Business Context and Reporting Period
Company: Central North Airport Group (Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., or OMA)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter and Full Year ended December 31, 2018
Filing Date: February 12, 2019
Business Overview: OMA operates 13 international airports in nine states of central and northern Mexico, including major hubs in Monterrey and tourist destinations. The company also manages hotel services and industrial parks.
Key Financial Metrics
| Metric | 4Q 2018 | Full Year 2018 |
|---|---|---|
| Adjusted EBITDA Growth | 21.9% | 23.6% |
| Adjusted EBITDA Margin | 69.9% | 70.0% |
| Total Revenue Growth | 17.7% | 16.6% |
| Net Income Growth | 31.2% | 34.0% |
| Net Income (4Q18) | Ps. 819 million | N/A |
| Passenger Traffic Growth | 10.4% | 9.7% |
| Capital Investments (4Q18) | Ps. 342 million | Ps. 1,449 million (Full Year) |
| Net Debt to EBITDA Ratio | 0.34 (as of Dec 31, 2018) | N/A |
| Cash and Cash Equivalents | N/A | Ps. 2,959 million (as of Dec 31, 2018) |
| Operating Cash Flow (Full Year) | N/A | Ps. 3,684 million |
Material Changes vs. Prior Period
- Revenue Drivers: Aeronautical revenues rose 20.3% in 4Q18 due to higher traffic volumes and flight operations. Non-aeronautical revenues grew 10.4%, driven by a 20.1% increase in parking revenue and a 73.0% surge in VIP lounge revenue following the opening of three new lounges.
- Cost Structure: Cost of airport services and G&A expenses increased 4.0%, primarily due to payroll expenses (including severance payments) and a 40%+ increase in electricity tariffs. However, total operating costs and expenses decreased 9.3% year-over-year when including construction costs, which do not affect cash flow.
- Operational Volume: Total passenger traffic increased 10.4%, with domestic traffic up 11.1% and international traffic up 5.7%. Available seats offered increased 9.6%.
- Profitability: Operating income rose 27.5% with a margin of 52.4%. Net income increased 31.2% to Ps. 819 million, with earnings per ADS rising 31.9% to US$0.84.
Outlook, Risks, and Management Commentary
- Investment Strategy: Capital investments in 4Q18 focused on the new passenger terminal in Reynosa, expansions in Chihuahua and San Luis Potosí, and other operational infrastructure. All investments were funded by cash generated from operations.
- Liquidity and Dividends: Financing activities resulted in a net outflow of Ps. 1,918 million in 2018, primarily due to dividend payments of Ps. 1,606 million. Cash balances increased by Ps. 681 million during the year.
- Management Changes: Ricardo Dueñas was appointed Chief Executive Officer on November 12, 2018.
- Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Actual results may differ due to risks discussed in the most recent Form 20-F, including factors beyond the company's control. The filing notes no financial derivatives exposure as of the report date.
Key Facts for Investor Verification
- Verify the sustainability of the 70.0% Adjusted EBITDA margin given the 40%+ increase in electricity tariffs.
- Confirm the impact of the new CEO appointment on strategic execution and capital allocation.
- Monitor the progress of the Ps. 1,449 million in capital investments, specifically the new Reynosa terminal and terminal expansions.
- Assess the growth trajectory of non-aeronautical revenue streams, particularly the high-growth VIP lounge segment.
- Review the full Form 20-F for detailed risk factors regarding regulatory changes and concession agreements.