Concentradora Fibra Hotelera Mexicana SA de CV

BMV:FIHO12

Earnings Call Transcript 2023-Q1

[Operator]

Good morning. My name is Camilla and I will be your conference operator today. At this time, I would like to welcome everyone to FibraHotel's 2023 Earnings -- First Quarter Earnings Conference Call. FibraHotel issued its quarterly report on Wednesday. If you did not receive a copy via e-mail, you can find it at www.fibrahotel.com or e-mail [ [e-mail] ].

Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance and financial results. Unless noted, all figures included here were prepared in accordance with International Financial Reporting Standards and are stated in nominal Mexican pesos.

Joining us from FibraHotel are Mr. Simon Galante, CEO; Mr. Eduardo Lopez, General Manager; Mr. Edouard Boudrant, CFO; and Mr. Guillermo Bravo, CIO.

With that, I will now turn the call over to Mr. Simon Galante. Sir, please begin.

[Simón Galante Zaga, executive]

Thank you, and good morning, everyone. I'm going to begin today's call by providing an overview of the first quarter of 2023 results followed by an overview of the new distribution policy and capital allocation priorities. I will then turn the call over to Edouard Boudrant, our CFO, who will discuss our financial results in more detail, and we will then open the call for questions and answers.

I am pleased to announce another set of record operating results. In the first quarter of 2023, our managed hotel portfolio [indiscernible] occupancy of 60.3%, which is 8.6 percentage points above the first quarter of 2022. ADR increased 15%, continuing to demonstrate pricing power and leading to RevPAR growth of 35%. Overall, recent trends in our portfolio continue, including leisure hotels have a good performance even when considering the exchange rate impact from the peso's appreciation.

In the quarter, we received lease revenue of MXN 110 million from the Fiesta Americana Condesa hotel. We expect numbers to continue to be solid, but with slower growth as they stabilize. Investments from the new [indiscernible] continue to support the results in our Northern hotel portfolio. We posted strong results from border towns such as Tijuana , Sedacuarez and Michoacán as well as Monterrey.

We think there is additional opportunity in these regions and hotels as new companies and clients increase their presence and come to market. Positive results from Mexico City hotels driven by stronger economic activity overall as well as net increase in events and groups. Year-on-year RevPAR in Mexico City increased 62%. Weaker results and prospects for hotels in the Bajio and Southern regions. We continue working on food and beverage initiatives, such as adding franchise restaurants at certain hotels. We recently opened a Las Grecas restaurants in [indiscernible] Saltillo in [indiscernible] Monclova hotels. [ Nayarit] Tepi -- Fiesta Inn Tepic at Senora Grill specialty restaurant in the Fiesta Americana Hermosillo Hotel with an investment of almost MXN 40 million.

Food and beverage revenue for the quarter reached MXN 209 million, which is 42% above the first quarter of 2022. Total revenues for the quarter were MXN 1.256 million or 32% above the first quarter of 2022. EBITDA was MXN 353 million with a -- sorry, 28.1% margin. We were able to offset certain cost pressures, including a tighter labor market with cost control initiatives and a focus on increasing rates. We are pleased with these margin results. AFFO for the quarter was MXN 189 million, even with these positive results, we continue to be cautious regarding macroeconomic conditions with high inflation and high interest rates and tighter credit conditions, which could lead to weaker consumer and economy.

I would like to recognize and highlight the efforts made by the company and our stakeholders during the past couple of years by focusing on our balance sheet Today, we have a stronger financial position than we have pre-pandemic. Net debt is MXN 3.856 billion. The net debt LTM EBITDA ratio is 2.7x, and LTV is only 25%. This financial position allows us flexibility moving forward as well as the ability to rein the state distribution to shareholders.

Regarding distributions, FibraHotel Technical Committee established a new distribution policy based on the maximum amount between 95% of the fiscal income and fixed quarterly amount per CBFI. Instead of a percentage of AFFO, for the first quarter of 2023, FibraHotel will pay a distribution of MXN 0.125 per CBFI for the full year 2023 FibraHotel estimate it will pay 3 additional distributions of MXN 0.125 per CBFI for a total of MXN 0.50 per CBFI for the full year.

This policy allows CBFI holders to have visibility of the expected distribution for the year. We will determine the quarterly distribution amount every year with the intention of increasing it above inflation over the time based on operating results. At the same time, the policy allows FibraHotel to retain cash flow to execute its business plan. We continue to have attractive opportunities for the use of capital, including debt reduction, we expect to continue to pay down our scheduled amortizations, reinvest in our portfolio during the last year, we invested in certain projects, such as adding suite in several hotels, including stream of rooms in Fiesta Americana Condesa Cancun, new master suite in Live Aqua San Miguel de Allende and Fiesta Americana [indiscernible] hotels. We also invested in refurbishing properties like Travo Monterrey, [indiscernible] , and Real Inn Mexicali hotels.

Inorganic growth opportunity to ramp out and diversify our portfolio, we are currently advancing on a couple of projects to develop luxury leisure hotels in leading beach rest is destinations. We expect to have more color on this in addition inorganic opportunities as we finalize agreements and go forward.

We continue to focus on improving ESG and governance. We are proposing to add Gimena Fernando Cortina as a new independent member of our technical committee. If the CBFI holders' assembly authorizes the proposal, our committee will have third a woman member and a fifth independent member.

