Grupo Aeroportuario del Sureste (NYSE:ASR) (ASUR), the Mexican airport operator, announced its second quarter results for 2024, highlighting a year-on-year passenger traffic increase of 3% to nearly 18 million passengers. The growth was primarily driven by strong performance in Colombia and Puerto Rico, which helped offset a decline in Mexico.
The company's total revenues saw a significant rise, increasing by nearly 18% to MXN 7 billion. Commercial revenues also experienced a boost, with a 7% increase across all regions. ASUR's executive Adolfo Castro provided insights into the company's financial health, future outlook, and ongoing challenges, including the Pratt & Whitney engine recall and the potential impacts from the US election campaign.
Key Takeaways
- ASUR's total revenue rose by nearly 18% year-on-year to MXN 7 billion.
- Passenger traffic increased by 3%, with notable growth in Colombia and Puerto Rico.
- Commercial revenues, including parking and car rental, were up by 7%.
- The company is actively working on sustainability initiatives and ESG compliance.
- ASUR is dealing with the Pratt & Whitney engine recall and monitoring the US election campaign for potential impacts.
- The company's cash balance is mainly in US dollars, with a significant portion being approximately $400 million.
Company Outlook
- Traffic in Puerto Rico and Colombia is expected to normalize and recover, respectively.
- Mexicana de Aviación's impact on ASUR's operations is minimal.
- The Punta Cana project is still in legal proceedings and completion is at least a year away.
Bearish Highlights
- A decline in traffic from the US and domestic issues are affecting Cancun Airport.
- Domestic traffic in Mexico is projected to be negative for the remainder of the year due to challenges in Mexico City.
Bullish Highlights
- Airlines such as Volaris, Viva, and Aeromexico are expanding their fleets, which may help mitigate the impact of the Pratt & Whitney engine issue.
Misses
- There are no new updates on the Punta Cana project, indicating a delay.
Q&A Highlights
- The company plans to review the use of excess cash annually for dividends and other purposes.
- In May and June, dividends of MXN 6.3 billion were distributed to shareholders.
- Adolfo Castro concluded the call with remarks on the company's resilience and strategic direction.
In conclusion, ASUR (ticker: ASUR) demonstrated a robust financial performance in the second quarter of 2024, despite facing some operational headwinds. The company remains focused on sustainability, commercial revenue growth, and managing external challenges while continuing to provide value to its shareholders.
InvestingPro Insights
Grupo Aeroportuario del Sureste (ASUR) has showcased financial resilience in its latest quarterly report. To further understand ASUR's position, here are some insights from InvestingPro that can provide additional context to the company's performance:
InvestingPro Data highlights that ASUR holds a market capitalization of approximately $9.09 billion USD, signaling a substantial presence in the industry. The company's P/E ratio stands at 13.97, which suggests that the stock may be reasonably valued in relation to its earnings. Additionally, ASUR's revenue growth over the last twelve months as of Q2 2024 is 7.15%, indicating a steady increase in the company's sales.
From the perspective of InvestingPro Tips, ASUR has been recognized for its strong gross profit margins, which as of the last twelve months as of Q2 2024, are at an impressive 63.43%. This efficiency in generating profit from sales is a positive sign for investors. Moreover, the company has consistently rewarded its shareholders, raising its dividend for 4 consecutive years, with a notable dividend yield of 5.23% as of the latest data.
For those interested in deeper analysis, there are 13 additional InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/ASUR. These tips provide further insights into ASUR's financial health, market position, and future profitability.
Investors seeking to leverage this information for their portfolio can benefit from an exclusive offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
In conclusion, ASUR's financial metrics and the strategic moves highlighted in the InvestingPro Tips suggest that the company is not only managing current challenges effectively but is also positioning itself for sustainable growth and shareholder returns.
Full transcript - Grupo Aeroportuario Sureste (ASR) Q2 2024:
Operator: Good day, ladies and gentlemen, and welcome to ASUR's Second Quarter 2024 Results Conference Call. My name is Ezequiel 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. Now I'd like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.
