Q4 2020 Grupo Aeroportuario del Centro Norte SAB de CV Earnings Call
It's.
Several of them.
The terms and conditions are still being worked out and we expect the issuance to close towards the end of March or beginning of April.
We have already filed with the National banking and Securities Commission.
West for authorization of a new set of World program.
As part of this process you see NPV require us to make some minor non material modifications to prior annual and quarterly information.
This minor modifications are expected to be filed later today and no changes to previously reported financial information were made as a result of this process. Most of those changes were informed but no substance.
Turning to our fourth quarter operational results.
Total passenger traffic reached $3 3 million in the quarter, resulting in a decline of 44% versus the fourth quarter of 2019 on a sequential increase of 43% when compared to the third quarter 2020.
The number of seats offered by airlines in our airports and for quarter grew 38% relative to the third quarter.
The best performing airports, which had the lowest decline in passenger in percentage terms compared to <unk> 19, where master plan will be again, the nossa <unk> and <unk>.
Conversely from our route perspective, the routes that experienced the greatest the negative impact of total passenger traffic during the quarter due to the reduction of frequency or suspension of flights were Monterrey, Chihuahua and Acapulco on their Mexico City routes.
Adjusted EBITDA.
Reached 153 million passengers in the quarter with a margin of 69, 6%.
<unk>, our efforts to control and optimize our cost and expense structure.
On the commercial front revenues decreased 38% with the largest impact on parking restaurants and retail.
Occupancy rate for commercial space in our terminal was 90% at the end of the quarter.
During the quarter, we continue with our support program of our tenants through which we offer discounts based on passenger traffic performance. The program more supply from July to December 2020.
Diversification revenues decreased 33%, mainly due to lower revenues from hotel services.
During the fourth quarter of 2020, the occupancy rates at our terminal to Anh collection Hotel was 42%, while the Hilton Garden Inn Hotel at the Monterrey Airport had an occupancy rate of 25% during the quarter.
On my cargo delivered a solid performance during the fourth quarter with an increase in tonnage handled of 4%, which resulted in a revenue increase of six percentage.
Eric import cargo operations contributed most of this growth in the quarter.
Total investments in the quarter, including MTP investments major maintenance and strategic investments were 472 million vessels.
Some of our major projects underway include the expansion and remodeling of the Monterrey Airport terminal a.
The expansion and remodeling of the Tampico terminal building.
The modernization of the see what the net with terminal building.
On works on runways, Taxiways and aviation platforms in several airports.
I would also like to announce that of whereabouts. The open the rate and also of terminal next week.
Yeah.
Finally, I would like to highlight that we received approval from the federal of Civil Aviation Agency of our Master development program for the 'twenty, one 'twenty five period.
The expected investment level for the next five years is approximately $12 billion expressed in pesos of December 2019.
Our new investment program includes important improvements and capacity increases in our largest airports in terms of passenger traffic contribution.
Some projects worth mentioning include Monterey German on a project, which will increase its annual capacity by 39% to $16 3 million passengers in 2025.
Will that kind of terminal expansion and remodeling, which would result in an increase in animals in animal passenger capacity of 74% to $3 3 million passengers by 2024.
So that's why this terminal expansion and remodeling with an increase in annual passenger capacity of 113% to $1 9 million passengers by 2022.
Our diagnosis of turn the call over to <unk>, who will discuss our financial highlights for the quarter.
Yeah.
[laughter].
Thanks for the kind of the good.
Good morning, everyone.
The review our financial results and then we will open the call for our questions.
Turning to almost fourth quarter of financial results.
I don't know just on revenues decreased 36, 3% driven by the $44 five degrees from passenger trends.
On the iron ore revenues decreased 35, 1% with commercial revenues, having the largest index.
Commercial revenues decreased 37, 7% on the facilities with the largest impact toward parking restaurants and retail.
Hudson revenues declined 53%. The decrease is mostly driven by the slower traffic recovery of the Monterrey Airport relative to the average of other airports.
Restaurants on retail decreased 37, 2% of 38, 8% respectively.
The decrease in the fixed strength and participation on sales as well of some discounts that were price during the quarter.
Diversification activities decreased 33, 3%, mostly driven by lower revenues from hotel services.
Total island article on non aeronautical revenues were.
1200 26 million vessels.
