Q2 2022 Grupo Aeroportuario del Centro Norte SAB de CV Earnings Call
Greetings and welcome to the Grupo airports airports Dorian Rio del Centro Norte de Ooma second quarter 2022 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the call.
Please press Star zero on your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Emmanuel Camacho Investor Relations Officer. Thank you Emmanuel you may begin.
Thank you Paul and good morning, everyone welcome to Wamus second quarter 2022 earnings Conference call.
Today, our CEO and.
And CFO for better scale.
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 be some theory, including factors that maybe beyond our control.
I will now turn the call over to the deadlines for yourself with your remarks.
Thank you.
Everyone. We appreciate your joining us today. This morning, I will review, our second quarter operational performance.
First of all I am pleased to inform that Walmart neighborhood.
<unk> performance during the second quarter of 2022 with all time highs.
Aeronautical revenues non aeronautical revenues adjusted EBITDA and adjusted EBITDA margin, which reached 77, 7% I will now briefly explain how we achieved these results.
During the quarter total passenger traffic reached five 9 million, an increase of 30% versus the second quarter of 'twenty one.
Compared to the second quarter of 2019 total passenger traffic stood at 99%.
Our passenger traffic performance remained sound and consistent with our expectations and increased business activity and a better performance from the business travel segment.
During the quarter the routes that contributed most to passenger traffic growth in volume terms versus the second quarter of 2021 were Monterrey on its Mexico City and what are the heart of routes and so that's why as Chihuahua.
Mexico City route all of them considered maintenance business ramps.
As a result of the strong passenger traffic performance as well as an increase in.
Oh, I'm glad we're not a hotel or earlier this year aeronautical revenue grew 33% in the quarter versus the second quarter of 'twenty, one to $1 8 billion pesos.
On the commercial front revenue increased 49% compared to the second quarter of 'twenty one.
<unk> revenues increased 53% versus 2021, mainly due to higher penetration levels in Chihuahua Monterrey as a result of higher business been amazing in those airports.
In addition, restaurants retail and car rentals also contributed most of the growth together with VIP lounges.
Richard rate for commercial space in our terminals was 89% at the end of the quarter.
In terms of commercial development and following up on our strategy to directly operate VIP outages during the quarter. We started construction of five new all my premium lounges in this U S wireless Lan.
People and see what the naval airports.
In addition, our alma lounges and walk you raised a couple of comments Atlanta, and San Luis Potosi airports are being remodeled we.
We expect to complete this project in the first quarter 2020.
After conclusion, we will operate a total of 13 I'm allowed us in 11 of our airports.
Diversification revenues increased 43% led by an outstanding performance in our hotel services well my cargo segment.
During the second quarter of 2022 occupancy rate at our terminals you NH collection hotel was 80%, while the Hilton Garden Inn Hotel had an occupancy rate of 75%.
Today's rates compared to 83, and 78% respectively in the second quarter of 2019, which reaffirms the strong performance of our hotels during the quarter.
As a means of improving our guest experience in our terminal two NH collection hotel during the quarter, we started a major remodeling projects at the hotel.
We recondition, all X 287 zones, and we renewed public areas such as the entrance lobby and restaurant among other spaces.
<unk> has been carried out in phases in order to ensure the funding dropped the operations of the hotel and it is expected to be finished by mid 2023.
Well Mark out of will continue delivering strong results as revenues increased 43% versus second quarter of 'twenty, one mainly driven by revenues from handling storage and capacity around.
Airport.
Eric.
We have already mentioned, our aeronautical and non aeronautical revenue performance, which hit all time highs along with our cost discipline translated into a record $1 8 billion and so adjusted EBITDA, an increase of 40% versus the second quarter of 'twenty, one and a record high margin of 77.
7%.
On the capital expenditure fund total investment in the quarter, including MVP investments major maintenance and strategic investments were 784 million pixels.
In June and New 10000 square meters section in the public area of Monterrey terminal a began operation.
This represents about 15% of the additional area contemplated for the whole terminal a project.
During the quarter, we continued to work on this all of the major projects the expansion and remodeling of Monterrey Airport terminal a expansion and remodeling of issue. That's why does terminal building expansion and remodeling of the terminal building reconfiguration of the Master planned terminal building.
Platforms reconfiguration at the Monterrey Airport modernization, obviously wasn't a naval Germinal building.
With that I'll now turn the call over to Liberal credit Yeah go for more details on our financial highlights for the quarter.
