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Earnings call: ASUR reports growth despite challenges in Q1 2024

EditorAhmed Abdulazez Abdulkadir
Published 04/24/2024, 10:16 PM
© Reuters.

Grupo Aeroportuario del Sureste (NYSE:ASR) (ASUR), one of the leading airport operators in Mexico, Puerto Rico, and Colombia, reported a robust first quarter for 2024, with a record high of 18.6 million passengers, marking a 4% year-over-year increase. The company announced total revenues surged by 14% to over MXN 7 billion, with Mexico contributing 76% to the total. Despite challenges such as Pratt & Whitney engine issues and capacity reductions at Mexico City Airport, ASUR is optimistic about traffic growth and is focused on enhancing passenger experience. The company's CEO, Adolfo Castro, discussed future expansions, including Terminal 4 and the reconstruction of Terminal 1, which are expected to proceed without disrupting airport operations.

Key Takeaways

  • ASUR's passenger traffic hit a record 18.6 million in Q1 2024, a 4% increase YoY.
  • Mexico's traffic grew by 4%, while Puerto Rico saw a 12% increase; however, Colombia experienced a slight decline.
  • Total revenues rose by 14% to just over MXN 7 billion, with Mexico accounting for the majority.
  • Commercial revenues increased by 5% due to the opening of new commercial spaces.
  • EBITDA grew by 13% YoY to MXN 5.1 billion.
  • Cash and cash equivalents increased by 21% YoY to nearly MXN 17 billion.
  • ASUR plans to distribute ordinary and extraordinary cash dividends of MXN 10 each.
  • Ongoing challenges include Pratt & Whitney engine issues and capacity reduction at Mexico City Airport.
  • Expansion projects are underway, including Terminal 4 and the reconstruction of Terminal 1.
  • The MDP tariff increase will start on April 1st, with expectations of a small decrease in domestic traffic offset by international traffic.

Company Outlook

  • ASUR expects traffic to continue growing, with a commitment to enhance the passenger experience.
  • Projects for bidding processes are being prepared for airport expansions.
  • International traffic, particularly from the US and Canada, is expected to support the company amid domestic travel restrictions.

Bearish Highlights

  • Colombia saw a slight decline in passenger traffic.
  • Domestic traffic in Mexico is expected to decrease slightly due to travel restrictions.
  • Commercial revenues in Mexico are affected by exchange rates and lack of expansion.

Bullish Highlights

  • New commercial spaces opened, contributing to a 5% increase in commercial revenues.
  • International traffic growth and favorable exchange rates contributed to operating revenue growth.
  • Traffic normalization in Puerto Rico and Colombia is expected throughout the year.


  • No new investments outside of Mexico or in the Caribbean at the moment.
  • Challenges with government restrictions impacting the delivery of energy from solar sources.

Q&A Highlights

  • No change in tariffs during the first quarter, but a discount was offered in November and December.
  • Cancun Airport's capacity expansion plans are expected to accommodate millions more passengers annually.
  • Water security projects are a focus for airports in Huatulco and Oaxaca due to water restrictions.
  • The company aims to meet science-based targets but faces issues with government restrictions impacting solar energy initiatives.

In conclusion, ASUR (ticker: ASUR) has demonstrated resilience and growth in the first quarter of 2024, with a strategic focus on expanding infrastructure and improving the passenger experience despite some ongoing challenges. The company's financial health appears robust, with significant increases in both passenger traffic and revenues, and a strong cash position that enables the distribution of dividends. ASUR continues to invest in its future while navigating the complexities of the current economic environment.

InvestingPro Insights

Grupo Aeroportuario del Sureste (ASUR) has shown impressive financial metrics in the last twelve months as of Q1 2024, which may interest investors looking at the company's current performance and future potential.

InvestingPro Data:

  • ASUR's market capitalization stands at a solid 10.21 billion USD, reflecting its significant presence in the transportation infrastructure industry.
  • The company boasts a Gross Profit Margin of 60.27%, underscoring its ability to maintain profitability despite operational challenges.
  • A noteworthy One Week Price Total Return of 11.4% indicates that the stock has experienced significant appreciation in the short term, which might suggest investor confidence in the company's recent developments and future outlook.

