Business Context and Reporting Period
Company: Central North Airport Group (Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., or OMA)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Second Quarter 2014 (Ended June 30, 2014)
Business Overview: OMA operates 13 international airports in central and northern Mexico and manages the NH Terminal 2 Hotel in Mexico City. The company reported unaudited consolidated results reflecting double-digit growth in passenger traffic and revenue.
Key Financial Metrics
| Metric | 2Q 2014 Value | Change vs. Prior Year |
|---|---|---|
| Total Revenues | Ps. 896 million | +8.3% |
| Aeronautical Revenues | Ps. 638 million | +11.4% |
| Non-Aeronautical Revenues | Ps. 209 million (implied) | +11.3% |
| Adjusted EBITDA | Ps. 457 million | +12.8% |
| Adjusted EBITDA Margin | 53.9% | +70 bps |
| Operating Income | Ps. 362 million | +15.3% |
| Net Income | Ps. 214 million | -0.8% |
| Earnings Per Share (ADS) | U.S.$ 0.33 | N/A |
| Total Debt | Ps. 6,213 million | N/A |
| Net Debt | Ps. 1,716 million | N/A |
| Net Debt / Adjusted EBITDA | 0.99x | N/A |
| Cash and Equivalents | Ps. 4,497 million | N/A |
Operational Highlights: Total terminal passenger traffic increased 11.5% to 3.6 million. Flight operations grew 5.0% to 84,204. Commercial space occupancy reached 96.0%.
Material Changes vs. Prior Period
- Revenue Growth: Both aeronautical (+11.4%) and non-aeronautical (+11.3%) revenues grew double-digits, driven by passenger volume increases and commercial diversification.
- Net Income Decline: Despite revenue and EBITDA growth, consolidated net income decreased 0.8% due to a significant increase in deferred taxes (Ps. 63 million) resulting from the repeal of the IETU tax effective January 1, 2014.
- Cost Control: Total costs and operating expenses increased only 4.0%, significantly lower than revenue growth, contributing to margin expansion.
- Debt Restructuring: On June 16, 2014, OMA issued Ps. 3,000 million in seven-year fixed-rate notes (6.85%) to prepay Ps. 1,300 million in floating-rate notes and fund investments, extending the debt maturity profile.
- Capital Returns: The company paid Ps. 400 million in capital reimbursements in May 2014 and Ps. 300 million in July 2014.
Guidance, Outlook, and Risks
Revised 2014 Outlook
- Passenger Traffic Growth: Revised to 6%–8% (previously 4%–6%).
- Revenue Growth: Revised to 9%–11% (previously 8%–10%).
- Adjusted EBITDA Margin: Expected to be 52%–54% (previously 51%–53%).
- Investments: MDP investments expected at Ps. 600–750 million; strategic investments at Ps. 250–300 million.
Risks and Contingencies
- Forward-Looking Uncertainties: Estimates depend on airline expansion plans, ticket prices, commercial project evolution, and economic conditions including oil prices.
- Regulatory Environment: Aeronautical revenues are subject to a maximum rate system regulated by the Ministry of Communications and Transportation.
- Liability: Potential joint liability with airlines regarding damages from checked baggage screening, though primary responsibility lies with the airline.
Investor Verification Checklist
- Deferred Tax Impact: Verify the sustainability of net income given the one-time tax provision increase related to the IETU repeal.
- Debt Maturity Profile: Confirm the successful prepayment of floating-rate notes (OMA11) and the terms of the new fixed-rate issuance (OMA14).
- Traffic Drivers: Assess the contribution of specific airlines (Volaris, VivaAerobus, Aeroméxico, etc.) which accounted for 95% of traffic growth.
- Non-Aeronautical Mix: Review the performance of the NH T2 hotel and commercial diversification, which contributed significantly to revenue growth.
- Cash Flow Strength: Note the strong operating cash flow (Ps. 602 million for H1 2014) and high cash balance (Ps. 4,497 million) supporting capital returns and investments.