Grupo Aeroportuario del Sureste SAB de CV (ASR) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ASUR second quarter 2015 results conference call. My name is [Kristy]. 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 today's conference.

(Operator Instructions).

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.

Thank you, Kristy. And good morning, everybody. Thank you for joining us today on the conference call to disclose our second quarter 2015 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 risk and uncertainties that could 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.

As usual, I will start by reviewing operations in San Juan, Puerto Rico international airport, and afterwards briefly discuss the results of the quarter.

Second quarter 2015, passenger traffic at San Juan , Puerto Rico airport increased 0.9% year-on-year to 2.3 million passengers. Note that our second quarter result has benefited from a MXN21.7 million equity gain from ASUR's equity participation [Aerostar]. And 11.4% -- MXN11 million gain in the stockholder's equity from depreciation of the dollar against the peso during the period.

In terms of infrastructure upgrade at San Juan air port, remain on track to complete the remodeling of Terminal C, including a fully renewed space with a revamped commercial offering and more efficient traffic flow. The space will be completed and in operation by the first quarter 2016.

Moving on to our Mexican operations, performance this quarter remains strong, total passenger traffic increased 14.3% year-on-year to MXN6.6 million, nearly in line with the record setting in first quarter 2015.

Domestic traffic continues to perform well with all operations reporting year-over-year traffic growth. Second quarter 2015, we saw an increase of 14.2% year-on-year, reaching a record for our second quarter.

Cancun airport has specifically bolstered an 8.8% increase that comes from 1.5 million passengers. We continue to see airlines expanding capacity or going point to point and increasing connectivity within the different cities in Mexico. The combination of increased capacity, high traffic and to from Mexico City, and lower fuel prices even after considering the effect of the depreciation of the peso is clearly contributing to more competitive efforts.

In addition, Cancun appeals to domestic travelers who are more intent to fly rather than use a bus.

The continued position of the dollar against the peso has remained a driving force behind ASUR's international traffic. Actually, passenger traffic between Mexico, Canada and the United States represented 88.6% of the total traffic compared to the 88% a year ago. So, while we are seeing a strong performance in traffic from Latin America, other areas, however, continue to show weak dynamic.

In summary, while traffic figures these airports are quite strong, [we will need] more choices for the remainder of the year.

Moving on to the profit and loss account, total revenues excluding the [1,059%] increase in revenue from construction services, rose 23.2% compared with the second quarter 2014. Commercial revenues per passenger posted a strong performance of 11.9% year-on-year, reaching MXN81.7, just below the record high of MXN82.6 set the last quarter.

This was not the only driven by a significant growth in passenger traffic but also reflect the efforts of our concessioners across most airports to drive commercial revenue.

Looking ahead, we are pleased [in anticipation] to maintain these levels of commercial revenue [up], we continue to expand terminal capacity of Cancun airport.

[EDA] increased to MXN1.1 billion, up 29.2% year-over-year, reflecting ASUR's ability to leverage this highly difficult space. Actually, operating cost and expenses excluding the increasing construction cost were up 9.1% well below revenue growth. In addition, EBITDA margin grew [in the impact] from construction revenue, grows 330 basis points to 70.8% from 67.5% in second quarter 2014.

Second quarter 2015 results, however, were affected by a non-cash foreign exchange loss of MXN30.5 million in the quarter resulting from the 204% depreciation of the peso on our currency [net driving position].

Overall, capital expenditures for the second quarter 2015 total MXN389 million invested along with the parameters of our mass development plan.

Funds were invested principally in the expansion of terminal 3 which is on track to be completed in December.

During the quarter we conducted the bidding process to select the contractor to begin the construction of Terminal 4. Construction is expected to start in August.

As usual, we maintain a healthy balance sheet with cash and cash equivalents of MXN3.2 billion and bank debt of MXN3.4 billion at the close of the quarter. This quarter we also delivered a cash dividend of [MXN5.20] out of returning reflecting our commitment to provide value to our shareholders.

Finally, on July 17, 2015 ASUR was able to successfully restructure the bank loans related to our Cancun airport. The Cancun airport subsidiaries came to an agreement to extend the maturities of the [Cres] loans with BBA Bancomer and Bank of America for a combined total a month of $250 million from 2018 to 2022.

In addition, the two banks agreed to commit an additional line of credit for a total of $85 million.

The proceeds of these additional loans will support the capital expenditures in Cancun airport.

Now, Kristy, let me open the floor for questions. Go ahead.

Thank you. (Operator Instructions)

And we'll take our first question from Steven Trent with Citi.

Thank you, Adolfo, and thanks for taking my questions. Good morning to you.

Actually, two if I may. The first is, you know, Puerto Rico given what seems to be a difficult budget situation there, you know, what's your view with respect to, you know, what we could see on the traffic standpoint as well as maybe, you know, taxation or utility rates?

Hi, good morning, Steven.

Well taxes have been increase in the island. There's a tax called [Evo] has increased from 7% to 11%. It probably will have a - have a minor impact on the economic of the Company because it's important to say that most of our traffic, the most important piece of our traffic lives in New York, so people that leave out of the island that go back to the island to see their families and go back again to the continent.

So, in general I would say to make this a short answer, I do not expect a major effect because of the situation today in San Juan.

Okay, great. And just one other question, your - the company's commercial revenue in 2Q on - it was up big excluding direct operations, but direct operations it was flat. Can you just refresh my memory? What is commercial revenue excluding direct operations?

