Grupo Aeroportuario del Centro Norte S.A.B. de C.V. Q1 2023 Earnings Call
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Yes.
Greetings and welcome to the Grupo airports or are you just central North today on my first quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode eat breathe.
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 it is now my pleasure to introduce your host Emmanuel Camacho Investor Relations officer. Thank you.
Emmanuel you may begin.
The Aura, California, CFO approval based game.
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.
Subject to a number of risks and uncertainties that could cause actual results to differ materially.
Risk factors that may be beyond our control.
With that I'll turn the call over to Ricardo Duenas for yourself any remarks.
Thank you Manuel and good morning, everyone. This morning, I will briefly comment on several events occurred during the quarter that one then I will review, our operational performance and financial results and finally, we will be pleased to answer your questions.
Last Friday, we held our 2023 annual shareholders' meeting where shareholders approved among other matters the declaration and payment.
Larry cash dividend to shareholders of $2 3 billion pesos in two installments.
First one a $1 8 billion peso no later than June 30th.
And the second one 500 million Bachelors no later than September 30.
In addition on March 10, we successfully completed our $3 2 billion peso issuance and long term sustainability linked notes in the Mexican market.
Pursuant to the framework of the notes, we have set an ambitious carbon footprint reduction target.
<unk> were used to amortize our all my 13 notes for 1.5 billion pesos and to repay $1 2 billion pesos in short term loans.
The remaining $500 million will be used for general corporate purposes, including the funding of future investments.
Moving onto our main first quarter of 2023 results.
OMA delivered solid financial and operating results in the fourth quarter of this year.
Adjusted EBITDA grew 41% in the quarter to 2 billion to 2 billion pesos and adjusted EBITDA margin reached 77, 5% largely as a result of an increase in both aero and non Aero revenues.
In the first quarter all my passenger traffic reached 6 million, an increase of 30% versus the first quarter of last year.
The airports that led passenger traffic growth during the quarter were Monterrey, Ciudad Juarez, Chihuahua and pulled back on.
And the routes with its strongest traffic growth compared to the first quarter of last year. Most of them considered mainly business routes, where the Monterrey to Mexico City, Guadalajara, Santa Lucia Luca and cone routes and the shoot up quite as to what it had a route.
On aggregate. These six routes added 470000 additional passengers in the quarter, an increase of 42% versus the first quarter of last year.
Primarily as a result of the strong passenger traffic performance, our Aero revenue grew 40% in the quarter to 2 billion barrels.
On the commercial front revenues increased 36% compared to the first quarter of last year, driven by parking restaurants retail and car rentals.
Occupancy rate for commercial space stood at 93, 6% at the end of the quarter.
Diversification revenues increased 22% our hotel services and all my cargo contributed most of this growth.
In the first quarter of this year occupancy rates at our terminal to a major collection hotel was 83%.
While the Hilton Garden Inn Hotel had an occupancy rate of 73, 4% signaling a further recovery of business travel.
Well my cargo revenues increased 14%, mainly driven by the handling of air and ground import cargo.
On the capital investment on the capital expenditure front total investments in the quarter, including MTP investments major maintenance and strategic investments were 757 million pesos.
During the quarter some of the most relevant projects. We are working on are the expansion and remodeling of the Monterrey Airport terminal a building as well as the <unk> wireless <unk> and Durango terminal buildings weaker.
The reconfiguration of the Master planned terminal building.
And major rehabilitation and reconfiguration of platforms and taxi waste in several airports.
I would now like to turn the call over to <unk>, who will discuss our financial highlights for the quarter.
Thank you Ricardo.
Turning to everyone.
Bill will review our financial results and then we will open the call for your questions.
Turning to almost first quarter financial results.
Everyone's got revenues increased 40% relative to the first quarter of 2022, driven primarily by the 29% increase in passenger traffic.
Revenues increased 25, 7% with.
With the highest growth work, our parking restaurants retail and Colorado.
Parking revenues increased 58% due to increased penetration in the Monterrey, Chihuahua and Reynosa airports. That's why that's how you're showing your Olberding church and mistakes in most of our airports.
The increased activity in our parking revenues. The result of an overall how your business at all.
Airports.
Restaurants, retail and car rentals rose, 49%, 43% and 20%, respectively due to higher revenue sharing and the impact of the different well implemented throughout 2000 patients.
Diversification activities increased 41, 5%, which had been strong hotel revenue growth and to a lesser extent continuous almost kind of a growth.
