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 2022 Earnings Conference Call. My name is Elaine, and I will be your operator. [Operator Instructions] As a reminder, today's call is being recorded.
Now I'd like to turn the call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.
Thank you, Elaine, and good morning, everyone. Before we start with the covering of the highlights from the quarter and then taking your questions, let me remind you that certain statements made during this call may constitute forward-looking statements, which are based on current management 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 in the Investor Relations section. We reported another solid quarter with record passenger traffic, improved cost efficiencies and strong profitability.
Starting with a review of travel demand, total traffic rose over 24% year-on-year and exceeded third quarter 2019 levels by nearly 23%, reaching a record of 17 million passengers in the third quarter. Efforts across our 3 geographies all contributed to this solid growth. Compared to prepandemic levels, third quarter 2019, Colombia maintained the strongest recovery of 37%, with domestic travel expanding in the low 30s international travel in the high 50s. We expected these [indiscernible] a strong recovery to continue over the coming months, supported by a structural shift in demand driven by new grounds and airlines. Traffic in Mexico was up 22% against third quarter 2019, driven by both international and domestic passengers with all the efforts contributing to this growth, in particular, international traffic growth accelerated to 30%.
This strong performance reflects higher travel demand from all regions of this market, exceeding 2019 levels, except Canadian demand, which still remains at slightly over 65% over the last 12 months of 2019. Looking ahead, traffic from Canada is expected to resume excluding their seasonal levels, mainly November through April next year, while the U.S. and Europe are expected to continue the deleveraging a steady growth, we also expect that with it within domestic business travel will continue to lack leisure. We expect Merida Airport to recover 2019 levels during the rest of the year with Veracruz Minatitlan and Villahermosa airports recovering in 2023.
Finally, in Puerto Rico, traffic continues to normalize after a very strong performance in prior quarters, posting a high single-digit increase in traffic compared with third quarter 2019. The domestic passengers up 9% and international travel practicing recovered to prepandemic levels. Overall, we continue to expect solid traffic demand underscored by pent-up travel demand with recoveries expected in some remaining markets such as Canada, helping mitigate any potential this deceleration that could result from an increasing inflationary global context. Moving now to our financial results. Note that all references to revenues and costs exclude construction revenues and that all comparisons are against the quarter 2019 levels. Revenues increased 50% to MXN 5.8 billion. This was again a record high for any given quarter, driven by a good performance in both aeronautical and non-aeronautical revenues across geographies.
 Mexico accounted 72% of total revenues in the quarter, Puerto Rico 15% and Colombia 12%. Imported by traffic growth, commercial revenues remained strong, up to 45% with increases of 7% in Mexico, 20% in Colombia and nearly double in Puerto Rico. Commercial revenues per passenger were nearly MXN 117 above the reported in third quarter 2019, a nearly flat year-on-year. Commercial revenues in the quarter were in the range of MXN 141 to MXN 161 in Mexico and Puerto Rico. In Colombia, Colombia Commercial revenues per passenger stood at MXN 37, slightly below third quarter 2019 levels. Note that the Colombian peso depreciated 24% against the Mexican Peso over the last 12 months, while international passengers account for nearly 17% of total traffic in Colombia.
Regarding the composition of our passenger traffic, the portion of domestic passengers remain the same as the third quarter 2019, although we benefited from additional growth in the U.S. tourism and from European passengers spending at prepandemic levels. The number of Canadian visitors remained flat at 65.5% of 2019 levels. Moving down to the P&L. Total operating expenses increased in the high teens, excluding expense reimbursements in Puerto Rico in both quarters, operating costs and expenses would have increased nearly 26%, but significantly below the revenue growth of 50%. In Mexico, costs were up 26%, significantly below the 67% increase in revenues. This was mainly driven by increased personnel costs along with higher [indiscernible] systems and concession fees. These increases reflect higher revenues and EBITDA, along with the higher cost of services, including the cost of sales that grows as a result of strong performance at directly operated stores. In Puerto Rico, costs were up 19% or 16% when excluding the benefit of expensing versus in both quarters, while revenues nearly doubled in this market. Finally, cost in Colombia were up in the low 20s, but below the 30% revenue growth.
