ALFA reports 1Q24 EBITDA of US $425 million

Rhea-AI Summary

ALFA, S.A.B. de C.V. reported a 1Q24 EBITDA of US $425 million, with key highlights including the appointment of Álvaro Fernández Garza as Chairman of the Board. Sigma achieved record quarterly EBITDA of US $264 million, with Alpek showing a 9% increase in 1Q24 volume. ALFA aims to reduce net leverage ratio to 2.5 times by year-end.

Positive

• Álvaro Fernández Garza appointed Chairman of the Board of Directors
• 1Q24 Comparable EBITDA of US $411 million, up 4% year-on-year
• Record quarterly EBITDA of US $264 million for Sigma
• Alpek's 1Q24 volume up 9% quarter-on-quarter
• ALFA focuses on reducing net leverage ratio to 2.5 times by year-end

Negative

• Alpek's Net Debt increased by 5% versus 4Q23
• Debt reduction is a key element for ALFA's final transformation phase
• ALFA Shareholders approved a lower dividend payout at the Annual Shareholders' meeting

Insights

Financial Analyst

The figures presented by ALFA indicate a noteworthy uptick in their EBITDA, up 13% year-on-year to $425 million in 1Q24 from $376 million in 1Q23. This growth is particularly impressive given the global economic challenges that many sectors are facing. A detailed look at the divisional performance reveals that Sigma's performance, with a 38% year-on-year growth in EBITDA, stands out as a significant contributor to the parent company's prosperity.

ALFA's strategy to reduce net leverage, targeting a ratio of 2.5 times by year-end from the current 3.5 times, is ambitious, yet seems achievable given the robust EBITDA growth and the commitment to monetize non-core assets. The company's shareholders will likely find solace in the fact that ALFA is strengthening its financial standing through these efforts, which in turn could lead to improved credit ratings and potentially lower cost of capital in the future.

Market Research Analyst

The petrochemical and food sectors are of particular interest as they provide a barometer for broader economic health. ALFA's business units, Alpek and Sigma, both reporting volume upticks, signal strong market demand, which could be indicative of resilience in consumer spending and industrial activity. The notable mention of Sigma's addition of three brands to the 'Hundred-Million-Dollar' club underlines strategic brand management and product market fit, key aspects that can sustain a company's growth trajectory in volatile markets.

Corporate Governance Expert

The appointment of an independent board member, Alejandra Palacios Prieto, is a positive signal towards enhancing ALFA's corporate governance. While this doesn't directly affect financial performance, it is a move that could be well-received by investors prioritizing corporate governance in their investment criteria. It signals ALFA's commitment to global business perspective infusion and diversity in leadership, which could contribute to more balanced decision-making at the board level.

SAN PEDRO GARZA GARCÍA, N.L. Mexico, April 23, 2024 /PRNewswire/ -- ALFA, S.A.B. de C.V. (BMV: ALFAA) ("ALFA") announced today its unaudited results for the first quarter of 2024 ("1Q24"). All figures have been prepared in accordance with International Financial Reporting Standards ("IFRS").

1Q24 HIGHLIGHTS

ALFA	•  Álvaro Fernández Garza appointed Chairman of the Board of Directors, in    addition to his position as CEO of ALFA •  Alejandra Palacios Prieto appointed Independent Member of the Board of    Directors, with her mandate beginning on May 15, 2024 •  Paid US $48 million cash dividend as approved at Annual Shareholders'    meeting •  1Q24 Comparable EBITDA of US $411 million, up 4% year-on-year,    supported by volume growth at Sigma and Alpek
Sigma	•  Twelfth consecutive quarter of year-on-year sales growth supported by    record first quarter volume of 449 ktons, up 5% versus 1Q23 •  Record quarterly EBITDA of US $264 million, up 38% year-on-year led by    Mexico, U.S. and Europe •  Sustained improvement in Net Debt to EBITDA ratio; 2.2 times driven by    strong EBITDA generation (US $965 million last twelve months)
Alpek	•  Álvaro Fernández Garza appointed Chairman of the Board of Directors •  1Q24 volume up 4% year-on-year and 9% higher quarter-on-quarter,    mainly driven by the Polyester segment •  Comparable EBITDA of US $154 million, on track to reach full-year    Guidance of US $600 million •  Net Debt up 5% versus 4Q23 driven by investment in Net Working Capital    amid rising feedstock prices; reaffirm commitment to reduce net leverage    ratio of 3.7 times towards 2.5 times by year-end

Message from ALFA's Chairman & CEO

"With enthusiasm, I assumed the additional role as Chairman of the Board during the first quarter. I greatly appreciate our Shareholders' support for entrusting me with this important responsibility. We stand at a special time as ALFA celebrates its 50th Anniversary and focuses on completing its transformation.

