ASUR: Passenger traffic up 8.93 percent

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MEXICO CITY, Mexico – Grupo Aeroportuario del Sureste, SAB de CV, the first privatized airport group in Mexico and operator of Cancún Airport and eight other airports in southeast Mexico, as well as a 50% JV partner in Aerostar Airport Holdings, LLC, operator of the Luis Muñoz Marín International Airport in San Juan, Puerto Rico, today announced results for the three-month period ended March 31, 2016.


1Q16 Highlights:

• EBITDA increased by 23.74% to Ps.1,414.59 million
• Total passenger traffic was up 8.93%
• Total revenues increased by 15.63%, reflecting increases of 15.42% in aeronautical revenues and 28.88% in non-aeronautical revenues, partially offset by a decline of 25.90% in construction services revenues
• Commercial revenues per passenger increased by 20.29% to Ps.99.35
• Operating profit increased by 25.18%
• EBITDA margin was 68.10% compared with 63.63% in 1Q15
• Adjusted EBITDA margin, excluding the effect of IFRIC12, was 73.14% compared with 71.31% in 1Q15

Passenger Traffic

1Q16 total passenger traffic increased year-over-year by 8.93%, reflecting growth of 13.04% in domestic passenger traffic and 6.53% in international passenger traffic.

The 13.04% increase in domestic passenger traffic was driven by increases across most of ASUR’s airports, with the exception of Minatitlán and Villahermosa, where traffic declined 1.81% and 1.15%, respectively. The 6.53% growth in international passenger traffic resulted mainly from an increase of 6.92% in traffic at the Cancún airport.

Table I: Domestic Passengers (in thousands)
Airport 1Q15 1Q16 %
Change

Cancún 1,171.2 1,363.6 16.43
Cozumel 21.3 32.6 53.05
Huatulco 116.2 121.3 4.39
Mérida 339.5 398.1 17.26
Minatitlán 55.2 54.2 (1.81)
Oaxaca 132.4 161.7 22.13
Tapachula 54.1 69.3 28.10
Veracruz 263.9 273.2 3.52
Villahermosa 277.8 274.6 (1.15)
TOTAL 2,431.6 2,748.6 13.04

Note: Passenger figures exclude transit and general aviation passengers.

Table II: International Passengers (in thousands)
Airport 1Q15 1Q16 %
Change

Cancún 3,867.6 4,135.2 6.92
Cozumel 154.6 144.7 (6.40)
Huatulco 65.1 72.2 10.91
Mérida 29.2 38.6 32.19
Minatitlán 2.1 2.6 23.81
Oaxaca 17.4 17.5 0.57
Tapachula 2.7 2.8 3.70
Veracruz 19.2 18.1 (5.73)
Villahermosa 13.0 11.8 (9.23)
TOTAL 4,170.9 4,443.4 6.53

Note: Passenger figures exclude transit and general aviation passengers.

Table III: Total Passengers (in thousands)
Airport 1Q15 1Q16 %
Change

Cancún 5,038.8 5,498.8 9.13
Cozumel 175.9 177.3 0.80
Huatulco 181.3 193.5 6.73
Mérida 368.7 436.7 18.44
Minatitlán 57.3 56.8 (0.87)
Oaxaca 149.8 179.2 19.63
Tapachula 56.8 72.1 26.94
Veracruz 283.1 291.3 2.90
Villahermosa 290.8 286.4 (1.51)
TOTAL 6,602.5 7,192.0 8.93

Note: Passenger figures exclude transit and general aviation passengers.

Consolidated Results for 1Q16

Total revenues for 1Q16 rose 15.63% year-over-year to Ps.2,077.35 million, mainly due to increases of:

• 15.42% in revenues from aeronautical services, mainly as a result of the 8.93% increase in passenger traffic; and

• 28.88% in revenues from non-aeronautical services, principally reflecting the 31.00% increase in commercial revenues detailed below.

