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

Welcome to the 2025 9 months revenue presentation of Groupe ADP. [Operator Instructions] Now I will hand the conference over to Cecile Combeau, Head of Investor Relations, to begin today's conference. Please go ahead.

Good morning, everyone and thank you for joining us for our 9 months revenue presentation. I'm here with Christelle Robillard, Group CFO, who will go through some prepared remarks before the Q&A session. Before we start and, as usual, I remind you that certain information to be discussed on today's call is forward-looking and is subject to risks and uncertainties that could cause the actual performance to differ materially. For these, I refer you to the disclaimer statement included in our press release and on Slide 30 of our presentation. And I will now leave the floor to our CFO, Christelle Robillard.

Thank you, Cecile and good morning, ladies and gentlemen. Thank you for joining us to discuss our 2025 9 months revenue. Let me now turn to Slide 3 for our key highlights. The left part of the slide showcases the solid figures we have recorded over the first 9 months despite a demanding context, as I will comment later. Group traffic is up 4%, while consolidated revenue grew 9% to about EUR 5 billion. This enabled us to confirm our 2025 outlook and targets. On strategic matters, we continue to move forward on the key projects that will shape our competitiveness and long-term development. You already know about most of them: the Connect France partnership with Air France, which is delivering its first tangible results, including the Short Connection Pass, launched this summer; the CDG & VOUS public consultation completed in July, which has provided valuable insights for our long-term development plan for Paris-CDG. And last but not least, our work towards the next economic regulation agreement is progressing well. I'm pleased to announce that our proposal will be unveiled on December 10, marking the start of the formal process that would lead to a new multiyear regulatory agreement starting in January 2027. I will come back to this important topic in a few minutes. On Slide 4, a few words on our airport tariffs. On October 17, the group submitted its tariff proposal for 2026, corresponding to a 1.5% increase. As a reminder, our 2 previous tariff hikes for 2024 and 2025 have fully offset the impact of the infrastructure tax under regulated scope. We will now be awaiting the approval decision by the regulator within 2 months as per the usual time line. Let's jump to Slide 6. Traffic in the 9 months evolved broadly in line with our assumption despite a less favorable context in some geographies. In Paris, traffic was up 3.5% year-on-year versus a 2% growth in Q3. While domestic traffic remains on the decline, international traffic has been driving growth since the beginning of the year. Traffic with North America remains above 2019 levels with growth normalizing at 2%. Traffic with Africa is up 5.5%, driven by VFR demand being well above 2019 in traffic, reaching 121%. Traffic with Asia Pacific, still in recovery, is the most dynamic, growing 8%, exceeding 90% of pre-COVID level. Among this, China catches up but capacities are not expected to increase further. At the group level, trends are mixed but showcased strong underlying growth dynamics, up 4% despite headwinds in some markets. TAV Airports traffic is up 5%, especially driven by its international assets, while Turkey saw less dynamism. GMR Airport traffic grew by 3%, largely driven by Hyderabad, while Delhi faced a difficult Q2 and Q3 given geopolitical tensions, runway works and the partial grounding of Air India fleet. Lastly, despite its unstable geopolitical context, AIG recorded a significant growth of 7.5%. Let me now turn to Slide 7 to retail performance. As mentioned, Extime sales per pax stand at EUR 31.3, 5.3% above 2023 levels but down 0.3% year-on-year. After an outstanding Q1 and muted Q2, this confirms the sequential slowdown we had commented upon. As a reminder, our full year outlook guided for an underlying 1% decline of growth in SPP versus 2024. As discussed earlier this year, the cause of this trend is twofold: previously flagged effects inherent to ADP's 2025 situation, the adverse comparison against the Olympics-driven advertising in 2024, ongoing works in Terminal 2E-K and reopening of terminals with lesser retail performance but also external headwinds, namely the slowdown in the luxury sector driven by the appreciation of euro against foreign currencies and adjustments in brand pricing policy. Observing this transitory effect, we stand cautious but remain confident in our underlying retail strategy and offering. Moving on to Slide 8. Revenue reached just above EUR 5 billion in the first 9 months of 2025, a solid growth of 9.4% compared to the same period in 2024. This increase is driven by various trends in each of our segments. In Paris, the Aviation segment is up EUR 106 million, reflecting both our tariff hike and the continued traffic growth. The Retail and Services segment is up EUR 178 million, which is largely due to scope effect from the acquisition of P/S and PEG in late 2024. Excluding those effects, the segment saw subdued growth due to the headwinds I mentioned and then [ of reinvoicing link ] to Line 14. International is up EUR 149 million. TAV delivered double-digit revenue growth, thanks to its international assets and services companies, while AIG continued its recovery despite geopolitical tension. Now let's go through the outlook quickly on Slide 10 to confirm our outlook for 2025, unchanged since the last publication. You have already noticed the reinstatement of the dividend flow of EUR 3 per share for 2025. Looking forward, I can highlight that our 2026 outlook and targets will be provided upon our 2025 full year publication in February next year. Now on to Slide 11 to conclude this presentation with a word on our next Economic Regulation Agreement. We can now share a clearer time line for the start of the process. Groupe ADP will release its public consultation document on December 10, which will officially kick off the negotiation and approval process. The rest of the time tables remains unchanged. Discussion with the French state and regulator's opinion will unfold in 2026 with the to the new contract in January 2027. To give you a comprehensive view of our industrial project and the key assumptions, parameters and clauses of our proposal, we will host an investor teach-in in Paris on December 11. This half day meeting will feature a plenary session, followed by deep dive workshops with management and plenty of time for Q&A and direct exchanges. The plenary will be live streamed for those cannot attend in person but we very much hope to welcome many of you in Paris and discuss the details of our proposal face to face. That's all for this section. Let's now open the line for your questions.

