Central North Airport Gr sees passenger traffic up 8% but faces cost pressure, predicts steady growth into 2026

OPERATOR - (00:04:20)

Welcome to the OMMA third quarter 2025 earnings call. @ 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 Star0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Emmanuel Camacho, Investor Relations Officer for OMMA. Thank you. You may begin.

Emmanuel Camacho - Investor Relations Officer - (00:04:49)

Thank you, Melissa. Hello everyone and welcome to OMMA's third quarter 2025 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 CEO Ricardo Reyna and CFO Rufo Perezprego. 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 are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expected. Now I'll turn the call over to Ricardo for his opening remarks.

Ricardo Reyna - (00:05:28)

Thank you Emmanuel. Good morning everyone and thank you for joining us today. This morning Rufo and I will review our operational performance and financial results and finally, we will be pleased to answer your questions. In the third quarter of this year, OMMA passenger traffic totaled 7.6 million passengers, an 8% increase year over year. Seat capacity increased by 11% during the quarter. On the domestic front, passenger Traffic grew by 7%, driven primarily by the Monterrey Airport, which saw increases on routes to the metropolitan area of Mexico City, mainly to Toluca Airport, Bajio, Puerto Vallarta, Merida and Queretaro. These routes collectively added over 300,000 passengers during the quarter, representing 68% of the total domestic passenger growth. International passenger Traffic increased by 11%, mainly driven by Monterrey on the route to San Francisco, San Luis Potosi with higher traffic on the routes to and Dallas and Tampico on the route to Dallas. Together, these routes added more than 47,000 passengers during the quarter, accounting for 46% of the total international passenger growth. Moving on to OMMA's third quarter financial highlights Aeronautical revenues increased 11%, with aeronautical revenue per passenger rising 3% in the quarter. Commercial revenues grew by 7% compared to 3Q24, and commercial revenues per passenger stood at 60 pesos. Commercial revenue growth was mainly driven by parking, restaurants, VIP lounges and retail, mainly as a result of higher penetration and an increase in passenger traffic. Occupancy rate for commercial space stood at 96% at the end of the quarter. On the diversification front, revenues increased 8%, with industrial services contributing most of this growth mainly because of additional square meters leased in our industrial park as compared to 3Q24 and contractual increases to rents, OMMA's third quarter adjusted EBITDA increased by 9% to 2.7 billion pesos with a margin of 74.8%. On the capital expenditures front, total investments in the quarter, including MVP investments, major maintenance and strategic investments were 472 million pesos. Finally, in relation to the negotiation process of our MAP Next Master Development Program discussion with the AFAC remain underway. We submitted our proposed Master Development program for the 26:30 period at the end of June and the process remains on track. During the quarter, we continued addressing AFAC's technical observations and advancing the validation of investment projects in accordance with the schedule agreed with the authority. We continue to expect the final resolution and publication of results during December. Our expectations regarding the overall investment level remain at committed levels of MDP investment similar in real terms to the level of the previous 2125 MDP and maximum tariff increase in the low single digits. I would now like to turn the call over to Rujo Perezprego who will discuss our financial highlights for the quarter.

Rufo Perezprego - (00:09:02)

Thank you Ricardo and good morning everyone. I will briefly go over our financial results for the quarter and then we will open the call for your questions. Aeronautical revenues increased 10.6% relative to 3Q24 mainly due to the increase in passenger traffic as well as higher aeronautical yields. Non aeronautical revenues increased 7.3%, commercial revenues increased 7.0%. The line items with the highest growth were parking, restaurants, VIP lounges and retail Parking grew by 9.4% mainly as a result of higher passenger traffic. Restaurants and retail increased 9.8% and 8.2% respectively, both driven by higher passenger traffic as well as the previously opened or replaced outlets. Vip lounges rose 9.9% mainly due to higher market penetration, primarily in Monterrey, as well as the increase in passenger traffic. Diversification activities increased 8.2%. Industrial services, which relates to the operation of the industrial park, contributed most to the growth in the quarter, increasing by 53% resulting from higher square meters leased as compared to 3Q24 as well as contractual rent increases. Total aeronautical and non aeronautical revenues grew 9.8% to 3.5 billion pesos in the quarter. Construction revenues amounted to 382 million pesos in the third quarter. The cost of airport services and GNA expense increased 14.4% versus 3Q24 primarily due to the following line items. Payroll grew by 10.7% mainly as a result of annual wage increases as well as higher headcount as compared to 3Q24. Other costs and expenses increased by 22% due primarily to higher IT related requirements and transportation services. Contracted services expense rose 16.4% mainly due to higher cost of security and cleaning services following contract renewals in prior prior quarters, reflecting the inflationary pressures and tight labor market conditions in Mexico. Minor maintenance increased 19.8% primarily due to timing effect of the works performed. Concession tax increased by 10.4% to 280 million pesos. In line with revenue growth. Major maintenance provision was 28 million pesos as compared to 75 million in the same quarter of last year. OMA's third quarter adjusted EBITDA grew 9.0% to 2.7 billion pesos and adjusted EBITDA margin reached 74.8%. Our financing expense increased by 9.8% to 299 million pesos, mainly driven by higher interest expense as a result of higher average debt levels. Consolidated net income was 1.5 billion pesos in the quarter, an increase of 9.1% versus the same quarter of last year. Turning to our cash position, cash generated from operating activities in the third quarter amounted to 1.9 billion pesos, and investing and financing activities used cash for 480 million pesos and 365 million respectively. As a result, our cash position at the end of the quarter stood at 4.4 billion pesos. At the end of September, total debt amounted to 13.6 billion. And we maintain a solid financial position, ending the quarter with a net debt to adjusted ebitda ratio of 0.9 times. This concludes our prepared remarks. Melissa, Please open the call for questions.

