Aleatica SAB de CV

BMV:ALEATIC

Earnings Call Transcript

[Operator]

Good day, everyone, and welcome to the OHL México conference call. [Operator Instructions] Please note that this call is being recorded. [Operator Instructions] For opening remarks and introductions, I'd like to turn the call over to Melanie Carpenter of i-advize Corporate Communications. Please go head.

[Melanie Carpenter, executive]

Thank you. Hello, everyone, and welcome to OHL México's conference call to discuss its unaudited results for the first quarter of 2018. Management's comments will be based on the earnings we issued yesterday after the close. If you didn't receive it, please find it at -- on the website at ohlmexico.com.mx in the Investor Relations section.

Comments today may include forward-looking statements that are based on data that's currently available. We ask that you please refer to the disclaimer in the earnings release for guidance on this matter. It's now my pleasure to introduce our speakers.

Joining us are Mr. Sergio Hidalgo, the Chief Executive Officer of OHL México; Mr. Juan Carlos Mateos, the Chief Financial Officer; and Mr. Francisco Sarti, Investor Relations Officer and Financing Director. And with that, I'm going to turn the call over to Mr. Sergio Hidalgo, who will begin with the presentation. Thank you. Please go head, Sergio.

[Sergio Hidalgo Monroy Portillo, executive]

Hello, everyone, and thank you for being with us today as we discuss OHL México's performance for the first quarter of this year. Before I begin my presentation, I would like to highlight that we will not be able to answer any questions regarding the tender offer that Magenta Infraestructura launched on April 9, given that OHL México is playing a passive role in this transaction. We will withhold any comments. Any questions should be directed toward [indiscernible]. And of course, Juan Carlos and Francisco will be more than glad to give you the contact details of the executives who can provide more detail.

Likewise, we are unable to comment on the transaction announced on February 14, 2018, between IFM Investors and CDPQ for the acquisition of IFM Investors' 49% direct interests in CONMEX. This transaction is being negotiated and is closed by third parties different from the company. However, we would like to mention that on April 12, Obrascon Huarte Lain, S.A., OHL Spain announced the closing of the transaction for the sale and transfer of 100% share capital of OHL Concesiones to IFM Global Infrastructure Fund. This transaction gives IFM investors indirect control of OHL Mexico.

We began 2018 with a favorable performance in all of our toll roads. This quarter, we revised our tolls to account for the inflation register in 2017 in all our projects, except Libramiento Elevado de Puebla. In addition, in 2018, the Holy Week took place in the first quarter in March compared to 2017 when it took place in the second quarter in April. The timing of these holidays boosted the use of our long-distance toll roads in the first quarter such as Autopista Amozoc–Perote and Circuito Exterior Mexiquense while reducing traffic in our urban toll roads in the Mexico City metro area.

Let's move to discuss our performance during the quarter. In the first quarter, [ as of 19 ] of this year, we recorded 16.4% increase in total revenues and 19.7% increase in toll road EBITDA, reaching MXN 1.6 billion and MXN 1.2 billion, respectively, with a toll road EBITDA margin of 72.1%.

On a per-concession basis, traffic in CONMEX increased by 4.5% during the quarter, reaching almost 364,000 daily vehicles, while total revenues grew 15.2% when compared to the same period of 2017, reaching almost MXN 993 million.

For Viaducto Bicentenario, traffic in the quarter decreased 4.3%, reaching 32,000 daily vehicles, while toll road revenues increased 19.7% during the quarter, reaching almost MXN 229 million.

In the case of GANA, traffic grew 8.1%, reaching 40,000 daily vehicles, while toll road revenues increased 21.8% reaching almost MXN 199 million.

Autopista Urbana Norte posted a 1% traffic decrease reaching 56,000 daily vehicles, while toll road revenues increased 13.7%, reaching close to MXN 227 million.

In the case of Supervía Poetas, traffic increased 2.1% to nearly 48,000 daily vehicles, and in Viaducto Elevado Luis Cabrera, it increased 7.6% and reached almost 33,000 daily vehicles.

Puebla Elevated Bypass had a 3.3% decline in traffic compared to the first quarter of 2017, reaching nearly 32,000 daily vehicles.

Moving on to our financials. Consolidated toll road revenues grew 16.4% in the quarter, reaching MXN 1.6 billion. Our total operating costs and expenses during the quarter remained practically unchanged compared to the first quarter 2017, reaching MXN 722 million. EBITDA from tolls for all our concessions that consolidate increased 19.7% during the quarter. CONMEX increased 14%, Viaducto Bicentenario increased 33.5%, GANA increased 41.7% and Autopista Urbana Norte increased 20.4%.

Thank you for your attention. At this moment, we will be happy to take any of your questions.

[Operator]

[Operator Instructions] We'll take our first question from [ Marco Barreto ] with Citi.

[Unknown Analyst]

I was wondering what is the traffic growth outlook for the year? And do you see any risk around that outlook related to NAFTA negotiations or the Mexican presidential election? That's my first question.

[Sergio Hidalgo Monroy Portillo, executive]

Thank you, Marco. We couldn't get the first question. Could you repeat it, please? Do you ask about the outlook for traffic for 2018?

[Unknown Analyst]

Yes, and the risks implicated with NAFTA negotiations or the coming elections.

