Copa Holdings SA (CPA) 2013 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Copa Holdings second quarter earnings conference call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this call is being webcast and recorded on August 8, 2013. Now I will turn the conference call over to Joe Putaturo, Director of Investor Relations. Sir, you may begin.

Thank you very much operator, and welcome everyone, to our second quarter earnings call. Joining us today are Pedro Heilbron, CEO of Copa Holdings and Jose Montero, our Chief Financial Officer.

First, Pedro will start with our second quarter highlights, followed by Jose, who will discuss our financial results. Immediately after, we'll open up the call for questions from analysts. Copa Holdings' second quarter financial results have been prepared in accordance with International Financial Reporting Standards. In today's call, we will discuss non-IFRS financial measures. A reconciliation of the non-IFRS to IFRS financial measures can be found in our second quarter earnings release, which has been posted on the Company's website, copa.com.

In addition, our discussion will contain forward-looking statements not limited to historical facts that reflect the Company's current beliefs, expectations and/or intentions regarding future events and results. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially and are based on assumptions that are subject to change. Many of these risks and uncertainties are discussed in our annual report filed with the SEC.

Now I'd like to turn the call over to our CEO, Pedro Heilbron.

Thank you Joe. Good morning to all and thank you for participating in our second quarter earnings call. First I would like to congratulate all of our co-workers for another solid quarter. Thanks to their efforts we have been able to grow and expand our network year after year while continuously delivering the world class products that our passengers enjoy and expect from us.

Among our main highlights for the quarter, revenues grew a very healthy 15% on 18% capacity growth. Traffic grew 20% leading to an almost 2 percentage point year-over-year increase in load factors, partly offsetting a drop in yields that resulted mainly from an increase in average length of haul. Although unit revenues were down 2.5% for the quarter, they were actually up 1% when adjusting for a 7% increase in length of haul.

On the cost front, we were able to reduce our ex-fuel unit costs and also benefitted from a drop in our all in cost per gallon of jet fuel. As a result, we delivered a 16.5% operating margins, a 2.4 percentage point year-over-year improvement.

On top of these outstanding financial results we continued delivering a world class product with on-time performance for the quarter coming in close to 90%, again among the best in the industry. In fact in June, Copa Airlines was recognized by Skytrax World Airline Awards as Best Airline and Best Staff Service in Central America and the Caribbean, which recognizes onboard and airport customer service. We are quite proud of this award, which are given based on annual customer satisfaction surveys, so they are a direct recognition for a well-done job.

During the first half of the year we expanded capacity very strong 19% year-over-year, and [demand] was able to assimilate this capacity as traffic expanded by 20%. Although one might think that at the expense of yields, nevertheless when evaluating yields one must take into account that we have added [15] new destinations in the last two years and that our average length of haul has also increased approximately 8% year-over-year. In fact adjusting for this increase in length of haul, yield and RASM have increased year-to-date through June.

That said, during the second half of this year, our year-over-year growth moderate substantially. During the third quarter, which is our high season, we expect to grow year-over-year capacity by approximately 10% compared to 27% in Q3 of last year. We expect this more moderate growth levels in Q3 and Q4 together with stronger seasonal demand to be positive for yield and load factors. In fact, our preliminary July figures point to marginally higher year-over-year unit revenues, driven by higher load factors and stable yields. On top of that forward bookings continued to point towards a healthy demand environment.

In terms of our expansion for 2013, last month we executed the first stage of our growth plan which included one new destination, Boston, [as well as] increased frequencies to several markets. Boston, now our eighth destination in the US, is proving to be a very good addition to our network. Initial demand has met expectations. In addition to Boston, we also increased frequencies to a number of destinations. For example, we added a sixth daily frequency to Medellin. Orlando and Punta Cana went from three to four daily flights, and we increased our flight to Port of Spain from daily to twice daily.

The second phase of our expansion plan which will be launched in December includes one new destination, Tampa in Florida, which will be served four times per week as well as increased frequencies to several markets. Some new frequencies which we have already announced are an eight daily flight to San Jose, Costa Rica. We will increase JFK, New York, from two to three daily flights. We will add four weekly frequencies to Las Vegas on top of the daily service we added in June of last year. And we will add frequencies to several other markets where we provide less than daily service.

With the recent addition of Boston and Tampa in December, Copa Airlines will provide service to 66 cities in North, Central, South America and the Caribbean strengthening its position as the most complete and convenient connecting point for intra-Latin America travel.

