Corporación América Airports Announces 4Q18 and Full Year Results

Passenger traffic up 3.9% with growth of 4.0% YoY in Argentina, 2.7% in Brazil, and 5.0% in Italy further supported by growth across most countries of operations

LUXEMBOURG--(BUSINESS WIRE)--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 twelve-month periods ended December 31, 2018. Financial results are expressed in millions of U.S. dollars and are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (“IASB”).

Commencing 3Q18, the Company began reporting results of its Argentinean subsidiaries applying Hyperinflation Accounting, in accordance to IFRS rule IAS 29 (“IAS 29”), as detailed on Section “Hyperinflation Accounting in Argentina” on page 18.

Fourth Quarter 2018 Highlights

• Consolidated revenues of $371.0 million, down 10.9% YoY. Excluding the impact of IFRS rule IAS 29, revenues declined 12.8% 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 3.9% YoY to 20.3 million
  • Cargo volume declined 2.0% to 118.5 thousand tons
  • Aircraft movements rose 1.9% to 220.6 thousand

• Operating Income declined 42.2% YoY, mainly impacted by IAS 29, and the operating margin contracted to 14.0% from 21.5% in 4Q17
• Adjusted EBITDA was $90.4 million, down 15.4% YoY, with Adjusted EBITDA margin Ex-IFRIC12 contracting 276 bps to 28.6%
• Ex-IAS 29, Adjusted EBITDA declined 18.6% YoY and Adjusted EBITDA margin Ex-IFRIC12 contracted 331 bps to 28.1%

Fiscal Year 2018 Highlights

• Consolidated revenues were down 9.5% YoY, to $1,426.1 million. Excluding the impact of IFRS rule IAS 29, revenues declined 2.3% 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, Uruguay and Armenia
• Growth across key operating metrics:
  • Passenger traffic up 6.1% YoY to 81.3 million
  • Cargo volume increased 5.2% to 410.1 thousand tons
  • Aircraft movements rose 3.4% to 880.6 thousand

• Operating Income declined 19.0% YoY, mainly impacted by IAS 29, and the operating margin contracted to 21.0% from 23.4% in 2017
• Adjusted EBITDA was $445.9 million, down 3.4% YoY, with Adjusted EBITDA margin Ex-IFRIC12 expanding 142 bps to 36.1%
• Ex-IAS 29, Adjusted EBITDA increased 4.4% YoY and Adjusted EBITDA margin Ex-IFRIC12 expanded 190 bps to 36.6%

CEO Message
Commenting on the fourth quarter 2018 results, Mr. Martín Eurnekian, CEO of Corporación América Airports, noted: “Our results during the quarter continued to reflect the challenging macro environment in Argentina, our largest market. Passenger traffic growth showed further deceleration and total revenues were also lower, impacted by significant currency depreciation in Argentina and, to a lesser extent, in Brazil. The macro and FX environment contributed to the ongoing mix-shift to domestic destinations and the resulting drop in commercial revenues in Argentina. By contrast, in other markets, we continued to make good progress in our commercial initiatives. In Italy, we experienced a 10% increase in commercial revenues as we continued to enhance the customer experience in Florence airport, adding new retail stores and other commercial offerings. The improving economic conditions in Brazil drove an 11% increase in local currency revenues.

Excluding one-time items in both quarters and construction service margin, comparable Adjusted EBITDA Ex-IAS 29 declined 21.4%, impacted by the difficult economic conditions in Argentina as inflation in the country is catching up with currency depreciation reducing the strong operating leverage experienced in the prior quarter. This more than offset the increase in adjusted EBITDA achieved in the majority of our other countries of operations. In Brazil, we delivered a 60.6% increase in comparable Adjusted EBITDA, while Italy reported 40.3% growth in Adjusted EBITDA.

2018 was also an eventful year for us as we positioned the Company for future growth. On the financial front, a key event was our Initial Public Offering. With respect to operations we served over 81 million passengers across our airport network – up 6% year-on-year, continued to add new routes and airlines, and began operations at El Palomar, our newest airport targeting low-cost airlines in Argentina. We also continued to advance our capex program in support of future traffic growth and to further enhance the passenger experience. This included the construction of a new departure terminal at Ezeiza Airport in Argentina, expected to begin operations this year, the start of the expansion of Aeroparque Airport and of regional airports in Jujuy, San Juan, Comodoro Rivadavia and Iguazú, among others. Another important event was the agreement we entered into with Investment Corporation of Dubai whereby we will jointly identify and develop new opportunities in the airport sector in Italy, Eastern Europe and Middle East. Moreover, we extended by 5 years our concession agreement in Ecuador. We are also pleased progress made early this year with the conclusion of the environmental and urban impact studies and approvals with respect to our expansion plans at the Florence Airport, aiming to meet unsatisfied traffic demand in the region and, most recently, with the 14-year extension of the concession agreement for Punta del Este Airport in Uruguay.

Looking to the current year, we see the difficult economic environment together with the added uncertainty of a Presidential election year in Argentina to continue impacting passenger traffic trends. While the macro backdrop is anticipated to gradually improve in the second half, given the lag between the purchase decision and the actual travel date, a pick-up in international traffic is expected to flow into our results early 2020. Domestic traffic in turn, is expected to continue improving during 2019. In Brazil, we expect to see the economy to continue its improving trend throughout the year. More specific to us, we remain focused on implementing our strategy and moving ahead with key capital investments. Key to securing future growth is the ongoing development of new routes and increasing frequencies along with further enhancing our customers’ travel experience. Although we face a number of headwinds again this year, we are well positioned for when the macro environment improves. In the meantime, our healthy balance sheet enables us to continue investing to support anticipated long-term growth.”