Total Aero and non Aero revenues grew 36% to $2 6 billion peso seta collector.
Structural revenues amounted to 664 million.
As a result of a higher MVP investment distributions.
The cost of airport services, and G&A expense increased 14 points in percentage relative to the first.
Quarter of two.
2022 basis point increase in payroll expenses were sold primarily of increased headcount and higher labor costs versus last year.
The increases came at the minor maintenance and contracted services line items, which we will.
Overall due to overall higher activity in our airports as well as inflationary adjustments.
Major maintenance provision was 77 million pesos as compared to 82 million pesos in the first quarter of 2000.
Almost fourth quarter adjusted EBITDA reached 2.0 billion pesos and the adjusted EBITDA margin reached 77, 5%.
Our financing expense was 229 million pesos, mainly due to a higher insurance expenses were supposed to have additional debt issuances and the high.
Cost of debt.
Our consolidated net income was $1 1 billion in the quarter, which reflects an increase of 43, 5% once you place.
Turning to our cash position cash generated from operating activities in the first quarter amounted to $1 3 billion peso. So cash at the end of the quarter stood at $2 8 billion pesos, which already reflects the payment of a special dividend of $1 45 billion peasants Macy's during the month of March.
And then at the end of the quarter total debt amounted to $10 7 billion pesos and we have a healthy net debt to adjusted EBITDA ratio of one one times.
This concludes our prepared remarks, Alicia please open the call for questions.
Thank you.
We will now be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Information until will indicate your line is in the question queue. You May Press Star two if you 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.
Thank you. Our first question comes from Carlos Perry Long Gate with B O. A please proceed with your question.
Thank you good morning, gentlemen, congratulations on the strong results.
Two questions. If I may 1st one is related to passenger traffic.
Thanks to a very strong obviously on the quarter. If you could give us some idea of your expectations for the remainder of the year. It looks like business traveling is coming back strongly.
You know what should we expect in terms of the remainder of the year that would be the first and the second is related to margins again, a very solid expansion. There. If you could provide some color as to.
Whether that is sustainable or you expect are you know some headwinds over the remainder of the year in terms of additional cost. Thank you.
Thank you. Thank you Carlos yes.
Passenger traffic remember that we're comparing to the first quarter of last year. When we have the army ground there in a COVID-19. So we have a we had an easier comp base, obviously, it's going to become more challenging as the year moves along.
But we're comfortable that something in the high single digits. It's a it's achievable and then in terms of margin are we believe are where were consistent I've mentioned before between 76 and 77% EBITDA margin is attainable.
Perfect. Thank you.
Yeah.
Thank you. Our next question comes from Josh Milberg with Morgan Stanley . Please proceed with your question.
Hey, everyone. Thank you for the call I was hoping you could give us your perspective on the outlook for return to category. One later this year just with the latest letters legislative developments and.
Also if you could just give a little bit of your take on what that could mean for all more on the international side in terms of route additions by Mexican carriers to U S destinations from Monterrey or your other airports printing you about next year, and then related to that and <unk>.
Want to ask a if you think you know eventually a postponement of fat return could actually help all MA and that it might compel the local carriers to direct more of their fleet capacity due to the domestic market, where you guys. Obviously have more exposure. That's my first question.
Sure.
Well, yes, a category one as you know our best week, one of the prerequisites to call where back to F AR to.
Category, one is that the approval of the airport and air a law, it's gonna be Pat It's it's already approved in the deputies chamber, it's going to the sand that it's gonna be approved either today and tomorrow.
Okay.
Yeah with respect to <unk> and then I mean, so we would expect a return to get to where you want to towards the end of the year. Once you have double they conduct its Audi in terms of a new route development.
As you know cause they only one dose effect Mexican carriers, but it has not affected our U S Congress so in the past.
A couple of years, we have seen a new airlines coming into our airports.
The U S to surf the demand Oh International travel. So nothing then turn to category one for Oh man will have a significant impact nor a delay in the potential of this regaining of the category one.
Okay. That's great and then my second question was just if you could give a kind of high level view on.
This this news around the bill that's out there that could give for the government and an ability to revolt confessions I'm. Just just your kind of high level view again on on you know what risks that presents or if that's really just noise and not something that we should be concerned about.
I mean, I think it's too early to anticipate we know the bill it's not going to be discussed in this period, it's going to move towards the end of the year. The next period is gonna be September to December we believe it's going to be discussed there we need to wait what is going to be the final language of that bill So where we're at.
