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: Fourth Quarter ended December 31, 2014, and Full Year 2014.
Date of Filing: February 27, 2015
The Company operates twelve airports in Mexico's Pacific region. Financial figures are unaudited, prepared under IFRS, and presented in nominal Mexican pesos.
Key Financial Metrics
Fourth Quarter 2014 vs. Fourth Quarter 2013
- Total Revenues: Decreased Ps. 7.1 million (0.5%) to Ps. 1,433.6 million (implied).
- Operating Income: Increased Ps. 47.3 million (7.6%).
- EBITDA: Increased Ps. 81.0 million (9.6%).
- Net Income: Decreased Ps. 268.5 million (30.0%) primarily due to the absence of a Ps. 207.4 million deferred tax benefit recognized in 4Q13.
- Operating Margin: Increased 380 basis points to 50.1%.
- EBITDA Margin (ex-IFRIC 12): Increased to 72.0%.
Full Year 2014 vs. Full Year 2013
- Total Revenues: Increased Ps. 318.3 million (6.1%).
- Operating Income: Increased Ps. 391.9 million (16.5%).
- EBITDA: Increased Ps. 433.9 million (13.3%).
- Net Income: Decreased Ps. 3.7 million (0.2%).
- Operating Margin: Increased 450 basis points to 49.9%.
- Cash and Equivalents (as of Dec 31, 2014): Ps. 1,595.5 million.
- Capital Expenditures (2014): Ps. 633.0 million.
Material Changes and Drivers
Revenue Drivers
- Aeronautical Revenues: Increased 2.2% in 4Q14 and 8.5% for the full year, driven by passenger traffic growth (0.1% in 4Q14, 6.7% full year).
- Non-Aeronautical Revenues: Increased 2.6% in 4Q14 and 14.4% for the full year, aided by new convenience stores and VIP lounges.
- IFRIC 12 Impact: Revenues from improvements to concession assets decreased 42.9% in 4Q14 and 36.0% for the full year due to lower investment levels in 2014 compared to 2013.
Expense and Operational Drivers
- Cost of Services: Decreased 7.5% in 4Q14 due to lower professional fees and utility savings (government waiver in Los Cabos post-Hurricane Odile). Increased 2.9% for the full year due to maintenance and security costs.
- Hurricane Odile: Caused a temporary suspension of flights at Los Cabos International Airport in September 2014, impacting Q4 traffic and third-party concession revenues.
- Tax Reform: The 2014 fiscal reform generated a significant deferred tax benefit in 4Q13 that did not repeat in 4Q14, causing the sharp decline in quarterly net income.
Outlook, Risks, and Recent Events
Debt and Liquidity Actions
- Debt Refinancing: In January and February 2015, the Company prepaid Ps. 989.5 million in outstanding loans with HSBC, Banamex, and BBVA Bancomer.
- New Issuance: On February 20, 2015, issued Ps. 2,600.0 million in Long-Term Debt Certificates (GAP 15 and GAP 15-2) with maturities of 5 and 10 years. Proceeds were used to pay down Scotiabank debt and fund 2015 capital investments.
- Credit Lines: Drew down Ps. 1,011.0 million from a Scotiabank credit line in early 2015 to facilitate debt prepayments.
Risks and Contingencies
- Regulatory: Revenues are subject to maximum rates set by the Mexican Ministry of Communications and Transportation (SCT).
- Accounting Changes: Several new IFRS standards (IFRS 14, 15, 9) are scheduled to become effective between 2016 and 2018.
- Forward-Looking Statements: Management notes risks related to economic conditions, industry trends, and capital expenditure plans.
Investor Verification Checklist
- Verify the impact of the 2014 Mexican tax reform on future deferred tax assets and net income volatility.
- Confirm the recovery trajectory of Los Cabos International Airport traffic post-Hurricane Odile.
- Review the terms and interest rate exposure of the new Ps. 2,600.0 million debt issuance (variable vs. fixed rates).
- Monitor the Company's compliance with SCT maximum aeronautical rates for 2014 and subsequent years.
- Assess the sustainability of EBITDA margins excluding IFRIC 12 non-cash items.