Grupo Aeroportuario del Sureste SAB de CV
BMV:ASURB
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Grupo Aeroportuario del Sureste SAB de CV
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Good day, ladies and gentlemen, and welcome to ASUR's First Quarter 2021 Results Conference Call. My name is Christina, and I'll be your operator. [Operator Instructions] As a reminder, today's call is being recorded.
Now I'd like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead.
Thank you, Christina, and good morning, everyone. Thank you for joining us, our conference call to discuss ASUR's first quarter 2021 and financial and operating results. I hope that all of you and your families are managing to stay healthy and safe.
As a reminder, please note that certain statements made during the course of our discussion to date 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, including the impact from COVID-19. For an explanation of these risks, please refer to our filings with the U.S. Securities and Exchange Commission and the Mexican Stock Exchange.
Before starting the discussion of our results for the quarter, as expected, earlier this month, we concluded the extraordinary maximum tariff revision for our Master Development Plan of -- for our Mexican operations. The revision resulted in a reduction of around MXN 2.65 billion from the original of MXN 10.9 billion as of December 2016 committed investments for the current 5-year period ending 2023. We also held our Annual Shareholders' Meeting yesterday, which, among other items, shareholders approved setting aside all remaining accumulated net profits for the fiscal year 2020 as well as setting aside 5% to increase the legal reserve to the ASUR's shares repurchase debt.
On the governance front, I wish to welcome Ms. Heliane Steden and Ms. Diana Chávez as new independent members of the Board of Directors, whose nominations were approved at yesterday's shareholders' meeting. Ms. Steden brings over 20 years of experience of financial market. She was Managing Director at Merrill Lynch and is member of the its flagship New York International offices. Prior expertise includes positions at Bankers Trust and Deutsche Bank. She's also on the Board of Trustees of the University of Southern California.
Ms. Chávez brings to ASUR extensive expertise in advancing the agenda of corporate governance and sustainability. She is the Executive Director and Chairperson of the Board of [indiscernible], a private sector center promoting research for the implementation of the United Nations Sustainability goals and initiatives in Colombia. She's also been the Chair of the Board of Trustees of UNITAR, the United Nations Institute for Training and Research in Geneva.
In addition, Independent Director, Ms. Bárbara Garza Lagüera who, until now, was a member of the Nominations and Compensations Committee, was appointed to Chair this committee. With these 2 new Board appointments, our Board is now composed of a total of 11 members, 7 of which are independent. Additionally, we have increased our female participation at the Board level and our Nominations and Compensations Committee is now headed by an independent Board member. These advances underscore our commitment to further enhancing ESG. We look forward to providing more updates on this front in our 2020 sustainability report that we expect to publish within the next 30 days.
Now moving on the travel environment across our airports. Commercial travel in Colombia resumed last September, while our airports in Mexico and Puerto Rico have remained open throughout the pandemic. Traffic in the first 3 months of the year continued to recover, observed since last June, down 32% year-over-year to [ 5.1 million ] passengers, compared with drops of 50% and 70% in the fourth and third quarters of last year. By country, traffic was down 36% in Mexico, 20% in Puerto Rico and 30% in Colombia. Domestic traffic continued to post better trends. In Mexico and Puerto Rico, domestic traffic was down year-over-year in the mid-high teens, with traffic in Colombia declining in the high 20s. This compared with the year-over-year declines in international traffic of nearly 50% in Mexico and Colombia and 70% in Puerto Rico.
Looking at our monthly traffic. Traffic recovers in Mexico...
Please, stand by. Please go ahead.
Thank you, Christina. Sorry for this inconvenience.
Looking at our monthly traffic. Traffic recovery in Mexico slowed down in January and February on the back of higher COVID cases, and health alert levels were established in several areas of Mexico. Traffic was also impacted by travel restrictions, mainly in Canada, which banned travel to U.S., Mexico and the Caribbean until the end of April, and now, extended up to June, as well as negative COVID testing and self-quarantine requirements in the U.S. for passengers returning to the country. March saw a recovery with a total traffic up 11%, reflecting easier comps and mainly driven by Puerto Rico and Colombia, while traffic in Mexico was relatively flat. The extraordinary result in the vaccination process in the U.S. have been positive on these figures.
Looking ahead at travel trends, we're operating -- while operations with airlines across the 4 regions we usually work with, the U.S., Canada, Europe and Latin America, resumed in the fourth quarter last year, passenger traffic remains impacted by weak demand. In near term, domestic traffic is expected to continue to track the recovery, while international traffic should become more relevant in the medium term as pent-up demand drives traffic, as a critical mass of vaccination is achieved. We expect these to be partially mitigated in Mexico by the slower recovery of the economy, which has been hit hardly by the pandemic. In short, we remain optimistic about long-term global travel demand and expect traffic to return. Our last 12 months report achieved in February 2020 within 10 to 18 months from now.
