, we continue to benefit from solid performance of duty free.

Parking revenues in Argentina, and higher fuel related revenues in Armenia.

Our strong results is also evident in our revenue per passenger which increased by 29% from $14 $6 in the first quarter of 2019 to $18 $8. This quarter.

Now turning to our cost structure on slide seven.

Total cost and expenses for the quarter increased 28% year on year ex district 12, falling the continued recovery of our business activity, but still below our top line growth.

Compared to 2019 total costs and expenses ex <unk> 12 for the quarter increased by 11%.

This is mainly explained by higher fuel cost in Armenia due to the strong increase in fuel sales in the quarter.

Worker and to a lesser extent by higher salaries in Argentina has the local inflation rate was significantly above currency depreciation.

G&A expenses were up 23% year on year, well below the 43% revenue growth.

And were slightly below first quarter 2019 levels versus revenue growth of 16%.

Moving on to profitability on slide eight we achieved the headquarters.

Adjusted EBITDA of $146 million in the quarter.

58% year on year, and 20% when compared to first quarter 2019.

This was the highest quarterly adjusted EBITDA in our history with all geographies supporting this remarkable performance. Moreover, we adjusted EBITDA margin ex <unk> 12 reached 42%.

Four percentage points from last year, and one five percentage points above pre pandemic levels.

Turning to slide nine we ended the quarter with a total liquidity position of $455 million relatively stable compared to year end 2022 importantly, with the exception of Italy, We believe that positive cash flow from operations in all geographies.

Yeah.

Moving on to our debt maturity profile on slide 10.

Total debt at quarter end was $1 $45 billion, while our net debt stood at $1 $1 billion.

We closed the quarter with a strong balance sheet and a healthy debt profile with no significant maturities until 2024.

Driven by the continued growth of our adjusted EBITDA and stable net debt levels our net.

Leverage ratio continue trending down to two one times from two four times at December 2022.

To wrap up we had a strong start to the year, we continued to deliver solid profitable growth that combined with our healthy balance sheet enable us to keep building towards our goal and create future value to our stakeholders.

I'll now hand back the call to Martin who will share some recent developments and discuss our view for the remainder of the year.

Thank you Couldnt get.

Turning to slide 11 for a discussion of some exciting news.

Just a few weeks ago, we met an important milestone in Argentina with the opening of the newly purchased.

At the Spacer International Airport in <unk> on April 17.

We are proud to provide passengers passing through an even better experience when banking checking in shopping and dining at RSA for import in.

It is the most modern airport terminal in Latin America.

With 50000 square meters of state of the capacity, we can know service up to 30 million passengers annually in the spacer almost doubling our previous capacity.

Reflecting our commitment to sustainability. This terminal is powered 100% by renewable energy sources.

This includes.

Led lighting.

The liquid cooling units.

Where air conditioning, which produce saving up to 60% in energy consumption. There is also technology in place to reduce water and electricity consumption.

Now to wrap up please turn to slide 13.

We are proud to have delivered a strong first quarter with record adjusted EBITDA and bottom line returning to pre pandemic levels.

Even with passenger traffic at 90%.

I also want to highlight the significant increase in revenues per passenger reached.

Each nearly nine.

$19.

From close to $15 in the same quarter.

<unk>.

We also made significant advances in our capex commitments.

We are well on track to comply with our $406 million capex obligation through 'twenty 'twenty four for <unk>.

One two a 10 year extension agreement previously announced.

We remain in discussions with the government with respect to the new Capex plan to increase the capacity to do so with a high quality of service the growing demand we're experiencing.

Italy.

The approval process.

Master plan at Florence Airport remains Undrawn.

Which will allow us to.

And then the demand.

In terms of the expansion of our airport network negotiations with authorities in connection with the new concession agreements, where I was in general Airport continued to advance.

And we are also analyzing two additional airports consistent investments in other countries.

The auction for Natal Airport took place last Friday.

Zurich Airport the center has been and was declared the winner.

This is also the so called friendly termination of concession agreements in Brazil, and we expect to receive an indemnification payment in the fourth quarter of the year.

Lastly, passenger traffic in April we'll see really at 95% of April 2018 levels, and we expect the recovery trend to continue throughout the year.

While being conscious on the ongoing challenging macro environment. We are encouraged by the strong demand in global travel and pleased with the robust start of the year.

Importantly, our solid financial position provides us with flexibility to support future growth.

This ends our prepared remarks, we are ready to take your questions.

Operator, please open the lines for your questions.

Okay.

Just to remind you if you'd like to ask a question. Please press star followed by one on your telephone keypad.

I would like to I think to your question. Please press star followed by Jay and then.

Thanks for your question. Please ensure your phone on mute it lately.

Our first question comes from Alejandro can meet chess.

Now secure space.

Your line is now open.

Yes, good morning, guys and congratulations with the results a couple of questions. If I may 1st one is Martin you mentioned the challenging environment.

So could you please walk us through what measures you're taking regarding the <unk> shown a potential devaluation in the currency.

The second question.

And then the second question.

Yes.

And you mentioned a number of growth opportunities both organically and inorganically.

How much additional capex will you require for that and how you're planning to final dose.

Yeah.

I think I'm going to thank you for your interest and your questions.

