Q1 2021 Grupo Aeroportuario del Sureste SAB de CV Earnings Call
Good day, ladies and gentlemen, and welcome to <unk> first quarter 'twenty 'twenty. One results conference call. My name is Christina and I'll be your operator at this time all participants are in listen only mode. We will conduct a question and answer session towards the end of todays conference.
If you would like to ask a question. Please press star followed by one you may withdraw your question at any time by pressing star followed by two.
If you are using a speaker phone please lift the handset before making your selection.
As a reminder, today's call is being recorded.
I'd like to turn this call over to Mr. Adult So Castro Chief Executive Officer. Please go ahead.
Thank you Christina and good morning, everyone.
Thank you for joining our conference call to discuss <unk> first quarter 2000 2021.
And so I used a lot in operating results.
Hope that all of you and your families are managing to stay healthy and safe.
As a reminder, please note that certain statements made during the course of our discussion today may constitute forward looking statements, which are based on current management expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to be from activated.
Including factors that may be beyond our company's control.
The impact from COVID-19.
For an explanation of these risks please refer to our filings with the U S Securities and Exchange Commission and the Mexican stock exchange.
Before starting the discussion of our results for the quarter as expected.
This month, we concluded the extraordinary Maxim better vision for our Master plan.
But for our Mexican operations the.
The revision resulted in a reduction of around $2 65 billion Mexican pesos from the reaching out with 90 billion Mexican pesos as of December 2016 committed investments for the current five year period, ending 'twenty 'twenty three.
We also held our annual shareholders meeting yesterday, which among other items shareholders approved setting aside all remaining accumulated net profit for the fiscal year 2020, as well as setting aside 5% increase the level of his day.
To that force shares repurchases debt.
On the governance Bronx, we should welcome Mr Liang Darren.
Yeah that service as new independent members of the board of Directors, whose nominations were approved yesterday the shareholders' meeting.
David brings over 20 years of experience.
Mike.
She was managing director at Merrill Lynch and member.
New York International offices.
Alright expertise includes positions at bankers Trust and Deutsche Bank.
She serves on the board of trustees of the University of Southern California.
Mr. Chavez brings to assure extensive expertise in advancing the agenda of corporate governance and sustainability.
Jean de executive director and chair person of the board of <unk> value.
Private sector century, promoting research for the implementation of the United Nations sustainable assistant stability growth goals and initiatives in Colombia.
She is also visit share.
The board of trustees of unit or the United Nations Institute for training and research in Geneva.
In addition, independent director Mrs. Barbara line cancel a widow, whose until now was a member of the nomination and compensation Committee was appointed to chair this commodity.
With these two new board appointments. Our board is now composed of a total of 11 members.
Seven of which are independent.
Additionally, we have increased our female participation at the board level and our nomination and compensation Committee is now headed by an independent Board member.
These advances underscore our commitment to enhancing ESG.
We look forward to providing more updates from these front.
Our 2000 Twenty's system stability reported that we expect to publish within the next 30 days.
Now moving on the travel environment across all of our airports commercial travel in Colombia assumed last September.
Our airports in Mexico, and Puerto Rico have remained open throughout the pandemic.
Traffic in the first three months of the year continued to recover observed since last June.
Down 32% year over year to $5 1 million passengers.
Compared with drops of 50% and 70% in the fourth and third quarters of last year.
By country profit.
Traffic was down 36% in Mexico, 20% in Puerto Rico, and 30% in Colombia.
We see traffic continued to post better trends.
In Mexico, and Puerto Rico domestic traffic was down year over year in the mid to high teens with traffic in Colombia declining in the high 20.
This compared with a year over year declines in international traffic up nearly 50% in Mexico.
And.
Colombia, and 70% in Puerto Rico.
Looking at our monthly traffic traffic recovers in Mexico.
Please standby.
Please go ahead.
Thank you Christina.
Sorry for this inconvenience.
Looking at our monthly traffic traffic recovery in Mexico slowed down in January and February from tobacco <unk> COVID-19 cases.
<unk> levels were establishing several areas of Mexico traffic.
