Grupo Aeroportuario del Sureste SAB de CV (ASR) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the ASUR fourth quarter 2016 results conference call. My name is Caroline 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 this call over to Adolfo Castro, Chief Executive Officer. Please go ahead.

Thank you, Caroline and good morning everybody. Thank you for being here with us in our conference call to discuss our fourth quarter and full-year 2016 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.

Now moving on to results, we ended 2016 on a solid note. Total passenger traffic in the quarter increased by almost 12% year-on-year totaling over 7 million passengers. Growth was mainly driven by domestic traffic which rose 14.8% year-on-year to nearly 3.5 million passengers. The majority of our airports posted a very good performance particularly at Cancun with a 19.5% increase in traffic. Overall, domestic traffic continues to benefit from affordable airfares as a result of weak oil prices and an increased airline capacity and connectivity in the country. Traffic however remains weak at Minatitlan reflecting the challenging conditions facing the whole industry. International traffic was up by 9.3% year-on-year, reaching over 3.6 million passengers primarily driven by an increase of more than 9% at Cancun airport supported by the continued [depreciation] of the Mexican peso against the US dollar. Passenger traffic between Mexico, Canada, and the United States represented 87.1% of the total traffic compared with the 86.9% a year ago. Full-year passenger traffic was almost 9% up with increases of nearly 11% in the domestic traffic and nearly 7% in the international traffic.

Moving into the income statements, total revenues in the quarter excluding construction services increased by 20% year-on-year. Commercial revenues posted a strong performance rising over 21% year-on-year driven by the expansion of the Terminal 3 completed on December 2015 and the consequence -- the congestion of Terminal 2 at Cancun airport. This brought commercial revenues per passenger up by almost 9% to MXN96.4.

Looking ahead, we expect to see a pickup in commercial revenues per passenger beyond our usual seasonality once we open Terminal 4 in the fourth quarter this year. This new terminal with a capacity of approximately 8 million passengers will allow to decongest traffic at Terminal's 2 and 3 as we redirect some passengers to this new modern and efficient terminal. We also plan to redirect passengers from Terminal 1 to Terminal 2 and close Terminal 1, a low cost charter terminal with 2 million passenger capacity. Once completed, this will bring total capacity at Cancun airport to 29 million passengers, up from the current 21 million capacity. Most importantly, this is expected to further drive commercial revenue per passenger growth as passengers will have now access to a better product and service offering in a layout more conductive to drive commercial traffic.

Operating costs and expenses excluding construction costs were up by 21% year-on-year mainly reflecting higher cost of services from Terminal 3 expansion concluded in December 2015. An important element was the increase by 21% of the cost per kilowatt hour for the Company during the period. Also, an 18% increase in revenues from direct commercial operations also contributed to the higher operating cost.

Looking ahead, we expect to see an increase during the third quarter due to the preparation for the opening of the Terminal 4 expected for the fourth quarter of the year. EBITDA for the quarter increased roughly 19% year-on-year reaching MXN1.3 billion as we continue to leverage our highly fixed cost base. Adjusted EBITDA margin, which excludes the impact of construction revenue was 70.04% in the quarter, a slight decrease from the 70.71% reported in the fourth quarter 2015. Results for the quarter also reflect the net gain of MXN7 million from our participation in Aerostar, up from a net loss of MXN13 million reported in the fourth quarter 2015 reflecting the positive commercial effects from the opening of Terminal C in the second quarter 2016 and improved operational performance resulting from better traffic flow in Terminal D. This was achieved despite the 1% year-on-year decline in passenger traffic to 2.1 million passengers. Traffic for the full-year however increased 2.6% totaling over 9 million passengers.

Shareholders' equity in the quarter also benefited from a MXN150 million gain from translation effect of Aerostar financial statements, which are denominated in US dollars compared with a gain of MXN27 million in the fourth quarter of 2015. Moving on to capital expenditures, we invested MXN1 billion in the quarter mainly in the construction of Terminal 4, which remains on track to be opened in the fourth quarter of this year. This brought total capital expenditures for 2016 to MXN1.8 billion, in line with our master development plan. Now currently, let me open the floor for questions. Thank you.

(Operator Instructions) Pablo Zaldivar, GBM.

