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Section 1: 6-K (6-K)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20546

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November, 2018

 

Commission File Number: 333-221916

 

 

 

Corporación América Airports S.A.

(Name of Registrant)

 

4, rue de la Grêve
L-1643, Luxembourg
Tel: +35226258274
Fax: +35226259776

(Address of Principal Executive Office)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F x     Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

   

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: November 26, 2018

 

  Corporación America Airports S.A.
     
  By: /s/ Andres Zenarruza
  Name: Andres Zenarruza
  Title: Legal Manager
     
  By: /s/ Raúl Guillermo Francos
  Name: Raúl Guillermo Francos
  Title: Chief Financial Officer

 

   

 

 

Exhibit Index

 

Exhibit No.   Description
     
99.1   Press release dated November 26, 2018 - Corporación América Airports S.A. announces 3Q18 YOY growth of 5.8% in Passenger Traffic.

 

   

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

CORPORACION AMERICA AIRPORTS ANNOUNCES 3Q18 YOY GROWTH OF 5.8% IN PASSENGER TRAFFIC

Passenger traffic up 5.9% YoY in Argentina and 5.2% in Brazil, further supported by growth across most countries of operations

 

Luxembourg, November 26, 2018— 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 and the tenth largest private sector airport operator worldwide based on passenger traffic, reported today its unaudited, consolidated results for the three- and nine-month periods ended September 30, 2018. Financial results are expressed in millions of U.S. dollars and are prepared in conformity with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as issued by the International Accounting Standards Board.

 

Starting in 3Q18, the Company is reporting results of its Argentinean subsidiaries applying Hyperinflation Accounting, in accordance to IFRS rule IAS29, as detailed on Section “Review of Consolidated Results”.

 

Third Quarter 2018 Highlights

§Consolidated revenues declined 17.4% YoY to $348.0 million. Excluding the impact of IFRS rule IAS29, revenues declined 7.7% YoY mainly due to lower travel demand in Argentina reflecting difficult macro conditions and the FX impact in Argentina and Brazil, partially offset by increases in Ecuador and Armenia
§Growth across key operating metrics:
§Passenger traffic up 5.8% YoY to 22.1 million
§Cargo volume increased 1.2% to 94.8 thousand tons
§Aircraft movements rose 2.6% to 231.1 thousand
§Operating Income declined 16.4% YoY, mainly reflecting IAS 29 impact, with operating margin expanding 30 bps to 25.0% from 24.7% in 3Q17
§Adjusted EBITDA reached $122.5 million, down 2.7% YoY, with Adjusted EBITDA margin Ex-IFRIC12 expanding 435 bps to 40.4%
§Ex-IAS 29, Adjusted EBITDA increased 8.8% YoY and Adjusted EBITDA margin Ex-IFRIC12 increased 469 bps to 40.7%

 

CEO Message

Commenting on the third quarter 2018 results, Mr. Martin Eurnekian, CEO of Corporación América Airports, noted: “We delivered year-on-year Adjusted EBITDA Ex IAS 29 growth of almost 9% this quarter despite the increasingly challenging macro environment, particularly in Argentina. Moreover, Ex-IFRIC Adjusted EBITDA margin expanded over 460 points to 40%. Our three key markets, Argentina, Brazil and Italy contributed to this higher profitability in the quarter.

 

Passenger traffic growth showed a slight deceleration this quarter while total revenues posted a high-single digit year-on-year decline, impacted mainly by an average quarterly depreciation in local currencies of 85% in Argentina and 26% in Brazil. Additionally, in Argentina, we saw a high-single digit decline in international travel, an accelerated mix-shift to more affordable domestic destinations, and the impact of FX translation on local currency revenues. Brazil’s revenue in local currency increased more than 10% reflecting continued traffic growth and the positive contribution from recent commercial activities. Our operations in Italy, continued to deliver a solid top line performance, supported by healthy traffic trends and the contribution from the redesigned VIP lounge, new retail stores as well as new space for duty free shops. Furthermore, our cost structure continued to benefit from the currency depreciation in Argentina and Brazil, along with higher profitability across most of our countries of operations.

 

Looking ahead, we see the difficult economic environment in Argentina continuing to negatively impact traffic trends in the country. Moreover, profitability is expected to be impacted more as inflation in the country catches up with currency depreciation lowering the strong operating leverage experienced this quarter. We remain focused on further strengthening our global airport platform, moving ahead in our capex initiatives particularly in Argentina and Italy, as well as developing new routes and frequencies while providing our passengers with a great travel experience, which in turn should create long-term value for the Company. This is further underscored by our strong balance sheet.”

 

Page 1 of 34  

 

 

Operating & Financial Highlights

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

  3Q17 3Q18 ex
IAS 29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex
IAS 29
Passenger Traffic (Million Passengers) 20.9 - - 22.1 5.8% -
Revenue 421.1 388.9 -40.9 348.0 -17.4% -7.7%
Aeronautical Revenues 205.1 196.0 -19.0 177.1 -13.7% -4.4%
Non-Aeronautical Revenues 216.0 192.8 -21.9 170.9 -20.9% -10.7%
Revenue excluding construction service 348.4 335.3 -32.9 302.4 -13.2% -3.8%
Operating Income 104.0 109.7 -22.7 87.0 -16.4% 5.5%
Operating Margin 24.7% 28.2% - 25.0% 30 351
Net (Loss) / Income Attributable to Owners of the Parent 19.0 -26.9 11.7 -15.2 -179.8% -241.4%
EPS (US$) 0.13 -0.17 0.07 -0.09 -173.9% -230.8%
Adjusted EBITDA 125.9 137.0 -14.5 122.5 -2.7% 8.8%
Adjusted EBITDA Margin 29.9% 35.2% - 35.2% 531 532
Adjusted EBITDA Margin excluding Construction Service 36.0% 40.7% - 40.4% 435 469
Net Debt to LTM EBITDA 2.26 1.87  - 2.09 -1,774 2,143

 

Operating Performance

 

Passenger Traffic

During 3Q18, total passenger traffic rose 5.8% YoY to 22.1 million, principally driven by YoY increases of 5.9% in Argentina and 5.2% in Brazil, which contributed an additional 0.6 and 0.3 million passengers, respectively, along with traffic growth across the majority of CAAP’s countries of operations.

 

Challenging macro conditions in Argentina, including the sharp currency depreciation in the quarter, impacted traffic dynamics in the country resulting in slower growth in overall travel demand and a mix-shift from international to domestic traffic. In Brazil, traffic growth slowed down to 5.2% YoY reflecting the presidential pre-election environment and currency depreciation, which partially offset the benefit from new routes and airlines. By contrast, passenger traffic in Uruguay experienced a contraction of 4.8% principally impacted by lower traffic from Argentina and Brazil. Traffic in Italy increased 3.2% reflecting the addition of new routes and airlines.

 

In Armenia, passenger traffic increased 13.8%, adding 0.1 million passengers, mainly due to the increase in international passengers coming from the U.S. during summer season and the addition of new frequencies to destinations in Russia. In Ecuador, traffic increased 10.4%, benefitting from easier comps as last year traffic was impacted by the hurricane that took place in Florida, resulting in the cancelation of several international flights. Peru contributed with a 0.1 million passenger increase, up 10.3% YoY, mainly driven by new frequencies and promotions by low-cost airlines driving competition and higher demand, underscored by the overall economic improvement in the country.

 

Domestic passengers, that represented 55.6% of total traffic during 3Q18, increased 11.3% YoY principally due to 14.1% growth in Argentina and 8.1% in Brazil, which contributed with 0.9 million and 0.2 million additional passengers, respectively. International passengers, which accounted for 33.8% of total traffic, remained relatively flat in the period, with increases of 4.8% in Italy and 13.8% in Armenia, respectively, offset by a decline of 6.8 in Argentina reflecting more challenging macro conditions.

 

Cargo Volume

Cargo volume increased 1.2% YoY in 3Q18 reaching 94.8 thousand tons, mainly driven by growth in Brazil and Ecuador, which added 3.7 and 1.6 thousand tons each. This was partially offset by lower cargo volume in Argentina and Uruguay, reflecting the challenging macro conditions. Armenia also reported a decline in cargo volume, mainly driven by political instability in the region.

 

Aircraft Movements

During 3Q18, total aircraft movements increased 2.6% YoY to 231.1 thousand, mainly reflecting growth of 3.9% in Argentina and 14.7% in Armenia, which contributed with 4.4 thousand and 0.9 thousand aircraft movements, respectively.

 

Tables with detailed passenger traffic, cargo volume and aircraft movement information for each airport can be found on page 20 of this report.

 

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Operational Statistics: Passenger Traffic, Cargo Volume and Aircraft Movements 

  3Q18 3Q17 % Var YTD18 YTD17 % Var
Domestic Passengers (in millions) 12.3 11.1 11.3% 33.2 30.5 8.9%
International Passengers (in millions) 7.5 7.5 -0.5% 21.1 20.4 3.1%
Transit Passengers (in millions) 2.3 2.3 0.1% 6.6 6.1 9.3%
Total Passengers (in millions) 22.1 20.9 5.8% 61.0 57.0 6.9%
Cargo Volume (in thousands of tons) 94.8 93.7 1.2% 291.5 268.8 8.4%
Total Aircraft Movements (in thousands) 231.1 225.3 2.6% 660.0 634.9 4.0%

  

Passenger Traffic
Breakdown
        Cargo       Aircraft Movements  
Country 3Q18 3Q17 % Var.   3Q18 3Q17 % Var.   3Q18 3Q17 % Var.
  (in millions)     (in thousands of tons)     (in thousands)  
Argentina 10.5 10.0 5.9%   52.4 55.4 -5.4%   115.4 111.0 3.9%
Italy 2.7 2.6 3.2%   2.7 2.5 9.2%   24.7 24.7 0.2%
Brazil 5.3 5.0 5.2%   17.4 13.6 27.6%   47.1 48.4 -2.6%
Uruguay 0.5 0.6 -4.8%   6.2 6.5 -5.3%   7.1 7.1 0.4%
Ecuador (1) 1.2 1.1 10.4%   9.8 8.1 20.0%   20.8 20.2 3.1%
Armenia 0.9 0.8 13.8%   5.2 6.2 -16.7%   7.1 6.2 14.7%
Peru (2) 1.0 0.9 10.3%   1.2 1.4 -10.8%   8.8 7.8 13.6%
TOTAL 22.1 20.9 5.8%   94.8 93.7 1.2%   231.1 225.3 2.6%
1)CAAP owns 99.9% of ECOGAL which operates and maintains the Galapagos Airport, but due to the terms of the concession agreement, ECOGAL’s results are accounted for by the equity method. However, 100% of ECOGAL’s passenger traffic and aircraft movements are included in this table.
2)CAAP owns 50.0% of AAP and accounts for its results by the equity method. However, 100% of AAP’s passenger traffic and aircraft movements are included in this table.

 

Review of Consolidated Results

Results for AAP Airports, the five airports CAAP operates in Peru, and ECOGAL which operates the Galapagos Airport in Ecuador, are accounted for under the equity method.

