Grupo Aeroportuario del Pacífico Q3 2023 Earnings Call Transcript

There are 12 speakers on the call.

Operator

Good morning, and welcome to the It is now my pleasure to turn the conference over to Gap's Investor Relations team. Please go ahead.

Speaker 1

Thank you, and welcome to Grupo Araportuario Del Pacifico's Q3 2023 conference call. Presenting for the company today, we welcome Mr. Raul Ruelta, Gap's Chief Executive Officer and Mr. Saul De Arell, Chief Financial Officer. Please be advised that forward looking statements Please note that the conference call may be made during this conference call.

Speaker 1

These do not account for future economic circumstances, industry conditions, company performance or financial results. As such, statements made are based on several assumptions and factors that could change. This could cause actual results to materially differ from current expectations. For a complete note on forward looking statements, please refer to the quarterly report. At this point, I'd like to turn the call over to Mr.

Speaker 1

Roaza for his opening remarks. Please begin, sir.

Speaker 2

Thank you, Maria, and thank you to everyone who took the time to join us today. Let's begin by addressing the recent events. We know that the last week has been tough on the market given the decision made by the Mexican government. Today, I would like to clarify the changes during this presentation and answer all the questions regarding this news. First, I will start with the financial results and then I will go deeper into the regulation.

Speaker 2

Let's recap GAAP's operational and financial performance for the Q3 of And then there is some events carried to taking questions. For the period, gas transported 16,200,000 passengers Throughout the 14 airports, representing a 10.8% increase. Together with the solid results we experienced during the first half of the year, These results keep us on track to reach our annual growth guidance. Aeronautical revenues increased by 8.2%. In Gas Mexican Airport, there was not increase in the produce price index, excluding petroleum, which led to zero inflation, Increasing the maximum tariff approved.

Speaker 2

In addition, the nearly 16% appreciation of Mexican peso over the U. S. Dollar negatively impacted consolidation of the 2 Jamaican airports during the Q3 'twenty three, therefore affecting our overall increase in revenue. As a result, there was a decline in the consolidated aeronautical revenue per passenger. Northern aeronautical revenue Grew by 14%.

Speaker 2

Most of the increase was attributed to the opening of the new spaces in the airport of Guadalajara, Montego Bay and Los Cabos. Passenger traffic growth and the renegotiation of tenant contracts also contributed to this increase. It is remarkable that despite the nearly 16% peso appreciation during the quarter, which affected 39% of commercial revenue, Northern and Outcome revenue per passenger increased 3%. On that note, I want to mention that just this Past week, at the Guadalajara airport, we operated the Terrace, an upscale rooftop space featuring well known restaurants and bars. Also at this airport, the Nixas Jus building is nearly complete and is expected to be fully operational during the Q1 of 2024.

Speaker 2

EBITDA reached MXN4.3 billion for the quarter, rising 4.5 percent with an EBITDA margin of 67.5%. This increase was not aligned with the passengers traffic growth because of the almost new inflation in the maximum tariff And the appreciation of the peso, which impacted total revenues growth figures. In addition, Cost increase was related to concession taxes, mainly in Jamaica, where we saw a passenger traffic recovery, Specifically in Montego Bay, if you recall, the concession fee in Montego Bay is variable based on the excess earned About the project scenario that was established at the beginning of the concession. We have been below this project scenario with the pandemic, hence, We haven't reflected additional concession fee in the past years. However, we are now seeing a recovery in Montego Bay and thus higher concession fees.

Speaker 2

Furthermore, inflation has caused higher cost of services and has the hiring of additional personnel and the changes in labor Additionally, the minimum wage increase has affected not only the figures for salaries, but also personal contracts such as janitorial, security and maintenance. Moving on to the CapEx, this continues to be carried out in accordance with the master development along with commercial investment. During the quarter, we deployed ARS 2,000,000,000, which were mainly allocated to the Guadalajara and Puerto Vallarta airports. We have also continued with the acquisition process for the land reserve in Guadalajara Airport. In recent events, this past September, Pratt and Whitney, a world leader in aircraft engines, announced that prevent the accelerated of the Airbus 320 and Airbus 321 EOS in line.

