Earnings call transcript: Grupo Aeroportuario Del Sureste Q3 2025 sees strategic U.S. expansion

Grupo Aeroportuario Del Sureste (ASURB), a $9 billion market cap airport operator, reported its third-quarter earnings, showcasing a strategic move with a planned acquisition in the United States. Despite a slight decline in EBITDA, the company remains financially robust, ending the quarter with a strong cash position. ASURB’s stock saw a modest increase, reflecting investor confidence in its strategic initiatives. According to InvestingPro analysis, the company maintains a "GREAT" financial health score of 3.35, highlighting its operational excellence.

Key Takeaways

• ASURB plans to acquire URW airports for $295 million, targeting major U.S. airports.
• Total revenues rose mid-single digits, exceeding 7 billion pesos.
• EBITDA margin fell slightly, with a 1% decline in consolidated EBITDA.
• Passenger traffic showed mixed results across regions, with growth in Colombia and Puerto Rico but a slight decline in Mexico.

Company Performance

ASURB’s performance in the third quarter demonstrated resilience amid mixed regional passenger traffic trends. The company served over 17 million passengers, with notable growth in Colombia and Puerto Rico. The Mexican market experienced a slight decline. The strategic acquisition of URW airports is expected to provide ASURB with a foothold in the lucrative U.S. market, aligning with its growth aspirations. The company’s impressive 21.26% revenue growth and strong return on equity of 31% underscore its operational efficiency.

Financial Highlights

• Revenue: Over 7 billion pesos, a mid-single-digit increase YoY.
• Consolidated EBITDA: 4.6 billion pesos, a 1% decline YoY.
• Adjusted EBITDA margin: 66.7%, down 157 basis points.
• Cash position: 16 billion pesos at quarter-end.
• Net debt to EBITDA ratio: 0.2 times, indicating strong financial health.

Outlook & Guidance

ASURB anticipates a more balanced operating environment moving forward, with expectations for traffic stabilization in Mexico and continued positive momentum in Puerto Rico and Colombia. The company plans to distribute dividends of MXN 15 per share in September and MXN 0.15 per share in November. With a substantial dividend yield of 14.31% and trading at a P/E ratio of 13.3, InvestingPro analysis suggests the stock is currently undervalued, presenting a potential opportunity for investors. For detailed valuation metrics and additional insights, check out the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

Adolfo Castro, CEO of ASURB, emphasized the importance of the company’s strategic entry into the U.S. market, stating, "Putting our name [in U.S. airports] is extremely important and this should be the platform for future growth in the United States." He also reiterated the company’s commitment to advancing its financial strategy and maintaining a robust financial profile.

Risks and Challenges

• Mexican market softness: Continued weak demand in the domestic market could impact future growth.
• Cost pressures: A 17% increase in total expenses, especially in Colombia due to amortization adjustments, could affect profitability.
• Integration risks: The acquisition of U.S. airports may present integration challenges and require significant management focus.

ASURB’s strategic initiatives and financial resilience position it well for future growth, despite some regional challenges. The company’s expansion into the U.S. market is a significant step in its long-term growth strategy. For investors seeking deeper insights into ASURB’s financial health and growth prospects, InvestingPro offers exclusive analysis, including over 30 additional financial metrics and expert ProTips not covered in this article.

Full transcript - Grupo Aeroportuario Del Sureste (ASURB) Q3 2025:

Operator: Good day, ladies and gentlemen, and welcome to the Absorb Third Quarter twenty twenty five Results Conference Call. My name is Latanya, 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 towards the end of today’s conference. As a reminder, today’s call is being recorded.

Now I’d like to turn the call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

Adolfo Castro, Chief Executive Officer, Azul: Thank you, Nathaniel, 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 current management expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company’s control. Additional details about our third quarter twenty twenty five results can be found in our press release, which was issued yesterday after market close and is available on our website in the Investor Relations section. Following my presentation, I will be available for Q and A. As usual, all comparisons discussed on this call may be will be year on year and figures are expressed in Mexican pesos unless specified otherwise.

