Business context and reporting period
Corporación América Airports S.A. (CAAP) filed its annual Form 20-F for the fiscal year ended December 31, 2022. The filing is not a standalone fourth-quarter report. CAAP is a Luxembourg holding company that acquires, develops and operates airport concessions in Argentina, Italy, Brazil, Uruguay, Ecuador and Armenia. The audited consolidated financial statements are presented in U.S. dollars under IFRS as issued by the IASB.
CAAP operated 53 airports and served 65.6 million passengers in 2022, including approximately 32.5% international, 57.6% domestic and 9.8% transit passengers. Argentina remained the largest market, representing 55.3% of consolidated revenue. The company also became preferred bidder, through a consortium, for airport concessions in Abuja and Kano, Nigeria; final concession terms remained subject to negotiation.
Key financial and operating metrics
| U.S.$ millions, except per-share data | 2022 | 2021 | Change |
|---|---|---|---|
| Consolidated revenue | 1,378.7 | 706.9 | 95.0% |
| Aeronautical revenue | 609.8 | 262.8 | 132.0% |
| Commercial revenue | 612.5 | 362.1 | 69.2% |
| Construction service revenue | 149.8 | 79.8 | 87.8% |
| Operating income | 304.6 | 6.5 | Significant improvement |
| Income from continuing operations | 165.6 | (159.8) | Returned to profit |
| Net income attributable to parent | 168.2 | (117.8) | Returned to profit |
| Adjusted EBITDA | 456.7 | 149.3 | 205.9% |
| Adjusted EBITDA excluding construction services | 454.8 | 147.0 | 209.3% |
| Operating cash flow | 302.6 | 108.0 | 180.3% |
| Cash and cash equivalents | 385.3 | 375.8 | 2.5% |
| Total borrowings | 1,465.4 | 1,439.6 | 1.8% |
| Net debt | 1,080.2 | 1,063.8 | 1.5% |
| Net debt to equity | 125% | 138% | Improved |
| Basic EPS | U.S.$1.05 | U.S.$(0.73) | Returned to profit |
Gross profit was U.S.$415.7 million versus U.S.$84.5 million in 2021. Using reported revenue and operating income, the operating margin was approximately 22.1% versus approximately 0.9% in 2021. Adjusted EBITDA margin was approximately 33.1% versus 21.1%; these are non-IFRS supplemental measures and should not replace IFRS results.
- Passenger traffic increased 83.7% to 65.6 million, aircraft movements increased 48.5% to 738.2 thousand, and cargo volume increased 6.1% to 343.1 thousand tons.
- Argentina revenue increased 110.1% to U.S.$762.6 million and Argentina Adjusted EBITDA increased to U.S.$277.9 million from U.S.$65.6 million.
- Armenia revenue increased 111.0% to U.S.$207.5 million, principally reflecting higher fuel sales and passenger traffic.
- Italy revenue increased 66.3% to U.S.$117.2 million; Italy Adjusted EBITDA improved to U.S.$21.2 million from U.S.$0.2 million.
- Brazil revenue increased 52.8% to U.S.$89.3 million, but Brasilia remains burdened by the accretion of its concession-fee liability. CAAP recorded U.S.$101.2 million of related losses in 2022 and expects a similar magnitude in coming years.
Cash flow, capital spending, debt and liquidity
- Operating cash flow was U.S.$302.6 million. Investing activities provided U.S.$9.4 million, while financing activities used U.S.$234.3 million.
- Financing cash use included U.S.$172.0 million paid to redeem AA2000 preferred shares, U.S.$328.8 million of loan repayments and U.S.$111.4 million of interest paid, partly offset by U.S.$372.0 million of new borrowings.
- Capital expenditures were approximately U.S.$164.9 million, including U.S.$124.2 million in Argentina, U.S.$17.2 million in Uruguay, U.S.$9.7 million in Italy, U.S.$7.6 million in Armenia and U.S.$2.0 million in Brazil.
- Borrowings totaled U.S.$1.465 billion, including U.S.$1.287 billion non-current and U.S.$178.0 million current borrowings. Contractual undiscounted principal and estimated interest cash flows totaled approximately U.S.$2.050 billion.
- Liquidity is managed primarily at operating subsidiaries. CAAP depends on dividends, distributions and management fees from subsidiaries, which are subject to local law, foreign-exchange controls, concession requirements and debt covenants.
- As of December 31, 2022, management stated that subsidiaries either met applicable financial covenants or had obtained temporary waivers. The filing does not provide a single consolidated liquidity coverage ratio.
Material changes versus the prior comparable period
- Travel recovery after the COVID-19 restrictions drove substantial increases in passengers, revenue, operating income and EBITDA across the portfolio.
- Revenue mix shifted toward aeronautical revenue, which represented 44.2% of 2022 revenue versus 37.2% in 2021; commercial revenue remained similar in absolute size but declined as a percentage of total revenue.
