ASUR 3Q17 Passenger Traffic Increased 8.1% YoY in Mexico and Declined 5.5% in San Juan, Puerto Rico

MEXICO CITY, Oct. 19, 2017 /PRNewswire/ -- Grupo Aeroportuario del Sureste, S.A.B. de C.V.  (NYSE: ASR; BMV: ASUR) (ASUR), the first privatized airport group in Mexico and operator of Cancun Airport and eight other airports in southeast Mexico, a JV partner in Aerostar Airport Holdings, LLC (Aerostar), and operator of the Luis Muñoz Marín International Airport in San Juan (LMM Airport), today announced results for the three- and nine-month periods ended September 30, 2017.

Highlights for the Quarter

• Agreements to acquire controlling interest in two Colombian airport groups, subject to governmental approval.
• Passenger traffic in Mexico up 8.1% YoY, supported by increases of 6.9% and 9.4% in domestic and international traffic, respectively. Cancun Airport was the main traffic driver.
• Traffic at LMM Airport declined 5.5% YoY, 4.3% in domestic traffic and 12.2% in international traffic impacted by Hurricane Maria in September 2017.
• Consolidated commercial revenues per passenger reached Ps.99.5.
• Consolidated EBITDA up 39.5% YoY, reaching Ps.1,916.6 million.
• Closed the quarter with a cash position of Ps.7,679.0 million. Net Debt to LTM EBITDA stood at 1.0x, reflecting consolidation of Aerostar.
• On track to complete construction of Terminal 4 at Cancun Airport, scheduled to open in 4Q17.

Passenger Traffic

ASUR's total passenger traffic in 3Q17 rose 4.9% YoY to 9.9 million passengers, driven by an 8.1% increase in Mexico, partially offset by a 5.5% decline in traffic in Puerto Rico.  The decline in passenger traffic at Luis Muñoz Marín Airport in San Juan, Puerto Rico reflects the impact of Hurricane Maria, which resulted in operations at this airport being suspended on September 19, 2017 at 19:30 pm and resuming on a limited basis on September 21, 2017 with 10 flights, increasing progressively to 41 daily flights at the end of September 2017. The airport is still operating on a limited basis.

The 8.1% YoY growth in passenger traffic achieved in Mexico reflects increases of 6.9% and 9.4% in domestic and international traffic, respectively. Cancun was the main driver behind traffic growth, reporting increases of 9.5% and 9.4% in domestic and international traffic, respectively, with the majority of ASUR's airports also contributing to higher traffic.

Total passenger traffic at LMM Airport in 3Q17 declined 5.5% YoY, reflecting reductions of 4.3% and 12.2% in domestic and international traffic, respectively as explained above.

Tables with detailed passenger traffic information for each airport can be found on page 14 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.

Consolidated Revenues

Consolidated Revenues for 3Q17 increased 37.1% YoY to Ps.3,230.1 million, principally due to increases of:

• 49.7% in revenues from aeronautical services, mainly as a result of the 4.9% increase in total passenger traffic, as well as the benefit from Ps.416.0 million in aeronautical revenues from LMM airport in 3Q17; and
• 41.3% in revenues from non-aeronautical services, principally reflecting the 44.6% increase in commercial revenues. Non-aeronautical revenues at Aerostar for June 2017 were Ps.207.4 million.

This was partially offset by a 4.4% decline in revenues from construction services in Mexico as a result of lower 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 46.4% YoY to Ps.2,820.5 million. Total revenues at Aerostar for the quarter represented 22.1% of ASUR's consolidated revenues excluding revenues from construction services.

Commercial Revenues in 3Q17 rose 44.6% YoY, principally due to the 4.9% increase in total passenger traffic, and the contribution of Ps.205.7 million in commercial revenues at LMM Airport for 3Q17. Commercial revenue growth in Mexico was mainly driven by increases in Duty Free, Food and Beverages, and Retail.

Consolidated Commercial Revenues per Passenger rose to Ps.99.5 in 3Q17, from Ps.94.6 in 3Q16, with Mexico contributing with Ps.100.5 in 3Q17 and LMM Airport with Ps.95.9 revenues per passenger in 3Q17.

Consolidated Operating Costs and Expenses

Consolidated Operating Costs and Expenses for 3Q17 increased 40.5% YoY to Ps.1,574.5 million, with 23.9% of consolidated costs and expenses for the quarter attributable to Aerostar. Excluding construction costs, however, operating costs and expenses rose 68.4% to 1,164.9 million.

Cost of Services rose 98.7%, mainly reflecting maintenance expenses as well as higher cost of sales from convenience stores directly operated by ASUR. Higher energy, security and professional fees also contributed to the increase in cost of services. Aerostar's results contributed with 39.4% of cost of services in 3Q17.

Construction Costs declined 4.4% YoY, mainly due to lower levels of capital improvements made to the Mexican concessioned assets during the period.

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

The Technical Assistance fee paid to ITA increased 14.0% YoY, reflecting EBITDA growth, in Mexico -excluding extraordinary items, a factor in the calculation of the fee.

