Q2 2020 Grupo Aeroportuario del Sureste SAB de CV Earnings Call
Good day, ladies and gentlemen, and welcome to <unk> second quarter 2020 results Conference call. My name is Hana and I'll be your operator at this time all participants are in a listen only mode. We will conduct a question and answer session towards the end of today's conference.
If he would like to ask a question. Please press star followed by one you may withdraw your question that any type of pressing star followed by too. If you are using a speaker phone. Please lets the handset before making her selection.
Minor today's call is being recorded no like to turn the call over to Mr. Adolfo Castro Chief Executive Officer. Please go ahead Sir.
Secure.
Hi, good morning, everybody.
Thank you were joined US I wouldn't go first go to school systems.
What is twentytwenty financial and operating control.
Okay cool each of you and your family managed to stay healthy I haven't seen since our previous very <unk> earnings call.
As a reminder, please note that certain statements made during the course, but with the scruffy today.
My question. Good forward looking statements, which are based record magnets. Good teachers employees and are subject to a number of risk and uncertainties that could cause actual results could differ materially.
Factors that may be going forward companies come true.
Your Dream Big news back from Cobiz Nike.
One explanation of these recent usually birthday <unk> filings with the U.S. Securities Exchange Commission and the Mexican still history.
I think dissipated resource this quarter were significantly impacted things are we thinking anything.
What do you dropped to global travel trends just starting in March.
However, we closed the quarter, where the strong balance sheet, which I will discuss you see more do you don't shortly.
Starting with related traffic conditions worldwide.
In March babies government mandated microscopic Jim.
I'm pleased to cope with then there's greater coping Nike buyers.
That's a quickie early it's across the worth going to get to break would say were limited capacity.
People are looking for.
Either due to government restrictions for Oh concern for their and their families skills.
I switched airports, Mexico Regal have remained open to date, we'll do operating with a significant fewer and fewer blight and much lower passenger traffic.
At the same time due to government was pictures on the essential commercial spaces. They don't require open to the Baltic objective.
I wouldn't know Netone OCO revenue did mark.
It's strictly what's kind of being higher in Colombia.
Where the comments, it's been the domestic and international commercial Air travel sees the third week of March.
With international flights expected to bridge human September the threat.
Dental domestic traffic would you buy the does Columbia Gulf with launch appraisal program from program.
For flights between Cds with low levels of the doctors.
Under this program each real could've been is back to have the ability to restart domestic flights as long as their counterparts in deals municipalities. Bolstering agreement was June is bright.
Given the complexity of these processes I were six airports in Colombia have no because doctors operations.
All of these factors resulted in a 94% declining back into traffic during the second water.
We would the pieces of nearly 50 cents in Colombia.
84% in Mexico, and 86% in Puerto Rico.
Well think like this report that big trends building domestic or international passengers.
When accumulated basis, that's a good traffic was down almost 51% year on year during the first six months of the year.
In addition starts in March certain earnings as well, so commercial tenants Huh Thatll grade and now were airports begun asking all foresee.
Either through these kinds of beam is supposed to us work for brand extension of the payment terms.
Beginning.
In June we initiated some initiatives to support the recovery process.
That's a reminder, most of the commercial agreements we've got weren't didn't seem to the minimum guarantee payment that passenger.
So in those cases, you know passengers are were during their Dennis do not Kraft paper.
In addition, wealthiest words main airline customers and making cool I can't get holdings, and let them or events group recently like it filed for chapter 11 bankruptcy protection in the United States.
These companies have continued to make them their payments, that's an outbreak relevant courts.
That's George we believe that's what we have some pieces that we need to me.
Totally gauges and continued to rating normally.
Let me now we get good.
The steps we have been taken so far to mitigate the values risk related to quoting 19.
Starting with killed and safety.
In accordance with the guidance that really relevant held up Dorothy.
Phil and safety protocols remain active football and pleased in passengers at that were.
In addition to preventive measures George as wedding basements.
Encaje Sammy doesn't track its been team.
On the expense drunk.
Our cost structure is largely leaks Pete.
Rapidly implemented cost reduction measures are processed foods operation to reduce gosh, born where possible.
Personnel and you didn't use representing the highest sure expenses remain focused on lowering maintenance and energy cost.
For example in Mexico, we temporarily closed dimming I was towards the back when they are 14 week April.
In July.
Hope intending to do I know.
Operating Democrats for outdoor.
When George social distance in support of the Quinn passenger lives.
We also shut it down one of the airports drunks would take similar steps across our operations as necessary.
