Corporación América Airports (CAAP) has disclosed a strong performance in the first quarter of 2024, with key financial metrics reaching new heights. The company's revenues per passenger hit a record $20.6, and adjusted EBITDA climbed by 16% year-on-year to $163 million. Growth in passenger traffic was particularly strong in Argentina, Italy, and Uruguay, although some regions such as Armenia, Ecuador, and Brazil showed weaker traffic. A highlight of the quarter was the 10-year extension of the Punta del Este Airport concession in Uruguay. The company also boasts a solid balance sheet, with a net leverage ratio at a historic low of 1.2 times.
Key Takeaways
- Revenues per passenger reached a new peak of $20.6.
- Adjusted EBITDA increased by 16% year-on-year to $163 million.
- Growth was driven by passenger traffic in Argentina, Italy, and Uruguay.
- Weaker traffic performance in Armenia, Ecuador, and Brazil.
- Cargo volumes and revenues saw an increase.
- A record low net leverage ratio of 1.2 times was maintained.
- 10-year extension secured for Punta del Este Airport concession in Uruguay.
- Negotiations for airport projects in Uruguay and Florence are ongoing.
- Discussions about CAPEX plans in Italy and Armenia, and a potential acquisition in Nigeria, are in progress.
- Annual maintenance CAPEX is projected to be around $30 million.
Company Outlook
- The company is focusing on growth and expansion, with ongoing negotiations for airport projects in Uruguay and Florence.
- Evaluating expansion projects in various regions to maintain growth momentum.
- Ongoing discussions about CAPEX plans in Italy and Armenia, and a potential acquisition in Nigeria.
Bearish Highlights
- Political and macroeconomic challenges are being closely monitored in Argentina.
- Geopolitical dynamics in the Caucasus region pose uncertainties.
- Tariff provisions in Argentina are still under negotiation, with no clear outcome yet.
Bullish Highlights
- The company has a strong balance sheet with a record low net leverage ratio.
- Positive growth in Uruguay and Italy, with a strong commitment to delivering results and creating shareholder value.
- Secured a 10-year extension for the Punta del Este Airport concession.
Misses
- Traffic in Armenia, Ecuador, and Brazil did not perform as well as other regions.
- Uncertainty regarding Argentine operations with respect to tariff increases or contract extension.
Q&A Highlights
- CAAP is in advanced discussions for an airport project, awaiting government action.
- The company is waiting for the government's next steps for a project in Nigeria.
- Annual maintenance CAPEX is expected to be around $30 million on a consolidated basis.
- The Argentine situation remains uncertain, with future forecasts and negotiations with the government pending.
Corporación América Airports has demonstrated resilience and strategic focus in its Q1 2024 performance, balancing growth prospects with cautious navigation of geopolitical and macroeconomic challenges. With ongoing projects and prudent financial management, the company remains committed to its trajectory of expansion while closely engaging with government entities to secure its operational future. Investors and stakeholders can anticipate further developments as CAAP continues to pursue opportunities for portfolio growth and value creation.
InvestingPro Insights
Corporación América Airports (CAAP) has not only shown a robust performance in the recent quarter but also presents an intriguing profile when considering the InvestingPro data and tips. With a market capitalization of $2.8 billion, the company is trading at a low P/E ratio of 7.85, which suggests that the stock could be undervalued relative to its near-term earnings growth potential. This is further substantiated by the company's perfect Piotroski Score of 9, indicating a very healthy financial state.
InvestingPro Tips highlight that CAAP has been profitable over the last twelve months and analysts expect it to remain profitable this year. This aligns with the company's strong adjusted EBITDA growth reported in the first quarter of 2024. Additionally, CAAP has experienced a significant price uptick over the last six months, with a 43.78% price total return, reflecting investor confidence and market recognition of its financial health and growth prospects.
From a valuation standpoint, the adjusted P/E ratio over the last twelve months as of Q4 2023 stands at 24.23, which when coupled with the PEG ratio of 0.29, indicates that the company's earnings growth is being undervalued by the market. This may present an opportunity for investors looking for growth at a reasonable price.
