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Corporacion America Airports Announces 4Q19 and FY19 Results; Provides Business Update on Initiatives to Mitigate Impact of COVID-19

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 and twelve-month periods ended December 31, 2019. 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"), as detailed on Section "Hyperinflation Accounting in Argentina".

Fourth Quarter 2019 Highlights

  • Consolidated revenues of $380.1 million, up 2.4% YoY. Excluding the impact of IFRS rule IAS 29, revenues increased 3.2% to $374.9, mainly due to higher construction service revenue in Argentina reflecting higher capex in the period.
  • Performance of key operating metrics:
    • Passenger traffic up 1.8% YoY to 20.9 million
    • Cargo volume decreased 3.9% to 114.0 thousand tons
    • Aircraft movements declined 3.6% to 212.6 thousand
  • Operating Income declined 76.1% YoY, to $12.4 from $51.9 million, mainly impacted by a $42.8 million impairment loss in Brazil. Operating margin contracted to 3.3% from 14.0% in 4Q18
  • Adjusted EBITDA was $50.7 million, down 44.0% YoY, with Adjusted EBITDA margin Ex-IFRIC12 contracting 1,171 bps to 16.9%. Excluding the impact from the a $42.8million impairment in 4Q19 and $3.1 million write-off in 4Q18 recorded in Brazil, Adjusted EBITDA would have remained flat YoY at $93.5 million, with Adjusted EBITDA margin Ex-IFRIC12 expanding 180 bps to 31.4%.
  • Ex-IAS 29, Adjusted EBITDA declined 44.2% YoY, to $48.6 million, and Adjusted EBITDA margin Ex-IFRIC12 contracted 1,155 bps to 16.6%. Excluding, the impact from the above mentioned impairment loss and write-off recorded in Brazil, Adjusted EBITDA ex-IAS 29 would have increased 1.4% YoY to $91.4 million, with Adjusted EBITDA margin Ex-IFRIC12 up 224 bps to 31.3%.

Fiscal Year 2019 Highlights

  • Consolidated revenues were up 9.3% YoY, or $132.5 million, to $1,558.6 million. Ex-IAS 29, revenues increased 3.0% YoY due to higher income from operations in Argentina, Uruguay, Armenia and Ecuador, partially offset by declines in Italy and Brazil.
  • Performance of key operating metrics:
    • Passenger traffic up 2.8% YoY to 84.2 million
    • Cargo volume increased 2.9% to 422.1 thousand tons
    • Aircraft movements declined 2.6% to 857.9 thousand
  • Operating Income declined 25.2% YoY, to $223.6 from $299.0 million, mainly impacted by a $23.0 million bad debt charge in 3Q19 in Argentina and an impairment loss of $42.8 million during 4Q19 in Brazil. The operating margin contracted to 14.3% from 21.0% in 2018
  • Adjusted EBITDA was $380.7 million, down 14.6% YoY, with Adjusted EBITDA margin Ex-IFRIC12 contracting 483 bps to 31.3%.
  • Ex-IAS 29, Adjusted EBITDA declined 19.9% YoY, to $385.7 million, and Adjusted EBITDA margin Ex-IFRIC12 contracted 527 bps to 31.4%. On a comparable basis, excluding the one-time impacts in 4Q19 and 4Q18 in Brazil and the $23.1 million bad debt charge recorded in Argentina in 3Q19, Adjusted EBITDA would have been $447.1 million and Adjusted EBITDA margin ex-IFRIC would have remained relatively flat at 36.6%.

CEO Message

"We are undergoing an unprecedented health crisis that has rapidly expanded worldwide disrupting the global economy, and in particular the aviation industry, resulting in drastic reductions in passenger traffic. In these trying times the first priority and utmost concern of our Company are the health and safety of our employees and customers," noted Mr. Martín Eurnekian, CEO of Corporación América Airports.

"The coronavirus outbreak comes at a time when adverse macro conditions in Argentina were already dampening travel demand and FX depreciation impacted performance in Brazil. This resulted in revenue declines of 6% ex-IFRIC12 for the fourth quarter and nearly 7% for the full year. Despite the impact in our topline, we delivered comparable adjusted EBITDA margin expansion of over 220 basis points in the quarter. We ended the year with a comparable adjusted EBITDA(1) of nearly 450 million dollars and an ex-IFRIC 12 margin of 37%.

Travel bans and restrictions introduced over the last month to reduce the spread of the COVID-19 pandemic across our countries of operations are taking a heavy toll. We began to see the impact of the virus on traffic flow late February in Italy and around the second week of March at our LatAm airports.

Reacting rapidly in the face of this disruption, we formed a crisis committee composed of myself and the operating CEOs of each of our subsidiaries and we are implementing a strategy focused on four key fronts: protecting our employees and passengers; introducing cost controls and cash preservation measures; undertaking near-term negotiations with regulatory bodies and seeking government support; as well as beginning the initial stages of renegotiating the economic re-equilibrium of our concessions.

