Business Context and Reporting Period
Company: Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASUR)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter (4Q) and Full Year (FY) ended December 31, 2014.
Business Overview: ASUR is the first privatized airport group in Mexico, operating nine airports in southeast Mexico (including Cancún) and holding a 50% joint venture stake in Aerostar Airport Holdings, LLC, which operates the Luis Muñoz Marín International Airport in San Juan, Puerto Rico.
Key Financial Metrics
Fourth Quarter 2014 (vs. 4Q13)
- Total Revenues: Ps.1,685.46 million (Increase of 14.01%)
- EBITDA: Ps.910.49 million (Increase of 19.52%); Margin rose to 54.02% from 51.53%
- Operating Profit: Ps.795.98 million (Increase of 21.41%); Margin rose to 47.23% from 44.35%
- Net Income: Ps.513.23 million (Decrease of 20.42%)
- Earnings Per Share (EPS): Ps.1.7108 (Decrease of 20.42%)
- Passenger Traffic: 5.77 million total (Increase of 14.05% YoY)
- Commercial Revenue per Passenger: Ps.76.28 (Increase of 1.19%)
Full Year 2014 (vs. FY13)
- Total Revenues: Ps.5,879.16 million (Increase of 7.95%)
- EBITDA: Ps.3,615.20 million (Increase of 9.91%); Margin rose to 61.49% from 60.40%
- Operating Profit: Ps.3,160.93 million (Increase of 10.09%); Margin rose to 53.77% from 52.72%
- Net Income: Ps.2,283.72 million (Decrease of 0.57%)
- Earnings Per Share (EPS): Ps.7.6124 (Decrease of 0.57%)
- Passenger Traffic: 23.16 million total (Increase of 9.86% YoY)
Liquidity and Balance Sheet (as of Dec 31, 2014)
- Cash and Cash Equivalents: Ps.2,855.36 million (Increase of 126.69% vs. Dec 31, 2013)
- Total Bank Debt: Ps.3,187.30 million (including accrued interest)
- Shareholders' Equity: Ps.18,751.10 million (78.38% of total assets)
- Total Liabilities: Ps.5,173.43 million (21.62% of total assets)
- Capital Expenditures (FY14): Ps.1,156.31 million
Material Changes vs. Prior Period
Revenue Drivers
Revenue growth in 4Q14 was driven by a 14.05% increase in passenger traffic, resulting in 12.88% growth in aeronautical revenues and 14.52% growth in non-aeronautical revenues. Commercial revenues rose 15.48%, with significant increases in food and beverage (21.39%), car rentals (20.45%), and parking fees (28.03%).
Profitability and Net Income Divergence
While operating profit and EBITDA increased significantly, Net Income declined in 4Q14. This divergence was primarily caused by:
- Foreign Exchange Losses: A Ps.126.96 million loss in 4Q14 due to a 9.74% depreciation of the Mexican peso against the U.S. dollar, compared to a Ps.13.49 million gain in 4Q13.
- Tax Reform Impact: The 2013 period included a Ps.420.21 million benefit from the cancellation of deferred IETU tax, which did not recur in 2014.
Cost Structure
Total operating costs rose 8.11% in 4Q14. Increases were driven by construction costs (16.09%) and technical assistance fees (19.27%), partially offset by an 8.02% decline in administrative expenses.
Outlook, Risks, and Management Commentary
Joint Venture (Aerostar/SJU)
ASUR's 50% stake in Aerostar (San Juan, Puerto Rico) reported a net loss of Ps.17.30 million in 4Q14, an improvement from the Ps.48.54 million loss in 4Q13. Terminal B remodeling was completed in November 2014, and Terminal C remodeling is expected to begin in Q1 2015. Passenger traffic at SJU increased 2.38% in 4Q14.
Regulatory Environment
ASUR's regulated revenues (approx. 58.40% of total income) are subject to maximum rates set by the Mexican Ministry of Communications and Transportation. The company noted that the 2014 Income Tax Law reform repealed the IETU tax, requiring the recognition of deferred income taxes.
Risks and Contingencies
- Currency Risk: Significant exposure to foreign exchange fluctuations due to foreign currency net liabilities and the U.S. dollar-denominated Aerostar joint venture.
- Regulatory Risk: Dependence on government-set tariff caps for aeronautical services.
- Forward-Looking Statements: Management notes that future expectations are subject to risks and actual developments may differ significantly.
Investor Verification Checklist
- Verify the impact of the Mexican peso's depreciation on future earnings, given the significant FX losses in 4Q14.
- Confirm the sustainability of the 14% passenger traffic growth rate, particularly at the Cancún hub.
- Review the timeline and cost implications for the Terminal C remodeling project at San Juan (SJU) airport.
- Assess the long-term effect of the 2014 Income Tax Law reform on deferred tax liabilities and future net income.
- Monitor the company's ability to maintain high EBITDA margins (54%+) amidst rising construction and concession fees.