Q4 2021 Grupo Aeroportuario del Centro Norte SAB de CV Earnings Call
[music].
Greetings and welcome to the Grupo airports, what else that central North to Oma's fourth 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 that this conference is being recorded.
I will now turn the conference over to our host and Manuel Camacho Investor Relations Officer. Thank you you may begin.
Thank you Leo good morning, everyone.
I'll come to how much fourth quarter 2021 earnings conference call.
Debating today, our CEO and.
And CFO .
Got it.
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.
Factors that may be beyond our control, which includes the impact of COVID-19.
I will now turn the call over to Ricardo Duenas for his opening remarks.
Thank you Manuel and good morning, everyone. We appreciate you joining us today, let me begin by saying that I am pleased to deliver strong results for the quarter, notably our passenger traffic performance our ability to expand revenue generation across all of our business units on our cost discipline have resulted in remarkable resorts world highlight.
In this call.
I will first discuss our full year 2021 highlights and then I will move on to our meaningful quarter 21 results.
Our 2021 results reflect a year of strong and consistent recovery in our operational and financial funds.
In the year, our passenger traffic grew 63% to $18 million in all our airports are compare as compared to 2020.
And stood at 22% below 2019 levels.
Notwithstanding our adjusted EBITDA was 5 billion pass us only 8% below 2019 with a record high and adjusted EBITDA margin of 73, 7%.
I am proud of all my ability to have delivered outstanding financial results each water outperforming our own expectations, despite still prevailing unprecedented challenges worldwide.
In 2022, we benefit in 2021, sorry, we benefited mostly from different domestic leisure markets as well as regional VFR related destinations for example, our Monterrey to 10 comes out was 6% above 2019 levels. It is important for me to highlight that by <unk>.
Half of 2021 we observed improved in imaging in business routes.
To give you an example, our Monterrey, Mexico route from a minus 50% in the first quarter of 'twenty, one to a minus 20% in fourth quarter 21, whereas the same quarters in 2019 and she wants you. That's what has allowed us to Mexico city are already above 2019 levels.
The controversial fund our revenues performed well a higher number of passengers served in our airports allowed us to increase parking revenues by 72% versus 2020.
In terms of commercial spaces, we benefited from improved sales performance of our tenants with revenue share from having grown 76% versus the previous year.
Importantly, our financial performance, coupled with clear skies ahead, and allow us to make significant dividend distributions in December 2021, and January 2022, which are aligned to our objective.
And our capital structure.
The cumulative distributions on December and January amount over $6 3 billion pesos and represented a yield of approximately 12%.
Turning to our fourth quarter total passenger traffic reached $5 4 million during the quarter, which was 5% above our third quarter performance.
In absolute terms, one survey master plan.
And what are the main contributors.
As compared to the fourth quarter of 2019 total passenger traffic stood at 90%.
The airports that that passenger copper recovery. Once you. That's what is most atlanta and rate north of that.
In terms of outperformance versus the fourth quarter at 19, those that experienced the greatest the greatest traffic growth in volume terms during the quarter were Monterrey on it's kind of cool in Dallas and San Antonio Route.
What is on its Mexico City route and mass Atlanta on its the one are up.
Finally in January 2022, our passenger traffic recovery level decelerated due to uncertainty caused by omnicom body and the rise in both of the cases at the beginning of the year.
We expect passenger traffic to rebound during the following weeks as contagion levels continue to reside.
From February 1st 220th of this year passenger traffic has decreased 13% versus the same period of 2019 and has improved in percentage terms week after week.
Turning to our fourth quarter operational results, our passenger traffic performance during the quarter, coupled with revenue expansion of our different business units on a cost discipline allowed us to deliver strong operating results.
Justice EBITDA increased 9% versus the fourth quarter of 2019 to one 5 billion with a margin of 75%.
On the commercial front revenues increased 57% compared to the fourth quarter of 'twenty.
<unk> revenue doubled versus 2020, we observed higher penetration levels in long stays mainly in Monterrey, Ciudad Juarez and Chihuahua.
