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 2023 Results Conference Call. My name is Paul, and I'll be your operator. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of today's conference. [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, sir.
Thank you, Paul, and good morning, everyone. Before I begin discussing our results, let me remind you that certain statements made during this call may constitute forward-looking statements, which are based on management's expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control.
As usual, additional details about our quarterly results can be found in our press release, which was issued yesterday after market close, and is available on our website Investor Relations Sector. Following my presentation, I will be available for Q&A. Before getting into a discussion of the quarterly financial results, I want to note that our latest sustainability report is available on our website, and we invite you to read all it.
Last year, during the first quarter conference call, we laid out the 7 key strategic objectives for the company to implement in the short term and medium term. Two notable advances made last year towards achieving these goals include, the formation of the Sustainability Committee. This committee has 3 members and will support the Board of Directors in making decisions focused on environmental, social and governance matters and incorporate them into the company's long-term strategy.
Furthermore, the company will support organization in integrated sustainability and corporate social responsibility at the highest level of the corporate governance in the company. The committee held its first meeting earlier this year. We also made progress with respect to reducing greenhouse gas emissions in 2022. We've begun [indiscernible] at the airports of Cancun [indiscernible] will generate 900,000 kilowatt hours annually in each airport.
We are already seeing benefits with the reduction in green gas in-house emissions. One of our objectives for the next year is to expand this project to other efforts in the group. As we continue to make progress to get closer to achieving our goals, we will provide you updates at the appropriate target. Now moving to a review of our operational and financial results together with some color on travel demand during the quarter.
Note that all comparisons are year-over-year unless otherwise noted. We are pleased to report record high passenger traffic revenues and EBDA in the first quarter of the year, but we are more cautious for the remaining of the year, given the easy comps from Omicron during the first 2 months of 2022 and the negative effect of the operational suspension of 2 Colombian airlines during the quarter.
We delivered sustained growth in the number of passengers traveling to our airports, up 19% and reaching a record of nearly $18 million. Mexico post the fastest growth with total passenger traffic up 23%, reflecting increases across all of our airports. Domestic travel was up in the high 20s with traffic at [indiscernible] above pre-pandemic levels, while we expect that accrues to fully recover this year.
In turn, international traffic was up in the high teens, mainly driven by steady demand from the United States and Europe and an uptick in Canada, which recovered pre-pandemic levels during the first quarter. With these all regions that we operate within, have recovered 12 months pre-pandemic levels. Puerto Rico followed with traffic up 22% with domestic traffic up in high teens and internationally, up by nearly 50%.
Lastly, total passenger traffic in Colombia increased 9% with domestic traffic slowing to the middle single digits and international passengers to the high traders. As anticipated, this lower growth reflects in the fees in VAT from 5% to 19%, which is impacting traffic trends and the suspension of operations of Viva Colombia at the end of February and [indiscernible] during March.
These airlines represented 17.4% and 1.9% of 2022 passenger traffic in Colombia, respectively. On a consolidated basis, the share of domestic traffic over total traffic is stood at 59.3% of total traffic compared with 60.1% in the first quarter 2022. Now moving to the P&L. As a reminder, all reference to revenues and costs exclude construction revenues. Before beginning with our key financial figures, revenues increased 22%, reaching all-time high of 6.3 billion pesos.
This robust performance is attributed to the solid growth in both our logical and non-aeronautical revenues across our 3 geographic regions. Mexico represented 75% of total revenues, while Puerto Rico accounted for 15% and Colombia contributed 10%. Commercial revenues continued to show an upward trend, increasing by 22% overall, with Mexico up 23%; Puerto Rico, 18%; and Colombia, 13%.
On a per passenger basis, commercial revenues increased to 123 pesos from nearly 121 pesos in the year-ago quarter. By region, commercial revenues per passenger were in the range of 145 to 147 in Mexico and Puerto Rico. Of note, these figures include the effect of the stock Mexican peso, which appreciated 10.36% and 36.23% versus the U.S. dollar and the Colombian peso since the end of the first quarter last year through the first quarter of this year.
