Mexico’s leading glass producer Vitro, S.A.B. de C.V. has announced its unaudited results for the second quarter 2015 (“2Q’15”) and six-month period ended June 30, 2015.
Mr Adrián Sada Cueva, Chief Executive Officer, said “We made significant progress this quarter in our strategy to position Vitro as a stronger and more focused company. A key event was the agreement to sell our Food and Beverage Glass container business to Owens Illinois, a leading company in the glass industry. The shareholders have approved the transaction and we are now awaiting approval from Mexican regulators in order to close the transaction.”
In May the company sold 100% of its Food and Beverages Glass Containers business to Owens-Illinois, Inc. for US$2.15 billion. As a result, these operations have been accounted for as discontinued in compliance with IFRS reporting.
Excluding the effect of discontinued operations from the sale of Food and Beverages glass containers business unit, Sales would have been US$438 million in 2Q’15, while EBITDA would have increased to US$121 million, representing a 25.9 percent increase in 2Q’15.
“I am also very pleased with our strong financial performance in the quarter. For the past several years we have consistently been able to report improving EBITDA and the second quarter continued that trend. Vitro reported a 30.8 percent increase in EBITDA from continuing operations with EBITDA margin expanding by 580 basis points to 22.8 percent. This was particularly impressive given the negative impact from the depreciation of the peso against the US dollar. In Peso terms, and excluding the impact of the currency depreciation, consolidated sales would have increased by 16.4 percent and EBITDA 56.3 percent compared with the same quarter last year. Our cost control and productivity initiatives continue to improve our cost structure as evidenced by a 14.6 percent decline in SG&A, which together with lower natural gas prices also drove our strong EBITDA performance,” he said.
“Flat Glass reported YoY EBITDA growth of 32.1% and a 450 basis point expansion in EBITDA margin, as higher capacity utilization following the repairs of one of our furnaces last February, together with a solid demand and an improved sales mix more than offset the negative impact from the peso depreciation. Flat Glass sales were down 3.0% YoY as a good performance in domestic construction and export sales to the OEMs were more than offset by the impact of a 19.3 percent YoY peso depreciation (quarterly average) and lower domestic automotive glass sales as some of the platforms we produce have reached its maturity, gradually decreasing their volume.”
“The remaining Glass Containers operations also performed well as our clients in both Mexico and the US are performing better. We are also benefitting from initiatives undertaken such as a more focused sales strategy and a larger pipeline of new products. Revenue was up 16.3 percent in the quarter in peso terms, but down 2.5 percent when translated to dollars reflecting the weaker peso versus the US dollar.
Mr. Claudio Del Valle, Chief Administrative and Financial Officer, commented on the balance sheet: “Building on our commitment to maintain a healthy balance sheet, we have taken significant steps over the past year to further strengthen our financial position. These actions are reflected in our improving financial ratios, with total net debt to EBITDA, including discontinued operations, declining to 2.4x in 2Q’15 from 2.6x in 1Q’15 and 2.9x in 2Q’14. Net free cash flow, which includes the discontinued operations increased to US$59 million in 2Q’15 from US$23 million the year-ago quarter driven by strong EBITDA and lower interest and cash taxes paid. As we look further ahead, Vitro’s balance sheet will be further enhanced as our current balance sheet do not yet reflect the positive impact from the expected proceeds from the sale of the F&B glass business as the transaction has not yet closed. We expect to apply these funds to pay down debt which will further strengthen our financial situation.”
“As we look to the future, we are optimistic. Vitro is a more focused company with a strong balance sheet that provides the financial flexibility to grow its business. The capacity constraint experienced at one of our float glass furnaces is now behind us. We will be benefitting from new OEM contracts for flat glass towards the end of the year and we have stepped up our sales efforts to win new business in CFT. The domestic construction industry is also beginning to show continued signs of recovery. Our management team is committed to further enhancing shareholder value leveraging our solid operations that have delivered consistent EBITDA growth and strong free cash flow generation for the past five years.”