Q1 2021 Grupo Aeroportuario del Centro Norte SAB de CV Earnings Call
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Greetings and welcome to the Grupo airports rail north central and northern and first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note this call.
Which is being recorded I will now turn the conference over to your host Emmanuel Camacho and you may begin.
Okay.
Thank you Shirley and good.
Good morning, everyone. Thank you for Sunday night, and welcome to almost first quarter cause out from 'twenty. One on this conference call the California on.
And my CEO beautiful credits Biro CFO will be joining us. This morning, we will discuss on my first quarter 2021 resource.
Please be reminded that certain statements made here and of course, our discussion today may constitute forward looking statements, which are based on current management expectations and beliefs and there are some.
Moving to a number of risks and uncertainties that could cause actual results to differ materially.
Factors that may be beyond our control, which it will be back with COVID-19.
I'll now turn the call over to the kind of the window.
Okay.
Good morning, everyone and thank you for joining us today and I hope that all of you and your families are safe and healthy.
This morning, I will review the evolution of our business as well as our first quarter performance, but before starting our discussion I would like to highlight a couple of recent milestones and events.
First of all on April 16, we successfully completed our $3 5 billion peso issuance and the Mexican market.
Through two tranches issued jointly.
One of these tranches and what's placed us a green bond and I am proud to say that day that we have become the first airport operator to place a green bond and the Mexican market and the only one with an outstanding Green Bond and Latin America.
The majority of profits will from the Green bond will be used on solar energy projects and energy efficiency projects throughout our airports as well on other projects that reduce energy consumption.
Proceeds from the second client were used to prepay on April 19, three.
3 billion peso on our long term notes issued in 2014.
Additionally on April 21, we held our 2021 annual shareholders' meeting where shareholders approved among other matters the declaration and payment of a cash dividend to shareholders up to 2 billion peso and delegate it to the board of directors and the power to determine the amount to be paid.
Out, which will come from any accumulated earnings as well as the date or date and forms of payment and the.
And the declaration of the dividend will become effective as of the day the board make its determination.
Turning to our passenger performance during the first quarter and.
In January and February that recovery trend that we had experienced since June of last year came to a Pos and.
And then such as the second wave of contagion after the year and holidays. The suspension of flights from Canada is January 26, and their requirements and negative COVID-19 tests by the U S of incoming travelers had an impact and air travel.
In February and the level of contagion and began to recede and epidemiological alerts levels and the country decreased as well.
In March <unk>.
And your traffic showed clear signs of faster recovery with a sequential increase of 53, 4% as compared to February 2021.
Currently on the nine states. We're all my house operations once day, it's and Orange status and seven states are and yellow and one is and green.
We expect passenger traffic to continue its recovery path and the volatile months asked and agent levels decrease and the health alert levels and the state where we operate and those are our main destinations allow for an increased mobility and economic activity and.
At the end of March a total of 128 origin destination routes were in operation compared to the 140 at the end of December 2020, and 100, and 183 routes and operation at the end of December 2019.
On the cost and expense side are actually taken in previous quarters resulted in an important declining cost of airport services and general and administrative expenses of 11%, mainly driven by lower security and cleaning costs, mainly on maintenance and payroll expenses.
At March 31, our cash position was $3 2 billion passes we believe that our cash position along with cash generated from operations will allow us to meet our investment and operating obligations for this year.
Turning to our first quarter operational results.
Total passenger traffic reached three 8 million in the quarter, resulting in net decline of 38% versus the first quarter of 2020.
And the best performing airports, which had the lowest decline and passengers and recent and percentage terms compared to the first quarter of 'twenty work and so that's what is radioshack, Chihuahua and Thats Atlanta.
From a rate perspective, the rapid experienced the greatest negative impact on total passenger traffic during the quarter due to the reduction of capacity, our Monterrey, and Culiacan and on their Mexico City routes and Monterrey and Guadalajara Route.
Adjusted EBITDA reached 808 million passengers and the quarter with a solid margin of 66, 67.9%.
On the commercial front revenue decreased 38% with the largest impact on and parking restaurants car rentals and retail.
Occupancy rate for commercial space and our terminals was 87% at the end of the quarter.
