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 Third Quarter 2020 Results Conference. My name is April, and I will 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, April, and good morning, everyone. Thank you for joining us on our conference call to discuss ASUR's third quarter 2020 financial and operating results. I hope each of you and your families have managed to stay healthy and safe since our previous earnings call.
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 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.
Results this quarter were also significantly impacted by the ongoing effects of the global 19 pandemic. Airlines continue to operate with limited capacity, while few passengers are taking flights, either due to government travel restrictions or because of health concerns. However, the lower rates of decline in monthly traffic that emerged in May and June continue into September. At the same time, ASUR's balance sheet has remained strong, which I will expand on shortly.
Starting with the overall travel environment. Neither Mexico nor Puerto Rico have issued travel bans to date, and ASUR airports in both countries have remained open. These airports, however, continue operating with significantly lower traffic levels. In line with Colombia's gradual connectivity plan, commercial travel has progressively resumed starting September 1.
Our airports in Rionegro, Medellín and Montería began operations on September 1, while those in Carepa and Quibdó restarted on September 21. Our airport in Corozal resumed operations more recently on October 2.
Within this context, ASUR's total traffic for the quarter was down 70% year-on-year to 3 million passengers, with declines of 64% in Mexico, 59% in Puerto Rico and 95% in Colombia. Both Mexico and Puerto Rico posted relatively better performance in domestic traffic, decreasing in the low to mid-50s range; while international traffic was down 78% and 88% year-on-year, respectively.
In September, certain airlines resumed some flights between Cancún Airport and Latin America. And this month, some flights within Europe restarted.
In Colombia, given the strict travel bans during most of the quarter, both domestic and international traffic showed similar performance levels as the previous quarter, with year-over-year declines in the mid- to high 90s. For the 9 months, our total passenger traffic declined 57% year-on-year. As a reminder, because most of our commercial agreements with tenants include a minimum guarantee payment per passenger, they are not obliged to pay rent in the absence of passengers.
As a regard to the airlines, 3 of our main airline customer have recently filed for bankruptcy protection, namely Aeromexico, Avianca Holdings and LATAM Airlines, continue to make regular payments. Accordingly, we believe ASUR maintains sufficient liquidity to meet its obligations and continue operating normally.
And we continue to minimize cash burn outside fixed cost, while maintaining effective health and safety protocols for employees and passengers is also allowing us to operate normally. Terminal 2 at Cancún Airport was reopened in July, while we expect to reopen Terminal 3 at the end of October. These, of course, will have an impact on our operating costs and expenses.
Moving on to ASUR's financial position. Ample liquidity and near-term principal payments that are quite low mean we continue operating from a position of financial strength, one that will allow us to effectively ramp up on our operation when travel demands accelerate. For perspective, we ended the quarter with cash and cash equivalents of MXN 6 billion, roughly the same as the year-end 2019.
Declines in cash of MXN 106 million in Mexico and MXN 206 million in Colombia were partially offset by MXN 132 million cash increase in Puerto Rico.
Total debt at the quarter was MXN 14.7 billion, up 8% year-end 2019. The increase was mainly due to the depreciation of the peso against the U.S. dollar, a drawdown of $10 million from a committed line of credit working capital in Puerto Rico and a new MXN 67 million bank loan in Colombia. We maintain a healthy maturity profile with principal payments of less than 1% of ASUR's total debt maturing in the fourth quarter and only 6% of total debt maturing in 2021.
As regards the currency exposure of ASUR's debt, the majority of it, 53%, is denominated in U.S. dollars, which is at the Aerostar subsidiary in Puerto Rico; while 20% is denominated in Mexican pesos and the remaining 20% in Colombia -- in Colombian pesos.
As a final point on ASUR's liquidity and balance sheet strength, our leverage ratio stood at 1.5x at the close of the third quarter compared with a 0.8x in the same quarter last year.