Adolfo Castro: Thank you, Ezequiel, and good morning, everyone. Before I begin discussing our results, let me remind you that certain statements made during this call may constitute forward-looking statements, which are based on current management expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control. Additional details about our quarterly results can be found in our press release, which was issued yesterday after market closed and is available on our website in Investor Relations section. Following my presentation, I will be available for Q&A. Before moving on to our performance for the quarter, let me provide an update on recent developments on the sustainability front. Beginning with -- we have compliance with [indiscernible] ESG reporting requirements, including the Mexican Stock Exchange, the United Nations Global Compact and the Mexican Register of carbon emissions. We are also implementing a data collection process that will allow us to calculate our scope-3 carbon emissions. This process is approximately at 90% complete as of the end of the second quarter for the Mexican airports. We also renewed our social project with Pronatura, which supports local fishing communities and promote sector tourism in the Yucatan Peninsula. The [indiscernible] project will include four additional direct beneficiaries and approximately 100 indirect beneficiaries. Additionally, we have been in conversation to strengthen ASUR alliance with the UNICEF and extend the activities of this agency to all airports across our group. Lastly, we are also in the final stages of establishing a strategic alliance with [indiscernible], a nongovernmental organization that aims to prevent human trafficking. We look forward to providing more updates as we continue to advance in our sustainability journey. Now starting with a review of ASUR's operational and financial performance for the quarter. As usual, all comparison this call will be year-on-year unless specified otherwise. Passenger traffic was up 3% year-on-year to nearly 18 million passengers, a record high for second quarter. Traffic growth in Puerto Rico and Colombia more than offset a softer performance in Mexico. By region, Colombia posted the strongest performance with traffic up 21% year-on-year driven by the increases in domestic and international in the high teens and in the high 20s. Traffic in Colombia continued to benefit from insert comps following the suspension of two operators in February last year, which accounted for 20% of the traffic. We expect this positive recovery trend to continue during the remaining of the year as Avianca and LATAM airlines regain some loss routes. Puerto Rico delivered a 9% increase in traffic driven by growth in high single digits and in domestic traffic and double digits in international traffic. As anticipated, we are seeing a normalization in the traffic of Puerto Rico as last year benefited from the increased operations by Frontier Airlines. Lastly, traffic in Mexico declined close to 5%, reflecting single-digit contractions in both international and domestic traffic. In terms of international traffic, we saw declines from all the regions, except Canada in the quarter. In turn, domestic traffic remains impacted by the initial effects of Pratt & Whitney engine problem experienced in the past few quarters as well as the capacity reduction of higher traffic movements at Mexico City Airport since early this year. As a reminder, Mexico City Airport accounted for 45% of ASUR's domestic traffic in 2023. And we expect the situation to continue negatively impacting domestic traffic this year which would post a small decline in the year. Now moving on to P&L. As a reminder, all references to revenue and costs are excluding construction. Total revenues increased nearly 18% to MXN7 billion in the quarter. Colombia stood out with the top line growth in the 30s, mainly benefiting from the pickup in international traffic. Mexico delivered revenue growth in the high teens and Puerto Rico in the middle single digits. Mexico accounted for 74% of the total revenues posted an 18% top line increase, even as passenger traffic declined 5%. Revenue was driven high 20s growth in aeronautical services, reflecting the adjustment established in the recent domestic airline plan and the impact of the weaker peso taking into account that international tariffs are based in U.S. dollars. In turn, non-aeronautical revenues increased low single digits. Puerto Rico accounted for 15% of the total revenues and delivered a 5% growth in the top line, reflecting high single-digit increase in non-aeronautical while aeronautical revenues increased by low single digits. In turn, Colombia, which represented 11% of revenues posted a 35% increase in top line, reflecting a good performance in both aeronautical and non-aeronautical revenues, which benefited from international traffic growth. As we continue to execute our strategy of expanding our conventional offering, we opened 45 new commercial spaces over the past 12 months. Of these, 17 were opened in Mexico, 4 in Puerto Rico and 33 in Colombia. As a result, commercial revenues were up 7%, more than double the growth in passenger traffic, mainly reflecting increases of 4% in Mexico, 9% in Puerto Rico, an impressive 40% in Colombia. On a per passenger basis, commercial revenue increased 5% year-on-year to nearly MXN128 in the quarter. This performance was mainly driven by growth of 16% in Colombia, 9% was in Mexico and Puerto Rico was relatively flat. Mexico reported record high commercial revenues per passenger at MXN154.5 million beyond the typical levels achieved in the pandemic benefiting from a strong U.S. dollar. Moving down to the P&L. Cost and expenses increased nearly 