Grupo Aeroportuario del Centro Norte SAB de CV
BMV:OMAB
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
140.53
189.26
|
| Price Target |
|
We'll email you a reminder when the closing price reaches MXN.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Grupo Aeroportuario del Centro Norte SAB de CV
You don't have any saved screeners yet
Greetings, and welcome to the Grupo Aeroportuario del Centro Norte Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Emmanuel Camacho, Investor Relations Officer. Thank you, sir. You may begin.
Thank you, Christine. Good morning, everyone. Thank you for standing by, and welcome to OMA's Second Quarter 2021 Earnings Conference Call. Ricardo Duenas, OMA's Chief Executive Officer; and Ruffo Perez Pliego, Chief Financial Officer, will be joining us this morning, and we'll discuss OMA's second quarter 2021 results.Please be reminded that certain statements made during the course of our discussion today may constitute forward-looking statements, which are based on current management expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our control, which include the impact of COVID-19.I will now turn the call over to Ricardo Duenas.
Thank you, Emmanuel, and good morning, everyone, and thank you for joining us today. I hope all of you and your families are safe and healthy. This morning, we will review the evolution of our business as well of our second quarter performance.During the quarter, our total passenger traffic continued to show clear signs of recovery, with a sequential increase of 50% compared to the first quarter of this year. This performance was mainly the result of higher mobility levels throughout the country and according with the epidemiological traffic alert system. The airports that contributed the most to our passenger traffic recovery in volume terms were Mazatlan, which delivered growth as compared to the second quarter of 2019, Durango, Reynosa, Ciudad Juarez Mexico and Culiacan.Additionally, vaccination rollout programs in Mexico and the United States allowed for gradual increased levels of passengers during the quarter, particularly on the international side, which stood at 98.5% of the international passengers in second quarter of 2019. The international passenger recovery is primarily driven by destinations such as Houston, San Antonio and Dallas.In July, the level of COVID-19 cases have begun to increase again as well as epidemiological alert levels in the country. Currently, of the 9 states where OMA has operations, one state is in red status, 3 in orange, 4 in yellow and one in green. We are confident that our passenger traffic will continue to evolve positively in the following months as the pace of vaccination rollout in Mexico and the U.S. makes progress and economic activity continues to improve.It is worth highlighting that in Q2 2021, 3 new routes opened, Monterrey McAllen, Monterrey Harlingen and Ciudad Juarez Puerto Vallarta. And 7 origin-destination routes that were suspended restart operations. For the third quarter of 2021, we have confirmed the opening of 13 origin-destination routes, most of which are brand new.Finally, at the end of June, a total of 131 origin-destination routes were in operation compared to 140 at the end of December 2020 and 183 routes in operation at the end of December 2019.Turning to our second quarter operational results. Total passenger traffic reached 4.5 million in the quarter, which decreased 24% as compared to the second quarter of 2019. In volume terms, the routes that experienced the greatest traffic growth during the quarter were Monterrey on its Mexico City and Cancun routes; Culiacan on the Tijuana route, Chihuahua on its Mexico City route and Monterrey and its Houston route.Adjusted EBITDA reached MXN 1.3 billion in the quarter, with a margin of 74.7%. This is the result of traffic and revenue recovery as well as our strict cost control efforts throughout all areas of the company. On the commercial front, revenues increased 88% compared to the second quarter of 2020, with the largest increase in parking, restaurants, car rentals and retail.Occupancy rates for commercial space in our terminals was 85% at the end of the quarter. Diversification revenues increased 114%, mainly due to higher revenues from hotel services and OMA Carga.During the second quarter of 2021, occupancy rate of our terminal NH Collection Hotel was 56% while the Hilton Garden Inn Hotel at the Monterrey airport had an occupancy rate of 46% during the quarter. OMA Carga delivered another outstanding performance during the quarter, with an increase in tonnage handled of 102%, resulting in revenue increase of 69% versus the second quarter of 2020. Revenues from air and ground import cargo drove the increase in revenues.Total investments in the quarter, including MDP investments, major maintenance and strategic investments were MXN 482 million. Additionally, some of our major projects underway include the expansion and remodeling of the Monterrey Airport terminals A and C, platform reconfiguration of the Monterrey Airport; expansion and remodeling of the Tampico terminal building; expansion and remodeling of the Ciudad Juarez terminal building; modernization of the Tijuana -- sorry, of the Zihuatanejo terminal building and green investments related to solar panels in our 13 airports.Finally, on July 7, Aerodrome Infrastructure, an affiliate of Fintech Holdings conclude a tender offer process through which it acquired 60.2 million Series B shares of OMA, equal to 15.4% of OMA's capital stock. As a result, Fintech Holdings indirectly owns 30.1% of OMA's capital stock.I would now like to turn the call over to Ruffo Perez Pliego, who will discuss our financial highlights for the quarter.
Thank you, Ricardo. Good morning, everyone. I will briefly review our financial results, and then we will open the call for your questions.Turning to OMA's second quarter financial results. Aeronautical revenues increased 778% relative to 2Q '20, driven by the 6.80% increase in passenger traffic. Non-aero revenues increased 107% with commercial revenues having the largest contribution. Commercial revenues increased 88%. The categories with the largest variations were parking, restaurants, car rentals and retail. Parking revenues increased 580%, mostly driven by higher passenger traffic. Restaurants, car rentals and retail increased 104%, 63% and 51% respectively, due to lower levels of discounts related to tenants and higher revenues from participation of sales.Diversification activities increased 814%, mostly driven by the higher revenues from 2 hotels and OMA Carga. Total aeronautical and non-aeronautical revenues in the quarter were MXN 1.750 billion. Construction revenue increased 50%. This is a noncash item that is required under applicable accounting standards, and it is equal to the construction cost of improvements to concession assets. So it has no impact on earnings.The cost of airport services and G&A expense increased 7% relative to 2Q '20 due to a 42% growth in contracted services and a 38% increase in minor microeconomic expenses. This is a result of higher levels of passenger traffic. These increases were partially offset by savings in bad debt expense, payroll expenses and materials and supplies.OMA's second quarter adjusted EBITDA was MXN 1,300 million and the adjusted EBITDA margin reached 74.7%. During the quarter, we recorded an increase in the major maintenance provision of 821%, reaching MXN 851 million. This reflects increased future major maintenance works under the new master development program that was approved by the authorities last year.Our financing expense was MXN 869 million, and consolidated net income was MXN 620 million. With regards to our financial position. Cash generated from operating activities in the second quarter amounted to MXN 1.1 billion, and total cash at the end of the quarter stood at MXN 4.2 billion. We believe that our cash position along with cash-generating -- generated from operations will allow us to meet all of our investments, financing and operational obligations for 2021.Total debt amounted to MXN 5 billion and stock price of the MXN 3 denominated bonds that we have. And our net debt to adjusted EBITDA ratio stood at 0.3x at the end of the quarter.This concludes our prepared remarks. Operator, please open the call for questions.
[Operator Instructions] Our first question comes from the line of Alan Macias with Bank of America.
Just a question on margins and adjusted EBITDA margin. What is your expectation going forward? And if you are seeing any acceleration in costs or in cost pressures in any of the item in particular?
We have -- during the quarter, we have kept a very strict control in costs. We have -- we think, we believe most -- some of them are going to be -- we've been able to keep them going forward. We expect for the whole year to be slightly above 70% EBITDA margin.
Our next question comes from the line of [ Jeremy Mendez ] with JPMorgan.
I have 2 questions actually. The first one is a follow-up on the traffic recovery you guys mentioned on the opening remarks. Just wonder if you could provide more color on how do you see traffic recover, when do you expect to be back to '19 levels? And how do you see the risk related to the increased number of cases of COVID-19 in Mexico? And the second question is related to the commercial segment. What are your expectations in terms of revenues on a per passenger basis?
With respect to the -- your first question [indiscernible], we're expecting total tax this year to be around BRL 17 million tax. That would be about 26% below 2019 levels. We're seeing a strong performance in the summer irrespective of the increase in self-alert levels. This, as we have mentioned in previous calls, continues to be driven primarily by [ BFR ] and domestic issuer travel. However, we would expect towards the end of the year, a pickup in corporate travel, driven by the improvement in economic conditions. At this time, we think we will reach the 2019 levels around early 2023. And sorry, what was your question with respect to COVID?
Yes. In terms of how do you see the risks regarding the increasing number of cases of COVID in Mexico, do you see an impact now in the third quarter on the end of the year?
We're seeing increased large levels from the health authorities. However, we do expect that there will not be strict confinement measures such as the ones that we saw last year. So we will -- we expect to continue to see increased mobility over the next few months. The vaccination program in Mexico is underway, and it's picking up speed. So we believe that the improvement in the vaccination coverage will allow us to continue having traffic recovery for the next month, and we do not foresee any such conditions as the ones we experienced last year.
And also, just to add to the point, we haven't seen any -- we've been tracking the numbers weekly, and we haven't seen any effect so far. The trend that we have seen for the last few months remains. So we haven't seen any evidence in the data that supports any negative impact so far.
