Business Context and Reporting Period
Company: Southeast Airport Group (Grupo Aeroportuario del Sureste, S.A. de C.V.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter and Full Fiscal Year ended December 31, 2005.
Release Date: February 22, 2006
Business Overview: ASUR operates nine airports in southeastern Mexico, including the major tourist hubs of Cancun and Cozumel. The company is the first privatized airport group in Mexico.
Key Financial Metrics
Fourth Quarter 2005 (vs. 4Q04)
- Total Revenues: Ps. 324.5 million (Down 32.57%)
- EBITDA: Ps. 133.4 million (Down 53.17%); Margin declined to 41.11% from 59.19%
- Operating Income: Ps. 24.3 million (Down 86.51%); Margin declined to 7.49% from 37.47%
- Net Income: Ps. 6.2 million (Down 96.94%)
- Earnings Per Share (EPS): Ps. 0.0205 (Down 96.94%)
- Passenger Traffic: Total traffic down 33.07% (International down 51.65%, Domestic down 6.69%)
Full Fiscal Year 2005 (vs. FY04)
- Total Revenues: Ps. 2,063.8 million (Up 1.08%)
- EBITDA: Ps. 1,233.5 million (Down 3.51%); Margin declined to 59.77% from 62.61%
- Operating Income: Ps. 799.4 million (Down 7.64%); Margin declined to 38.73% from 42.39%
- Net Income: Ps. 563.2 million (Down 10.21%)
- Earnings Per Share (EPS): Ps. 1.88 (Down 10.21%)
- Passenger Traffic: Total traffic down 4.14%
Liquidity and Balance Sheet (as of Dec 31, 2005)
- Cash and Cash Equivalents: Ps. 1,533.6 million (Up 29.50% from prior year)
- Total Assets: Ps. 14,063.4 million
- Total Liabilities: Ps. 1,037.7 million (7.38% of total assets)
- Shareholder Equity: Ps. 13,025.7 million (92.62% of total assets)
- Capital Expenditures (FY05): Ps. 632.2 million
Material Changes and Drivers
The severe decline in 4Q05 performance was primarily driven by Hurricane Wilma, which struck the Yucatan Peninsula on October 20, 2005.
- Traffic Impact: Cancun and Cozumel airports saw total passenger traffic declines of 48.36% and 74.56% respectively in 4Q05. At year-end, only 39.72% of hotel rooms in Cancun were operational.
- Revenue Mix: Aeronautical revenues fell 36.33% due to lower traffic. Non-aeronautical (commercial) revenues fell 21.78%, with significant drops in retail (-39.51%), car rental (-41.75%), and food/beverage (-16.53%).
- Cost Structure: Total operating costs remained relatively flat (-0.25%) despite revenue drops, as concession fees and technical assistance costs decreased significantly. However, costs of services increased 9.07% due to maintenance and project evaluation expenses.
- Full Year Context: Despite the Q4 collapse, FY05 revenues grew slightly (1.08%) due to a 20.13% increase in commercial revenues, bolstered by arbitration awards from Dufry Mexico and Aldeasa totaling Ps. 49.4 million.
Outlook, Risks, and Management Commentary
Capital Projects
- Terminal 3 (Cancun): Construction began in December 2005. Estimated total investment is US$100 million. Features include 84 check-in counters and advanced security systems.
- Second Runway (Cancun): Federal government granted land concession. Estimated investment is US$50 million. Expected to double airport capacity.
Risks and Contingencies
- Hurricane Wilma Damage: ASUR recorded Ps. 134.0 million in damage for 4Q05. Ps. 89.0 million has been advanced by insurance, with Ps. 44.0 million pending. Final assessment is ongoing.
- Insurance Costs: Management expects a significant increase in insurance premiums upon renewal in February 2006 due to the magnitude of 2005 hurricane events.
- Future Traffic: Management expects the negative impact of Hurricane Wilma on passenger traffic to persist through a large portion of 2006.
- Tariff Regulation: Regulated revenues accounted for 72.30% of total revenue in FY05. Rates are set by the Mexican Ministry of Communications and Transportation.
Investor Verification Checklist
- Insurance Recovery: Verify the final settlement amount for Hurricane Wilma damages and the timeline for the remaining Ps. 44.0 million.
- 2006 Traffic Recovery: Monitor monthly passenger traffic reports to assess the duration of the recovery period for Cancun and Cozumel.
- Insurance Premiums: Confirm the magnitude of the expected premium increase for the 2006 policy renewal.
- Capital Expenditure Funding: Review cash flow projections to ensure the US$150 million combined investment in Terminal 3 and the second runway is funded without significant new debt.
- Commercial Revenue Per Passenger: Track the sustainability of the 9.89% increase in commercial revenue per passenger in 4Q05, which was driven by direct operations despite lower traffic.