I would like to end my remarks by recognizing and thanking all our employees, investors and stakeholders for the trust and patience during the past 3 years. We learned a lot of lessons from this crisis that makes us better and stronger company. The results and the new distribution policy marked a new phase of growth and opportunities for the company. With that, I will now the call over to Edouard Boudrant, our CFO, to discuss the financial and operating results of the first quarter.

[Edouard Boudrant, executive]

Thank you, Simon, and good morning, everyone. During the first quarter of 2023, in terms to a very strong operating performance of hotels or financial results followed the trend observed during the last quarters. Tourism and business hotels continued to show positive trends as observed during the first quarter of the year, and our operating performance improved significantly versus the first quarter of last year. The occupancy rate of our managed hotels for the quarter was 60% versus 52% for the first quarter of 2022. We closed the first quarter with 84 hotel event. Average daily rate was MXN 1,436, increasing 15% versus the first quarter of 2022. Quarterly RevPAR was MXN 866, representing a 35% increase versus the first quarter of 2022.

The Fiesta Americana Condesa Cancun Hotel had a net package ADR of MXN 6,594. Occupancy was 84% and net package RevPAR was MXN 5,526, representing a 13% increase versus the first quarter of 2022. In USD, the rate as the rate is sold in USD, ADR increased by 14% for the from $303 to $345 and RevPAR increased by 24% from $233 to $289. Total revenues for the quarter were MXN 1,256 million, versus MXN 9,051 million for the first quarter of 2022.

The rent collected by the Fiesta Americana Condesa Cancun represented MXN 110 million, which is 9% of our total revenues. Our lodging contribution for the quarter was MXN 454 million versus MXN 328 million for the first quarter of the year 2022. The margin of floating contribution for the managed hotels was 29%, improving significantly versus a 25% margin for the first quarter of last year. Real estate expenses were MXN 22 million versus MXN 20 million during the first quarter of last year. Corporate expenses were MXN 78 million versus MXN 60 million during the first quarter of last year.

Our EBITDA for the quarter was MXN 353 million versus MXN 248 million for the first quarter of last year. In terms of EBITDA margin, it improved from 26% to 28%. We closed the quarter with net debt of MXN 3.9 billion, decreasing almost MXN 140 million versus the end of last year. Gross debt amounted to MXN 4.4 billion and the loan-to-value ratio is very conservative at 25%.

During the quarter, the debt position generated a financing cost of MXN 107 million. The net financial income was negative 63 -- MXN 68 million. As of today, our debt structure is extremely healthy. Only 7% is maturing during the next 12 months and average cost of debt is 9.78%. We closed the quarter with a MXN 511 million cash position compared with MXN 501 million at the end of last year and considering that we prepaid MXN 40 million of the MXN 156 million debt maturing in July of this year.

During the first quarter, we deployed MXN 42 million of maintenance and repositioning CapEx. MXN 14 million for CapEx, MXN 16 million on improvement in the Hotel Live Aqua San Miguel de Allende, MXN 9 million on the improvement in the hotel Real Inn in Mexicali and MXN 12 million on improvement in other hotels of the portfolio.

For the quarter, FFO or AFFO were positive MXN 258 million and MXN 189 million. Please note, as mentioned by Simon, in accordance with our technical committee decision to establish a new distribution policy, we will pay for the first quarter of the year, a distribution of MXN 0.125 per certificate. We are very pleased to return cash to our shareholders after a 3-year period with our distribution and we are very grateful with all stakeholders that help us to reshape FibraHotel as a best-in-class company in the lodging real estate space.

At this point, I would like to open the floor for the Q&A session.

[Operator]

[Operator Instructions] Our first question is from [ Edson Vilasco ] with [ Sumikal ]

[Unknown Analyst]

I have just one regarding on not only the distribution, but I remember a couple of quarters ago, the main goal was to reduce the leverage of the company. So regarding the base, are you comfortable with LTV or you're planning to reduce your leverage?

[Guillermo Escobosa, executive]

Thank you for your question and for participating in the call. I think that the distribution decision is a little bit broader than just the debt situation. We really expect it to be a profound changing how the company interacts with distributions and with the remaining cash flow over time. We believe that having a fixed amount with a good certainty of payout and with the ability to grow it helps investors have more visibility. And on the other hand, we continue to see opportunities in the market. The easiest opportunity right now is paying down variable rate debt, that is at 13% on average.

So that is an attractive use of capital. But we're also seeing inorganic opportunities, and we're seeing further projects that we will advance on. So it provides us with the flexibility to take all of the above and have the best opportunity. Right now, we are comfortable with our debt position. At these higher rates, we would like to repay more. But it's still a low leverage on average from what we think. So overall, we're comfortable, but we will continue to do the best alternative with the cash that we have.

[Unknown Analyst]

Okay. A quick follow-up on inorganic growth. I remember, I think it was the last quarter, the fourth quarter of 2022, that you were considering a [indiscernible] an opportunity. But are you still this in play repositioning assets that you have in the portfolio?

[Guillermo Escobosa, executive]

Yes. We continue advancing on those alternatives where we have repositioned internally some hotels already added suite in some hotels and made some investments and we continue to looking at both selling assets and also repositioning some hotels.

[Operator]

[Operator Instructions] There are no further questions at this time. Thank you for participating in FibraHotel's 2023 First Quarter Results Conference Call. If you have any further questions, please do not hesitate to visit www.fibrahotel.com or contact FibraHotel's Investor department relations. This concludes today's call. Thank you, and have a good day.