 

Following the categorization of Argentina as a country with a three-year cumulative inflation rate greater than 100%, the country is considered highly inflationary in accordance with IFRS. Consequently, starting July 1, 2018, the Company is reporting results of its Argentinean subsidiaries applying IFRS rule IAS 29. IAS 29 requires that results of operations in hyperinflationary economies are reported as if these economies were highly inflationary as of January 1, 2018, and thus year-to-date results should be restated adjusting for the change in general purchasing power of the local currency, using official indices, before converting the local amounts at the closing rate of the period (i.e. September 30, 2018 closing rate for 9M18 results). For comparison purposes, the impact of adopting IAS 29 in Aeropuertos Argentina 2000 (“AA2000”), the Company’s largest subsidiary in Argentina which accounted for 96.3%, 99.1% and 99.3% of passenger traffic, revenues and Adjusted EBITDA, of the Argentina segment in 3Q18, is presented separately in each of the applicable sections of this earnings release, in a column denominated “IAS 29”. In 3Q18, the application of IAS 29 has resulted in a negative impact of $40.9 million on CAAP’s revenue and of $14.5 million on its Adjusted EBITDA. For 9M18, CAAP is reporting negative impacts of $228.3 million on revenue and of $77.5 million on Adjusted EBITDA from the application of IAS 29.

 

The 3Q18 IAS 29 adjustment results from the combined effect of: (i) the indexation to reflect changes in purchasing power on 3Q18 results against a dedicated line in the financial results, and (ii) the difference between the translation of 3Q18 results at the closing exchange rate of September 30, 2018 and the translation using the average year-to-date rate on the reported period, as applicable to non-inflationary economies. Furthermore, IAS 29 requires adjusting for cumulative inflation the non-monetary assets and liabilities on the balance sheet of operations in hyperinflationary economies. The resulting effect from the adjustment until December 31, 2017 is included in Equity and, from this date on, in a dedicated account in the financial results, reporting deferred taxes on such adjustments, when applicable. During 3Q18, the transition to Hyperinflation Accounting in accordance with the IFRS rules, resulted in: (i) a negative $9.1 million adjustment reported under financial loss, (ii) a negative impact on Operating Income of $22.7 million, and (iii) a positive impact on EPS of $0.07.

 

Page 3 of 34  

 

 

Revenues

Consolidated Revenues were down 17.4% YoY to $348.0 million in 3Q18, mainly reflecting a decline of $79.6 million in Argentina, attributed to the impact of IAS 29, as explained above, as well as to the challenging economic conditions in the country.

 

Excluding the impact of IAS 29, consolidated revenues would have declined 7.7%, or $32.2 million, mainly attributed to a drop of 14.8%, or $38.7 million, in Argentina.

 

Revenues, ex-IAS 29, in Argentina were negatively impacted by lower travel demand given the difficult macro conditions, a mix-shift from international to domestic traffic which is linked to the local currency, and the FX translation effect on domestic revenues resulting from the 85% quarterly average Argentine peso depreciation in the period, which more than offset higher passenger traffic and aircraft movements. In Brazil, revenues declined 11.3%, or $3.8 million, primarily affected by the currency translation effect on revenues resulting from the 26% quarterly average Brazilian real depreciation, while, in local currency, revenues benefited from the recovery in passenger traffic although expanding at a lower rate than in the prior quarter. In Italy, revenues declined 4.0% YoY mainly reflecting marketing support expenses, which in 3Q18 are deducted from Aeronautical Revenues, instead of SG&A, due to a change in the advertising agreement.

 

By contrast, in Armenia, revenues increased 31.9%, or $9.1 million, mainly driven by higher fuel demand and prices, along with higher construction revenues, and, to a lesser extent, reflecting the 13.8% growth in passenger traffic.

 

Revenue growth in Ecuador was mainly driven by higher traffic in the period, benefitting from easier comps. Revenues in Uruguay increased 2.5%, or $0.7 million, mainly driven by the implementation of a $1.4 security tariff per passenger, partially offset by lower construction services revenue and a decline in Duty free revenue, mainly driven by the decline in passenger traffic.

 

Excluding construction services, consolidated revenues would have declined 13.2% YoY to $302.4 million on an ‘As Reported’ basis, and 3.8% to $335.3 million when also excluding the impact of IAS 29.

 

Revenues by Segment (in US$ million)

Country 3Q17 3Q18 ex
IAS 29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex
IAS 29
Argentina 262.2 223.5 -40.9 182.6 -30.4% -14.8%
Italy 48.6 46.7 - 46.7 -4.0% -4.0%
Brazil 33.5 29.7 - 29.7 -11.3% -11.3%
Uruguay 26.8 27.4 - 27.4 2.5% 2.5%
Armenia 28.5 37.6 - 37.6 31.9% 31.9%
Ecuador (1) 22.5 23.7 - 23.7 5.4% 5.4%
Unallocated -1.0 0.2 - 0.2 -121.8% -121.8%
Total consolidated revenue (2) 421.1 388.9 -40.9 348.0 -17.4% -7.7%
1Only includes Guayaquil Airport.
2Excluding Construction Service revenue, revenue decreased 25.4% YoY in Argentina and 8.1% in Italy, but increased 4.3% in Uruguay and 24.0% in Armenia.

 

Revenue Breakdown (in US$ million)

  3Q17 3Q18 ex
IAS 29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex
IAS 29
Aeronautical Revenue 205.1 196.0 -19.0 177.1 -13.7% -4.4%
Non-aeronautical Revenue 216.0 192.8 -21.9 170.9 -20.9% -10.7%
Commercial revenue 142.9 138.6 -13.9 124.7 -12.7% -3.0%
Construction service revenue (1) 72.7 53.6 -8.0 45.6 -37.3% -26.3%
Other revenue 0.5 0.6 0.0 0.6 30.8% 30.8%
Total Consolidated Revenue 421.1 388.9 -40.9 348.0 -17.4% -7.7%
Total Revenue excluding Construction Service revenue (2) 348.4 335.3 -32.9 302.4 -13.2% -3.8%
1Construction Service revenue equals the construction or upgrade costs plus a reasonable margin.
2Excludes Construction Service revenue.

 

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Aeronautical revenue accounted for 50.9% of total revenues, and declined 13.7% YoY, or $ 28.0 million, to $177.1 million. Argentina was the main contributor to this decline, with a reduction of 22.5%, or $24.2 million, mainly resulting from the adoption of IAS 29, as explained above. Had IAS 29 not been applied, Aeronautical Revenues would have decreased 4.4%, or $9.1 million, mainly reflecting a drop of 4.9%, or $5.2 million, in Argentina as a result of the mix-shift from international to domestic traffic and the currency translation effect on domestic traffic resulting from the 85% quarterly average currency devaluation. Aeronautical revenue in Brazil was negatively affected by the 26% quarterly average depreciation of the Brazilian real against the US dollar. This more than offset the 5.2% YoY increase in traffic in Brazil, resulting in a decline in revenues of $2.6 million. In Italy, higher passenger traffic was partly offset by a $4.9 million charge for marketing support expenses, which in 3Q18 are deducted from Aeronautical revenues instead of SG&A. By contrast, Aeronautical revenues in Uruguay increased 11.4%, or $1.5 million, mainly driven by the new security fee introduced for the implementation of SISCA (Sistema Integrado de Seguridad y Control Aeroportuario), while in Armenia and Ecuador, aeronautical revenues increased 7.0% and 6.2%, respectively, primarily driven by growth in passenger traffic.

 

Non-Aeronautical revenues declined 20.9% YoY to $170.9 million, mainly driven by:

 

§12.7%, or $18.2 million, decline in Commercial Revenues, to $124.7 million. This decline was mainly driven by a reduction of 29.1%, or $24.8 million, in Argentina, mainly resulting from the adoption of IAS 29, as explained above. Excluding the impact of IAS 29, Commercial Revenues would have decreased 3.0%, or $4.2 million, mainly reflecting a decline of 12.7%, or $10.8 million in Argentina, as a result of the reduction in international traffic and cargo activity due to macro conditions, as well as the impact of the Argentine peso depreciation on the share of local currency denominated revenues and lower passenger demand. In Brazil, Commercial Revenues declined 7.1%, or $1.2 million, mainly reflecting the currency depreciation, while in local currency, revenues increased 16.4% YoY. By contrast, Commercial Revenues in Armenia increased 42.9%, or $5.8 million, mainly from higher fuel demand and prices and $1.0 million in Italy, primarily reflecting the redesigned VIP lounge and passenger growth.

 

§A 37.3%, or $27.1 million, decline in Construction Service revenue mainly reflecting currency depreciation and the adoption of IAS 29 in Argentina, as explained above. Had IAS 29 not been adopted, Construction Service revenue would have declined 26.3%, or $19.1 million, mainly as a result of the Argentine currency depreciation, which more than offset higher capital expenditures during the period in the country. In addition, Construction Service revenue increased $2.2 million in Armenia and $1.8 million in Italy, reflecting higher capex in those countries.

 

Excluding Construction Service revenue, non-aeronautical revenues would have declined 12.6% YoY to $125.3 million. Had IAS 29 not been applied, Non-aeronautical revenues excluding Construction Service revenue would have declined 2.9% YoY to $139.2 million.

 

Consolidated Operating Costs and Expenses

During 3Q18, Consolidated Operating Costs and Expenses declined 17.6% YoY to $265.3 million, mainly resulting from the effect of currency depreciation against the US dollar in both Argentina and Brazil and lower operating costs and expenses following the adoption of IAS 29 in Argentina, as explained above, which more than offset higher construction service costs and fuel outlays in Armenia, and higher construction service costs in Italy. Had IAS 29 not been applied, Consolidated Operating Costs and Expenses would have declined 11.7%, or $37.6 million YoY.

 

Cost of Services declined 16.3% YoY, or $44.3 million, reflecting the following variations:

§A 37.5%, or $27.2 million, decline in construction service costs, principally reflecting the currency depreciation and the impact of IAS 29 in Argentina, as explained above. Had IAS 29 not been applied, construction service costs would have declined 26.5%, or $19.2 million, mainly as a result of a decrease in construction service costs in Argentina of 32.6%, or $22.7 million, benefitting from the currency depreciation, which more than offset higher capex in the period, as well as higher capex in Italy and Armenia.
§A 19.7%, or $10.5 million, decrease in salaries principally due to the impact of IAS 29 and the benefit from the depreciation of the Argentine peso against the US dollar. Had IAS 29 not been applied, salaries would have declined 12.0%, or $6.4 million, mainly as a result of the depreciation of the Argentine peso against the US dollar.
§A 24.6%, or $ 9.0 million, decline in maintenance expenses, mainly reflecting a reduction of 37.0% in Argentina, as a result of the adoption of IAS 29, as explained above, together with the impact of the Argentine currency depreciation. Had this rule not be applied, maintenance expenses would have declined 12%, or $4.4 million, mainly reflecting the depreciation of the Argentine peso against the US dollar, which more than offset higher maintenance expenses in Uruguay, due to the implementation of SISCA (Sistema Integrado de Seguridad y Control Aeroportuario).
§A 17.2%, or $8.6 million, decrease in concession fees, mainly due the impact of IAS 29. Had IAS 29 not been applied, the decline would have been 7.5%, or $3.8 million, mainly as a result of an 8.6% drop in Argentina following the reduction in revenues and the depreciation of the peso against the US dollar. Moreover, concession fees in Brazil declined 29.2% YoY due to the depreciation of the Brazilian real against the US dollar, together with the change in the passenger curve by which the concession fee is calculated.