During the quarter, we continued to support our tenants through our new discount program based on passenger traffic performance.
Diversification revenues decreased 16%, mainly due to lower revenues from hotel services during.
And during the first quarter of 2021, the occupancy rate of our terminal to a major collection hotel was 53% while the Hilton Garden Inn Hotel at the Monterrey Airport had an occupancy rate of 34% during the quarter.
Well, Mark and again delivered an outstanding performance during the quarter with and increasing tonnage handled of 27%, which resulted in a revenue increase of 30%.
And your input cargo operations contributed most to this growth and the quarter.
Total investments, including MVP investments major maintenance and strategic investments were 360 million patents and the quarter.
Some of our major projects underway include.
The expansion and remodeling of the Monterrey Airport terminal a.
Expansion and remodeling of the Tampico terminal building.
Expansion and remodeling of the shoe that flattish terminal building.
Modernization of the see what the Naval terminal building and works on runways, Taxiways and aviation platforms and several airports.
I would now like to turn the call over to roof, a bad player who will discuss our financial high electrical and water.
Yeah.
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 first quarter financial results.
I don't know if it got revenue decreased 31, 6% driven by the 37, 8% decline and passenger traffic.
On the iron ore revenues decreased 27, 8% with commercial revenues, having the largest impact.
Commercial revenues increased 37, 8% the categories with the largest impact to our parking restaurants car rentals and retail.
Parking revenues declined 43% and the decrease is mostly driven by a slower recovery and what's really airports relative to the average of the other airports.
Restaurants car rentals, and retail decreased 45, 5%, 36% on and 44, 4% respectively.
Well on.
On the fixed rents and participations on sales.
Diversification activities decreased to 15, 8% on.
This was driven by lower revenues from postal services, which were partially offset by an increase in revenue so Amit.
And the industrial park of 29, 9% at 42% respectively.
Total I don't know whats gone on long Island also on revenues were 1100 $90 million versus.
Construction revenues increased 62.
Zero per cent.
This is a noncash item that is required under applicable accounting standards and it.
It has no effect on earnings.
The cost of airport services, and G&A expenses decreased 11%.
During the quarter, we recorded savings on some contract services and payroll expenses and he is a result of the initiatives implemented to reduce costs during 2020.
Additionally, minor amount goes cost reached 28 percentage as a consequence of deferrals of non essential works.
On the first quarter adjusted EBITDA reached 800, and atheist vessels and adjusted EBITDA margin was 67, 9%.
During the quarter, we recorded an increase in the major maintenance provision of $63 eight per cent to $78 million versus.
This reflects increased future major and minor and works under the new and the Pea that was approved by the authorities last year.
During the quarter, our financing expense was 33 million pesos and consolidated net income was 416 million passes.
Cash generated from operating activities from the first quarter amounted to 736 million and cash at the end of the quarter.
$3 2 billion passes.
As mentioned before following the issuance of the $3 5 billion peso five and seven year debt securities well my prepaid the 14th month with a principal amount of three vessels.
As a result, the majority the maturity profile and that's what's extended with no significant maturities due until March 2023, and the amount of $1 5 billion pesos.
This concludes our prepared remarks.
So now let me please open the call for questions.
Sure.
At this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your kind of flow.
A confirmation tone will indicate your line is and the question queue.
And we're starting to do you like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Our first question is from Alan Garcia with Bank of America.
Please proceed with your question.
Hi, good morning, and thank you for the call.
Uh huh.
Just two quick questions I guess the first one is if you can.
And like what percentage of your maximum average be reached during the quarter and.
And what percentage do you expect to reach during the year.
Yeah that would be my two questions. Thank you.
Yeah.
Okay.
And we expect that for the full year.
The macro towers and recovery will be around 95%.
And on average four quarter hallmark airports.
And the first quarter and slots and slight lift slightly lower from that evens.
Even absent the increase and ties that leans momentum opioids and the middle of February.
And so so basically you have half of the quarter.
The effect of the tariff.
Increased to passengers and two airlines.
And we will see that impact moving forward.
So and so that's why overall for the year it will be batteries on the first sponsored.
