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Empresas ICA's CEO Discusses Q3 2013 Results - Earnings Call Transcript

Oct 28 2013, 14:16 | about: ICA BOOKMARK / READ LATER

Empresas ICA SAB de CV (ICA) Q3 2013 Earnings Conference Call October 28, 2013 11:00 AM ET

Operator

Welcome to the Empresas ICA third quarter earnings conference call. Your host this morning will be Mr. Victor Bravo, ICA’s Chief Financial Officer. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

I would now like to turn the call over to Mr. Victor Bravo to begin.

Victor Bravo - Chief Financial Officer
Thank you, Operator. Good morning and thank you for joining us for ICA’s third quarter 2013 conference call. Joining me are Gabriel de la Concha, our Chief Investment Officer and Head of our Investor Relations Department, and a new IR team including Ana Paulina Rubio and Elena Garcia. I will go over ICA’s third quarter operational and financial results, our debt positions and update on our outlook for the year. After this, we will open the call to your questions.

Five accomplishments stand out in ICA’s third quarter results. First, Concessions revenues grew more than 100% for the second quarter in a row. This was the result of the start-up of four concessions late last year, plus the continuous maturation of orders.

Second, Airports continues to generate consistent growth with strong margins as a result of traffic growth and expansion of non-aeronautical services.

Third, Construction has ramped up steadily during the course of the year, although it is still below target. Third quarter Construction revenues were 11% above the second quarter and 30% more than the first quarter.

In combination, the results of the three business segments produced a 70% increase in operating income and a 27% increase in consolidated adjusted EBITDA, compared to third quarter 2012, even though total revenues decreased.

Fourth, we reduced net debt by 13% or Ps. 6.3 billion as compared to June 30, as a result of the application of funds from the two strategic transactions to sell RCO and a portion of our OMA shares. Those proceeds were used principally to pay short-term corporate debt. We will have some small additional asset sales in third quarter and we expect to continue to recycle assets to fund new concessions and further reduce debt as part of our portfolio asset management.

Fifth, backlog is Ps. 34 billion equivalent to 22 months work at the average rate of the first nine months of 2013. The total level of backlog has been maintained above the December 31, 2012 level, even with the economic slowdown in Mexico.

Our non-consolidated affiliate, ICA Fluor, grown from very large contracts from Pemex and Pemex Mexican joint venture, with a total contract value of approximately $410 million, most important of this is the distillate processing plant at the Tula Refinery. The contact is the first stage of what is expected to be a multi-billion dollar ICA’s [series] initiative for Pemex. These new industrial construction projects, which are included in non-consolidated outlook, will contribute significantly to our cash flow [contingencies].

Looking at the results of our business segments in second quarter, Construction revenues were Ps. 6 billion. The operating margin grows to 7.2% and adjusted EBITDA margin was 9.4%, above the levels of the prior year.

The MItla-Tehuantepec and Barranca Larga - Ventanilla highways have become the largest civil projects in construction. The Playa del Carmen branch of the Mayab and the Palmillas - Apaseo El Grande tollroads have also entered construction. The 23% decrease in Construction revenues results from delays in the delivery of rights of way, slow payments by some clients (inaudible) our working capital and the relatively low start-up pulling out new projects for bids by the government.

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