Feb 25, 2014
Operator
Good day, ladies and gentlemen, and welcome to the ASUR Fourth Quarter 2013 Results Conference Call. My name is Lori and I'll be your operator.
[Operator Instructions] As a reminder, this call is being recorded.
Operator
For opening remarks and introduction, I'd like to turn this call over to Mr. Adolfo Castro, Chief Executive Officer.
Please proceed.
Adolfo Castro Rivas
Thank you, Lori [ph]. And good morning, everybody.
Thank you for joining us today for the conference call to discuss our fourth quarter 2013 results. Allow me to remind you that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on joint management expectations and beliefs that are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our company's control.
For an explanation of this risk, please refer to our filings with the Securities and Exchange Commission and the Mexican Stock Exchange.
Adolfo Castro Rivas
I will start today's call with an overview of the key recent events, followed by an update on San Juan Puerto Rico International Airport. Afterwards, I will briefly review the results for the quarter.
As you know, early January, we received approval for our master development plan, including efficiency factor and tariffs for 2013 through 2018. We're pleased with the results of the negotiations.
Adolfo Castro Rivas
CapEx for the 5-year period is in line with our expectations. Note our CapEx for the period also includes moving forward the construction of the new terminals, Terminal 4 at Cancun Airport, to support its growing passenger traffic.
Cancun's -- Cancun Airport's capacity today stands at around 70 million passengers, close to the 60 million passengers serviced last year. We also focus on the expansion of Terminal 3 at Cancun Airport, as well as expanding the terminal buildings at direct reserve and other ongoing investments.
Adolfo Castro Rivas
MDP negotiation also included a 2.7% reduction in tariffs on regulated revenues. Deficiency packet was maintained at 0.7%.
We also paid a cash dividend of MXN 4.04 per share last December for a total amount of MXN 1.3 billion.
Adolfo Castro Rivas
Moving now to San Juan Airport. Passenger traffic for the quarter was 1.9 million, a 7.5% quarter-on-quarter decline, reflecting seasonality, reaching 6.9 million passengers since February 28, 2013.
On the financial front, at a store net income contribution versus 50% ownership stake for the quarter was a net loss of MXN 48.5 million.
Adolfo Castro Rivas
We're focused on taking the necessary steps at San Juan airport to improve the level offered the whole passenger's traffic, and with these, drive commercial revenues, which at the moment are similar to increased [ph] 9 years ago, all the while reducing operating costs. Around this line, we continue to move forward on our plan to upgrade airport facilities.
Last November, we closed Terminal B to start the remodeling work, which we expect to complete by the year. Keep in mind that the full upgrade of San Juan terminals is a process that will continue for approximately 3 years, as we remodel Terminal C and make some minor adjustments at Terminal A.
Adolfo Castro Rivas
Moving on to the results for the quarter. Passenger traffic increased 9% year-over-year, with domestic traffic up 8% to 2.4 million passengers, a record for our fourth quarter.
Domestic traffic was particularly strong at Cancún, Mérida, Veracruz, Minatitlán, Oaxaca and Villahermosa's airports. Traffic at Cancún remained strong, with 1.2 million passengers, a record for our fourth quarter.
International traffic was also strong, up by 10% year-on-year, reaching 2.7 million passengers, also, a record for the fourth quarter. The share of international traffic grows slightly, to 52.7% of the total traffic from 52.4% in the fourth quarter 2012.
Adolfo Castro Rivas
Passenger traffic between Mexico, Canada and the United States represented 90.3% of the total traffic compared with the 90% 1 year ago. Revenues were up by 10.6%, reflecting higher traffic.
Conventional revenues grow and increase in construction revenues. Commercial revenues to the passenger increased 0.67%, to MXN 75.38 year-on-year, an all-time high.
While we remain focused on maximizing commercial revenue growth, we do not expect a significant expansion to commercial revenues per passenger or duty capacity constraints of the results. The investments contemplated in the new MDP will provide the required additional capacity constraints to drive non-related revenues.
Adolfo Castro Rivas
Operating profit expenses rose 7.3% year-on-year, mainly driven by the 18% increase in the construction cost. Excluding construction cost, operating company expenses would have increased 3.3%.
As anticipated, this an -- this increase include the cost of the reopening of Terminal 1 at Cancun Airport to give lead to Terminal 2.