Okay. And just a follow-up on the commercial segment. How do you see revenues on a per passenger basis has already saw an increase now in the second quarter?
Well, commercial revenues we expect also to continue improving. Our most important line item in commercial revenues is car parking. We already saw in the second quarter a stronger performance than in previous months from car parking, and we expect that as travel continues to improve, to benefit from those line items.And in the case of restaurants, retail, tenant and car rentals, we have general discounts that were implemented in the second half of last year, and we gradually phased those discounts out during the second quarter of this year. So we would expect less impact from those discounts going forward, and that would help us get improved results from the fixed rent portion. And also as passengers continue to increase, we should also see a pickup in the participation on sales that we get from most of our commercial contracts. So we should expect a bit of an acceleration in commercial revenues over the second half.
Our next question comes from the line of Javier Gayol with GBM.
My first question would be related to the capital structure of the company. We see, as you mentioned, currently, even with the plus numbers in the EBITDA front, we see a very comfortable net debt to EBITDA ratio. Is management comfortable at this position? Or would you be seeking additional debt to the balance sheet on the short term? That will be my first question.
Yes, as you mentioned, our debt levels are at a very comfortable position. As you know, at MXN 4,500 billion -- MXN 4.5 billion. So far, we plan to remain there. There's -- we believe there's room to improvement, but we will be analyzing as time moves on.
And also, in the second half of the year, we should expect the dividend, it was delegated to the Board of Directors, the decision of when and how the dividend will be paid. As you remember, that would amount up to MXN 2 billion. So at some point in late 3Q or 4Q, we should see also that distribution being made, so that would increase slightly the net debt-to-EBITDA level.
That's very helpful. And my second question is just a follow-up regarding the commercial revenue part of the business. And I was wondering, are you guys doing any new strategies in the commercial front to improve that revenue mix from commercial revenues at the airports? And is this something that we should expect from the capital deployment into the airports that you guys mentioned in Zihuatanejo and Tampico and so on. Is this part of the strategy to increase the commercial front of the business?
Yes. It is part of the strategy. There will be new square footage, commercial space, for example, in the Tampico terminal, it will be about to open. Culiacan, Juarez, the new airport in Monterrey, we will expect in the short term, new square footage. So we expect more commercial space there.So far, we have an 85% occupancy rate. We believe by the end of the year, we'll be above 90% occupancy. We also have been more aggressive in negotiating our contracts with the discounts that we mentioned earlier, there was a trade-off. And since we decreased those discounts were comping by an increase in the percent of revenue share that we have. So yes, we continue working on strategies as well as new -- we'll continue evaluating from diversification and commercial activities.
Our next question comes from the line of Alejandro Zamacona with Credit Suisse.
Just a follow-up question on the EBITDA margins. So we noted that for this quarter, you reached an all-time high margin. So I'm curious to hear your thoughts around to what extent we can continue to see a margin expansion. Where can we see normalized margin expansion? I know that you already mentioned you expect a full year margin for '21 above 70%. But going more on the medium term, what would be a margin that we can -- say, a normalized margin? And also if this margin expansion may be boosted not only by the eventual traffic recovery and the further potential increase in airport fees, but from a further cost control?
So certainly, this quarter, we posted a very strong number in terms of profitability. I think in the following quarters, we'll see a slight decline relative to 2Q in terms of margin. There are some contracts that we negotiated during the COVID crisis that will be up for renewal in the next few months. So we will not expect to see such good terms in those contracts with third parties, for example, in cleaning or security. So we'll see some pressure on those type of costs. And we would not expect to see further margin expansion in the midterm relative to these levels that we are seeing at this time.
Okay. And then if I may, just another question on the minor maintenance cost, since the beginning of COVID, we have seen significant decreases. So is it fair to expect a catch-up in the upcoming quarters after doing the minimum required I guess maintenance during COVID?
Yes. I think we -- as passengers and airport facilities have a greater utilization, we would be seeing increased maintenance expenses. Last year, primarily, we were able to close certain areas of terminals and in that way reduce the usage of some equipment. But now that's basically all terminals are fully opened for their scheduled itineraries, we should see a pickup in minor maintenance expense over the next quarters. I mean this quarter relative to last year, you already saw an increase in maintenance, still below the 2019 level. But yes, probably over the next few quarters, we will trend towards the 2019 levels.
Our next question comes from the line of Gabriel Himelfarb with Scotiabank.
