TAM Records Loss - Analyst Blog

Latin American airline operator, TAM S.A. (TAM) reported a net loss of R$154.1 million (US$85.6 million) during the second quarter of fiscal 2010, compared with an income of R$555.1 million (US$265.6 million) in the year-ago quarter. This was driven by the decrease in foreign exchange gain based on the appreciation of U.S. Dollar against Brazilian Real.

Reported loss per share was R$1.51 or 84 cents per ADR, compared with an EPS of R$5.60 or US$2.68 per EPADR in the corresponding period of 2009 and 14 cents as anticipated by the Zacks Consensus Estimate.

During the quarter, net revenues were R$2,611.4 million (US$1,450.8 million), up from R$2,269.6 million (US$1,085.9 million) in the second quarter of 2009, primarily due to a 50.3% increase in international cargo revenues based on higher volume and higher international prices.

Passenger revenues and the overall cargo revenues spiked 15.5% and 32.5% year over year, reaching R$2,160.0 million (US$1,200.0 million) and R$1,870.2 million (US$1,039.0 million), respectively, based on the global economic recovery.

Total cost of service and operating expenses grew 6.3% year over year; but based on revenues it fell by 810 basis points due to cost optimization. EBITDAR (excluding aircraft rent) for the quarter was R$168.1 million (US$93.4 million) with a margin of 6.4%, compared to R$28.6 million (US$13.7 million) with a margin of 1.3% in the corresponding quarter of 2009.

TAM continued with its fleet development and renovation strategy and received one new A320 aircraft and two A330 aircraft with a total of 143 aircraft at the end of the second quarter, which is expected to increase to 151 aircraft by the end of fiscal year 2010.
 
Net debt at the end of the quarter reduced to R$6,762.3 million (US$3,756.8 million) from R$7,628.1 million (US$4,271.7 million) at the end of the previous quarter. During the quarter, the company generated R$342.0 million (US$190.0 million) as cash from operating activities, compared to R$187.9 million (US$89.9 million) during the second quarter of 2009 and negative R$369.0 million (US$206.6 million) during the previous quarter. The increase was attributable to deferred revenues of R$126.5 million (US$70.3 million).

We expect TAM to benefit from the global economic recovery, particularly from the emerging economies in Latin America. The economic growth in emerging markets will be higher than the developed markets.
 
Thus, Latin American airliners such as LAN Airlines S.A. (LFL), GOL Linhas Aereas Inteligentes S.A. (GOL) and TAM are expected to grow, powered by the regional economy.

 
GOL LINHAS-ADR (GOL): Free Stock Analysis Report
 
LAN CHILE-ADR (LFL): Free Stock Analysis Report
 
TAM SA-ADR (TAM): Free Stock Analysis Report
 
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