Speaker 2

It is expected around 700 engines worldwide We'll undergo inspection from 2023 to 2026. These inspections are mandated by the FFA after a specific number of cycles depending on the engine type. Currently, the FAA has Only issued the 1st service instruction for the initial batch of engines. It is important estimated that it will take from 2.50 to 300 days For BMW to remove and expect the engines to be returned to the operations. Volaris that represents 43% of our total passenger Announced in this conference call that from the current 126 aircraft fleet, they have 22 Airbus 321neo And 55 to 20 NEOs that may be temporarily affected.

Speaker 2

The visibility is limited, But GAAP estimates that most of the impacts will be felt in 2024 and 2025. Vegetation is still evolving. We will keep you updated once more information is about. On the other hand, On October 19, the Mexican House of Representatives present a bill regarding the Mexican federal duties laws Changing the concessions fee from 5% to 9%. This bill was passed by the Mexican Senate Yesterday, going into effect of January 1, 2024.

Speaker 2

The amount paid in excess over the 5% of For the 2025, 2029 NTP period, the new concession tax over the aeronautical revenues will be included in our operational costs and will be recovered through the joint maximum tariff. On October 4, we received a notification from the Civil Aviation Agency Modifying the rules of tariff regulation that have been in place since 1999. After 2 weeks of analysis on October 19, The authority announced the amended rules, clarifying the methodology for determining the joint maximum tariff I'm defining the scope regarding supervision of compliance by the authorities. The full text of the new rules Well disclosed in our press release on that same day and can be found on our website under press releases. I just want to briefly review some of the main changes in the rules for tariff regulation.

Speaker 2

First of all, Changes in the discount rate going from cost of capital to weighted average cost of capital. We believe that this reflects the actual balance sheet position of the company as well as the leverage strategy followed in recent years. Secondly, a close back over 3% excess in warlock units for the 12 Fair Pipes project in the King Canyon. The trigger for the calculation will be when the aggregate workload units of the period exceed 3% of the growth workload units projection established in the MDP. In that case, we will have to calculate excess revenue generated offset by the concession fee paid for those revenues.

Speaker 2

The result will be subtract from the reference value of the next Kinkenya. It is important to mention that this will be review for the wireless unit of the 2025 to 2029 period, hence, Will be applicable in the 2,030 reference box. 3rd, the change in the terminal value. In the formal rules, we project the net cash flow from the year 16 to the end of the concession period. Now the terminal value will begin in the year 6 until the end of the concession period.

Speaker 2

It is important to note The gas John Maximo tariff for 2023 2024 as well as the MDP remain the same. Before we move to Q and A, I would like to confirm our guidance figure for 2023 published in the Q2 of 2023. I just want to underscore our confidence in the underlying fundamental of our business and our commitment to our shareholders. Thank you for your attention. I would like the operator to open the floor for your questions.

Operator

Thank you. At this time, we will open the floor for your questions. First, we will take the questions from the conference call and then the webcast questions. We'll take our first question from Guillermo Mendez with JPMorgan. Please go ahead.

Operator

Your line is open.

Speaker 3

Good morning, Raul, Saul. Thanks for taking my question. I have two questions. The first one is related to the GTF engine situation. I know there's still a lot of moving parts and uncertainty, but what is your best estimate for the potential impacts for In 2024 2025.

Speaker 3

And the second question is regarding the MDP changes, so the Changes on the regulatory front. If you see any room for any kind of legal measures against the changes? And just a clarification in terms of the MDP negotiation, if the base case is still to have it completed before the potential election

Speaker 2

Thank you, Guilherme. This is Raul. I mean, talking about the enzymes, I would say it is difficult to have a number right now because it's something that is really evolving. I will say that in a couple of months, we're going to have more clarity about what could come. But at the moment, on our really first view, we think that it could have an impact from minus 5% To minus 7% on the total passengers of GAAP.

