Vitro: 4Q 2008 sales down 17.7%, EBITDA 41.6% lower

Unaudited results for the 4Q 2008 announced on 27 February 2008 by Vitro SA de CV, one of the world“s largest producers and distributors of glass products, showed the impact of the worldwide financia…

Unaudited results for the 4Q 2008 announced on 27 February 2008 by Vitro SA de CV, one of the world“s largest producers and distributors of glass products, showed the impact of the worldwide financial crisis. A 28.2% depreciation in the Mexican peso was the major contributor to a decline in consolidated net sales of 17.7% year-on-year during the quarter while EBITDA fell 41.6 %. The consolidated EBITDA margin decreased to 10.9% from 15.3% in the same period 2007. Commenting on the results for the quarter, chief executive Hugo Lara said, “This was a difficult quarter for Vitro as the worldwide recession and tight credit markets clearly impacted results. It is also clear that Vitro“s strong market position and franchise, a long standing diversified blue chip client base and the investments in our manufacturing facilities over the past ten years constitute an important foundation in these challenging times. But most importantly, we are confident we are taking all the necessary steps to continue business as usual although at a lower capacity while maintaining ongoing relationships with customers and suppliers. In fact, we are focused on actively controlling costs, managing our liquidity, and generating cash flow, while we restructure our financial obligations”. Claudio del Valle, chief administrative and financial officer, said: “In the face of global declining demand, Glass Container sales volumes were down in all segments reflecting overall weak conditions. As a result, domestic and export sales declined year-over-year by 16.9% and 14.1%, respectively. While EBITDA benefited somewhat by cost reduction initiatives we reported a 34.1% year-over-year drop for glass containers. On a comparable basis, excluding Comegua which was deconsolidated since December 2008, EBITDA would have decreased 30.6% year-on-year. Looking forward, our goal is to optimize production lines to assure continuity and [we] have launched several programs to increase volumes”. “Flat Glass sales fell 17% this quarter, mainly driven by continued tough industry conditions in the North American Automotive business, as well as the US and Spanish construction segments. In the Mexican construction market, we maintained our market share despite an industry wide volume decrease. Auto glass volumes to the OEM market fell 10% in the face of a 26% industry drop as a result of weakening demand, which translated into a market share gain from 14% to 17% in the NAFTA region. Float glass exports remained strong with volume up 22% year-over-year. EBITDA, in turn, declined during the period, mainly as a result of lower fixed-cost absorption. Looking ahead, our goal is to build sales through marketing programs for the domestic automotive glass replacement aftermarket, expansion of Vitro Cristalglass product offerings, increasing float glass exports to new markets. For Vitro America, the focus is on value added products and areas where we can differentiate our products. In all Flat Glass, we are analyzing demand and expect to rationalize capacity where required”. Addressing the restructuring process, Mr. Lara said, “Today we are in the process of negotiations with counterparties to determine alternatives for restructuring derivative obligations. An additional element of the restructuring involves our bondholders and other financial counterparties. A committee has been formed and we have been negotiating with bondholders. At this point, we are in the process of developing a business plan that outlines our strategy and expected performance which will be presented to creditors in the next few weeks”. “We have also taken steps to revitalize the company, including cost reduction initiatives throughout every aspect of our company, while optimizing production capacity to maximize utilization and efficiencies consistent with the current level of operations. Together, these initiatives will represent annualized savings of between USD 80 and USD 120 million once fully implemented. During 2008, USD 40 million were implemented and will have their full benefit in 2009. To further maximize our cash position we have also reduced capital expenditures to USD 74 million for 2009 and sold several minor non-productive assets”. “In summary, we are taking decisive steps to better position Vitro for the future and will continue to maintain constant communication with creditors, financial institutions, clients and suppliers as we advance our plans in 2009”, Mr. Lara concluded.