Earnings Call Transcript - CAAP 2026-03-17

Operator

Good morning, and welcome to Corporacion America Airport's fourth quarter 2025 conference call. A slight presentation accompanies today's webcast and is available in the Investors section of the company's website. As a reminder, all participants are in a listen-only mode. There will be an opportunity to ask questions at the end of the presentation. At this time, I would like to turn the call over to Patricio Inaki-Esnola, Head of Investor Relations. Patricio, you may go ahead.

Patricio Iñaki Esnaola, Head of Investor Relations

Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today's call will be Martina Urnequian, our Chief Executive Officer, and Jorge Ruda, our Chief Financial Officer. Before we proceed, I would like to make the following safe harbor statement. Today's call will contain four lucky statements, and I refer you to the four lucky statements section of our earnest release and recent filings with the SEC. Resume no obligation to update and revise any forward-looking statements to reflect new or change events or circumstances. Please note that throughout this column all references to revenues, costs, and just an easy-time margin will refer to figures excluding IPv6 Cloud. Also, all comparisons discussed are year-over-year unless otherwise noted. I will now turn the call over to our CEO, Martin Euler-Kamp.

Martin Francisco Antranik Eurnekian Bonnarens, CEO

Thank you, Iñaki, and good morning to everyone joining us today. We finished 2025 with a very solid performance. Across the business, we saw continued revenue momentum, strong profitability, and important progress on the strategic front. Passenger traffic remained robust in the fourth quarter, raising just over 9% year-over-year and reaching new heights for both the quarter and the full year, with Argentina, Armenia, Italy, and Uruguay setting annual traffic records. Equally important, this performance was broad-based with positive trends across our main markets, in particular strong international growth in Argentina. Revenue growth, once again, outpaced traffic, supported by solid performance in both our aeronautical and commercial businesses, along with further improvement in revenue per passenger. Commercial revenues remain especially strong with good contributions from cargo, fuel, and passenger-related services across the portfolio. This positive momentum also translated into strong profitability. We delivered strong adjusted EBITDA growth in the quarter, together with meaningful margin expansion. As operating leverage and commercial execution continued to support results. At the same time, we ended the year with a healthy balance sheet, low leverage, and strong liquidity, providing significant financial taxability. We also made meaningful strategic progress. In Armenia, we secured a 35-year extension of the concession, and in Galapagos, we obtained a six-year extension, both of which enhance the long-term visibility of our portfolio. We also have received concession awards and been declared preferred bidders on two new airport concessions, which I will discuss shortly. Moving on to passing the traffic on slide four, we ended the year with another quarter of solid growth across our operations total passenger traffic reached a record to 22.3 million supported by both domestic and international travel with particularly strong momentum in the international segment international traffic grew 12 percent with every country in our portfolio posting year-over-year growth argentina was once again the main contributor accounting for more than a half of the total increase in traffic during the quarter, with solid contributions from Italy, Brazil, and Armenia. Domestic traffic increased nearly 7%, mainly driven by Argentina and Brazil, with Ecuador also contributing positively. Let me briefly go through the main markets. In Argentina, passenger traffic increased nearly 9%, a record for both the quarter and the full year. Domestic traffic was up 6%, supported by strong load factors and additional capacity across several routes. International traffic was up 15%, reflecting continued route reactivations and frequency increases. We saw positive contributions from airlines such as LATAM, Per Canada, Emirates, Delta, China Eastern, and ETA Airways, among others, which continue to strengthen connectivity and support demand. This strong performance continued into January and February, with passenger traffic growing 7.9% and 5.8% year-over-year, respectively. In Italy, traffic grew 8%, also reaching new heights for both a quarter and a full year. Growth was mainly driven by international segment which increased 11 percent with solid performance across both Florence and Pisa. Domestic traffic declined modestly during the quarter mainly reflecting some operational disruptions at certain airlines. This positive trend continued into January and February with passenger traffic increasing 4 percent and 7.4 percent year over year respectively. Brazil also posted a strong water, with total traffic up 12%. Domestic traffic remained solid, while international traffic also grew at a healthy pace. The improvement reflects a better environment among the main airlines operating in the country and stronger activity during the summer season, including additional frequencies on routes to the United States. This trend extended into January and February when overall traffic increased by 16% and 8.2% year-over-year respectively. Uruguay returned to growth in the quarter, with traffic up 5% and reaching new heights for both the quarter and the full year. This performance reflects a recovery from the temporary disruption we saw in the third quarter related to planned runway closure. Traffic also benefited from stronger seasonal operations, new routes and added frequencies particularly ahead of the summer season. Traffic in the first two months of the year performed well with year-over-year increases of 1 and 2.4% in January and February respectively. In Armenia, we saw a pickup in passenger traffic up nearly 14%, breaking another record for both the quarter and the full year. Growth was supported by sustained international demand and expanded connectivity. During the quarter, we then established a new base at Tvarnoš and launched 10 new routes to Europe, which further extended the airport's position as an important regional hub. This strong performance continued into January and February, with passenger traffic increasing by 10 and 11.6% year-over-year respectively. Finally, Ecuador returned to growth with traffic up 1%. While the environment remains challenging, performance improved versus the prior quarter, supported by a recovery following the runway works completed earlier in the year, and modest growth in both domestic and international traffic. Traffic in the first two months of the year performed well with year-over-year increases of 5 and 8.6% in January and February respectively. Overall, the fourth quarter contributed to a very strong year for passenger traffic with healthy momentum across the portfolio and record levels in several of our key markets. Turning to cargo on slide five, we also delivered a strong quarter with cargo revenues up 22% year over year, supported by solid contributions from Argentina, Uruguay, and Brazil. On the volume side, results were mixed across the portfolio. Total cargo volume was slightly below last year, with growth in Argentina and Uruguay offset by software trends in Brazil, Italy, Armenia, and Ecuador. Even so, the strong overall revenue performance highlights our ability to capture value from the cargo business. Looking ahead, we remain focused on strengthening our platform, improving our commercial capabilities, and contributing to capture growth opportunities across the network. I will now turn the call to Jorge, who will review our financial results. Please go ahead.