Speaker 2

For sure, this could be Much better if the number of planes in some way come to fly yearly Or don't have any kind of the or they don't have the number of the batch of engines on that plane. But Today is really difficult to say. So we run some, I would say, big numbers about some of our routes Taking account the low factor, for instance, in the rules that there are some additional space, we think that the impact will be lower. But also we have to take in account that in January, on the Mexico City airport, there's going to be a Cut off capacity announced already announced by the federal government that could cause Also, our reorder on some of our operations that could have as a result that some planes Well, some rotation of planes will move from Mexico City Airport to other airports in the country. Saying all that, our view today is going to be an impact that could be around 5% to 7%.

Speaker 2

But again, we're saying that there's a lot of information that today is not completely clear.

Speaker 4

Okay. Hi, Guilherme, this is Saul. So in terms of the MDP changes, we don't see Any potential legal claim in the coming months we will see where is The effects, regarding the MDP negotiation is I think is We have more certainty, more clarity about some of the calculations in terms of that scan rate. I think it's good for the market to have this certainty. And it's very early to know what could be The effect we know that the election will be in the same year.

Speaker 4

We do not expect any change in terms of the review With the government, we believe that this is the basis for the MDP review For 2025, 'twenty nine. And by the end of September, We will have the change of government and probably in the last quarter 2024, we will have or we should have The new NPP and the new tariffs.

Speaker 3

That's super clear. Thank you, Raul and Saul. Have a great day.

Operator

Our next question comes from Alberto Valerio with UBS. Please go ahead.

Speaker 5

Hi, Saul and all that team, thank you for taking my question. My question is regarding the discount rate. When moves to cost of equity to what we Usually, we see a decrease. And if you take the methodology that the government just reports to us, We would see this change. However, for the old regulatory framework, We used to have max container bonds plus a spread that we estimate close to 4%.

Speaker 5

And with this new regulatory framework, even walking being below the cost of equity, This would be higher than the previous one. My question is, this doesn't make sense with the announcement of tariff cuts. Where could I be wrong here? What I could be missing on these new discount rates For the new regulatory framework. Thank you.

Speaker 2

Thank you, Alberto. I will say that going from Which could be the impact right now for us is difficult because we are more than, I mean, a year before We really know which going to be the specific rates that we will have taken account, inflation And all the different variables that today are in some way moving. One of the things that you said that is interesting also is that in the cost of Capital in the new formula, the government at all the different maturities of bonds From 10 from 5 years to 30 years. I think that is good for the calculation of the cost of capital Because at the end of the day, in the time, it will reflect in some way the long term cost of capital For a company in Mexico. So I think that one of the things that are interesting And in some way have been clarified by the system is related to the cost of capital And the different maturities that we'll use that will take in account all the different maturities for the UMS, but it's I think a good news for the company and for the regulation.

Speaker 2

It's difficult to say which is going to be the impact because there are a lot of variables happening right now, We are more than 1 year ago from our actual review Of the calculation of and the maximum tax.

Speaker 5

Fantastic. And if I may, just a follow-up in terms of CapEx. Before we are talking about to keep the same CapEx per passenger Close to ARS40 billion for the next MDP. Should you keep in mind the same reference value or should increase or decrease Then you were thinking 6 months ago?

Speaker 2

I would say that one of the parts That will be is one of the moving parts that we are seeing right now. Today, we don't know how this is going to be the impact How long going to take the impact of the Airbus 320 and 331 engines If you go deeper into the MDPs, it's saying not only in 2025 or Event 2026. So today it's really difficult to say which Additional capacity we will bring to the table. For sure, right now we are working right now on all our Quality services and capacity reviews for understand which is going to be The biggest amount or the amount that we will have on CapEx for the coming years. One of the things that is important to have in mind that some of the CapEx that will be reflected In the new master plan has already paid.

Speaker 2

And with that, I was saying about Mainly the Guadalajara land reserve that already passed through the balance sheet of GAAP, but It will be reflected on the maximum tariff in the next period. So In general terms, I will say that the CapEx per passenger could be closer of what we have in the past, But it's important to know that the effect of the Guadalajara land reserve Has already paid, so it will not have future effect on the cash flows of the whole of the company, Even it will be reflected on the new master plan as a part of our program.

Operator

Thank you. We will take our next question from Pablo Montivay with Barclays. Please go ahead.