These reaffirms the higher than observed in the business traveler segment.
In addition, restaurants retail and advertising also contributed most of the growth.
Occupancy rate for commercial space in our terminals was 87% at the end of the quarter compared to 85% in the third quarter, reflecting a steady recovery path.
We're suffocation revenue increased 53% our hotel services on all my category contributed mostly to this growth.
During the fourth quarter of 2021, the occupancy rate at our terminal to NH collection Hotel was 78, 3%, while the Hilton Garden Inn Hotel at Monterrey Airport about 61%.
Oh, My God I got had another outstanding quarterly performance with an increase in tonnage was off 26%, resulting in a revenue increase of 20% versus fourth quarter of 'twenty.
Revenues from handling and custody around import cargo drove the increase in revenues.
On the capital expenditure front total investments in the quarter, including M. D. C investments major maintenance and strategic investments were 752 million passes we continue with a major expansion and remodeling of the Monterrey Airport terminal eight we expect to open an expanded landside area in the spring.
<unk> of about 9000 square meters.
Additionally, we're working on the following major projects the expansion and remodeling of this U S wireless terminal building.
Expansion and remodeling of the Tampico terminal building there.
The reconfiguration of the mass Atlanta terminal building.
Platform bracket refrigeration at Monterrey Airport.
Modernization of the C terminal building.
Green investments related to solar panels in our 13 airports.
And with that I will now turn the call over to hope that if they go over more detail on our financial highlights for the quarter.
Thank you Carol good morning, everyone I will briefly review our financial results then we will open the call for your questions.
Turning to almost <unk> larger financial results.
I don't know if skilled revenues increased 69% relative to <unk> 60.
62% increase in passenger traffic.
Total revenues increased 56%.
With commercial revenues being the largest contributor.
Commercial revenues increased 57% the categories with the highest growth where parking restaurants retail and advertising.
<unk> revenues increased 2% due to the increased penetration in the us.
Monterrey, Ciudad Juarez Chihuahua airports.
Restaurants, retail and advertising increased 52%, 65% or 93%, respectively, mainly due to the end of the first warranted during previous sponsors as well as higher revenues from revenue sharing.
The diversification activities increased 53%.
I don't know, let's call it who knows when it will be called readiness were twofold.
And the larger group.
66% versus last quarter of last year.
Construction revenues increased 64% as a result of increased investments.
Because of airport services and G&A.
<unk> expense increased 24% relative to the fourth quarter of 2020.
Mainly due to an 18% growth in payroll expense, which is the result of changes in labor religion, physical during the year and higher expenditures in electricity.
And all of our line items as a result of the overall higher activity in our airports.
The less it's worth highlighting that our cost of airport services and G&A expense was only 2% higher than that of the fourth quarter of 2019.
Almost fourth quarter adjusted EBITDA reached one 5 billion pesos.
Adjusted EBITDA was 75%.
Our financing expense was 30 million passes which was largely benefited from them to change the game and converts one FX loss in <unk> 'twenty.
As a result consolidated net income was one.
Yes.
Once financial position remains strong.
Cash generated from operating activities in the fourth quarter amounted to $1 3 billion vessels.
At the end of the quarter stood at 6 billion doses.
During the quarter, we paid 2 billion peso vigilant.
Total debt amounted to $7 7 billion pesos, which includes short term those of coupons selling diesel vessels.
Our net debt to adjusted EBITDA ratio stood at one four times at the end of the quarter.
This concludes our prepared remarks, operator, please open the call for questions.
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Our first question comes from Alejandro stomach corner with credit Suisse. Please state your question.
Yeah. Thank you I really kind of a room for my money and thank you for taking my questions.
A quick question on the I don't know if you call it.
Sorry.
Just can you confirm that you have already incorporated.
Workers for.
For 2022.
MBP negotiation with.
I understand what that was.
I shall be implemented in 2021, and so and.
Then she sees when they are being charged.
And what we expect.
Margins.
