Macquarie Infrastructure (MIC) Misses Q1 EPS by 18c, Revenues Miss

Macquarie Infrastructure (NYSE: MIC) reported Q1 EPS of $0.13, $0.18 worse than the analyst estimate of $0.31. Revenue for the quarter came in at $416 million versus the consensus estimate of $457.6 million.

First Quarter 2020 Segment Results and Outlook

"Atlantic Aviation performed well through the first ten weeks of the year consistent with the increases in general aviation flight activity reported by the Federal Aviation Administration although stay-at-home orders and other travel restrictions have reduced average daily flight activity substantially from mid-March. Similarly, travel restrictions and mandatory quarantines have all but eliminated visitors to Hawaii. The impact on Hawaii's hotels and restaurants has materially reduced demand for gas produced and distributed by Hawaii Gas.

"IMTT performed well with demand for storage of petroleum and liquid chemical products increasing materially during the quarter. Storage utilization is expected to increase to over 95% by mid-May from 86% at the end of 2019 with the incremental leases having an average duration of approximately one year," said Frost. "Nearly all leasable capacity is now under contract."

• IMTT generated EBITDA excluding non-cash items of $77 million in the first quarter of 2020, down 26% versus the prior comparable period. Excluding the termination fee, EBITDA would have increased by 18%. The improved operating results reflect the recognition of tank cleaning fees from customers and higher average capacity utilization in the quarter of 85.4% compared with 82.5% in the first quarter of 2019.IMTT believes that the increase in utilization will support storage rate improvement in the medium term and notes that certain customers have sought to renew contracts early to ensure continued access to storage. Partially offsetting these improvements are costs associated with COVID-19 preparedness and potential reductions in ancillary services such as throughput. Given the contracted nature of most of the revenue generated by IMTT, MIC expects these items to have a net positive impact on the financial performance of the business in 2020.
• Atlantic Aviation generated EBITDA excluding non-cash items of $66 million in the first quarter of 2020, down 16% versus the prior comparable period. General aviation flight activity declined by approximately 80% at the end of March compared with the same period in 2019 and has remained at similarly reduced levels through April.Although approximately 20% of Atlantic Aviation's gross profit is generated from base tenant hangar rental, most of the business' top line is correlated with the level of general aviation flight activity in the U.S. Given the uncertainty around the duration of travel and other restrictions and the rate at which they will be lifted, the status of commercial aviation and consumer travel preferences post-COVID-19, it is not possible to accurately forecast the financial performance of Atlantic Aviation in 2020 at this time. The Company notes that under any scenario the result is expected to be below the guidance (since withdrawn) it provided to the market in February.
• MIC Hawaii generated EBITDA excluding non-cash items of $15 million in the first quarter of 2020, down 25% versus the prior comparable period. The decrease primarily reflects realized hedge losses as a result of a decline in propane prices and the impact of reduced consumption of gas by commercial customers such as hotels and restaurants in the second half of March. Travel and other restrictions have reduced average daily visitor arrivals to Hawaii by over 95%.Commercial and industrial gas consumption (including by hotels and restaurants) is expected to remain low, while residential consumption is expected to remain largely intact for as long as travel and other restrictions remain in effect resulting in an aggregate decline in total gas sales of between 30% and 40%. Given the uncertainty around the duration of travel restrictions and the rate at which they will be lifted, the status of commercial aviation and consumer travel preferences post-COVID-19, it is not possible to accurately forecast the financial performance of MIC Hawaii in 2020 at this time. The Company notes that under any scenario the result is expected to be below the guidance (since withdrawn) it provided to the market in February.
• MIC's Corporate and Other segment includes primarily interest expense on holding company level debt, fees payable to the Company's external manager and public company expenses, offset in the prior comparable period by income from a relationship with a developer of renewable power generation opportunities. The relationship with the developer was concluded in July of 2019. The increase in general and administrative expenses the first quarter of 2020 reflects primarily costs incurred in connection with the Company's pursuit of strategic alternatives.

For earnings history and earnings-related data on Macquarie Infrastructure (MIC) click here.

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