Mexico City, April 27, 2020 – Mexarrend, S.A.P.I. de C.V. (“Mexarrend” or the “Company”), announced its unaudited consolidated financial results for the first quarter of 2020 (“1Q20”) and three-month period (“3M20”) ending March, 2020. All figures are expressed in Mexican Pesos (“$”) unless stated otherwise, and have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
Financial and Operating Highlights 1Q20
- Mexarrend has implemented several initiatives to face the situation caused by the COVID-19 pandemic. These include working remotely in an efficient way and ensuring the continuity of the Company’s operations, whilst safeguarding the well-being of our employees.
- We are focused on maintaining the Company’s liquidity, as well as strengthening our capitalization and leverage ratios.
- Due to the depreciation in the peso/USD exchange rate, and market volatility, there has been an impact on the Company’s debt and equity, solely due to accounting effects rather than an underlying change in our financial exposure given hedges in place (MXN/USD of $24.29 at market close on March 31st, 2020).
- All debt in dollars is hedged, both for coupon and principal payments, ensuring exchange rate depreciation does not impact the cash flow of the Company. Mexarrend’s hedge accounting shows variations when presenting the market value of its derivative instruments as part of the Company’s assets, which are not always equal to the variations in the exchange rate shown in the income statement. These variations are presented in the OCI (Other Comprehensive Income) stockholders’ equity accounts.
- Total revenue in 1Q20 was $384.9 million, an increase of 12.7% versus 1Q19. The first portfolio sale took place this quarter, contributing to the increase in income for the period.
- Interest income on capital leases increased by 58.3% in 1T20 compared to the previous year, demonstrating our strength in product placement. Our first portfolio sale has also been reflected in this result, taking advantage of our commercial area’s capacity to generate larger transactions, without affecting the concentration and diversification of our portfolio.
- Gross profit increased by 16.4% from $111.3 million in 1Q19 to $129.5 million in 1Q20.
- Operating results presented a positive trend. This was due to the increase in portfolio size, as well as increased cost and expense efficiencies. In 1Q20, operating income grew by 31.1% and the operating margin increased from 12.0% in 1Q19 to 14.0% in 1Q20.
- In 1Q20 the Company reported a net profit of $22.1 million, reflecting strong operating trends mentioned above. The comprehensive financing result showed the effectiveness of our hedges, neutralizing the effects of exchange rate variations.
- The total portfolio reached $8.972 billion as of March 31st, 2020, an increase of $2.178 billion or 32.1% compared to the same period in 2019; the real estate portfolio increased by 40.1% to $1.249 billion. Net productive assets reached $10.220 billion, reflecting our successful new customer identification strategy, while adhering to our processes for approval and maintaining a high-quality portfolio.
- Total assets at the end of the period were $11.713 billion compared to $7.822 billion at the end of 1Q19, a 49.7% increase largely due to the additional cash obtained by the bond issuance in July 2019, the growth of the portfolio, and the re-valuation of our derivative instruments used for hedging. If we isolate the effect of the valuation of our derivative instruments, the increase would have amounted to 36.8%.
- Our non-performing loan indicator remained stable at 5.3% despite the current economic environment, reflecting our prudent approval, monitoring and collection processes. Given the current environment, we are following up with all the clients in our portfolio, in order to understand their liquidity needs. If necessary, we will work with them to change their payment program in the short term to support their cash flow, while always maintaining the guarantee limit and profitability in said transactions.
- Financial debt increased by $1.909 billion in the quarter and by $4.576 billion in comparison to the period ending in March 2019. As previously mentioned, a large part of this variation is due to exchange rate depreciation. By having all of our dollar-denominated debt hedged, if we ignore the effect of exchange rates for the period, the increase in debt for the quarter and by comparison for the period ending in March last year were $68.4 million and $2.639 billion respectively. The variation versus March 2019 reflects the resources from the international bond that was issued in July 2019.
- The leverage ratio, considering the hedge of the principal of the dollar-denominated debt was executed at a peso/USD rate of close to $19.00 pesos and without considering the effects in OCI for the aforementioned hedges, is equivalent to 5.3x. Without considering the effect of this coverage, as shown on the balance sheet, it is equivalent to 10.2x. However, the Company ended the period with a cash balance of $1.526 billion, representing a net leverage ratio of 8.6x and of 4.3x when considering the hedging effect.
- As part of our Sustainability initiatives, Mexarrend obtained the distinction of a Socially Responsible Company from the Mexican Center for Philanthropy (CEMEFI in Spanish). It also joined the initiatives of the UN Global Compact. The above denotes the Company’s commitment to operate under the best international practices, as it continually focuses on becoming a more sustainable company.
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Investor Relations Contact Details
Eduardo Limón
E-mail: eduardo.limon@mexarrend.mx
Mariana Mangas
E-mail: mariana.mangas@mexarrend.mx
Investor Relations
E-mail: ri@mexarrend.mx