ALFA S.A.B. DE C. V. 10 March 2015
We Do Not See Major Drivers to Jump In HOLD
Last Price: MP 29.8 Figures in millions of pesos Alfa High Liquidity Price Target 2015: MP 33.0 Upside: 10.8% 2013 2014 2015e 2016e Revenues 203,456 228,886 239,269 245,894 ■ We are re-initiating coverage of Alfa with a new MP 33.0/sh. 2015 year-end EBITDA 22,009 26,493 31,225 32,633 price target and are maintaining the HOLD recommendation on the back of Margin 10.8% 11.6% 13.1% 13.3% limited positive drivers. Growth YoY -9.1% 20.4% 17.9% 4.5% ■ We project an annual 2014-17 EBITDA growth rate of 8% mainly driven by Net Profit 5,926 (2,259) 8,899 9,326 Margin 2.9% -1.0% 3.7% 3.8% Alpek´s expected recovery and a strong 2015 at Sigma due to the Campo Frio EPS 1.15 (0.44) 1.73 1.82 acquisition in June 2014. Total Assets 165,390 232,540 225,604 229,826 ■ Considering the uncertainty regarding Alfa´s plan for the Mexican Energy Cash and ST Inv. 11,902 22,141 15,757 20,204 sector — the announced joint venture with Pacific Rubiales Energy (PRE) is Total Liabilities 100,221 163,619 152,769 152,753 on hold — the recent loss in PRE´s investment and a shy guidance for Net Debt 45,552 75,251 75,078 68,555 Newpek, we do not believe Alfa´s valuation justifies another energy-reform Equity 65,169 68,921 72,835 77,073 premium. Majority 56,441 55,156 58,288 61,680 ■ Finally, given company´s international footprint, approx. 80-85% of total cost Multiples and 95% of the debt are denominated in foreign currency, we do not expect a EV/Sales 1.2x 1.1x 1.0x 1.0x EV/EBITDA 11.0x 9.7x 7.8x 7.3x significant impact on results derived from the recent MP depreciation. P/E 31.8x NA 17.2x 16.5x
Sigma, Nemak and Alpek represent 95% of Alfa´s PT. Our new MP 33.0/sh. 2015 ROE 10.4% NA 13.6% 13.4% year-year end price target is derived using a SOTP method. For Alpek, Nemak and ROA 4.1% NA 4.4% 4.5% Sigma, which contribute with MP 5.9, MP 11.6 and MP 14.0/sh to Alfa´s price target, Net Debt/ EBITDA 2.1x 2.8x 2.4x 2.1x respectively, we are using DCF models. For Alestra and Newpek we are applying an Dividend Yield 2.7% 0.1% 0.8% 0.8% EV/EBITDA multiple.
Alpek and Sigma will drive EBITDA expansion. We expect a strong 2015 for Sigma Mkt. Cap USD 9.8 Bn Float 45% on the back of the Campo Frio acquisition in June 2014, with an expected EBITDA growth of 9% in 2014-17, in addition to Alpek´s expected recovery in 2015-17. 3mo. Avg. USD 22 m 1yr. low-high MP 27.1 - 47.5 Time to worry about capacity constraints at Nemak. Although the outlook for North American and European auto industries is encouraging, Nemak´s 2015 operating ALFA vs. IPC (Mar 2014 = 100) guidance includes only a 3% EBITDA growth. We believe volume growth is now limited, given 2015 expected production of 51.5 million equivalent units would 140 represent 93% of the installed capacity. 120
More headwinds for the energy division. The uncertainty regarding the viability of 100 the planned joint-venture with Pacific Rubiales Energy and further losses in this 80 company´s investment represent major headwinds for Alfa´s plans to expand its operations into the Mexican Energy sector. Finally, Newpek´s 2015 operating results 60 will be significantly affected by lower oil prices, including limited production growth. Jul-14 Oct-14 Apr-14 Jan-15 Jun-14 Feb-15 Mar-14 Aug-14 Sep-14 Nov-14 Dec-14 Alfa´s main risks are: i) short/medium-term stock´s price volatility, ii) elevated May-14 exposure to changes in: foreign exchange, interest rates, commodity prices, among ALFAA IPC others, iii) operating risks relates to recent M&A activity, and iv) labor/political conflicts in Mexico, LATAM, US, Europe and Asia. Pablo Abraham Peregrina We have also initiated coverage of Alpek. Actinver´s petrochemicals analyst, [email protected] Federico Robinson, initiated coverage of Alpek, 82% owned by Alfa, with BUY and a +52 (55) 1103 6600 x 1395 2015 year-end price target of MP 20.5/sh. Mauricio Arellano Sampson For more information regarding this name, please consult: BUY for Patient Investors; Expect Strong Rebound Once Oil Bounces Back and New Projects Kick In, published [email protected] March 10, 2015 +52 (55) 1103 6600 x 4132
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Actinver’s Equity Research 1 Table of Contents
Investment Thesis ……………………………………………….... Page 3
Valuation ..……………………………………………...………...... Page 4
Historical Multiples………………………….……………………... Page 4
International Peers .…….…….…….…….…….………………... Page 5
Consolidated Estimates…………………………………………... Page 6
