Q4 2022 Grupo Aeroportuario del Centro Norte SAB de CV Earnings Call
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Ladies and gentlemen, thank you for standing by please continue to hold our conference will begin in a couple of minutes.
Once again, our conference will begin in a couple of minutes. Please continue to standby.
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Greetings and welcome to the Grupo airports, where are you Oh.
Oma's fourth quarter 2022 earnings 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.
As a reminder, this conference is being recorded I would now like to turn the conference over to your host Emmanuel Camacho Investor Relations Officer. Thank you you may begin.
Thank you Melissa good morning, everyone welcome to Wamus fourth quarter 2022 earnings Conference call.
I Didnt me. This morning are CEO , Ricardo Duenas and CFO of <unk>.
Please be reminded that certain statements made during the course of our discussion today may constitute forward looking statements, which are based on current management expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially including factors that may be beyond our control.
And with that I will turn the call over to Ricardo Duenas for his opening remarks.
Thank you Manuel and good morning, everyone. We appreciate you joining us today.
I will highlight several important events and milestones then it will be pretty review, our operational performance and financial results. Finally, we will be pleased to answer your questions.
First of all in December 2022 months airports finalize the process for the acquisition of $29, 99% of series B and series double B shares a bomb, which made by C airports our largest shareholder.
Which part of the process prior to the closing of the transaction on a hell of a shareholder.
I was meeting with six new profit three members for the board, but the board all of them part of the balance sheet were appointed.
And the resignation of the six former Robert Gerry members of our board was accepted.
I would like to express my gratitude to our former board members and I would also like to welcome our six new board members, which I'm certain will contribute almost value creation across the board.
Lindsay airports is the worst largest private airport operator imagine 65 airports in 12 countries and served 255 million passengers in 2019.
Some of the assets management one C airports include London Gatwick airports.
Well, Mike, we expect leverage from them and see what expertise in managing and developing our infrastructure and to adopt best practices to provide world class service to our passengers.
In other news in January .
He was recognized for the second year in a row as one of the 12 Mexican companies to be part of the 2023.
We're generating quality index, we are proud to be recognized as a company committed to fostering gender equality inclusion and diversity across our different teams within the company.
Finally last Monday, we held an ordinary shareholders' meeting where shareholders approved.
The declaration and payment of any.
Ordinary cash dividend to shareholders up to $1 45 billion patches and delegate it to the board the power that's remind the amount and dates of payments.
Yesterday, we published a press release announcing that we will distribute an extraordinary dividend of $1 45 billion I suppose to shareholders on March 2nd of this year.
Payment of this dividend reinforces our objective optimizing our capital structure.
Moving onto annual performance.
OMA delivered a strong performance in the fourth quarter and for the full year 2022.
For the full year, we started records for passenger traffic revenues adjusted EBITDA.
Adjusted EBITDA margin consolidated net income.
I will start by discussing our full year 2022 highlights and then I will move onto our main for Q21 results.
In 2022.
In 2022 are positive passenger traffic performance reflect the strong recovery in volumes from Baird.
This is related routes as compared to 2021 the routes with the largest passenger fees were Monterrey to Mexico City Monterrey Chihuahua.
Why does to Mexico.
All of them business oriented groups.
Also posting strong increases in 2022, where the Monterey.
Monterey canceling routes.
Total this five routes jointly added a total of $1 9 million additional passengers representing 36% of the total $5 2 million passenger fees during the year.
We believe there is room for strong and continuing.
Passenger traffic growth prospects based on opportunities in Mexico continued to expand as a result of our solid performance 12 month passenger traffic stood at a new record level of $23 2 million passengers, which represents a 29% growth as compared to 2021.
Has outpaced by 0.2% our 2019.
19 levels I am proud to say that the effects of the pandemic and traffic performance are clearly this.
On the financial performance, Brian Aeronautical and non aeronautical revenues reached record levels in 2022.
Growing each by 23% versus 2019.
As a result, our adjusted EBITDA for the year was seven point.
I think 1 billion pesos, 27% above 2019, and we set a new record for adjusted EBITDA margin, which expanded to 76, 3%.
Importantly by our continued efficiency in our cost and expense structure.
Consolidated net income for the year stood at $3 9 billion.
So it's an increase of 21% versus 2019 during the year, we distributed value for shareholders by paying out an aggregate of $6 7 billion patches dividends throughout the year and disbursed a total of $3 3 billion peso seen our master development program commitments and all our strategic Capex.
I will now review, our fourth quarter operational performance.
For the quarter of 22, almost passenger traffic reached $6 5 million an increase of 27.