Over the past half-century, our Company has built a legacy that transcends both industry and community. It is a privilege to continue working with ALFA's Board and the entire team to fulfill our transformational vision which is based on independent Business Units.

In terms of consolidated results, 1Q24 represents a better-than-expected start to the year, highlighted by double-digit EBITDA growth as our two key businesses benefitted from solid demand.

Alpek reported higher 1Q24 volume driven by its Polyester segment. In addition, Asian reference polyester margins posted a slight sequential improvement even as feedstock prices rose versus 4Q23. Moreover, Alpek is on track with the implementation of its comprehensive plan to capture efficiencies across administrative functions and production facilities. First quarter Comparable EBITDA of US $154 million is in line with our petrochemical business' full-year guidance.

Sigma reported its 12th consecutive quarter of year-on-year increase in Revenues and achieved an all-time high quarterly EBITDA of US $264 million. Robust growth across all regions contributed to this good performance. Record volume, a stronger Mexican Peso and favorable poultry prices were among the main drivers in 1Q24.

Preferred brands are a crucial force behind Sigma's results by region. It is exciting to see Sigma further strengthening its portfolio by adding three of its dairy brands to the select group generating annual sales higher than US $100 million. La Chona^®, Los Altos^® and Nochebuena^® recently surpassed this meaningful sales milestone, increasing the total number of 'Hundred-Million-Dollar' brands to 14 from 11.

Another noteworthy Sigma development was the successful placement of Ps $10,000 million (approx. US $600 million) in local notes, also known as Certificados Bursátiles. The issuance was oversubscribed by 2.7 times and marks Sigma's return to the Mexican debt market after more than 15 years. Sigma is already working to place a new issuance under the same program during the second quarter to refinance a larger portion of its outstanding debt and extend its maturity profile.

Sigma's robust financial position is fundamental to complete ALFA's transformation process. Moreover, Alpek is prepared to advance as an independent entity, given that the planned separation would not have any financial or operational impact on our petrochemical business.

Debt reduction is a key element of ALFA's final transformation phase. Consolidated debt at the close of 1Q24 was US $5.094 billion, comprised of US $1.807 billion at Alpek and US $3.287 billion aggregate debt at ALFA and Sigma. The aggregate debt outside of Alpek needs to be reduced to maintain a healthy leverage supported by Sigma's EBITDA generation.

ALFA is advancing on the selective monetization of non-core assets to reach the desired financial conditions, with various formal sale processes currently underway. Additionally, ALFA Shareholders approved a lower dividend payout at the Annual Shareholders' meeting.

On the Corporate Governance front, ALFA Shareholders also approved the appointment of Alejandra Palacios Prieto as an Independent Member of the Board of Directors, with her mandate beginning on May 15, 2024. We look forward to enhancing ALFA's Board with Alejandra's perspective on the global business landscape.

Looking ahead for 2024, we are committed to continue building upon our 50-year legacy by driving to realize ALFA's full value potential. Thank you for your support and trust."

All the best,
Álvaro Fernández

Important note on changes to ALFA's
Consolidated Financial Statements

ALFA's shareholders approved to spin-off ALFA's share ownership of Axtel into a new, listed entity called "Controladora Axtel" on July 12, 2022. The shares of "Controladora Axtel" were distributed to ALFA shareholders and began trading on the Mexican Stock Exchange on May 29, 2023. In accordance with International Financial Reporting Standards (IFRS), Axtel meets the definition of a "Discontinued Operation" for purposes of ALFA's Consolidated Financial Statements. "Discontinued Operations" are the net results of an entity that is either being held for disposal or which has already been disposed of.

