ASUR 2Q14 Passenger Traffic Up 10.65% YOY

MEXICO CITY, July 21, 2014 /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, as well as a 50% JV partner in Aerostar Airport Holdings, LLC, operator of the Luis Munoz Marin International Airport in San Juan, Puerto Rico, today announced results for the three- and six-month periods ended June 30, 2014.

2Q14 Highlights¹:

• EBITDA² increased by 8.58% to Ps.873.78 million
• Total passenger traffic was up 10.65%
• Total revenues increased by 4.46%, reflecting increases of 7.55% in aeronautical revenues and 9.17% in non-aeronautical revenues, partially offset by a decline of 47.14% in construction services revenues
• Commercial revenues per passenger declined by 1.42% to Ps.73.03
• Operating profit increased by 8.51%
• EBITDA margin rose to 65.18% from 62.70% in 2Q13

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1.  Unless otherwise stated, all financial figures discussed in this announcement are unaudited, prepared in accordance with International Financial Reporting Standards (IFRS) and represent comparisons between the three- and six-month periods ended June 30, 2014, and the equivalent three- and six-month periods ended June 30, 2013.  Results are expressed in pesos. Tables state figures in thousands of pesos, unless otherwise noted. Passenger figures exclude transit and general aviation passengers. 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 = Ps.12.9712.

2.  EBITDA means net income before: provision for taxes, deferred taxes, profit sharing, non-ordinary items, participation in the results of associates, comprehensive financing cost and depreciation and amortization. EBITDA should not be considered as an alternative to net income, as an indicator of our operating performance or as an alternative to cash flow as an indicator of liquidity. Our management believes that EBITDA provides a useful measure that is widely used by investors and analysts to evaluate our performance and compare it with other companies. EBITDA is not defined under U.S. GAAP or IFRS and may be calculated differently by different companies.

Passenger Traffic

For the second quarter of 2014, total passenger traffic increased year-over-year by 10.65%. Domestic passenger traffic rose 11.82% while international passenger traffic increased by 9.74%.

The 11.82% growth in domestic passenger traffic was driven by increases at across all airports. The 9.74% growth in international passenger traffic resulted mainly from an increase of 9.74% in international traffic at the Cancun airport.

It should be noted that during 2013 Holy Week fell in March while in 2014 it fell in April.

Passenger traffic for 1H14 increased by 8.34%, reflecting increases of 8.57% in domestic passenger traffic and 8.18% in international passenger traffic.

Consolidated Results for 2Q14

In July 2012, the Puerto Rico Ports Authority granted Aerostar, ASUR's joint venture with Highstar Capital IV and its affiliated funds, a 40-year concession to operate the Luis Munoz Marin International Airport in Puerto Rico ("SJU") under the United States FAA's Airport Privatization Pilot Program. On February 27, 2013, the transaction was consummated and Aerostar began operating the SJU Airport. During 1Q13, our Cancun airport subsidiary made a US$118.00 million capital contribution to Aerostar corresponding to its 50% membership interest in Aerostar. ASUR accounts for its ownership stake in Aerostar through the equity method, in accordance with IFRS. In addition, ASUR made a US$100.00 million subordinated shareholder loan to Aerostar in 1Q13.

Total revenues for 2Q14 increased year-over-year by 4.46% to Ps.1,340.63 million. This was mainly due to increases of:

• 7.55% in revenues from aeronautical services, mainly as a result of a 10.65% increase in passenger traffic;
• 9.17% in revenues from non-aeronautical services, principally reflecting the 9.07% increase in commercial revenues detailed below.

These increases were partially offset by the 47.14% decline in revenues from construction services that resulted from lower capital expenditures and other investments in concessioned assets during the period.

ASUR classifies commercial revenues as those derived from the following activities: duty-free stores, car rentals, retail operations, banking and currency exchange services, advertising, teleservices, non-permanent ground transportation, food and beverage, and parking lot fees.

Commercial revenues increased by 9.07% year-over-year during 2Q14, principally due to a 10.65% increase in total passenger traffic. There were increases in revenues from the following activities:

• 9.31% in retail operations;
• 14.44% in food and beverage;
• 16.60% in car rental revenues;
• 26.31% in other revenue;
• 3.69% in advertising;
• 16.56% in parking lot fees;
• 20.04% in banking and currency exchange services;
• 21.20% in ground transportation; and
• 16.66% in teleservices.

Duty-free revenues, however, declined 1.24% year-over-year.

