ASUR 3Q19 Passenger Traffic Increased 0.4% YoY in Mexico, 5.7% in Puerto Rico and 14.0% in Colombia

MEXICO CITY, Oct. 23, 2019 /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-and nine-month periods ended September 30, 2019.

3Q19 Highlights¹

• Passenger traffic in Mexico rose 0.4% YoY, with domestic traffic up 2.9% offsetting a 2.5% decline in international traffic.
• Traffic in Puerto Rico (Aerostar) increased 5.7% YoY, supported by a 7.2% increase in domestic traffic which more than offset a 5.1% decline in international traffic.
• Traffic in Colombia (Airplan) rose 14.0% YoY, driven by growth of 12.8% in domestic traffic and 21.0% in international traffic.
• Consolidated commercial revenues per passenger reached Ps.99.2.
• Consolidated EBITDA increased 8.7% YoY, reaching Ps.2,475.6 million.
• Cash position at year-end was Ps.6,196.8 million. Net Debt to LTM EBITDA stood at 0.8x.

Passenger Traffic

ASUR's 3Q19 total passenger traffic increased 4.1% YoY reaching 13.9 million passengers driven by increases of 0.4% in Mexico, 5.7% in Puerto Rico, and 14.0% in Colombia. 

Passenger traffic growth of 0.4% YoY in Mexico was mainly driven by a 2.9% increase in domestic traffic which more than offset the 2.5% decline in international traffic. Merida and Oaxaca airports were the main drivers behind domestic traffic growth, with increases of 14.7% and 25.2%, respectively. Oaxaca, in turn, achieved a 59.6% increase in international traffic, while Cancun reported declines of 0.4% and 2.2% in domestic and international traffic, respectively.

Traffic in Puerto Rico increased 5.7% YoY, recovering following the impact of Hurricane Maria, which hit the island in September 2017. Domestic traffic increased 7.2% YoY while international traffic declined 5.1%.

Colombia reported a 14.0% YoY increase in total traffic driven by growth of 12.8% and 21.0% in domestic and international traffic, respectively. Rionegro Airport in Medellin was the main driver of traffic growth, reporting increases of 15.5% and 21.0% in domestic and international traffic, respectively. 

Tables with detailed passenger traffic information for each airport can be found on page 19 of this report.

Review of Consolidated Results

Consolidated Revenues

Consolidated Revenues for 3Q19 rose 11.5% YoY, or Ps.424.2 million to Ps.4,106.3 million, mainly driven by increases of:

• 5.8% in revenues from aeronautical services to Ps.2,380.6 million. Mexico contributed with Ps.1,552.1 million, while Puerto Rico and Colombia contributed with Ps.460.8 million and Ps.367.8 million, respectively;
• 11.0% in revenues from non-aeronautical services to Ps.1,488.4 million, mainly due to the 11.5% increase in commercial revenues. Mexico contributed with Ps.1,056.2 million in revenues from non-aeronautical services, while Puerto Rico and Colombia contributed with Ps.294.4 million and Ps.137.8 million, respectively; and
• 162.7%, or Ps.146.9 million in revenues from construction services. This was mainly due to capital expenditures in Cancun and Merida airports in line with Mexico's Master Development Plan, as well as new construction works in Puerto Rico. Construction revenues in Colombia increased reflecting the recognition of a Ps.81.0 million concesion valuation loss in 3Q18. Excluding the impact from the concession valuation loss in Colombia, consolidated construction revenues would have increased YoY by 38.5%, or Ps.65.9 million.

Excluding revenues from construction services, which are deducted as costs under IFRS accounting standards, total revenues would have increased 7.7% YoY to Ps.3,869.0 million. Mexico contributed with 67.4% of total revenues excluding revenues from construction services, while Puerto Rico and Colombia represented 19.5% and 13.1%, respectively.

Commercial Revenues in 3Q19 increased 11.5% YoY to Ps.1,385.1 million, mainly reflecting the 4.1% increase in total passenger traffic. Commercial revenues in Mexico rose 6.1% to Ps.955.8 million, mainly driven by the opening of new commercial spaces, including duty free, retail, food and beverages, and car rentals, among others.  Likewise, commercial revenues increased YoY by 21.5% to Ps.292.4 million in Puerto Rico, and 36.4% to Ps.137.0 million in Colombia.

Commercial Revenues per Passenger increased 7.3% YoY to Ps.99.2 in 3Q19. Mexico contributed with commercial revenues per passenger of Ps.114.3 in 3Q19, Puerto Rico with Ps.124.2, and Colombia with Ps.42.2. Commercial revenues per passenger increased 5.7% in Mexico, 14.9% in Puerto Rico and 20.6% in Colombia.

