Orbia Announces First Quarter 2022 Financial Results

Rhea-AI Summary

Orbia Advance Corporation reported strong Q1 2022 results with net revenues of $2.6 billion, a 36% increase year-over-year. This growth was driven by robust demand across all businesses, particularly in Polymer Solutions and Data Communications. EBITDA rose 35% to $611 million, while net income surged 77% to $250 million. The company completed the acquisition of a majority stake in Vectus in India, enhancing its Building and Infrastructure division. Moving forward, Orbia increased its EBITDA guidance for 2022 to a range of $1.75 billion to $1.9 billion.

Positive

• Net revenues rose 36% to $2.6 billion in Q1 2022.
• EBITDA increased 35% to $611 million.
• Net income surged 77% to $250 million.
• Strong performance in Polymer Solutions and Data Communications.
• Acquisition of Vectus in India to bolster Building and Infrastructure segment.
• Increased EBITDA guidance for 2022 to $1.75 billion - $1.9 billion.

Negative

• Cost of goods sold increased 38% due to higher raw material and labor costs.
• SG&A expenses rose 7%, reflecting ongoing investments that may impact margins.
• Tax provision jumped 125%, leading to a higher effective tax rate of 33.6%.

MEXICO CITY--(BUSINESS WIRE)-- Orbia Advance Corporation, S.A.B. de C.V. (BMV: ORBIA*) (“the Company” or “Orbia”) today released unaudited results for the first quarter of 2022.

Orbia had a strong start to the year, with robust performance driven by double-digit revenue growth year-over-year across all businesses. In particular, Polymer Solutions experienced strong PVC prices and sustained global demand, while Data Communications was bolstered by increased demand, favorable pricing and stabilized input costs.

Q1 2022 Financial Highlights
(All metrics are compared to Q1 2021 unless otherwise noted)

• Net revenues of $2.6 billion increased 36%, with higher sales across all businesses
• EBITDA of $611 million increased 35%, driven by higher sales and higher profitability, particularly in Polymer Solutions and Data Communications
• Net majority income of $250 million increased 77%, driven by higher revenue and margins
• Free cash flow of $68 million
• Completed acquisition of majority stake in Vectus in India in Building and Infrastructure

“I am proud of our team and the results that we achieved in the first quarter. Despite uncertainty related to global events and inflationary pressures, we continued to grow the business and to earn strong returns for our shareholders,” said Sameer Bharadwaj, CEO of Orbia.

Bharadwaj continued, “In the first quarter, our markets remained robust, with strong demand across our five businesses, and we invested in initiatives supporting our growth strategy. We continued to maintain a healthy balance sheet and looking forward, we remain well-positioned to capture profitable growth opportunities across the Company in both the short and long-term.”

Q1 2022 Consolidated Financial Information¹
(All metrics are compared to Q1 2021 unless otherwise noted)

mm US$		First Quarter
Financial Highlights		2022		2021		%Var.
Net sales		2,596		1,914		36%
SG&A		297		277		7%
Operating income		467		305		53%
EBITDA		611		451		35%
EBITDA margin		23.5%		23.6%		-4 bps
Financial cost		42		68		-38%
EBT		426		237		80%
Income tax		143		64		125%
Consolidated net income (loss)		283		173		63%
Net majority income (loss)		250		141		77%
Operating cash flow		194		(4)		N/A
CAPEX		(101)		(53)		89%
Free cash flow		68		(85)		N/A
Net debt		2,851		2,870		-1%

1

Unless noted otherwise, all figures in this release are derived from the Consolidated Financial Statements of the Company as of March 31, 2022, and are prepared in accordance with International Accounting Standards 34 “Interim Financial Reporting” of the International Financial Reporting Standards (IFRS), which have been published in the Bolsa Mexicana de Valores (BMV). See Notes and Definitions at the end of this release for further explanation of terms used herein.

Net revenues of $2,596 million increased 36%.

Revenues for the quarter grew in all businesses. Primary drivers of the year-over-year increase included favorable PVC prices in Polymer Solutions, increased North America demand in Data Communications and favorable demand and pricing in Building & Infrastructure.

