Latin American airport operator Grupo Aeroportuario del Sureste (ASR 1.32%), or ASUR, usually relies on the Cancun airport to propel its quarterly results. However, that wasn't the case during the second quarter, as international passenger traffic growth at that airport only rose 1.1%. While that would have likely caused the company to report lackluster results in previous periods, that wasn't the case this quarter. That's because many of the company's other airports, especially those it recently acquired, delivered excellent results during the period.
ASUR's results: The raw numbers
|
Metric |
Q2 2019 |
Q2 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Total passenger traffic |
14.0 million |
13.1 million |
6.9% |
|
Earnings per share |
$2.48 |
$1.89 |
31.3% |
Data source: Grupo Aeroportuario del Sureste.
What happened with ASUR this quarter?
Colombia helped propel the quarter:
- Total passenger traffic at ASUR's nine Mexican airports rose 4.7% compared to last year's second quarter to 8.7 million. Unlike most other quarters, Cancun wasn't the main growth driver, as its traffic only increased 2.5% year over year due to sluggish international growth. Instead, the company benefited from a 14.4% spike in domestic passenger traffic at its other eight Mexican airports. That more than offset a 6.7% decline in international passenger traffic at those locations. One factor playing a role in the changing traffic pattern this year was the impact of Holy Week in Mexico. It began on April 12 this year, which was much later than last year, when it started in March.
- Traffic at the Luis Munoz Marin Airport in San Juan, Puerto Rico, continued to recover from the impact of Hurricane Maria. Overall, passenger traffic increased 6.1% year over year to 2.4 million, thanks in large part to an 11.4% jump in international passengers.
- The highlight of the quarter was the company's airports in Colombia. Overall, traffic surged 14.9% to 2.4 million. The main driver was the Rionegro Airport in Medellin, where domestic traffic jumped 18.1%, while international traffic soared 18.5%.
- The rise in passenger traffic helped drive revenue up 4.7% from the year-ago period. Sales increases of 7.7% in Mexico and 6.6% in Colombia more than offset a 5.7% revenue decline in Puerto Rico.
- Earnings, meanwhile, grew at an even faster rate of more than 30%. The main driver is an improvement in margins: Operating costs and expenses only increased by 0.6%, while revenue rose 4.7%.
Image source: Getty Images.
Looking forward
ASUR will be investing heavily to expand and modernize its airports over the next five years. The company is completely reconfiguring and expanding the terminal at the Merida airport in Mexico. In addition to that, it's also expanding terminal 4 at Cancun. These and other projects will enable the company to handle more passengers at its airports, which sets it up for continued traffic and earnings growth.
The company has also significantly improved its balance sheet following the recent acquisition of a larger interest in San Juan as well as the airports in Colombia. Net debt has fallen 28% in the past year, which, when combined with its uptick in earnings, has pushed its leverage ratio from 1.49 times debt to EBITDA to 0.92 times. That balance sheet improvement gives the company the flexibility to invest in its airports as well as to pursue new growth opportunities.