Construction revenue increased 13, 9% as you know because the noncash item the lease required under applicable accounting standards. It is equal.
<unk> to construction cost of improvements to concession assets, so the personal impact on earnings.
The cost of airport services, and G&A expense decreased 17, 7%.
During the quarter, our payroll decreased 12, 5% as a result of reduction of headcount during the third quarter.
Of course, it's savings on electricity and subcontracted services as we have maintained the strict cost control. Despite the sequential increase in the level of passengers.
Additionally, momentum caused decreased 18, 6% as the consequence of deferrals of non essential works.
As the result, almost fourth quarter adjusted EBITDA was 853 million vessels of the adjusted EBITDA margin was 69, 6%.
During the quarter, we recorded an increase in the major maintenance provision of 55% to 200 of $9 million.
This reflects the approval of the major maintenance price and the new MVP debt.
Less approved by the.
Around the Gulf War in November.
The recording of this provision also has an impact in the Texas, which reduce the effective tax rate for the quarter the.
The effective tax rate for future quarters is expected to go back to normalized levels of around 30%.
During the departure of our financing expense was $270 million and consolidated net income was 200 on $39 million versus.
The cash generated from operating activities from the third quarter amounted to $602 million versus any of you to a lower operating channel results.
Cash at the end of the quarter stood at 3 billion versus.
This concludes our prepared remarks and.
<unk>. Please open the call for questions.
Thank you we will now conduct a Q&A session.
I would like to ask the question. Please press the raise your hands button located at the bottom of the screen.
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Our first question comes from the line of Alejandro stomach on.
Please state your company name and ask your question. Thank you.
Thank you this is on the kind of somewhat.
Okay, great interest.
We've got a level of four in the mill.
Our goal.
My first question is on the commercial business.
Yes.
Yeah, Matt.
So what kind of <unk>.
Okay.
What day one.
Okay.
Thank you for the company.
Right.
Okay.
Okay.
On that day.
Okay.
And my second question.
On the airport.
You understand the last.
We were.
We're now charging.
Sure.
Relative to the material barings.
Closed right now.
Alright Barry.
Some of the short.
Okay.
Yeah.
Income from there.
Thank you.
Thank you. Thank you Alejandro part of your question for.
For the first part.
We don't have a policy for this year.
We will see how things evolve.
The traffic so far the only discounts that would be granting to our tenants were the ones. We have mentioned in the past from July to December which was variable on passenger traffic, but what we so far we had him time to extend that four of the first quarter of this year, but as as the.
Of the epidemic evolves, we will we will evaluate.
And for airport fees, our plan has been to path to make the pass through to.
So the maximum tariff in one year you are correct, we implemented the first increase.
A week ago, the beginning of this month and we will implement the second increase.
Somewhere around January next year.
To reach the 100% maximum rates.
Could we expect another of our increase in the airport case.
What we saw on luxury.
Not for this year, you will you will experience of it probably somewhere in January.
Next year.
Okay.
The increase part of the next year.
Similar to the increase.
Yes, yes, it will be around the half of the increase was this year half of that increase will be in January.
Your line is too that the place.
Rover.
General terms flow right.
Right.
Thank you.
Thank you Alejandro.
Thank you. Our next question comes from Mauricio Martinez.
Please state your company name and ask your question.
Hi, Good morning, this is mohit <unk> from GBM.
My question I have two questions. Firstly for taking my question. My first question is regarding the debt.
The financing.
I'd like to know if you expect the core brands.
Interest rates level.
The way your financial costs.
Comparing with the with.
The current debt that the bonds of these maturing.
In June.
On the view can give us any color on the which level should be comfortable for you in terms of net debt to EBITDA.
The forward that would be my first question Andrew.
And the second question on is on the <unk>.
On the cost reduction on that.
We saw.
This quarter.
We saw impressive free cash.
Cost cutting.
The results.
How sustainable do you expect these cost reductions to be in the net in the next quarters.
And.
As of the traffic levels starts to recover do you expect these cost levels to maintain that will be my two questions. Thank you.
Thank you Marty as Johann I'll answer the first part for the bond issuance. The specific terms of the bond and our scale of being analyzed but we would expect and issuance of about three three and a half million billion, a 3000 500 million of.
<unk> thousand would be used to refinance the bond and 500 million to fund. The addition of Capex under the MVP.