With regards to infrastructure, I am pleased to mention that the Tocumen Airport south terminal expansion is underway. This expansion, which will add another 20 jet bridges to our connecting center in the next three to four years will keep Tocumen at the forefront of airport capacity in our region and ensure that our hub has the necessary infrastructure to accommodate our future growth plans.

Turning to economic environment, the region's growth prospects have been cut back slightly partly due to slower growth in Brazil and Mexico. Nevertheless, regional GDP is still projected to grow approximately 3% this year. With Central America expected to grow 4% while South America and the Caribbean are estimated to grow 3% and 2% respectively. With an expected GDP growth of approximately 8% for 2013, Panama continues to have one of the fastest growing and most promising economies in the region.

Performing remarkably well amid the execution of large public investment infrastructure projects, ambitious private sector projects, and very healthy domestic demand which is being supported by higher employment and a growing middle class. The long-term strength and growth prospects of Panama's economy should definitely benefit Copa in the coming years. Where at the same time our network and regional connectivity increasingly contributes to Panama's prosperity through job creation, new opportunities for inter-regional commerce and trade as well as the attraction of a growing number of multinationals that are setting up regional headquarters in Panama.

As you can see from our recently released July traffic figures, where international traffic grew 16%, we continue to see healthy regional demand trends, and are confident about our expansion plans and the market's ability to assimilate our projected capacity growth, while we take the opportunity to continue consolidating and expanding our network.

So to summarize, we are very pleased with our second quarter results. Our team continues to deliver world class operational performance. We are further strengthening and consolidating our network. The regional economic environment remains strong, so we expect healthy load factors and yields during the second half of the year, and we look forward to another year of healthy growth and industry leading results. Thank you, with that now, Jose will go over our second quarter results.

Thanks Pedro, and good morning everyone. Thanks again for joining us.

First, let me begin by thanking all our coworkers for the efforts in running a world-class operation and delivering a very solid quarter, one in which we grew capacity by 18%, increased revenues by 15%, and maintained very competitive ex-fuel unit costs, which along with lower fuel prices allowed us to deliver once again one of the strongest operating margins in the industry.

In terms of financial results, reported net earnings for the quarter came in at $74.4 million or earnings per share of $1.68, compared to last year's net income of $32 million or earnings per share of $0.72.

Excluding a fuel hedge mark-to-market loss of $10.6 million, underlying net income for the quarter came in at $85 million, compared to last year's second quarter underlying net income of $58.5 million, which excludes the fuel hedge mark-to-market loss of $26.5 million during that period.

With respect to traffic, revenue passenger miles increased 20% year-over-year, driving the load factor for the quarter to 75.3%, a 1.7 percentage point increase, compared to last year's second quarter load factor. Nevertheless, 4.6% decline in passenger yields offset our higher load factors and contributed to 2.5% drop in revenues.

It's important to mention that adjusting for 7% year-over-year increase in length of haul, yields for the quarter decreased only 1.2% and yield revenues or RASM actually increased 1%.

Operating revenues for the quarter came in at $592 million or 15% year-over-year increase on 18% capacity growth. Solid revenue performance during our low season.

On the expense side, second quarter operating expenses increased close to 12% year-over-year, while cost per available seat mile decreased by 5% mostly as a result of lower fuel prices. We also saw nearly 3% year-over-year improvement in CASM ex-fuel, which came in at $0.067 for the quarter.

Moving on to operating earnings, consolidated operating earnings for the quarter came in at $97.7 million, growing 35% year-over-year, and translating into an operating margin of 16.5%, well above last year's second quarter operating margin of 14.1%.

In terms of non-operating income and expense, second quarter results reflected net non-operating expense of $15.3 million, consisting mainly of a net interest expense of $4.7 million and a $10.6 million loss in the other net losses, mostly related to the mark-to-market of fuel hedge contracts.

With respect to fuel hedges, we ended the second quarter with hedges for 38% of the projected volume for the second half of the year using crude oil and jet fuel swaps. 15% of our volume is hedged in jet fuel at an average price of $2.84 per gallon, and 23% in crude oil, at an average of $89 a barrel. In addition, for 2014 and 2015, we had coverage of approximately 18% and 10% respectively; similar prices and using the same instruments.

