Gimena Albanesi - Investor Relations Martin Eurnekian - Chief Executive Officer Raúl Francos - Chief Financial Officer Jorge Arruda - Finance and M&A Manager.

Mark Zhang - Oppenheimer Charles Cartledge - Sloane Robinson.

Good morning. And welcome to the Corporacion America Airports’ Third Quarter 2018 Earnings Call. A slide presentation accompanies today’s webcast and is available in the Investors section of Corporacion America Airports Investor Relations website at http://investors.corporacionamericaairports.com.

As a reminder, all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. And as a reminder, today’s call is being recorded. At this time, I would now like to turn the conference over to Gimena Albanesi of Investor Relations. Please go ahead..

Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today’s call will be Martin Eurnekian, our Chief Executive Officer; and Raúl Francos, our Chief Financial Officer. Also with us today is Jorge Arruda, Finance and M&A Manager. All will be available for the Q&A session.

Before we proceed, I would like to make the following Safe Harbor statements. Today’s call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and reconcilings with the SEC.

We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. I would also like to remind you that following the recent categorization of Argentina as a highly inflationary in accordance with IFRS standard commencing July 2018, we began applying IFRS rule IAS 29.

This rule applies directly starting January 1st this year. So comparison purposes, we now recently presenting actually for this result, we are also disclosing the isolated impact of the adoption of Hyperinflation Accounting in Argentina and our results excluding IAS 29.

Additional information in connection with the application of rule IAS 29 can be found in our earnings report. Now that for comparison purposes and a better understanding of our underlying performance in our presentation, we will be discussing results excluding Hyperinflation Accounting in Argentina.

With that being said, I would now turn the call over to our CEO, Martin Eurnekian..

Thank you, Gimena. Hello, everyone, and thank you for joining us today. It’s a pleasure to welcome you to Corporacion America Airports’ third quarter 2018 earnings conference call. I will begin my presentation with a discussion of the highlights of the quarter and then Raúl will take you through our financial results.

Afterwards, I will provide an update on our key business segments and our view for the remainder of the year. We will then open the call for your questions.

Starting with slide number three, with faith and increasingly challenging macro environment in some of our key market this quarter, particularly in Argentina where we are experiencing a significantly weaker travel dynamics and to a lesser extent in Brazil.

This resulted in a sequential deceleration in total passenger traffic growth of 1 percentage point to almost 6% year-over-year this quarter. Again, this back drop revenues bode to the high single-digit year-on-year decline. In Argentina, we are seeing a drop in international alone with a mix shift to domestic destinations.

Revenues were also affected by the FX translation impact on local currency in Argentina as well as in overall revenues in Brazil, resulting from the stronger devaluations experienced in both countries.

Looking at profitability, we turned in another quarter of margin expansion with EBITDA margin ex-IFRIC up more than 430 basis points to over 40%, driven by strong margin expansion in our core markets Argentina, Brazil and Italy.

In addition, as our cost structure is based in local currency, we benefited from the strong currency depreciation in Argentina. Excluding inflation accounting in Argentina, adjusted EBITDA margin ex-IFRIC expanded over 460 basis points year-over-year to almost 41% and adjusted EBITDA increased by high single-digit.

With the goal of expanding our airport platform for the long-term growth and to enhance the service we provide to our passengers we made capital expenditures of $51 million in the quarter in essence were largely center in our airport infrastructure in Argentina and Italy.

As you can see on slide number four, passenger traffic increased across the majority of our countries of operations. In Argentina, however, traffic growth continued to decelerate to almost 6%.

We saw continued slower travel demand along with an ongoing mix shift from international to domestic traffic as passengers look for more affordable travel alternative. In Brazil traffic was up mid-single digits, mainly driven by growth in domestic traffic at Brasilia airport.

Italy continue to report traffic growth of over 3%, mainly driven by higher international traffic supported by the addition of new routes and airlines which more than offset softer domestic traffic. In Uruguay traffic contracted almost 5% year-over-year, impacted by the continued lower passenger demand from key markets Argentina and Brazil.

Our other markets, however, posted solid traffic growth in the quarter. Passenger in Ecuador was up 10% year-on-year benefiting from easier comps as traffic in the year ago quarter had been impacted by the cancellation of international flights as Hurricane Irma hit Florida.

