OMAB

Business Context and Reporting Period

Company: Central North Airport Group (Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.), trading as OMA (NASDAQ: OMAB).

Reporting Period: Fourth Quarter (4Q) and Full Year 2015. The filing (Form 6-K) was released on March 1, 2016.

Operations: OMA operates 13 airports in central and northern Mexico, including major hubs in Monterrey, Culiacán, and Chihuahua. The company also manages hotel operations (NH Terminal 2 in Mexico City, Hilton Garden Inn in Monterrey) and diversification projects.

Key Financial Metrics

Fourth Quarter 2015 Results

• Total Revenues: Ps. 1,229 million (up 24.0% YoY).
• Aeronautical Revenues: Ps. 807 million (up 24.5% YoY).
• Non-Aeronautical Revenues: Ps. 330 million (up 32.4% YoY), representing 29.0% of total aeronautical and non-aeronautical revenue.
• Adjusted EBITDA: Ps. 651 million (up 39.6% YoY); Margin of 57.2% (up 531 bps).
• Operating Income: Ps. 609 million (up 74.9% YoY); Margin of 49.5%.
• Net Income: Ps. 396 million (up 39.3% YoY).
• Earnings Per Share (EPS): Ps. 1.01 (US$ 0.46 per ADS).
• Investment Expenditures: Ps. 196 million (MDP and strategic investments).

Full Year 2015 Results

• Total Revenues: Ps. 4,145 million (up 21.1% YoY).
• Adjusted EBITDA: Increased 30.8%; Margin of 59.1%.
• Net Income: Ps. 1,237 million (up 20.4% YoY); EPS of Ps. 3.14 (US$ 1.45 per ADS).
• Operating Cash Flow: Ps. 2,064 million.
• Investing Cash Flow: Outflow of Ps. 429 million.
• Financing Cash Flow: Outflow of Ps. 1,778 million (primarily Ps. 1,200 million capital reimbursement to shareholders and Ps. 244 million share repurchases).
• Return on Capital: 20.8%.

Liquidity and Debt

• Total Debt (as of Dec 31, 2015): Ps. 4,713 million (95% in Mexican pesos, 5% in USD).
• Net Debt: Ps. 2,047 million.
• Net Debt to Adjusted EBITDA Ratio: 0.84.
• Cash and Cash Equivalents: Ps. 2,666 million.

Material Changes vs. Prior Period

• Passenger Traffic: 4Q15 traffic rose 11.3% to 4.4 million passengers. Domestic traffic grew 11.6%, while international traffic grew 9.5%. Full year 2015 traffic reached a record 16.9 million (+15.2%).
• Cost Management: Total operating costs and expenses decreased 3.6% in 4Q15, primarily due to a credit in the maintenance provision following the definition of the 2016-2020 Master Development Plan (MDP).
• Revenue Mix: Non-aeronautical revenue growth (32.4%) outpaced aeronautical growth (24.5%), driven by commercial initiatives and hotel operations.
• Hotel Performance: NH Terminal 2 hotel revenues rose 17.4% (driven by a 16.5% increase in average room rate). Hilton Garden Inn (Monterrey) generated Ps. 14 million in its first full quarter.
• Advertising: Advertising revenues declined 23.8% due to the termination of a previous contract, though a new agreement with SSL Digital was signed effective Jan 1, 2016.

Guidance, Outlook, and Risks

2016 Outlook

• Passenger Traffic Growth: Estimated between 6% and 8%.
• Revenue Growth: Aeronautical revenues expected to grow 22-24%; Non-aeronautical revenues expected to grow 13-15%.
• Adjusted EBITDA Margin: Expected to range between 60% and 62%.
• Investment Expenditures: Expected to be Ps. 1,500 to 1,700 million for MDP projects and Ps. 150 to 250 million for strategic investments.

Material Events and Risks

• Master Development Plan (MDP): The 2016-2020 MDP for all 13 airports was approved on Dec 30, 2015, with a total committed investment of Ps. 4,446 million. New maximum rates were also approved.
• Shareholder Changes: Aeroinvest (subsidiary of ICA) reduced its direct shareholding to 3.8% but maintains an indirect holding via SETA, resulting in a total 16.3% stake.
• Operational Risks: Outlook is subject to airline expansion plans, ticket prices, oil prices, and general economic conditions.
• Accounting Changes: Early adoption of Equity Method under IAS 27 in Dec 2015 affects legal-entity financial statements but not consolidated results.

Investor Verification Checklist

• Verify the sustainability of the 57.2% Adjusted EBITDA margin given the significant increase in planned capital expenditures (Ps. 1.5B - 1.7B) for 2016.
• Confirm the impact of the new advertising contract with SSL Digital on reversing the 23.8% revenue decline seen in 4Q15.
• Monitor the execution of the 2016-2020 Master Development Plan and the associated cash outflows against the projected investment ranges.
• Assess the sensitivity of international revenue growth to exchange rate fluctuations (Peso vs. USD), which contributed to a 63.6% increase in international passenger charge revenue in 4Q15.
• Review the details of the Ps. 1,200 million capital reimbursement to shareholders in 2015 to understand future dividend or buyback policies.