Cost of goods sold of $1,832 million increased 38%.

This increase was primarily due to higher raw material costs and higher volumes, and to a lesser extent, increased freight and labor costs across all businesses.

SG&A of $297 million increased 7%. As a percentage of sales SG&A decreased approximately 300 basis points to 11.4%.

The increase in SG&A was primarily due to continued investment in executing the Company’s growth strategy.

EBITDA of $611 million increased 35%, while EBITDA margin was essentially flat at approximately 23.5%.

The increase in EBITDA for the quarter was driven by solid performance across all businesses, particularly Polymer Solutions and Data Communications.

Financial costs of $42 million decreased 38%.

The decrease was driven primarily by FX gains related mainly to the appreciation of the Mexican Peso and the Brazilian Real, as well as a positive effect from a lower cost of debt.

Taxes of $143 million increased 125%. The effective tax rate for the quarter was 33.6%, up by approximately 680 basis points compared to the same period last year.

The increase in the tax provision and rate in the quarter was driven primarily by the appreciation of the Mexican Peso.

Net income to majority shareholders of $250 million increased 77%.

This change was mainly driven by the increase in profits noted above.

Free cash flow of $68 million. In the quarter, strong EBITDA was partly offset by increased working capital related to higher accounts receivable related to higher sales and by higher capital expenditures.

Net debt of $2,851 million was comprised of total debt of $3,821 million, less cash and cash equivalents of $970 million. The Company’s net debt-to-EBITDA ratio decreased from 1.34x to 1.29x quarter-over-quarter due to higher EBITDA.

Q1 2022 Revenues by Region
(All metrics are compared to Q1 2021 unless otherwise noted)

First Quarter
Region		2022		2021		% Var. Prev Year		% Revenue
Europe		865		668		29%		33%
North America		897		580		55%		35%
South America		542		433		25%		21%
Asia		228		187		22%		9%
Africa and others		63		46		38%		2%
Total		2,596		1,914		36%		100%

Q1 2022 Financial Performance by Business Group
(All metrics are compared to Q1 2021 unless otherwise noted)

Polymer Solutions (Vestolit and Alphagary), 38% of Revenues

Orbia’s Polymer Solutions businesses Vestolit and Alphagary focus on PVC general and specialty resins and PVC and zero-halogen specialty compounds with a wide variety of applications in solutions that undergird everyday life. They supply Orbia’s downstream businesses and global customers seeking applications in pipes, cables, flooring, auto parts, household appliances, clothing, packaging, health and safety and medical devices.

mm US$		First Quarter
Polymer Solutions		2022		2021		%Var.
Total sales*		1,065		708		50%
Operating income		242		161		50%
EBITDA		308		224		38%
*Intercompany sales were $78 million and $79 million in 1Q22 and 1Q21, respectively.

Revenues of $1,065 million increased 50% year-over-year. EBITDA of $308 million increased 38% and EBITDA margin decreased approximately 270 basis points to 28.9%.

Strong revenue growth was driven primarily by higher PVC prices, resulting from tight supply/demand balance and robust demand in the construction industry, with key markets performing better than pre-pandemic levels. Last year, adverse weather conditions in the United States’ Gulf Coast region negatively affected volumes.

EBITDA was up year-over-year driven by higher revenues, partly offset by higher feedstock and electricity costs in Europe. The margin percent was lower as these higher costs were not fully recovered through pricing.

Building & Infrastructure (Wavin), 30% of Revenues

Orbia’s Building and Infrastructure business Wavin is redefining today’s pipes and fittings industry by creating solutions that last longer and require less labor to install. Benefiting from PVC supply chain integration with the Polymer Solutions businesses and its ability to serve customers on three continents, Wavin is also developing sustainable technologies around water management and indoor climate systems for the livable, lovable and resilient cities of the future.

mm US$		First Quarter
Building & Infrastructure		2022		2021		%Var.
Total sales		778		679		15%
Operating income		75		62		20%
EBITDA		105		95		10%

Revenues of $778 million increased 15% year-over-year. EBITDA of $105 million increased 10% and EBITDA margin decreased approximately 50 basis points to 13.5%.

