- Alpek, Sigma y Axtel, operated continuously for their essential character.
- June EBITDA accounted for almost 60% of 2Q20 Consolidated EBITDA.
- ALFA’s consolidated cash balance was US $2.397 billion, plus US $2.633 billion in available credit lines.
- ALFA expects to capture an estimated cost savings and cash flow benefits close to $850 million by the end of 2020.
Monterrey, Mexico, July 16, 2019. ALFA, S.A.B. de C.V. (BMV: ALFAA) (ALFA), a leading holding company that manages a diversified portfolio of subsidiaries with global operations announced today its unaudited results for the second quarter of 2020 (“2Q20”). All figures have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
2Q20 Highlights
ALFA
- Solid financial position; US $2.4 B Consolidated Cash plus US $2.6 B available Credit Lines
- Strong sequential monthly EBITDA improvement; +230% June vs April
Alpek
- Continuous operations, resilient demand and better-than-expected reference margins
- Strong underlying fundamentals offset by temporary drop in oil and feedstock prices
Sigma
- Continuous operations and lower-than-expected pork prices
- Low Foodservice demand and MXN depreciation weighed on 2Q20 results
Nemak
- All facilities successfully resumed operations by June as OEMs restarted production
- Rapid cost realignment; US $125 million savings 2Q20 vs 1Q20
Axtel
- Continuous operations and better-than-expected performance driven by Infrastructure unit
- Restarted Infrastructure unit sale process and monetized unused spectrum concessions
Miranda Newswire – Full Press Release: Go to Web Site
Message from ALFA’s President
“First and foremost, I hope that you and your loved ones are safe and healthy as we are still living through an unprecedented event that has significantly impacted the global community. Our thoughts and prayers go out to everyone who has been affected directly or indirectly by COVID-19.
ALFA’s efforts remain focused on the continued safety and health of our employees and our ongoing ability to serve our customers responsibly, providing essential goods and services.
We took early decisive action in all our operations to protect the well-being of our employees and their families through training and awareness campaigns, increased hygiene and sanitization protocols, virtual collaboration, workspace distancing and personal protective equipment, among others.
ALFA and all its Subsidiaries have taken an active role in the global fight against COVID-19 by donating medical supplies, approximately six million meals and web connectivity. Also, by collaborating in a comprehensive ventilator performance enhancement effort, among other relief initiatives.
At the same time, we made some difficult but proactive adjustments as we strive to capture approximately US $850 million in estimated cost savings and cash flow benefits by the end of the year; including Net Working Capital, CAPEX and Dividends, among others. These initiatives are necessary to mitigate the virus-related impact to our businesses and to ensure that we emerge from the crisis in a stronger leadership position.
Nemak is rapidly realigning its cost structure amid lower light-vehicle production volumes, realizing US $125 million in savings between 1Q20 and 2Q20. Similarly, Sigma adjusted and reallocated resources from its Foodservice channel to other parts of its business amid lower demand from hotels and restaurants.
We also acted decisively during the quarter to further strengthen the Company’s financial position. Alpek and Nemak shareholders approved the revocation of dividends for a combined amount of US $119 million. Alpek shareholders also delegated authority to its Board for a potential payment of revoked dividends on a future date.
Additionally, certain bank loans were amended with new financial covenant thresholds to reflect the temporary distortions brought about by COVID-19. Also, ALFA and several of its businesses obtained new credit lines totaling US $720 million to reinforce liquidity.
At the close of 2Q20, ALFA’s consolidated cash balance was US $2.397 billion, plus US $2.633 billion in available credit lines. The Company’s cash position is comparable to the EBITDA generated in full year 2019 and is larger than the aggregate amount of debt maturities between 2020 and 2022.
During the second quarter, large portions of the global economy were subject to restrictions or disruptions caused by the ongoing fight against the virus. In April, auto production plummeted more than 90% in North America and Europe; Brent oil prices dropped to the lowest level since 2002; and the Mexican Peso depreciated to a record low monthly average of Ps $24 per USD.
In turn, ALFA’s 2Q20 results were impacted by these temporary distortions. However, it was encouraging to see sequential improvement on key macro variables as many countries and sectors of the global economy started a gradual transition to the “new normal”. We are cautiously optimistic that the worst part of the economic shutdowns may be behind us.
From an operational standpoint, all our manufacturing facilities were up and running by the end of the quarter. Alpek, Sigma and Axtel operated at capacity throughout 2Q20 given the essential nature of their business and resilient underlying demand.
In addition, certain key variables such as reference polyester margins and pork prices were better than expected for Alpek and Sigma, respectively.
Unfortunately, this was more than offset by an estimated US $329 million COVID-19 related impacts on 2Q20 Consolidated EBITDA in connection with i) multi-week shutdowns at Nemak; ii) lower oil and feedstock prices at Alpek; iii) lower Foodservice demand; and iv) Mexican Peso depreciation at Sigma and Axtel. This unprecedented combination of impacts was also reflected in a Controlling Interest Net Loss of US $88 million during the quarter.
Noteworthy, ALFA’s 2Q20 Consolidated EBITDA of US $231 million showed significant sequential monthly improvements as virtually all OEMs had restarted operations by June; average Brent oil prices recovered more than 70% versus April; and the Mexican Peso gained almost 10% intra-quarter. Hence, June EBITDA accounted for almost 60% of 2Q20 Consolidated EBITDA.
Beyond the immediate response to COVID-19 and the associated near-term impact on results, all subsidiaries are moving ahead with their long-term initiatives. Key recent developments include:
- Axtel restarted its Infrastructure unit sale process and monetized unused spectrum concessions
- Newpek is in the final stage to sell the majority of its U.S. assets
- Nemak won new business to produce structural parts for EVs worth US $10 million annually, and received the “Launch of the Year” award from VW for a plug-in hybrid battery housing
- Sigma created new “Global Plant-based” business unit to boost this category across geographies
We are encouraged by the early signs of stabilization but acknowledge that there is limited visibility to provide reliable Guidance at this time. ALFA and its subsidiaries will continue to ensure the highest safety standards, focus on business continuity, and pursue long-term strategic initiatives.
My sincere appreciation to every member of our teams for their hard work and dedication in order to maintain essential food supply at Sigma; materials for food & beverage packaging and medical supplies at Alpek; connectivity for virtual collaboration at Axtel; and to rapidly adjust as well as effectively resume operations at Nemak. I also thank our customers, suppliers, partners and creditors who have all come together to address this situation.”
Álvaro Fernández
SELECTED FINANCIAL INFORMATION (US $ Millions)
2Q20 EARNINGS CALL INFORMATION
Date: Friday, July 17, 2020
Time: 1:00 p.m. EST (NY) / 12:00 p.m. CST (CDMX)
By Phone
United States: +1-877-451-6152
International: +1-201-389-0879
Mexico: 800-522-0034
Conference ID: 13706172
Webcast: http://public.viavid.com/player/index.php?id=140511
Replay: https://www.alfa.com.mx/RI/conference.htm
Investor Relations Contact Details
Hernán F. Lozano
VP Investor Relations
ALFA, S.A.B. de C.V.
Tel: +52 (81) 8748-2521
E-mail: iralfa@alfa.com.mx
Carolina Alvear
Corporate Communication Director
ALFA, S.A.B. de C.V.
Tel: +52 (81) 8748-2521
E-mail: comunicacion@alfa.com.mx