I just have a couple. The first one is regarding the cost of services. You mentioned during your remarks that during the quarter costs were higher mainly due to higher energy prices and cost of direct operations. Should we expect similar figures for the first and second quarter of the year and then they should evolve higher in the third quarter due to the opening of Terminal 4, right?

Exactly. That is right.

Okay. That would be my first question. And my second question on Puerto Rico. Even though we saw an improvement against last year performance, the figure disclosed during the quarter was significantly lower than what we saw on the first three quarters of the year. Is there a reason for that drop?

Absolutely, if you see the numbers, basically we have a similar seasonality of the one we have in Cancun. Always the fourth quarter is the lowest one and the first one is the highest. So, if you see the 2.1 million passengers, let's say times four, that will be 8.4 million passengers against the 9 point something million passengers we saw for the year. So the reason why you are seeing these numbers is seasonality.

Pablo Monsivais, Barclays.

I have one quick question also regarding Puerto Rico. What is the outlook on commercial revenue per passenger. I mean are you seeing some improvements on this front. I remember that you mentioned that you expect at some point this figure to be similar to that of Cancun, but where are we right now on this? Thank you.

Okay, Pablo you're absolutely right. Four years ago when we took over, I said that what we were expecting is Puerto Rico to sell more in commercial revenues per passenger against Cancun, that's what we are trying to achieve and I believe we are on the right track to do that this year. It's going to be extremely important because it's going to be the first one, [once Terminal D opened and also Terminal B is closed]. So in terms of commercial revenues, we are right on track and that's what you are seeing in the results. If you see the results for the fourth quarter, that was a 150% something increase in terms of the effects for us and one of the key elements there of course is commercial revenue per passenger.

Pablo Barroso, Credit Suisse.

Congratulations on the results. I have a couple of questions. We have seen a steep peso depreciation, do you believe this could be one of the main reasons to maintain current traffic level along 2017 or what should we expect?

Well Pablo, this is -- the first three questions are coming from Pablo's. So the situation now is that because of the peso devaluation, you are seeing or we are seeing an increase in the traffic from the US basically, but also what we saw during the month of December and also in the case of January is a very strong increase from the domestic traffic. What I believe is that this is because the same reason, exchange rate.

So today Mexicans cannot afford to go outside. So they decide to go inside and they are traveling domestically. How long this is going to last is something that I really don't know but of course, you know that the first quarter is the most important for us in terms of absolute figures. So if this continues for the first quarter what we saw in December and what we saw in January, yes, this is going to be a strong year again.

Okay, yes just a quick follow-up. We saw this tendency since like -- at least for five months, so the rationale should say that in 2017 this should continue, right because Mexicans cannot afford anymore to go outside of Mexico, right, and Cancun being the one of the most touristic destinations in Mexico.

Yes, exactly. You are saying five months, but if you see in the case of December, it jumped more than what it was for the month of (multiple speakers) and October.

Okay. So first quarter will be essential, right?

Exactly.

Okay and just my final question, could you give us some color on Terminal 4 construction, are you going to open by year-end?

We are on track and I would say during the fourth quarter. We are still during the fourth quarter.

(Operator Instructions) Magdalena Santana, Citi.

Congratulations for the results. I have three questions. The first one is about (inaudible) in Brazil and what about other markets. And the second is, have local officials implement any new security measures in flood monitoring in Playa del Carmen. And the last one is, have you noticed any impact on your operations regarding the boycott of American brands, like if there is any backlash against American tourists and that's it.

Hi, good morning Magdalena. First of all, we are not participating in Brazil. We decided not to do so. Second, in the case of security measures, yes, they have announced some additional security measures to protect tourists in the region Cancun and [Villahermosa]. And in the case of the third one, I'm not seeing that, exactly what I have just mentioned is that we are seeing additional traffic coming from the US because of peso [devaluation today, it's very clear for me that Cancun and the country itself, it's a very cheap destination for the US pass].

(Operator Instructions) Marco Montanez, Vector.

Do you have new information from Oaktree Capital about the decision of its investment in the Luis Munoz airport? Thank you.

Not yet. We have not received any official information from them.

(Operator Instructions). And it appears we have no further questions at this time, I'll turn things back over to Mr. Castro for any closing remarks.

Thank you, Caroline and thank you everybody for joining us today on this conference call. Also do not hesitate to contact me if there's any further question and have a great day. Goodbye.

And that will conclude today's conference call. Thank you everyone for your participation, you may now disconnect.