Speaker 6

Hi, thanks for taking my question. It's kind of a follow-up to the previous question. The fact that we're moving from to a WACC from a cost of equity, but your debt ratio is very low. It is correct to think that you're basically back again to cost of equity calculation because your debt ratio is quite low. That's number 1.

Speaker 6

Number 2, in general, how do you feel about this agreement? Do you feel comfortable with having these rules? Or is there anything that probably you feel is not right? And I don't know, perhaps A related question on that. Do you feel like the government liberty to estimate the G, the growth Variable on the terminal value calculation is something that you probably dislike or how do you feel in general about this?

Speaker 6

Thank you.

Speaker 2

Thank you, Pablo. Let me begin with the g factor for the terminal value. You'll remember that the G factor has ceased in all the life of our convention. But on the past, it's just to be The average of the last 5 years before the counting of the beginning of the terminal value on the formula. So on the past, it was really clear and the authority applied just Directly from that average of traffic growth.

Speaker 2

On this new version, The yield still say be I would say the same in terms of the terminal value. It still be a calculus from Average growth from the projections of traffic Still the same way and for sure it has a bigger impact than in the past because it will take from the Year 6 until the end of the concession, but at least thinking on what the past The way that the past in the past was the G calculated and in some way accepted By the government, the federal government, I will not foresee any changes in the way that Could or not could affect. At the end of the day, Pablo, the new rules are in some way clear about the way Of the calculus of the G, the only part that we need to have a much better understand It's the normalization of the CapEx for the long term on the terminal value. I will say that. That is The tricky part that we'll need to understand better how the authority will Apply that, we have enough time to understand On the couple of months and to begin any before we have the new negotiation of the maximum tariff.

Speaker 2

Yes.

Speaker 4

In terms of Pablo, this is Solu. In terms of the cost of equity or WACC, We believe that this change reflects the composition of our balance sheet. So obviously, the cost of And what has a main difference, but it's complicated to say now that if we could Return to the cost of equity calculation. The bases are pretty clear and what we have to do as management Is to analyze the best composition, the best balance of our debt, our In general terms of our capital structure and to see what is the best approach for the next Tariq with you and obviously to try to obtain the fair return for our investors In terms of our MDP and obviously in terms of the new regular basis.

Speaker 6

Thank you very much.

Operator

Our next question comes from Bruno Amorim with Goldman Sachs. Please go ahead.

Speaker 7

Thank you. Good morning, everybody. So I have Two questions. The first one on the new regulatory framework for the calculation of the tariffs as of the MDP. I'd like to ask You some help to understand the big picture because you correct me if I'm wrong, but it seems that Those changes they point to lower tariffs.

Speaker 7

The concession fee will increase. The concession is not being extended. And CapEx at the end of the day is a function of traffic, so it's not being changed. So if you have lower tariffs, higher concession fee And other variables are not changing. Is it fair to say the return on the regulated side of the business is coming down?

Speaker 7

Or is there Any offset that I'm not aware of? And the second question is on the parallel discussion for the Short term reduction in the tour, which has been in the press over the past few days. What's the basis for that, for that revision in tour side of the MDP, what could be the offsets to keep the contract balanced? Those are my two questions. Thank you very much.

Speaker 2

Thank you, Bruno. Our today, it's difficult to say which is going to be the final Result of the calculus because at the end of the day, we have moving parts on the demand, Moving parts on the rates. So it's I will say that it's difficult to Dare to say which is going to be the direct impact on the new calculation. In general terms, I will say that the biggest change in all these regulatory frameworks It's the weight of the calculation of the from cost of capital to work. So over there, depending In the structure of cost of debt of the company for the future, it will be or not Offset the possible impacts on the calculus of the WACC.

Speaker 2

But again, It's really difficult to today say a number or say by itself that It's going to be a decrease on tariffs. We need to run the numbers. We need to understand the new characteristics of the market To understand the specifically, which is going to be the size of our CapEx. And after that, we could have A more correct number that will happen in the coming months. It is important to say in terms of the change On the concession fee, it is important to notice that the regulation the new regulation is still having The tool for pass through the tariff and release the cost Of the concession fee, that is implied by the aeronautical revenue.

