Business Context and Reporting Period
Company: Southeast Airport Group (Grupo Aeroportuario del Sureste, S.A.B. de C.V.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter ended March 31, 2007
Business Overview: ASUR operates nine airports in southeastern Mexico, including the major hub at Cancun. The company is the first privatized airport group in Mexico.
Key Financial Metrics
Financial figures are expressed in constant Mexican pesos (Ps.) in thousands, unless otherwise noted.
| Metric | 1Q07 | 1Q06 | % Change |
|---|---|---|---|
| Total Revenues | 683,064 | 525,268 | 30.04% |
| EBITDA | 441,839 | 315,120 | 40.21% |
| Operating Profit | 315,907 | 193,961 | 62.87% |
| Net Income | 223,618 | 135,027 | 65.61% |
| Earnings Per Share (Ps.) | 0.7454 | 0.4501 | 65.61% |
| Earnings Per ADS (US$) | 0.6757 | 0.4080 | 65.61% |
| EBITDA Margin | 64.68% | 59.99% | +4.69 pts |
| Operating Margin | 46.25% | 36.93% | +9.32 pts |
Liquidity and Balance Sheet (as of March 31, 2007):
- Cash and marketable securities: Ps. 1,448.90 million
- Total Liabilities: Ps. 1,278.52 million (8.29% of total assets)
- Shareholder's Equity: Ps. 14,148.71 million (91.71% of total assets)
- Capital Expenditures (Capex) for 1Q07: Ps. 243.16 million
Material Changes vs. Prior Period
- Traffic Recovery: Total passenger traffic increased 28.24% year-over-year. This growth is primarily attributed to the recovery from Hurricane Wilma, which severely impacted the first quarter of 2006. International traffic rose 35.64%, while domestic traffic rose 16.30%.
- Revenue Mix: Aeronautical revenues grew 32.90% driven by traffic volume. Non-aeronautical revenues grew 22.93%, with commercial revenues up 23.31%.
- Commercial Revenue Per Passenger: Declined 3.73% to Ps. 34.86 per passenger, despite total commercial revenue growth, due to the rapid expansion in passenger volume outpacing revenue generation in certain categories.
- Cost Structure: Total operating costs increased 10.82%, significantly lower than the 30.04% revenue growth, driving margin expansion. Notable cost increases included technical assistance fees (up 40.35%) and concession fees (up 30.04%).
- Regional Variance: While Cancun and Cozumel saw massive traffic rebounds, Oaxaca airport traffic declined 25.60% due to ongoing public demonstrations and travel advisories.
Outlook, Risks, and Unusual Items
Management Commentary and Outlook
Management attributes the strong performance to the tourism recovery in the Mayan Riviera. The company continues to invest in modernization (Ps. 243.16 million in 1Q07) and has opened new retail and dining concessions to boost non-aeronautical revenue.
Risks and Contingencies
- Oaxaca Unrest: Ongoing protests in Oaxaca have led to a 20.08% decline in domestic traffic at that airport. Airlines are not scheduling flights, and the US State Department has issued travel advisories. The duration and resolution of this conflict remain uncertain.
- Regulatory Environment: 77.45% of total income is derived from regulated aeronautical services subject to maximum rates set by the Mexican Ministry of Communications and Transportation.
- Asset Tax Changes: Mexican authorities reduced the asset tax rate from 1.8% to 1.25% in December 2006. ASUR recorded Ps. 5.8 million as an expense and Ps. 17.8 million as a recoverable asset in 1Q07.
Unusual Items / Recent Developments
- Indicative Acquisition Proposal: On March 29, 2007, Chairman and Interim CEO Fernando Chico Pardo submitted an indicative proposal to acquire 42.65% of ASUR's capital stock via a tender offer at Ps. 56.00 per Series B share (approx. 15% premium). If successful, Mr. Pardo would beneficially own 54% of the company. The offer is subject to regulatory approvals and board approval.
- Mayan Riviera Airport: The Mexican government is expected to launch a public bidding process for a new international airport in the Mayan Riviera. ASUR is interested but has no assurance of participation or success.
Investor Verification Checklist
- Acquisition Proposal Status: Verify the outcome of the indicative tender offer by Fernando Chico Pardo and any subsequent regulatory approvals required.
- Oaxaca Operational Impact: Monitor the duration of the Oaxaca protests and the potential for long-term traffic loss at that specific airport.
- Commercial Revenue Efficiency: Analyze the trend of commercial revenue per passenger, which declined in 1Q07, to ensure future traffic growth translates to proportional revenue growth.
- Regulatory Tariff Reviews: Confirm the timeline for the annual review of maximum aeronautical rates by the Mexican Ministry of Communications and Transportation.
- Mayan Riviera Bidding: Track the official announcement of the bidding process for the new Mayan Riviera airport concession.