Q4 2023 Grupo Aeroportuario del Pacífico SAB de CV Earnings Call
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Good morning, and welcome to Gap's fourth quarter 2023 conference call. Thank.
Thank you for joining US. Please note that all lines have been placed on mute to prevent any background noise during the presentation at.
At this time I am pleased to turn the call over to gap. So that the presentation may begin. Please go ahead.
Thank you and welcome to the Dupont portfolio in particular.
<unk> 2023 conference call I am pleased to have from the company today.
Lifetime, Chief Executive Officer, and Mr Yourself.
Chief Financial Officer.
Any forward looking statements made during this conference call do not account for future economic circumstances industry conditions company performance.
All results.
Please keep in mind.
To navigate these changes.
Their shareholders value to the best of our ability.
It is important to mention that despite this considerable headwinds.
We achieved remarkable milestones through 2023, adjusted EBITDA reached another record of $17 7 billion pesos up nine 7% compared to 2020.
Commercially 2023 was a groundbreaking gear.
We reached the highest commercial revenue in our history.
Our strategy, our strategic focus in the area of foot temporary warehouse.
Retail and expansion projects is evidence of our commitment to improve the passenger experience and continuous sustainable growth.
We are constantly working to recognize market brands adapt to them and make them wrong.
Currently we have several expansion projects underway as part of our strategic growth initiative.
These include new layouts seemed a little.
Scavo, some point a way up airports as well as the additional mixed use buildings that includes a hotel commercial patients in corporate office network.
Furthermore, we concluded year with strong balance sheet, reaching 10 billion pesos in cash at the end of this year as well as a comfortable debt maturity profile with a net debt to EBITDA ratio to one seven times.
And in 2020 three we raised funds for capital expenditures, mainly an airport expansion and infrastructure improvement.
Well as far as recognizing of the debt maturity.
Maturity payment of 3 billion pesos will be due during the first quarter of 2024 corresponding to the GAAP 19 bonds Certificate would you believe we're financing through our sustainable Lincoln bond issuance in the coming weeks.
Throughout 2023, we'll continue to focus on our long term planetary sustainability strategy.
The terminal processor, a building at the corner of airport.
And Ah Gull, LEED certification, which was the first time.
One of our airports was granted.
Sure.
We also participate in the edge certification for gender equality, our hosted our first ever gala to benefit our discussion of foundation from the Jungle Andrew.
During the year, we raised around $9 3 million pesos to benefit our schools.
In line with that with our education programs to the high school rates than what's on there are takeover Monterey program committing to provide excellent education to our students.
Moving now hitting out in our 2020.
Guidance.
We anticipate a 3% to 5% slowdown in passenger traffic across our airport network due to the challenged growth on.
The review of the PNW rankings.
With very few skews in our view of the aircraft that is scheduled to round. It due to the accelerated preventive inspection as well as the flat frequency and food offerings on the various airlines.
This increase in passenger traffic, we directly lead to lower aeronautical Arabians.
We foresee a decrease from 2% to 4% versus 2023.
However on a more positive note neural net revenues are expected to grow from 12% to 14%.
He started passenger traffic decrease we are considering the development of additional business area such as the start of operation of the mixed use building what Ohio.
The building includes a hotel corporate office and commercial spaces.
In addition to the opening ourselves around 1100 parking spots the therapy in Guadalajara additional commercial spaces.
Carlos hunting portfolio Gastar and the changes in the terms of the existing contracts.
We expect a 65% EBITDA margin loose plus or minus 1%.
The contraction comes mainly from our highest concession fees and Mexican airports from 5% to 9% beginning January 2024.
Plus labor cost increase in Mexico of around 20% and 40% for Jim Mike.
In terms of Capex, we expect to reach around 9 billion pesos in the coming year.
Along with our annual commitment and investment in Mexico of $3 8 billion pesos. We are also allocating $1 5 billion peso for the commercial projects include their finance the final phase of the mixed use building.
<unk> expansions and the opening of additional business lines operated directly by us.
Additionally, we will purchase additional landing well.