For readers interested in a deeper analysis, there are 9 additional InvestingPro Tips available for CAAP, which can provide further insight into the stock's potential and performance nuances. By using the coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable tips and more detailed metrics.
Corporación América Airports’ strategic initiatives and strong financial indicators suggest a positive outlook, and the InvestingPro insights further underscore the company's potential for growth and profitability. With the additional insights available through InvestingPro, investors can make more informed decisions regarding their interest in CAAP.
Full transcript - Corporacion America Airports (CAAP) Q1 2024:
Operator: Good morning and welcome to the Corporación América Airports First Quarter 2024 Conference Call. A slide presentation accompanies today's webcast and is available in the investor section of the Corporación América Airports website. As a reminder, all participants are in a listen-only mode. 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 Iñaki Esnaola, Head of Investor Relations. Patricio, please go ahead.
Patricio Iñaki Esnaola: Thank you. Good morning everyone and thank you for joining us today. Speaking during today's call will be Martín Eurnekian, our Chief Executive Officer and Jorge Arruda, 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 and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Please note that throughout this call all references to revenues, costs, adjusted EBITDA, our margin we will refer to figures excluding IFRIC12. I will now turn the call over to our CEO, Martín Eurnekian.
Martín Antranik Eurnekian: Thank you Iñaki. Hello everyone and welcome to our first quarter 2024 earnings call. I will spend today’s presentation with some overall highlights on our first quarter’s performance. I will then hand it off to Jorge who will provide additional details in his financial review before we open the call for questions. I am pleased with the good start to the new year. We delivered a positive quarter with values up in the low double-digit against the same quarter last year and meeting passenger traffic growth. Our continued focus on commercial execution is posting good results with revenues per passenger continuing to expand reaching $20.6 this quarter, an all-time high since our IPO in 2018 in normalized environment. As a reminder, there were a few quarters in 2020 where passenger figures were significantly reduced due to the pandemic resulting in artificial [ph] revenues per passenger figures reflecting our consistent focus on execution and healthy travel demand, adjusted EBITDA increased further up 16% year-on-year, reaching $163 million, while the margin expanded 1.5 percentage points as we continue to gain operational leverage. This performance was supported by all geographies with the exception of Ecuador, which incurred in a mandatory onetime contribution to the security of the country. Moreover, our robust balance sheet with a leverage ratio at an all-time low underscores our commitment to ensuring financial strength while providing flexibility to support growth initiatives. Noteworthy, we recently signed an amendment to our Punta del Este concession agreement that includes, among other things, the extension of the term concession agreement for a 10-year period from 2023 to 2043. Please turn to Page 4 for a review of passenger traffic trends. Our airports benefited from a sustained recovery in travel demand, underpinned by higher load factors and the gradual return of flight routes and frequencies across our operations. On a comparable basis, and excluding Natal Airport in which we exited the concession this February, as previously disclosed, passenger traffic increased 4.3% year-on-year. Growth was mainly driven by international passengers which increased in the low teens, while domestic traffic remained flat. Moving on to some color by country, starting with Argentina, our main market which delivered a 5.3% year-on-year increase in passenger traffic. Growth was underpinned by international traffic, up nearly 16%, reflecting increased weekly frequencies from ITA Airways, Aeroméxico, and Emirates. While JetSmart and Paranair announced the launch of new routes. Domestic passenger traffic remained flat in the context of a challenging macro backdrop. Recall that while domestic traffic comprises of 65% of total traffic in the country, over 90% of passenger use fees are generated by international traffic and are fully linked to U.S. dollar. The positive trend continued into April when international passenger traffic grew by 9.3% against the same month last year. Next, Italy, where passenger traffic was up nearly 14% year-on-year. This good performance was mainly driven by a 17% increase in international traffic and mid-single-digit growth in domestic traffic. Both Florence and Pisa Airport delivered solid traffic growth while some domestic destinations have yet to resume a Pisa airport. This positive trend continued into April when passenger traffic grew by 12% year-on-year. Uruguay also posted strong traffic, up 29% benefiting from the addition of new routes and frequencies. This positive trend continued into April, while JetSmart