Speaker 2

So I will say that the effect of the concession fee on the aeroptical revenues In the next modification of the maximum tariff would be neutral, Just that part of the concession fee.

Speaker 4

Yes. Hi, Bruno. This is Saul. In terms of the Sure. Tim, the reduction of TUWA that has been in the press.

Speaker 4

We would like to let you know that it's Something that we do every year and we provide to the market is kind of benefits. It's not an exception. It is Probably right now there is additional noise in that, but it's something that we do almost every year, providing this kind of Incentives to the market and the discounts into our discount In Aeronautical Services, it's happening all the time. Obviously, right now, It was part of the review with the authorities, but it's something that we do regularly. So it is true.

Speaker 4

It is a discount, but it's something that we just to do every So it's not an exception, but just now because on this.

Speaker 2

And to be clear about the 2 reduction, one of the things that we We'll announce in the coming days is that we will have a discount of 2% of 10% In 9 of our airports, during November December, then we will review inflation in all our tires, Not only Dua, and we will keep with the new tariff a discount of the 10% in 9 of our airports. In your terms, That is a promotion that we will put in place for the coming year from 2024. And it is important again really important to say that these promotions or discounts on TUWA It's not affecting or changing the rules on the maximum tariffs because the maximum tariff It's still in place. It's still exactly the same that were negotiated and Announced by the government 5 years 4 years ago. So

Speaker 7

just to make sure that we got it, So you're saying it doesn't change the maximum tariff, but you're going to charge a lower tour by 10% in some airports. So is it fair to say in those specific airports The tariff or the revenues per passenger will be roughly 10% below the maximum tariff going forward?

Speaker 2

Not necessarily because, as you know, the maximum tariff is a basket of services. In that services, we And other services and of course, for example, there are 2 variables that really changed the way that we Calculate the figures about the maximum tariff that is the inflation and the exchange rates. So what we are saying on this moment for the coming year and what some of the things that we will announce in coming This is that we will have a reduction of the 10% of Tura in 9 of our airports. This 10% is in I would say it will be after the inflation review and it's just in that Specific type. It's not directly implied a reduction on the 10% of the total Aeronautical revenues.

Speaker 4

Yes. And just to add something regarding that is that the effect of Inflation that was almost new during the year has for the maximum tariff has more high effect than the Count to us. And also the appreciation of VAPESO is affecting the revenue and represents Obviously, an impact in the revenues, but it doesn't affect directly to the fulfilling of our maximum tariff. So those macroeconomic effect is In July, in the feeling of the maximum tariff. So it's fair to say and Just to let you know that discounts on TUWA has An effect in the maximum tariff that is not full.

Speaker 4

So it will be part of the fulfilling of the maximum tariff during 2023 and the footprint of the maximum tariff for 2024.

Speaker 7

How much of the regulated Tire Phase 2 or the related revenues roughly? It's the majority, right?

Speaker 4

Of our aeronautical revenues represents around 85% of our total aeronautical revenues.

Speaker 7

Okay. So if you lower the 2% by 10%, you lower your revenues on the regulated side by 8.5 Can there be an offset like increasing tariffs for the airlines?

Speaker 2

It will be some kind of offset because The inflation for all for 2024 for all the tariffs, including the Cuba, will be put in place on the 1st month of the year. And again, it will be for the maximum target for the basket. It's important to know what's going to happen with a possible or with The exchange from peso and dollar and with inflation. So it's not like a completely Pass through from discount, it doesn't have a direct, I will say the rest of it, 1 to 1 to what it means around optical revenue. So it's the mix of the basket.

Speaker 2

What we announced is that a decrease on the Tua for 9 of our Gulf airports of 10% discount.

Speaker 7

Thank you very much. I have other questions, but I'll let others ask. Thank you.

Operator

We'll take our next question from Jay Singh with Citi. Please go ahead.

Speaker 8

Hey, thanks for taking my questions. My first one is how much What are you guys seeing from the new Mexicana Airlines? Are they actually selling tickets? And as a follow-up, how much damage have you seen in Cabos because of Hurricane Wilma? Thanks.

