First Insight | Avianca 2Q14 Earnings Results
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Avianca Holdings | 2Q14's Financial Results
- 2Q14 revenues stood at USD 1,140 mn, up 3.6% YoY and relatively in line with our expectations (surprise: -1.5%) and the market's (surprise: +0.4%). Revenues benefit from the seasonality of the business (summer season and Brazil World Cup). Passenger revenues grew 2.9% YoY (passengers +5.9%, yields -1.4%), while cargo & other revenues grew 6.6% YoY. Passenger load factor remain stable at 78.2%, meanwhile cargo load factor increase 400bps YoY to 62%.
- 2Q14 Operating Income (EBIT) was USD 50 mn (+41.3% YoY, 48% above our estimates and 26% above market's expectation). The positive surprise in this line was explained by a lower growth pace in total operating expenses (+2.3% Vs +5.5% estimated), including sales and marketing, aircraft rentals and flight operations performance. Total CASK (operating expenses/ASK) dropped 1.9% YoY to 11.04 cents. It is important to keep in mind that AVH is actually implementing the second phase of their integration process, which is focused on achieving further cost savings synergies. EBIT margin for the quarter was 4.4%, +120bps YoY, but 60bps below the company's guidance for the year (5%-7%). EBITDAR during 2Q14 stood on USD 164 mn, +14% YoY and 7.9% above our estimates.
- Net Income was USD -22 mn during 2Q14, -131% YoY and well below our USD 11 mn estimate, and the market's expectation (-USD 5 mn). Excluding special items (gain/loss asset sales, derivates, FX) net income would have been USD 19.5 mn. Net margin stood at -1.9%, below 2Q13 figure (6.4%) and our estimates (0.9%). This behavior was mainly explained by a net FX loss of USD 44.5 million compared to a net gain of USD 71.2 million during 2Q13. Effective tax rate during 2Q14 was 6.3% vs 20.1% of 2Q13
- As of June, 2014, AVH had USD 890 mn in cash, from which USD291 mn (33%) are pending repatriation from Venezuela.
Overall, we consider 2Q14 results were positive given the good performance in revenues, operating expenses and operating Income vs our estimates. However, we highlight that the EBIT Margin for the 1H (4.4%) is still below the 2014 company guidance (5%-7%). Although we were expecting a negative impact from FX in the quarter, this was much bigger than estimated (-USD 45 mn in 2Q14 vs +71 mn in 2Q13), affecting therefore 2Q14's net income. Trapped cash in Venezuela as a percentage of total cash fell to 33% from 54% in 1Q14.
The company will host a conference call to discuss the results today at 8 AM.
Source: Avianca, Corredores
Corredores Asociados S.A. Comisionista de Bolsa is not responsible for investment decisions that may be derived from the information and analyses presented in this document. These decisions, their effects and consequences will be the sole responsibility of the investor. The information published is informative and has been taken from reliable sources, but Corredores Asociados S.A. does not guarantee that they are free of errors. Total or partial reproduction of this document is not allowed without the prior and express authorization of Corredores Asociados S.A.
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