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: Fourth Quarter (4Q) and Full Year 2014. Results announced February 23, 2015.
Operations: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey, and manages commercial spaces and a hotel (NH T2) at Mexico City International Airport.
Key Financial Metrics
Fourth Quarter 2014
- Passenger Traffic: 3.9 million (+14.3% YoY).
- Total Revenues: Ps. 992 million (+6.3% YoY).
- Aeronautical Revenues: Ps. 648 million (+13.9% YoY); Ps. 165.0 per passenger.
- Non-Aeronautical Revenues: Ps. 249 million (+14.7% YoY); Ps. 63.5 per passenger (record quarterly share of 27.8%).
- Adjusted EBITDA: Ps. 483 million (+13.9% YoY); Margin of 53.8%.
- Operating Income: Ps. 365 million (+56.3% YoY).
- Net Income: Ps. 284 million (-46.5% YoY); Ps. 0.72 per share (US$ 0.39 per ADS).
- Investment Expenditures: Ps. 252 million (MDP and strategic).
Full Year 2014
- Passenger Traffic: 14.7 million (+10.6% YoY), a record high.
- Total Revenues: Ps. 3,423 million (Aeronautical Ps. 2,533m; Non-Aeronautical Ps. 890m).
- Adjusted EBITDA: Ps. 1,890 million (+12.9% YoY); Margin of 55.2%.
- Operating Income: Ps. 1,486 million (+22.9% YoY).
- Net Income: Ps. 1,027 million (-14.5% YoY); Ps. 2.58 per share (US$ 1.40 per ADS).
- Return on Equity: 16.8%.
- Cash Flow: Operating cash flow Ps. 1,504 million; Net cash increase Ps. 1,274 million.
- Debt: Total debt Ps. 4,724 million; Net debt Ps. 1,916 million. Net debt to Adjusted EBITDA ratio: 1.01.
Material Changes vs. Prior Period
- Traffic Growth: Driven by 19 new routes in 4Q14 and 46 net new routes in 2014. Key growth contributors included Monterrey (+21.1%), Tampico (+23.1%), and San Luis Potosí (+46.9%).
- Revenue Mix: Non-aeronautical revenue share reached a historic high of 27.8% in 4Q14 due to commercial diversification (advertising, parking, retail, and the Masterkey loyalty program).
- Net Income Decline: Despite revenue and EBITDA growth, net income decreased significantly in both 4Q14 (-46.5%) and Full Year 2014 (-14.5%). This was primarily due to a one-time tax benefit from the repeal of the IETU tax recognized in the 2013 comparative period, which is not present in 2014.
- Cost Control: Total costs and operating expenses decreased 10.5% in 4Q14, largely due to a 61.7% reduction in the maintenance provision following a re-estimation of long-term requirements.
Guidance, Outlook, and Risks
2015 Outlook
- Traffic Growth: Estimated between 6% and 8%.
- Revenue Growth: Aeronautical 7-9%; Non-aeronautical 13-16%.
- Adjusted EBITDA Margin: Expected between 53% and 55%.
- Capital Expenditures: MDP investments Ps. 500-700 million; Strategic investments Ps. 100-200 million.
- New Projects: Hilton Garden Inn and Phase 1 of the Industrial Park in Monterrey expected to commence operations.
Risks and Contingencies
- Forward-Looking Uncertainty: Estimates depend on airline expansion plans, ticket prices, oil prices, and general economic conditions.
- Liability: Potential joint liability with airlines regarding damages from checked baggage screening if willful misconduct is proven.
- Currency: Financing expenses were impacted by the depreciation of the peso against the U.S. dollar.
Investor Verification Checklist
- Verify the impact of the 2013 IETU tax repeal on the year-over-year net income comparison to understand the true operational profitability trend.
- Confirm the sustainability of the 27.8% non-aeronautical revenue mix, which is a record high for the company.
- Review the reconciliation of Adjusted EBITDA to ensure consistency with the company's definition (excluding maintenance provision and construction revenue/costs).
- Monitor the execution of the 2015 MDP and strategic investment plans, particularly the new Monterrey diversification projects.
- Assess the debt servicing capacity given the net debt to Adjusted EBITDA ratio of 1.01 and exposure to peso depreciation.