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 Second Quarter 2021 Results Conference Call. My name is Sandy, 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, sir.
Thank you, Sandy, and good morning, everyone. Thank you for joining us -- our conference call to resort -- to discuss ASUR's second quarter 2021 and financial and operating results. I hope that all of you and your families remain healthy and safe. 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, 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.
Passenger traffic trends continue to show sustained improvements across the board with a total of almost 12 million passengers traveling to our airport during the quarter. Although this is 14% below pre-pandemic levels of COVID-19. It represents an increase of over 13x when compared with the same quarter last year.
Puerto Rico posted the strongest recovery with passenger traffic exceeding the second quarter '19 levels by 10%, driven by a high-teen increase in domestic traffic, which more than offset a weaker international performance. Domestic traffic in Mexico and Colombia also contributed to show better trends, although still below pre-pandemic levels, down 12% and 30%, respectively, versus second quarter '19.
And currently, Cancun Airport practically reached the same domestic travel levels that we posted in the second quarter '19, while showing improvement on the back of successful vaccination process in the U.S., recovery in international traffic continues to lag. Mexico delivered the fast recovery with international traffic nearly 20% below the level reached in second quarter '19, followed by Colombia and Puerto Rico, which post drops in the mid-20s and high 50s, respectively, when compared against second quarter '19.
Looking at our monthly traffic since March, traffic has started to pick up again. Driven the gradual rollout of vaccination campaign in Mexico and further [ boosted ] by higher-than-travel demand typical during the summer season. On the downside, traffic was negatively impacted by travel restrictions mainly in Canada, which extended travel ban to the U.S. and the Caribbean until the end of August.
Also impacting traffic are negative COVID-19 testing and just quarantine requirements in the U.S. for passengers who return to their country.
Next, as we look ahead at emerging travel trends, remember that operations at the majority of the airlines serving the 4 regions we usually work with mainly in the U.S., Canada, Europe and Latin America resumed at the end of last year. In terms of international traffic, we expect that the accelerated pace of the vaccination rollout in the U.S. with 57% of the population with at least 1 dose will continue to translate in a gradual recovery of international traffic in our Mexican operations, particularly during the summer season in the Maya Riviera that serves tourism, travel and an improved outlook once the winter season arrives.
In the near term, however, we expect domestic traffic to continue with a slow recovery as countries probably advancing their vaccination campaigns, restrictions are lifted and economy's slower recovery. By contrast, we expect that business travel will take more time to recover, which could be the case for airports like Merida, Veracruz and Villahermosa in Mexico and Rionegro in Colombia.
We also remain cautiously optimistic about global travel demand and expect traffic to reach the 12-month record that we achieved in February 2020 within 8 to 16 months from now.
Now let's move on the highlights of ASUR's financial performance. More details can be found in the press release issued yesterday after market close. Our strong balance sheet has allowed us to navigate the [ current traffic ] travel environment as well as ramp up operations as the mind continues to gradually recover.
ASUR's financial position remains strong with cash and cash equivalents of MXN 7.8 billion at the end of the quarter, up 51% from December 2020 levels. All countries of operation contributed to this higher cash position. Reporting increased MXN 2.1 billion in Mexico and MXN 0.5 billion in Puerto Rico, Colombia contributed nearly MXN 6 million in cash compared with the use of cash in the first quarter.
We closed the quarter with a total financial debt of MXN 13.7 billion, down 3% from the end of the year 2020. Net debt to last 12 months EBITDA was 0.9x, while interest cover ratio was 5x. Our maturity profile remains healthy with only 3% of the debt maturing before the end of the year and approximately 26% next year.
With regards to accounts receivables, we continue to receive payments from the 3 airlines Aeromexico, Avianca Holdings and LATAM Airlines Group that filed for Chapter 11 bankruptcy protection in the United States.
On a sequential basis, accounts receivables increased 26%, mainly driven by a 61% increase in Mexico, reflecting revenue growth and contract account receivables in Puerto Rico and Colombia decline of 16% and 5%, respectively.
Turning to the P&L revenues ex construction increased 324% to MXN 3.9 billion year-on-year and were just 4% below pre-pandemic levels of second quarter '19, driven by declines of nearly 5% in revenues from non-aeronautical services and 4% from aeronautical services.
Mexico accounted 68% of total ex construction revenues in Puerto Rico and construct -- and Colombia represented 23% and 9%, respectively. On a sequential basis, revenues ex construction increased a robust 43%. On a per passenger basis, commercial revenues reached nearly MXN 119 up from MXN 99 posted in the same quarter of 2019, is still distorted by the sharp reduction in passenger traffic.
Continuing down to the P&L, operating expenses ex construction costs increased 31% year-over-year, mainly driven by higher activity levels in Mexico. However, consolidated costs were down 8% when compared to the second quarter '19 levels and slightly exceeded the decline in revenues in that period.