Revenues were up year-over-year due to continued strong demand and pricing, with solid performance across Europe and Latin America. Additionally, the quarter includes the contribution of the Vectus transaction in India, which started consolidating in February of this year.

EBITDA performance also improved year-over-year, reflecting strong volumes, effective price management and a mix shift to value-added products, although input cost increases impacted the profitability of the business.

Precision Agriculture (Netafim), 12% of Revenues

Orbia’s Precision Agriculture business Netafim’s leading-edge irrigation systems, services and digital farming technologies enable stakeholders to achieve significantly higher and better-quality yields while using less water, fertilizer and other inputs. By helping farmers grow more with less, Netafim is contributing to feeding the planet more efficiently and sustainably.

mm US$		First Quarter
Precision Agriculture		2022		2021		%Var.
Total sales		313		275		14%
Operating income		28		29		-3%
EBITDA		53		52		0%

Revenues of $313 million increased 14% year-over-year. EBITDA of $53 million remained flat and EBITDA margin decreased approximately 230 basis points to 16.8%.

Precision Agriculture experienced growing demand across most markets, including some improvement in India.

EBITDA was flat year-over-year as the business continued to experience high raw material and transportation costs throughout the quarter, which have not yet been fully reflected in selling prices.

Data Communications (Dura-Line), 13% of Revenues

Orbia’s Data Communications business Dura-Line produces more than 400 million meters of essential and innovative infrastructure annually: telecommunications conduit, cable-in-conduit and other HDPE products and solutions that create physical pathways for fiber and other network technologies to connect cities, homes and people worldwide.

mm US$		First Quarter
Data Communications		2022		2021		%Var.
Total sales		325		184		77%
Operating income		62		21		198%
EBITDA		70		29		143%

Revenues of $325 million increased 77% year-over-year. EBITDA of $70 million increased 143% and EBITDA margin increased approximately 590 basis points to 21.6%.

Data Communications’ strong revenue and EBITDA performance was driven by robust growth, primarily in North America, combined with more favorable pricing.

Fluorinated Solutions (Koura), 8% of Revenues

Orbia’s Fluorinated Solutions business, Koura provides fluorine and downstream products that support modern living in a vast number of ways. Koura operates the world’s largest fluorspar mine and produces intermediates, refrigerants and propellants used in automotive, infrastructure, semiconductor, health, medicine, climate control, food cold chain, energy storage, computing and telecommunications applications.

mm US$		First Quarter
Fluorinated Solutions		2022		2021		%Var.
Total sales		204		172		19%
Operating income		62		38		62%
EBITDA		76		56		37%

Revenues of $204 million increased 19% year-over-year. EBITDA of $76 million increased 37% and EBITDA margin increased approximately 500 basis points to 37.4%.

Growth in revenues reflected better pricing, as well as higher demand in intermediates such as hydrofluoric acid and aluminum fluoride and downstream chemicals, including refrigerants and propellants.

The increase in EBITDA was driven by revenue growth, favorable product mix and improved pricing to offset higher input costs.

Balance Sheet, Liquidity and Capital Allocation

Orbia continued to strengthen its balance sheet, generating free cash flow of $68 million during the first quarter. The Company’s net debt-to-EBITDA ratio decreased from 1.34x to 1.29x during the quarter.

Working capital increased by $309 million during the quarter, primarily reflecting higher selling prices and volumes. Capital expenditures of $101 million during the quarter increased 89% year-over-year.

During the quarter Orbia drew down $150 million from its revolver credit facility and $100 million from a short-term loan in Mexican Pesos, which is reflected as new debt of $286 million in the Company’s cash flow statement.

The Company paid $108 million in mergers and acquisitions costs reflecting the closing of the Vectus transaction.

