Grupo Aeroportuario del Sureste SAB de CV
BMV:ASURB
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
391.05
608.86
|
| Price Target |
|
We'll email you a reminder when the closing price reaches MXN.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Grupo Aeroportuario del Sureste SAB de CV
You don't have any saved screeners yet
Good day, ladies and gentlemen, and welcome to ASUR's First Quarter 2019 Results Conference Call. My name is Nicole, and I'll be your operator. [Operator Instructions] As a reminder, today's call is being recorded. And now I'd like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.
Thank you, Nicole, and good morning, everyone. Thank you for joining us on our conference call to discuss ASUR's first quarter 2019 financial and operating results.
As a reminder, please note that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on current management's expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control. For an explanation of these risks, please refer to our filings with the U.S. Securities and Exchange Commission and the Mexican Stock Exchange.
As you know, yesterday was ASUR's Annual Shareholders' Meeting. I would like to start with this subject because there were 2 dividends at the meeting. In addition to an ordinary cash dividend of MXN 7.46 per share, we also paid holders of ASUR Series B and BB shares an extraordinary dividend of MXN 2.54. Both dividends will be paid in a single statement on or after June 6.
Now a review of ASUR's first quarter performance. Beginning with the passenger traffic at our 16 airports, total traffic increased 8% year-on-year to 13.8 million passengers. In Mexico, our largest market, passenger traffic rose 2.4% and accounted for 63% of ASUR's total traffic. Domestic and international traffic increased 4.4% and 1%, respectively. Please note that we have more difficult comps this quarter as Holy Week was in April this year versus March last year. Cancun Airport continues to be primarily the driver of our passenger traffic, with a 4% increase in domestic traffic and 1% in international traffic.
Most of our other airports in Mexico also contributed to the quarter's high traffic. As anticipated, U.S. traffic remained weak, down 500 basis points year-on-year in the first quarter, and we expect this trend to continue throughout the year.
In Puerto Rico, passenger traffic growth remained high due to the last year's lower comps related to Hurricane Maria. Domestic traffic has there increased 23%, while international traffic rose 30%, producing an aggregate increase of 24% year-on-year. The actual air passenger traffic accounted for 17% of our total traffic in the first quarter.
Passenger traffic in Colombia was 20% of ASUR's total traffic, rising 15% during the quarter. Domestic and international traffic increased 17% and 8%, respectively. Bear in mind that in last year's quarter, domestic traffic was fueled and partially impacted by a leading carrier capacity adjustment in this country. The current quarter also reflects the continued normalizing of domestic traffic following the September 2017 pilot strike in the country.
I will now review ASUR's financial results for the first quarter. Excluding construction revenues, our consolidated revenues increased 9% year-on-year to MXN 3.9 billion, with Mexico accounting for 71% of revenues and Puerto Rico and Colombia accounting for 18% and 11%, respectively.
Aeronautical revenues were up 8% year-on-year, driven by an increase of 7% in Mexico, while in Puerto Rico and Colombia, these revenues rose 11% and 10%, respectively. We are also pleased to report a 13% increase in international revenues, reaching MXN 1.5 billion in the quarter, which was above the 8% increase in passenger traffic, as we continue to enhance our commercial operation.
In Mexico, which accounted for 74% of commercial revenues, commercial revenues grew 10%, mainly due to the opening of new commercial spaces. This was achieved despite the shifting passenger mix with domestic traffic increasing to 42.7% of total traffic compared to the 41.9% in the same quarter a year ago.
In Puerto Rico and Colombia, commercial revenues posted higher growth, up 24% and 23%, respectively. In addition to our favored traffic comps in Puerto Rico, we have opened 9 new commercial spaces at LMM Airport over the last 12 months. In Colombia, we had opened 39 new commercial spaces during this period, which in addition to increasing passenger traffic helped drive commercial revenues in this country.
