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: Second Quarter 2012 (ended June 30, 2012).
Overview: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey, Culiacán, and Chihuahua, plus the NH Terminal 2 Hotel in Mexico City. The quarter reported solid growth across aeronautical operations, commercial activities, and diversification projects.
Key Financial Metrics (2Q12)
| Metric | Value (MXN) | YoY Change |
|---|---|---|
| Total Revenues | Ps. 722 million | +3.4% |
| Aeronautical Revenues | Ps. 522 million | +15.3% |
| Non-Aeronautical Revenues | Ps. 163 million (implied) | +17.1% |
| Adjusted EBITDA | Ps. 353 million | +19.1% |
| Adjusted EBITDA Margin | 51.6% | +150 bps |
| Operating Income | Ps. 266 million | +24.6% |
| Consolidated Net Income | Ps. 161 million | +23.7% |
| Earnings Per ADS | US$0.24 | N/A |
| Capital Expenditures | Ps. 139 million | N/A |
| Cash and Equivalents (as of 6/30/12) | Ps. 368 million | N/A |
| Long-Term Debt | Ps. 1,506 million | N/A |
| Short-Term Debt | Ps. 250 million | N/A |
Material Changes vs. Prior Period
- Traffic Growth: Total passenger traffic increased 4.3% to 3.0 million. Domestic traffic rose 4.5%, while international traffic grew 3.3%. Flight operations decreased 3.1% to 82,944.
- Revenue Drivers: Aeronautical revenue growth was driven by traffic increases and tariff hikes effective October 2011 and April 2012. Non-aeronautical revenue growth stemmed from new retail locales, advertising, and the NH T2 Hotel.
- Cost Structure: Total costs and expenses decreased 6.0% to Ps. 456 million, primarily due to a significant drop in construction revenues/costs (from Ps. 106 million in 2Q11 to Ps. 37 million in 2Q12), despite a 10.9% increase in operating costs related to baggage screening and security.
- Tax Impact: Income tax provision rose 38.8% as the Monterrey airport exhausted its tax losses, beginning to generate tax expense in 2012.
Guidance, Outlook, and Risks
Revised 2012 Outlook
- Passenger Traffic: Expected to grow between 3.5% and 4.5%.
- Revenue Growth: Aeronautical and non-aeronautical revenues expected to increase 10% to 13%.
- Adjusted EBITDA Margin: Projected range of 48.5% to 51.0%.
- Capital Expenditures: Master Development Plan (MDP) investments estimated at approximately Ps. 840 million.
Risks and Contingencies
- Forward-Looking Statements: Results depend on airline expansion plans, ticket prices, economic conditions, and commercial project evolution.
- Currency Risk: Depreciation of the peso contributed to exchange losses on dollar-denominated debt, offsetting reduced interest expenses.
- Regulatory: Aeronautical revenues are subject to a maximum rate system regulated by the Ministry of Communications and Transportation (SCT).
Investor Verification Checklist
- Verify the reconciliation of Adjusted EBITDA to Net Income, as it excludes non-cash maintenance provisions and construction items.
- Confirm the impact of the Ps. 500 million capital reduction paid to shareholders in June 2012 on liquidity and financing activities.
- Monitor the occupancy rate and RevPAR of the NH Terminal 2 Hotel, which saw a drop in occupancy (75.5%) despite higher room rates.
- Review the specific tariff increases implemented in October 2011 and April 2012 to understand the sustainability of aeronautical revenue growth.
- Assess the exposure to peso depreciation on the US$18.7 million UPS Capital financing and other dollar-denominated debt.