We expect the interest rates to be very similar to the ones. We currently have.
And regarding the second question on the sustainability of our.
The cost reduction measures.
In the first quarter of this year, we will be having our annual reviews on some of our contracts such as cleaning.
The security.
The securities.
On labor contract Social circle, the as you should expect.
I believe some inflationary increase in many of those line items.
However.
Some sort of in terms of head count we believe the limit of prepare accounts. So it should be maintained the irrespective of the traffic recovery expected.
In the.
2021 2000.
2020 and regarding electricity.
Certainly.
In terms of.
Do you know what consumption last year on an annual basis, our consumption was reduced around 33% year on year relative to 2000.
Sure.
On a 29 towards the 2019.
Some of that consumption will be.
The last.
On the traffic recovers, but we have made the lack of investment in substitute zinc for example, <unk> in many of our airports and the runways on in terminal at lighting.
So we chose it gets back to the two most of the 19 levels anytime soon.
Wonderful thanks for you.
The thing with very clear thanks.
Thanks, Keith on next question comes from the little photo of almost semi US. Please state your company name and ask your question. Thank you.
Hi, good morning, gentlemen.
And as Ralph on Ramos from Bradesco BVI.
Most of my questions have been answered.
The point, but just maybe if you can elaborate a little bit on the on this.
Restatement or are these some modifications to the previous statements.
There'll be very much appreciate it thank you.
Sure the chemical mentioned during the call those were non non.
Form the substantial changes.
Specifically to the ex beer added files the.
<unk> have been filed with the <unk> on the Bolsa.
Many of the changes if not the most.
Referred to making cross references to certain sections of the same trial.
So it's basically the last there was no change in the financial numbers.
There is no sort of social tiers of the ball.
Yeah.
And thank you and congratulations on the results.
Okay. Thank you.
Our next question comes from <unk>. Please state your full name and company name and ask your question. Thank you.
Hi, good morning.
The Allison.
Yes, okay. Thank you.
Some of the up from some of that.
Two questions.
The first one is related to the tender offer from Fintech.
Because I was reviewing the amendment filed.
Filings for the Securities Exchange Commission and it says that.
Even if you in your report.
The the been the allowed December set the they probably.
Hi.
Why all of the.
Grupo luxury elements the.
This week or the last week of January of <unk> week of February if I correct. So I was wondering you can give us more color about it.
<unk> are still ongoing or it's going to be on hold and the second one is regarding to.
What are your expectations for parts of passenger traffic recovery not only for 10 of 21 I mean.
What are your expectation to be at the same level before the pandemic because many of the analysts sets. The probably is going to take more time, but we will expect thank you.
Thank you. Thank you I wanted to ask for your question regarding the first part of the tender offer of our information. It is the same that we reported on December on our understanding of that is that they were going through the regulatory approvals.
But if this goes through.
We expect no relevant changes in AMA operations, where decision made for game.
Before the transaction on Fintech had in direct control of the Walmart a week on set that so the sales to set the shares to Fintech is mainly on the administrative matter.
But the information we currently have of the one we mentioned in December.
Okay.
And for the second part.
For this year.
So certainly we experienced a slowdown in the recovery levels in January of that's already been reported.
When you expect traffic to be tough.
So the what is the second half of the year once the sale.
The alert levels are further reduce on the VAT.
Exploration program.
As for the rollout.
When do you expect traffic this year to be between 35% to 30% lower down the 2019.
And the.
More on longer term vision is that we would expect traffic to reach 2019 levels.
The rewards the end of 2022 or beginning of 2023.
Okay. Thank you so much it was really helpful.
Thank you.
Thank you on next question comes from Stephen Trent.
Please state your company name before asking a question. Thank you.
Hi, Good morning. This is Steve Trent from Citi of can you hear me.
Yes, we can.
Okay. Thanks.
Thanks, very much guys.
I was just curious if you could.
Maybe provide some longer term color on what might be thinking about.
Outside of investments so it seems for example.
That that airport into Loon.
Or it might not be coming out of nowhere again.
And tenders here on there in the Caribbean Basin in the past you guys had maybe.
Talking about minority Stakes in some of these projects and just curious to get your thoughts.
Moving forward.
Oh, Yes, hi, and thank you for your question.
For the two luminary report Theres not much information I definitely of information that we have.