To be allocated to our future expansions, which will cost approximately $1 5 billion pesos.
We also have around $700 million of Capex deployed in 2023, but that will be paid in 2024.
Lastly, we plan to buy around $1 5 billion pesos the programs related to the American airports.
I would like to conclude by emphasizing that despite the challenge we remain steadfast in our commitment to manage regulatory changes and sustained growth in <unk>.
During our continued success and value creation for all stakeholders.
We have got we remain confident that the underlying fundamentals of our business remain strong.
With this I want to thank you all for your attention.
We're now ready to answer your questions operator, please open the line for questions.
Certainly at this time, if you would like to ask a question. Please press star one now on your telephone keypad to withdraw yourself from the queue. You May press the pound key once again to ask a question press Star one now on your telephone keypad.
We'll take our first question from Juan pumps of Bradesco BVI.
Hi team. Thank you for taking my question.
I have a question two questions actually on traffic and.
The MVP.
The first one on traffic.
Are you seeing the airlines cope with this with this revision of patent Whitney engines at least in January and December.
And also what do you what do you think is the impact from the slight reduction in Mexico City on on your airports and and on the international side are you seeing bookings strong from the U S and Mexico or have you seen a moderation in this market. That's my first question.
Question would be on the MVP negotiation I mean, I know you can't share a lot. It is still in progress but is there any chance that it gets completed ahead of schedule because of the transition.
Ministration, Thank you very much.
Thank you <unk>.
In terms of the profit one of the things that we are seeing just for DS.
The changes on.
On the available seats due to the inspection software and James is that the airlines are looking for the more profitable routes.
What we are seeing all our airports and in all the all the country is in some ways that theyre moving some of the operations from domestic market to international markets. For instance is youll see a higher four pretty intense on the international side.
We are seeing a really remarkable.
The increase in passengers on January <unk>.
That's in that in a big part is related with <unk>.
Better Geos.
For sure.
The I would say, it's smarter allocation of the of the of the fleet of paradigm, taking that count the lack of seats.
The other fact related with Mexico City Airport and.
And the capacity.
For sure is an additional change that is.
Additionally, I will say, we learnt our variable.
All the things that are happening right now is in the Mexican market.
For sure taking that count that some of the airlines for lights or re variables are changing their biggest fleet or the fleet with a bigger number of seats, Mexico City Airport.
Change in some of the of the fleet of other airports, but what we're seeing right now.
We're in the airports of gap is.
Sure Chris.
On the capacity I mean, the passenger's number for their routes that come out close to Mexico City Airport.
But in the other hand, we are seeing really interesting trends on why the higher airport related with international.
The passengers.
It is important dimension that for Houston hold on it.
International passengers and specifically.
One is related with California market, South, California market from while I had them. So one of the things that we have seen in Guadalajara.
An increase.
On pattern is domestic passengers on connections to international flags in Guadalajara Airport, mainly from Milan. So.
That is one of the things that we have seen so when we talk about international markets the ones related with VFR markets are growing really in that.
Great pace on this first quarter of this year.
He also on leisure markets has backyard and cabos.
We are beginning to see.
That some of the new routes will come for the second unfair and in the first quarter, we are seeing more.
A flatter increase on passengers, but overall I will remind you that for instance on the first.
Month of the year in January we saw five.
Three.
Five 3% increase.
International passengers.
And it was really a.
Important to volt dad, why that higher airport in terms of international passengers growth 25%.
The last part of your question related with the Master development plan under negotiation of the PMD.
<unk>.
For sure the airport those really clear the authority have until the last day of the June two.
To keep up.
<unk>.
We are working really together with authority, we're working together with airlines to get there their comments about our master plan.
But we could not we will.
Met our best therefore, trying to get a faster possible they'll first session.
But we could not sure that the authority will take.
All the time that the airport those gives them too.
These days the authorization so I mean.
We are working really close with them, but we don't have a complete assurance about how how how free cash could be that.
Thank you Ron for the detailed response.
We'll take our next question from Stephen Trent of Citi.