InvestingPro Tips:

  • ASUR has raised its dividend for 3 consecutive years, signaling a commitment to providing shareholder value and a stable financial position that allows for such distributions.
  • The company's cash flows can sufficiently cover interest payments, indicating a healthy financial structure that is less vulnerable to interest rate fluctuations.

Investors interested in a deeper dive into ASUR's performance and additional insights can find more InvestingPro Tips, with a total of 16 available for ASUR at https://www.investing.com/pro/ASUR. To gain access to these valuable insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript - Grupo Aeroportuario Sur-adr (ASR) Q1 2024:

Operator: Good day, ladies and gentlemen, and welcome to ASUR’s First Quarter 2024 Results Conference Call. My name is Sherry, and I will be your operator. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, today's call is being recorded. Now, I would like to turn the call over to Mr. Adolfo Castro, Chief Executive Officer. Please go ahead, sir.

Adolfo Castro: Thank you Sherry. 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 risk and uncertainties that could cause actual results to differ material, including factors that may be beyond our company's control. As usual, additional details about our quarterly 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&A. Moving on to the review of ASUR's operational and financial performance for the quarter. As usual, all comparison discussed will be year-on-year unless specified otherwise. We saw record high passenger traffic in the quarter at 18.6 million travelers up 4% year-on-year. [Indiscernible] performance was mainly driven by increases of 4% in Mexico, 12% in Puerto Rico, which more than upset the low single-digit decline in Colombia. By region, Puerto Rico, again, stood at the region with the strongest traffic growth, with traffic up nearly 12% driven by a double-digit increases in both domestic and international traffic. Traffic in Mexico was up nearly 4% as high single-digit growth in international and passenger driven mainly by traffic to and from the United States and Canada more than offset the low single-digit decline in domestic travel. In addition to the impact from the initial effects of the Pratt & Whitney engine problems we have experienced in the last quarters domestic traffic was also affected by reduction in air traffic movements at Mexico City Airport, starting January 8th this year. Recall this airport accounted for 45% of tourist domestic traffic in 2023 and we expect this to continue negatively impacting domestic traffic this year. Lastly, in Colombia, traffic had started to recover with year-over-year decline small [Indiscernible]. Down only 2% in the quarter driven by [Indiscernible] account, domestic traffic following the suspension of two local airlines in February of last year that accounted 20% of our traffic in Colombia in 2022 and 19% increasing international travel. We expect the recovery in traffic in Colombia to continue through the remaining of the year as Avianca and Latam continue to recover some of the lost routes, with March already posting a 9% growth in total traffic in Colombia. Now turning to the P&L, as a reminder, all reference to revenues and costs exclude construction and cost of revenues. Total revenues increased 14% to just over MXN 7 billion in the first quarter. Mexico and Colombia stood out with growth in the mid-teens, while Puerto Rico delivered low single-digit revenue growth impacted by stronger peso despite the double-digit traffic growth. Mexico, which accounted for 76% of total revenues, posted a 16% increase in its top line. This was mainly explained by growth in aeronautical services in the mid-20s, while non-aeronautical revenues increased below single digit. Revenues in Puerto Rico, which accounted for 14% of the total, increased nearly 2% at 10% growth in non-aeronautical revenues, was partially offset by a 5% reduction in aeronautical revenues, reflecting the strong peso. Lastly, Colombia, which represented 10% of the revenues, posted a mid-teen increase in the top line, reflecting a good performance in both aeronautical and non-aeronautical revenues, which benefited from the international traffic growth and the strong Colombian peso. Executing our strategy of expanding our commercial offering over the past 12 months, we opened 17 new commercial spaces in Mexico, 6 in Puerto Rico, 22 in Colombia. Commercial revenues were up nearly 5%, slightly above passenger traffic growth, mainly driven by increases of 10% in Mexico, while Puerto Rico and Colombia posted increases of 10% and 14% respectively. On a per passenger basis, commercial revenues increased 2% year-on-year to nearly MXN 125. This performance was mainly driven by growth in the high teens in Colombia, again reflecting a strong FX, which more than offset low single digits in Mexico and Puerto Rico. On the cost front, consolidated expenses increased nearly by 14%, generally in line with revenue growth in the quarter. This was mainly driven by Mexico, which reported a higher concession fee due to increases by 80% established by the Mexican government and 20% increase in minimum wages, both effective January 1st, partially offset by the 50% reduction in annual assistance fees. Consolidated EVA increased 13% year-on-year to MXN 5.1 billion in the quarter, while the adjusted dividend margin, which excludes construction, was MXN 71.4 compared with MXN 71.9 in the year ago quarter. All regions contributed to EBITDA growth. Mexico remains the main driver of profitability, with EBITDA increasing 15%, followed by Colombia with an increase of nearly 11% and Puerto Rico just over 1%. Moving on to the balance sheet, we closed the quarter with a strong cash and cash equivalents position of nearly MSN 17 billion, up 21% from the same quarter last year. Total debt declined 4% from the year end 2023, reflecting the position of the Mexican and Colombian pesos and the payment of principal amounts of outstanding debt in Mexico. In turn, the leverage ratio was negative 0.3 times. Tomorrow, April 24th, the annual shareholders meeting is being held, for which we have proposed the distribution of an ordinary cash dividend of MXN 10 or MXN 90.6 a share payable in May and an extraordinary cash dividend of MXN 10 payable this June. Lastly, last week we published our 2023 sustainability report, the third year report and the secular UNICEF [ph] and encourage you to read them, all of which can be found on our website. Wrapping up, first quarter 2024 delivered solid results, even as we faced the ongoing issues with the Pratt & Whitney engines and the capacity reduction at Mexico City Airport. Our good performance reflects increased traffic through our airports, along with improved passenger experience we are delivering. These trends bode well for the remaining of the year. We are committed to report our growth potential and enhancing the passenger experience through the investment in capacity in our commercial offerings. Importantly, our financial position is healthy and our capital allocation priorities are balanced between investing for growth and returning cash to shareholders. This ends my prepared remarks. Sherry, please open the floor for questions.

