ASUR signals U.S. expansion with $295M URW Airports acquisition amid mixed regional traffic trends

Earnings Call Insights: Grupo Aeroportuario del Sureste (ASR) Q3 2025

MANAGEMENT VIEW

* CEO Adolfo Castro Rivas highlighted a major strategic milestone with the announcement of a definitive agreement to acquire URW Airports for an enterprise value of $295 million, describing it as "a significant step forward in ASUR's international expansion strategy, building our established presence in the U.S., which began with the operation of San Juan Puerto Rico Airport in 2030." He noted that URW manages commercial programs at Los Angeles International Airport, Chicago O'Hare, and John F. Kennedy International Airport, collectively processing around 14 million enplanements annually.
* Castro Rivas stated, "This acquisition provides ASUR with a strategic foothold in the 3 of the largest U.S. air travel markets and strengthens our position in the high-growth nonregulated commercial segment in the U.S. airport industry." The acquisition will be financed by JPMorgan Chase, with closing expected in the second half of 2025, subject to regulatory approvals.
* Passenger trends for the quarter were mixed: "We serve over 17 million passengers across our airports, with traffic remaining practically flat as continued growth in Colombia and Puerto Rico helping to offset persistent headwinds in Mexico."
* Colombia saw passenger traffic increase 3%, with international traffic up 11%. Puerto Rico had total traffic up 1%, international passengers rising nearly 12%. In Mexico, total traffic declined 1%, with domestic down nearly 2% and international down 0.3%.
* On commercial development, "We added 45 new commercial spaces across our airports over the last 12 months, including 31 in Colombia, 8 in Puerto Rico and 6 in Mexico."
* Financial discipline and operational rigor continue to be emphasized, with a strong cash position and ongoing infrastructure investments.

OUTLOOK

* Castro Rivas expects "a more balanced operating environment across our portfolio. In Mexico, we expect traffic to gradually stabilize over the next year as aircraft ability improves. In Puerto Rico and Colombia, we expect continuous positive momentum supported by the healthy international demand and improving productivity."
* The CEO suggested continued focus on commercial strategy, infrastructure investment, and maintaining a strong financial profile.

FINANCIAL RESULTS

* Total revenues increased in the mid-single digits, reaching over MXN 7 billion, driven by growth in Puerto Rico and Colombia.
* Mexico, representing 70% of total revenues, posted a slight low single-digit decline. Puerto Rico, at nearly 18% of revenues, reported high single-digit growth. Colombia accounted for 30% of total revenues and delivered high single-digit revenue growth.
* Consolidated EBITDA declined just over 1% year-on-year to MXN 4.6 billion. Puerto Rico and Colombia delivered EBITDA growth of nearly 5% and 10%, respectively. EBITDA in Mexico declined close to 4%.
* Adjusted EBITDA margin (excluding construction) declined by 157 basis points to 66.7%.
* The quarter was negatively impacted by a foreign exchange loss of nearly MXN 1 billion and a MXN 333 million adjustment in the concession amortization method in Colombia.
* Cash position stood at MXN 16 billion, down 19% from December 31, 2024, mainly due to dividend payments. Net debt-to-EBITDA ratio remained at 0.2x.
* An extraordinary dividend of MXN 15 per share was paid in September, with another MXN 15 per share scheduled for November.
* CapEx investments reached close to MXN 1.9 billion, focused on Mexican airport upgrades, a new pedestrian bridge in Puerto Rico, and maintenance in Colombia.

Q&A

* Rodolfo Ramos, Banco Bradesco BBI, asked about the URW acquisition’s economics and the concession amortization change in Colombia. Castro Rivas noted, "In the case of URW, I cannot yet share numbers... In the case of Colombia, basically, what we have done is to change amortization method... it's going to be from now the same level."
* Ernst Mortenkotter, GBM, asked about URW acquisition synergies. Castro Rivas explained, "The most important for us is to get -- to put a foot in the U.S. market... this should be the platform for future growth in the United States."
* Andressa Varotto, UBS, inquired about Motiva Airports and Mexican traffic trends. Castro Rivas stated he could not comment on Motiva but noted, "the traffic is really weak and the demand is weak in the case of the region," citing Pratt & Whitney engine issues.
* Pablo Ricalde Martinez, Itaú, asked about the timing for the Cancun Terminal 1 expansion. Castro Rivas confirmed, "we are expecting... to open this new facility during the third quarter 2026."
* An unknown analyst asked if declining traffic could accelerate tariff increases. Castro Rivas responded, "No. I don't see that. Our maximum tax compliance this year should be similar of what it was last year."

SENTIMENT ANALYSIS

* Analysts focused on details of the URW acquisition, traffic softness in Mexico, and potential impacts to revenue, signaling a neutral to slightly cautious tone as they pressed for clarity on growth drivers and risk factors.
* Management maintained a measured but confident tone in prepared remarks, emphasizing strategic rationale and discipline, but responses in Q&A often involved cautious language and some deflection, particularly regarding specific financial details of acquisitions and traffic outlook.
* Compared to the previous quarter, management's tone shifted from positive on expansion and stabilization to a slightly more defensive posture as market headwinds and acquisition questions dominated the discussion.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw a major shift with the URW acquisition announcement, advancing U.S. expansion as a new strategic priority.
* Passenger trends in Mexico remained soft, with only a slight decrease from the previous quarter, while international growth in Puerto Rico and Colombia continued but at a tempered pace.
* Financial results showed a move from revenue growth and modest EBITDA increases in Q2 to stagnant or declining margins in Q3, weighed by FX losses and amortization adjustments.
* Analyst questions shifted from operational details and capacity to a strong focus on the economics and strategic logic behind the URW deal and the persistence of soft Mexican traffic.
* Management’s confidence on future growth opportunities was less pronounced than in Q2, with a heavier emphasis on operational discipline and cautious traffic recovery expectations.

RISKS AND CONCERNS

* Persistent weak demand in Mexico, especially in domestic and U.S.-bound travel, linked to external factors like the Pratt & Whitney engine issue.
* Currency volatility negatively impacting revenue and profitability, particularly due to a strong Mexican peso against the U.S. dollar.
* The adjustment in Colombia’s concession amortization method represents a structural change, not a one-off, potentially impacting reported profitability for the foreseeable future.
* Ongoing infrastructure projects and large capital outlays, including the URW acquisition, introduce execution and integration risks.
* Management acknowledged these risks but emphasized financial discipline, robust cash reserves, and a diversified regional portfolio as mitigating factors.

FINAL TAKEAWAY

Grupo Aeroportuario del Sureste’s third quarter results underscore the company’s strategic push into the U.S. market with the $295 million URW Airports acquisition, while operational performance was shaped by flat overall passenger numbers, regional traffic softness in Mexico, and FX-driven headwinds. Management remains focused on disciplined execution, infrastructure investment, and commercial expansion in higher-growth markets, with cautious optimism for traffic stabilization and continued portfolio diversification in the coming year.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/asr/earnings/transcripts]

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