ASUR 1Q18 Passenger Traffic Increased 9.3% YoY in Mexico and Declined 19.2% in San Juan, Puerto Rico and 5.2% in Colombia

MEXICO CITY, April 23, 2018 /PRNewswire/ -- Grupo Aeroportuario del Sureste, S.A.B. de C.V.  (NYSE: ASR; BMV: ASUR) (ASUR), a leading international airport group with operations in Mexico, the U.S. and Colombia, today announced results for the three-month period ended March 31, 2018.

1Q18 Highlights¹

• Passenger traffic in Mexico increased 9.3% YoY, reflecting increases of 12.4% and 7.3% in domestic and international traffic, respectively. Cancun Airport was the main traffic driver.

• Traffic in Puerto Rico (Aerostar) declined 19.2% YoY, 17.0% in domestic traffic and 35.6% in international traffic, impacted by Hurricane Maria, which hit the island in September 2017.

• Traffic in Colombia (Airplan) fell 5.2% YoY, reflecting a decline of 8.7% in domestic traffic that more than offset a 19.9% increase in international traffic.

• Consolidated commercial revenues per passenger reached Ps.99.9.

• Consolidated EBITDA up 50.8% YoY, reaching Ps.2,670.5 million.

• Closed the quarter with a cash position of Ps.5,725.3 million. Net Debt to LTM EBITDA stood at 1.36x, reflecting consolidation of Aerostar and Airplan.

¹ Unless otherwise stated, all financial figures discussed in this announcement are unaudited, prepared in accordance with International Financial Reporting Standards (IFRS), including application of IFRS 9 and 15 that came into force in 2018, and represent comparisons between the three-month period ended March 31, 2018, and the equivalent three-month period ended March 31, 2017.  On May 26, 2017, ASUR increased its share ownership in Aerostar to 60% from its prior 50% ownership. Accordingly, starting June 1, 2017, ASUR began to fully consolidate Aerostar results on a line by line basis, while until then, results were accounted for by the equity method. Furthermore, starting October 19, 2017, ASUR began to consolidate results of Airplan in Colombia. All figures in this report are expressed in Mexican pesos, unless otherwise noted. Tables state figures in thousands of pesos, unless otherwise noted. Passenger figures for Mexico and Colombia exclude transit and general aviation passengers, unless otherwise noted. Commercial revenues include revenues from non-permanent ground transportation and parking lots. All U.S. dollar figures are calculated at the exchange rate of US$1.00 = Mexican Ps.18.2709 (source: Diario Oficial de la Federacion de Mexico) while Colombian peso figures are calculated at the exchange rate of COL$ 153.77 = Ps. 1.00 Mexican pesos (source: Investing). Definitions for EBITDA, Adjusted EBITDA Margin, Majority Net Income can be found on page 17 of this report.  

Passenger Traffic

ASUR's total passenger traffic in 1Q18 increased 1.2% YoY to 12.8 million passengers, reflecting a 9.3% increase in traffic in Mexico that was partially offset by declines of 19.2% in Puerto Rico and 5.2% in Colombia. 

The 9.3% YoY growth in passenger traffic in Mexico reflects increases of 12.4% and 7.3% in domestic and international traffic, respectively. Cancun was the main driver behind traffic growth, reporting increases of 16.4% and 7.2% in domestic and international traffic, respectively, with the majority of ASUR's other Mexican airports also contributing to higher traffic.

In Puerto Rico, traffic remained impacted by Hurricane Maria which hit the island in September 2017. Consequently, total passenger traffic at LMM Airport in 1Q18 declined 19.2% YoY, with reductions of 17.0% and 35.6% in domestic and international traffic.

In Colombia, international traffic increased 19.9% YoY but was more than offset by an 8.7% decline in domestic traffic.

Tables with detailed passenger traffic information for each airport can be found on page 20 of this report.

