Release Date: February 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Atlas Arteria Ltd (ASX:ALX, Financial) reaffirmed distribution guidance of $0.40 per security for 2024, indicating strong financial performance.
- Traffic at APRR hit record levels, driven by a 3.3% increase in light vehicle demand, contributing to a 7.1% increase in EBITDA.
- The acquisition of Chicago Skyway has outperformed expectations, extending concession life and diversifying cash flows.
- Toll prices at APRR, ADELAC, and Warnow Tunnel increased significantly due to inflation, providing a long-term revenue boost.
- Atlas Arteria Ltd (ASX:ALX) maintains a high proportion of fixed-rate debt, offering protection from interest rate risks.
Negative Points
- The introduction of a new tax in France on companies operating long-distance transport infrastructure significantly impacted the security price.
- Safety performance at APRR missed the target for the lost time injury frequency rate, indicating room for improvement.
- Heavy vehicle traffic growth was marginal due to flat European economies and reduced agricultural production.
- The French Parliament's new tax will represent 4.6% of revenues, impacting financial performance.
- Dulles Greenway traffic remains below 2019 levels, despite a gradual return to office-based work in Northern Virginia.
Q & A Highlights
Highlights of Atlas Arteria Ltd (ASX:ALX) Earnings Call
Q: Can you clarify the base for the free cash flow per share metric in the new LTI structure?
A: Yes, the base for the free cash flow per share metric is the $609 million 2023 free cash flow. (David Collins, CFO)
Q: Could you explain the distribution guidance for 2024, particularly the $0.07 to $0.08 per share of cash on hand?
A: The $0.07 to $0.08 per share of cash on hand is to support the $0.40 distribution. This reflects the impact of the new infrastructure tax in France and the step-up in amortization on the Fin Eiffarie line. (David Collins, CFO)
Q: What are the assumptions for FX rates for the next year?
A: We expect a broadly stable outlook for FX rates, without significant changes from the current levels. (David Collins, CFO)
Q: Can you provide more details on the updates to the APRR CapEx program?
A: We have adjusted the short-term CapEx guidance down by deferring non-essential CapEx to mitigate the impact of the new tax. The longer-term guidance reverts to previous averages in the late 2020s. (David Collins, CFO)
Q: Where will the capital for potential buybacks come from if cash is needed to support distributions for FY '24?
A: Future re-gearings, particularly at Chicago Skyway, could fund share buybacks. However, this is not immediate and would likely occur in 2026 or later. (Graeme Francis Bevans, CEO)
Q: What is the EUR 32 million other cost in APRR below the EBITDA line?
A: It is a one-off adjustment to the discount rate used to calculate the maintenance provision under IFRS. This adjustment is backed out in the company level NPAT as it is not a French GAAP impact. (David Collins, CFO)
Q: How long do you expect to not pay the French tax, and when will you consider backing it out of your accounts?
A: We expect to litigate this year and eventually negotiate with the French government. Until then, we will provision conservatively. (Graeme Francis Bevans, CEO)
Q: What is the expected capital investment for the A412 project and how will it be funded?
A: We cannot disclose the quantum as we are in exclusive negotiations. The project will be funded internally through APRR's free cash flow or borrowing capacity, without requiring equity contributions from shareholders. (Graeme Francis Bevans, CEO)
Q: Does the 5.5% CAGR target for free cash flow per security assume compensation for the French tax?
A: No, the 5.5% CAGR target does not assume compensation for the French tax. It is based on the assumption that the tax continues through to the end of the concession. (David Collins, CFO)
Q: Can you provide more details on the proposed working group on the future of French toll roads?
A: The working group will have broad representation, including existing concession holders like APRR. The purpose is to explore options for future toll road concessions. (Graeme Francis Bevans, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
