Grupo Aeroportuario del Sureste Earnings: Higher Traffic Fails to Translate Into Profit Growth

By Markets Fool.com

Mexican airport owner Grupo Aeroportuario del Sureste , or ASUR, reported fourth-quarter results on Monday morning. The company enjoyed strong passenger traffic growth, especially at its key Cancun airport. Nonetheless, the company's earnings per share fell by just over 20% due to foreign exchange losses. Let's fly in a little closer to see what happened during the quarter.

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Traffic flies higher
Overall passenger traffic was up 14.1% from the fourth quarter of the previous year as passenger growth was strong both domestically and internationally. Domestic passenger traffic rose 14.2% on solid growth at each of the company's nine airports. Growth was strongest at Cozumel and Huatulco, up 31.3% and 41.1%, respectively. Growth at Cancun, which is by far ASUR's largest airport at 50% of domestic traffic, was up 13.1% during the quarter.

Cancun represents 94% of the company's international passenger traffic.While international traffic growth rose by 14.6% at the airport, weak increases across most of the rest of ASUR's airports pulled down overall international passenger traffic growth to 13.9%.

Revenue ramps up, but a weak peso eats into profit
ASUR's increased passenger traffic helped boost revenue by 14%. The company enjoyed strong revenue growth from all three of its segments: aeronautical services revenue was up 12.9%, nonaeronautical services rose by 14.5%, and construction services revenue spiked 16.1%.

The highlight was nonaeronautical services,which enjoyed solid growth across several operations. Quarterly revenue rose 28% from both parking lot fees and banking and currency exchange services, while car rental revenue and food and beverage both enjoyed a 20% jump in revenue.

ASUR translated that revenue growth into improved profitability by keeping expenses in check: total operating costs and expenses only increased 8.1%, thanks in part to an 8% drop in administrative expenses. This helped push the company's operating margin up from 44.4% in the year-ago quarter to 47.2% in the reported quarter.

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Unfortunately, all this good news could not overcome weakness in the Mexican peso, which depreciated by 9.7% against the U.S. dollar. ASUR recorded a foreign exchange loss of 126.96 million pesos in the quarter, which is a big reversal of the 13.5 million peso foreign exchange gain the company recorded in the fourth quarter of 2013. This loss caused net income to drop 20% to 513.23 million pesos and earnings per share to drop to 17.108 pesos, or $1.16.

Investor takeaway
ASUR delivered a solid quarter. Passenger traffic, revenue, and operating profit all enjoyed double-digit growth. Unfortunately, the strong dollar took a big slice out of the company's earnings.

The article Grupo Aeroportuario del Sureste Earnings: Higher Traffic Fails to Translate Into Profit Growth originally appeared on Fool.com.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Grupo Aeroportuario del Sureste. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.