Operator: Thank you. [Operator Instructions] Our first question is from Alejandro Fuchs with ITAU. Please proceed.

Alejandro Fuchs: Yes. Hello, Adolfo. Thank you for the call and for taking the questions and congratulations on the results. Two quick questions from my end. Firstly, on Mexico, I was a little bit surprised to see administrative costs and cost of service increasing 2% and 10%. Can you walk us through some of the initiatives that explain and the companies taking this cost control that you guys are having? That's the first one. And then the second one is very quickly on Punta Cana. There was no mention in the release about the current situation with the government of the Dominican Republic. I wanted to know if you can give us a brief update of where we are or any color that is appreciated. Thank you.

Adolfo Castro: Thank you, Alejandro. Well, in terms of the cost control, the most important thing was the reduction of the 50% strategic TANF fee. That is basically offsetting the increase in the concession fee we saw for the quarter. In terms of other costs, of course, as you are mentioning administrative costs, just 2%, this has to do mainly with some efforts we have done in terms of the insurance costs and the other negative effect was the 20% increase in minimum wage that affects basically security and cleaning. That's what I can say for the moment. In the case of the Dominican Republic, we do not see any updates. So the last update was the decree issued by the President on January 5th, cancelling the previous decree issued by the previous President that approved the construction of the airport. We have presented our legal procedures and those are ongoing. And once we know something from them, we will let you know.

Alejandro Fuchs: Thank you.

Adolfo Castro: You're welcome.

Operator: Our next question is from Rodolfo Ramos with Bradesco BBI. Please proceed.

