Business Context and Reporting Period
Company: Southeast Airport Group (ASUR / ASUR)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter and Twelve Months ended December 31, 2017
Date of Filing: February 23, 2018
Overview: ASUR operates 16 airports across Mexico, the U.S. (Puerto Rico), and Colombia. The reporting period was significantly impacted by two major acquisitions: the full consolidation of Aerostar (operator of Luis Muñoz Marín Airport in San Juan, Puerto Rico) starting June 1, 2017, and the acquisition of Airplan (operator of six airports in Colombia) starting October 19, 2017. Operations in Puerto Rico were severely disrupted by Hurricane Maria in September 2017.
Key Financial Metrics (4Q17)
| Metric | 4Q17 Value | 4Q16 Value | YoY Change |
|---|---|---|---|
| Total Revenue | Ps. 3,871.7 million | Ps. 3,076.6 million | +25.8% |
| EBITDA | Ps. 1,937.8 million | Ps. 1,344.4 million | +44.1% |
| EBITDA Margin | 50.0% | 43.7% | +635 bps |
| Net Income | Ps. 3,113.8 million | Ps. 917.5 million | +239.4% |
| Majority Net Income | Ps. 2,262.5 million | Ps. 917.5 million | +146.6% |
| Earnings Per Share (MXN) | Ps. 7.54 | Ps. 3.06 | +146.6% |
| Cash & Equivalents | Ps. 4,461.0 million | Ps. 3,497.6 million | +27.5% |
| Net Debt | Ps. 12,910.4 million | Ps. 963.1 million | +1,240.4% |
| Net Debt / LTM EBITDA | 1.74x | 0.18x | N/A |
| Commercial Revenue per Passenger | Ps. 95.4 | Ps. 96.4 | -1.0% |
Note: All figures in Mexican Pesos (Ps.) unless otherwise noted. Tables state figures in thousands of pesos.
Material Changes vs. Prior Period
- Acquisitions and Consolidation: The dramatic increase in Net Debt and Total Debt is primarily due to the consolidation of Aerostar and Airplan. Revenue growth was driven by the inclusion of these new operations, offset by declines in Puerto Rico and Colombia traffic.
- Operating Profit Volatility: Consolidated Operating Profit turned negative (Ps. -3,424.4 million) with a margin of -88.4%, compared to a positive Ps. 1,204.4 million in 4Q16. This was caused by a Ps. 4,719.1 million impairment charge on long-term assets in Puerto Rico due to Hurricane Maria and amortization related to the Aerostar acquisition.
- Traffic Divergence:
- Mexico: Traffic increased 6.2% YoY, driven by Cancun Airport (Terminal 4 opened).
- Puerto Rico: Traffic declined 26.9% YoY due to Hurricane Maria.
- Colombia: Traffic declined 13.0% YoY, impacted by a local pilot strike, despite an 11.7% increase in international traffic.
- Construction Revenues: Declined 29.2% YoY to Ps. 824.1 million due to lower capital expenditures in the period.
Outlook, Risks, and Management Commentary
- Hurricane Maria Impact: Management confirmed LMM Airport in Puerto Rico has regained capacity for normal operations. However, a reasonable estimate of total infrastructure damages is not yet available. The company is insured for infrastructure damage and loss of direct income, with a maximum deductible of US$ 10.0 million.
- Colombia Acquisition: ASUR acquired a 92.42% stake in Airplan. Goodwill of Ps. 2,120.1 million was recorded, subject to a one-year final purchase price determination.
- Terminal 4 at Cancun: Operations began in 4Q17, contributing to traffic growth and commercial revenue increases in Mexico (Duty Free, Food & Beverage, Retail).
- Debt Profile: Total debt increased to Ps. 17,371.4 million. Approximately 59.5% of debt is denominated in U.S. dollars, 23.1% in Mexican Pesos, and 17.4% in Colombian Pesos. The Interest Coverage ratio stood at 9.8x.
- Regulatory Environment: Operations in Mexico and Colombia are subject to tariff regulations by local authorities. In Puerto Rico, the Airport Use Agreement governs airline contributions.
Investor Verification Checklist
- Impairment Accuracy: Verify the final assessment of Hurricane Maria damages and the adequacy of insurance recoveries against the Ps. 4,719.1 million impairment charge.
- Debt Consolidation: Confirm the specific terms and amortization schedules of the newly consolidated debt from Aerostar and Airplan, particularly the US$-denominated portion.
- Colombia Integration: Monitor the resolution of the pilot strike in Colombia and its long-term impact on domestic traffic recovery.
- Commercial Revenue Sustainability: Assess whether the Ps. 95.4 commercial revenue per passenger can be sustained or improved given the mix of new, lower-yield Colombian airports and the recovery phase in Puerto Rico.
- Construction Revenue Normalization: Evaluate future capital expenditure plans to understand the trajectory of "Construction Revenues" under IFRIC 12, which currently distort operating margins.