Business Context and Reporting Period
Company: Southeast Airport Group (Grupo Aeroportuario del Sureste, S.A.B. de C.V. or ASUR)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2012
Accounting Standard: International Financial Reporting Standards (IFRS) – First year of adoption.
Operations: ASUR operates nine airports in the southeast region of Mexico under 50-year concessions. The portfolio is heavily concentrated in Cancún International Airport, which generated 76.7% of total revenues in 2012. The company also holds a 50% interest in Aerostar, a joint venture that began operating the Luis Muñoz Marín (LMM) International Airport in San Juan, Puerto Rico, in February 2013.
Key Financial Metrics (2012 vs. 2011)
| Metric | 2012 (MXN Millions) | 2011 (MXN Millions) | Change |
|---|---|---|---|
| Total Revenues | 5,119.9 | 4,573.3 | +12.0% |
| Net Income | 2,075.3 | 1,591.1 | +30.4% |
| Operating Income | 2,529.9 | 2,092.8 | +20.9% |
| Operating Margin | 49.4% | 45.8% | +3.6 pts |
| Net Margin | 40.5% | 34.8% | +5.7 pts |
| Cash Flow from Operations | 2,649.2 | 1,915.4 | +38.3% |
| Cash and Equivalents (Year End) | 2,265.4 | 1,638.7 | +38.2% |
| Total Debt (Outstanding) | 314.9 | 696.6 | -54.8% |
| Passengers Served | 19.25 million | 17.54 million | +9.7% |
Material Changes and Drivers
- Revenue Growth: Driven by a 9.7% increase in passenger traffic and a 15.8% increase in domestic passengers. Aeronautical revenues rose 14.0%, while non-aeronautical (commercial) revenues grew 18.1% due to improved contractual terms and higher traffic.
- Profitability: Net income increased 30.4% despite a 4.4% rise in operating expenses. The effective tax rate decreased from 25.8% to 19.7% due to changes in deferred tax provisions and the recognition of deferred income tax liabilities for specific airports.
- Debt Reduction: Total indebtedness decreased significantly from Ps.696.6 million in 2011 to Ps.314.9 million in 2012, primarily due to repayments of Ps.381.1 million on bank loans.
- Construction Services: Revenues from construction services decreased 7.1% to Ps.663.2 million, reflecting a reduction in capital improvement projects compared to the prior year.
Guidance, Outlook, and Risks
- Regulatory Environment: Maximum rates for regulated services are set for the period ending December 31, 2013. New rates for 2013–2018 are to be set by the Ministry of Communications and Transportation in 2013. The company faces uncertainty regarding the potential construction of a new Mayan Riviera airport, which could impact Cancún traffic.
- Tax Dispute: The Ministry of Finance challenged the company's amortization rate for tax purposes regarding the Cancún concession. The company estimates potential fines and penalties of approximately Ps.439.1 million if the appeal is unsuccessful. The appeal was pending as of April 2013.
- Customer Concentration: The company relies on a few major airlines. American Airlines (in bankruptcy protection) and US Airways (merging with American) accounted for approximately 7.0% of revenues in 2012. The bankruptcy of Grupo Mexicana resulted in a Ps.128.0 million reserve for doubtful accounts.
- Expansion: The company expanded into Puerto Rico via the Aerostar joint venture, acquiring a 40-year lease for the LMM Airport. This required a new U.S.$215.0 million credit facility in February 2013.
- Exchange Rate Risk: Revenues from international passengers are dollar-denominated but collected in pesos. Depreciation of the peso can increase peso-denominated revenues but also increases the cost of servicing dollar-denominated debt.
Key Facts for Investor Verification
- Concentration Risk: Verify the impact of Cancún International Airport, which contributed 76.7% of total revenues and 75.1% of passenger traffic in 2012.
- Tax Contingency: Monitor the outcome of the appeal against the Ministry of Finance regarding the Ps.976.7 million assessment on concession amortization, with potential penalties estimated at Ps.439.1 million.
- Airline Solvency: Assess the financial stability of key customers, particularly American Airlines (in bankruptcy) and the impact of the American/US Airways merger on future traffic and receivables.
- Debt Covenants: Review the covenants associated with the new U.S.$215.0 million loan (LIBOR + 1.99%) taken in February 2013 to fund the Puerto Rico expansion, including leverage and interest coverage ratios.
- Regulatory Rate Setting: Track the Ministry of Communications and Transportation's decision on new maximum rates for the 2013–2018 period, which will directly impact future revenue ceilings.