Construction revenues and expenses. ASUR is required by IFRIC 12 to include in its income statement an income line reflecting the income from construction or improvements to concessioned assets made during the period. During 2Q14, ASUR recognized Ps.45.28 million in revenues from "Construction Services", a 47.14% year-on-year decrease due to lower capital expenditures in concessioned assets. The same amount is recognized under the expense line "Construction Costs" because ASUR hires third parties to provide construction services.

Because equal amounts of Construction Revenues and Construction Expenses have been included in ASUR's income statement as a result of the application of IFRIC 12, the decline in Construction Revenues in 2Q14 did not result in a proportionate decrease in the EBITDA Margin, which is equal to EBITDA divided by total revenues.

Total operating costs and expenses for 2Q14 declined 0.42% year-over-year, primarily due to the following decreases:

• 47.14% in construction costs, reflecting lower levels of capital improvements made to concessioned assets during the period; and
• 3.02% in administrative expenses, reflecting higher expenses in 2Q13, principally professional fees and travel expenses related to the SJU privatization project, as well as the preparation of the Master Development Plan.

These declines were partially offset by the following increases:

• 8.79% in cost of services, principally due to the reopening of Terminal 1 at Cancun Airport in November 2013, as well as the higher cost of sales derived from the increase in sales at convenience stores directly operated by ASUR.  
• 8.80% in the technical assistance fee paid to ITA, reflecting the increase in EBITDA for the quarter (a factor in the calculation of the fee);
• 7.88% in concession fees paid to the Mexican government, mainly due to an increase in regulated revenues (a factor in the calculation of the fee); and
• 9.06% in depreciation and amortization, resulting mainly from capitalized investments.

Operating margin for the quarter increased to 56.77% from 54.65% in 2Q13, reflecting an increase of 4.46% in revenues and a decline of 0.42% in expenses during the period.

Comprehensive Financing Gain (Loss) for 2Q14 was a Ps.11.01 million gain, compared to a Ps.65.07 million loss in 2Q13.  This was principally due to the impact of the 0.64% appreciation of the Mexican peso against the U.S. dollar on ASUR's foreign currency net liability position as compared to a 5.39% depreciation in 2Q13.

Income (Loss) from Equity Investment in Joint Venture. During 2Q14 our equity in the income of Aerostar, our joint venture with Highstar Capital IV and its affiliated funds, was a net gain of Ps.21.89 million. In addition, ASUR recorded a Ps.9.07 million loss in stockholders' equity resulting from the translation effect of Aerostar's financial statements (which are denominated in U.S. dollars), in connection with the valuation of the capital stock derived from the appreciation of the peso against the U.S. dollar in 2Q14. In 2Q13, ASUR reported a net gain of Ps.26.80 million from our equity in the income of Aerostar in 2Q13 and a Ps.77.07 million gain in stockholders' equity resulting from the translation effect of Aerostar's financial statements in connection with the valuation of the capital stock derived from the depreciation of the peso against the U.S. dollar.

During 2Q14 total passenger traffic at the SJU airport was 2,260,472.

Income Taxes.

On January 1, 2014, a comprehensive Income Tax Law reform package entered into effect, repealing the IETU tax and causing the cancellation of deferred IETU. As a result, ASUR completed a financial valuation of its subsidiaries that were subject to this tax and now must recognize a deferred income tax.

Income taxes for 2Q14 increased by Ps.230.60 million, or 2,675.6% year-over-year, principally due to the following factors:

• A Ps.0.70 million decline in IETU as a result of the repeal of the IETU Law starting on January 1, 2014;
• A Ps.62.21 million increase in the provision for income taxes, reflecting a Ps.47.8 million benefit reported in 2Q13 resulting from the Mexican tax amnesty program. The increase also reflects the fact that the Veracruz and Villahermosa airports began recognizing income tax from December 2013. 
• A Ps.175.08 million increase in deferred income taxes resulting from the recognition of a Ps.152.51 million benefit from the reduction in the amortization rate applicable to the concession to 15% which was retroactively applied to periods beginning in 2006. The increase also reflects the recognition of the effects of inflation in the residual value of assets at the Veracruz and Villahermosa airports as a result of the repeal of the IETU Law and the increase in the applicable tax rate to 30% from 28% according to the new provisions of the Income Tax Law as of January 1, 2014.
• A Ps.6.01 million decrease in deferred IETU principally due to the repeal of the IETU Law.