Just 2 quick questions. First, about the routes that were closed. Could you give us a bit of color, which routes were closed or why were closed? And the second is about maximum rate. Do you think this year you're going to -- you will be able to reach the maximum rate or you're going to wait till next year?
I'll start with your second part. We expect to end this year with a compliance with a maximum rate of around 95%. And we expect by the beginning of next year to reach the 100% maximum rate recovery. We mentioned since last year that we plan a year of pass-through for the full rates to materialize. As for your first question, yes, there were many routes that were closed. A lot of them were related to Interjet, which, as you know, disappeared. And Aeromexico as well that has been consolidating most of their traffic in the Mexico City airport.So the strategy that Aeromexico has been following has been to recover some of the slots that Interjet left open in Mexico City airport. So they have been consolidating their efforts there. But as we move on in our conversation with them, we expect to recover the regional traffic that we had with them.
Our next question comes from the line of [ Nayo Kayatsuko ] with GBM.
My question is on international traffic, but it is already at pre-pandemic levels. Do you see this being related to vaccine tourism to the U.S.? Or what do you believe to be the driver in this front?
You're correct, Nayo. It has been very vaccine-related. Some of the new routes that we opened, for example, were the McAllen route and that is, we believe, a vaccine route. But also there's the Harlingen one, San Antonio, Houston. Some of them, we think they will remain. During the quarter, we had a peak, for example, at some point in one month, we were almost 20% above pre-pandemic levels. So far, we almost for the quarter were flat. We expect international traffic to be solid for the rest of the year. Not all of it is vaccine-related. Some of it, it is, and some would -- we believe it will remain.
Our next question comes from the line of Pablo Monsivais with Barclays.
Can I have a follow-up of previous questions on the commercial revenues? Still traffic is 23% down on a pre-pandemic level. But can you just explain to us how are you seeing commercial spending per passenger on the ground? Have you seen a change in pattern because of a lower corporate travel? Or have you seen just people spending less? How are things behaving at Monterrey Airport mainly?
So in the case of Monterrey Airport, and this probably explains why the performance -- the variable performance we have had in the different line items is that recovery has been in the past few months, at least in the case of Monterrey, primarily being driven by VivaAerobus. VivaAerobus is, as you know, the main -- the only user of terminal C. And whereas in terminal A and terminal B or airlines such as Aeromexico or in the case of Volaris and Interjet, it used to operate in terminal A, those terminals have not recovered to the levels that terminal C has recovered.In terms of square footage of commercial spaces, terminal C is the one with the least amount of space. So we, in an effort to balance out our performance throughout the terminals, we started in July to move certain operations of VivaAerobus from terminal C into terminal A, and we think that given the greater commercial exposure that those passengers will have in terminal A will allow us to have a better performance of commercial revenue in the Monterrey Airport.And also we moved certain operations of Aeromar, for example, from terminal A to terminal B where Aeromexico and Delta operate, also as an effort to improve the traffic in that terminal. So we are making efforts to have a more balanced traffic in our Monterrey terminals, and this should help our performance in commercial revenue for tax in Monterrey. Also we had experienced in the previous months some vacancies. Still in the quarter, we had some 470 square meters being vacated. We do expect to bottom out in the second quarter in terms of occupancy. So we should see improvements in occupancy in the next following quarters, and that will also help us improve the commercial revenue for PACs that we are currently generating.
Our next question comes from the line of Andressa Varotto with UBS.
So my question is on the diversification revenues go. How are you seeing hotel services revenues ramp up in the pandemic, when do you expect it to reach a normal level? And you're also seeing very strong numbers in the Culiacan. If you could also talk about which initiatives the company has been implementing to capture that? And also if you have additional...
Sorry, Andressa, we didn't get your -- could you please repeat the question? The line isn't great.
Okay. Sorry. So my question is on diversification revenue. So on the hotel services, when do you see normalization of the business? And also if you have other initiatives to increase your diversification revenue? That's it.
Diversification, yes, we're continuing to evaluating new projects. For the hotels, the NH hotel that we have in the Mexico City Airport has been recovering faster than the Hilton. That's mainly due by the composition of our -- of the customers. Most of the NH are crew members of airlines. So that has been recovering faster. The profile of our Hilton customer are mostly business-driven, Hilton Honors tourists that haven't recovered as fast. It's hard to say a number when we expect they will normalize. We believe they will normalize somewhere by mid next -- mid or 3 quarter, 4 quarter of next year.
We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.
I want to thank all of you again for participating in this call. Ruffo, Emmanuel and I are always available to answer your questions, and we hope to see you soon. Thank you, and have a good day.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.