While the path to recovery remains uncertain and is dependent on several factors including the duration of the pandemic, government assistance and the resilience of the global economies, we are working on all fronts to reinforce our business.

We have built a strong network of international and domestic airports and have made significant investments over the past years to further modernize our airport infrastructure that will play an important role in reigniting economic growth once the current travel restrictions begin to be lifted," concluded Mr. Eurnekian.

1 Comparable adjusted EBITDA in 2019 excludes a 43 million dollar non-cash impairment loss in Brazil, a bad debt charge of 23 million dollars in Argentina, as well as certain one-time items in 2018 totaling 1 million dollars.

Operating & Financial Highlights

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

 

4Q19 as
reported

4Q18 as
reported

% Var as
reported

IAS 29
4Q19

4Q19 ex IAS
29

4Q18 ex IAS
29

% Var ex IAS
29

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

20.9

20.5

1.8%

 

20.9

20.5

1.8%

Revenue

380.1

371.0

2.4%

5.1

374.9

363.3

3.2%

Aeronautical Revenues

173.7

181.2

-4.2%

2.9

170.8

178.6

-4.4%

Non-Aeronautical Revenues

206.4

189.8

8.8%

2.3

204.1

184.8

10.5%

Revenue excluding construction service

295.4

313.3

-5.7%

5.8

289.6

307.2

-5.7%

Operating Income

12.4

51.9

-76.1%

-14.0

26.4

65.9

-59.9%

Operating Margin

3.3%

14.0%

-1,072bps

-

7.0%

18.1%

-1,109bps

Net (Loss) / Income Attributable to Owners of the Parent

-37.3

40.2

-

11.1

-48.5

11.5

-

EPS (US$)

-0.23

0.25

-

0.07

-0.30

0.07

-

Adjusted EBITDA

50.7

90.4

-44.0%

2.1

48.6

87.0

-44.2%

Adjusted EBITDA Margin

13.3%

24.4%

-1,105bps

-

13.0%

24.0%

-1,100bps

Adjusted EBITDA Margin excluding Construction Service

16.9%

28.6%

-1,171bps

-

16.6%

28.1%

-1,155bps

Net Debt to LTM EBITDA

2.66x

1.98x

6,821

-

-

-

-

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

(1) Preliminary data on 547 flights in October, 423 in November, and 280 in December 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 and transit retroactively since June 2018 to return to the count methodology utilized until May 2018. Notwithstanding, total traffic figures remain unchanged.

(2) Note that preliminary passenger traffic figures for 2018 and 2019 for Ezeiza Airport, in Argentina, 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.

Operating & Financial Highlights FY 2019

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

 

2019 as
reported

2018 as
reported

% Var as
reported

IAS 29
2019

2019 ex
IAS 29

2018 ex
IAS 29

% Var ex IAS
29

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

84.2

81.8

2.8%

-

84.2

81.8

2.8%

Revenue

1,558.6

1,426.1

9.3%

-25.3

1,583.9

1,538.3

3.0%

Aeronautical Revenues

724.0

716.2

1.1%

-10.1

734.1

764.6

-4.0%

Non-Aeronautical Revenues

834.6

710.0

17.6%

-15.2

849.9

773.8

9.8%

Revenue excluding construction service

1,208.4

1,227.7

-1.6%

-14.5

1,222.9

1,309.3

-6.6%

Operating Income

223.6

299.0

-25.2%

-61.4

285.0

379.0

-24.8%

Operating Margin

14.3%

21.0%

-662bps

-

18.0%

24.6%

-661bps

Net (Loss) / Income Attributable to Owners of the Parent

9.1

7.1

27.7%

6.0

3.1

-11.6

-

EPS (US$)

0.06

0.04

61.6%

0.04

0.02

-0.07

-

Adjusted EBITDA

380.7

445.9

-14.6%

-5.0

385.7

481.6

-19.9%

Adjusted EBITDA Margin

24.4%

31.3%

-684bps

-

24.4%

31.3%

-695bps

Adjusted EBITDA Margin excluding Construction Service

31.3%

36.1%

-483bps

-

31.4%

36.6%

-527bps

Net Debt to LTM EBITDA

2.66x

1.98x

6,821

-

-

-

-

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

(1) Preliminary data on 750 flights in August, 873 flights in September, 547 in October, 423 in November, and 280 in December 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 and transit retroactively since June 2018 to return to the count methodology utilized until May 2018. Notwithstanding, total traffic figures remain unchanged.

(2) See Footnote 2 in previous table.

Update on Action Plan to Mitigate Impact of COVID-19

COVID-19 Impact

At December 31, 2019, a limited number of cases of an unknown virus in China had been reported to the World Health Organization. In January and February 2020, the COVID-19 virus spread to other parts of the world, mainly certain countries in Europe such as France, Germany and Italy. 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. The current health crisis is having and will likely continue to have, a negative impact on passenger traffic levels and air traffic operations. The full extent to which the COVID-19 will impact CAAP’s business, results of operations, financial position and liquidity is unknown.