Good morning, gentlemen, and thanks very much for taking my question.
I was curious you know given.
Your experience with Jamaica, and I know.
You guys have a long knowledge in that market from Europe.
Vis vis your Spanish.
Strategic Investor are you looking at any opportunities to invest outside of Mexico.
Yes competitors seems to be having a bit of trouble in the Dominican Republic.
Just love to get your view on on high level opportunities.
Mexico. Thank you.
Hi, Steve This is sold BRL.
As you know we are following.
The opportunities and we have been different meetings and conference in looking for opportunities right now we have well middle of one process for a one airport in tubes and Caicos a island.
The we were already pre qualify us as a bidder. So we will compete with another four.
Sure.
The airport operators is that the only active.
The opportunity that we have now and middle of and we will be looking for another opportunities. We're really open to see and explore any any kind of opportunity right now it's only only only one.
Okay I appreciate that so.
And just one other question Justin.
Help get our arms around.
The new Mexican airport regulation.
The way that we read the text back in October is that.
The government was potentially going to be more interventionist.
In terms of looking at tariffs and responding to.
Concerns about tariffs.
Have you seen any increased communication.
The government at this juncture or is it and I know it hasn't been that much time, but does it seem that.
You know the amount of.
Inquiries and communication that you receive from the ICT is about the same as it was before.
Thank you Sir.
And so in general I would say.
That the communication with the density is steel.
The same that in the past.
And talking about I will say the tariff.
We.
Secondly is the same that the market.
<unk> said that the FCT take for the first time, the new amendment of the of the.
Seven of our array of tariff and they apply it you also have the formula right.
In the case of cattle. So I will say that we are not seeing any kind of.
Additionally, intervention or or any kind of different change in the way that we communicate with you with OTT worldwide is important too.
In some way bolt is that on the first time that the new annexes in place for the case if at all.
<unk> applied it and pain.
An important increase on tariff.
Related with the <unk>.
The full appliance of the new Formula So I will set that values. The most important thing that therefore, the first time that the new formula.
Easing juice the authority just respect it.
Okay I appreciate that rural thank you.
Thank you Sir.
We'll take our next question from Alberto Valerio of UBS.
Alright, Thanks, Hal So taking my question I have two on my side.
Switzerland about tariffs.
You had a discount.
November and December last year and presents come fall between airports should those Cds.
So we moved from January one.
And why do why does should we expect in terms of salaries for 2020 for inflation. They keep station as a proxy would be okay and my second question is about the MVP for the end of the year. We saw so closing the gap to top.
Passenger to you guys in OMA to close 100 to 110 basis that syndrome topics.
What should we expect for gap is there room to increase further the capex the passenger or should we see the same ratio that we saw in the past and MVP. Thank you very much.
So first.
There are some discounts.
For this year of 24, while you're going to see is that 6% of discount in nine of our airports that will continue.
Related with the package of discounts that we have for for airlines and we used to have it but now we have made it more public I will say that but what we do not see a discount of 6% in nine of our airports in terms of the passengers fee.
It is important to mention that the rest of our time.
Chris in terms of the.
A consumer inflation.
These new changes.
B apply it from March 15.
That implies the rest of our of our tariffs in Mexico.
In terms of the Capex for the next MVP I will say that we are language where he is.
Telecom Capex.
We are around 100 vessels.
IRA.
Prices for passengers. So our day of the of the Master plan for the coming periods would be around that for you.
Very clear cannot consider reduced.
Airports.
Tom Paris airports at the most expensive various airports that goes along with that we remain with a discount.
Okay.
Hi, Michael this is so.
We don't have the most expensive.
So far we are not expecting to have with the new.
The tariff review.
We will conclude at the end of the year. So we do not expect to have the most expensive airports I think in terms of marketing study or in terms of passenger charges.
No bother me.
Dress myself wrongly.
Talking about each side, we've seen your thoughts there.
Jackpot soft get those one that we remain with the discount should be the most expensive because you have different better as some of you already bought right.
Those who are on lease.
