Q1 2024 Grupo Aeroportuario del Centro Norte SAB de CV Earnings Call
Greetings and welcome to the Grupo Arab Lucero, Dallas Central North Sea.
My first quarter 2024 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 yourself all key pad.
I'll now turn the conference over to your host Emmanuel Camacho Investor Relations you may begin.
Emmanuel Camacho: Hello, everyone.
Emmanuel Camacho: <unk> first quarter 2034 Energy's conference call, where he likes to have is joining us today as we discuss our company's performance.
Our results for the past quarters.
Emmanuel Camacho: With me today are CEO will become the winners and CFO nickel based game.
Emmanuel Camacho: You're 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.
Speaker Change: With that I'll turn the call over to the counseling for his opening remarks.
Counseling: Thank you Amanda and good morning, everyone. We appreciate your presence in this call today. This morning, and I will review our quarterly operational financial results and then we will be pleased to answer your questions.
Counseling: In the first quarter, while Ms passenger traffic reached $5 9 million a decrease of one 5% versus the first quarter of last year.
Counseling: Excluding the Acapulco airports, where hotel infrastructure continues to be affected by the impact of hurricane or <unk>.
Counseling: That hit in October 2023 terminal passenger traffic in our other 12 airports increased by an aggregate of 0.9% during the quarter.
Excluding a couple go Oh my experienced a decline in domestic traffic of one 2% in the quarter driven by lower domestic seat capacity, which declined by nine 1%.
Counseling: The main airports affect that and work with the Accountants you. That's why does your airports, notably onsite on routes, such as Korea, and whatnot and so that's why it to Mexico City.
International passenger traffic recorded a strong performance with a 10% increase compared to the first quarter of last year, driven by airlines expanding capacity on international routes.
Counseling: During the quarter international capacity grew by seven 1%.
Counseling: This international growth was primarily led by the Monterrey Airport, which saw a 14% rise in international passenger traffic.
Counseling: There are routes, where the highest increase from Monterrey went to Atlanta, Toronto, Las Vegas, but what that in Dallas.
Counseling: These rights along with San Luis Potosi to Houston, and see what the next ones that got the Dallas routes contributed at the approximate to approximately 80% of the international passenger traffic increased during the quarter.
Counseling: Furthermore, in the fourth quarter, we launched four new international routes three of which were based at the Monterrey Airport.
Counseling: In terms of our airline participation Viva who's represented 48% of our total traffic during the quarter.
Counseling: With a notable a 16% increase in terminal passenger numbers compared to the first quarter of 'twenty, three while varieties, which accounted for 20% of our total traffic experienced at 24% decrease during the quarter largely due to the Pratt <unk> Whitney engine recall affecting their fleet.
Counseling: Moving on to more of a first quarter financial highlights.
Counseling: Aeronautical revenues increased five 3% in aeronautical revenue per passenger rose, 7% in the quarter.
Counseling: Commercial revenues increased 12% as compared to the first quarter of last year, driven by car rentals restaurants and parking.
Counseling: The car rental and restaurant line item benefited from the opening and consolidation of new business units across our airports during the past quarters.
Counseling: Occupancy rate for commercial space stood at 95, 3% at the end of the quarter.
Counseling: On the diversification front revenues increased 21%.
Counseling: Intel services contributed most to this growth mainly as a result of an increase in operation in both hotels.
In the first quarter occupancy rate at our terminal to NHS NH was 89%, while the Hilton Garden Inn Hotel had an occupancy rate of 77%.
Counseling: All my cargo increased 2%, mainly as a result of an increase in revenue related to import cargo services.
Counseling: Well, Matt first quarter, adjusted EBITDA increased by 3% to 2 billion pesos and the adjusted EBITDA margin was 74, 6%.
Counseling: For comparative purposes, with the first quarter of last year, we exclude the surplus of the concession tax over our aeronautical revenues, resulting from the rate increase from 5% to 9% for this concept pursuant to the Mexican federal duties law, which amounted to $86 3 million and was written.
Counseling: Awarded concession tax expense in the quarter, along with its impact on <unk> financial results. Our adjusted EBITDA would have been 2.127 million with a margin of 77, 7%.
Counseling: On the capital expenditures front total investments in the quarter, including MVP investments major maintenance and strategic investments were $1 1 billion pesos.
Counseling: 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 Hawaii story on Culiacan Durango terminal buildings.
