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; BMV: OMA).
Reporting Period: Second Quarter 2011 (ended June 30, 2011).
Business Overview: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey and tourist destinations like Acapulco and Mazatlán. The company also operates the NH T2 Hotel in Mexico City International Airport. Financial statements are prepared under International Financial Reporting Standards (IFRS), with 2010 comparative figures reformulated for IFRS adoption.
Key Financial Metrics (2Q11)
| Metric | 2Q11 Value | 2Q10 Value | Change |
|---|---|---|---|
| Total Revenue | Ps. 698 million | Ps. 638 million (implied) | +9.4% |
| Aeronautical Revenue | Ps. 453 million | N/A | +9.3% |
| Non-Aeronautical Revenue | Ps. 245 million (implied) | N/A | +20.0% |
| Adjusted EBITDA | Ps. 297 million | Ps. 270 million | +9.8% |
| Adjusted EBITDA Margin | 50.1% | N/A | N/A |
| Consolidated Net Income | Ps. 130 million | Ps. 190 million | -31.8% |
| Earnings Per ADS | US$0.22 | N/A | N/A |
| Capital Expenditures | Ps. 195 million | N/A | N/A |
| Total Debt (Short & Long Term) | Ps. 1,197 million | N/A | N/A |
| Cash and Equivalents | Ps. 263 million | N/A | N/A |
Note: All figures in Mexican Pesos (Ps.) unless otherwise noted. Exchange rate used: Ps. 11.7748 per US$1.
Material Changes vs. Prior Period
- Traffic Stabilization: Total passenger traffic increased 1.1% to 2.9 million. Domestic traffic rose 2.1%, while international traffic declined 4.4% due to route suspensions and peso appreciation.
- Revenue Mix Shift: Non-aeronautical revenues grew significantly faster (20.0%) than aeronautical revenues (9.3%), driven by the NH T2 Hotel (revenue +51.6%, occupancy 82.6%), advertising (+70.2%), and new commercial spaces in Monterrey Terminal B.
- Cost Pressures: Costs and general/administrative expenses surged 24.5% to Ps. 297 million. This was primarily due to a 160% increase in the maintenance provision (accounting for 44% of the cost increase) and higher operating costs for Terminal B.
- Net Income Decline: Despite revenue growth, net income fell 31.8% due to higher tax provisions (cash and deferred) and the increased maintenance provision.
Guidance, Outlook, and Risks
Full Year 2011 Outlook
- Traffic Growth: Estimated at 0.5% to 3%.
- Revenue Growth: Expected to grow 8% to 12% over 2010 revenues (Ps. 2,574 million).
- Adjusted EBITDA: Projected range of Ps. 950 million to Ps. 1,180 million (vs. Ps. 868 million in 2010).
- Adjusted EBITDA Margin: Expected between 46.5% and 49.0% (vs. 40.5% in 2010).
- Capital Expenditures: Total expected between Ps. 800 million and Ps. 950 million.
Subsequent Developments (July 2011)
- Debt Refinancing: On July 15, 2011, OMA issued Ps. 1,300 million in 5-year peso-denominated notes (rated mxAA+/AA+). Proceeds were used to prepay Ps. 1,006 million of existing debt with higher interest rates (TIIE + 4.0%), replacing them with lower-cost debt (TIIE + 0.70%).
- Dividends: Paid the first quarterly installment of the 2010 dividend (Ps. 0.25 per share) on July 15, 2011.
Risks and Contingencies
- Forward-looking statements are subject to risks including changes in airline expansion plans, ticket prices, economic conditions, and the evolution of commercial projects.
- International traffic remains sensitive to route suspensions (e.g., Grupo Mexicana) and currency fluctuations.
Investor Verification Checklist
- Verify the impact of the new Ps. 1,300 million note issuance on future interest expense and liquidity.
- Monitor the sustainability of the 20% growth in non-aeronautical revenues, specifically the NH T2 Hotel occupancy rates.
- Assess the trajectory of the maintenance provision, which significantly impacted Q2 net income.
- Track international passenger traffic recovery, particularly on routes to the US (Houston, Dallas, Chicago).
- Confirm the execution of the Master Development Plan (MDP) investments within the projected Ps. 800-950 million capex range.