Efficiency measures implemented over the past couple of years have allowed costs on our control to remain our third quarter 2019 levels and only 81% of these levels were confirmed then on a per passenger basis. This was true even with a 50% increase in revenue during the period, note that costs under our control include cost minus construction costs, depreciation and amortization as well as technical and concession fees. We achieved a record high profitability this quarter with consolidated adjusted EBITDA of MXN 4.1 billion, up 64% from 2019 levels, driven by solid performance across key metrics, sustained growth in passenger traffic together with higher commercial revenues and operating leverage more than offset higher tariffs. Mexico turned into a very strong performance with adjusted EBITDA up 51% to MXN 3.1 billion. Colombia continued to recover with EBITDA up 67% to MXN 455 million.
Puerto Rico in turn posted a 7% increase in EBITDA to nearly MXN 470 million for [ to ], down 16% year-on-year, reflecting the 7% decrease in passenger traffic and increasing the cost of services, primarily because of increasing the cost of [ vantage ]. A geographic region, adjusted EBITDA margin improved nearly 5 percentage points in Mexico to 75.3% and 10 percentage points in Colombia to nearly 64%. The margin in Puerto Rico was slightly over 49% this quarter, 70 basis points upon third quarter 2019, but below the 59% reported in the same quarter last year, reflecting the impact of Hurricane Fiona during the quarter, resulting in closing the airport for 15 days. In [ some ], we reported another solid quarter with traffic and revenues at record ties, which combined with the operating leverage resulted in a 42% increase in net maturity income to MXN 2.5 billion in the quarter, up from MXN 1.7 billion in the third quarter '21 and MXN 1.3 billion in third quarter 2019.
 Turning to CapEx. We invested nearly MXN 550 million during the quarter, of which 88% was allocated to Mexico, nearly 12% to Puerto Rico and MXN 1 million to Colombia. We remain on track with our CapEx plan across the regions. In Mexico, we completed the first phase of Terminal 4 expansion of Cancun Airport, which consisted of adding 2 international boarding gates and we continue moving forward with the expansion of Terminal building in Merida with the third phase of this project to be completed by the year-end. We are also on track with the remodeling of Terminal B and major maintenance repairs to runways and taxiways in Puerto Rico. Commenting on the balance sheet, we've maintained a strong liquidity position and a healthy debt profile. We closed the quarter with cash and cash equivalents of nearly MXN 14 billion with the net debt plus of more EBITDA at 0.1x at the quarter end with interest coverage at 10.7x. Finally, across receivables, decreased nearly 17% year-on-year, reflecting increased activity across our airports. Before we move to the Q&A portion of the call, a quick recap of the quarter.Â
We welcome another record number of passengers in the third quarter, surpassing 2019 levels once again, thanks to [ proposed ] travel spend. While Canadian target remained below its prepandemic levels, traffic in all of our other markets was above 2019 levels. Also, we expect Canadian traffic will finally normalize this winter season, such a recovery would help offset any fall in demand that could eventually [ arise ] from inflationary environment that persists in the U.S., Europe and elsewhere in the world. As today, we see healthy traffic trends that are supported by a still strong pent-up demand. Lastly, I noted earlier, we were able to deliver strong profitability as additional passenger growth drove operating leverage that we have achieved by significantly improving efficiency levels throughout our business over the last 2.5 years. Please Elaine open the call for questions.
[Operator Instructions] We will take our first question today from Rodolfo Ramos of Bradesco BBI.
I have a couple. The first one is on your outlook for traffic. International has been clearly the leader here. And given your expectation of this pent-up demand from Canada should be continue -- it seems that that will continue to be the case. I just wanted to get your thoughts on the domestic side, Volaris reported earnings, and it seems like they're having a little bit of trouble getting down with fares. It seems like there's a high level of elasticity, demand for leisure destinations on the domestic side. So I just wanted to get your thoughts on that side on the domestic traffic recovery. How do you expect this to evolve in this winter season? And then I have a second question as well, if I may.
Well, in the case of domestic, I mean, basically, in the case of Mexico, because you mentioned Volaris. It's very clear to me that leisure is above what we call business traffic, business traffic in our case is capital fees. I just mentioned in the case of Merida that has been recovering very nicely over the last couple of months, which is not the case of Veracruz and Villahermosa and Minatitlan, I do not expect them to recover until next year. So we will [ software ] in that sense, not being able to recover 2019 levels. But in the case of tourism, I'm very confident that we will get in the way that we have been for the last couple of months.
It's important to mention and if you see the past reports, I had to compare the passenger traffic in the case of Mexico for total traffic in January 2022 versus September 2022. Normally, in the case of tourism, September is the lowest month of the year. Let's try to see seasonality in the previous years, and you will understand why I'm saying this. So when you see the comparison between January and [ February ] will understand that we still have some room to increase in the first quarter next year.
