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: Third Quarter 2017 (ended September 30, 2017).
Business Overview: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey, Culiacán, and Ciudad Juárez. The company also manages hotel services (NH Collection Terminal 2, Hilton Garden Inn) and logistics operations (OMA Carga).
Key Financial Metrics (3Q17)
| Metric | Value (MXN) | Value (USD) | YoY Change |
|---|---|---|---|
| Total Revenues (incl. construction) | 1,884 million | - | +25.9% |
| Aeronautical Revenues | 1,163 million | - | +10.2% |
| Non-Aeronautical Revenues | 368 million | - | +8.8% |
| Adjusted EBITDA | 1,023 million | - | +9.8% |
| Adjusted EBITDA Margin | - | - | 66.8% (Unchanged) |
| Operating Income | 869 million | - | +8.5% |
| Net Income | 580 million | - | +19.1% |
| Earnings Per Share (EPS) | 1.47 | - | +19.6% |
| Earnings Per ADS | - | 0.66 | +31.3% |
| Total Debt | 4,629 million | - | - |
| Net Debt | 2,476 million | - | - |
| Cash and Equivalents | 2,153 million | - | - |
| Net Debt / Adjusted EBITDA | - | - | 0.67x |
Material Changes vs. Prior Period
- Traffic Growth Deceleration: Total terminal passenger traffic grew only 1.3% to 5.2 million, down from higher historical rates. This was driven by a 1.5% reduction in seat supply due to slot changes at Mexico City International Airport and fleet optimization by airlines.
- Revenue Mix: Aeronautical revenues rose 10.2% due to tariff increases in 2Q17 and traffic growth. Non-aeronautical revenues grew 8.8%, driven by commercial activities (restaurants, car rental, retail) and diversification (hotels, logistics).
- Construction Impact: Total revenues surged 25.9% largely due to a 244% increase in construction revenues (Ps. 352 million), which reflect the value of improvements to concessioned assets under Master Development Programs (MDP). These do not generate profit but increase total revenue and cost figures.
- Cost Structure: Total operating costs increased 45.9% primarily due to construction costs and a Ps. 77 million major maintenance provision. Excluding these items, operating costs rose 9.5% due to higher payroll, utilities, and maintenance.
- Profitability: Despite slower traffic growth, net income increased 19.1% due to revenue growth outpacing operational cost increases and a reduction in financing expenses (lower exchange losses).
Outlook, Risks, and Unusual Items
- Natural Disasters: Earthquakes on September 9 and 17, and Hurricanes Harvey and Max, negatively impacted operations. The NH Collection Hotel in Terminal 2 suspended operations for one week due to power loss but suffered no structural damage.
- Investment Commitments: OMA committed to Ps. 1,410 million in MDP investments for 2017. As of 3Q17, 84% of planned works were contracted. Total 3Q17 investment expenditures were Ps. 450 million.
- Strategic Initiatives: The company launched the OMA Foundation to support education and physical infrastructure. OMA was included in the Dow Jones Sustainability Emerging Markets Index for the second consecutive year.
- Risks: Forward-looking statements are subject to risks including regulatory changes, economic conditions, and natural disasters. The filing notes that actual results may differ materially from projections.
Investor Verification Checklist
- Traffic Trends: Verify the sustainability of the 1.3% traffic growth rate given the reduction in seat supply and potential lingering effects of natural disasters.
- Construction Accounting: Confirm understanding that the 25.9% revenue increase is heavily influenced by non-cash construction revenue recognition (IFRIC 12) which does not impact net income.
- Debt Profile: Review the debt composition (97% MXN, 3% USD) and the low net debt-to-EBITDA ratio of 0.67x to assess liquidity and refinancing risks.
- Non-Aeronautical Growth: Assess the contribution of diversification activities (hotels, OMA Carga) to revenue stability as traffic growth slows.
- Regulatory Environment: Monitor the impact of the Maximum Rate System on future aeronautical revenue potential and tariff adjustments.