Jorge Rula, CFO

Thank you, Martin, and good day, everyone. Let's begin with our top line on slide 6. Total revenues increased 17%, nearly doubling passenger traffic growth of 9%. This strong performance was driven by double-digit growth in both aeronautical and commercial revenues, supported by positive contributions across all countries of operation, with all countries but Ecuador delivering double-digit revenue growth. Revenue per passenger was up nearly 8%, reaching $20.8 compared to $19.4 in the same quarter last year. Aeronautical revenues increased 17%, mainly driven by strong results in Argentina and further supported by broad-based growth across the portfolio. Argentina remained the main contributor, with aeronautical revenues up 21%, largely reflecting a 15% increasing international traffic volumes. A strong momentum continued in Brazil, Armenia, and Italy, each delivering double-digit growth, all in line with passenger traffic trends. Commercial revenues were up 60%, well above the 9% increasing traffic. This was supported by higher contributions from cargo and field revenues and solid growth across VIP lounges, parking facilities, and duty-free. Overall performance was consistent across the portfolio, with all countries except Ecuador achieving double-digit growth. Turning to slide 7, total costs and expenses, excluding EFREC-12, increased nearly 11%. broadly in line with higher operating activity, and well below revenue growth of 70%, resulting in positive operating leverage during the quarter. Cost of service were up 11%, largely due to higher concession fees in line with revenue growth, as well as higher fuel costs in Armenia, consistent with the expansion in fuel revenues and higher DNA expenses. SGMA expenses increased 6%, mainly reflecting higher maintenance and payroll expenses, particularly in Argentina. In Argentina, total cost and expenses increased just over 7% year-over-year, well below revenue growth of 18%, reflecting strong operating leverage, continued cost discipline, and favorable currency fluctuation. Moving on to profitability on slide 8, adjusted EBITDA EXIFIC-12 was up nearly 40% to $211 million, reflecting strong performance in Argentina and Armenia, as well as the $32.5 million positive impact on EBITDA related to the arbitration award payment received from the government of Peru. Argentina delivered another outstanding quarter, with adjusted EBITDA up 43%, with margin expansion of 7.5 percentage points, supported by strong passenger trends, continued momentum in our commercial activities, as well as effective cost controls. Armenia also performed very well with Ajita Ibika, up 15%, driven by record passenger levels. Margin contraction during the quarter primarily reflected higher operating expenses and greater contributions from the fueling business, which structurally carries lower margin than the core airport operations. At Bavilla Airport, adjusted EBITDA year-on-year comparisons were impacted by the $110 million COVID-related economic received in fourth quarter 2024. Excluding this item, adjusted EBITDA increased 34% year-on-year with a margin expansion of 6.4 percentage points with reflecting healthy traffic growth and strong performance across VAP lounges and other passenger-related revenues. Italy posted an 11% decrease or 4% increase when excluding construction services at Toscana Reporte Construcione. In Uruguay, a jefe de vita was likely down 2%, reflecting higher salaries and maintenance expenses, along with year-on-year appreciations of the Uruguay and Peso, which also impacted margins. Finally, in Ecuador, a jefe de vita declined 12%, mainly due to the higher maintenance expenses concentrated in the fourth quarter, 2025. Overall, excluding the $110 million COVID-related economic preclusion in Brazil in the fourth quarter of 2024 and the $32.5 million arbitration award recognized in the fourth quarter of 2025, adjusted the data EXIFIC-12 increased 33.3% year over year to $178 million with a margin expansion of 4.6 percentage points to 38.3 percent. Now turning to slide nine, we close the quarter with total liquidity of $750 million representing a 36 percent increase versus the $526 million reported at year end 2024. Notably, each of our operating subsidiaries delivered positive two-year operating cash flow, highlighting the resilience and diversification of our cash generation profile across geographies. Cash used in financing activities mainly reflected debt repayments in Argentina, as well as dividends paid to non-controlling interest in cap subsidiaries. Moving on to the debt and maturity profile on July 10. Total debt at year end was $1.1 billion, while our net debt decreased further down to $502 million from $780 million in December 2024. As a result of lower net debt and continued strong financial performance, our net debt leverage ratio continue to improve reaching 0.7 times at year end to wrap up our results reflect the great moment of our portfolio and the quality of our management team we close the year with the strongest balance sheet in our history giving us financial flexibility to advance our growth strategy through both organic initiatives and inorganic opportunities I will now hand the call back to Martin, who will provide closing remarks and discuss our view for the year.