Most the highest status side got should view those one we should just call it that.
We will keep for this year.
Yes, it does something discounts I mean.
900, <unk> would have the 6% of this call.
Currently the passenger seat and the only one that will not have any kind of discussed zain mexicali more Indian mythology.
Perfect. That's it thank you very much particular application.
Youre welcome.
We will take our next question from Pablo <unk> of Barclays.
Hi, Thanks for taking my question.
A follow up on my previous question.
In summary.
What is your expectations on how close you expect to to be this year relative to your maximum target. So are you expecting to be 97 anything.
Having in mind all these concerns that you are talking about them. Thank you.
Hi, Pablo this is sold.
It's fairly early to know obviously the discounts offered in project charges will affect the fulfilling of the maximum tariff.
It will depend also in in terms of installation regarding the studies, which is the producer price index less petroleum. So we have a range of between 94% to 97% for this year.
So it depends a lot also Pablo this is old.
As we mentioned for sure deflation.
But also the exchange rate.
For international passengers.
In the other part that is important that also gave us.
Our biggest fulfillment is in the case, where the domestic market.
Growth is lower base that the international market, we could get a better fulfillment because as you'll remember the passenger seat for international market.
Our higher than the domestic market so.
We are really early in the year to have like all these macroeconomic trends in the land.
For the moment, we are seeing this the rents at that time, we mentioned the.
I mean, we should be really keep our lives are nice really close to these macro trends.
See if that if that would mean fulfillment.
Fulfillment could be higher than we.
We expect it.
Okay, and just a sort of a follow up.
Can you.
Tell us what is your inflation expectations that you are incorporating in the specific targets not from tour.
Yes Hello.
The inflation applicable for a specific studies is.
As John explained is consumer price index is 4%.
For the maximum tariff that we are expecting is one 5%.
Okay.
Thank you very much.
And once again to ask a question. Please press star one now on your telephone keypad, one moment, while we queue.
Yeah.
Yeah.
We'll take our next question from Juan Mccain zone of GBM.
Hi, guys.
Yes.
My first question is regarding capital allocation.
You mentioned in your report.
It's probably not.
Boston should with you details.
Or is there room for us.
Yeah.
And also are you planning to move forward.
Nicole.
Hi, Ron this is.
This is all as we announced in the in our press release, we the board of directors approve.
A payment of $13 86.
Personally shared.
A capital reduction in favor of our shareholders and it will be submitted to the approval of the store during the general shareholders meeting that will be held in April of 'twenty 'twenty four.
Yes.
EBITDA.
Oh.
Maybe another idiot.
No.
For now is the only only amount approved by the board of directors and that's the only pay band to be distributed to the shareholders.
Alright.
And just one quick question.
We saw slower.
Along with it.
Uh huh.
Bye bye.
The compensation in any way so far.
Yeah.
We couldn't understand you can give repeat the question. Please.
Yes Hello.
Yes, we fell off or they can come up with.
M C.
It's going to be.
Have you been in subs.
Shaun White.
Okay.
Thank you.
Right now as you know we have an agreement with our strategy Garland.
For the moment.
We will continue with that would that would be good with the agreement that we have but for sure. We will continue evaluating which are the best options for the company, but for the moment and I could tell you that we have.
Evaluating the options for the company.
Okay.
Alright.
We'll move next to Isabella Salazar.
With GBM.
Yeah.
Hello, Thank you for taking my question.
I was wondering if you could give us some details about the Jamaican concession regarding the economic rebalancing has it already been done and also in terms of commercial projects sorry. These contributing to the overall results are when did they start contributing.
Thank you.
Hi, cellular tissue so well.
We are continue we have conversations.
Jamaican authorities.
We have.
<unk> a barrel agreement.
The process in Jamaica is very long they they will have to pass through the parliament for different approvals. So we wait.
We are expecting to have this is a rebalancing.
To conclude at the end of this year.
They announced that.
Probably in the second half of this.
This year that second half could be from July to December. So we are we don't have any certainty about about this so we will have to wait.
And to see.
If it's possible to parse through the <unk>.
