Q2 2023 Grupo Aeroportuario del Sureste S. A. B. de C. V Earnings Call

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We are using a speaker please lift the handset before making a selection as a reminder, today's call is being recorded now I would like to turn this call over to Mr. Adolfo Castro Chief Executive Officer. Please go ahead Sir.

Thank you Kenny and good morning, everyone.

Before I begin discussing never letting it reminds you that certain statements made during this school may constitute forward looking statements, which are based in Mexico.

If the needs and are subject to syndrome, which can uncertainties.

And so in my opinion.

Maybe you could do your own company spectrum.

As you should and you shouldn't be doing that work.

Give your jokes and be talking a word press release, which was he should yesterday after market close.

Debatable.

Investor Relations section.

Totally make presentation will be available for Q&A.

Before getting into a discussion of the glut in Pittsfield.

Let me start todays call. Please check the governments in terms of getting tenants.

Sure.

Gary as we recently entered into a joint business agreement with what he said and CBC.

One.

To develop it.

If traffic international airports, you Bang on with Dominican Republic. This is you shouldn't Pittsburgh Pirates Booty salespeople gave me and told us.

That was paid in June .

They're not generating once.

Once the construction is there for the spring.

Finally, we expect when things get 25% ownership stake ventured.

Representing a totally committed investments for a suitable $66 million.

The remaining 48 or two you're going to do this would be best if I assume would be applied to the construction of the game.

The recycling you said will be affected.

Right.

Basically the main can be booked.

We have a leading market position in construction real estate development.

In education.

Since its foundation that music group has been committed to helping people are quite.

Basic goods and services such as housing.

Third and application.

And he said groups, where did friendly's add a building to Samsung.

Great.

14 to make every board and long term and that's what made it gets airports in Santo Domingo.

So.

International passengers.

So they could take advantage of the second most important interesting market and the Latin America Africa.

And presenting a very attractive growth opportunity.

D C perspective lodging capacity defensive I'm 40, Sydney passengers to boots.

Becker to double by 2040.

This compared with the 100 and they put it gets asked.

Okay, what region you can see.

Passenger traffic.

We received approximately 8 million passengers annually with traffic.

Spent 30 million by 2040.

We can pass it to said 18 passengers annually.

On airport will provide mother and efficient facilities offering superior experienced both passengers and airlines.

Acting as a good guy.

For your Coke business.

Additionally, the airports would be conveniently located approximately two just from the truth.

Cooking area I'm.

I'm 32 kilometers from the kind of international.

The airport will be treated like between vital beach, and that's really New Jersey.

Area to the north of Baghdad to play in Macau, and we would've liked.

The fan out is good experience and increasing with the vitamin Shoppe stroke distinct group two is expected to continue over the next three decades in this region.

The JV already owns the plant to develop new airports, which which was approved by the government at.

At the moment it is Phoenix you should base.

Project planning and with.

With the construction expected to start once these spaces finalized and that's what I expect to go look.

We expect that that would make that mentioned they put to begin operations at goldsmith.

Three years from now.

Second.

And our general meeting.

36 shareholders approved the distribution for an ordinary cash dividend nine persons and 93.

$9 93 per share that was paid at the end of May and an extraordinary dividend. The emphasis has shifted to these babies are good.

Now moving onto Us foods operating and financial performance for the quarter.

Before his batting no debt.

<unk> argued on year unless otherwise noted.

And simply stated in our prior quarters, we still have slowed down and that's what we've done.

Messenger traffic growth this quarter.

Nearly 40%.

Nevertheless, it was a record high for second quarter, and $17 3 million travelers.

Recall that in the first quarter of 'twenty three.

It benefited from easy comps only during the first months of 'twenty two.

But this quarter, we are experiencing the negative effect of the suspension of two quick little bit Netherlands earlier in the year.

Which is impacting our location in that region.

Consolidated basis, the share of domestic traffic with Dunkin' perfect remained stable year on year.

30% of the total traffic during the second quarter.

We'll go next to review by country, starting with Mexico posted 9% growth in passenger traffic.

Hum.

The double digit levels experienced in the first quarter due to easy comps because only grown in 'twenty two.

Domestic travel and Lasalle in the high teens, 17%.

