Grupo Aeroportuario del Centro Norte Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 29, 2025

There are 7 speakers on the call.

Operator

Ladies and gentlemen, greetings, and welcome to the Grupo Aeroportuario Del Centro Norte, Omaha First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in the listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Emmanuel Camacho, Investor Relations Officer.

Operator

Please go ahead, sir.

Speaker 1

Thank you, Ensico. Hello everyone. Welcome to Ooma's first quarter twenty twenty five earnings conference call. We're delighted to have you join us today as we discuss our company's performance and financial results for the past quarter. Joining us today are our CEO, Ricardo Vena and CFO, Rupo Perezpevo.

Speaker 1

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 now I'll turn the call over to Ricardo Buenas for his opening remarks.

Speaker 2

Thank you, Manuel. Good morning, everyone. We appreciate your presence on this call today. This morning, Rufo and I will review our quarterly operational and financial results and then we will be pleased to answer your questions. In the first quarter of this year, AllHas passenger traffic totaled 6,400,000 passengers, a 9.1% increase year over year.

Speaker 2

This increase was mainly attributable to an increase in seat capacity of 13.4% during the quarter. On the domestic front, passenger traffic grew by 8%, driven primarily by the Monterrey Airport, which saw increases on routes to Queretaro, the metropolitan area of Mexico City, including the Mexico City, Aifa and Toluca airports. Hermosillo, Ciudad Juarez, Guadalajara and Culiacan. These routes collectively added over 285,000 passengers during the quarter, representing 72% of the total domestic passenger growth. International passenger traffic increased 15.1%.

Speaker 2

This growth was also driven by the Monterrey Airport with passenger traffic increases on routes to San Antonio, Chicago, Los Angeles, Orlando, San Francisco, Oakland, Miami, Austin, and Denver. These routes collectively added over 132,000 passengers during the quarter, accounting for 94% of the total international passenger increase in the first quarter. During the first quarter, we launched 16 new routes, five of which were international. In terms of airline participation, VivaAir Augusta represented 49% of our total traffic during the quarter with an 11% increase in terminal passenger numbers compared to the first quarter of twenty twenty four, while Volaris, which accounted for 22% of our total traffic, recorded a 20% passenger increase during the quarter. Moving on to NOMA's third quarter financial highlights.

Speaker 2

Aeronautical revenues increased 13.8% with aeronautical revenue per passenger rising 4.3% in the quarter. Commercial revenues had a strong double digit growth with commercial revenue per passenger growing 13% to MXN66 as compared to the first quarter of twenty twenty four, driven by VIP lounges, restaurants and retail. VIP lounges benefit from higher access rates and a larger number of users as well as the effect of the previously opened lounges. The restaurant and retail line items benefited from the consolidation of new business units open across our airports during past quarters. Occupancy rate of commercial space stood at 96% at the end of the quarter.

Speaker 2

On the diversification front, revenues increased 22%. OMA Cargo contributed most to this growth, mainly as a result of an increase in revenue related to air cargo operations in Monterrey. Revenue from industrial services increased 56.4% year over year, reaching MXN42 million, primarily driven by a higher number of square meters leased in our industrial park. During the quarter, we completed construction of a warehouse measuring about 9,200 square meters, as well as 2,400 square meter expansion of an existing facility. Additionally, we are currently building a 5,000 square meters warehouse, which we expect to complete in the second quarter of this year.

Speaker 2

OMA's first quarter adjusted EBITDA increased by 16% to MXN2.4 billion and an adjusted EBITDA margin of 74.9%. On the capital expenditure front, total investments in the quarter, including MVP investment, major maintenance and strategic investments were MXN502 million. Lastly, I want to mention that last Friday, we held our twenty twenty five Annual Shareholders Meeting, where shareholders voted on several matters, including the declaration and payment of a 4,500,000,000.0 cash dividend. I would now like to turn the call over to Rufo Perez Viejo, who will discuss our financial highlights for the quarter.

Speaker 3

Thank you, Ricardo, and good morning, everyone. I will briefly walk you through our financial results of the quarter, and then we'll open the call for your questions. Aeronautical revenues increased 13.8% relative to the first quarter of twenty twenty four, driven primarily by higher aeronautical yields as well as increase in both domestic and international passenger traffic. Non aero revenues increased by 20.9%. Commercial revenues increased by 2.8% and the nine items with the highest growth were VIP lounges, restaurants and retail.

