Corporación América Airports S.A. (NYSE:CAAP) Q2 2025 Earnings Call Transcript

Corporación América Airports S.A. (NYSE:CAAP) Q2 2025 Earnings Call Transcript August 21, 2025

Operator: Good morning, and welcome to the Corporación América Airports’ Second Quarter 2025 Conference Call. A slide presentation accompanies today’s webcast and is available in the investors section of the company’s website. [Operator Instructions] At this time, I would like to turn the call over to Patricio Iñaki Esnaola, Head of Investor Relations. Patricio, please go ahead.

Patricio Inaki Esnaola: Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today’s call will be Martin Eurnekian, our Chief Executive Officer; and Jorge Arruda; our Chief Financial Officer. Before we proceed, I would like to make the following safe harbor statement. Today’s call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Please note that throughout the call, all references to revenues, costs, adjusted EBITDA margin will refer to figures excluding IFRIC 12. I will now turn the call over to our CEO, Martin Eurnekian.

Martin Francisco Antranik Eurnekian Bonnarens: Thank you, Iñaki. Good day, everyone, and thank you for joining us today. I am pleased to report an excellent quarter for CAAP. Passenger traffic was up almost 14% from last year, with strong growth in the great majority of our markets. Argentina had a standout performance, keeping a new second quarter historical record with double-digit increases in both international and domestic travels. We also saw solid gains in Brazil, Italy, Uruguay and Armenia, while Ecuador remained largely flat. Italy, Uruguay and Armenia also hit new second quarter historical records. On the top line, revenues grew nearly 19%, outpacing passenger growth and demonstrating a strong execution of our management team in increasing revenues per passenger as well as the quality of our portfolio.

Revenue per passenger hedged up to $21 driven by steady contributions for cargo parking, VIP lounges and duty free. This led to a 23% year-over-year increase in adjusted EBITDA, supported by notable contributions from Argentina, Uruguay and Armenia, with the margin up 1.4 percentage points to 38.6%. We closed the quarter with a very strong financial position that gives us flexibility to keep moving on our growth plans. We also wanted to highlight that we obtained environmental approval from the region of Tuscany for the Florence Airport Master Plan in April. Lastly, our Argentine subsidiary, AA2000 has recently approved a $150 million dividend distribution. Moving on to Slide 4. We saw a very strong traffic performance across operations, except Ecuador where traffic was flat.

Total passenger traffic increased 13.7% year-over-year to nearly 21 million passengers, accelerating from the 7% growth or 9% ex-Natal reported in the first quarter. Domestic traffic rose just under 15%, driven primarily by a recovery in demand in Argentina and Brazil and to a lesser extent, in Italy. International traffic increased 12% with positive contributions from all markets, except Ecuador and particularly strong results in Argentina and Italy which together accounted for more than 80% of the year-over-year increase in the quarter. Brazil, Uruguay and Armenia also posted strong growth in international traffic. Let’s look at performance by country. In Argentina, our largest market, overall traffic growth accelerated to 17% from nearly 13% in the first quarter.

Domestic traffic was up 16% supported by sustained demand recovery and multiple route additions. On international front, traffic increased close to 19% reflecting new and expanded services from carriers such as JetSMART, GOL, SKY, Azul, LATAM, Avianca and Air Europa. This strong performance continued into July with domestic and international passenger traffic increasing by 10% and 13%, respectively. Italy delivered a 9% increase in traffic reaching a second quarter record driven by both domestic and international travel. International traffic, representing 81% of the total was up 9%, supported by strong growth at Florence and Pisa Airports. Domestic volumes grew 11%, led by nearly 20% growth at Pisa, mainly reflecting Ryanair’s frequency increases.

This solid performance continued into July with domestic and international passenger traffic increasing by 8% and 6%, respectively. Brazil recorded a 15% year-over-year increase in traffic. Domestic traffic up nearly 14% and transit passengers up 15%. International traffic, though a smaller share of the mix, grew over 41% with routes to the U.S. reaching record highs. In July, overall traffic increased by 6% against July last year. In Uruguay, traffic was up nearly 9% marking also a second quarter record. The performance in the quarter benefited from the strong activity during Easter holiday. Azul announced the introduction of a new route between Montevideo– and Campinas which began operating last month. In July, overall traffic in Uruguay declined 6% year-over-year, mainly impacted by the removal of the Montevideo-Buenos Aires route by JetSmart as well as several days of adverse weather conditions that led to flight cancellations.

