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 2011 (4Q11) and Full Year 2011.
Filing Date: February 24, 2012.
Business Overview: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey, Acapulco, and Mazatlán, as well as the NH T2 hotel in Mexico City International Airport. The company adopted International Financial Reporting Standards (IFRS) early for the 2011 fiscal year.
Key Financial Metrics (4Q11)
| Metric | Value (MXN) | YoY Change |
|---|---|---|
| Total Revenues (Aeronautical + Non-Aeronautical) | 691 million | +29.0% |
| Total Revenues (Including Construction) | 774 million | +20.2% |
| Aeronautical Revenues | 527 million | +32.7% |
| Non-Aeronautical Revenues | 164 million (implied) | +18.3% |
| Adjusted EBITDA | 342 million | +50.7% |
| Adjusted EBITDA Margin | 49.5% | N/A |
| Operating Income | 257 million | N/A |
| Operating Margin | 33.2% | N/A |
| Net Income | 231 million | +25.5% |
| Earnings Per Share (EPS) | Ps. 0.58 | N/A |
| Earnings Per ADS | US$ 0.33 | N/A |
| Capital Expenditures (Capex) | 233 million | N/A |
| Long-Term Debt (as of Dec 31, 2011) | 1,535 million | N/A |
| Cash and Cash Equivalents (as of Dec 31, 2011) | 524 million | N/A |
Material Changes vs. Prior Period
- Passenger Traffic: Increased 7.1% to 3.0 million passengers. Domestic traffic rose 9.4%, while international traffic declined 4.7%.
- Revenue Drivers: Aeronautical revenue growth was driven by passenger volume increases and tariff hikes effective April and October 2011. Non-aeronautical revenue growth was fueled by commercial initiatives and the NH T2 hotel (up 9.6%).
- Cost Structure: Costs and G&A (excluding maintenance provision and construction) rose 12.1% due to higher electricity charges, a new security contract, and severance payments. The airport concession tax increased 27.7% due to revenue growth.
- Profitability: Adjusted EBITDA margin expanded to 49.5%, reflecting strong cash flow generation despite cost increases.
- Debt Refinancing: In July 2011, OMA issued Ps. 1,300 million in 5-year bonds at favorable rates (28-day TIIE + 70 bps) and used proceeds to prepay Ps. 1,006 million in existing debt, reducing financing expenses by 16% in 4Q11.
Guidance, Outlook, and Risks
2012 Outlook
- Passenger Traffic: Estimated growth of 2.5% to 3.5%.
- Revenue Growth: Aeronautical and non-aeronautical revenues expected to increase 8% to 12%.
- Adjusted EBITDA Margin: Projected range of 48.5% to 51.0%.
- Capital Expenditures: Approximately Ps. 700 million under the Master Development Plan.
Risks and Contingencies
- Forward-Looking Statements: Actual results may differ due to airline expansion plans, ticket prices, commercial project evolution, and general economic conditions.
- Accounting Transition: The company adopted IFRS in 2011, resulting in changes to depreciation, maintenance expense recognition, and deferred tax calculations compared to prior MFRS reporting.
- Regulatory Environment: Aeronautical revenues are subject to a maximum rate system regulated by the Ministry of Communications and Transportation (SCT).
Investor Verification Checklist
- Verify the impact of the IFRS adoption on comparative financial data, specifically regarding depreciation and maintenance expense capitalization.
- Confirm the sustainability of the 49.5% Adjusted EBITDA margin given the 12% increase in operating costs.
- Monitor the performance of international routes, which declined 4.7% in 4Q11, versus the strong domestic growth.
- Review the debt service coverage ratio given the Ps. 1,535 million long-term debt balance and the reliance on variable interest rates (TIIE).
- Assess the execution of the Ps. 700 million 2012 Capex plan, particularly the expansion of Terminal C in Monterrey and baggage screening systems.