Traffic was also impacted by travel restrictions, mainly in Canada, which bank traveled to U S Mexico and the caveat.
At the end of April and now extended up to June.
As well as negative COVID-19 testing and self quarantine requirements in the U S book passengers returning to the to the country.
More March saw a recovery, we are total traffic up 11%, reflecting easier comps and mainly driven by Puerto Rico and Colombia.
Traffic in Mexico was relatively flat.
Every stroke and the vaccination process in the U S has been positive but these figures.
Looking ahead at travel trends were operating.
While operations with airlines across the four regions, we usually work with the U S, Canada, Europe, and Latin America resumed in the fourth quarter last year passenger traffic remains impacted by weak demand.
In near term domestic traffic is it.
To continue to drive the recovery, while international traffic should become more relevant in the medium term.
Pent up demand drives traffic.
The critical mass with vaccination is it cheap.
We expect these to be partially mitigated in Mexico.
This lowered recovery of the economy, which has been Keith Hartley by the pandemic.
In short we remain optimistic about long term global travel demand and expect traffic to return our last 12 months record achieved in February 2020 within 10 to 18 months from now.
Now, let's move to <unk> financial performance for the quarter.
More details can be found in the press release issued yesterday after market close.
Despite this challenging environment, we maintain a highly liquid and a strong balance sheet that allow us to navigate that.
Choppy travel environment and brought bulk operations went track when demand accelerates.
Cash and cash equivalents at the broader increase 11% to $5 7 billion vessels from year end levels.
Increasing cash flow.
Over $600 million vessels in Mexico, and nearly $7 million in Puerto Rico were partially offset by a $64 million versus cash decline in Colombia.
At the year end was relatively flat from the year end 2020 levels at $13 7 billion.
While net debt to last 12 months EBITDA was 2.2.
Two one times and interest coverage ratio was $2 90 day.
We also benefit from lower near term principal payments with just over 5% of our total debt maturing in the next nine months of B here.
In terms of the currency exposure, 52% the vessel's debt is denominated in U S dollars.
As added star subsidiary in Puerto Rico.
The remaining 29% is denominated in Mexican vessels with 19% in Colombian pesos.
Now a brief update on accounts receivables.
Mexico, Avianca Holdings, and Latam Airlines group.
<unk> filed for chapter 11 bankruptcy protection in the United States.
To make our payments at the same time, nearly 75 million barrels in accounts receivables from inkjet with fee income operations meet December we're fully provision in fourth quarter 'twenty.
<unk> accounted for 5% of total revenues in 2020.
Year on year accounts receivables were down in Mexico, and Colombia, but increase in the high teens in Puerto Rico.
Now moving to the P&L revenue six construction were down 36% year on year to $2 7 billion versus assets.
Non aeronautical revenues decline in the meeting.
Well I don't know if nickel revenue showed a slight benefit from a decline in the high 20, Mexico accounted for 64 per cent of the total ex construction revenue was growth.
Rico, Colombia represented nearly 26 and 2% respectively.
The sequential basis revenue six construction were up 11%.
Excluding revenue from construction services, which are adopted assets.
Under Ifr Ias accounting standard total revenues would have declined 36, 2% year on year to $39 8 million excluding.
Revenues from construction sales.
Yes.
Please standby.
Again, now moving to the P&L revenue six construction were down 36% year on year to $2 7 billion versus assets Jordan non aeronautical revenue declined in the mid 30 is what aeronautical revenues.
Slightly better performance declining in the high Twenty's, Mexico accounted for 64% of total equivalent production revenue.
Puerto Rico, Colombia represented nearly 26 and 2% respectively.
Sequential basis revenue six of interruption.
11%.
Excluding revenue from construction services, which are the doctor doesn't cost under.
The company from.
Total revenue would have declined 36% year on year.
Two two.
<unk> $2439 8 million, excluding revenues from construction sales.
Mexico accounted for 66.5 of total revenues, while Puerto Rico, and Colombia represented 24, seven and eight 8% respectively on a per passenger basis commercial revenues were nearly under the knee vessels up.
From the 100, <unk> hundred 16 vessels, achieving in first quarter to.