<unk>.
Yes. Thank you. Thank you Alejandro so yes as everyone remembers we were approved around a 13% increase in REO tariffs.
We said we were going to increase in two tranches, we implemented the one last year and in January It was executed in February and that was for 10%. This year with the same thing if we increase them by slightly above 11%. We've had that a couple of weeks ago and will start being.
Executed this month.
And as for how much we will be reaching the maximum tariff it would really depend on what will be the inflation for this year.
Okay got it. Thank you on that same line too.
Sure.
What can we expect for margins.
Are these year after reaching the.
The old times high margins that we saw in the last three quite a bit I remember that in the last conference call you mentioned that margins around 75% could be sustained it yeah.
What does this would mean that the higher tariffs could be upset by a gotcha gotcha.
Sure.
Now, we believe that that 75% I would mention is sustainable going forward.
Yeah.
Thank you.
Our next question comes from Guillermo Mendez with.
J P. Morgan Please state your question.
And he got a little room for morale Ah. Thanks for taking my question I have two questions. The first one is in terms of traffic.
A call on the let's call it makes them about being back to 19 figures.
By early 2023 does what it says that we try to see if that's still the case, if all the Corona impact.
In fact, the your expectations by any means and the second question in terms of kept home location.
Should we think your dividend policy going forward, especially considering your low leverage numbers. Thanks.
Okay. Thank you, yes, we expect passenger traffic to <unk> from 3% to 5% below 2019 levels for this year. However.
However, we expect by the third quarter of this year passenger traffic to be above that in the same quarter of the second of 2019 and as for the dividend we expect to maintain our 2000.
Two 2 billion personal device.
And were narrowed dividend that we've maintained in the past.
Got it thanks.
Okay.
Our next question comes from Javier <unk> with GBM. Please state your question.
Oh hi.
Hi, Scott.
Cool.
Thanks for taking my question.
It's a follow up question.
We just won a.
Regarding the Petro location and you mentioned during your remarks that you.
We're seeking to optimize the capital structure of the company.
I was wondering.
Terms of leverage and given the changes that you've made to your to your bylaws, which.
Each level of net debt to EBITDA or any other metric.
You might have.
<unk>.
Do you feel comfortable with close to 2022.
Yeah.
Sure.
This is Russell.
So the numbers of year end 2021.
It reflects the $4 3 billion peso dividend that was paid in the middle of January .
So.
In addition to our base case expectation.
But I'd say more than that will give you those of two vessels with regard to medicine.
We would estimate that by the end of this year.
Around.
One times net debt to EBITDA.
Peaking around the summer Oh, you know in June are their own local Japan's yes.
Adjusted EBITDA.
Yeah.
Okay. So what does it mean that you.
You are not seeking to or looking into increasing depth for the company.
Yeah.
Basically the fact that you mentioned is basically just to core printing.
What has happened over 2022.
That is correct.
I think it will be.
Depends on the use of proceeds of financial leverage.
Without any acquisition.
And size.
It's going to be harder.
Harder to continue increasing our leverage.
Thank you. Thank you very much for electrical and congratulations on the great.
Thank you.
Yeah.
Our next question comes from Rodolfo Ramos with Bradesco. Please state your question. Thank you.
Good morning, gentlemen, thanks for taking my question.
My question is a follow up on the traffic one.
Using current strip.
To hear that.
No the Monterrey, Mexico route because it's already gone from 50% to 20% below pre pandemic levels, but I just wanted to get a little bit more color on what you've seen in January February .
We saw that also GAAP announced.
I'm, assuming you'll see your Monterrey route.
So im just wondering how you're seeing these other legacy business routes like Monterrey Guadalajara, perhaps.
So far this year.
And any color that you can provide on new routes and then I have a follow up on some serious question.
<unk>.
Sure Hi, Paul So generally.
We saw a deceleration on <unk>.
Generally speaking in all of our markets.
We attribute that to omnicom varieties, which are maybe make people.
