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

Greetings. Welcome to OMA's Second Quarter 2026 Earnings Conference Call. At this time, all participants are in listen mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Emmanuel Camacho. Thank you. You may begin.

Thank you, Gil, and hello, everyone. Thank you for standing by, and welcome to OMA's Second Quarter 2026 Earnings Conference Call. Thank you for joining us today as we discuss our company's performance and financial results for the past quarter. Joining us today are our CEO, Cigar Vine; and CFO, Profertil. 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 including factors that may be beyond our control. And now I'll turn the call over to Ricardo Lenis for his opening remarks. .

Thank you, Emmanuel. Good morning, everyone, and thank you for joining us today. This morning, Ruf and I will review our quarterly operational and financial results, and then we'll be pleased to answer your questions. During the second quarter of 2026, OMA served 1.2 million passengers, an increase of 0.4% versus the second quarter of last year. while available seat capacity decreased by 0.3%. Domestic passenger traffic grew by 0.6% as compared to the second quarter of '25. Our San Luis Potosi Airport was the main contributor to domestic passenger traffic growth with increases on the routes to Alpha and Cancun airports. These routes collectively added over 23,000 passengers during the quarter, representing 61% of the total domestic passenger growth. International passenger traffic decreased by 1.2% and mainly driven by our Monterrey Airport with lower traffic on the Los Angeles, Dallas, Fort Worth and San Antonio routes. In terms of growth by airline, Volaris, which accounted for 25% of our total passenger traffic in the quarter recorded a 7% growth versus the second quarter of 2025 while Viva, which accounted for 50% of our total passenger traffic recorded a 2% decline. During the quarter, airlines opened 24 new routes across our airports including 18 domestic and 6 international routes. This included the launch of Aeromexico new route to Paris in April as well as Iberia's new route to Madrid in June marking the airline's first ever operation in Monterrey. The Paris route generated more than 14,000 passengers during the quarter following its strong initial performance, the rate was converted from a seasonal to a permanent year-round operation, further increasing Monterreys connectivity with Europe. Turning to our financial performance. Aeronautical revenues increased 4% during the quarter, mainly reflecting the tariff adjustment that became affected in mid-April. Commercial revenues continued to perform well during the quarter, increasing 7% versus the second quarter of 25%. Commercial revenue per passenger reached MXN 66.4, an increase of 6.3%, while occupancy of commercial space remained at 96% at the end of the quarter. Diversification revenues increased by 17% year-over-year. mainly driven by OMA cargo business, where revenues increased 29%, reflecting new client operations and additional high-value cargo handling in Monterrey as well as higher activity at our Chihuahua warehouse. Total services revenues grew by 6%, supported by higher occupancy at the NH Hotel Terminal 2 hotel and higher average daily rates at both hotels. Industrial Services revenues reached MXN 57 million, an increase of 9%, mainly attributable to a greater number of square meters leased. Almost second quarter adjusted EBITDA increased 6.6% to MXN 2.7 billion, while the adjusted EBITDA margin expanded to 75.2% reflecting revenue growth and disciplined cost management despite continued inflationary and labor cost pressures. Total investments in the quarter, including MDP investments, major maintenance and strategic investments were MXN 949 million. Before concluding, I would like to highlight 2 relevant events during the quarter. First, OMA achieved a sustainability performance target linked to our sustainability-linked bonds reaching an 88% reduction in Scope 1 and Scope 2 wind house gas emissions per passenger by the end of 2025 well above the 58% reduction target set against our 2018 baseline. The outcome reflects the company's ongoing investments in energy efficiency and decarbonization initiatives. Finally, on July 16, we issued MXN 3 billion in long-term notes in the Mexican market. Proceeds were used to repay MXN 1.7 billion of outstanding short-term bank debt as well as to repay the MXN 640 million corresponding to our OMA 23 notes maturing on July 24. The remaining proceeds will fund committed investments under the master development program and general corporate purposes, including working capital requirements. I would now like to turn the call over to Ruffo Perez Pliego, who will discuss the financial highlights for the quarter.

