ASUR’s Earnings Call: Strategic Moves Amid Challenges

Grupo Aeroportuario Del Sureste ((ASR)) has held its Q3 earnings call. Read on for the main highlights of the call.

Grupo Aeroportuario Del Sureste (ASUR) recently held its earnings call, revealing a mixed sentiment among stakeholders. The company celebrated strategic milestones, such as the acquisition of URW Airports and growth in international passenger traffic in Colombia and Puerto Rico. However, these achievements were overshadowed by challenges, including stagnant overall passenger traffic, a decline in Mexican traffic, increased operating costs, and a slight dip in EBITDA and margins.

Acquisition of URW Airports

ASUR announced a definitive agreement to acquire URW Airports for $295 million. This acquisition marks a significant step in ASUR’s international expansion strategy, providing a foothold in the U.S. market. The acquisition is expected to enhance ASUR’s portfolio by including major airports like Los Angeles International Airport and Chicago O’Hare International Airport.

Passenger Traffic Growth in Colombia and Puerto Rico

The earnings call highlighted positive trends in passenger traffic in Colombia and Puerto Rico. Colombia experienced a 3% increase in passenger traffic, bolstered by an 11% rise in international traffic. Similarly, Puerto Rico saw a 1% increase in total traffic, driven by a nearly 12% surge in international passengers.

Revenue Growth in Puerto Rico and Colombia

ASUR reported robust revenue growth in Puerto Rico and Colombia. Puerto Rico achieved high single-digit revenue growth, with aeronautical revenues up by 5% and non-aeronautical revenues increasing by 10%. Colombia also delivered high single-digit revenue growth, with non-aeronautical revenues rising significantly in the high teens.

Strong Financial Position

ASUR closed the quarter with a strong financial position, boasting a cash reserve of MXN 16 billion and a healthy net debt-to-EBITDA ratio of 0.2x. This financial stability positions the company well for future investments and strategic initiatives.

Flat Passenger Traffic

Despite growth in certain regions, ASUR’s total passenger traffic remained flat at over 17 million. Persistent headwinds in Mexico contributed to this stagnation, highlighting the challenges the company faces in maintaining growth across all markets.

Decline in Traffic in Mexico

Traffic in Mexico declined by 1%, with domestic traffic falling nearly 2% and international traffic experiencing a slight 0.3% contraction. This decline underscores the ongoing challenges in the Mexican market, impacting ASUR’s overall performance.

Higher Operating Costs

ASUR reported a nearly 17% year-on-year increase in total expenses. A significant portion of this increase was attributed to a change in the amortization method of the concession in Colombia, reflecting adjustments in financial strategies.

Decline in EBITDA and Margin

The company experienced a slight decline in consolidated EBITDA, which fell just over 1% year-on-year. The adjusted EBITDA margin decreased by 157 basis points to 66.7%, indicating pressure on profitability due to lower traffic and higher costs.

Forward-Looking Guidance

Looking ahead, ASUR is focused on its international expansion strategy, highlighted by the acquisition of URW Airports. The company anticipates stable passenger traffic across its airports, with growth in Colombia and Puerto Rico expected to counterbalance the decline in Mexico. ASUR plans to continue infrastructure investments in key airports and align Colombia’s concession amortization method with projected revenue generation.

In summary, ASUR’s earnings call presented a balanced view of achievements and challenges. While the company is making strategic strides in international expansion and experiencing growth in certain regions, it faces hurdles such as stagnant traffic in Mexico and rising costs. The forward-looking guidance suggests a focus on leveraging new acquisitions and optimizing operations to drive future growth.