Counseling: Reconfiguration of the Masterplan terminal building.
Counseling: Major rehabilitation and reconfiguration of platform and taxi waste in several airports and construction of for industrial warehouses.
Speaker Change: Lastly, I want to mention that tomorrow, we will hold our 2024 annual shareholders' meeting shareholder will vote on several matters, including the declaration and payment of a four to 5 billion peso cash dividend, we extend our sincere gratitude to our shareholders for their invaluable participation and unwavering commitment to our <unk>.
Counseling: Okay.
Speaker Change: I would now like to turn the call over to <unk>, who will discuss our financial highlights for the quarter.
Speaker Change: Yeah.
Speaker Change: Thank you good morning, everyone I will give a review of our financial results for the QUADRA and then we will open the call for your questions.
Speaker Change: I don't know what you call revenues increased five 3% relative to the first quarter of 'twenty, three driven primarily by higher yields.
Speaker Change: Yields as well as an increase in international passenger traffic.
Speaker Change: No naval revenues increased 13, 3%.
Speaker Change: Commercial revenues increased 11, 6% the categories with the highest growth where car rentals restaurants and parking.
Speaker Change: Ah rainfalls rose, 25.4%, mainly due to an increase in revenues. The result of the consolidation of initiatives implemented in past quarters.
Speaker Change: Restaurants increased 18, 6%, you try and increasing the expense as well as the consolidation of initiatives ultimately doing it than in previous quarters.
Speaker Change: Parking increased eight 3% driven by an increase in numbers, how do you see in our airports as well as higher penetration in the U S. Why does Chihuahua Monterrey airports.
Speaker Change: Diversification activities grew 26%, mainly due to higher revenues from hotel services as occupancy levels increased in both hotels.
Speaker Change: Total aeronautical and non aeronautical revenues were 7.2% to $2 7 million passengers in the QUADRA.
Speaker Change: Construction revenues amounted to 1.01 million persons in 124.
Speaker Change: Increase of Sweet.
Speaker Change: An increase of 53% are sort of sort of how your MVP investments execution.
Speaker Change: The cost of services and G&A expense had a 6.4 growth versus the first QUADRA twenty-three, primarily driven by six 5% increase in payroll and a 16.5 growth in contracted services as a result of overall inflationary increases and the effect of mean wage increases.
Speaker Change: Additionally, our cost of hotel services grew by 21, 7% neutral increasing operations in both hotels.
Speaker Change: Oh sessions tax increased 87% to 223 million vessels as a result of a change in the rate from 5% to 9% applies on revenues generated by airport concessions.
Speaker Change: On the tariff regulation basis effective October 2023 payments made to the government related to analytical revenues in excess of those included in the most recent tariff revision will be added to the reference value to be used in the next lesson one tariff revision.
Speaker Change: Therefore, starting in January 2020 seats, the success concession tax payments will begin to be recovered through the Muslim terrorists.
Speaker Change: In the first quarter of 2024, 4% surplus on the concession tax or on the analytical revenues amounted to $26 3 million equivalent to trip on one of the some of our I don't know if you call a non aeronautical revenues.
Speaker Change: This will position Glu in the 223 million that was recorded this consumption tax expense for the QUADRA.
Speaker Change: Excluding this amount our.
Speaker Change: I wanted to just as any that would have been two points.
Speaker Change: 12 billion passengers with a margin of 77.7%.
Speaker Change: We continue to one of the nice alternative accounting treatments, if they recover all amounts of the concession tax however until a final decision is made we decided to recorded as an expense.
Speaker Change: Major maintenance provision less 71 million vessels compared to 77, new vessels in the first quarter of 'twenty three.
Speaker Change: Or.
Speaker Change: EBITDA was 2.0 million passengers on the adjusted EBITDA margin was 74, 6%.
Speaker Change: Our financing expense was 276 million pesos, mainly due to a hiring through <unk> expenses as a result of an increase in financing costs and the variation in the person's value for the major maintenance provision.
Speaker Change: Consolidated net income was $1 1 million passengers in the QUADRA, which was flat relative to last year.
Speaker Change: Turning to our cash position.
Speaker Change: Cash generated from operating activities in the first quarter amounted to 1.5 million person some cash at the end of the QUADRA stood at $3 4 million vessels.