 

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§A 28.9%, or $7.3 million, increase in depreciation and amortization mainly due the impact of IAS 29, as explained above. Had IAS 29 not been applied, depreciation and amortization would have declined 3.2%, or $0.8 million.
§A 10.6%, or $3.6 million, increase in other cost of services, mainly due to higher cost of fuel in Armenia.

 

Had IAS 29 not been applied, Cost of Services would have declined 10.8%, or $29.3 million.

 

Excluding Construction service cost, Cost of Services would have decreased by 8.6% YoY, or by $17.2 million, to $182.6 million. Had IAS 29 not been applied, cost of services Ex-IFRIC12 would have declined 5.1%, or $10.1 million.

 

Selling, General and Administrative Expenses (“SG&A”) fell 25.3% YoY, or $12.5 million, to $36.7 million in 3Q18 mainly driven by:

§A 41.3%, or $7.0 million, decline in services and fees, reflecting a drop of $4.9 million in marketing support expenses in Italy which in 3Q18 are deducted from Aeronautical revenues due to a change in the advertising agreement, while in 3Q17 were accounted for as SG&A; and
§A 21.1%, or $2.7 million decline in sales taxes, mainly reflecting IAS 29 effect in Argentina. Had IAS 29 not been implemented, the decline would have been 5.3%, or $0.7 million.
§A 21.7%, or $2.0 million decline in salaries and social security contributions, due to the impact the depreciation of the Argentine peso against the US dollar and IAS 29 rule. Had IAS 29 not been implemented, the declined would have been 14.9%, or $1.4 million, mainly reflecting the currency depreciation in Argentina.

 

Had IAS 29 not been applied, SG&A would have declined 17.5%, or $8.6 million YoY.

 

Excluding Construction service cost, Total Operating Costs and Expenses would have declined 11.8% YoY to $220.1 million in 3Q18 from $249.6 million in 3Q17. Had IAS 29 rule not been applied, Total Operating Costs and Expenses EX-IFRIC12 would have declined 7.4%, or $18.4 million YoY.

 

  3Q17 3Q18 ex
IAS 29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex IAS
29
Cost of Services 272.1 242.8 -15.0 227.8 -16.3% -10.8%
Salaries and social security contributions 53.6 47.2 -4.1 43.1 -19.7% -12.0%
Concession fees 50.1 46.4 -4.9 41.5 -17.2% -7.5%
Construction service cost 72.4 53.2 -8.0 45.2 -37.5% -26.5%
Maintenance expenses 36.4 32.0 -4.6 27.5 -24.6% -12.0%
Amortization and depreciation 25.4 24.5 8.2 32.7 28.9% -3.2%
Other 34.2 39.5 -1.7 37.8 10.6% 15.4%
Cost of Services Excluding Construction Service cost 199.7 189.6 -7.0 182.6 -8.6% -5.1%
Selling, general and administrative expenses 49.2 40.6 -3.8 36.7 -25.3% -17.5%
Other expenses 0.6 1.0 -0.1 0.8 30.4% 53.0%
Total Costs and Expenses 321.9 284.3 -19.0 265.3 -17.6% -11.7%
Total Costs and Expenses Excluding Construction Service cost 249.6 231.1 -11.0 220.1 -11.8% -7.4%

 

Adjusted EBITDA and Adjusted EBITDA excluding Construction Service

Adjusted EBITDA for the third quarter of 2018 declined 2.7% YoY to $122.5 million, driven by a decline in Argentina while Adjusted EBITDA increased across most other countries of operations. Consolidated Adjusted EBITDA margin, however, expanded 531 bps to 35.2% from 29.9%. Excluding Construction service margin, Adjusted EBITDA margin increased 435 bps to 40.4%, from 36.0% in 3Q17.

 

The main contributor to this decline was Argentina with a drop of 17.8%, or $14.0 million in Adjusted EBITDA, with Adjusted Segment EBITDA margin Ex-IFRIC12 increasing 417 basis points to 44.9%. Excluding IAS 29 impact, Adjusted EBITDA in Argentina would have stayed relatively flat, with Adjusted Segment EBITDA margin Ex-IFRIC12 increasing 398 bps.

 

Had IAS 29 not been adopted in the quarter, Adjusted EBITDA would have increased 8.8% YoY to $137.0 million, with Adjusted EBITDA margin expanding to 35.2% from 29.9%. Excluding both, the impact from IAS 29 and construction service margin, Adjusted EBITDA margin would have increased 469 bps to 40.7%, from 36.0% in 3Q17, driven by margin expansion across Argentina, Brazil and Italy, which more than offset a margin contraction in other small countries of operations.

 

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See “Use of Non-IFRS Financial Measures” on page 18.

Adjusted EBITDA by Segment (in US$ million)

 

  3Q17 3Q18 ex
IAS 29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex
IAS 29
Argentina 78.6 79.0 -14.5 64.6 -17.8% 0.6%
Italy 15.0 15.8 - 15.8 5.3% 5.3%
Brazil 3.6 6.3 - 6.3 75.2% 75.2%
Uruguay 12.5 13.4 - 13.4 7.0% 7.0%
Armenia 15.0 16.2 - 16.2 8.4% 8.4%
Ecuador 7.0 6.4 - 6.4 -8.8% -8.8%
Unallocated -0.3 -0.7 - -0.7 161.1% 161.1%
Perú -5.5 0.5 - 0.5 n/a n/a
Total segment EBITDA 125.9 137.0 -14.5 122.5 -2.7% 8.8%

 

Adjusted EBITDA Reconciliation to Income from Continuing Operations (in US$ million)

 

  3Q17 3Q18 ex
IAS 29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex
IAS 29
Income from Continuing Operations 21.7 -33.7 12.1 -21.6 -199.6% -255.1%
Financial Income -8.8 -43.6 27.8 -15.8 79.2% 395.1%
Financial Loss 66.3 197.5 -83.3 114.2 72.4% 198.0%
Inflation adjustment 0.0 0.9 9.1 10.0 - -
Income Tax Expense 19.3 -10.7 11.5 0.8 -95.9% -155.4%
Amortization and Depreciation 27.4 26.6 8.2 34.9 27.6% -2.6%
Adjusted EBITDA 125.9 137.0 -14.5 122.5 -2.7% 8.8%
Adjusted EBITDA Margin 29.9% 35.2%   35.2% 531 532
Adjusted EBITDA excluding Construction Service 125.5 136.5 -14.4 122.1 -2.7% 8.8%
Adjusted EBITDA Margin excluding Construction Service 36.0% 40.7%   40.4% 435 469

 

Financial Income and Loss

CAAP reported a Net financial loss of $108.5 million in the third quarter of 2018 compared to a loss of $57.5 million in 3Q17. Financial income increased by $7.0 million to $15.8 million, primarily reflecting the adoption of IAS 29 and higher Foreign exchange transaction income due to the impact of the currency depreciation over assets held in US dollars in Argentina, together with higher interest income in Argentina. Had this rule not been applied, Financial income would have increased $34.8 million. During 3Q18, CAAP reported a financial loss of $114.2 million, up 72.4% from a loss of $66.3 million in the year-ago quarter, primarily due to higher foreign exchange expenses in Argentina in connection with the $400M AA2000 bond, offset by the impact of IAS 29. By contrast, a lower liability from Brazilian concessions, resulting from the currency depreciation which more than offset the change in the passenger curve along with the impact of higher inflation on the net present value of future concession fee payments, and the change in the discount rate, also contributed to partially offset the increase described above. Had IAS 19 rule not been applied, financial loss would have been $197.5 million.

 

Page 7 of 34  

 

 

  3Q17 3Q18 ex
IAS 29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex
IAS 29
Financial Income 8.8 43.6 -27.8 15.8 79.2% 395.1%
Interest income 1.8 8.3 -1.0 7.3 309.1% 362.3%
Foreign exchange income 6.8 34.8 -26.9 7.9 17.1% 412.9%
Other 0.2 0.5 0.0 0.5 118.2% 118.2%
Financial Loss -66.3 -197.5 83.3 -114.2 72.4% 198.0%
Interest Expenses -25.8 -21.0 0.0 -21.0 -18.5% -18.6%
Foreign exchange transaction expenses -18.0 -155.6 83.3 -72.3 302.1% 765.0%
Changes in liability for Brazilian concessions -22.2 -18.7 0.0 -18.7 -15.8% -15.8%
Other expenses -0.3 -2.2 0.0 -2.2 579.8% 579.8%
Inflation adjustment 0.0 -0.9 -9.1 -10.0 - -
Inflation adjustment 0.0 -0.9 -9.1 -10.0 - -
Financial Loss, Net -57.5 -154.8 46.3 -108.5 88.7% 169.3%

 

Income Tax Expense

During 3Q18 the Company reported a tax loss of $0.8 million, mainly due to the combination of: i) a loss before income tax in Argentina as a result of the foreign exchange losses caused by the depreciation of the Argentine peso against the US dollar, and ii) a loss before income tax in Brazil, principally caused by the change in the fair value of the financial liability related to the Brazilian concessions. This compares with income tax expenses of $19.3 million reported in 3Q17.

 

Net Income/Loss and Net Income/Loss Attributable to Owners of the Parent

During 3Q18, CAAP reported Net Loss for the Period of $21.6 million compared to a gain of $21.7 million in 3Q17. The main drivers were the impact of IAS 29 in Argentina, as discussed above, and the impact of the financial loss, net, in the quarter.

 

During 3Q18, the Company reported a Net Loss Attributable to Owners of the Parent of $15.2 million and loss per common share of $0.09, compared with a Net Income Attributable to Owners of the Parent of $19.0 million in 3Q17 equivalent to earnings per common share of $0.13 for the same period last year.

 

Consolidated Financial Position

As of September 30, 2018, cash and cash equivalents amounted to $267.9 million, a 21.7% increase from $220.1 million at June 30, 2018. Total Debt at the close of the quarter decreased to $1,152.6 million, from $1,161.5 million at June 30, 2018. A total of $680.2 million, or 59.0% of total debt is denominated in U.S. dollars, while 25.1% is denominated in Brazilian reals and 15.7% in Euros.

 

The Net Debt to LTM EBITDA ratio stood at 2.09x at the end of 3Q18, compared with Net Debt to LTM EBITDA of 1.98x as of June 2018 and 1.99x as of March 31, 2018.

 

Page 8 of 34  

 

 

Consolidated Debt Indicators (in US$ million)

 

As of Sept 30, 2018 As of June 30, 2018
Leverage    
Total Debt / LTM Adjusted EBITDA (Times)1,3 2.72x 2.44x
Total Net Debt / LTM Adjusted EBITDA (Times) 2,3 2.09x 1.98x
Total Debt 1,152.6 1,161.5
Short-Term Debt 106.8 95.8
Long-Term Debt 1,045.8 1,065.7
Cash & Cash Equivalents 267.9 220.1
Total Net Debt4 884.7 941.4
1The Total Debt to EBITDA Ratio is calculated as CAAP’s interest-bearing liabilities divided by its EBITDA.
2The Total Net Debt to EBITDA Ratio is calculated as CAAP’s interest-bearing liabilities minus Cash & Cash Equivalents, divided by its EBITDA.
3The Total Net Debt is calculated as Total Debt minus Cash & Cash Equivalents.

