Grupo Aeroportuario del Sureste SAB de CV (ASR) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ASUR's Fourth Quarter 2012 Results Conference Call. My name is [Tadeo] 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 the conference. (Operator Instructions).

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

Thank you, Tadeo. Good morning everybody. Thank you for joining us today for a conference call to discuss our fourth-quarter results and today year-end 2012 results.

Allow me to remind you that certain statements made here during the course of our discussion today may constitute forward-looking statements which are based on current management expectations and beliefs and are subject to a number of risks and uncertainties that would cause actual results to differ materially, including factors that may be beyond our company's control. For an explanation of these risks, please refer to our filings with the Securities and Exchange Commission and the Mexican Stock Exchange.

On today's call, I will provide a brief update on progress made in connection with our international expansion plan, the mass development plan, our outlook for passenger traffic for this year and go over the key highlights of the results of the quarter.

In terms of our international expansion plan, let me start with San Juan, Puerto Rico International Airport. Yesterday evening, the US Federal Aviation Administration issued an order approving the lease between Aerostar and Puerto Rico Port Authority and is expected to provide Aerostar with its Part 139 Operating Certificate today.

Aerostar has obtained the regulatory approvals necessary to close the transaction and all remaining conditions precedent under the lease have been satisfied or waived. We are waiting for the final decision of the government of Puerto Rico will take on this matter and we will then decide about the next steps.

You know that transparency is a one of our basic principles in terms of investor communications and we look forward to providing additional updates as we move along further in this process.

Although San Juan Airport is a very interesting project for us in both medium and long-term, investing in the license to operate the airport does not significantly reduce our excess balance sheet capacity. With this in mind, we look for other vehicles to allow us to optimize our balance sheet structure and continue to drive growth, always in line with our current business.

For example, we are likely to see the government opening a bidding process for the new airport in Mexico City as the current international Airport has been operating at full capacity. A bidding process could unfold in short-term and if it does, we will want to participate on this project.

Let me give you now an update on our mass development plan. We presented our mass development plan proposal to the government on December 21st of last year. The federal authorities now have a year to review the documentation and we will be in negotiations with them during this period, more actively in the fourth quarter.

We do not anticipate any big surprises and expect that the authorities will basically honor the terms of our concession agreement as they have been doing over the past 12 years. The new rates will be then valued as from the first day of January 2013.

Looking ahead, we are not expecting passenger traffic growth in the year 2013 to be as strong as last year. If such passenger traffic growth levels will continue this year, we will have to make small investments and incremental costs to effectively support to continue this strong domestic expansion.

In fact, domestic traffic growth has been disproportionately high relatively to international traffic and this will ultimately lead to increased operating costs for us. Looking for disciplined investment opportunities to expand our operations, we also continue to drive cost higher as we continue to engage in this process.

Overall, we continue to focus on building value for our shareholders, guided by our long-term vision to be the leading airport in Mexico and Latin America while taking small caution but firm steps towards achieving that goal.

Moving on to the results, this was a very good quarter. Passenger traffic increased 11% year-on-year mainly driven by a 12% expansion in domestic traffic we reached 2.21 million passengers this quarter, the highest fourth quarter on record for us in a fourth-quarter.

Domestic traffic was particularly strong at Cancun, Minatitlan, Veracruz, Villahermosa, and Oaxaca. Traffic at Cancun remains at historical peaks reaching the 1.4 million passengers. The smaller airports however are still affected by the lack of domestic airline fleet capacity.

International traffic rose 10% to 2.4 million passengers. International passenger traffic was 48% of the total traffic, slightly above the 47% share in our fourth-quarter 2011. Passage between Mexico, Canada, and the United States represents 86.9% of the total traffic compared with 88.9% a year ago.

Revenues this quarter fell 2% reflecting the lower committed investments under the mass development plan during the period. Excluding construction services, total revenue will have increased 13% year-on-year. Commercial revenues for passenger's rose to MXN73.4, a record for a fourth-quarter.

As you can see, we remain focused in maximizing commercial revenue opportunities. But is not easy given the shift in passenger traffic mix towards domestic traffic which is restrictive from purchasing duty free items.

The declining construction costs also impacted operating costs and expenses which were down 12% year-on-year. Excluding construction expenses, operating costs rose 9%.

Cost of sales from high revenues at our commercial direct operation and expenses resulting from our participation in the San Juan airports as well as fees from the bond required in the appeal of a decision of returning a tax credit at Cancun for 2006 and 2007 again were the main reasons for these increases.

EBITDA was up almost 14% with an EBITDA margin increase around 700 basis points year-on-year to 50.22%. We made investments of MXN226 million this quarter as we continue to with the terminal expansion in Huatulco, Oaxaca, Villahermosa, and Veracruz airports, all of which are expected to be completed during the year 2013.

Finally, we maintain a strong balance sheet with cash and cash equivalents of MXN2.3 billion and bank debt of MXN350 million at the close of the quarter.