Speaker 4

Hi, Jade. This is Saul. Well, we do know exactly what could be the effect and the benefit in caboz I don't know what we're going to hear again, but we believe that obviously the destination tourist destinations We'll be benefited by this diversion of the tourism.

Speaker 2

But yes, but for the For the normal, I mean, saying about what San Jose is saying is the case of Otis, of the impact of Yuracan and Acapulco, I mean, it's Stable, a huge distraction there. For sure, some of the passengers will move to other Leisure destinations. But for the case of normal that affected a couple of days ago in La Paz and in Los Cabos, We don't have major impact on infrastructure. We only have closure of the airports for one day. We are seeing a really quick recovery on traffic, on caboz and in La Paz.

Speaker 2

So we don't see really major impacts on traffic because it will be only reflect a couple of days So, closing, but not just only that.

Operator

Our next question comes from Anton Morgancoter with GBM. Please go ahead.

Speaker 9

Hi, thank you for taking my question. I just have two quick questions. One is regarding your investments on the commercial front. Given the higher concession fee that will certainly pressure some of your cash flows, do you expect to continue at the same pace that you've been having? I mean, I know most of the projects are almost done, but do you expect this to have an effect?

Speaker 9

And also, if are you considering buybacks?

Speaker 2

Thank you, Anton. In terms of the commercial CapEx, as When we make it efficient to have a major commercial CapEx in place, For sure, we see a really short term recovery rates. I mean, we see that the recovery of the investment is Really, really fast. For sure, we will incorporate the impact, the possible impact of the 9% on our business cases. And if the return for the investment still being higher than our Our work as a company is interesting for creating the creation value for the company.

Speaker 2

We will still put in place CapEx. But for sure, we will have to take in account on our business plan, commercial business plans and Specific business plan for new CapEx, these new impacts and for sure in case that The return for the investor is not correct. We will not put in place that specific additional CapEx. In case of the buybacks, for sure, it's something that we will Continue analyzing, but it's important to understand that the new Rules for what will make us make different possible different decisions. We are analyzing that, Which is going to be our new cost desk structure for the future.

Speaker 2

So I will say that For the moment, it is more important for the company to have, first, the clarity, which is going to be Our leverage for the future, for instance, before we make or we put in place any kind of buyback

Operator

Your next question comes from Pedro Falcao with Santander. Please go ahead. And we will move next with Juan Mataza with GBM. Please go ahead.

Speaker 10

Hi. Thanks for taking my question. My question is regarding the direct operation of commercial business. Obviously, revenues in that segment have been growing, but also costs. Are you expecting costs to continue growing or are they on a

Speaker 2

Hi, Juan. It will be I mean, they're going to be a part of the cost, I mean, the cost of sales, if the revenues on the direct operations of GAAP On some of the business lines that we operate directly as could be the convenience stores of the VIP lounges, For sure, it's a part of the cost that is related to cost of sales. So if the revenues still growing, we're going to have some kind of growth On the cost of sales, for sure, on the total cost. But it is important to say some part of this cost Also come from the new openings, pre operational costs and in some of these Directly operated by us business, as soon as we are having bigger Amounts of bigger volumes, we could achieve better prices for the cost that in some moment will begin to give Better margins for the specific for this specific business. But in general terms, I would say that Some of the costs related with the business directly operated by us We're still growing in the line or alignment with the cost of the growth On the revenues.

Speaker 10

Right. Thanks for the clarity.

Operator

And we have a follow-up from Pablo Montivas with Barclays. Please go ahead.

Speaker 6

Hello. Hi. Can you hear me well?

Speaker 2

Yes, Pablo.

Speaker 6

Okay. One question I wanted to follow-up on Bruno's Question. Is the Dua that we're seeing in the press, the 10% decrease Is unrelated to these new rules that the government is setting? I mean, There are like 2 different things. You are offering discounts on the Tua and the rules are a different thing.

Speaker 6

Can you please clarify that? Thank you.