 

CAPEX

During 3Q18, CAAP made capital expenditures totaling $51.3 million, a 37.2% decrease from $81.7 million in 3Q17, reflecting mainly the currency depreciation in Argentina and the impact of IAS 29. Had this rule not be applied, capex in the period would have been $59.3 million.

 

The most significant investments in 3Q18 include:

 

§$46.8 million invested in Argentina primarily for the construction of the new departures terminal building at Ezeiza Airport, the remodeling of the terminal at Iguazú Airport and Mar del Plata airports and the construction of a new terminal building and the expansion of the parking at Comodoro Rivadavia Airport;
§$5.0 million invested in Italy, primarily on terminal reconfigurations for higher capacity and Master plan development in Florence Airport; and
§$2.6 million invested in Brazil, primarily from construction of runway safety areas and engineering projects at Brasilia Airport.

 

Page 9 of 34  

 

 

Review of Segment Results

 

Argentina

CAAP operates 37 airports in Argentina, including the country’s two largest airports, Aeroparque and Ezeiza, with approximately 3.5 million and 2.5 million passengers in 3Q18, respectively. The Company’s main concession in Argentina, AA2000, accounted for approximately 10.1 million passengers, or 47.6%, of CAAP’s 22.1 million total passengers worldwide served during the quarter.

 

Starting in 3Q18, reported numbers are presented applying Hyperinflation accounting for our Argentinean subsidiaries, in accordance with IAS 29, as explained above.

 

Argentina represented 52.5% of the Company’s 3Q18 consolidated revenues and 52.7% of its adjusted EBITDA. Excluding the effect of IAS 29, Argentina would have represented 57.5% of revenues and 57.7% of Adjusted EBITDA.

 

The following table presents the impact from Hyperinflation accounting on 3Q18 under the column ‘IAS 29’, while the column “3Q18 ex IAS 29” presents 3Q18 results calculated without the impact from Hyperinflation accounting. The impact of IAS29 is presented only for AA2000, the Company’s largest subsidiary in Argentina which accounted for 96.3%, 99.1% and 99.3% of passenger traffic, revenues and Adjusted EBITDA of the Argentina segment in 3Q18.

 

3Q17 3Q18 ex IAS
29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex
IAS 29
OPERATING STATISTICS            
Domestic Passengers (in millions) 6.2 - - 7.0 14.1% -
International Passengers (in millions) 3.4 - - 3.2 -6.8% -
Transit Passengers (in millions) 0.4 - - 0.3 -12.1% -
Total Passengers (in millions) 10.0 - - 10.5 5.9% -
Cargo Volume (in thousands of tons) 55.4 - - 52.4 -5.4% -
Total Aircraft Movements (in thousands) 111.0 - - 115.4 3.9% -
FINANCIAL HIGHLIGHTS            
Aeronautical Revenue 107.6 102.4 -19.0 83.4 -22.5% -4.9%
Non-aeronautical revenue 154.6 121.1 -21.9 99.2 -35.8% -21.7%
Commercial revenue 85.1 74.3 -13.9 60.4 -29.1% -12.7%
Construction service revenue 69.5 46.8 -8.0 38.8 -44.1% -32.6%
Total Revenue 262.2 223.5 -40.9 182.6 -30.4% -14.8%
Total Revenue Excluding IFRIC12(1) 192.7 176.7 -32.9 143.8 -25.4% -8.3%
Cost of Services 173.2 136.0 -15.0 121.0 -30.2% -21.5%
Selling, general and administrative expenses 23.3 20.4 -3.8 16.6 -28.8% -12.3%
Other expenses -0.1 0.7 -0.1 0.5 n.m n.m.
Total Costs and Expenses 196.5 157.1 -19.0 138.1 -29.7% -20.0%
Total Costs and Expenses Excluding IFRIC12(1) 127.0 110.3 -11.0 99.3 -21.8% -13.1%
Adjusted Segment EBITDA 78.6 79.0 -14.5 64.6 -17.8% 0.6%
Adjusted Segment EBITDA Mg 30.0% 35.4% 35.3% 35.4% 541 541
Adjusted EBITDA Margin excluding IFRIC 12(3) 40.7% 44.7% 43.9% 44.9% 417 398
Capex 71.2 46.8 -8.0 38.8 -45.6% -34.3%
1Excludes Construction Service revenue.
2Excludes Construction Service cost.
3Excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, and is calculated by dividing EBITDA by total revenues less Construction Service revenue.

 

Page 10 of 34  

 

 

Passenger Traffic in Argentina increased 5.9% YoY in 3Q18, reflecting challenging macro conditions in the country together with the currency depreciation in the quarter which resulted in slower growth in overall travel demand and a mix-shift from international to domestic traffic. Accordingly, international traffic declined 6.8% YoY to 3.2 million passengers, while domestic traffic increased 14.1% reaching 7.0 million passengers in the quarter.

 

Traffic growth in the quarter was mainly driven by increases of 16.2% at Córdoba Airport, which is increasingly becoming a domestic hub, and 24.4% at Bariloche Airport, mainly as a result of a very good winter season. Traffic growth also reflects movements at El Palomar Airport, which began operation in February 2018. Of note, traffic at Tucumán Airport rose 307% reflecting easier comps as this airport was closed almost the whole comparable quarter in 2017 while the new runway was being built. By contrast, cargo volume was down 5.4% reflecting the macro environment, while total aircraft movements increased 3.9% during the period.

 

Revenues were down 30.4% YoY, or $79.6 million, to $182.6 million in 3Q18, mainly resulting from the adoption of IAS 29, as explained above. Excluding the $40.9 million negative impact from f IAS 29, revenues would have been $223.5 million, down 14.8% YoY, mainly reflecting lower overall demand given the challenging economic conditions in the quarter and the FX translation effect on local currency revenues from the sharp Argentine peso depreciation in the period, which more than offset higher passenger traffic and aircraft movements. Aeronautical revenue declined 22.5% YoY, or $24.2 million, and commercial revenues fell 29.1%, or $24.7 million, mainly reflecting the adoption of IAS 29. Had IAS 29 not been adopted, Aeronautical Revenues would have declined 4.9%, or $5.2 million, reflecting a mix-shift from international to domestic traffic and the currency translation effect on domestic traffic, while Commercial Revenues would have declined 12.7%, or $10.8 million, mainly as a result of a mix shift from imports to exports in cargo activity due to macro conditions, the impact of the FX translation on the share of local currency denominated revenues and the decline in international traffic, together with lower passenger demand. Construction Service revenue declined 44.1% YoY, or $30.7 million, mainly reflecting currency depreciation, together with the adoption of IAS 29. Had IAS 29 not been adopted, Construction Service Revenue would have declined 32.6%, or $22.7 million YoY.

 

Excluding construction service revenue, total Argentina revenue in 3Q18 decreased 25.4% YoY to $143.8 million, with a decrease of 8.3%, or $16.1 million, had IAS 29 rule not be adopted in the period.

 

Cost of services declined 30.2% YoY, or by $52.3 million, to $121.0 million, mainly as a result of the adoption of IAS 29. Had IAS 29 not been adopted, cost of services would have declined 21.5%, or $37.2 million, primarily due to a decrease of 21.3%, or $6.2 million, in maintenance expenses and a reduction of 19.9%, or $5.5 million, in salaries and social security contributions which benefitted from the Argentine peso depreciation, together with a decline of 8.6% in the concession fee, in line with lower revenues. This was partly offset by an increase of 30.6% in services and fees, mainly due to higher tariffs on utilities. Construction Service costs declined mainly benefiting from the currency depreciation, together with the adoption of IAS 29.

 

SG&A declined by 28.8% YoY, or $6.7 million, to $16.6 million in 3Q18, reflecting the impact of IAS 29. Had this rule not be applied, SG&A would have declined 12.3%, or $2.9 million, due to a reduction by 13,8%, or $1.7 million, in turnover taxes and a decrease of 29.2%, or $1.3 million, in salaries and social security contributions mainly benefitting from currency depreciation.

 

Adjusted Segment EBITDA in Argentina declined 17.8%, or $14.0 million, to $64.6 million in 3Q18, reflecting IAS 29 adoption. Had IAS 29 not been adopted, Adjusted Segment EBITDA would have remained relatively flat at $79.0 million, with Adjusted EBITDA margin EX-IFRIC12 expanding 398 bps.

 

During 3Q18 CAAP made capital expenditures ex-IAS 29 for $46.8 million invested in Argentina, primarily for the construction of the new departures terminal building at Ezeiza Airport, the remodeling of the terminal at Iguazú and Mar del Plata airports, as well as for the construction of a new terminal building and the expansion of the parking at Comodoro Rivadavia Airport.

 

The table below presents the impact from IAS 29 applied starting January 1, 2018 on 9M18 under the column ‘IAS 29’, while the column “9M18 ex IAS 29” presents results for the nine-month period ended September 30, 2018 calculated without the impact from IAS 29. The impact of IAS29 is presented only for AA2000, the Company’s largest subsidiary in Argentina which accounted for 96.3%, 98.7% and 99.2% of passenger traffic, revenues and Adjusted EBITDA of this segment in 9M18.

 

Page 11 of 34  

 

 

  9M17 9M18 ex
IAS 29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
FINANCIAL HIGHLIGHTS            
Aeronautical Revenue 318.8 326.5 -101.1 225.3 -29.3% 2.4%
Non-aeronautical revenue 410.9 392.0 -127.1 264.9 -35.5% -4.6%
Commercial revenue 249.3 235.2 -72.4 162.7 -34.7% -5.7%
Construction service revenue 161.7 156.8 -54.7 102.1 -36.8% -3.0%
Total Revenue 729.7 718.5 -228.3 490.2 -32.8% -1.5%
Total Revenue Excluding IFRIC12(1) 568.0 561.6 -173.6 388.1 -31.7% -1.1%
Cost of Services 464.8 439.6 -117.4 322.2 -30.7% -5.4%
Selling, general and administrative expenses 69.4 63.1 -19.3 43.8 -36.9% -9.1%
Other expenses 0.2 1.1 -0.3 0.8 359.4% 528.0%
Total Costs and Expenses 534.3 503.8 -137.0 366.9 -31.3% -5.7%
Total Costs and Expenses Excluding IFRIC12(1) 372.9 347.2 -82.3 264.8 -29.0% -6.9%
Adjusted Segment EBITDA 233.7 251.0 -77.5 173.5 -25.8% 7.4%
Adjusted Segment EBITDA Mg 32.0% 34.9% 34.0% 35.4% 336 291
Adjusted EBITDA Margin excluding IFRIC 12(3) 41.1% 44.7% 44.6% 44.7% 357 355
Capex 162.0 157.1 -55.4 101.7 -37.2% -3.0%
1Excludes Construction Service revenue.
2Excludes Construction Service cost.
3Excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, and is calculated by dividing EBITDA by total revenues less Construction Service revenue.

 

Page 12 of 34  

 

 

Italy

Italy represented 12% of the Company’s consolidated 3Q18 revenues and 11.6% of its adjusted EBITDA, excluding the effect of IAS 29. CAAP operates two airports in Italy, Aeroporto Galileo Galilei di Pisa (“Pisa Airport”) and Aeroporto di Firenze (“Florence Airport”), with approximately 1.9 million and 0.8 million passengers in 3Q18, respectively.