On a per passenger basis, commercial revenue increased 5% to MXN 104.6, driven by good performance across our operations. Mexico reached a record high of MXN 122, helped by increased direct advertising together with the positive contributions for most business lines.
In Puerto Rico, commercial revenues per passenger rose slightly to MXN 118, also a record level for this quarter. Here, we continue to benefit from the country's reconstruction efforts, particularly with regard to the transportation sales, which posted strong increases. These revenues were further supported by growth across all commercial segments.
Finally, in Colombia, this revenue category increased 6% to MXN 39, also a record level for this operation. This was mostly due to new retail stores.
Moving to ASUR's profitability. Consolidated EBITDA increased 8% year-on-year to MXN 2.7 billion, with the margin expanding to 65% from 63% in prior year's quarter. Our EBITDA rose 7% in Mexico and 30% in Puerto Rico, which continue to benefit from higher revenue comps and MXN 41 million insurance claim recovery related to Hurricane Maria.
In Colombia, our EBITDA decreased 13%. It was primarily due to a 76% increase in cost of services, mostly a MXN 37 million spent related to early termination of an agreement with a concessionaire at Rionegro Airport.
ASUR's consolidated adjusted EBITDA margin, which excludes the effects of IFRIC 12, contracted 59 basis points to 67.5%. Mexico's adjusted EBITDA margin decreased 57 basis points to 73.9%, mainly a result of 13% increase in cost of service due to a 58% increase in the cost of energy per kilowatt hour, which was higher than the 31.9% increase during the fourth quarter 2018.
In Puerto Rico, our adjusted EBITDA margin increased 825 basis points to 57.6% due to a slower cost increase and the insurance recovery I just mentioned. Colombia adjusted EBITDA margin contracted 130 basis points (sic) [ 1293 basis points ] to 43.9% due mainly to the higher cost of service, primarily the fee for the termination of the concessionaire agreement. ASUR's first quarter majority net income increased by 1%.
Moving on to the balance sheet. Total debt decreased 4%, partially the result of paying down the portion of the U.S. dollar-denominated debt at our Puerto Rico subsidiary. At the end of the quarter, the ratio of net debt to the last 12 months EBITDA improved sequentially to 0.9x. Cash and cash equivalents rose to 28% to MXN 5.9 billion. Capital investments in the quarter totaled MXN 270 million compared to the MXN 600 million in last year's quarter. Of this amount, MXN 149 million was allocated to modernizing ASUR's airports in Mexico under our master development plan in the country. In Puerto Rico, we invested MXN 121 million to modernize LMM Airport.
This concludes my prepared remarks. Nicole, please, open the call for questions.
[Operator Instructions] Our first question comes from Alan Macias, Bank of America.
Just one question. Are there any opportunities in order to lower cost and expenses, especially in Mexico and Colombia? And what are your expectations for adjusted EBITDA margins for this year? If you can share that.
Well, basically, in the case of Mexico what we are seeing is a very slow increase in the cost per kilowatt hour. We are, as we speak, preparing some additional initiatives to reduce the consumption. And we are expecting that the solar panels we have hired at the end of 2015 will be in place and in operation during the third quarter this year, and that will help us to reduce the cost of energy, which is what is burning today.
In the case of Colombia, the payment we have made for the parking lot in Rionegro is a onetime event. Also, it's important to mention the major maintenance provision of MXN 6.6 million. That will be there from now on. And additionally, it was MXN 8 million from a bad account from an airline that is having trouble. And I believe that is just, again, a onetime event. So that will improve profitability as well in the case of Colombia.
[Operator Instructions] We have our next question from Alejandro Zamacona from Crédit Suisse.
My first question is regarding the recent traffic deceleration. And if we -- and I want to ask if you have any comments on the recent seaweed, Sargassum, and security issues in Cancun? And how can it affect the traffic going forward?