7% versus fourth quarter of 'twenty, one and was $8, 7% above the same quarter of 2019.
The airports that passenger traffic growth during the quarter were months ratio that's why does.
And in Chihuahua, and work with our strongest traffic growth compared to <unk> 21, all considered mainly business routes for months rates in Mexico City to look at Tijuana Guadalajara routes on the aggregate those routes. There's routes added 349000 additional passengers in the quarter, an increase of 33% versus fourth quarter of 'twenty one.
Okay.
Formula one or 'twenty two confirms the positive momentum of business travel segment enormous portfolio.
As a result of the strongest passenger traffic performance, our aeronautical revenue grew by 26% in the quarter versus the fourth quarter of 'twenty, one to 2 billion persons.
On the commercial front revenues increased 35% compared to the fourth quarter of 'twenty, one driven by parking car rentals restaurants, VIP lounges and retail.
Occupancy rate for commercial space stood at 93, 5% at the end of the year.
Diversification revenues increased 24% our hotel services and on my part.
Attributed most of this growth.
Fourth quarter of 2022 occupancy rate, our general to NH collection was 41, 5%, while the Hilton Garden Inn.
Hotel occupancy rate of 75, 1%.
While my cargo delivered strong results once more as revenues increased 20% versus fourth.
Quarter of 'twenty, one mainly driven by the strong operation of air and ground cargo.
On the capital expenditure front total investments in the quarter, including M. D. P investments major maintenance and strategic investments were $1 2 billion pesos.
During the quarter some of the most relevant project we're working on are the expense.
And our modeling of the Monterrey Airport terminal a building as well as you'd have why does checkout terminal buildings be coffee creation of the massive terminal building.
Major we have <unk> platforms, it's actually waste in several airports.
And platform reconfiguration at the Monterrey Airport.
And with that I will now turn the call over.
But is there room for more detail on our financial highlights for the quarter. Thank.
Thank you uncle.
Good morning to everyone.
To review our financial results and then we'll open the call for your questions.
Turning to almost fourth quarter financial results.
I don't know if the revenues increased 26% ROTC.
The fourth quarter of 2021, driven by the 21% increase in passenger traffic.
Nowhere I love, how you seem to maintain in the first quarter of last year.
Annual revenues increased also 26.0%.
Commercial revenues increased 34, 6% and the authorities with the highest.
Well the car parking car rental restaurants, VIP lounges Ivy Hill.
Increased 46% due to higher penetration in the Chihuahua, Monterrey and Culiacan airports.
The improved business.
In those in those airports.
Our rental restaurants and retail.
C. H 28, 2%, respectively, mainly due to higher revenue sharing and the opening of new commercial spaces.
VIP lounges increased 48% you primarily to the recognition of revenues from it that rest of operation as well as an increasing number of users of the AUM that premium lounges.
They were certification.
This increased 24%, reflecting the struggled celebrates.
On the kind of performance.
Total revenues.
Revenues were $2 6 billion investments in the quarter and grew 26% relative to the <unk> 21.
Construction revenues increased 71%.
Holds of higher M E T investments execution.
The cost of airport services, and G&A expense increased 15.9% relative to <unk> 'twenty, one mainly due to an increase in payroll expenses. As a result, primarily I think the script counts higher salaries versus last year and provisions including statutory profit.
Other increases came at the contracted services line item, which grew due to overall higher activity in our airports.
Sure.
Partially upset by lower electricity expenses as a result of a higher proportion of energy supply from green sources during the quarter.
Apparel Sabra.
Waiting in our 13 airports generated 17% of all my energy consumption and so on.
Our airports, where supply more wind energy as compared to <unk> 21.
Overall during the quarter, 95% of our energy came from Green sources.
Bigger maintenance provision less 42 million pets, that's compared to 18 medium presence in <unk> 'twenty one.
Well my fourth quarter, adjusted EBITDA reached 1.9 billion pesos and the adjusted EBITDA margin was 75, 8%.
Or financing expense reached two 4 million passengers.
Mainly due to higher interest expense as a result of additional debt issues and higher cost of debt.
But the income was $1 1 billion peso seen departure, an increase of 11, 8% relative to <unk> 'twenty one.
Turning to our cash position.
Absolutely.
It's from operating activities in the fourth quarter of up to one 6 billion pesos in cash at the end of the quarter stood at $3 4 billion passes.
At the end of the year the total debt.
That amounted to $10 2 billion pesos and that wasn't that's that's to adjusted EBITDA ratio stood at one times.
Yeah.
February of this year, we have started the process for the refinancing of our bonds maturing in 2023 the.
The refinancing is expected through the issuance of a new bond in the local markets. That's a war and the terms and conditions are still being worked out and we expect the issuance to close early in March.