 

  3Q18 3Q17 % Var. YTD18 YTD17 % Var.
OPERATING STATISTICS            
Domestic Passengers (in millions) 0.5 0.5 -3.4% 1.4 1.4 -0.6%
International Passengers (in millions) 2.2 2.1 4.8% 5.1 4.9 4.0%
Transit Passengers (in millions) 0.0 0.0 17.6% 0.0 0.0 34.3%
Total Passengers (in millions) 2.7 2.6 3.2% 6.4 6.3 3.0%
Cargo Volume (in thousands of tons) 2.7 2.5 9.2% 8.4 7.9 6.5%
Total Aircraft Movements (in thousands) 24.7 24.7 0.2% 60.7 61.2 -0.8%
FINANCIAL HIGHLIGHTS            
Aeronautical Revenue 30.2 35.0 -13.7% 77.4 82.2 -5.8%
Non-aeronautical revenue 16.5 13.6 21.0% 43.0 34.4 24.9%
Commercial revenue 11.5 10.5 9.1% 28.4 24.3 16.7%
Construction service revenue 4.4 2.6 67.2% 11.1 8.8 26.2%
Other revenue 0.6 0.4 29.2% 3.5 1.3 170.4%
Total Revenue 46.7 48.6 -4.0% 120.4 116.6 3.2%
Total Revenue Excluding IFRIC12(1) 42.3 46.0 -8.1% 109.3 107.8 1.3%
Cost of Services 30.3 26.7 13.6% 85.9 74.4 15.5%
Selling, general and administrative expenses 3.5 9.4 -63.2% 10.3 23.7 -56.7%
Other expenses 0.0 0.0 - 0.0 0.0 -
Total Costs and Expenses 33.8 36.1 -6.4% 96.1 98.1 -2.0%
Total Costs and Expenses Excluding IFRIC12(1) 29.7 33.7 -12.0% 86.1 90.1 -4.4%
Adjusted Segment EBITDA 15.8 15.0 5.3% 33.1 25.8 28.5%
Adjusted Segment EBITDA Mg 33.9% 30.9% 300 27.5% 22.1% 540
Adjusted EBITDA Margin excluding IFRIC 12(3) 36.7% 32.0% 466 29.3% 23.2% 612
Capex 5.0 3.8 32.4% 13.2 12.4 6.7%
1Excludes Construction Service revenue.
2Excludes Construction Service cost.
3Excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, and is calculated by dividing EBITDA by total revenues less Construction Service revenue.

 

Passenger Traffic in Italy increased 3.2% YoY in 3Q18 driven by growth of 4.8% in international passengers. Cargo volume was up 9.2%, while total aircraft movements remained relatively flat at 24.7 thousand tons.

 

Revenues in 3Q18 decreased 4.0% YoY, or $2.0 million, to $46.7 million, mainly reflecting the following variations:

 

·A 9.1%, or $1.0 million, increase in commercial revenues driven mainly by the recently redesigned VIP lounge and new retail stores, coupled with an increase to the minimum fee and new duty-free shops and increases in parking tariffs at Florence airport;

 

·A 67.2%, or $1.8 million, increase in Construction Service revenue reflecting higher capital expenditures in the quarter; and

 

·A 13.7%, or $4.8 million, decline in aeronautical revenues mainly reflecting the marketing expenses which in 3Q18 were deducted from Aeronautical revenues, due to a change in the advertising agreement.

 

Page 13 of 34  

 

 

Cost of services reached $30.3 million, up 13.6% YoY as a result of higher construction service cost due to the increase in capital expenditures, and the related increase in the provision for risks and maintenance, a non-cash item recorded to reflect the capex maintenance plan. Higher external fees, porterage and security services also contributed to the increase.

 

SG&A declined 63.2%, or $5.9 million, to $3.5 million in 3Q18, mainly as a result of marketing support expenses that are recorded under Aeronautical Revenues in 3Q18, due to a change in the advertising agreement, while in 3Q17 they were included within SG&A.

 

Adjusted Segment EBITDA in Italy increased 5.3%, or $0.8 million, to $15.8 million in 3Q18, with Adjusted Segment EBITDA margin expanding 300 basis points to 33.9% in 3Q18 from 30.9% in 3Q17. Excluding construction services, Adjusted Segment EBITDA margin would have increased 466 basis points to 36.7% from 32.0% in 3Q17.

 

During 3Q18 CAAP made capital expenditures for $5.0 million in Italy, primarily on the expansion of the terminal at Pisa Airport and Master plan development in Florence Airport.

 

Page 14 of 34  

 

 

Brazil

Brazil represented 7.6% of the Company’s consolidated 3Q18 revenues and 4.6% of its adjusted EBITDA, excluding IAS 29. CAAP operates two airports in Brazil, Presidente Juscelino Kubitschek International Airport (“Brasilia Airport”) and Airport of São Gonçalo do Amarante (“Natal Airport”) with approximately 4.7 million and 0.6 million passengers in 3Q18, respectively.

 

 

3Q18 3Q17 % Var. YTD18 YTD17 % Var.
OPERATING STATISTICS            
Domestic Passengers (in millions) 3.2 2.9 8.1% 9.1 8.7 3.9%
International Passengers (in millions) 0.1 0.1 -16.6% 0.4 0.4 2.2%
Transit Passengers (in millions) 2.0 1.9 2.5% 5.6 5.1 8.6%
Total Passengers (in millions) 5.3 5.0 5.2% 15.1 14.3 5.6%
Cargo Volume (in thousands of tons) 17.4 13.6 27.6% 47.1 39.5 19.4%
Total Aircraft Movements (in thousands) 47.1 48.4 -2.6% 138.3 138.1 0.1%
FINANCIAL HIGHLIGHTS            
Aeronautical Revenue 14.6 17.2 -15.3% 45.1 49.4 -8.7%
Non-aeronautical revenue 15.1 16.3 -7.1% 47.0 46.7 0.6%
Commercial revenue 15.1 16.3 -7.1% 47.0 46.7 0.6%
Total Revenue 29.7 33.5 -11.3% 92.1 96.1 -4.2%
Cost of Services 24.7 30.3 -18.5% 80.2 88.9 -9.8%
Selling, general and administrative expenses 3.0 4.2 -27.0% 11.4 10.2 11.3%
Other expenses 0.1 0.0 293.8% 0.3 2.2 -87.7%
Total Costs and Expenses 27.8 34.4 -19.4% 91.9 101.4 -9.4%
Adjusted Segment EBITDA 6.3 3.6 75.2% 13.0 7.8 66.3%
Adjusted Segment EBITDA Mg 21.1% 10.7% 1041 14.2% 8.2% 600
Capex 2.6 4.2 -38.5% 5.8 9.2 -36.8%

Note: This segment does not include the effects of IFRIC 12 with respect to the construction or improvements to concessioned assets.

 

Passenger Traffic in Brazil increased 5.2% YoY in 3Q18 driven by the slowly recovering economic environment. Domestic passenger traffic increased 8.1% in the quarter, reflecting the continued economic recovery in the country. By contrast, international traffic declined 16.6% mainly reflecting the currency volatility experienced in the quarter.

 

Revenues in 3Q18 were down 11.3% YoY, or $3.8 million, to $29.7 million, impacted by the depreciation of the Brazilian real during the period. Aeronautical revenues declined by 15.3%, or $2.6 million, despite the 5.2% growth in passenger traffic. In local currency, aeronautical revenue increased 5.7%. Moreover, commercial revenues were down by 7.1% YoY, or $1.2 million, mainly reflecting the 26% quarterly average currency depreciation, which more than offset higher revenues from advertising, VIP lounges and space rentals. Measured in local currency, commercial revenues increased 16.4% YoY.

 

Cost of services declined 18.5%, or $5.6 million, to $24.7 million, mainly due to the depreciation of the Brazilian real against the US dollar and lower concession fee charges. In addition to the adjustment in the concession fee in December 2017 that resulted in an increase in the discount rate used to calculate this fee, a change in the passenger curve used to calculate the amortization of the intangible asset introduced in September 2018 contributed to further reduce the concession fee amount for 3Q18. This more than offset the increase in employee benefits and higher taxes in line with the increase in revenues in local currency.

 

SG&A was $3.0 million in 3Q18, a decline of 27.0%, or $1.1 million, mainly due to the currency depreciation and a bad debt recovery in the quarter.

 

Adjusted Segment EBITDA in Brazil increased to $6.3 million in 3Q18, reaching a 21.1% Adjusted Segment EBITDA margin mainly due the reduction in concession fee charges reflecting a change in the passenger curve used to calculate these fees.

 

During 3Q18 CAAP made capital expenditures of $2.6 million, primarily from the construction of runway safety areas and engineering projects at Brasilia Airport.

 

Page 15 of 34  

 

 

Awards & Recognitions

Brasilia Airport, Brazil

On August 16, 2018, Brasilia Airport was granted with an environmental sustainability certificate for its contribution to the reduction of greenhouse gas emissions since the adoption of renewable energy solutions. Throughout 2017, the airport reduced 1,733 tons of CO2 emissions, equivalent to planting over 12,000 trees, making it the only terminal in Brazil to obtain this recognition.

 

Key Events for the Quarter

Corporación América Airports and Investment Corporation of Dubai Announce Two Business Agreements

On July 27, 2018, Corporación América Airports and Investment Corporation of Dubai (“ICD”), the principal investment arm of the Government of Dubai announced they entered into a share purchase agreement whereby CAAP will sell 25% of its wholly owned subsidiary Corporación America Italia S.p.A. (“CAI”) to ICD (the “Transaction”). CAAP and ICD also entered into a Memorandum of Understanding (“MOU”) to jointly pursue new opportunities in the airport sector in Italy, Eastern Europe (exc. Russia) and the Middle East. The MOU aims to build upon CAAP’s management capabilities and deep knowledge of the airport industry as well as ICD´s unique access to financing and the capital markets. CAI is the controlling entity of Toscana Aeroporti S.p.A. (“TA”), a publicly traded Italian company which manages and holds the concessions for the Florence and Pisa airports in Italy. Since its initial public offering in February 2018, CAAP acquired an additional 11% ownership stake in TA, increasing its stake from 51% to approximately 62%. Following the closing of the Transaction, CAAP has a 75% share ownership of CAI. The transaction was closed on September 12, 2018

 

Corporación América Airports Announces Update to the Guayaquil Airport Concession Agreement

On July 9, 2018, the Company announced that its 50.0% owned subsidiary Terminal Aeroportuaria de Guayaquil S.A. (TAGSA), which operates and maintains the Guayaquil Airport in the city of Guayaquil, Ecuador, amended the concession agreement (the “Guayaquil Concession Agreement”) among TAGSA, Autoridad Aeroportuaria de Guayaquil and the Municipality of Guayaquil, including the commitment of incremental capital expenditures of US$32.2 million together with the extension of the term of the Guayaquil Concession Agreement for a five–year period from 2024 to 2029. The Guayaquil Concession Agreement amendment also includes an increase in the annual concession fee, effective as of July 1, 2018, from 50.25% to 55.25% paid over aggregate gross revenues received from tariffs and charges and certain other commercial revenues (e.g., fuel, parking spaces and use of convention center). Terms of the Guayaquil Concession Agreement amendment also sets forth an increase of US$524,600 in the administrative service fee, paid semiannually commencing February 2019.

 

Subsequent Events

On November 12, 2018, El Palomar was categorized as an international airport.

