Grupo Aeroportuario Del Sureste, S.A.B. De C.V. Q1 2010 Earnings Call Transcript

Grupo Aeroportuario del Sureste, S.A.B. de C.V. Q1 2010 Earnings Call Transcript
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Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASR)

Q1 2010 Earnings Call Transcript

April 23, 2010 10:00 am ET

Executives

Adolfo Castro – CFO and Strategic Planning Officer

Analysts

Nick Sebrell – Morgan Stanley

Mauricio Santos – GBM

Augusto Ensiki – Morgan Stanley

Pablo Abraham – BBVA Bancomer

Pablo Riveroll – Credit Suisse

Presentation

Operator

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Previous Statements by ASR
» Grupo Aeroportuario del Sureste, S.A.B. de C.V. Q3 2009 Earnings Call Transcript
» Grupo Aeroportuario del Sureste, S.A.B. de C.V. Q2 2009 Earnings Call Transcript
» Grupo Aeroportuario del Sureste, S.A.B. de C.V. Q1 2009 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the ASUR first quarter 2010 results conference call. My name is Marisol and I will be your coordinator for today. At this time, participants are in a listen-only mode. (Operator Instructions)

For opening remarks and introductions, I would like to turn the call over to Mr. Adolfo Castro, Chief Financial Officer. Please proceed, sir.

Adolfo Castro

Thank you, Marisol. Good morning, everybody. Thank you for joining us today for the conference call of our third quarter results.

Allow me to remind you that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including risks that may be beyond our company's control. For an explanation of these risks, please refer to ASUR's filings with the Securities and Exchange Commission and the Mexican Stock Exchange.

Today, I will just comment on the results for the quarter and how we see our markets evolving on the backdrop of the current economic environment in Mexico. To date, passenger traffic declined 3.6% this quarter, showing an improvement from the declines of 27%, 14%, and 6% posted in second, third, and fourth quarters of 2009, respectively.

During the quarter, traffic declined 4.6% in January, 6.9% in February. In March, however, we saw the first positive comps since the start of the H1N1 virus in Mexico in April 2009. Keep in mind also that March traffic figures include one week of Easter week, while last year Easter holidays took place in April.

Cancun reported its second consecutive quarter of positive domestic traffic since the H1N1 outbreak in Mexico in April 2009. We also continue to see the positive effect of the recovery of domestic routes lost in November 2008 when ALMA Airlines ceased operations. International traffic also continued its improvement trend, with all airports with the exception of Cancun and Oaxaca reporting positive comps. International traffic at Cancun fell 4%, a significant improvement from the declines posted in previous quarters.

International passenger traffic, as a percentage of total traffic, remained relatively unchanged year-over-year at 66.7%. Passenger traffic between Mexico, Canada, and the United States represented 91.87% of total traffic compared with 90.91% in first quarter 2009.

Looking ahead, we expect to see positive traffic figures, mainly as a result of the Easter comps, due to the strong decrease we saw last year, following the announcement of the H1N1 virus made on April 26 and the challenging domestic economic environment. The problem we saw in Europe because of the ashes has generated some flight cancellations at Cancun Airport.

Total revenues fell 1.45% this quarter, driven by the decline of 0.9% in aeronautical revenues and 2.49% in non-aeronautical revenues. It's important to mention that the Producer Price Index during 2009 was nearly 2% in comparison with increase by 3.6% of the Consumer Price Index. Maximum tariff is adjusted with a PPI, excluding petroleum. Commercial revenues per passenger, in turn, fell 0.79% year-on-year to 60.15 pesos per passenger. This compares with 60.62 pesos per passenger in first quarter 2009 after a 5.6% appreciation of the Mexican peso against the U.S. dollar.

Operating costs and expenses rose 1.51% this quarter. Although we maintain our focus on cost reductions to adjust our cost structure to the challenging environment, this quarter we saw the impact of the additional energy consumption resulting from the operation of the second runway at Cancun Airport, which was, as you may remember, began operations during October 2009.

Operating profit for the quarter declined 4% to 506.8 million pesos, reflecting lower revenues and higher costs discussed before. As a result, operating margin fell by 139 basis points to 52.17% in first quarter 2009. EBITDA margins, in turn, declined 101 basis points to 68.63%.

This quarter, we made capital investments of 94.31 million pesos, mainly on the final payments for the Cancun second runway, major maintenance of a runway in Merida Airport, and the start of terminal expansions in Veracruz, Villahermosa, and Oaxaca Airports.

Moving to our balance sheet, we closed the year with cash and short-term investments with 1,331 million pesos, a 31.57% decline year-on-year, the majority on which remains in short-term investments. Remember that we paid 1,884 million pesos in cash dividends in the second quarter 2009. At the end of the quarter, ASUR's total bank debt was 495 million pesos under a 750 million pesos three-year credit agreement in which we entered in May 2009. This quarter, we made a second quarter – a second capital payment of 54.5 million pesos.

Now, let me open the floor for questions. Please, Marisol, go ahead.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Nick Sebrell from Morgan Stanley. Please proceed.

Nick Sebrell – Morgan Stanley

Good morning, Adolfo. Could you answer two questions? First, if you could talk – just give us an update on the second airport, what's the current status? Is – has the likelihood of it happening this year changed at all? And as the – the auction, I mean. The second one is debt. What kind of level over the long term are you targeting in terms of leverage? Do you have a net debt-to-EBITDA number in mind or anything else that you could give us?

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