Really they all too early to say, what what impact it could have not in airports, but in every.
Business that has any <unk> concession regarding the government.
Okay fair enough. Thank you for the detailed responses.
Thank you. Our next question comes from guilt Mendez with J P. Morgan. Please proceed with your question.
Oh, hi, everyone. He called it the roof will take it. Thanks for taking my question. The first question related to the MTP maximum tariff. After the recent increase that was signed at beginning of the year.
How far your phone to Mexican level, and if you do expect achieved an excellent level by early next.
Next year and the second question is just in terms of capital allocation E rare disorder deeply into those for this year Oh My continues to cooperate a little leverage so how should we think about capital allocation going forward. If you can expect some additional dividends or buybacks or potentially some M&A activities outside of Mexico.
Thank you.
With respect to our maximum tariff recovery last year.
We were sizing these all of the 90% Mark I think that for this year, we're targeting to be around 95%.
For the full year.
And.
With respect to capital allocation.
In this year already.
Brokerage and paid a special dividend of $1 45 billion.
We got as I mentioned.
It was approved by shareholders last Friday in a total of two 3 billion. So the total distributions to shareholders would be this year of $3 75 billion and Ah gastro generation permits.
In future years, I mean, we will see but what's the level of dividend, sorry, but I, where we do not expect to have an increase.
In leverage with respect to purity levels.
Super clear thank you.
Thank you. Our next question comes from Rodolfo Ramos with <unk>. Please proceed with your question.
And good afternoon, everyone. Thanks for taking my question I have a couple the first one is on on your non aeronautical revenue per passenger you know we're still you know we're still above those levels that we saw before the pandemic struck so just wanted to see whether you have a normalized.
Target that you're not you're are looking at especially as traffic continues to recover.
So that would be my my first question and then my My second question is can you remind us I'm not sure. If you if you have that information, but what would be their requirements.
Or restrictions for a foreign company to acquire all of my shares are I don't know, if there's something in the regulation or or something else that could make.
Make that more difficult. Thank you.
Sure with respect to commercial revenue sorry, the non Idaho opex levels.
We see it separately.
Separately, but it's purely commercial too what is non idle as you know all of the hotel got at all and other diversification. If you just do not kind of a specific relationship tool to passengers.
So, especially years ago inquiries going forward it will not necessarily have an impact in.
The total non iron ore revenue.
We have made.
Refurbishments on and Reconfigurations of terminal C. In recent year or so we expect for example, this year, we opened new outlets in the areas that are going to be integrated in the Monterrey Airport business you have quite a surplus so that will continue to provide a boost to our commercial revenues for vaccine.
In the next quarters.
Okay.
And with respect to our restrictions, yes, I believe the law establishes a.
That's in order for a foreign company to acquire more than <unk>.
50% of the or 51% of a shortage. So a concession there are certain special apartments needs to be obtained by the foreign investments Commission. So so that would be a process that would need to be carried out with that oh.
Great. Thank you Jessica next talk to you if I may squeeze it and you know you you've been you know now with with Oxy for a full quarter operating just wanted to get your just kind of a formal.
Feedback on on how is that coming a comparison you know different commercial areas working together or you know any any synergies that you've seen over the over the quarter and how is that working out.
Thanks.
Yes. It has been very positive there's a lot of synergies where they have been adding value. Obviously, we're leveraging a lot of their platform in terms of a departmental design non aero revenues relationship with Airlines route development.
The Rdna's Ah and they'll both companies are very similar so it has been a relatively easy integration.
Great. Thank you for the color.
Thank you. Our next question comes from Alberto Valerio with UBS. Please proceed with your question.
I have enough money.
Excellent.
Thanks for taking my questions.
I would like to know about the average.
Yes, yes.
Yeah.
Florida.
And we also see some pressure from the address Oh yeah.
What.
So I'm wondering how can we expect or didn't increase.
Sure.
Oh I see.
Sure Mike.
Yeah.
Uh huh.
Right.
Thank you.
Zero in Nashville.
Sure.
My stable.
Thank you very much.
Hi.
So yes.
We were told.
Do you think are owned and 95 per cent a recovery.
Is your a bit.
Next year I mean, we can see what the impacts are in with respect to the inflation are there are.
Some factors that do affect or benefits their recovery of muscle power, which include for example, the FX rate movements or the growth are the different roles in different airports that have a different level of charges.
So I think that towards the end of the year we'll.