Reflecting the sharp reduction in passenger traffic together with a reduction of international traffic passenger mix.
Going down to the P&L cost reductions achieved across our operations contributed to a 21% year on year decline in coach Inc. Consolidated costs.
In Mexico cost declined nearly 10% year on year, mainly due to lower technical and concession fee.
As well as lower cost of sales from directly operated convenience stores, given the lower levels of activity.
David in imaging maintenance growth also contributed to lower costs.
Although since October we have been operating with all of our terminals.
Airport.
Excluding a $29 4 million tax refund.
Many of the airports in first quarter 'twenty first in Mexico would have declined 13% year on year.
In Puerto Rico growth, excluding construction were down nearly 230 million pesos or 41%.
A total of 187 million pesos equivalent to $11 $2 million, where employers through the U S Cares Act.
A total of $9 $3 million remained available under the trend.
We obtained savings of 26 million vessels in energy security and maintenance costs.
Terrible basis, and excluding the 124 million passengers from the insurance recovery in connection with its European media in the physical added 20 <unk>.
Ill have declined close to 52.
Year on year.
Finally in Colombia expenses declined nearly 50%, 15% largely due to lower concession fees due to the impact of the pandemic on the revenue base.
Lower cost of services also contributed to lower costs.
Continuing to the continuing down to the P&L consolidated EBITDA declined 42% year on year to $1 3 billion best most impacted by COVID-19.
Country of operations continued to report EBITDA gains led by Mexico with $1 1 billion with vessels 150.
$56 million in Puerto Rico, and $210 million.
Net sales in Colombia.
Adjusted EBITDA margin was 58 eight in the first quarter 'twenty, one and declined when compared with the $69 nine in the first quarter 'twenty. However.
However, the margin improved from 54, six in the fourth quarter and $44 six in the third quarter of last year.
On to Capex, we made capital expenditures of nearly 360 million vessels during the quarter obese.
Over 90% was invested in Mexico, 9% in Puerto Rico, and maintenance Capex in Colombia.
In Mexico, we remained on schedule in changing the construction of the Paris attacks per week to the second runway I think when airport and are starting the first expansion of base Board.
Hello.
Okay.
The first phase of terminal four weighted.
Puerto Rico, we are undertaking major maintenance repairs to run away from tax increase in summary.
<unk> maintained a solid balance sheet and we have a solid track record of prudently managing cash and viable cost to effectively navigate than damage. We're also confident in the long term recovery of our passenger base supported by our attractive Airport network.
That ends my prepared remarks.
Thank you again.
Again to the audience. It is star then one for questions and again, please make sure. Your mute function is turned off or the handset has ticked up before pressing the corresponding digits.
Ask that you please limit yourself to two questions and you may re queue with any additional questions again that is star then one for questions.
That ends my prepared remarks for today Christina Please open the lines for questions.
And we will take our first question from Alejandro Zen Mokoena with credit Suisse.
Okay.
Hello, All and Paul Thank you for Nicole Thank you for taking my questions.
Next question from that very fact.
So I understand.
You have received most of the reimbursement.
<unk> amount.
There are still remaining around 4 million.
Hi, Ron.
Greg.
So my question here.
Uhm potential.
Okay.
The off reimbursements or E.
Combining the conversations will be outgrow the surrounding stomach.
Alejandro Hi, good morning.
The reaching of $34 4 million.
Yes.
There is a remaining balance of $9 million.
As of today.
There is some additional $10 million for the second Act.
With that respect.
Okay. Thank you and for my second question, if I may.
On the <unk>.
Chris.
So can you give any update on where you are standing right now.
When can we expect you guys to be fully implemented.
Well the types if sales are.
Applicable as from the first day of the year.
Remember that the tire side, our fourth for the year not on a monthly basis.
So they are.
In fact in place as from January this year.
What I believe of course is due to the increase we have b.
Approved.
We're not going to be able to reach the 100% of maximum grade b the year, because we cannot implement increases in our specific rates.
Larry or in an immediate way.
Okay. So what percentage do you believe you can reach.
Sure.
That will depend on the trucks that will depend on.
And also on the passenger mix.
Okay.