In preparation for the operation of international routes, the Company finalized the extension and modernization of terminal with new 1,113 square meters which included the necessary facilities for the operation of international flights, arrival and boarding areas, new baggage conveyor belts and check-in counters as well as the extension of airplane parking areas.

 

Hyperinflation Accounting in Argentina

Following the categorization of Argentina as a country with a three-year cumulative inflation rate greater than 100%, the country is considered highly inflationary in accordance with IFRS. Consequently, starting July 1, 2018, the Company is reporting results of its Argentinean subsidiaries applying IFRS rule IAS 29. IAS 29 requires that results of operations in hyperinflationary economies are reported as if these economies were highly inflationary as of January 1, 2018, and thus year-to-date results should be restated adjusting for the change in general purchasing power of the local currency, using official indices, before converting the local amounts at the closing rate of the period (i.e. September 30, 2018 closing rate for 9M18 results). For comparison purposes, the impact of adopting IAS 29 in AA2000, the Company’s largest subsidiary in Argentina which accounted for 96.3%, 99.1% and 99.3% of passenger traffic, revenues and Adjusted EBITDA in the Argentina segment in 3Q18, is presented separately in each of the applicable sections of this earnings release, in a column denominated “IAS 29”. In 3Q18, the application of IAS 29 has resulted in a negative impact of $40.9 million on CAAP’s revenue and of $14.5 million on its Adjusted EBITDA. For 9M18, CAAP is reporting negative impacts of $228.3 million on revenue and of $77.5 million on Adjusted EBITDA from the application of IAS 29.

 

The 3Q18 IAS 29 adjustment results from the combined effect of: (i) the indexation to reflect changes in purchasing power on 3Q18 results against a dedicated line in the financial results, and (ii) the difference between the translation of 3Q18 results at the closing exchange rate of September 30, 2018 and the translation using the average year-to-date rate on the reported period, as applicable to non-inflationary economies. Furthermore, IAS 29 requires adjusting for cumulative inflation the non-monetary assets and liabilities on the balance sheet of operations in hyperinflationary economies. The resulting effect from the adjustment until December 31, 2017 is included in Equity and, from this date on, in a dedicated account in the financial results, reporting deferred taxes on such adjustments, when applicable. During 3Q18, the transition to Hyperinflation Accounting in accordance with the IFRS rules, resulted in: (i) a negative $9.1 million adjustment reported under financial loss, (ii) a negative impact on Operating Income of $22.7 million, and (iii) a positive impact on EPS of $0.07.

 

Page 16 of 34  

 

 

3Q18 EARNINGS CONFERENCE CALL

 

When: 10:00 a.m. Eastern time, Nov 27, 2018
   
Who: Mr. Martín Eurnekian, Chief Executive Officer
   
  Mr. Raúl Francos, Chief Financial Officer
   
  Ms. Gimena Albanesi, Head of Investor Relations
   
Dial-in: 1-888-317-6016 (U.S. domestic); 1-412-317-6016 (international)
   
Webcast: https://services.choruscall.com/links/caap181127.html
   
Replay: Participants can access the replay through December 04, 2018 by dialing:
   
  1-877-344-7529 (U.S. domestic) and 1-412-317-0088 (international). Replay ID: 10126529.

 

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.

 

Page 17 of 34  

 

 

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, as shown on the table below.

 

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 2017, it served 76.6 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: 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 Registration Statement on Form F-1 filed with the SEC for additional information concerning factors that could cause those differences.

 

Investor Relations Contact

Gimena Albanesi

Head of Investor Relations

Email: gimena.albanesi@caairports.com
Phone: +5411 4852-6411

 

Page 18 of 34  

 

 

— Operational & Financial Tables Follow –

 

Operating Statistics by Segment: Traffic, Cargo and Aircraft Movement

  3Q18 3Q17 % Var. YTD'18 YTD'17 % Var.
Argentina            
Domestic Passengers (thousands) 7,031 6,164 14.1% 18,363 16,455 11.6%
International Passengers (thousands) 3,171 3,403 -6.8% 10,277 10,150 1.3%
Transit passengers (thousands) 345 393 -12.1% 980 853 15.0%
Total passengers (thousands) 10,547 9,959 5.9% 29,621 27,458 7.9%
Cargo volume (tons) 52,423 55,395 -5.4% 169,465 155,382 9.1%
Aircraft movements 115,420 111,037 3.9% 334,757 314,061 6.6%
Italy            
Domestic Passengers (thousands) 501 519 -3.4% 1,387 1,394 -0.6%
International Passengers (thousands) 2,181 2,081 4.8% 5,051 4,858 4.0%
Transit passengers (thousands) 2 2 17.6% 3 2 34.3%
Total passengers (thousands) 2,684 2,602 3.2% 6,441 6,255 3.0%
Cargo volume (tons) 2,688 2,461 9.2% 8,373 7,865 6.5%
Aircraft movements 24,733 24,681 0.2% 60,663 61,170 -0.8%
Brazil            
Domestic Passengers (thousands) 3,183 2,946 8.1% 9,093 8,749 3.9%
International Passengers (thousands) 123 147 -16.6% 411 402 2.2%
Transit passengers (thousands) 1,968 1,920 2.5% 5,591 5,150 8.6%
Total passengers (thousands) 5,274 5,013 5.2% 15,096 14,301 5.6%
Cargo volume (tons) 17,354 13,605 27.6% 47,135 39,466 19.4%
Aircraft movements 47,148 48,425 -2.6% 138,304 138,118 0.1%
Uruguay            
Domestic Passengers (thousands) 0 0 -13.0% 1 1 6.7%
International Passengers (thousands) 533 559 -4.6% 1,720 1,697 1.4%
Transit passengers (thousands) 5 6 -22.5% 12 17 -32.6%
Total passengers (thousands) 538 565 -4.8% 1,733 1,715 1.0%
Cargo volume (tons) 6,159 6,501 -5.3% 19,710 20,068 -1.8%
Aircraft movements 7,098 7,073 0.4% 25,168 24,613 2.3%
Ecuador (1)            
Domestic Passengers (thousands) 637 560 13.8% 1,807 1,656 9.1%
International Passengers (thousands) 543 511 6.3% 1,470 1,414 4.0%
Transit passengers (thousands) 20 17 22.5% 54 53 2.8%
Total passengers (thousands) 1,200 1,087 10.4% 3,331 3,122 6.7%
Cargo volume (tons) 9,759 8,135 20.0% 30,292 25,287 19.8%
Aircraft movements 20,778 20,153 3.1% 58,818 60,092 -2.1%
Armenia            
Domestic Passengers (thousands) 0 0 - 0 0 -
International Passengers (thousands) 946 831 13.8% 2,152 1,922 11.9%
Transit passengers (thousands) 0 0 - 0 0 -
Total passengers (thousands) 946 831 13.8% 2,152 1,922 11.9%
Cargo volume (tons) 5,153 6,183 -16.7% 12,953 17,046 -24.0%

 

Page 19 of 34  

 

 

  3Q18 3Q17 % Var. YTD'18 YTD'17 % Var.
Aircraft movements 7,073 6,165 14.7% 18,024 16,003 12.6%
Peru (2)            
Domestic Passengers (thousands) 958 868 10.3% 2,596 2,268 14.5%
International Passengers (thousands) 0 0 269.6% 1 0 271.4%
Transit passengers (thousands) 0 0 - 0 0 -
Total passengers (thousands) 958 868 10.3% 2,597 2,268 14.5%
Cargo volume (tons) 1,244 1,394 -10.8% 3,603 3,703 -2.7%
Aircraft movements 8,837 7,778 13.6% 24,279 20,861 16.4%

 

(1)ECOGAL’s operational data included in this table, although its results of operations are not consolidated.
(2)AAP’s operational data included in this table, although its results of operations are not consolidated.

 

Page 20 of 34  

 

 

Foreing Exchange Rate

Country 3Q18 3Q17 3Q18 3Q17 2Q18 2Q17 2Q18 2Q17 1Q18 1Q17 1Q18 1Q17
  Avg Avg EoP EoP Avg Avg EoP EoP Avg Avg EoP EoP
Argentine Peso 31.96 17.29 41.25 17.31 23.58 15.75 28.85 16.60 19.68 15.68 20.15 15.39
Euro 0.86 0.85 0.86 0.85 0.84 0.89 0.86 0.88 0.81 0.94 0.81 0.94
Brazilian Real 3.96 3.15 4.00 3.17 3.61 3.21 3.86 3.31 3.24 3.14 3.32 3.17

Amounts provided by units of local currency per US dollar

 

Operating & Financial Highlights

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

  9M17 9M18 ex
IAS 29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
Passenger Traffic (Million Passengers) 57.0 - 61.0 6.9% -
Revenue 1,158.5 1,175.5 -228.3 947.2 -18.2% 1.5%
Aeronautical Revenues 575.1 586.5 -101.1 485.3 -15.6% 2.0%
Non-Aeronautical Revenues 583.4 589.0 -127.1 461.9 -20.8% 1.0%
Revenue excluding construction service 986.2 1,002.6 -173.6 829.0 -15.9% 1.7%
Operating Income 279.4 313.4 -95.5 217.9 -22.0% 12.2%
Operating Margin 24.1% 26.7% -3.7% 23.0% -112 254
Net (Loss) / Income Attributable to Owners of the Parent 67.1 -23.1 -3.6 -26.7 -139.8% -134.4%
EPS (US$) 0.45 -0.15 -0.02 -0.17 -137.2% -132.1%
Adjusted EBITDA 354.7 394.8 -77.5 317.3 -10.6% 11.3%
Adjusted EBITDA Margin 30.6% 33.6% -0.1% 33.5% 287 296
Adjusted EBITDA Margin excluding Construction Service 35.9% 39.2% -1.1% 38.1% 224 337
Net Debt to LTM EBITDA 2.26     2.09 -1,774 20,859

 

Aeronautical Breakdown (in US$ million)            
  3Q17 3Q18 ex IAS
29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex IAS
29
Aeronautical Revenue 205.1 196.0 -19.0 177.1 -13.7% -4.4%
Passenger use fees 155.6 151.9 -16.4 135.4 -13.0% -2.4%
Aircraft fees 36.5 34.7 -2.5 32.2 -11.9% -4.9%
Other 13.0 9.4 0.0 9.4 -27.3% -27.3%
             
Page 21 of 34  

 

 

Commercial Revenue Breakdown (in US$ million)          
  3Q17 3Q18 ex IAS
29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex IAS
29
Commercial revenue 142.9 138.6 -13.9 124.7 -12.7% -3.0%
Warehouse use fees 49.3 47.1 -7.3 39.8 -19.2% -4.4%
Duty free shops 17.7 15.2 -1.5 13.7 -22.5% -14.0%
Rental of space (including hangars) 8.9 9.0 -0.7 8.3 -6.1% 1.5%
Parking facilities 11.9 9.2 -0.9 8.3 -29.8% -22.6%
Fuel 12.5 18.0 -0.4 17.6 41.4% 44.2%
Food and beverage services 7.0 6.4 -0.4 6.0 -14.6% -9.2%
Advertising 5.4 4.9 -0.3 4.6 -14.5% -8.7%
Services and retail stores 4.6 4.4 -0.2 4.2 -8.3% -5.0%
Catering 3.6 2.9 -0.4 2.5 -31.8% -19.5%
VIP lounges 6.0 6.4 -0.4 6.0 1.1% 7.1%
Walkway services 2.4 2.6 -0.4 2.2 -7.4% 8.0%
Other   13.7 12.6 -1.2 11.4 -16.9% -8.1%