Speaker Change: At the end of the QUADRA total debt amounted to $10 7 billion pesos. We ended the QUADRA with healthy net debt to adjusted EBITDA ratio of 0.8 times.
Speaker Change: Yes.
Speaker Change: This concludes our prepared remarks smalley. Please open the call for questions.
Speaker Change: Thank you.
Speaker Change: At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
Speaker Change: Our first question comes from the line of.
Speaker Change: And there's with J P. Morgan. Please proceed with your question.
Andrea: Thank you. Thanks for taking my question Hi, he cut of the roofing Manuel My question. My first question is regarding the traffic outlook.
Andrea: Any color on the last conference call you mentioned about an expectation of having a flattish traffic performance seems doesn't 24 when compared to last year.
Speaker Change: Is this still the case I mean, how should we think about the traffic performance going forward given the latest assessments on the aircrafts groundings.
Speaker Change: And the second question and I'll show you alluded to is its on a couple of quick specifically.
Speaker Change: We continue to see a with perform and naturally but how should I think about the pace of recovery going forward. Thank you.
Speaker Change: Thank you. Thank you for letting me, we're monitoring very closely our traffic, it's really depending on how the Pratt and Whitney.
Speaker Change: Engine issue evolves, we're looking right now for that for the year in terms of traffic somewhere in the mid to low negative single digit.
Speaker Change: As for Acapulco, We're currently seeing a we're operating around 50% of that.
Speaker Change: Capacity that we were handling a pre Otis. We're also monitoring very closely and it will depend on the recovery of of the city.
Speaker Change: Yeah.
Speaker Change: Got it thank you very much.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Andrew.
Andrew: Fuchs with.
Andrew Fuchs: Can you talk please proceed with your question.
Andrew Fuchs: Okay. Thank you hold that incredible momentum and thank you for the color and congrats on the results.
Andrew Fuchs: Two quick ones from my side first.
Andrew Fuchs: Of course.
Fuchs: I was curious to see what the NAV.
Fuchs: Sure.
Fuchs: 5%.
Fuchs: I was hungry wondering how we can we may be in context of last year's total.
Fuchs: For the last few months.
Fuchs: The year was tempered Sun belt right.
Fuchs: Inflation, how do we get to the plus 5% on the national pool.
Fuchs: Last question and then the second one on the one optical revenue per passenger.
Fuchs: So 15% year over year.
Fuchs: Absolutely.
Speaker Change: So congratulations on that maybe almost all of them.
Speaker Change: Can you share with us a little bit more color on Saturday.
Speaker Change: I think the last two quarters.
Speaker Change: And maybe.
Speaker Change: Didn't see is also adding to the strong performance anything that you could call them.
Speaker Change: To continue to see strong performance on the monitor and optical side going forward. Thank you.
Speaker Change: Hi, I'll handle a with respect to the I love to go yield it has to do with a basis of comparison.
Fuchs: So as you point out are in light at the end of last year, we started to have a 10% reduction in to us and certain airports.
Speaker Change: We did some inflationary increases in January of this year and we also plan to do them in January of next year.
Speaker Change: But last year our tariff.
Fuchs: Amaze, our Wassa just as until the end of March. So so that's why you see the benefits of the basis of comparison, primarily.
Fuchs: And with respect to our commercial initiative, yes, we have been.
Fuchs: Working very closely with with when seasons are they they become the a major shareholder of the of the company are part of the strategy.
Fuchs: Is to develop a extra analytical revenues are we have been aggressive in renegotiating Oh packages of all of our spaces.
Fuchs: In the food and beverage and retail segments.
Fuchs: Also as new Oh does become available we didn't give them the expansions.
Speaker Change: We are finishing up.
Speaker Change: In the in the Monterrey Airport.
Speaker Change: We expect the strong performance to continue into next the following quarters.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of out and Macias with Bank of America. Please proceed with your question.
Macias: Hi, Thank you for the call I have just one question on the technical assistance.
Macias: I guess expense.
Macias: Yes.
Macias: Is that what we saw in the first quarter should we.
Macias: Continue to to expect going forward.
Speaker Change: Levels. Thank you.
Speaker Change: Hi, Hi, Alan.
Alan: Yeah Technical assistance, Oh fee has not been a modified.
Speaker Change: Generally stunts at 3% of the revenues sorry of the EBITDA generated by the airport concessions.
Speaker Change: So so so those no modification in that respect are.
Speaker Change: Going forward.
