Concentradora Fibra Hotelera Mexicana SA de CV

BMV:FIHO12

Earnings Call Transcript 2022-Q4

[Operator]

Good morning. My name is Paul and I will be your conference operator today. At this time, I would like to welcome everyone to FibraHotel's 2022 fourth quarter and year-end 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 gbravo.fibrohotel.com.

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. Simón Galante, CEO; Mr. Eduardo López, General Manager; Mr. Edouard Boudrant, CFO; and Mr. Guillermo Bravo, CIO. With that, I will turn the call over to Mr. Simón Galante. Sir, please begin.

[Simón Zaga, executive]

Thank you, and good morning, everyone. I am going to begin today's call by providing an overview of the record fourth quarter and year-end 2022 results. The current situation, and then we'll turn the call over to Edouard Boudrant, our CFO, who will discuss our financial results in more detail, and we will open the call for questions and answers. I am pleased to announce the record results from the fourth quarter and the full year 2022.

The results continue to demonstrate the positive strength in the hotel sector in Mexico together with the quality and diversification of our portfolio. For the quarter, our managed portfolio had an occupancy of 63.4%, which is 7.5 percentage points above the fourth quarter of 2021. These occupancy levels continue to allow us to focus on driving rate as ADR increased 15% to PHP 133. Year-on-year, RevPAR growth was 30%. For the full year 2022, occupancy was 60%, which is 4.3 percentage points below 2019. ABR was 1,325 petrol we achieved 12% above 2019, and RevPAR was MXN 794, which is 4% above 2019.

Tourism numbers continue to be positive. In the quarter, the Fiesta Americana Condesa Cancun Hotel had a net package ADR of MXN 6,448, and we received lease revenues of MXN 111 million for the full year. We received MXN 408 million in lease revenue from the hotel. We are encouraged by positive forward booking numbers and have not seen a slowdown in demand in tourism in Cancun.

During the quarter, we saw a positive recovery from Mexico City hotels, partly driven by the citywide -- in the quarter, our CDMX portfolio increased RevPAR 78% year-on-year and have higher revenues than the same quarter in 2019. On the other hand, Bajio Hotels continue to lack the recovery and the revenue for the fourth quarter of 2022 is almost 20% below the same quarter of 2019.

Even with the strong recovery, there's still additional room for upsizing our portfolio. In 2023, we will focus on those remaining recovery opportunities as well as an increase in ADR for the properties that have good demand dynamics. We are encouraged by the strong budget outlook proposed by the hotel operators for 2023. I -- on the food and beverage front, we are happy to announce that the Sonora Grill restaurant in the Fiesta Americana Mozilla Hotel opened in December 22, and the initial results have been very encouraging. Revenues for the quarter were MXN 1.335 million and EBITDA worth MXN 401 million, which is 15% higher than the third quarter of 2019.

For the full year 2022, revenues were MXN 4.6 million and EBITDA worth MXN 1.344 million, which is 16% higher than 2019. Both quarterly and [indiscernible] are the highest in [indiscernible] history to date. As we continue to face cost pressures, we are pleased with the results of our cost control strategies. We achieved an EBITDA of 30% in the quarter and 28.6% in the full year of 2022, which is the highest for a year in FibraHotel's history. AFFO for the first quarter was MXN 210 million and for the full year 2022 AFFO was MXN 672 million. I would like to highlight that even though we are bullish from the strong results and the budget outlook. We continue to be cautious regarding macroeconomic conditions, including high inflation and high interest rates, which could lead to an economic slowdown.

As you know, our core strategic objective of FibraHotel is having a strong balance sheet. I am happy to announce that we have achieved our target of having a stronger financial position than before the COVID price. At year-end 2022, net debt was less than MXN 4 billion. The net debt-to-EBITDA ratio was 3x, and LTV was only 25.7%. These results are more relevant when taking into account that in this period, we have acquired the Fiesta Americana Hacienda Galindo hotel and reinvested an important amount of CapEx in our portfolio. Regarding capital allocation and based on the company's financial strength, we expect to resume distributions in the first quarter of 2023.

In the future, we do not expect to pay distribution of 100% of the AFFO. We expect to have a fixed quarterly dividend in 2023, and we will announce the distribution policy in the next quarter -- on capital allocation, we will also take into account and use retained turning on other priorities, including debt reduction. We expect to pay down our scheduled amortization, we invest in our portfolio and our ESG and SMB strategy inorganic growth opportunities to round out and diversify our portfolio. For example, we are currently looking at an opportunity to develop a leisure hotel in a leading beach destination, which we will have more color on these additional inorganic opportunities as we go forward. On the ESG front, during the quarter, we updated our materiality analysis by applying the dual materiality concept and identified 17 material topics to focus on, including energy efficiency, renewable energy, labor practices, water management, corporate ethics and Integrity, among others.

We also received a score of 49 points versus 46 points the previous year from SMP CSA assessment and the first time score of C from CDP. These results will not be possible without the commitment and effort of our employees, partners and investors. We appreciate your [indiscernible] With that, I will now pass the call over to Edouard Boudrant, our CFO, of FibraHotel to discuss the financial and operating results of the second quarter..