I hand over to Jorge.

To repay them and will remain available.

Part of that equation.

Hi, Alejandro George speaking here again, thank you for your question so in connection with the first one.

First of all I'd like to remind you that the lion's share of our revenue.

In Argentina.

Is in dollars or linked to dollars.

In excess of 85%.

All of our already existing for dollars and.

Just under 50% of our cost structure in dollars and the remaining is in Texas.

Yes.

Our view in the long term.

For Argentina is that inflation and devaluation will converge. So while there may be an impact in the short term because of higher inflation than evaluation, we believe that overtime. This will.

Going forward.

And have a similar path. So overall, we are not concerned about that.

I think we have been able.

To outperform in commercial revenues and as we reported our EBITDA margin has been growing so.

So far this has not been any impact and on the long term, we do not see any ship.

Your second question in terms of organic and inorganic growth.

Connection with our organic growth.

Our Capex program et cetera.

<unk> are going to be focused in addition to Argentina in which we reported.

In Italy, where.

We are well advanced with the approval process for the new Master planning as you can see airports.

And in Armenia, where we are in discussions with the government and in both cases.

Once that is finalized it will.

She will trigger a new Capex program.

And we will be fully financed with new indebtedness at the subsidiaries without the need of any equity contribution from the parent company.

In connection with the inorganic growth.

The opportunities that we are pursuing.

We believe that will require a marginal equity contribution and the lion's share of the.

Yeah.

The needs that we will have debt in particular, our capex will be financed with debt.

So I'm not sure if I answered the 100% of your question, but we remain available.

That's great. Thank you.

Thank you.

Oh.

The next question is from Stephen Trent from Citi.

Your line is now live.

Yes.

Hi, good morning, everybody and.

Thanks for taking my question.

Just one or two for me I appreciate the.

Capex obligations, you mentioned the $406 million through 2024.

How should we think about long term.

Sort of normal rate capex.

Going forward.

My first question. Thanks.

Okay.

Thank you Trent.

Yeah.

Well.

The Capex mentioned in Argentina is the mandatory capex.

We have agreement for mandatory Capex in the next four years for 50 million each year additional.

And then.

I think it will be up to the economic with DRAM in it.

Different negotiations.

Regarding.

New capex levels for Argentina. So.

It can be difficult to foresee.

Beyond the maintenance Capex.

Thank you very much.

Okay.

Okay, Great I appreciate that Martin and then just one other.

Follow up from me.

Definitely.

Interesting to hear about the new terminal at <unk>.

And the cost savings that you'll get from sustainable energy.

But considering that 2000 is a single pill regulatory structure will you be able to keep that upside or well the regulator.

Just your return base.

Based on the.

The incremental operating cash flow from the cost savings.

Yeah.

Thank you for your question Ken.

The.

The calculation is complex and one single line of costs.

And.

For that to happen. It will also mean that we are achieving the.

The standout so.

It's a question that's difficult to reply on them on a single line of cost level.

Although these efficiencies that we're gaining goes to goes beyond.

The cost savings that we're having.

Because we are also.

Into our commitment on on ESG and environment and these are the first steps that we're taking in that in that census, what.

Okay I appreciate the color on marching I'll I'll leave it at that thank you.

As a reminder, if you would like to ask a question. Please press star followed by one on your kind of thing.

Pat.

Our next question is from Peter Barley from Bank of America. Your line is now open.

Hello, Marty and Jorge Congratulations on the results and thank you for the opportunity for a question.

In the context of the new newly inaugurated terminal LSA side can you talk about what youre seeing in terms of increased international flight connectivity at the airport and how that is expected to evolve perhaps from plans some carriers like aerolineas and others and how soon might we see inbound international traffic from.

<unk> like U S and Brazil, returning to or even exceeding pre pandemic levels. Thank you.

Sure. Thank.

Thank you for your question.

We've been seeing.

This recovery trend.

Since the lifting of the restrictions.

Most of the pandemic.

And since then we have is that we have been seeing a steady growth in international connection flights.

Goes beyond say central because.

We just opened that terminal.

Don.

Departure terminal NSA cert.

But.

Since the lifting of the restrictions we also opened.

No.

And our new international area at Irobot.

So we're not only seeing the recovery in volumes for a.

But at a bucket has grown a lot depends.

<unk> been destinations.

The restaurant is covered and the overall number is the one that we just gave which is a continued recovery trend.

Of course domestic travel higher but if you take.

Each of destination individually for example, Brazil is doing it's doing really well.

In terms of recovery and all the other regions that have not fully restored the frequencies that they have pre pandemic out are the ones that still have to catch up.

But we are.

Really happy with the trend.

Which are.

It still continues into going beyond pre pandemic traffic levels during this year.

Thank you very much.

As a reminder, if you'd like to ask a question. Please press star followed by one on your tenant.

Thank you Pat.

We have no further questions. This concludes our Q&A.

I will now hand back to Martin <unk> for final remarks.

I just wanted to thank all of you for joining us today.

Wanted to remind you that our team remains always available to take further questions and discuss about our business.

Please enjoy the rest of your day Goodbye.

Okay.

This concludes today's call. Thank you all for joining you may now disconnect your lines.

Hi.

[music].

This concludes.