In terms of fleet, during the quarter we received one of our seven scheduled aircraft deliveries for the year, which are all Boeing 737-800s. So, we ended the quarter with a fleet of 86 aircraft; 42 737-800s; 18 737-700s; and 26 Embraer 190s.

During the remainder of the year there are four scheduled deliveries, three in the third quarter, one of which has already been delivered, and one in the fourth quarter. So we expect to end the year with a fleet of 90 aircraft with an average age of approximately five years.

Turning to our balance sheet, we continue to strengthen the Company's position. Cash and cash equivalent at the end of the quarter totaled $849 million, which represents 35% of last 12 months revenues. We also maintained a very favorable position in terms of leverage and a total debt to equity ratio of [0.7] times.

Given our current and projected cash position, our Board of Directors approved a change toward dividend policy, increasing it from a maximum of 30% of the previous year's consolidated net income to a maximum of 40%. Additionally, our dividends will now be paid on a quarterly basis instead of yearly.

The Board also decided that they will start paying the quarterly dividends beginning in the third quarter of this year. So we will start by paying a third quarter dividend, $0.73 per share on September 16th to shareholders of record as of August 30th. And we will pay another dividend of $0.73 per share on December 16th.

In summary, we will be paying a dividend of up to 40% of previous year's net income, divided in equal installments during the months of March, June, September, and December each year.

So to recap, demand for air travel in our region continues to expand [or help] continues to attract a growing number of passengers. We had another quarter of solid capacity and revenue growth. We continue to be well positioned to achieve another year of strong earnings and we continue to return value to our shareholders.

In terms of our guidance for 2013, given our performance during the first half of the year, the economic outlook in the region and current trends we are updating our guidance as follows. We are expecting our capacity growth in terms of ASMs to be at approximately 14%, load factor is expected to come in at plus or minus 76%. We are keeping our revenue guidance at plus or minus $0.136. We are updating our CASM ex-fuel guidance to plus or minus $0.067. We are maintaining our effective fuel price assumption for the year, including into-plane and net of hedges at approximately $3.20 per gallon. And as a result we continue to expect strong operating margin for the year in the range of 19% to 21%.

Thank you. And with that, I will turn over to Pedro for closing remarks.

Thank you, Jose. Now we open up the call for some questions.

(Operator Instructions.) Duane Pfennigwerth, Evercore Partners.

This is Jeff Reisenberg in for Duane, today. When we're looking at your RASM comps in the second half of 2013, they're getting easier relative to the first half. Your capacity growth rates are stepping down pretty substantially. Why wouldn't we expect to see sharp increases in RASM in the back half of the year versus the 1% to 2% type growth rate implied by your guidance?

Well, a --- it is Jose here. We believe that yields will probably be remaining flat for the rest of the year, and it's going to be slightly higher unit revenues year-over-year. If you take into account that we put in 15 new destinations over the last couple of years and a very strong growth for the last 24 months, there is still half a year to go, and meanwhile our visibility for the latter part of the year is not necessarily yet as clear. So, we are still maintaining our operating margin guidance between 19% to 21%.

Okay. And also, it seems that foreign exchange would have held back RASM a bit in the quarter. So, what would your RASM have been year—over—year in the second quarter on a constant currency basis?

Well, I don't think we have necessarily a RASM basis with the way that exchange rates were -- our sector exchange rates, but what I can say is that we have a -- if you look the impact towards exchange rate was --

Transactional was (inaudible - multiple speakers).

Yes, $1.5 million in transactional exchange rate impact for us in -- both in -- in Columbia mostly. But I think that overall our RASM, you know, it's not material I don't think to RASM.

No. And demand has held up, we have not seen an impact on demand, and bookings, going forward, look fine. So, we haven't seen so far, and it is Pedro here, much of an impact from the currency devaluations down south.

Okay. Thank you for taking the questions.

Thank you.

Hunter Keay, Wolfe Research.

Can you give us a little more color on what's happening with the CASM ex-fuel? Was there any kind of timing benefit that pushed anything from 2Q into the back half? Really kind of wondering what's driving back half CASM ex-fuel up so much. And is it fair, given the capacity deceleration into next year that a goal of yours is to keep CASM ex-fuel flat in 2014 versus 2013?

Well, for the second half of the year they are indeed -- this is Jose here by the way, there is -- there are some timing events that will come in line during the second half of the year, essentially driven by advertising activities that usually come in, in the second half. And also there are some higher maintenance reserves to us having more leased aircraft coming in.