Speaker 4

Hi, Paolo. This is Ouel. I just want to point out that this comes into us It happens almost every year, and we do regularly as far as our incentives To the market, to the airlines, we provide a different kind of discounts, not only to us, we provide discounts when they open Additional routes when the airlines add additional frequencies, so it's part of the business that we have to Take into consideration is the fulfilling of the maximum tariff. That's our target. And as you know, we are in almost 99 That will be affecting us.

Speaker 4

There are other two effects, the exchange rate, the appreciation of the peso And also the inflation applicable to the tariffs. So just to be clear, the discounts Intuit will be 10% for these 2 months of the year, November December. And for 2024, it will be the It stands in 2 of the same, but we will have to update all the specific tariffs, not only to us, all the specific tariffs For the full year with inflation. So at the end and again just to try to point out, our target is Fulfill the 100% of the maximum tariff, last year we reached around 96% Of the maximum tariff and what we are expecting at the end of this year around 90%, 98%, 97.5%. And for 20, 24, we will see what will be the range, but probably will be in that area, 98%, 99%

Speaker 6

Okay. And Just a follow-up on this. Like we have seen the share price that it dramatically move to the downside. What is a piece of information that the market or us were not understanding based on what we have here on the rules? What do you think is a key issue to close the gap and to understand what is the economic impact, the actual economic impact of these changes?

Speaker 4

Thank you. Pablo, I think the main difference is the change in discount rate From key to WACC, and that's the main part. Just to know what could be the effect is Complicated to say now. We have to continue with our regular review with the reporting in terms of CapEx, In terms of the MDP, the different inputs, the OpEx, the discount rate, everything. I think the effect on the share price is more the uncertainty about The phases were announced by the government and we didn't know exactly, but after different meetings and conversations, I think we have a regular basis that you can see is attached in our last We press release is fully explained there.

Speaker 4

And I think this is in terms of interpretation, It's more the perception of the market than a real change. We will see what is the real effect In terms of return, until next year when we are at the end of the year, the different inputs, the different rates, The composition, the capital structure of the balance sheet of the company With all different assumptions, we will have more visibility on that. But for now, it's just to let you know why the new rules Our full translated and is in our press release and you can go through and see All that, the main changes.

Speaker 6

Thank you.

Operator

Thank you. We will now take our webcast questions. I will turn the call over to management.

Speaker 11

Thank you. We have several questions in the webcast. There are one of them that we have already answered, so I will Skip those ones. So I will start with the question of Pablo Coloma from MetLife. Is it fair to assume That EBITDA margin were reduced by 4% with the new concession fee in 2024 is at 60 6% the new expected level of the company going forward.

Speaker 2

Thank you, Pablo. I will say that Today, we will for the coming day for the coming year, we will make a big effort in terms of the cost management. So It's today I would say that it is not completely clear which is going to be the impact on that on the margin because We have a couple of effects today into the table. We have the effects of the engines that we are not pretty clear Today, about the size of that impact. In the other hand, we have the Temporarily impact on the aeronautical revenue coming from the change on the concession fee.

Speaker 2

But also, we have part of our revenues that comes from Yamalca and Aregna fully, I would say affected or not affected by these changes on the law of federal Right. So in that view, I will say that this for us is Early to completely say which is going to be the impact to the margin for the coming year, I could assure you, as management, we are working to offset any kind of or Trying to offset the maximum of all the effort on the cost management To have the correct margin for the company. But again, today It's still being early to understand the impact.

Speaker 11

Thank you, Raul. And now I'm going to move to Ana Cecilia Reyes, she's from Grupo Ballo. She has some questions. Having a little more clarity on the regulation changes, Do you plan to continue with the issue of the new bonds? And So are there any changes on the dividend policy?

Speaker 2

Hi, Cesar. I will say that Today, we are not we don't have yet what's going to be the policy For the next master plan, 2025 to 2029, we need to run the numbers, we need to understand which is going to be The new tiles, the new CapEx and then we will make the decisions about our policies on leverage and dividends. So for the moment, it's not clear which going to be our future policy. Obviously, we need to understand which going to be the new tariffs on the next regulation and on the next Review of the maximum tariffs and to understand the size of the CapEx and to understand Specifically in which year I will need to put in place which size of investment and which kind of investment. So In general, thanks, I would say that today we don't have yet the clarity to say which is going to be The new or our dividend and leverage policy for the 2025, 2029

Speaker 11

Thank you, Raul. I am going to move to Alejandro Fush's questions. He has 2. The first one, the concession tax going to 9%. On the bill presented, it says That the tax is paid on gross sales as it was in the past.

Speaker 11

If I understood correctly, on the remarks, you mentioned that it was on Aeronautical revenue. Has that changed?

Speaker 4

Hi, Alejandro. It's basically the same They share the same methodology for to apply these tax. The change is only about from 5 to 9. That's the change. Everything is the same.

Speaker 11

And the second one, you mentioned that higher cost concession tax will be passed through higher tariff, if I understand correctly. But On the new law that clause was taken, could you please clarify this point as well?

Speaker 2

Yes.

Speaker 4

The maximum tariff includes the cost of the concession fees. In general terms, we will include this for the NBP for 'twenty nine 'twenty five to 'twenty nine. But for the year 'twenty four, because this new deal will be enact In January 1, 24, we will include the excess of the payment over the adenatic revenues On the next reference value that will be used for the calculation of the period 25, 20

Speaker 11

Thank you. So, well, now I'm going to move to Marco Montanez from Victor. He says, reviewing the formula to calculate the maximum tariff, it seems that the companies have the incentive to Increase the leverage to increase the discount rate. What do you think? And which would be the equilibrium to increase the discount rate versus increase the leverage?

Speaker 11

Thank you.

Speaker 4

Hi, Marco. Well, it's some way to see it, but we will have to do a deeper analysis On that, what is the best balance for the company? Obviously, looking for the higher return for our investors, We have to think that moving from key to work is a huge difference and we have to analyze The total effect into that scan rate. So it's something that we will go deeper in the following months. We have, as Raul explained early that we have almost a year to analyze and to see what could be the real effect in terms of

Speaker 2

And just complementing the answer of Saul, again, it's important to think That the effect is not only related on tariffs by itself. The tariffs, the new tariffs that we could have in 2025 to 2029, we need to see the full picture. That means CapEx, leverage And dividend policy. So as soon as we have clarity about that, we could say which is going to be The new policy is in that way for GACO. What is important is trying not to insulate Just the effect of the maximum tariff on the future year, but see it as a full picture that incorporates the CapEx, The leverage and the dividend in different ways for understanding the what's going to be the policy for future of the company.

Speaker 11

Thank you. Kenton Morehead from DWS. She's asking if this increase in tax from 5% to 9% includes iron and non aero, correct? But aero can be recovered. Is that right?

Speaker 4

Hi, Ketan. That's correct. It's basically the same The calculation that we have before is just the change in terms of the percentage that should be applicable To the aero and non aero revenues.

Speaker 11

Yes. Thank you. So and Pablo Coloma from MetLife again. Here, What will apply with the sustained debt issuance? Will you come back to the market?

Speaker 11

Do you think that debt cost could have increased with the new regulation?

Speaker 4

Well, as I was explaining, we will analyze that because the level of leverage It's really important so far. We know that the study from the company last year As to leverage 100 percent of our CapEx, we have a huge commitment in terms of CapEx At the end of this year and for next year and we have to finalize the new NBP to review and decide. That is something that we will analyze in the following months and decide as soon as possible. But For now, it's something that we are analyzing.

Speaker 11

Thank you. And the last one comes from Evan Karts From Lourdes Abbot, is the work calculation based on net debt to total cap or gross debt to total cap?

Speaker 4

Hi, Laurent. This is hi, Ivan, sorry. This is It's over the total debt.

Speaker 11

Perfect. So thank you, Saul. And with this, we will Finish the webcast call, and I will return the word to Raul Revolta for the final remarks.

Speaker 2

Thank you, everyone, for joining us today in our Q3 results conference. The team remains available to answer any questions you may be have. Please enjoy the rest of the day. Thank you very much.

Operator

And this does conclude today's program.

Speaker 2

Thank you

Earnings Conference Call
Grupo Aeroportuario del Pacífico Q3 2023
00:00 / 00:00