Okay, let me factor in what's commercial operation because if you see the report carefully, there's a note on the bottom of the table saying that we have agreed to sign an agreement with a new concessioner in the case of advertising so as [problem] maybe [year] advertising is no longer a direct commercial operation for us.

So, today the only commercial direct operation is the case of convenience stores. And that is what probably you are seeing in that situation during in the quarter.

Advertising, got it. Okay, I saw that note, I didn't - I didn't quite understand but that's helpful. I appreciate the time, Adolfo.

Okay, thank you.

And we'll take our next question from Ramon Obeso from Scotiabank.

Hi. Thank you for the call. The question is regarding aeronautical pricing. We saw a strong growth in aeronautical revenue for passenger this quarter, could you give us some color on this and how sustainable these levels are going forward? Thank you.

Absolutely. I don't know if we can -- revenues are basically regulated revenues. Regulated revenues are basically the result of our maximum rates times the number of passengers or the number of workload unit. So, the number you are seeing, it's basically the result of the maximum rate that was approved by the authority at the beginning of the year 2014 plus inflation minus 0.7% inefficiency factor.

It is important to say that the case of inflation measured by the PPI excluding petroleum and not CPI. So, probably the effect that you're seeing is the effect on the CPI.

And of course it is obtainable for the - for the remaining of the year.

Okay, thanks.

You're welcome.

(Operator Instructions)

And our next question comes from Pablo Zaldivar with Grupo Bursatil Mexicano.

Hello, Adolfo. Thank you for taking my question. Do you have a time frame when the Cancun renovations will be ready?

Well, as I said in the remarks, the expansion of Terminal 3 is expected to be concluded at the end of this year. So, in December it should be ready.

Okay, perfect.

And can you give us a number or just an estimate or something of how much additional commercial area will be included in the new terminal?

Okay, I would say that basically the expansion of Terminal 3 is - well, it's divided in two pieces. The first piece the seating and the second piece is boarding gate. So basically most of these it's going to be operational. The space is not that we will increase the square meters in commercial revenues.

But the benefit of these is that this will allow to decongest terminal 2. So some of the passengers that are today in Terminal 2, which is basically congested, will be able to fly from Terminal 3 and that will give us a relief and that should increase the commercial availability of the passenger.

Unidentified Participant^ Okay, thank you very much.

You're welcome.

And our next question comes from Jean Bruny with BBVA Compass Bank.

Adolfo thanks for the - for the call. I just have a quick one, actually, on the - on something that appeared in the Mexican press about months ago with [the city man trying] the possibility to privatize on the [ASUR] airport.

So just want to know what's your view on this operation? We know that you and ASUR [Carmen] which is not very far from the airport or the geographical exposure you have at the moment. So, I don't if you - if that's something really you mentioned about. Is something happening or we can expect from more news on that matter in the coming weeks or months? Thanks.

Well, to be honest, I do not have any additional information of the one that you have is just the note on the press. I do not have additional information.

Of course if [we so curious], one we so curious we will read the documents carefully and we will be interested to analyze the possible opportunity there.

Okay, thank you very much.

You're welcome.

And our next question comes from Ferdinand - Fernando Abdalla with JPMorgan.

Hey, good morning, Adolfo. I just have a question regarding CapEx in the MDP that you published to the market. It's expected to invest roughly MXN3 billion per share, but I gather in the first half CapEx was around MXN500 million. So, should we expect CapEx in the second half to increase and reach this MXN3 billion or part of this CapEx will move to next years of the MDP?

Hi, Fernando. Good morning. You know, CapEx this year, as you were saying, is - it's more than MXN3 billion and this has to be extended during this year no matter what.

Okay, perfect, thanks.

You're welcome.

(Operator Instructions). Our next question comes from Steven Trent with Citi.

Hi, Adolfo. And thank you for taking my follow-up. Just one more if I may. You know, looking at the very strong traffic growth that we've had, you know, assuming that the current growth rates are - excuse me, the current growth rates are sustained, you know, how long do you think it would be, you know, holding everything else constant, before we have to start assuming a mark down in tariffs in the next regulatory review?

Well, the traffic - it's really strong as I said during the remarks, because of the exchange rate that is originating more US traffic to our destinations, mainly Cancun. I don't know how sustainable this is. You will - you probably have more information of the one that I have, but of course at the level of the peso that are we are seeing today, it's creating an opportunity for the US guys to go to Cancun. And they are taking this opportunity.

The other important information is of course the strength of the domestic traffic. The airlines continue to increase the capacity, they continue to have airplanes into their fleet. Also, I have to say that we are seeing more point to point routes, more direct flights to Cancun from somewhere else apart from Mexico City.

The other thing is that we're seeing - we continue to see increase in the case of Mexico City, so a better use of the [plus]. They have even the capacity constraints they had on these particular piece of the airport.

So, I believe that we - this is strong traffic growth that we have seen today, it's because of these reasons. And of course as I have said during the remarks, I would be cautious about the future. I would not be expecting this to continue for a longer term, so that's the - that's my view.

Okay, that's helpful. Thanks again for taking my follow-up, Adolfo.

You're welcome.

(Operator Instructions)

It appears we have no questions in the queue at this time. I would now like to turn the conference back over to Mr. Adolfo Castro for any closing remarks or comments.

Thank you, Kristy, and thank you, everybody, for joining us today on the conference call. Also, do not hesitate to contact me if there's any further questions. Have a good day. Good-bye.

This does conclude today's conference. Thank you for your participation. You may now disconnect.