Make a seasonal towards any further adjustments, but at this time are where are.
We're thinking of these 95 per cent recovery for the year.
Okay.
Himself topics, if I may one more Oh do you expect to do this year.
Topics and if you are looking.
Looking abroad, Mexico airports for a potential extension of the.
Future.
That's the two questions.
So full capex execution and this includes both our investments in concessions assets as well as our major maintenance execution.
It should be around $3 5 billion a level.
11.
And with respect to a potential M&A activity.
And any expansion outside Mexico.
We'll be first of it is valued by Vinci airports are not necessarily to be performed through.
Through all that.
Sometimes it makes sense. Thank you very much.
Thank you. Our next question comes from Bruno I'm Maureen with Goldman Sachs. Please proceed with your question.
Thank you I actually have three questions for you the first one on <unk>.
On the outlook on the regulatory side. The question is actually related with the potential changes in regulation I just wanted to understand where do we stand and what does that leave you.
The prior forecast made at the time of the last revision.
Correct me, if I'm wrong, but I guess your last revision happened at the end of 2020 are doing the pandemics old traffic levels were pretty much depressed saw sharp rebound over the past couple of years. So the question is where do we stand now because he's a lot towards the forecast at the moment for traffic.
2023, he's the company running are both in line are or below and also could you. Please call for them if at the moment when you had.
The revision are named you'd be at the end of 2020 the level of interest rates that were used as a proxy for.
And then for the calculation of the allowance restarting reflected you know kind of depending on rates at that moment, which if I'm not mistaking worldwide people wherever you are today. So that's kind of the first question. The second question on Nearshoring. You know can you share with US you know evidence of impact on your traffic.
Not confuse me T Oh around your.
Your main airports are coming from near shoring.
So it's already not materially impacting traffic should we expect more impact going forward and then the third question is just a clarification.
Can you. Please let us know why you have not being able to run closer to their maximum tariffs you know widemouthed run closer to 100% what prevents the company from.
<unk> be let's say more in line with the ceiling in terms of the time. Thank you so much.
So oh no.
So oh those are your question, it's not necessarily the northern U U U represented them, but with respect to the Nearshoring evidence.
I mean.
We have seen some so some news there was a big announcement of a major electric vehicle manufacturer that will have a significant investment in the Monterey area and some other announcements by Oh, there are foreign companies to establish presence around the Monterrey.
Area. So right now that that is a type of of aliens that it's being Oh, given publicly obviously as time passes and that investment starts announced investments start to translate into.
The restaurant investments I mean, we'll probably be able to present more data on that but.
But we do see is an increase primarily in our months away and so that's why there's a routes are as you know we want to really have the best performing growth in the quarter.
That's work and we do believe that a lot of that is linked to the renewed interest in Monterrey is the major industrial and manufacturing center and we have seen that seems up and that makes it quite as well as positioning itself as a.
Very strong a destination for the maquiladora laws on another type of our industrial businesses and we that's one of the reasons we are growing.
Growing our total capacity in July quite as to what turns out to be met so.
That's with respect to New York.
Shoring.
With respect to the MVP.
Negotiation.
Or is it still early in the process, we have not started to see what the potential impacts of the different variables that affect the calculation will be we have to submit a definitive plan through the authority in the middle of 2025 and at the end of 2025.
Reached a new investment program and I'm, sorry, if I would look for the next.
Five years.
So right the purity levels of interest rates two to us or not will not be impactful are the interest rate formula that takes that 24 month average before June .
June of 2025, or so so we'll see what the average cheese or whether that's the time frame, which has not yet started.
And in.
In the case of our maximum tariff.
Most of the reason.
It's two fold.
Thank you.
The larger than expected inflation that we had in 2021 and 2020 tool obviously.
Make us that's farther away from from from the 99% goal.
Also we had before.
The passenger mix season in some of our airports.
That's a dual impact there.
So I think that's that that is primarily the impact happening I'm trying to get closer to that so they went to 4% mark in the recovery.
Thank you very much and just a very quick a follow up you know.
You look at traffic now at the beginning of 2023.
Is it below above or you know in line with the traffic of course that you'll never regulator agreed on at the end of 2020.
It's a slightly above but it's it's not significantly above yep.
Perfect. Thank you so much.
Thank you. Our next question comes from Lucy Roadmaps with Compass Group. Please proceed with your question.
Yeah.
Hi, Good morning. Thank you for taking my question. It's just a follow up quick follow up on.