In Armenia, traffic was up 8%, fueled by the arrival of several new carriers, including China Southern, Air Cairo, Salam Air, and Sky Express and the announcement of a Wizz Air base launching 8 new European routes. These developments are strengthening connectivity and supporting our role in positioning Armenia as a regional hub. Traffic in July rose by 7% against the same period last year. Lastly, traffic in Ecuador was broadly flat, with a 0.5% decline in total passengers. Domestic traffic rose slightly, while international volumes declined impacted by reduced U.S. operations. High airfare levels and still challenging security environment in the country continue to affect travel. In July, traffic remained broadly flat compared to July 2024.

In sum, this was a record second quarter for Argentina, Italy, Uruguay and Armenia, highlighting the strength and resilience of our network and our ability to capture growth across diverse geographies. Turning now to Cargo on Slide 5. We delivered another strong quarter with cargo revenues up 30% year-over-year, led by Argentina, Brazil and Uruguay. The increase reflected not only higher volumes in key markets, but also improved pricing dynamics and new revenue streams. In Argentina, cargo revenues were boosted by the new cargo business model implemented in mid-March, which is delivering as planned. Uruguay also saw a solid lift from tariff increases in the courier segment while Brazil benefited from increased higher pharma imported volumes as well as higher average ticket on domestic cargo.

Armenia maintained its positive trend, contributing meaningfully to overall volumes. Looking ahead, we will continue to build on this momentum, enhancing our current capabilities and leveraging growth opportunities across our airports while maintaining a competitive and efficient cost structure. I will now turn the call over to Jorge, who will review our financial results. Please, go ahead.

Jorge Arruda Filho: Thank you, Martin, and good day, everyone. Let’s start with our top line on Slide 6. Total revenues ex-IFRIC12 increased 18.9% year- over-year, outpacing passenger traffic growth of 13.7%. This strong performance was driven by double-digit growth in Argentina, Armenia, Italy and Uruguay. Excluding the onetime litigation benefit recorded in the second quarter of 2024, Brazil also delivered double-digit revenue growth, further supporting our solid results. Our revenue per passenger was up 4.5% to $21 from $20.1 last year. Aeronautical revenues were up 15.1% mainly supported by the strong performance we saw in Argentina, coupled with positive contributions from all countries except Ecuador. In Argentina, revenues were up more than 20% supported by an 18.5% year-on-year increase in international traffic and to a lesser extent, higher domestic passenger fees following the tariff adjustment implemented in November last year.

Strong momentum continued in Argentina, Uruguay and Italy, each delivering double-digit growth, while Brazil posted a 9.5% increase in line with passenger traffic trends. In contrast, Ecuador reported a 2.2% revenue decline, reflecting a modest drop in traffic during the quarter. Commercial revenues were up 22% year-on-year, well above the 13.7% increase in traffic, driven by higher cargo revenues and solid performance across parking facilities, VIP lounges, duty-free stores and other passenger-related services. Fuel related revenues, primarily in Armenia, also contributed to the increase. Growth was particularly strong in Argentina and Armenia, up 27% and 26%, respectively, with additional double-digit gains in Italy and Uruguay further highlighting the strength of our commercial portfolio.

Turning to Slide 7. Total cost and expenses, excluding ex-IFRIC12 were up 16.8% year-over-year in line with higher activity but below revenue growth of nearly 19%. Cost of services rose by 15.4%, primarily reflecting higher concession fees and maintenance expenses tied to increased activity in Argentina as well as higher fuel costs in Armenia, consistent with the growth in fuel revenues. SG&A expenses increased 22%, largely due to higher salaries in Argentina, driven primarily by inflation outpacing currency devaluation and tough comparisons with second quarter 2024. We note, however, the total cost and expenses in Argentina excluding IFRIC12 declined 5.5% in the second quarter compared to the prior quarter, confirming the improved trend we signaled in our first quarter earnings call.

Moving on to profitability on Slide 8. Adjusted EBITDA ex-IFRIC12 reached $169 million, up 23% year-over-year mainly driven by a 34% increase in Argentina and positive contributions from all countries except Ecuador. Uruguay delivered another consecutive quarter of strong growth with adjusted EBITDA up 27%, supported by a steady traffic gains and robust commercial performance, particularly in cargo and other passenger-related revenues, such as duty-free and VIP lounges. Armenia delivered double-digit growth underpinned by traffic growth and robust fuel revenues contributing to the positive momentum across our key markets. Adjusted EBITDA at Brasilia Airport was up 16%, excluding the onetime benefit of $1.7 million from the resolution of a litigation process which was recorded in second quarter 2024.

In Italy, adjusted EBITDA increased 2% or 14% when excluding other construction service-related costs at Toscana Aeroporti Costruzioni, a subsidiary of Toscana Aeroporti. Adjusted EBITDA in Ecuador declined 3%, reflecting weaker passenger traffic during the period. Adjusted EBITDA margin ex-IFRIC12 expanded 1.4 percentage points year-over-year to 38.6%, mainly driven by margin improvements in Argentina and Uruguay. Notably, in Argentina, we achieved a 3.2 percentage point margin expansion supported by strong traffic growth and robust commercial revenues despite continued pressure on Argentine peso costs from inflation running ahead of currency depreciation and tough year-over-year comparisons. Turning to Slide 9. On the back of our strong cash flow generation, we closed the quarter with a total liquidity position of $595 million, up 13% from the $526 million recorded at year-end 2024.

