Cibanco S A Institucion De Banca Multiple (DBMXF) Q3 2024 Earnings Call Highlights: Navigating ...

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  • Revenue: MXN 1.3 billion pesos for the quarter, a 2% increase from MXN 1.273 billion pesos in Q3 2023.

  • EBITDA: MXN 303 million pesos, with an EBITDA margin of 23.3%.

  • Net Debt: MXN 3.675 billion pesos, with a Loan-to-Value (LTV) ratio of 24.2%.

  • Occupancy Rate: 61% for managed hotels, down from 63.7% in Q3 2023.

  • Average Daily Rate (ADR): MXN 1,548 pesos, a 12% increase compared to Q3 2023.

  • RevPAR: MXN 943 pesos, a 7% increase from Q3 2023.

  • Fiesta Americana Condesa Cancun RevPAR: Decreased 15% in USD from $228 to $195.

  • Lodging Contribution: MXN 402 million pesos, a 6% decrease from MXN 429 million pesos in Q3 2023.

  • Corporate Expenses: MXN 74 million pesos, down from MXN 83 million pesos in Q3 2023.

  • Cash Position: MXN 544 million pesos, compared to MXN 608 million pesos at the end of last year.

  • FFO and AFFO: Positive MXN 214 million pesos and MXN 143 million pesos, respectively.

  • Distribution: 13.75 per certificate for Q3 2024, with a total distribution of 55 per certificate for the year, a 10% increase from last year.

Release Date: October 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Cibanco S A Institucion De Banca Multiple (DBMXF) reported a record portfolio growth of 7.3% year over year.

  • The company achieved a 12.2% increase in Average Daily Rate (ADR), surpassing inflation.

  • Limited service and full service hotels showed strong performance with RevPAR growth of 12.6% and 12.1% respectively.

  • Mexico City outperformed with a RevPAR growth of 14.6% during the quarter.

  • The company announced a new hotel development project with the iconic Ritz Carlton brand, expected to open in late 2027.

Negative Points

  • The third quarter results were below expectations due to challenging demand and increased labor costs.

  • Overall occupancy decreased by 278 basis points, reflecting weaker room demand.

  • The Fiesta Americana Condesa Cancun Hotel experienced a RevPAR decrease of 14% in dollars.

  • Margin compression was noted due to rising operating expenses, particularly labor costs.

  • The company faced headwinds from hurricanes and a decrease in flight arrivals impacting results in Cancun.

Q & A Highlights

Q: Can you provide more details on the CapEx for the Punta development for the Ritz Carlton, including the timeline and cost distribution? A: We don't have a clear answer yet as the project and timelines are still being determined. Most of the payments will be back-ended, with no significant payments expected this year. We will provide more information in the next call.

Q: Given the labor cost issues, what is a sustainable margin moving forward? A: We face strong pressure from operating costs, particularly labor. We are implementing initiatives to minimize the impact, such as reducing staffing and food offerings. We aim to improve margins over the medium term, but significant short-term increases are unlikely.

Q: How do you see demand for the coming quarters and into 2025, especially given the occupancy decreases? A: It's difficult to predict due to conflicting market trends. While leisure travel is slowing, economic activity is inconsistent. We expect limited supply to help regain pricing power once demand increases. However, macroeconomic events like the US elections could impact demand.

Q: Will retained cash be enough to fund the Punta development, or will you need to increase debt? A: We expect to fund the project primarily with existing cash flow. If additional debt is needed, it will be minimal and likely at the end of the project. We do not anticipate a significant increase in debt levels.

Q: How do you plan to manage the residential component of the Punta project? A: The residential component is managed by another partner, Beyond Ventures. We will benefit from the operational income of the rental pool and other services like spa and restaurants once the residences are operational.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.