Grupo Aeroportuario del Sureste SAB de CV (ASR) 2009 Q4 法說會逐字稿

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  • Operator

  • Good day, ladies and gentlemen, and welcome to the ASUR Fourth Quarter 2009 Results Conference Call. My name is Veronica and I will be your coordinator for today. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session.

  • (Operator Instructions)

  • For opening remarks and introductions, I would like to turn the call over to Mr. Adolfo Castro, Chief Financial Officer. Please proceed, sir.

  • Adolfo Castro - CFO

  • Thank you, Veronica. Good morning, everybody. Thank you for joining us today for the conference call of our fourth quarter results. Allow me to remind you that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on management's current expectations and beliefs and they are subject to a number of risks and uncertainties that could cause actual results to differ materially, including risks that may be beyond our company's control.

  • For an explanation of these risks, please refer to ASUR's filings with the Securities and Exchange Commission and Mexican Stock Exchange.

  • Today's call, we will center on our results for the fourth quarter and we will see the market evolving on the backdrop of the current economic environment in Mexico. Total passenger traffic declined almost 6% this quarter, showing an improvement from the declines of 27% and 14% posted in the second quarter and third quarter 2009, respectively.

  • As anticipated, all the airports, with the exception of Cozumel, Huatulco and Merida, which had easy year-on-year comps, continued fill declines in passenger traffic. Cancun Airport, however, posted its first increase in domestic passenger traffic since the H1N1 influenza outbreak in Mexico in late April 2009. We are also seeing the positive effect of the recovery of domestic routes that we were -- that were lost in November 2008 when some of the carriers ceased operations.

  • Looking at the monthly traffic, we continue to see a slow recovery from the 50.7% decline posted last May. Traffic declined 7% in October and 4% in November and 7% -- and 5% in December -- 4% in December and 5% in January.

  • As I have mentioned before, we're still seeing today's effect of the challenging economic environment in Mexico, the indirect impact of the H1N1 virus. Remember that the international tourist operators look at alternative summer destinations in early in the year, following the uncertainty and held concerns on the onset of the outbreak.

  • International passenger traffic represented 53.7% of the total compared with the 54.5% in fourth quarter 2008. Passenger traffic between Mexico, Canada and the United States represented 91.2% of total traffic compared with the 89.4% in the fourth quarter 2008. Domestic traffic, in turn, grows 46.3% of the total traffic from the 45.5% in the year ago quarter.

  • Looking into the future, we should be getting close to seeing positive traffic comes, mainly driven by the international traffic growth. Domestic traffic, however, is most likely to remain weak for most of the year. We are still see the impact of the loss of some airlines, the reductions in flight frequencies and the recent increase in fares, also the Mexican economic situation.

  • Today, total revenues fell 0.32% -- 34% this quarter, driven by the declines in 0.08% in our aeronautical revenues and 0.8% in non-aeronautical revenues. Commercial revenues, however, increased 0.9% year-over-year. In fact, commercial revenues for passengers reached a record high of MXN61.34 per PAX.

  • Going forward, we remain focused on talking -- on taking all the steps to continue to drive commercial passenger traffic growth. This principally focuses on the medium term. We will be adding some additional space and -- in the smaller airports in the future.

  • Today, during the quarter, we continued to make progress in our efforts to reduce operating and cost expenses. In fact, we achieved a 10.7% reduction in cost of services as a result of lower energy and labor costs. In terms of energy, we benefited from the 17% year-on-year reduction in energy prices combined with efficiency improvements that we implemented at our airports to reduce consumption.

  • For example, we improved the efficiency of air conditioners, the highest energy consumption at our airports and replaced regular lamp bulbs with LEDs in some places in the terminals. What -- but keep in mind that this year we will have the impact of additional energy consumption as a result of the second runway at Cancun Airport.

  • In addition, during the third quarter, we reassigned some operating employees of Cancun Airport to corporate offices, which resulted in a declining cost of services, but an increasing administrative expense.

  • Operating profit for the quarter increased 3% to MXN288.2 million, reflecting the reduction in costs, which more than offset the 0.34% decline in revenues. As a result, operating margins for the fourth quarter rose by 126 basis points to 38.26%. EBITDA margin, in turn. rose 290 -- 209 basis points to 59.12%.

  • This quarter we made investments by MXN421.1 million, mainly on the second runway of Cancun Airport, which was upgraded in October last year. During the year, we will make capital investments of around 16 -- MXN617 million.

  • Moving to our balance sheet, we closed the year with cash and short-term investments of MXN961 million, a 44.54% decline in year-over-year, the majority of which remains in short-term investments that we -- remember that we paid MXN1,884 million in cash dividends in the second quarter 2009. At the end of the year, ASUR's total [bank] was MXN545.46 million under a MXN750 million three-year trade agreement in which we entered into May 2009 with a group of three banks.