Traffic goes back to break them into Capex.

I think once you're in the low single digits, mainly driven by Canada, which grew.

During the quarter.

Next with the recall that you had the fastest growth bump.

Domestic traffic.

And internationally by 43%.

Lastly, the best instruction Columbia contracted nearly 18%.

Declines of 20%, representing domestic and international passengers respectively.

As mentioned in our prior.

Cool just reflects this pension operations will be bad I would tie in to this quarter.

Which represented 17 417, 4% and one 9% up 22 passenger trucks people on their perspective.

The increase in value added taxes from 519% at the beginning but yet also impacted traffic trends.

Turning to the P&L.

All references to revenues and of course exclude construction revenues.

Revenues.

Well, it's not that Puerto Rico, Colombia figures reflect this Mexican peso, which I appreciated 15, and 18% versus the U S dollar and the Colombian peso.

We ended the second quarter last year, but at the end of the second quarter this year respectively.

Now starting with the top line.

Revenues increased 5% to 6 billion business in the quarter.

Mainly driven by growth not because I don't know now it sounds like we're seeing in Mexico.

Three quick Colombia posted declines of nearly 1% and 16% respectively.

Overall, Mexico represented 74% of total revenues.

Colombia accounted for 16% and 10.

<unk> respectively.

Note that even though kind of currency revenues were up.

Yeah me too.

10% and 6% you put three critical they'll get respectively.

Commercial revenues were up 6% doubling passenger traffic growth.

Driven by increases of 8%, Mexico City perspective.

Cool.

More than offsetting the 15% decline in Google.

On a per passenger basis commercial revenue increased 222 benches.

From nearly 120 in the year ago quarter.

By region figures range from 142 vessels in Mexico, 246 vessels in Puerto Rico, and 41 passengers in Columbia.

In local currency with Colombia posted increases in commercial revenues per passenger.

One thing one 3% respectively.

These proposals reflect our sustained focus on expanding our commercial offerings.

Chase did try and experience of our passengers at crystal with airports.

Yeah.

It gets respect during the last 12 months, we opened 20, new images basis in Mexico, 14 point could be cool and 40 42.

Turning to cost total comparable operating expenses were up 8% compared to 5% revenue growth in the quarter.

Note that comparable growth.

252 million expense recovery the splendor.

Something from the application of the C. R. R S. A a acting Puerto Rico.

To the benefit of 175 million for the same quarter last year.

In Mexico expenses rose 16%.

Percent revenue growth, while we maintain tight controls on expenses.

The increase was primarily driven by the.

Cost of services reflected the effect.

30% increase in the minimum wage at the beginning of the year.

In turn strong investments drove higher amortization expense.

And particularly good cost declined 15% benefited from a salary expense recovery.

Under the E. R S. A J at this quarter compared to the second quarter.

Excluding this recovery in both periods.

Expenses would have increased 11%, that's very proficient of pizza and maintenance more than offset savings in personnel and energy cost.

Could it be Colombia declined 8% as provisions for that account in connection with the potential to look at us Airways, where more than compensated by declines across <unk>.

Yeah.

Hi.

Consolidated EBITDA for the quarter was up 3%, reaching $4 2 billion, mainly driven by higher profitability.

In Mexico.

9% to 34 3 billion.

This performance was partially offset by declines of 8% in Puerto Rico to over 530 meter benches, and 24% in Colombia two of them pretty quickly.

In Germany.

Early days adjusted EBITDA margin declined 240 basis points to 69%.

Reflecting contractions of hundreds of basis points in Mexico to 74, 2%.

430 basis points to 54, 5%.

And 530 basis points equal to 50%.

46%.

To begin we delivered another good quarter in Mexico, I think that.

The strong peso and the Colombian airline that has stopped patients during the quarter.

Moving to our financial position, we maintain a robust balance sheet with cash and cash equivalents of important convenience business and a healthy debt reported after beating the ordinary dividend at the end of July .

I wanted to a total of nearly three big emphasis.

Our current receivables increased 7% driven by passenger traffic in Mexico, and Puerto Rico.

And then with combined receivables.

2030 basis from the two look at airlines that were suspended earlier in the year.

