Friday, 21 August 2020

Corporacion America Airports reports latest results

Corporación América Airports the largest private-sector airport operator based on the number of airports under management reported its unaudited, consolidated results for the three-month and six-month periods ended June 30, 2020.  Currently, the Company operates 52 airports in 7 countries across Latin America and Europe including Argentina, Brazil, Uruguay, Peru, Ecuador, Armenia and Italy. In 2019, Corporación América Airports served 84.2 million passengers. 

Financial results are expressed in millions of U.S. dollars and are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Commencing 3Q18, the Company began reporting results of its Argentinean subsidiaries applying Hyperinflation Accounting, in accordance to IFRS rule IAS 29 (“IAS 29”), as detailed on Section “Hyperinflation Accounting in Argentina”.

Second Quarter 2020 Highlights

Consolidated revenues of $81.7 million, down 80.2% YoY. Excluding the impact of IFRS rule IAS 29, revenues declined 78.9%, or $312.0 million, to $83.5 million, mainly due to a $170.5 million drop in Aeronautical revenues driven by the impact of the COVID-19 pandemic, and lower construction service revenue in Argentina reflecting lower capex in the period

Key operating metrics decreased YoY impacted by COVID-19:
97.8% in passenger traffic to 0.4 million
56.5% in cargo volume to 45.5 thousand tons
86.2% in aircraft movements to 28.5 thousand

Operating Loss of $76.1 million compared to an operating gain of $76.5 million in 2Q19, primarily due to the impact of COVID-19 pandemic on revenues
Adjusted EBITDA Loss of $33.0 million, compared to Adjusted EBITDA of $118.5 million in 2Q19
Ex-IAS 29, Adjusted EBITDA was a loss of $33.2 million compared to $113.1 million in 2Q19
On May 20, 2020 the Company’s Argentine subsidiary, Aeropuertos Argentina 2000, closed an offer to exchange its $400 million outstanding Senior Secured Notes due 2027, with a total of 86.73% of the original principal amount tendered for exchange.
On May 26, 2020, CAAP’s Uruguayan subsidiary, ACI Airport Sudamérica S.A., closed an offer to exchange its outstanding $200 million Senior Secured Guaranteed Notes due 2032, with a total of 93.6% of the original principal amount tendered for exchange.


Subsequent Events

On August 7, 2020, the Company’s Italian subsidiary announced a pool of financial institutions approved an 85 million Euro loan transaction, with a 6-year term and a 2-year grace period.
On August 20, 2020, CAAP’s Argentine subsidiary successfully issued a $40 million local dollar-linked note with a 2-year maturity.
During August 2020, the regulator in Italy granted a 2-year extension to all airport concessions in the country.
Mr. Martín Eurnekian,  EO of Corporación América Airport said:  “This has been the toughest quarter in our history, and in the travel industry worldwide. Passenger traffic declined to unprecedented low levels, impacted by travel restrictions to contain the outbreak of COVID-19, together with the sharp drop in overall air travel. We have taken immediate action to mitigate the impact of this health crisis and are consistently executing against an extensive action plan aimed at ensuring the wellbeing of employees and passengers, protecting liquidity and strengthening our financial position,” 

“Our swift cost reduction efforts allowed us to lower cash operating costs and expenses by 50% year-on-year this quarter1, surpassing our target. Importantly, through our cost reduction and cash preservation initiatives, we significantly reduced operating cash burn, reaching cash break-even levels in Argentina and Uruguay. We also successfully deferred a total of US$126 million principal and interest payments in connection with notes and loan facilities in Argentina and Uruguay, with very high investor participation. Subsequent to quarter-end we also secured a total of $40 million in new financings in Argentina and entered into an agreement with financial institutions to obtain an 85 million Euro loan in Italy. We are also progressing on our negotiations with regulatory bodies and governments to obtain government support in the context of this unparalleled crisis, and also keeping a medium-term view to request compensations of our concession agreements.