  • This quarter, we made a capital payment of MXN54.5 million. During August 2009, we purchased a cap of interest rates and fixed the rates at 6.36% -- 6.37%, 6.44% and 6.21% with each of the three banks respectively. The cost of interest rate swaps was MXN2.5 million.

  • Now let me open the floor for questions. Veronica, please go ahead.

  • Operator

  • (Operator Instructions)

  • And your first question comes from the line of Nicolai Sebrell of Morgan Stanley. Please proceed.

  • Nicolai Sebrell - Analyst

  • Hello, Adolfo. I was wondering if you could just go over two things quickly. First, any developments on the second airport? What's the latest with that? I know it's a perennial question, so I'll get it out of the way right away.

  • Second is, if you could talk a little bit more about airline health. What are you guys seeing in your discussions with the airlines going forward and looking forward in 2010? Is there any possibility of them expanding fleet, or is it a situation where they need to concentrate on trying to keep pricing power and shoring up cash flow in that way? Just any color you could give us on that would be helpful.

  • Adolfo Castro - CFO

  • Hi, Nick, good morning. In the second airport, of course you know that the latest news that we had were that they will be making the bidding process during November last year. Of course, it didn't occur. Nevertheless, last week, the Mexican President has stated again that they will be making the bidding process shortly. Of course, we do not have any additional information and we really don't know when this can happen.

  • My personal expectation is that this can occur during this year. I'm talking about the beginning of the bidding process.

  • Nicolai Sebrell - Analyst

  • Yes.

  • Adolfo Castro - CFO

  • Of course, we will have to take it from there. I am expecting more or less a one-year bidding process and then a final ruling on the project, and after that the construction of the infrastructure. So, we will not see an airport operating there in some years to come.

  • In the case of the airline, and the airline health, well, first of all, I believe that some airlines made money last year because they have increased their prices significantly and also they have reduced frequency. So their load factors and their efficiency is -- or was better than what they were in 2008.

  • So on one side, some of them are making money. Also, in terms of expansion, I know that some of them will receive additional capacity, as far as understanding the jet B buyer pools will receive additional planes and they will have to place them somewhere.

  • Nevertheless, with the -- I would say between brackets, bankruptcy of (inaudible) last year, what we have seen today is a market to consolidation and that's why they have been able to increase the rates. My concern is that with the level of rates that we have today, of course, different than the ones that we had during 2007 -- half of 2008, we will not see the huge increase of passengers in terms of domestic traffic that we have over 2006, 2007 and 2008.

  • Nicolai Sebrell - Analyst

  • Yes.

  • Adolfo Castro - CFO

  • So that's my general expectation in terms of what the airlines can do about the traffic. On the other side, of course, as I have said, the domestic economy in Mexico is not so well. Of course it's getting better if we consider that the Mexican GDP dropped 7% last year. Of course, we are seeing some -- or we have expectation of an increase this year.

  • But, of course, what I believe is that we will not go back up to the same level that we had before the crisis during this year. That's my expectation. What I'm trying to say here is that, of course, this recuperation will occur, but not completely this year. That's what I can say to you. I don't know if you have any more comments on that.

  • Nicolai Sebrell - Analyst

  • Yes. Just two things. One, so maybe looking at the pre-crisis traffic level, do you think it's reasonable to guess, and it's just a guess, that it might happen next year?

  • Adolfo Castro - CFO

  • Yes. I think we -- that we can reach, let's say next year, but not this one.

  • Nicolai Sebrell - Analyst

  • No, of course. And then when you were talking about yields and the level of rates, keeping a lid on domestic growth. Is it more that you think airlines will keep the same yields and therefore constant yields mean not a lot of demand stimulation? Or, is it because prices are so low that they don't have the ability to change the prices?

  • Adolfo Castro - CFO

  • My opinion is that they will remain at the same level that they have today and that means no additional incentives for the people to travel.

  • Nicolai Sebrell - Analyst

  • Yes.

  • Adolfo Castro - CFO

  • That's what I believe.

  • Nicolai Sebrell - Analyst

  • Okay. Quite clear. Thank you.

  • Operator

  • Your next question comes from the line of Stephen Trent from Citi. Please proceed.

  • Stephen Trent - Analyst

  • Good morning, Adolfo. One or two questions for me. The first, if I could trouble you to repeat what you said -- you mentioned something about energy costs in relation to the second runway in Cancun and I apologize, I didn't catch everything you said, if I could ask you to clarify.

  • Adolfo Castro - CFO

  • Okay. In the case of energy costs, what I was saying is last year the second runway was not in operation. So the second runway is in operation since October last year, but not the full year. So in terms of comparison, of course, this year we will have more consumption because of this -- in the case of Cancun Airport.

  • Stephen Trent - Analyst

  • So in some sense, maybe better fixed cost dilution this year versus last year on a full-year basis?

  • Adolfo Castro - CFO

  • Yes, what I'm saying is that we will -- we continue with the efforts to reduce consumption and then to reduce the cost of the energy. But in the case of Cancun, we will have this additional consumption this year that probably will offset the negative or the positive effect of the reduction in consumption.

