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Executives

Adolfo Castro – CFO

Analysts

Alan Solis – Credit Suisse

Tomas Lajous – UBS

Varanese Munoz [ph] – Santander

Claudia Medina – Itau Asset Management

Augusto Ensiki – Morgan Stanley

Andrew West – Harding Loevner

Francisco Suarez – HSBC

Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASR) Q4 2010 Earnings Conference Call February 24, 2011 10:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the ASUR fourth quarter 2010 results conference call.

My name is Louisa and I’ll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (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, Louisa, and good morning, everybody. Thank you for joining us today for the conference call of our fourth 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.

I will start with a brief comment on recent developments, including an update on Tulúm Airport; afterwards I will discuss passenger traffic performance and the results of the quarter.

As you know at the end of January, COFECO the antitrust agency in Mexico released its petition not allowing ASUR to bid in the bidding process for the construction, management, operation and exploitation of the public airport that is to be built in the Tulúm in the state of Quintana Roo. As we have said before, we disagree with this decision and the views expressed by the commission. Basically they are eliminating our [inaudible] in the competition to offer the lowest rate at the airport.

Remember that the criteria establishing the bidding process was that the winner will be the one who offers the lowest rate. Because of these, we have initiated legal proceedings in accordance with the Mexican legislation to defend us to its rights. However, we cannot provide any assurance that any legal proceedings to challenge the COFECO decision would be successful or that COFECO will be required to deny the bidding process.

Keep in mind that we have previously announced if the airport were to be granted, the granting authority agreed to chose Cancún’s MDP and maximum rate as a result of the negative effect that this airport will have in Cancún’s passenger traffic. The agreement is to make the adjustments within 90 days after the concession is granted.

Now moving to the results. Passenger traffic during the quarter increased by 1.7% year-over-year in line with our expectations. Traffic was up 5.1 in October, 1 in November, and fell 0.1 in December. Remember that

[Technical Difficulty]

Operator

Pardon me, sir. Hello, hello this is the operator.

Adolfo Castro

[Starts Abruptly] Over capacity and it was easier to capture passengers fly Mexicana. Looking ahead, even if Mexicana and Oaxaca reinitiate operations this year, we see capacity constraints on domestic markets. This situation should be normalized until the year 2012.

International traffic continued to show a recovery, although at a lower rate of 2.4% year-on-year mainly driven by the strong performance at Cancún Airport, continuing the trend seen during the year, traffic growth with easier comps from the H1NI influenza outbreak and the economic crisis in the fourth quarter 2009. As a result, the international passenger traffic continues to increase in chairs of total traffic, of the 55% from the 53.4% in the fourth quarter 2009.

Passenger traffic between Mexico, Canada and the United States represented 89.2% of total traffic compared with the 91.2% in the fourth quarter 2009. Consolidated revenues increased 58.3% this quarter, mainly driven by the adoption of the INIF 17 related to service concession contracts, which resulted in addition of 401 million pesos in revenues from the recognition of improvements to our concessioned assets. Keep in mind that this was offset by a charge to operating income from the same numbers [ph] as we hired third parties to provide construction services. Excluding construction services, total revenue would have increased 5.1%.

Commercial revenues to passenger in turn remains strong up 4.1% year-on-year to 63.88 pesos and above the record high of 61.33 pesos achieved in the fourth quarter of 2009. This quarter, we continued to expand its bases for commercial activities. For example, last year we took over our 14 convenient stores from a concessioner that was in Chapter 11. We opened eight of these stores at the end of the fourth quarter and remaining will be opened during the first quarter of this year. All of them operated directly by us.

Operating cost and expenses rose 76.1% year-on-year this quarter, mainly as a result of the application of INIF 17 related to the service construction contracts. Excluding the impact from applying INIF 17, operating cost and expenses have increased 5.4% year-on-year.

Operating profit rose 29.6 million pesos to 373.7 million pesos, although operating margin declined to 31.50% from the 38.20% in the same quarter last year. And while EBITDA rose 4.8% this quarter, EBITDA margin was down to 39.1 from the 59.1 in the fourth quarter 2009. These reflect negative impact from the inclusion of construction revenues and expenses as a result of the INIF 17, while there wasn’t a corresponding increase in the EBITDA.