Thank you Carlo.
Morning, everyone.
I'll briefly review our financial results and then we will open the call for your questions.
Turning to <unk> second quarter financial results.
I don't know if gold revenues increased 33% relative to a second quarter of 2021, driven by a 30% increase in passenger traffic.
Analytical tariff implemented in the first quarter over the year.
Non Idaho revenues increased 40%.
Oh, well, that's commercial revenues increased 49%.
They want to see where the highest growth where parking restaurants retail car rentals and VIP lounges.
Car parking revenues increased 54% due to increased penetration that you all want on Monterrey airports.
Restaurants, retail co rentals increased 61% and 5% and 40% respectively, mainly due to higher revenue sharing and the opening of a new commercial spaces.
VIP lounges increased 55% due primarily to the recognition of revenues from its operation as well as an increase in the number of users of the languages.
Diversification activities increased 43%, reflecting strong almost out of that and hotel divisions performance.
Although I don't know what to call them when they want to the revenues reached $2 4 billion vessels in the quarter and 35% versus the second quarter of 'twenty one.
Construction revenues increased 30% as a result of the increased <unk> investments.
Because the airport services and G&A expense increased 12% relative to a single White rose three one.
Mainly due to an increase of 16% in payroll expense, which results from the effects of the changes in labor relations in Mexico's.
Were implemented in the second half of 2021, and the incorporation of new business lines, mainly that I read the operation of the one that bring him around this.
Minor maintenance and basic services group due to overall higher activity in our airports.
We also supply school as well as we recorded the direct cost of operations of the lounges.
The major let those provision was 298 million vessels compared to 851 million into Q1.
The increase is mainly attributable to the inflationary effect of the expected costs on future My town sports.
As a result of increases in the producer price index for the construction sector.
Although second quarter, adjusted EBITDA was $1 8 million pets.
And the adjusted EBITDA margin was seven samples per cent.
Our financing expense was 883, new vessels you to higher interest expense as a result of additional debt issuance and the non cash implied interest on the major maintenance provision.
Consolidated net income was named one of the 28 vessels and increase of 50% versus a slow quarter for us in 'twenty one.
Yeah.
Turning to our cash position.
That's generated from operating a simple quarter amounted to $1 1 billion pesos in cash at the end of the quarter stood at 1.8 vessels.
During the quarter, we paid the first one point H built vessel installment of the $2 3 billion peso. If it is approved in the 2012 to shareholders' meeting.
Second and final installment of 500 million vessels, well spacing two days ago.
At the end of the quarter, the total debt or total debt amounted to $9 2 million vessels I know why.
Net debt to adjusted EBITDA ratio stood at one four times.
This concludes our prepared remarks, please open the call for questions.
Hum.
Okay.
[noise].
Well.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Yeah.
Yeah.
Thank you. Our first question is from Alejandro Tomo Kona with credit Suisse. Please proceed with your question.
Thank you Scott.
And then.
We're taking medication.
My first question.
I will now become buyers.
I recall that you were instructed us to implement it.
Got it.
13%.
I can see either no less.
Throughout.
Two years, so I'm wondering.
Why wouldn't we.
This required there.
Women, who work in Milton.
We haven't seen any.
You can't squeeze them using it was lower than the kitchen, so any color on that.
Sure.
Sure.
This is Russell.
We reported.
I haven't thought because revenue per box increased two 4% to 8% versus the same quarter of last year.
This is primarily the.
Fact of mix I'm always wrong.
In our airports.
As well as a lower contribution from international passengers. So for example in.
The second quarter of 2022, 11% of our passengers war.
This converts to a 14% computing 20.
21, a as you know in commercial.
Passenger.
Charges or.
Have you ever done domestic ones.
And also we experienced growth from airports that pattern.
A lower than average.
So for example.
Versus the same park theater, Monterey grew 32% Chihuahua moved 35%. That's your that's what it's about 45%.
And these are airports that have a draw that's lower than the average.
And we also had to.
Smaller my uncle.
Two what the passengers are in this quarter around.
Around 47, 5% of our total passengers what being passengers are skilled virtual 48, 5%.
We've seen quite a lot last year. So the combined impact of all these three effects as I've mentioned our.
Results in Asia.
A reduction of the.
Average fee that you see quarter over quarter, we did increase our mortgage was these hearings around 12%, but because of the mix that I just explained.
But.
It's just left with just around 3%.
So part of the mix in Florida.
