OMAB

Business Context and Reporting Period

Company: Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMA)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter 2011 (Ended September 30, 2011)
Business Overview: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey, Acapulco, Mazatlán, and Zihuatanejo. The company also operates the NH T2 hotel in Mexico City International Airport. Financial statements are prepared under International Financial Reporting Standards (IFRS).

Key Financial Metrics

Material Changes vs. Prior Period

• Passenger Traffic: Total traffic increased 1.9% to 3.2 million passengers. Domestic traffic rose 3.3%, while international traffic declined 6.9% due to route reductions to Houston, Miami, and New York.
• Revenue Growth: Aeronautical revenue growth was driven by tariff increases effective April 2011 and higher passenger charges. Non-aeronautical revenue grew 18.5%, fueled by commercial initiatives, a new advertising agreement, and the NH T2 hotel performance.
• Cost Reduction: Costs and general/administrative expenses decreased 22.9% to Ps. 302 million. This decline is primarily attributable to a Ps. 145 million provision for doubtful accounts related to Grupo Mexicana de Aviación recorded in 3Q10, which did not recur in 3Q11.
• Profitability: Adjusted EBITDA more than doubled (111% increase) and Net Income rose 57.1%, largely due to revenue growth and the absence of the prior year's airline bankruptcy provision.
• Hotel Performance: The NH T2 hotel occupancy rate improved to 85.3% from 70.7% in 3Q10, with room rates increasing from Ps. 1,153 to Ps. 1,330.

Guidance, Outlook, and Risks

• Debt Refinancing: In July 2011, OMA issued Ps. 1,300 million in 5-year peso-denominated bonds (rated mxAA+/AA(mex)) at TIIE + 70 bps. Proceeds were used to repay Ps. 1,006 million of higher-cost debt (TIIE + 400 bps), lowering the cost of debt and improving cash flow.
• Investment Plan: Capital expenditures of Ps. 114 million in 3Q11 focused on the Master Development Plan (MDP), including terminal expansions in Chihuahua and Monterrey, runway rehabilitation, and baggage screening equipment.
• Dividends: The second quarterly installment of the 2010 dividend (Ps. 0.25 per share) was paid on October 17, 2011.
• Risks and Contingencies:
  • Currency Risk: The company recorded a Ps. 37 million exchange loss in 3Q11 due to peso depreciation on a dollar-denominated loan for baggage screening equipment.
  • Regulatory Risk: Aeronautical revenues are subject to a maximum rate system regulated by the Ministry of Communications and Transportation (SCT).
  • Forward-Looking Statements: Management cautions that future results may differ due to risks including economic conditions, regulatory changes, and competition, as detailed in the Form 20-F Risk Factors.

Investor Verification Checklist

• Revenue Quality: Verify the sustainability of the 12.3% aeronautical revenue growth, which relies on tariff revisions and traffic recovery.
• International Traffic Trends: Monitor the 6.9% decline in international traffic and the impact of route closures to major U.S. hubs (Houston, Miami, New York).
• Debt Structure: Confirm the impact of the new Ps. 1,300 million bond issuance on future interest expenses and liquidity.
• Non-Aeronautical Mix: Assess the contribution of the NH T2 hotel (25% of non-aeronautical revenue) and commercial space occupancy (92%) to overall margins.
• IFRS Transition: Review the reconciliation of financial results from Mexican Financial Reporting Standards (MFRS) to IFRS, particularly regarding maintenance provisions and concession amortization.