Business Context and Reporting Period
Company: Central North Airport Group (OMA)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter 2020 (Q4 2020) and Full Year 2020
Date of Filing: February 15, 2021
OMA operates 13 international airports in central and northern Mexico. The reporting period was heavily impacted by the COVID-19 pandemic, resulting in significant declines in passenger traffic and revenues compared to prior periods. The company reported unaudited consolidated financial results.
Key Financial Metrics
| Metric (Million Pesos) | Q4 2020 | Q4 2019 | Full Year 2020 | Full Year 2019 |
|---|---|---|---|---|
| Total Revenues | 1,623 | 2,263 | 5,367 | 8,527 |
| Adjusted EBITDA | 853 | 1,402 | 2,549 | 5,563 |
| Adjusted EBITDA Margin | 69.6% | 73.2% | 62.0% | 73.5% |
| Operating Income | 532 | 1,165 | 1,721 | 4,855 |
| Net Income (Consolidated) | 239 | 761 | 1,098 | 3,227 |
| EPS (Pesos) | 0.61 | 1.94 | 2.80 | 8.20 |
| Operating Cash Flow | 602 | 954 | 1,303 | 3,717 |
| Cash and Equivalents (End of Period) | 2,959 | 3,430 | 2,959 | 3,430 |
| Net Debt | 1,746 | 1,335 | 1,746 | 1,335 |
Note: All figures in millions of Mexican Pesos (Ps.) unless otherwise noted. Net Debt includes financial leases.
Material Changes vs. Prior Period
- Passenger Traffic: Total traffic decreased 44.5% in Q4 2020 (3.3 million passengers) and 52.3% for the full year (11.1 million passengers) compared to 2019. International traffic declined 57.5% in Q4, while domestic traffic fell 42.7%.
- Revenues: Total revenues dropped 28.3% in Q4 and 37.1% for the full year. Aeronautical revenues fell 36.3% (Q4) and 48.8% (Full Year). Non-aeronautical revenues decreased 35.1% (Q4) and 35.6% (Full Year). Construction revenues increased 13.9% in Q4 due to project execution rates.
- Profitability: Operating income declined 54.3% in Q4 and 64.5% for the full year. Net income fell 68.6% in Q4 and 66.0% for the full year. Adjusted EBITDA margins compressed to 69.6% in Q4 and 62.0% for the full year.
- Costs: Total operating costs and expenses remained relatively flat, decreasing only 0.7% in Q4 and 0.7% for the full year, despite revenue declines. This was due to a 55.7% increase in the major maintenance provision and higher construction costs offsetting reductions in payroll and basic services.
- Debt: Net debt increased to Ps.1,746 million (from Ps.1,335 million in 2019), resulting in a Net Debt/Adjusted EBITDA ratio of 0.69x (up from 0.24x). A significant portion of long-term debt (Ps.3,000 million) matures in 2021.
Outlook, Risks, and Management Commentary
- Recovery Trends: Management noted a gradual recovery in Q4 2020 compared to Q3, with passenger traffic up 43% sequentially. However, a second wave of COVID-19 contagions in late 2020 and early 2021 caused a deceleration in recovery.
- Operational Status: As of the report date, 140 origin-destination routes were in operation. The company has installed COVID-19 testing modules in 11 airports with international operations.
- Investment Plans: OMA received approval for its Master Development Program (MDP) for 2021-2025, committing Ps.11,980 million in investments. Q4 2020 capital investments and strategic investments totaled Ps.472 million.
- Risks: Key risks include the uncertainty of the pandemic's duration, government-imposed travel restrictions, and the economic impact on passenger demand. The company highlighted that forward-looking statements are subject to these uncertainties.
- Unusual Items: Financing expenses increased significantly in Q4 (Ps.270 million) due to foreign exchange losses and interest expenses. The effective tax rate was 8.9% in Q4, impacted by deferred taxes related to the maintenance provision update.
Investor Verification Checklist
- Debt Maturity Wall: Verify the refinancing status of the Ps.3,000 million bond (OMA14) maturing in 2021, which represents a significant portion of total debt.
- Cash Flow Sustainability: Monitor operating cash flow generation against the Ps.1,746 million net debt level, especially given the 64.9% year-over-year decline in full-year operating cash flow.
- Passenger Recovery Trajectory: Track the reactivation of international routes and the impact of epidemiological risk levels in key operating states (Nuevo León, Mexico City) on Q1 2021 traffic.
- Construction Revenue Recognition: Understand that construction revenues (Ps.396 million in Q4) are non-cash accounting entries under IFRIC 12 and do not contribute to cash flow or net income.
- Foreign Exchange Exposure: Assess the impact of peso appreciation/depreciation on reported results, as the company noted a Ps.195 million impact on cash balances due to FX fluctuations in Q4.