Business context and reporting period
Corporación América Airports S.A. (CAAP), a Luxembourg holding company listed on the NYSE under “CAAP,” filed its annual Form 20-F for the fiscal year ended December 31, 2023. The filing contains audited consolidated IFRS financial statements for 2023, 2022 and 2021. CAAP operated 52 airports across Argentina, Italy, Brazil, Uruguay, Ecuador and Armenia at year-end. The filing is annual rather than a standalone 2023 fourth-quarter report.
Passenger traffic and results continued to recover from the COVID-19 disruption. CAAP serves a geographically diversified airport portfolio, but Argentina remained the largest market and the AA2000 concession represented approximately 45.1% of consolidated revenue in 2023.
Financial and operating highlights
<>| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | U.S.$1,400.0 million | U.S.$1,378.7 million | +1.6% |
| Income from continuing operations | U.S.$226.5 million | U.S.$165.6 million | +36.7% |
| Adjusted EBITDA | U.S.$677.7 million | U.S.$456.7 million | +48.4% |
| Adjusted EBITDA excluding construction services | U.S.$671.3 million | U.S.$454.8 million | +47.6% |
| Operating cash flow | U.S.$356.4 million | U.S.$302.6 million | +17.8% |
| Cash and cash equivalents | U.S.$369.8 million | U.S.$385.3 million | −4.0% |
| Total borrowings | U.S.$1,333.2 million | U.S.$1,465.4 million | −9.0% |
| Net debt | U.S.$963.4 million | U.S.$1,080.2 million | −10.8% |
Revenue comprised U.S.$644.5 million of aeronautical revenue, U.S.$603.7 million of commercial revenue, U.S.$144.7 million of construction-service revenue and U.S.$7.2 million of other revenue. Gross profit was U.S.$485.4 million, operating income was U.S.$540.6 million and income before tax was U.S.$202.2 million.
Approximate 2023 margins were 34.7% gross margin, 38.6% operating margin, 16.2% net margin and 48.4% Adjusted EBITDA margin. Adjusted EBITDA is a non-IFRS measure and excludes, among other items, interest, taxes, depreciation and amortization; it should not be viewed as a substitute for IFRS earnings or cash flow.
Airports handled 81.1 million passengers, 849,473 aircraft movements and 370,200 tons of cargo. Passenger traffic increased 23.7%, aircraft movements increased 15.1% and cargo volume increased 7.9% versus 2022. International passengers represented approximately 35.0% of total traffic, domestic passengers 56.3% and transit passengers 8.8%.
Net cash used in investing activities was U.S.$66.4 million, compared with U.S.$9.4 million of investing cash inflow in 2022. Net cash used in financing activities was U.S.$201.6 million, including U.S.$200.5 million of loan repayments and U.S.$83.8 million of interest paid. Capital expenditures totaled approximately U.S.$161.6 million, including U.S.$93.3 million in Argentina, U.S.$34.5 million in Uruguay, U.S.$17.5 million in Italy and U.S.$7.1 million in Armenia and Ecuador combined.
At December 31, 2023, equity was U.S.$803.9 million and the reported net debt-to-equity ratio was 120%, compared with 125% in 2022. Borrowings included U.S.$1,133.5 million of non-current debt and U.S.$199.7 million of current debt. Undiscounted contractual borrowings cash flows, including estimated interest, totaled U.S.$1,815.0 million.
Material changes versus the prior comparable period
- Traffic recovery: Passenger growth supported higher revenue in Italy, Brazil, Uruguay, Ecuador and Armenia. Argentina revenue declined 16.0% to U.S.$640.6 million, primarily because hyperinflation accounting and the Argentine peso devaluation reduced U.S.-dollar-translated revenue.
- Profitability: Cost of services decreased 5.0% and selling, general and administrative expenses decreased 1.9%. Operating income benefited from a U.S.$102.8 million impairment reversal and U.S.$100.6 million of other operating income.
- Unusual Brazilian item: The re-bidding and termination of the Natal Airport concession generated a net gain of approximately U.S.$166.5 million, including a U.S.$103.8 million reversal of prior impairment and U.S.$62.7 million of other operating income. The concession assets and related liabilities were derecognized.
- Debt reduction: Borrowings declined by approximately U.S.$132.2 million, despite significant capital spending and debt-service requirements.
- Associates: CAAP acquired a 49% interest in Navinten S.A., the Uruguayan duty-free operator, and recorded U.S.$7.3 million of share-of-income from Navinten. Navinten was accounted for using the equity method.
- Currency translation: Currency translation adjustments produced a U.S.$281.7 million loss in other comprehensive income, compared with a U.S.$91.1 million gain in 2022, largely reflecting currency effects in Argentina and other operating markets.
Guidance, outlook, commentary, risks and unusual items
The filing does not provide formal consolidated earnings or revenue guidance. Management expects continued investment in airport infrastructure and passenger capacity. CAAP and the Italian Government were discussing a proposed EUR528 million plan for Florence and Pisa, including approximately EUR440 million for Florence and EUR88 million for Pisa between 2024 and 2027, subject to regulatory approvals. CAAP was also discussing a potential U.S.$400 million infrastructure plan in Armenia through 2027.
- AA2000 commitments: Phase 1 commitments under the Argentine concession totaled U.S.$436.3 million, including the U.S.$174.2 million preferred-share redemption, with U.S.$364.5 million executed as of the filing date. Phase 2 commitments of approximately U.S.$164 million plus VAT remain pending for 2024–2027. Failure to comply could result in fines or termination/revocation of the concession.
- Argentina concession and debt linkage: The Argentine Government may buy out the AA2000 concession for public-interest reasons. Termination or buyout would trigger defaults and potential acceleration under several Argentine notes and credit facilities. AA2000 revenue represented approximately 45.1% of CAAP’s consolidated revenue in 2023.
- Regulatory uncertainty: Argentina’s Decree 70/2023 introduced broad economic and aviation-policy changes, but its ultimate scope and effect remain uncertain. ORSNA’s review of the AA2000 financial projection and tariff/economic-equilibrium framework was postponed into 2024.
- Macroeconomic exposure: Argentina reported 211.4% inflation in 2023, a sharp peso devaluation and continuing foreign-exchange controls. These conditions affect reported U.S.-dollar results, debt service, remittances and the ability to transfer dividends.
- Brazil: ICAB remains exposed to the outcome of litigation concerning rescheduling of 50% of the 2021 Brasilia concession fee. The Brazilian ANAC appealed a favorable ruling. The filing also discloses unresolved tax, labor and commercial proceedings.
- Italy and Uruguay: Florence’s master plan remains subject to environmental and governmental approvals. Uruguay’s amended Carrasco concession requires approximately U.S.$67 million of investments in the new regional airports through 2028.
- Other contingencies: Material matters include environmental remediation in Argentina, an Argentine airport supplier claim, Brazilian tax and labor proceedings, an Ecuadorian tax dispute and Italian litigation concerning Florence-area property contracts. The filing states that no provision was recognized for several matters because losses were not considered probable or reliably estimable.
- Cybersecurity: CAAP reports no material cybersecurity incident to date, but identifies airport systems and third-party providers as critical exposures. The company implemented a cybersecurity policy, security operations monitoring and an incident-response committee.
- Controls: Management and the independent auditor concluded that internal control over financial reporting was effective as of December 31, 2023. The audit identified Brazilian concession-asset impairment assessment as a critical audit matter because of the judgment involved in passenger-growth and discount-rate assumptions.
Most important facts an investor should verify
- Whether CAAP’s cash generation is sufficient to fund AA2000 Phase 2 commitments, planned Italian and Armenian infrastructure projects, scheduled debt maturities and concession fees.
- The status of ORSNA’s review of AA2000 capital expenditures and the postponed financial-projection and tariff review, including the effect on concession economics.
- The maturity and refinancing plan for approximately U.S.$294.3 million of contractual borrowings due within one year, based on undiscounted principal and estimated interest cash flows.
- The outcome of the Brazilian ANAC appeal regarding the rescheduling of the 2021 Brasilia concession fee and the continuing financial burden of the Brasilia concession.
- The sustainability of 2023 earnings after excluding the U.S.$166.5 million Natal Airport gain, the U.S.$102.8 million impairment reversal and other unusual operating income.
- The effect of Argentine inflation, devaluation, foreign-exchange controls and IAS 29 on future U.S.-dollar revenue, cash flow, debt service and dividend transfers.
- The final scope and timing of the Florence master plan and the proposed EUR528 million Italy infrastructure program.
- Potential liability and timing for environmental, tax, labor, commercial and concession-related proceedings disclosed in the filing.
- Whether passenger growth, particularly in Armenia and Argentina, remains strong enough to support concession-asset valuations and avoid future impairment charges.