Inflation, the producer price index hasn't had as much higher than we anticipated.
Okay got it.
And then my second question if I may.
Don't forget too.
No.
For the company.
We Gotta mentioned, we saw a strong recovery for these quite there.
And are you, including Uh huh.
Higher coupon rate.
I'm, just wondering what kind of traffic at each dose exposure.
Sure.
T R or leisure.
And my second question.
If we could expect.
Yeah of course.
Yeah.
Some recovery of the business.
Thank you.
The what was the last part of that we're putting on a handle that we can expect to see what sort of it.
Yes, we could.
We could see.
Some recovery from certain kids are supposed to do.
And through the potential recovery.
The business segment.
Okay.
Yeah. So I think yes, it could be a read through that our hotels are most of them. So we have two hotel wanted to the Mexico City Airport isn't germinal due which is dedicated to aeromexico theirs.
Part of our customers are our flights.
Personnel.
All business passengers and in Monterrey is the same thing and the Hilton if theres a lot of Hilton honors program, which is mostly business passengers ackman. So yes that is also a positive sign that business travel is is he is returning.
Not only seeing that in our hotels were also seeing it in all routes.
Look at the last couple of months the growth in the business second named valves has been much larger.
And the one we have seen in B F. Our Lord choice.
Yes.
Yeah.
Okay. Thank you.
Thank you.
Thank you. Our next question is from Rodolfo Ramos with Bradesco BBA. Please.
Please proceed with your question.
Good morning, and congrats on so.
A follow up on.
Question Uh Huh.
And you can tell us where do you stand in terms of your maximum sorry execution, how far you are from from reaching that level on that.
It would be my first question.
We are thank you.
We're anticipating to close this year with a 90 around 90.
For a sense a maximum tariff compliance the reason being is that the producer price index, excluding oil, which it would be appropriate.
Index to do well.
<unk> has been much like it has been around two percentage points above.
Consumer price index.
Okay. Thank you and if I may also on this business travel routes that you've discovered can you tell us give us a little bit more Colorado to.
What do you expect in terms of the timeline.
Got it.
Seems to me that in the most recent months, we have seen shopping a little bit on the sluggish side, if we compare to other leisure and VFR destination.
So just wanted to see how you're thinking about.
This recovery if you think it's more likely to be more pronounced stores towards year end or next year.
Did you see any seasonality that you can talk about specifically about the Monterrey, Mexico that they wanted to.
I don't know it'd be great.
Well, so I think that's we say a very strong recovery in both April and a knee.
June as you mentioned was kind of as Louise we attribute that to the barstool it keeps the wave of Kobe.
Which even though it doesn't have a critical affect some of our salespeople is it does result in cancellation of travel.
Room bookings.
And that's the first of all the leads the impressions concept.
This meetings.
And in Congress.
So oh.
Lots of ways and we see a we would expect a pick up in.
In those routes and where she initially.
Classic T D.
Uh huh.
Work, especially for example.
Just on some of the business the critical business routes, which are here.
We monitor our cases on a week on a weekly basis are we the fact that we already are.
Last week or a couple of weeks ago, we already picked in this way for the triangles are already coming down we're starting to see airlines, adding capacity and in the future and there was also the issue of oil prices going up and prices are train tickets are slightly going up so that also had some impact.
Okay. Thank you and one last follow up if I may.
How do you see.
The new or let's say never configuration of Mexico City Airport impacting your network I mean do you see it.
We weren't in sea route.
That connect smaller perhaps within their network being relocated to be honest.
So look I do you see.
And in fact there.
Oh well.
Haven't seen any negative impact actually from the the only valve that happening taking out having to do that.
Moving operations to sometimes yet which are a very small fraction less than.
5%, but what what we see without issue, which we think is kind of a midterm opportunity as we do believe that as we see more saturation in the Mexico City Airport that is going to be an opportunity for airports like Monterrey.
All the traffic that doesn't have to go into the Mexico City Airport will have to go through water airports. So I believe the airlines will start looking out a strategy to bypass the Mexico City Airport.
And that's an opportunity for us.
Thank you.
Yeah.
Thank you. Our next question is from Stephen Trent with Citi. Please proceed with your question.
Good morning, gentlemen, and thanks very much for taking my question I'm, just very quickly two for me the first.
You could give some color on.
What happened with accounts receivable it looks like that the AR receivables turnover slowed down and I was wondering if.
You guys are having any.
Our conversations with airlines and you know.
