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: First Quarter ended March 31, 2011
Business Overview: ASUR is the first privatized airport group in Mexico, operating concessions for nine airports in southeast Mexico, including the major hub at Cancún. The company is listed on the NYSE (ASR) and the Mexican Bolsa (ASUR).
Key Financial Metrics
Financial figures are presented in millions of Mexican Pesos (Ps.) unless otherwise noted. All figures are unaudited and prepared under Mexican Financial Reporting Standards (MFRS).
| Metric | 1Q11 | 1Q10 | Change |
|---|---|---|---|
| Total Revenues | 1,062.90 | 1,064.73 | (0.17%) |
| EBITDA | 677.20 | 666.00 | 1.68% |
| EBITDA Margin | 63.71% | 62.55% | +1.16 pts |
| Operating Profit | 583.03 | 576.79 | 1.08% |
| Operating Margin | 54.85% | 54.17% | +0.68 pts |
| Net Income | 420.20 | 430.45 | (2.38%) |
| Earnings Per Share (Ps.) | 1.4007 | 1.4348 | (2.38%) |
| Earnings Per ADS (US$) | 1.1762 | 1.2049 | (2.38%) |
Liquidity and Balance Sheet (as of March 31, 2011):
- Cash and Cash Equivalents: Ps.1,851.06 million (up 61.64% year-over-year).
- Total Bank Debt: Ps.860.8 million (including Ps.0.9 million accrued interest).
- Shareholders' Equity: Ps.15,215.66 million.
- Total Liabilities: Ps.3,530.96 million (18.83% of total assets).
Material Changes vs. Prior Period
Revenue Composition: Total revenue remained nearly flat (-0.17%) due to a significant decline in construction revenues offset by growth in core operations.
- Construction Revenues: Declined 34.31% to Ps.61.9 million due to fewer improvements to concessioned assets. This decline was mirrored by a 34.31% drop in construction costs.
- Aeronautical Revenues: Increased 2.04% to Ps.652.5 million, driven by tariff increases that offset a 1.32% decline in total passenger traffic.
- Non-Aeronautical Revenues: Increased 5.28% to Ps.348.5 million. Commercial revenues specifically rose 5.88%, with commercial revenue per passenger increasing 8.24% to Ps.65.10.
Passenger Traffic: Total traffic declined 1.32% to 4.62 million passengers.
- Domestic Traffic: Decreased 3.35%, heavily impacted by declines at Oaxaca (-33.52%), Minatitlán (-22.58%), and Tapachula (-20.31%).
- International Traffic: Decreased 0.31%, primarily due to a slight dip at Cancún (-0.39%).
- Seasonality: The decline was partly attributed to the timing of Holy Week, which fell in March 2010 but in April 2011.
Expenses and Taxes:
- Operating Costs: Declined 1.65% year-over-year, primarily due to lower construction costs.
- Income Taxes: Increased 15.21% due to provisional IETU payments and a shift in tax treatment for Cancún Airport (asset taxes vs. IETU).
- Financing Costs: Comprehensive financing costs dropped 99.9% to negligible levels, driven by net interest income and a mark-to-market gain on interest rate swaps.
- Forward-Looking Statements: Future expectations are subject to risks identified in SEC filings; actual results may differ significantly.
- Interest Rate Risk: The company has hedged 32% of its interest rate exposure on Ps.920 million in credit agreements.
- Exchange Rate Risk: The company reported a Ps.5.4 million exchange rate loss in 1Q11.
- Construction Revenue Volatility: Verify the sustainability of core revenue streams given the 34% drop in construction revenue, which is tied to specific asset improvement cycles.
- Domestic Traffic Trends: Investigate the causes of significant declines at secondary airports (Oaxaca, Minatitlán, Tapachula) to determine if these are temporary or structural.
- Tax Liability Impact: Confirm the long-term impact of the shift from IETU to asset taxes for Cancún Airport on future net income.
- Debt Servicing: Review the terms of the Ps.920 million credit agreements and the effectiveness of the interest rate hedge against future TIIE fluctuations.
- Commercial Yield: Assess the durability of the 8.24% increase in commercial revenue per passenger as a key driver of profitability.
Guidance, Outlook, and Risks
Management Commentary: Management highlighted the resilience of core aeronautical and commercial operations despite the drop in construction revenue and passenger traffic. The increase in commercial revenue per passenger (8.24%) indicates successful monetization of existing traffic.
Capital Expenditures: ASUR invested Ps.51.25 million in 1Q11 for airport modernization under master development plans.
Regulatory Environment: Regulated revenues accounted for 65.81% of total income. The Mexican Ministry of Communications and Transportation sets maximum rates, which are reviewed annually.
Accounting Changes: The company adopted new Mexican Financial Reporting Standards (NIF) effective January 1, 2011, including I-MFRS 17 regarding service concession contracts. Management states these changes will not have a substantial impact on financial disclosure.
Risks and Contingencies: