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

Good day ladies and gentlemen and welcome to Assure's second quarter 2025 results conference call. My name is Christine and I'll be your operator. At this time all participants are in a 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 speaker phone, 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, Christine, and good morning, everyone. Before I begin discussing our results, let me remind you that certain statements made during the call today may constitute forward-looking statements which are based on word management expectations and beliefs and are subject to certain risks and uncertainties. that would cause active results to differ materially, including factors that may be beyond our company's control. Additional details about our second quarter 2025 results can be found in our press release, which was issued yesterday after market close and is available on our website in the Best of Relations section. Following my presentation, I will be available for Q&A. As usual, all comparison discussed on this call will be year-on-year figures and are expressed in Mexican pesos unless specified otherwise. During the second quarter, we served 17.7 million passengers across all airports we operated, with traffic remaining largely flat year-on-year. Once again, that performance in Colombia and Puerto Rico offset suddenness in Mexico. Puerto Rico was the best performing market this quarter, boasting 3% growth in passenger traffic, supported by domestic traffic and sustained strength in international traffic. In Colombia, traffic was up 1% with international travel up 2% and domestic contracting a low single digit. Lastly, Mexico reported a decline of nearly 2% in total traffic with an increase of 1.2% in domestic, offset by a decrease by 4.5 in international travel. International travel in Mexico continued to experience year-on-year declines from all regions during the quarter. Passenger volumes from Europe were down 4.7%, from the U.S., 5.3%, South America, 2.7%, and Canada, 1.6%. A minimum fault portion of this decline, approximately 38%, is attributable to the ramp-up of the new airport in Tulum, which continues to draw some passenger flow previously concentrated in Cancun. Beyond this shift, we believe the broader softness in the threshold traffic reflects broader market dynamics, including a more cautious demand, environmental across several sources of market. While the underlying drivers vary, some of these pressures are also evident in other international markets as well. Looking ahead, we expect traffic in Mexico to gradually stabilize over the course of next year, as the effects of the engine-related aircraft problems appear to have bottomed out and Tulum Airport reaches more normalized level of operations. With respect to the potential U.S. Department of Transportation restrictions on Mexican carriers, ASURS does not expect a material impact on our operations from these measures, as our exposure to the affected airlines is minimal. To put this in context, Aeromexico accounted for just 0.3% of total passengers traveling between our airports and the U.S. while Viva, Airbus, and Volaris together represented approximately 1.3%. As I noted in prior calls, we see long-term growth potential for both Cancun and Tulum, each driven by the specific demand dynamics of their respective catchment value. While the product market environment remains uncertainty, History has shown that travel-related disruptions, particularly those tied to U.S. and Mexico demand, tend to be temporary in nature. Now, turning to a review of our financial performance, recall that all reference to revenue and cost figures constitute construction. Total revenues increased 5% year-on-year to 7.4 billion pesos, reflecting top-line growth across operations. particularly in Puerto Rico and Colombia. Mexico, which accounted for 72% of total revenues, posted a low single-digit increase of 0.7% with relatively growth in aeronautical and non-aeronautical revenues. Puerto Rico contributed 17.7% of the total revenues with top-line growth in the high teens, This compared to growth in the high 20s in the prior quarter that was supported by the foreign exchange rate benefit resulting from a weaker PESO. Colombia, which accounted for 12% of the total revenues, posted a 15.4% top line growth, this accelerating from growth in