Now let's move to ASUR's financial performance for the quarter. More details can be found in the press release issued yesterday after markets closed. Despite this challenging environment, we maintained a highly liquid and a strong balance sheet that allow us to navigate the current choppy travel environment and ramp up operations when demand accelerates.
Cash and cash equivalents at the quarter increased 11% to MXN 5.7 billion from year-end levels. Increasing cash of over MXN 600 million in Mexico and nearly MXN 7 million in Puerto Rico were partially offset by MXN 64 million cash decline in Colombia. Debt at the year-end was relatively flat from the year-end 2020 levels at MXN 13.7 billion, while net debt to last 12 months' EBITDA was 2.1x and interest coverage ratio was 2.9x. We also benefit from low near-term principal payments with just over 5% of our total debt maturing in the next 9 months of the year.
In terms of the currency exposure, 52% of ASUR's debt is denominated in U.S. dollars [ which is at ] Aerostar subsidiary in Puerto Rico. The remaining 29% is denominated in Mexican pesos with 19% in Colombian pesos.
Now a brief update on accounts receivables. At Mexico, Avianca Holdings and LATAM Airlines Group that filed for Chapter 11 bankruptcy protection in the United States continue to make regular payments. At the same time, nearly [ MXN 75 million ] in accounts receivables from Interjet with fleet operations mid-December were fully provisioned in fourth quarter '20. Interjet accounted for 5% of our revenues in 2020. Year-on-year, accounts receivables were down in Mexico and Colombia, but increased in the high teens in Puerto Rico.
Now moving to the P&L. Revenues ex-construction were down 36% year-on-year to MXN 2.7 billion, as ASUR nonaeronautical revenues declined in the mid-30s, while aeronautical revenues showed a slight better performance, declining in the high 20s. Mexico accounted for 64% of the total ex-construction revenues, while Puerto Rico and Colombia represented nearly 26% and 2%, respectively. On a sequential basis, revenues ex-construction were up 11%. Excluding revenues from construction services, which are deducted as a cost under IFRS accounting standards, total revenues would have declined 36.2% year-on-year to [ MXN 2,439.8 million ], excluding revenues from construction services.
Please stand by.
Again, now moving to the P&L. Revenues ex-construction were down 36% year-on-year to MXN 2.7 billion, as ASUR nonaeronautical revenues declined in the mid-30s, while aeronautical revenues showed a slightly better performance, declining in the high 20s. Mexico accounted for 64% of total ex-construction revenues, while Puerto Rico and Colombia represented nearly 26% and 2%, respectively.
On a sequential basis, revenues ex-construction, were up 11%. Excluding revenues from construction services, which are deducted as a cost under IFRS accounting standards, total revenues would have declined 36% year-on-year to MXN 2,439.8 million, excluding revenues from construction services. Mexico accounted for 66.5% of total revenues, while Puerto Rico and Colombia represented 24.7% and 8.8%, respectively. On a per passenger basis, commercial revenues were nearly MXN 108, up from the MXN 116 achieved in first quarter '20, reflecting the sharp reduction in passenger traffic together with the reduction of international traffic passenger mix.
Moving down to the P&L. Cost reductions achieved across our operations contributed to a 21% year-on-year decline in consolidated costs. In Mexico, cost declined nearly 10% year-on-year, mainly due to lower technical and concession fees, as well as lower cost of sales from directly operated convenience stores, given the lower levels of activity. Savings in energy and maintenance cost also contributed to lower costs, although, since October, we have been operating with all of our terminals at Cancun Airport. Excluding a MXN 29.4 million tax refund at many airports in first quarter '20, cost in Mexico would have declined 13% year-on-year.
In Puerto Rico, cost excluding construction, were down nearly MXN 230 million or 41%. A total of MXN 187 million equivalent to $11.2 million were reimbursed through the U.S. CARES Act. A total of $9.3 million remain available under the trend. We obtained savings of MXN 26 million in energy, security and maintenance costs. On a comparable basis and excluding the MXN 124 million from the insurance recovery in connection with Hurricane Maria in the first quarter '20, costs have declined close to 52% year-on-year.
Finally, in Colombia, expenses declined nearly 15%, largely due to lower concession fees due to the impact of the pandemic on the revenue base. Lower cost of services also contributed to lower cost.
