Yahoo Finance Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) Q1 2024 Earnings Call Transcript
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) Q1 2024 Earnings Call Transcript April 25, 2024
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to Grupo Aeroportuario del Centro Norte OMA 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. [Operator Instructions] I will now turn the conference over to your host, Emmanuel Camacho of Investor Relations. You may begin.
Emmanuel Camacho: Thank you, Shimali. Hello, everyone. Welcome to OMAS First Quarter 2024 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. Participating today are CEO Ricardo Duenas and CFO Ruffo Pliego. 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, not subject to a number of risks and uncertainties that could cause actual results to differ materially, including factors that may be beyond our control. And with that, I'll turn the call over to Ricardo for his opening remarks.
Ricardo Duenas: Thank you Emmanuel. Good morning everyone. We appreciate your presence in this call today. This morning, Ruffo and I will review our quarterly operational financial results and then we will be pleased to answer your questions. In the first quarter, OMA's passenger traffic reached 5.9 million, a decrease of 1.5% versus the first quarter of last year. Excluding the Acapulco airport, where hotel infrastructure continues to be affected by the impact of Hurricane Otis that hit in October 2023, terminal passenger traffic in our other twelve airports increased by an aggregate of 0.9% during the quarter. Excluding Acapulco, OMA experienced a decline in domestic traffic of 1.2% in the quarter, driven by lower domestic seat capacity which declined by 9.1%.
The main airports affected were Culiacán and Ciudad Juárez airports, notably on routes such as Culiacán to Tijuana and Ciudad Juárez 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 and international routes. During the quarter, international seat capacity grew by 7.1%. This international growth was primarily led by the Monterey Airport, which saw a 14% rise in international passenger traffic. The routes with the highest increase from Monterey were to Atlanta, Toronto, Las Vegas, Bogotá, and Dallas. These routes, along with San Luis Potosito, Houston, and Zihuatanejo and Zacatecas to Dallas, routes contributed to approximately 80% of the international passenger traffic increase during the quarter.
Furthermore, in the first quarter, we launched four new international routes, three of which were based at the Monterey Airport. In terms of airline participation, VivaAerobus represented 48% of our total traffic during the quarter. With a notable 16% increase in terminal passenger numbers compared to the first quarter of 2023, while Volaris, which accounted for 20% of our total traffic, experienced a 24% decrease during the quarter, largely due to the Pratt & Whitney engine recall affecting their fleet. Moving on to OMA's first quarter financial highlights. Aeronautical revenues increased by 5.3%. And aeronautical revenue per passenger rose 7% in the quarter. Commercial revenues increased 12% as compared to the first quarter of last year, driven by car rentals, restaurants, and parking.
The car rental and restaurant line item benefited from the opening and consolidation of new businesses' units across our airports during the past quarters. Occupancy rates for commercial space stood at 95.3% at the end of the quarter. On the diversification front, revenues increased 21%. Hotel services contributed most to this growth, mainly as a result of an increasing operation in both hotels. In the first quarter, occupancy rate at our terminal 2NH was 89%, while the Hilton Garden Inn Hotel had an occupancy rate of 77%. OMA cargo increased 2%, mainly as a result of an increasing revenue related to import cargo services. OMA's first quarter adjusted EBITDA increased by 3%, to Ps.2 billion, and the adjusted EBITDA margin was 74.6%. For comparative purposes with the first quarter of last year, we exclude the surplus of the concession tax over aeronautical revenues, resulting from the rate increase from 5% to 9% for this concept pursuant to the Mexican Federal Duties Law, which amounted to Ps.86.3 million and was recorded as a concession tax expense in the quarter, along with its impact on OMA's financial results.
Our adjusted EBITDA would have been Ps.2.127 million with a margin of 77.7%. On the capital expenditures front, total investments in the quarter, including MDP investment, major maintenance and strategic investments were Ps.1.1 billion. During the quarter, some of the most relevant projects we are working on are the expansion and remodeling of the Monterey airport terminal A building, as well as the Juarez Torreón, Culiacán, and Durango Terminal Buildings. Reconfiguration of the master plan Terminal building, major rehabilitation and reconfiguration of platform and taxiways in several airports and construction of four industrial warehouses. Lastly, I want to mention that tomorrow we will hold our 2024 annual shareholders meeting. Shareholders will vote on several matters including the declaration and payment of a Ps. 4.25 billion cash dividend.
We extend our sincere gratitude to our shareholders for their invaluable participation and unwavering commitment to our company. I would now like to turn the call over to Ruffo Peresplego who will discuss our financial highlights for the quarter.
Ruffo Perez Pliego: Thank you, Ricardo. Good morning, everyone. I will briefly review our financial results for the quarter and then we will open the call for your questions. Aeronautical revenues increased 5.3% relative to the first quarter of 2023, even primarily by higher aeronautical yields as well as the increase in international passenger traffic. Non aero revenues increased 13.3%. Commercial revenues increased 11.6%. The categories with the highest growth were car rental, restaurants and parking. Car rentals rose 25.4%, mainly due to an increase in revenue as a result of the consolidation of initiatives implemented in past quarters. Restaurants increased 18.6% due to an increase in fixed rent, as well as the consolidation of initiatives also implemented in previous quarters.
Parking increased 8.3% driven by an increase in average tariffs in our airports as well as higher penetration in the Ciudad Juarez, Chihuahua and Monterrey airports. Diversification activities increased 20.6%, mainly due to higher revenues from hotel services as occupancy levels increased in both hotels. Total aeronautical and non-aeronautical revenues were 7.2% to Ps.2.7 billion in the quarter. Construction revenues amounted to Ps.1.01 million in 1Q 24 as an increase of 53% as a result of higher MVP investment execution. The cost of services and G&A expense had a 6.4 growth versus the first quarter of 2023, primarily driven by 6.5% increase in payroll and a 16.5 growth in contracted services as a result of overall inflationary increases and the effect of minimum wage increases.
Additionally, our cost of hotel services grew by 20.7% due to the increase in operations in both hotels. Concession tax increased 87% to Ps.223 million as a result of a change in the rate from 5% to 9% applied on revenues generated by airport concessions. Under the tariff regulation basis effective October 2023, payments made to the government related to aeronautical 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 maximum tariff revision. Therefore, starting in January 2026, these excess concession tax payments will begin to be recovered through the maximum tariffs. In the first quarter of 2024, the 4% surplus on the concession tax on the aeronautical revenues amounted to Ps.86.3 million, equivalent to Ps. 3.1 of the sum of our aeronautical and non-aeronautical revenues.
This surplus is included in the Ps.223 million recorded as concession tax expense for the quarter. Excluding this amount, our adjusted EBITDA would have been Ps.2.12 billion with a margin of 77.7%. We continue to analyze alternative accounting treatments of the recovery amount of the excess concession tax. However, until a final decision is made, we decided to record it as an expense. Major maintenance provision was Ps.71 million compared to Ps.77 million in the first quarter of 2023. Our EBITDA was Ps.2.0 billion and the adjusted EBITDA margin was 74.6%. Our financing expense was Ps.276 million, mainly due to a higher interest expense as a result of an increase in financing costs and the variation in the present value of the major maintenance provision.
Consolidated net income was Ps.1.1 billion in the quarter, which was flat relative to last year. Turning to our cash position, cash generated from operating activities in the first quarter amounted to Ps.1.5 billion on cash at the end of the quarter stood at Ps.3.4 billion. At the end of the quarter, total debt amounted to Ps.10.7 billion and we ended the quarter with a healthy net debt to adjusted EBITDA ratio of 0.8 times. This concludes our prepared remarks. Shamali, please open the call for your questions.
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