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Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (OMAB) Q4 2022 Earnings Call Transcript

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Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) Q4 2022 Earnings Conference Call February 17, 2023 8:00 AM ET

Company Participants

Emmanuel Camacho - Investor Relations

Ricardo Duenas - Chief Executive Officer

Ruffo Perez Pliego - Chief Financial Officer

Conference Call Participants

Rodolfo Ramos - Bradesco BBI

Gabriel Himelfarb - Deutsche Bank

Francisco Suarez - Scotiabank

Operator

Greetings and invited to nan Grupo Aeroportuario del Centro Norte OMA Fourth Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this convention is being recorded.

I would now for illustration to move nan convention complete to your host, Emmanuel Camacho, Investor Relations Officer. Thank you. You whitethorn begin.

Emmanuel Camacho

Thank you, Melissa and bully morning, everyone. Welcome to OMA's Fourth Quarter 2022 Earnings Conference Call. Joining maine this greeting are CEO, Ricardo Duenas and CFO, Ruffo Perez Pliego.

Please beryllium reminded that definite statements made during nan people of our chat coming whitethorn represent forward-looking statements which are based connected existent management's expectations and beliefs and are taxable to a number of risks and uncertainties that could origin existent results to disagree materially, including factors that whitethorn beryllium beyond our control.

And pinch that, I will move nan telephone complete to Ricardo Duenas for his opening remarks.

Ricardo Duenas

Thank you, Emmanuel. Good morning, everyone. We admit you joining america today. This morning, I will item respective reporting events and milestones, past I will concisely reappraisal our operational capacity and financial results. Finally, we will beryllium pleased to reply your questions.

First of all, successful December 2022, VINCI Airports finalized nan process for nan acquisition of 29.99% of Series B and Series BB shares of OMA which made VINCI Airports, our largest shareholder. As portion of nan process anterior to nan closing of nan transaction, OMA held a shareholder gathering successful which 6 caller proprietary members for nan Board -- of nan Board. All of them portion of nan VINCI Group were appointed and nan resignation of nan 6 erstwhile proprietary members of our Board was accepted.

I would for illustration to definitive my gratitude to our erstwhile Board members and I would besides for illustration to invited our 6 caller Board members which I americium definite will lend to OMA's worth creation crossed nan Board. VINCI Airports is nan world's largest backstage airdrome operator, managing 65 airports successful 12 countries and served 255 cardinal passengers successful 2019. Some of nan assets guidance of VINCI airports see London Gatwick and Lisbon airports.

At OMA, we expect to leverage from VINCI Board expertise successful managing and improvement successful larboard infrastructure and to adopt champion believe to supply a world-class work to our passengers. In different news, successful January, OMA was recognized for nan 2nd twelvemonth successful a statement arsenic 1 of nan 12 Mexican companies to beryllium portion of nan 2023 Bloomberg gender equality index. We are proud to beryllium recognized arsenic a institution committed to fostering gender equality, inclusion and diverseness crossed our different teams wrong nan company.

Finally, past Monday, we held an mean shareholders' gathering wherever shareholders approved nan declaration and costs of mean rate dividend to shareholders up to MXN1.45 cardinal and delegated to nan Board nan powerfulness to [indiscernible] nan magnitude and dates of payments. Yesterday, we published a property merchandise announcing that we will administer an bonzer dividend of MXN1.45 cardinal to shareholders connected March 2 of this year. Payment of this dividend reinforces our nonsubjective of optimizing our superior structure.

Moving connected to yearly performance. OMA delivered a beardown capacity successful nan 4th fourth and for nan afloat twelvemonth 2022. For nan afloat year, we served records for rider traffic, revenues, adjusted EBITDA, adjusted EBITDA separator and consolidated nett income. I will commencement by discussing our afloat twelvemonth 2022 highlights and past I will move connected to our main 4Q '21 results.

In 2022, our affirmative rider postulation capacity reflects nan outer betterment successful volumes from business-related routes arsenic compared to 2021. The routes were nan largest rider successful were Monterrey to Mexico City, Monterrey to Guadalajara and Ciudad Juárez to Mexico City. All of them business-oriented groups. Also, posting beardown increases successful 2022 were nan Monterrey-Tijuana and nan Monterrey-Cancún routes. In total, these 5 routes jointly added a full of 1.9 cardinal further passengers, representing 36% of nan full 5.2 cardinal rider summation during nan year. Additionally, during nan year, we opened 31 caller routes, of which 20 were international. We judge location is room for beardown and continued rider postulation maturation prospects arsenic business opportunities successful Mexico proceed to expand. As a consequence of our coagulated performance, 12-month rider postulation stood astatine a caller grounds level of 23.2 cardinal passengers which represents a 29% maturation arsenic compared to 2021 and has outpaced by 0.2% our 2019 levels.

