Business Context and Reporting Period
Company: Grupo Aeroportuario del Sureste, S.A.B. de C.V. (Southeast Airport Group / ASUR)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2016
Accounting Standards: International Financial Reporting Standards (IFRS)
Reporting Currency: Mexican Pesos (Ps.)
ASUR operates nine airports in the southeast region of Mexico under 50-year concessions, with Cancún International Airport serving as the primary revenue driver (82.7% of total revenues in 2016). The company also holds a 50% joint venture interest in Aerostar, which operates the Luis Muñoz Marín International Airport (LMM) in Puerto Rico.
Key Financial Metrics (2016)
| Metric | 2016 (Ps. Millions) | 2015 (Ps. Millions) | Change |
|---|---|---|---|
| Total Revenues | 9,753.5 | 8,994.6 | +8.4% |
| Net Income | 3,629.3 | 2,913.7 | +24.6% |
| Operating Income | 4,932.6 | 4,072.9 | +21.1% |
| Operating Margin | 50.6% | 45.3% | +5.3 pts |
| Net Margin | 37.2% | 32.4% | +4.8 pts |
| Cash & Equivalents | 3,497.6 | 2,084.2 | +67.8% |
| Total Debt (Outstanding) | 4,460.8 | 3,708.5 | +20.3% |
| Passenger Traffic | 28.4 million | 26.1 million | +8.7% |
Note: Debt figures reflect outstanding indebtedness including bank loans. The company holds a significant portion of its debt in U.S. dollars (approx. 69.6% of total liabilities).
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 8.4% driven by a 15.6% rise in aeronautical services and a 24.6% increase in non-aeronautical services. This was primarily due to an 8.7% increase in passenger traffic and the depreciation of the Mexican peso against the U.S. dollar (19.9% depreciation in 2016).
- Construction Services: Revenues from construction services decreased 18.0% to Ps. 2,117.0 million, reflecting a slowdown in major capital projects compared to 2015 (specifically the Veracruz terminal extension).
- Cost Management: Total operating expenses decreased 2.0% to Ps. 4,820.9 million, largely due to the reduction in construction costs, which offset increases in technical assistance fees (+20.5%) and government concession fees (+18.3%).
- Profitability: Net income grew 24.6% to Ps. 3,629.3 million, outpacing revenue growth due to improved operating margins and a reduction in net comprehensive financing losses.
Guidance, Outlook, and Risks
Recent Developments & Outlook
- Colombia Expansion: In spring 2017, ASUR entered agreements to acquire controlling interests in Airplan and Aeropuertos de Oriente, operators of 12 airports in Colombia, for approximately U.S. $262 million. The transaction is expected to close in summer 2017 pending regulatory approval.
- Aerostar (Puerto Rico): ASUR is in the process of increasing its stake in the LMM Airport joint venture from 50% to 60% by purchasing an additional 10% from its partner, Highstar.
- Capital Projects: Construction of Terminal 4 at Cancún International Airport has commenced, with operations expected to begin in Q4 2017.
Key Risks
- Currency Fluctuation: Significant depreciation of the peso increases the peso cost of servicing U.S. dollar-denominated debt and creates a risk of exceeding regulated maximum revenue rates per workload unit.
- Regulatory Environment: Revenues are subject to a "dual-till" price regulation system. Exceeding maximum rates can result in fines or concession termination. The company is currently appealing a tax determination regarding concession amortization rates.
- Geopolitical & Economic: Operations are sensitive to U.S. and Mexican economic conditions, immigration policy changes, and perceptions of safety in Mexico (drug-related violence).
- Concentration Risk: Cancún International Airport generated 82.7% of total revenues in 2016.
Investor Verification Checklist
- Debt Covenants: Verify compliance with the consolidated leverage ratio (max 3.50:1) and interest coverage ratio (max 3.00:1) required by the U.S. $300 million credit facility.
- Colombia Acquisition: Monitor the status of regulatory approvals from Colombian authorities for the Airplan and Oriente acquisitions.
- Exchange Rate Exposure: Assess the impact of peso volatility on the U.S. dollar-denominated debt service costs and the risk of breaching regulated maximum revenue caps.
- Tax Litigation: Track the outcome of the appeal regarding the 15% vs. 2% amortization rate for tax purposes, which could result in an additional liability of Ps. 116.0 million.
- Passenger Traffic Trends: Monitor international passenger growth, particularly from the U.S., which accounts for over 60% of international traffic.