News

Grupo Aeroportuario del Sureste, S. A. B. de C. V. (ASR) Q2 2023 Earnings Call Transcript

Grupo Aeroportuario del Sureste, S. A. B. de C. V. (ASR)

Q2 2023 Earnings Conference Call

Company Participants

Adolfo Castro - Chief Executive Officer

Conference Call Participants

Rodolfo Ramos - Bradesco BBI

Guilherme Mendes - JPMorgan

Javier Gayol - GBM

Anton Mortenkotter - GBM

Jay Singh - Citi

Alan Macias - Bank of America

Presentation

Operator

Good day, ladies and gentlemen, and welcome to ASUR's Second Quarter 2023 Results Conference Call. My name is Kevin, and I'll be your operator. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of today's conference. [Operator Instructions] As a reminder, today's call is being recorded.

Now I would like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

Adolfo Castro

Thank you, Kevin, and good morning, everyone.

Before I begin discussing our results, let me remind you that certain statements made during this call may constitute forward-looking statements, which are based on management's expectations and believes and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control.

Additional details about our quarterly results can be found in our press release, which was issued yesterday after market close and is available on our website in the Investor Relations section. Following my presentation, I will be available for Q&A.

Before getting into a discussion of the quarterly results, let me start today's call with recent developments in terms of capital allocation. Through a U.S. subsidiary, ASUR recently entered into a joint business investment agreement with Grupo Abrisa and CVC One to develop and built a private international airport in Bavaro, Dominican Republic. This entailed an initial investment by ASUR of $17.8 million that was paid in June, funded by internal generated funds. Once the construction of this airport is finalized, we expect to maintain a 25% ownership stake in venture, representing a total estimated investment for ASUR of $66 million. The remaining $48.2 million to be invested by ASUR will be applied to the construction of the airport.

The Abrisa Group is a well-respected and diversified business group based in Dominican Republic, with a leading market position in construction, real estate development, health and education. Since its foundation, the Abrisa Group has been committed to helping people acquire basic goods and services, such as housing, healthcare and education. The Abrisa Group were the founders of AERODOM in 2002, which operated six airports in Dominican Republic. Among them, Las Americas Airport in Santo Domingo that was sold to Advent International in 2008.

Today, Punta Cana is the second most important tourism market in Latin America after Cancun and presenting a very attractive growth opportunity. To put this in perspective, lodging capacity in Punta Cana is around 47,000 hotel rooms and is expected to double by 2040. This compared with 120,000 hotel rooms in Cancun region. In terms of passenger traffic, Punta Cana receives approximately 8 million passengers annually, with traffic expected to expand to [13 million] (ph) by 2040.

With capacity to serve 8 million passengers annually, Bavaro International Airport will provide modern and efficient facilities, offering a superior experience to both passengers and airlines, while acting as a catalyst for local business. Additionally, the airport will be conveniently located approximately 12 kilometers from the current tourist hotel area and 32 kilometers from Punta Cana International Airport. The airport will be situated right between Bavaro Beach and the fast-growing new tourist area to the north of Bavaro around Playa Macao and Uvero Alto. This area has currently experienced an increase in hotel development to absorb the sustained growth and tourist expected to continue over the next three decades in this region.

The JV already owns the plot of the land to develop the new airport, which was approved by the government. At the moment, it is in its initial phase of project planning and development, with the construction expected to start once the phase is finalized and authorized by the government. We expect the Bavaro International Airport to begin operations approximately three years from now.

Second, at the Annual General Meeting held on April 26, shareholders approved the distribution for an ordinary cash dividend of MXN9.93 per share that was paid at the end of May and an extraordinary cash dividend of MXN10 per share to be paid in November.

Now, moving on to ASUR's operating and financial performance for the quarter. Before starting, note that all comparisons are year-on-year, unless otherwise noted.

As anticipated in our prior call, we saw a slowdown in total passenger traffic growth this quarter, up nearly 4%. Nevertheless, this was a record high for second quarter at 17.3 million travelers. Recall that in the first quarter '23, traffic benefited from easy comps from Omicron during the first months of 2022, while this quarter, we are experiencing the negative effects of the suspension of two Colombian airlines earlier in the year, which is impacting our operation in that region. On a consolidated basis, the share of domestic traffic over total traffic remained stable year-on-year at 63% of the total traffic during the second quarter.

Moving next to a review by country. Starting with Mexico, posted a 9% growth in passenger traffic. This accelerating from the double-digit levels experienced in the first quarter due to the easy comps because of Omicron in 2022. Domestic travel was up in the high teens, 17%, with traffic at Veracruz back to pre-pandemic levels. International traffic was up in the low-single digits, mainly driven by Canada, which recovered pre-pandemic levels during the first quarter.

Next, Puerto Rico delivered the fastest growth, up 15% with domestic traffic up 12% and international up by 44%.

Lastly, total passenger traffic in Colombia contracted nearly 18%, with declines of 20% and 4% in domestic and international passengers, respectively. As mentioned in our prior call, this reflects the suspension of operations of Viva Air and Ultra Air in the first quarter, which represented 17.4% and 1.9% of 2022 passenger traffic in Colombia, respectively. The increase in value-added taxes from 5% to 19% at the beginning of the year also impacted traffic trends....

Read the full article on Seeking Alpha

]]>