Our information from the regular abreast with the government has mentioned they have the intention to build the new airport that will have joined military and commercial operations.
What so far.
No it's not.
It's not on the interest of Walmart to get involved in in that airport and and I believe it's it's not the intention of the government the high private operators in that airport.
And then more broadly in the Caribbean Basin are of Central America, any any interest at all of our.
Got it.
Yeah. So again, we mentioned in the past where.
We were involved in the Varvatos airport process.
We are currently part of the pre qualified bidders for the concession process. However, the price has been delayed and we understand it will resume after April of this year.
Okay very helpful. Let me leave it there. Thank you. Thank you Steven.
Yeah.
Very much so.
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Okay, we will come back to the question from the phone line later on well now take a question from Alan Macias LNG State Your company name and ask your question. Thank you.
It kind of theory you out on.
Can you hear me now.
Yes.
That's my question is quickly on on business. The traffic. If you can tell us what percentage of 2020 of representatives.
Versus 2019.
And what what are you looking there.
In terms of recovery for the business.
Traffic. Thank you.
We don't have the specific figure of how much relative traffic change year over year.
Certainly with all of that one of our most affected routes last year was the Mexico to two months of rain routes, which is.
Our main route in the realm of system and.
On the traffic Index route is primarily business related.
We still see that the.
Leisure destinations and some BFR markets, specifically like from from our click on the airports are recovering faster than on our Monterrey Airport.
We'd expect the business traffic.
It starts to recover.
More quickly.
Towards the end of the year once the economic activity is ramped up in the country overall and travel restrictions from international companies are lifted we do know that the lot of corporates.
In the month right.
The task of operations in Monterrey.
Our now lots of taking place because of restrictions through corporate of travel.
From the international companies, but once those companies lift those restrictions, we should see ultimately pick up and traveling in Monterrey Airport.
Thank you and just the.
Last question.
Do you have a percentage of the traffic coming from Canada, but what percentage represents of your total traffic. Thank you.
Sure.
2019, it was 0.9% of our total traffic.
In 2020, it was 1.1% of our total consolidated of traffic.
However for the airports of see what the nickel on Master planning.
The Canadian traffic represented the buyouts.
15, and 9% respectively last year.
So that is one of the reasons why the numbers reported from this true airports in January traffics were lower than expected because of because of the reduction of Canadian travelers.
Great. Thank you.
Thank you. Our next question comes from Gabriel Hangout, Bob. Please state your company name before asking your question. Thank you.
Okay.
The call the real from Scotiabank.
Just a quick question on <unk>.
Have you seen or do you think that you might that it'll capacity coming from international carriers might be allocated into more frequent routes or even new routes origination. Thanks.
I think the lead times.
Corridors of both international and domestic are working towards rebuilding their networks that were already in place prior to Covid.
So we should expect to recover those first those those routes that have been in operation prior to the pandemic.
And afterwards, Neil routes that the we're not in operation before the pandemic.
Of that behavior is low the Blake alluded for international as well as domestic carriers.
Okay.
Yeah.
Okay. Thanks.
Yeah.
Thank you we will now attend to the question from the phone line ending H one one.
Please state your full name and company name before asking your question.
Yeah.
Remember that you may need to Unmeet yourself from Yafei line by pressing star sex.
Hello, Yes.
You hear me.
Yes, we can the okay just walk.
One quick question thinking that corporate passenger.
The market can be reviewed the structurally going forward.
Are you right now thinking about any potential changes on your commercial strategy for months of array.
Because you will call, perhaps does that incorporate the clot in the years of more BFR or how should we think about.
No no no no I think on revenue per passenger in Monterrey by 2022 or 2023.
You have a reduction of incorporate.
The travelers thank you.
Thank you for thank you for all of the question I think it's important to remember that most of the business travel of the Monterrey Airport and or in all of that in general is mostly indulge industrial.
Business related.
Expect.
That kind of business traffic not have the same impact us as the other kind of business traffic.
Monterey force for the for the near term it has been.
Focused on our big percentage for low cost carriers, we expect the trend.
And we expect that trend to continue in insurance, where you have of anything else that's out there.
Uh huh.
No no I think the same is.
Very speculative to try to assess the the structural change if any in E.
Sure.
Passenger type in the Monterrey, but we agree with the tunnel said about our probably being more industrial than on the pure lead corporate sales consultant type of traffic so the.
