Q3 2023 Corporación América Airports SA Earnings Call

Ladies and gentlemen, please standby the call will begin shortly.

Again, ladies and gentlemen, please standby the call will begin shortly.

Thank you.

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Good morning, and welcome to the corporate America airports third quarter Conference call.

Slide presentation accompanies today's webcast and is available in the investors section of the corporate US Young America airports website as well.

Reminder, all participants are in a listen only mode there.

There will be an opportunity to ask questions at the end of the presentation.

At this time I would like to turn the call over to Patricio <unk> head of Investor Relations, but Tcl. Please go ahead.

Thank you.

Morning, everyone and thank you for joining us today.

Speaking during today's call will be Martin <unk>, our Chief Executive Officer.

Our Chief Financial Officer.

While we proceed I would like to make the following safe Harbor statement.

This call will contain forward looking statements and I refer you to the forward looking statement section of our earnings release and recent filings with the SEC.

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

I'll now turn the call over to our CEO Martine Alan Mckim.

Thank you Jackie Hello, everyone and welcome to our third quarter 2023 earnings call.

I will start today's call with an overview of key highlights followed by a review of traffic and cargo Chinese.

I will then hand, it over to Jorge <unk>.

For an overview of our third quarter financial results.

We delivered another strong quarter with robust performance across the business.

Revenues ex <unk> 12 increase.

Increased 37%.

Compared to third quarter 2019, and.

And adjusted EBITDA.

Yet another record high at $173 million.

Up seven 3% compared to the third quarter of 2019.

Even with passenger traffic at 2% below pre pandemic levels.

Adjusted EBITDA margin.

Duane expanded eight six percentage points to.

249% as we continued to drive operating gains.

This good performance was supported by positive adjusted EBITDA growth across all geographies.

Our sustained focus on efficient execution together with the continued recovery in travel demand.

In addition, we closed the quarter with a strong balance sheet and Gulfport our maturity profile.

Our leverage ratio improved further this quarter, achieving an all time low of one six times on the back of higher profitability and the slight reduction in net debt.

We are also making good progress in the execution of our fully funded investment programs in Argentina and Uruguay.

Additionally, we continue to work on.

New airports investment opportunities and remain focused on demonstrating long term value to our stakeholders.

Please turn to slide four.

For a discussion on traffic.

By September <unk>.

Overall traffic have recovered to 99% of pre pandemic traffic levels.

We the international passenger traffic, surpassing third quarter of 2019 levels by 5%.

This performance was supported by continued recovery in travel demand reflected by higher load factors and the gradual return of flight routes and frequencies across all countries of operation.

On a geographic basis.

I think volumes in Italy surpassed pre pandemic levels for the first time this quarter, while Armenia and Nic will.

Continued to beat 2019 volumes.

In turn passenger traffic in Argentina, and Uruguay remained in line with third quarter of two 1 billion de levers when does that begin Brazil continues on the path to full recovery.

Our media continues to lead the recovery supported by the entrance of new carriers and increased flight frequencies.

Traffic was up 40% year on year, beating pre pandemic levels for the sixth consecutive quarter.

This solid performance continued into October with traffic, surpassing pre pandemic levels by 62%.

In Argentina.

Passenger traffic increased nearly pre pandemic levels.

Even as we experienced a minor contraction from the second quarter of 2023.

Which benefited from it.

Government sponsored program to boost domestic tourism.

Domestic traffic.

Which accounted for more than 70% of total traffic remains strong.

Pre pandemic levels by 4%, while international passengers to cover 289% of third quarter of 2019 levels.

Dover total traffic exceeded.

Evidenced by the 10%.

With domestic traffic, surpassing pre pandemic numbers and international traffic improving to 96% of London 19 volumes in Angola solid performance in both domestic and international traffic driven mainly by increased frequencies supported by sustained growth trend.

In passenger traffic, which was 12% our pre pandemic levels.

Growth continued into October beat in 2019 volumes by 9%.

Here in Hawaii continued to recover with the number of passengers increasing to 94% of third quarter of 2019 notes. This.

This good performance continued into October as passenger traffic.

