Business Context and Reporting Period
Company: Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASUR)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter ended March 31, 2014
Business Overview: ASUR operates nine airports in southeast Mexico (including Cancún) and holds a 50% joint venture interest in Aerostar Airport Holdings, LLC, which operates the Luis Muñoz Marín International Airport in San Juan, Puerto Rico.
Key Financial Metrics
| Metric | 1Q 2014 | 1Q 2013 | Change |
|---|---|---|---|
| Total Revenues | Ps. 1,383.14 million | Ps. 1,374.51 million | +0.63% |
| EBITDA | Ps. 951.03 million | Ps. 917.32 million | +3.68% |
| EBITDA Margin | 68.76% | 66.74% | +2.02 pts |
| Operating Profit | Ps. 837.99 million | Ps. 814.17 million | +2.93% |
| Operating Margin | 60.59% | 59.23% | +1.36 pts |
| Net Income | Ps. 634.38 million | Ps. 486.61 million | +30.37% |
| Earnings Per Share (EPS) | Ps. 2.1146 | Ps. 1.6220 | +30.37% |
| Earnings Per ADS (US$) | $1.6198 | $1.2425 | +30.37% |
| Total Passenger Traffic | 5,876,600 | 5,535,500 | +6.16% |
| Commercial Rev. per Passenger | Ps. 77.95 | Ps. 74.24 | +5.00% |
Liquidity and Debt:
- Cash and cash equivalents (March 31, 2014): Ps. 1,603.41 million (up 27.30% from year-end 2013).
- Total bank debt (March 31, 2014): Ps. 2,811.82 million.
- Shareholders' equity: Ps. 16,915.33 million.
- Total liabilities: Ps. 4,903.80 million.
Material Changes vs. Prior Period
- Revenue Composition: Total revenue growth was modest (+0.63%) due to a significant 76.65% decline in construction services revenue (Ps. 21.11 million vs. Ps. 90.43 million), which offset growth in aeronautical (+3.04%) and non-aeronautical (+11.32%) revenues.
- Passenger Traffic: Total traffic rose 6.16%, driven by international traffic growth of 6.90% (primarily at Cancún) and domestic growth of 4.85%. Note: Holy Week occurred in March 2013 but in April 2014, creating a seasonal timing difference.
- Cost Structure: Total operating costs declined 2.71%. This was driven by the drop in construction costs (-76.65%) and lower administrative expenses (-8.06%), partially offset by a 19.91% increase in cost of services due to the reopening of Cancún Terminal 1 and higher direct sales costs.
- Net Income Surge: Net income increased 30.37%. This was primarily driven by a reversal in the joint venture performance: ASUR recorded a Ps. 10.55 million gain from its Aerostar (Puerto Rico) investment in 1Q14, compared to a Ps. 122.05 million loss in 1Q13.
- Tax Reform Impact: Income taxes declined 13.92% due to the repeal of the IETU tax in Mexico effective January 1, 2014, and a decrease in the provision for income taxes.
Guidance, Outlook, Risks, and Unusual Items
- Regulatory Environment: ASUR's regulated revenues (approx. 74.65% of total income) are subject to maximum rates set by the Mexican Ministry of Communications and Transportation. The annual average tariff per workload unit for 1Q14 was Ps. 171.67.
- Debt Covenants: The company is subject to strict covenants on its US$215.00 million credit facility, including a maximum consolidated leverage ratio of 3.50:1.00 and an interest coverage ratio of 3.00:1.00. Failure to comply could restrict dividends and trigger immediate repayment. ASUR reported compliance as of the report date.
- Capital Expenditures: Investments in 1Q14 were Ps. 36.77 million, part of ongoing master development plans to modernize airports.
- Forward-Looking Statements: The filing contains forward-looking statements regarding future expectations, which are subject to risks and uncertainties. Actual results may differ significantly.
- Unusual Items: The significant swing in net income is largely attributable to the equity method accounting for the Aerostar joint venture, which moved from a substantial loss to a gain year-over-year.
Investor Verification Checklist
- Joint Venture Volatility: Verify the sustainability of the Aerostar (Puerto Rico) joint venture performance, as the shift from a Ps. 122M loss to a Ps. 10M gain was the primary driver of the 30% net income increase.
- Construction Revenue Normalization: Confirm the trajectory of construction services revenue, which dropped 76% due to lower capital expenditures, and assess if this is a temporary fluctuation or a structural change in revenue mix.
- Debt Covenant Compliance: Monitor the consolidated leverage and interest coverage ratios to ensure continued compliance with the US$215M credit facility covenants, which restrict dividend payments.
- Seasonality Adjustments: Account for the timing difference of Holy Week (March 2013 vs. April 2014) when analyzing passenger traffic growth trends.
- Tax Law Implications: Review the long-term impact of the January 1, 2014, Mexican Income Tax Law reform (repeal of IETU) on future deferred tax liabilities and effective tax rates.