Well, basically, what we have seen in the traffic for a couple of months now is the decrease in the case of the U.S. traffic. And this is not just for ASUR, it's also for the entire country. As I have mentioned, what we saw during the first quarter in comparison with the first quarter a year ago, it was a decrease of 500 basis points. And what I believe is that this will continue. We do not see plans or something to change this view for the moment. Of course, we don't know exactly what is the real reason of these. What I can say is that it's not just for Cancun, it's also for the entire country.
Okay. And my second question is regarding the Oriente acquisition. Any updates on that side?
What I believe is that it will not occur ever. We have presented an offer more than a year ago, and the offer was not accepted. So for us, that is completed. That is done.
And our next question comes from Natalia Zamora with GBM.
I was wondering, could you give us some additional information as to why the parking lot concessionaire at Rionegro in Colombia agreement was terminated early?
Well, this contract was in trouble for probably more than 2 years. It was in the court. And also, this was generating a lack of service at this airport. Due to these, basically, we finally end up paying the MXN 37 million I mentioned during the initial remarks to conclude the contract and basically to take over the parking lot, and that's what we did during the first quarter.
These parking lots need a lot of investment and a lot of improvements to increase the level of service, and that's what we're going to do in the benefit of the passenger that is using the airport. Of course, this will represent an additional revenue for us, but it is important to say that one of the most important thing to us, to complete or to end the situation at the court and basically to improve the level of service.
Okay. Great. Very helpful. And just a second question, if I may. What's your view on Cancun's capacity from the U.S. and other countries? I mean what do you expect going forward for airlines regarding capacity in this airport?
Well, in the case of Cancun, after the opening of Terminal 4, we do not have any short-term problems in terms of capacity. But it's also important to say that during the current MDP, there is a project there to expand or to make the first expansion of Terminal 4. We will be adding additionally to what it has today, 6 aircraft stands. And we believe this will be enough for some years.
We'll take our next question from Ruben López with Santander.
My question is on international traffic in Mexico. Of course, it was weak in the first Q. But actually, international traffic in Mexico turned from negative in January to positive in March despite having a negative [ culinary effect ] in March. So I was wondering whether this improvement sequentially is coming from U.S. passengers? Or is it more a matter of all the regions offsetting with traffic from the U.S.? That's my question.
;
Well, thank you for the question because you are absolutely right. March was, in my opinion, a good month even that we saw low numbers due to the Holy Week. We can say that it was, at the end, not as bad as we saw in January and February. As I mentioned that the most negative effect we had for the quarter is the U.S. traffic, the other regions are growing and are growing well, I would say, probably in the case of Europe, more than what we originally expected. Going forward, I really don't know what will occur and if we will be able to see the end of the negative trend from the U.S., let's say, at the end of this year.
Perfect. And just really -- just a second one. This quarter, we saw a decline in cost of services in -- as a percentage of revenues in Puerto Rico. Of course, this number benefits from the improvement of traffic. But I was wondering if you can give us an idea of a normalized level either as a percentage of revenues or cost of services per passenger.
Well, I do not see any -- or we do not expect anything in relation with an increase in cost of services in Puerto Rico. So I believe we can maintain the level we are seeing now.
[Operator Instructions] We'll move on to Christian Landi with Scotiabank.
So you already mentioned about some of those impacts that you had in Colombia for this quarter, onetime events. I was wondering if you would be able to share what's -- is there like an EBITDA target that you have, an EBITDA margin target that you have? Would this could be around 50% for Colombia? That's my question.
Well, I do not have an EBITDA target. The target we have is to increase commercial revenues per passenger. It is also important to say that we have been waiting a lot for the opening of the new duty free there. The duty free has not been able to open yet because they have not yet received the approval from the government. I hope that this will come in the second quarter. And this will improve also our commercial activities. But what we see is -- or the objective is to increase commercial revenues per passenger. It's not an EBITDA or an operating margin.
And we have a question from Lucas Laghi with Citibank.
