Progress on plan to mitigate impact of
Covid-19, including cost reductions and debt refinancing to
preserve liquidity
Corporación América Airports S.A. (NYSE: CAAP), (“CAAP”
or the “Company”) the largest private sector airport operator based
on the number of airports under management reported today its
unaudited, consolidated results for the three-month periods ended
March 31, 2020. 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 (“IASB”).
Commencing 3Q18, the Company began reporting results of its
Argentinean subsidiaries applying Hyperinflation Accounting, in
accordance to IFRS rule IAS 29 (“IAS 29”).
First Quarter 2020 Highlights
- Consolidated revenues of $302.8 million, down 16.0% YoY.
Excluding the impact of IFRS rule IAS 29, revenues declined 18.3%,
or $68.6 million, to $306.6 million, mainly due to a $35.9 million
drop on Aeronautical revenues driven by the impact of the COVID-19
pandemic, and lower construction service revenue in Argentina
reflecting lower capex in the period.
- Performance of key operating metrics:
- Passenger traffic down 16.8% YoY to 17.1 million
- Cargo volume decreased 20.6% to 83.3 thousand tons
- Aircraft movements declined 16.0% to 178.6 thousand
- Operating Income declined 59.3% to $31.3 million from $76.8
million in 1Q19, primarily due to the impact of the Covid-19
pandemic on revenues and a $4.5 million impairment recorded in
Brazil in 1Q20
- Adjusted EBITDA was $80.9 million, down 30.8% YoY, with
Adjusted EBITDA margin Ex-IFRIC12 contracting 734 bps to 31.3%.
Excluding the impact from the above-mentioned $4.5 million
impairment, Adjusted EBITDA would have been $85.4 million, down 27%
YoY, with Adjusted EBITDA margin Ex-IFRIC 12 contracting 424
bps.
- Ex-IAS 29, Adjusted EBITDA declined 33.1% YoY, to $81.6
million, and Adjusted EBITDA margin Ex-IFRIC12 contracted 773 bps
to 31.3%. Excluding the impact from the above mentioned impairment
loss recorded in Brazil, Adjusted EBITDA ex-IAS 29 would have
declined 29.4% YoY to $86.1 million, with Adjusted EBITDA margin
Ex-IFRIC 12 down 599 bps to 33.0%, from 39.0% in the same period
last year.
- Subsequently to the end of the quarter, the Company’s Argentine
subsidiary Aeropuertos Argentina 2000 launched and executed an
offer to exchange its outstanding Senior Secured Notes due 2027,
with a total of 86.73% of the original principal amount tendered
for exchange. Settlement date was May 20, 2020.
- Subsequently to the end of the quarter, CAAP’s subsidiary ACI
Airport Sudamérica S.A. launched an offer to exchange its
outstanding Senior Secured Guaranteed Notes due 2032. Approximately
92.15% of the total original principal amount was tendered for
exchange before the Early Participation Deadline of May 14,
2020.
CEO Message
“We are navigating an unprecedented crisis that has severely
disrupted the economy worldwide and specifically the travel
industry, which has resulted in significant declines in passenger
traffic starting mid-March, 2020 when our operations began to see
the impact of government shutdown measures," noted Mr. Martín
Eurnekian, CEO of Corporación América Airports.
“Over the past months we have rapidly introduced initiatives to
mitigate the impact of COVID-19 and strengthen our financial
position. On the balance sheet front, through a series of
transactions in Argentina and Uruguay, in May we successfully
refinanced nearly 50% of our principal and interest payments due
over the next 12 months, extending maturities and enhancing
flexibility. We have also made significant progress on protecting
our liquidity by reducing operating costs and expenses, deferring
concession fee payments and limiting capex, while we continue to
work on obtaining additional funding. In terms of cost controls, as
most of these initiatives were implemented late March and early
April, the benefit is anticipated to flow starting second quarter
results. Simultaneously, we have begun negotiations with regulators
to review the economic re-equilibrium of concession agreements.
