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

Good day, ladies and gentlemen, and welcome to Assorta's second quarter 2023 results conference call. My name is Kevin, and I'll be your operator. At this time, all participants are in listen-only mode. We will conduct a question and answer session towards the end of today's conference. If you'd like to ask a question, please press star, followed by one. If you want to withdraw your question at any time, please press star, followed by two. If you're using a speakerphone, please lift the handset before making a selection. As a reminder, today's call is being recorded. Now I would like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

Thank you, Kevin, and good morning, everyone. Before I begin discussing our results, let me remind you that certain statements made during this call may constitute forward-looking statements which are based on current management expectations and beliefs and are subject to several risk and uncertainties that could cause actual results to differ materially. including factors that may be beyond our company's control. Additional details about our strategy results can be found in our first release, which was issued yesterday after markets closed, and is available on our website in the Best of Relations section. Following my presentation, I will be available for a Q&A. Before getting into a discussion of the quarterly results, let me start today's course with recent developments in terms of capital allocation. To a U.S. subsidiary, as we've recently entered into a joint business investment agreement with Grupo Adresa C. One, to develop and build a private international airport in Bavaria, Dominican Republic. That was made in June, funded by internal generated funds. Once the construction of this airport is finalized, we expect to maintain a 25% ownership stake in venture, representing a total estimated investment for ASUR of $66 million. The remaining $48.2 million to be invested by ASUR will be applied to the construction of the airport. The Abrisa Group is a well-respected and diversified business group based in Dominican Republic with a leading market position in construction, real estate development, health, and education. Since its foundation, the Abrisa Group has been committed to helping people acquire basic goods and services such as housing, healthcare, and education. The Abrisa Group were the founders of Aerodrome in 2002, which operated six airports in the American Republic. Among them, Las Americas Airport in Santo Domingo, that was sold to Advent International in 2008. Today, Cotecana is the second most important tourism market in Latin America, after Cancun, and presenting a very attractive growth opportunity. To put this in perspective, lodging capacity in Punta Cana is around 47,000 hotel rooms and is expected to double by 2040. This compared with 120,000 hotel rooms in Cancun region. In terms of passenger traffic, Punta Cana receives approximately 8 million passengers annually, with traffic expected to expand to 13 million by 2040. With capacity to serve 18 passengers annually, Bavar International Airport will provide modern and efficient facilities offering a superior experience to both passengers and airlines, while acting as a catalyst for local business. Additionally, the airport will be conveniently located approximately 12 kilometers from the current tourist hotel area and 32 kilometers from Punta Cana International Airport. The airport will be situated right between Bavaro Beach and the fast-growing new tourist area to the north of Bavaro around Playa Macao and Uberabato. This area is currently experiencing an increase in hotel development to absorb the sustained growth in tourists expected to continue over the next 30 decades in this region. The JV already owns the plot of the land to develop the new airport which was approved by the government. At the moment, it is in its initial phase of project planning and development, with the construction expected to start once this phase is finalized and authorized by the government. We expect the Bavaria International Airport to begin operations approximately three years from now. Second, at the Annual General Meeting held on April 26, shareholders approved the distribution for an ordinary cash dividend 9.93 pesos per share that was paid at the end of May and an extraordinary cash dividend of 10 pesos per share to be paid in November. Now moving on to ASUS operating and financial performance for the quarter. Before starting, note that all comparisons are year-on-year unless otherwise not the As anticipated in our prior call, we saw a slowdown in total passenger traffic growth this quarter of nearly 4%. Nevertheless, this was a record high for second quarter at 17.3 million travelers. Recall that in the first quarter of 23, traffic benefited from easy comms from Omicron during the first months of 2022, while this quarter we are experiencing the negative effects of the suspension of two Colombian airlines earlier in the year, which is impacting our operation in that region. On a consolidated basis, the share of domestic traffic over total traffic remains stable year-on-year at 63% of the total