Grupo Aeroportuario del Sureste SAB de CV (ASR) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ASUR first quarter 2014 results conference call. My name is Alan. I'll be your operator.

At this time, all participants are in a listen-only mode. We'll conduct a question and answer session towards the end of today's conference.

If you'd like to ask a question, press star followed by the digit one. You may withdraw your question by pressing star followed by the digit two.

If you're using a speakerphone, please pick up the handset before making your selection. As a reminder, today's call is being recorded.

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

Thank you, Alan.

And good morning, everybody. Thank you for joining us today for a conference call to discuss our first quarter 2014 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 current management 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.

For explanation of these risks, please refer to our filings with the Securities and Exchange Commission and the Mexican stock exchange.

I will start today's conference with an update on San Juan, Puerto Rico International Airport. Afterwards, I will briefly review the results for the quarter.

Passenger traffic at San Juan Airport was up 10.8% quarter-on-quarter to 2.2 [million] reflecting the increase. Weather conditions in the north of the United States, particularly in the case of New York, also negatively affected traffic for the quarter.

Aerostar net income contribution this quarter was 50% ownership stake, [then being 10.6 million] pesos, compared with 122.1 million dollars in the first quarter 2013.

Note that we took over this airport on February 27th, 2013, and we footed one-time expenses of 112 million pesos in the first quarter 2013.

We remain focused on maintaining our stance with upgrades to the airport facilities at San Juan; improve the level of service of total passengers and [add commissioned radios].

In line with business strategy, we are now remodeling Terminal B, which was closed by (inaudible). And work is expected to be completed by the year-end.

All airport updates should continue to [add customers for years] as we remodel Terminal C and make some minor adjustments at Terminal A.

Before I review ASUR results for the quarter, let me remind you that what was published on January the 3rd. At the year-end, we completed our maximum [targeting decision] process, which resulted in a 3.7% decrease in [weighted] average [in single target], and includes a [0.7% efficiency target].

This means that with the same amount of passengers and [similar weeks, regulated benefits] this year will be a 3.7% lower in the benefits compared to 2013.

Note also that the maximum benefits adjusted will produce a [transfer] in petroleum, which in 2013 increased 0.1% compared with a 4% increase in the [consumer pressing].

We'll move on to the results for the first quarter. After this [topic], [we're pleased to grow 20%] year-on-year and to all-time high of [5.9 million].

It was achieved despite [discovered price] as in 2013 [starting with March] while [BP is held in airport].

[Holistic] capitals [4.9%] to 2.1 million passengers have entered the first quarter. We've been achieving an all-time high of more than 1 million passengers, and reporting increases across most airports.

[Crossing the line] (inaudible). Passenger traffic [has put up] and was affected by the result of frequencies at the [integers], the only airline flying to and from Mexico City Airport, while lower traffic [is contributed] to the effect of (inaudible) this year.

International traffic grew 6.1% year-on-year, reaching a high of 3.8 million passengers. The share of international traffic grew 40 basis points to 65.4 of total traffic.

Passenger traffic between Mexico, Canada and the United States represented 87% of the total traffic compared with 86.3% a year ago.

Our total revenue grew slightly, 0.6%, excluding the 76.7% reduction in construction revenues; increased 6.1% year-over-year.

Commercial revenue for the past year was up 5% year-on-year to [77 billion pesos], again, beating previous levels and reflecting new opening of [San Juan] (inaudible).

But I have to mention, as I have mentioned before, we do not expect to significantly [expand for the release of] passenger until the compatibility is is contemplated in the new [MVP again].

Operating cost and expenses fell 2.7% during the quarter, including the 75% decline in construction costs. Operating cost and expenses will in turn increase by 11.5%, meaning really that the combined effect of having both last year [of the] (inaudible) mentioned with the [practical] costs of San Juan, Puerto Rico, and the reopening of Terminal 1 to provide [a relief] to then move Terminal 2 and [higher] direct cost of [sales] resulting from 18.5% increase [in government] from direct operations.

[NPA growth] 3.7% year-on-year for a total of 951 million, representing an [EPM] margin increase of 202 basis points to [68 on total returns].