Past 2019 volumes by 7%.

Passenger traffic in Italy.

<unk> for the first time.

Up 4% from third quarter of 2019 volumes supported by growth in the high teens international traffic and low single digit in the domestic traffic.

While some installations have not yet resumed at Pisa Airport Florence Airport continue to operate our pre pandemic levels.

Increasing in the mid teens from the third quarter of Dunkin' and the Netherlands.

Traffic exceeded 2019 levels by 6%.

Finally traffic in Brazil was at 94% of pre pandemic levels compared to 96% in the previous quarter are some local airlines remain impacted by financial.

<unk> got constraints.

October traffic was at 10%, we'd opened and Delever still impacted by the aforementioned financial constraint.

Constraints.

Moving on to cargo on slide five.

We are pleased.

<unk> sustained recovery in our cargo business.

Volumes were up 13% year on year to 93% of pre pandemic levels compared to 86% in the prior quarter.

Cargo revenues in <unk> were 56% higher than the third quarter of 2019 levels.

With all geographies, beating pre pandemic levels, except Brazil, which still remains in a recovery phase.

I will now hand off the call to Jorge who.

Who will review our financial results.

Please go ahead.

Thank you Martina and good day to everyone starting with our top line on <unk>.

Slide six as Mark stated we are pleased with the third quarter results total revenue was exit.

Increased 22% year on year, and so far pre pandemic levels by 37%.

The strong trends, we have seen throughout the year continued in this quarter in both aeronautical and commercial segments. So far.

Although our core revenues.

27% year on year and surpassed frequently that makes levels like 17%, mainly supported by tariff increases and the sustained recovery passenger traffic across our airport network.

Argentina, Armenia, Uruguay, and Brazil maintained strong momentum for a mouthful revenues.

With double digit year on year, and also one compared to three quarter 2019.

Commercial revenues, which accounted for 48% of our total revenue in the quarter.

16% year on year, and 65% above pre pandemic levels.

The solid growth in product revenue.

Revenue in Argentina.

Sure.

In Armenia, and VIP lounges in Brazil were the main drivers behind this growth profile.

Compared to 2019 levels, we have achieved strong commercial revenue growth, while our both passenger traffic growth, resulting a 40% increase in revenues for effects too.

$19 this quarter from $14 $6 in the third quarter of 2000 alike.

Turning to slide seven total costs and expenses for the quarter increased 14% year on year ex <unk> 12 were.

Reflecting the sustained growth of our business, but at the same time remains well below the 42% growth in revenues and 19% growth in passenger traffic.

Compared to 2019 total costs and expenses exited 12.

18%.

The primary factors.

Higher fuel cost in our anemia due to increased fuel sales, while in Argentina, we explore higher concession fees tied to increased activity and higher salary.

Local inflation rates are above hurdle to the tissues.

SG&A expenses increased 9% year on year.

Also well below the 22% revenue growth compared to third quarter 2019, SG&A was down 25%, mainly reflecting the easier comparison from the impact of bad debt charge of $42 million in Argentina are recorded in the third quarter of the total in <unk>.

Moving now to profitability on slide eight our robust top line growth coupled with our strong focus on cost control continued to support to improve profitability.

As a result, the third quarter 2023, adjusted EBITDA reached $173 million.

Another record and surpassing the historical highs achieved in the first two quarters of data.

Year on year, adjusted EBITDA was up 32% with strong contributions from Argentina, Italy, and the adjusted EBITA margin exited towards expanded 3.2 percentage points to 49% in this quarter compared to 2019 level, but adjusted EBITDA include 73% or 44.

When excluding the bad debt charge recorded in the third quarter of 2019.

Turning to slide nine we closed the quarter.

Total liquidity position of $558 million up $181, one compared to year end 2022, reflecting our sustained strong cash flow generation, notably our operating subsidiaries reported positive cash flow from operating activities.

Moving on to debt maturity profile on slide 10 total debt at quarter end was <unk>.

$142 billion, while our net debt decreased to 955 million from $1 $1 billion.

In 2022.

We closed the quarter with a strong balance sheet.

<unk> debt profile with no significant maturities in the next quarters.