Commercial revenues per passenger in Colombia were up in the low single digit in Mexican pesos, impacted by the currency depreciation that increased 37.8% in local currency, reflecting the opening of 29 commercial spaces over the past 12 months. Moving to costs. Total comparable operating expenses were up 12% below the 22% revenue growth in the quarter. Note that comparable costs exclude the effect of the 196 million pesos expense recovery in the first quarter 2022, resulting from the application of the Transat in Puerto Rico.
Expenses in Mexico increased in the low 20s, below the 26% revenue growth. Higher costs were primarily due to personnel, energy and maintenance, along with increased technical assistance and concession fees in line with the higher EBDA. We have worked hard to maintain our cost control policy, but a 20% increase in the minimum wage had a negative impact on clean and security contracts. In Puerto Rico comparable costs were relatively stable as a reduction in the medium as we serve more than offset higher cost of services.
Cost in Colombia was generally flat compared to a high single-digit increase in revenues. Solid passenger traffic growth, together with higher commercial revenues and increased operating leverage resulted in another quarter of [indiscernible] EBDA reaching 4.5 billion pesos, up 23% and adjusted EBDA margin of nearly 72%, up 90 basis points from the year-ago quarter.
Again, this quarter, we deliver high profitability in our 3 regions of operation. Mexico posted a high increase in EBDA of 28% to 3.6 billion pesos. In Puerto Rico, EBITDA was up 4% to 520 million pesos, while Colombia EBDA rose 12% to over 415 million pesos. Adjusted EBDA margin improved 80 basis points in Mexico to nearly 77% and by 150 basis points in Colombia to just over 3%.
In turn, Puerto Rico posted a 260 basis point decline in adjusted EBDA margin to nearly 55%. To recap, we delivered yet another strong quarter, characterized by a record break traffic and revenues. The combined effect of these achievements and our operating leverage led to an increase of 15% in net majority income reaching 2.5 billion pesos for the quarter. In terms of the balance sheet, we maintained a robust cash position of 50 billion pesos and a well-balanced debt profile.
Accounts receivables were up 44%, mainly reflecting the high passenger traffic across our airport network as well as source in Puerto Rico from the recognition of other revenues disclosed in the fourth quarter 2022. We anticipate collecting these receivables within the first half of 2023. To a lesser extent, Viva Colombia and entire outstanding receivables were combined sum of 22 million pesos. Capital investment during the quarter were 143 million pesos, of which nearly 50% was allocated to Mexico, 47 to Puerto Rico and 6 million pesos were invested in Colombia.
Before we move to the Q&A portion of the call, some brief closing remarks. We are pleased to have the start of the year with a strong note. Nevertheless, as we think about the remaining of 2023, the year-over-year comps will not be as we experienced in the first quarter, as I mentioned earlier, 2 of the Colombian airlines have recently suspended operations. Meanwhile, we will continue to look for ways to further improve our cost structure and drive margin improvement.
Our balance sheet is healthy, and we will continue to invest to support future growth. Separately, on the news front, at the end of the quarter, the President of Mexico sent to the Mexican Congress appealed to reform 23 lots, the bill was to provide among other things, additional brands for the Mexican government to modify or to revoke license, authorizations and permits. And it's not clear whether the Congress will pass this bill and it represses the impact it may have on the Mexican economy and the company's operation.
We believe this deal will be discussed by the Mexican Congress during the third quarter of this year. In conclusion, with a keen focus on providing value to our shareholders, our Board of Directors has proposed an ordinary net cash dividend of 9.93 pesos per share payable in May and an extraordinary net cash dividend of 10 pesos per share payable in November for each of the ordinary [indiscernible] shares, it is equivalent to a combined total of nearly 6 billion pesos in dividend payments.
These other items will be voted by our shareholders at our annual general meeting held this Wednesday. This ends my presentation, please Paul open the floor for questions.
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Guilherme Mendes with JP Morgan. Please proceed with your question.