In Mexico, costs were up 64% year-on-year, mostly due to the higher technical assistance and concession fees on the back of higher revenues and EBITDA. Higher cost of services also contributed to this increase, mainly reflecting the reopening of Terminals 2 and 3 at Cancun Airport, which were closed in the second quarter '20, compared to the second quarter '19.
Operating costs and expenses ex construction increased 8.2%. By contrast, in Puerto Rico declined 4% year-over-year benefiting from the reimbursement this quarter related to the cancellation of a security contract with the municipality of Carolina, together with a reimbursement from TSA in connection with offering security, as required by the U.S. government.
Comps also benefited from the cost reduction in the second quarter '21 as a result of a favorable FX conversion impact and from a higher provision for our foreign bad debt in the second quarter '20 in connection with the COVID-19 pandemic. Note that a total of $8.2 million remain available on the U.S. [transact credit] as funds were not deployed to reform expenses this quarter.
Finally, expenses in Colombia were up 29% year-on-year, mostly reflecting increases in concession fees to a lesser extent in cost of services resulting from higher traffic levels.
Consolidated EBITDA increased to MXN 2.5 billion this quarter from MXN 51 million in the year ago quarter, which was fully impacted by restrictions worldwide to control the pandemic. When compared to the pre-pandemic performance, EBITDA was only 3% below comparable to the second quarter '19 levels, which excludes the nonrecurring insurance recovery in that quarter.
Both countries of operation reported EBITDA gains with Mexico contributing EUR 1.8 billion, Puerto Rico over MXN 0.5 billion and Colombia MXN 157 million. Exhibit 12, the adjusted EBITDA margin improved to 65% in the second quarter '21, up from 6% in the first quarter of the year and 53% in the second quarter '19 when excluding the insurance recovery that benefited that quarter.
With regards to CapEx, we invested just over MXN 460 million in the quarter, the lion's share of which was allocated to Mexico, while MXN 60 million were invested in LMM Airport in Puerto Rico. In Mexico, we remain on schedule with expansion of terminal building in Merida and the construction of the parallel taxiway of the second runway at Cancun Airport and starting the first phase of expansion of Terminal 4. While in Puerto Rico, we are undertaking major maintenance repairs to runways and taxiways.
To summarize my remarks, ASUR's maintained a solid balance sheet that is enabling us to ramp up operations as our markets recover and in long term. We're confident in our ability to continue rebuilding our passenger base. Based on the encouraging growth trends we are seeing and supported by our attractive airport network.
In the meantime, we continue prudently managing financial cash and variable costs while travel demand remains affected by the pandemic.
On the dividend front, as previously announced last month, our Board of Directors approved a payment date, October 1, 2021, in ordinary net cash dividend of MXN 8.21 per share that had been approved at our 2020 annual general meeting.
Finally, before opening the call for questions, we recently published our 2020 sustainability report, which is housed on our website. We welcome you to read it and learn about our recent progress and initiatives on ESG front. We remain committed to further enhancing our ESG strategy and performance. And our other objectives for our next sustainability report, we intend to add the SASB framework to complement our reporting under the GRI framework.
That concludes my remarks for today. Sandy, please open the lines for the questions.
[Operator Instructions]. Our first question comes from Alejandro Zamacona at Credit Suisse.
My first question is on the airport fees increase. So maybe extraordinary recent renegotiation. The maximum airport fees increased roughly 17% in real terms. We noticed that some airlines in Mexico have already updated the airport fees at some airports for [ Corozal ] but revised from since July 16. So could you please confirm by how much airport fees are increasing? And when should we expect this to reach the maximum fees?
Alejandro, what are you talking about is the result of our extraordinary maximum time review process. That was approved basically at the beginning of April. So as you are mentioning, 17% was approved. And of course, towards the year, we're increasing our rates to be able to reach that 17% increase.
But of course, what I can tell you is that this year, we are not going to reach the maximum compliance level. We're going to be below in comparison of our results in previous years. This is due to the time it takes to increase our rates on the first place and second, is because we received the approval in April, as I mentioned. So what we expect this next year to be able to comply with the maximum tariff compliance.
Okay. So -- And my second question is on the accounts receivable. So I know that you -- in the remarks, you mentioned a 6% increase and which is basically for Mexico, right? But -- my question is -- here is -- is this increased from MXN 750 million in the first quarter of '21 up to MXN 1.2 billion in the second quarter. is it all related to Mexico? Or what can you comment about that?
I would say, in general, all the airlines are paying on time with the exception, of course, of [indiscernible]. As I mentioned that amount has been reset. But the increase that you are seeing in Mexico is the result of an increase in the sales side, not in the lack of payment.
The next question comes from Guilherme Mendes at JPMorgan.
