Grupo Aeroportuario del Pacifico SAB de CV
BMV:GAPB
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Grupo Aeroportuario del Pacifico SAB de CV
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Good morning, and welcome to GAP's First Quarter 2021 Conference Call. [Operator Instructions]
It is now my pleasure to turn the call over to GAP's Investor Relations team. Please go ahead.
Thank you, and welcome to the Grupo Aeroportuario del Pacfico First Quarter 2022 Conference Call. Presenting from the company today, we welcome Mr. Raul Revuelta, GAP Chief Executive Officer; and Mr. Saul Villarreal, Chief Financial Officer.
Please be advised that forward-looking statements may be made during this conference call. These do not account for future economic circumstances, industry conditions, the company's future performance or financial results. As such, statements made are based on several assumptions and factors that could change causing actual results to materially differ from the current expectations.
For a complete note on the forward-looking statements, please refer to the quarterly report issued earlier this week.
At this point, I'd like to turn the call over to Mr. Revuelta for his opening remarks. Please begin, sir.
Thank you, Maria. Good morning, everyone, and thank you for joining us today. GAP experienced solid results during the first quarter of 2022, reflecting the recovery that has been prevalent throughout the Mexican travel industry. We reached almost 30 million passengers, a recovery of almost 70% compared to 2021, an increase of 6% versus 2019. This outstanding result was mainly driven by growth of the Tijuana, Los Cabos airport, 2 our strongest performing airports for the year 2021.
Notably, Guadalajara also did well, and for the first time since the pandemic, experienced positive passenger traffic numbers during March, evidence of the strengthening business travel market. As a result, aeronautical revenues increased by 47% compared to the 2019, driven by the passenger traffic recovery throughout GAP's network as well as an increase in the maximum tariff, reaching 97% of that period maximum tariff.
Moving on the commercial revenues, it rose by 33% compared to 2019. Most of the increase came from food and beverage, retail operation as well as duty-free. The tenants discounts that we have discussed previously, continue in place. However, given the passenger traffic recovery, most tenant ended up paying their revenue share. As we mentioned in the previous call, we negotiate the terms of several contracts, which resulted in financial conditions that were more positive for the company.
In addition, we opened more square meters, both reflected in the extraordinary increase of 87%, which we can see in the total commercial revenues compared to 2021. The only business line that continues to lack is advertising with a minus 48% versus 2019. There are, however, several strategies that we are working on to mitigate this impact, including the development of digital advertising using the actual airport [indiscernible] to enhance brand experience, for instance, the use of marketing shows.
EBITDA reached MXN 3.7 billion for the quarter with an EBITDA margin of around 74%. This was the result of the outstanding passenger traffic recovery, higher maximum tariff and solid commercial revenues that were partially offset by the 26% increase in cost of service by 2019. Only 15% increase, excluding the consolidation of Kingston airport, since this airport did not enter our portfolio until October 2019.
We have worked hard to maintain our cost control policy, but we do expect some higher cost coming in accordance with our expansions and inflationary effects.
Moving on the financial performance, cash and cash equivalents increased by 15%, reaching a total of MXN 16.9 billion. On the debt front, this figure reached MXN 31.2 billion. This includes a new issuance of another tranche of debt bonds in the Mexican market for a total of MXN 5 billion. A portion of these proceeds were used to pay the GAP17 bond that was during March 2022 for MXN 1.5 billion. The remaining portion will be allocated towards mandatory CapEx for this year as well as other commercial investments. It is important to mention that the rating agencies of S&P and Moody's, both gave this bond a AAA rating on a local scale due to the GAP's solid result and strong fundamentals.
In accordance with these figures, we continue with healthy leverage levels reaching a net debt-to-EBITDA ratio for trailing 12 months of 1.1x, complying with all our debt covenants.
Moving on to the CapEx. In Tijuana, the construction of the terminal processor building progressed as planned. If you look at our GAP Day 2022 event, you were able to see the first half and almost finished project [indiscernible] a lot of work has been finalized, and we are scheduled for the official opening in May 2022. This new building will add around 40,000 square meters, and it will already expand our ability to better serve international markets, complementing the great functionality of the cross-border bridge.
In the Guadalajara Airport, we continue with the construction of the second runway as well as a new commercial mixed-use building. We expect that this building will be completed during 2023, and we look forward to sharing those updates with you in the future communication. The international terminal building in Los Cabos continues its expansion, adding around 20,000 additional square meters, which also includes commercial spaces.
I want to mention that the construction project has reached 50% progress rate. Additionally, we are currently working on the design for the second terminal building in Puerto Vallarta, which is already in the first stage of construction.