Hi Adolfo good morning, thank you for taking my question. I have two questions. The first one is related to the regulatory noise that you just mentioned regarding the concession deal sent by Amla to Congress. The question is, if you see any kind of risk for your coming MDP negotiation? I understand there's still a lot of doubts, and we haven't seen the full definition of it.
But what's your best guess on how this could potentially impact the sector as a whole? And the second question is regarding to Colombia. As you mentioned, you have 2 less players operating in the region. How do you see the competitive environment in the region and the potential impact on traffic going forward?
Hi good morning. Well, there really is not a concession deal. The deal is affecting all the entities that have received from the government a license, a permit and approval for an authorization or a concession. It's not just for concession. Also, the bill has some other things. It is not just to strengthen the power of the Mexican government in concessions. I'm not expert on loss or legal matters.
You can read the 20th report, and you will see what my lawyers say about this document. In the case of Colombia, yesterday at night, there was a communication from the ministry of transport, where they are approving the merge between Viva Colombia and Avianca under certain conditions. This may help in order that these airlines can restart operations. Also, I receive a notification from [indiscernible] but they want to start operations.
And this may improve the situation in Colombia because what I believe is that currently Avianca and LATAM does not have the possibility to absorb all the passengers these airlines left into the tail. I hope that these 2 things will improve, and we will see information, I would say, over the next week.
Okay thanks very much. Have a nice day Adolfo.
You’re welcome.
Thank you. Our next question is from Rodolfo Ramos with Bradesco BBI. Please proceed with your question.
Thank you and good morning, Adolfo. A couple of questions from my side as well. The first one is, if you can share a little bit on your expectations for international traffic, particularly coming from the U.S. I don't know if you have any visibility as to bookings or anything we were looking at air travel searches from the U.S. to Cancun and it looked like they're a bit off from what we saw at this time of the year in last year.
So I just wanted to get your thoughts there. And I have a second question, a follow-up on the first one.
Okay. Rodolfo hi, good morning. We do not have too much or additional information of the one you have. Of course, we have the bookings up to the end of the season of the winter season that ends almost at the end of April. What I expect is more stable growth in the case of the U.S., the important point will be the summer in the case of the U.S. and domestic. And towards the end of the year, again, the Colombian traffic.
Okay. Thank you. And a follow-up on the previous question. On your MDP, I mean, I don't know if there's anything you can share as to the progress of your MDP. I mean you mentioned that this reform doesn't contaminate so to speak, the process, but just wanted to get any initial comments that you can make regarding perhaps tariff expectations or any projects in terms of CapEx. Just anything for us to have visibility at this time where kind of like the regulatory concern is a little bit more heightened.
Well, the only thing that I can say about the MDP is that the first half of the year, normally, the authority is busy to each one of the airports basically to check 2 things. One is what we call the inventory, what is the real status of every single piece of the infrastructure at the airport. And the second one is to review each one of the projects we have proposed to them. What I can say to you is that this program of visits have started and they are at the airport as we speak.
Towards the second half of the year, is when the government start checking the passage traffic which can rate and time our calculations.
Thank you. Our next question is from Alberto Valerio with UBS. Please proceed with your question.
Adolfo thank you for taking my questions. I would like to do another follow-up on the MDP. You are the only one to provide a CapEx estimate for the following 5 years of the current MDP. And if I'm not mistaken, 2018, you provide a thanksgiving CapEx. Can you ensure that it's related, if it makes sense or if it not make sense anymore? And another point is that CapEx that is postponed from the external generic MDP in 2021, if you could also add this extra CapEx to your planned CapEx of [indiscernible] back in 2018? And just to complement, do you think that the spread above the 10-year bond of Mexican bonds could be close to what we got in 2018, close to 1%? Or do you think it can be higher for the next year the MDP? Thank you.
Hello. Your line is going. I couldn't hear well your question, but let me say that in the case of the 2 billion pesos that were postponed from the previous CapEx, of course, those will be considered in the current MDP numbers. And also in the case of the situation of this postponement is due to the fact of the new passenger traffic forecast. So the [indiscernible] are postponed because if we do not reach the levels of passenger traffic that is required to make the projects, the government take the decision to postpone those projects in order not to affect the maximum rate.