Consolidated Operating Costs and Expenses

Consolidated Operating Costs and Expenses, including construction costs, for 3Q19 increased 2.7% YoY, or Ps.54.1 million, to Ps.2,079.7 million. Excluding construction costs, operating costs and expenses declined 0.6%, or Ps.11.8 million, year-on-year, reflecting the following variations:

• A 3.1%, or Ps.28.5 million, increase in Mexico reflecting higher administrative costs, increases in legal, technical assistance and concession fees. This was partially offset by declines in maintenance and energy costs;
• A 12.4%, or Ps.61.3 million, increase in Puerto Rico mainly mainly as a result of an increase of Ps.12.4 million in payroll expenses along with higher professional fees. Furthermore, concession fees increased 13.4% as a result of higher aeronautical revenues while depreciation and amortization expenses rose 13.6% reflecting higher capex investments; and
• A 23.0%, or Ps.101.9 million, decline in Colombia composed reflecting a Ps.116.2 million, or 52.3%, decline in depreciation and amortization principally reflecting a change in amortization methodology, which starting January 2019 is on a straight-line basis instead of the percentage of completion method which implied variations in the accumulated amortization rate of the concession. This was partially offset by the 20.3%, or Ps.16.2 million, increase in concession fees as a result of the increase in aeronautical revenues that was mainly driven by a 13.1% increase in passenger traffic.

Cost of Services rose by 4.6%, or Ps.43.1 million. In Mexico, cost of services increased 1.7% YoY, or Ps.8.1 million, mainly reflecting higher legal professional fees and administrative expenses, partially offset by a decline in maintenance and energy costs. By contrast, cost of services in Colombia declined 1.3%, or Ps.1.9 million, principally reflecting higher professional legal fees in 3Q18, partially ofset by an increase in the maintenance provision for the future replacement of fixed assets as per IFRIC 12. Cost of services in Puerto Rico increased 11.8%, or Ps.36.9 million, principally reflecting higher payroll costs along with an increase in professional fees.

Construction Costs increased by 38.5% YoY, or Ps.65.9 million. This was mainly driven by increases of 48.6%, or Ps.44.9 million, in Mexico and 234.4%, or Ps.37.2 million, in Puerto Rico, partially offset by a 25.7%, or Ps.16.2 million, decline in Colombia. 

G&A Expenses, which reflect administrative expenses in Mexico, increased 14.0% YoY mainly reflecting higher salaries and professional fees.

Consolidated Technical Assistance increased 5.1% YoY, mainly reflecting EBITDA growth in Mexico, excluding extraordinary items, a factor in the calculation of the fee.

Concession Fees increased 11.2% YoY, principally 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 3Q19 also reflect increases in Puerto Rico and Colombia.

Depreciation and Amortization declined 17.1%, or Ps.92.9 million, principally due to a Ps.116.3 million, or 52.3%, decline in Colombia, resulting mainly from the change in the amortization methodology, which as of January 1, 2019 is on a straight line rather than a percentage of completion basis. By contrast, depreciation and amortization in Mexico increased 1.8%, or Ps.3.0 million, while Puerto Rico reported an increase of 13.6%, or Ps.20.4 million, mainly from the recognition starting March 2018 of the amortization of the intangible asset resulting from the valuation of the investment in Aerostar under IFRS 3.

Consolidated Operating Profit and EBITDA

Consolidated Operating Profit in 3Q19 ammounted to Ps.2,026.6 million with Operating Margin of 49.4%. This was principally due to increases of 5.8%, or Ps.129.5 million, in aeronautical revenues, and 11.0%, or Ps.147.8 million, in non-aeronautical revenues. Mexico reported an operating profit of 1,665.4 million, Puerto Rico of Ps.197.3 million, and Colombia Ps.163.9 million.

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, and is calculated as operating profit divided by total revenues less construction services revenues, was 52.4% in 3Q19 compared with 46.1% in 3Q19.

EBITDA increased 8.7%, or Ps.197.3 million, to Ps.2,475.6 million in 3Q19. EBITDA increased 5.1%, or Ps.89.6 million in Mexico, 11.6%, or Ps.38.2 million in Puerto Rico, and 34.6%, or Ps.69.5 million in Colombia. 3Q19 EBITDA Margin was 60.3% compared to 61.9% in 3Q18.

Adjusted EBITDA Margin, which excludes the effect of IFRIC 12 with respect to the construction of or improvements to concessioned assets in Mexico, Puerto Rico, and Colombia was 64.0% in 3Q19 compared to 63.4% in 3Q18.

Consolidated Comprehensive Financing Gain (Loss)

In 3Q19, ASUR reported a Ps.135.8 million Consolidated Comprehensive Financing Loss, compared to a Ps.280.3 million loss in 3Q18.

Interest expense declined by Ps.19.0 million during the period, or 6.4%, mainly reflecting a Ps.12.9 million decline in interest payments in Mexico as the Company paid down loans in June and November 2018, together with a Ps.10.0 million decline in interest payments in Colombia, reflecting a loan payments in 2H18. Interest income increased Ps.15.6 million, or 26.8%, reflecting a higher cash balance in the quarter.

In 3Q19, ASUR reported a foreign exchange gain of Ps.70.4 million, resulting from the 1.14% quarterly average depreciation of the Mexican peso against the U.S. dollar together with a lower U.S. dollar foreign currency net asset position. This compares to a Ps.39.5 million foreign exchange loss in 3Q18 resulting from the 3.8% quarterly average Mexican peso appreciation during that period on a higher foreign currency net asset position.

Income Taxes

Income Taxes for 3Q19 increased by Ps.180.7