Review of Consolidated Results

In May 2017, ASUR increased its share ownership in Aerostar to 60% from its prior 50% ownership. Accordingly, until May 31, 2017, ASUR's ownership in Aerostar was accounted for by the equity method, while starting June 1, 2017, ASUR began to fully consolidate Aerostar results on a line by line basis. In addition, on October 19, 2017, ASUR acquired a 92.42% ownership stake in Airplan, which operates six airports in Colombia, and starting on that date, ASUR began to fully consolidate its operations on a line by line basis.

In accordance with IFRS 3 "Business Combinations", in 1Q18, ASUR accounted for the result of the valuation of its investment in Aerostar based on its acquisition of an additional 10% ownership stake on May 26, 2017, resulting in ASUR holding a 60% interest in Aerostar.  As a result, ASUR's financial statements for 1Q18 reflect the following effects: i) in the Income Statement, Ps.42.3 million in amortization of the concession, a Ps.14.1 million gain from deferred income taxes, and Ps.11.3 million in recognition off the minority interest in Aerostar; and ii) in the Balance Sheet, the recognition of a net intangible asset of Ps.5,912.0 million, goodwill of Ps.887.2 million (net of an impairment of Ps.4,719.1 million), deferred taxes of Ps.591.3 million, and a minority interest of Ps.5,341.1 million in Stockholders' Equity.

In 1Q18, ASUR also accounted for the result of the valuation of its investment in Airplan based on its acquisition of a 92.42% ownership stake on October 19, 2017.  As a result, ASUR's financial statements for 1Q18 reflect the following effects: i) in the Income Statement, Ps.24.0 million in amortization of the concession partially offset by a Ps.7.9 million gain from deferred income taxes and Ps.1.2 million in recognition of the minority interest in Airplan; and ii) in the Balance Sheet, the recognition of a net intangible asset of Ps.1,418.0 million,  goodwill of Ps.1,504.9 million, deferred taxes of Ps.612.9 million, and a minority interest of Ps.153.3 million in Stockholders' Equity.

Consolidated Revenues

Consolidated Revenues for 1Q18 increased 58.1% YoY to Ps.3,916.6 million, mainly as a result of the following increases:

• 63.5% in revenues from aeronautical services to Ps.2,204.7 million, principally due to the Ps.1,497.8 million increase in revenues from aeronautical services in Mexico, along with aeronautical revenues of Ps.412.0 million from Aerostar and Ps.294.8 million from Colombia;

• 36.9% in revenues from non-aeronautical services to Ps.1,399.5 million, principally reflecting the 38.9% increase in commercial revenues. Mexico contributed with Ps.1,087.8 million, further supported by contributions of Ps.220.6 million from Puerto Rico and Ps.91.1 million from Colombia; and

• 192.8% in revenues from construction services in Mexico, Puerto Rico and Colombia as a result of higher capital expenditures and other investments in concessioned assets during the period.

Excluding revenues from construction services, which are deducted as costs under IRFS accounting standards, total revenues would have increased 52.1% YoY to Ps.3,604.2 million. Total revenues at Aerostar and Colombia for 1Q17 represented 17.6% and 10.7%, respectively, of ASUR's consolidated revenues excluding revenues from construction services.

Commercial Revenues in 1Q18 increased 38.9% YoY, mainly reflecting the 9.3% increase in total passenger traffic in Mexico, along with contributions of Ps.218.3 million and Ps.89.7 million in commercial revenues in Puerto Rico and Colombia, respectively, in 1Q18. Commercial revenues in Mexico rose 5.6%, mainly driven by increases in Duty Free, Food and Beverages, and Retail among others, mainly reflecting the opening on Terminal 4 at Cancun Airport during 4Q17.

Commercial Revenues per Passenger declined to Ps.99.9 in 1Q18, from Ps.117.8 in 1Q17, with Mexico contributing with Ps.114.0, Puerto Rico with Ps.117.5 and Colombia with Ps.36.9 revenues per passenger in 1Q18. During the period, commercial revenues per passenger declined 3.2% in Mexico, but increased 10.8% in Puerto Rico and 3.8% in Colombia.