The actually recover as the economy picks.
As well as the benefits from the new <unk> agreements are also.
Being felt more.
Or more of evidently and on and if if anything most of the for the non Aero revenues, what what I believe would have the most impact on the next few years will be the new square footage for the new terminal. We mentioned before we are building the new terminal a.
Which will include a lot of new area for potential on non aeronautical.
The revenue.
Okay.
Okay. Thank you and the clinical follow up.
How do you think like a vendor of your investment team and the.
Hotels out of you having them today in Mexico City, how do you think they will perform going forward because of the list.
We have seen the NH hotel performing better than the Hilton Monterrey Airport.
The main reason is the brother diversified base of clients.
In the pace of of the NH you'd have crews Sheila.
The passengers of single were nice for connecting flights.
It's in the middle of the city of sorts are you.
Also have thoughts on sort of some clients that the.
Our use of the hotel's location for four of their visit to Mexico City in.
In the case of Monterrey the.
Made in 2019, the travel of the client base for the Hilton Hotel was mostly.
The international Hilton.
Works program appliance.
Since that.
Second line test has declined significantly over the year now of the hotel is also of looking for.
Domestic type of of travelers.
And we are of the process of of market from the services of the hotel to those new.
The segments.
So but in the case, we would expect to see the image to outperform the the.
Hilton Garden this year in terms of occupancy.
And of course for new projects, we're constantly evaluating other airports to see if there's potential for a new airports. So far we don't have any concrete on our project.
Going forward.
Alright.
Thank you very much.
Thank you on.
Next question comes from Ian Mendes. Please state your company name and then go ahead with your question. Thank you.
Hi, gentlemen, I mean without the known is the remainder is with JP Morgan I have two questions. The first one the actually the follow up when you're a miniature of about the truck recovery.
That you expect to be back to 19 levels by the end of sales and trading tool began towards the 33 just.
Just wondering I mean, how do you see the potential mix on your air traffic in many of that if you could potentially scheme of more leisure traffic when the compared to the to the mix of had before the pandemic and the second question is regarding your dividend policy of the so called them I think of the let's call it.
That you'll be above the weighted the dividend policy again by the beginning of 2021 are just sort of double check if you have any updates on that thank you.
Okay.
Well in the case of the deemed dividend policy.
We still have.
We are evaluating all of the year is done that look like.
But.
We still do not have had our board meeting starts would be probably announce side.
Late March prior to the annual shareholder meeting, which is expected to take place towards the end of April.
Okay.
And the traffic recovered.
And could you repeat the again your question about the the traffic recovery.
Yeah sure, it's the wider bench about traffic being back to 2019 levels by the end of 2022 I was just wondering if how do you see the mix.
Of the air traffic on the airports.
If you could potentially see more VFR and leisure routes when compared to the creep in the Nic levels.
Some of the sure we only half.
The three airports that are least short a couple of calls see what the net hall and Master plan.
So certainly we would expect a strong recovery, especially in the next winter season on the one that's starts December of this of urea and <unk> in April of next year or the Canadian West coast market and see what the megawatt on massive Glenn.
And we probably see the rate of growth in click on performing better than in Monterrey, and click on the is primarily the VFR traffic, but given the the size of some of our Monterrey Airport.
Certainly the recovery.
Uh huh.
In absolute terms.
We'll have to be driven by by the business travel.
Domestic travel as well.
The industrial airports, such as one of the raise in with Chihuahua flattish et cetera.
I think everyone.
One way or returns of business as usual I would expect the mix to the very similar to the one that we had pre pandemic.
I think what will be different is the path of recovery some segments are recovering faster than others.
For example, we know domestic travel recovering faster than international VFR and leisure is also recovering faster than the business because once we return to the business as usual you should expect somewhere the.
Similar mix than we had before.
No that's very clear thank you.
Thank you.
And Keith we remind you to ask a question from the phone line you can dial star of nine or if you have joined the call over the Internet press the raise your hands button at the bottom of your screen.
Okay.
We have not received any further questions at this point say that concludes our question and answer session.
Keith.
I would now like to hand, the call back over to Ricardo Duenas for some closing remarks.
I just want to thank all of you again for your participation in this call Grupo Manuel and I are always available to answer your questions and we hope to see you soon thank you and have a good day.
Yeah.
This concludes today's call you may now disconnect.