the low 30s achieved in prior quarters. This was driven by both aeronautical and continued recovery in domestic traffic and international traffic, and the opening of 35 new commercial spaces over the past 12 months, partially offset by a strong Mexican peso. As part of our ongoing strategy to enhance our commercial offerings, we opened 47 new commercial spaces over the last 12 months. As I said, 35 in Colombia, 7 in Mexico, 5 in Puerto This expansion supported high single-digit growth in total commercial revenues driven by strong performance in Colombia and Puerto Rico and a modest increase in Mexico. For the passenger basis, commercial revenue reached nearly 140 pesos in the quarter, representing mid-single-digit year-on-year growth with contributions from all three regions. Colombia lead with a 22% increase followed by 3% gain in Puerto Rico, despite less favorable exchange rates. In Mexico, commercial revenue per passenger rose nearly 3% to 159 pesos, even as passenger traffic softened. Moving on to cost, total expenses increased nearly 10% year-on-year. This is elevating from the 18% growth we saw in Paraguay. In Mexico, costs rose 7%, primarily reflecting the 12% increase in minimum wage effective at the start of the year. In both Puerto Rico and Colombia, costs increased in low teens, benefiting from depreciation of the Mexican peso against the U.S. dollar and the Colombian peso. As a result, consolidated UDA rose reaching 5 million pesos in the quarter. Notably, Puerto Rico and Colombia boasted a double-digit EVDA growth of 20% and 15% respectively, while Mexico saw a 1.6% decrease in EVDA in line with the passenger traffic, the negative impact of the strong peso, and the higher cost I just explained. The adjusted DBA margin, which excludes construction revenue, stood at nearly 68% compared with the 69% in the same quarter last year. The slight margin contraction was mainly attributable to 170 basis points declined in Mexico, while Colombia boasted a more 20 basis point decrease. Puerto Rico and the other half delivered 120% margin improvement in adjusted DBA margin. Our bottom line this quarter was negative impact by a foreign exchange loss of 200 million pesos, driven by the appreciation of the Mexican peso against the U.S. dollar. This compares to a foreign exchange gain of 942 million in the same quarter last year, which reflected the opposite effect driven by the appreciation of the peso during that period. Moving on to our balance sheet, We maintain a strong cash position, closing the quarter with nearly 20 billion pesos in cash and cash equivalents, up 30% year-on-year. Net debt to FDA ratio increases slightly to 0.1 types, reflecting the drawdown of a loan facility in Mexico for 9.5 billion pesos in the quarter. Turning to capital allocation, In May, we pay a 50 pesos per share cash dividend, funded from account of accumulated return earnings. In addition, we will be paying 209 dividends of 15 pesos per share each in September and another one in November. Capital expenditures in the quarter total 1.4 billion pesos, with most of this investment directed towards modernization and expansion projects at our network level. This includes the ongoing work of the reconstruction and expansion of Terminal 1 at Rincón Airport and the terminal expansion in Oaxaca. In Puerto Rico, we're currently advancing in the construction of taxiway hotels. All construction activities continue to take place outside operational areas to ensure no disruption to airport operations. Lastly, on the governance, During the quarter, Mrs. Isabel Prieto was appointed to our board of directors as an independent member. Following the resignation of Mr. Ricardo Guajardo-Tosche, with this, 57% of our board is comprised of independent directors and female representation has increased to 36%. We thank Mr. Guajardo-Tosche Mrs. Prieto brings a wealth experience in both public and private sector, beginning her career in financial services. To close, our second quarter performance underscores the resilience of our diversified portfolio and our sustained efficiency improvements. We continue investing in infrastructure. long-term growth. We also remain attentive to evolving global macroeconomic conditions and believe our healthy financial position will help to mitigate potential risk. This concludes my prepared remarks. Christine, please open the floor for questions.