Adolfo Castro Rivas
EBITDA for the quarter was up by 13.5% year-on-year, reaching a total of MXN 752 million, with an EBITDA margin increase of 131 basis points to 51.53%. We invested MXN 292 million this quarter, mainly to complete the expansion works in the terminals of Huatulco, Oaxaca and Villahermosa.
In terms of our balance sheet, we closed the quarter with cash and cash equivalents of MXN 1.3 billion. After the MXN 1 billion in payments we made on December 27, bank debt stood at MXN 2.8 billion business year-on-year -- at the year end.
Adolfo Castro Rivas
Finally, a quick comment on taxes before opening the floor to questions. Important tax modifications were made by the Mexican Tax Authority at the end of the quarter.
Among them, the most important ones and twos, the cancellation of the flat tax rates, the cancellation of the provision that allowed for a reduction in corporate taxes from 30% to 28% in 2014, an adjusted -- and adjustments in value-added taxes for Mexico's border region, which includes Cancún, from 11% to 16%, value-added taxes of 15% for not inside city buses.
Adolfo Castro Rivas
Now let me open the floor for questions. Please, Lori, go ahead.
Operator
[Operator Instructions] And we'll go first to Eugenio Amador from Credit Suisse.
Eugenio Amador
I was wondering if you could provide some guidance on the San Juan Puerto Rico operations for 2014. What would be your estimated profit and loss at year end in 2014?
And also, if there is any guidance on noncommercial revenue -- non-aeronautical revenue, per passenger or any sort of guidance.
Adolfo Castro Rivas
You know that we do not provide guidance because it is hard for us to predict the future. What I can share with you is that we have seen during the last 10 months, because, as you know, in 2 days, we will comply the third year of operation of this airport.
So if you see the results of the first 10 months, in terms of the 50% equity stake of ASUR, the result was a loss of MXN 148 million. Remember that MXN 112 million is the result of onetime events.
So in reality, what you can see is a loss of MXN 30 million, more or less, for these first 10 months. Remember that what we came for the concession or for the long-term lease agreement was $650 million.
If you divide this by 40 years, which is the length of the agreement, that means that you have an amortization of MXN 50 million every year. So the MXN 30 million, let's say, round numbers, $2 million for the MXN 50 million, $4 million for the MXN 100 million.
If you add on top of this MXN 400 million -- $4 million, the MXN 50 million of the depreciation, you'll have a positive EBITDA. This is something that you need to start seeing on San Juan Puerto Rico's numbers.
They're asking about the future. As I've said, we have not yet been there for 1 year.
So we cannot say what is going to happen in the future. In terms of the commercial revenue per passenger, as I said in the initial remarks, what we can see that today is as Cancún 9 years ago.
Also it's important to understand that we are in a remodeling process. You can try to see the graph we have in terms of commercial revenue per passengers in our web page, in our presentation.
And please, go back of what has happened in the year 2000 and 2001. Look at that piece of the graph and you will see what I'm talking about in terms of taking over, making -- closing a piece of the building, making a remodeling process and then open this piece of the building.
That's what I can say to you.
Operator
And we'll go next to Marco Montanez with Vector.
Marco Montanez
A couple of questions, if I may. Regarding the revenues from direct operations.
Is there any plans to increase its proportion in the future? I mean, do you have any plans to embody more business in your direct operations, once the contracts with third party is finished?
Adolfo Castro Rivas
No, we do not expect to have more direct operations, in terms of additional deed of lines. You know we are operating directly today at parking lot advertising and convenience stores.
And that's what I believe we will continue in the future. The proportion is -- for the future, is how much this is going to grow against the other activities, it's hard to say it.
But I believe they should remain more or less stable, in terms of proportion.
Operator
And we'll go next to Stephen Trent with Citigroup.
Kevin Kaznica
This is Kevin standing in for Stephen. I guess, our first question is, will the expansion of Cancún on Terminal 3 requiring shutdown time?
I know you mentioned it in the call, but I just wasn't sure.
Adolfo Castro Rivas
Sorry, what was your question?
Kevin Kaznica
Will the expansion of Cancún's Terminal 3 require any shutdown time?
Adolfo Castro Rivas
We are expecting to open that next year. I would say second semester of next year.
Kevin Kaznica
Okay. Just one other question.
What are your views on projects outside of Mexico? It looks like LaGuardia Airport is already taken.
But what about other opportunities?