During the fourth quarter we made capital investments of 381.2 million pesos as we continue with terminal expansions in Veracruz, Villahermosa, and Oaxaca airports begun in the first part of this year and the passengers flows operations at the Cancún Airport.

In terms of our balance sheet, cash and short-term investments at the end of the quarter increased 50% to 1,442.88 million pesos. Bank debt at the year end totaled at 890.6 million pesos.

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

Question-and-Answer Session

Operator

(Operator Instructions). Question comes from the line of Alan Solis with Credit Suisse. Please proceed.

Alan Solis – Credit Suisse

Yes, good morning, Adolfo, great quarter. My question is related to the receivables from Mexicana provision in the third quarter of last year, you are not legally required to pay down those debts to the airport groups in order to resume operations?

Adolfo Castro

Well, two things. First, you know that we have decided to – reflecting the results of the last year, the accounts receivables that were not paid by the Mexicana. So every peso that we indicate of this company starts – restarts operation receive, it’s going to be positive news for the company. We have not applied to negotiate with them. Basically we have been talking with them in order to try to recover as much as we can. Our basic principle is to recover the passenger fee and we are not accepting this a little less and that.

Why the passenger fee? Because the passenger fee is an amount of money that they have taken that belonged to them, because passenger fee is something that they collect on our behalf and they should be at least paying this amount to us. Of course, in accordance with Mexican laws that is more than 50% of the credit notes accept what they are offering the remaining 49 will have to accept.

At this moment, I cannot say what’s the – what’s the – well, I – at this moment, I can say that there is not yet an agreement with more than 50% of the credit notes. The end, the final comment is, if they restart operations, yes they will have to pay something, and then we will see positive numbers in the case of the company.

Alan Solis – Credit Suisse

Okay, but not necessarily the full amount, it would have to be some sort of negotiation, if I understood correctly.

Adolfo Castro

Yes, it could be a negotiation or it could be the final result of the creditors’ decisions.

Alan Solis – Credit Suisse

Okay, thank you, Adolfo.

Operator

Your next question comes from the line of Tomas Lajous with UBS. Please proceed.

Tomas Lajous – UBS

Hi Adolfo, thank you very much for the call. Can you talk a little bit about what happened with CapEx? If I’m not mistaken, CapEx for 2010 was well below the MDP, so if you can update us on what’s happening there, if and when that CapEx is going to come through and how should we be thinking about CapEx going forward and about how this affects the MDP.

Adolfo Castro

The CapEx of last year had two different impacts. The first one was that we were able to comply with some of the works with lesser amount that was originally considered in the MDP. So in other words, we made savings and we complied [ph] with the consent. Because of these we have presented to the authority some different options to use that amount of money.

From a regulation perspective, we have to spend that amount of money, the full-year amount and put these in numbers. If I have to repay the ground rate [ph] with a cost of 1000 and we were able to repay the ground rate with 900, the other 100 was paid, but they will have to – we will have to spend those during this year and we will spend those once the authority has approved the concept of where we are going to spend those 100. So it’s not a final or a definitive spending in capital.

The second thing is the situation was with Veracruz and Villahermosa were we have requested the authority to diminish the amount of CapEx due to the fact that the passenger traffic in those airports were not at the same levels that was originally considered for the MDP, because of the situation with the domestic airlines mainly after June 2008.

The authority has approved to reduce the amount of CapEx. So the next step is to talk with them and see what kind of impact these will have on the maximum rate of these two specific airports. And that’s what we will have to do in the next quarter of this year.

Tomas Lajous – UBS

Okay, great. Thank you very much, Adolfo. But more generally, I mean does that mean that your capital intensity is falling, you’re able to sort of continue delivering on revenues and EBITDA with less CapEx, and I guess that’s why you have to talk about with the regulators? And also could this be sort of joined into the discussions about what happened with 2009 with the GDP falling more than 5% and passenger traffic falling, does that sort of come into the fold?

Adolfo Castro

The reason why we are able to negotiate or we are able to be equipped with the CapEx reduction is because a drop in GDP of – during the year 2009 were more than 5%, and as this impact had also a decrease in the level of passengers.