This concludes our prepared remarks.
Operator, please open the call for questions.
Thank you at this time, we'll 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 your line is in the question queue. You May press star two if you'd like to remove your question from Mccann for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
Our first question comes from the line.
Rodolfo Ramos with Bradesco BBA. Please proceed with your question.
I'm wondering if you're kind of unusual.
Thanks for taking my question just a couple on my side.
One is can you.
Give us a little bit all of your expectation in terms of.
Of your cost.
Carsten and DNA.
For this year.
There's a lot of moving parts no you have payroll increasing sharply and then you have you know these are lower cost on the on the utility side, but just wanted to see whether you expect this number to be around $400 million per quarter.
This year and perhaps you can elaborate on some of the cost pressures.
The compensation Nobody's vacation days pension contributions.
You've been talking about.
On your outlook for 'twenty community that would be very much appreciated and the second question is on <unk>.
Looting.
For some of your initial remarks is on this value creation framework from having bouncy in your.
The controller.
And on the board.
Can you, perhaps talk a little bit or elaborate a little bit more on.
The areas of opportunity that you see you have been a couple of months.
Formerly having formally closed.
This control and change in control. So I just wanted to see what are the priority some of the maybe.
If there is any operational changes that we can expect or.
Something.
And then more big picture there.
Great. Thank you.
Sure.
Sure well, let me I'll take the second one and I'll leave a roof.
Well to answer the first one.
For <unk>, we expect to leverage its operational and commercial expertise to drive value creation Omar. Some examples that have been identified on that build upon our strategy. In recent years are to continue to develop are served with developments and increase international passenger.
Mix increased on air revenues to improve commercial offering and diversification developments leverage <unk> expertise in planning for growth and expansion in capex optimization, among others and as for management. They give it they have given a vote of confidence to their current management and we're working a lot with them.
Very well.
What do you want to go through the cost structure. Thank you.
The other folks in terms of our cost side I think we should expect mostly.
Stationary increases going forward the big surge in <unk>.
Passenger growth that we experienced.
Last year, obviously had some some pressuring our operational cuts much as we can.
The stability.
Bethany.
In the coming months, we should also expect the same in in car type.
Great. Thank you.
Thank you.
Next question comes from the line.
Tom <unk> with UBS. Please proceed with your question.
Okay.
Hello, guys. Congrats on your results. Thank you. My question is just a quick one I.
I mean, I know that there's a modest step.
Got it on a consolidated basis, but I don't know that they have.
Our operations in a couple of months worth on that whole airports I was just wondering if you expect to see any impact in those airports for your operations going forward.
Any airline that we're already took that Microsoft.
Thank you Anthony.
We're gonna anticipating this unfortunate event for some time.
Dissipation of Aeromar normal was very small 0.6% of the traffic.
And the routes that they were covering that they didn't have any exclusivity. So that means there were other airlines covering that route. So we expect all the traffic.
The few traffic that was covered by Irma will be captured very quickly by the rest of the year right. So in short I don't see any impact going forward as a result of this unfortunate event.
Oh, great. Thank you and then just another quick one Oh, what I'd just seen in terms of clients for business travel talking about all of these near shoring boom.
<unk> seen some moderate house property, causing creatives.
Youll see this related to that or if you could provide some of your color on that thank you.
Yes, we're seeing their impact we think the near shoring.
That is real is happening and we're seeing it in our portfolio of airports, if you'll look at segregate the traffic performance in the last few months.
Oh near shoring destinations for examples you've got wise are growing a much larger percentage than the average of the ore or their own myer.
Okay. Thank you.
Thank you. Our next question comes from the line ethylene Nielsen.
Please proceed with your question.
Hi, everyone.
Thanks for taking my question. So I had two questions on my side I'm sorry.
You have already mentioned that.
What's great here is about why did electricity materials cost decline.
Quarter one.
When we actually.
Back to them to rises every.
Everywhere else and the second question is regarding.
Terrorists like do you see any risks of our Mexican airports getting a service thats going forward one.
When MTBE.
Negotiations start to resolve.
I'll take the first question and then if you can repeat the second one because we look like you're completely but on the on the utilities decide as you know over the last.
18 months, we invested in solar parks in all of our airports. So in the fourth quarter of the year, our solar power generated 17% of our total energy consumption and that contributed significantly to the savings that youre seeing in <unk>.
In the fourth quarter relative to the fourth quarter of 2021.
With respect to your specific question, if I may ask to replace it for them.
Sure sure and thank you for the answer on the first one the second one was regarding the.
Airport service like.