It looks like as much as they have been doing towards the end of the year and also we had some cancellations of rides are resulting from lack of crews.
We're subject to contingents and was able to talk to you.
Sure.
In February we saw a normalization of those events. So so for the first one the data February we're seeking.
We're looking for.
The large improvement.
With respect to business routes.
We do see improved.
Improved performance over the coming.
Weeks and months.
I mean, we see that there are events like transfer some of the conferences that are already planned, especially for for the summer for in person events and I think that is an indication that.
Corporate travel is starting to pick.
<unk> got to watch the summer on the phone all the months. So we will look at that business.
This allows us to have a much better performance than what we saw last year.
Thank you.
A follow up on the tonnage on the Mac sometimes question.
So huge.
You mentioned, you're implementing them, 11% increase this year.
So.
Taking that into account how much would you be short.
Do you want to look at maybe a sofa.
<unk> growth this.
This year, how much short you would be to reach the maximum tariff this year just to see what the.
Upside in terms of revenues.
Yeah. So.
So last year.
For 2021, we ended up.
Around 92, 1% recovery of the maximum tariff.
Despite the 10%.
Inquiries that we implemented in February obviously.
<unk> of that.
What's the result of unexpected inflation towards the end of the year, which as you all know and Theres all of us around seven 4% for the year or so so that's H and lots of the nominal increase.
We have done for the year as Kevin mentioned.
In the middle of February we already implemented another 11% increase in passenger charges.
To the extent that inflation receipts that warrants a mid single digits I think that we can get to around 97% recovery for 2020.
Perfect. Thank you very much.
Our next question comes from Pablo <unk> with Barclays. Please state your question.
Okay.
Hi, Thanks for taking my question just a follow up on the 75% EBITDA margin level that you mentioned.
I Wonder why.
Why do you think this is a sustainable level considering the traffic for example in the fourth quarter is still 10% below the pre.
Pre COVID-19 and I'm I'm I'm, assuming that there should be some operating leverage in 2022.
Maybe are you expecting higher cost per passenger for some reason or a one.
Why shouldn't we expect a slightly higher.
Martin, giving them to traffic as you get to recover I'm also thinking that these.
Kind of passenger.
Thinking about the corporate passenger car, it's a higher commercial revenue per passenger profile. So if you can.
Provide some color.
Color will be appreciated thank you.
Sure. Thank you Paolo.
We would expect a.
Margins to be slightly north of 75% for for.
For this year.
Which would be around a 200 basis point improvement relative to the overall margin achieved in 2000.
'twenty one.
We do see some margin expansion.
In terms of cost.
Yes, we're experiencing inflation in some of our cost.
Cost base.
Such as.
Energy.
Labor and maintenance.
So I mean, there might be some slight margin expansion given the operational leverage.
But we would.
I think it will be.
More than a couple of hundred basis points above the full year 2021 11.
Okay. Thank you.
Our next question comes from Philippe Nelson with Citi. Please state your question.
Hello, everyone.
And thanks for taking my question I have two questions on my side. The first one is.
If you can refresh my memory, a little regarding the interplay between oil prices and.
Airport tariffs if there is any correlation in what would be in an index for us to to look at if there's any.
And Oh I'll I'll do the next one falling.
So in terms of all of the direct correlation between a poor tariffs on.
Uh huh.
And oil prices.
No direct one.
Under the contractual regulatory framework, where tariffs increase.
The maximum charge that we're allowed to charge can.
Can you please.
Based on the industrial producers price index.
Excluding.
The oil component.
So.
The increase in maximum target will not be linked to oil prices.
Okay. Thank you and the second one is regarding our maintenance provision.
I'd like to hear a little.
Why we see so much a decline.
The year over year at maintenance.
Maintenance provision.
Especially when you're you have a pipeline of Oh expenditures and are the competitors also talking about increasing maintenance expedient expenditures to help the customer experience.
Sure.
Our maintenance.
Our provision actually.
For the full year increased around.
30% from.
Hi.
392 million to 512 million vessels.
Dr reflects in.