For 2014, we have not determined yet our guidance and we will have that later on in the year. But as you know, we've maintained very competitive unit cost over time and with lower (inaudible). More of our aircraft are in the 737-800 family where there will be -- the unit cost benefit of that going forward.

And this is Pedro here, but I would say that at this point a flattish CASM would be a fair assumption. But again, we will have better visibility with our preliminary guidance at the end of the year in November.

That's great. Very helpful. Thank you both of you. And to think about Copa over the next three to five years, what -- how should we think about your airline evolving over the next few years. You just had a nice three-year period here with 20% plus capacity roughly, and how should we think about this Company evolving over the next three to five years? And what are going to be your targets? Is it going to be to sustain an EBIT margin around this 20% level? Is it going to be taking it higher? I mean, is it going to be as capacities decelerate and these markets mature, your goal to drive 50 bps of EBIT margin expansion a year or something like that. But just talk me through the strategy for how we should expect this Company to look as it evolves in a decelerating capacity environment? Thanks, Pedro.

Okay. Yes, so it's Pedro. We usually -- when we answer a question like this one, we don't have a lot exciting stuff to share because we're about doing like more of the same in a better way. So if we think of the next three to four years, we're going to be -- we're going to continue strengthening our hub in Panama adding destinations and adding frequencies, trying to keep our very high standards with world leading on-time performance, very competitive unit cost, and we will keep implementing technologies and other initiatives to keep our costs as low as possible.

But it's all based on the same business model, no major changes, adding destinations. But also we have huge opportunities in terms of adding frequencies as our markets mature given that there are still many destinations that we fly less than daily or where we fly just once a day, and we operate as you know (inaudible) so we have great opportunities there.

In terms of margins, I mean, growth is going to be more in the lower double-digits than what we have seen in the last three, two and half years where we were speeding up growth given all the opportunities we have. It's going to be more in the lower double-digits, but it's still going to be very, very healthy growth.

And we expect to maintain margins pretty much where we have averaged them in the last few years. I don't think we should expect increased margins. We already have world leading margins, so expecting to take them above that maybe will be a little bit too much.

Okay. Very helpful. Thanks again.

Thank you.

Thanks.

Michael Linenberg, Deutsche Bank.

Just a couple of questions here. Can you talk about maybe some of the share of flows that you may have seen with TACA shutting down the San Jose, Costa Rica hub. And I guess presumably the fact that you're going to an eight frequency, which I can't think in the history of Copa if you have actually ever had more than seven daily frequencies in a market, so this sounds like a new record. Is that predicated on the fact that there were flows and passengers going to that market that maybe now could be better served over the Panama hub. If you could elaborate on that that would be great?

Okay. Yes, eight frequencies per day is the most we have flown to any particular destination. The San Jose hub was not -- was our weakest hub. And we really didn't compete that much with -- so there will be some benefit. And you could say part of that eight frequency might serve some of that market, but we do not expect to seeing material benefit from them. We do think they are flying in San Jose, we are not expecting a material difference or a material benefit. It will be slight at best.

Okay. Good, Pedro. And then my second question, and this is probably more for Jose. You have airplanes coming later this year, obviously airplanes next year. We have seen interest rates move pretty meaningfully of late. How are you financing airplanes in 2013 or the rest of 2013 into 2014? Do sale leasebacks make sense? Have you considered maybe doing something in the EETC markets; we're seeing a lot more international carriers look more closely at that market as that market has opened up. Just any thoughts on that, Jose?

Yes. So the aircraft that we are taking delivery of this year are all -- they're leaseback transactions and so we, for a couple of reasons, one of them also being the fact that that brings down some flexibility to our fleets, and is --for us it has been a good method for this year. And for -- we are evaluating always different opportunities and different alternatives that are out there for us for financing aircraft. And so next year, we have eight units coming of which there are four that are owned aircraft, and we're in the process still of determining what is the best, most positive way to finance the aircraft.

Okay. Very good. Thank you.

(Inaudible - multiple speakers) as you know historically we have financing there has been several avenues for us that are available.

Okay. Very good. Thank you.

Thank you, Michael.

Jim Parker, Raymond James.

I have a question regarding the rather substantial amount of cash you have in Venezuela. And I believe Venezuela is like 8% or less of your revenue, but 32% of your cash is there. Is there something going on -- two or three years ago it was $100 million, so not it's now like $273 million. Is there any concern there that they are holding your cash and won't repatriate it?