And just be mindful that the.
Price increase that we implemented was about half of the power.
And increased and was it last year under the MVP revision. So we would expect reached close to 99%.
Recovery of the maximum tariff.
The first quarter of 2022, when we pass through and the other half a day increase.
Thank you.
Yeah.
And our next question is from Alejandro Zama corner with Credit Suisse. Please proceed with your question.
And it got a little kind of Grupo came on and thank you for the call.
I guess I'm most question Louise.
And what's your what's the latest on the potential and thereafter from DIC.
I understand that this is on external topics two on that.
I also understand that the best practices committee at on that.
Most of the phase and the.
The author to give their opinion.
And so.
And any color around this would be very useful.
Thank you on the handle for your question, we don't have any additional information on other from the one that we published on December last year.
And as I mentioned that think they have the intention of acquiring up to 40%. That's an additional 25%, but since then we don't have any additional information at the moment.
Yeah.
Okay. Thank you I'm just my second question if I may.
Domestic airlines.
And I understand that.
It's a relative on 30 944 on my strategy to the.
And the airlines have stated their intention to restart operations although.
And yes. They are also starting a chapter 11 process and so have you had any discussions with the airlines.
And to restart operations.
And your future.
Thank you.
Thank you Alejandro yes, it's true and so you had mentioned yesterday that they're going through chapter 11, and we don't believe there's any impacts where all my and <unk>.
First of all that day, they stopped having operations in December last year, a day. They didn't have any route that was covered only by themselves. So the impact has been the.
The seats that they have been.
Releasing that the competition has absorb them really rather quickly so even though <unk> had and make our exposure to enormous around 11% but.
It hasn't been material because the other airlines have captured all of that Oh.
The seats available and the second part and we don't have we didn't have any exposure to interject and any economic exposure to enter yet.
Okay. Thank you.
Okay.
Our next question is from Pablo <unk>.
<unk> <unk> with Barclays. Please proceed with your question.
Hi, Good morning, guys and thanks for taking my question.
Wanted to pick your brain on the announcement on the call ladies and light on Mexico of its.
It's split expansion going forward.
We're seeing that the Mexican market has recovered quite strongly and have you talked to I don't makes it go on without he's already on their expansion plans and and how active have you been with visa and 19 are true.
Going to open new routes and or what type of market do you seeing day can.
And they can work with you to to use that new fleet that is entering the market. Thank you.
Sure.
We have continued volume growth we.
And we believe dominion on rates.
And Mexico, including Polaris side on Mexico.
Certainly in our airports.
Recovery.
And has been driven primarily by <unk>.
Relative to Kalydeco and they don't Miss because those so we welcome this type of use.
We have not yet.
<unk> discussed and strategic routes, where they can deploy.
These capacity book, but certainly positive.
Before or our airport group that they have excess capacity going forward would you still have to deployed somehow so we would expect.
A faster recovery and the second half of the year of these two airlines relative from what they have been doing simple.
And then you can start with me, we got but at this time, we have not yet identified specific routes.
And inquiries or their offerings.
Okay perfect. Thank you very much.
Okay.
Next question is from Peds and merger I would surmise that please proceed with your question.
Hi, Good morning, and thank you for taking my questions and have a couple of them and the Switzerland Gordon on.
Drew expectation about recovery last quarter, you mentioned on.
Do you expect the recovery to Tony can choose but it seems that even airlines and and a couple of minutes ago buoyant mentioned that they were expected to 10, and 23 or maybe 2020 four.
So.
I was wondering if you can give us some more color about that and on the second one is regarding June and construction costs are going to see us and Chris do instruments from one.
More likely like we have seen and this quarter.
Thank you.
And did it start with the second part of your question on construction works.
More or less.
<unk> 300 million per year and.
Slightly higher perhaps he's gonna be major.
And as a reminder, it was worse, which switch.
This does not flow through the construction income on costs.
So in order to reach our $2 5 billion commitment more or less for the full year and construction possible test and one mouth around 2 billion versus so so for the next quarters, you would have to see on inquiries.
We have closer to that 2 billion mark of construction and income and construction works.
And then regarding the recovery traffic I think that our base case is that we would reach pre pandemic level, it's around 2023.