Okay. And secondly, on your MDP, I mean, it's still early. It will be concluded next year. But I just wanted to get your thoughts if you've seen any changes on the process and if you're still looking to incorporate the potential impact of a Tulum airport potentially starting operations in '24?
Well, the MDP, once we close the quarter, we will go and work very hard to be able to deliver our proposal by the year-end to the government. I don't see any changes in the process. And of course, what you're mentioning will be included in our proposal.
We move now to Alejandro Zamacona of Credit Suisse. Apologies, we are moving to [ Philip Nielson ] of Citi.
I have 2 on my side. The first question would be what long-term opportunities do you see in terms of increasing commercial revenue per passenger in Colombia. I noticed that you mentioned about peso contributing America negatively. But I wanted to have a little more color on your initiatives on that. And the second question would be, if you have any color on new airport auctions and [ steadies ] opportunities for outside Mexico for new airports.
As I mentioned in the initial remarks, we faced 24% Colombian peso devaluation versus the Mexican peso. So if you include these variables in the results of Colombia, you will understand why the globe in Colombia, a party was very small, but you see that in Colombian pesos, it was very strong. In terms of initiatives, you can see in the report what we have done in the case of Colombia over the last year and a half, and you will find out that we have made a lot of initiatives in the case of Colombia. So we're happy with those. We are seeing some results. Of course, the valuation of the Colombian Peso had an impact, severe impact in the case of the [ report ]. In terms of new opportunities outside Mexico, [ I'll ] see any significance in front of me to take.
We now move to Gabriel Himelfarb of ScotiaBank.
Just a quick question. Could you give us a bit of color about the maximum tariff. About how much -- what percentage are you this year? And do you think that under inflation conditions, it could impact or have some effect on the master development on the next [indiscernible]?
In the case of the maximum rate, of course, you can follow [indiscernible] you can see the weighted [indiscernible] for the quarter. And if you follow you will find out that there was an increase in the quarter. But of course, with the high inflation situation, we are now, I can estimate that we are not going to be able to reach the 99 [indiscernible] compliance that we need to -- We have made a catch-up from last year that it will not be enough to cover the high incision that we are seeing now. I don't see any impact of that during the next MDP.
We now move our next question to [ Anton Morton Cotter ] of GBM.
Congrats on your results. I have just -- I mean, you guys had a really strong cash flow generation. I think it should continue like that going forward, you've reached a really high cash balance. But still, you raised some there in Puerto Rico. And I was wondering if you could your Puerto Rican concession. So I was wondering if you could share some color on that. Do you have any plans or any CapEx commitments in the new term?
Thank you for your words. Yes, we are very strong in terms of cash flow. As we said in the report, it's MXN 14-something billion. Next year, CapEx program for the case in Mexico is not so important. In the case of Puerto Rico, it could be more than what we had this year. And we will have to think about what we're going to do during the end of the year and then to propose something to the Board of Directors and that [indiscernible] on what are we going to do with this cash position.
Okay. This capital allocation strategy may be more tilted into looking to distribute or making an [ extranet ] dividend? Or are you guys looking into potential acquisitions or something?
We are always looking for potential acquisitions. And as I said before, I do not have any significant in front of me for now.
Okay. And if I may, just a quick one. Do you expect more benefits from the [ Apha law ]?
Sorry.
Do you expect any more cost recovery [ bornments ] from the [ ARPA law]Â or as the one you had this quarter?
IÂ cannot understand your question. [ ARPA law ], what's that?
No, the ARPA, the cost reimbursements...
This should be a small piece in front of us, of course, we will have to make the application and see if that is approved or not. Thank you.
[Operator Instructions] We will now take a question from Andressa Varotto of UBS.
Congratulations on the results. I have 2 questions on my end. The first one is on the category 1. I know that [indiscernible] is not directly impacted by that. But if you could give us a color on what you've been seeing around Mexico's work to recover the Category 1 would be great. And my second question is your expectations on international traffic trends. If you believe that the pent-up demand is over for now and we could see some international traffic deceleration from now onwards. Those are my 2 questions.