Tomas Lajous – UBS

Okay, thank you.

Adolfo Castro

You’re welcome.

Operator

The next question comes from the line of Varanese Munoz [ph] with Santander. Please proceed.

Varanese Munoz – Santander

Hi, good morning, Adolfo. The question is regarding – this year the operating level and do you have moderate increases in your working capital – in your working capital and CapEx, so free cash flow to equity increased by a solid 56%. Is it possible for a better dividend to be paid in 2011?

Adolfo Castro

One thing that I have to figure out we have conclude – we are in the process to conclude the audit – the audit of our numbers. Once this is concluded, I will present my proposal to the strategic partners and to the operations committee, to the Board of Directors and finally to the shareholders assembly. The only thing that I can say to you is that the maximum dividends possible is the result in weakened earnings plus the profit of the year without – making a reduction of the result, that’s the maximum possible that must be declared.

Varanese Munoz – Santander

Okay, thank you.

Adolfo Castro

You’re welcome.

Operator

Your next question comes from the line of Claudia Medina with Itau Asset Management. Please proceed.

Claudia Medina – Itau Asset Management

Hi Adolfo. Varanese asked my question. So could you please remind me what the full amount of the maximum dividend could potentially be and how that compares with the dividend payback here please?

Adolfo Castro

Well, Claudia, good morning. Basically you know that we do not have a written business policy and that we allot this every year. We are considering the six consensus [ph] at the moment. One of the major elements that we have in front is or was the situation of the Riviera Maya project.

What I believe today is that this situation with COFECO will not change, so I don’t think that we are going to be able to see that. So that’s giving us some kind of relief in that sense in terms of cash requirements. But again the maximum possible has to be with the [inaudible] so that’s what I have to see right now and then to make my proposal to the profit of this year in the company.

Claudia Medina – Itau Asset Management

Excellent, okay, thank you, and congratulations on the results.

Adolfo Castro

Thank you.

Operator

(Operator Instructions). And the next question comes from the line of Augusto Ensiki with Morgan Stanley. Please proceed.

Augusto Ensiki – Morgan Stanley

Hi Adolfo, good morning. A question regarding your taxes, I guess, getting a bit lower than we are looking for this quarter and still pretty reasonable for the year, I guess. But is the annual tax rate, I guess, it came in around 32% or so, is that what we can expect going forward on a – at least on an annual basis?

Adolfo Castro

Hi, good morning. Well, basically the annual tax is very close to the corporate mix, let me put it that way, to the corporate rate. Remember that the corporate rate in Mexico will be decreasing in the future. So when you are saying the future, keep in mind that the corporate rate will diminish from 32 to 28 in the future. Basically what we have seen during the fourth quarter in terms of taxes has to do also with effect of Mexicana in terms of making a reduction from a tax perspective of what we have not collected from their side. So yes that certainly was a surprise for you during the fourth quarter. But remember that on an annual basis should be very close to our corporate rate.

Augusto Ensiki – Morgan Stanley

Great. And then just going back to – you said about the decreasing rate, when is that expected to come down?

Adolfo Castro

As far as I understand and please check these with the Mexican legal laws, it should be 29 next year and 28 the year after.

Augusto Ensiki – Morgan Stanley

Great. Okay, 29 is in 2012.

Adolfo Castro

Yes.

Augusto Ensiki – Morgan Stanley

Okay, great. Thank you very much, Adolfo.

Adolfo Castro

You’re welcome.

Operator

Your next question comes from the line of Andrew West with Harding Loevner. Please proceed.

Andrew West – Harding Loevner

Hi, good morning. My question is just about the basics of the business. Do you have any outlook in terms of what are costs looking like? How many new hotel openings coming in Cancún? Sort of things that are going to be driving both your passengers, your fee per passenger and your costs.

Adolfo Castro

Okay. In terms of cost this year, I don’t see any major surprise apart from any other extraordinary expense apart from what we are having today because of the Riviera Maya project. From May last year up to probably this moment we have spend some amount basically to prepare our offer. Probably from now on the amount that we are going to be spend is going to be on legal fees. But apart from these I do not see any major change in our cost structure in the company.

