ASUR 4Q10 Passenger Traffic Up 1.69% YOY

MEXICO CITY, Feb. 23, 2011 /PRNewswire/ -- Grupo Aeroportuario del Sureste, S.A.B. de C.V. (NYSE: ASR; BMV: ASUR), (ASUR) the first privatized airport group in Mexico and operator of Cancun Airport and eight other airports in southeast Mexico, today announced results for the three and twelve-month periods ended December 31, 2010.

4Q10 Highlights(1):

• EBITDA(2) increased by 4.83% to Ps.466.95 million
• Total passenger traffic was up 1.69%
• Total revenues increased by 58.32% due to increases of 4.68% in aeronautical revenues, 5.72% in non-aeronautical revenues and 100.0% in construction services
• Commercial revenues per passenger increased by 4.08% to Ps.63.84
• Operating profit rose by 29.63%
• EBITDA margin declined to 39.14% from 59.12% in 4Q09

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1. Unless otherwise stated, all financial figures discussed in this announcement are unaudited, prepared in accordance with Mexican Financial Reporting Standards (MFRS) and represent comparisons between the three-month period ended December 31, 2010, and the equivalent three-month period ended December 31, 2009. Results are expressed in nominal pesos. Tables state figures in thousands of pesos, unless otherwise noted. Passenger figures exclude transit and general aviation passengers. Commercial revenues include revenues from non-permanent ground transportation and parking lots. All U.S. dollar figures are calculated at the exchange rate of US$1 = Ps.12.3496.
2. EBITDA means net income before: provision for taxes, deferred taxes, profit sharing, non-ordinary items, comprehensive financing cost and depreciation and amortization. EBITDA should not be considered as an alternative to net income, as an indicator of our operating performance or as an alternative to cash flow as an indicator of liquidity. Our management believes that EBITDA provides a useful measure of our performance that is widely used by investors and analysts to evaluate our performance and compare it with other companies. EBITDA is not defined under U.S. GAAP or MFRS and may be calculated differently by different companies.

Passenger Traffic

For the fourth quarter of 2010, total passenger traffic increased year-over-year by 1.69%. This was mainly as a result of reduced traffic in the year-ago period as a result of the outbreak of A/H1N1 influenza in Mexico, announced on April 28, 2009, and the global recession. International passenger traffic increased 4.23% while domestic passenger traffic declined 1.27%.

The 4.23% increase in international passenger traffic resulted mainly from an increase of 4.47% in international traffic at the Cancun airport. The 1.27% decline in domestic passenger traffic was due to declines of 14.44%, 17.38%, 4.63%, 34.05%, 14.66%, 5.65% and 10.71% in domestic traffic at Veracruz, Oaxaca, Merida, Minatitlan, Tapachula, Huatulco and Cozumel airports, respectively, which more than offset increases in passenger traffic at ASUR's other airports.

Passenger traffic for FY10 increased 7.59% compared to FY09, reflecting increases of 11.66% in international passenger traffic and 2.28% in domestic passenger traffic.

Consolidated Results for 4Q10

Total revenues for 4Q10 increased year-over-year by 58.32% to Ps.1,192.89 million. This was mainly due to the addition of revenues from construction services as a result of ASUR's adoption of I-MFRS 17, and to a lesser extent, increases of:

• 4.68% in revenues from aeronautical services, principally as a result of the 1.69% increase in passenger traffic; and
• 5.72% in revenues from non-aeronautical services, reflecting the 4.52% increase in commercial revenues detailed below.

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, and parking lot fees.

Commercial revenues increased by 4.52% year-over-year during the quarter, principally due to higher passenger traffic. There were increases in revenues in the following activities:

• 3.09% in duty-free stores;
• 34.14% in advertising;
• 1.85% in food and beverage;
• 5.85% in other revenues;
• 1.69% in retail operations; and
• 44.24% in banking and currency exchange services.

These increases were partially offset by revenue declines of:

• 3.98% in teleservices;
• 3.74% in ground transportation;
• 0.14% in car rentals; and
• 4.74% in parking lot fees.

Construction revenues and expenses. As a result of ASUR's adoption of I-MFRS 17, "Service Concession Contracts", ASUR is required to include in its income statement a new income line reflecting the income from construction or improvements to concessioned assets made during the period. During 4Q10, ASUR recognized Ps.401.39 million in "Construction Services" because of improvements to its concessioned assets. The same amount is recognized under the new expense line "Construction Costs" because ASUR hires third parties to provide construction services.

Because equal amounts of Construction Revenues and Construction Expenses have been included in ASUR's income statement as a result of the application of I-MFRS 17, ASUR's total revenues increased in 4Q09 without a corresponding increase in EBITDA, and therefore its EBITDA Margin, which is equal to EBITDA divided by total revenues, experienced a relative decrease.

Total operating costs and expenses for 4Q10 increased 76.11% year-over-year. This was primarily due to the following increases:

• 18.79% in administrative expenses, principally in professional fees and participation in trade shows to promote new routes;
• 4.13% in cost of services, mainly reflecting higher labor costs resulting from the annual salary increase for unionized employees, professional fees, surveillance and maintenance costs;
• 4.83% in the technical assistance fee paid to ITA, reflecting the increase in EBITDA for the quarter (a factor in the calculation of the fee); and
• 100% in construction costs due to ASUR's adoption of I-MFRS 17.

These increases were partially offset by the following declines:

• 40.65% in depreciation and amortization resulting mainly due to changes in the depreciation and amortization rates, as a result of the adoption of I-MFRS 17; and
• 0.74% in concession fees paid to the Mexican government, mainly due to the decline in the taxable base (a factor in the calculation of the fee).

Operating margin for the quarter declined to 31.33% from 38.26% in 4Q09. This was mainly due to the adoption of I-MFRS 17, which resulted in an increase in revenues without a corresponding increase in operating profit and the 18.79% increase in administrative expenses which more than offset smaller increases in revenues from aeronautical and non-aeronautical services.

Comprehensive Financing Cost for 4Q10 increased year-over-year by Ps.11.69 million. During 4Q10, the Company reported an exchange rate loss of Ps.1.5 million and net interest income of Ps.6.3 million, resulting from interest income of Ps.19.9 million and accrued interest expenses of Ps.13.6 million. During the quarter ASUR posted a mark-to-market gain in its interest rate swap of Ps.1.5 million.

Income Taxes. Following the changes in Mexican tax law that took effect January 1, 2008, which established a new flat rate business tax ("Impuesto Empresarial a Tasa Unica", or "IETU") and eliminated the asset tax, the Company evaluated and reviewed its deferred assets and liabilities position under Mexican Financial Reporting Standards.

Income taxes for 4Q10 declined by 17.17%, or Ps.21.10 million year-over-year, principally due to the following factors:

• A Ps.4.4 million decline in IETU;
• A Ps.89.2 million increase in the provision for income taxes;
• A Ps.17.4 million decline in asset taxes; and
• A Ps.88.5 million decline in deferred income taxes and deferred IETU.

Net income for 4Q10 increased 74.40% to Ps.278.16 million from Ps.159.50 million in 4Q09. Earnings per common share for the quarter were Ps.0.9272, or earnings per ADS (EPADS) of US$0.7508 (one ADS represents ten series B common shares). This compares with earnings per share of Ps.0.5317, or EPADS of US$0.4305, for the same period last year.

Consolidated Results for Fiscal Year 2010

Total revenues for FY10 increased year-over-year by 35.27% to Ps.4,235.5 million. This was mainly due to the addition of revenues from construction services as a result of ASUR's adoption of I-MFRS 17, and to a lesser extent, the following increases:

• 11.77% in revenues from aeronautical services as a result of the 7.59% increase in passenger traffic during the period; and
• 11.26% in revenues from non-aeronautical services, principally as a result of the 10.60% rise in commercial revenues detailed below.

Commercial revenues for FY10 rose by 10.60% year-over-year, principally as a result of revenue increases in the following areas:

• 8.58% in duty-free stores;
• 11.86% in food and beverage;
• 12.31% in retail operations;
• 63.47% in banking and currency exchange services;
• 10.83% in car rentals;
• 10.53% in other income;
• 10.81% in ground transportation services; and
• 5.41% in advertising.

These increases were partially offset by revenue declines in the following areas:

• 2.83% in parking lot fees; and
• 27.10% in teleservices.

Total operating costs and expenses for FY10 rose 39.99%, mainly due to the following increases:

• 35.16% in administrative expenses, principally labor costs, resulting from the reassignment of employees from certain operating areas to corporate. Higher professional fees and participation in trade shows to promote new routes also contributed to the increase;
• 20.31% in cost of services, mainly reflecting the Ps.128.0 million increase in the reserve for doubtful accounts resulting from the bankruptcy announced by ASUR's client Grupo Mexicana de Aviacion. Higher energy, security and maintenance costs also contributed to the increase. These increases were partially offset by lower labor costs resulting from the reassignment of employees from certain operating areas to corporate;
• 6.95% in technical assistance costs, reflecting the corresponding increase in EBITDA during the period;
• 10.76% in concession fees, mainly due to an increase in the taxable base (a factor in the calculation of the fee); and
• 100.0% increase in construction costs due to ASUR's adoption of I-MFRS 17.

These increases were partially offset by a 39.76% decline in depreciation and amortization mainly due to changes in the depreciation and amortization rates, as a result of the recognition of INIF 17.

Operating margin decreased to 40.71% for FY10, from 42.71% in FY09.  This was mainly the result of the Ps.128.0 million increase in the reserve for doubtful accounts resulting from the bankruptcy announced by ASUR's client Grupo Mexicana de Aviacion. The adoption of I-MFRS 17, which resulted in an increase in revenues without a corresponding increase in operating profit and the 35.16% increase in administrative expenses also contributed to the decline in operating margin.

Net income for FY10 increased by 59.91% to Ps.1,275.14 million. Earnings per common share for the period were Ps.4.2505, or earnings per ADS (EPADS) of US$3.4418 (one ADS represents ten series B common shares). This compares with Ps.2.6580, or EPADS of US$2.1523, for the same period last year.

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 FY10 were Ps.2,344.92 million, resulting in an annual average tariff per workload unit of Ps.135.52. ASUR's regulated revenues accounted for approximately 55.36% of total income for the period.

The Mexican Ministry of Communications and Transportation reviews compliance with the maximum rates on an annual basis at the close of each year.

Balance Sheet

On December 31, 2010, Airport Facility Usage Rights and Airport Concessions represented 82.05% of the Company's total assets, with current assets representing 14.92% and other assets representing 3.03%.

Cash and marketable securities on December 31, 2010 were Ps.1,442.88 million, 50.08% above the Ps.961.40 million on December 31, 2009.

Shareholders' equity at the close of 4Q10 was Ps.14,795.46 million and total liabilities were Ps.3,418.46 million, representing 81.23% and 18.77% of total assets, respectively. Total deferred liabilities represented 66.53% of the Company's total liabilities.  

Total bank debt at December 31, 2010 was Ps.890.61 million, including Ps.3.7 million in accrued interest.

During the quarter, ASUR made principal payments of Ps.29.2 million in connection with the Ps.750 million three-year credit agreement with a group of three banks.

During August 2009 ASUR purchased a hedge against the risk of a significant increase in TIIE. The Company is hedged for 100% of the interest rate exposure under its Ps.750 million credit agreement. The interest rate was fixed for three years at 6.37%, 6.33% and 6.21% with each of the three banks, respectively. The cost of the interest rate hedge during the quarter was Ps.1.4 million.

Capital Expenditures

During 4Q10, ASUR made investments of Ps.381.18 million as part of ASUR's ongoing plan to modernize its airports pursuant to its master development plans.

Accounting Pronouncements

In January 2009, the National Banking and Securities Commission issued certain amendments to the "General Provisions applicable to securities issuers and other participants in the stock market" whereby it established the requirement for public companies to prepare financial statements under International Financial Reporting Standards (IFRS) as issued by the IASB starting with fiscal years beginning on or after January 1, 2012.

In August 2010, the Mexican Board for Research and Development of Financial Reporting Standards, A.C. (Consejo Mexicano para la Investigacion y Desarrollo de Normas de Informacion Financiera, A.C. - CINIF) issued the interpretation to Financial Reporting Standards No. 19 "Change Derived from the Adoption of IFRS". This INIF requires disclosure of an entity progress of  adoption of IFRS in the financial statements to be issued after September 30, 2010.

As previously announced, ASUR is currently in the process of transitioning its financial information to IFRS, and expects to present its first financial statements under IFRS (as issued by the IASB) for the fiscal year beginning  January 1, 2012. As part of this process and as required by INIF 19, the Company has evaluated the principal effects that would take place if ASUR were to adopt IFRS as of January 1, 2011, which are as follows:

An updated program for the adoption of International Financial Reporting Standards (IFRS) with the Mexican National Banking and Securities Commission (CNBV) and the Mexican Stock Exchange (BMV) is included in Exhibit 1 to this release.

Recent Events

COFECO Issues Unfavorable Opinion on ASUR's Participation in Bidding Process for Riviera Maya

On January 31, 2011 ASUR announced that the Comision Federal de la Competencia (COFECO) reported an unfavorable opinion regarding the Company's participation in the bidding process for the construction, management, operation and exploitation of the public airport that is to be built in the town of Tulum in the state of Quintana Roo.

COFECO states that two commissioners of COFECO voted in favor of permitting ASUR to participate in the bidding process; however, three commissioners denied ASUR's request. ASUR disagrees with the decision and the views expressed by the Commission and will initiate legal proceedings, pursuant to established Mexican legislation, to defend its right to participate in the bidding process.

ASUR cannot provide any assurance that any legal proceedings to challenge the COFECO decision would be successful, or that COFECO would be required to delay the bidding process or permit ASUR to participate in it as a result of such proceedings.

About ASUR:

Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASUR) is a Mexican airport operator with concessions to operate, maintain and develop the airports of Cancun, Merida, Cozumel, Villahermosa, Oaxaca, Veracruz, Huatulco, Tapachula and Minatitlan in the southeast of Mexico. The Company is listed both on the NYSE in the U.S., where it trades under the symbol ASR, and on the Mexican Bolsa, where it trades under the symbol ASUR. One ADS represents ten (10) series B shares.

Some of the statements contained in this press release discuss future expectations or state other forward-looking information. Those statements are subject to risks identified in this press release and in ASUR's filings with the SEC. Actual developments could differ significantly from those contemplated in these forward-looking statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Our forward-looking statements speak only as of the date they are made and, except as may be required by applicable law, we do not have an obligation to update or revise them, whether as a result of new information, future or otherwise.

Exhibit 1: Updated Plan for the Adoption of International Financial Reporting Standards as Issued by the International Accounting Standards Board

a)  Identification of the responsible people or areas

b) Training

The training plan only contains the relevant aspects that will cover precisely the tasks to be performed by the following areas:

Completed Activities

For each of the activities completed as of the date of presentation of this Exhibit, a detailed description of the findings and/or work performed to complete such activities, as well as the decisions taken in respect of each activity as follows:

SOURCE Grupo Aeroportuario del Sureste, S.A.B. de C.V.