Rodolfo Ramos: Thank you. Good morning, Adolfo. Two questions on my side. Elaborating a bit on your comment about the headwinds that you're seeing in Mexico City with the slot reductions there, I mean, how viable do you think it is for Felipe Ángeles and even Toluca which we have seen picking up to absorb and develop some of the traffic? I personally haven't had a good experience flying in and out of Felipe Ángeles but would like to get your thoughts on how these metropolitan airports might help you out there. And I have a second question on that.

Adolfo Castro: Okay. In the case of Mexico City Airport, as I have said in the initial remarks, there was a restriction in capacity. So there was a reduction from 52 to 43 air traffic movements per hour. That's a 70% decrease in terms of capacity. Basically, this reduction has been applied to domestic carriers, not to international. And I can say for the quarter, Mexico City Airport has lost more or less compared with last year almost a million passengers. In terms of Santa Lucia, I would say that not all the passengers that are not able to fly from Mexico City due to the lack of operations are willing to go to Santa Lucia. And in that sense, the system is losing a lot of passengers. In terms of Toluca, Toluca is basically the same as it was last year. So Toluca partly has been kept in terms of no more frequencies or no more operations coming from the government.

Rodolfo Ramos: Thank you. And my second question was on your CapEx program. I mean, as you embark on this historic CapEx program, do you expect any disruptions to your commercial revenues per passenger as you roll out some of these projects? What could be the impact in between, if any?

Adolfo Castro: I don't see any disruption in terms of the commercial revenues because of the construction or because of expansions. In terms of the CapEx, basically today we are preparing the projects in order to make the bidding process to find the contractor. So that is why you are seeing a very small amount during the first quarter. But I don't see any disruption. The two or the three main expansions we will have are those related to Terminal 4, the expansion and reconstruction of Terminal 1 and expansion of the terminal in Oaxaca. And all of them are outside the operating area. So we will be able to construct without affecting the operation of the airport.

Rodolfo Ramos: Great. Thank you.

Operator: Our next question is from Guilherme Mendes with JPMorgan. Please proceed.

Guilherme Mendes: Hi Adolfo. Good morning. Thanks for taking my question. First question is regarding the MDP tariffs. I recall on the last conference call you mentioned about starting the MDP tariff increase in April. I was just wondering if you were able to do so and how you are tracking on this price increase. And the second question, if you could please comment about the traffic outlook and especially think about the breakdown between international passengers and domestic. Thank you.

Adolfo Castro: Okay. In the case of the MDP, as you know, there was an adjustment approved by the government at the end of last year. It was December 13 when we disclosed that. We immediately started our internal procedures to adjust our increasing rates, so the rates of the products. And those are going to be adjusted as from the 1st of April this year. So the first quarter does not affect any increasing tariffs and increasing tariffs so far. In terms of the traffic outlook, well, you know the threat and weakness situation and the restriction of Mexico City will impact in a significant way the domestic traffic. Probably you can conceive a small decrease by the year in the domestic traffic. We are hoping to be supported by the international traffic as it has been for the first quarter basically with the U.S. and Canada. Of course a challenge moment is going to be the summer because Canada does not travel in summer. So the only engine or the only support should have to come from the U.S.

Guilherme Mendes: Okay. That's clear. Thank you. Have a good day.

Operator: Our next question is from Alberto Valerio with UBS. Please proceed.

Alberto Valerio: Hi. Thank you for taking my question, Adolfo. My question is more on the bottom line. Against our projections and also year-over-year, we will see higher financial results. I would like to know if you have any non-recurring events on the line, that's it. Thank you.

Adolfo Castro: Sorry, but your sound is really bad. I cannot understand your question, Alberto.

Alberto Valerio: I'll try again. Just if you have any non-recurring events on financial results.

Adolfo Castro: I cannot hear you.

Operator: I believe it was any more current events on financial results.

Adolfo Castro: Sorry?

Operator: Any more current events on the financial results.

