Aeroports de Paris SA (ADP) Earnings Call Transcript & Summary

Yes, yes. For sure, we can clarify this. So there will still be a pre-close call. This conference call with a short notice was due to the fact -- is totally an exceptional event due to the fact that we had disclosed yesterday this specific preliminary information regarding H1 2025 results. Given the magnitude of the impact of FX evolution, we considered that it was better and more transparent to the market to give you as information straight away. So we organize this specific call to explain the elements regarding all those impacts. But of course, we are maintaining in parallel the pre-close call with the IR team, and we -- it's now something that we have organized for the last result, and we are intending to maintain that, but these are 2 different process.

Okay. So tomorrow, it's still -- we still got a call with...

Yes, of course. We might do it a bit shorter and not address again things that we just discussed like spend per pax again, things like that.

And we will now take our next question from Harishankar of Deutsche Bank.

It's Hari from DB. Firstly, would you be able to split the FX impact into the 3 buckets that you've highlighted in the press release on TRY depreciation or the INR depreciation. And secondly, if I read through the Turkish depreciation impact, it looks like you're talking about from the companies that are having the lira asset, which is the currency and that's issued in foreign currency, the depreciation leading to an increase in the value of these debts in their accounts, which is understandable. But presumably, you would be converting this back into EUR terms for ADP reporting? And shouldn't that actually be neutral? I just couldn't get my head around it.

Sorry, the line was really not so good, so very, very hard for us to understand. But if I get some of your -- some elements in your question, so indeed, we have 3 effects, 3 major effects in those FX variation, either direct or indirect on our account. So the first -- the 2 first effects adding to the depreciation of the Turkish lira with a currency exchange loss. So just to explain, this is totally detailed in our press release, but for Turkish company, with the Turkish lira as their functional currency and which have issued debt in foreign currency. So that means euro or USD, the depreciation of the Turkish lira lead to the increase in the value of the debt in their account. So this has an impact on financial results or on profit and loss from equity-accounted company when it's not a fully integrated companies. Second effect for Turkish companies with the euro as their functional currency is the depreciation and this is really the new effect that we are seeing for the 2 past months. The depreciation of the Turkish lira is now stronger than the local inflation measured by the internal hyperinflation index. And in this case, the value of the future tax benefits decreasing, leading to the negative impact on our account. And this has an impact -- and I guess this is answering, I hope, to your question, this has an impact on deferred tax loss. So this is -- this is clearly an indirect impact through deferred tax loss. And then the third effect is the Indian rupee depreciation. And here, the major effect concerned the FCCB, which is euro denominated and which lead to an increase in the level of debt in GMR Airports account. And for this, as it is in the equity-accounted companies, there are no direct impact for me in the income tax.

Understood. Apologies about the quality of the line. Hopefully, it's better now. Maybe on the first part, any broad bucket between what is the value in each of these items?

The split of each item. So no, sorry, we are not disclosing it. We give a full range. But all in all, it's kind of half and half between Turkish lira and Indian rupee, but we don't give the specific bucket for each item because its estimate for the moment, it has to be confirmed within the final result. So it's better not to clarify and we are starting the process of closing. So we will be able maybe to give more color when we have the final figure for first half. But keep in mind that it's -- at this stage, our estimation is half-half between Turkish lira effect -- the 2 first elements, sorry, and the effect regarding Indian rupee.

And we will now take our next question from Cristian Nedelcu of UBS.

The first question, you signed a long-term agreement with Air France regarding developing the Paris Airports. I wanted to check if you step back, are there other airlines in particular that you believe can drive traffic growth over the next years in Paris? So any other airlines that are expressing interest to increase their capacity in a meaningful way in Charles De Gaulle and Orly? The second question in terms of the regulatory proposal, is there any time line that you can give us? Are we expecting any decision from the regulator on the WACC or any -- or maybe if you can tell us a bit more when you think you will present your economic proposal for the next regulatory period? And the third one, if you allow me, there's a few press articles talking about Hyderabad spending around $1.6 billion on CapEx until the end of this decade. I don't know if you can comment if that information is accurate. But in particular, I'd be curious, will they need to raise more debt to finance that CapEx program in Hyderabad? Or is that financed organically through for their free cash flow generation? In the past, you've mentioned there's not a lot of free cash flow generation until the end of the decade. So I was curious if you can clarify that.