Revenues from construction services declined 25.90%, primarily as a result of lower capital expenditures and fewer 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 operations, and parking lot fees.

Commercial revenues increased by 31.00% year-over-year in 1Q16, principally due to a 8.93% increase in total passenger traffic. There were increases in revenues from the following activities:

• 31.35% in retail operations;
• 31.72% in duty free;
• 72.16% in car rental revenues;
• 49.19% in other revenue;
• 16.43% in food and beverage operations;
• 32.13% in banking and currency exchange services;
• 16.48% in advertising;
• 16.42% in parking lot fees; and
• 12.03% in ground transportation.

These increases were partially offset by a 9.98% decline in teleservices revenues.

Retail and Other Commercial Space
Opened since March 31, 2015
Business Name Type Opening Date

Cancún
Kipling Retail June 2015
Banamex Banking August 2015
Banamex Banking August 2015
Gasolinera Gas Station September 2015
Roger Leather Boutique Retail December 2015
US$ 10 Store Retail December 2015
US$ 10 Store Retail December 2015
Coconut’s Food & Beverage December 2015
Starbucks Café Food & Beverage February 2016
The Kitchen Counter by Wolfgang Puck Food & Beverage March 2016
Mérida
Watch My Watch Retail September 2015
Veracruz
Sunglass Hut Retail December 2015
NLG Services Salon Vip March 2016
Star Island Café Food & Beverage March 2016
Johnny Rocket Food & Beverage March 2016
Cloe Retail March 2016
Oaxaca
Hertz Car Rental October 2015
Huatulco
Snack Bar Food & Beverage November 2015

* Only includes new stores opened during the period and excludes remodelings or contract renewals.

Table IV: Commercial Revenues per Passenger for 1Q16
1Q15 1Q16 % Change

Total Passengers (‘000) 6,660 7,253 8.90
Total Commercial Revenues 550,065 720,570 31.00
Commercial revenues from direct
operations (1) 126,908 128,609 1.34
Commercial revenues excluding
direct operations 423,157 591,961 39.89

1Q15 1Q16 % Change

Total Commercial Revenue per Passenger 82.59 99.35 20.29
Commercial revenue from direct
operations per passenger (1) 19.05 17.73 (6.93)
Commercial revenue per
passenger (excluding direct operations) 63.54 81.62 28.45
Note: For purposes of this table, approximately 57,500 and 60,700 transit and general
aviation passengers are included in 1Q15 and 1Q16, respectively.
(1) Revenues from direct commercial operations represent ASUR’s operation of convenience
stores in airports, as well as the direct sale of advertising space through April 30, 2015,
when advertising sales were concessioned to a third party.

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 relevant period. During 1Q16, ASUR recognized Ps.143.25 million in revenues from “Construction Revenues,” a year-on-year decrease of 25.90%, reflecting 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 Costs have been included in ASUR’s income statement as a result of the application of IFRIC 12, the amount of Construction Revenues does not have an impact on EBITDA, but it does have an impact on EBITDA margin, as the increase in revenues that relate to Construction Revenues does not result in a corresponding increase in EBITDA.

As a result, 1Q16 EBITDA Margin was 68.10% compared with 63.63% in 1Q15. Adjusted EBITDA Margin, however, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, was 73.14% in 1Q16 compared with 71.31% in 1Q15.
Total operating costs and expenses for 1Q16 rose 2.87% year-over-year, primarily due to the following increases:

• 10.78% in cost of services, mainly due to the opening of the Terminal 3 expansion, higher software license fees and maintenance expenses; the higher cost of sales derived from the convenience stores directly operated by ASUR also contributed to this increase;

• 23.79% in the technical assistance fee paid to ITA, reflecting the increase in EBITDA for the quarter (a factor in the calculation of the fee);

• 19.54% in concession fees paid to the Mexican government, mainly due to an increase in regulated revenues (a factor in the calculation of the fee);

• 10.95% in depreciation and amortization, resulting mainly from capitalized investments; and

• 2.25% in administrative expenses, principally reflecting higher travel expenses and professional fees.

These increases were partially offset by a 25.90% decline in construction costs, reflecting higher levels of capital improvements made to concessioned assets during the period.

Excluding construction costs, operating costs and expenses rose 12.53% to Ps.647.91 million.

Table V: Operating Costs and Expenses for 1Q16
1Q15 1Q16 % Change

Cost of Services 275,150 304,800 10.78
Administrative 51,367 52,524 2.25
Technical Assistance 60,187 74,505 23.79
Concession Fees 73,344 87,679 19.54
Depreciation and Amortization 115,725 128,399 10.95
Operating Costs and Expenses
Excluding Construction Costs 575,773 647,907 12.53
Construction Costs 193,332 143,254 (25.90)
TOTAL 769,105 791,161 2.87

Operating margin for the quarter was 61.91% compared with 57.19% in 1Q15, principally reflecting a 15.63% increase in revenues.

Adjusted operating margin, which excludes the effect of IFRIC 12 with respect to the construction or improvements to concessioned assets, and is calculated as operating profit divided by total revenues less construction services revenues, was 66.50% in 1Q16 compared with 64.09% in 1Q15.

Comprehensive Financing Gain (Loss) for 1Q16 was an Ps.18.58 million loss, compared to an Ps.18.48 million loss in 1Q15. Interest expenses rose by Ps.11.47 million during the period, principally as a result of the increase in interest rates. During 1Q16, ASUR reported a foreign exchange loss of Ps.23.35 million, reflecting a lower quarterly average depreciation of the Mexican peso against the U.S. dollar on ASUR’s foreign currency net liability position, as compared to the Ps.35.18 million loss in 1Q15, which resulted from a higher quarterly average peso depreciation.

Table VI: Comprehensive Financing Result (Cost)
1Q15 1Q16 Change % Change

Interest income 37,168 36,713 (455) (1.22)
Interest expenses (20,475) (31,945) (11,470) 56.02
Foreign exchange gain (loss), net (35,177) (23,349) 11,828 (33.62)
Total (18,484) (18,581) (97) 0.52

In addition, in 1Q16, ASUR recognized a Ps.3.45 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 stockholders’ equity derived from the 0.07% appreciation of the peso against the U.S. dollar between the close of 4Q15 and the close of 1Q16.

Income (Loss) from Equity Investment in Joint Venture. During 1Q16, our equity in the income of Aerostar, our joint venture with Highstar Capital IV and its affiliated funds, was a net gain of Ps.49.85 million. In addition, ASUR recorded a Ps.3.45 million loss in stockholders’ equity resulting from the translation effect of Aerostar’s financial statements (which are denominated in U.S. dollars), relating to the valuation of the shareholders’ equity derived from the 0.07% appreciation of the peso against the U.S. dollar between the close of 4Q15 and the close of 1Q16. In 1Q15, ASUR reported a net gain of Ps.32.52 million from our equity in the income of Aerostar and a Ps.94.53 million gain in stockholders’ equity resulting from the translation effect of Aerostar’s financial statements relating to the valuation of the shareholders’ equity derived from the depreciation of the peso against the U.S. dollar.
During 1Q16, total passenger traffic at SJU airport increased 2.52% to 2,349,929 from 2,292,085 in 1Q15.

Income Taxes for 1Q16 increased by Ps.91.86 million year-over-year, principally due to the following factors:

• A Ps.70.51 million increase in the provision for income taxes, reflecting a higher taxable income base at the Veracruz and Cancún airports, as well as at Cancún Airport Services and taxable income at Huatulco airport; and

• A Ps.22.57 million decline in deferred income taxes, largely reflecting the initial recognition of Ps.43.77 million in deferred income taxes at Huatulco Airport, which was partially offset by the effects of inflation in the fiscal tax balance.