Before discussing our results, I would like to begin today’s call with an important strategic development. As recently announced, we entered into a tentative agreement to acquire URW airports for an enterprise value of $295,000,000 This transaction marks a significant step forward in Azul’s international expansion strategy, building our established presence in The U. S, which began with the operation of San Juan Puerto Rico Airport in 2013. URW airports managed commercial programs are three most iconic and high traffic airports in The United States. URW airports managed commercial programs are three of the terminals at three of the airports in the Los Angeles International Airport with six terminals Chicago Hearne International Airport at Terminal 5 and in the case of Jermaine Kennedy International Airport covering Terminals 8 and the upcoming new Terminal 1.

Together, these terminals processed around 40,000,000 employment items. This acquisition provides Azul with a strategic foothold in the three of the largest U. S. Air travel markets and strengthens our position in the high growth non regulated commercial segment in The U. S.

Airport industry. The acquisition will be financed by JPMorgan Chase. As with all our strategic positions, we are approaching this opportunity with a financial discipline and operational view that has long defined as execution. Closing is expected during the 2025, Subject to customary regulatory approvals, we look forward to keeping you updated on our progress in the quarters ahead. Now turning to our third quarter performance.

We served over 17,000,000 passengers across our airports, with traffic remaining practically flat as continued growth in Colombia and Puerto Rico helping to offset persistent headwinds in Mexico. Starting with Colombia, passenger traffic rose 3% to close to 5,000,000, supported by a solid 11% increase in international traffic and a modest growth just under 1% in domestic products. In Puerto Rico, total traffic was up 1%, reaching over 3,000,000 passengers. Growth was driven by international passengers, which increased nearly 12% year on year, offsetting the 0.5% decrease in domestic traffic. In Mexico, traffic declined 1% to nearly 10,000,000 passengers for the quarter.

The decrease reflects softer demand, domestic traffic, which was down nearly 2% and international, which saw a slight contraction of 0.8%. Passenger volumes from The United States, our largest international source market, decreased just 0.2%, while South America contracted 7.2 On the positive note, Canada and Europe increased 9.31.3%, respectively. Looking ahead, we anticipate a more balanced operating environment across our portfolio. In Mexico, we expect traffic to gradually stabilize over the next year as EBITDA ability improves. In Puerto Rico and Colombia, we expect continued positive momentum supported by the healthy international demand and improving credit yields.

Now turning to review our financial results. As a reminder, all figures exclude construction revenues and costs unless otherwise noted. Comparisons are all year on year unless otherwise noted. Total revenues increased in the middle single digits reaching over 7,000,000,000, driven by Flovent Puerto Rico and Colombia. Mexico at 70 of total revenues posted a slight low single digit decline, with our aeronautical revenues practically flat and non aeronautical revenues down in the middle single digits.

Revenue growth was limited by softer passenger volumes and a stronger peso, which continues to weight down The U. S.-linked revenue streams. Puerto Rico at nearly 18% of total revenues reported revenue growth in the high single digit, driven by increases in 5% in aeronautical revenues and 10% in non aeronautical revenues. This performance reflects positive passenger traffic trends sustained demand across commercial activities. Colombia, which accounted for total of or 20% of the total revenues, delivered revenue growth in the high single digits, reflecting a mid single digit increase in aeronautical revenues, while non aeronautical revenues were up in the high teens.

This good performance was supported by passenger traffic growth and Sonic growth, partially offset by a strong Mexican peso. Continuing our ongoing focus on commercial development, we added 45 new commercial spaces across our airports over the last twelve months, including 31 in Colombia, eight in Puerto Rico and six in Mexico. This supported a low single digit increase in commercial revenues as solid growth in Puerto Rico and Colombia was partially offset by a weaker performance in Mexico. On a per passenger basis, commercial revenue rose 1% to 126. By region, Colombia led a 14% increase followed by Puerto Rico, up 10%, while Mexico posted a 4% decline, reaching 144 per passenger.

Turning to costs. Total expenses were up nearly 17% year on year. By region, Mexico posted a 4% increase, largely due to higher maximum minimum wages and service costs. Puerto Rico reported expense increase of nearly eight percent, reflecting inflationary pressures and higher operating activities. While Colombia, cost increased 76%, mainly driven by an adjustment in amortization method of the concession.