“Looking ahead, we operate a modern network of domestic and
international airports that will play an important role in
reigniting economic growth. The path to recovery, however, remains
uncertain and is contingent on a number of factors including the
successful development of medical treatments or vaccines,
government assistance, consumer confidence to travel and the
evolution of the global economies. Overall, the situation is fluid
with some countries starting to consider lifting restrictions on
domestic travel and/or opening borders for regional flights in the
near term, as well as lifting quarantines. This could indicate we
are starting to see initial signs of a gradual recovery process
shaping up. With this in mind, we have started to build our
recovery plan, preparing for a new world and developing the new
safety and health standards that will be critical to reactivate the
travel industry in the near future.
“In conclusion, I wish to thank our teams and partners worldwide
for their hard work during these difficult times, as we move
together in overcoming this global challenge and rebuild travel,”
concluded Mr. Eurnekian.
Operating & Financial Highlights
(In millions of U.S. dollars, unless otherwise noted)
1Q20 as reported
1Q19 as reported
% Var as reported
IAS 29 1Q20
1Q20 ex IAS 29
1Q19 ex IAS 29
% Var ex IAS 29
Passenger Traffic (Million
Passengers) (1)(2)
17.1
20.6
-16.8%
-
17.1
20.6
-16.8%
Revenue
302.8
360.6
-16.0%
-3.8
306.6
375.2
-18.3%
Aeronautical Revenues
154.7
185.0
-16.4%
-1.7
156.4
192.3
-18.7%
Non-Aeronautical Revenues
148.2
175.6
-15.6%
-2.1
150.3
183.0
-17.9%
Revenue excluding construction
service
256.6
299.8
-14.4%
-2.6
259.2
310.9
-16.6%
Operating Income
31.3
76.8
-59.3%
-23.2
54.5
94.4
-37.5%
Operating Margin
10.3%
21.3%
-1,099 bps
-
19.2%
25.2%
-593 bps
Net (Loss) / Income Attributable to
Owners of the Parent
-15.1
30.4
n/a
-3.3
-11.7
34.8
n/a
EPS (US$)
-0.09
0.19
n/a
-0.02
-0.04
0.22
n/a
Adjusted EBITDA
80.9
116.9
-30.8%
-0.7
81.6
122.0
-33.1%
Adjusted EBITDA Margin
26.7%
32.4%
-572 bps
-
26.6%
32.5%
-591 bps
Adjusted EBITDA Margin excluding
Construction Service
31.3%
38.7%
-734 bps
-
31.3%
39.0%
-773 bps
Net Debt to LTM EBITDA
2.87x
2.07x
7,972
-
-
-
-
Note: Figures in historical dollars (excluding IAS29) are
included for comparison purposes.
1)
Note that preliminary passenger traffic figures for Ezeiza
Airport, in Argentina, for 2019 as well as January 2020 were
adjusted to include additional inbound passengers not accounted for
in the initial count, for an average of approximately 5% of total
passenger traffic at Ezeiza Airport and 1% of total traffic at
CAAP, during that period. Importantly, inbound traffic does not
affect revenues, as tariffs are applicable on departure
passengers.
2)
Preliminary data on 1,256 in January and 195 in February 2020 at
Brasilia Airport, due to delays in the submission of information by
third parties. Moreover, starting November 2019 the Company has
reclassified its passenger traffic figures for Brasilia Airport
between international, domestic and transit retroactively since
June 2018 to return to the count methodology utilized until May
2018. Notwithstanding, total traffic figures remain unchanged.
Update on Action Plan to Mitigate
Impact of COVID-19
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. The governments and
transportation authorities across the Company’s countries of
operations issued flight restrictions. Currently, in Argentina,
Ecuador and Peru, borders are still closed with bans on domestic
and international flights, with airports only operating cargo and
repatriation flights. Similarly, in Uruguay, borders are closed to
commercial passenger traffic. In Argentina, the regulator recently
issued a resolution prohibiting airlines to sell air tickets for
travel before September 1, 2020. In the rest of CAAP’s countries or
operations, while borders remain open, the Company is only
operating cargo and domestic flights reflecting the global
disruption in travel, except for Armenia, where CAAP is also
operating international flights.
