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 (4Q) and Full Year 2010. Results reported on February 25, 2011.
Operations: OMA operates 13 international airports in central and northern Mexico, including major hubs in Monterrey and tourist destinations like Acapulco and Mazatlán. The company also operates the NH Terminal 2 Hotel in Mexico City and the OMA Carga airfreight business.
Key Financial Metrics
Fourth Quarter 2010
- Total Revenue: Ps. 817 million (69.2% increase year-over-year). Excluding the accounting impact of INIF 17, revenue grew 11.0% to Ps. 536 million.
- Net Income: Ps. 368 million (126.5% increase), driven largely by a Ps. 298 million tax credit.
- Earnings Per Share (EPS): Ps. 0.92 (US$0.59 per ADS).
- Adjusted EBITDA: Ps. 227 million (2.5% increase). Margin was 42.3% excluding INIF 17 effects.
- Capital Expenditures (Capex): Ps. 498 million.
Full Year 2010
- Total Revenue: Increased 39.8% (including INIF 17) or 13.1% (excluding INIF 17).
- Net Income: Ps. 553.4 million (17.6% increase).
- Adjusted EBITDA: Ps. 940.8 million.
- Operating Cash Flow: Ps. 610.7 million.
- Total Debt: Ps. 1,102.3 million as of December 31, 2010.
- Cash Balance: Ps. 312.8 million as of December 31, 2010.
Material Changes vs. Prior Period
- Passenger Traffic: Increased 0.6% in both 4Q10 and full year 2010 to 2.8 million passengers in the quarter. Growth was dampened by the August 2010 suspension of Grupo Mexicana operations.
- Flight Operations: Decreased 1.6% in 4Q10 but increased 5.5% for the full year.
- Revenue Mix: Non-aeronautical revenue per passenger surged 34.5% in 4Q10, driven by the NH T2 Hotel (revenue up 191.2%), advertising, and the new Monterrey Terminal B commercial space.
- Accounting Changes: Adoption of INIF 17 ("Service Concession Contracts") resulted in recognizing Ps. 281 million in construction revenue and equal expense in 4Q10. This inflated total revenue figures but had no impact on operating income or EBITDA.
- Tax Impact: A Ps. 298 million net tax credit in 4Q10 resulted from re-estimating deferred tax liabilities following the approval of Master Development Plans and Maximum Rates for 2011-2015.
Outlook, Risks, and Management Commentary
- Investment Program: The Ministry of Communications and Transportation (SCT) approved the Master Development Plan (MDP) and maximum rates for 2011-2015. Total planned investments are Ps. 2,745.2 million, with 82.5% allocated to concession standards, maintenance, and safety.
- Strategic Projects: OMA is implementing an advanced Baggage Handling System across 13 airports, financed partly by a US$23 million loan from UPS Capital supported by the U.S. Ex-Im Bank.
- Regulatory Environment: The U.S. FAA raised Mexico's civil aviation rating to Category 1 in December 2010, restoring the ability of Mexican airlines to open new routes to the U.S.
- Accounting Transition: OMA approved the early adoption of International Financial Reporting Standards (IFRS) effective January 1, 2011. This will result in significant balance sheet adjustments, including the elimination of Ps. 1,535 million in accumulated inflation adjustments and Ps. 900 million in accumulated amortization.
- Risks: Continued volatility in air traffic volumes due to airline suspensions (e.g., Grupo Mexicana) and the impact of exchange rate fluctuations on debt service.
Investor Verification Checklist
- Verify the impact of the INIF 17 accounting change on revenue growth metrics; exclude construction revenue/expense to assess organic operational growth.
- Confirm the sustainability of the Ps. 298 million tax credit, which was a non-cash adjustment based on deferred tax re-estimation.
- Monitor the progress of the Baggage Handling System installation and the associated US$23 million debt service obligations.
- Review the transition to IFRS in the 2011 filings to understand the impact on asset valuation, depreciation, and reported equity.
- Assess the recovery of passenger traffic in airports heavily dependent on Grupo Mexicana (e.g., Acapulco, Torreón, Reynosa) following the airline's suspension.