OPERATOR - (00:13:04)

Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Pablo Recalde with Ital. Please proceed with your question.

Pablo Recalde - Equity Analyst - (00:13:32)

Hi, good morning. I have one question regarding your traffic expectations. Maybe for the fourth quarter, maybe your early thoughts on 2026, taking into account the World Cup.

UNKNOWN - (00:13:49)

You understand? Can you hear me? Yes. Yeah.

Ricardo Reyna - (00:13:57)

Yes. Thank you, Pablo. So we're looking for the rest of the year to finish in our traffic overall for the year between 7 and 8% growth. And our expectation at this point in time for next year it's traffic to be in the low to mid single digits for next year growth.

Pablo Recalde - Equity Analyst - (00:14:23)

Okay, perfect, thanks.

OPERATOR - (00:14:29)

Thank you. Once again. If you'd like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Enrique Cantu with gbm. Please proceed with your question.

Enrique Cantu - Equity Analyst - (00:14:44)

Hi, thank you for the call and for your time. I have a quick question. Commercial revenue per pack declined this quarter, the first contraction since early 2023. Could you elaborate on the main drivers behind this softness and how do you plan to reaccelerate this non aerial growth?

Rufo Perezprego - (00:15:14)

Hi, Enrique. So, yeah, commercial revenue per passenger mainly reflects in the quarter reflects the impact of one time revenues recorded in the previous year and in the following quarters. We expect commercial revenues per passengers to gradually increase in line with inflation from current levels.

Enrique Cantu - Equity Analyst - (00:15:38)

Okay, perfect. And just another one if I may. AGMA and utility costs rose this quarter, eroding margins despite strong line, a strong top line growth. Do you view these cost pressures as temporary or should we expect a structurally higher cost that is heading into 2020?

Rufo Perezprego - (00:16:04)

So sorry, could you, could you repeat that? Maybe you're too close to the microphone.

Enrique Cantu - Equity Analyst - (00:16:11)

Yeah, sorry. So it's regarding AGMAS and utility costs. We saw that these quarter day erode margins. Do you view these cost pressures as temporary or should we expect this higher cost base heading to 2026?

Rufo Perezprego - (00:16:33)

So yes, as we mentioned, there are some specific line items that are facing some pressures like cleaning and security, where the total level of cost in the following quarter should be similar to the level of cost that we are facing right now. However, we do have started to analyze different alternatives to continue maintaining cost at check. And it's part of the history of the company to be very cost conscious and we expect pressures not to be permanent.

Enrique Cantu - Equity Analyst - (00:17:18)

Perfect, thank you very much.

OPERATOR - (00:17:23)

Thank you. Once again, it's star one to join the question queue. Our next question comes from the line of Gabriel Himmelfarb with Scotiabank. Please proceed with your question.

Gabriel Himmelfarb - Equity Analyst - (00:17:34)

Hi, good morning, thanks for the call. A quick question on capital allocation first for the next mdp. I think you have mentioned that almost all the capital will go to Monterrey. It will be focused on perhaps increasing the capacity of the airport or developing more the commercial space of the commercial portion of the business. And my second question, Are you seeking or have you considered expanding OMA's, sorry, OMA's portfolio towards outside Mexico? Thank you.

UNKNOWN - (00:18:12)

Yeah, thank you. Thank you.

Rufo Perezprego - (00:18:13)

Gabriel, the last part. We're always looking for opportunities to expand internationally. At this point in time, we don't have a concrete transaction that we could. That we could share. In terms of the mdp, it's around half of the MDP will be allocated to Monterey. Given that half of the traffic is allocated in Monterrey, we're looking to expand in most of the capacity that will generate commercial opportunities as well. There's pavement, there's technology, there's environmental and sustainability projects as well.

Gabriel Himmelfarb - Equity Analyst - (00:18:50)

Okay, thank you.

OPERATOR - (00:18:56)

Thank you. There are no questions at this time. I'll turn the floor back to Mr. Duanez for any final comments.

Ricardo Reyna - (00:19:04)

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

UNKNOWN - (00:19:18)

Thank you.

OPERATOR - (00:19:20)

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