Peru also posted a robust performance, with traffic up 10.2% year-on-year as new frequencies and promotions by low-cost airlines are driving higher demand, further supported by an improving macro back drop. Finally, in Armenia, we saw a temporary spike in traffic of almost 13%, but expect traffic growth to normalize to recent levels.

I will now hand off the call to Raúl Francos, who will review our operations and financial results. Please, Raúl, go ahead..

Thank you, Martin. Good day, everyone. As Gimena mentioned at the beginning of our presentation, for the better understanding of our performance we will discuss our results excluding the impact of Hyperinflation in Argentina. Now turning to slide five.

Total revenue declined close to 8% year-on-year to nearly $390 million and almost 4% when excluding construction revenues. We continue to experience a sharp currency depreciation in Argentina and Brazil this quarter, with a yearly average devaluation of 85% in Argentina and 26% in Brazil.

Aeronautical revenue were mid-single digits after good performance in Uruguay, Ecuador and Armenia, it was more than offset by the lower revenue obtained in Argentina and Brazil.

Likely, despite increase in traffic Italy continued to face tough cost this quarter as marketing support expenses are reduced from revenue reflecting change in marketing agreement, which a year ago quarter there were included in SG&A.

Following a similar trend commercial revenue declined 3% year-on-year, reflecting a weaker performance in Argentina and FX translation impact in Brazil.

By contrast commercial revenues in Armenia rose by year over 40% driven by higher fuel demand on prices, while Italy is benefiting from our investment to enhance service offering to passenger coupled with higher traffic growth. As you can see on slide six, our cost structure continue to benefit from the stronger position in Argentina and Brazil.

This rose about 12% year-on-year decline in total operating cost and expenses. Cost of services, ex-IFRIC fell 5%, driven by decline in salaries and lower concession fees in both Argentina and Brazil, partially offset by higher costs in Armenia, concession on fees decline in Argentina as a result of the devaluation impact of revenue.

Lower concession fees in Brazil reflect the change in passenger curve used to calculate amortization of the impact of rule IAS. SG&A also benefited from currency depreciation, declining 18% in the period mainly as a result of lower salaries and sales taxes in Argentina.

Italy also contributed to the reduction in SG&A driven -- this quarter marketing and support expenses were deducted from Aeronautical revenues. Coming to profitability on slide seven. We delivered a 9% year-on-year increase in adjusted EBITDA ex-IFRIC reaching $137 million in the quarter.

Brazil and Armenia were the main contributors to this increase, further supported by Uruguay and Italy. This was achieved despite softer adjusted EBITDA growth in Argentina, reflecting difficult market dynamics. Importantly, adjusted EBITDA margin ex-IFRIC expanded almost 470 basis points to almost 41% from 36% in the same quarter of last year.

This was mainly driven by significant margin expansion across our three key markets, Argentina, Brazil and Italy, that more than offset in margin contraction in our operations. Note, however, the margin expansion in Argentina is anticipated to moderate as inflation continues to catch up with the currency devaluation.

Also, while we turn to strong operating results, our bottomline was negatively impacted by the higher financial loss that resulted for increase non-cash effects losses related to our U.S. dollar denominated wage in Argentina. This was slightly offset by lower income tax expenses recorded in the quarter.

As you can see on slide eight, our healthy balance sheet provide a solid platform to continue carrying out our strategic initiative.

To debt at the close of the quarter was relative stable at $1.2 billion and our net debt to last 12 months adjusted EBITDA ration increased slightly to 2.1 times from 2 times in the prior quarter mainly due to the impact of Inflation Accounting on adjusted EBITDA.

Excluding this effect the ratio was 1.9 times, reflecting higher cash generation in the period. We keep conservative maturity profile with less than 10% of our debt maturing within the year and an adequate currency mix is about 59% of our debt denominated in U.S. dollars, 25% in reais and 16% in euros.

Let me now turn the call back to Martin, who will go over performance at our key business segments and will comment on our outlook..

Thank you, Raúl. Let me now review the performance of our key business segments, starting with Argentina on slide nine. We saw an 8% year-on-year decline in revenues ex-IFRIC despite the 6% increase in passenger traffic as business dynamic remained impacted by several factors.

First, we are experiencing a stronger mix shift from international to lower priced domestic destinations. As a result, domestic traffic increased over 14% while international traffic contracted almost 7%.

