Business Context and Reporting Period
Company: Central North Airport Group (Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2013 (unaudited)
Filing Date: June 7, 2013
Business Overview: The company operates airports in Mexico, generating revenue from aeronautical services (landing fees, passenger charges), non-aeronautical services (retail, advertising, hotels), and construction services related to airport development.
Key Financial Metrics
| Metric | Q1 2013 (Ps. '000) | Q1 2012 (Ps. '000) | Change |
|---|---|---|---|
| Total Revenues | 787,652 | 704,501 | +11.8% |
| Operating Income | 302,279 | 264,470 | +14.3% |
| Net Income | 226,017 | 183,890 | +22.9% |
| Operating Margin | 38.4% | 37.5% | +0.9 pp |
| Cash & Equivalents (End of Period) | 2,892,630 | 1,152,433 (Dec 31, 2012) | +151.0% |
| Net Cash from Operating Activities | 279,218 | 22,608 (USD equiv) | Positive Flow |
| Total Debt (Bank + Long-term) | 3,619,326 | N/A | N/A |
| Earnings Per Share (Basic/Diluted) | Ps. 0.57 | Ps. 0.46 | +23.9% |
Note: All figures in thousands of Mexican Pesos (Ps.) unless otherwise noted. Q1 2012 USD figures in source table were approx. $22.6M for operating cash flow.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 11.8% driven by a 7.5% rise in aeronautical revenue and a 20.9% surge in non-aeronautical revenue. Construction revenue also grew 21.9%.
- Traffic Increases: Total terminal passengers rose 4.6% to 3.03 million. Domestic traffic grew 5.1% and international traffic grew 2.6%. Significant growth was seen at Monterrey (+8.9%) and Reynosa (+42.9%) airports.
- Cost Dynamics: Total operating costs increased 10.3%, lagging revenue growth. Maintenance costs rose 49.2% and safety/security costs rose 22.7%, largely due to the implementation of checked-baggage screening operations in December 2012.
- Profitability: Operating margin expanded to 38.4% from 37.5%. Net income grew 22.9% despite a 21.3% increase in net interest expense, aided by a 26.8% reduction in income tax expense.
- Liquidity Event: Cash and cash equivalents increased 151% from year-end 2012 levels, primarily due to the issuance of Ps. 1.5 billion in 10-year peso-denominated notes in March 2013.
Guidance, Outlook, and Recent Developments
- Capital Stock Reimbursement: On May 23, 2013, the company paid the first installment of a Ps. 1.2 billion capital stock reimbursement (Ps. 1.00 per share). The remaining Ps. 800 million is scheduled to be paid in four quarterly installments through April 2014.
- Debt Management: Proceeds from the Ps. 1.5 billion bond issuance and Ps. 100 million in commercial paper were used to repay short-term debt and finance capital expenditures.
- Outlook: Management notes that Q1 2013 results are not necessarily indicative of full-year 2013 results. Continued investment in master development programs is expected.
- Risks/Contingencies: The filing references potential regulation of parking service rates by Mexican authorities, which are currently excluded from aeronautical rate caps. Exchange rate fluctuations impacted net exchange gains, which decreased 63% due to peso appreciation.
Investor Verification Checklist
- Debt Structure: Verify the terms and interest rates of the Ps. 1.5 billion 10-year notes issued in March 2013 and the total debt load of Ps. 3.62 billion.
- Capital Return Schedule: Confirm the dates and amounts for the remaining four installments of the capital stock reimbursement.
- Regulatory Environment: Monitor potential changes in Mexican airport regulations regarding parking fees and concession taxes (currently 5% of gross revenue).
- Operational Costs: Assess the long-term impact of the new checked-baggage screening operations on maintenance and security cost structures.
- Currency Exposure: Evaluate the impact of peso appreciation on future exchange gains/losses and USD-denominated earnings.