Martin Francisco Antranik Eurnekian Bonnarens, CEO

Thank you, Jorge. Turning now to slide 12, I will briefly summarize the key takeaways from the last quarter and from 2025. 2025 was a record year for CAP. We delivered record passenger traffic, strong revenue growth, meaningful EBITDA margin expansion, and closed the year with a very solid balance sheet. These results reflect the resilience and quality of our portfolio, the discipline execution of our teams, and the benefits of our diversified geographic footprint. Beyond the strong operating and financial performance, we also made important progress in strengthening the long-term visibility of our portfolio and advancing our expansion pipeline. In Armenia, we secured a 35-year extension of the concession through 2067, which includes a $425 million investment program and the significant expansion of our infrastructure. In Ecuador, we achieved a six-year extension of the Galapagos concession. On the inorganic growth front, we have received concession awards and have been selected as preferred bidders for both Baghdad in Iraq and Luanda in Angola, while continuing to evaluate additional bidding processes and M&A opportunities across multiple regions. While these projects remain subject to the execution of the definitive concession agreements, Both opportunities offer attractive long-term growth potential. At the same time, we remain disciplined in our capital allocation. This discipline approach remains central to how we allocate capital and expand our portfolio. Our operating performance was also matched by strong industry recognition. During the year, Aeropuertos Argentina was named best airport operator in South America. Brasilia was ranked number two worldwide in punctuality among medium airports, Carrasco was recognized as best airport in Latin America and the Caribbean in this category, and Zvarnocht was named best airport in Europe and most dedicated staff in the segment. These recommendations reflect our continuous focus on operational excellence and customer experience. Looking ahead, we remain focused on execution and value creation. We expect continued positive momentum in passenger traffic across our key markets, supported in particular by strong international traffic trends in Argentina. At the same time, we will continue to prioritize commercial optimization and revenue per passenger growth across the portfolio. We are also closely monitoring the evolving geopolitical situation in the Middle East and remain attentive to any potential implications for international travel. I will now turn the call over for questions.

Operator

Thank you, sir. Ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. And should you wish to withdraw from the polling process, please press star followed by two. And if you're using your speakerphone, you will need to lift the handset first before pressing any keys. And out of consideration to other callers on the line today, we ask that you please limit yourself to one question, one follow-up, and recue should you have additional. Thank you. And your first question will be from Alessandro de Michels at Jefferies. Please go ahead.

Alessandro de Michels, Analyst — Jefferies

Good morning, gentlemen. Thank you very much for taking my questions. Martin, you mentioned the strong traffic growth that you expect for the rest of the year. We have seen an increase in profitability across the business. So should we assume that what we have seen in terms of margins, profitability, is like the new base for CAP going forward? That's the first question. And then the follow-up is, have you actually seen any kind of impact from the war in terms of your operations in Armenia, please?