Second, Aeronautical revenues from domestic passengers and a portion of our commercial revenues that are in peso denominated remain affected by the FX translation impact from the sharp peso devaluation. And finally, in this context, we are seeing a mix shift in cargo volume with higher export activity and the number of higher margin imports.

Despite this change market dynamics adjusted segment EBITDA ex-IFRIC was relatively flat at $79 million in the quarter, reflecting higher cost dilution from our cost structure in Argentina, which continues to benefit from the peso devaluation.

Adjusted segment EBITDA margin for Argentina expanded close to 400 basis points to almost 45% in the quarter. Note, however, that we expect margin to normalize going forward as inflation catches up with the peso devaluation.

Maintaining our goal of further enhancing our airport infrastructure, we made capital expenditures of almost $47 million this quarter in Argentina.

Investments were mainly targeted to the construction of the new departures terminal building at Ezeiza Airport which we expect will be finalized by mid next year and will allow for a more efficient traffic flow, while offering a better travel experience to our passengers.

This quarter we also continued with the remodeling of the terminal building at Iguazú in Mar del Plata airports and are making headway in the construction of the new terminal building and expansion of the parking space at Comodoro Rivadavia Airport.

We continue advancing with CapEx execution to absorb future passenger traffic growth, until till the overall CapEx program is approved we are supporting the governments airplane revolution plan investing above the minimum contractual requirements and in line with the CapEx plan we are developing closing with the government.

Investments are mainly focused on what are cited and specific airports in other regions in the country and then funded with cash flow from operations.

We are also pleased to report that El Palomar Airport, which is mainly focused on low cost airlines has been recently qualified for international routes and expect to start operating flights to neighboring countries, Uruguay, Chile and Paraguay by the end of the year. Now please turn to slide 10.

Passenger traffic growth in Brazil slowed to 5% reflecting greater uncertainty in the pre-election environment. Revenue in turn were down 11% year-on-year impacted by the FX translation effect from the depreciation of the Brazilian real.

However, on local currency basis, revenue was up over 10% reflecting the increase in passenger traffic and the positive contribution from recent commercial initiatives, particularly in advertising, VIP lounges and space rentals. Adjusted segment EBITDA in Brazil was up by 75% year-on-year reaching $6.3 million in the quarter.

Higher operating leverage mainly from a reduction in the concession fee as Raúl just explained, together with lower SG&A allowed us to deliver a strong expansion in adjusted segment EBITDA margin which doubled to 21% from 11% a year ago quarter.

Keeping up with our CapEx program, this quarter we invested close to $3 million for the construction of runway safety areas and engineering projects at Brasilia airport.

In terms of the expansion of the terminal at Brasilia airport to accommodate an additional shopping area accessible from the outside, following the recent Presidential election, we are currently reassessing the scope of this project and expect to define how to best approach it over the next few months. Now moving on to Italy in slide 11.

Passenger traffic continued to grow at a healthy pace, up 3.2% year-on-year. We also achieved a good topline performance. The redesigned VIP lounge, recently opened retail stores and new space for duty free shops continue to generate revenue growth. Comparable revenues ex-IFRIC and excluding marketing support expenses were up 6% in the quarter.

We are also pleased to report high profitability this quarter supported by solid traffic growth, a pickup in commercial revenues and higher operating leverage. Adjusted segment EBITDA was up 5% and adjusted segment EBITDA margin at ex-IFRIC expanded over 460 basis points to 37% in the quarter.

Moving ahead with our CapEx program, we invested closed to $5 million in the quarter for the expansion of the terminal at Pisa Airport and Master plan development at Florence Airport. We expect to obtain the final project approval for the new runway at Florence Airport before the end of the year and start construction in the first quarter of 2019.

Please turn to slide 12. While we will not provide specific guidance giving the challenging environment in Argentina and to a lesser extent in Brazil, we are providing some additional color this quarter. In Argentina, we expect to see a stronger mix shift to more affordable domestic destinations in the fourth quarter.

Gradually we should begin to see a slow pickup in inbound international traffic as travelling to Argentina becomes more affordable on the back of the weak peso. We expect these trends to continue in the remainder of 2018 and to deepen in 2019.

Based on a slowly improving micro environment we should expect to start to see a recovery in Argentina in the second half of next year, resulting in low single-digit decline in traffic growth for next year.

