FRANKFURT, Germany, May 23, 2017 /PRNewswire/ --
- Growth momentum stimulated by expansion of the Group's international portfolio
- FRA's core hub-business to be complemented by growing low-cost segment
- Dividend proposed to increase to EUR1.50 per share
At the 16th Annual General Meeting (AGM) held today at the Jahrhunderthalle in Frankfurt, Fraport AG's executive board chairman (CEO), Dr. Stefan Schulte and the company's shareholders looked back on a volatile 2016 business year. The traffic slowdown during the summer months at the Group's Frankfurt Airport home base could not be entirely offset by strong passenger figures at the beginning of 2016 and towards the end of the year.
CEO Schulte explained: "The geopolitical situation and terror risks in Europe were decisive factors contributing to fewer passengers, particularly from Asia and the U.S. Moreover, Frankfurt Airport's passenger traffic was also impacted by the strong growth of low-cost carriers, especially at those airports within our catchment area. We have initiated the necessary response to this development by opening up Frankfurt Airport to the low-cost segment. Nevertheless, our core business continues be the premium hub segment and our partnership with Lufthansa as our main customer."
In 2016, passenger traffic at Frankfurt Airport (FRA) dipped slightly by 0.4 percent to 60.79 million passengers, thus lagging behind the general market trend - which was characterized by an increasing impact of the low-cost segment. In contrast, FRA's cargo volume rose by 1.8 percent to some 2.11 million metric tons in 2016.
Fraport AG's operating result or EBITDA (earnings before interest, taxes, depreciation and amortization) markedly improved by 24.2 percent to EUR1,054 million in fiscal 2016, despite slightly declining passenger traffic and the weaker retail business at FRA. The strong result was driven by a compensation payment received in connection with the Manila terminal project and the successful partial sale of Fraport's stake in its St. Petersburg subsidiary. Looking at the bottom line, Fraport achieved a Group result (net profit) of EUR400 million.
Commenting on the company's positive performance, CEO Schulte said: "This is the best result ever achieved by Fraport. We would like to share this success with our shareholders and therefore propose a dividend increase to EUR1.50 per share." In 2016, Fraport AG paid a dividend of EUR1.35 per share.
To maintain Fraport's future competitiveness in the challenging business environment, CEO Schulte emphasized that market changes needed to be taken seriously and addressed properly: "Customers today expect low-cost flight offers. The low-cost segment already accounts for more than 40 percent of Europe's continental air traffic. Moreover, we have been losing significant traffic share to neighboring competitor airports offering low-cost airline services. Hence, a major aviation gateway like Frankfurt cannot continue to ignore this market trend over the long run."
To meet the expected passenger growth, Fraport is currently assessing the option to move up construction of Pier G, which was already included in the respective zoning approval for the future Terminal 3 project. Featuring a capacity of four to six million passengers, Pier G would be tailored specifically to meet the requirements of low-cost traffic, while being able to accommodate transfer traffic - thus remaining in line with the zoning specifications for the new passenger terminal. Fraport expects the investment volume for building the new pier to range between about EUR100 million and EUR200 million.
At the same time, Fraport will be pushing forward the planned investments for further strengthening its core hub product at FRA. In this context, Schulte referred to the future Terminal 3 as the most important project. With the new terminal, Fraport intends to offer a premium product with a clear focus on transfer traffic and network carriers. Fraport is also making additional investments at FRA's two existing terminals to further enhance the passenger experience and increase customer satisfaction, as well as to expand the airport's service package. Examples include the new station for the Sky Line people-mover at Concourse C of Terminal 1, and the new MY CLOUD transit hotel and a second Fraport VIP Lounge.
CEO Schulte described Fraport's international portfolio of airports as a growing business segment that strongly contributes to the Group's revenue: "Our broadly diversified international portfolio enables us to counterbalance downturns in individual markets, for example in Turkey, by positive growth in other regions. We will continue to consistently pursue this successful risk-diversification strategy."
Currently, Fraport's External Activities & Services business segment already generates more than 20 percent of the company's revenue and over one third of the Group result (net profit). In fiscal 2016, the business segment's contribution even reached about 60 percent, due to special effects resulting from the Manila project and the St. Petersburg subsidiary. Fraport is further expanding its international activities with the recent successful launch of the concession for managing 14 Greek regional airports, as well as the expected operational takeover of two airports in Brazil.
Schulte confirmed the outlook for the current 2017 business year. Fraport expects passenger traffic to grow by two to four percent, while revenue is forecast to rise up to EUR2.9 billion. The Group result (net profit) is expected to reach a range between EUR310 million and EUR350 million - a significant increase compared to the adjusted Group result of almost EUR300 million achieved in the completed 2016 business year.
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