Speaker 3

VIP lounges rose 80%, mainly due to an increasing rates and higher number of users as well as the opening and the consolidation of the Sihuatanejo Lounge, which started operations last year. Restaurants increased 32.8% driven by greater customer penetration and the opening or replacement of outlets in previous quarters in airports such as Monterey, Ciudad Juarez and Luang. Retail increased 50.9% as a result of the contribution of new spaces opened or replacements of existing spaces in previous quarters as well as a higher penetration, primarily in airports like Juarez, Monterrey, Torreon and Culiacan. Diversification activities increased 22% mainly due to high revenues from Omicaga and the industrial park. Total aeronautical and non aeronautical revenues grew 15.6% to 3,100,000,000.0 in the quarter.

Speaker 3

Construction revenues amounted to MXN $4.00 3,000,000 in the first quarter, a decrease of 60% as a result of lower NDP investment execution. The cost of services and G and A expense increased 10.2% year over year, primarily due to a 42% rise in our cost and expense. Payroll increased by 9.9%, while contracted services grew 8.8%, mainly due to higher costs for security and cleaning services following contract renewals in prior quarters. Concession tax increased 16% to MXN $259,000,000 in line with the increase in revenues. Major maintenance provision was MXN 53,400,000.0 as compared to MXN 71,300,000.0 in the first quarter of twenty twenty four.

Speaker 3

As Ricardo mentioned, OMA's first quarter adjusted EBITDA was MXN 2,400,000,000.0 and adjusted EBITDA margin reached 74.9. Our financing expense reached $312,000,000, an increase of 13% mainly due to a lower interest income as a result of lower average cash balance during the quarter as compared to the same period of the last year. Consolidated net income reached Ps. 1,300,000,000.0, which showed an increase of 19.7% versus the first quarter of twenty twenty four. Turning to our cash position.

Speaker 3

Cash generated from operating activities in the first quarter amounted to MXN 1,900,000,000.0 and cash at the end of the quarter stood at MXN 2,300,000,000.0. At the end of the quarter, total debt amounted to MXN 11,300,000,000.0. We maintained a strong balance sheet ending the quarter with a net debt to adjusted EBITDA ratio of one time. This concludes our prepared remarks. Siko, please open the call for questions.

Operator

Thank you. Ladies and gentlemen, we will now be conducting a question and answer answer session. The first question comes from Alan Masias with Bank of America. Please go ahead.

Speaker 1

Hi. Good morning and thank you for the call. Just a question on your expectations for traffic. Traffic in Monterrey has continued to be very strong. I understand there's more capacity, but how are you looking at demand and how was April so far?

Speaker 1

Thank you.

Speaker 2

Hello, Alan. Thank you for your question. Yes, first quarter traffic was looking good numbers. April, remember April, we're going to have the holidays, the Holy Week on April. We didn't have that one last year.

Speaker 2

So, on a month to month, the numbers are going to be good. We're still looking at the same expectation as we mentioned on the previous call, somewhere around the mid single digits. We are cautious for the rest of the year as we're monitoring the macro landscape and the international news coming there.

Speaker 1

Thank you.

Operator

Thank you. The next question comes from the line of Pablo Montserrat with Barclays. Please go ahead.

Speaker 1

Hi. Thanks for taking my question. This is just a more broad question. But in case that your MVP has low CapEx requirements and you don't have major investment opportunities abroad, what do you think the right strategy for dividends will be for OMA going forward? Thank you.

Speaker 3

Hi, Pablo. So over the past few years, we have tried to distribute as much cash as possible to shareholders in the form of dividends. That strategy, I don't think it's going to change in the foreseeable future. So as we are able to generate higher free cash flow, that should be translated into higher dividend distributions.

Speaker 1

Thank you.

Operator

Thank you. The next question comes from Chen Spies with Morgan Stanley. Please go ahead.

Speaker 4

Yes. Hello. Congrats on the results. I have two questions. The first one is on capital allocation.

Speaker 4

CCR is, as you probably know, selling their assets some of their assets in Brazil. Would you be interested in those assets or part of those assets or all of them? It would be much appreciated if you could give any perspective on that. And my second question is on like the traffic guidance. We're seeing that like the low cost carriers have retrenched some of their capacity, Volaris, Viva, But still, things are pointing to quite good capacity increases for you guys for the rest of the year, maybe double digits.

Speaker 4

So your guidance does surprise me a bit. Maybe it's could you elaborate if how conservative you're being? And even if things kind of collapse in the second half of the year due to the macro environment, wouldn't that like set the stage better for you guys compared to the other airport operators? Because it would lower the base of like your traffic that you will be settling or negotiating in your next MDP. Thank you.

Speaker 2

I'll take the first. The first one, yes, we took a look at the CCR assets, but we, at the moment, we decided not to participate on that process. And for the second part, Mirafu?