I americium proud to opportunity that nan effects of nan pandemic and postulation capacity are intelligibly down this. On nan financial capacity front, aeronautical and non-aeronautical revenues reached grounds levels successful 2022, increasing each by 22% versus 2019. As a result, our adjusted EBITDA for nan twelvemonth was MXN7.1 billion, 27% supra 2019 and we group a caller grounds for our adjusted EBITDA separator which expanded to 76.3%, aided importantly by our continued ratio successful our costs and disbursal structure.

Consolidated nett income for nan twelvemonth stood astatine MXN3.9 billion, an summation of 21% versus 2019. During nan year, we distributed worth to our shareholders by paying retired an aggregate of MXN6.7 cardinal successful dividend passim nan twelvemonth and disbursed a full of MXN3.3 cardinal successful our maestro improvement programme commitments and connected our strategical CapEx.

I will now reappraisal our 4th fourth operational performance. In 4th fourth of '22, OMA's rider postulation reached 6.5 million, an summation of 20.7% versus 4th fourth of '21 and was 8.7% supra nan aforesaid 4th of 2019. The airports that led rider postulation maturation during nan 4th were Monterrey, Ciudad Juárez, Culiacán and Chihuahua. And nan way for nan strongest postulation maturation compared to 4th fourth of '21, each considered chiefly business routes were Monterrey to Mexico City, Toluca, Tijuana, Guadalajara routes.

On nan aggregate, these routes added 349,000 further passengers successful nan quarter, an summation of 33% versus 4th fourth of '21. Performance successful 4th fourth '22 confirms nan existent affirmative momentum of business recreation conception successful OMA's portfolio. Primarily arsenic a consequence of nan strongest rider postulation performance, our aeronautical gross grew by 26% successful nan 4th versus nan 4th fourth of '21 to MXN2 billion.

On nan commercialized front, revenues accrued 35% compared to nan 4th fourth of '21, driven by parking, car rental, restaurants, VIP lounges and retail. Occupancy complaint for commercialized abstraction stood astatine 93.5% astatine nan extremity of nan year. Diversification revenues accrued 24%. Our edifice services and OMA Carga contributed astir to this growth. In nan 4th fourth of 2022, occupancy complaint of our Terminal 2 NH postulation was 81.5%, while nan Hilton Garden Inn Hotel had an occupancy complaint of 75.1%. OMA Carga delivered beardown results went much arsenic revenues accrued 20% versus 4th fourth of '21, chiefly driven by nan beardown cognition of aerial and crushed import cargo.

On nan superior expenditure front, full investments successful nan quarter, including MDP investments, awesome attraction and strategical investments were MXN1.2 billion. During nan quarter, immoderate of nan astir applicable projects we're moving are we grow modeling of nan Monterrey Airport Terminal A building arsenic good arsenic nan Ciudad Juárez and Culiacán terminal buildings.

Reconfiguration of nan Mazatlán terminal building, awesome rehabilitations of platforms and taxi ways successful respective airports and level reconfiguration astatine nan Monterrey Airport. And pinch that, I will now move nan telephone complete Ruffo Perez Pliego for much item connected our financial highlights for nan quarter.

Ruffo Perez Pliego

Thank you, Ricardo and bully greeting to everyone. I will concisely reappraisal our financial results and past we'll unfastened nan telephone for your questions. Turning to OMA's 4th fourth financial results. Aeronautical revenues accrued 26% versus Fourth 4th of 2021, driven by nan 21% summation successful rider postulation and summation successful our aeronautical tariffs implemented successful nan first 4th of past year.