Thank you. We will now begin the question and answer session. To ask a question, dial in by phone and press star then 1 on your telephone keypad. Please ensure the mute function is turned off, and if you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then two. At this time, we will pause momentarily to assemble our roster. Thank you. Our first question comes from the line of Jens Fees with Morgan Stanley. Please proceed with your question.

Yes. Hello, Adolfo. Thank you for taking my questions. I have basically two. One is regarding non-aero revenues. So just was wondering what drove, like, the sequential decline in non-aero revenues. Was it a mix of the types of passengers, or is anything else explaining it? And secondly... I mean, you already mentioned the DOT situation with the US not impacting you, but I was thinking that maybe one outcome might be that the capacity restrictions in Mexico City might be lifted, which would end up benefiting potentially the passenger traffic in the system as a whole. In case that materializes, how much of a positive impact would you expect? Thank you.

Thank you, James, and good morning. Well, in the case of non-aeronautical revenues, of course, the exchange rate played an important role during the quarter. Now, I would say, of course, a slight difference in the passenger mix, international versus domestic, and also in the case of domestic, the situation that we have in 1092. In terms of your second question, I don't know if you saw 30 days ago that the Mexican government decided to decrease or to ease the restriction they had in Mexico City Airport from 43 to 44. This announcement explained that they have made an analysis of the years from 42 to 43. So one operation more in Mexico City Airport reflects more or less one median passenger traffic in that airport. I was expecting this restriction to be lifted towards the end of the year. I have my serious doubts that this will happen after what we saw in this announcement. Of course, the situation of the DOT came later, and I believe the Mexican government will have to review the situation and see what they're going to say after what the DOT has expressed. As I said, the situation between the traffic to and from the U.S. from our airports It's basically managed by U.S. Airlines. As I said, item X equals 0.3. In the case of Piva and Volaris together, 1.3%, so it's 1.8%, 1.6% of the total traffic between the two countries. So I do not expect any major implication of this. In our case, of course, as a result of this, the government decided to increase the operations in Mexico City, that will be beneficial to us.

Okay, perfect. Thank you very clear. Thank you very much. You're welcome.

Our next question comes from the line of Stephen Trent with Citi. Please proceed with your question.

Good morning, Adolfo, and thanks very much for taking my question. The first, just quickly on Tulum, is it still the case that its charter traffic is still sort of the primary piece of the pie that's leaving Cancun and shifting to Tulum? Or, you know, are you seeing a little bit more of a tilting commercial? Thank you.

Hello?

Yes, Adolfo, can you hear me?

Yeah, but could you repeat your question, because you are not.

Sure, sure, no problem. Yeah, I was just curious, in terms of what you're seeing in Tulum Airport and the traffic impact to Cancun, Am I thinking about this correctly? It's still primarily charter traffic. That's the piece that's going there, or are you seeing a little more of a shift of commercial traffic there, too? Thank you.

Well, it's, of course, you can find some charter flights there, but basically, I would say most of these is commercial flights basically coming from the U.S., you know, A piece is coming from Mexico, but the most important region in that sense is U.S.

Got it. Appreciate that. And just a very quick question on the balance sheet. I saw there was a $1.5 billion peso investment in financial instruments in 1Q that is no longer there in 2Q, and just Just was curious what was sort of the rationale behind the shift. Thank you.

Well, the rationale is the huge amount of funds that we have in the bank in investments. So we decided to invest a piece of that in a fund instead of the usual instruments we have been in just to try to get some or return for that amount of money.

Okay. Let me leave it there. Very helpful. Thanks, Adolfo.

Our next question comes from the line of Guillermo Mendez with JP Morgan. Please proceed with your question.

Hi, Adolfo. Good morning. Thanks for taking the time. The first question is on the follow-up on the traffic cost look. You mentioned it again that you do expect some kind of normalization on Mexican traffic into next year. Just trying to understand what does it mean for the second half of this year. I understand the base of comparison is relatively easier. So, is it fair to assume that we could expect some kind of traffic growth, let's say, mid-single digits on Mexican traffic into the second half of 25 when compared to second half of 24? And the second question, it's on the FX impact. So you mentioned the negative impact on aeronautical revenues. Can you clarify what is the actual impact on commercial revenues during the quarter? Thank you.

Yes. Well, the domestic traffic, as you have seen in the numbers during the quarter, is no longer decreased. It was a small increase. And basically this is because the engine problem of Platt & Whitney is basically bottomed out. So Bonares has expressed yesterday that they have six aircrafts in the shop. I'm going to say in the grounded because of the problem. Exactly. And that's exactly the same figure we saw during the first quarter. So this is the lowest part of the curve, I would say. As we can see with the numbers from now on, we should see an increase in domestic because of this, you know, That is, in my opinion, the most important situation. Of course, the situation in Mexico City helps on this. But as we said, there was a small increase in the restriction from 42 to 43. So from now on, everything should be better than how it was before. In the case of VFX in the commercial revenues, this has to do with the exchange rate activities there on one side. On the other side, it has to do with duty-free. And of course, what I have mentioned before, the situation we have in the case of Terminal 2, you know. So that's why you are seeing a very soft, I would say, non-analytical revenues in the second quarter compared with the first quarter this year.