 

Revenue Breakdown (in US$ million)            
  9M17 9M18 ex
IAS 29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
Aeronautical Revenue 575.1 586.5 -101.1 485.3 -15.6% 2.0%
Non-aeronautical Revenue 583.4 589.0 -127.1 461.9 -20.8% 1.0%
Commercial revenue 409.7 412.6 -72.4 340.2 -17.0% 0.7%
Construction service revenue (1) 172.3 172.9 -54.7 118.2 -31.4% 0.3%
Other revenue 1.3 3.5 0.0 3.5 164.7% 164.7%
Total Consolidated Revenue 1,158.5 1,175.5 -228.3 947.2 -18.2% 1.5%
Total Revenue excluding Construction Service revenue (2) 986.2 1,002.6 -173.6 829.0 -15.9% 1.7%

 

Revenues by Segment (in US$ million)

Country 9M17 9M18 ex
IAS 29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
Argentina 729.7 718.5 -228.3 490.2 -32.8% -1.5%
Italy 116.6 120.4 120.4 3.2% 3.2%
Brazil 96.1 92.1 92.1 -4.2% -4.2%
Uruguay 84.0 89.3 89.3 6.3% 6.3%
Armenia 67.0 87.3 87.3 30.3% 30.3%
Ecuador (1) 64.5 67.3 67.3 4.4% 4.4%
Unallocated 0.6 0.6 0.6 6.9% 6.9%
Total consolidated revenue (2) 1,158.5 1,175.5 -228.3 947.2 -18.2% 1.5%

 

Page 22 of 34  

 

 

Aeronautical Breakdown (in US$ million)            
  9M17 9M18 ex
IAS 29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
Aeronautical Revenue 575.1 586.5 -101.1 485.3 -15.6% 2.0%
Passenger use fees 437.7 457.7 -84.8 373.0 -14.8% 4.6%
Aircraft fees 99.1 104.3 -14.8 89.5 -9.7% 5.3%
Other 38.3 24.4 -1.5 22.9 -40.3% -36.4%
             
Commercial Revenue Breakdown (in US$ million)            
  9M17 9M18 ex
IAS 29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
Commercial revenue 409.7 412.6 -72.4 340.2 -17.0% 0.7%
Warehouse use fees 140.0 143.4 -36.5 106.9 -23.6% 2.4%
Duty free shops 48.3 30.9 8.1 39.0 -19.2% -36.1%
Rental of space (including hangars) 24.2 38.4 -15.2 23.1 -4.5% 58.5%
Parking facilities 32.4 29.3 -5.5 23.9 -26.3% -9.4%
Fuel 28.8 45.1 -4.5 40.7 41.2% 56.8%
Food and beverage services 20.2 20.1 -2.4 17.7 -12.2% -0.4%
Advertising 16.8 17.6 -4.2 13.4 -20.2% 4.5%
Services and retail stores 14.1 15.1 -2.7 12.4 -11.7% 7.4%
Catering 12.0 7.6 -0.1 7.5 -37.6% -36.7%
VIP lounges 15.6 17.9 -1.1 16.8 7.5% 14.6%
Walkway services 9.0 7.5 -2.0 5.5 -38.9% -17.0%
Other   48.2 39.7 -6.4 33.3 -30.9% -17.7%

 

Total Expenses Breakdown (in US$ million)            
  3Q17 3Q18 ex IAS
29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex IAS
29
Cost of services 272.1 242.8 -15.0 227.8 -16.3% -10.8%
Selling, general and administrative expenses 49.2 40.6 -3.8 36.7 -25.3% -17.5%
Financial loss 66.3 197.5 -83.3 114.2 72.4% 198.0%
Inflation adjustment 0.0 0.9 9.1 10.0 - -
Other expenses 0.6 1.0 -0.1 0.8 30.4% 53.0%
Income tax expense 19.3 -10.7 11.5 0.8 -95.9% -155.4%
Total expenses 407.5 472.0 -81.6 390.3 -4.2% 15.8%
             
Page 23 of 34  

 

 

Cost of Services (in US$ million)            
  3Q17 3Q18 ex IAS
29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex IAS
29
Cost of Services 272.1 242.8 -15.0 227.8 -16.3% -10.8%
Salaries and social security contributions 53.6 47.2 -4.1 43.1 -19.7% -12.0%
Concession fees 50.1 46.4 -4.9 41.5 -17.2% -7.5%
Construction service cost 72.4 53.2 -8.0 45.2 -37.5% -26.5%
Maintenance expenses 36.4 32.0 -4.6 27.5 -24.6% -12.0%
Amortization and depreciation 25.4 24.5 8.2 32.7 28.9% -3.2%
Services and fees 12.1 17.0 -1.1 16.0 31.7% 40.5%
Cost of fuel 8.2 12.5 0.0 12.5 53.3% 53.3%
Taxes 4.9 4.5 -0.2 4.3 -10.8% -7.6%
Office expenses 5.6 2.5 -0.5 2.0 -63.9% -55.5%
Provision for maintenance cost 0.3 1.0 0.0 1.0 209.4% 209.4%
Others 3.2 2.0 0.1 2.1 -34.7% -36.5%
             
Selling, General and Administrative Expenses  (in US$ million)          
  3Q17 3Q18 ex IAS
29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex IAS
29
SG&A 49.2 40.6 -3.8 36.7 -25.3% -17.5%
Taxes 12.7 12.0 -2.0 10.0 -21.1% -5.3%
Salaries and social security contributions 9.1 7.8 -0.6 7.1 -21.7% -14.9%
Services and fees 17.1 10.3 -0.3 10.0 -41.3% -39.7%
Office expenses 2.7 2.9 -0.5 2.4 -10.2% 7.6%
Amortization and depreciation 2.0 2.1 0.1 2.2 10.2% 5.9%
Maintenance expenses 0.7 0.8 -0.1 0.7 -7.4% 3.4%
Advertising 0.7 0.9 -0.2 0.7 10.3% 39.4%
Insurances 0.5 0.4 0.0 0.4 -25.3% -24.1%
Charter services 0.2 0.2 0.0 0.2 2.5% 2.5%
Bad debts recovery 0.0 -2.6 0.0 -2.6 14550.0% 14550.0%
Bad debts 2.0 3.7 -0.3 3.4 71.3% 86.1%
Others 1.6 2.2 0.0 2.2 38.8% 38.9%
             
Expenses by Segment (in US$ million)            
Country 3Q17 3Q18 ex IAS
29
IAS 29 3Q18 as
reported
% Var as
reported
% Var ex IAS
29
Argentina 196.5 157.1 -19.0 138.1 -29.7% -20.0%
Italy 36.1 33.8 - 33.8 -6.4% -6.4%
Brazil 34.4 27.8 - 27.8 -19.4% -19.4%
Uruguay 16.9 16.9 - 16.9 0.5% 0.5%
Armenia 16.5 24.4 - 24.4 47.8% 47.8%
Ecuador 15.4 17.7 - 17.7 15.2% 15.2%
Unallocated 6.2 6.6 - 6.6 6.8% 6.8%
Total consolidated expenses (1) (2) 321.9 284.3 -19.0 265.3 -17.6% -11.7%
(1)Excludes income tax and financial loss
(2)We account for the results of operations of ECOGAL and AAP using the equity method

 

Page 24 of 34  

 

 

Consolidated Operating Costs and Expenses (in US$ million)

  9M17 9M18 ex IAS
29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
Cost of Services 749.8 747.4 -117.4 630.1 -16.0% -0.3%
Salaries and social security contributions 157.3 150.3 -22.6 127.7 -18.8% -4.4%
Concession fees 144.9 141.4 -25.6 115.8 -20.1% -2.4%
Construction service cost 171.3 171.5 -54.7 116.9 -31.8% 0.2%
Maintenance expenses 106.3 104.0 -24.0 80.0 -24.8% -2.2%
Amortization and depreciation 75.5 74.4 17.9 92.3 22.2% -1.4%
Other 94.6 105.7 -8.2 97.5 3.0% 11.7%
Cost of Services Excluding Construction Service cost 578.6 575.9 -62.7 513.2 -11.3% -0.5%
Selling, general and administrative expenses 140.1 127.4 -19.3 108.1 -22.8% -9.1%
Other expenses 3.5 2.0 -0.3 1.7 -50.0% -41.2%
Total Costs and Expenses 893.4 876.9 -137.0 739.9 -17.2% -1.8%
Total Costs and Expenses Excluding Construction Service cost 722.1 705.4 -82.3 623.0 -13.7% -2.3%

 

Total Expenses Breakdown (in US$ million)            
  9M17 9M18 ex IAS
29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex IAS
29
Cost of services 749.8 747.4 -117.4 630.1 -16.0% -0.3%
Selling, general and administrative expenses 140.1 127.4 -19.3 108.1 -22.8% -9.1%
Financial loss 214.3 482.1 -171.4 310.8 45.0% 125.0%
Inflation adjustment 0.0 0.9 20.6 21.4 - -
Other expenses 3.5 2.0 -0.3 1.7 -50.0% -41.1%
Income tax expense 39.8 8.0 -13.7 -5.7 -114.2% -79.9%
Total expenses 1,147.5 1,367.9 -301.4 1,066.4 -7.1% 19.2%
             
Cost of Services (in US$ million)            
  9M17 9M18 ex IAS
29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex IAS
29
Cost of Services 749.8 747.4 -117.4 630.1 -16.0% -0.3%
Salaries and social security contributions 157.3 150.3 -22.6 127.7 -18.8% -4.4%
Concession fees 144.9 141.4 -25.6 115.8 -20.1% -2.4%
Construction service cost 171.3 171.5 -54.7 116.9 -31.8% 0.1%
Maintenance expenses 106.3 104.0 -24.0 80.0 -24.8% -2.2%
Amortization and depreciation 75.4 74.4 17.9 92.3 22.3% -1.4%
Services and fees 38.5 45.2 -4.6 40.6 5.3% 17.3%
Cost of fuel 19.2 27.8 0.0 27.7 44.9% 45.1%
Taxes 14.0 13.3 -0.7 12.6 -10.2% -5.5%
Office expenses 13.1 10.0 -2.5 7.5 -42.5% -23.7%
Provision for maintenance cost 1.3 2.1 -0.3 1.8 42.3% 64.9%
Others 8.4 7.3 -0.1 7.2 -14.4% -12.7%
             
Page 25 of 34  

 

 

Expenses by Segment (in US$ million)            
Country 9M17 9M18 ex IAS
29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex IAS
29
Argentina 534.3 503.8 -137.0 366.9 -31.3% -5.7%
Italy 98.0 96.1 96.1 -2.0% -2.0%
Brazil 101.3 91.8 91.8 -9.3% -9.3%
Uruguay 49.5 53.5 53.5 8.0% 8.0%
Armenia 44.0 58.9 58.9 34.0% 34.0%
Ecuador 46.9 50.0 50.0 6.8% 6.8%
Unallocated 19.2 22.6 22.6 17.6% 17.6%
Total consolidated expenses (1) (2) 893.4 876.8 -137.0 739.9 -17.2% -1.9%
(1)Excludes income tax and financial loss
(2)We account for the results of operations of ECOGAL and AAP using the equity method

 

