Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong growth in proportional toll revenue driven by inflation-linked toll increases.
- Reaffirmed distribution guidance of $0.4 per security for 2024, supported by improved free cash flow.
- On track to achieve 2025 emissions reduction targets, reflecting strong sustainability efforts.
- Appointment of Hugh Wehby as new CEO, bringing extensive infrastructure experience.
- Successful refinancing initiatives, enhancing balance sheet flexibility and reducing refinancing risks.
Negative Points
- Negative impact on EBITDA due to the new French long-distance transportation infrastructure tax.
- Traffic reduction at APRR due to pharma strikes and lower heavy vehicle traffic.
- Increased operational costs at Dulles Greenway due to legal fees and new violation enforcement system.
- Ongoing litigation and uncertainty surrounding the new French tax, which could take up to four years to resolve.
- Higher labor costs at APRR due to wage escalation and prior period adjustments.
Q & A Highlights
Q: Can you give us a sense of the litigation outcome around the French tax and what a positive outcome would look like?
A: The constitutional challenge argues that the tax is unconstitutional as it targets a specific sector. The outcome will be known on September 12. If unsuccessful, we will seek toll increases under our contract to compensate for the tax. If rejected, we will proceed with commercial litigation, which could take up to four years. A positive outcome would mean the tax is deemed illegal, and we would get a refund for any advanced tax paid.
Q: On the APRR labor costs, is the substantial increase a permanent shift?
A: The increase is due to two factors: a prior period credit related to the raising of the retirement age in France, which accounts for about 7%, and current period wage escalation of around 5%. The prior period adjustment is a one-off.
Q: When will the trapped money from the Chicago Skyway be released?
A: Post June 30, we had USD19 million released from the IRS withholding. The majority of that amount is now available.
Q: Can you share more details about the A412 project, including its size and funding?
A: We will provide detailed information post-signing. We have an option to purchase it at any time, similar to the A79 project. The project will be funded through excess cash on APRR's balance sheet or borrowings at the APRR level.
Q: How confident are you in hitting the EBITDA target for Chicago Skyway for FY24?
A: Historically, H2 is stronger than H1 due to higher traffic in the summer months. We expect this trend to continue, making us confident in achieving the target.
Q: What are the multiyear CapEx expectations for Chicago Skyway?
A: We had elevated CapEx in 2023. For 2024, the guidance is around USD11 million, which is a reasonable estimate for future years. This includes transitioning from reactive to proactive maintenance.
Q: Can you explain the consolidation adjustments and their future impact?
A: The previous inter-company loan arrangements expired in December 2023. Going forward, the only adjustments will be due to differences between French GAAP and IFRS, primarily related to maintenance provision calculations and land tax treatment. The full-year impact should be minimal.
Q: How will the reversal of the land tax difference affect the second half?
A: The land tax difference will show up as a positive in the second half, making the full-year number close to zero, except for any movements in the TP09 index.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