By contrast with elections over in Brazil and economy slowly recovering, we expect to see traffic growth to begin accelerating the work at the end of the year, particularly in terms of international passenger traffic with the addition of four new international routes.

At the same time, we expect to continue seeing solid traffic trend in our other markets. We remain focused on further strengthening our global airport platform, developing new routes and frequencies, while providing our passengers with a great travel experience. This is further underscored by our strong balance sheet.

We are now ready to take questions. Operator, please open the call for questions..

Thank you. [Operator Instructions] And the first question comes from Ian Zaffino with Oppenheimer. Please go ahead with your question..

Hi. Good morning, guys. This is Mark on for Ian. Thanks for taking our questions. So a very good quarter, again a very solid.

I just like to, I guess, touch upon the profitability, you guys mentioned on the call and the press release, how it’s being -- expected to be impacted by inflation as it catch itself and then lower some operating leverage down from sequentially this quarter.

So I just like to understand what are some of the expectations going forward and are there like any other, while if you can pull to maintain that level of profitability? Thank you..

Thank you for the question. It’s a really tough question you are asking forecasting inflation is seems very difficult with the current environment in Argentina. We have seen high inflation numbers so far, but we are also seeing recession numbers in the economy that should currently be the growth of inflation, but it’d be very difficult to see.

The dynamics you had seen in the last couple of years where that -- after devaluation in the period of time inflation would catch up in dollar term, but it would be very difficult to forecast next year what will happen..

Okay. That’s fair. And then, just a little bit on the topline, like, you guys are doing a great job in adding new flights and frequencies.

I just want to see what the sort of your expectations going to maybe at the end of the year fourth quarter ‘18 what the sort of activity has been going forward and the expectations relative to the performance this quarter? Thank you..

Well, our expectations are that the dynamics we are seeing throughout the year will continue. We are seeing a slowdown in international traffic, probably, mainly due to the devaluation of the peso. But we keep seeing domestic growth. We keep seeing airlines continuing with their plans to establish themselves in Argentina to fly domestic.

Norwegian for example and a couple of other airline that are working their way through starting to fly in Argentina, so we are still optimistic in the domestic side of traffic. As we have seen this year, so we do not expect those dynamics to change in the fourth quarter..

Okay. Great. Thank you, guys, and I will jump into queue again..

And the next question comes from Charles Cartledge with Sloane Robinson. Please go ahead with your question..

Thank you and thank you very much for the presentation today. So you point to increase the cost pressure in Argentina, which I understand. So if you are free to price as you wish then presumably you would compensate for these cost pressures with increase revenues, probably, through increase per passenger ticket revenues.

I just want to clarify would to do that, if you wanted to do that, particularly on domestic fees or passenger fees, would you need ODMAS [ph] approval and if so, what are you doing to get ODMAS [ph] approval, because obviously you are operating under fixed IRR regime, I believe that it’s -- your overdue a bit of a catch up with regard to recessing that regime in the current year with all the dislocations that having to manage with the devalued currency.

So if you could just walk me through the procedure for, for example, raising passenger fees on domestic routes? That would be helpful. Thank you..

Well, it’s a regulatory body that has to do the annual analysis and come up with an answer. We are waiting for that.

But it also, the fact that, most of our revenues are in dollars play a role in basically automatically increasing our tariff in pesos and also play a role in the fact that our costs dilute in peso, that’s why we have also seen an increase in margins in this quarter for example.

So that dynamic is not that clear, although, we have to wait for the regulator to do its analysis and come up with an answer..

So as a follow-up question, I’d just like to ask, I mean, I believe AA2000 has not had a regulatory reset for a couple of years now, but it’s meant to happen every year.

So is there any schedules meeting with your regulator to make sure that that you’re on track on your IRRs and if not, than to reset passenger fees or landing fees appropriately? Thank you..

Well, we definitely work towards having them do the job, but since it’s not within our power to force them and also there can be temporary disadjustments of the IRR. We are definitely talking to them and hoping that they do their work and come up with a revision on the economic I believe we want the concession.

We hope that they basically finish up their job and published a revision soon as they are ready..

Thank you..

[Operator Instructions] And our next question comes from Andrew Levine with Sincetary Capital [ph]. Please go ahead with your question..

Hi. How are you and thank you again for the call.

My first question is kind of related to the last one which was, is just if there’s been any discussion of a timeline on concession renewal? And then because that will probably be a quick one, second -- second question is on inbound versus outbound international traffic, if you could provide any color on how that change would expect an increase in inbound, although, the international is down significantly overall to Argentina in particular?.