“Over the past months we have been working to develop and establish customized protocols to ensure maximum health standards across the Company. We believe this is crucial in moving towards reactivating the travel industry, sustaining the continuity of operations and regaining consumer confidence to travel by air. Today, all of our airports have been adapted to meet these new requirements and limit the risk of infection. I want to thank the whole company for the effort they are making to navigate this challenging global environment and move ahead in rebuilding travel.

“Looking ahead, we maintain a conservative outlook for the near-term. Visibility remains low with recovery subject to the wide-spread availability of medical treatments or vaccines, progressive lifting of government restrictions, sustained government assistance, regained consumer confidence to travel and overall improved economic conditions,” concluded Mr. Eurnekian.

Operating & Financial Highlights

(In millions of U.S. dollars, unless otherwise noted)

 

2Q20 as

reported

2Q19 as

reported

% Var as

reported

IAS 29

2Q20

2Q20 ex

IAS 29

2Q19 ex

IAS 29

% Var ex

IAS 29

Passenger Traffic (Million Passengers) (1)(2)

0.4

20.0

-97.8%

-

0.4

20.0

-97.8%

Revenue

81.7

412.6

-80.2%

-1.8

83.5

395.5

-78.9%

Aeronautical Revenues

8.0

185.4

-95.7%

-0.2

8.2

178.7

-95.4%

Non-Aeronautical Revenues

73.7

227.2

-67.5%

-1.6

75.3

216.8

-65.3%

Revenue excluding construction service

51.6

312.6

-83.5%

-0.7

52.3

301.0

-82.6%

Operating (Loss) / Income

-76.1

76.5

-199.5%

-18.3

-57.8

87.7

-165.9%

Operating Margin

-93.1%

18.5%

-11,167 bps

-

-69.2%

0.22

-9,138 bps

Net (Loss) / Income Attributable to

Owners of the Parent

-55.4

49.1

-212.9%

-2.8

-52.7

39.9

-232.0%

EPS (US$)

-0.35

0.31

-211.7%

-0.02

-0.33

0.25

-231.6%

Adjusted EBITDA

-33.0

118.5

-127.8%

0.3

-33.2

113.1

-129.4%

Adjusted EBITDA Margin

-40.3%

28.7%

-6,907 bps

-

-39.8%

28.6%

-6,839 bps

Adjusted EBITDA Margin excluding

Construction Service

-64.5%

37.7%

-10,222 bps

-

-64.1%

37.4%

-10,152 bps

Net Debt to LTM EBITDA

5.27x

2.12x

31,528

 

 

 

 

Note: Figures in historical dollars (excluding IAS29) are included for comparison purposes.





Operating & Financial Highlights

(In millions of U.S. dollars, unless otherwise noted)

 

6M20 as

reported

6M19 as

reported

% Var as

reported

IAS 29

6M20

6M20 ex

IAS 29

6M19 ex

IAS 29

% Var ex

IAS 29

Passenger Traffic (Million Passengers) (1)(2)

17.6

40.6

-56.7%

-

17.6

40.6

-56.7%

Revenue

378.9

798.8

-52.6%

-11.3

390.1

771.1

-49.4%

Aeronautical Revenues

159.8

382.7

-58.2%

-4.7

164.6

371.1

-55.7%

Non-Aeronautical Revenues

219.0

416.2

-47.4%

-6.5

225.6

400.0

-43.6%

Revenue excluding construction service

303.7

631.6

-51.9%

-7.8

311.5

612.1

-49.1%

Operating Income

-45.6

159.9

-128.5%

-42.3

-3.3

182.0

-101.8%

Operating Margin

-12.0%

20.0%

-3,205 bps

-

-0.8%

23.6%

-2,444 bps

Net (Loss) / Income Attributable to

Owners of the Parent

-70.5

84.2

-183.8%

-6.2

-64.3

73.6

-187.4%

EPS (US$)

-0.44

0.53

-183.8%

-0.04

-0.40

0.46

-187.4%

Adjusted EBITDA

46.1

244.5

-81.2%

-2.3

48.4

235.0

-79.4%

Adjusted EBITDA Margin

12.2%

30.6%

-1,845 bps

-

12.4%

30.5%

-1,808 bps

Adjusted EBITDA Margin excluding

Construction Service

14.9%

38.4%

-2,350 bps

-

15.2%

38.2%

-2,292 bps

Net Debt to LTM EBITDA

5.27x

2.12x

31,528

-

-

-

-

Note: Figures in historical dollars (excluding IAS29) are included for comparison purposes.