Non-aero revenues accrued besides 26.0%. Commercial revenues accrued 34.6% and nan categories pinch nan highest maturation were car parking, car rental, restaurants, VIP lounges and retail. Parking revenues accrued 46% owed to higher penetration successful nan Chihuahua, Monterrey and Culiacán airports arsenic a consequence of improved business dynamism successful those airports. Car rentals, restaurants and unit accrued 58%, 28% and 22%, respectively, chiefly owed to higher gross sharing and nan opening of caller commercialized spaces. VIP lounges accrued 48% owed chiefly to nan nickname of revenues from a nonstop cognition arsenic good arsenic an summation successful number of users of nan OMA Premium Lounges. Diversification activities accrued 24%, reflecting nan beardown edifice operations OMA Carga's performance.

Total aeronautical and non-aero revenues were MXN2.6 cardinal successful nan 4th and grew 26% comparative to nan 4Q of '21. Construction revenues accrued 71% arsenic a consequence of higher MDP finance execution. The costs of airdrome services and G&A disbursal accrued 15.9% comparative to 4Q '21, chiefly owed to an summation successful payroll disbursal arsenic a consequence chiefly of accrued headcount, higher salaries versus past twelvemonth and provisions, including statutory profit shares. Other increases came astatine nan contracted services statement point which grew owed to wide higher activity successful our airports. And security which was partially offset by little energy disbursal arsenic a consequence of a higher proportionality of power supplied from greenish sources. During nan quarter, star panel's operating successful our 13 airports generated 17% of OMA's power consumption. And our airports were supplied much upwind power arsenic compared to 4Q '21.

Overall, during nan quarter, 95% of our power came from greenish sources. Major attraction proviso was MXN42 cardinal arsenic compared to MXN118 cardinal successful 4Q '21. OMA's 4th fourth adjusted EBITDA reached MXN1.9 cardinal and nan adjusted EBITDA separator was 75.8%. Our financing disbursal reached MXN204 million, chiefly owed to higher liking disbursal arsenic a consequence of further indebtedness issuance and nan higher costs of debt. Consolidated income was MXN1.1 cardinal successful nan quarter, an summation of 11.8% comparative to 4Q '21.

Turning to our rate position. Cash generated from operating activities successful nan 4th fourth amounted to MXN1.6 cardinal and rate astatine nan extremity of nan 4th stood astatine MXN3.4 billion. At nan extremity of nan year, nan full indebtedness amounted to MXN10.2 cardinal and our nett indebtedness to adjusted EBITDA ratio stood astatine 1x. In February of this year, we person started nan process for nan refinancing of our bonds maturing successful 2023. The refinancing is expected done nan issuance of a caller enslaved successful nan section markets and nan position and conditions are still being worked retired and we expect nan issuance to adjacent early successful March.

This concludes our prepared remarks. Operator, please unfastened nan telephone for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility comes from nan statement of Rodolfo Ramos pinch Bradesco BBI.

Rodolfo Ramos

Just a mates connected my side. The first 1 is, tin you springiness america a small spot of your anticipation successful position of your costs and G&A for this year. There's a batch of moving parts. You person payroll expanding sharply and past you person these little costs connected nan inferior side. But I conscionable wanted to spot whether you expect this number to beryllium astir MXN400 cardinal per 4th this year. And possibly if you tin elaborate connected immoderate of nan costs pressures that nan companies are seeing, whether it's picnic days, pension contributions. If you tin talk astir that connected your outlook for 2023, that would beryllium very overmuch appreciated.

And nan 2nd mobility is connected -- and alluding to immoderate of your first remarks is connected this worth creation from having VINCI arsenic a controller and connected nan Board. If you tin possibly talk a small spot aliases elaborate a small spot much connected wherever are nan areas of opportunity that you see? You've been a mates of months formally -- having formally closed this power -- this alteration successful control. So conscionable wanted to spot what are nan priorities, immoderate of nan -- possibly if there's immoderate operational changes that we tin expect aliases thing much large image there, that would beryllium great.

Ricardo Duenas

Sure. Rodolfo, fto maine -- I'll return nan 2nd one. I'll time off Ruffo to reply nan first one. As for VINCI, we expect to leverage its operational and commercialized expertise to thrust worth creation astatine OMA. Some examples that person been identified connected nan measure of OMA strategy of caller years are to proceed to create aerial work developments and summation world rider mix, summation non-air revenues to amended commercialized offering and diversification developments, leverage VINCI expertise successful readying retired for maturation and description and superior optimization, among others. And arsenic for management, they person fixed a batch of assurance to their existent guidance and we're moving on pinch that very well.