Of course, in terms of what I have said you in the opening, in terms of the direct commercial operations, if we are going to operate more stores and we are going to sell more products, the cost of these products compared with last year is going to be high.

In terms of hotel rooms and in the Cancún and Riviera Maya region, what I can say to you is that today we have a margin for expansion without any construction in hotel rooms. In other words we have today less load factor that we used to have in the case of this region. Why this is basically because of the international crisis of swine flu and the problems with the domestic airlines.

The new projects in my opinion were stopped because of the same situations, but these impact is something that we will have to see until the year 2013 in terms of from now on we have some margin to increase passenger traffic because there is some empty hotel rooms. Once these hotel rooms are full, we will need additional ones that have to be initiated during the year 2009 and 2011. And in that sense we have to say that it’s true that there is no new or there were no so many new projects during these, let’s say, last 15 months. I don’t know if these can – if this answers your question.

Andrew West – Harding Loevner

Yes, that’s helpful. Do you have a sense of what occupancy rates are now and sort of if how much growth would it be to go from current occupancy rates to normalized occupancy rates?

Adolfo Castro

I don’t have an exact figure. Please again try to check with the hotel associations. But these figures should be very close to 70 on annual basis. And normally we are 74.

Andrew West – Harding Loevner

Okay. So you could get more than 5% just from –

Adolfo Castro

Factor for hotel room, yes.

Andrew West – Harding Loevner

Yes, okay, thanks.

Operator

(Operator Instructions). And your next question comes from the line of Augusto Ensiki with Morgan Stanley. Please proceed.

Augusto Ensiki – Morgan Stanley

Adolfo, sorry, just one additional question. Is the note of a marginal decrease in the concession fees paid? I mean it’s small, but just wondering the – what is the – is the decline in the taxable base same thing that you were talking about earlier regarding lower taxes?

Adolfo Castro

No, probably it’s because of the rent that we are operating there with stores. And we have a company that it’s making the agreements with some of the concessioners and also this is a new company that is managing the direct commercial operations, and this company is not subject to that tax. So in the consolidated way probably the number that you are seeing, if that applies, it’s probably 4.9 or 4.8. I don’t know.

Augusto Ensiki – Morgan Stanley

And so is revenue that doesn’t incur – that doesn’t get counted in for the concession fee.

Adolfo Castro

That is not subject to the concession fee.

Augusto Ensiki – Morgan Stanley

Understood. Okay, thank you very much once again.

Adolfo Castro

You’re welcome.

Operator

(Operator Instructions). And your next question comes from the line of Francisco Suarez with HSBC. Please proceed.

Francisco Suarez – HSBC

Thank you. Congrats on the results, Adolfo, and thank you for the call. Just a quick question, can you just actually talk about what is actually the mood among carriers for reopening of new routes? Of course, the airports are authorizing quite a bit and the oil prices is moving to high scale, but [inaudible] to your destinations should reduce those things, isn’t it. So perhaps you can share with us a little bit of what is the percentage of new routes opening to your airports?

Adolfo Castro

Okay, let me divide this in two pieces, international traffic and domestic traffic. International traffic is moving okay. I don’t see major problems there. In the case of the domestic, of course with the current situation we live here, and with the oil price increases that we are seeing as we speak, this is not a nice news for Mexicana or for a new company to start.

If you see the newspapers, Mexicana and Oaxaca basically are focusing on the Southeast region of the country. If they restart operations, of course, we will see new flights there. Of course, we cannot talk about new routes because they’re not going to open in place. Basically their routes are going to be Mexico City and Cancún. So in the case of the domestic, the current situation is not the best. In the case of international it continues to be the same, so it’s a positive in international.

Francisco Suarez – HSBC

Thank you very much for that. Thanks.

Adolfo Castro

You’re welcome.

Operator

(Operator Instructions). And at this time, there are no questions on the line. Mr. Castro, I will hand the call over to you for closing remarks.

Adolfo Castro

Okay, thank you, Louisa. Thanks everybody for joining us today in our conference call. As always, do not hesitate to contact me if you have any other further questions. Thank you for being here and have a good day. Good-bye.

Operator

Thank you for your participation in today’s conference. This concludes your presentation and you may now disconnect. Have a great day.

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