To conclude, I want to mention that our ordinary and extraordinary shareholder meeting took place last week, and all the proposals in the agenda were successfully approved. With a quorum of 82.9% for the ordinary shareholders' meeting and 86% for the extraordinary shareholders' meeting. As I mentioned, we had a very successful GAP Day at in the new terminal processor building Guadalajara last month.
I just want to say a special thank you to all those who attended as well as our team who put it together. At this point, that is for my remarks. I will ask the operator to please open the floor for your questions.
[Operator Instructions] And the first question comes from Guilherme Mendes with JPMorgan.
So I have 2 questions. The first question is regarding margins. My question is, how sustainable do you see margins going forward? You just mentioned about cost pressures going forward. But what can we expect in terms of EBITDA margins over the incoming quarters? And the second question is in terms of traffic performance. What is the outlook for traffic in 2022?
This is Raul. I mean in general terms, I would say that exactly with all the pressure that we will have on cost, for one hand the inflation that is happening around the world. And in the second part, additional square meters that we are putting into our portfolio with the expansion of Tijuana Airport, for instance, or Cabos Airport on this year.
We -- for sure we're going to have some additional pressure on the cost. So I will say that talking around margins that will be aligned with our 70% to 72% will be something that could be sustainable on time.
But again, we are in a, I would say, a really shaky moment when we are talking about inflation. So I would say that, that could be the -- one of the area of pressure for this year. Talking about the outlook for traffic in 2022. We -- as we said in our guidance, we are expecting going from the range of 14% of increase to 20% of increase. Again, we also talk about this guidance, assuming that there is no other additional problem with pandemic or the deliveries for planes or additional planes in the fleet of the Mexican airlines, of course in time. But we are aligned on that guidance of traffic.
And the next question comes from Alejandro Zamacona with Credit Suisse.
Quick question in terms of dividend. So if you start to assume that the MXN 10.5 billion or MXN 14.4 per share dividend, is it in some way a catch-up for the dividend needed in 2020? And how should we think for dividends going forward?
Yes. Alex, this Saul Villarreal. Well, as we have mentioned before in the previous quarters, we will try to normalize our dividend payment. We just recently announced that the shareholders meeting approved the payment of MXN 14.4 per share for this year. Indeed, we are planning to make 2 different -- to pay in 2 tranches during the year. But we will try to see the normalization of the dividend as we had in the previous to the pandemic. So 2020 was the only year that we didn't pay any dividend, but we are considering to continue and normalize for the coming years.
Okay. And then my second question, if I may. In terms of labor cost, do you have any plans for hiring new staff in the upcoming months or quarters? And with the terminal expansions in Los Cabos and Guadalajara, this could be a potential impact on costs in the upcoming quarters. So just curious on that point.
Alejandro, this is Raul. I think just as we talked in different conference calls, it is important to remember that all the airports works with some way economies of scale. So always the cost arrive first than the passengers because at the end of the day, when we put in place a new facility, if the facility is designed for GAP -- or expand the possibility of attend passengers for at least 5 to 6 years. So I will say that for sure, as we put in place -- or we put in operations, the different terminals, we're going to see some value jumps on the cost. The phase 1 will happen in the coming weeks that we will be in operation of the Tijuana airport new building.
At the end of the day, we are increasing more than 80% the total square meters of the airport with this new terminal facility. So yes, we're going to see a jump in cost -- on cost. Because for this example, we're going to have additional maintenance, additional cleaning services, additional security services, energy consumptions, insurance, everything for our new building.
So I would say that for sure, we're going to see some kind of jump in the cost of operation for terminal Tijuana in May. For sure, for the end of the year that we -- and we will end the expansion of the T2 in Los Cabos. Also, we're going to have some additional jump. But I would say, for this year, this will be the 2 only facilities that we will begin to operate, and that could have some kind of impact in the cost of operation.
I will say for the size of the management, these are the more clear effects that we want to see in the coming months. But for sure, we also know that the inflationary effect will give us some additional pressure. For sure, we will try to avoid as possible all this impact with the negotiation of our different contractors. But the truth is that is something that is happening around the world. So it would be difficult to say that GAP will be maintained neutral to this effect.
And the next question comes from Juan Macedo with GBM.
Congrats on the report. My question is regarding CapEx. We saw a slightly weak deployment for the quarter considering your guidance for the year. Could you give us some color on a possible time line you have for the full deployment of the CapEx?
Juan, yes, it is in -- the first quarter of the year is complicated because we have to conclude some projects. But according to readvancing in the year, we will make and deploy in a higher level and a higher pace the CapEx, not only for the mandatory CapEx, which is the MDP, but also for the commercial projects.
We have several projects like the second runway in Guadalajara, which is already on way. We have the construction of the mixed-use building in Guadalajara, which is already on the way. Also, we are finishing the CapEx for the Tijuana Airport. And we are also finishing the expansion of the Los Cabos Terminal 2 expansion. So it will be accelerated in the following months. So we are pretty confident to reach the level of CapEx that we announced in our guidance.
