Davy Research |
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Air France KLM
(AF FP)
Q2 operating income ahead of consensus; company reiterates guidance of improved H2 compared to last year
30 July 2012
Joshua Goldman
| Closing Price: | 390c | Rating: | Underperform | 19/01/12 | Previous: | Neutral | 09/09/11 |
FACTS: Air France KLM has released (July 30th) Q2 results. The company generated operating result of -€66m (Davy -€165m; consensus -€165m) on revenue of €6.5bn (up 4.5% year-on-year), helped by a 2.6% currency effect (Davy €6.65bn; consensus €6.47bn). The company took non-cash restructuring provision of €368m and had a negative change in derivatives of €372m leading to net income of -€895m (Davy -€193m; consensus -€214m).
ANALYSIS: The passenger business saw an improved performance in Q2 2012, but cargo suffered from the weak global trading environment. The fuel bill increased, mainly on the back of the strengthening of the dollar. Revenues for the passenger business increased 6.8% to €5.13bn, delivering an operating result of -€47m (Q2 2011: -€140m). Passenger traffic rose 2.4% on virtually stable capacity (+0.3%) leading to a 1.7pp gain in the load factor to 82.8%. Unit revenue per available seat kilometre (RASK) rose 6.1%, helped by a positive currency effect of 2.5%. Unit revenue per passenger kilometre (RRPK) rose by 4.0% and by 1.4% excluding the currency effect. Looking towards the summer season, the company says that "bookings are positively oriented, in line with the recent trend".
Cargo traffic declined 6.9% and capacity was down 3.0%, leading to a 2.7 point decline in load factor to 64.1%. Unit revenue per available tonne kilometre (RATK) declined by 2.4% and by 6.7% excluding currency effect. Q2 2012 revenues were €764m (-4.4%). The operating result was -€62m which was below last year's performance of -€14m.
Maintenance saw Q2 2012 revenues of €265m (+1.1% compared to Q2 2012) and a sharp rise in the operating result to €40m (Q2 2011: €23m). Revenues from the other businesses declined 4% to €341m, due mainly to the discontinuation of Martinair's leisure activity.
In H1 2012, investments net of disposals stood at €600m. Operating cash-flow was €461m. The group had net cash of €3.3bn, of which €466m was from the Amadeus operation, and fully available credit lines of €1.85bn. Net debt was €6.24bn versus €6.51bn at the end of December 2011.
DAVY VIEW: Overall, the company has come in ahead in Q2 at an operating income line compared to our forecasts which are broadly in line with consensus (actual -€66m; Davy -€165m; consensus -€165m). The company has broadly reiterated guidance of improved H2 results and net debt at a maximum of €6.5bn. "Nevertheless, in the second half, the group should benefit from the first significant effects of Transform 2015. In this context, its objective is to generate an operating result above the 195 million euros realised in the second half of 2011. On this basis, it is on track to achieve a reduction in net debt at 31 December 2012 compared with 31 December 2011".
We still believe that it will be challenging to fully implement, and therefore realise the full benefits of, its Transform 2015 plan. We note that the company has thus far signed a new collective agreement with ground staff but cabin crew have rejected the proposal and the ballot results from the cockpit crew are not expected until the second half of August.
We will review our forecasts following the conference call at 14:00 CET at +44 207 162 0125; password AKH.