Concession fees, which include fees paid to the Mexican government and Puerto Rican Authorities, rose 17.8%, mainly due to an increase in regulated revenues in Mexico, a factor in the calculation of the fee.

Depreciation and Amortization increased 78.9% and mainly reflects capitalized investments. Aerostar contributed with 42.2% of depreciation and amortization in 3Q17.

Consolidated Operating Profit and EBITDA

Consolidated Operating Profit in 3Q17 increased 34.0% to Ps.1,655.6 million. Operating Margin for 3Q17 declined to 51.3% from 52.4% in 3Q16, mainly as a result of the 37.1% increase in revenues along with a higher increase in costs and expenses. Aerostar's results represented 15.0% of consolidated operating profit for 3Q17.

Adjusted Operating Margin, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets in Mexico, and is calculated as operating profit divided by total revenues less construction services revenues, was 58.7% in 3Q17 compared with 64.1% in 3Q16.

EBITDA rose 39.5% to Ps.1,916.6 million in 3Q17, reflecting higher operating leverage. Aerostar results also contributed with 18.2% of EBITDA for the period. During 3Q17, ASUR recognized Ps.409.5 million in Construction Revenues, a year-on-year decline of 4.4%, due to lower capital expenditures and investments in concessioned assets. As a result, 3Q17 EBITDA Margin was 59.3% compared to 58.3% in 3Q16.

Adjusted EBITDA Margin, however, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets in Mexico, was 68.0% in 3Q17 compared to 71.3% in 3Q16.

Consolidated Comprehensive Financing Gain (Loss)

In 3Q17, ASUR reported a Ps.102.8 million Comprehensive Financing Loss, compared to Ps.14.2 million loss in 3Q16. Interest expense rose by Ps.174.3 million during the period, reflecting mainly a higher debt balance resulting from the full consolidation of Aerostar along with the increase in interest rates during the period. Aerostar's interest expenses for 3Q17 totaled Ps.123.5 million. Interest income increased by Ps.7.4 million, as a result of a higher cash balance and the increase in interest rates.

In 3Q17, ASUR reported a foreign exchange gain of Ps.49.2 million, resulting from 1.8% quarterly average appreciation of the Mexican peso against the U.S. dollar on ASUR's foreign currency net liability position. This compared to a Ps.29.1 million foreign exchange loss in 3Q16 resulting from the 2.7% quarterly average Mexican peso depreciation during that period.

Income Taxes

Income Taxes for 3Q17 rose by Ps.73.6 million year-over-year, principally due to the following factors:

• A Ps.68.8 million increase in the provision for income taxes, reflecting a higher taxable income base at Cancun Airport; and
• A Ps.4.9 million decline in deferred income taxes, largely reflecting the recognition of the effects of the 0.94% increase in inflation during 3Q17 on the fiscal tax balance.

Majority Net Income

Majority Net Income for 3Q17 increased by 20.1% to Ps.1,100.7 million, up from Ps.916.8 million in 3Q16. Earnings per common share for the quarter were Ps.3.6690 and earnings per ADS (EPADS) were US$2.0205 (one ADS represents ten series B common shares). This compares with earnings per share of Ps.3.0560 and EPADS of US$1.6829 for the same period last year. The higher majority net income principally reflects the 4.9% growth in total passenger traffic and ASUR's increased ownership in Aerostar. Aerostar results are consolidated on a line by line basis since June 1, 2017. During 3Q17, Aerostar's results were consolidated on a line by line basis, while in 3Q16 ASUR reported a Ps.29.1 million gain corresponding to its participation in Aerostar.

Consolidated Financial Position

On September 30, 2017, airport concessions represented 76.5% of the Company's total assets, with current assets representing 21.9% and other assets representing 1.6%.

As of September 30, 2017, ASUR had cash and cash equivalents of Ps.7,679.0 million; a 119.55% increase from Ps.3,497.6 million at December 31, 2016. Aerostar contributed with Ps.635.5 million in cash and cash equivalents in 3Q17.

Stockholders' equity at the close of 3Q17 was Ps.26,062.4 million and total liabilities were Ps.17,462.1 million, representing 59.9% and 40.1% of total assets, respectively. Deferred liabilities represented 9.1% of ASUR's total liabilities.

Total Debt at the end of the quarter increased to Ps.14,712.4 million, from Ps.4,160.4 million in 3Q16, principally reflecting debt at Aerostar as shown on Tables 5 and 6, as well as the Ps.4,000 million loan at Cancun Airport. A total of Ps.10,712.4 million of ASUR's debt, or 72.8% of total debt is denominated in U.S. dollars.

The Net Debt to LTM EBITDA ratio stood at 1.0x at the end of 3Q17, while the Interest Coverage ratio was 8.8x as of September 30, 2017. This compares with Net Debt to LTM EBITDA and Interest Coverage Ratio of 0.1x and 42.0x as of September 30, 2016, respectively.