We invested at (inaudible) and settled this quarter (inaudible) [needs to complete and begin the space] working the [terminal workers].

In terms of balance sheet, we closed the quarter with [past improvements] of [1.15 million] pesos while [banks moved] at [2.8 billion] pesos at the quarter end.

Now, let me open the call for questions. Please, Alan, go ahead.

Thank you, sir.

If you'd like to ask a question at this time, please signal by pressing star one on your touchtone telephone. Again, if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to each our equipment and pick up the handset before signaling.

Once again, that's star one to ask a question.

We'll first go to Neal Dihora with Morningstar.

Hey, good morning. Thanks.

Hey, you mentioned the decrease in [customer] services partly due to owning more concession stores. What percent of the concession stores that you have are your own now, versus somebody else operating them?

Tell me again your question.

So, it sounds like you're operating your own concession stores in some of the terminals. But I assume you have other stores that some other people operate where you just get the royalty revenue.

What portion of the stores are yours, are the ones that you operate?

I don't have a percentage, but you have in the report our revenues from the commercial operations. So, you have the total amount of the commercial and you can deduct how much is the others and how much is us to get a number. You have it in the report.

Okay, thanks.

You're welcome.

All right. Once again, that is star one if you'd like to ask a question. We'll pause for another moment. And one more time, that's star one if you'd like to ask a question.

We'll now go to Stephen Trent with Citi.

Morning, guys. I'm kind of going to [take this one, okay]? Can you hear me, guys?

Yes, sir. Your line is open.

Can you hear me? All right, if you can hear me, Stephen (inaudible) Trent. Good morning.

What's your take on the Mexico City Airport? Do you see no new airport coming or do you [now simply just scratch into the water] as an airport?

Do you see the [SCT Parks] privatizing this installation, or is this a case [to lose]? Thanks.

Hi, good morning. I don't have any information about the Mexico City Airport, with exception of what is published in the newspapers every day.

If you believe the news that we have that was published two days ago, they were saying that they will take some divisions on this airport up to July this year. And that's the last -- the latest information that we have. That's the only thing that I can say to you.

Okay, so I guess I was just trying to get your sense of what you think the potential is for this here; or I guess will the airport probably -- do you think that's a priority or not.

I guess just one other question, since it doesn't seem like there's a lot of people on the line. What's happening with cash flow operations [that leads to us] and sort of adjusting capital policy? Or is it [just a shortcut function]?

In terms of the [cash flow] for the quarter, what you should remember that we paid dividends at the end of last year. And here in the first quarter, we paid tax on dividends with an amount, probably not exactly, because this is coming from the top of my head, 200 and maybe 5 million pesos that I remember we paid in tax dividends during the first quarter; [and from that] is the [reason] of your question.

Okay, understood.

Now, also, we're just kind of trying to get a run rate for your [total] '14 CAPEX for the full year. Has does 1Q compare to [clear] CAPEX for the full year?

Your line is cutting. I cannot hear you very well.

I'm sorry about that. We're just kind of wondering how 1Q CAPEX compares to the required CAPEX for full 2014.

Well, (generally the 3rd), we probably show we're committing [that one] for the full year.

The [amount] was approved, basically, at the end of last year. So, during the first part of [this year], basically focused on [meeting] or trying to [meet excessive] projects than to make select contractors making bid and process [signing contracts].

As you can see, the first quarter has been very low in comparison of what we have to spend during the full year. It will be, of course, speed up on the second [quarter].

The [stuff comes around again]; it's the [CAPEX user] in the [report] we published on January the 3rd. But from the top of my head, it's 1.2 billion pesos.

Again, that [30-something] that we [invested is there]. So, the beginning of this year, basically, the preparation for investments that we will be making during the second, third and fourth quarter.

Okay, understood. I guess my last [question would be] do you see it being really spread out or [just solid] and probably maybe most in 4Q?

Most of the [investment] is going to be made during the 4Q.

[That'll work]. Okay, thank you very much [now].

You're welcome.