Speaker Change: It will depend on the level of our EBITDA.
Speaker Change: EBITDA generated by the airport concessions or.
Speaker Change: Whether it goes up or down it depends on the airports performances.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Rodolfo Ramos with Bradesco BBA. Please proceed with your question.
Rodolfo Ramos: Thank you congratulations on the results on my team I have a couple of on the on the traffic side.
Rodolfo Ramos: Thinking more a little bit more long term.
Rodolfo Ramos: Medium term, how how do you see this slot reduction or like these bottlenecks that we've seen in Mexico City.
Rodolfo Ramos: Impacting your your your system at all given that.
Rodolfo Ramos: How important the Mexico City Metropolitan area is for the Monterrey Airport. So every my my first question and then second I don't know if you've heard any.
Speaker Change: Any additional news around the airport in Monterrey.
Speaker Change: The transfer of operations to the military.
Speaker Change: Should have happened or is about to happen any day now.
Speaker Change: Obviously, the military isn't anything we play struggling with Mexicana Felipe accolades, but how likely do you think it is for them to start the commercial operations I don't know how could that impact. Thank you.
Speaker Change: Thank you. Thank you all for in terms of a slight reduction in Mexico City with what we're expecting is traffic what the government is expecting is traffic from the Mexico City airport to shift into either Santa Lucia probably to look at mostly mostly Santa Lucia. So what we're expecting medium term long term is that trap.
Speaker Change: <unk> will start in the either shifting to the other alternative airports like Santa Lucia not 100%, but the rest will find their way around the network of airports. So that's why we believe that that we are part of that solution that traffic will start at some point that access traffic that it's not moving to other airports the bypassed.
Speaker Change: The airport in Mexico City, So we were not expecting a medium.
Speaker Change: Jeremy impact.
Speaker Change: Traffic is challenging this year because of the Pratt and Whitney issue, but other than that aside from that near shoring is still there. The fundamentals are still there. So we're bullish on traffic going forward. So like network just to follow up there.
Speaker Change: Network development do you think it's going to be a more key like providing point to point Monterrey to two other smaller.
Speaker Change: Cities.
Speaker Change: Correct.
Speaker Change: Yeah, Yeah, I think that's fair to say okay.
Speaker Change: And in terms of the that the airport in the north.
Speaker Change: At this point, there's no we haven't there's no official announcement besides what we heard in December we don't know that there's a lot of investment that the <unk> would have to do Monterrey airport doesn't have a capacity constrained. So so the technical need it's it.
Speaker Change: It would have to be it would have to be analyzed but at this point, we don't see that that project right now it's a it's an action.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Fernando Garcia with BTG Pactual. Please proceed with your question.
Fernando Garcia: Hello, and thank you for taking my question, so from our side as far as.
Fernando Garcia: I wanted to get the update on the MVP negotiation I know we are far from.
Fernando Garcia: The timeline for that.
Fernando Garcia: Considering all the moving parts that we saw at the beginning of the year with a two hour dance coffee increasing concession fee isn't what makes you guys here later.
Speaker Change: On the carriage.
Speaker Change: And you should get on the Max MTP for expecting a flattish tariffs like you were previously.
Speaker Change: Me expecting are you now looking for a small carriers increase.
Speaker Change: And second one on margins our margins would be considering.
Speaker Change: Considering all the moving parts.
Speaker Change: As you are expecting now like light and lower traffic do you still expect to keep these margins of about 75% going forward how should we look at it. Thank you.
Speaker Change: Yeah Fernanda. Thank you for your question.
Speaker Change: You're right we're still in an early stage of the M. D. P. S where we will have this have made that until June of next year right now where we're working on the projection and the traffic projections on the capex needs that we'll be looking forward. We're working very closely with Vinci development is next M E P.
Speaker Change: We're using all of their expertise their experience that they have they are very good and very efficient at optimizing capex, which is what we are currently working on so it's still early to say and have some some guidance into where we're thing where we think we would land on tariffs.
Speaker Change: And in terms of magic of margins I think something between 70% to 74% it's fair to assume.
Speaker Change: So considering that considering that the convert concession tax will be considered and expense.
Speaker Change: Yeah.
Speaker Change: And thank you.
Speaker Change: Our next question comes from the line of Pablo recall did with Santander Mexico. Please proceed with your question.
Pablo: Hum incredible comfortable with maybe a follow up.
