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

Good day, ladies and gentlemen, and welcome to ASUR's second quarter 2024 results conference call. My name is Zico, and I'll be your operator. At this time, all participants are in listen-only mode. We will conduct a question and answer session toward the end of today's conference. If you would like to ask a question, please press star 1. If you want to withdraw your question at any time, please press star 2. If you are using a speakerphone, please lift the handset before making a selection. As a reminder, today's call is being recorded. Now I'd like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

Thank you, Sitko. 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 risks and uncertainties that could cause active results to differ materially, including factors that may be beyond our company's control. 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 investor relations section. Following my presentation, I will be available for Q&A. Before moving on to our performance for the quarter, let me provide an update on recent developments on the sustainability front. We have complied with virus ESG reporting requirements, including the Mexican Stock Exchange, the United Nations Global Compact, and the Mexican Register of Carbon Emissions. We are also implementing a data collection process that will allow us to calculate our scope-free carbon emissions. This process is approximately at 90% complete as of the end of the second quarter for the Mexican airports. We also renew our social project with Clonatura, which supports local fishing communities and promotes ecotourism in the Yucatan Peninsula. The next couple of projects will include 40 additional direct beneficiaries and approximately 100 indirect beneficiaries. Additionally, we have been in conversation to strengthen our alliance with the UNICEF and extend the activities of this agency to all airports across our group. Lastly, we are also in the final stages of establishing a strategic alliance with EXPAC a non-governmental organization that aims to prevent human trafficking. We look forward to providing more updates as we continue to advance in our sustainability journey. Now, starting with a review of ASUS operational and financial performance for the quarter. As usual, all compliance with this cost will be year on year unless specified otherwise. Passenger traffic was up 3% year on year, to nearly 18 million passengers, a record high for a second quarter. Traffic growth in Puerto Rico and Colombia more than offset a softer performance in Mexico. By region, Colombia posted the strongest performance with traffic of 21 year-on-year, driven by increases in domestic and international in the high teens and in the high 20s. Traffic in Colombia continued to benefit from easier comps following the suspension of two operators in February last year, which accounted for the 20% of the traffic. We expect this positive recovery trend to continue during the remaining of the year as Avianca and LATAM Airlines regain some lost roots. Puerto Rico delivered a 9% increase in traffic driven by crowds in high single digits and in domestic traffic and double-digit in international traffic. As anticipated, we are seeing a normalization in the traffic of Puerto Rico, as last year benefited from the increased operations by Frontier Airlines. Lastly, traffic in Mexico declined close to 5%, reflecting single-digit contractions in both international and domestic traffic. In terms of international traffic, we saw declines from all the regions except Canada in the quarter. In turn, domestic traffic remains impacted by the initial effects of Pratt & Whitney engine problem experienced in the past few quarters, as well as the capacity reduction of air traffic movements at Mexico City Airport since early this year. As a reminder, Mexico City Airport accounted for 45% of ASUS domestic traffic in 2023. And we expect the situation to continue negatively impacting domestic traffic this year, which could cause a small decline in the year. Now, moving on to P&L. As a reminder, all references to revenue and costs are excluding construction. Total revenues increased nearly 18% to $7 billion in the quarter. Colombia stood out with the top-line growth in the 30s, mainly benefiting from the pickup in international traffic. Mexico delivered revenue growth in the high teens and Puerto Rico in the middle single digits. Mexico accounted for 74% of the total revenues, posted an 18% top-line increase, even as passenger traffic declined 5%. Revenue was driven by high 20s growth in aeronautical services, reflecting the adjustment established in the recent master development plan and the