Now turning to the top line. Revenues ex construction declined 56% year-on-year to MXN 1.7 billion. ASUR continued to experience similar declines in aeronautical and nonaeronautical revenues during the quarter. Mexico was the main contributor, accounting for nearly 60% of ex construction revenues. Puerto Rico accounted for approximately 37% of total revenues, while Colombia remained impacted by the strict travel bans for most of the quarter. On a sequential basis, revenues ex construction increased 86% from slightly over MXN 900 million in the second quarter.
Total commercial revenues per passenger were slightly over MXN 137 compared to the MXN 99 per passenger in the same period of last year. As we saw in the prior quarter, the increase reflects the sharp contraction in passenger traffic in combination with few commercial spaces with fixed rent.
In turn, operating cost and expenses, excluding construction costs, declined 28% year-on-year, driven by reductions across our 3 countries of operation.
In Mexico, costs declined 25% on lower maintenance and energy expenses due to temporary closures of Terminals 2 and 3 at Cancún Airport, lower cost of sales from directly operating -- operated convenience stores, along with the lower technical and concession fees also contributed to decrease in Mexico's cost.
These declines were partially offset by higher provisions of doubtful collections in light of the low demand levels that our commercial clients continue experiencing.
In Puerto Rico, we obtained a $33 million grant under the U.S. CARES Act during the third quarter to be applied for reimbursement of airplanes expenses. Of this amount, $8.3 million were reimbursed, which, together with a lower cost of service and concession fee, contributed to the -- a 34% decline in cost during the quarter. This improvement was partially offset by higher amortization charges resulting from the impact of FX conversion. In dollar terms, total cost in Puerto Rico were down 35% year-on-year. I note here that $24.7 million remain available under the grant.
Finally, cost in Colombia contracted 30% due to savings in maintenance, energy and security expenses, along with lower professional and concession fees.
Moving now to the P&L. Consolidated EBITDA declined 70% year-on-year to MXN 755 million due to base effect of the pandemic that I have been discussing. However, compared to the MXN 16 million in the second quarter 2020 when excluding the onetime insurance recovery related to Hurricane Maria that quarter.
By country of operations, EBITDA gains of MXN 492 million in Mexico and MXN 312 million in Puerto Rico in the quarter were offset by an EBITDA loss of MXN 59 in Colombia. Ex IFRIC 12, ASUR's consolidated adjusted EBITDA margin declined to 45% this quarter from 64% in the year ago quarter, but improved from comparable 1.8% in second quarter 2020.
With regards to CapEx, we invested MXN 835 million in the third quarter. Of this amount, we invested over 90% or MXN 759 million in Mexico to continue executing the expansion of the Merida Airport terminal. For example, the expansion of the checking area at this terminal has been completed and now is operational.
In the first 9 months, we invested a total of MXN 1.5 billion in Mexico, and we remain on schedule of initiating the construction of the parallel taxiway to the second runway at Cancún Airport and with the beginning of the first expansion phase of Terminal 4.
Note that our Master Development Plan in Mexico calls for an investment of approximately MXN 5.3 billion in 2020. Stay-at-home orders in Mexico continue to result in disruptions at each of the projects under the plan. We have kept the government apprised of these delays and have received related approvals to proceed with MXN 2.1 million of construction work during 2021.
As a final note in Mexico, last month, our President announced plans to build a new airport in Tulum. However, as of today, there has not been -- there has been no official information about where exactly it will be located, who will operate the airport nor the type of aviation it will serve.
In Puerto Rico, we invested a total of MXN 74 million, mainly for major maintenance repairs to runways and taxiways.
For major maintenance of our airports in Colombia, we invested nearly MXN 2 million during the quarter. Because our CapEx commitment for this airport was reached last year, only major maintenance CapEx remains in this country.
Before taking questions about the quarter, I wish to emphasize, once again, that ASUR continues to operating from a position of financial strength, enabling us to successfully navigate the various adverse effects of the pandemic on our business. In addition to our solid balance sheet, we continue carefully managing cash while reducing variable costs where we can, to better align them with existing travel demands. We, therefore, remain confident that ASUR will be well positioned when travel conditions became [ sustainably striving ]. That ends my prepared remarks.