Maybe put in a different way, do you have high-level numbers on what is the USD exposure you have on your commercial activity?

It's not that easy because, of course, the only one that is related to US dollars is GDP, no? The other thing is the way the people expense, no? in terms of food and beverage prices are in pesos, but that doesn't mean that the people will spend more if Mexican pesos depreciates, which is not the case in the stores. In the stores, again, the prices are in pesos, you know, but the people tend to spend more if the Mexican pesos depreciates.

Got it. Thank you, Adolfo. Have a nice day.

You're welcome.

Our next question comes from the line of Pablo Monsivias with Barclays. Please proceed with your question.

Hi. Good morning, Adolfo. A follow-up on the commercial revenues question. What should we expect for the next two quarters with the situation you're naming on the terminal? Two, should we state again a couple of quarters of a soft commercial revenue activity? And my second question is maybe to put different the question of , what percentage of the rents that you have in your tenants at Cancun are in US dollars? Thank you.

Pablo, in the case of , we should expect for the next four quarters. It will be up to the third quarter next year when we will be able to open the new reconstruction and extended Terminal 1, which should alleviate the significant weight of the situation in Terminal 2. My prices or the way that we charge in the commercial revenues is basically appropriate A minimum guarantee payment per passenger and a percentage of the sales. Normally what they pay to us is a percentage of their sales. And as I said before, if their sales are in pesos, in between brackets, this is pesos. That is not the currency. The thing that explains the spending behavior has to do with the passenger worthiness of these, you know, In the past, I used to say what a Russian is to U.S. guys in the duty free. No, one has to do with the passenger, not with what is there.

Okay. Thank you very much.

You're welcome.

Our next question comes from a line of Pablo Recalde with East Itao Asset Management. Please proceed with your question.

Hi. Good morning. I was just I have two questions. The first one is from the Mexico profitability or EBITDA margin. I don't know if you can explain a little bit further what happened on that cost line. You mentioned an increase in labor costs and utilities, but just wondering if maybe you registered a provision or something, and that's why expenses grew that much and profitability declined that much, and how should we think of profitability in Mexico going forward? And my second question is on your balance sheet and your cash and balance. If I've already stated 60% of the cash is in BNB, I just want to double check that window.

Yes, Pablo. Well, in the case of the margin, you know, and normally I don't want to or I don't like to talk about margins because revenues and expenses are basically independent. The expenses side grew 7%. of the year. It was less than what we had in the first quarter. We had to take some actions there due to the situation of the weak traffic we had during the whole. The combination of both is what you are saying, a decrease in the margin. That is something that we need to see on an independent basis.

Okay.

In the case of what you're saying in the balance sheet, what was your question?

Like that, which percentage of your cash is in USD? Try to understand the effect loss of your P&O. If I'm not mistaken, around 60% of your cash is in USD.

Yeah, in the case of Mexico, at the end of the quarter, we had $700 million in dollars.

Okay.

Thanks. Our next question comes from the line of Fernanda Recchia with BTT Pachul. Please proceed with your question.

Good morning. Thank you for taking my question. Two here from our side as well. So the first on the dividend policy going forward, we saw that despite the payment of this first tranche, you're leveraging in a pretty comfortable level. So just wondering what we can think about next year onward, if we could expect such a good dividend payment like we saw in 2025. And second, still a follow-up on the Troon, maybe if you could elaborate a little bit further, when do you expect this airport to reach full capacity, and when do you expect it to stop hurting Cancun's fears? Thank you.