And the next question comes from Bruno Amorim with Goldman Sachs.
I have a question on your traffic growth guidance for the year. If we just multiply your first quarter traffic by 4 as a way to simplify the forecast for the full year. This implies a 17% growth year-on-year, which is pretty much in the midpoint of your guided range. And to the extent that there could be additional growth during the year, don't you think the guidance is kind of conservative? Is it a fair assumption to make?
Yes. For sure, we are being somewhat cautious because let's think for a second that some -- different changes with the pandemic is happening that in Mexico, for instance, what used to be the biggest airline in terms of domestic traffic that used to be Interjet, stopped operations for the pandemic. So we know that in Mexico, we are having a lack of capacity in terms of the domestic planes. So for sure, we know that demand is there. But in some way, we now just seeing the load factors of the different airlines that this space, for instance, VivaAerobus or Volaris are getting in a really higher load factor in their planes.
So what I'm trying to say is that all the sort of fleet that the airlines have announced for sure will give us some additional jump or even could give us some more positive result on the traffic. But at the end of the day, depends more in their capacity to bring additional fleet.
And in that area, one of the other additional big question that everybody in the market is, in some way, asking is for new planes. There are some parts that in some way are jeopardizing by the war of Ukraine. I mean some of the timing parts of the planes, for instance, have a shorter, in terms of inventories. So at the end of the day, I see some kind of risk coming for the additional fleet. But in general terms, I could say that if the Mexican airlines fulfilled their original plans or the plans that have announced. For sure, we could be more in the positive side of the guidance or even higher. But for sure, I will say, Bruno, that our numbers as always [ cash-run ], and taking in account different risks that we are seeing on the horizon. But for sure, if this risk will not occur, for sure, we're going to be in a more positive result for another year.
Very clear. And if I may, just a follow-up question. Interest rates, the 10-year rates in Mexico are on the rise. They are now near multiyear highs. And they are an important component of the tariff adjustment process every 5 years. Do you think -- let's assume for the sake of simplicity, that 10-year rates remain where they are, near 9%. Is it straightforward for you to see that being reflected into the allowed return during the MDP process? Or is there any sort of subjectivity around that?
Bruno, this is Saul. Yes, you're right. The interest rates are high right now. And obviously, it depends at the moment of the exclusion of the review of the MDP in the new tariff approval from the authorities if at all. We are going to consider the new -- at that moment, the new rates. So it's something in our favor? Yes, absolutely, because this is a moment that we have, in some way, a defense position because we have 78% of our interest rate fixed.
We have an average cost of finance of around 7%, which is very good according to the circumstances. But for the tariff negotiation, we will consider the last 24 months of the average of the interest rates. So it implies that in case that we are in the middle of the negotiation, we will consider a higher level of rate. So you are correct.
And the next question comes from Filipe Nielsen with Citibank.
I have 2 questions on my side. The first one is regarding traffic recovery. How do you see Jamaican traffic recovery in the coming quarters versus Mexico recovery? And how do you see it building up, like stealing some tourism traffic from Southern Mexico? And how do you see this -- the tourism in Jamaica building up compared to the Mexican tourism? That's the first one, and then I'll ask the second one.
Okay. Thank you. Talking about the recovery of the traffic in Jamaica. Let's remember that the Jamaican authority has been more -- in the past has been more aggressive in the way that they manage the COVID. And in some time, in the last year, they closed completely the islands. What is important also to remember is that the peak time for the -- the peak season for the travelers in Jamaica runs from November to March. So part of the restrictions that the Jamaican Government put in place, of course, or touch part of the winter season in the last year and part of this year.
So I will say that we are really positive of the results that Jamaica will have. For the next winter season, I mean in the next November, we are seeing that the most important, I would say, structural change for our leisure destination is happening. That is the expansion of the key rooms. And Montego Bay developed is right now -- in the area of Montego Bay is happening an enormous growth of additional key rooms. So I will say that we are positive in the middle and long term of Jamaica because the traction of new hotels is still happening.
For the case of Cabos and Vallarta, it's also happening the same. We are seeing a huge construction of additional key rooms in the case of Vallarta. One example of that project is the [indiscernible] of Vallarta Group that is put in place a really important project for the coming years on Vallarta. The first stage of this project will be opened, and inaugurated on November of this year. Also in Cabos, it's an interesting booming real estate that give us the sense that the future will be also really excellent for Los Cabos. I would say that assuming we are seeing that the -- in all our leisure destination Los Cabos, Puerto Vallarta, Montego Bay, there's an important growth of key rooms and hotels, development of real estate that will -- that give us, in some way, the tranquility of that really optimistic future for coming years.