Adolfo Castro Rivas
Well, for the moment, we are not seeing any other. Probably the other one that could come and that we will at least see the documents in Santiago, Chile.
Operator
We'll go next to Neal Dihora with Morningstar Equity.
Neal Dihora
Your cost of services for 2013 were pretty lower, the growth was quite low. I just wondered if you had comments a little bit on why that was, and maybe comments on 2014.
Adolfo Castro Rivas
You're talking about the operational thoughts?
Neal Dihora
Yes, just the cost of service line.
Adolfo Castro Rivas
Well, basically, I can say that we're trying to control costs, as always, on one side. On the other side, keep in mind that what we are doing today is comparing with the previous year.
And in the previous year we were spending some money in the case of the billing process for Puerto Rico. So an appease in the case of Brazil.
So probably, that is why you are seeing this as too low. For the moment, the only thing that we are doing is LaGuardia.
And of course, the cost between LaGuardia and Puerto Rico is complicated. San Juan Puerto Rico was more expensive.
Apart from that, I don't know what else to say to you.
Operator
[Operator Instructions] We'll go next to Bernardo Velez with GBM.
Bernardo Velez
I was wondering, what can we expect for dividends going forward, and 2014? And if the dividend approved on December was kind of an extraordinary dividend?
Adolfo Castro Rivas
Bernardo, in terms of your question, I don't know if the dividend we've paid on December 27 was or not part of the dividends for this year. And this is something that I will have to discuss with the Board of Directors and then to make it -- propose it to our shareholders [indiscernible].
You will know once we do this.
Operator
And we'll go next to Stephen Trent with Citigroup.
Kevin Kaznica
It's Kevin again. Now, just one last question.
You guys opened a lot of new retail areas on Cancún in the fourth quarter. Now would that -- would you consider that an above normal launch of retail establishments?
And if you strip these out, any sense as to what would have happened to commercial revs per passenger, kind of year-over-year basis?
Adolfo Castro Rivas
Okay, the -- what you're seeing in the report for the fourth quarter was Terminal 1. All of these areas are basically in Terminal 1, as we anticipated, due to the important growth in passenger traffic at Cancún, we have to open Terminal 1.
But first, could not end the right year. So what you are seeing is -- with that.
Operator
And we'll go next to Ana Reynal with Santander.
Ana Gabriela Reynal
Just one quick question. Where do you see your debt level in the next couple of years?
Adolfo Castro Rivas
Sorry, when -- what was your question?
Ana Gabriela Reynal
Where do you see your debt level in the next couple of years? This is relating to the master development plan, if you're going to finance some of that with new debt.
Adolfo Castro Rivas
Okay, well, it's hard to say. If you see -- I'm talking about round numbers, okay?
The total master development plan was at MXN 7 billion, of which we already paid MXN 700,000. So the remaining MXN 6.3 billion.
If you see this as basically 2x last year of -- 2x last year EBITDA. So it's not, in my opinion, a huge amount.
But of course, that will depend if we're going to take leverage or not, so that will depend on what kind of results do we have in these years. And also, what kind of investment opportunities we found.
But basically, you know that we want to grow with leverage. So the investment opportunities, in our opinion, should be fine on that high leverage.
Operator
[Operator Instructions] And we'll go next to [indiscernible] with BBVA.
Unknown Analyst
I just have a couple of questions. This one is on the MDP that you announced in early January.
And the WACC you used that was applied in the calculation of the new maximum tariffs. The other question is on the airports that the government is trying to do -- to build in Mexico City.
And just to know if you've heard about it and what is your interest in the project?
Adolfo Castro Rivas
Okay. In terms of the WACC, it's not public information.
In terms of Mexico City, there was an announcement at the end of the fourth quarter that the Minister of Communications and Transport had basically -- he said that they were working to solve Mexico City problems. He talked about an expansion of the Korean won.
And that's basically what I know. During the month of January and almost 3 weeks of February, I have not seen any other important statement on this report.
But what I believe is that they are working really hard in order to solve this problem.
Operator
[Operator Instructions] And with no other questions in queue, I'd like to turn the conference back over to Mr. Castro for any additional or closing remarks.
Adolfo Castro Rivas
Thank you, Lori [ph]. And thank you, everybody, for joining today on our conference call.
As always, do not hesitate to contact me if there's any further question. Thank you, all of you, and have a good day.
Goodbye.
Operator
That does conclude today's conference. Thank you all for your participation.