impact of the weaker desert, taking into account that international tariffs are based in U.S. dollars. In turn, non-aeronautical revenues increased no single digits. Puerto Rico accounted for 15% of the total revenues and delivered 5% growth in the top line, reflecting high single-digit increase in non-aeronautical while aeronautical revenues increased by no single digits. In China and Colombia, which represented 11% of revenues, posted a 35% increase in top line, reflecting a good performance in both aeronautical and non-aeronautical revenues, which benefited from international traffic growth. As we continue to execute our strategy of expanding our commercial offering, we opened 45 new commercial spaces over the past 12 months. Of these, 17 were open in Mexico, 4 in Puerto Rico, and 33 in Colombia. As a result, commercial revenues were up 7%, more than double the growth in passenger traffic. mainly reflecting increases of 4% in Mexico, 9% in Puerto Rico, and an impressive 40% rise in Colombia. On a capacity basis, commercial revenue increased 5% year-to-year to nearly 128 pesos in the quarter. This performance was mainly driven by growth of 16% in Colombia, 9% was in Mexico, and Puerto Rico was relatively flat. Mexico reported record high commercial readiness per passenger at 154.5 pesos, beyond the typical levels achieved during the pandemic, benefiting from a strong U.S. dollar. Moving down to the P&L, cost and expenses increased nearly 30% year-on-year. On a comparable basis, excluding the 252 million recovery expenses in Puerto Rico under the Coronavirus Response and Relief Supplemental Appropriations Act in the second quarter of last year, total costs were up 16%, slightly below revenue growth. By geography, costs in Mexico were up 18%. RESULTING FROM INCREASES OF 80% IN THE CONCESSION FEES ESTABLISHED BY THE MEXICAN GOVERNMENT AND 20% IN MINIMUM WAGES, MAINLY IN CLEANING AND SECURITY, BOTH EFFECTIVE JANUARY THE 1ST. THIS WAS PARTIALLY UPSET BY A 50% REDUCTION IN THE TECHNICAL ASSISTANCE FEE. ON A COMPARABLE BASIS, PUERTO RICO REPORTED A 10% INCREASE IN COST, WHICH WAS BELOW REVENUE GROWTH, WHILE COLOMBIA were up 19% above revenue goals. Coastal-dated EVDA was up 18% year-on-year to 5 billion pesos in the quarter, while adjusted EVDA margin, which excludes construction, was relatively unchanged at 69%. Note that on a comparable basis, excluding the recovery expenses in Puerto Rico in the second quarter of last year, EVDA would have increased 26%, and the adjusted EVDA margin were expanded by 435 basis points year-on-year. This good performance was driven by a solid profitability across our three regions of operation. Puerto Rico presented the strongest performance with comparable EVDA up over 90%, Colombia falling by 49% increase, while Mexico posted an 18% increase in VBA. Turning to the balance sheets, we maintain a healthy financial position with cash and cash equivalents of nearly 15 billion pesos. After taking into account the dividend payments totaling of 6.3 billion pesos during the quarter, equivalent to a cash and cash of dividend of 10.926 pesos per share and an extraordinary increase cash dividend of 10 pesos per share. Lastly, in terms of CAPEX, we made investments of nearly 650 million pesos during the quarter and close to 820 million pesos in the first half of the year. We're currently in the process of project planning and covering out the green process to select contractors. Key projects include at Cancun Airport, the expansion of Terminal 4, and reconstruction and expansion of Terminal 1. And finally, the expansion of the terminal in Oaxaca Airport. Note that all construction works will take place outside the operating area and do not affect the operation of these airports. Wrapping up, we deliver a solid second quarter with net majority income of 50% year-on-year to 3.7 billion pesos. This good performance also benefited from the foreign exchange gain of nearly 950 million pesos this quarter, resulting from the 10% quarter and depreciation of the Mexican peso against the U.S. dollar, compared with a 350 million FX loss reported in the same quarter last year. This quarter was not without its challenge, notably the ongoing issues of prepping Whitney engines and reduction of capacity at Mexico City Airport, but we navigated through these and delivered some results in the quarter. This ends my prepared remarks. Zico, please open the floor for questions.

Thank you. Again, to the audience, it is star then one for questions. And again, please make sure you mute your function is turned off or the handset is picked up before pressing the corresponding digits. Our first question is from Rodolfo Ramos from Bradesco BBI. Please go ahead.