The aptly named Grupo Aeroportuario del Sureste SAB CV (NYSE: ASR), or ASUR, which is the major operator of airports in southeastern Mexico, is in the process of spreading its wings further across Latin America. That's after the company announced in April a deal to buy a controlling interest in two Colombian airport groups, and increase its ownership interest in Puerto Rico's San Juan Airport from 50% to 60%. With the San Juan deal closing during the second quarter, the company is now consolidating its financials, which helped provide an additional lift to ASUR's Q2 results.
ASUR's results: The raw numbers
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What happened with ASUR this quarter?
Cancun International, the second-busiest airport in Mexico by passenger traffic, continues to shine:
- Total passenger traffic in ASUR's nine Mexican airports rose 14.6% to 7.9 million passengers during the quarter, and Cancun continues to drive the bulk of that growth thanks to the recent expansion of its Terminal 3. Overall, passenger traffic at Cancun was up 15.8% to 6.1 million. Contrast that to the company's other eight airports in the country where traffic was up 10.9% to 1.8 million.
- With the consolidation of San Juan's results, ASUR also began reporting that airport's traffic. During the quarter, San Juan handled 2.4 million passengers, which was up 5% from same period of last year.
- ASUR brought in an average of 102.3 pesos per passenger during the quarter. It collected PS104.7 per passenger across its Mexican airports, which was up 7.7%, helping boost its adjusted operating margin from 64.8% to 66.5%. Meanwhile, San Juan only pulled in PS80.4 per passenger, resulting in a lower adjusted operating margin of 42.5%. Those are numbers that the company hopes to improve as it takes greater control over that airport's operations and makes enhancements to operations and customer service.
- One of the significant changes resulting from the consolidation of San Juan is its impact on ASUR's balance sheet. The company noted that total net debt increased to PS8 billion, which is up from just PS1.3 billion in Q2 2016. As a result, its leverage ratio rose from 0.3 times net debt-to-LTM EBITDA (last 12 months earnings before interest, taxes, depreciation, and amortization) to 1.3 times. However, that's still a relatively conservative ratio considering the stable revenue and high margins that the company generates.
For years, the primary driver of ASUR's growth has been rising passenger traffic at Cancun. While that airport will remain an important growth driver for the company, especially since it expects to complete construction on Terminal 4 by the end of the year, it's making inroads elsewhere in Latin America. It now owns a larger stake in San Juan, enabling it to consolidate those financials and take more control over operations. In addition, it's working to acquire a controlling interest in two airport operators in Colombia. These deals will significantly increase the company's overall passenger traffic: San Juan handles about 9 million passengers per year while the dozen Colombian airport concessions it's acquiring will add another 15 million passengers. Further, the transactions will provide both an initial boost to profitability and a runway for future growth, as the company participates in the upside from increasing traffic, and takes advantage of the margin expansion opportunities available from adding new services that boost revenue per passenger.
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