And next, we'll go to Victor Sanchez with Morgan Stanley.

Hi, everyone. This is actually [Ricardo Aldez] from Morgan Stanley. Sorry, I had to jump off the call a bit, so I apologize if this has been asked.

I just want an update on the new terminal in Cancun. What is the view of the Company, in terms of commercial revenue per passenger?

Because I assume that we're probably going to see higher growth when the terminal is at full speed; so, an update on that. That would be great.

Hi, good morning.

Well, basically, today we're working on concluding the [demolition] of Terminal 2. Then we will proceed and we are now working on that, which is the expansion of Terminal 3, and then finally, Terminal 4.

Today, what we are doing in terms of Terminal 4 is designing the terminal. We are in the early stages of the design of the terminal, basically selecting the size; working on the permits, environmental permits [and all of these].

In terms of your question, your specific question [concerning] revenues, for Terminal 4 what we expect is that this will be better than what we have today [for the same] passengers.

[In terms of] Terminal 4 [on the] domestic and the national, [the same way that] Terminal 2 is today. So, what we expect is to have a better facility; a facility with a better layout than the one that we have today is in Terminal 2.

Remember, Terminal 2 is something that we received from the government at the beginning of the concession [year]. It's clear that we have been able to [patch] and change some of the terminal; but of course, it's not the same [to construct from] all the design from scratch [than to patch] a building.

So, the answer, [to clear up], is we expect to have a better commercial revenue [per] passenger in comparison with the [position] that we have today.

That's very helpful. And here is no precise timing for the conclusion of Terminal 4, is there?

Well, for the moment, the plan we have is 2017.

I'm sorry, I didn't get that. Sorry.

2017 for Terminal 4.

Okay.

2015 for the expansion of Terminal 3.

Okay, got it.

And just another one on this same topic, actually, so, you do expect commercial revenue per passenger to be a little bit lower, or at least to see slower growth going forward until you deliver the expansion of Terminal 3 and conclusion of the Terminal 4? Would you expect to grow, [I think], commercial revenue to be sluggish a little bit?

Exactly. That is what I have been saying. Do not expect a higher growth in commercial revenue per passenger until we can [adjust this capacity shift].

Very helpful. Thank you very much.

You're welcome.

And now we'll take a question from Bernardo Velez with GBM.

Hi, good morning, Adolfo. Thanks for taking my call.

I was wondering, and if I recall correctly, your [training] in technical assistance contract and on August. So, my question is can we expect the automatic renovation of this contract, or has ASUR thought of calling a shareholders' meeting in order to discuss the renovation or another change to the terms of the contract?

Okay, Bernardo. Hi, good morning.

This is a good question because it allows me to remember you and the others; that we have [published our 20] (inaudible) [an hour]; seems a bit [old for the metric] (inaudible) [in terms of that].

And your question is it's clear; it has been in that report, as well. The [thing of this intervening] was renovated last year. So, I don't know why you are saying that it should be up to August; that's not the [other contract cap].

Okay. So, you have already renovated. And so, it's for a five-year term, right?

Exactly.

Okay. And I suppose that within this contract, you continue to receive some benefits coming, I don't know, expertise, in terms of construction; operation of new airports and stuff like that, right? So, I guess my question is when can we expect ASUR to be expert enough, sort of, it doesn't need this contract anymore?

That's a tough question, in a sense. When do you really want to have all the experts inside the company, and paying them all the time? That's a good question. Maybe when we have the sizing up of that.

Let me give you one clear example; something I have mentioned some [meetings] ago. Today, we are in the process of the design of the [new] airport. Of course, we have a lot of people in the company that knows about how to run an airport and knows about how to design a building. But believe me, this is a major task and you do not construct new buildings every day.

So, because of these two areas in receiving technical assistance with these particular tasks, this is just one small example of what we are receiving today from this contract. And I don't need to have onboard all the people that we need for these particular tasks.

Okay, so it's probably more about one-time effects or needs that ASUR may need, right? So--

Another example, another key example is the [MVP], and this is something that we do every five years.

Okay, perfect. Thanks for taking my call.