Now moving on to Us foods financial position.
Oh switch performance continued to be impacted by a very weak travel demand.
We're still operating from a position of financial strength with ample liquidity and very low principal payments to be paid in the near term.
In other words, we continued to meet all contingent obligations and we wouldn't be able to effectively ramp up our abrasions wake travel demand speak so.
I would like to know that even though the stick with what it wasn't warts water you ever we still have liked improvement in traffic performance.
In May cumbersome with April and June gloom bars, and with me.
Goes because what it would cashing question, we blends of 7.1 billion. That's was up 15% from the 6.2 billion up the and hoping you.
Mexico contributed just slightly over 600 than 15 million best.
To the pieces.
Our cash position, what Puerto Rico, Columbia contribute nearly 330 million pairs of 49 million pairs with respect.
But those that at the border.
Yeah. It was 15.5 billion, that's just up 13% from your and 2019.
These was mainly due to the position of the best will give the was daughter and drove down $10 million from a commitment line of credit to support Capex projects under construction at Ilim Airport to Airport authority.
We have a healthy dept matured you complies with principal payments, a wholly frequented than 88 million best for 2.5% <unk> total debt.
Maturing in the second half of the.
Also note that only 830 million, that's what's in principle payments or slightly over 5% total debt maturing 2021.
The majority of that were dept, 54% he'd been denominated in us dollars, which he is out there I just start subsidiary in Puerto Rico, where nearly 26% to be meaning that these denominated in Mexican Texas and 20% in Colombia best.
And somebody asked Jewish maintained a solid balance sheet with no with net debt to last couple of months, even D.A. at 1.1 times at the close of second quarter 20.
Compared with that Cedar 0.7 times reported at the close of per square.
I mean levy selected we'd there David Yeah, as we spoke of the impact of spoken Nike.
I would like to emphasize once again, that's a great crisis affecting us whose performance is not discussed.
We have succeeded navigating and overcoming borders or the past two declines.
From the impact of 911.
To that 2008 financial crisis, and B H one in one crew.
You know cases back there just trying to eventually Requote in fact between 2000 and.
Through 2019.
Mexico animal traffic increase.
Compound annual growth rate of 6% door Startco high over 34 million passengers in June the engine degenerative disease.
And following each crisis, we grew even through the liquidity, let's use the broke into our we ship orders of course the situation we're passing through these wars.
Yep.
While the travel demand is expected to remain depressed for the foreseeable future. That's just one thing that's strong balance sheet and we've continued to manage cash and cash costs and expenses programs.
Now, let me touch reported to be able to keep the highlights of the second quarter results.
For more details can be found in the press release issued yesterday evening.
Revenues ex construction were down 77 year on year, driven by a similar declines you never know because <unk> and then no net or not because revenues.
We're very good where the main contributor dues revenues accounted for nearly 61% of their revenues. This quarter, followed by Mexico with its share of almost 80% exactly Columbia, representing Piper simple that took us <unk>.
Conflicting streak travel bans exactly.
Well certainly did it come much of evidenced with passenger were slightly over 350 batches compared to nearly 800 doses per passenger in the same period last year.
The increase mainly reflects the sharp contraction there were passenger traffic supported by basically.
You Commission spaces with Biggs rents per square meter.
On the expense from operating cost and expenses, excluding construction costs were down 20% year on year.
Guilt back if were to raise funds in maintenance and.
Energy consumption degrees, mostly in Mexico and Colombia.
Mexico post the 34% declining costs, reflecting lower maintenance and energy expenses, along with a lower cost of sales related to directly operated Campinas books.
Thanks, Kevin concession fees, both cool also declined during the period.
The lower costs were actually up said base hard I, probably shouldn't popped up to full collection accounts that we booked.
Given the impact of little demand levels for our having whenever you commercial drives.
Well in Colombia were down 41%, mostly the result of savings in maintenance energy NC grid expenses as well as lower professional fees.
I quoted.
Of course, the fourth vertical were all nearly 6% year on year, mainly result, resulting from the ethics conversion impact, which more than offset declines in cost of services like a concession fees indoor tams dopa, most important vertical were down 17% year in India.
Moving on to Pitiful WPP reported consolidated EBITDA was down 98% year on year in two big the 1 million business impacted by the coping 19 been dynamic.
Look peers benefited from insurance recoveries related to the we're getting ready yet.
In the second quick 20 disseminated to 35 million sensors, where last year was nearly 263 million that's.