Impact of COVID-19 On CAAP’s April and May 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. This resulted in a
98.3% decline in passenger traffic in April 2020 and a similar
decline in the first two weeks of May. While cargo activity was
also impacted, cargo volume in April 2020 declined 56.2%
year-on-year, as transportation of medical and essential items
continue to support the continuity of supply chains. This was
driven by all countries except Uruguay which benefited from some
extraordinary cargo movements that month.
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 is advancing on its four-pronged strategy with a
number of actions aiming to mitigate the negative impact of the
COVID-19 virus implemented:
- 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 is adjusting its
safety policies to ensure a successful transition back to office
premises when restrictions are lifted.
- Cost controls and cash preservation measures: CAAP has
made 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 Italy,
Uruguay and Armenia, employees under furlough are receiving
government unemployment subsidies. In Argentina, the Company is
receiving government assistance to cover a portion of April
salaries, representing a monthly relief of $1.2 million dollars and
has applied to receive the relief in May, pending government
approval. The government could eventually further extend this
assistance.
- Reducing 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 expects total cash operating costs and expenses excluding
concession fees to decrease by approximately 43% under this crisis
scenario, based on current Company’s estimates for 2Q20 and actual
2Q29 figures ex-IAS29. All of the Company’s operations are under a
variable concession fee regime, with the exception of the Brazilian
concessions, which are subject to a combination of variable and
fixed concession fee structure.
The Company continues to also 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 has started discussions with regulatory
agencies to renegotiate concession fee payments to align to the
current environment. In Brazil, approval to defer to December 2020
the variable and fixed concession fee payments that were due May
and July, respectively, was already obtained. In Italy, the Company
obtained regulatory approval to defer until January 2021 the
semi-annual concession fee payment originally due July 2020. The
calculation of the amount will be made based on the actual number
of passengers in 2020. Negotiations with regulators have also began
in Ecuador and Uruguay.
- Re-equilibrium of the concession agreements: Concession
contracts in Argentina, Armenia and Italy allow for guaranteed
returns. The concession contracts in Brazil and Ecuador have force
majeure re-equilibrium clauses. In Brazil, the Company has
initiated conversations to begin the process of requesting economic
re-equilibrium, while in Ecuador it has already filed a request to
begin an economic re-equilibrium process of the Guayaquil
concession. In Uruguay the Company expects to initiate the process
to request the economic re-equilibrium of the Montevideo
concession. The amounts and mechanisms for compensation will be
negotiated with authorities. CAAP is in the initial stages of this
process, which requires 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, the
Company has deferred or refinanced a total of $126 million dollars
in principal and interest payments. Debt maturities originally due
over the next 12 months declined to approximately $149.0 million
from $278 million as of March 31, 2020, 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 over the next 12 months. 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 launched an exchange offer for its $200
million notes due 2032, and obtained 92.15% of the principal amount
tendered for exchange at the early participation deadline. As a
result, CAAP has the option to defer up to $20.5 million dollars in
principal and interest payments originally due over the next 18
months. In addition, the Company deferred a total of $8.7 million
in principal payments due 2020 under local notes.
- In Brazil, last March the Company obtained a 6-month deferral
of principal and interest payments until October of all of its debt
in Brazil, originally due until September.
- Cancelled all non-mandatory capital investments and deferred
non-priority projects. In 1Q20, $52.0 million were invested in
capital expenditures, including expansion works along with most of
the minimum maintenance capex planned for the year.
- 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
particularly in its main markets, to preserve the Company’s
liquidity and financial flexibility in this challenging
environment. In 1Q20, the Company obtained additional funding for
an amount of $37 million dollars.