Adolfo Castro: Well, the exchange rate is going to be extremely important for us. You have seen some adjustment during the last two weeks and that has to do with international traffic in our case as you have seen for the first quarter. If you see the growth in our optimal revenue for the first quarter, that probably was a surprise to you, but that has to come with a difference between the 6.8 million and 6.2 million passengers in terms of international passengers in the first quarter. So, the exchange rate is crucial.

Operator: Our next question is from Anton Mortenkotter with GBM. Please proceed.

Anton Mortenkotter: Hi, Adolfo. Thank you. Thank you for the call and congrats on the results. I have two quick questions. One is related to trade receivables. I was just wondering what the dynamics are seeing this quarter and why did that increase so much. And the second one is regarding capital allocation. Understanding that even when accounting for the high CapEx and commitments for this year and also for the already announced dividends, the net cash position seems to be set to continue increasing during the year. Could we expect an additional announcement on a dividend or is there anything that's been thought about on that front?

Adolfo Castro: In the case of trade receivables for the quarter, you can see a very nice adjustment or decrease in the case of Puerto Rico. That has to do with the recuperation of the result of the trial we had there, the 2% of the fuel flowage. In terms of Mexico, that has to do with the normal operation and the same in the case of Colombia. In terms of capital allocation, we ended the quarter with MXN 17 billion. The dividends that are proposed for tomorrow's shareholders meeting will be, roughly speaking, 6.6, 6.7. So then we have to see the CapEx. But as I said in the initial remarks, we're trying to be, on one side, very supportive on the growth. As you know, we have a MXN 29 billion CapEx for the next five years. But on the other side, we are paying these extraordinary dividends this year, which is almost the same as it was last year.

Anton Mortenkotter: Thank you.

Operator: Our next question is from Juan Mercado [ph] with GBM. Please proceed.

Unidentified Analyst: Hi, Adolfo. Thanks for the call and congrats on the results. My first question would be a follow-up on a previous question regarding tariffs. You mentioned that the first quarter, there wasn't an adjustment for the new max tariff. Do you mean by this that there was only a partial adjustment or was there none at all?

Adolfo Castro: There were no adjustments on the first quarter.

Unidentified Analyst: All right, that's very clear. Thank you. And just an additional question. You mentioned that on the 1st of April, you would do this adjustment. Is this for the 100% of the maximum tariff or at what level should we expect this adjustment?

Adolfo Castro: Well, of course, it's not the 100%. It would have to be less than that. The most, again, critical point would be the situation of the exchange rate. As I mentioned, 150% of the traffic is international and those pay in U.S. dollars.

Unidentified Analyst: Yes. All right, that's very clear. Thank you, Adolfo.

Adolfo Castro: You're welcome.

Operator: Our next question is from Fernanda Recchia with BTG. Please proceed.

Fernanda Recchia: Hi, thank you. Adolfo, and congrats on the results. Two follow-up questions on our side. The first, regarding traffic outlook, you provided an outlook for Mexico, but could you comment a little bit more on Puerto Rico and Colombia? As you spoke on your initial remarks, Colombia started to see a normalization. How should we expect the traffic for the year-end? And Puerto Rico, do you expect a slowdown on the double-digit growth pace that they are posting? And my second question is on commercial revenues. As you mentioned on our initial remarks, it's reached close to 125 on a consolidated basis. How should we expect this indicator to move along the year? Do you expect, as you deploy more capital in Mexico, to increase the Mexico ratio? Thank you.

Adolfo Castro: Well, in the case of the traffic for Puerto Rico and Colombia, both will be, in my opinion, normalized during the year. One that has to do with the bankruptcy of the tour lanes in February last year. In that sense, we saw the first quarter negative of 2%, but we see on a monthly basis, we saw an increase of 9% for the month of March. So I hope, what I'm expecting is, this to continue throughout the end of the year and then that we are able to recuperate what we have lost from these two islands. In the case of Puerto Rico, the normalization goes exactly the opposite because last year we had a very nice increase when the frontier got into the island and that's why we show a very high traffic last year about 20s which is not normal. In the first quarter you saw the 12% increase which is reducing from these 20s that we saw last year. The 2023 increase in Puerto Rico was 18%. So the normalization would be towards the second and third quarter to see a more normal growth in the case of Puerto Rico. In terms of commercial revenues, I have to say that today we're still struggling in the case of Mexico because two things. One has to do with exchange rates of course and the other one has to do with the lack of expansion. So commercial revenues from an operational perspective will continue to suffer this situation in the case of Cancun, Benziti [ph] Terminal 2 until we are able to expand the area that should occur at the end of 2025.

