Grupo Aeroportuario del Centro Norte SAB de CV Q4 FY2023 earnings call

Full Year 2023 Highlights

• Record passenger traffic, revenues, adjusted EBITDA (78.4% margin), and net income.
• Robust growth in aeronautical and non-aeronautical revenues due to successful cost control.
• Monterrey airport was a key driver of passenger traffic growth (+22% y-o-y).
• Major milestones: Opening of Wing 1 in Monterrey, remodeling of NH Terminal 2 Hotel in Mexico City, construction of industrial warehouses in Monterrey, and opening of 3 OMA premium lounges.
• Effectively managed regulatory adjustments and recovered from Hurricane Otis impact on Acapulco.

Fourth Quarter 2023 Highlights

• Passenger traffic 6.8 million (+5.2% y-o-y), Monterrey contributed 96% of total growth.
• Aeronautical revenues up 13% to MXN2.2 billion, commercial revenues up 14% driven by restaurants, parking, and lounges.
• Diversification revenues up 15%, OMA Carga saw growth from increased tonnage handled.
• CapEx MXN1 billion, ongoing projects include Monterrey airport expansion, terminal reconfigurations, and industrial warehouse construction.
• Achieved airport carbon accreditation level 2 at 13 airports.

In the fourth quarter of 2023, OMA's passenger traffic reached 6.8 million, a 5.2% increase versus Q4 2022. Excluding Acapulco, passenger growth was 7.1%. Aeronautical revenues grew 13.4% in the quarter, driven by passenger traffic growth and higher revenue per passenger. Non-aeronautical revenues, including commercial and diversification, saw growth: commercial revenues increased 14.3% with restaurants, parking, VIP lounges, and retail driving growth; diversification activities rose 14.9% led by OMA Carga. Adjusted EBITDA for the quarter was MXN2.3 billion with a margin of 77.7%. For the full year 2023, OMA achieved record passenger traffic of 26.8 million (+15% y-o-y), aeronautical revenues grew 27%, non-aeronautical revenues 18%, adjusted EBITDA MXN9.1 billion (+28%), and net income MXN5 billion (+28%).

Traffic

• Expect flattish traffic in 2024 due to Pratt & Whitney engine recall impacting low-cost carriers in Mexico.

Tariffs

• Inflationary increases applied to tariffs starting January 2024, with discounts in 10 airports implemented in November/December 2023. No margin expansion expected in 2024 due to cost pressures and increased concession tax.

Dividends

• Still assessing dividend amount for 2024, to be presented by end of March for Shareholders Meeting in April.

Labor Costs

• Current labor cost levels, with wage adjustments for 2024 to be factored in.

• Impact of Pratt & Whitney engine recall on low-cost carriers affecting traffic.
• Uncertainties in MDP negotiation and tariff regulation changes.
• Capacity reductions at Mexico City Airport affecting traffic patterns.
• Slow recovery of Acapulco Airport due to Hurricane Otis and city recovery challenges.

Q: What to expect from MDP negotiation with new tariff regulation and CapEx needs?

A: Ruffo mentioned MDP still in progress, working on optimized CapEx, too early to indicate tariff adjustment impact.

Q: View on private Monterrey airport and its impact on Monterrey airport?

A: Ricardo stated no official announcement, monitoring situation, no budget allocation yet.

Q: 2024 traffic base case considering Pratt & Whitney impact?

A: Ruffo said expecting flattish traffic in 2024 due to Pratt & Whitney recall.

Q: Tariffs and margin expectations for 2024?

A: Ruffo said no margin expansion expected in 2024 due to cost pressures and increased concession tax; Ricardo mentioned inflationary increases applied in January.

Q: Dividends and labor costs outlook?

A: Ruffo said dividends still being assessed, to be presented by end of March; labor costs current levels with wage adjustments for 2024.

Q: Airports with 10% TUA discount and impact?

A: Ruffo said discounts in 10 airports, 10% discount overall with inflation added in January.

Q: Impact of Mexico City Airport capacity reduction on OMA traffic?

A: Ruffo said Mexico City capacity reduction led to 9% decline in OMA routes in January, with some traffic diverted to Toluca and AIFA.

Q: Acapulco airport recovery timeline?

A: Ricardo said Acapulco is at 50% of pre-pandemic levels, recovery depends on city recovery, expecting international flights in May/June.

Q: Monterrey commercial and Carga outlook for 2024?

A: Ruffo said commercial side to benefit from full year effect of Wing 1 opening, Carga to see growth with new clients and cargo airlines targeted.