Notably, all of our operating subsidiaries reported positive year-to- date cash flow from operating activities, except for Ecuador due to the onetime annual concession fee payment, which is due and paid every January. Cash used in financing activities reflected debt repayments in Argentina and Ecuador as well as dividends paid to noncontrolling interest in subsidiaries. As Martin noted at the beginning of the call, driven by strong cash generation, our Argentine subsidiary has recently approved a dividend distribution of $150 million, of which $127.5 million will be paid to CAAP. We are very pleased with the performance of our operations in Argentina, which enables us to meet our CapEx commitments, pay our debt service and distribute excess cash to strengthen our consolidated cash position.

Moving on to the debt and maturity profile on Slide 10. Total debt at quarter end was $1.1 billion, while our net debt decreased to $643 million from $718 million in December 2024. Our net leverage ratio improved to a record low of 1x, driven by lower net debt and stronger adjusted EBITDA levels. To wrap up, we delivered strong operating and financial results, ending the quarter with a solid balance sheet and healthy debt position. We remain focused on pursuing both organic and inorganic growth opportunities to enhance our airport portfolio and create value. I will now hand the call back to Martin, who will provide closing remarks and discuss our view for the remainder of the year.

Martin Francisco Antranik Eurnekian Bonnarens: To close, let’s turn to Slide 12. This was a very strong second quarter with broad-based passenger growth across our network that underscores the resilience and quality of our diversified portfolio. We continue to perform well in driving revenue growth and EBITDA margin expansion while keeping a solid financial position. On the commercial front, we remain focused on enhancing non-aeronautical. In Argentina, we inaugurated the new duty-free arrivals area at Ezeiza Airport in May expanding it from 700 to 1,100 square meters to improve the passenger experience and capture additional commercial opportunities. In Brazil, construction of the shopping mall at Brasilia Airport is progressing with opening planned for April 2026 alongside other initiatives to grow food and beverage, retail and service offerings across the portfolio.

Strategically, we are moving forward across our concessions. In Argentina, we are progressing with the AA2000 concession rebalancing process. In Italy, we secured environmental approval from the region of Tuscany for the Florence Airport Master Plan in April. While in Armenia, we continue to make progress on the CapEx program approvals to expand Yerevan Airport. On the new business front, we are awaiting official resolution from the government of Montenegro and actively pursuing opportunities in Latin America, Iraq, Angola and other M&A initiatives, among others. Looking ahead, we expect positive traffic momentum to continue in Argentina with strong summer seasons anticipated in both Italy and Romania. In sum, our second quarter performance underscores the strength of our geographic diversification, the quality of our portfolio, the effectiveness of our strategy and the dedication of our teams across markets.

Operations, please open the lines for questions.

Q&A Session

Operator: [Operator Instructions] Your first question is from Guilherme Mendes from JPMorgan.

Guilherme G. Mendes: Yes. The first one is in Argentina. If you can provide some details on what are the next steps for the recaliber discussion? I know you can — you don’t have a lot of visibility on timing, but if you can share what should we expect on the next milestones that would be useful? And the second one is on Motiva’s former CCR airport sales. If you are still interested in this asset, if it is something that you probably would bid alone or you consider doing so with our partner probably dividing the Brazilian assets to the non-Brazilian assets?

Jorge Arruda Filho: Thank you for your question. Let me start with the second one. We are looking at the asset. As you may know, it’s a typical M&A process subject to NDA confidentiality, et cetera. But what we can say at this point in time is that we are looking at the asset. It’s an interesting opportunity for CAAP, and we will keep the market updated as we make progress in the process. Regarding Argentina, your first question, conversations with the technical teams are ongoing, have never been interrupted. The conversations includes the rebalancing of the economic equilibrium, investment requirements in system, among other aspects. There is a new Secretary of Transport since mid-May, we are very engaged with all the authorities. We believe that we are making good progress, and we will keep the market updated as we make concrete steps into this process.

Operator: [Operator Instructions] There are no further questions at this time. I will now hand the call back over to Martin Eurnekian for the closing remarks. Please proceed.

Martin Francisco Antranik Eurnekian Bonnarens: I would like to thank everyone for your participation and interest in our call. I remind you that our team remains available for any questions that you might have in the future. Thank you very much, and please have a very good rest of your day. Bye-bye.

Operator: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may all disconnect your lines.