2022 Revised Outlook

Taking into account the strong results for the first quarter, Orbia is increasing its EBITDA guidance for 2022 to a range of $1,750 million to $1,900 million.

Investor Day Details

Orbia will host an investor day on Tuesday, May 17, 2022 beginning at 9:00 a.m. Eastern Time. The live event will take place in Boston, Massachusetts, with a streamed webcast option for virtual attendees.

Sameer Bharadwaj, Chief Executive Officer and Jim Kelly, Chief Financial Officer, along with Orbia’s Business Group Presidents and members of the senior leadership team will provide insight into the Company’s sustainability-aligned business platform, long-term growth and value creation strategy and multi-year financial targets.

To register for the virtual webcast, please click here. To register for in-person attendance, please send a message to our Investor Relations team at investor@orbia.com.

Conference Call Details

Orbia will host a conference call to discuss Q1 2022 results on April 28, 2022, at 10:00 am Central Time (CT; Mexico City)/11:00 am Eastern Time (ET; New York). To access the call, please dial 001-855-817-7630 (Mexico), 1-888-339-0721 (United States) or 1-412-317-5247 (International).

Participants may pre-register for the conference call here.

The live webcast can be accessed here.

A recording of the webcast will be posted several hours after the call is completed on Orbia’s website.

For all company news, please visit https://www.orbia.com/this-is-orbia/newsroom/.

Consolidated Income Statement
mm US$		First Quarter
Income Statement		2022		2021		%
Net sales		2,596		1,914		36%
Cost of sales		1,832		1,332		38%
Gross profit		763		582		31%
SG&A		297		277		7%
Operating income (loss)		467		305		53%
Financial cost		42		68		-38%
Equity income (loss) from associates		2		(0)		N/A
Income (loss) from continuing operations before income tax		426		237		80%
Income tax		143		64		125%
Income (loss) from continuing operations		283		173		63%
Income (loss) from discontinued operations		(0)		(0)		N/A
Consolidated net income (loss)		283		173		63%
Minority stockholders		33		32		2%
Majority net income (loss)		250		141		77%
EBITDA		611		451		35%

Consolidated Balance Sheet
		mm US$
Balance sheet		Mar 2022		Dec 2021		Mar 2021
Total assets		11,358		10,587		10,231
Current assets		4,333		3,724		3,316
Cash and temporary investments		970		782		713
Receivables		1,746		1,370		1,322
Inventories		1,382		1,292		937
Others current assets		234		282		343
Non current assets		7,025		6,862		6,916
Property, plant and equipment, net		3,076		3,051		3,108
Right of use Fixed Assets, net		347		346		311
Intangible assets and Goodwill		3,200		3,130		3,171
Long-term assets		402		335		325
Total liabilities		7,884		7,182		7,180
Current liabilities		2,950		2,643		2,989
Current portion of long-term debt		392		240		635
Suppliers		1,588		1,505		1,348
Short-term leasings		82		86		80
Other current liabilities		888		812		925
Non current liabilities		4,934		4,539		4,192
Long-term debt		3,429		3,280		2,948
Long-term employee benefits		213		221		271
Long-term deferred tax liabilities		348		318		307
Long-term leasings		284		281		251
Other long-term liabilities		660		440		415
Consolidated shareholders' equity		3,474		3,404		3,051
Minority shareholders' equity		695		668		686
Majority shareholders' equity		2,779		2,737		2,365
Total liabilities & shareholders' equity		11,358		10,587		10,231

Operating Cash Flow
		First Quarter
mm US$		2022		2021		%Var.
EBITDA		611		451		35%
Taxes paid, net		(69)		(77)		-10%
Net interest / bank commissions		(55)		(80)		-31%
Change in trade working capital		(309)		(257)		21%
Others (Other assets - provisions, net)		(10)		(15)		-34%
CTA and FX		27		(27)		N/A
Operating cash flow		194		(4)		N/A
CAPEX		(101)		(53)		89%
Leasing payments		(24)		(28)		-12%
Free cash flow		68		(85)		N/A
FCF conversion (%)		11.2%		-18.9%		N/A
Dividends to shareholders		0		(0)		N/A
Buy-back shares program		(28)		(1)		5170%
New debt (paid)		286		(40)		N/A
Minority interest payments		(31)		(31)		1%
Mergers & Acquisitions		(108)		-
Financial instruments and others		2		(6)		N/A
Net change in cash		189		(162)		N/A
Initial cash balance		782		875		-11%
Cash balance		970		713		36%