Jim, thank you for your question. This is Jose. We have been able to repatriate our funds from Venezuela. It just takes time. The process with the government takes time. We have been (inaudible) that we repatriate the funds at the official exchange rate, and so there is a lag in the amount of time that -- from the time that we file our request for repatriation until the government pays, but up to now, we have been able to get the funds out.

Has the time lag increased?

Jim, this is, Pedro. It has increased a little, not a lot. I mean, it's pretty much the same as it was maybe last quarter, but more than what it was a year ago, maybe it has increased by a couple of months. Our revenues have increased quite a bit also.

Okay.

A matter time. The money will come out; it just it takes its time.

And just looking at your growth, you're talking about perhaps low-double digits like 11%, 12% something like that but next year you have only four aircraft, so like 4% increase in the fleet. And then you will have a longer trip length. I'm curious, are you going to lease some aircraft or is it only going to be a net of four aircraft next year?

Right. So yes, we will -- again, we haven't given guidance for next year yet, official guidance. So we are giving you kind of a directional indication of where we are going. And so we would be -- we have lease expirations which in that number -- in that four net number, we have eight new deliveries and four aircraft we're returning, four leased aircraft we're returning. And so to achieve the lower, the low-double digit growth, we will have to retain all or some of those leased aircraft. And we hope to make that operation in the coming months, update our fleet projections and then give official guidance or preliminary guidance towards November of this year. Though we will have to retain some of those leased aircraft, and that's what we will do instead of leasing in new aircraft.

All right. Thanks.

Of course there is some timing related as always in terms of the aircraft that are coming in later in the year and that would be operational in the fourth quarter of the year, and the full year effect of those aircraft for next year is significant as well.

Yes. All right, thanks.

Eduardo Couto, Morgan Stanley.

Most of my questions were already answered, but I would like to touch bases a little bit on the -- on South America. Have you guys seen any slowdown in South America, especially Brazil, given the recent currency depreciation? And if you could also tell us how much Brazil represents of your total ASM, that would be helpful?

Okay, I will answer the first part, and then Jose will look up the second part, but we have not seen a slowdown. And I mean in general terms our demand is where we expected it to be and the forecast looks okay. So we again, we have not seen a slowdown that we can attribute to a currency devaluation or the economic slowdown.

And in terms of our revenues, around 13% of our revenues are Brazil, related to Brazil.

One three, Jose?

One three.

Yes.

Okay. Thank you guys and congratulations on the result.

Okay, Eduardo, thank you.

Thank you.

Bianca Faiwichow, GBM.

Can you comment why is the CapEx involved in the firm orders for 37 aircraft that you have, and when do you expect to receive it, I mean in how many years? Thank you.

So the CapEx for this year is around $168 million, and also you have to remember that this year most of our aircraft are, I think, [acquired via share] leaseback transactions, so that's the reason behind the CapEx rate for this year.

Yes, but and regarding this firm order that you have for 37 aircrafts, what can we expect in the coming years if you can comment please?

Okay, so for 2014 for example, our CapEx figure is probably going to be around $280 million, mostly related to PDP funding of these aircraft. So you can expect -- and we are having four purchased aircraft next year so you can make that -- take that as an assumption.

Okay, perfect. And this 37 aircraft when do you expect to receive, I mean, in how many years, just to have an idea? Thank you.

Aircraft per year, so for next year in 2014 we have eight deliveries, of which four are leases and four are owned aircraft. As Pedro mentioned before, there are four 737-700s that are coming off lease next year, and we are in the process of evaluating whether we maintain those going forward.

And then in 2015, we have six aircrafts coming in, in our skyline, and then in 2016 we have seven aircraft in our skyline.

Okay, perfect. And just to complement Eduardo's question, can you comment a little bit more about your international demand break down? I mean which region is doing better, thank you.

So our demand, we are in the middle of our high season right now and we haven't really seen any impact to our demand. So demand obviously in the coming months looks okay also, we haven't really seen a significant impact to it.

This is Pedro. And then, yes, it looks normal right now. Maybe it's a little bit too early to know what's going to happen in November and December towards the end of the year. So we will know that probably in a few months.

Okay, perfect, thank you.

Thanks.

Daniel McKinsey, Buckingham Research.

