Empresas fka ICA

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Empresas ICA (ICA) Q2 2014 Results - Earnings Call Transcript

Aug. 3, 2014 8:21 AM ET | About: Empresas ICA S.A. DE C.V. (ICA)

Operator

Good morning. My name is Lia and I will be your conference operator today. At this time, I would like to welcome everyone to the Empresas ICA Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) Your host this morning is Victor Bravo, Chief Financial Officer of Empresas ICA. You may begin.

Victor Bravo - Chief Financial Officer
Good morning and thank you for joining us for ICA’s second quarter 2014 conference call. With me today are Gabriel de la Concha, our Chief Investment Officer and Head of Investor Relations, and the IR team including Paulina Rubio and Elena Garcia.

I have to focus my comments this morning on five highlights in our results. First, I will cover on the construction segment and stronger source in constructions in airports and in line with our outlook for the year.

Significant reductions in SG&A also. Second, we have to get it another step in our initiative to increase the international share of our business with the acquisition of Facchina Construction Group or FCG) n the United States and contract wins in Colombia and Chile.

The Board has set medium-term goals to expand the international’s share of the construction business to 30% from a baseline of less than 10%. Third, we are completing our construction projects.

We expect to start operations of four projects in the second half including the Agua Prieta water projects, and a highway expansion in (inaudible) this push accounted for most of the revenue increase in the quarter. Fourth, capital markets transactions significantly improved our debt maturity profile and cut short-term debt in half.

Finally, we have a solid pipeline of new projects for this as the ATT announced last week ICA is in first place for the contract for the Mexico rail tunnel. This project win could be a positive signal for construction activity in the second half of 2014.

Let me address each of these five points and then we will open up the call for your questions.

Construction activity continues to recover in Mexico relatively slowly. International is making a significant contribution to construction. The operating constructions are maturing and generating large increases in traffic volume. The airport business continues to exceed expectations for growth in volumes and revenues.

Revenues from operating results for the second quarter and for the full six months of 2014 are in line with our full year average. Looking at the details, two factors in 2013 have such year-over-year comparisons. We have a 419 million peso gain on the sales on the RCO tollroads in the last year’s second quarter recorded as other fee income.

In addition, revenue related to the real estate as a major group in the first half of 2013 was concentrated in the second quarter at a constant basis. Construction revenue increased 22% in the second quarter. The acquisition of Facchina accounted for about 15% of this growth in the first half, construction increased 23%.

SPC contributed about 7% to growth and the other 16% was organic. Construction margins also recovered. The second quarter adjusted EBITDA margins rose to 9.6% and the six months adjusted EBITDA margin improved to 8.4%, up 350 basis points.

Revenues from the construction business decreased 17% in the second quarter. This was level of success in 2013 that I mentioned. For the six months, revenues grew 16% largely as a result of the growth in traffic volume.

Traffic on the four operating highways rose 36% in the second quarter and 46% in the first half, led by Rio de Los Remedios and Verde-Ciudad Valles highways. The Acapulco Tunnel had a solid revamp and Mayab Road traffic also grew.

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