Fraport beats on cash flow as lower Lima capex trims net debt

Investing.com -- Fraport AG (ETR:FRAG) on Tuesday beat expectations on free cash flow and reduced group net debt by €100 million in the second quarter, despite earnings pressure from its international segment due to foreign exchange headwinds and new terminal costs in Lima.

The operator of Frankfurt Airport and other international hubs reported group net debt of €8.53 billion at the end of the quarter, down from €8.63 billion in the first quarter. 

The improvement was driven by lower-than-expected capital expenditures in Lima and favorable exchange rate movements.

Group EBITDA came in at €380 million. Jefferies reported that, excluding a one-off benefit in Ground Handling, EBITDA was 1% below company consensus. 

The shortfall was primarily attributed to the international segment, where commissioning costs related to expansion in Lima and unfavorable exchange rates weighed on performance.

Morgan Stanley (NYSE:MS), in a separate note, said EBITDA was 1% to 4% above company consensus and its own estimates, citing a net €6 million benefit from Ground Handling and a gain in “Other” activities within the international segment. 

However, Morgan Stanley noted that second-quarter free cash flow missed expectations due to higher capital expenditures in Frankfurt, primarily related to Terminal 3 construction and maintenance work.

Fraport confirmed its full-year 2025 guidance, including expectations for a “moderate increase” in EBITDA and free cash flow “close to break even.” 

Capital expenditures are projected to total €1.1 billion for the year, with the company expecting a lighter spending period in the second half. 

The group result is forecast to be “flat to down,” and no dividend is expected for 2025. A dividend payment is anticipated in 2026.

The company also announced a dedicated deep dive day on its Lima operations for Sept. 8. Terminal 3 at Frankfurt is expected to be approved in the third quarter and remains on track to open in 2026.

In the Aviation segment, Jefferies said both sales and EBITDA exceeded expectations. The performance was supported by slightly higher charges and improved control over operating expenses. Staff costs were in line with forecasts.

Retail operations posted a modest beat on topline revenue, with EBITDA unchanged. Shopping and Services revenue per passenger increased to €2.57 from €2.56 in the same period last year. 

Total (EPA:TTEF) sales per passenger rose to €3.17 from €3.10 in 2024, up 2.3% compared to 2019 levels.

The Ground Handling segment was a notable contributor to Frankfurt’s performance. Adjusted for the €6 million one-off, EBITDA in the segment was approximately €8 million above consensus. 

Sales benefited from increased market share, driven in part by capacity constraints at competitor Swissport. Segment headcount decreased compared to the previous quarter.

Fraport operates Frankfurt Airport and holds stakes in airports across Europe, Asia and the Americas.