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Avianca Holdings's 1Q14 Financial results

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May 16, 2014 ( newswire) 1Q14's revenues were USD 1.1 billion, -1.7% YoY given the decrease of 2.2% in passenger revenues (prices -4.4% and number of passengers +0.3%) and the slightly increase of 0.5% in cargo & other revenues, the latter representing approximately 16.5% of total revenues. These results were basically explained by the reduction and simultaneous redeployment of AVH's capacity, expressed in ASKs, from Venezuela to other markets. It is important to mention that the efficient redeployment of capacity has a maturation cycle of between 6 to 12 months; therefore we will expect to have a short term impact in financial results until year end. These figures came 9% below our estimates and 7% below market consensus.

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  • Operating income for the same period was USD 50 mn (-51.3% YoY), accounting for an operating margin of 4.6% (-460 bp Yoy). Quarterly results came 57% below our estimates and 52% below market consensus. However, excluding non-cash Fx charges, gain or loss on assets as well as derivative instruments and one-time expenses associated to the phasing out of aircraft; operating income will be of USD 57.2 mn (margin of 5.2%).
  • Net income for the period was USD 12.3 mn (-84% YoY), for a net margin of 1.1% (-580 bp). Adjusted net income stood on USD 31.6 mn, for an adjusted net margin of 2.9%. This figures came well below our figures (-85%) and 50% below market expectations.
  • The cash trapped in Venezuela was of USD 319 mn (54% of total cash as of march 2014).
  • The company revised downward its load factor for 2014 year end (from 79%-81% to 77%-79%). Additionally, it revised downward its EBIT margin for the year (from 8.75%-9.25% to 5%-7%).

Overall we consider 1Q14 financial results were negative and were basically affected by the redeployment of Venezuela's capacity. The latter will continue to have a negative impact in short term financial results given that the efficient redeployment of capacity has a maturation cycle of between 6 to 12 months. Additionally, the company revised 300pb downward their estimates for 2014's EBIT margin from its previously based scenario.

Today the company will host its conference call at 9AM Colombian Time Newswire

Corredores Asociados S.A. Comisionista de Bolsa no se hace responsable por la toma de decisiones de inversión que se deriven de la información y de los análisis presentados en este documento, dichas decisiones, sus efectos y consecuencias serán de exclusiva responsabilidad del inversionista. Los datos publicados son informativos y han sido tomados de fuentes confiables, pero Corredores Asociados S.A. no garantiza que los mismos estén libres de errores. No se permite la reproducción total o parcial de este documento sin la autorización previa y expresa de Corredores Asociados S.A.

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