Your line is paying on time.
I'm just curious on that's my first question. Thanks.
So so so I mean I kind of receivable has been growing in line with even though were increasing.
Revenues.
We have a healthy a receivable balance on them.
Now.
No airline is a breach of the terms. So so so we'd have a cure.
That don't use the old portfolio.
Yeah.
Okay. I appreciate that I saw the receivables look like they turned over a little bit more slowly, but but but very helpful.
And I was just wondering as well.
Can you refresh my memory is Oh my God.
Taking any interest in any foreign airport projects I know there has been.
Alright Burgos airport.
That the auction may come at some point the RFP at least in anyway.
Any interest in that or you know are you guys.
Yes sure.
Focusing on the domestic market. Thank you.
Thank you Stephen we're constantly looking for opportunities so.
So far we don't have anything concrete yes, we have we are participating in Nevada, but have you as you mentioned it has been placed on hold but yes. We're also we're always looking for opportunities where we can have a comparative advantage.
Okay. That's helpful I'll leave it there thanks guys.
Yeah.
Thank you.
Thank you. Our next question comes from Pablo amongst survives with Barclays. Please proceed with your question.
Hi, guys. Thanks for taking my question a I have a quick one on the commercial revenues per passenger or none that I want the revenue per passenger.
Tax increase significantly.
Of course in 'twenty, 'twenty and 2021 it was.
Mostly because if on the passing of Europe , but right now were reaching to a more normalized passenger level and yet you have a higher ratio of non iron ore revenue per passenger what should we incorporate there going forward a few things that he should be around.
The high Ninety's, perhaps are getting.
Getting into 100 pixels per passenger I don't know if you can shed some light would be useful. Thank you.
Sure.
Yeah.
I think that the ratio.
I don't have it has been obviously being driven by maybe a merger roseau Hawkeye, which continues to deliver solid results.
The significant recovery.
On your in the wholesale business.
Well if you use this out like commercial revenues per passenger.
Leaves the other legacy traditional activities.
It's of course a feeling.
We would expect our commercial revenues per box for for this year to be above 45 vessels for a passenger.
And obviously.
We should expect also a continuous growth in Oh, my God enough for the remainder of the year you know, let us do what we are seeing now.
And hotels.
We expect to reach close to it.
Occupancy ratios.
But we had in 2019 to watch.
End of this year or so so so luxury constantly more gradual.
Relative to the Xiaomi, probably over previous partners, Oh, I don't know yourself your outlook.
Okay. Thank you very much.
Thank you. Our next question comes from Hugo Basara with G. P. M. Please proceed with your question.
Hello. Good morning, Thanks for taking my question just want to make sure I heard correctly about your maximum execution.
You're anticipating to close this year at 98% of the maximum level.
Oh, it's not quite at 93 nine.
93 around 83.
Okay. Thank so much not mobile.
Thank you. Thank you. Thank you. Our next question is from Gabriel <unk> with Scotiabank. Please proceed with your question.
Hi, Thanks for the call just a quick question about a cost increase.
Could you give us a bit of color.
Why.
How does the labor cost.
I think what it is.
Hey.
Last year that they were before.
<unk> had a.
But contract.
Sure.
I think it's primarily related to two.
Head count increase.
We have oh.
Luckily.
These people are.
Additional people that are in the new AMA lounge.
Sure.
And we have around it comes down to people.
It worked previously how through third party companies are now part of the company. So we have roughly around 680.
And please it wasn't off in the same quarter of last year or so so basically that explains the increase in payroll.
Yeah.
Okay, and just can you do both a bit of a color what would have been done in Europe , whom terminal warehouse a lot of.
Training capacity like a flavor how have you seen some of your own terminal.
Yeah.
Oh no.
We are.
These are major major adjustments over the past couple of years, what do you mean.
For a more efficient, but we are not experiencing the same type of problems.
Problems are being happening ignore airports on the wall.
But we do have the right.
Size, all of payroll, which all too often.
Our level of operations that we have.
And it's not only it's not only airports airlines the layoffs during the crisis in Mexico, we're not as large as they come.
Countries in Europe for example, if that's what you're seeing in Europe , a big problem in the shortage labor because they did.
Big layoffs, and we hire than it has been more difficult than we expected they need because you paid it so there hasn't been a mismatch with supply and labor demand.
Paul can get into giving that.
That's large in Mexico definitely not in airports and we didn't have layoffs.
Layoffs and an evidence in a shorter amount of international counterparts.
