On May 16, TAM S.A. (TAM) reported its financial results for the first quarter of fiscal year 2011. TAM reported a net income of R$128.8 million (US$77.6 million) in the quarter, up from a loss of R$70.9 million (US$39.2 million) in the year-ago quarter and down 14.4% sequentially.
Earnings per share entered positive territory and was R$0.80 per share (48 cents per ADR) compared with a loss of R$0.50 per share reported in the year-ago quarter. Earnings were above the Zacks Consensus Estimate of 38 cents per ADR.
In the first quarter, net revenue was R$3,042.5 million (US$1,832.8 million), up 16.8% year over year but down 5.6% sequentially. The year-over-year improvement was primarily due to higher passenger revenue in the quarter.
Passenger revenues and the overall cargo revenues in the first quarter reached R$2,372.8 million (US$1,429.4 million) and R$255.1 million (US$153.7 million), representing a year-over-year growth of 7.2% and (0.3%), respectively.
Total operating expenses in the first quarter increased 16.0% year over year but declined 2.5% sequentially to R$2,932.3 million (US$1,766.4 million). The y/y increase was due mainly to higher fuel, marketing and related expenses, personnel, maintenance and reviews, and landing charges. As a percentage of revenue, operating expenses plummeted 60 basis points year over year and 3.2% sequentially.
EBITDA (excluding aircraft rent) in the first quarter was R$380.5 million (US$229.2 million) with a margin of 12.5% compared with 14.5% in the corresponding quarter of 2010.
TAM continued with its fleet development and renovation strategy and received 1 new Airbus A320 in the quarter, with a total of 152 aircraft at the end of the first quarter. During the second quarter, the company received 1 A321 and 2 new A330s bringing the total fleet size to 155. The company anticipates exiting 2011 with 156 aircraft in operation and 2015 with 182 aircraft.
Financial liability at the end of the quarter was R$7,139.8 million (US$4,353.5 million) versus R$7,358.9 million (US$4,354.4 million) in the previous quarter. During the quarter, cash used in operating activities was R$105.0 million (US$63.3 million), down 71.5% on a year-over-year basis.
During the fiscal year 2010, LAN and TAM have signed a MoU to merge operations and form a new company called LATAM Airlines Group S.A. (LATAM). LAN will become the parent company with a 73% stake in TAM and the shareholders of TAM will receive 0.9 shares of LATAM for each TAM share. It will be an all-stock transaction of approximately US$2.7 billion.
For the fiscal year 2011, the company anticipates demand growth in domestic market to be between 15%-18% and supply to range within 10%-14%. International supply growth is expected to be roughly 10%.
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