Notes and Definitions

The results contained in this release have been prepared in accordance with International Financial Reporting Standards (“NIIF” or “IFRS”) with U.S. Dollars as the reporting currency. Figures are presented in millions, unless specified otherwise.

Figures and percentages have been rounded and may not add up.

About Orbia

Orbia is a company driven by a shared purpose: to advance life around the world. Orbia operates in the Polymer Solutions (Vestolit and Alphagary), Building and Infrastructure (Wavin), Precision Agriculture (Netafim), Data Communications (Dura-Line) and Fluorinated Solutions (Koura) sectors. The five Orbia business groups have a collective focus on expanding access to health and wellness, reinventing the future of cities and homes, ensuring food and water security, connecting communities to information and accelerating a circular economy with basic and advanced materials, specialty products and innovative solutions. Orbia has commercial activities in more than 110 countries and operations in over 50, with global headquarters in Boston, Mexico City, Amsterdam and Tel Aviv.

Prospective Information

In addition to historical information, this press release contains "forward-looking" statements that reflect management's expectations for the future. The words “anticipate,” “believe,” “expect,” “hope,” “have the intention of,” “might,” “plan,” “should” and similar expressions generally indicate comments on expectations. The final results may be materially different from current expectations due to several factors, which include, but are not limited to, global and local changes in politics, economic factors, business, competition, market and regulatory factors, cyclical trends in relevant sectors as well as other factors that are highlighted under the title “Risk Factors” in the annual report submitted by Orbia to the Mexican National Banking and Securities Commission (CNBV) and available on our website at https://www.orbia.com/investor-relations/financial-reports/annual-reports-and-filings/. The forward-looking statements included herein represent Orbia’s views as of the date of this press release. Orbia undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.”

Orbia has implemented a Code of Ethics that helps define our obligations to and relationships with our employees, clients, suppliers, and others. Orbia’s Code of Ethics is available for consultation at the following link: http://www.Orbia.com/Codigo_de_etica.html. Additionally, according to the terms contained in the Mexican Securities Exchange Act No 42, the Orbia Audit Committee has established a “hotline” system permitting any person who is aware of a failure to adhere to applicable operational and accounting records guidelines, internal controls or the Code of Ethics, whether by the Company itself or any of its controlled subsidiaries, to file a complaint (including anonymously). This system is operated by an independent third-party service provider. The system may be accessed via telephone in Mexico, via internet at http://www.ethics.orbia.com or via email at ethics@orbia.com. Orbia’s Audit Committee has oversight responsibility for ensuring that all such complaints are appropriately investigated and resolved.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220427006009/en/

Investors

Gerardo Lozoya, Investor Relations Director

+52 55 5366 4084

gerardo.lozoya@orbia.com

Media

Kacy Karlen, Corporate Communications Director

+1 865-410-3001

kacy.karlen@orbia.com

Source: Orbia Advance Corporation

FAQ

What are Orbia's financial results for Q1 2022?

Orbia reported net revenues of $2.6 billion, EBITDA of $611 million, and net income of $250 million for Q1 2022.

How much did Orbia's net income increase in Q1 2022?

Net income increased by 77% year-over-year to $250 million.

What is the revenue growth percentage for Orbia in Q1 2022?

Orbia's net revenues grew by 36% compared to Q1 2021.

What is Orbia's updated EBITDA guidance for 2022?

Orbia has increased its EBITDA guidance for 2022 to a range of $1.75 billion to $1.9 billion.

What drove the revenue growth for Orbia in Q1 2022?

Revenue growth was driven by strong demand across all businesses, particularly in Polymer Solutions and Data Communications.