Excluding these recoveries consolidated EBITDA would have declined 99% year over year to see the medium business.
The update.
203 million business and put a pretty good was offset by the EBITDA losses of 140 in Mexico and 47 in Colombia.
If you bring 12 and excluding the insurance recovery in both quarters. Adjusted EBITDA margin declined 1.8 presented this quarter from 65.4 in the same quarter last year.
In terms of capital allocation, meaning can be done contribute capital expenditures of 660 million vessels into second quarter.
Of these amounts 77 was invested in Mexico to continue executing phase one expansion of the maybe that airport Tim.
The amended up for bid for the Oh, probably massive been over blending Mexico will close for investments of approximately 5.3 billion. That's.
During the first half of the year, we invested a total of 714 million passengers in these countries and we remain on schedule.
Building that part of it was actually wait till the second runway I think when their foot and with the beginning of the birds expansion phase of them enough for.
We also expect to go to phase one of many of them.
Expansion and start the second phase easier that said.
There were the disruptions at each of these development projects.
To this day at home or interesting, Mexico, and we have kept in the government upright.
The related delays.
Capex and were pretty good Douglas <unk> hundred 138 million pairs was this quarter, mainly reflecting some major maintenance repairs in Texas.
Finally, we invested slightly one.
Over 1 million, that's just related to major maintenance in Colombia, I said were capex commitment for Dan to bridge and lets conclude it does the.
Looking ahead, we only expect to best major maintenance in Colombia.
I would like to compute lightweight today and that as towards continued to breed from a position or financial strength and that we are carefully managing cash calibrating valuable because blame them as best as weekend with a quick demand conditions in order to successfully navigate the Greek crisis, we remain confident.
That weekend.
And my prepared remarks kinda. Please open the lines for questions.
Thank you.
Again fitting audience at a star then one for questions and again, please make sure. Your mute function is turned off or the handset has picked up before pressing the corresponding digits. Once again that a star one to ask a question.
Oh.
And we'll go first to Alejandro sound Mokoena with credit Suisse.
Yeah. Thank you Hello level for thank you for the cool.
Our first question the Sunday renegotiation of the M.B.B. Braun <unk> so.
On that they can pick see how many times are you expecting toward these renegotiation.
And what were they would be they expected topics for its <unk> for these renegotiation or or the expected outcome for these renegotiations.
Alexander Frank Good morning, well.
Yeah, you may and know the only way to revise our maximum diary and an extraordinary way.
On the grade conditions is one the Mexican GDB drops by more than 5% during the last 12 months.
I estimate that that will have cure.
During the busy year.
And once the final yeah.
Number is published by the official authorities, we won't be able to five.
We request to have dogs.
Having said that why aspect is definitely we'll be able to five that on the first quarter next year.
How much time, it will take it I really don't know.
And there is no what timeline for that but I would expect at least anymore. So during the second quarter of next year, we wouldn't be able to know more or less and what was what the outcome of the negotiation process.
In terms of the numbers of course it today, we cannot.
To give you a precise or an accurate number or how much that cap rates will be reduced because.
Got it does not produce because we want basically reduce assemblies dropped off a little demand.
So once we know.
The outcome of the little demand for the year.
We will be able to make the necessary gas plays for us to see leach projects are no longer needed because of these little demand and those are going to be the ones that will have to be postponed it's not cans at least for no or deferred on fuel.
The demand these there again.
So.
Well hear from now we wouldn't be able to more or less the will to tell you the outcome of that process.
Okay. So I guess, it's just a lady on topics rather than that.
Reduction them to topple amount you are willing to negotiate right.
Okay, Let me, let me explain again.
Sure.
Let's talk about the expansion two day of them you know for.
Okay that expansion he needed for what we need to be cool that the men, what's going well there there are certain standards that we have to comply in accordance with that were concession package. So.
As a certain amount of square meters of 10 minimum.
Everything yeah, because our passenger traffic so he's the best into traffic demand increases.
That's work is not necessarily.
For for the moment is not necessary and.
We will have to find that pointing to future where these will have to be made.
That is and that is.
The orange over these branches to review what is needed and what is not in accordance with the demand we have.
So once we know what walk the effect on the demand.
And because of these inflation, we wouldn't be able to calculate these numbers again and to say if these is gonna be the for one year two years three years.
Okay. Thank you and my second question if I may it's some they are no go business for Puerto Rico. So.
It is there any possibility for airlines to renegotiate that seeks to the payment contract.
Well the country, they said been written and that contract there.
Can you renegotiate of course.
