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: Third Quarter 2015 (ended September 30, 2015) and the nine months ended September 30, 2015.
Business Overview: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey, Acapulco, Mazatlán, and Zihuatanejo. The company also manages commercial spaces and hotels within its terminals, including the NH Terminal 2 hotel in Mexico City and the newly opened Hilton Garden Inn in Monterrey.
Key Financial Metrics (3Q15 vs. 3Q14)
| Metric (Million Pesos) | 3Q15 | 3Q14 | % Change |
|---|---|---|---|
| Total Revenues | 1,143 | 994 | +15.0% |
| Aeronautical Revenues | 800 | 689 | +16.1% |
| Non-Aeronautical Revenues | 279 | 215 | +29.7% |
| Construction Revenues | 64 | 90 | -28.6% |
| Operating Income | 541 | 449 | +20.6% |
| Adjusted EBITDA | 673 | 545 | +23.4% |
| Consolidated Net Income | 306 | 271 | +12.9% |
| EPS (Ps.) | 0.78 | 0.68 | +14.7% |
| EPADS (US$) | 0.36 | 0.41 | -12.2% |
Liquidity and Debt (as of Sept 30, 2015):
- Total Debt: Ps. 4,723 million.
- Net Debt: Ps. 2,334 million.
- Net Debt to Adjusted EBITDA Ratio: 1.03x.
- Cash and Cash Equivalents: Ps. 2,389 million.
- USD Debt Exposure: 5% of total debt.
Material Changes vs. Prior Period
- Traffic Growth: Total passenger traffic increased 15.8% to 4.6 million. Domestic traffic rose 14.8%, while international traffic surged 23.3%. All 13 airports recorded growth.
- Revenue Mix: Non-aeronautical revenues grew faster (29.7%) than aeronautical revenues (16.1%), driven by OMA Carga (+154.3%), parking, advertising, and the new Hilton Garden Inn hotel.
- Margin Expansion: Adjusted EBITDA margin reached a record 62.4% (up 206 basis points), and operating margin improved to 47.3%.
- Cost Control: Cost of airport services and general/administrative expenses grew only 6.6%, significantly below revenue growth, aided by lower utility rates and efficient material usage.
- Financing Costs: Financing expenses increased 21.1% primarily due to the depreciation of the Mexican peso against the U.S. dollar.
Guidance, Outlook, and Risks
Revised 2015 Outlook:
- Passenger Traffic Growth: Revised up to 13%–15% (previously 10%–12%).
- Aeronautical Revenue Growth: Revised up to 16%–18% (previously 13%–15%).
- Non-Aeronautical Revenue Growth: Revised up to 23%–26% (previously 18%–20%).
- Adjusted EBITDA Margin: Expected to be 57%–60% (previously 56%–58%).
- Investments: Master Development Plan (MDP) investments expected at Ps. 500–700 million; strategic investments at Ps. 100–200 million.
Key Risks and Contingencies:
- Currency Risk: Significant exposure to USD-denominated debt, though partially hedged by international passenger charges. Recent peso depreciation increased financing costs.
- Operational Risks: Dependence on airline expansion plans, ticket pricing, and economic conditions (including oil prices).
- Regulatory: Aeronautical revenues are subject to a maximum rate system regulated by the Ministry of Communications and Transportation.
Investor Verification Checklist
- Currency Impact: Verify the sensitivity of net income to further peso depreciation given the 21% increase in financing costs.
- Non-Aeronautical Sustainability: Assess the sustainability of the 29.7% growth in non-aeronautical revenue, particularly the 154% jump in OMA Carga and the contribution of the new Hilton Garden Inn.
- Debt Maturity Profile: Review the maturity schedule of the Ps. 4.7 billion debt, noting the 5-year bond (OMA11) maturing in 2016.
- Construction Revenue Volatility: Note the 28.6% decline in construction revenues, which are non-cash accounting entries under IFRIC 12 and do not impact operating cash flow.
- Shareholder Structure: Confirm the recent conversion of 9 million Series BB shares to Series B by strategic partner SETA, maintaining their 16.7% stake.