Without this, the increase would have been 5.4%. Lastly, in Puerto Rico and Colombia, cost benefited from the decision of Mexican peso against the U. S. Dollar. On the profitability, growth consolidated EBITDA declined just over 1% year on year to MXN 4,600,000,000.0 in the quarter.

Puerto Rico and Colombia delivered EBITDA growth of nearly 510%, respectively, while EBITDA in Mexico declined close to 4%, mainly reflecting lower traffic and higher operating costs. The adjusted EBITDA margin, which excludes construction related revenues and costs under IFRIC 12, declined by 157 basis points to 66.7%. This reflects lower margin contribution from the Mexican and Puerto Rico operation, where the margin contracted 152 basis and 151 basis points, respectively. In contrast, Colombia reported an 81 basis points margin expansion. On our bottom line, this quarter was negatively impacted by the acquisition of the Mexican peso against the U.

S. Dollar, which resulted in a foreign exchange loss of nearly billion compared to the reverse effect during the third quarter of last year. Profitability was also affected by the ARS $333,000,000 adjustment in the Concert and Amortization method in Colombia that I just explained. Now moving to our balance sheet. We closed the quarter with a solid cash position of ARS 16,000,000,000, down 19% from 12/31/2024, primarily reflecting dividend payments made during the period.

Our net debt to EBITDA ratio remained at a healthy 0.2 times. In terms of capital deployment, in September, we paid an extraordinary dividend of MXN 15 per share funded from written earnings. Note that in November, we will be paying an additional dividend of MXN $0.01 5 per share. Lastly, we invest close to MXN 1,900,000,000.0 during the quarter, primarily directed to projects over Mexican airports, including the reconstruction and expansion of Terminal 1 at Cancunepo and the terminal expansion in Guajada. In Puerto Rico, we progress we are progressing on the new pedestrian bridge for Terminal A, while in Colombia, we tested in maintenance CapEx.

In closing, our third quarter results reflect the resilience of multi country profitable and the value of our disciplined execution and in a more tempered demand environment, while traffic in Mexico continued to face near term headwinds, we are encouraged by the ongoing momentum in Puerto Rico and Colombia. We remain focused on advancing on our financial strategy, investing in infrastructure and maintaining a firm financial profile. Please conclude my prepared remarks. Natalia, please open the floor for questions.

Operator: Thank you. We will now begin the question and answer session. The first question comes from Rodolfo Ramos with Bradesco BBI. Please proceed.

Rodolfo Ramos, Analyst, Bradesco BBI: Good morning, Rodolfo. Thanks for taking my question. I have a couple, if I may. The first one is in regards to the URW acquisition. Can you shed a bit of light on the economics revenue per tax?

How much EBITDA contribution you’re expecting from these assets on an annualized basis? And the second is on Colombia. Can you elaborate on this adjustment to the concession amortization method that we saw during the quarter? Was this a one off? Or should it be a new level going forward?

And this has to do something with the economics of your concession title there. You.

Adolfo Castro, Chief Executive Officer, Azul: Hi, Roberto. Good morning. Thank you for your questions. In the case of URW, I cannot yet share numbers with you until all of this is approved. In the case of Colombia, basically, what we have done is to change the monetization method because in accordance with our estimates, during 2027, we will not receive regulated revenues anymore and the concession should be over by 02/1932.

So we are aligning the monetization in accordance with the revenue generation there. And it’s going to be not one off. It’s going to be from now the same level.

Rodolfo Ramos, Analyst, Bradesco BBI: Thank you, Alex.

Adolfo Castro, Chief Executive Officer, Azul: You’re welcome.

Operator: The next question comes from Anton Morton Kotter with GBM. Please proceed.

Adolfo Castro, Chief Executive Officer, Azul: Hi, Alofo. Thank you for the call. I wanted to follow-up a little bit on URW. I understand you cannot discuss the financials, leaving that aside, it seems like a great way to gain some strategic insight into the consumer that goes from your airports to The U. S.

