Air China reports 18.3% EBITDA decline in 2017 and 6.9 pp EBITDA Margin decline from 28.9% to 21.9%
27/03/2018 • About Air China (
$753) • By InTwits
Air China reported 2017 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Air China has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.3%. At the same time it's a lot of higher than industry average of 2.3%.
- CAPEX is quite volatile: 13,096 in 2017, 39,281 in 2016, 42,297 in 2015, 53,957 in 2014, 44,427 in 2013
- The company has potentially unprofitable business model: ROIC is at 6.3%
- It operates with high leverage: Net Debt/EBITDA is 3.5x while industry average is
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Air China ($753) key annual financial indicators
| mln. CNY | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 94,603 | 101,385 | 104,368 | 107,298 | 115,380 | 7.5% |
| Gross Profit | | | | 24,041 | | -100.0% |
| SG&A | 6,982 | 6,483 | 5,974 | 5,295 | 6,224 | 17.5% |
| EBITDA | 15,109 | 18,638 | 28,535 | 30,979 | 25,320 | -18.3% |
| Net Income | 3,264 | 3,852 | 7,063 | 6,809 | 7,244 | 6.4% |
Balance Sheet
|
|---|
| Cash | 14,762 | 8,640 | 7,138 | 6,848 | 5,563 | -18.8% |
| Short Term Debt | 43,362 | 32,669 | 17,266 | 32,075 | 34,892 | 8.8% |
| Long Term Debt | 68,239 | 80,263 | 86,791 | 74,129 | 59,907 | -19.2% |
Cash flow
|
|---|
| Capex | 18,054 | 18,947 | 11,297 | 9,720 | 10,209 | 5.0% |
Ratios
|
|---|
| Revenue growth | -0.8% | 7.2% | 2.9% | 2.8% | 7.5% | |
| EBITDA growth | -19.7% | 23.4% | 53.1% | 8.6% | -18.3% | |
| Gross Margin | | | | 22.4% | | -22.4% |
| EBITDA Margin | 16.0% | 18.4% | 27.3% | 28.9% | 21.9% | -6.9% |
| Net Income Margin | 3.4% | 3.8% | 6.8% | 6.3% | 6.3% | -0.1% |
| SG&A, % of revenue | 7.4% | 6.4% | 5.7% | 4.9% | 5.4% | 0.5% |
| CAPEX, % of revenue | 19.1% | 18.7% | 10.8% | 9.1% | 8.8% | -0.2% |
| ROIC | 2.5% | 4.2% | 9.1% | 9.9% | 6.3% | -3.6% |
| ROE | 6.3% | 7.1% | 12.4% | 10.6% | 9.4% | -1.2% |
| Net Debt/EBITDA | 6.4x | 5.6x | 3.4x | 3.2x | 3.5x | 0.3x |
Air China ($753) key quoterly financial indicators
| mln. CNY | 17Q1 | 17Q2 | 17Q3 | 17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 28,906 | 28,316 | 34,340 | 28,287 | 9.9% | 4.6% | 7.8% | 4.2% |
| Net Income | 1,466 | 1,860 | 4,952 | -1,038 | -39.8% | 81.9% | 31.4% | |
Balance Sheet
|
|---|
| Cash | 15,680 | 11,135 | 12,520 | 5,563 | 77.9% | 41.6% | 32.9% | -18.8% |
| Short Term Debt | 31,187 | 25,310 | 30,686 | 33,693 | 70.5% | 4.1% | 11.1% | 25.1% |
| Long Term Debt | 35,358 | 67,698 | 30,254 | 59,907 | -23.6% | 64.7% | -23.5% | -19.2% |
Ratios
|
|---|
| Gross Margin | 18.9% | 14.5% | 26.6% | 3.1% | -4.9% | -7.5% | -0.9% | -12.4% |
| Net Income Margin | 5.1% | 6.6% | 14.4% | -3.7% | -4.2% | 2.8% | 2.6% | -2.1% |
Revenue and profitability
Air China's Revenue increased on 7.5%. Revenue growth showed slow down in 17Q4 - it was 4.2% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 6.9 pp from 28.9% to 21.9% in 2017.
SG&A as a % of Revenue showed almost no change in 2017.
Net Income marign showed almost no change in 2017.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 8.8% in 2017. CAPEX/Revenue decreased on 9.8 pp from 18.7% in 2014 to 8.8% in 2017. For the last three years the average CAPEX/Revenue was 9.6%.
Return on investment
The company operates at low ROIC (6.28%) and ROE (9.36%). ROIC decreased on 3.6 pp from 9.9% to 6.3% in 2017. ROE decreased slightly on 1.2 pp from 10.6% to 9.4% in 2017.
Leverage (Debt)
Debt level is 3.5x Net Debt / EBITDA and 3.7x Debt / EBITDA. Net Debt / EBITDA jumped on 0.3x from 3.2x to 3.5x in 2017. Debt dropped on 10.7% while cash dropped on 18.8%.
