Corporación América Airports S.A. — Form 20-F Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2020, filed April 9, 2021. CAAP is a Luxembourg holding company operating airport concessions in Argentina, Italy, Brazil, Uruguay, Ecuador, Armenia and Peru. It operated 52 airports and reported under IFRS in U.S. dollars. Results were severely affected by COVID-19-related travel restrictions, border closures and reduced airline activity.
Key financial metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | U.S.$607.4 million | U.S.$1,558.6 million | Down 61.0% |
| Gross profit/(loss) | $(46.2) million | U.S.$420.2 million | Turned to loss |
| Operating income/(loss) | $(163.7) million | U.S.$223.6 million | Turned to loss |
| Loss from continuing operations | $(361.9) million | $(5.8) million | Loss increased |
| Loss attributable to parent | $(253.1) million | U.S.$9.1 million income | Turned to loss |
| Adjusted EBITDA | U.S.$13.6 million | U.S.$380.7 million | Down 96.4% |
| Adjusted EBITDA excluding construction services | U.S.$12.3 million | U.S.$378.5 million | Down 96.8% |
| Operating cash flow | U.S.$0.8 million | $(19.7) million | Improved, but near breakeven |
| Cash flow from investing | U.S.$1.6 million | $(12.1) million | Improved through lower capex |
| Cash flow from financing | U.S.$90.5 million | U.S.$24.6 million | Higher borrowings and deferrals |
| Cash and cash equivalents | U.S.$281.0 million | U.S.$195.7 million | Up 43.6% |
| Total borrowings | U.S.$1,344.8 million | U.S.$1,208.3 million | Up 11.3% |
| Total equity | U.S.$805.3 million | U.S.$1,198.6 million | Down 32.8% |
Reported gross margin declined to approximately (7.6%) from 27.0% in 2019. Operating margin declined to approximately (27.0%) from 14.3%, while Adjusted EBITDA margin declined to approximately 2.2% from 24.4%.
- Total passenger traffic fell 70.0% to 25.2 million; aircraft movements fell 58.9% to 352,905; and cargo volume fell 39.8% to 255,600 tons.
- Aeronautical revenue fell 69.6% to U.S.$220.0 million. Commercial revenue fell 46.1% to U.S.$259.7 million, and construction-service revenue fell 64.1% to U.S.$125.8 million.
- Argentina remained the largest segment, contributing U.S.$350.0 million, or 57.6% of consolidated revenue. Ezeiza Airport contributed U.S.$135.9 million, or 22.3% of consolidated revenue.
- Brazil, Italy, Uruguay, Ecuador and Armenia all reported lower revenue and materially lower segment EBITDA. Brazil generated negative Adjusted EBITDA of U.S.$6.5 million, primarily reflecting the fixed concession-fee liability and COVID-19 disruption.
- Cash increased despite minimal operating cash generation because of financing proceeds, debt-service deferrals, cost reductions, reduced capital expenditure and government or regulatory support.
Material changes versus the prior comparable period
- COVID-19 caused a substantial deterioration in traffic, revenue, profitability and operating leverage across all operating segments.
- CAAP recorded U.S.$62.3 million of impairment losses, including U.S.$26.4 million on the Natal concession asset and U.S.$35.9 million on goodwill related to Brazilian subsidiaries.
- Other operating income increased to U.S.$54.1 million, including approximately U.S.$33.2 million of Brazilian COVID-19 economic re-equilibrium and a U.S.$12.0 million Italian government grant.
- Cost-control actions reduced cost of services by 42.6% and selling, general and administrative expenses by 39.5%, including workforce reductions, furloughs, salary measures, supplier negotiations and deferred maintenance.
- Capital expenditures were substantially reduced, including Argentina capex of U.S.$95.8 million versus U.S.$308.3 million in 2019.
- CAAP issued 3.2 million shares for its management compensation plan, increasing issued share capital to 163.2 million shares; 2.6 million of the new shares remained in treasury at year-end.
- The Argentine AA2000 concession was extended to February 2038, subject to significant investment, funding and preferred-share redemption commitments. Italy’s Pisa and Florence concessions received two-year extensions.