Governmental Flight Restrictions

Given the scale of the virus spread, in March 2020, several governments around the world, including Latin American governments, rapidly implemented drastic measures to contain the spread, including but not limited the closing of borders and prohibition of travel to and from certain parts of the world for a time period, generally between 30 days and 45 days. Specifically, the governments and transportation authorities in the majority of the Company’s countries of operations have issued flight restrictions.

Depending on how the situation evolves, governments may impose more restrictive measures, including the extension of the travel bans for longer periods.

Impact of COVID-19 On CAAP’s 1Q20 Passenger Traffic

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. Passenger traffic in our Italian operations started to decline late February, while our airports in Latin America were impacted starting the second week of March. According to preliminary operational figures, CAAP’s passenger traffic was down by approximately 12% YoY in the first week of March, declined further to around 18% in the second week, deteriorating to a drop of nearly 60% in the third week and over 90% in the fourth week of March. For the whole month, preliminary traffic is estimated to have declined approximately 45% YoY. Note that these preliminary figures may be subject to adjustments.

Implementation of Mitigation Initiatives Focused on Preserving Financial Position

A crisis committee was set in place, composed of the Company’s CEO and operating CEOs of each subsidiary to assess operations, focused on enhancing the sustainability of the Company’s business. In addition, CAAP has developed a four-pronged strategy and implemented a number of actions aiming to mitigate the negative impact of the COVID-19 virus, as follows:

  • Employees and passengers: The Company has further enhanced safety and hygiene protocols across our 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.
  • Cost controls and cash preservation measures: CAAP has introduced reductions in operating costs by:
    • Reducing personnel expenses including salary reductions, suspension of salary increases and freezing new hiring, mandatory use of pending vacations and/or advancing vacations to employees when possible, placing operating employees on furlough in certain geographies. In Italy and Uruguay, employees under furlough are receiving government unemployment subsidies.
    • Reducing maintenance and other operating expenses while maintaining the quality and safety standards, required to support the minimum level 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. This target reduction is based on current Company estimates for 2Q20 and actual 2Q29 figures ex-IAS29. In relation with concession fees, all of the Company’s operations are under a variable concession fee regime, with the exception of our Brazilian concessions, which are also subject to a fixed concession fee.

The Company is also aggressively managing 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 fees payments to align to the current environment. In Brazil, CAAP has recently obtained the approval to defer until December the variable and fixed annual concession fee payments originally due May and July, respectively. Negotiations with regulators have also began in Argentina, Italy and Uruguay. The Company has also requested deferral of tax payments our main markets. In Brazil, we obtained the deferral of PIS/COFINS taxes. Additionally, in Argentina, we are negotiating the collection of $40 million of certain past due receivables from a national carrier and a $15 million recovery of VAT Credits in connection with capital expenditures. In Italy, CAAP is in discussions to obtain a grant for an amount of approximately Euro 20 million for our Florence and Pisa airports.

Re-equilibrium of the concession agreements: Under the concession contracts that have guaranteed returns, Argentina and Armenia operate under single-till schemes which entail the achievement of a certain return over the life of the concession. Our two airports in Italy operate under a dual-till model, which allows for re-equilibrium in aeronautical activities. 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 recently filed a request to begin an economic re-equilibrium process of the Guayaquil concession. The amounts and mechanisms for compensation will be negotiated with authorities and may include a reduction in the concession fee amount and/or mandatory capex, increasing tariffs, extending the tenor of the concession or a combination thereof. 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 is taking the following measures:

  • Cancelled all non-mandatory capital investments and deferred non-priority projects. Approximately 69 million dollars were already invested in 1Q20, 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.
  • Obtained a 6-month deferral of principal and interest payments until October of all our debt in Brazil, that was originally due until September and obtained additional funding in the first quarter for an amount of $40 million. 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 the current scenario, there is significant uncertainty regarding the recovery of this crisis, which will be dependent on a number of factors including the duration of the pandemic, government assistance and the resilience of the global economies. CAAP believes its airport network will play an important role in reigniting economic growth once the current travel restrictions begin to be lifted. In the interim, CAAP is focused on the health and security of our employees and passengers while working to ensure the sustainability of the Company.

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

4Q19 EARNINGS CONFERENCE CALL

When:

9:00 a.m. Eastern time, April 7, 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/caap200403.html

Replay:

Participants can access the replay through April 14, 2020 by dialing:

 

1-877-344-7529 (U.S. domestic) and 1-412-317-0088 (international). Replay ID: 10141087.

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 24 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, 2018 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/20200406005877/en/

Contacts

Investor Relations Contact
Gimena Albanesi
Investor Relations Manager
Email: gimena.albanesi@caairports.com
Phone: +5411 4852-6411