and Sky have both announced new routes starting in May. By contrast traffic was weaker in Armenia, Ecuador and Brazil. Armenia posted relatively flat traffic following the significantly strong performance over the past couple of years. In April, total traffic was down 4% versus the same month of last year. In Ecuador, traffic declined nearly 3%, driven by weaker domestic traffic following the exit of a local airline in October last year, while international traffic was up 1%. Traffic in April was down 6% year-on-year as weaker domestic traffic more than offset a 2% increase in international traffic. Lastly, in Brazil, traffic dynamics remained heavily impacted by financial and aircraft constraints at some local airlines which together with the rising ticket prices affected travel demand resulting in a comparable year-on-year decline of nearly 2% when excluding Natal Airport. This challenging industry environment continued into April. Moving on to Slide 5. Cargo volumes continued to recover and were up in the low single-digits year-on-year. Armenia, Ecuador, and Argentina were the main drivers behind cargo volume growth this quarter, while the other geographies posted slight declines. Cargo revenues in turn increased 6% in the quarter with year-on-year improvements in all countries of operations. I will now hand off the call to Jorge, who will review our financial results. Please, go ahead.
Jorge Arruda: Thank you, Martín, and good day, everyone. Let's start with our top line on Slide 6. Total revenues ex-IFRIC increased 12.4% year-on-year. This was well above the 4.3% passenger traffic growth ex-Natal for the quarter benefiting from consistent positive momentum in both the aeronautical and commercial business. Aeronautical revenues were up 19.4% year-on-year, mainly driven by higher international passenger traffic in Argentina and tariffs increased in Uruguay. Importantly, aeronautical revenue growth remained robust across the board, also supported by strong performance in Italy, Ecuador, and Armenia, which delivered double-digit year-on-year growth in the first quarter of 2024. Commercial revenues increased 5.1% year-on-year benefits from growth in the majority of our geographies and the impact of IAS29 in Argentina. We saw a strong performance in Brazil while in Italy, mainly driven by higher peak cargo and advertisement revenues. This was partially offset by lower duty free revenues in Argentina, impacted by the December 2023 period evaluations and by lower fuel-related revenues in Armenia. Combined, these factors contributed to a 10% increasing revenue passenger to $20.6 this quarter, up from $18.8 in the first quarter of 2023. Turning to Slide 7. Total cost and expenses ex-IFRIC12 increased 8.5% year-on-year, generally following the growth of our business but nonetheless remain below the 12.4% revenue growth. This was mainly explained by higher salaries in Argentina and the local inflation rate was above average currency depreciation, coupled with higher concession fees in line with increased year-on-year activity. This was partially offset by a decrease in fuel costs in Armenia due to lower fuel sales in the quarter. Notably, a restatement to our streamlined cost structure, we experienced material reductions in OPEX per passenger in Argentina, Italy and Uruguay. Moving on to profitability on Slide 8. Our top line growth continued to drive operating leverage which resulted in a solid adjusted EBITDA growth and margin expansions in the quarter. Adjusted EBITDA ex-IFRIC12 totaled $163 million, up 16.4% year-on-year, well above the 4.3% growth in passenger traffic ex-Natal. This contributed to a 1.5 percentage point expansion in adjusted EBITDA margin to 41.7% in the quarter. Moreover, except for Ecuador, we maintained strong momentum across all countries achieving adjusted EBITDA growth that exceeded the increase in traffic and margin expansion. I would like to highlight the exceptional performance of our business in Uruguay, where adjusted EBITDA increased 36%, primarily driven by solid passenger traffic growth combined with higher tariffs, VIP lounges, and duty-free revenues. Turning to Slide 9, supported by our strong cash flow generalization we closed the quarter with a total liquidity position of $545 million, up $87 million when compared to year-end 2023, with most of our [indiscernible] positive cash flow from operating activities. Moving to the debt and maturity profile on Slide 10. Total debt at quarter end was $1.2 billion, while our net debt decreased to $821 million from $964 million at year-end 2023. We remain committed to maintaining a robust balance sheet and healthy debt profile. Sustained growth in adjusted EBITDA and a reduction in debt levels have contributed to further reducing our net leverage ratio bringing it down to 1.2 times from 1.4 times at December 2023. Wrapping up from my side, I also would like to highlight that despite certain headwinds mentioned herein, we delivered growth on revenues, revenues per passenger, EBITDA and EBITDA margin without any real expansion in our cost. I'm pleased with the performance of our portfolio. I will now hand the call back to Martín, who will provide closing remarks and discuss our views for the year.