April, please open the line for questions.
[Operator Instructions] And we'll first hear from Alan Macias of Bank of America.
Just a quick question on Colombia. Just what have you seen on traffic recovery in Colombia? Is the numbers -- are they encouraging? And is it a fair assumption that there will be a slower recovery than what we have seen in Mexico?
Alan, thanks for your question. In the case of Colombia, I have to say that we may probably see the same kind of recovery process that we saw in Mexico. The only point that could be a negative effect for this recovery process is the situation that some of this traffic, principally from Medellín to Bogotá, is a business traffic. So let's wait and see how the recovery process is there.
Alejandro Zamacona of Crédit Suisse.
Two questions for us. The first one is on the MDP potential renegotiation. As far as we understand, you haven't request a renegotiation. So I'm curious on the current status and if you have some sort of time for this renegotiation.
Alejandro, in the case of what you are mentioning, in accordance with our contracts, it's stated that in the case of the Mexican GDP dropped by more than 5% over the last 12 months, and that has an impact on traffic. We may request an extraordinary maximum tariff revision. That number of 5.3% negative GDP for Mexico over the last 12 months was published on August 26 this year. Since then, we are working to construct the requests, and we are in the process to deliver that to the authorities. I believe it may be filed during the fourth quarter this year.
Okay. And my second question is on the CARES Act reimbursement in Puerto Rico. So considering that you have used roughly MXN 5 billion in this third quarter, and there are an additional MXN 25 million available, what's the expectation going forward to use it for the next quarter? Is it going to being fully deployed on the fourth quarter? Or it's going to be a gradual deployment going forward?
Gradual deployment, and I'm sure that some of these will be in 2021.
Next, we'll hear from Mauricio Martinez of GBM.
Just a follow-up question on the MDP. Do you, at this moment, have any expectation regarding CapEx or maximum tariff or even discount rate that could be used in the formula, something that you can gauge the progress and the progress that you have made at this point that you can share with us?
Mauricio, we are exactly in that process. As I said, we are in the process to confirm documents and finalizing the calculations. So I cannot share with you any of those numbers as of today.
Okay. Fair enough. And my second question, if I may. I hear that some CapEx that you mentioned in your initial remarks, but I'm not sure if I heard it right. It's MXN 2.1 billion for next year?
Yes, MXN 2.1 billion will be constructed next year.
And in addition to how much in the fourth quarter?
So we were expecting MXN 5.3 billion for the year. You have the numbers of the third quarter. And you have to deduct this MXN 2.1 billion, that will be deferred for next year.
For next year. Okay.
Pablo Monsivais from Barclays.
My question is as traffic recovers and you gradually open terminals in Cancún, can you please provide some guidance on how do you expect your costs trending forward? In specific, do you think that cost of services could reach pre-COVID levels by, I don't know, at some point in 2021 or 2022? How do you see costs trending?
Well, apart from the cost expenses we have saved because of the closure of Terminal 2 and 3, we have made some additional things around the company. So it's important to understand that during the second quarter, these both Terminal 3 and 2 were closed. As I mentioned during the remarks, Terminal 2 was opened in July, and we are expecting to open Terminal 3 at the end of October.
I believe that, of course, we will see some increase in the cost for the fourth quarter, not at the level we saw last year.
Okay. In order to get to very close to the levels that you have in 2019, do you think that by 2021, we're going to get there?
Well, it's hard to say. Nobody knows exactly what is going to happen with this pandemic situation. But if things go back to normal, I believe we will have to go back to normal again, and normality is something that we can refer to 2019.
Next, we'll hear from Marcos Barreto of Citi.
Just a couple of questions from my side. First, could you provide some additional color on the CARES Act funding that was received in Puerto Rico? Specifically, did it come from taxpayer grant?
Marcos, this is a grant from the U.S. government to all the airports. [ In that sense ], Puerto Rico Airport is considered inside this Act. The approval was 33.4 million. You have seen what we have disbursed. There's remaining 24.7 that will be at disbursed in the future.