Consolidated Operating Costs and Expenses

Consolidated Operating Costs and Expenses, including construction costs, for 1Q18 increased by 103.6% YoY, or Ps.874.6 million, to Ps.1,719.2 million, mainly impacted by the following increases:

• 12.3%, or Ps.90.8 million, in Mexico mainly due to increases in professional fees, higher cost of sales from the opening of stores directly operated by ASUR in Terminal 4 of Cancun Airport, as well as security and maintenance expenses.

• 18.1%, or Ps.76.2 million, in Puerto Rico mainly due to the Ps.28.4 million increase in concession fees and Ps.12.4 million from the recognition of extraordinary expenses resulting from Hurricane Maria in Puerto Rico.

• 26.5%, or Ps.62.2 million, in Colombia principally reflecting a Ps.76.8 million increase in the amortization of the concession (includes Ps.24.0 million from the recognition of the intangible asset resulting from the valuation of Airplan under IFRS 3), resulting from the increase in accumulated amortization from 67.36% as of March 2017 to 78.03% as of March 2018.

Excluding construction costs, operating costs and expenses increased 119.8% to Ps.1,621.6 million.

Cost of Services increased 130.6%, mainly reflecting expenses of Ps.314.0 million and Ps.90.8 million in Puerto Rico and Colombia, respectively, reflecting the consolidation of those operations. Mexico contributed with a Ps.42.8 million increase in cost of services, reflecting higher maintenance expenses resulting from the opening of Terminal 4 in Cancun airport, along with higher cost of sales from convenience stores directly operated by ASUR. Higher energy, security, maintenance and professional fees, also contributed to the increase in cost of services.

Construction Costs declined 8.5% YoY to Ps.97.6 million, mainly due to higher levels of capital improvements made to the concessioned assets during the period. Mexico contributed with Ps.11.8 million in construction costs, Puerto Rico with 9.9 million and Colombia with Ps.75.9 million.

G&A Expenses, which reflect administrative expenses in Mexico, increased 2.0% YoY.

Consolidated Technical Assistance increased 11.0% YoY, mainly reflecting EBITDA growth in Mexico excluding extraordinary items, a factor in the calculation of the fee.

Concession fees increased 108.0% YoY, mainly reflecting higher fees paid to the Mexican government, mainly due to an increase in regulated revenues in Mexico, a factor in the calculation of the fee. Concession fees for 1Q18 also include Ps.31.1 million from Puerto Rico as starting year six of the concession, the fee is equivalent to 5% of revenues.

Depreciation and Amortization increased 223.4%, principally due to the Ps.35.3 million increase in Puerto Rico derived from the recognition of the concession resulting from the valuation of the investment in Aerostar under IFRS 3 which impacted amortization by Ps.42.3 million. Colombia also reflects a Ps.76.8 million increase in depreciation (includes recognition of the Ps.24 million in amortization of the intangible asset resulting from the valuation of the investment in Airplan under IFRS 3), as a result of the increase in the accumulated amortization rate from 67.36% in March 2017 to 78.03% in March 2018.

Consolidated Operating Profit and EBITDA

In 1Q18, ASUR reported a Consolidated Operating Gain of Ps.2,197.4 million and Operating Margin of 56.1%, mainly as a result of increases of 63.5%, or Ps.856.6 million, in aeronautical revenues, and 38.9%, or Ps.359.4 million in commercial revenues, as well as contributions in operating income of Ps.136.2 and Ps.304.3 million from Puerto Rico and Colombia, respectively.

Adjusted Operating Margin, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets in Mexico, Colombia, and Puerto Rico, is calculated as operating profit divided by total revenues less construction services revenues; and was 61.0% in 1Q18 compared with 68.9% in 1Q17.

EBITDA increased 50.8%, or Ps.899.3 million, to Ps.2,670.5 million in 1Q18, with Puerto Rico contributing with Ps.311.9 million and Colombia with Ps.434.3 million in EBITDA. Mexican operations reported an 8.6% YoY increase in EBITDA during the quarter. During 1Q18, ASUR recognized Ps.312.4 million in Construction Revenues, a year-on-year increase of 192.8%, due to higher capital expenditures and investments in concessioned assets. As a result, 1Q18 EBITDA Margin was 68.2% compared to 71.5% in 1Q17.