Consistently following last quarters as a result of the continued growth of our adjusted EBITDA and lower debt levels. Our net leverage ratio increased further to one six times from two four times.

At December 2014 to achieving another all time low.

In sum, we believe that we're both operating and financial results further, reducing our leverage and strengthen our financial position to support future growth opportunities.

I will now turn the call back to Martin, who will provide closing remarks and discuss our view for the reminder of the year.

Now wrapping up please turn to slide 12.

We are pleased to have reported a strong third quarter.

A new record high adjusted EBITDA.

And the margin expanded eight six percentage points versus the same period of 2018.

One one percentage points.

When excluding the bad debt charge recorded in the third quarter of 2019.

In achieving this good result, even though traffic volume is still a bit below pre pandemic levels.

Also noteworthy is the considerable increase in revenues per passengers.

Which increased 40% to 19 got asked this quarter from $13 six in the third quarter of 2019.

Looking ahead, we remain focused on advancing in the negotiations with the government of Armenia regarding at 400 million Capex program.

The rollout process.

The new Master plan that Jordan its airport, which continued to advance and then receiving the indemnification payment related to the return of Natal Airport within the next few months.

We are also focused on expanding our network and making continuous progress with the government of an idea regarding the atwood, yet and kind of concession agreements.

In terms of travel dynamics.

Main cautiously optimistic.

So we are monitoring the macroeconomic environment in Argentina.

Hey, good position, we have successfully managed across many different cycles and challenges over the past 20 years.

We also maintain a positive view on Romania, Italy, Brazil and Uruguay.

On the financial front, we are supported by and benefit from a solid balance sheet.

<unk> operations each of our operating subsidiaries.

This ends our prepared remarks.

We're ready to take your questions operator, please open the line for questions.

Thank you, ladies and gentlemen, we will now begin the question and Anthony suffering.

Do you have a question. Please press star followed by the number one on your Touchtone sorry.

With Raytheon Com acknowledging your request to Derisk the decline from the polling process. Please press star followed by the number killed.

Using a speaker phone please lift your handset before pressing Amit.

We also request that participants to limit yourself to one question and one follow up.

Our first question comes from the line of Brian.

Hi, F&B detail. Please go ahead.

Yes.

Hello. Thank you for taking my question and congrats on the results Joe question here on the lifestyle, but first I wanted to just try to explain little bit traffic trends.

We saw that traffic has been posting double digit growth and as Marty mentioned.

Sure Mike.

Now has it been benign for pharma. So just wondering if you could provide us some color on the trends you are anticipating for next.

Yeah, and our next months maybe.

Maybe if you could give some comments by region it would be very helpful and platform.

So again later.

That's all I have.

We're getting on that Mike mentioned that the negotiations are ongoing but I think with that.

The latest timeline, we had was November forget evolution. So just wondering is this timeline is the latest Brian are you still have any update regarding this thank you.

Yeah.

Hi, Fernando this is George Thank you so much for your questions as.

As well as your comments.

Regarding traffic trends as you correctly pointed out Armenia has been leading the growth year to date.

We are up 53% versus last year, and perhaps although still growing and still actually relatively good growth, but on the other spectrum within our portfolio as Brazil, with plus 10% versus last year.

So.

We remain positive and constructive going forward.

Uh huh.

We this year consider that we are still in the final stages of a recovery what we had lost during the Covid So going ahead.

What we expect is a more.

Normal growth if you will but we are very constructive and have very positive feelings.

Some of our airport.

Portfolios in it.

Sure.

Our company.

Our <unk> being one of them.

The scanner.

We are very constructive in Brazil.

In Argentina, obviously, there are elections.

Coming.

And we have to wait and see what are going to be the financial measures by the new government et cetera, but as Martine said, we have gone through many many crisis then.

I always have managed to perform well during the many many questions that we went through so in summary, we are constructive.

Yeah.

Regarding at all.

<unk>.

The government.

And by that I mean, the ministry of ports and airports and the minister of finance.

Requested the necessary amendments if you will to the budget law to.

To the Congress to include these indemnification payment. He has been sent several weeks ago to the Congress, it's a normal procedure.