The changes in ALFA's Consolidated Financial Statements are as follows:

• The Consolidated Statement of Financial Position presents Axtel's assets as "Current assets from discontinued operations" and its liabilities as "Current liabilities from discontinued operations" at the close of 1Q23. Prior periods are not restated.
• The Consolidated Statement of Income presents Axtel's net revenues and expenses as a single line item "Profit (loss) from discontinued operations" as follows:
  • 1Q23: accumulated figures for the three months ended March 31, 2023
  • 4Q23: no figures presented related to Axtel
  • 1Q24: no figures presented related to Axtel
• The Change in Net Debt presents Axtel's net inflows and outflows as a single line item "Decrease (Increase) in Net Debt from discontinued operations" as follows:
  • 1Q23: accumulated figures for the three months ended March 31, 2023
  • 4Q23: no figures presented related to Axtel
  • 1Q24: no figures presented related to Axtel

SELECTED FINANCIAL INFORMATION (US $ MILLION)
				(%) 1Q24 vs.
	1Q24	4Q23	1Q23	4Q23	1Q23
ALFA & Subs
ALFA Revenues	4,106	3,885	4,085	6	1
Alpek	1,903	1,691	2,062	13	(8)
Sigma	2,170	2,161	1,991	-	9
ALFA EBITDA1	425	282	376	51	13
Alpek	168	53	187	217	(10)
Sigma	264	229	192	15	38
ALFA Comparable EBITDA2	411	395	396	4	4
Alpek	154	167	207	(8)	(26)
Sigma	264	229	192	15	38
Majority Net Income3	60	(652)	(14)	109	520
CAPEX & Acquisitions4	75	192	86	61	13
ALFA Net Debt	5,094	4,919	5,049	4	1
Alpek	1,807	1,729	2,082	5	(13)
Sigma	2,084	2,025	1,840	3	13
ALFA Net Debt/EBITDA5	3.5	3.5	2.7
ALFA Interest Coverage6	3.6	3.5	5.3

1 EBITDA = Operating Income + depreciation and amortization + impairment of assets

2 Comparable EBITDA = Operating Income + depreciation and amortization + impairment of assets + extraordinary items

3 Majority Net Income includes Majority Net Income from Discontinued Operations (Axtel) for 1Q23

4 Includes divestments

5 Times. LTM= Last 12 months. Ratio calculated with Discontinued Operations for all periods

6 Times. LTM= Last 12 months. Interest Coverage= EBITDA/Net Financial Expenses with Discontinued Operations for all periods

1Q24 EARNINGS CALL INFORMATION

Date:	Wednesday, April 24, 2024
Time:	1:00 p.m. EDT (NY) / 11:00 a.m. CST (CDMX)
Registration:	https://us02web.zoom.us/webinar/register/WN_htlSXobxQSmHHBgeFqxxYA
Replay:	https://www.alfa.com.mx/en/events/

About ALFA

ALFA is comprised mainly of two businesses with global operations: Sigma, a leading multinational food company, focuses on the production, marketing, and distribution of quality foods through recognized brands in Mexico, Europe, the United States, and Latin America. Alpek is one of the world's top producers of Polyester (PTA, PET, PET sheet and rPET), and the leader in the Mexican market for Polypropylene (PP) and Expandable Polystyrene (EPS). In 2023, ALFA reported revenues of Ps $291,207 million (US $16.4 billion), and EBITDA of Ps $24,783 million (US $1.4 billion). ALFA's shares are quoted on the Mexican Stock Exchange and on Latibex, the market for Latin American shares of the Madrid Stock Exchange. For more information, please visit www.alfa.com.mx

Disclaimer

This release may contain forward-looking information based on numerous variables and assumptions that are inherently uncertain. They involve judgments with respect to, among other things, future economic, competitive and financial market conditions and future business decisions, all of which are difficult or impossible to predict accurately. Accordingly, future results could vary from those set forth in this release. The report presents unaudited financial information. Figures are presented in Mexican pesos or U.S. dollars, as indicated. Where applicable, peso amounts were translated into U.S. dollars using the average exchange rate of the months during which the operations were recorded. Financial ratios are calculated in U.S. dollars. Due to the rounding up of figures, small differences may occur when calculating percent changes from one period to the other.

View original content:https://www.prnewswire.com/news-releases/alfa-reports-1q24-ebitda-of-us-425-million-302125189.html

SOURCE ALFA, S.A.B. de C.V.

FAQ

What was ALFA's 1Q24 EBITDA?

ALFA reported a 1Q24 EBITDA of US $425 million.

Who was appointed as Chairman of the Board of Directors at ALFA?

Álvaro Fernández Garza was appointed as Chairman of the Board of Directors at ALFA.

What was Sigma's record quarterly EBITDA in 1Q24?

Sigma achieved a record quarterly EBITDA of US $264 million in 1Q24.

What was the percentage increase in Alpek's 1Q24 volume compared to the previous quarter?

Alpek's 1Q24 volume increased by 9% quarter-on-quarter.

What is ALFA's goal regarding net leverage ratio by the end of the year?

ALFA aims to reduce net leverage ratio to 2.5 times by year-end.