Fernanda Recchia: Thank you very much.

Adolfo Castro: You're welcome.

Operator: Our next question is from Jay Singh with Citi. Please proceed.

Jay Singh: Hey, thanks for taking my question. Jay Dalligan from Stephen Trent's team. The first question I want to ask was it only in January you reduced the technical assistance fees or do you sort of do it in the subsequent quarter?

Adolfo Castro: You said January 1.

Jay Singh: Where you reduced the technical assistance fee?

Adolfo Castro: The technical assistance reduction is as from the first year and it will be 2.5 [Indiscernible], five years.

Jay Singh: Thanks. And my next question is that I know you already spoke a bit about Mexico City Airport area, but do you have any further comments on competition from Tulum?

Adolfo Castro: Well, in the case of Tulum what we know roughly speaking is the numbers that have been published by the government are around 40,000, 41,000, 42,000 for the months of December, January, February. There's more than 3 million in the case of Cancun.

Jay Singh: Thanks a lot.

Operator: Our next question is from Joao Frizo with Goldman Sachs. Please proceed.

Joao Frizo: Hello, good morning. Thanks for taking my questions. I have two quick follow-ups. The first one is on the third side, right? So if you could please help us reconcile what drove the increase quarter-on-quarter on passenger revenues in the first quarter, right? We saw a sharp increase. As you mentioned, you did not adjust for the MDP until April, so this is not the driver. So maybe what these functions are for reducing the discounts you guys offered in the fourth quarter last year or maybe something else if you could just help us reconcile that would be great. And my second follow-up is on Cancun Airport. Could you please just remind us what the expected capacity would be once expansion is completed? Thank you very much.

Adolfo Castro: Well, in the case of the tariff, you mentioned one of the effects we compared tariff from the fourth quarter when the first quarter is here. Well, first of all, we didn't adjust the tariff during the first quarter, so we are counting exactly the same as we were during the fourth quarter last year. Let me put that very clear. Of course, as you have mentioned, during the months of November and December, we had to give a 10% discount on the passenger fee both international and domestic. But the other effect, and that's what I mentioned in the initial remarks, is the proportion of domestic and international. For this quarter, you can see the difference between 6.8 million in international versus 6.2 in last year. International traffic pays more due to the additional space you have to provide for customs and migration, and that is why you probably are seeing an increase. But the intent of the tariff of the specific products, there was no increase for the quantity. In terms of the capacity of Cancun, what we are going to increase is, as I have mentioned, we are going to reconstruct and expand Terminal 1. Terminal 1 should be more than 3 to 4 million passengers on a yearly basis. Of course, the capacity has to do with the level of service. In the case of Terminal 4, we are in the process of expanding 4 additional boarding gates. That would be more than 3 million in addition. And finally, towards the end of the 5-year period, we will add another 8 to 10 aircraft stands, also in Terminal 4. And that should be more than 5 million to 6 million additional passengers on a yearly basis capacity.

Joao Frizo: Super, thank you very much.

Adolfo Castro: You're welcome.

Operator: Our next question is from Pablo Ricalde [ph] with Santander (BME:SAN). Please proceed.

Unidentified Analyst: Hi, Adolfo. A follow-up on Mexico non-air revenues. That international contribution within the past few years, how should we think in that regard in terms of UASB? Do you increase that year-over-year in UASB terms?