I know that you had some other questions, but I couldn't hear.
Can I try again? It's better now?
It's really poor.
I can follow up thank you very much.
Okay you’re welcome.
Thank you. Our next question is from Juan Macedo with GBM.
Hi Adolfo, thanks for the call and congrats on the results. I have 2 questions. My first question is regarding the commercial segment. We saw great results in the net revenues per passenger on Colombian concessions despite the Mexican peso appreciation. Could you give us some color on that dynamic? Is it due to commercial expansion? Or does it come from passenger behavior?
Well, this is coming from what we have done there. As I mentioned in the remarks, we have opened 29 spaces in the case of Colombia. And those are producing well results. Of course, as I mentioned during the initial remarks, probably we are not seeing the full effect of this in Mexican peso figures because of the acquisition of the Mexican peso versus the Colombian peso and it was 36% over the last 12 months. So if you put all of these on the top of the number we have presented in the report, you will see that the results in Colombia are very good.
Yeah agreed. Thank you. And my second question is regarding tariffs. Could you give us some detail on when and how the tariff increment implementations go during the quarter?
Well, remember that the type or the level of how much we reach of the maximum rate is measured 1 per year in a calendar year. So last year, we end up around 96%. I do believe with the current expectation of inflation this year, probably we will be at 98% this year.
Great. Thanks for the color.
Thank you. Our next question is from Bruno Amorim with Goldman Sachs. Please proceed with your question.
Good morning Adolfo, thank you taking my question. It's a follow-up on MDP as well. I know you cannot comment on the outcomes, of course. But maybe you can help us understand where do we stand in terms of traffic, the need for CapEx and then cost of capital, right? The first question would be, is it fair to say that traffic is now above what was initially expected when you and the regulators agreed on the extraordinary revision during the pandemic given the sharp recovery in traffic?
The second question would be is there spare capacity to accommodate this additional demand without the need for higher CapEx? Or all else held constant should this eventually stronger than initially expected traffic rebound to drive higher than initial expected CapEx? And the last question would be on cost of capital. At the moment, when you have reset the tariff and the CapEx plan during the pandemic, has the regulator adjusted the cost of capital as well or not?
I'm asking this because at that moment in time, 10-year rates in Mexico were well below the current level. So this could have an implication for the direction of the tariffs as well. Thank you.
Hello Bruno. In the case of traffic, yes, in some cases, traffic is higher than expected in comparison with what we presented in our [indiscernible] provision. Remember that we did that in the first quarter '21, but that's for some efforts. For some others, it is not. So in total, I would say, probably is higher, but just a bit. In terms of high CapEx, what I can say to you is that the project -- the important projects will come in the case of Cancun airport.
We are talking about terminal expansion. Remember that the 2 billion pesos or the most important portion of the 2 billion pesos that was postponed in CapEx was the expansion of the gate in the case of Cancun terminal 4. And of course, those are going to be included in the new MDP. In terms of the cost of capital, that will be measured, as I said, during the third and fourth quarter this year.
Remember that the government uses the last 24 months of the Mexican paper issued in the international markets long term. So we will be able to answer your question up to the third or fourth quarter this year.
Yes. But just a follow-up on the cost of capital. When you and the regulator agreed on the extraordinary revision during the pandemic, has the allowed return being adjusted at the moment in time, reflecting the cost of capital at that time or not?
It was adjusted yes.
Okay. Thank you very much.
Our next question is from Philippe Nielsen with Citi. Please proceed with your question.
Adolfo, good morning or good afternoon and thanks for taking my questions. So I have 2 questions on my side. The first one is with the MDP review on the horizon, how should we think about the technical assistance fee? And if you think that it's reasonable to consider that fee, given that ASUR is much more experienced versus back in 1998.