Preparation to restart operations
The path to recovery still remains uncertain and is dependent on
a number of factors including the successful development of medical
treatments or vaccines, government assistance, consumer confidence
to travel and the evolution of the global economies.
As the situation evolves and restrictions begin to be gradually
lifted, the Company has started the development of customized
protocols across its airports of operations to ensure maximum
health, safety and comfort for passengers and employees when
activity resumes. A dedicated team is working together with the
aviation industry and regulators to set and redefine new safety and
health protocols, also monitored and will be approved by infectious
diseases experts.
The Company is adapting its airports to the new environment, by
implementing measures to minimize the risk of infection of
passengers and employees, including sanitization and social
distance measures, screening and biosecurity control procedures,
and the implementation of digital solutions to reduce contacts with
airports equipment while limiting the crowds.
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
1Q20 EARNINGS CONFERENCE CALL
When:
9:00 a.m. Eastern time, May 22, 2020
Who:
Mr. Martín Eurnekian, Chief Executive
Officer
Mr. Raúl Francos, Chief Financial
Officer
Ms. Gimena Albanesi, Investor Relations
Manager
Dial-in:
1-888-347-6492 (U.S. domestic);
1-412-317-5258 (international)
Webcast:
https://services.choruscall.com/links/caap200522.html
Replay:
Participants can access the replay through
May 29, 2020 by dialing:
1-877-344-7529 (U.S. domestic) and
1-412-317-0088 (international). Replay ID: 10144435.
Use of Non-IFRS Financial Measures
This announcement includes certain references to Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted EBITDA excluding
Construction Service and Adjusted EBITDA Margin excluding
Construction service, as well as Net Debt:
Adjusted EBITDA is defined as income for the period
before financial income, financial loss, income tax expense,
depreciation and amortization.
Adjusted EBITDA Margin is calculated by dividing Adjusted
EBITDA by total revenues.
Adjusted EBITDA excluding Construction Service (“Adjusted
EBITDA ex-IFRIC”) is defined as income for the period before
construction services revenue and cost, financial income, financial
loss, income tax expense, depreciation and amortization.
Adjusted EBITDA Margin excluding Construction Service
(“Adjusted EBITDA Margin ex-IFRIC12”) excludes the effect of
IFRIC 12 with respect to the construction or improvements to
concessioned assets and is calculated by dividing Adjusted EBITDA
excluding Construction Service revenue and cost, by total revenues
less Construction service revenue.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDA
excluding Construction Service and Adjusted EBITDA Margin excluding
Construction Service are not measures recognized under IFRS and
should not be considered as an alternative to, or more meaningful
than, consolidated net income for the year as determined in
accordance with IFRS or as indicators of our operating performance
from continuing operations. Accordingly, readers are cautioned not
to place undue reliance on this information and should note that
these measures as calculated by the Company, may differ materially
from similarly titled measures reported by other companies. We
believe that the presentation of Adjusted EBITDA and Adjusted
EBITDA excluding Construction Service enhances an investor’s
understanding of our performance and are useful for investors to
assess our operating performance by excluding certain items that we
believe are not representative of our core business. In addition,
Adjusted EBITDA and Adjusted EBITDA excluding Construction Service
are useful because they allow us to more effectively evaluate our
operating performance and compare the results of our operations
from period to period without regard to our financing methods,
capital structure or income taxes and construction services (when
applicable).
Net debt is calculated by deducting “Cash and cash
equivalents” from total financial debt.
Figures ex-IAS 29 result from dividing nominal Argentine
pesos for the Argentine Segment, by the average foreign exchange
rate of the Argentine Peso against the US Dollar in the period.
Percentage variations ex-IAS 29 figures compare results as
presented in the prior year quarter before IAS 29 came into effect,
against ex-IAS 29 results for this quarter as described above. For
comparison purposes the impact of adopting IAS 29 in Aeropuertos
Argentina 2000, the Company’s largest subsidiary in Argentina, is
presented separately in each of the applicable sections of this
earnings release, in a column denominated “IAS 29”. The impact from
“Hyperinflation Accounting in Argentina” is described in more
detail page 23 of this report.
