PAC

Pacific Airport Group (GAP) - Q2 2021 Financial Summary

Business Context and Reporting Period

This Form 6-K filing covers the consolidated results for the second quarter ended June 30, 2021 (2Q21), and the first six months of 2021 (1H21). Pacific Airport Group (GAP) operates 12 airports in Mexico's Pacific region and two in Jamaica (Montego Bay and Kingston). The reporting period reflects a significant recovery in passenger traffic compared to the pandemic lows of 2Q20, though volumes remain below pre-pandemic 2Q19 levels. The company continues to navigate international travel restrictions, including testing requirements for the U.S. and Canada.

Key Financial Metrics (2Q21)

• Revenue: Total revenues reached Ps. 4,895.7 million, a 229.7% increase from 2Q20. Aeronautical services grew 447.9% to Ps. 3,023.6 million, while non-aeronautical services rose 174.7% to Ps. 911.2 million.
• Profitability: Operating income surged to Ps. 2,286.8 million (720.3% increase), turning a 2Q20 loss into a significant profit. Net income was Ps. 1,424.0 million, compared to a loss of Ps. 582.2 million in 2Q20.
• EBITDA: EBITDA increased to Ps. 2,797.1 million (1,948.8% increase). The EBITDA margin (excluding IFRIC 12 effects) improved to 71.2% from 15.6% in 2Q20.
• Cash Flow: Operating cash flow was positive at Ps. 2,530.4 million. Cash and cash equivalents stood at Ps. 15,503.0 million as of June 30, 2021.
• Debt and Liquidity: The company issued Ps. 4,500.0 million in long-term bonds during the quarter. Proceeds were used to repay Ps. 2,500.0 million in existing debt (Scotiabank working capital and GAP16 maturity) and fund committed investments. Total liabilities increased by Ps. 2,063.7 million year-over-year.

Material Changes vs. Prior Periods

• Passenger Traffic: Total passengers increased 562.6% to 11.04 million in 2Q21 compared to 2Q20. However, this represents a 9.6% decrease compared to 2Q19 (12.21 million).
• Cost Structure: Cost of services increased only 8.1% (Ps. 52.1 million) despite the massive revenue rebound, driven by strict cost controls and reduced credit loss provisions. Operating costs excluding IFRIC 12 adjustments rose 31.6%.
• Regional Performance: Mexican airports drove the recovery with a 526.5% increase in passenger traffic. Jamaican airports (Montego Bay and Kingston) saw significant volume increases (3,832.9% and 751.5% respectively) but remain below 2019 levels due to travel restrictions.
• Shareholder Returns: The company executed a capital reduction of Ps. 3.82 per share and repurchased Ps. 872.9 million worth of shares in 2Q21. Cumulative repurchases since March 1, 2021, totaled Ps. 1,892.4 million.

Outlook, Risks, and Management Commentary

• Recovery Trend: Management notes a "better-than-expected recovery" in the first half of 2021. International passenger traffic is accelerating, and business travel is recovering, though full pre-pandemic levels are not yet achieved.
• Asset Impairment: The company reviewed long-term assets and concluded that no significant deterioration is expected. No business interruption or airport closures are foreseen.
• Risks: Key risks include the continued negative effects of the pandemic, potential new travel restrictions, and the inability to predict future financing availability or credit conditions. The company cannot ensure that the negative impact of the pandemic will continue to decrease in the coming quarter.
• IFRIC 12 Impact: A significant portion of revenue and cost growth is attributed to "Improvements to concession assets" (IFRIC 12), which represents committed infrastructure investments. Management cautions that this recognition does not have a cash impact and margins including these figures may not be comparable to standard operating margins.

Investor Verification Checklist

• Verify the sustainability of the 71.2% EBITDA margin (excluding IFRIC 12) as passenger volumes approach pre-pandemic levels and cost controls may relax.
• Monitor the impact of the Mexican Peso appreciation (from ~Ps. 23.36 in 2Q20 to Ps. 20.05 in 2Q21) on the translation of Jamaican airport revenues and costs.
• Assess the timeline for the full recovery of international routes to the U.S. and Canada, which currently face testing and suspension restrictions.
• Review the specific allocation of the Ps. 4,500.0 million bond proceeds to ensure committed investments at Mexican airports are on schedule.
• Confirm the trajectory of non-aeronautical revenue per passenger, which remains significantly lower than 2019 levels (Ps. 82.5 vs. Ps. 199.0 in 2Q19).