- CAAP executed an amendment to terminate and re-bid the Natal Airport concession. Transfer to a new operator and the amount of any indemnification remained subject to future proceedings.
Guidance, outlook, commentary, risks and unusual items
Management did not provide quantified 2021 earnings or traffic guidance. It expects results to remain negatively affected for as long as the COVID-19 crisis and travel restrictions continue. Management cited industry expectations for signs of recovery toward the second half of 2021, subject to vaccination progress and government restrictions.
Management stated that existing financial resources and expected operating cash generation were sufficient to fund liquidity needs for the next 12 months, but this conclusion depends materially on the duration and severity of the pandemic, traffic recovery, financing access and continued regulatory support.
- Liquidity and leverage: Net borrowings were U.S.$1,063.8 million, compared with U.S.$1,012.6 million in 2019. Net borrowings equaled 132% of equity versus 84% in 2019. Contractual obligations totaled U.S.$4.6 billion, including U.S.$1.4 billion of borrowing principal and U.S.$1.7 billion of other liabilities.
- Debt refinancing: CAAP and subsidiaries deferred or refinanced debt payments, exchanged Argentine and Uruguayan notes, obtained additional financing and received covenant waivers or standstills. These actions increased future repayment obligations and may increase cash interest or PIK interest.
- Argentina commitments: AA2000 was required to allocate U.S.$132 million to ongoing works, secure funds totaling approximately U.S.$406.5 million for works and preferred-share redemption, and invest U.S.$200 million during 2024–2027. Failure could result in fines, termination or revocation.
- Concession concentration: The AA2000 concession generated 57.4% of consolidated revenue in 2020. The Argentine Government retains a right to buy out the concession, which would trigger defaults and acceleration under specified Argentine debt instruments.
- Airline credit risk: Aerolíneas Argentinas and Austral owed AA2000 approximately AR$308 million and U.S.$49 million. CAAP recorded substantial receivable allowances, and a repayment plan for amounts owed through March 31, 2020 was agreed in February 2021.
- Currency and inflation risk: Argentina remained hyperinflationary under IAS 29. The Argentine peso depreciated 40.5% against the U.S. dollar in 2020. CAAP had U.S.$556.5 million of foreign-currency-denominated borrowings and does not generally hedge its currency exposure.
- Brazil: The company expects continuing losses from the accretion of fixed concession liabilities. A pending audit concerning certain Brasilia Airport contracts could result in fines of R$40 million to R$150 million if alleged irregularities are confirmed.
- Other contingencies: Pending matters include environmental claims in Argentina, an approximately U.S.$4.7 million Neuquén supplier claim, an Ecuadorian tax dispute of approximately U.S.$1.4 million, and confidential ICSID arbitration relating to the terminated Chinchero concession in Peru.
- Accounting judgments: The auditor identified concession-asset and goodwill impairment testing and COVID-19 liquidity analysis as critical audit matters because of significant assumptions concerning passenger growth, fees, operating costs, discount rates and liquidity requirements.
Most important facts for an investor to verify
- Passenger and aircraft-traffic recovery by country, particularly Argentina, Brazil and Italy, and the effect of renewed travel restrictions.
- Cash availability by subsidiary versus cash held at the Luxembourg holding company, including restrictions on upstream dividends and transfers.
- Debt maturities, covenant compliance, waivers, PIK interest, refinancing requirements and the effect of LIBOR transition on approximately U.S.$66.8 million of linked debt.
- AA2000’s ability to fund the U.S.$406.5 million availability requirement, preferred-share redemption and subsequent capital commitments under the extension.
- Status and economics of the Natal concession re-bidding process and expected indemnification.
- Regulatory compensation claims and concessions renegotiations in Brazil, Uruguay and Ecuador, including whether amounts are cash recoveries, tariff increases or offsets against concession fees.
- Recoverability of concession assets, goodwill and deferred tax assets, including U.S.$167.5 million of unrecognized deferred tax assets and the sensitivity of impairment models to traffic and discount-rate assumptions.
- Collectability of airline and commercial receivables, particularly amounts owed by Aerolíneas Argentinas and other distressed carriers.
- Current status of environmental, tax, corruption-related and other legal proceedings and whether additional provisions or cash payments may be required.