In accordance with it with a contract, but I do not see any.
Any chance for now.
You'll see that great negotiation process.
Okay. Thank you political.
You're welcome.
Well go next tumors, so martinez with GBM.
Hi, Good morning about four thank you for for taking my question.
My question is kind of a follow up over the past one in topics and do you expect to up knowing that that you already have as something that some delays in capex deployment, calling for for this year.
Yeah, I'm on but do you expect to the blood for for that fight via the end up you can read anything that the current not surgical gloves.
I mean, you expect any the federal.
Pushing it forward for next year.
And I wish you have had good morning, I do not have yet I finally figured that a catch up with you at the moment.
Sure that a there were around three months' worth there were no construction in the country.
On a you know there was a degree by the issued by the government, where they said that close to men fielding glass.
In the country have to be used in there and their programs in their works.
So because of that we will we were not able to continue that process.
Why were expensive you.
Kind of course drops or do you kind of expand that building without these elements. So.
We're in that process and I do not have a figure yet.
But but the chances that maybe it would be lower than that those side today.
Well the chances are that these 5.3 billion.
It's lower are very high.
Perfect and and maybe that's a good question if I might be regarding the new accounts receivables, we would practically we didn't see any change.
Yes, if it's not out I refuse a reduction from Trumping produced water.
It.
Maybe if you got gave us a more color and that's how how many good CHS, we'd do it especially would be that Mems.
Yeah the airport at how.
One how about nickel T.H. on and need you can give us a couple on the shape of all of your tenants.
Yeah going forward.
Okay and.
As I said during the initial remarks most of them commercial contracts.
Yeah, close where they have to be.
The higher amount, Paul I'm minimum guarantee payment for bassinger or upwards and special incentives.
Because of the low shopping.
Of course, they were not setting.
Much skier no but in that case, what applies is their minimum.
Payment the Bassinger.
So I say said be ready today.
Initial remarks eat there is no passengers they do not have to pay rent.
Because sales are zero.
And the minimum guarantee payment. The passenger is okay, we'll have to be multiplied by the amount of passengers so in that sense.
We have nots ER.
<unk> renegotiating or negotiating with all the commercial tenants.
In most of the cases the adjustment this up dramatically.
It is clear that some are suffering.
A lot on some of them are nothing but the cases that they're not thing is because they are working in some other airports, where they have to be a fixed rent and and of course.
Let's say they are using that money from here to put it that no.
In in some cases, we ever renegotiating with some commercial tenants.
But in some of those are basically yeah that juggling. These me it's made up dramatic.
Perfect. Okay very helpful. Hello, Thank you.
Thank you we'll go next to Adolfo Ramos first Bradesco <unk>.
Thank you and good morning, I'm still thinking for taking my question.
My first one is because some traffic I was wondering if you can give us a little bit of color of how how are you seeing traffic so far.
The number handy up until the 20 month or whether you know how how you see.
That decline progress and a follow up on the on the previews question.
Equal and I run negotiation no. The contract is not on the cars at the moment, but have you seen or do you expect any airline used to stop selling but the vehicle, which would then go to them to for making that payment or how do you see the stability Oh this readiness going forward I think.
Yeah.
For a little for had good morning, and the case of the traffic. The only thing that I can say to you is that the as I said you into their remarks.
May was better than April June was made up better than me and July.
I believe it's going to be better than than me.
But nevertheless, the month of traffic, we're seeing today it is extremely low.
It's this situation is not going to recalibrate file.
When we have seen that that are going back to 2008 with the financial crisis close just trying to affect close the bankruptcy of their lives here in Mexico.
Because they did six months to go back to the previous levels.
He said it could be worse.
If they have vaccine is not being found or actuaries not being found no.
And we have seen in recent developments in terms of the vaccine that's a very well so piece meal.
So I believe the vaccine is gonna be ready by the end of this year. So in that sense, maybe we can see some integration process next year.
But of course, the final decision processes not gonna be there on deals are more or less secure it's been thumb. So I don't believe that the war and we'll go back to normal just with vaccine.
He pencil Puerto Rico.
This is not the first time, you kind of go back and see what has happened during the weekend media in September 2017.
There was a sharply a sharp decline in passenger traffic and of course, you can trace there.
The comparison between a lot because revenues and these sharp decline so.
That's what we're experiencing today as well.
And I don't see any any difference from.
That.
Thank you all up and just if I may squeezing out lots one we saw a into my role I'm going back to a let's have a maximum let alone in terms of course lead.
Got cone.