Thank you Alonso.
Youre welcome.
Go to our next question from Alan Macias with Bank of America.
Alright, good morning Carlos.
Just one question.
On dividends.
Could you provide an update on dividend payments expected for this year. Thank you.
Alan Good morning.
You've reported.
In the last year.
Shareholders' Assembly.
The dividend of eight point something vessels once approved.
So that payment that based of the payment was subject to board approval as from May 11. This year.
The board of directors is the one who will be saying when the dividend is going to be paid.
Thank you.
You are welcome.
Thank you our next question from Guillermo Fernandez with J P. Morgan.
Yes, Thanks, Glenn why everyone Hi, Adolfo Thanks for taking my question. My first question is regarding Colombia per the equal. So you already got the MVP renegotiation Mexico.
If I'm not mistaken you have already under contract.
Some terms that will allow you to extend your contracts given the impacts from the pandemic.
Just wondering I mean, how fast you should tend to be a reality so again similar.
With balance in both Colombia and in political equal and the second question is just to confirm day to mention that due to expect.
Your talk traffic levels to be back in that 10 to 18 months beer that's it.
If that's the case, if that's valid both for domestic and four international Thank you.
Yes, hi, good morning, well in the case of Colombia, we do not have to do anything.
Sure.
Pension of the contract equals.
As adjusted automatically.
Remember that when we break it breaks our regulated investment flow. The return I would say the concession is silver with a minimum period of 2013 tool and a maximum of $20 48.
We have said before.
I mean the situation.
Concession will be concluding in 2032.
So basically the contract as it just picked up dramatically.
It gives a Puerto Rico there is no any change on the on the contract.
So I don't know if these answers your question.
Yes, it does.
Okay.
The question was.
In terms of the recovery you mentioned in your opening remarks that you do expect to be back to record levels in that 10 to 18 minutes I just wanted to double check if that's correct and if that.
It's the case, if that has value for both domestic and international.
Okay, our our peak for the last 12 months passenger traffic.
I'd say the record wells achieving in February 2020.
So what I'm, saying is we should be reaching we expect to reach that level.
10 to 18 months from now.
Okay. Thank you.
Youre welcome.
Okay.
Go to our next question from Juan <unk> with Bradesco.
Hi alone flow. Thank you for taking my my question.
We recently saw the new outsourcing luggage passing the Mexican Congress.
What do you think is the impact on us So I mean I understand that in sourcing will also be prohibited. So do you think services such as security cleaning.
Cleaning will be qualified our specialized services.
Hi, good morning, well, we are analyzing this situation of course it has been approved at both.
The deputies and senators jumper.
But it has not been published.
In the case of security and cleaning.
In our licensing fees, we do not believe that these could be consider as in sourcing.
So the companies I believe will have will have to provide the services they are providing today.
Okay. Thank you very much.
Youre welcome.
And we'll take our next question from Joseph.
With.
Yes.
Okay.
Right.
Hi, Good morning, Thank you for taking my question.
I have just two quick questions. The first one is on the MVP.
Negotiation.
We saw that you published the Capex T J's clients come from 'twenty, one to 2033, but double H E.
We saw that.
<unk> invested.
Then it was originally expected.
P J I'll take that so I have one question on how is the covenants for any capex.
And the negotiation and Michael from question is on the traffic we saw a very positive rebound in <unk>.
So if you could make from color of April and alcohol b the upcoming months.
Go ahead of the high season. Thank.
Thank you.
Youre welcome Solvay Capex postponement of $2 1 billion peso that was approved by the authorities in the third quarter last year.
Whats considered in the new figures, we have percentage so.
I would say the numbers that you have to consider in June but just on your forecast are the ones. We just property. So it is.
Three point something billion vessels for this year.
In the case of the traffic yes.
We saw a nice recovery process for the case of March of course remember that.
The pandemic situation has started in mid March last year.
So a portion of that.
Because of the pandemic of last year.
Nonetheless.
Still optimistic in terms of what we're seeing in the successful U S. Vaccination process. So I hope that we will see the effects will be new in the Soma.
Great. Thank you very much.
You're welcome.