So -- and also, when this is mixed or blended with the change in some of the trends of traffic in the world that the long haul is not working as good as in the past, that we are seeing some kind of trend of people going for vacation in a more closer area than in the past. We're also seeing that U.S. will be a market that will for sure accelerate the result of leisure destination Los Cabos, Vallarta or Montego Bay.
And I have a second question, if I may. Do you see any new projects aside of Barbados that you're interested in? And how are the negotiations of -- or studies for new airports in the future?
For the moment, the only project that we are seeing is Barbados. We are, as you know, we're really careful about and disciplined about all the M&A strategies. So for the moment, I would say that the only project that we are seeing is Barbados.
And the next question comes from Lucila Gomez with Compass Group.
So I have 2 questions. And my first one would be, do you feel confident on your -- the current maximum tariffs that you have in place? And are you maybe looking forward on the coming months -- to quarters to reach 100%? And my other question would be, in the commercial side, do you currently have any discounts to help increase the -- for example, on restaurants and stores to help them out during the pandemic or are you no longer giving any more discounts on rents?
Lucila, this is Saul Villarreal. Thank you for your questions. Yes, we feel confident about the maximum tariff. Right now, we are in the level of 97% of fulfillment. We just adjust some of the passenger charges from April. So in some of our bigger airports in Mexico.
So we believe if we continue with this trend, and the passenger traffic continues, so we will reach the total of the maximum tariff. We have to consider and taking into account the exchange rate with effect in favor the fulfillment of the maximum tariff. And we have to consider also the inflation. Higher inflation is more complicated to reach higher -- or the 100% of the maximum tariff. So it depends on these 2 external factors. But for now, we are pretty, pretty confident of the -- to reach the 100%.
In terms of the commercial side, we have been given some discounts according to our program of incentives, supporting some of our tenants in our airports. However, due to our passenger traffic trend and recovery, we are -- the effect is very irrelevant. We do not see that we will continue providing. We have to take into account that the discounts are over the minimum rental, and most of our clients are paying already the royalty fee, which is higher than the minimum rental. So the effect of the discounts are not relevant at this moment.
[Operator Instructions] The next question comes from Pablo Monsivais with Barclays.
I have a quick one. I recall that you said at the beginning of the call that you renegotiated some contracts, commercial contracts at your airport. Can you please give us some color on what is your expectations on the non-aeronautical revenue per passenger growth. And because we have seen an improvement over the last few quarters. But I want to see if there's a chance that we should see that number increasing, I don't know, 5%, 6% or 10% or it's just going to be flattish or following inflation. Just a little bit more detail on that would be great.
Thank you, Pablo. I will say that there's 2 big parts that are in some way, helping us to -- or 3 parts that are helping us to get a better result on commercial revenues. The first for sure is the passengers. So the key part there for sure is the volume. But also, if we see a better -- even a better recovery in international passengers in Vallarta, Cabos and Montego, we will see some additional jump on the commercial revenues. The second is related in the newer spaces for [indiscernible] as you know -- everyone knows, Cabos perhaps one of the biggest rate of revenue per -- commercial revenue per passengers in Mexico. So as we have the new building or the expansion of the building in Cabos in time for November or the new season of passenger in Cabos, we now have some additional jump on the results.
And I will say last, some of the contracts that we have -- we negotiated are related mainly in Vallarta. What happened in Vallarta? As everybody knows, we are beginning the construction of the new terminal building that will be operative on 2 more years or for the last quarter of 2024. So in the midterm, we have at least 2.5 years in the actual terminal that we need to take some advantage of the recovery of the passengers.
So we begin some negotiation of really short time of 2.5 years contracts, to get some additional revenues for the case of Vallarta. So I will say that in general terms, we are optimistic to maintain or either increase more our results on the ratio of commercial revenue per passenger, we have the -- almost MXN 85 per passenger in the first quarter. I will say that we will continue that trend of growing for the end of the year.
[Operator Instructions] And you have a follow-up question from Guilherme Mendes with JPMorgan.
Quick follow-up question in Jamaica. How has been the negotiation regarding a potential rebalance on the contract?
Guilherme, we have been working with the government of Jamaica regarding this. The authorities are hiring some advisories in terms of beginning with the negotiation. Our perception is that we will finalize at the end of the year. Even though we have a very good relationship with the government, it is important that the negotiation will be done by the special team integrated by different ministers from the government. So we have to wait until this is fully integrated, and the advisers are ready to begin with the negotiation. So our best estimate is to begin in June in order to finalize at the end of the year.
And there are no further questions over the phone at this time. And at this time, I would like to hand the call over to the team for any closing remarks.
Thank you, everyone, again, for joining us today in our first quarter results conference. We want to remind you that we are always open and available to answer any questions. On behalf of GAP, we wish you a great day.
Thank you. And this does conclude today's call. Thank you for your participation. You may now disconnect.