Martín Antranik Eurnekian: Now to wrap up, please turn to Slide 12. We started the year on a positive footing, delivering a solid performance across key operational and financial metrics. Higher operating leverage contributed to drive sustained EBITDA growth and margin expansion and the record low net leverage ratio. Advancing on our strategic priorities, we met two milestones this quarter. First, we obtained a 10-year extension of the concession agreement of our Punta del Este Airport in Uruguay. Second, we have recently been notified by the ICSID Arbitral Court of the final award pertaining to the arbitration procedure concerning Chinchero International Airport in Peru, demoing the Republic of Peru to pay a gross amount of $91 million to the consortium in which we hold a 50% economic interest. We continue to advance in connection with the negotiations related to the expansion of our airports in Uruguay and Florence. At the same time, we continue to selectively assess expansion projects across different geographic regions to further expand our airport network. We continue to witness positive dynamics in Uruguay and Italy which have been contributing to our overall growth. Despite facing challenges in the Brazilian market, we have successfully managed our business throughout this challenging cycle, posting EBITDA growth. We are closely monitoring the macro and political environment in Argentina, a concession, we have successfully managed for over 25 years as well as the geopolitical dynamics in the Caucasus region. We remain committed to delivering strong results, maintaining a healthy balance sheet, and creating value for our shareholders. Thank you for your continued support and confidence in the company. This ends our prepared remarks. We are ready to take your questions. Operator, please open the lines for questions.
Operator: [Operator Instructions]. And your first question will be from Alejandro Demichelis at Jefferies. Please go ahead.
Alejandro Demichelis: Yes, good morning. Thank you very much for taking my questions. One question and one follow-up. The first question is going to be how you're seeing the evolution of international traffic into Argentina through the end of the year given the discussions you're having with the airlines, given the slow thought that you are kind of being reserved and so on? That's the first one. And then the second is, I think both Martín and Jorge, you mentioned this record low gearing level, how should we think or how are you thinking about balancing growth, investment, those M&A opportunities, and cash return to shareholders, can we think about some dividends coming at some point?
Jorge Arruda: Hi, Alejandro, it is Jorge here. How are you?
Alejandro Demichelis: Well, thank you.
Jorge Arruda: Good. Thank you very much for the question. So we remain positive in connection with international traffic, generally speaking across our portfolio, most notably Argentina, Uruguay, and Italy. I think these are markets that are performing -- that have performed well, and we are positive. In Argentina, we are seeing traffic in several directions. Notably, I think going forward within America, even the open Sky agreements that are being put in place. So yes, remain positive. Regarding your second question, first of all, I think as we have been saying, our main focus for the next couple of years is to grow our portfolio. So our main objective will continue to be to grow our portfolio. We also remind you that as we previously reported, we are in discussions in Italy and Armenian in connection with CAPEX. And those CAPEX will require leverage, not equity from the shareholders in principle. But primarily back at the local level. So yes, so our objectives are as I mentioned.
Alejandro Demichelis: That’s very clear. Thank you very much.
Operator: Thank you. Next question will be from Pedro Maulhardt at Latin Securities. Please go ahead.
Pedro Maulhardt: Hi Martín, hi Jorge, Patricio, and your colleagues. Congratulations on the quarter results. And I want to know when do you expect any adjustments or tariff provisions for Aeropuertos Argentina [ph] needed concession throughout this year and which are the key events for the rest of the year concerning your two main projects nowadays, which are the master plan in Florence, in Armenia and also the potential acquisition of Abuja in Nigeria?