Finally capital expenditures in the quarter totaled 153 million basis.

Of these 50% or so credit to Mexico.

6% to put up a pretty cool.

Meaning to Colombia.

So even though we are seeing healthy passenger traffic trends and we have a solid financial position and we're investing for the future growth.

Yes.

These answers presentation, Kevin Please open the call for questions.

Certainly we would now be conducting a question and answer session.

If you placed in the question queue. Please press star one on your telephone keypad.

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A reminder, please pickup your handset before pressing star one our first question today is coming from Adolfo Ramos from Bradesco <unk>. Your line is now live.

Thank you.

Thanks for taking my question I ask a couple of them.

The first one is on air.

Airports.

The level of passenger that you're targeting over the long run.

And when you expect to continue.

And also if there is anything you can share on the economics of the amount of income that you expect to obtain once once it's stabilized so that'd be my first question.

Okay. What I have said is that we are.

Working towards it.

We have an eight 8 million passengers capacity.

Yeah they won.

In the infrastructure up yet.

In terms of the Konami install it to them.

We have three years away from that moment.

Thank you and then the second question I had was.

On your on your M. D. B I mean, we have seen this administration would be more more confrontational with concession based businesses.

You've seen headlines about some industry players pushing back against the current level of service I mean, this is not just for you but.

The industry broadly can.

Can you talk about.

Your expectations on your on your MVP anything that you've seen recently.

And whether you've seen any changes on where there is a process or methodology anything versus your previous negotiations. Thank you.

So far we have not seen anything ingold products.

Sensation.

As of today, we have that.

So we have together with the authorities conduct a bid process to be seabold, the airports and review each one of the projects we have triples.

And during the second half of the year, we go through the economics in terms of the passenger traffic that they spend breakdown and finally the final calculation. So so far I can say to you that I don't see any.

Any changed in comparison.

Yes.

Thank you as a reminder, that star one to be placed in the question queue and we ask you. Please ask one question one follow up that return to the queue.

Our next question is coming from gear Mendez from Jpmorgan. Your line is now live.

Hi, Adolfo good morning. Thanks for taking my question. My first question is a follow up to the previous one on the Dominican Republic in airports I understand D 8 million passengers a year, but just thinking of the of the ramp up of this operation. So by the time. It's it's concluded three years from now how fast for you reached a median and how.

How is the competition to make sure. It's only 30 kilometers from the concept of an international airport. So how should we think about the competition.

In the region and the second one is regarding Colombia are I mean, how do you see the outlook in terms of threat to performing post the theme probably with the with the two airlines that went bust I mean, how fast do you expect the recovery on traffic in the region. Thank you.

It will come in the picture today.

And I will be at approximately.

8 million passengers.

We are constructing or wouldn't be we wouldn't be constructing.

Infrastructure with a capacity of $8 million.

Normally I would say.

Coupons jumped infrastructure.

They've won.

With a target, but let's say between five to seven years.

In the case of Colombia, what I can say to you is that I don't see how we'll be able to airlines avianca.

We'll be able to recuperate in a fast way.

What we have lost it from Andrea that'd be like Colombia. So my expectation is that we would be affected for the rest of the year.

Yeah.

Okay. Thank you.

Youre welcome.

Thank you. Your next question today is coming from Javier Garrido from GBM. Your line is that a lot.

Thanks for taking my question.

I have a follow up on the mid volatile airports you could just help us understand the regulatory framework.

Of that venture and <unk>.

Is there any at this time in your joint venture are there any.

Options that you have to maybe buy a 100% or is it anything like that structure into the concept of the joint venture that we should be aware of.

Thank you.

For the moment, that's what we have we had guided to this approach that we would be working together with them.

And I think the future very slowly.

And I have sitting to my initial remarks, what we are expecting to have.

Is 35% and obesity.

Of course in the future it can grow.

We do not have any option at the moment to treat.

This patient.

Thank you.

Okay.

We have a relation of Oh well.

The airports you said.

Similar to what we should expect like Mexico, like Colombia that puts the leeco what sort of scheme are you guys looking at or are there.

It's not a cause to Mexico north to Colombia.

The government has the same on the passenger fees some of them were fees I would say in general terms. He said towards the end system.