Financial Income and Loss (in US$ million)

  9M17 9M18 ex IAS
29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex
IAS 29
Financial Income 53.1 107.1 -49.9 57.2 7.7% 101.9%
Interest income 30.7 20.0 -4.3 15.7 -48.7% -34.7%
Foreign exchange income 22.2 84.5 -45.4 39.1 76.4% 281.3%
Other 0.2 2.6 -0.3 2.3 927.6% 1040.0%
Financial Loss -214.3 -482.1 171.4 -310.8 45.0% 125.0%
Interest Expenses -92.1 -67.1 -1.6 -68.7 -25.4% -27.1%
Foreign exchange transaction expenses -53.7 -336.5 172.8 -163.7 204.9% 526.7%
Changes in liability for Brazilian concessions -66.3 -69.0 0.0 -69.0 4.1% 4.1%
Other expenses -2.2 -9.5 0.2 -9.3 322.8% 331.8%
Inflation adjustment 0.0 -0.9 -20.6 -21.4 - -
Inflation adjustment 0.0 -0.9 -20.6 -21.4 - -
Financial Loss, Net -161.2 -375.9 100.8 -275.1 70.6% 133.2%

 

Adjusted EBITDA Reconciliation to Income from Continuing Operations (in US$ million)

  9M17 9M18 ex
IAS 29
IAS 29 9M18 as
reported
% Var as
reported
% Var ex IAS
29
Income from Continuing Operations 72.6 -42.5 -8.4 -50.8 -170.0% -158.5%
Financial Income -53.1 -107.1 49.9 -57.2 7.7% 101.9%
Financial Loss 214.3 482.2 -171.4 310.8 45.0% 125.0%
Inflation adjustment 0.0 0.9 20.6 21.4 - -
Income Tax Expense 39.8 -19.3 13.7 -5.7 -114.2% -148.5%
Amortization and Depreciation 81.1 80.7 18.0 98.7 21.6% -0.6%
Adjusted EBITDA 354.7 394.8 -77.5 317.3 -10.6% 11.3%
Adjusted EBITDA Margin 30.6% 33.6%  - 33.5% 287 296
Adjusted EBITDA excluding Construction Service 353.7 393.4 -77.5 315.9 -10.7% 11.2%
Adjusted EBITDA Margin excluding Construction Service 35.9% 39.2% 38.1% 224 337
Page 26 of 34  

 

 

Selected Income Statement Data (in US$ million)

  3Q18 3Q17 % Var. 9M18 9M17 % Var.
Argentina            
Total Revenue 182.6 262.2 -30.4% 490.2 729.7 -32.8%
Total Revenue excluding Construction service revenue(1) 143.8 192.7 -25.4% 388.1 568.0 -31.7%
Operating Income 48.0 70.5 -31.9% 132.9 209.4 -36.5%
Adjusted Segment EBITDA 64.6 78.6 -17.8% 173.5 233.7 -25.8%
Adjusted Segment EBITDA Mg 35.4% 30.0% 541 35.4% 32.0% 336
Adjusted EBITDA Margin excluding Construction service(1) 44.9% 40.8% 416 48.8% 43.0% 355
Italy            
Total Revenue 46.7 48.6 -4.0% 120.4 116.6 3.2%
Total Revenue excluding Construction service revenue(1) 42.3 46.0 -8.1% 109.3 107.8 1.3%
Operating Income 12.9 12.6 2.8% 24.3 18.6 30.7%
Adjusted Segment EBITDA 15.8 15.0 5.3% 33.1 25.8 28.5%
Adjusted Segment EBITDA Mg 33.9% 30.9% 300 27.5% 22.1% 540
Adjusted EBITDA Margin excluding Construction service(1) 36.7% 32.0% 466 29.3% 23.2% 612
Brazil            
Total Revenue 29.7 33.5 -11.3% 92.1 96.1 -4.2%
Operating Income 2.7 -0.9 -393.0% 1.0 -5.3 -119.0%
Adjusted segment EBITDA 6.3 3.6 75.2% 13.0 7.8 66.3%
Adjusted Segment EBITDA Mg 21.1% 10.7% 1041 14.2% 8.2% 600
Uruguay            
Total Revenue 27.4 26.8 2.5% 89.3 84.0 6.3%
Total Revenue excluding Construction service revenue(1) 27.3 26.2 4.3% 88.8 82.3 8.0%
Operating Income 10.5 9.9 6.0% 34.1 33.1 3.2%
Adjusted Segment EBITDA 13.4 12.5 7.0% 44.6 42.8 4.1%
Adjusted Segment EBITDA Mg 48.8% 46.7% 202 49.9% 51.0% -105
Adjusted EBITDA Margin excluding Construction service(1) 49.0% 47.7% 128 50.2% 52.0% -185
Ecuador            
Total Revenue 23.7 22.5 5.4% 67.3 64.5 4.4%
Operating Income 6.0 7.1 -15.4% 15.3 14.4 6.4%
Adjusted segment EBITDA 6.4 7.0 -8.8% 20.1 19.9 1.2%
Adjusted Segment EBITDA Mg 27.1% 31.3% -424 29.9% 30.9% -96
Armenia            
Total Revenue 37.6 28.5 31.9% 87.3 67.0 30.3%
Total Revenue excluding Construction service revenue(1) 35.3 28.5 24.0% 82.8 66.9 23.8%
Operating Income 13.2 12.0 9.8% 28.5 23.1 23.3%
Adjusted Segment EBITDA 16.2 15.0 8.4% 37.4 31.7 18.2%
Adjusted Segment EBITDA Mg 43.2% 52.6% -937 42.9% 47.3% -439
Adjusted EBITDA Margin excluding Construction service(1) 45.8% 52.6% -684 45.1% 47.4% 229
Unallocated            
Total revenue 0.2 -1.0 -121.8% 0.6 0.6 7.2%

 

Page 27 of 34  

 

 

  3Q18 3Q17 % Var. 9M18 9M17 % Var.
Operating income -6.4 -7.2 -11.2% -18.1 -13.8 31.5%
Adjusted segment EBITDA -0.7 -0.3 161.1% -4.5 -1.1 298.5%
Adjusted Segment EBITDA Mg N/A N/A N/A N/A N/A N/A
1Excludes Construction Service revenue.
2Excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, and is calculated by dividing EBITDA by total revenues less Construction Service revenue.
3Starting in 3Q18, reported numbers are presented applying Hyperinflation accounting for our Argentinean subsidiaries, in accordance with IAS 29, as explained above. Please refer to Review of Segments – Argentina to see the effect of this rule in our Argentinean subsidiaries.

 

Page 28 of 34  

 

 

Operating Statistics by Airport: Traffic, Cargo and Aircraft Movements

  Domestic Passenger Traffic
(in thousands)
International Passenger Traffic
(in thousands)
Transit Passengers
(in thousands)
Total Passenger Traffic
(in thousands)
Cargo volume
(in tons)
Aircraft movements
  3Q18 3Q17 % Var. 3Q18 3Q17 % Var. 3Q18 3Q17 % Var. 3Q18 3Q17 % Var. 3Q18 3Q17 % Var. 3Q18 3Q17 % Var.
Argentina                                    
Aeroparque (1) 2,903 2,782 4% 405 738 -45% 224 245 -9% 3,532 3,765 -6% 478 559 -15% 33,201 35,407 -6%
Bariloche 564 464 21% 26 9 200% 1 2 -71% 591 475 24% 119 93 28% 4,874 4,152 17%
Catamarca 17 19 -8% 0 0 - 1 5 -88% 18 23 -24% 33 50 -34% 561 697 -20%
C. Rivadavia 188 169 11% 0 0 -100% 1 1 -37% 188 170 10% 293 197 49% 2,640 2,573 3%
Córdoba 592 485 22% 217 220 -1% 46 31 49% 854 735 16% 466 518 -10% 8,532 7,430 15%
El Palomar (2) 233 0 - 0 0 - 0 0 - 233 0 - 0 0 - 1,935 0 -
Esquel 13 18 -29% 0 0 - 0 0 -53% 13 18 -29% 0 0 - 205 262 -22%
Ezeiza (1) 155 164 -5% 2,313 2,272 2% 39 53 -25% 2,508 2,489 1% 49,045 51,724 -5% 19,199 17,111 12%
Formosa 33 27 23% 0 0 -57% 0 0 -100% 33 27 23% 47 66 -29% 552 603 -8%
General Pico 1 1 -1% 0 0 - 0 0 -100% 1 1 -3% 0 0 - 1,434 1,010 42%
Iguazú 318 268 19% 0 0 27% 0 0 -83% 318 268 19% 0 0 - 2,709 2,400 13%
Jujuy 101 73 39% 0 0 -70% 4 2 147% 105 74 41% 28 30 -7% 1,268 1,126 13%
La Rioja 19 20 -8% 0 0 - 1 4 -86% 19 25 -21% 36 57 -36% 558 538 4%
Malargüe 1 2 -57% 0 0 -59% 0 0 - 1 2 -57% 0 0 - 105 200 -48%
Mar del Plata 99 58 71% 0 0 100% 3 3 3% 102 61 67% 37 31 19% 2,044 1,330 54%
Mendoza 374 324 16% 152 136 12% 5 10 -48% 531 470 13% 366 436 -16% 5,502 5,094 8%
Parana 17 40 -58% 0 0 -42% 0 0 -27% 17 40 -58% 0 0 -100% 604 1,002 -40%
Posadas 86 60 44% 0 0 35% 0 0 291% 87 60 44% 87 117 -25% 1,126 1,023 10%
Pto Madryn 28 20 39% 0 0 - 0 0 - 29 20 41% 0 0 - 195 196 -1%
Reconquista 4 1 174% 0 0 -45% 0 0 -74% 4 2 166% 0 0 - 796 892 -11%
Resistencia 85 94 -10% 0 0 74% 1 0 274% 86 94 -9% 129 92 40% 1,126 1,265 -11%
Río Cuarto 10 15 -33% 0 0 - 0 0 1680% 10 15 -33% 15 4 250% 220 384 -43%
Río Gallegos 61 67 -9% 0 0 346% 1 2 -30% 63 69 -9% 130 145 -10% 800 1,065 -25%
Río Grande 37 39 -3% 0 0 0% 0 0 - 37 39 -3% 51 88 -42% 643 613 5%
Salta 311 282 10% 17 21 -22% 3 11 -76% 330 314 5% 332 353 -6% 3,015 3,447 -13%
San Fernando 6 7 -19% 2 2 -12% 0 0 - 8 10 -17% 0 0 - 9,274 9,447 -2%
San Juan 49 53 -8% 0 0 -84% 0 3 -100% 49 56 -13% 0 42 -100% 618 702 -12%
San Luis 24 25 -2% 0 0 - 0 0 - 24 25 -2% 66 29 123% 416 432 -4%
San Rafael 15 17 -11% 0 0 - 0 0 - 15 17 -11% 0 0 - 1,167 951 23%
Santa Rosa 13 13 1% 0 0 -100% 0 0 66% 13 13 2% 2 3 -10% 736 907 -19%
Santiago del Estero 43 28 52% 0 0 - 0 0 -100% 43 29 51% 50 50 -1% 754 576 31%
Tucumán 234 64 269% 29 3 846% 9 0 8724% 272 67 308% 268 114 135% 2,656 656 305%
Viedma 10 9 11% 0