Martín Antranik Eurnekian: Pedro, thank you for your question, Martín here. Regarding tariff provisions in Argentina, as you probably know, we are doing a revision. The control agency has just been filled in terms of the Board that makes the decision that they were just named only a few weeks ago. So we expect the new leadership to come in and start engaging with us in terms of having better visibility on the tariff provision that is due since last year actually. And also on the catch-up that we need to do in terms of the domestic tariff that is denominated in Pesos and needs to have a catch-up. So we are positive on this engagement, but we still are in a very early stage to have a clear idea in terms of timing and results. I will pass on to Jorge for your follow-up question.
Jorge Arruda: Hi Pedro, Jorge here. So we continue in very active discussions with the respective governments in Italy and Armenia in connection with the respective CAPEX plans. In Italy to remind everyone is in connection with a new runway and a new terminal in Florence which is much needed. And the airport is a premium airport in a fantastic location in the heart of Tuscany, etcetera. So we are really looking forward to obtain that approval. And in connection with Armenia following the significant growth we have enjoyed in the past 18, 24 months there is a need of an expansion in many aspects of the airport. And again, we are in advanced discussions with the government with a view to close this as soon as possible. Obviously, it's difficult for us to precise the timing, but we are working around the clock to make that happen as soon as possible.
Martín Antranik Eurnekian: And Martín here, jumping in on your comment on Nigeria. We are still waiting for the government to take the next step towards the signing of the contracts. It's been delayed, and we still don't have a clear indication on timing, but it has not gone the other way either. So we are waiting.
Pedro Maulhardt: Well, thank you very much for your answers.
Operator: [Operator Instructions]. Next is Jay Singh at Citi. Please go ahead.
Stephen Trent: They just called it wrong. Hi, good morning. This is actually Steve Trent. Sorry, having trouble with my phone. Just kind of two questions on my side. The first is I saw you're in the process of negotiating something with, I believe, Armenia, beat some higher CAPEX to come. Assuming that goes through, do you have any color on what should be your annual maintenance CAPEX in the next couple of years? Thank you.
Martín Antranik Eurnekian: Yes, hi. I think we have a problem with the line and it's muted, but give us one second.
Stephen Trent: No problem.
Patricio Iñaki Esnaola: Steve, this is Iñaki, I think we are having some trouble with Jorge line. In terms of maintenance CAPEX, the number that you should kind of have in mind is around $30 million more or less for the company aggregate on a consolidated basis.
Stephen Trent: Okay, great. Thank you very much Iñaki. And just one other quick one for me. I know you have that guaranteed return for your Argentine operations. On a high level going forward to what degree is it possible to consider another extension of AA2000 rather than tariff increases?
Martín Antranik Eurnekian: Hello Steve, Martín here. Thanks for your question. As you know, generically, the point of adjustments of these contracts are CAPEX studies and duration. It's still too early to say whether -- how are these betas are going to kick in and if this is going to turn into a full negotiation or not. Remember that the IRR has to be achieved at the end of the concession. So that also depends on the forecasts looking forward into the end of the concession. So I think it's too early to say whether which levy is going to really pull in order to reach the economic equilibrium of this concession. But as you probably imagine, we are engaging with the government towards and the contra agency towards understanding how can that be achieved and what is the easiest and most direct way that also impacts positively on the industry overall.
Stephen Trent: Okay, appreciate it Martín. Thanks very much.
Operator: Thank you. And at this time, it appears that we have no further questions. I would like to turn the call back over to Martín.
Martín Antranik Eurnekian: Thank you. I wanted to thank everybody for taking the time to be with us today and remind you that our team is available to engage with any of you if you have any further doubts or inquiries on our company. Thank you very much. Enjoy the rest of your day.
Operator: Thank you sir. Ladies and gentlemen, this does indeed conclude today's conference call. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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