The risks of our Mexican airports Theres getting pets are doing during the negotiations of the Nexsan E E.
Uh huh.
Developments.
I mean, we're still we're solve three years.
Three years for the Mac negotiation, we're offloading.
Remember 25 years.
Still too far but that the regulatory framework has been very clear.
It is straightforward and <unk> seven the concession title and has been working well and we have no reason to believe that it would behave differently going forward.
They typically have done.
Thank you. Our next question comes from the line of Juan Macedo of GBM. Please proceed with your question.
Hi, Thanks for the call on the results.
Good question.
My first question would be in regards to M&A are you assessing their knee M&A projects.
And my second question is regarding your how are you doing to make it.
February if you could tell us how that win.
Okay great.
So on the M&A side.
We last year were still participating in the <unk> process, which has been called off.
After the incorporation of even see in our capital structure, we are not expecting to conduct M&A.
Oh, my level, but our expectation that it would likely be done a da vinci airports level.
And that's the tariff go we're still working on the details and we'll we'll report as soon as we have more information.
Great.
My question is regarding I'm sorry.
What percent of Europe grow Star report, but it's certainly true have you reached.
But what percentage of what sorry.
All of your Mexican move up real story for 2023.
Are you at 100% yes.
Yeah.
So for 2020 do our maximum diaries was 90%.
90% Max.
Maximum tax compliance.
Okay. So you are currently at 90 person right.
Right right.
That is correct. Thank you thanks for thanks for that color.
Okay.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Gabriel.
Deutsche Bank. Please proceed with your question.
Yes.
Hi, good morning.
Alright. Good morning, Thanks for the color on two quick questions. The first one are you seeing any shift from transit passengers that well.
Well the cross brewing, who.
Through Mexico City airports toward your network like Oh.
Monterey.
Nextgen edge.
And my second question is regarding the Canadian traffic.
An increase in Canadian traffic incoming Mexico, two either in connection or in destination node and what percentage of the total international traffic does the Canadian traffic represent Inc.
Yeah.
Uh huh.
In the.
The case of the.
The diversion of traffic out of the Mexico City airport into some of our airports.
The slow process, but it is oh.
Happening what we're seeing.
More than that the connections.
At Monterrey Oh.
You'll have a further productivity from those airports we are also increasing.
Our international presence so with a European route that we have there was one.
[noise] announced to South America.
I think that there is evidence that our Monterrey is starting to become a either for some of these international routes.
Although in the aggregate our connection traffic because it's still not not significant but we do expect to gradually continue to tweak.
So please take advantage of the saturation of the Mexico City.
Airports.
Okay.
And regarding the Canadian traffic.
Can you give us some color on.
What percent that's about with the funds from the international traffic in D C.
Bob.
Traffic coming from Canada, they opened their enforcement.
Ill get back to you on the specific Canadian traffic, what they can say that the 2022 winter season, I mean, the one that's still true.
Hello.
Yes.
Pandemic levels.
It has been significantly better than last year, but still we are not yet at the.
Pre pre COVID-19 levels in the specific markets, but we'll get you back to the specific.
Information.
Thank you very much.
Yeah.
As a final reminder, it is star one to join the question queue. Our next question comes from the line of Francisco Suarez with Scotiabank. Please proceed with your question.
Good morning, Thanks for the color congrats on the results yes.
The question that I have is basically on on your diversification strategy. We noticed that you are adding more capacity on warehouses whats been your jump into which means that.
The market is totally sold out.
Do you see the opportunity to speed things up in terms of overall more capital deployment to open new warehouses in your airports.
Back on your footprint.
Near shoring, France for sure.
And then and there and I believe is that the second question that I had this zone.
Do you expect that.
Now, having but we'll see.
It does it will that will that may.
We have a positive effect on your funding cost. Thank you.
I'll take the first one in terms of diverse.
Vacation, yes, it's part of the previous question about English language is showing $1. Even specific airports. We're also seeing in the cargo and industrial park activity.
We have specialty in Monterey within there is theres still potential to grow we have land area.
To increase.
The industrial Park, and we will keep increasing as more tenants are looking to establish themselves in the airport.
Regarding our funding strategy.
Remember that we primarily funds in peso in the local markets.
It's a very competitive.
Rates are certainly Eaton Corporation a larger.
Operator operation as a shareholder it is a positive on and I think on the margin it will help us.
If we since we are not in the international market or at least that in fact, it would be somewhat limited.
Okay. Okay. Thanks fair enough congrats again okay.
Thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Duane is for any final comments.
Thank you. Thank you all for your participation today, a ROFO Manuel and I are always available to answer your questions and we hope to see you soon thank you and have a good day.
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