Following the conclusion of the sale of its troubled US subsidiary Anchor Glass Corp. to Canada“s Consumers Packaging, Vitro SA of Mexico is now preparing to meet future challenges.
“What comes next…
Following the conclusion of the sale of its troubled US subsidiary Anchor Glass Corp. to Canada“s Consumers Packaging, Vitro SA of Mexico is now preparing to meet future challenges. “What comes next for Vitro is, number one, to improve in every aspect the service that we give to our current markets. Number two, we are very focused on finding ways to reduce the company“s leverage,” Vitro chief financial officer Jose Antonio Lopez said in a recent interview. “This reduction will be achieved through improved efficiency of operations, through sales of assets that do not interest us and/or with co-investment in businesses that do interest us,” he said. In the first quarter of 1997 Vitro will begin to reduce its indebtedness through savings from greater operating efficiency, he added. He said Vitro is currently working to divest itself of non-strategic assets although he declined to say which assets could be sold. Over the next 14 to 16 months, the company expects to lower its net debt by US$ 300 million, to some US$ 1.5 billion, Lopez said. Analysts have said that Vitro may sell a stake in its container and glassware divisions for a total of up to US$ 200 million. To improve its financial profile, analysts have also suggested that the company might sell its 49% interest in the chemical and textile company Cydsa, which in their view does not complement Vitro“s core business. But the company has repeatedly said it does not plan, “any movement…, the history of Cydsa“s profitability has been very good for us through the years.” Reflecting on the Anchor Glass sale, Lopez said the market has responded favourably and that in a month and a half he said share prices have risen to 19 pesos from 14 pesos. “It was a very large investment in its time and very aggressive. The first years were very fruitful for us and unfortunately the markets turned on us adversely,” Lopez said. The investment led to a loss Vitro has estimated at 3.063 billion pesos. Although the drain was not from cash flow, it constituted a strong blow to stockholders equity, analysts have said. Without Anchor Glass, at the end of the third quarter Vitro owed 1.64 pesos per peso of stockholders equity. In contrast, its level of leverage for the same time period in 1995 was 1.52 pesos of liability per peso of equity. Meanwhile, market analysis firm Inverlat has increased its rating of Vitro to accumulate from hold. “We are increasing our rating…maintaining our thesis that the upward potential for the stock far outweighs any downside risk,” wrote analyst Sergio Torres in a recent report. “We think the convergence of the stock price to our valuation target largely depends on the actual announcement of certain strategic decisions, given their expected positive effect on investors“ confidence,” he added. Among these strategic decisions, Torres underlined the sale of interests in subsidiaries, cutting debt, guaranteeing pension fund liabilities for US glassmaker Anchor Glass Container Corp., refinancing a Eurobond and increased competition. Torres said Vitro“s financial outlook had looked more certain since the company divested from its US subsidiary Anchor.