Thank you, Fernanda. Well, in the case of England for this year, let's try to conclude this year first. You know, we have another payment in September, another one in November, and then we will have to evaluate how was the situation for the year and the results of operations, and then next year we will propose something to the boards and then to the assembly. In the case of Tulum Airport, if we see last 12 months, Tulum Airport 3, If we see the last 12 months, end of December last year, it was 1.2. So there was an increase of 300,000 passengers during the first half of the year. I was expecting a . If you go back to my first conference call of the year, I was expecting 2.9 million for this airport. basically showing cancellation of some routes, Bogota, Detroit, Minneapolis, and Somalis, basically are saying to me that this airport will not reach what I was expecting at the beginning of the year. This airport should have, roughly speaking, 2.9 million in accordance with the location So going back to your question, one will not be hurting from this once this airport reaches the 2.9 million. In the meantime, we will have to continue talking about the ramp up of Tulum.

Okay. Thank you very much.

You're welcome.

Our next question comes from the line of Andres Aguar with GBM. Please proceed with your question.

Good morning, Adolfo. Thanks for the call. One thing, if you could share the rationale behind the new debt. And given your current high cash balance, how are you thinking about deployment going forward and possibilities for further leverage for CapEx? Thank you.

Hi, Andres. Well, the new check has to do with taxes and expenses in Cancun Airport, no? We thought that it was something important for us to maintain some cash in hand for the future, given the fact that the dividend, the proposed dividend, proposed for this year is a total of 24 billion So it was important to be sure that we were able to fund that situation.

Thank you. You're welcome.

Our next question comes from the line of Abraham Fuentes with Banco Santander. Please proceed with your question.

Hi, everyone. Good morning. We have seen a drop in the number of tourists that are visiting the U.S. Do you think that Mexico could capture any of those passengers? And if that will be the case, when do you think we can begin to see it effect in terms of traffic?

Well, this is true. There are diminishing decline from all the regions to the U.S. in terms of tourism. We have approached some Canadian airlines and talked about this situation. And basically what they're saying is that they will evaluate the situation towards the end of the year. If this continues, of course, they will jump into our region, you know. For the moment, what they have expressed is that they do not want to lose their slots in their most important efforts in the U.S. they have, you know. Basically, I do believe that next year we will see some positive effect of this basically from Canada and from Europe.

Okay, thank you.

Our next question comes from Enrique Soho with Fundamenta Capital. Please proceed with your question.

Hi, Adolfo. Thank you for taking my question. I wanted to quickly dive into international traffic dynamics in Mexico. More specifically, during this first half of the year, we have seen traffic internationally fall 7.5% in the first Q and 4% in the second Q. None of this has been happening basically with Tulum not ramping up. How do you expect international traffic to kind of continue in the second half of this year? And should we expect Tulum to basically ramp up in 2026 and hindering growth next year? Thank you.

As I said during the initial remarks, the decline, 38% of the decline of this quarter in international traffic is related to Tulum Airport. The difference is related to a weaker market from all the regions, all are negative, Canada, U.S., Europe, and South America. what to expect for the future. Let's see what economics, on one side, macroeconomics, on the other side, all of these situations with the U.S. migration policies. And the case of South America with the situation of been analyzed by the Mexican government today, and also considering that the next year we will have some games of the World Cup in Mexico, they will have to do something about it.

Great. And just a quick follow-up, if I may. In terms of domestic passengers, we should not continue to see it falling, but do you expect a strong rebound? Do you see that when talking to Volaris and Vibraribus, or do you think it will be a more gradual change? Thanks.

Well, what I do expect is a better behavior. So, you know, more decrease from the velocity .

Great. Thank you. You're welcome.

Our next question comes from the line of Alberto Velez with UBS. Please receive your questions.

Adolf, thank you for taking my questions. One reminder from our side here, it's about CapEx. How should we expect the case of CapEx deployment for the next quarter? This quarter comes a little bit below what consensus in us was expecting. So how should we see the deployment of CapEx in the following quarters? Thank you very much. You're welcome.

Well, I have to say that in the case of the CapEx, we are above

Our internal budget for the first half of the year is likely a moment. What do we expect for the end of the year is to comply with what we have written in our MVP, roughly speaking, 7 million pesos. Remember that most of this is suspended towards the food water.