Thank you, Andressa, for your words. In case of category 1, [Technical Difficulty] here less effective, I would say, almost no effect [Technical Difficulty] before our quarter nation effort. Basically, the tourists come to Cancun in international.[ I'm asking a westerly of yours, ] there was a press release where we basically expressed that 0.1% of our total traffic was traveling in Mexican airline to the U.S. So that was in 2020. So I don't see a major impact in our case. Becomes working to try to recover category 1. There was a change in the aeronautical offices a week ago. And what they have expressed is that the objective of this new person is to recover category 1 in the short term. So my expectation is that we will be -- we, as a country, we will be able to recuperate that up to the first half of next year. In the case of the international traffic trends, everything is working well.
All the regions have recovered 2019 levels with the exception of Canada that I just mentioned in my initial remarks. As I said today, over the last 12 months, Canada is still 65% of 2019 levels. I'm expecting them to come back to the country because they were affected last winter season. Normally, they come from November to April. So last [ year ] winter season, they were affected by Omicron. And I hope that this year, there will be no more effects of COVID situation. So that's why I'm still very positive of this situation. The maximum amount of Canadians we have seen in the past is 2.7 million. So then you can make a matter of how many of those we are away from 2019 levels.
We now move our next question to Alejandro Zamacona of Credit Suisse.
Sorry, if these questions have been already asked. I got disconnected but I was just wondering if you can share some thoughts on the cost of service in Puerto Rico. We saw a significant increase and we were wondering if this increase was related to hurricane Fiona and what could we expect going forward?
Alejandro, yes, you're right. We are seeing some increases in the cost of services of Puerto Rico. I said during the initial remarks, one of the most important element here was the cost of the energy. We had also on top of that an effect because of Fiona because the energy was out from the grid and we have to operate with emergency energy for some days of the week, and that, of course, has an effect on the cost of services. In general, I would say, yes, we are seeing some effects of the inflationary situation we are living now in the whole world.
Okay. So but is it fair to assume that you have nonrecurring expenses to this quarter related to [indiscernible] P&L? Or what can we expect for costs going forward?
Well, that will depend on the cost of energy. I don't see that the cost of energy will decrease in the short term. So in that sense, even that we had a onetime effect because of Fiona, in general terms, I would say that we will see more or less the same numbers in the front.
Okay. And then my second question, if I may. On the MDP, I know it's quite early yet, but do you have any color on the CapEx that you are planning to commit for the next 5 years period?
We're in the process, and we do not have final figures yet. The only thing that I can say to you is that the most important expansion project will have to [ cure in the case of Ecknow ].
We move to Guilherme Mendes of JPMorgan.
Two follow-up questions. The first one, in terms of traffic, I mean, looking beyond 2023, so more of a long-term perspective, do you expect traffic, especially in Mexico to be back to the historical levels we saw over the past 10, 15 years? The second question is regarding margins; a follow-up question from the previous one. So with this additional pressure on energy costs, et cetera, it's [indiscernible] to some of the margins to remain below the 70% margins going forward?
Well, I will recommend you to forecast the revenue because in a separate or independent way. I do not recommend you to forecast with margins. But of course, if revenues -- Well with passenger traffic growth and revenue growth. I'm confident that, that will grow more than what the cost side will do.
Okay. Got it. And in terms of the traffic in the longer term?
Well, if you see what has occurred in the past, there are some charts, you have a lot of figures, traffic for the last 22 years, at least. And if you see the decline being before an event of, let's say, September 11, the hurricane Wilma, the swine flu, [indiscernible] prices in the U.S. and now could be -- the timing has been that after the event is more or less the same as it was before. So now you can see the adjustment that we have seen in the case of Puerto Rico. That we have anticipated. We will start seeing the adjustments in the case of Mexico and Colombia is the only one that is still very steep, let's say, almost vertical. And that's why I said in the initial remarks that I'm still confident that we will see some months before we start in the transport.
[Operator Instructions] We have a follow-up question from Andressa Varotto of UBS.
Just quickly on the commercial revenue side. We saw some signs that [indiscernible]Â per pricing is destabilizing. Do you see this current level as a normalized level going forward?
Yes. We saw some adjustments if we see that in terms of business just within the current in the case of party loan. Apart from what I just mentioned because of Colombia, because of the 24% devaluation of the Colombian Peso versus the Mexican Peso. These 2 activities were affected during the quarter. If you remember, we were calling these COVID behavior. And now apparently what we are seeing is a change in trend. We will have to wait next quarter to see if that is definitive or it will continue as it was before..
That concludes the question-and-answer portion of today's conference call. I would like to turn it back over to Mr. Castro for any additional or closing remarks.
Thank you, Elaine, and thank you, all of you again for participating in our third quarter results conference call. On behalf of ASUR, we wish you a good day. Goodbye.
Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.