Business Context and Reporting Period
Company: Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (Pacific Airport Group)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter (ended September 30, 2018) and Nine Months ended September 30, 2018.
Operations: The Company operates 12 airports in Mexico's Pacific region and holds a majority stake in Sangster International Airport in Montego Bay, Jamaica. Figures are unaudited and prepared under IFRS.
Key Financial Metrics (3Q18 vs. 3Q17)
| Metric | 3Q18 Value | Change vs. 3Q17 |
|---|---|---|
| Total Revenues | Ps. 498.8 million increase | +16.4% |
| Operating Income | Ps. 254.6 million increase | +16.7% |
| EBITDA | Ps. 297.7 million increase | +15.9% |
| Net Income | Ps. 197.8 million decrease | -16.9% |
| Operating Margin | 50.4% | +10 bps |
| EBITDA Margin (excl. IFRIC 12) | 69.3% | -50 bps |
Liquidity and Balance Sheet (as of Sept 30, 2018):
- Total Assets: Increased by Ps. 2,347.2 million vs. Sept 30, 2017, driven by cash (+Ps. 999.6 million) and improvements to concession assets (+Ps. 959.3 million).
- Total Liabilities: Increased by Ps. 2,767.3 million, primarily due to bond issuances of Ps. 2.3 billion and bank loans.
- Debt: Interest expenses increased by Ps. 122.4 million (69.5%) due to new long-term bond issuances and higher interest rates.
Material Changes vs. Prior Period
- Passenger Traffic: Total terminal passengers increased by 921.6 thousand (9.1%) in 3Q18. Domestic traffic rose 714.6 thousand, while international traffic (including Cross Border Xpress users) rose 207.0 thousand.
- Revenue Drivers: Aeronautical revenue grew 17.2% due to traffic increases and inflation-adjusted fees. Non-aeronautical revenue grew 15.7%, aided by new commercial spaces and a 6.5% depreciation of the Mexican peso against the U.S. dollar.
- Cost Structure: Cost of services increased 25.1%. Mexican airport costs rose due to higher employee costs, utility prices, and security expenses. Montego Bay costs surged 72.7% largely due to IFRIC 12 accounting recognition for infrastructure improvements.
- Net Income Decline: Despite higher operating income, Net Income fell 16.9% primarily due to a Ps. 438.6 million net exchange rate loss from currency translation effects and higher interest expenses.
Guidance, Outlook, and Risks
- New Routes: The Company expects to launch 20 new routes in Q4 2018, mostly with two to three frequencies per week.
- Expansion: Approximately 6,000 square meters of new commercial space will be added in Q4 2018, with an additional 2,000 square meters planned for 2019.
- Strategic Acquisition: On October 10, 2018, GAP signed a contract to operate Norman Manley International Airport (KIN) in Kingston, Jamaica, starting October 2019. This is expected to contribute ~3.5% passenger growth and ~6.0% revenue growth to consolidated results.
- Risks: Results are sensitive to foreign exchange fluctuations (MXN/USD). The filing includes standard forward-looking statement disclaimers regarding economic conditions and industry trends.
Investor Verification Checklist
- IFRIC 12 Impact: Verify the distinction between reported EBITDA margins and those excluding IFRIC 12 (Service Concession Arrangements), as the latter does not have a cash impact.
- Currency Translation: Confirm the specific impact of the Mexican peso depreciation on reported USD-denominated revenues from Montego Bay and the resulting translation losses on Net Income.
- Debt Service: Review the terms of the Ps. 2.3 billion long-term bond issuance and its effect on future interest coverage ratios.
- Montego Bay Consolidation: Note that the 25.5% non-controlling interest held by Vantage Airport Group Limited affects the attribution of net income.
- KIN Integration: Monitor the timeline for the October 2019 takeover of the Kingston airport to assess future growth projections.