Definitions and Concepts
Commercial Revenues: CAAP derives commercial revenue
principally from fees resulting from warehouse usage (which
includes cargo storage, stowage and warehouse services and related
international cargo services), services and retail stores, duty
free shops, car parking facilities, catering, hangar services, food
and beverage services, retail stores, including royalties collected
from retailers’ revenue, and rent of space, advertising, fuel,
airport counters, VIP lounges and fees collected from other
miscellaneous sources, such as telecommunications, car rentals and
passenger services.
Construction Service revenue and cost: Investments
related to improvements and upgrades to be performed in connection
with concession agreements are treated under the intangible asset
model established by IFRIC 12. As a result, all expenditures
associated with investments required by the concession agreements
are treated as revenue generating activities given that they
ultimately provide future benefits, and subsequent improvements and
upgrades made to the concession are recognized as intangible assets
based on the principles of IFRIC 12. The revenue and expense are
recognized as profit or loss when the expenditures are performed.
The cost for such additions and improvements to concession assets
is based on actual costs incurred by CAAP in the execution of the
additions or improvements, considering the investment requirements
in the concession agreements. Through bidding processes, the
Company contracts third parties to carry out such construction or
improvement services. The amount of revenues for these services is
equal to the amount of costs incurred plus a reasonable margin,
which is estimated at an average of 3.0% to 5.0%.
About Corporación América Airports
Corporación América Airports acquires, develops and operates
airport concessions. The Company is the largest private airport
operator in the world based on the number of airports and the tenth
largest based on passenger traffic. Currently, the Company operates
52 airports in 7 countries across Latin America and Europe
(Argentina, Brazil, Uruguay, Peru, Ecuador, Armenia and Italy). In
2019, Corporación América Airports served 84.2 million passengers.
The Company is listed on the New York Stock Exchange where it
trades under the ticker “CAAP”. For more information, visit
http://investors.corporacionamericaairports.com
Forward Looking Statements
Statements relating to our future plans, projections, events or
prospects are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include all statements that are not historical facts and
can be identified by terms such as “believes,” “continue,” “could,”
“potential,” “remain,” “will,” “would” or similar expressions and
the negatives of those terms. Forward-looking statements involve
known and unknown risks, uncertainties and other factors that may
cause our actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Many factors could cause our actual activities or
results to differ materially from the activities and results
anticipated in forward-looking statements, including, but not
limited to: the COVID-19 impact, delays or unexpected casualties
related to construction under our investment plan and master plans,
our ability to generate or obtain the requisite capital to fully
develop and operate our airports, general economic, political,
demographic and business conditions in the geographic markets we
serve, decreases in passenger traffic, changes in the fees we may
charge under our concession agreements, inflation, depreciation and
devaluation of the AR$, EUR, BRL, UYU, AMD or the PEN against the
U.S. dollar, the early termination, revocation or failure to renew
or extend any of our concession agreements, the right of the
Argentine Government to buy out the AA2000 Concession Agreement,
changes in our investment commitments or our ability to meet our
obligations thereunder, existing and future governmental
regulations, natural disaster-related losses which may not be fully
insurable, terrorism in the international markets we serve,
epidemics, pandemics and other public health crises and changes in
interest rates or foreign exchange rates. The Company encourages
you to review the ‘Cautionary Statement’ and the ‘Risk Factor’
sections of our annual report on Form 20-F for the year ended
December 31, 2019 and any of CAAP’s other applicable filings with
the Securities and Exchange Commission for additional information
concerning factors that could cause those differences.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200521005773/en/
Investor Relations Contact Gimena Albanesi Investor
Relations Manager Email: gimena.albanesi@caairports.com Phone:
+5411 4852-6411
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