I have 2 questions actually. The first one is on the airlines front. To kind of double check if there's any significant impact related to the downgrade of the Mexican Aviation Agency by the FAA. And the second question is what is the latest on the Tulum Airport?
In terms of the downgrades, we do not see any impact, and we do not expect any impact from these because most of our passenger traffic that travel to the U.S. basically travels in U.S. airline. As I mentioned during last year, 0.2% of our passenger traffic travels to the U.S. in a domestic airline.
In terms of Tulum Airport, I do not have more details than what you have in terms of what it has been said by the president of the country that he wants to construct a new airport in Tulum, that will be operated by the Army. That's all what we say -- that's all what we said and what we know.
Next question comes from Rodolfo Ramos of Bradesco BBI.
I have 2 questions. The first is on your traffic that you've seen so far. Mexico started to go through this third wave of COVID-19 And the state of Quintana Roo was acutely impacted. And this started towards the end of June, beginning of July, so not yet captured by your traffic reports -- monthly reports. So I wanted to see, how have you seen this development impacting appetite for travel to Cancun?
As you are mentioning, this third wave is occurring. To be honest, I would say it's not the third wave in Mexico. It's the first wave in Mexico because in reality, we have been -- we have not been able -- ever to control the pandemic like it was controlled in Europe and Asia.
So I would say it's the first. And you are right. We are up to date at the highest ever in terms of people that got sick, unfortunately. In terms of hospitalizations and fatalities, we are below as we were before. This means that vaccines are working and working well.
And I do not expect major impact to major effect as we saw here in terms of the same numbers. It is true that restrictions can be again enforced, but I do not expect those to be as strong as they were last year.
And then my second question is on your commercial revenue side. As you mentioned during your initial remarks, it's still quite distorted by the movement of volatility in traffic flow. But what do you think is a reasonable target for you, I mean, considering your expansion of different commercial sites?
I mean should we look at the MXN 100 per passenger level that we saw back in 2019? I mean how do you think this could evolve in the following months, especially as you approach this pre-pandemic level of traffic?
Well, as you have said in the second quarter in 2019, we reached MXN 99 per passenger. We have seen nice results in some activities like cab rental, like ground transportation. We do not expect a permanent effects after COVID-19 is over, if it's over. I believe that this MXN 119 that we are seeing today is still distorted because of lack of passengers.
You can see that effect in the case of Colombia, trying to compare how it was a year ago when there was almost no passenger with the numbers you are seeing today. Nevertheless, we have seen nice response during these -- the second quarter. We will have to wait and see what is the new level after COVID-19. But of course, I do not expect permanent effects on these activities.
The next question comes from Pablo Monsivais at Barclays.
Just wanted to hear from you, what's the current situation in -- and your expectations for Colombia? Traffic has kind of recovered, but not quite much. And still, we have more optimistic expectations for the second half. But what are you seeing on the ground? Do you think that we can reach pre-pandemic levels in the first quarter of next year? Or what's your take?
Pablo, in the case of Colombia, we need to recall that Colombia was closed completely -- the country completely as from the third week of March to the end of August last year. So in comparison terms with Mexico and Puerto Rico that never closed, of course, is the latest one. That's the first comment.
The second comment is, most of the traffic in Colombia, I would say, is business traffic related to Medellin and Bogota. What I said during the remarks is that business traffic will recover later in comparison with tourism, traffic and VFR traffic. So VFR in the case of Puerto Rico, you can see that Puerto Rico is above pre-pandemic levels.
And using the case of Mexico, mostly. In my initial comments, I said that we have to be -- we will have to wait more time to see the recovery process in cases like Merida, Villahermosa and Veracruz, and that is basically because of the business traffic.
It will take more time. And I would say that my expectation is that we will have and we will see permanent effect on this activity around the world. We are not going to travel in the same way as we were before the pandemic in terms of business traffic. We will use technology. And of course, budgets in companies are going to be restricted and also the current situation is not going to be the same for a while.
One follow-up. And let me dig into this. You said that you are expecting a permanent effect. Do you have any fear on your mind, ballparking, I don't know to expected the structural 20% decrease in corporate travel or 10%? What is your best estimate?
Well, it's hard to say again, but it will depend on the different regions and the economics of those regions. But you are right, between 10% to 20% could be the permanent effect. That doesn't mean that we are not going to reach the same numbers someday.
But what I'm trying to say is that business traffic will recover later than the other leisure and VFR, but also that the amount of people that will be traveling in business for business will not be the same as it was -- the proportion is not going to be the same as it was. So if you were traveling, I don't know, 30 times a year, probably in the future, you will travel 25. That's what I'm trying to say.
The next question comes from Javier Gayol at GBM.
Hi, Adolfo, congratulations on the results. My question is related to capital allocation and cash generation. The on track to generate around MXN 7.5 billion in operating cash flow and If we added to that -- well, we subtract the CapEx that you guys have plus the dividend, we get to a number of around an excess cash of around, let's say, MXN 3.5 billion to MXN 3 billion in our estimates.
