Vitro has announced its unaudited results for the second quarter of 2014, with strong performance in the Glass Containers business unit, primarily in the beer and soft drinks segments, as well as higher Flat Glass automotive sales and exports to the US.
Vitro, S.A.B. de C.V., the leading glass producer in Mexico, has announced its unaudited results for the second quarter of 2014.
Consolidated sales were up 2.2% year-on-year to USD 455 million. Strong performance was seen in the Glass Containers business unit, primarily in the beer and soft drinks segments, as well as higher Flat Glass automotive sales and exports to the US, offset weaker Flat Glass domestic construction sales and exports, as well as the negative impact from the 2.5% peso depreciation.
Notwithstanding the benefits from a leaner operating structure, lower legal expenses and increased Flat Glass value added construction sales to US and automotive products, EBITDA fell 5.4% year-on-year to USD 96 million, affected by the 14% increase in natural gas prices, a 2.5% year-over-year peso depreciation (quarterly average) and lower sales volumes to certain segments.
Sequentially, net debt decreased by USD 8 million mainly reflecting a higher cash balance compared to previous quarter.
Consolidated Net Sales for 2Q’14 increased 2.2% to USD 455 million, from USD 445 million during 2Q’13, boosted by a strong performance in the beer, soft drinks and wine segments in Glass Containers and the Automotive segment in Flat Glass. These factors contributed to offset the impact of a market contraction in the Construction segment in Flat Glass, a weak sales volume in the Cosmetics segment in Glass Containers as well as the negative effect of a 2.5% year-over-year peso depreciation (quarterly average). YTD Consolidated Net Sales increased 0.7%, notwithstanding a challenging first half of the year throughout most of the markets served by the company.
Glass Containers sales increased 3.1% in 2Q’14 to USD 317 million, from USD 308 million in 2Q’13. Domestic sales benefited primarily from increasing sales volumes and a better product-mix in the Beer, Soft Drinks and Wine segments, respectively, offsetting lower sales volumes in the CFT segment, reflecting a weak domestic consumer environment.
Export sales increased 1.2% to USD 116 million in 2Q’14, from USD 114 million in 2Q’13 due to a strong performance in the Beer and Wine and Liquor segments, particularly exports to Caribbean markets, counteracting the impact of continued difficult conditions in the Latin American markets for the CFT segment.
Flat Glass sales at USD 136 million in 2Q’14, were basically flat compared to USD 137 million reported in 2Q’13. Domestic sales were boosted by increasing sales volumes to the Automotive industry, which has been experiencing healthy growth this year, offsetting the slow market domestic construction industry and a slight price erosion. Export sales were driven by a steady sale of value added products to the US markets which resulted in a positive price mix. This factor partially offset a capacity shift from some export markets into the domestic market as well as the impact of currency depreciation and market dynamics in Brazil. In July 2014, the company was notified of a compensatory quota to its exports of
construction glass towards Brazil and it is in the process of determining the impact that such measure will have on its operating results. Foreign subsidiaries’ remained practically flat at USD 10 million for both periods, mainly derived from a slight decrease in the Colombian subsidiary.
Consistent increases in natural gas prices, a 2.5% year-over-year peso depreciation (quarterly average), along with weak dynamics in some of the key domestic industries in which Vitro participates impacted 2Q’14 results. Nonetheless, ongoing efforts to improve operational efficiencies, lower legal expenses and a better price mix partially offset the effect on EBIT and EBITDA.
Consolidated EBIT decreased 4.2% to USD 63 million in 2Q’14, from USD 65 million in 2Q’13. At the same time, the margin declined 90 basis points to 13.8%, from 14.7% in the same period last year. EBITDA decreased 5.4% to USD 96 million in 2Q’14, from USD 102 million in 2Q’13, while EBITDA margin declined 170 basis points to 21.2% compared to 22.9% in the same period last year.
Glass Containers EBIT decreased to USD 56 million in 2Q’14, from USD 61 million in 2Q’13 while EBITDA decreased to USD 81 million, from USD 90 million in the same period. EBIT and EBITDA margins decreased to 17.7% and 25.5%, from 19.8% and 29.1%, respectively.
EBIT and EBITDA were positively influenced by the solid performance in both domestic and export markets in the Beer segment. This was complemented by better price mix sales to Caribbean markets in the Wine and Liquors segment and for soft drinks in the domestic market. These factors partially compensated the effect of increasing natural gas and electricity prices, a 2.5% year-over-year peso depreciation (quarterly average) and challenging domestic market dynamics derived from the impact of the tax reform that took effect on 1 January 2014.
Flat Glass EBIT increased to USD 9 million in 2Q’14, from a negative EBIT of USD 1 million in 2Q’13, while EBITDA increased to USD 17 million, from USD 7 million in the same period last year. The EBIT and EBITDA margins increased to 6.4% and 12.2%, from negative 0.5% and 5.4%, respectively.
Flat Glass EBIT and EBITDA benefited from an improved price mix reflecting increasing sales of value added products to the US construction industry and the growth in sales to the automotive market. This outweighed the negative effect of a contraction in the domestic market construction industry, the increasing price of energy sources (higher natural gas prices particularly impacts the Float Glass facilities), and a 2.5% year-over-year peso depreciation (quarterly average).