Thank you.

Okay. And one more time, that is star one if you'd like to ask a question. We'll pause for another moment.

All right, we'll go to [Jean Brunie] with [DBZA] Bank.

Hello, Adolfo. Thank you for the call. I just have a couple of question. This one is on your [administrative] expenses that went down by 8% during the quarter, and that now represents well below the 3% of sale that they used to represent before.

I just want to know if this trend will be maintained for the rest of the year, [quite sure you mentioned] the sort of cost; or do you expect a rebound in coming quarters?

There's a lot [that's standing] on the [radial] of the Cancun Airport. We've seen some news in the newspapers reporting that you may have to pay local taxes for the Cancun Airport; just want your view on that point. Thanks.

Okay, hi. Good morning. Let me go in the cost side.

In the cost side, this quarter was particular because of [petty things worked out]. Usually the tools are [talking cost] and consumption revenue [for your] analysis. In my opinion, these [you're] distorting always the information of the public company. So, I recommend you do exclude that from analysis.

Second, remember that last year during the first quarter, we recuperated the expenses that we made in the case of the [privatization] process of San Juan, Puerto Rico. You had it on the report.

There's a clear indication in that report and in the report of the (landing here) how much we received because of that. So, you have a positive effect that today is a [big incoming cost].

And the third one has to do with the direct costs of our commercial direct operations. We had a very significant increase in sales during the quarter; it was an 18.5% increase. And of course, with 18.5% increase in direct cost, it's [more].

Let me explain this. If you are selling hundred magazines, the cost that we will have for these hundred magazines is going to be different against selling 118 magazines, okay?

So, these are the three effects that we have for one time; let me put it that. Of course, the direct costs is not in the [center of] one time. The one time is to the increase of 17.8, 17.5%.

The other thing that we've had [inside] of cost today is the reopening of Terminal 1 in November last year. But that is not one time; that is going to be for the future. So, in that sense, the effect of the additional costs as from November last year, because of Terminal 1, [might be there] for some time.

And that is, more or less, what I can share with you. So, the [composite] for the second quarter is going to be different because of San Juan. We will not have the [division] process in the second quarter.

We will have Terminal 1 and we will have some problem [increasing with] sales in the direct cost. That's what I can say.

The property tax you are talking about, and specifically, the news related to Cancun Airport; well, let me say that we are not the owners of the land and there are some other legal aspects why we are not subject to that asset tax or this property tax.

Every three years, when a new guy comes into the government of the municipality, wants to collect more money because always they have lack of money. So, because of these every three years, when a new guy came, he starts saying we need to collect money from these airports.

And in the case of Cancun, we have gone this process through the courts, and there's final ruling saying that we should not, and we are not subject, to these specific [debts paid] tax. Of course, if the laws are changed in the future, and I have to say that the constitution of the country, particularly the Article 115 [sense], then we could probably be subject to this tax.

In the meantime, I'd wait. Because we are not the owners of the property. The owners of the property is the government.

And because of this, we are paying the government a fee for the use of the land and the assets that are [on top of] the land. We are paying the concession fee; the concession fee is more or less 5% of the revenues. And we have represented 20% of the profit of the company for the last 15 years.

So, it's a significant amount what we have to pay to the government, the federal government, for the use of the concession assets, okay? It is a concession. It's not that we own the property; and that is why we are not at the moment subject to this [debt] tax.

I don't know if I was clear on the answer.

That was very clear. Thank you very much, Adolfo.

You're welcome.

And again, that's star one to ask a question. And one final time, that is star one if you would like to ask a question at this time.

It looks like there are no further questions at this time. So, Mr. Castro, I'd like to turn it back over to you for any additional or closing remarks.

Thank you, Alan.

And thank you, everybody, for joining us today on our conference call. As always, do not hesitate to contact me if there is any further questions. And thank you for being here today.

And I believe in the afternoon, you will be able to see what are the results for our shareholder family; that will start [30] minutes from now.

Thank you and have a great day. Good-bye.

And that does conclude today's conference. We thank everyone for their participation.