Ruffo, do you want to reply nan costs structure?

Ruffo Perez Pliego

Thank you, Ricardo. Rodolfo, successful position of costs side, I deliberation we should expect mostly inflationary increases going forward. The large surge successful rider maturation that we knowledgeable past twelvemonth only had immoderate unit successful our operational costs. But we expect stableness impacting maturation successful nan coming months, we should besides expect nan aforesaid successful costs side.

Operator

Our adjacent mobility comes from nan statement of Anton Morganti [ph] pinch GBM.

Unidentified Analyst

Congrats connected nan results. Just a speedy one. I mean I cognize that Aeromar is not important connected a consolidated ground but I do cognize that they person beardown operations successful Acapulco and Zihuatanejo airports. I was conscionable wondering if you expect to spot immoderate impacts successful those airports for your operations going guardant aliases if immoderate hose already took that marketplace share?

Ricardo Duenas

Thank you, Anton. We're going to anticipating this unfortunate arena for immoderate time. The information of Aeromar was very small, 0.6% of nan traffic. And nan routes that they were covering that they didn't person immoderate exclusivity. So that intends location were different airlines covering that route. So we expect each nan postulation -- aliases nan fewer postulation that was covered by Aeromar will beryllium captured very quickly by nan remainder of nan airlines. So successful short, I don't spot immoderate effect going guardant arsenic a consequence of this unfortunate event.

Unidentified Analyst

Okay. And conscionable different speedy one. What are you seeing successful position of trends for business travel? Talking astir each of these nearshoring boom. Are you really seeing some? I mean, Monterrey postulation has accrued but do you spot this related to that? Or if you could supply immoderate of your colour connected that?

Ricardo Duenas

Yes, we're seeing nan effect wrong nan nearshoring -- that is real, is happening and we're seeing it successful our portfolio of airports. If you look astatine this aggregate, nan postulation capacity successful nan past fewer months, nearshoring destinations, for example, Ciudad Juárez are increasing astatine a overmuch larger percent than nan mean of nan different OMA airports.

Operator

Our adjacent mobility comes from nan statement of Sally Nielsen pinch Citi.

Unidentified Analyst

So I person 2 questions connected my broadside and sorry if you person already mentioned astir that. But I was funny astir why did energy materials costs diminution this 4th erstwhile we really expected them to emergence arsenic everyplace else. And nan 2nd mobility is regarding tariffs. Like do you spot immoderate risks of Mexican airports getting tariffs cuts going guardant erstwhile MDP negotiations commencement to resolve?

Ruffo Perez Pliego

I'll return nan first mobility and past if you tin repetition nan 2nd 1 because we can't perceive competitively. But connected nan inferior side, arsenic you know, complete nan past 18 months, we invested successful star parks successful each of our airports. So successful nan 4th fourth of nan year, our star parks generated 17% of our full power depletion and that contributed importantly to nan savings that you're seeing successful nan 4th fourth comparative to nan 4th fourth of 2021. And pinch respect to your 2nd question, if I whitethorn inquire to you to rephrase then.

Unidentified Analyst

Sure. The 2nd 1 was regarding airdrome tariffs. Like are you seeing immoderate risks of Mexican airport's tariffs getting trim during nan negotiations of nan adjacent MDP developments?

Ricardo Duenas

I mean we're still -- we're 3 years for nan adjacent negotiation. We're up for nan September 25, really 2 years till excessively far. But nan regulatory model has been very clear. It is straightforward successful nan NH7 concession [ph] title. It has been moving good and we person nary logic to judge that it would behave otherwise going forward.

Operator

Our adjacent mobility comes from nan statement of Juan [ph] pinch GBM.

Unidentified Analyst

Congrats connected results. I person 2 questions. My first mobility would beryllium regarding M&A. Are you assessing immoderate M&A projects? And my 2nd mobility is regarding your tariff impairment. You implemented early February, if you could show america really that went. It would beryllium great.

Ruffo Perez Pliego

So connected nan M&A side, we -- past year, we're still participating successful nan Barras process which has been called off. After nan incorporation of VINCI successful our superior structure, we are not expecting to behaviour M&A astatine nan OMA level but our anticipation is that we apt beryllium down astatine nan VINCI Airports level.

Ricardo Duenas

And aft tariff goal, we're still moving connected nan details. And we'll study arsenic soon arsenic we person much information.