- Cost of services rose 54.7% to U.S.$963.0 million, driven by higher concession fees, salaries, maintenance, construction activity and fuel costs. Financial loss increased 49.6% to U.S.$196.4 million.
- AA2000 redeemed the Argentine Government’s preferred shares for payments totaling approximately U.S.$172.0 million, reducing non-controlling interest and contributing to financing cash outflows.
- CAAP completed its exit-related obligations for Peru’s AAP disposal, including a further U.S.$14.7 million payment in 2022; related guarantees were lifted or replaced in December 2022.
- Uruguay’s Carrasco concession continued to expand to new regional airports. The filing reports U.S.$17.2 million of 2022 capital expenditures in Uruguay and approximately U.S.$67.0 million of required investment for the new airports between 2022 and 2028.
Guidance, outlook, commentary and principal risks
Management did not provide formal consolidated revenue or EBITDA guidance. The filing states that traffic recovered across all operating countries in 2022 and that CAAP resumed capital expenditure programs as pandemic effects eased. Planned or discussed investment programs include approximately U.S.$500 million plus VAT under AA2000, U.S.$73.5 million in Uruguay over the next five years, U.S.$42.0 million in Armenia, and proposed infrastructure plans in Italy and Armenia that remain subject to approvals and financing.
- Argentina concentration: AA2000 generated approximately 55.0% of consolidated revenue in 2022. The Argentine Government may buy out the AA2000 concession for public-interest reasons, and termination or buyout would trigger defaults and potential acceleration under certain notes and credit facilities.
- Concession compliance: Failure to meet investment, service, payment or regulatory obligations could lead to fines, enforcement of guarantees, early termination or revocation of concessions.
- AA2000 commitments: ORSNA confirmed availability of more than U.S.$406.5 million for the mandatory capex program, but 2022 capital expenditures remained subject to ORSNA review. Failure to approve expenditures could require additional investment.
- Brazil: ICAB has unpaid or disputed concession-fee obligations, with court protection temporarily suspending enforcement. The Brasilia concession could be affected if the injunction is lifted or obligations are not resolved. Brazil also recorded a U.S.$101.2 million loss from concession-liability accretion in 2022.
- Natal airport: The re-bidding process is intended to transfer operations to a new operator and generate an indemnity based primarily on non-amortized capital expenditures. Timing and amount remain uncertain; the company expected a net indemnity in late 2023 based on the customary process timetable.
- Italy: Approval of the revised Florence 2035 master plan and associated environmental procedures remains pending. Planned Florence and Pisa investments are subject to regulatory approvals, government support and financing.
- Macroeconomic and currency exposure: Argentina reported 94.8% inflation and 71.9% peso depreciation against the U.S. dollar in 2022. Foreign-exchange controls may constrain debt service, capital expenditures, refinancing and dividends.
- Geopolitical risk: The Russia-Ukraine war affected routes and costs. Armenian operations had approximately U.S.$80 million of combined aeronautical and commercial revenue from international flights to and from Russia in 2022.
- Other risks: Passenger traffic volatility, fuel prices, interest rates, cybersecurity, labor disruptions, environmental liabilities, tax disputes, customer concentration and concession termination remain material risks.
The independent auditor issued an unqualified opinion on the IFRS consolidated financial statements and internal control over financial reporting. The critical audit matter was impairment testing of Brazilian concession assets, with a carrying value of approximately U.S.$695.3 million and significant assumptions regarding passenger growth, fees, operating expenses and discount rates.
Most important facts for investors to verify
- Reconcile reported cash, current borrowings, debt maturities and restricted cash with subsidiary-level liquidity and covenant requirements.
- Monitor ORSNA’s approval of AA2000 capital expenditures and compliance with the remaining 2023–2027 investment commitments.
- Track the AA2000 concession’s public-interest buyout right, tariff adjustments, concession-fee payments and any related debt acceleration provisions.
- Verify the status of ICAB’s concession-fee litigation, injunction and BNDES covenant compliance.
- Confirm the timetable, indemnity calculation and debt settlement mechanics for the Natal airport re-bidding.
- Assess the funding and regulatory approvals required for planned Florence, Pisa, Uruguay and Armenia infrastructure programs.
- Review the concentration and collectability of Aerolíneas Argentinas receivables; AA2000 recognized allowances and only recognizes certain passenger-fee revenue from the airline.
- Evaluate sensitivity of Brazilian concession-asset recoverable amounts to passenger growth, tariffs, operating costs and discount rates.
- Review unresolved environmental, tax, corruption-related, labor and commercial litigation exposures, including the Florence land-contract claim and Brazilian payment-related fine.
- Confirm dividend capacity at CAAP, given Luxembourg distributability requirements and restrictions on transfers from operating subsidiaries.