Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC) Q4 2023 Earnings Call Transcript
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC) Q4 2023 Earnings Call Transcript February 28, 2024
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to GAP's Fourth Quarter 2023 Conference Call. Thank you for joining us. Please note, that all lines have been placed on mute to prevent any background noise during the presentation. At this time, I am pleased to turn the call over to GAP, so that the presentation may begin. Please go ahead.
Maria Barona: Thank you, and welcome to the [Technical Difficulty] Call. I'm pleased to have from the company today, Mr. Raul Revuelta, Chief Executive Officer; and Mr. Saul Villareal, Chief Financial Officer. Any forward-looking statements made during this conference call do not account for future economic circumstances, industry conditions, company performance or financial results. Please keep in mind that any statements or assumptions made are based on current factors and information that could materially change causing results to differ from current expectations. For a complete note on forward-looking statements, please refer to the quarterly report issued earlier this week. Thank you all for your attention. Mr. Revuelta, please begin with your opening remarks.
Raul Revuelta: Hello, everyone, and thank you for your attendance today. As we reflect on the year 2023, we reached the highest EBITDA level in the heat of the company even though we face several challenges. In the end of the overcame den, the year started at a varying currency rate as we reached historic levels in terms of passenger traffic numbers, revenues and the expansion of airport areas. However, the positive target was offset by germane macroeconomic factors. One was the exchange rate floatation and second was a low inflation rate applicable to maximum tariff. To begin, the appreciation of Mexican peso impacted the American airports revenue, which are in U.S. dollars. The appreciation also affected certain commercial revenues in Mexico as well as international passenger fleet.
In total, we have had around 20% of our total consolidated revenue. At the same time, the National Passenger Price Index, excluding Petroleum, which is used to update tariffs in Mexico remained mainly flat throughout the year, and staying below a 1% increase from the previous year, compared to the official rates of around 6% during 2022. Cash substantially increased during '23 despite our greatest effort to remain within strict budget parameters, mainly without cost increases regarding maintenance, personnel, cleaning and electricity and with passenger traffic at a record 64 million passengers. We had a higher expenses to maintain the quality level of higher number of passengers. In addition, the consumer price index in real terms has been sustainably increasing, together with a higher minimum wage and changes in labor level, consequently, we are facing a growing challenge concerning costs, thus directly impacting our profits.
By the end of 2023, we faced various challenges starting with the passenger traffic deceleration due to the Pratt & Whitney preventive engine inspections. In addition, the major challenge we face as well due to the regulatory changes and concession fee adjustments which affected our market value. Nevertheless, we have tackled this issue and have engaged in strategic negotiations with relevant regulatory bodies to navigate these changes and preserve shareholders' value to the best of our ability. It is important to mention that despite these considerable headwinds, we achieved remarkable milestones during 2023. Adjusted EBITDA reached another record of MXN17.7 billion, up 9.7% compared to 2022. Commercially, 2023 was a groundbreaking year and one which we reached the highest commercial revenue in our history.
Our strategy -- strategic focus in the area of food and beverage, parking, retail and expansion projects is evidence of our commitment to improve the passenger experience and continued sustainable growth. We are constantly working to recognize market trends adapt to them and make them our own. Currently, we have several expansion projects underway as part of our strategic growth initiatives. This include [indiscernible] Guadalajara, Los Cabos and Puerto Vallarta airport as well as the additional mixed-use building that includes a hotel commercial spaces and corporate office in the Guadalajara airport. Furthermore, we concluded the year with a strong balance sheet, reaching MXN10 billion cash at the end of this year as well as a comfortable debt maturity profile with the net debt-to-EBITDA ratio to 1.7 times.
During 2023, we wait funds for capital expenditures mainly at the airport expansion and infrastructure improvement as well as for refinancing of the debt maturity. A maturity payment of MXN3 billion will be due during the first quarter of 2024, corresponding to the GAP-19 bonds certificate, which is refinanced to a sustainable linked bond issuance in the coming weeks. Throughout 2023, we continue to focus on our long-term 2024 sustainability strategy. The terminal processor building at the Tijuana airport obtained a gold lead certification, which was the first time on one of our airports was granted with this [indiscernible]. We also participate in the EDGE certification for gender equality and hosted our first-ever gala to benefit our discussion of foundation from the [indiscernible].
And during the year, we raised around MXN9.3 million to benefit our schools. In line with that, we extend our education program to the high school rates in Guadalajara under our [indiscernible] program committing to provide excellent education to our students. Moving ahead in our 2024 guidance. We anticipate at 3% to 5% slowdown in passenger traffic across our airport network due to the challenged growth owned by the review of the P&W engine. We base figures in our view of the aircraft that is scheduled to grounded due to the accelerated preventive inspection as well as the flight frequency and fleet offerings on the various airlines. This decrease in passenger traffic will directly lead to lower aeronautical revenues, thus, we foresee a decrease from 2% to 4% versus 2023.
However, on a more positive note, non-aeronautical revenues are expected to grow from 12% to 14%. This type of passenger traffic decrease, we are considering the development of additional business areas such as the start of operation of the mixed-use building in Guadalajara. The building includes a hotel, corporate office and commercial space. This is in addition to the opening of around 1,100 parking spots. The tariffs in Guadalajara additional commercial space in Los Cabos and in Puerto Vallarta and the changes in the terms of the existing contracts. We expect a 65% EBITDA margin plus or minus 1%. That contraction comes mainly from a higher concession fees in Mexican airports from 5% to 9% beginning January 2024, plus labor cost increased in Mexico of around 20% and a 40% for Jamaica.
In terms of CapEx, we expect to reach around MXN9 billion in the coming year. Along with the annual committed investment in Mexico of MXN3.8 billion, we are also allocating MXN1.5 billion for the commercial projects, including the final phase of the mixed use building in Guadalajara, parking expansions and the off taking of additional business lines operated directly by GAP. Additionally, we will purchase additional land in Guadalajara to be allocated to our future expansions, which will cost approximately MXN1.5 billion. We also have around MXN700 million of CapEx deployed in 2023, but that will be paid in 2024. Lastly, we plan to buy around MXN1.5 billion in the projects related to the Jamaican airports. I would like to conclude by emphasizing that despite the challenge, we remain steadfast in our commitment to manage regulatory changes and sustain growth, ensuring our continued success and value creation for all stakeholders.
We at GAP, we remain confident that the underlying fundamentals of our business remain strong. With this, I want to thank you all for your attention. We are now ready to answer your questions. Operator, please open the line for questions.
See also 20 Countries With the Longest Coastlines in the World and 20 Countries With Worst Vision Problems.
To continue reading the Q&A session, please click here.