[Operator Instructions] The next question comes from Eric Lemarie from CIC Market Solutions.

Yes. I got 3, if I may. The first one on India. Maybe could you update us on Delhi and the difficulties you are currently dealing with? Do you see a better Q4 in particular for Delhi? And what about Noida Airport? I think it is open now. Are you still comfortable with the situation and with the competition from Noida? And do you see any risk there? My second question on Extime. Could you maybe tell us more on your guidance, given the performance so far in 2025? And how do you see Q4 so far? And the last question on the regulation. Do you see the current political situation as a risk for your future economic agreement negotiation, maybe a risk of delay, I don't know. And in particular, would it be an issue for you if the Minister of Transport, for instance, change sometimes in 2026?

Thanks, Eric, for all this question. So maybe beginning with India and the Delhi difficulties. Indeed, there was some conjunctural difficulties in Delhi regarding the traffic over the past few months. But this is something more conjunctural, as I highlighted in the presentation, especially unfortunately, the impact of the crash of Air India, which leads to have some check on the aircraft. Second element, some works on the runway, which are now finalized and should help to increase the traffic in the months to come. And lastly, some geopolitical tension due to the conflict with Pakistan, which can also lead to decrease the traffic. But all in all, we are confident that all of these elements are more conjunctural and that we'll have still an important exposure to traffic growth in the midterm. Regarding your second question in India from Noida, So this has not -- the airport is not still open. It will be the case in a few weeks. Just to remind you that Jewar Airport is located 75 kilometers from Delhi city center, which implies a 2- or 3-hour journey by car, so not so easy. With an initial capacity of 12 million passenger, it will primarily address the catchment area allocated in its direct vicinity, like Noida and other cities from the state of Uttar Pradesh. With the opening of the new Terminal 1, Delhi Airport has a 100 million passenger capacity. So airlines do not have any development constraints in Delhi Airport. Jewar Airport, as for itself, may primarily have some freight flights and short-haul flights operated by regional or low-cost airlines. So all in all, we are confident that there won't be any impact on Delhi traffic due to competition. Regarding your second question in term of retail. So indeed, there was a slowdown this Q3, especially due to the luxury sector impacted by the significant euro appreciation against U.S. dollar, first but also against Chinese renminbi that leads to have our prices much less competitive in this context. And all the more as brands have not readjusted fully their pricing and prefer to maintain momentum in the local market case impacted by this FX moves. Conversely, we can also notice at the same time that there is a strong momentum in categories driven by Extime, especially beauty. On top of this macroeconomic element, there is also the impact of specific elements due to ADP previously flagged and supportive headwinds. I mentioned in my presentation the rebasing of advertising post Olympics, the works in Terminal 2E-K, the full year impact on some reopening of some terminals which are less performance in term of retail. But all in all, our performance is consistent with the outlook for the full year and we have confirmed our guidance, which is a growth between 4% to 6% compared to 2023. And lastly, on your question regarding regulation. Clearly, we do not expect the current political context to affect the ERA discussion, which are more technical discussions than political ones. So we are still in a position to have technical discussion with the different technical services. Regarding specifically the regulator, as you know, it's an independent authority. So clearly, no issue here. And regarding your specific question of the Transport Minister, we are confident that there is continuity of the state so that there will always be a government representative to sign on ERA.