Okay. Thank you congrats and we just hope.
Thank you. Thank you.
Thank you. Our next question is from Jeremy Mendez with J P. Morgan. Please proceed with your question.
Good morning, he got a roomful. Thanks for taking my question two questions here first the first one is a follow up from the previous questions in terms of cost and think in terms of margins just wondering if the the seven 7% margins. We saw this quarter do you guys see as sustainable going forward.
And the second question related to Capex, we're seeing a lot of pressure in terms of inflation.
Not only on cost, but on Catholics as well are there or.
Or what are the main measures initiatives to kind of mitigate the dispersion of Catholics going forward. Thank you.
Well for the first part we think 76% for the rest of the year around 76% will be manageable and and in terms of costs. We have been doing a lot of our economy.
If you Havent finding a lot of inefficiencies and capex deployment that are offsetting the increase in prices that we're seeing.
Inflation.
Got it perfect just to make it clear the 76 for the second half of the year, whereas the average for the year.
The average for the year for example.
Just remind that we have a war.
Collective bargaining really reviewing the full queue. So so so and we do not expect to.
Q2 will have any Chinese indefinitely.
A year or so so that's why you'll see a slightly lower margin in the next few quarters on what we have in digital partner.
Got it Super clear thank you.
Okay.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Our next question comes from Edson.
With some guy. Please proceed with your question.
Hi, Good morning, Thank you for taking my questions.
Just a point off from them.
But he didn't call center.
Just plain like understand looking ahead, the increase up 32% it some in this quarter or possibly.
Some of them in place in a macroeconomic environment.
Environment.
And then we're done.
Hmm inquiries.
My first question and then I'm sorry.
Yeah.
Let me go over there we didn't hear the first the first part of that question, if you'd be kind enough to repeat please.
Oh, yes for sure.
It took hold off on that football all good evening.
Kaufman sensor.
This quarter the increase.
What Hussein.
Cause it to one 5%.
So.
Looking ahead.
For the quarter.
But the range because of the macroeconomic factors.
Because right.
Right now we've been picking up quite a bit different.
Im going to call.
Hum.
Oh, so the numbers you are referring.
It refers of 31, 5% is.
<unk> includes.
Depreciation and the construction costs on them.
Image I'm ready for installation.
So oh.
All those costs are noncash costs are so so so we focus more on the cash cost.
That which in our case was around the 15% increase including the cost of hotel services.
And we will.
So adjusted adjustments to what they.
The final quarter of the Euro so initiatives, we have some some money.
Union concerns that will be negotiated in the alternative also.
So many patients.
In fact, when you also pulled out of San Francisco and trying to tap into the year, but I wouldn't expect a significant increase.
So listen the acuity levels of those cash costs that we are.
Having a subsidized.
Yes.
Okay. Thank you. The second question is regarding in too much of a trial. This.
This quarter we saw.
But I was wondering is there.
This is really critical point.
Needed to.
Good.
General Mexico.
I mean, the thing or it's related.
Related to why did you kind of give us a little bit more color about what would be helpful. Thank you.
Sure so so.
Second quarter of 'twenty, one will be three <unk>.
In virtual drive a little we attribute in part to.
The vaccine tourism.
I'm really wants to modulate to Texas to cause that.
David.
That's the tropics <unk> this year was less than a month or so.
So our main routes.
So I'm Danielle Keystone.
I was Monterey.
We did experience a decline.
Declines a lots of the same quarter last year or so so.
We see that.
Mostly because of the what's happened in the second largest business in 'twenty, one and the legal fees related to Oh Gee.
Uh huh.
New routes opened in traditional route openings from.
From U S carriers to our airports NUCYNTA ER months.
So so we are not experiencing.
A net of the impact from the contrary to what you're saying.
Okay. Thank you so much Chris a bit unclear.
Back to the results.
Thank you.
Thank you. Our next question is from Alan Macias with Bank of America. Please proceed with your question.
Hi, Good morning, Yeah, just a just a one question on your dividend policy and what.
What if you can share what we could expect for next year. Thank you.
We think around around.
Paid a $2 3 billion as of this year I think we will try to keep the same amount of going forward.
Great. Thank you.
Thank you there are no further questions at this time I'd like to turn the call back over to Ricardo Duenas CEO for any closing comments.
I want to thank all of you for participating in this call will put them in my life and I are always first of all to answer your questions and we hope to see you soon thank you and have a day.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.