Yeah of course.

Adding it private tip, which is not exactly the same as what we have in Mexico. So the reputation.

So I would say it's peaked in that sense, but it is a step towards fuel system, where the government has.

So to say in some specific types.

Got it.

Okay.

That's fair thank you.

Youre welcome.

Thank you next question today is coming from Anton <unk> from GBM. Your line is that life.

Hi, Paul.

Quick question on classroom.

Once wanted.

Are you seeing any.

I mean, besides and it shows the effect of FX when you replace one of them.

Have you seen any impact maybe less consumption of some of your airports or something like that.

No I have not seen anything like that or.

That's what I have sitting to my initial remarks, if you could see that the peso appreciation from the U S saw that the Colombian peso.

Of this 215% and 18%.

Yeah.

Of course that person Acacia important application in every shoals and presenting.

When we transfer all of these two person.

That's why I said to my initial remarks.

The Commission revenue.

C J.

In local currency.

Significantly we see.

And what Transcatheter.

In the case of Colombia, It was an increase of 31%.

When you translate it into Mexican vessels at five <unk> P. S.

Yes. Thank you so much.

Thank you.

The other one is related to the service cost, we saw an increase quarter over quarter.

Should we expect these levels to be maintained or provide some color there.

Yeah.

Effect that was showing the kids so Mexico was at the beginning of the year.

Due to the minimum wage increase by 20% that affects both CPU.

Services like cleaning and security.

Sure.

Of course.

Of course personnel.

Salary increases a portion of that size.

But yes, we would be effective.

From now on in terms of that.

Gross short sea during the second quarter.

Okay.

Okay and just another quick one I also saw some really high cash taxes over the quarter quite different from previous quarters, you can tell us a little bit about what.

That has to do with the level of evidence in the case of Mexico.

It properly.

When you see the consolidation effects.

That is showed sorry, not so well in the other two airports.

They are in the case of Mexico, and that's why we showed increase in Texas.

Perfect. Thank you that's all.

You're welcome.

Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Jason from Citi. Your line is now live.

Thank you. This is Jason from Steve Trans team. My first question is your Mexico Capex was very low at just due to it being the final year of the Master development plan or something else.

As far as the last year and the expected amount for the year so around one six.

Yes.

Thank you and as a follow up it's a sewer considering any expansion opportunities abroad, maybe airport acquisitions in Central America or the Caribbean. Thank you.

Well.

The other thing that we can.

You have today is what I just mentioned in the case of the American people.

Thank you. Our next question is coming from Alan Macias from Bank of America. Your line is now live.

Good luck thank.

Thank you for the call.

Just if you could give us a little color on on international traffic.

Oh Wow.

Traffic.

Visitors.

Hum.

Has been acting up has been.

Been decreasing and what to what do you see behind this.

Of course, the Canadian traffic has recovered quite well, but are you seeing any yeah.

Affecting U S visitors.

Besides a strong peso thank you.

Hi, good morning.

I don't see any decreases in the U S traffic I would say, it's more increase if we could but the second quarter.

With the previous year.

Yes.

Good afternoon traffic during the quarter as I mentioned.

During my initial remarks, most of the growth came from Canada.

Great.

Yes.

And it's good for them.

Europe is increasing that dynamic.

Yeah.

Yes.

Can you give us the level or the average of our Mexican.

Flying from Cancun to who are the U S.

Is that a significant amount of traffic or or has that been growing.

Whereas if you are trying to Alaska.

21.

Yeah, good traffic between U S.

Monthly.

Germany with a U S carrier.

And if we go back in time.

<unk> 2021 when Mexico.

Laughter kept devoted one or two once the capital issuance.

We issued 6K, saying that cedar 0.5% of our traffic.

Drawing from our airports in Mexico to the U S are traveling with our domestic card base with 99, five and struggled with a U S carrier.

Thank you.

You're welcome.

Thank you as a reminder, that star one to be placed in the question queue. One moment. Please while we poll for further questions.

Okay.

Yeah.

We reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.

Thank you Kevin and thank you all of you again for participating in our second quarter results conference call on behalf of a tool we should have a good day and goodbye.

Thank you that does conclude today's teleconference. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.