Now let me open the floor for questions. Please, Tadeo, go ahead.

Thank you. (Operator Instructions). Our first question is from the line of [Ronaldo Velez] with GBM. Please go ahead.

Good morning, Adolfo. I just wonder if you have more color regarding the (inaudible) airport whether -- when you will start operating it how about the financing and in general terms, a little bit more information?

Ronaldo, good morning. Basically as I have said, we are waiting for the final decision of the government of Puerto Rico. Once we have that, we will be able to inform the market about the next steps.

Okay, so and when are you expecting the next steps to begin?

I would say shortly, probably within one or two days.

Okay, perfect. Thank you.

You're welcome.

Thank you. (Operator Instructions). Our next question is from the line of Ricardo Alves with Morgan Stanley.

Hi, Adolfo. It's actually Augusto here. A question on the cost line and the cost of service, you mentioned that it was higher this quarter due to some cost from the airport project as well as your own -- the additional stores that you guys now operate. Could do you tell us how much of the costs were from those items relative to how costs normally are? I'm just trying to get a breakout of what would be one time and what would be recurring. Thank you.

Okay. Let me start with the direct, I mention operation. You have the numbers of how much we were able to sell during the quarter. In terms of direct cost for that, I would say at least between 50% to 60% is the direct cost of our sales. So from these you can deduct that fees.

In the case of San Juan, Puerto Rico for the quarter, probably -- I don't have an exact figure to share with you right now but we can say around $1 million.

Okay, so it's actually very smaller. And that's something that doesn't continue, right? This is just -- now that the project -- the proposal is now over, you don't see that coming back?

If we are successful on this project, most of these costs will be covered. If not, it will be an expense for the year.

Understood. Thank you very much, Adolfo.

You're welcome.

Thank you. (Operator Instructions).

Our next question is from the line of [Rey Santos] with Citi. Please go ahead.

Adolfo, this is Rey, speaking for Steve Trent here at Citi. Can you give us more color on the new Mexico City airport as far as timing?

Well, Rey, good morning. Basically what I know is that the current government is working on that operation. I don't have too much detail about timing. My expectation is that if they're going to go for a bidding process, they will make it within the next 12 months. That's what I can share with you. It's clear for me that one of the most important projects for them in terms of airports is this one.

Sounds good. Very clear. Thank you.

You're welcome.

(Operator Instructions). Our next question is from the line of Ellen Lyerly of Deutsche Bank. Please go ahead.

Good morning, Adolfo. Two questions. One is what is the financing capacity of ASUR for making a new investment in the project? And then, would you be looking to finance it again through Cancun airport as you did through the Puerto Rico airport to maximize the tax efficiency?

Hi, good morning. Well, in terms of debt capacity, of course, we don't have any specific number to share with you but if we, round numbers, we have the exact numbers in the filing. If we say that we can be leveraged between 2 to 3 times EBITDA, and the EBITDA last year it was around 200 and something million dollars, you will say $600 million.

Let me try to make numbers in the case of San Juan, Puerto Rico. As you have seen in our press release, and the payment that we should be making to the federal government of Puerto -- to the government of Puerto Rico is around [615 million] plus fees and working capital and all of that would be around [700 million].

In terms of project debt, debt directly to the company in Puerto Rico, we can talk about [350 million]. And we have said that we will be supporting this company with [100 million], so the remaining is [250 million], so the [actual check] should be around [125 million]. If we go back to the [600 million], so there's some additional money that we can use for a new project in the future.

I don't know if this answers completely the question and if we are going to make this through Cancun airport, yes we are going to be making this through Cancun airport.

Yes, thank you.

You're welcome.

The other question I had was on the revenue yield per passenger. In the fourth quarter it looks like it improved around 1.4% whereas during the nine-month period in the year improved low double digits. So can explain why commercial revenue per passenger didn't increase as much in the fourth quarter as it did in the rest of the year?

As I have said in the initial remarks, with the passenger mix we're having, so having more domestic or growing domestically against international, it's kind of [gross] to sell duty free to them so we cannot sell duty free to domestic guys. So it's hard to increase the commercial revenues at the same proportion as we did in the past, but you know that this is one of the main focuses that this company has and we are working basically to continue with this improvement.

Well, it seems like domestic has been growing throughout the year. So are there other causes customer kind when the press release it said that there was a decline in rental revenues that more than offset your growth in commercial. Can you explain how -- is that material or not?

No. In the case of car rental, it's not material. The important elements in terms of the growth we saw last year, without considering the issue is the duty free are basically advertising the direct commercial operation of our stores.

Okay, thank you.

You're welcome.

Thank you. I'm showing no additional questions. Please continue.

Did you have any closing remarks?

Okay. Thank you, Tadeo. And thank you everybody and thank you for joining us today on our conference call. As always, do not hesitate to contact me if there's any further questions. Thank you for being here today and we will be providing some of this information in the case of San Juan Puerto Rico shortly.

Thank you, and have a good day.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.