Given the restrictions that existing the budget law in Brazil.

The government expect within the next few weeks to receive that then.

Within.

Perhaps a week following the receipt of the approval by the Congress of these amendments to the budget the payment would be made to US and then Zurich would make their part.

So in summary, we expect our indemnification payments to be paid.

In two installments first by the government and second by Zurich within a matter of a few days between one and the other.

The Minister told me that they expect this process to be concluded by year end.

We will continue to update the market.

As we hear from the government.

Okay.

Okay.

Thank you very much for answers and a good day.

Thank you.

Ladies and gentlemen, just a reminder, so do you have a question. Please press star followed by the number one on your Touchtone phone.

We have our next question coming from the line of Steven Chang from Citi. Please go ahead.

Good morning, everybody and thanks for taking my questions.

Just one for me and then one follow up per your rules.

Could you refresh my memory on Capex, where you think.

The long term maintenance number is going to be given that your capex today is that it seems very low versus.

Historical levels.

And two.

With.

Run off elections in Argentina, and the pipeline.

Are you at this very early stage being any kind of major parlance policy differences with respect to that.

Ports are aviation a bit different candidates. Thank you.

Okay.

I'll ask Steven Martin here.

I will address.

Your second question first and then I'll pass it on to devote vehicle.

For the second one.

So.

Regarding <unk>.

Still very uncertain.

Although we are very very close if you could answer.

The outcome of the elections.

And we'd be outcome also understanding the positive policy changes.

<unk>.

So.

We are.

Looking at this with caution.

And I expect them to engage with.

The new government.

The Goldman remains bumpy.

Most probably we will see.

A huge new branches from what we've seen so far is.

If it changes colour.

Then we'll have the one that's been.

What the government policies.

Most importantly, we have been virtually everybody before.

Too early to say.

Yeah.

While we could ship.

We are cautiously optimistic.

On the outcome.

Andy.

Yeah makes sense.

Where would you go.

And I think all candidates agreed the duties.

Is one of the key build outs for Dps.

Thanks will.

As you would be dilutive to bring.

Going into the country. So we expect any.

And we are doing.

To support the growth of tourism.

Would you score for our industry.

I'll pass it on to quality.

Got it.

Okay.

Thank you Martin Hi, Steve how are you. Thanks for your question George speaking.

So I think let me.

Let me divide the answer into two okay.

First.

And I would like to answer what is the recurring capex, we see in our portfolio in total.

Aside from expansion Capex.

So the capex that we have to do from time to time.

In our airports.

<unk>.

Our side again any expansion any new terminals any new runways et cetera. So the amount is between 30 and $32 million that we see recurring within our portfolio.

Aside from that we have expansion Capex, we're committed capex.

That we have currently.

We are in the final stages of Argentina out of the first tranche of $406 million or 65 remaining and then we have the $200 million in.

<unk> 50 per year.

Four years.

So that's Argentina, and then we have pizza.

About $45 million to $50 million in pizza.

Aside from that what we expect to do.

Uh huh.

The future is that.

New Master planning in Florence Airport for a new terminal a new runway.

Which is still subject to final approvals by the government and we expect that we will have we seen the next.

Nine months, if you will and then we will immediately thereafter begin the Capex program and in Armenia, which we are negotiating with them.

In pizza, the total amount of Capex, which in fact, it's public information has been.

Certain extent widely reported is 400 million euros of which 150 million euros would would be financed through a grant.

Pursuant to a scheme that exist for European mid sized airports and in Armenia.

Once approved.

We expect we've seen four to five years to deploy $400 million U S dollars.

Okay Super I appreciate the color and then thanks gents.

Thank you.

There are no further questions at this time I would now like to turn the call back over to Mr. Mike Makinen for final closing comments.

I want to do finalize thinking everybody for joining us Tonight and reminding you that our team remains available.

For any further questions or discussions, which enjoy the rest of your life. Thank you very much.

Thank you, Sir ladies and gentlemen, this concludes your conference call for today.

Thank you for participating and ask that you. Please disconnect your lines have a lovely day.

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