These approvals.
Through the Parliament.
Well regarding your second questions about the commercial projects.
As we mentioned.
We will have the opening of the mixed use building in Guadalajara, which is very interesting integrating the wholesale 180 rooms of wholesale corporate offices and retail.
Retail area commercial area integrated to the to the airport terminal and to the into the parking lot. We are also opening additional a basis of sports in the parking lot.
So that would be ready in the he will start in the first in the other hand, we already have that arise in the wellhead airport, which is a very nice and very large area of commercial.
Food and beverage that will contribute with the E.
Commercial revenue increased as we announced in our Ware.
Our guidance, even though that decrease.
<unk> in terms of passengers, we will have a relevant increase in terms of commercial revenues.
Yes.
About the timing of openings as I will mention the hotels.
The mixed use building will be begin operation on their broker.
The parking lots.
Where they have some offerings in Guadalajara, we have an opening.
This summer.
Thanks for that.
At the end of the year, we will have at least.
11000 additional spots for why that kind of what that means an increase of almost 100% of spot.
For sure Doug will give us.
It's important bluestone.
On the on the parking lots.
Revenue for mainly for the coming here.
But it is.
Really something important to have in mind and the last in terms of the tariffs that.
Today, we have an important.
Number of them.
Yes.
Sure.
Companies that are already operating with.
We did all the all the area.
All the different spots are ready to begin.
Two built around 70% of the spaces are already operating from the January.
Yes.
The area of all the new.
Our new commercial layout of well ahead.
We will be fully put it in place.
We will deploy.
For August of this of this year for that moment, we will begin to see.
Our.
Revenues, they're all their full impact for the full additional revenues that will come from that.
Additionally out.
But I will say that what we are expecting for the coming months is that the trend that we have of the last quarter of <unk> that was an increase of commercial revenues in a high double digit.
We'll continue for the next quarters.
I would say on the on the on the call our guidance for the full year of the Northern Africa revenues will be two Clos regarding the increase of revenue from 12% to 14%.
Okay.
Perfect. Thank you much for year end.
We will take our next question from Federico Galassi of T. S. G.
Yeah. So.
Well, that's a little bit of sense.
Just two questions that I was wondering if the later continue within with the primary challenge.
In the line of Caroline doesn't cause a big increase.
Did you get it.
This is a number of if you want that.
She will maintain there is more room to grow here.
And this this is another question.
Yes.
Thank you Perry.
For sure we have a really interesting growth on commercial revenue in the line of the of the car rentals.
While <unk>, mainly to the billing process of Los Cabos Airport.
I would tell you that for this year also we have the.
<unk>.
First of all the Exxon and deals that we are expecting an increase also related with the bidding process for over 100 airports. So at <unk>, we are expecting for that specific line.
The double digit growth will continue for two.
2024.
Okay.
Great Thanks and.
The second question just wanted to make it through the Coke side in particular in a cost of employees and maintain at that again.
A big chunk.
Yes, I mean capital adequacy of them said that I missed it.
What can we expect for BCS in particular, we.
We can be the DC minimum wage he and she can channel data.
People are the Golar <unk> talking about the.
Denise about like changing the in the label.
How much are viewing these two topics.
Okay very good easy so.
Obviously, we have faced a lot of pressure in terms of the increase in salaries not only in our you know our general airports.
Middle of the country, but also in the.
He.
And the board airports.
Italy and Tijuana.
2%, increasing minimum wages is affecting in general the contributions the Easter shifts securities and also in terms of benefits to the employees. So.
It also affects the security and cleaning that is related with the.
With the personal high by third parties.
Is a suppliers.
It's also affecting in terms of maintaining it we will try to look for cost control in all the years 'twenty 'twenty four but they are some effects that will be impossible to to control.
As you know we've tried to maintain the cost per passenger a very efficient and we will try to maintain that considering that for this year we are expecting.
Kris or at least a vacation policy.
Traffic at four between minus three minus 5%. So it is it is an important point it is complicated and will be worse in case that change in level low in terms of that.