Net income for 2Q14 declined by 15.24% to Ps.554.75 million from Ps.654.50 million in 2Q13. Earnings per common share for the quarter were Ps.1.8492, or earnings per ADS (EPADS) of US$1.4256 (one ADS represents ten series B common shares). This compares with earnings per share of Ps.2.1817, or EPADS of US$1.6819, for the same period last year. This decline principally reflects the benefit in 2Q13 from the Mexican tax amnesty program, as well as the negative impact from the increase in the Income Tax Rate from 28% to 30% as of January 2014.

Consolidated Results for 1H14

Total revenues for 1H14 increased year-over-year by 2.48% to Ps.2,723.76 million, mainly due to the following increases:

• 5.21% in revenues from aeronautical services as a result of the 8.34% increase in passenger traffic during the period;
• 10.27% in revenues from non-aeronautical services, principally as a result of the 10.29% increase in commercial revenues detailed below.

These increases were partially offset by a 62.29% decline in construction services in connection with lower capital investments during the period.

Commercial revenues for 1H14 rose by 10.29% year-over-year, principally as a result of revenue increases in the following areas: 

• 11.79% in retail operations;
• 2.26% in duty-free stores;
• 13.61% in food and beverage;
• 17.12% in car rentals;
• 22.99% in other income;
• 4.45% in advertising;
• 14.46% in parking lot fees;
• 19.27% in banking and currency exchange services; 
• 15.31% in ground transportation services; and
• 9.60% in teleservices.

Total operating costs and expenses for 1H14 declined by 1.55% year-on-year. This was primarily due to the following declines:

• 62.29% in construction costs, reflecting lower committed improvements made to concessioned assets during the period; and
• 5.43% in administrative expenses, principally reflecting professional fees and travel expenses in connection with SJU airport in 1H13.

These declines were more than offset the following increases:

• 13.97% in cost of services, principally due to the reopening of Terminal 1 at Cancun Airport in November 2013, as well as the higher cost of sales derived from the increase in sales at convenience stores directly operated by ASUR. The increase also reflects higher maintenance and security expenses, partially offset by the reimbursement to ASUR of fees previously paid to third parties in connection with ASUR's participation in the SJU privatization project, including travel expenses;
• 6.05% in technical assistance costs, reflecting the corresponding increase in EBITDA during the period;
• 6.18% in concession fees, mainly due to the increase in regulated revenues (a factor in the calculation of the fee); and
• 9.32% in depreciation and amortization resulting mainly from higher capitalized investments.

Excluding accumulated expenses and reimbursements in connection with the SJU privatization project, cost of services would have increased by 9.00%.

Operating margin increased to 58.71% in 1H14, from 57.02% in 1H13.  This was mainly the result of the 2.48% increase in revenues and the 1.55% decline in operating expenses for the period.

Comprehensive Financing Gain (Loss) for 1H14 was a Ps.13.51 million gain, compared to an Ps.18.88 million loss in 1H13, principally due to a Ps.6.94 million foreign exchange gain in 1H14 resulting from the impact of the 0.86% appreciation of the Mexican peso against the U.S. dollar during the period on ASUR's foreign currency net liability position. This compares with a Ps.44.2 million foreign exchange loss in 1H13 resulting from the impact of the 5.39% depreciation of the Mexican peso against the U.S. dollar during the period on ASUR's foreign currency net liability position.

Interest income declined by Ps.16.89 million year-on-year reflecting lower income from short-term investments resulting from the decline in cash balance during the period related to the dividend payment in December 2013. Interest expense increased by Ps.1.90 million, reflecting the disbursement of loans from BBVA Bancomer and Merrill Lynch in February 2013.

Income (Loss) from Equity Investment in Joint Venture.

During 1H14, our equity in the income of Aerostar was a net income of Ps.32.44 million. In addition, ASUR recorded a Ps.24.08 million gain in stockholders' equity resulting from the translation effect of Aerostar's financial statements (which are denominated in U.S. dollars), in connection with the valuation of the capital stock derived from the appreciation of the peso against the U.S. dollar.