And the second question is now that we are in the halfway mark of the 50-year concessions, do you think that it's fair to assume that ASUR could have some sort of opinion to renew its concessions? Or if it's too early to say, maybe some color on those 2 points. Thank you.
Hello. In terms of the technical assistance, it's important to say that this is not for free. We have an agreement with ITA that they have to comply with. And also I have to say this is one of the most important moments where they have to deliver, which is the case of the MDP. In the case of the renewal of the concession, the contract says that it's for 50 years, and it can be renewed.
The contract doesn't say how. And I'm sure that I'm not going to be here in this company or maybe this world when this will occur. So for the moment, I'm not concerned about the renewal because that should occur in 2048.
Great thank you very much for the call.
Thank you. Our next question is from Gabriel Himelfarb with Scotia Bank. Please proceed with your question.
Hello Adolfo, thanks for the call. Just a follow-up question on the MDP. For modeling purposes, do you think it's appropriate we add a risk premium to the discount rate due to the current regulations that have been developing in the Congress? And also, do you think we should consider additional CapEx for example, connecting the terminals with the [indiscernible] or any tariff increase that could be allowed due to the Tulum airport?
Well, in the case of the cost of capital or the discount rate that has been defined as the one of the industry. So of course, the process to complete that is the Mexican paper issued in the national market the last 12 months average for the last 24 plus something, okay? But again, that will be disclosed during the third, fourth quarter this year. Now in the case of what you are saying about the connection with the [indiscernible] we are working today as we speak with the government to be able to connect the [indiscernible] with the airport and yes, that will be or should be considered in the next MDP.
Okay. And in the case of the Tulum Airport, if the airport is approved, do you think the government will allow you higher tariffs that compensate the traffic drag?
Is to allow the higher traffic, remember that how we do the calculation is to forecast our passenger traffic in the future. And that, of course, includes all the effects, the economy, the different trends, hurricanes, to airport everything.
Okay thank you.
You’re welcome.
Thank you. Our next question is from Francisco Suarez with Scotiabank. Please proceed with your question.
Hello good morning. And also thank you for the call. A question on your sustainability report. I was noticing that you are doing a really good job in overall energy consumption in absolute and relative terms compared to 2019 figures. But I just noticed that in terms of water consumption and nonhazardous waste, that is not the case. Can you explain a bit of why it might be happening? And what is your overall strategy to cut the gross consumption of water in your terminals in Mexico?
Absolutely. In the case of water, that's a good question because our net MDP or I would say the focus or the important focus of net MDP is water. It's clear that we have not done yet most of the things that we can do there. Of course, what you are seeing in the numbers includes the water that we have to spend to construct the expansion of the buildings. So that is why probably you see some higher numbers in the case of some other airports.
But we will see this improvement once we finish with those works.
Great. And if I may, a follow-up on this also. It is interesting because when we discuss about potential retrofits in other types of structures with companies, those are kind of challenging in terms of the economics to do that. But under your industry, it seems that you are in a great position to put that on the MDP as well to make a retrofit in the terminal, for instance, and with that cut your overall energy and water intensity in those buildings.
Do you think that, that might be a possibility? And if it's actually correct what I'm saying that perhaps if this type of CapEx is placed on the MDPs as you're going to do that now in the next one. That is actually the way to make a profit out of those investments that in other industries seems to be more and more challenging.
Well, in the case of the energy, you will have to go back to at least [background noise] that we issued the 15th of December 2015. You will see that we were announcing that we signed an agreement with a company called SunPower to purchase energy from solar source. And that at the moment represented 100% of the energy consumption at the airport.
Today, probably this is around 78% of the construction because after that, we opened Terminal 4 and all the reductions that we have been able to manage in plan. We are waiting these to be in place there. The solar farm is waiting for the approval from the energy near Mexico. The solar farm is ready since the first quarter last year. And once they get this approval, our increase in the case of solar energy will be extremely important.
Got you. But going back to my initial question, does retrofit to your existing buildings, the older terminals can be put in the MDPs and with that not only cut your overall energy and water intensities but also earn a profit out of these investments?
