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: First Quarter 2010 (ended March 31, 2010).
Filing Date: April 23, 2010.
Overview: OMA operates 13 international airports in central and northern Mexico and manages the NH Terminal 2 Hotel at Mexico City International Airport. The company reported unaudited, preliminary results for the quarter.
Key Financial Metrics
| Metric | 1Q 2010 Value | YoY Change |
|---|---|---|
| Total Revenues | Ps. 509.5 million | +4.9% |
| Operating Income | Ps. 164.5 million | -7.8% |
| Adjusted EBITDA | Ps. 273.6 million | -1.1% |
| Net Income | Ps. 103.4 million | -30.4% |
| Earnings Per Share (EPS) | Ps. 0.26 (US$0.17/ADS) | N/A |
| Operating Margin | 32.3% | -4.4 percentage points |
| Adjusted EBITDA Margin | 53.7% | -3.3 percentage points |
| Capital Expenditures | Ps. 123.1 million | N/A |
| Cash and Equivalents (End of Period) | Ps. 224.6 million | N/A |
| Total Debt (as of Dec 31, 2010) | Ps. 844.8 million | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 4.9% despite an 8.2% decline in passenger traffic (2.8 million passengers). Growth was driven by the NH T2 Hotel, OMA Carga (+87.4%), advertising (+18.5%), and parking (+2.4%).
- Traffic Trends: Passenger traffic fell 8.2% year-over-year. Domestic traffic decreased 9.3%, while international traffic decreased 4.2%. Conversely, flight operations (takeoffs/landings) increased 2.1%, and cargo volume surged 37.8%.
- Cost Increases: Operating costs and GA expenses rose 16.2% to Ps. 197 million, primarily due to the new NH T2 Hotel operations. Excluding hotel costs, expenses rose 8.1% due to certification and development initiatives.
- Profitability Decline: Net income dropped 30.4% due to higher operating costs, increased financial expenses from higher debt levels, and a higher tax provision resulting from Mexico's fiscal reform (corporate tax rate increased to 30%).
Outlook, Commentary, and Risks
- Management Strategy: Objectives for 2010 include strengthening core aeronautical revenues, expanding non-aeronautical offerings, and controlling cost increases.
- Hotel Performance: The NH T2 Hotel occupancy rate averaged 42.2% for the quarter, reaching 52.3% in March, contributing significantly to non-aeronautical revenue.
- Capital Projects: Significant investments are underway for Terminal B at Monterrey and various infrastructure improvements. A major project to relocate the Tampico airport is in the planning phase with an estimated cost exceeding Ps. 2,500 million, though OMA is not funding the construction directly.
- Dividends and Buybacks: The Annual Shareholders' Meeting declared a Ps. 400 million cash dividend and authorized up to Ps. 400 million for share repurchases.
- Risks: The filing notes standard forward-looking statement risks, including uncertainties in traffic recovery, regulatory changes, and economic conditions affecting passenger volumes.
Investor Verification Checklist
- Verify the sustainability of the 37.8% cargo volume growth following the start of DHL operations at Monterrey.
- Monitor the occupancy rate trajectory of the NH T2 Hotel to assess its impact on future non-aeronautical margins.
- Review the impact of the 30% corporate tax rate on future net income projections.
- Confirm the timeline and funding structure for the Tampico airport relocation project.
- Assess the trend in passenger traffic recovery, noting that the 8.2% decline, while negative, was less severe than the prior five quarters.