Net Financial Cost for 2Q’14 was USD 19 million, compared to a Net Financial Cost of USD 101 million in 2Q’13, which represents an 81% decrease. Lower Net Financial Cost was mainly driven by a Foreign Exchange (“FX”) Gain of USD 6 million, compared to an FX Loss of USD 61 million in 2Q’13, resulting from a 0.6% peso appreciation during 2014 (closing quarter) compared to a 5.4% peso depreciation in the prior year. Additionally, Net Interest expenses totalled USD 20 million in 2Q’14, resulting in a 35% decrease from USD 30 million in 2Q’13, mainly due to lower interest expenses as a result of the MCDs prepayment in 2013 and the cancelation of an interest provision related to CACIB debt, as well as the rate improvement resulting from debt refinancing efforts.
During 2Q’14 the company accrued a Total Income Tax expense of USD 10 million, compared to a benefit of USD 9 million in 2Q’13. Total Income Tax increase was mainly driven by the recording of a Deferred Income Tax of USD 7 million, compared to a Deferred Income Tax gain of USD 24 million in 2Q’13. This factor diluted the positive effect of a reduction in Accrued Income Tax of USD 13 million, down to USD 2 million in 2Q’14, from USD 15 million in the same period last year.
In 2Q’14 the company posted a Consolidated Net Income of USD 34 million, mainly attributable to a USD 63 million EBIT partially offset by Net Financial Cost of USD 19 million and an Income Tax expense of USD 10 million.
As of 30 June 2014, the company had a cash balance of USD 234 million, of which USD 15 million was restricted cash including collateralized lease contracts and cash related to Vitro’s accounts receivable financing program, compared to a cash balance of USD 226 million in the previous quarter. Unrestricted cash as of 30 June 2014 was USD 219 million, a 4.2% increase from previous quarter.
Total Net Debt, which is calculated by deducting cash and cash equivalents classified in short and long term assets, decreased by USD 8 million to USD 1,024 million at the end of 2Q’14, compared to USD 1,032 million in the previous quarter, reflecting a cash balance increase and a slight reduction in gross debt. At the end of 2Q’14, the company is evaluating different alternatives to refinance its Note for USD 235 million with maturity in April 2015.
During 2Q’14 Vitro reported a Net Free Cash Flow of USD 17 million, compared to Net Free Cash Flow of USD 69 million in 2Q’13, primarily as a result of a higher Net Interest Paid of USD 63 million derived from interest payments on 2015 and 2018 Notes coupled with an upfront payment related to the settlement with CACIB in May, 2014. Additionally, a lower Working Capital recovery resulting from increasing accounts receivables partially compensated by a lower inventory in line with incremental business activity coupled with an important recovery of accounts receivables in 2Q’13 and a higher CapEx of USD 18 million impacted Net Free Cash Flow in 2Q’14.
Capital Expenditures: During 2Q’14 CapEx totalled USD 18 million, compared to USD 10 million in 2Q’13. Glass Containers represented 93% of total CapEx, which was mainly utilized for planned furnace repairs, manufacturing
of moulds used in production of glass containers and maintenance across facilities. Flat Glass accounted for the remaining 7%, utilized for racks and tooling for the auto glass segment and maintenance.
On 29 May 2014, the company and CACIB settled a series of lawsuits pending in Mexico and the United States, including one that involved the Fintech group and certain of its affiliates.
The terms of the settlement provided for Vitro to issue in favour of CACIB a USD 58.5 million note due 2016, bearing an interest at a rate equal to three-month LIBOR plus 4.25% per annum and make an up-front payment of USD 15.0 million to CACIB upon the execution of definitive documentation in respect of the settlement.
Vitro and CACIB were able to reach a consensual agreement to settle their outstanding claims to both parties’ satisfaction, closing the final chapter on Vitro’s restructuring process.
On 30 June 2014, Vitro completed the bank debt refinancing for 298 million pesos of its subsidiary Industria del Álcali, S.A. de C.V. with improved terms, reflecting the confidence of its financial partners.
This resulted in an improvement in both the maturity and the interest rate of the previous structure. The maturity was extended from December 2014 to June 2018 and the interest rate improved from an interbank equilibrium interest rate (TIIE for its acronym in Spanish) + 3.25% to TIIE + 2.75%.
This refinancing is a positive event that helps the company to increase its liquidity and consolidates is financial position.
On 14 May 2014 the company informed that its glass container for True Passion fragrance by Mary Kay was presented with the World Packaging Organisation’s (WPO) prize for Health and Beauty during the WorldStar Awards 2014. The event was part of Interpack 2014, held in Düsseldorf, Germany, and represents the most prestigious acknowledgement within the global containers’ industry.
This container was awarded from a total of 316 containers presented by companies during 2013 and underscores Vitro’s innovation capabilities in design as well as manufacturing, and further confirms that the company is the best option for those who attempt to communicate concepts of beauty, fashion, luxury, and style in its products.
True Passion is the first sensual fragrance that Mary Kay designs exclusively for the Latin-American market. The colours and shapes of the container emphasize the effusiveness that characterizes Latin women, as well as their vitality and high aesthetic sense