Jorge Rula, CFO

Hi, it's George here. Thank you very much for your question. So, regarding margins profitability, what we saw in the first two months of the year, you probably have seen our traffic numbers, we increased by approximately 8%, 7.8% more precisely, overall with international 14.5% and domestic 1.5%. So we expect, we remain constructive for the next few months, and we expect our business to continue growing according to passengers and a bit over passengers, in fact. Margins, in terms of EBITDA margins, is stable for the time being. In terms of your second question, approximately 10 to 15 percent of the traffic in Armenia has been affected by the war. The first few months of the year were very positive, around 11% growth for the first two months, and what we have observed since the war is flat, no growth, no decline, but I think it's totally tied to the war, and when this war ends, traffic would resume very quickly it's very difficult to say at this point in time but also part of this traffic is connecting traffic in the Middle East that probably at least some of them should be going through other routes that are available in Armenia but

Operator

again the impact that we saw in the first few days of the war is a flat growth that's very clear thank you thank you next question will be from andres cardona at city group please go ahead please go ahead andres can you unmute your line please no response please go

Andres Cardona, Analyst — Citigroup

ahead andres i i'm trying to ask can you hear me yes go ahead we can hear you so my two questions are about any update about the argentina concession rebalance anything you could share in terms of timing or expectations and second if you have also an update of the italy pro italy investment opportunity i also understand it hasn't been approved but what are you expecting in terms of

Jorge Rula, CFO

timing okay so thank you for your questions is george again here um on argentina we are in the right track uh however it's very difficult for us to provide uh publicly a timing uh for the outcome of uh of the rebalance given the political and bureaucracy dynamics associated with a process like this one but again we are in the right track we are in very frequent discussions with the government and we will keep the market updated as we receive concrete news from the government in connection with Italy it's also very difficult for us to to provide a timetable on as to when this will be finalize and we'll be able to begin constructions. But we are making progress. I think the approval that we got was the environmental approval. There's a few more presses to go before we are fully approved to begin construction. But again, we are in the right track and again, we will keep the market posted as we receive concrete news. Thank you.

Andres Cardona, Analyst — Citigroup

Thank you.

Operator

Once again, ladies and gentlemen, if you do have any questions, please press star followed by two. I'm sorry, followed by one on your touchtone phone. And to remove yourself, press star two. And our next question will be from Julia Orsi at JPMorgan. Please go ahead.

Julia Orsi, Analyst — JPMorgan

Yes. Hello, everyone. Good morning. Thanks for taking the time. Can you comment a bit on your capital allocation strategy going forward?

Jorge Rula, CFO

I know you mentioned a discipline strategy, but can you comment a bit on what you're expecting in terms of new regions and concessions that you might be willing to invest and second what should you think of the commercial revenues growth going forward and the main drivers behind it thank you thank you for your questions in connection with capital allocation we as martin has mentioned in the call we have been awarded in iraq and angola we are pursuing those opportunities Obviously, with the situation in Iran and the war, et cetera, this process we expect to be delayed. And in Angola, we are in frequent discussions with the government to try to move ahead and finalize this process. Besides that, we are looking at other opportunities in the Middle East, in Central Asia, in Africa, and in the Americas. As I reported in previous conference calls, we have significantly boosted our new business team and are actively looking at various opportunities, and we believe that the best use of our liquidity is to grow the portfolio, and that's what we are working 24-7 to achieve. In connection with commercial revenues, we indeed saw a very good year in 2025 with growth across the board, particularly in VIP lounges, in parking, in fueling as well, in some markets on the cargo. and what we are seeing the first few months of the year is a bit more of the same, perhaps not as intense as we saw in 2025, but the portfolio is performing very well.

Julia Orsi, Analyst — JPMorgan

Perfect. Thank you.

Operator

Thank you. Next question will be from Pablo Riccardi at ETA. Please go ahead, Pablo.

Patricio Iñaki Esnaola, Head of Investor Relations

Hi. Good morning, Professor America. Maybe thinking of a follow-up on the capital allocation, What are you thinking in terms of funding to do all these acquisitions outside of Argentina?

Jorge Rula, CFO

Are you hearing that? Sorry. I think the targets that we are currently looking at, the funding would come primarily from cash at hand, given the size of the opportunity that we are looking at. Thanks a lot.

Operator

Thank you. and at this time we have no other questions registered so I would like to turn the conference back over to Martin I wanted to thank everybody for joining us today and remind you that our investor relations team is available for any further questions and have a very good rest of your day