ASR

Business Context and Reporting Period

Company: Southeast Airport Group (Grupo Aeroportuario del Sureste, S.A.B. de C.V.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Second Quarter and Six Months ended June 30, 2017
Key Operational Change: On May 26, 2017, ASUR increased its ownership in Aerostar Airport Holdings, LLC (operator of San Juan, Puerto Rico's LMM Airport) from 50% to 60%. Consequently, ASUR began fully consolidating Aerostar's results line-by-line starting June 1, 2017, whereas prior periods were accounted for using the equity method.

Key Financial Metrics (Second Quarter 2017)

Note: All figures in thousands of pesos unless otherwise noted. Exchange rate used: US$1.00 = Ps. 18.0626.

Material Changes vs. Prior Period

• Revenue Growth: Consolidated revenue increased 30.8% YoY, driven by a 36.7% rise in aeronautical services and a 31.7% rise in non-aeronautical services. This growth was significantly influenced by the full consolidation of Aerostar (San Juan) for one month and a 12.3% increase in total passenger traffic.
• Passenger Traffic:
  • Mexico: Traffic rose 14.6% YoY (7.95 million passengers), with domestic traffic up 18.0% and international up 12.0%. Cancun Airport was the primary driver.
  • San Juan (LMM): Traffic rose 5.0% YoY (2.42 million passengers), with international traffic up 9.6%.
• Debt Profile: Total debt increased to Ps. 10.89 billion from Ps. 3.99 billion in 2Q16. This sharp increase is primarily due to the consolidation of Aerostar's debt, which was previously not included on the balance sheet. Net Debt to LTM EBITDA rose from 0.3x to 1.3x.
• Costs: Operating costs and expenses rose 27.4% YoY. Excluding construction costs, operating expenses increased 36.4%, reflecting higher maintenance, energy, and security costs, as well as the inclusion of Aerostar's costs.

Guidance, Outlook, and Risks

• Capital Projects: Construction of Terminal 4 at Cancun Airport is on track to open in the fourth quarter of 2017. Total capital expenditures for 2Q17 were Ps. 308.3 million.
• Strategic Acquisitions: ASUR announced agreements to acquire a controlling interest in two Colombian airport groups, subject to governmental approval.
• Dividends: Paid an ordinary cash dividend of Ps. 6.16 per share (Total: Ps. 1,848 million).
• Regulatory Environment:
  • Mexico: Regulated revenues are capped by the Ministry of Communications and Transportation. As of June 30, 2017, accumulated regulated revenues were Ps. 4,655.3 million.
  • Puerto Rico: Aerostar operates under an Airport Use Agreement with airlines, guaranteeing an annual contribution of US$62 million for the first five years, adjusted by CPI thereafter.
• Foreign Exchange: ASUR reported a foreign exchange loss of Ps. 5.8 million in 2Q17 due to a 1.2% appreciation of the Mexican peso against the U.S. dollar, compared to a Ps. 27.6 million loss in 2Q16.

Investor Verification Checklist

• Consolidation Impact: Verify the specific contribution of Aerostar (San Juan) to the Q2 revenue and debt figures, as the shift from equity method to full consolidation significantly alters year-over-year comparability.
• Debt Maturity: Review the amortization schedule for Aerostar's debt (Table 6), noting significant maturities in 2020 and 2021, and the interest rate exposure (LIBOR + spread).
• Construction Revenue Accounting: Confirm understanding of IFRIC 12 application, where construction revenues and costs are recognized simultaneously, impacting revenue totals but not EBITDA.
• Colombian Acquisitions: Monitor the status of governmental approvals for the proposed acquisition of two Colombian airport groups.
• Tariff Compliance: Track the annual review of maximum rate regulations by the Mexican Ministry of Communications and Transportation to ensure no revenue caps are breached.