Net income for 1Q16 increased by 24.73% to Ps.928.33 million, up from Ps.744.26 million in 1Q15. Earnings per common share for the quarter were Ps.3.0944 and earnings per ADS (EPADS) were US$1.7952 (one ADS represents ten series B common shares). This compares with earnings per share of Ps.2.4809 and EPADS of US$1.4393 for the same period last year. The higher net income principally reflects the 8.93% increase in passenger traffic. During 1Q16, ASUR reported a Ps.49.85 million gain corresponding to its participation in Aerostar, the joint venture to operate SJU airport, compared to a gain of Ps.32.52 million in the same period in 2015.

Table VII: Summary of Consolidated Results for 1Q16
1Q15 1Q16 % Change

Total Revenues 1,796,601 2,077,355 15.63
Aeronautical Services 982,048 1,133,452 15.42
Non-Aeronautical Services 621,221 800,649 28.88
Commercial Revenues 550,065 720,570 31.00
Total Revenues Excluding
Construction Revenues 1,603,269 1,934,101 20.63
Construction Revenues 193,332 143,254 (25.90)
Operating Profit 1,027,496 1,286,194 25.18
Operating Margin 57.19% 61.91% 8.25
Adjusted Operating Margin1 64.09% 66.50% 3.77
EBITDA 1,143,221 1,414,593 23.74
EBITDA Margin 63.63% 68.10% 7.01
Adjusted EBITDA Margin2 71.31% 73.14% 2.57
Net Income 744,261 928,334 24.73
Earnings per Share 2.4809 3.0944 24.73
Earnings per ADS in US$ 1.4393 1.7952 24.73

Note: U.S. dollar figures are calculated at the exchange rate of US$1 = Ps.17.24.

1. Adjusted Operating Margin, excludes the effect of IFRIC12 with respect to the construction or improvements to concessioned assets, and is equal to operating profit divided by total revenues less construction services revenues.

2. Adjusted EBITDA Margin, excludes the effect of IFRIC12 with respect to the construction or improvements to concessioned assets, and is calculated by dividing EBITDA by total revenues less construction services revenues.

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 1Q16 were Ps.1,437.99 million, resulting in an annual average tariff per workload unit of Ps.158.25. ASUR’s regulated revenues accounted for approximately 69.22% of total income for the period.

Compliance with maximum rate regulations is reviewed by the Mexican Ministry of Communications and Transportation at the close of each year.

Balance Sheet

On March 31, 2016, airport concessions represented 70.05% of the Company’s total assets, with current assets representing 14.56% and other assets representing 15.39%.

Cash and cash equivalents on March 31, 2016, were Ps.2,945.61 million, an increase of 41.33% from the Ps.2,084.16 million recorded on March 31, 2015.

Shareholders’ equity at the close of 1Q16 was Ps.21,332.93 million and total liabilities were Ps.5,807.78 million, representing 78.60% and 21.39% of total assets, respectively. Deferred liabilities represented 26.36% of ASUR’s total liabilities.

Total bank debt at March 31, 2016 was Ps.3,696.92 million, including Ps.9.03 million in accrued interest and commissions.

ASUR’s Cancún airport subsidiary has total bank loans of U.S.$215.0 million, comprised of two separate loans of US$107.5 million from each of BBVA Bancomer and Bank of America. The loans mature in 2022 and will amortize semi-annually from 2018 through 2022, pursuant to an agreed schedule. The loans are denominated in U.S. dollars and charge interest at a rate equal to LIBOR plus 1.85%. The loans are guaranteed by Grupo Aerportuario del Sureste, S.A.B. de C.V. and were originally used to finance ASUR’s capital contribution and subordinated shareholder loan to Aerostar.

Capital Expenditures

During 1Q16, ASUR made investments of Ps.156.73 million as part of ASUR’s ongoing plan to modernize its airports pursuant to its master development plans.