Unidentified Analyst

Great. One much mobility regarding tariffs. What percent of your approved tariff for 2023 person you reached?

Ricardo Duenas

What percent of what, sorry?

Unidentified Analyst

Of your maximum approved tariff for 2023. Are you astatine 100% Or are you still [ph].

Ricardo Duenas

So for 2022, our maximum tariff was 90%. 90% maximum tariff compliance.

Unidentified Analyst

Okay. So you're presently astatine 90%, right? Do I understand…

Ricardo Duenas

That is correct.

Operator

[Operator Instructions] Our adjacent mobility comes from nan statement of Gabriel Himelfarb pinch Deutsche Bank.

Gabriel Himelfarb

Two speedy questions. The first one, are you seeing immoderate displacement from transit passengers that travel -- well, that transverse done to Mexico City airdrome towards your network? Like utilizing Monterrey arsenic a relationship edge. And my 2nd mobility is respect nan Canadian traffic. Do you person seen an summation successful Canadian postulation successful coming to Mexico to either relationship aliases destination nodes? And what percent of nan full world postulation does nan Canadian postulation represent?

Ruffo Perez Pliego

In nan lawsuit of nan type of postulation retired of nan Mexico City Airport into immoderate of our airports. It's a slow process but it is happening. We're seeing much connections being developed astatine Monterrey. So you person further connectivity from that airport. We are besides expanding our world presence. So pinch nan European way that we have, location was 1 announced to South America earlier this week. I deliberation that location is grounds that Monterrey is starting to go a feeder for immoderate of these world routes. Also successful nan aggregate, our relationship postulation is still not important but we do expect to gradually proceed to summation and return advantage of nan saturation of nan Mexico City airport.

Gabriel Himelfarb

Okay. And regarding nan Canadian traffic, tin you springiness america a colour connected really -- what percent of that represents from nan world traffic? And do you spot a step-up successful postulation coming from Canada arsenic they opened their borders?

Ruffo Perez Pliego

I will get backmost to you connected circumstantial Canadian traffic. What I tin opportunity is that nan 2022 wintertime season, I mean, nan ones still presently going connected is yet beneath nan pre pandemic levels. It has been importantly amended than past twelvemonth but still, we are not yet astatine nan pre-COVID levels successful that circumstantial market. But will get you backmost pinch nan circumstantial information.

Operator

[Operator Instructions] Our adjacent mobility comes from nan statement of Francisco Suarez pinch Scotiabank.

Francisco Suarez

Congrats connected nan results and nan mobility that I person is fundamentally connected your diversification strategy, we noticed that you are adding much capacity connected warehouses pinch being your associated task pinch VINCI. The marketplace is wholly sold out. Do you spot opportunities to divided things up successful position of our much superior deployment to unfastened caller warehouses successful your airports connected nan backmost connected your footprint and nan nearshoring trends for sure. And I judge that nan 2nd mobility that I person is connected -- do you conscionable expect that now having been -- will that whitethorn person a affirmative effect connected your backing costs?

Ricardo Duenas

I'll return nan first one. In position of diversification, yes, arsenic portion of nan erstwhile mobility astir nearshoring, nearshoring, we're not only seeing circumstantial airport. We're besides seeing successful nan cargo and business parkland activity. We have, particularly successful Monterrey, we deliberation there's still imaginable to grow. We person a onshore area to summation nan business portion and we will support expanding arsenic much tenants are looking to found themselves successful nan airport.

Ruffo Perez Pliego

And regarding our backing strategy, retrieve that we chiefly money successful pesos successful nan section marketplace astatine a very competitory rate, surely incorporation of a larger cognition shareholder is simply a positive. And I deliberation connected nan margin, it will thief us. But if we -- since we are not successful nan world market, astir apt that effect would beryllium somewhat limited.

Francisco Suarez

Congrats, again.

Ricardo Duenas

Thank you.

Operator

Ladies and gentlemen, that concludes our question-and-answer session. I'll move nan level backmost to Mr. Duenas for immoderate last comments.

Ricardo Duenas

Thank you. Thank you each for your information today. Ruffo and Emmanuel and I are ever disposable to reply your questions and we dream to spot you soon. Thank you and person a bully day.

Operator

This concludes today's convention call. You whitethorn disconnect your lines astatine this time. Thank you for your participation.

Editor: Naga



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