From February 28, 2013 to June 30, 2013 our equity in the income of Aerostar, our joint venture with Highstar Capital IV and its affiliated funds, was a net loss of Ps.95.25 million, principally due to Ps.113.8 million in one-off costs resulting from all expenses incurred during the more than two years in which ASUR was involved in the bidding process for the privatization of SJU airport, including market research, preparation of all bidding documentation, obtaining the Part 139 Certificate from the FAA, advisory, legal, consulting, and debt financing fees, as well as all other costs incurred until the first day of operations under Aerostar's management; together with an operational gain of Ps.35.05 million generated between February 28, 2013 until June 30, 2013.  In addition, ASUR recorded a Ps.30.06 million gain in stockholders' equity resulting from the translation effect of Aerostar's financial statements, in connection with the valuation of the capital stock derived from the depreciation of the peso against the U.S. dollar.

Total passenger traffic at SJU for 1H14 was 4,418,833.

Net income for 1H14 increased by 4.21% to Ps.1,189.12 million. Earnings per common share for the six-month period were Ps.3.9637 or earnings per ADSs (EPADS) of US$3.0558 (one ADS represents ten series B common shares).  This compares with Ps.3.8037, or EPADS of US$2.9324, for 1H13.

Tariff Regulation

The Mexican Ministry of Communications and Transportation regulates the majority of ASUR's activities by setting maximum rates, which represent the maximum possible revenues allowed per traffic unit at each airport.

ASUR's regulated revenues for 1H14 were Ps.1,985.27 million, resulting in an annual average tariff per workload unit of Ps.166.72. ASUR's regulated revenues accounted for approximately 72.89% of total income for the period.

The Mexican Ministry of Communications and Transportation reviews compliance with the maximum rates on an annual basis at the close of each year.

Balance Sheet

On June 30, 2014, airport concessions represented 69.82% of the Company's total assets, with current assets representing 16.34% and other assets representing 13.84%.

Cash and cash equivalents on June 30, 2014, were Ps.2,351.97 million, a 86.73% increase from the Ps.1,259.56 million in cash and cash equivalents recorded on December 31, 2013.

Shareholders' equity at the close of 2Q14 was Ps.17,461.01 million and total liabilities were Ps.4,943.76 million, representing 77.93% and 22.06% of total assets, respectively. Deferred liabilities represented 33.62% of the Company's total liabilities. 

Total bank debt at June 30, 2014 was Ps.2,806.42 million, including Ps.12.05 million in accrued interest and commissions.

During 2Q14, ASUR made aggregate principal payments of Ps.5.5 million in connection with the Ps.50.00 million three-year credit agreement entered by our Veracruz airport subsidiary.

Capital Expenditures

During 2Q14, ASUR made investments of Ps.49.21 million as part of ASUR's ongoing plan to modernize its airports pursuant to its master development plans. During 1H14 capital expenditures totaled Ps.85.39 million.

2Q14 Earnings Conference Call

Analyst Coverage

In accordance with Mexican Stock Exchange Internal Rules article 4.033.01 ASUR informs that the stock is covered by the following broker-dealers: Actinver Casa de Bolsa, Barclays, BBVA Bancomer, BofA Merril Lynch, Citi Investment Research, Credit Suisse, Deutsche Bank, Grupo Bursatil Mexicano, Grupo Financiero Interacciones, Grupo Financiero Monex, HSBC, Intercam Casa de Bolsa, Itau BBA, INVEX, JP Morgan, Morgan Stanley, Morningstar, Santander Investment, Scotia Capital, UBS Casa de Bolsa, Vector.

Please note that any opinions, estimates or forecasts regarding the performance of ASUR issued by these analysts reflect their own views, and therefore do not represent the opinions, estimates or forecasts of ASUR or its management. Although ASUR may refer to or distribute such statements, this does not imply that ASUR agrees with or endorses any information, conclusions or recommendations included therein.

About ASUR:

Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASUR) is a Mexican airport operator with concessions to operate, maintain and develop the airports of Cancun, Merida, Cozumel, Villahermosa, Oaxaca, Veracruz, Huatulco, Tapachula and Minatitlan in the southeast of Mexico, as well as a 50% JV partner in Aerostar Airport Holdings, LLC, operator of the Luis Munoz Marin International Airport of Puerto Rico. The Company is listed both on the NYSE in the U.S., where it trades under the symbol ASR, and on the Mexican Bolsa, where it trades under the symbol ASUR. One ADS represents ten (10) series B shares.

Some of the statements contained in this press release discuss future expectations or state other forward-looking information. Those statements are subject to risks identified in this press release and in ASUR's filings with the SEC. Actual developments could differ significantly from those contemplated in these forward-looking statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Our forward-looking statements speak only as of the date they are made and, except as may be required by applicable law, we do not have an obligation to update or revise them, whether as a result of new information, future or otherwise.

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