Thank you, Ricardo, and good morning, everyone. I will briefly go over our financial results for the quarter before opening the call for questions. Aeronautical revenues increased 3.9% relative to the second quarter of 2025 mainly reflecting the tariff adjustments that took effect in April 2026. Domestic passenger charges grew in line with these new tariffs, while international passenger charges declined mainly due to the appreciation of the Mexican peso and lower international traffic. Other aeronautical services grew at a more moderate pace than the tariff increase, reflecting fewer aircraft operations during the quarter. . Together, these effects resulted in a 3.5% increase in aeronautical revenue per passenger. Non-aeronautical revenues increased 9.8% and Commercial revenues increased 6.7%, mainly driven by higher parking, restaurants, VIP lounges and retail revenues. Parking revenues increased 8.8%, driven by higher passenger traffic as well as higher tariffs from longer states across our airports. Restaurants and retail revenues were up 11.3% and 4.2%, respectively, both mainly as a result of higher penetration rates and opening of new outlets. VIP lounges increased by 15.8%, driven by higher capture rates in the Monterrey Airport as well as the recent start of operations of the VIP lounge in Torreon. Diversification activities grew by 17.4% in the quarter, mainly due to the increase in Omacaga revenues. Total aeronautical and non-aeronautical revenues grew 5.4% to MXN 3.6 billion in the quarter. Construction revenues amounted to MXN 844 million in 2Q '26. The cost of airport services and G&A expense increased 3.6% versus 2Q '25, supporting the expansion of adjusted EBITDA margin. The increase mainly reflected higher payroll, contracted services and materials and supply expenses. Payroll increased 9.5%, mainly reflecting inflationary adjustments and addition of new positions. Contracted services increased 10.7%, primarily due to higher security and cleaning expenses resulting from contract renewals and minimum wage increases. And materials and supplies increased 18.7%, mainly reflecting the higher operational requirements in our Oma Cara and our VIP launch operations. . Concession tax increased 3.9% to MXN 294 million. Major maintenance provision was MXN 99 million compared to MXN 50 million in 2Q '25 reflecting new MPP provisioning requirements. As a result, adjusted EBITDA increased 6.2% to MXN 2.7 billion, and the margin reached 75.2%. Our financing expense decreased by 17.4% to MXN 337 million in the quarter mainly as a result of a lower effect from the change in present value of our major maintenance provision, which was partially offset by higher interest expense on debt. Consolidated net income was MXN 1.5 billion in the quarter, an increase of 10.2% versus 2Q '25. Turning to our cash position. Cash generated from operating activities in the second quarter amounted to MXN 1.8 billion, while investing and financing activities used MXN 776 million and MXN 2.1 billion, respectively. As a result, our cash position at the end of the quarter was MXN 2.6 billion. At the end of June, total debt amounted to MXN 14.3 billion and leverage measured as net debt to adjusted EBITDA ratio stood at 1.1x. This concludes our prepared remarks. Dilo, please open the call to questions.

[Operator Instructions] Our first question is from Jeff is with Morgan Stanley Investment Mana.

This is Jens. Congrats on the results. So I have a question on the Mexican tariff completion. What's your expectation throughout the year? And also if you can give a bit more details on your CapEx. We saw that you have -- you have spent so far like EUR 1.4 billion in your Mexican airports through the first half of the year, while your MDP investments are 1.2. So what's going on there? Are you like anticipating some of the investments that are in the MDP plan .

Sure. For the first part, Jeff, we're planning to end the year. We just recently adjusted tariffs mid-April. So considering that, we believe by the end of the year, we're going to be around the 93% compliance with maximum tariffs. And as for the second part, maybe Lu, you want to join .