Continuing to the -- continuing down to the P&L, consolidated EBITDA declined 42% year-on-year to MXN 1.3 billion, impacted by COVID-19. All country of operations continue to report EBITDA gains, led by Mexico with MXN 1.1 billion, MXN 1.056 million in Puerto Rico, and MXN 110 million in Colombia. Ex-IFRIC 12, the adjusted EBITDA margin was 58.8% in the first quarter '21, a decline when compared with the 69.9% in the first quarter '20. However, the margin improved from 54.6% in the fourth quarter and 44.6% in the third quarter of last year.
Moving on to CapEx. We made capital expenditures of nearly MXN 360 million during the quarter. Of these, over 90% was invested in Mexico, 9% in Puerto Rico and maintenance CapEx in Colombia. In Mexico, we remained on schedule initiating the construction of the parallel taxiway to the second runway at Cancun Airport and starting the first expansion of phase 4 of -- the first phase of Terminal 4. While in Puerto Rico, we are undertaking major maintenance repairs to runways and taxies.
In summary, ASUR maintains a solid balance sheet, and we have a solid track record of prudently managing cash and variable costs to effectively navigate the pandemic. We're also confident in the long-term recovery of our passenger base, supported by our attractive airport network.
That ends my prepared remarks.
[Operator Instructions]
That ends my prepared remarks for today. Christina, please open the lines for questions.
And we'll take our first question from Alejandro Zamacona with Credit Suisse.
My first question is on the CARES Act in Puerto Rico. So I understand that we have received most of the reimbursement, including in the usual amount. I mean we are still remaining around MXN 40 million, if I am not incorrect. So my question here is, if there's any potential for a new round of reimbursements? Or if you are combining the conversations with the authorities around this topic?
The original MXN 34.4 million is -- there is a remaining balance of MXN 9 million as of today. And there's an additional MXN 10 million for the second act on that respect.
Okay. And for my second question, if I may, it's on the new maximum airport tariffs. So can you give any update on where you are standing right now? And when can we expect new tariffs to be fully implemented?
Well, the tariffs itself are applicable as from the first day of this year. Remember that the tariffs are for the year, not on a monthly basis. So they are, in fact, in place as from January 1 this year. What I believe, of course, is due to the increase we have been approved. We're not going to be able to reach the 100% of maximum rate this year because we cannot implement increases in our specific tariffs in a very or in an immediate way.
Okay. So what percentage do you believe you can reach in the year?
That will depend on the [ traffic ]. That will depend on -- it can also, on the passenger mix.
We'll go to our next question from Alan Macias with Bank of America.
Just one question on dividends. Can you provide an update on dividend payments expected for this year?
As you recall in the last year, shareholders' assembly, a dividend of MXN 8-point something was approved. But that payment -- the date of the payment was subject to a Board approval as from May 11 this year. So the Board of Directors is the one who will be saying, when this dividend is going to be paid.
We'll go to our next question from Guilherme Mendes with JPMorgan.
My first question is regarding Colombia and Puerto Rico. So you already got the MDP renegotiation in Mexico. And if I'm not mistaken, you have already under your contract some terms that will allow you to extend your contracts given the impacts from the pandemic. Just wondering, I mean, how fast this should come to be a reality? So getting a similar rebalance on both Colombia and Puerto Rico?
And the second question is just to confirm that you mentioned that you do expect your top traffic levels to be back in a 10 to 18 months period, that's it? If that's the case, if that's valid both for domestic and for international?
Well, in the case of Colombia, we do not have to do anything for the extension of the contract because it is adjusted automatically. Remember that when we recuperate our regulated investment, plus the return, I would say the concession is over with a minimum period of 2032 and a maximum of 2048. We have said before the pandemic situation that our concession will be concluding in 2032. So basically, the contract is adjusted automatically. And in the case of Puerto Rico, there is no -- any change on the contract, no? So I don't know if this answers your question.
Yes, it does.
Okay. Your second question was?
In terms of the traffic recovery, you mentioned in your opening remarks that you do expect traffic to go back to record levels in 10 to 18 months. I just wanted to double check, if that's correct. And if that's the case, is that valid for both domestic and international?
Okay. Our peak for the last 12 months passenger traffic, let's say, the record, was achieving in February 2020. So what I'm saying is we should be reaching -- we expect to reach that levels 10 to 18 months from now.
We'll go to our next question from [ Juan Ponce ] with Bradesco.
We recently saw the new outsourcing law get passed in the Mexican Congress. What do you think is the impact on ASUR? I mean I understand that in-sourcing will also be prohibited. So do you think services such as security, cleaning will be qualified as specialized services?