The next question comes from Andrew Lobbenberg from Barclays.

Can I ask 2 questions? Just coming back to that last point on regulation, where you say that you think that the ERA debate is technical. When you present your plan to us in -- on the 10th of December, it will reflect the plans to expand the airport. And surely, decisions over airport expansion are not technical but they are policy and how highly any one government weights the environmental agenda compared to a growth agenda or something like that does become very political. So I'd just be curious to see what you say to that? And then my other question again is, sorry, it's going to come back to the retail. It seems that you guys have been guiding us to expect weakness in your sales per pax for about a decade because of [ 2A-C and Hall K ]. But it never came and it never came and it never came. And certainly, this quarter, we do see that weakness. I'm just wondering about the timing of these headwinds. I mean, is it that they've just started appearing and so we should expect the headwinds to be material for the coming quarters? Or perhaps is it the case that the headwinds have been there in previous quarters but underlying trading was so strong that it overcame them? So how should we think about the timing or the duration of the headwinds on retail?

Thank you, Andrew, for your question. So you're totally right. The discussion around capacity expansion is not technical and then have some political impact. But for that, we are totally confident because, as you know, we have shared and we have launched over the past few months, 2 consultation regarding the target vision both for Orly and CDG. So speaking specifically of CDG, the consultation generated over 20,000 contribution across more than 700 municipality, so giving us a clear view of stakeholders' expectation and the long-term vision for 2050. So we can consider that this political debate has already been addressed through this consultation. We have different priorities that have emerged from this consultation, mobility and intermodality, quality of service, accessibility, sustainability and low carbon energy and local integration and employment. All this inside that we have received directly feed into our industrial road map, strengthening our priorities on environmental ambition, passenger experience and territorial integration. So finally, all this process that we have voluntarily conducted reinforce the legitimacy of our future ERA proposal as it demonstrates broad stakeholder engagement and secure common elements on our long-term priorities. So that's why we are kind of confident on this political debate. Regarding your second question in term of retail and the specific headwinds for ADP. Indeed, we have spoken of these headwinds since -- for a long time. But clearly, it's now really -- we now really begin to feel the impact. The work at 2E-K will spread over a long period since the boarding lounges will be renovated in the second phase. So just to say that work in Terminal 2E-K will be continuing in 2026. And we have just begun a new phase of work leading to the closure of the beauty and cosmetics area. Some boarding gates are closed due to construction work, as I mentioned, which will lead to transfer to L and M of the terminal, which will continue to have an impact. So there will still be clearly an impact on those headwinds in the months to come.

The next question comes from Dario Maglione from BNP Paribas.

I have 3, if I may. First one, based on the consultation -- the outcome of the consultation for Charles de Gaulle expansion and works, then you published that in the beginning of this month, should we expect some major works to road access or rail access to the airport? And will this be included in the CapEx for the next regulatory period? Second question is related to the -- what's coming in terms of regulation. Of course, there are debates in France about the French corporate tax rate. How would you deal with this uncertainty in the next regulatory period? And third question about traffic, which in Paris, which in September was quite weak, so if you can explain why? And what shall we expect for the winter also based on the plans by airlines?