<unk> reduced a journal.
From 48 hours to 40 hours that will represent around 20% to 25% increase in terms of head count for the company. So right now we are facing trouble scepter troubles to hire people in all of our airports in all lines of the a.
Of the head count any of that changed past.
We will have a similar prevalence for additional people.
Okay.
Okay.
Finishing the <unk> east, especially Peru, Peru go a head and think will be impactful for the operation.
The impact for operations.
No we did not.
And in terms of operations for this but we will see.
The significant increase in terms of cost pressures that I visit cost numbers.
The franchise.
As I will say is their silo.
And our labor law in the table of the Congress related with there today would have.
Yeah.
Eight hours labor week in Mexico. The proposal on the Congress is to bring it to 40 hours per week.
If that happens if that low high retention and labor lower asset for sure it will have.
An important impact in the number of the head count.
Our airports that we will need for from continuing our operations, but again.
A is that you've seen some of the different changes that date a.
Congress Manhattan.
In the table.
We know we know have the assurance that this will happen or not.
For sure.
I would say.
Change of the stroke drought cost of the company.
Not just for GAAP, but for all the companies in Mexico is that loans approved.
By the Congress. So we are going to keep an eye on that.
How does the local loop.
But I.
I will say there will not be impact on differentials, but for sure it will be additional pressure for our costs.
The third.
<unk> of personnel.
Yes.
Thank you. Thank you so much guys.
Thank you.
At this time I would be happy to turn the call over to Alejandro Soto.
Thank you we have a question from Carlos and Alex push in there.
Webcast and he's asking two different questions first where does the company to try to you to try to mitigate some of the pressures in salaries. If you can.
Yeah.
Thank you Alejandro.
For sure. We are as you know some of the DNA of gap has being really disciplined on demand most of our staff.
We are working.
To continue given that the best possible services to our passengers.
<unk> taken are bringing into the company additional technology that will give us the opportunity to bring additional.
The efficiencies to the company onto the operations. So one of the D or the key points that we are trying to deploy on this year is that we will not hire additional headcount rich's stature of the new business lines directly operated by us it could be the wholesale.
That will be up for sure our first effort in <unk>.
Some way to freeze the growing.
Headcount for the company.
For sure.
As the passengers.
After all these Brooklyn, Queens MTS program will continue to growth in the future, our India will be to try to freeze all of that head count.
In some way bring additional efficiencies to the company for sure to the margins of the company, but the first idea and the way that we are working right now is to try to bring additional technology to the company to align to avoid any any.
Additional increase on the head count forthcoming Geos.
Thank you Robert and the second question from Alex flourished also if you can share your expectations for the tariff on the Capex for these re negotiation of the MVP.
I mean, we will continue on the same line that we have talking about in the past that we think that the negotiation would be zero to 5%.
For sure there.
A lot of things moving in the mill.
All the pressure on cost of salaries in some way it should be necessary necessary to reflect the progress of the master plan.
But also we really need to have a fully understand what will happen is tariff of the passengers how long.
Yeah.
And so on where the full recovery of the of the market from the <unk> problem.
So.
I will say that we keep our original target of zero to 5% in terms of the increase of the of the maximum tariff for the company.
Yeah.
Thank you Ravi. This is a question that I would highlight that webcast.
Very well will return to a follow up question from Juan Ponce of Bradesco BVI.
Hi, yes. Thank you for the follow up question is just on the 6% discounts in airports just wanted to confirm how long will these discounts will be in place.
For the all the 12 months of these of this year.
Yes.
Understood.
And there are no further questions at this time.
Okay. Thank you very much for your attention before I conclude I want to mention that the gap day 2020 for Abiomed is coming up and will be held captive Guadalajara Airport of April 10, 2024, We hope you can join us for our modeling of management presentation.
And that guided too for all our neuro innovation and expansion is taking place in the airport.
Please contact our Investor relations team for more details. Thank you have a wonderful day.
This does conclude gap's fourth quarter 2023 conference call you may now disconnect and everyone have a great day.
Yeah.
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