Well, we are analyzing this situation. Of course, it has been approved at both -- at the Deputies' and Senators' Chamber. But it has not been published. In the case of security and cleaning, we are analyzing these. We do not believe that this could be considered as in-sourcing. So the companies, I believe, will have to provide the services as they are providing today.
And we'll take our next question from Andressa Varotto with UBS.
I have just 2 quick questions. The first one is on the MDP extraordinary negotiation. So we saw that you published the CapEx figures for 2021 to 2023. But in 2020, we saw that ASUR invested less than it was originally expected in the previous announcement and the peak. So I don't know -- this question on how was the 2020 CapEx triggered in the negotiation?
And my second question is on the traffic. We saw a very positive rebound in March. So if you could give some color of April and also the upcoming month, ahead of the high season?
You're welcome. So the CapEx postponement of MXN 2.1 billion that was approved by the authorities in the third quarter last year, was considered in the new figures we have presented. So I would say the numbers that you have to consider on your budget or your forecast are the ones we just published. So it is MXN 3-point something billion for this year.
In the case of the traffic, yes, we saw a nice recovery process for the case of March. Of course, remember that the pandemic situation started in mid-March last year. So a portion of that is because of the pandemic of last year. Nevertheless, I'm still optimistic in terms of what we are seeing in the successful U.S. vaccination process. So I hope that we will see the effects of this during the summer.
[Operator Instructions] We'll take our next question from Roberta Versiani with Citi.
Just one quick one on the MDP. In light of this recent tariff increase, how does ASUR expect to pass along all of this higher pricing to the airline. Could it be that volume-related discounts will be given to the airlines? How does it look like for this year, with the situation still being complicated?
Roberta, as I have mentioned, it's not easy on this moment to increase our specific rates. And that is why I believe we're not going to reach the normal levels of maximum tariff compliance for this year. So we will have to see this very careful, and we will be adjusting our rate in the future to recuperate our maximum tariff levels compliance in 2021.
[Operator Instructions] We'll go to our next question from Alan Macias with Bank of America.
Just a follow-up question on maximum tariffs. Have you increased tariffs as of April, within the -- at the airports? And I guess, do you have more leeway to increase maximum tariffs for international traffic since the peso has been shrunk? Would that be accurate?
Alan, no, we have not increased our rates in April. And to increase some rates, it requires a process that takes between 3 to 4 months. And as I said before, again, I do not expect to reach maximum tariff compliance at 100% this year as we used to. So we believe that, that will be or should be achieved in '21.
In the case of the international traffic, yes, of course, the rates are higher due to the additional area we have to provide to them at the airport, which is the one that is related to migration and customs. All of that is in dollars, it's true. And -- but at the end of the day, the maximum rate is in pesos.
We'll go to our next question from Gabriel Himelfarb with Scotiabank.
Just a quick question. Do you think there's any risk this year as the climate becomes warmer about the [ stored gas ] in Cancun and near Riviera Maya?
Yes, of course, we have this risk always. The [ gas ] is something that we cannot control. And of course, we cannot predict because it's not seasonal, more cyclical. The season is starting with lower levels in comparison with the ones that we had in 2018, which was a very bad year for us. We'll have to wait and see what is the outlook.
We'll take a follow-up question from [ Juan Ponce ] with Bradesco.
So I see Canada extended -- 2 major airlines in Canada extended suspension of flights to Mexico and the Caribbean until May 21. Is May a big month for Canadian travelers such as like in the first quarter?
No, it is not. Unfortunately, the high season for Canadians have passed. That's due to weather conditions. So I would say the additional extension as from April 30, it is not very important in terms of the impact in comparison with the one that we have in the first quarter.
A follow-up from Guilherme Mendes with JPMorgan.
The follow-up is on the nonaeronautical revenues. Just [ simply ], how is your relationship with the commercial tenants, if they should expect any additional discounts on the airports?
Well, I would say, in general terms, the noncommercial revenue is working well. Of course, some of them have been facing trouble, probably not because of us, but because of other operations they have in some other airports where the contract just flattened per square meter. So in the case of those, in general terms, most of the contracts are adjusted automatically because the way that we collect from them. So I do not expect any major situation with them.
[Operator Instructions] Since there are no questions at this time, that concludes the question-and-answer portion of today's conference. I would like to turn the call back over to Mr. Castro for closing remarks.
Thank you, Christina, and thank you again for participating in our first quarter results conference. On behalf of ASUR, we wish you a good day, and please stay safe. Goodbye.
Ladies and gentlemen, that concludes ASUR's First Quarter 2021 Results Conference Call. We would like to thank you again for your participation. You may now disconnect.