Thank you for these 3 questions. So beginning with the consultation of CDG. So as I mentioned, it's generated many, many contribution and we already tried to feed those feedbacks in our industrial road map. But regarding specifically your question in term of road access, no, that's not a major part of our industrial project. We will give you much more color and this will be the whole point of the presentation in mid-December. But clearly, there is not the same topic as it used to be the case where we -- when we were talking of a brand-new Terminal 4, which led to a important investment in term of road access. Regarding your second question of the French corporate tax and the impact it can have on regulation. Just to tell you that the regulated WACC we are taking into account is based on the current corporate tax rate, excluding any temporary surcharge or one-off additional contribution. For the next economic regulation, you know that this WACC will be fixed over the entire duration of the ERA. But of course, we are totally aware that given the current context in France, we could be exposed to tax volatility. So that's why we are exploring adjustment mechanism that could partially offset any gap between the forecast and actual tax burden. Let's have this conversation more in detail on the 11th of December. Cecile, you want to take the third one?

Yes. On September traffic, indeed, as we pointed out in previous disclosure, we were expecting a progressive softness in traffic evolution. In September, what you might have noticed in particular is in CDG, reflects mainly capacity reallocation, not an issue regarding underlying demand. Several airlines actually reduced or shifted some traffic from Schengen and North America, which were previously allocated to CDG, to Orly and they did that after the summer. So that's what is reflected in the September traffic. So that weighed on CDG's short-haul traffic, while long-haul growth, North America and Asia kind of [ paused ] at the same time, reflecting here as well some elements that we had largely commented on. And -- so this capacity evolution are seen as short-term adjustments. And comparison as well for the rest of the year will ease towards the year-end because ATC disruptions that you had seen at the beginning of the year as well as Middle East tensions from the late of last year 2024 will fade from the comparison basis, so improving the comparison.

The next question comes from [ Tobias from Bernstein ].

I have 2 questions, please. One more on retail. Extime Duty Free was essentially flat year-over-year in Q3. And just to sort of quantify what you had said before, is that the trajectory that we should expect also for Q4 and maybe going into 2026? And then the second one on Aviation. Your tariff proposals for 2026 is 1.5%, which we all expect to be signed off, which very simplistically gives us a unit revenue increase by 1.5% for sort of airport fees. Could you give us a steer on how you see Aviation OpEx, operating cost, on a per unit base evolving in 2026?

Thanks for this question. So clearly, regarding the SPP, [indiscernible] we remain confident and conscious of the natural environment that could still play on the performance and the impact -- the performance for the rest of the year. Looking forward in 2026, it's a little bit early to comment. But as I was mentioning, as the specific headwinds that weigh on ADP performance will be continuing in 2026, especially the works in Terminal 2E-K. As I was mentioning, we are entering a more important phase in term of work with the closure of the beauty and cosmetics area. That should also weigh on 2026 performance. For the rest of the year for 2025, we are nevertheless totally confident in our capacity to reach the guidance, which is a growth between 4% to 6% growth compared to 2023. Regarding your second question in term of the increase in tariff and the link with the evolution in term of OpEx. As you know, the main driver of our OpEx basis is the opening of new infrastructure and [indiscernible]. Having said that, when you look specifically on each of our [indiscernible], external services will be -- the evolution will be driven by the increase both in traffic growth of specific items and also our efforts towards quality of service. Regarding also the staff cost, which is an important item in our OpEx basis, it should remain dynamic in Paris, reflecting both the structural salary increase baseline of 2.5%, as you know, on average per year as well as the impact of the last recruitments we made over the past 12 months. Regarding the specific items in term of taxes, we will continue to follow the impact of the finance project deal that could have an impact but it's clearly too early to say as the process is ongoing. So all in all, the proposal we made with a tariff increase of 1.5% is in line with our OpEx assumption -- evolution assumption for 2026.