Adjusted EBITDA Margin, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets in Mexico, Puerto Rico, and Colombia was 74.1% in 1Q18 compared to 74.7% in 1Q17.

Consolidated Comprehensive Financing Gain (Loss)

In 1Q18, ASUR reported a Ps.196.3 million Consolidated Comprehensive Financing Loss, compared to a Ps.20.4 million gain in 1Q17.

Interest expense rose by Ps.270.2 million during the period, reflecting mainly a higher debt balance resulting from the consolidation of Aerostar (Puerto Rico) and Airplan (Colombia), as well as interest generated by the loans incurred in Mexico in October 2017. Interest expenses in Puerto Rico amounted to Ps.127.8 million in 1Q18, while Colombia contributed Ps.79.5 million in interest expenses. Interest income increased by Ps.15.7 million, as a result of a higher cash balance and the increase in interest rates.

In 1Q18, ASUR reported a foreign exchange gain of Ps.44.9 million, resulting from the 4.6% quarterly average depreciation of the Mexican peso against the U.S. dollar on ASUR's foreign currency net asset position. This compared to a Ps.7.2 million foreign exchange gain in 1Q17 resulting from the 1.2% quarterly average Mexican peso appreciation during that period.

Income Taxes

Income Taxes for 1Q18 rose by Ps.151.1 million year-over-year, principally due to the following factors:

• A Ps.2.2 million increase in the provision for income taxes, mainly reflecting a higher taxable income base at Cancun Airport partially offset by a deferred income tax gain in Colombia derived from changes in tax legislation according to Decree 2235 published on December 27, 2017.

• A Ps.148.9 million increase in deferred income taxes, largely reflecting the effects of Decree 2235, issued on December 27, 2017, with respect to the treatment of tax assets and liabilities in Colombia, which resulted in an expense of Ps.105.2 million in 1Q18, partially offset by the recognition of the inflation benefit from deferred income tax. Inflation in 1Q18 was 1.24%, compared to 1.67% deflation in 1Q17.

Majority Net Income

Majority Net Income for 1Q18 increased by 8.7% to Ps.1,454.6 million, up from Ps.1,338.6 million in 1Q17. Earnings per common share for the quarter were Ps.4.8488 and earnings per ADS (EPADS) were US$2.6538 (one ADS represents ten series B common shares). This compares with earnings per share of Ps.4.4621 and EPADS of US$2.4422 for the same period last year.

Consolidated Financial Position

On March 31, 2018, airport concessions represented 86.5% of the Company's total assets, with current assets representing 12.7% and other assets representing 0.8%.

As of March 31, 2018, ASUR had cash and cash equivalents of Ps.5,725.3 million, a 22.4% increase from Ps.4,677.4 million at December 31, 2017. Puerto Rico contributed with Ps.313.1 million in cash and cash equivalents in 1Q18 and Colombia with Ps.61.1 million.

Stockholders' equity at the close of 1Q18 was Ps.34,775.5 million and total liabilities were Ps.22,131.1 million, representing 61.1% and 38.9% of total assets, respectively. Deferred liabilities represented 13.8% of ASUR's total liabilities.

Total Debt at quarter-end decreased to Ps.17,013.6 million, from Ps.17,371.4.0 million in December 31, 2017, principally reflecting the consolidation of debt in Puerto Rico and Colombia as shown on Tables 5 and 6, as well as the Ps.4,000 million loan at Cancun Airport. A total of Ps.9,665.3 million of ASUR's debt, or 56.8% of total debt, is denominated in U.S. dollars, Ps.4,357.0 million, or 25.6%, in Mexican pesos, and Ps.2,991.4 million, or 17.6%, of the total is denominated in Colombian pesos.

Net Debt to LTM EBITDA stood at 1.4x at the end of 1Q18, while the Interest Coverage ratio was 16.9x as of March 31, 2018. This compares with Net Debt to LTM EBITDA and Interest Coverage Ratios of 1.7x and 2.4x as of December 31, 2017, respectively.