  • Adolfo Castro - CFO

  • Okay. Great. Thank you. Just one other thing, looking at the quarter itself, with the deferred tax charges that came through, as you think about 2010, the -- ASUR's broad tax regime, do you see sort of any major differences versus the last two years, vis-a-vis what's coming down from the government or anything you see in the underlying business, which leads you to take a, maybe, a slightly different view on ASUR's tax implications -- tax pay-out this year?

  • Adolfo Castro - CFO

  • Okay. A very tough question. First, let me try to start with a simple statement, saying the effective tax rate that you have seen for the full year 2009 is -- should not be the same for the year 2010. What I expect is a reduction in the tax effective rate. The tax effective rate that we had last year were -- was more or less 40%. I'm expecting less than that for this year.

  • Remember, that we have said since the beginning of last year that the effective rate should be increasing basically because of the flat tax rate that was implemented in 2008 from the Mexican government.

  • If the passenger traffic recovers, of course, we will have a better profit, in the case of Cancun Airport, and that could generate that we can start paying income tax instead of [year two] or flat tax rate. That will improve, in our opinion, the payments because we can credit some taxes against those income taxes that will generated in Cancun.

  • The important thing, in my opinion, in the case of taxes, is not just the effective tax rate, it's also the effect in the cash flow statement. So what I can say to you is not all the taxes that you are seeing in the P&L have been or will be -- or will meant a cash taxes in the near future, so please take a look at the cash flow statement in terms of taxes and then you do have a better approach.

  • Stephen Trent - Analyst

  • Okay. I appreciate the color. That's all for me. Thanks, Adolfo.

  • Operator

  • (Operator Instructions)

  • Your next question comes from the line of Andrew West from Harding Loevner. Please proceed.

  • Andrew West - Analyst

  • Good morning. Thanks for the call. Could you, on an annualized basis, describe what -- how much volume you think you'd be getting back simply from not having the flu effect this year, in 2010? In other words, even if nothing happened, what would be the sort of baseline growth, just from avoiding those months?

  • Adolfo Castro - CFO

  • Okay. It's not, again, it's not an easy answer because, yes, we believe that the major effect -- the major negative effect that we had last year was the swine flu effect. If you see the numbers, the swine flu effect was announced in Mexico, 26th, 27th of April last year and that had a severe impact since May last year.

  • If you see the numbers of May, June, July and August, it probably -- we can be almost sure that all of them are resulted from the negative impact of the swine flu. After that, I'm not so sure that all of this is coming from the swine flu. We can say that some of those, it's coming from the negative economic situation and also the situation of the airlines here in Mexico and that we have talked about.

  • So if I can make a rough estimate, more or less what we saw as negative numbers from May up to the month of August, we can say that most of this is swine flu and some of the negative numbers that we saw during September, October, November, December can come from swine flu, but not the major portion. Then you can make more or less the calculation.

  • It's important to say that the -- our peak in terms of analyzed figures was around 16.8 million passengers. And what I'm trying to say with all of this is that we will not go back to the same level that we were before the crisis during this year. That's at least my expectation.

  • Andrew West - Analyst

  • Thanks.

  • Operator

  • (Operator Instructions)

  • And your next question comes from the line of Karla Pena from Vector. Please proceed.

  • Karla Pena - Analyst

  • Hi, good morning, gentlemen. Hi, Adolfo. I was just wondering if you could give us some color on Mexicana's operations in Cancun as well, using it as a hub, if you've seen a -- like a more -- a higher traffic or if you expect to see it just in the next -- how you expect to see it in the next quarters? That's the question.

  • Adolfo Castro - CFO

  • Karla, good morning. Basically, you are talking about in brackets hubs operations that they have started in December last year at Cancun airport. What they are doing is to try to connect some of the US cities with Central and South America; that some of these routes are working pretty good, some are not and they probably will have to make some adjustments there.

  • I see as -- I see this as a positive thing for them and also for us in the region. Yes, a lot of people are taking advantage of connecting their flights through Cancun instead of, in some cases, Mexico City or in some cases Miami. So I see -- I am positive about these kinds of operations.

  • Karla Pena - Analyst

  • Hello?

  • Adolfo Castro - CFO

  • Yes?

  • Karla Pena - Analyst

  • Oh, sorry. I thought -- I think I lost you. Would you expect to see like some other airlines going through -- well following Mexicana's actions?

  • Adolfo Castro - CFO

  • It could be the case of some others.

  • Karla Pena - Analyst

  • Okay. Thank you.

  • Operator

  • (Operator Instructions)

  • Ladies and gentlemen, this ends the question and answer session. I will now turn the call over to Mr. Adolfo Castro for closing remarks. Please proceed, sir.

  • Adolfo Castro - CFO

  • Thank you, Veronica. Thank you for your attention and being here with us on our conference, and have a good day. Thank you.

  • Operator

  • Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.