I just was wondering if you could discuss a little bit what kind of synergies do you see or what is the strategic rationale behind this acquisition? Thank Thank Anton. Well, basically, the most important for us is to get to put a foot in The U. S.

Market. The U. S. Market represents 22% of the aviation market of the world. And these terminals are extremely important for The U.

S. Market. So putting our name there, it’s extremely important and this should be the platform for future growth in The United States from being in the same kind of contracts that we are entering right now. That is the most important thing. Perfect.

Thanks.

Operator: Thank you. Our next question comes from Andero Vallado with UBS. Please proceed.

Andero Vallado, Analyst, UBS: Adoso. Thank you for taking my question. I have two here on my side. The first one is about Motiva airports that are for sales, which being seeing the news folks that Azure is one of the candidates interested in this airport. So I was just wondering if you could provide some more information if you’re looking, for example, at all of the airports or just a subset of them?

And how will the company finance this? And my next question is regarding the traffic trends that you’ve been seeing for Mexico. We’ve been seeing recently on news as well that Tulum Airport has been facing some cancellations and if you think that this could help Cancun Airport in the near future. Thank you. These are my two questions.

Adolfo Castro, Chief Executive Officer, Azul: Thanks, Anthony. And good morning. In the case of Motiva, I cannot comment. In the case of the traffic trends, what I see today is a slow reputation in the domestic market because of prepping with the engines, something that should improve in my opinion during the next year. For the moment, the traffic is it’s really weak and the demand is weak in the case of the region.

If we see Cancun and Tubular together for the first eight months of the year, and I’m saying eight months because that is the latest public figure for the case of the Airport Of Tulum, the traffic for the region is a decrease of 3.1. If we go to the latest month that has been published for the case of the Airport Of Tulum, which is the month of August this year, August versus August last year, the traffic of the region was a decrease of 5.1%. So the traffic is soft. Nevertheless, what you are saying in terms of the recent cancellations to the Airport Of 2.

Operator: Thank you. Our next question comes from

Adolfo Castro, Chief Executive Officer, Azul: Sorry, could you repeat?

Operator: The next question comes from Pablo Riccardi with Atul. My

Adolfo Castro, Chief Executive Officer, Azul: question is related to the mutual level, non mutual level in Gangloo. Is it still expected to be open around Q3 twenty twenty six? Or are delays on that construction of that one? Pablo, hi, good morning. What we are expecting is to open this new facility and during the third quarter twenty twenty five twenty twenty six, sorry.

Okay. So that’s expected.

Operator: The next question comes from Gabriel Hemmerrod with Deutsche Bank. Please proceed.

Adolfo Castro, Chief Executive Officer, Azul: Just two questions. First, is there any way or somehow that capacity allocation from carriers has been shifting from Cancun? And the second one is the decrease in traffic could somehow make the phase of driving the tariffs towards the maximum tariff faster for either this year or next year? Thank you. Well, in terms of capacity, we are not seeing a shift in capacity.

What we are seeing basically is a weak demand, as I said, from the domestic resulted from Pratt and Whitney and some other elements. And in the case of The U. S, the numbers for the quarter is 0.2% decrease, which is small, but it’s the largest market we have. Let’s see how the winter comes. And I hope that the winter will be very strong in the North Part Of The Americas and then they come.

Positive side is the case of Canada, which is it’s up for the quarter, and I hope that it will be up during the fourth quarter as well. Okay. Thank you. And in the case of the traffic that has somehow decreased, that could accelerate the pace on which tariffs are increased up to the maximum tariffs? No, I don’t see that.

Our maximum tariff compliance this year should be similar on what it was last year, so more than 99%.

Rodolfo Ramos, Analyst, Bradesco BBI: Okay. Thank you.

Adolfo Castro, Chief Executive Officer, Azul: You’re welcome.

Operator: At this time, we’ll turn the call back over to Mr. Adolfo Castro for closing comments.

Adolfo Castro, Chief Executive Officer, Azul: Thank you, Latanya. And thank you all of you again for joining us on our conference call for the third quarter twenty twenty five. We wish you a good day and goodbye.

Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.

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