In our case.
A greater amount of major microdose, which primarily bolt.
Statement of runways, and Taxiways and works in David surfaces.
As part of our committed MVP investments for the 2020 through to 2000.
25 periods.
Thank you gentlemen.
Okay.
Clarify in the fourth quarter of 2020.
We already have.
Its tonnage made provisions towards what was the new MVP.
Bruce Bye bye.
Authority at the end of last year. So our last quarter of 2020 are reflective of the increase in provisions.
Both of the new plant that was supposed.
Towards the end of last year.
Okay, great. Thank you for the answer.
Yeah.
Yeah.
Thanks, and our next question comes from Edson Munguia with.
Go ahead please.
Hi, Good morning, Thank you for taking my questions.
Just talking about similar because I didn't get it.
It took me about maintaining its position.
I'm just trying to understand.
It's a big maintaining pretty soon it's gonna be number.
Yeah.
But you are feeling comfortable with.
That's true.
Because I didn't I didn't quite get it that the explanation.
Second question is about Oh Wow.
Sure.
You have a pipeline of other.
Coffee makers here of mines.
Establishing them into March in Oklahoma.
Right.
All countries in automotive pardon me.
Canada, our or something related but.
But I don't think it could be.
The fourth quarter.
Okay.
So starting with your last question.
We do have.
A dozen conversations with airlines to.
Increase our productivity international connectivity of our airports with only months away, but also other unfortunate, particularly the leisure destinations that we'd have in the in the Pacific Coast.
At this time.
<unk>.
More of those leads that we have are with existing airlines.
Such as Idol, Mexico varieties and divide the loose.
To expand service into into the U S. A but I mean, we as I mentioned currently attend.
Events and trade for us and Uh Huh.
New lease.
New airlines into our airports.
With respect to your first question.
The connection was a bit noisy so you could repeatedly.
Sure.
And then my team's provision.
I was trying to understand in which the level of maintenance provision are you comfortable.
On average from 2019 to 21.
On average.
It's around 400 million pets on that bridge.
Trying to understand.
Some level of break down it seems like you're comfortable with.
It's not necessarily what we are.
Comfortable with its revenue.
Accounting standards, we need to make provisions for expected.
Worse in David surfaces.
In the next few years the scope at certain disclose right.
But I think that given our committed to investments in the MVP.
The 2021 level.
It's a good thing you gave or Florida.
A few years.
Okay really helpful and congratulation on the results.
Yeah.
Thank you.
Yeah.
Thank you and just a reminder to ask a question. Please press star one on your telephone keypad to remove yourself from queue. Please press star two.
Our next question comes from Gabriel Himmelfarb with Scotiabank. Please state your question.
Hi, good morning, Thanks for the call.
Quick question about new route opening.
You give us a bit of color about.
Do you think they are they believe they're going to be.
The opening of the year for our international It seems like for example, Canada.
Canada do you think there is more.
Mood openings, this year or more demand coming from Canadian <unk> and.
Canadian travelers and a second question.
It's about the new will be open from a month away from I believe.
I think that the.
The network group shifting from.
It Didnt predict model toward bypassing Mexico City airport, and creating new routes.
Oh, the airport, rather than Mexico senior like months at Monterey that go.
Could generate with long haul routes. Thank you.
Thank you.
Yes.
So for the for the Afore. There first question New routes, Yes, we will incorporate 11 origin destination routes out of those 11 five are brand new routes.
Out of those so far five or national and the rest are international during the first half we're going to open those international Arctic Canada. So yes, there. We believe there is still more room to improve.
We need to improve to Canada and ask for your your second question.
We cannot speak.
On behalf of airlines, but it is definitely our intention to try to become an alternative for the saturation that we're seeing in the metropolitan area of Mexico City and so so yes, that's the conversation we're having with the airlines trying to make regional hubs are out of our other.
Yeah.
Okay.
How many weeks to Canada.
Okay.
There.
No sorry, it's three new routes so far okay as of today.