[Edouard Boudrant, executive]

Thank you, Simón, and good morning, everyone. During the fourth quarter of 2022, thanks to a very strong operating performance of our sales, our financial results followed the trend observed during the last quarters. Tourism and business hotels continue to show positive trends as observed during the third quarter of the year and our parking performance improved significantly quarter-over-quarter.

The occupancy rate for managed hotels for the quarter was 63% versus 62% for the third quarter of 2022. We closed the first quarter with 84 hotel opened. Average daily rate was MXN 1,433, increasing 10% versus the third quarter of 2022 and a 15% increase versus the first quarter of 2021. Quarter pre-RevPAR was MXN 909 representing a 13% increase versus the third quarter of 2022 and a 31% increase versus the fourth quarter of 2021. The Fiesta Americana Condesa Cancun Hotel had a net package at of MXN 6,448. Occupancy was 78% and net package RevPAR was MXN 523 in line versus the third quarter of 2022 and representing a 15% increase versus the fourth quarter of 2021. Total revenues for the quarter were MXN 1,236 million versus MXN 1,210 million for the third quarter of 2022.

It is the highest level ever reached in terms of revenues of dive. The rent collected by the hotels Fiesta Americana Condesa Cancun represented a MXN 111 million, which is 8% of our total revenues. Our login contribution for the quarter was MXN 505 million versus MXN 438 million for the third quarter of 2022.

The margin of lodging contribution for the managed hotels was 32%, improving significantly versus a 30% margin for the last 2 quarters. Real estate expenses were MXN22 million versus MXN 20 million during the third quarter of 2022. Corporate expenses were MXN 82 million versus MXN 68 million during the third quarter of 2022. Our EBITDA for the quarter was MXN 401 million versus MXN 349 million for the third quarter of 2022, the highest level for reach in terms of EBITDA for FibraHotel. In terms of EBITDA margin, it improved for 29% for the past 2 quarters to 30%.

We closed the quarter with a net debt of MXN 4 billion, decreasing almost MXN 300 million versus the third quarter. Gross debt amounted to MXN 4.5 billion, a lower level compared to the pre-pandemic level. Please note that during the quarter, we decided to fully amortize the MXN 200 million banner the facility, which were down in March of 2021. With that anticipated amortization, we prepaid MXN 380 million during the year. In December, we decided to convert part of our[indiscernible] facility denominated in Mexican pesos to U.S. dollar. MXN 486 million were converted at an exchange rate of 19.76, leaving the following: MXN 460 million at TIL plus 200 basis points and USD 24.6 million at suffer plus 250 basis points. With this debt conversion, U.S.-denominated debt represents 15% of FibraHotel total debt, previously 5% or USD 35 million and FibraHotel average cost of debt decreased approximately 47 basis points. We finished the quarter with a conservative LTV of 26%, a lower level compared to the pre-pandemic level.

During the quarter, the debt position generated a financing cost of MXN 117 million. The net financial income was negative MXN 98 million. As of today, our debt structure is extremely healthy. Only 8% is maturing during the next 12 months and average cost of debt is 9.42%. We closed the quarter with a MXN 501 million cash position compared with MXN 422 million at the end of the last quarter. During the fourth quarter, we deployed MXN 98 million of maintenance and the repositioning CapEx. MXN 46 million for [indiscernible] CapEx, MXN 20 million on improvement in the hotel Fiesta Americana Condesa Cancun, MXN 13 million on improvement in the hotel Liverpool. MXN 11 million for the Sonora Grill restaurant in the Fiesta Americana Mozilla Hotel and MXN 15 million of improvement in all the orders of the portfolio.

In the fourth quarter, in line with our audit committee and our auditor recommendation, we did a review of the different values of our real estate properties in our portfolio. The net impact to the change in asset values was a positive MXN 493 million. I would like to highlight that this change are small as a percentage of total asset value. This is partly due to our historically conservative stance regarding the value of the assets on our balance sheet as we carry the value for managed hotels at a historical depreciated costs. As an example, accumulated depreciation for the property at MXN 3 billion or 22% of the historic costs. The change included an impairment charge of MXN 13 million for 2 hotels and a MXN 506 million increase from MXN 3.6 billion to MXN 4.1 billion in the fair value of the hotel Fiesta Americana Condesa Cancun, registered as investment property. This increase in fair value is based on the hotel in perspective. The appraisal has been conducted by HVS, a prestigious film specialized in hospitality and[indiscernible]service.

For the quarter, our FFO or AFFO were positive MXN 283 million and MXN 210 million. Please note that for the fourth quarter of 2022, we will not pay distribution. At this point, I would like to open the floor for the Q&A session. Operator, we are ready to take any questions.

[Operator]

[Operator Instructions] There are no questions at this time. I'd like to hand the floor back over to management for any closing comments.

[Simón Zaga, executive]

Thank you for participating in our call. And if you have any questions, as always, please don't hesitate to reach out. Have a great day.

[Operator]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation