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

Good day, ladies and gentlemen, and welcome to ASUR's fourth quarter 2021 results conference call. My name is April, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of today's conference. If you would like to ask a question, please press star followed by the digit 1. And if you would like to withdraw your question at any time, you may do so by pressing the star 2. If you are using a speakerphone, please lift the handset before making your selection. As a reminder, today's call is being recorded. And now at this time, I would like to turn the call over to Adolfo Castro, Chief Executive Officer. Please go ahead.

Thank you, April. And good morning, everyone. Thank you for joining our conference call to discuss ASMU's Fourth Quarter 2021 Financial and Operating Results. I hope that you and your loved ones have managed to stay healthy and safe, and the pandemic will soon be behind us. Additional details about our quarterly results can be found in our press release, which was issued yesterday after market closed and is available on our website in the Best of Relations section. Let me remind you that certain statements made during the course The code may constitute forward-looking statements which are based on current management expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control, including the pandemic from COVID-19. Now, a review of operating and financial results, as well as some color on travel demands. Starting with passenger traffic, total traffic nearly doubled year-on-year and exceeded four-quarter 2019 pre-pandemic levels by nearly 7%. This good performance was driven by improvements across the board, where nearly 15 million passengers traveling to our airports during the fourth quarter. Colombia posted the strongest recoveries. surpassing 4 quarter 2019 traffic by 11%, with domestic and international travel up 11% and 14% respectively. Puerto Rico also performed well with traffic nearly up 6% against 4 quarter 2019. Domestic traffic was up nearly 9% and continues to drive strong overall traffic. More than offsetting the softer international passenger traffic, which reached 77% of four-quarter 2019 levels. Traffic in Mexico continued to recover, beating four-quarter 2019 levels by 5%, reflecting a high single-digit increase in ventilation traffic with growth across all airports. Domestic passengers, in turn, were up low single-digit at nearly 12% increase in domestic traffic at Cancun Airport, was partially offset by a lower growth rate at our smaller airports. Looking ahead, while we are maintaining a casualty stance given the Omicron variant, which impacted traffic mainly in Mexico and Puerto Rico, and slowed the pace of the recovery in January, we are seeing better performance in the second half of February. Expectations and continue of harsh winter in the North America would result in a good travel season for our airports. As anticipated, we are also seeing a recovery in European passengers, although somewhat have happened by Omicron variant. However, it remains to be seen how the invasion of Ukraine will impact Europe's economy and the rest of the world. Although the rate at which Mexico's economy recover is unknown at this time, we expect domestic traffic to continue its travel recovery. The lifting of other countries' travel restrictions and their own economy's recovery are also expected to benefit our Mexican airports. But as I advised during the previous earnings call, a recovery in the business travel is expected to lack of leisure travel. This should result in slow recoveries at airports like Merida, Veracruz, Minatizan, and Villahermosa, which were, in average, nearly 20% below 2019 traffic levels during the quarter. In sum, I noticed on our last poll we remain cautiously optimistic about the global travel demand and should fully Omicron dissipate and travel is not hindered by a fourth wave. We expect total traffic to reach last, by second quarter this year, the level we saw in 2019 in terms of last 12 months' passenger traffic. Moving on a source balance sheet, our ample liquidity position has allowed to continue ramping up operations to meet the rising level of travel demand we're seeing across the airports. In summary, we closed the year with a strong cash position with cash and cash equivalents reached 8.8 billion pesos, nearly 70% above 2020 levels, after paying a total of 2.5 billion pesos in cash even last October. Mexico contributed with nearly 6 billion pesos in cash, Puerto Rico with 2 billion, and Colombia with nearly 1 billion. At the same time, we maintain a healthy balance sheet with net debt, last month's EBDA of 0.5 times, at the closest of the quarter, and the interest cover ratio of 8.4 times. Our debt maturity profile is also strong, with a slightly 3% of principal payments during the year, and nearly 15% next year. In addition, account receivables increased 38% year-on-year, up 116% in Mexico, reflecting increased business activity. It's partially upset by declines in low 80s in Puerto Rico and mid-10s in Colombia. Now turning to a source income statement, starting with the top line. Revenues construction nearly doubled year-on-year, reaching 4.8 billion pesos in the fourth quarter. Revenues also saw a good recovery of 24%. when compared to pandemic levels of port water 2019. Non-aeronautical services increased in the mid-30s, and aeronautical services high single digits. We saw sustained recovery across geographies, with Mexico accounting 70% of total ex-construction revenues in the quarter, Puerto Rico 19, and Colombia 11. Commercial revenues were up 112% year-on-year, driven mainly by the 94% recovery in passenger traffic, with increases of 112 in Mexico, 117 in Puerto Rico, and nearly 96 in Colombia. Commercial revenues per passenger reached nearly 116 pesos compared with the pre-pandemic level of 92 pesos achieved in the fourth quarter of 2019. By country, we posted commercial revenues in the range of 140 to 142 pesos in Mexico and Puerto Rico and 39 pesos in Colombia. Note, these figures remain distorted by what we call pandemic behavior. We were seeing higher use of car rentals, parking lots, as well as convenience stores as people grab and go. while activity in restaurants is lower than expected. In the future, we expect commercial revenues per passenger to normalize. We also saw an improvement in the traffic mix this quarter, with a share of high spending Europeans back to the levels observed in 2019 and continued flow in the U.S. tourism. The share of domestic traffic returned to the levels of 2019, while the major differences is the Canadian travelers are still far beyond pre-pandemic levels. Once this normalizes, we expect to see this reflect in a commercial revenue mix closer to pre-pandemic composition. Moving down on our P&L, operating expenses and extra construction costs increased 48 year-on-year, but were up just nearly 8% when compared with quarter 2019, despite the 24% in revenues ex-construction. In Mexico, cost ex-construction rose 30% year-on-year, mainly due to higher technical assistance and concession fees driven by higher revenues and EVDA, along with a higher cost of services. Higher cost of sales from directly operating stores have also contributed to the increase in the cost as many passengers are buying meals to go at our convenience stores instead of going to a restaurant. We are seeing this happening as well in Puerto Rico. Back to Mexico, compared with 4 quarter 2019 operating cost and expenses, ex-construction, were up 28% with revenues ex-construction up 30%. In Puerto Rico, costs more than doubled, as 420 benefited from a 227 million pesos expense reimbursement from the grant under the CARES Act. However, on a comparable basis, expenses were up 20% year-on-year, reflecting a higher maintenance provision, concession fees, and cost of sales of directly operating stores I just mentioned. When compared to fourth quarter 2019 levels, comparable costs were up 27% while revenues rose 47%. Final expenses in Colombia were up 27% year-on-year, mainly driven by higher concession fees as travel demand rebounded. Compared to fall quarter 2019, expenses were up by 27%, significantly below the 157% increase in cost post-ex-construction. That brings us to profitability. Consolidated EVDA more than doubled to 3.3 billion pesos this quarter from 1.3 in fall quarter 2020. Mexico was the main EVDA contributor with 2.5 billion pesos, followed by Puerto Rico with nearly 460 million pesos, and Colombia close to 340 million pesos. When comparing to four quarter 2019 levels, EVDA was up by 35%, driven by EVDA increases of 37% in Mexico, 14% in Puerto Rico, and 57% in Colombia. basically resulted from the revenue increase originated by more passengers, better commercial revenue for passenger at higher times. Adjustability and margin XE312 increased to 68% in the fourth quarter from 55% in the year-ago quarter, and also surpassing the 64% margin reported in the fourth quarter 2019. By country of operations and compared to fourth quarter 19, Adjusted dividend margin posted expansions of nearly five percentage points in Mexico to 75% and 17% dashed points to 61 in Colombia, while in Puerto Rico the margin contracted to percentage points to 52. Regarding CapEx, Uniquatum invested a total of 2.2 billion pesos, a significant achievement in just three months and meeting our CapEx commitment for the year. We also invested $97 million in Puerto Rico and nearly $1 million in Colombia. Taking a deeper look at the world capital investment plans in Mexico, for the full year, we invested a total of $3.5 billion, almost equal to the committed investments for the year. Let me provide you an update of the key projects. Expansion of the terminal building in Merida remains on track, with the second phase of the project inaugurated during December. We now begin with the third phase of the terminal expansion project that we expect to conclude by the end. At Cancun Airport, we completed the construction of the parallel taxiway of the second runway last December, and we are working on the first phase of the terminal port expansion. This entails adding two porting gates on international products. For this year, our capex commitment is approximately $2.2 billion for Mexico, which includes works on Terminal 4 and emergency aprons at Cancun, Phase 3 for the terminal expansion in Merida, and the terminal expansion at Tapachula. In Puerto Rico, we expect to invest close to $30 million this year as we continue with the major maintenance repairs to runways and taxiways and remodel Terminal D. Before opening the call for your questions, I would like to reiterate a couple of points. Our still-strong financial position gives us ample flexibility to ramp up ASUS operations to meet and top demand in each of our markets. Also, this year and beyond, we intend to fully leverage ASUS's attractive airport network to grow our passenger base. Anticipating the long-term growth trends that we expect will manifest themselves across the markets. However, we will remain disciplined with the cash use and expenses as the course of the pandemic, although encouraging at this time, could worsen again. This concludes my review for the four-quarter results. April, please open the line for questions.

Thank you. Again, if you would like to ask a question, simply press the star key followed by the digit one on your telephone keypad. Also, if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one. And we'll first hear from Guillermo Hernandez of J.P. Morgan.