Adolfo Castro: In terms of international traffic, well, first of all, maximum rates are stated in Mexican pesos. So, the effect of the international versus domestic, at the end, if we reach close to the 100, there is no difference. But the point is, during the quarter compared with the quarter last year, international paid more pesos in comparison with the domestic. And that's why we were able to see a better regulated traffic capacity.

Unidentified Analyst: Okay. So, but is that to be only in UASB terms because we saw a short Mexico to MXN year-over-year? And besides that, revenues grew almost 20% in that context.

Adolfo Castro: Well, in that sense, again, if we see a domestic traffic decrease during the year that could be offset by international traffic. That will help, of course, from this perspective. And that's why I was saying also the effect, the exchange rate Mexico versus dollar will be extremely important for the year.

Unidentified Analyst: Okay.

Operator: Our next question is from Gabriel Himelfarb with Scotiabank. Please proceed.

Gabriel Himelfarb: Hi, Adolfo. Congrats on the results. Just a quick follow-up question in terms of new investments. Are you seeing any new investments perhaps outside Mexico, maybe in the U.S. or in the Caribbean? Thank you.

Adolfo Castro: For the moment, we do not have any project in front.

Gabriel Himelfarb: Okay. Thank you. Congrats on the results.

Operator: Our next question is from Arthur Suelotto with APO Capital. Please proceed.

Arthur Suelotto: Hi. Thank you. Thank you, Adolfo, and congratulations for the results. Just a quick question on my side. You announced at the end of last year the new MDP that will be valid from 2024 onwards. Just to know if you have any particular adjustments to the value of your concession on the balance sheet regarding this particular change in the way that the MDP is calculated. If so, is this recognized in the balance sheet of the fourth quarter of 2023 or in the first quarter of 2024? Thank you.

Adolfo Castro: The adjustments on the balance sheet are once we construct the MDP. We do not have any adjustments because of the approval we received last year.

Arthur Suelotto: Thank you. Very clear.

Adolfo Castro: You're welcome.

Operator: [Operator Instructions] Our next question is from Francisco Suárez with Scotiabank. Please proceed.

Francisco Suárez: Hey, Adolfo. Good morning. Thanks for the call and congrats on your results. The question I have is on your projects related with water security. Just to confirm, the two airports that you're speaking about that are part of the MDP are Huatulco and Oaxaca, I guess. Is that correct?

Adolfo Castro: In terms of use of water?

Francisco Suárez: Yes. The water security, the permits to all water-related projects that are part of the MDP?

Adolfo Castro: Yes. We have some other projects in some airports related to water. But of course, the most critical are the ones that you have mentioned, Oaxaca and Huatulco, because of, I would say, I don't want to say the lack of the water, but there are some restrictions in both. And that's why we are working in those as we speak.

Francisco Suárez: Got it. And with that regard, noticing that you have committed on your science-based targets, two questions on that front. How far your ambition may go? Are you aiming to 1.5 degrees or is it well below 2 degrees? And secondly, do you think that the current framework, the regulation framework on the MDP might be supportive to put investments that are consistent with these targets?

Adolfo Castro: Well, of course, we are putting those and those should be consistent on this water. But let me go back again to the most important initiative we have, which was signed on December 2015. At the moment, represented 100% of the energy we were consuming and that contract was to receive energy from solar sources. The company that was in charge of this project has not been able yet to deliver the energy. The solar farm is ready or has been ready for the last two years and they have not been able to be connected due to the government restrictions. So on that front, we're talking about, roughly speaking, 80 million kilowatt hours yearly that today could represent 80% of the energy we have or we are consuming. So that is the most critical thing we have because if they are not able to be connected, we will have to find out how to solve this situation. In the case of the current MDP, as you have mentioned, there are some focus on energy, but the most important focus now is it's also water.

Francisco Suárez: Got it. Thanks. Congrats again.

Adolfo Castro: You're welcome.

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

Adolfo Castro: Thank you, Sherry, and thank you all of you again for joining us today in this first quarter 2024 conference call. On behalf of us all, we wish you a good day and goodbye. Now you may disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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