Okay. And then my second question is aside from what seems to have been only a minor damage to the Cancún region because of the hurricane, are there any updates on the sargassum situation?
Well, sargassum was lower in comparison -- lower in terms of volume in comparison with what we saw in 2018. Of course, due to seasonality, today, we do not have almost any sargassum anymore. So we will have to expect what is the volume for next year. This is not something that we can predict or that is something that is cyclical. The worst we have seen over the last 20 years was in 2018. I would say probably like that year, 3 years in 20 years.
Next, we'll hear from Rodolfo Ramos of Bradesco BBI.
Most of my mine have been answered. Just -- can you give us a little bit of color on how much was traffic impacted during the month of October due to hurricane [ impact ]?
Well, in the case of the hurricane, I can say that probably 1.5 days has been lost from the airports of Cancún [ and consumers ] in terms of passenger traffic.
Sorry, how much?
1.5 days.
[Operator Instructions] Next, we'll hear from Fernanda Oliveira (sic) [ Fernanda Recchia ] of BTG.
Congratulations on the results. And my quick question here. We heard some regulatory noise regarding additional investments, [ annual in requesting ] Tapachula airport and also applications in [ Cancun Airport ] in Tulum. I wanted to hear your opinion about this. And if you have included potential investments in Tapachula [ in the key division ]?
Fernanda, thanks for your words. In the case of Tapachula, we're expecting to hear what are the intentions on that airport. This is an airport of more or less 2 flights a day. So we will have to wait and see what there are expectations on this project.
Perfect. And regarding Tulum Airport, do you have any info?
In the case of the airport of Tulum, as I said in my remarks, we do not have official information as of today. And the most important questions we have at the moment are the ones that I said during the remarks.
Gabriel Himelfarb from Scotiabank.
Just 2 quick questions. First, you reported a decrease in account receivables for Colombia and Mexico. Can you give us a bit of color of how much was due from -- or the decrease was from collection and how much from write-offs? And second, well, you mentioned in the press release that you have been receiving the payments from Aeromexico, LATAM and Avianca. However, have you seen any deterioration in the payment of any other carriers?
Well, in the case of the reduction in accounts receivables, one of the -- or the principal effect is, of course, the reduction in sales. So you can track these from the seasonality on one side and compare that with the previous quarter. In terms of write-offs, as I said during the remarks, we have increased our reserve for doubtful accounts. From the top of my head, because I don't have the exact figure, but let's say that during the quarter, it should be around MXN 30 million. In terms of the remaining airlines, I would say, more or less, all of them are being on track with the exception of one, that is the case of Interjet.
Andressa Varotto of -- I'm sorry, she removed herself from the queue.
Mauricio Martinez of GBM has a follow-up.
Yes, I'm wondering if you can give more color on the cost of service, specifically on your expectations going forward. We thought that this quarter, you will practically maintain the levels of cost savings that you had in the second quarter. But going forward, fourth quarter, next year, how much do you think this could go up? And well, I imagine that, that will be driven by the ramp-up in passengers. But what are your expectations on the cost of service?
Mauricio, as I said, the only negative impact we can expect for the fourth quarter is the opening of Terminal 3. So you will see an increase there. Of course, the opening of Terminal 3 has to do with the recovery process and additional measures we have to take at airports in terms of social distancing. And of course, the capacity is not exactly the same as it was before these measures were implemented. So the only effect, again, is it's increased in the case of Terminal 3.
[Operator Instructions] And that concludes the question-and-answer portion of today's conference call. I would now like to turn the call back over to Mr. Castro for closing remarks.
Thank you, April. And thank you again for participating in our second -- in our third quarter results conference. On behalf of ASUR, we wish you a good day and please stay safe. Goodbye.
Again, ladies and gentlemen, that concludes ASUR's Third Quarter 2020 Results Conference Call. We would like to thank you again for your participation. You may now disconnect.