Okay, thank you. You're welcome.

Again, if you have a question, please press star, then one. Our next question comes from the line of Alan Macias with Bank of America. Please proceed with your question. Alan Macias, your line is live. Our next question comes from the line of Anton Morton Carter with GBM. Please proceed with your question.

Hi, Adolfo. Thank you very much for the call. Just a quick one. I mean, aside from Cancun, in the smaller airports in Mexico, maybe like Mérida or Oaxaca, we've seen some steady performance. I was just wondering what kind of dynamics are you seeing in those smaller airports and what would you expect going forward? I mean, anything interesting there?

Well, every single airport, of course, has its own situation. I would say that when we go in the case of Oaxaca, public demonstrations in Oaxaca have affected, of course, the fusion there. In the case of Merida, it's growing less than how it was before, but it's still growing. It's very well in the case of William Moussa, I would say security has affected the traffic. So each one has its own particular .

Okay, thank you. You're welcome.

Our next question comes from the line of Gilmer Mendez with JP Morgan. Please proceed with your question.

Hey Adolfo, thanks for the follow up. A coupon on traffic. There has been a lot of news on increasing sargassum in the Caribbean region. Is this kind of concerning in your view? Could it imply downside risk to your traffic assumptions for the second half of the year?

In the case of sargassum, I have to say,

not, if we go back in history, we cannot say every three years, every five years, every seven years, you will have sagacity in the region. The worst ever has been in 2018, but what we have seen for this year, this may be the worst ever. The situation there is very difficult. Of course, in terms of seasonality of the year, summer is the most important. So I would say after all during the third quarter and fourth quarter, you will see less sarcasm for what you will see for the summer. But yes, it's true that this year has been a very tough situation.

Got it. Thank you. You're welcome.

Our next question comes from the line of Fernando Recio with BTG Pacual. Please proceed with your question.

Hey, Adolfo, just a quick follow-up. Could you comment a little bit on your inorganic growth opportunity that you're currently evaluating? I don't know if you have any update on Bavaro Airport. And apart from that, is there any other opportunity that you're looking at?

The case of Bavaro is still the same. We're still in the legal process of that. for the moment the project is on course, and yes, we are seeing some other opportunities.

Okay, and just a follow-up here. We know that TCR is under a development process. Is this process make sense for you? Are you looking at it?

I cannot comment on all the other opportunities we're analyzing for the moment.

Great. Thank you. You're welcome. Our next question comes from the line of Alan Macias with Bank of America. Please proceed with your question.

Hi. Good morning. Thank you for the call. Just if you can give us some color on what's happening or what are the drivers for international traffic in Puerto Rico and Colombia. They're growing double-digit levels. And if this is sustainable for the second half of this year. Thank you. You're welcome.

Well, in the case of Puerto Rico, I would say this has to do with what's happening there with concerts and everything. Everything related to music. So I thought that it was really often that one. And some international traffic are taking opportunity to go there because of that. In the case of Colombia, basically it's the U.S.

Mr. Castro, are you still connected?

I'm connected, yes.

Okay. And Mr. Macias, was that the end of your question?

Yes, thank you.

Thank you. As a reminder, if you would like to ask a question, please press star then 1 on your telephone. Our next question comes from the line of Frederico Galassi with TRG. Please receive your question.

Hi, Adolfo. Thank you for taking my question. Quick question in operations. I can see a jump in cost of services in terms of revenues or year-over-year. The question is, is there any one-off, or this is the level that we have to sink in for Mexican operation in the near future?

This is what you would expect for the coming years, yes.

Okay, but it's not one of his 100% operations.

Yeah.

Okay, thank you.

You're welcome.

That concludes the question and answer portion of today's conference call. I would like to turn it back over to Mr. Castro for closing remarks.

Thank you, Christine, and thank you all again for joining us today for our second quarter 2025 conference call. We wish you a good day and goodbye.

Ladies and gentlemen, that concludes ASUR's second quarter 2025 results conference call. We would like to thank you again for your participation. You may now disconnect.