30% year-on-year. On a comparable basis, excluding the MXN252 million recovery in expenses in Puerto Rico under the Coronavirus Response and Relief Supplemental Appropriations Act in the second quarter of last year. Total costs were up 16%, slightly below revenue growth. By geography, cost in Mexico were up 18%, resulting from increases of 80% in the concession fees established by the Mexican government and 20% in minimum wages, mainly in cleaning and security, both effective January 1. This was partially offset by a 50% reduction in the technical assistance fee. On a comparable basis, Puerto Rico reported a 10% increase in cost, which was below revenue growth while Colombia were up 19% above revenue growth. Consolidated EBITDA was up 18% year-on-year to MXN5 billion in the quarter, while adjusted EBITDA margin, which excludes construction was relatively unchanged at 69%. Note that on a comparable basis, excluding the recovery expenses in Puerto Rico in the second quarter of last year, EBITDA would have increased 26% and the adjusted EBITDA margin were expanded by 435 basis points year-on-year. This good performance was driven by a solid profitability across our three regions of operation. Puerto Rico presented the strongest performance with comparable EBITDA up over 90%, Colombia at followed by 49% increase, while Mexico posted an 18% increase in EBITDA. Turning to the balance sheet. We maintain a healthy financial position with cash and cash equivalents of nearly MXN15 billion after taking into account the dividend payments totaling of MXN6.3 billion during the quarter, equivalent to a cash and cash dividend of MXN10.926 per share and an extraordinary cash dividend of MXN10 per share. Lastly, in terms of CapEx, we made investments of nearly MXN650 million during the quarter and close to MXN820 million in the first half of the year. We are currently in the process of project planning and carrying out the bidding process to select contractors. Key projects include a Cancun airport, the expansion of Terminal 4 and reconstruction and expansion of Terminal 1. And finally, the expansion of the terminal in Riohacha Airport. Note that all construction works will take place outside the operating area and those not affect the operation of these efforts. Wrapping up, we delivered a solid second quarter with net majority income up 50% year-on-year to MXN3.7 billion. This good performance also benefited from the foreign exchange gain of nearly MXN950 million this quarter, resulting from the 10% quarter and depreciation of the Mexican peso against the U.S. dollar, compared with a MXN350 million FX loss reported in the same quarter last year. This quarter was not without its challenges, notably the ongoing issues of Pratt & Whitney engines and reduction of capacity in Mexico City Airport, but we navigated through this and deliver strong results in the quarter. This ends my prepared remarks, Ezequiel, please open the floor for questions.
Operator: [Operator Instructions] Our first question is from Rodolfo Ramos from Bradesco BBI. Please go ahead.
Rodolfo Ramos: Just a couple from my side. The first one is on traffic. I wanted to get your sense of where we stand in the -- in this in the recall on Pratt & Whitney. You're one of the least exposed. Just wanted to get your thoughts on where we stand there. And on traffic as well, if you would expect, given the rhetoric that we've seen so far from the U.S. election campaign, whether we can expect a similar impact from what we saw last time around in terms of the U.S. international bond traffic. So that's my first one on traffic. And secondly, if you can just give us a sense of pricing of where you currently stand. You had mentioned in the previous call that you increased prices in April. So just wanted to see where do you stand versus your maximum tariffs and what to expect there going forward?
Adolfo Castro: Well, in the case of Pratt & Whitney, of course, I do not have the exact and precise data. But what I understand the most affected is blades, they sent 19 airplanes during the fourth quarter and 26 during the first quarter. And you know the time of the recall is around 300 days. So, we will see those planes coming back to production, I would say, at the end of September this year. So from now until September, the planes are not going to improve and after that, I will -- I believe they will stabilize up to first quarter next year, and then they should improve. In the case of what you have mentioned, because of the elections in the U.S., yes, I do expect and you can see that very clear, that Mexico -- the Mexican situation will be there in all the candidates. And they will be blaming all the problems we have here, and that may affect traffic during the fourth quarter. In terms of pricing, we have adjusted our prices. So, we are working towards to have a maximum tied compliance of close to 99% for the year.
Operator: The next question is from Guilherme Mendes from JPMorgan (NYSE:JPM). Please go ahead.
Guilherme Mendes: I was wondering in terms of the commercial revenues. As has been surprising to the upside on a per passenger basis. And you mentioned about opening a bunch of new commercial spaces in the three regions. How should we think about this segment going forward, meaning in addition to the investments that you're going to make in Cancun Airport, should we expect additional openings or ramp-ups on the commercial front? And my second question is on traffic, following up on the previous one, but I think about Puerto Rico and Colombia. You mentioned in the past conference call about a normalization on the trends of both Colombia and Puerto Rico accelerating and decelerating. Just wanted to double check if that's still your base case expectation?
