OMAB

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 2017 (ended June 30, 2017).
Business Overview: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey, Chihuahua, and Culiacán. The company also manages diversification activities such as hotel services (NH Collection Terminal 2, Hilton Garden Inn) and logistics (OMA Carga).

Key Financial Metrics

Note: All figures in Mexican Pesos (Ps.) unless otherwise noted. Construction revenues of Ps. 300 million are included in total revenues but excluded from Adjusted EBITDA calculations.

Material Changes vs. Prior Period

• Passenger Traffic: Total terminal passenger traffic increased 8.3% to 4.9 million. Domestic traffic grew 8.8%, while international traffic grew 4.9%. Monterrey contributed 50.0% of total traffic.
• Revenue Drivers: Aeronautical revenue growth was driven by higher passenger volumes and tariff increases. Non-aeronautical revenue growth was supported by diversification activities (hotels, OMA Carga) and higher checked baggage screening revenues.
• Cost Structure: Total operating costs increased 39.9% primarily due to a Ps. 300 million increase in construction costs (which equal construction revenues). Excluding construction costs, operating expenses rose only 2.8%.
• Financing Expenses: Increased by Ps. 58 million to Ps. 90 million, largely due to exchange losses from the appreciation of the peso against the U.S. dollar affecting cash holdings.
• Cash Flow: Operating cash flow for the first six months of 2017 increased 69.5% to Ps. 1,410 million. Net cash decreased by Ps. 983 million in the first half of the year, primarily due to a dividend payment of Ps. 1,575 million.

Outlook, Commentary, and Risks

• Management Commentary: OMA reported solid financial results driven by growth in operating indicators. The company highlighted the performance of diversification activities and the successful opening of 16 new commercial initiatives in 2Q17.
• Investment Commitments: Total investment expenditures (Capex, major maintenance, strategic investments) for 2Q17 were Ps. 331 million. The 2017 Master Development Program (MDP) commitment is Ps. 1,410 million, with 69% of works contracted as of the end of 2Q17.
• Corporate Actions: A dividend of Ps. 1,600 million was approved and paid in May 2017. The company also cancelled 6.2 million Series B shares acquired under its share purchase program.
• Operational Updates: A new route between Monterrey and Seoul, Korea, operated by Aeroméxico, began on July 1, 2017.
• Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Risks include currency fluctuations (impacting financing expenses), regulatory changes in the maximum rate system for aeronautical revenues, and general economic conditions affecting travel demand.

Key Facts for Investor Verification

• Construction Accounting: Verify the treatment of Ps. 300 million in construction revenues and costs, which inflate total revenue but do not impact Adjusted EBITDA or Net Income.
• Currency Exposure: Monitor the impact of peso appreciation on financing expenses, which increased significantly in 2Q17 due to valuation of USD-denominated cash.
• Debt Profile: Confirm the stability of the net debt-to-Adjusted EBITDA ratio (0.76x) and the composition of debt (97% in Mexican pesos).
• Dividend Policy: Note the substantial cash outflow for dividends (Ps. 1,575 million in H1 2017) and its impact on the cash balance.
• Regulatory Environment: Review the "Maximum Rate System" constraints on aeronautical revenue growth and the potential for future tariff adjustments.