We actually think there might be upside to this.
And timing because of our larger exposure to domestic travel as opposed to international traffic.
But.
I think it is.
And if the patients too.
And the original expectations or belief that three three and we would be reaching and prevent any limits.
Okay.
Really helpful. Thank you so much.
Yeah.
And our next question.
And and dressers erode or with UBS. Please proceed with your question.
Okay.
Hi, Good morning. Thank you very much for taking my question I just have a follow up on that second question.
And I, just saw better and check level then.
That's right.
Sure.
If you could tell us like there was already some recovery on.
Alright.
Of course, you'll have to check and I'm not yet.
And my second question and I can.
Regarding sales and listen.
And and in the Mexican price and valves and downgrade of Mexico by the FAA AIDS and category killer So on.
And this would have liked.
Clarification on that it seems like more price.
Our I mean Barry.
On a potential and I guess is impacts and expected that.
Thank you.
Okay.
And the truth.
So.
The language.
Non <unk> book, but just to recap on the first question regarding the corporate travel and recovery.
Yes, if you already saw a 60 day in mind and that was.
Hum somewhat positive rebound and traffic down and the first month of the year.
Oh no no no.
Yes.
March certainly and then what's the benefit of having the Easter holiday.
Volume in the last week of March and the first week of April.
So for example on the case of our Monterrey airports.
On the routes that experienced growth was the most and based on corn and airports and so really the mantra and can pull right.
Whereas the Monterrey, Mexico City continues to have significant declines year on year. So we have seen the recovery in.
On the domestic leisure routes and we have seen recovery and VFR routes such as for example, could you have done and why now and Chihuahua why on that.
On the corporate travel has yet to recover we would expect.
And the corporate demand that we observed which is to a large expense when we qualitative look on our.
Corporate travel.
Being more weighted to the recovery of industrial production and.
GDP and clearer.
GDP growth.
But right now our leisure and VFR and what's driving the net recovery.
And as for the our expectations for the half double a audits.
It's in process right now.
We are it is a sensitive issue for for the industry and actually this morning, the director of the facts came out saying that he is very confident that we won't we won't lose category one.
And so so we will stick to that and we think we're positive that we're going to come out from this audit and good terms.
Oh, that's great. Thank you very much.
Yeah.
Our next question is from Gabriel and will sharp with Scotiabank. Please proceed with your question.
Hi, good morning, Thanks from the for the call. Just a quick question can you give us a bit of color about the parts that you have been giving to tenants and how they have been affecting your commercial revenue.
Sure.
We have a program that started in the second half of last year.
Discounts based on the.
The percentage decline of traffic and.
And the Oman airports.
We are.
And just as the discussions with payments in January and February.
And Phil.
March when we reach it.
And the agreement with.
The major tenants not necessarily all.
To what extent.
The net program.
However, the terms of the program and now have a lower percentage decline and the previous brought on last year.
Sure.
And it would be our expectation.
And phase out these these.
And support programs over the second quarter of this year.
We have and pass the discounts and the first quarter.
Our commercial revenues would have probably been about 7% higher than we reported.
Okay. Thank you.
And also just as a reminder, if anyone has any questions. You May press star one on your telephone keypad doing so and ensure that you do joined the Q&A lease.
And our next question is from one pumps with Bradesco. Please proceed with your question.
Hi, Thanks for taking my question, which is more on the legislative side the.
Mexican and Congress recently passed a bill that will prohibit outsourcing and insourcing and except for what qualifies as a specialized labor.
And what do you think is the potential impact on our operating and expenses if any.
Thank you Juan for the question.
We have and working on it and it's still work in progress.
We know that some of our services that we have currently have delay like cleaning and security and will still be considered and outsourcing.
We're still working on the analysis, but we believe the impact on the cost side on Walmart will be non material.
Okay perfect.
Okay.
Okay.
And we have reached the end of on a question and answer session and I'll now turn the call over to Ricardo Duenas for closing remarks.
I want to thank all of you again for participating in this call and room for Manuel and I are always available to answer your questions and we hope to see you. Soon thank you very much and have a good day.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
Okay.
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