Adolfo Castro: Well, in the case of commercial revenues, what you saw for the quarter, it was parking and also car rental, those were the two winners for the quarter. I have to say that, of course, in the case of Mexico, which has reached a record high of MXN154 per passenger. We were positively affected by the Mexican peso depreciation. In the case of the traffic of Puerto Rico and Colombia, yes, I do believe that Puerto Rico should normalize during the remaining of the year. And in the case of Colombia, what I do expect is the recovery process towards the end of the year of what we have lost last year with the ground of these two airlines that represent 20% of the traffic during 2022.
Operator: The next question is from Jens Spiess with Morgan Stanley (NYSE:MS) Investment. Please go ahead.
Jens Spiess: I just wanted to ask on the realized tariff. I think you reported MXN326. And doing some math here, we get that it represents around 95% of your maximum tariff, if we rate it by traffic of the individual airports. Does it sound about right? Or are we missing anything? And a follow-up to that, are you worried about the depreciation in the Mexican vessel? Or I think, that being said, a further depreciation in the Mexican peso, which could maybe result in a high-end risk of you exceeding the maximum tariffs and potentially having to give some discounts towards the end of the year?
Adolfo Castro: Well, in the case of the maximum tariff, there's a key part in the Mexican section that says what was the weighted average maximum rate obtained -- well, implicate obtained during the quarter. What I was saying last year, yes, we reached 95% and what we are expecting -- it's close to 99%. Of course, that will depend on what you just mentioned in terms of the Mexican peso. Mexican peso devaluation will help us to get these objectives as the tariffs for the international plants are based in U.S. dollars. So that -- remember that maximum rate is in pesos. So that will help us to reach the objective.
Jens Spiess: Okay. Perfect. And if I may, just one follow-up. In terms of traffic -- I mean, comparing it to what you forecasted within your tariff review, I mean, we're not even close to getting to the 3% clawback, aren’t we? Or any color on that?
Adolfo Castro: Well, in terms of traffic, what I would say is what we were expecting from Pratt & Whitney and the decrease in the international traffic has been higher in comparison with what we were expecting at the end of last year.
Jens Spiess: A bit higher, okay.
Adolfo Castro: They've not been dramatic.
Jens Spiess: Okay. higher but not close to 3% clawback?
Adolfo Castro: Higher in terms of more negative. So today, the current traffic is more negative as we were expecting.
Operator: The next question is from Fernanda Recchia with BTG. Please go ahead. Fernanda Recchia may we ask you to unmute your line, and please go ahead with your question. As there is no response, may I request that we move to the next participant. The next question is from Jay Singh with Citibank. Please go ahead.
Jay Singh: I guess the first thing I wanted to ask is, you mentioned earlier that Colombia and Puerto Rico traffic strength you've seen moderating a little bit. But I also want to ask the JetBlue has been raising capacity into Puerto Rico's market. So, considering that, do you still see some degree of moderation? Or do you just see it sticking around a little bit higher?
Adolfo Castro: Jay, I cannot hear you well. Could you speak louder.
Jay Singh: Sure. So, you mentioned Colombia and Puerto Rico's traffic strengthened potentially moderating in the coming quarters. But a JetBlue has been raising their capacity into Puerto Rico's market. So do you see that sticking around? Or do you still see it normalizing?
Adolfo Castro: The most important effect in Puerto Rico last year was the entrance of from PS. They are expanding and creating a base in Puerto Rico. Of course, when you reach the comparables year-over-year, then it will not be easier to reach the 18% growth we got last year. So that's why I'm saying that it should normalize once we reach the 12 months rollover with the entrance of [indiscernible].
Jay Singh: And for my second question, I wanted to ask how much CapEx can we expect on a consolidated basis? And what would the split look like between the MDP and the non-MDP?
Adolfo Castro: Again, I cannot hear you.
Jay Singh: Okay. How much CapEx can we expect on a consolidated basis? And what would the split look like between the MDP and the non-MDP?
Adolfo Castro: The MDPs for this year is around MXN3.8 billion. That, of course, will be -- will have to be adjusted with the construction price index. And that's what we have to comply with. I have to say that at the beginning of the five-year period, once the projects have been approved at the end of last year, we have to wait until we develop the projects, make the billing process and buying the contractors, and then they can start constructing. So that's why you are seeing a very slow between brackets number for the first half of the year, the MXN800-and-something million comparable with the MXN3.8 billion that we have to spend during the year.
Operator: The next question is from the line of Pablo Monsivais with Barclays (LON:BARC). Please go ahead.