Sure. Remember that we had some carryover investments that were from the previous MDP that were going to be completed in 2026 and 2027. So that has to be added to the actual 2026 commitment. So for this year, we are expecting around MXN 3.5 billion to MXN 4 billion total investment for the year.

Okay. Perfect. Perfect. Yes, just 1 additional question. Like it seems like flight schedules are pointing to some like seat growth moderation in the fourth quarter, but very strong growth in the first quarter of next year. Are you seeing the same?

Not yet. The schedules or the, I would say, more definitive schedules for the winter season have yet to be published. So right now, we have an indication. And yes, we see some conservativeness from airlines in 4Q, so I don't necessarily think that the first quarter yet do reflect the expectations of airlines, and they are just very indicative at this time. .

Our next question is from Rodolfo Ramos with Brett Bradesco, BBI. .

I have to -- the first 1 is a follow-up on Jeff. I don't know if you can talk a little bit about your outlook on traffic growth. I know there's a lot of challenges on the horizon here, but wanted to get your sense and visibility. And specifically, if you can comment on -- on the potential for developing Monterey's route network. It's encouraging to see more regular services to New York, for example. I don't know if there's any other low-hanging fruit on the domestic market. So that's my first question on the traffic side. . And then on the second, if I may, it was very interesting to see a Cara with very strong top line growth. Just 1 of your peers has also seen a very active activity on the cargo side. So I wanted to get a little bit of the sense that you get from the industries that you're seeing participating in your volumes. I don't know if there's any other potential for you to go into bonded warehouses or try to capture more value out of this booming exports that Mexico is having?

Thank you, Ronald, for your question. So regarding traffic growth, yes, of course, as a result of the oil spike -- jet fuel spike that we've seen in the first half of the year. We're seeing airlines adjusting some of its capacity for the rest of the year. We're still -- we are anticipating to be in positive numbers. We think traffic is going to be around flat to low single digits, thing that reflects some of the resilience of some of the OMA's airport network. There are some Monterey routes already announced that are in the pipeline, specifically with WestJet, Acapulco Montreal Chihuahua, Mexico IFA, Mazatlan Vancouver, Monterey and cover, so we're currently working with airlines to try to expand and take advantage of Monterrey strategic location. . In terms of cargo, yes, we're seeing very good numbers coming from there. We're currently expanding our warehouse. We're planning to finish that expansion in the next coming months. Some of the growth you've seen has been driven by new client operations as well as the handling of additional high-value cargo operations. Chihuahua, there was an interesting spike due to the implementation of handling service for UPS and FedEx. So we're investing in a cargo in systems and processes. So we expect good growth coming in the next coming months to continue seeing that type of growth.

Our next question comes from Alberto Valerio with UBS.

My first question is relation rated the working capital of the company. We saw a nice growth, mid-double-digit growth for net income. But when you go for the cash generation from operations, it's a little bit soft than that. If you can explain the differences in receivables and payables. Is that recurring for the remainder of the year or if it was response for this quarter?

Alberto. So yes, we've seen increased utilization of working capital. We are accelerating our CapEx execution versus what we had last year. So there are some advanced payments of new contracted works that are reflective of advances in the working capital. And as construction progresses, those advances will be amortized, but they are a signal of our increased CapEx execution. And the other 1 is our tax payments have been higher. We have a higher factor for calculation of provisional taxes versus what we had in the first half of last year. So even though provisional taxes are based on revenue and revenues are growing in the low single digits, our factor reflects that higher level of provisional payments, which in the annual tax filing of next year, there will be less of an impact. But during the year, we'll all see that type of increase in taxes paid. .

Fantastic. So we should see this normalize the construction at least and so the MDP CapEx being on execution and the taxes is something more on regular base. Is that correct?

Yes. And starting next year, a new factor will be recalculated. So that will tend to normalize levels versus this year.

Fantastic. And 1 more, if you may. I miss because cutting the first question of our colleague. When should we expect to almost reach the maximum tariff again, should withdraw a linear line into that? .