We have 2 questions. The first one, if you could give us a bit more color on the nature of the higher security costs, maybe the reason behind it. And the second one is actually a question regarding the electricity costs as well. It's like to what extent solar panels could offset the higher electric bills?
Well, in terms of security, basically, there's additional elements to cover or to increase the security at the airport of Cancun. In terms of solar panels, it's not to offset the 58% I mentioned during the call, but of course, it's to give us some kind of relief of this huge increase in the cost of energy we have seen for the last 8 months. I don't know if you remember in the call during the third quarter last year where I mentioned that the increase was 95%. So we are -- as I said, we are taking measures to try to decrease the consumption in the first place and also to try to reduce the cost of energy, reducing the cost of what we are paying per kilowatt hour. So I hope that we will have some, at least, kind of relief during the fourth quarter this year.
[Operator Instructions] We'll take a question from Samuel Alves from BTG Pactual.
Two quick questions here from my side. The first one, we know the deceleration in investments this time around. The question is if you expect investments to accelerate going forward this year and well, how much we should expect for the entire year. And a quick second one, if you have any impacts from IFRS 16 on your accounting standard.
Thank you, Alves, for the questions. In terms of investments here, you're absolutely right. The number we just mentioned, the MXN 100-something million for the first quarter in Mexico is due to the process we are taking now to have the specific projects and then to make the bidding process to find a contractor because the investment for this year and of course, with our lean master development plan, it's a very heavy one. Roughly speaking, from the top of my head, it's around MXN 2 billion for the year. So yes, we will have to accelerate during the second and third and fourth quarters this year.
Okay. And regarding IFRS 16?
No, we didn't have any significant impact. As a matter of fact, we just have one lead agreement, which is the offices -- the corporate offices in Mexico City. It's a very small one in comparison with the size of the company. So just to say, we do not have any impact at all from the new IFRS.
[Operator Instructions] And we have a question from Andrés Nieto from Signum Research.
We have observed a huge correlation between -- for the U.S. traffic yearly and the commercial revenues yearly also. So we were wondering if you think there is another segment of the international passengers that, well, maybe improve the commercial revenues from this year? And I don't know if you could give us some idea of the commercial revenues for 2019 due to the deceleration of the U.S. passenger traffic.
Andrés, thank you for the question. As I mentioned during the last 8 to 9 months, we have seen decrease or deceleration process and finally in negative numbers in the case of the U.S. traffic. Of course, the U.S. traffic is an important portion of our commercial revenues. And normally, on a per passenger basis, this is a very important region for us.
As I mentioned during the initial remarks, despite the passenger mix we have seen for the quarter, where domestic traffic has increased, I would say, a couple of -- almost 1%-ish, we have been able to manage the increase of -- in commercial revenues per passenger in Mexico. So we are happy of the results we have obtained during the first quarter on this particular item despite the passenger shift from U.S. to domestic.
Okay. And regarding the Terminal 4 expansion in Cancun, do you have an estimate on how much will the commercial revenues will grow? Because I remember you told us that you expect to finish the construction of the expansion in 2019. Am I correct?
Well, the Terminal 4, it's completed. It's now -- it's in operation since the end of 2017. But of course, these buildings have been designed to have additional expansions. The first one will be the one that I mentioned. It will come 2 to 3 years from now. And this building today, roughly speaking, can manage around 9 million to 10 million passengers. The additional expansion -- the first expansion will be to have another 40 million passengers. But this building has been designed originally to manage 25 million passengers. So we will see many further expansions before we can see Terminal 5 in the case of Cancun Airport.
Okay. And that does conclude today's question-and-answer portion of today's conference. I would like to turn it back over to Mr. Castro for closing remarks.
Thank you, Nicole, and thank you again, everybody, for joining us on our first quarter results conference call. On behalf of everyone at ASUR, we wish you a good day.
And ladies and gentlemen, that concludes ASUR's First Quarter 2019 Results Conference Call. We would like to thank you again for your participation. You may now disconnect.