Speaker 3

Yes. Seat capacity situation is somewhat volatile. There were some announcements made last week, and some capacity cuts are being reflected starting May and June by some of the low cost carriers. Remember also that in the fourth quarter of twenty twenty four, several routes were open. So there will be a much higher base of comparison in the fourth quarter as well.

Speaker 3

So yes, it might be a bit conservative, but there are some uncertainties and we don't want to be over optimistic on capacity growth at this time. And regarding your the second half of your question on if this is going to benefit us MVP negotiation that will occur towards the second half of the year. Remember that the current formula looks at the tariff sorry, at the traffic for the first five years and actually through 02/1940, in our case. So any minor changes in capacity in a certain year wouldn't move that much the needle when you are looking at the next fifteen year traffic forecast. So I don't think it's going to be necessarily a huge positive to have a lower traffic expectation this year.

Speaker 4

Okay. Perfect. So it probably helps in the negotiations, only marginally. Perfect. Appreciate the clarity.

Speaker 4

Thank you.

Speaker 3

Thank you.

Operator

Thank you. The next question comes from Alberto Ballerio with UBS. Please go ahead.

Speaker 5

Hi. Thank you, gentlemen, for taking my question. My question is on Neuronological revenues per tax. It was strong this quarter, a jump from fourth quarter last year and also year over year from the first quarter. I'm wondering if you can see another jump for the following quarters or it will be something more stable in inflation index for looking forward for that line?

Speaker 5

Thank you.

Speaker 3

Yes. I think that's the results in extra error reflects the strategy that we have been implementing over the last couple of years, especially since VINCI acquisition. For the next quarters in terms of commercial revenue per packs, expect a similar outcome as to the first quarter. And most likely in 2026, we'll see a higher yield as the new spaces in Monterrey starts to be open.

Speaker 5

Perfect. Those spaces would be open before World Cup, isn't it?

Speaker 2

Yes, correct.

Speaker 5

Perfect. Thanks very much, gentlemen.

Operator

Thank you. The next question comes from Pablo Riccardi with Itau. Please go ahead.

Speaker 1

Hi. Good morning, Tomatil. Congratulations on that. I have two questions. The first one is on the routes.

Speaker 1

I remember when your new partner came in, Vinci, who had all these plans of adding new routes, like local routes. Is that still on the table? Or given all these macro concerns, that's on hold for now? And and my second question is on the investment part.

Operator

You can you start again? Sorry to interrupt you, miss Pablo. Maybe the question to use your handset, please.

Speaker 1

I don't know if you can hear me now. Yeah. We can hear you.

Operator

Yes, sir. Please go ahead. So

Speaker 1

my my first question is on the new routes. I remember when Beach came in, there was, like, all these plans of adding new routes, like, long haul routes. Is that still on the table or that's on hold for now?

Speaker 3

In terms of new routes open, it's we a constant dialogue with airlines. We are focusing both in building our international connectivity and the increase that you saw in the last few quarters, especially particularly for Monterey Airport, points towards that strategy of building good connectivity out of Monterrey. But we also have very two strong players in the local market. And therefore, we also focus on building greater regional connectivity.

Operator

Okay. Thanks. Thank you. The next question comes from the line of Jay Singh with Citibank. Please go ahead.

Speaker 6

Thanks for taking my questions. Jay dialing on for Steven Trent. First thing I want to ask is, do you see any regulators pushing to adjust the TUA at Mexico City import? To the extent that you could talk about it maybe could this have any tariff implications for OMA?

Speaker 2

Sorry, the question again, the regulator pushing to what again?

Speaker 6

To adjust the airport use fees at Mexico City Airport?

Speaker 3

Well, the two up for Mexico City Airport is set in dollars and it increases by U. S. CPI inflation. We have not heard that, that process or mechanics of adjustment is going to change. So I believe that's adjusted at the beginning of every year.

Speaker 3

So probably the adjustment already took place in January, and we wouldn't expect increase to us in the Mexico City Airport for the rest of the year.

Speaker 6

Okay. Got it. And my second question is, how much do you interact with DaVinci on strategic matters such as the MDP or any potential foreign investments?

Speaker 2

We have a very close communication with them. They're involved in the MDP, of course. In non aero, they have been very active in CapEx execution as well. So, it's a very close communication with them.

Speaker 6

Got it. Thanks so much, gentlemen.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Ricardo Duenas, CEO, for closing comments.

Speaker 2

We would like to thank everyone for participating in today's call. We appreciate your insightful questions, engagement, and continued support. Rufo, Emmanuel, and I are always available should you have any further questions or require additional information. Thank you once again, and have a great day.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Grupo Aeroportuario del Centro Norte Q1 2025
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