traffic during the second quarter. Moving next to a review by country, starting with Mexico posted 9% global passenger traffic This is elevating from the double-digit levels experienced in the first quarter due to the easy comms because of Omicron in 2022. Domestic travel was up in the high teens, 17%, with traffic at Veracruz back to pre-pandemic levels. International traffic was up in the low single digits, mainly driven by Canada, which recovered pre-pandemic levels during the first quarter. Next, Puerto Rico delivered the fastest growth, up 15%, with domestic traffic up 12% and international up by 44%. Lastly, total passenger traffic in Colombia contracted nearly 18%, with declines of 20% and 2% in domestic and international passengers, respectively. As mentioned in our prior call, this reflects the suspension of operations of Viva Air and Ultra Air in the first quarter. which represented 17.4% and 1.9% of 2022 passenger traffic in Colombia, respectively. The increase in value-added taxes from 5% to 19% at the beginning of the year also impacted traffic trends. Turning to the P&L, recall all references to revenues and cost excludes Also note that Puerto Rico and Colombia figures reflect the strong Mexican peso, which appreciated 15% and 18% versus the U.S. dollar and the Colombian peso since the end of the second quarter last year to the end of the second quarter this year, respectively. Now, starting with the top line, revenues increased 5% to 6 billion pesos in the quarter, mainly driven by growth in the Arctic and . . . . . . . . . . . in Mexico, 6% in Puerto Rico, more than offsetting the 15% decline in Colombia. On a per-passenger basis, commercial revenues increased 222 pesos, up from nearly 120 in the year-ago quarter. By region, figures range from 142 pesos in Mexico, 246 pesos in Puerto Rico, and 41 pesos in Colombia. In local currency, Puerto Rico and Colombia posted increases in commercial revenues per passenger of 5.1% and 31.3% respectively. These proposals reflect our sustained focus on expanding our commercial offerings to further increase the travel experience of our passengers across our airport's networks. In this respect, during the last 12 months, we opened 20 new commercial spaces in Mexico, 4 in Puerto Rico, and 44 in Colombia. Turning to cost, total compatible operating expenses were up 8% compared to 5% revenue growth in the quarter. Note that compatible costs exclude the effect of $252 million expense recovery this quarter for something from the application of the CRSAA Act in Puerto Rico, compared to the benefit of $175 million in the same quarter last year. In Mexico, expenses rose 16%, about a 10% revenue growth. While we maintain a tight control of our expenses, the increase was primarily driven by the high cost of services reflected the effect of 20% increase in the minimum wage at the beginning of the year. SESSION EXPENSES. IMPORTANT RECOVERY COSTS DECLINED 15% BENEFITED FROM A HIGHER EXPENSE RECOVERY UNDER THE CRRSAA ACT THIS QUARTER COMPARED TO THE SECOND QUARTER 22. EXCLUDING THIS RECOVERY, INVOLVED PERIODS EXPENSES WILL HAVE INCREASED 11% AS HIGHER PROFESSIONAL FEES AND MAINTENANCE MORE THAN OFFSET SAVINGS IN PERSONNEL AND ENERGY COSTS. Currently, Colombia declined 8% as provisions for data counting connection with the suspension of two local airlines were more than compensated by declined across most of their line items. Consolidated EVA for the quarter was up 3%, reaching 4.2 billion pesos, mainly driven by high profitability in Mexico, up 9% to 3.3 billion. This performance was partially upset by declines of 8% in Puerto Rico to over 530 million pesos and 24% in Colombia to over 300 million pesos. In turn, consolidated adjustability margin declined 140 basis reflecting contractions of continent basis points in Mexico to 74.3%, 430 basis points in Puerto Rico to 54.5%, and 530 basis points in Colombia to 52.6%. To recap, we deliver another good quarter in Mexico, attracted by the strong pressure and the effects of the two Colombian airlines that stopped operations during the quarter. Moving to our financial position, we maintain a robust balance sheet with cash and cash equivalents over 14 billion pesos and a healthy debt report after paying the ordinary dividend at the end of May, which amounted to a total of nearly 3 billion pesos. The current receivables increased 7%, driven by half passenger traffic in Mexico and Puerto Rico, together with combined receivables of 23 pesos from the two local airlines that were suspended earlier in the year. Finally, capital expenditures in the quarter totaled 153 million pesos. Of these, 50% was allocated to Mexico, 46% to Puerto Rico, and the remaining to Colombia. Summing up, we are seeing healthy passenger traffic trends. We have a solid financial position, and we're investing for the future growth. To end my presentation, Kevin, please open the call for questions.

Certainly. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. If you'd like to be removed from the queue, please press star 2. As a reminder, please pick up your handset before pressing star 1. Our first question today is coming from Rodolfo Ramos from Bradesco BBI. Your line is now live.