Governmental Flight Restrictions

The recent COVID-19 virus outbreak has generated a disruption in the global economy, and in particular, the aviation industry resulting in drastic reductions in passenger traffic. During March 2020, several governments around the world, including Latin American governments, implemented drastic measures to contain the spread, including the closing of borders and prohibition of travel, domestic lockdowns and quarantine measures. While the governments and transportation authorities across the Company’s countries of operations also issued flight restrictions, the overall situation is volatile, as governments worldwide adjust travel bans based on the evolution of the sanitary situation.

Currently, in Argentina where borders remain closed and commercial operations have not yet resumed, CAAP is only operating cargo, repatriation and some special flights.
In Italy, commercial operations restarted the first week of June with restrictions for travelers coming from certain countries. Currently, 22 airlines are operating, serving 7 domestic and 18 international destinations.
Uruguay restarted air travel in the first week of July, with 3 airlines serving 2 international destinations as well as some special flights, although borders remain closed to non-resident foreigners, with certain exemptions.
In Brazil, all incoming foreigner travelers were banned from entering the country from March 30 to the end of July but commercial operations never stopped. Currently, 4 airlines are operating at Brasilia airport, serving 34 domestic destinations. Although operating at significant lower levels, passenger traffic showed slight increases since June.
In Armenia, while restrictions on the entry of foreigners were lifted, air travel is still banned with the exception of repatriation and special fights.
Commercial operations in Ecuador restarted during the first week of June, although certain requirements apply and activity remains subdued.
Impact of COVID-19 on CAAP’s Passenger Traffic and Cargo activity

The Company’s operations have been severely impacted by the introduction of the flight restrictions mentioned above as well as flight bans in many other countries worldwide. Total passenger traffic in April 2020 declined 98.3% year-on-year, showing a slight recovery in June and July, with declines of 96.9% and 92.9%, respectively. While commercial flights are operating in Italy, Brazil, Ecuador and Uruguay, Argentina and Armenia are still operating under a regime of repatriation and special flights. Cargo activity was also impacted, with cargo volume declining 56.2% year-on-year in April 2020 and 59.4% in May, although June and July showed a very slight improvement declining 53% year-on-year

Implementation of Mitigation Initiatives Focused on Preserving Financial Position

The crisis committee, composed of the Company’s CEO and operating CEOs of each subsidiary, continues to assess operations, with the goal of enhancing the sustainability of the Company’s business. CAAP continued to make progress on its action plan focused on:

Employees and passengers: The Company has further enhanced safety and hygiene protocols across its airports to protect the well-being of passengers and operating personnel. For essential staff working on premises, health gear was provided and additional sanitizing policies established. The Company has also established remote working when possible, and adjusted its safety policies to ensure a successful transition back to office premises for the countries where restrictions were lifted.
Cost controls and cash preservation measures: CAAP hasmade progress on lowering operating costs by:
Reducing personnel expenses in Brazil, Uruguay, Italy and Armenia, including lay-offs, salary reductions, placing operating employees on furlough and/or reduction of working hours. In Argentina, the Company received government assistance to cover a portion of salaries from April to July, representing a monthly relief of $1.0 million dollars. The government could eventually further extend this assistance.
Lowering maintenance and other operating expenses, through the revision of maintenance contracts across all countries of operations.
As a result of these combined measures, the Company achieved a 51% year-on-year reduction in cash operating costs and expenses in the quarter, beating its 43% reduction target. Note this excludes concession fees and construction costs.

The Company also continues to aggressively manage its working capital by negotiating with its suppliers the extension of payment terms and reducing its capex program.