I don't know the good definition of your record, but let me say the most important consumption on energy is related to air conditioner. Of course, when we construct [background noise] the new equipment will be more efficient in comparison with the others. And that's where we get this benefit of the new equipment or when we replace those in the old buildings.
Yes. Perfect. Thank you Adolfo. Congrats on the results.
You’re welcome. Thanks.
Our next question is from Alan Macias with Bank of America.
Hi Adolfo. Thank you for the call. My question was answered, but can you just repeat your dividend payment that you mentioned?
Yes. The general shareholders meeting is going to take place tomorrow. The proposal is 9.93 pesos in an ordinary dividend to be paid on May and the extraordinary 10 pesos per share to be paid in November.
Thank you.
Thank you. Our next question is from Lucila Gomez with Compass Group. Please proceed with your question.
Just a quick follow-up on the Cancun Airport after all these expansions, what is the annual capacity that the airport has right now in terms of traffic? And where do you think you'll be reaching for this year?
The capacity of course, has to do with the level of service. It's very difficult to say what is the full capacity of a building in just a single number because a restriction can be security field is something that you can solve with, let's say, 100 [indiscernible] But if you want just a single number in the case of Cancun Airport could be today, 31 million, 32 million passenger traffic a year, okay. More or less what we have today. So we are very close to the capacity defined in terms of the level of service we want.
So in other words, that doesn't mean that we cannot have more passengers. But of course, in some time of the day, some these days of the year, probably the level of service you will perceive that is not the profit.
Okay. So just as a follow-up, if you wanted to add more passengers, what would be like the moment it would allow you to reach at the moment?
Okay. In the MDP, the way we do is we draw our passenger traffic line for the next 15 years, and then we convert this into use per hour in each one of the pieces of the airport. And the standard is that we can have lack of capacity just 30 hours in a year. So that means in the 31st hour of the year, demand is high at technical capacity, we have to go to the next step to increase the security filter, to increase [indiscernible] to increase selectors, etc.
That is how we construct the MDP.
Our next question is from Fernanda Radia with APG. Please proceed with your question.
Hey Adolfo. Good morning, thank you for taking my questions. I have 2 on my side. The first one, we heard that this year should be the record in terms of [indiscernible] So I was just wondering if you could maybe provide us your thoughts on the potential impact this could have on Cancun Airport. And the second, you say that you are net cash as of Q1. I was wondering if you could provide us any thoughts regarding capital allocation despite dividend payment if you are thinking of further expanding your geographic footprint? And if it does, which region would you be so focused on?
Fernanda, thank you for your question. Well, I don’t believe that this year is going to be the record year. I believe that 2018 will be the record year so far. But it’s true that we are having Zagato and these hotel owners are doing an extraordinary work, came in the pitches every single day. In the case of cash, yes, 15 billion pesos is a very good number. But as I mentioned, I will have to pay 6 billion pesos of those 15 million pesos during the year.
It's true that we have a low CapEx level this year, but we have to be prepared for next one.
[Operator Instructions] Our next question is from Mauricio Butrago with AM Advisors. Please proceed with your questions.
Hello Adolfo. I have 2 quick questions. The first one is how the close of operations of Viva Air in Colombia impacted your results in the quarter? And second question is just if you can repeat the guidance of CapEx and EBITDA for this year, please?
Hi Mauricio. In the case of Viva Air, as I mentioned, they stop operations at the end of February, some passengers during March, and they represented 17.4% of our traffic in 2022. So the impact in the case of Colombia, we all saw that with match passenger traffic figure, it was an important adjustment in the case of the month of March in comparison of how it was in February.
In terms of [indiscernible] what we are expecting is round number 700 million pesos in the case of Mexico and around 20-something million pesos in the case of Puerto Rico and probably10 million pesos in the case of Colombia.
This concludes our question-and-answer session for today's conference call. I would now like to turn the conference over to Mr. Castro for any closing remarks.
Thank you, Paul, and thank you all of you, again, for participating in the first quarter results conference call. On behalf of us all, we wish you a good day.