Okay. First of all, the second question regarding the outbound versus inbound traffic. As of last quarter that we have reported third quarter typically seen we had an outbound traffic of around 60% for international passengers and 40% inbound. This was down from the previous quarter of the Brazil was 66% Argentina out with 34% inbound traffic.

And we expect this trend to continue and we expect that coming -- moving forward we will have reduced percentage of Argentina in our overall international passengers..

Yeah. And regarding your first question, we are also waiting for the government to be ready to start some negotiations to work with consultancy which is still delayed. And also we have seen a little bit of priority shift within the environment in the last four months to six months with all of that what happen with the macro of the country.

So we hope that those discussions negotiations can start as soon as possible..

Thank you..

And our next question comes from Pir Zafar with Salder River Capital [ph]. Please go ahead with your question..

Hi. Thank you very much for taking our questions.

So I had a few, the first one would be, could you have not really published any estimates of what is overdue in terms of catch-up based on your -- the contractual IRR for the AA2000 concession in Argentina? So I don’t know if you -- could you give us a little more color as to when you do get the opportunity to catch-up based on the original contract? What you expect you should receive, because it appears you were -- you continue to -- the confession continues to deliver below what was originally signed.

So that’s the first question. Then the second one would be on Brazil. So you are currently adding -- currently building very significant commercial real estate in downtown and prime Brasília.

Could you give us a little more color as to how large you believe that opportunity could be eventually especially in light of the recent elections, -eventually this could be a very high EBITDA asset and how should we think about it and when do you believe it could start to meaningfully make a difference in Brazil? And then the last question is just on the current stock price, how do you internally think about the current level are and is there any opportunities to maybe engage in buyback or do you have an opinion about the current stock price and that -- if you do not believe it reflects the prospect of the company, is there anything you believe you should be doing? Thank you very much..

Starting with your first question. It’s similar to the one before we need the government to do the yearly revision to understand their view for the future of the concession and understand if we would be on track or not regarding the regulatory framework.

We hope that that happen soon and as soon as it happen we will give -- we will have an opinion whether we agree with the government’s forecast or not. And you have to keep in mind that we need to meet the IRR by the end of the period. So, again, there can be a slight adjustments over run during the period.

So once we have that we will be able to have a clear opinion if we agree or not with the revision. To your second question regarding Brasilia, I will ask Jorge Arruda on the line to comment on the prospects for real estate development..

Hello. This is Jorge Arruda. In addition to be able to file corporate M&A and also we have the feel and the feel of our Brasilia Airport. The Brasilia Airport is almost situation where we have a large airport that is actually located inside the city. So 10 minutes to 15 minutes from the so called ministry area.

And also the fact that we have a large area we see the construction agreement to develop. We plan to develop about I million square meters. We have this plan for awhile. The crisis didn’t help.

We have now -- we have since the beginning of the year being growing, actually late last year we have been growing in terms of passenger and economy is picking up. If you -- I’m sure you are aware there’s a new government and there is -- generally speaking a very positive mood around, therefore we’re quite optimistic.

We have a few agreements lined up. As we mentioned before we don’t provide guidance but our plan is that third-party developed the project and we basically lease the land, therefore it’s pure income for us. We expect to have projects such as conviction centers, entertainment centers, office space and hotels, among the few others.

And we hope and we are working towards being able to provide more specific details in our next quarterly meeting, also that that will depend on how the micro environment shapes up in the country..

Thank you, Jorge. And to answer your third question, of course, we believe that the price has not reflected the increasing value of the company. We have clearly been affected by many factors being Argentina’s performance, number one, in terms of as it our manifest.

We are considering every possibility to defend the share price, being number one, the sound management of the company for long-term growth, but also other alternatives as share buybacks and so on, but we need to make sure that anything we do will positively affect the dynamics of our share and we see that while Argentina keeps creating concern among investor we still need to wait and understand what will be the real need or long-term trend of investment in Argentina..

And at this time, there are no further questions. So please sir go ahead with concluding remarks..

So I would like to thank everybody for joining us today. We appreciate very much your interest in the company and we look forward to meeting you more and more over the coming months and providing financial and business updates next quarter. Our team remains available for any questions you may have. So thanks again and have a good day..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..