Yes. So regarding the partnership with Air France, just to remind you that indeed, we have signed an agreement to really reinforce our position and competitive at the hub level in a context where there is important competition with other international hub, especially in the Middle East. It was important for us to have a specific agreement with Air France to work on some specific measures to reinforce our position and our competitivity regarding other airports. It is clearly a separate process and the process of the negotiation of the economic regulation agreement. There are some quick wins with Air France but with no impact in terms of no commitment, in terms of CapEx or tariff, which will be negotiated through the economic regulation agreement. Regarding your question, are there other airline interested in increasing their capacity in Paris? Yes, this is something we are also working on. And in the framework of the negotiation for the next economic regulation agreement, we are speaking with the main airlines to see what could be their need and to see what we could envisage specifically for other important airlines. The economic regulation agreement concerned really all the airlines. So we have to find the best balance as possible to answer to each party's interest. So regarding your second question for the economic regulation agreement, the time line we gave for the first quarter is unchanged. That is to say that we intend to submit a proposal at the end of this year, 2025, to have 1-year negotiation with the French state to get the approval of the regulator, but also to discuss with airline with the final objective to implement the new regulation agreement at the beginning of 2027 at the latest. Regarding the WACC, there is no change since our last disclosure. We are expecting to have an opinion as a regulator within the framework of the 2026 tariff process from one side. And we will have also specific opinion given by the regulator at the beginning -- expected at the beginning of 2026 for the estimation of the WACC for the ERA period. So this is something expected more at the beginning of 2026 and nothing new should be known before this. Maybe I better let Antoine answer.

Yes. Thank you, Christelle. So briefly on Hyderabad, I guess that what you are referring to is probably some numbers or rumors around numbers that are linked with the ongoing consultation of Hyderabad on its next control period for the tariffs. And at this stage, it's a bit too early to know the exact amount and the phasing of this announced for Hyderabad. Nevertheless, it is clear that if you look at the traffic forecast for Hyderabad, which is very dynamic and very dynamic, in particular, on the international traffic, which is also very contributive. We know that there will be probably indeed by the end of the decade, a new CapEx cycle to accommodate these traffic growth in the -- at the airport. Having said that, Hyderabad has a very good, as you know, financial profile and has -- that's a very positive news for GMR Airports. Hyderabad has already started this year to distribute dividends to its mother company, GMR Airports, hence generating -- starting to generate also very positive cash flow to the holding level. And that also strengthens the fact that -- and we reiterate this target that we have already given to the market and which is also aligned with GMR and our partner to have a positive free cash flow generation at GMR Airports level by the end of the decade and potentially dividend distribution at the end of the decade. So that is confirmed regardless of the CapEx that may occur in Hyderabad.

And we will now take our next question from Andrew Lobbenberg of Barclays.

I just wondered if you could give any comments on the announced ATC strike for tomorrow. It's obviously not a complete shock for a French ATC to go on strike in July, whether you are expecting a worse or better season this year? And then just whether you can offer any comments on some of the volatility we've seen around the discussion of potential increased taxes on aviation, which I think were out there in the market and then were slightly downplayed by the Prime Minister's office yesterday, I think.

Yes. Thanks, Andrew. So regarding the strike that will occur in the days to come, it's clearly too early to tell how the cancellation could be reported or could be delayed or how the traffic could be split over the days ahead. So clearly, yes, too early to see the consequences of the movement. But all in all, once again, it's not something that would lead us to change our guidance. We confirm our annual guidance. So no expected impact. We are always confident about our annual level. So at this stage, no expected impact regarding this specific strike that will occur in the days to come. Regarding your second question, yes, on the tax. So indeed, you know that we have gone through important tax increases over the past few months. We have mentioned today the surplus regarding income tax, which is a temporary tax at this stage. You also know the impact we have gone through because of long distance infrastructure tax. For this, we have managed to offset all the regulated impact of this tax, that is to say, 75% of the total amount, and total amount estimated at EUR 130 million. We have offset it through 2 tariff increase in 2024 and 2025. There has been also the impact on the ticket prices. So here, it's more an indirect effect for us because it can have an impact on the traffic level if the ticket prices are deemed too high by passengers. For the moment, once again, we have not at our level seen any major impact on the volume of traffic. It's maybe not the case for regional airports and small airlines. There have been some rumors in the press indeed that there could be a new evolution regarding new increase of taxes. Clearly, here, again, sorry, but it's too early to tell. It's just a rumor in the press at this stage. Of course, we will monitor the situation because this is something that has clearly an impact on our accounts. And so we will monitor during all the process of the negotiation of the Finance Bill Act.

That was our last question. I will now hand it back to Cecile Combeau for closing remarks.

Thank you. So we can indeed close this call. Thank you all again for joining us on short notice. I will briefly remind that the quiet period will start on Monday, July 7. So as indicated earlier during the call, we intend to host tomorrow with Eliott at the usual group pre-close call, which is scheduled at 11 a.m. The objective, as you know, is to remind all key public information and business trends before entering the quiet periods. So the results themselves will be published on the 30th after market close and the conference call with management will be held on the following day, July 31, at 11 a.m. Paris time. And with that, I thank you again for having logged to this call and wish you a good day. Thank you.

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.