Pablo Monsivais: May I just ask if you can provide some color on the -- on your perspective for U.S. traffic to Cancun? We have seen some weakness and U.S. carriers are saying that they are taking out capacity. But what are your thoughts on this? And especially how deep or how prolonged can this be? That's number one. And number two, I would like to have more detail on your commercial revenues plans for Colombia and Puerto Rico going forward?
Adolfo Castro: Well, in the case of the traffic of Cancun, as you have seen in the first half of the year, in terms of [indiscernible] basically affected by the domestic situation of Pratt & Whitney and the reduction of the air traffic movements at Mexico City Airport from 52 to 43. I don't think that these two things will change. So that those two things will continue affecting with traffic during the second half of the year. And also, the new negative effect is reduction in the traffic from the U.S., as I have mentioned in my initial remarks. As it was mentioned during the call, during 2018 -- at the end of 2018 because of the elections of the U.S. where there was someone saying every single day that Mexico was a bad place to be. Probably, we will be affected from this traffic from the U.S. So not very high hopes on the track for Cancun over the year.
Operator: The next question is from Andressa Varotto with UBS. Please go ahead.
Alberto Valerio: Actually, it's Alberto Valerio from UBS team. Adolfo, I would like to know about the new airline in Mexico, Mexicana de Aviación what we should expect from them if you have talked to them for some new routes to your airport? And also, what should we expect from the industry of airlines in Mexico, if you see any additional capacity. We know that we both Viva and Volaris [indiscernible] with [indiscernible] issue. But for next year in 2026, what should we expect from the domestic industry?
Adolfo Castro: Well, in the case of Mexicana de Aviación when I have heard or what I have read in the news and the numbers that have been provided by the Mexican government is they have transported around 100,000 passengers during the first five months of the year. So, if we compare that with the 8 million from Volaris, 9 million from Viva, and probably another 8 million from Aeromexico doesn't mean too much. As we have seen, Viva, Volaris and Aeromexico have been adding some additional plans to their fleets. This is also in the case of Volaris and Viva mitigating -- partially mitigating the effect of Pratt & Whitney. And remember that this Pratt & Whitney situation is a temporary situation. So, we should see a strong recovery from these three next year.
Operator: The next question comes from Isabela Salazar with GBM. Please go ahead.
Isabela Salazar: I was wondering if you could give us any update on Punta Cana?
Adolfo Castro: We don't have any updates. The legal projects have been established, and that will take time, as I have said during my previous earnings conference call, the project [indiscernible] call for one year at least.
Operator: The next question comes from [Andres Aguilar with GBM]. Please go ahead.
Unidentified Analyst: I was wondering if you could provide an overview of expected traffic mix, I think you're not in domestic passengers for the remainder of the year?
Adolfo Castro: Well, as I have mentioned, traffic -- domestic traffic for remaining of the year, it's going to be affected by these two things, starting with in Mexico City. So, we should expect these to be negative in the whole system, not just in the case of [indiscernible].
Operator: The next question comes from Anton Mortenkotter with GBM. Please go ahead.
Anton Mortenkotter: Adolfo, congrats on the results. I have two quick questions. One is related on your cash balance. I was wondering if you can tell us how much of that is dollarized? And the second one is, considering the cash flow generation that you have right now and with the CapEx commitments, even though they are really high for the next coming -- the next five years, seems like you will end up with a significant cash balance of around MXN20 billion. I was just wondering what are your thoughts on the possible use of that cash?
Adolfo Castro: Well, basically, all -- you can see the numbers, Puerto Rico is U.S. Colombian pesos and in the case of Mexico, some of this is U.S. dollars. Roughly speaking, in Mexico, we should be around $400-and-something million of -- in dollars and the rest in pesos. In terms of the cash flow generation, yes, of course, we have a lot of CapEx in front, very high numbers in the coming years. But as always, we will review this at the end of every year in terms of the tax situation, the cash balance, the CapEx commitments, and we will propose the dividend to the Board of Directors and then to the shareholders of [indiscernible]. As I had mentioned, during May and June, we have paid MXN6.3 billion in dividends. And it was an ordinary dividend of MXN10.926, an extraordinary dividend of MXN10 as it was done last year.
Operator: Ladies and gentlemen, that concludes the question-and-answer portion for today's conference call. I would like to turn it back over to Mr. Castro for closing remarks.
Adolfo Castro: Thank you, Ezequiel, and thank you all of you again for joining us today for the second quarter 2024 conference call. We wish you a good day and goodbye. Now you may disconnect.
Operator: Thank you. Ladies and gentlemen, that concludes ASUR's second quarter 2024 results conference call. We would like to thank you again for your participation. You may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.