Pablo: Hmm.
Pablo: Or did you break up nicely off of an intangible asset.
Pablo: So you are in that.
Speaker Change: That all boats.
Pablo: Peter.
Pablo: Yeah.
Pablo: Sorry.
Peter: But the less a part of your question I couldn't hear it.
Speaker Change: Yes, sorry about that.
Speaker Change: Regarding by a sort of an expense, but a fun tangible effect.
Speaker Change: Most of them from the sand wash them all behind what you said.
Speaker Change: It was a matter of like you turn on the T shirt or a matter of the compounds.
Speaker Change: So so we're still assessing.
Speaker Change: Assessing alternative accounting.
Speaker Change: Christmas for them for this line item, we haven't reached a final decision that weren't stealing conversations with or all the sourcing in this respect.
Speaker Change: And would expect to have a resolution in the upcoming quarters.
Speaker Change: The way we reported it was it was the more conservative approach and obviously this does not have any impact in the recoverability of the excess amount of space.
Speaker Change: Pursuant to the tariff Rab basis, but that's the only discussion both internally and with our auditors.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Jason with Citi. Please proceed with your question.
Jason: Hey, it's Jay dialing in from Stephen Trent team. Thanks for taking my question well. It's two on my end. The first thing I wanted to ask is is it too early to say whether the next administration will begin discussions fixed income session contracted beyond 2048, rather than improving large tariffs increases every five years.
Speaker Change: Yeah.
Speaker Change: Hi, Jay.
Speaker Change: We havent had that conversation.
Speaker Change: It seems that it's it's too early to have that type of conversation considering that the the years remaining on the concession.
Speaker Change: Okay and my next question is a general high level view over what investors could expect regarding tariffs and Capex for the next regulatory review.
Speaker Change: Yeah.
Speaker Change: As we mentioned it is still too early in the process, we are submitting that.
Speaker Change: Next MVP until June so we're currently working in trafficking and Capex projections that we are working with our with Vinci our partners.
Speaker Change: To develop a very efficient and optimized capex are leveraging their expertise their international expertise.
Speaker Change: Sounds good thanks for the color.
Speaker Change: Thank you. Our next question comes from the line of Gambia, Thus far with Scotiabank. Please proceed with your question.
Gambia: Hi, good morning, Thanks for the call just a quick follow up question about the concession fee. It's my understanding that the decreasing the concession fee will be somehow upset in the new Master development plan in 2026, but in the meantime is there any.
Gambia: Setting mechanism to to offset the impact on profitability to increase of the concession fee or it's just pure cost control. Thank you.
Gambia: Yeah.
Gambia: So so so on irrespective of what the accounting treatment of the cash flow benefit will will come until the next negotiation.
Speaker Change: Certainly there not only because of this junior.
Gambia: You know that we need but also to compensate for some of the passenger loads that we're experiencing we continue to be very aggressive on our cost containment.
Speaker Change: Sure. So we're always looking to optimize our expense base and that is part of our philosophy of running our.
Speaker Change: Our company.
Speaker Change: Okay. So in the meantime, there's no there's no kind of a rig luxury offset or even increasing a bit buster maximum great too.
Speaker Change: 100%.
Speaker Change: Or something just pure cost control.
Speaker Change: Yeah.
Speaker Change: Oh, well are we Uh huh.
Speaker Change: Last year, we ended up at 97, 5% of maximum tariff.
Speaker Change: Recovery. This year, we are expecting to be above that.
Speaker Change: So in that sense out of those those are meeting on measures to compensate for the additional outflow of position times that we're experiencing.
Speaker Change: Okay. Thank you congrats on the results. Thank you.
Speaker Change: Thank you Ellen.
Speaker Change: Okay.
Speaker Change: Thank you and we have reached the end of the question and answer session I'll now turn the call back over to Ricardo Duenas for closing remark.
Ricardo Duenas: We would like to thank everyone for participating in today's call. We appreciate your insightful questions engagement and continued support roof Juan Manuel and I are always available should you have any further questions will require additional information. Thank you once again and have a great day.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Ricardo Duenas: Okay.
Ricardo Duenas: Okay.
Ricardo Duenas: It's all about.
Ricardo Duenas: Okay.
Ricardo Duenas: [music].
Ricardo Duenas: Okay.
Ricardo Duenas: Yeah.
Ricardo Duenas: Yes.
Speaker Change: [music].