As a reminder, if you would like to ask a question at this time. Please press star one again Thats star one for questions.
We will take our next question from Roberta <unk> with Citi.
Okay.
Hi, <unk>. Thanks for taking my question just one quick one on DMD.
Your line of this recent average inquiry how does <unk>.
Thank you.
To pass along all of this higher price into the airline could it be that volume related discounts will be given to the airlines how does it look like for this year with the situation still being complicated. Thank you.
Okay.
I have mentioned.
It's not easy on.
This movement to increase that were specific rate and that is why I believe we're not going to reach that.
The normal.
So Maxim parish compliance for this year.
So we will have to see this with this very carefully.
And we will be adjusting rates in the future.
Recuperate, our maximum tariff levels complaints in 2021.
Okay. Thanks Adolfo.
Youre welcome.
And again, if you would like to ask a question. Please press star one at this time.
Go to our next question from Alan Macias with Bank.
America.
Great. Thank you just a follow up question.
Maximus patterns.
Have you increased.
Average as of April 8th EMEA at the airports.
And I guess do you have more deep way to increase.
Maximum tariff for international traffic since the peso has been struggling with that.
Yeah, great. Thank you.
Thank you.
Your line no we have not increased our rates in April.
To increase celebrates it requires a process that takes between three to four months.
And as I said before again.
I do not expect to reach maximum.
Got it.
Brian.
At 100% this year as we used to.
So.
We believe that.
That will be or should be achieved in 'twenty one.
In the case of international traffic, Yes of course, the rates are higher due to additional area, we have to provide to them at the airports, which is there.
The one that is related to migration and customs.
Okay.
All of that is in dollars it's true.
But at the end of the day day maximum rate do you think that these investors.
Thank you.
You're welcome.
Paul.
Go to our next question from Gabriel Himmelfarb with Scotiabank.
Hi, Thanks for the call.
Just a quick question.
Do you think there is any race this year.
The final becomes warmer Corey gatlin bankable non linear.
Right.
Thanks.
Gabrielle Hi, good morning, Yes, so of course, we have b.
These risk always.
So it's something that we cannot control and of course, we cannot predict because he is not seasonal or cyclical.
The season is it starting with lower levels in comparison with the ones that we had in 2018, which was a very bad year for us.
And we'll have to wait and see what is the outlook.
Okay. Thank you.
Youre welcome.
We'll take a follow up question from Juan parts with Bradesco.
Hi, Thank you so much for taking my question again.
So I see it kind of extended two major two major airlines that kind of extended.
Pension of flights to Mexico.
Caribbean till may 21st.
Is may of big months for Canadian travelers, such as like in the first quarter.
No it is not.
Unfortunately, the high season for Canadians to map that.
Is that due to weather conditions.
I would say the additional expansion is from April 30th.
It is not.
Very important in terms of the impact in comparison with the one that we had.
In the first quarter.
Perfect. Thank you so much.
Youre welcome.
Follow up from Guillermo Fernandez Swift.
J P Morgan.
Yes, Thanks, a lot from port of follow up question.
The follow up is on being nowhere not correctness Jos.
<unk> how is the relationship with the commercial tenants if we should expect additional.
Comments on the airports.
Well.
I would say in general terms have been noncommissioned revenue is working well of course some of them.
Have been facing.
Probably not because of laws with because of.
Other operations they have in some other airports, where the contract that's flat trends fiscal a meter.
Indications of bullish in general terms.
Most of the contracts are adjusted up dramatically.
The way that we collect from them. So I do not expect any major situation with them.
Okay. That's clear thank you.
Youre welcome.
As a reminder, if you'd like to ask a question. Please press star one at this time again that is star one for questions.
There are no questions at this time that concludes the question and answer portion of today's conference I'd now like to turn the call back over to Mr. Castro for closing remarks.
Thank you Christina and thank you again for participating in our first quarter results conference.
Conference on behalf of <unk>, we wish you a good day and pleased that they say goodbye.
Gentlemen that concludes Asur's first quarter 2021 results conference call, we'd like to thank you again for your participation you may now disconnect.
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Yeah.
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Yes.
Okay.