What you've been talking about the maximum targets, but I just wanted to ask what was the same year over year increase that you made this trial showing that sir.
Patrick.
Hum.
Uh huh.
So they.
The increase that we.
We are implemented in the first quarter of this year was in the double digit area.
Yeah.
Okay. Thank you and.
Is it fair to assume that maybe.
Moving forward on the next quarters, we could see and similar or not maybe not double digits about similar.
Our increasing.
Uh huh.
But I think that that will depending on how inflation behaves and how far away, where we're from the 100%. So that that decision will be taken them some were around out there.
Second half of this year.
Okay. Thank you.
Yeah.
Thank you. Our next question comes from Antoine Mark Moore take Corso with UBS. Please proceed with your question.
Hi, guys. Thank you for calling and congrats on your results I just have a quick follow up on her first question no there hasn't been since involvement in the company.
Could you provide some more detail on any project. Initially for an example to help us better understand how you're leveraging from beaches expertise and how it is expected to possibly.
The business.
Sure I mean, just to give you a few a few examples and the sign of our new terminals. They they they operated 70 airports around the world. So they know what have worked in other countries and what hasn't worked so theres a lot of information to leverage there. There's a lot a lot of relationships that we can.
Can lever for example with potential suppliers.
They have more purchasing power with a lot of them, we were able to to get on that.
Did you get the benefit of that.
They talk it seems they have 70 airports around the world. They have conversations with basically every airlines around the world are most airlines around the world. That's a great opportunity for us to have access to the right people and tried to bring some attention into all mine potentially open. Some new routes are same thing in non Aero business. They also have the knowledge and they have a team.
<unk> of specialized people in each field in in in their Paris headquarters, which is it's also very valuable to US. Another example is that in for example, tendering processes are where we're currently tendering some non narrow retail space most of the it was the.
Retail companies competing for those for that for that space. They previously have relationships with them. They they know and they get give us a very higher and better negotiating power with with them.
That's that's that's pretty clear and just another one on related to that Oh.
The Lora form they I don't know.
One I mean I understand there was no significant impact on you guys. Just wondering if there isn't any backup printer operationally wise, probably both met an offset there and that's in the industry.
Not while the law does permit Ah governments to both operate airlines and airports at the same time, which under the previous the Westbrook. He did so I believe that.
For me I feel like it'll standpoint, yeah, some sedan or the Navy goes operate airlines and airports at the same time I thought in our airports are there's no additional activities or oversight contemplated by by the fed.
Super clear thank you.
Thank you. Our next question comes from Fernando Garcia with BTG. Please proceed.
With your question.
Hi, Good morning, everyone and thank you for taking my question I have two on my side.
First one is still on tariffs when we compare our Monterrey Chihuahua.
One thing he has one of the highest two watts.
And considering United States regarding its feeling queasy tariff along good yet and your exposure to Viva, which is an ultra low cost carrier just wanted to understand if you are thinking I'll provide any kind of discount for airlines that have higher.
Frequency evening in Monterrey, or how do you think of this high exposure Churchill Viva.
In this scenario.
Hi, Hi, two us and my second one regarding Monterrey Airport. Just wondering if you have any plans maybe to anticipate the deal when you run away.
In case, you have traffic remains are performing strongly thank you.
So with respect to a potential took a wrong way in in Monterrey are yeah. It is contemplated in the final stages of the development of the airport so Oh.
Post 2035 or so.
So it's nothing that we are jointly.
I mean, I've seen door or are starting to talk to discuss and certainly no walks oh it will be done in the next few years in that regard, but I mean, the towards the latter part of the concession yeah, depending on when the traffic outlook, a civil war way may be needed.
We will continue supporting the growth of of one debate.
And with respect to our once a way airports, where exposure to talk to Viva Oh, no Viva that's around a 40% market share in all of our airports. It's the smoke and show that we have Oh, bye Bye Willadsen idle Mexico and.
Our incentive policy is a J. There also so we cannot discriminate to one of the airlines versus versus others and they are.
Based on our.
No route openings and things like that so so no specifics policy with respect to their language.
It's going to be.
Right. Thank you.
Thank you there are no further questions at this time I would like to turn the floor back over to Ricardo Duenas, Chief Executive Officer for closing comments.
Thank you all for your participation today Rufo Manuel and I are always available to answer your questions and we hope to see you soon thank you and have a good day.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.
Okay.
Yeah.
Okay.
Yeah.
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