Operating & Financial Highlights
(In millions of U.S. dollars, unless otherwise noted)
	4Q17	4Q18 ex IAS 29 (Non-IFRS)	IAS 29	4Q18 as reported	% Var as reported	% Var ex IAS 29
Passenger Traffic (Million Passengers)	19.6	20.3	-	20.3	3.9%	3.9%
Revenue	416.6	363.3	7.7	371.0	-10.9%	-12.8%
Aeronautical Revenues	191.9	178.6	2.7	181.2	-5.6%	-7.0%
Non-Aeronautical Revenues	224.7	184.8	5.0	189.8	-15.6%	-17.8%
Revenue excluding construction service	338.9	307.2	6.1	313.3	-7.5%	-9.3%
Operating Income	89.7	65.9	-14.1	51.9	-42.2%	-26.5%
Operating Margin	21.5%	18.1%	-4.2%	14.0%	-756	-339
Net (Loss) / Income Attributable to Owners of the Parent	-3.6	11.5	28.7	40.2	-1215.9%	-419.7%
EPS (US$)	-0.02	0.07	0.18	0.25	n.m.	n.m.
Adjusted EBITDA	106.9	87.0	3.4	90.4	-15.4%	-18.6%
Adjusted EBITDA Margin	25.7%	24.0%	-	24.4%	-127	-170
Adjusted EBITDA Margin excluding Construction Service	31.4%	28.1%	-	28.6%	-276	-331
Net Debt to LTM EBITDA	2.74	1.84	-	1.98	-7,624	-9,018
Note: Non-IFRS figures in historical dollars are included for comparison purposes.
Operating & Financial Highlights
(In millions of U.S. dollars, unless otherwise noted)
	2017	2018 ex IAS 29 (Non-IFRS)	IAS 29	2018 as reported	% Var as reported	% Var ex IAS 29
Passenger Traffic (Million Passengers)	76.6	-	-	81.3	6.1%	-
Revenue	1,575.2	1,538.3	-112.2	1,426.1	-9.5%	-2.3%
Aeronautical Revenues	767.0	764.6	-48.4	716.2	-6.6%	-0.3%
Non-Aeronautical Revenues	808.1	773.8	-63.8	710.0	-12.1%	-4.2%
Revenue excluding construction service	1,325.1	1,309.3	-81.6	1,227.7	-7.3%	-1.2%
Operating Income	369.1	379.0	-80.0	299.0	-19.0%	2.7%
Operating Margin	23.4%	24.6%	-3.7%	21.0%	-247	120
Net (Loss) / Income Attributable to Owners of the Parent	63.5	-11.6	18.3	7.1	-88.8%	-118.2%
EPS (US$)	0.43	-0.07	0.12	0.04	-89.5%	-117.0%
Adjusted EBITDA	461.6	481.6	-35.7	445.9	-3.4%	4.3%
Adjusted EBITDA Margin	29.3%	31.3%	-	31.3%	196	200
Adjusted EBITDA Margin excluding Construction Service	34.7%	36.6%	-	36.1%	142	190
Net Debt to LTM EBITDA	2.74	1.84	-	1.98	-7,624	-9,010
Note: Non-IFRS figures in historical dollars are included for comparison purposes.

To obtain the full text of this earnings release and the 4Q18 earnings presentation, please click on the following link: http://investors.corporacionamericaairports.com/Results-Center

4Q18 EARNINGS CONFERENCE CALL

When:	9:00 a.m. Eastern time, April 11, 2019
Who:	Mr. Martín Eurnekian, Chief Executive Officer
	Mr. Raúl Francos, Chief Financial Officer
	Ms. Gimena Albanesi, Head of Investor Relations
Dial-in:	1-888-347-6492 (U.S. domestic); 1-412-317-5258 (international)
Webcast:	https://services.choruscall.com/links/caap190411.html
Replay:	Participants can access the replay through April 18, 2019 by dialing:
	1-877-344-7529 (U.S. domestic) and 1-412-317-0088 (international). Replay ID: 10129952.

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.

Figures ex-IAS 29 result from dividing nominal Argentine pesos for the Argentine Segment, by the average foreign exchange rate of the Argentine Peso against the US Dollar. Percentage variations ex-IAS 29 figures compare results as presented in the prior year quarter before IAS 29 came into effect, against ex-IAS 29 results for this quarter as described above. For comparison purposes the impact of adopting IAS 29 in Aeropuertos Argentina 2000, the Company’s largest subsidiary in Argentina of the Argentina segment in 4Q18, is presented separately in each of the applicable sections of this earnings release, in a column denominated “IAS 29”. The impact from “Hyperinflation Accounting in Argentina” is described in more detail page 18 of this report.

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.

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 2018, Corporación América Airports served 81.3 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 annual report on Form 20-F for the year ended December 31, 2017 and any of CAAP’s other applicable filings with the Securities and Exchange Commission for additional information concerning factors that could cause those differences.