Services sector seems to continue operating as they have been since the middle of June I was wondering if there's anything or anything to update on that front on whether you've seen maybe.
Hi, Andy businesses or as Paul said this in particular I follow this federal directive.
[noise] would yes ways what is wrapping the south of the state is not the kitchen Inc. and Coolconnect when is it just feels orange.
So I think when is the Italy in normal operation when I'm, saying some of the state is basically so to loon and a two month.
Okay. Thank you.
You're welcome.
And as a reminder, if he would like to ask a question star one at this time.
Well go next tumor burden for Siani with Citi.
Hello adulthood. Thanks for the call a just a quick question what are your thoughts on the development up the man Chang.
Yeah, I just a another one I know you mentioned this already but could you give me some more color on international traffic sales.
I think they show rates are rising the Mexico, and they think they put pitch backup the timetable on their realization on thank you.
Hi, good morning, when indicates that the map train what I understand it's a project that piece on going.
In the case so.
The good Quinn airports, where it has been announced last week.
It's a it's a light train that goes from the ceded to the to the airport connecting all show with them the math train.
And basically what im understanding that these project piece and then going in terms of international traffic.
They were just having international traffic twin from the United States.
There was some flights a few flights from from Canada.
Indicates some of the United States, which is the most important for all day.
Yeah.
So flights with a with a very low factor because of lower the man.
And that of course will depend on how the situation evolves in the United States United States. It's a it's a very large country nor are we cannot say the same.
In terms of what's happening today, New York or in comparison with California.
California to date have succeeded the cases in New York, New York is basically controlled and get them, so but proportional the traffic.
Or just more importantly, prostaglandin, California is showing that sense.
I'm not so afraid though.
Situation of course.
We really don't know what can happen day, there's a another rebound.
Good.
Good effect of could affect our traffic for the fourth quarter.
Great. Thanks, Jennifer.
You're welcome.
And then once again, if you like to ask a question sort of star one at this time.
Well go next to Alan let's see US, let's think of America.
Hi, Good morning, colorful just wondering one question on traffic in Colombia, and what you're seeing there are regarding the pandemic I understand that domestic flights can you renegotiate.
Just can you give us for the color. Thank you.
Hi, Good morning World. The process are saying mentioned you're in there the remarks.
He is now more complicated than what it wasn't that bad because now even below that the federal government has to.
That the municipalities kind of proved please.
Yeah. It has been very complicated to find.
Two majors or the pair of Cds so.
So these two majors to approve.
The case and the most important ones. The kids are booked on the mature, but with dies, it's very reluctant to open the the airport together showing that since.
I don't know what there will be the outcome, but I still believe that a.
For some time the airports in Colombia will be close.
Thank you.
You're welcome.
Well go next to Pablo month since he has less Barclays.
Hi, local good morning, Thanks for taking my question I talked a one question.
Do you mind sharing your opinion on that.
Status of Mexican their names because we have either get that they just received a fresh start to go from private investors.
On the other kind I don't Mexico is going to out restructuring process, so that might likely means that they will reduce or its capacity. Overall what are you bought in the medium term of the impact of these thank you.
Hi, good morning, Pavel well. The most important example is to go back again to these a period of June 2008.
Oh due August 20 done.
If you see our presentation.
In page 17, you can find the history of these.
More than 50% of Oh.
Aircrafts were losses during these periods.
So.
Around eight or nine.
Airlines in Mexico bankrupt well.
So of course, there was an impact on or a passenger traffic yeah. There wasn't any back or an important being backed I would say three months four months.
Yeah.
I'm always.
To December 2010.
When the that allows one to us makena lots as one bankrupt.
If you push him today the print in them so that the over because what is low if the demand that is there is no than that so.
Even though that we can say that indicates we lose is somewhat of visa it's because of.
The situation.
The problem is not how many blames.
They will have so that probably needs.
Many people they would like to to try them and be transport. This.
With them.
So today and I don't see too much trouble in and they've reduced capacity that we just about these the result of the little them and what what is important to recoveries. It's the man.
Okay perfect. Thank you very much.
You're welcome.
[noise] and once again, if you like to ask a question that a star one.
That concludes the question and answer portion of today's conference call I would like to turn it back over to Mr. Costco for closing remarks.
Thank you Hannah and thank you again for participating no workforce in our second quarter results conference on behalf of US We wish you good Dante's Stacy.
Good bye.
Ladies and gentlemen that concludes sure second quarter 2020 results conference call, we would like to thank you again for your participation you may now disconnect.