So I want to -- and with a net debt to EBITDA of 0.9%. I wanted to understand how are you looking at ASUR's potential capital allocation. Are you more inclined towards lowering debt during clients refinancing or increasing debt and maybe do investments? If you could give us some color on the strategy from that front. That would be great for us.
Thank you. Well, in general terms, I would say it's too early to tell. What I want to say here is that, for me, the pandemic is not over yet. I think that it would take 2, 3 months to be able to say that the world has been able to control this. In the meantime, as I said during the remarks, we have to be cautious.
In terms of numbers, you saw the MXN 2.5 billion EBITDA for the quarter, it's true. But also, it was -- the dividend was -- or the date of the payment of the dividend was approved and was set for October 1. And that is around MXN 2.5 billion. So for the moment, that's what we are trying to do, is to be cautious on one side; second, to approve dividend and third, in terms of new project, new expansions, we will have to wait.
The question is as we see some recovery worldwide in terms of travel. How have you guys seen the environment for new travel versus between your airports and on some international places. Have you seen people more interested in coming to Cancun and increasing the routes? Is that a possibility that we should take into consideration?
Yes. In the case of Cancun or in the case of Mexico, basically, the problem we have today is travel ban. And of course, that we are in the summer -- let me be clear. So we think about Canadian traffic. Normally, they travel from November up to April. They normally do not travel during the summer due to weather conditions.
So today, even with this travel restriction, we will not see Canadians in Cancun, of course. But that's what I'm saying -- that's why I'm saying that we will expect a better outlook for the winter season. So I believe that this winter season will be better for us, and we will be able to see all the regions contributing to the increase in traffic.
The next question comes from Anton Mortenkotter at GBM.
Congratulations on the results. I just have 2 quick questions. One related to the CapEx deployment. I mean, up to date, you've invested around MXN 700 million out of the almost MXN 3 billion committed in your CapEx plan for the year in your Mexican airports. I was wondering if you could provide some more detail about the CapEx deployment in the future quarters?
Of course, well, what I can say to you is that we have to comply with the MXN 3 billion you are talking about. Of course, it's something more than MXN 3 billion, but remember that our maximum -- extraordinary maximum tariff revision was approved in April.
In that sense, of course, there was an adjustment in investment program. So we have more or less 3 months delayed but do not worry, we will catch up on the second half of the year because we have to comply with the MXN 3-point something billion during '21.
Perfect. And just another question. This one's related to Cancun. I've seen some news and some papers from San Diego's University about strong sightings of Sargassum. The Riviera Maya is said to be like one of the biggest or heaviest Sargassum sightings since in -- since history. And although it hasn't reached Cancun beaches, it has reached surrounding cities. So I was wondering if -- do you see any negative impact from this?
Well, of course, there's an impact this year, I would say, it's mild comparison with 2018 that was the strongest year for that. If not -- what I'm saying is now it's not because I'm happy with what I'm seeing. That is something that we cannot do anything about in terms of business nature and sargassum will be there from time to time in the Caribbean sea.
In the case of '18, I remember, it was also in the U.S., it was on the -- that Florida was crowded -- it was a pool of sargassum. It has an impact. Yes. That is I would say is mild and of course, towards the end of the year, that will be diminishing.
[Operator Instructions]. The next question comes from Gabriel Himelfarb at Scotiabank.
Congratulations on the results. Just a quick follow-up question. It's about the dividend. Do you think -- or what's your view on future dividends? Do you think dividend -- well, at traffic levels or financial performance could improve as you prove continued growth or increase in dividend?
Gabriel thanks a lot. I have to send my proposal for dividends during February next year. So I have some time to see what is the outcome of this year in terms of results to see the real situation in terms of the pandemic to see if that was over or not. So it's a long wait from now until that moment.
The next question comes from Roberta Versiani at Citi.
I'm sorry if you mentioned this before, but could you give me some more color on the MXN 385 million reversal of payment in Huatulco, for example, why was it canceled? And how should I think about this in accounting terms, does it run through your income statement or how does it work?
Well, basically, we finally decided not to go further on these due to many circumstances. And in terms of accounting, basically, it was a reduction in assets, in fixed assets and increasing cash.
Okay. And what was this going to be like -- was it going to be, if you can tell, of course, like something for a retail area or wholesale for [ flight crew ], I don't know, I was just wondering.
I couldn't understand your question.
[Operator Instructions]. That concludes the question-and-answer session of today's conference. I would like to turn it back over to Mr. Castro for closing remarks.
Thank you, Sandy, and thank you again for participating in our second 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 Second Quarter 2021 Results Conference Call. We would like to thank you again for your participation. You may now disconnect.