[Sergio Hidalgo Monroy Portillo, executive]

Yes. Of course, we have discussed that in our board and analyzed that in the board. We don't foresee any effect in the business, either from a -- neither, I should say, from the NAFTA negotiations and from elections. As you know, our business is concentrated in the urban area, and we clearly see that -- and I would not link to the commercial corridor that comes from the North. We're very optimistic about NAFTA. Nevertheless, no, we do think that NAFTA is going to be signed soon, but we don't foresee that if that doesn't happen, it will have an effect in our business. Just the beat in what we call Phase 1 of CONMEX because of increasing trucks that we have over there, but we don't foresee anything that will be relevant and affect the performance that CONMEX have had so far. On elections, no doubt, we don't think that any candidate might have an effect on the traffic in the urban roads at all. We think that the service that we provide is right here in a very complicated metropolitan area and now in the complicated metropolitan area in Puebla as well. So we really don't foresee any effects on the business.

[Unknown Analyst]

And for my second question. Have you seen or do you any timeline on distinct changes on your day-to-day operations, operational strategy since [ IFM ] completed the first tender?

[Sergio Hidalgo Monroy Portillo, executive]

Yes, it's not new but we really [indiscernible] in the first meetings we have had with IFM. They have confirmed to us that we're in the right path in following the -- in strengthening the service to the client. So we're creating a whole direction that will attend our clients, that will have better communication and contact with our clients, which is something that we've been doing and working on for the past year, but we think that all of the people who use our roads will start to see how we change the way we communicate with them and the way we provide our service to them. This is one of the areas where we clearly see an improvement in our business.

[Operator]

[Operator Instructions] We'll go next to Robert Crimes from Insight.

[Robert Crimes, analyst]

Just wondering if we could have a bit of an update on Atizapán. I mean, your massive investment has been going in, in recent years, it's been very, very relative to expectations. So wondering when the assets will open and what the new investment schedule will look like? And how it could potentially delay -- affect the returns and the IRR on the project?

[Sergio Hidalgo Monroy Portillo, executive]

Well, as you know, we have a really big investment happening at this time, which is Atizapán-Atlacomulco. We would have loved to have that road finished by now. But unfortunately, the right-of-way problems that the government face have not allow us to advance much faster in that project. Nevertheless, we created a group with them. We've been working to try to solve all the community problems that there are over there. As we announced more than a year ago, we put an investment of MXN 1 billion into Trust so that we can help the government solve the problems for the right-of-way. And that's been working really well. And now Phase 3 of the road is totally ready so that we can build the road there. And we do expect that, that part of the road will be finished this same year. And we're pushing really hard to try to have Phase 1 as well. So we're concentrating on that, on Atlacomulco. We think that this is -- I do believe this is going to be our best road because of the corridor that it connects to the metropolitan area coming from the Port of Manzanillo and then from Guadalajara and Michoacan. So that's where we're concentrating the investment. We are starting many different projects to improve the performance of our current assets. We still believe that there are opportunities to improve mobility in the city and complement our projects, so we're concentrating and starting those type of investments that we're certain will improve the performance of our current assets.

[Robert Crimes, analyst]

Okay. But in terms of investment this year that you're planning to spend on Atizapán, it's -- how much is it going to be roughly for this year and next year?

[Sergio Hidalgo Monroy Portillo, executive]

Yes. For this year, we should reach about MXN 3.5 billion. We hope we can and we have the right-of-way to put MXN 3.5 billion for the rest of the year. And then it will be another MXN 3.5 billion, almost MXN 4 billion to finish the whole road for next year. So we still expect to finish the road midst of next year if the right-of-way is available. If not, we will keep you posted.

[Robert Crimes, analyst]

And the extra costs that you've had in terms of organizing the right-of-way. How's -- is that going to be fed into the potential toll road prices? Or how is it going to work in terms of the return?

[Sergio Hidalgo Monroy Portillo, executive]

Yes, at the end, that modify the way we participated in projects. So there will have to be a recognition from the government for that further investment. And at the right moment, we will reflect that in the conditions and the terms of the concession.

[Robert Crimes, analyst]

Okay. And then just another unrelated question. But how is Libramiento relative to expectations that the new asset that you've got with PINFRA? How's that performing? Are you happy with it?

[Sergio Hidalgo Monroy Portillo, executive]

Yes, we're really happy. Actually, since we opened the road, it's been above expectations. There was a little adjustment this time in the traffic. I think that there are many small investments that we have agreed with PINFRA to improve the road. Let me give you one example over there. Unfortunately, the Volkswagen plant that is right there near the road cannot use the road for their trucks. They would love to do it because that would guarantee that the timing of the movements that they have to do. But we're agreeing with them in doing further investment to facilitate their trucks to use the road. So there are some things that -- minor investments that we will do just to improve mobility again and consolidate our current assets.

[Robert Crimes, analyst]

I'm not -- this asset, Libramiento, has a guaranteed project. I think it's 10% is -- if I remember correctly.

[Sergio Hidalgo Monroy Portillo, executive]

Yes. It has 10%. It's not exactly the way it works in our Mexico City or state of Mexico project score. We have a guarantee return. It doesn't work the same way, and that's why we account for it differently, but it does have a formula to sit with the government and analyze the return that we get periodically so we can reach that 10% return.

[Operator]

[Operator Instructions] It appears we have no further questions. I'll return the call back to Mr. Hidalgo for any closing remarks.

[Sergio Hidalgo Monroy Portillo, executive]

Thank you, Alfredo, and thanks all of you again for your time and interest in OHL México. As always, Juan Carlo, Francisco and I remain available for any questions you may have. And please don't hesitate to reach any of us if you want to discuss further the performance of the company. And please have also a good day and a good long weekend that it's good [indiscernible] that is coming soon here in Mexico. Thanks, again. Bye.

[Operator]

And this will conclude today's program. Thanks for your participation. You may now disconnect. Have a great day.