This is [Scott Hart] calling in for Dan. So it sounds like there are some IT project that you are initiating later this year. What are the projects exactly, and are they going to be big enough to impact margins in the back half of the year?

There are a couple of projects that we have, both on the -- our passenger experience side and also on the back office side of the house. So these are projects that have been designed over the last six months and now we are going to start implementing in the second half of the year. So as I mentioned, just to summarize they are projects associated with passenger experience at the airport, et cetera, always investing in our copa.com website, and there is some back office type IT investments also coming online.

Okay, thanks. It looks like your number one growth route this year is Panama to Cancun, but the question is not so much about the route, it's really about the visa situation with Mexico. Our understanding is that it's nearly impossible for Latin Americans to get a visa to travel not just to Mexico but to many of the destinations you serve. And Columbia is obviously doing a lot to tackle their social problems. And so it's in a much different place than it's been historically. So more broadly, is there something that at Copa or I guess even the Panamanian government can do to relax the visa restrictions for many of these destinations you serve?

Yes, actually, visa restrictions have been greatly relaxed in the last year, two years, maybe in some cases in the last few months. For example, Mexico no longer requires visas for Colombians or Brazilians, that's a fairly recent development which has obviously aided traffic. As we go into new markets, for example, when we started serving Montego Bay we got the Jamaican authorities to agree to lift visa requirements to Colombians and other nationalities. Panama is pretty liberal in terms of visa requirements for other Latin American countries. So there has been a -- I would say a significant relaxation of requirement, which has helped traffic throughout the continent and for all carriers, not only for Copa.

Thanks, and to follow up on that, it's kind of a mission impossible question to answer but what kind of demand is ultimately unleashed?

Can you -- your question came a little bit --

What kind of demand are you seeing with the relaxations?

Well, yes, we are seeing -- I mean you just mentioned one market that has seen a greater demand and when we went into Montego Bay, we were able to double frequencies in a short time span, thanks to visa relaxation. Panama does well -- it has a direct correlation between traffic and visa requirements. So it has been good for intra Latin America traffic

Okay, great, thank you.

(Operator Instructions) Pedro Balcao, Santander.

This is Bill Bartle from Santander. My question is with such a strong deceleration in supply implied in your full year guidance of just 14% increase in ASM, if we should expect an acceleration in load factor or an increase in yields, or any combination of the two in the second half of the year? Thank you.

Yes. So, this is Jose here. So what we are seeing for the second half of the year is again we are seeing flattish yields and slightly higher revenues. And of course as I mentioned before there is still the latter part of the year where visibility will come in probably a little bit later in terms of understanding what the demand trends are going to be.

Okay, thank you.

Stephen Trent, Citigroup.

Just two questions from me. The first is your long-term fleet strategy. I mean, as we move through time what are your thoughts with respect to owning versus leasing, considering new aircraft on the way out and what might be any potential residual value impact on today's flights?

So, this is Jose here. For now I think that we are going to maintain our own/lease balance. I think that the 737NG has proven to be a great asset both in terms of its performance and unit cost and its reliability. And so therefore we believe that going forward we will continue with kind of the same trend that we will be following in balancing out owned versus leased aircraft. Of course, in the last couple of years we increased somewhat the number of leased aircraft that we have in our portfolio simply to bring some balance. And right now we are around 70% of our fleet being owned and 30% leased. So I think that's probably going to continue over time.

Okay, great. Thanks Jose. And just one other question. I saw in the quarter at least the effective taxation had come in moderately below our expectations. And I am wondering if there is any color and guidance on how we should think about taxation over the next quarter or two? Thank you.

Yes, Steve. Our tax rate for the first half was around 10.7% effective tax rate, and there is some timing in just the way that we --- taxes are filed in Panama. And so, for the second half of the year, we are -- our effective tax rate is going to be around 16.8%. It should come to an average for the year of around 13.7%. So there is, as I mentioned, some timing in terms of some of the tax payments that are made, specifically here in Panama.

Okay, very helpful. I'll leave it at that. Thanks, Joe.

Thank you, Stephen.

Thank you. And at this time I'm not showing any further questions. So I would like to turn the call back to Pedro Heilbron for any further remarks.

Okay, perfect. Thank you. Thank you all. This concludes our second quarter earnings call. Thank you for being with us. And thank you for your continued support. We will see you next time. Have a great day.

Ladies and gentlemen, thank you for your participation. That concludes the presentation. You may disconnect, and have a wonderful day.