Okay. Thank you. Thank you very much.
So I don't know I don't think international ones, three dart to Canada to our to the U S and one to Cuba.
Okay.
Okay. Thank you.
Our next question comes from Juan Ponce with Bradesco BBA. Please state your question.
Alright. Thank you. Thank you for taking my question just a clarification regarding the adjusted EBITDA margin expansion you expect in 2022, I don't know if I heard 200 bps, but just wanted to make sure.
Uh huh.
Sure.
Second in for full year 2000.
'twenty, one we have 73, 7% margin.
Total.
Yes.
Currently not more of the docs would be the expansion. So we would expect for 2000.
He wants to.
Okay. Thank you very much.
Yeah.
Our next question comes from Guillermo Mendez with J P. Morgan. Please state your question.
Hey, guys. Thanks for the follow up question.
In terms of crude strategy you guys kudos makes it a broker or bothers airport.
Just wanted to double check.
In what situation would be current auction beam.
If you guys might be interested in your other regions to checking in Brazil. Thanks.
So some of the programs processes for us.
<unk> has seen.
They still holds.
Quite a few months.
And we continue to be interested in it but at this time the governmental Barbados persons.
Provided.
<unk>.
When an ease the process would be restarted.
And with respect to other regions.
Certainly we're interested in Caribbean.
South America Central America.
And because of Brazil, given the structure of concessions whereby its group of several airports some of them quite large some of them very small.
We have decided not to.
Participating in the loss of some processes.
Okay very clear thanks.
Okay.
Thank you. Our next question comes from Federico the lofty with Lillian Please state your question.
Hi morning.
Okay.
Thank you for the culture at a.
A couple of question the first one who switched to flow to.
Check when you mentioned the increase in debt is yeah.
This 11% each nominee.
Thin or anybody else that will stop that.
Yep.
It's nominal terms.
Okay.
Yes.
Versus the tires in.
2021.
Perfect perfect.
And the second one is commercial today than it was when they ship.
And you are almost flat again for 2019.
Or perhaps the minus 10%.
Do you see or do you have enough capacity to continue to increase commercial revenues. Even if you go to same level of 19 are in the in the third quarter of <unk>.
Yeah.
Yes, we see.
<unk> room to improve our.
Commercial will keep us the ratio at the end of the last year was.
87%.
Before the pandemic.
Louis.
Well above that probably for the end of this year, we would expect to put 2022 with respect to Windsor Islands, 92, or 93% of that keeps us the ratios.
So greater occupancy.
Improved passenger demand.
On the revenue sharing.
The conditions that we have with tenants.
<unk> will provide.
A good.
Support to increase our commercial readiness.
And I'd also say that if I, if I may add.
What are you seeing in the reason you're seeing the same commercial revenues with less traffic was also the result of some of the measures that we've taken in the last couple of years that probably hasn't been seen duty to Covid and then make some of those measures for example is.
We conducted some competitive process.
In the new and new commercial locations.
We took direct operation of VIP lounges.
We optimized some of the contract by increasing the percentage of revenue.
Et cetera.
Okay.
And the last question if I may.
Industrial services, you have a champion in the fourth quarter in revenues against that airport that is a new.
Yeah well.
Yeah.
A new plant there.
No I wouldn't have any selling day.
That's your lunch.
I would like to Bruce do you have in the business.
Okay.
So yes.
Some additional wins.
For full quarter as opposed to a partial quarter of casing.
In the third quarter, we're currently.
Buildings, one other industrial warehouse of.
The 10000 square meters.
And after that.
It's a new construction, which is currently being.
Done.
The park would be at around like 60% of its capacity. So so there's still some room to grow as well, even if a couple of years.
Okay. Thank you so much.
Thank you there are no further questions at this time I'll turn the call back to management for closing remarks. Thank you.
I'd like to thank all of you again for participating in this call a roof Manuel and I are always available to answer your questions and we hope to see you soon thank you and have a good day.
Thank you. This concludes today's conference all parties may disconnect have a great day.