Negotiations with regulatory bodies and government support: The Company advanced on the renegotiation of concession fees with regulatory bodies In Brazil, last March the regulator approved the deferral to December 2020 of the variable and fixed concession fee payments that were due May and July, respectively. In Italy, last March the Company obtained regulatory approval to defer until January 2021 the semi-annual concession fee payment originally due July 2020 and in August, CAAP also obtained a government grant for a total of Eur. 20 million to be deployed over a two-year period. Negotiations with regulators are still ongoing in Ecuador and Uruguay in relation with the payment of the concession fee.

Re-equilibrium of the concession agreements: Concession contracts in Argentina, Armenia and Italy allow for guaranteed returns. In Italy, subsequent to quarter end, the regulator granted a 2-year extension to all airport concessions in the country. The concession contracts in Brazil and Ecuador have force majeure re-equilibrium clauses. In Brazil, the Company filed a formal request in connection with the economic re-equilibrium of the Brasilia and Natal concessions, while in Ecuador it had already filed a request to begin an economic re-equilibrium process of the Guayaquil concession. In Uruguay the Company has started the process to request an economic compensation to mitigate the impact of COVID-19 in the Montevideo concession. The amounts and mechanisms for compensation will be negotiated with authorities. CAAP is in the initial stages of these processes, which require going through administrative regulatory channels.
Financial position and liquidity: As cash preservation is a critical focus, the Company has taken the following measures:

As a result of renegotiations with debt holders and banks, last May the Company deferred or refinanced a total of $126 million dollars in principal and interest payments as follows:
In Argentina, the Company completed an exchange offer for its $400 million international notes due 2027, with 86.73% of the principal amount tendered for exchange, resulting in a deferral of a total of $60 million dollars in principal and interest payments originally due until February 2021. It also deferred a total of $36.6 million dollars in principal due 2020 in connection with its $120 million Credit Facility and a $10 million bilateral loan.
In Uruguay, the Company executed an exchange offer for its $200 million notes due 2032, and obtained 93.60% of the principal amount tendered for exchange. As a result, CAAP has the option to defer up to $20.5 million dollars in principal and interest payments originally due until June 2021. In addition, the Company deferred a total of $8.7 million in principal payments due 2020 under local notes.
Since April, cancelled all non-mandatory capital investments and deferred non-priority projects. In 2Q20, $32.9 million were invested in capital expenditures, which included a carry-over from the first quarter and certain mandatory capex.
Implemented a set of cost control measures to reduce operating expenses and negotiate payment terms with our suppliers to limit additional cash outflows.
Suspended dividends to third parties in the concessions in Italy and Ecuador for an amount of $17 million dollars. Moreover, CAAP currently does not pay corporate dividends and the Company does not have in place a share repurchase program either.
CAAP continues to work closely with the financial community to preserve the Company’s liquidity and financial flexibility in this challenging environment. Subsequent to quarter-end, the Company secured additional financing in Argentina through a $40 million dollar-linked local bond at a 0% interest rate with a 2-year maturity. CAAP also reached an agreement with a pool of financial institutions in Italy, to obtain an 85 million Euro bank loan, with a 6-year term and a 2-year grace period, guaranteed by the Italian public export credit insurance agency.
As a result of the strong cost reduction and cash preservation initiatives, CAAP managed to significantly reduce operating cash burn, reaching cash break-even levels in Argentina and Uruguay.

Restart of operations

As restrictions begin to be gradually lifted and activity resumes, the Company has implemented customized protocols across its airports to ensure maximum health and safety for passengers and employees. A dedicated team worked together with the aviation industry and regulators, to develop and establish customized protocols to ensure the maximum health standards across the Company’s airport network, which were also monitored approved by infectious diseases experts. In the airports where commercial operations resumed, these protocols were approved by the respective regulatory agencies and health authorities. These include sanitization and social distance measures, screening and biocontrol procedures for all passengers travelling through our airports, as well as leveraging digital solutions.

To obtain the full text of this earnings release and the earnings presentation, please click on the following link: http://investors.corporacionamericaairports.com/Results-Center






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