Estimates by Division……………..…...…...…...…..…..…….…. Page 7-10
Alpek …………………………………………………………. Page 7
Nemak ……………………………………………………….. Page 7
Sigma ………………………………………………………… Page 8
Alestra ………………………………………………………… Page 9
Newpek ………………………………………………………. Page 9
Balance sheet & other…...………..…...…...…...…..…..…….…. Page 11
Company Description……………..…...…...…...…..…...…..….. Page 12-16
Nemak ………………………………………………………… Page 12
Sigma …………………………………………………………. Page 14
Alestra ………………………………………………………… Page 15
Newpek ………………………………………………………. Page 16
Financial Statements 2013-17E………………….…….………..… Page 17
Appendix……...……………………………………………..…….... Page 18
A. Management Team & Corporate Governance…………… Page 19
B. Additional support graphs & charts………………………… Page 20-23 Alfa…...………………………………………………….. Page 20 Alpek…...………………………………………………….. Page 20
Nemak…………………………………………………….. Page 21 Sigma.…………………………………………………….. Page 23
Actinver’s Equity Research 2 Investment Thesis Although Alfa´s expected operating growth (2014-17 EBITDA CAGR: 8%) is attractive, we consider it is already priced in; the 2016 EV/EBITDA fwd multiple stands 5% above its historical average. Moreover, we believe the uncertainty regarding Alfa´s plan for the Mexican Energy sector and the reported loss in PRE´s investment do not justify a valuation premium. We maintain a HOLD recommendation with a new 2015 year-end price of MP 33.0/sh.
Investment Positives Alpek´s recovery and the Campo Frio acquisition will drive operating growth. After a weak 2014, we expect Alpek recover in 2H15 after a two-year slump caused by intense Chinese competition and lower oil prices. Alpek recovery will be driven by the oil price normalization and the start-up of new projects. On the other hand, the Campo Frio acquisition in June 2014 will boost Sigma´s 2015 results. Nemak´s capacity constraints could lead to the anticipated IPO. Considering a 2015e capacity utilization of 93% and an encouraging outlook for North American and European auto sales, Nemak´s most important markets, we could not rule out M&A activity in the short-term, which could trigger the awaited IPO of this division.
Investment Negatives We expect short-term volatility will persist Given the exposure of Alpek´s results to oil price movements and the uncertainty regarding Pacific Rubiales Energy, 19% ownership and JV to develop projects in Mexico, we expect Alfa´s stock will be negatively affected by volatility in the next months. Once its main driver, now an anchor We believe the impressive surge in Alfa´s valuation during 2014 is explained by overshooted expectations after the Mexican Energy Reform was approved and the company´s intentions to expand its operations into this sector. However, considering the disappointing results in the PRE investment, Newpek´s bearish outlook and no-tangible plans to develop a Mexican energy franchise we still expect multiple headwinds for this division.
Actinver’s Equity Research 3 We Are Maintaining HOLD on Alfa ■ We are re-initiating Alfa´s coverage with a MP 33.0/sh 2015 year-end price target Our MP 33.0/share PT implies a and are maintaining the HOLD recommendation. 10.8% upside vs. 11% expected for ■ We believe the expected 2014-17EBITDA growth of 8% mainly driven by Alpek´s recovery and the Campo Frio acquisition is already priced in Alfa´s 2016 EV/ the Mexbol index. EBITDA fwd multiple of 7.4x; 5% above its historical mean. ■ Moreover, we believe the uncertainty regarding Alfa´s plan for the Mexican Energy sector does not justify an energy-reform valuation premium. We are using a SOTP methodology to obtain our new year-end 2015 price target . For Alpek (82% of total capital), Nemak and Sigma we are using DCF models; meanwhile for Alestra and Newpek we are applying an EV/EBITDA multiple. We are also adding Alfa´s consolidated stake in Pacific Rubiales Energy (19% of total capital) at market value and finally, we apply a 15% holding discount.
Price Target Composition by Subsidiary Alfa, S.A.B. DE C.V MP/sh 40 0.4 Sum of the Parts Valuation (MP million) 1.6 1.8 35 Valuation Implicit Alfa´s 30 Method EV/EBITDA Mult. Value 25 14.0 14.0 Alpek DCF 7.9 35,667 20 15 Nemak DCF 8.8 70,170 11.6 11.6 10 Sigma DCF 9.9 84,307 5 5.9 (2.3)5.9 Alestra EV/EBITDA mult. 5.2 9,481 0 Newpek EV/EBITDA mult. 10.0 11,168 -5 Alpek Nemak Sigma Alestra Newpek PRE Net debt Stake in PRE Market Value - 2,630
Source: Actinver Enterprise Value 213,422 - Net debt (Holding) 13,958 Market Cap 199,464
Holding discount 15% PT (MP) 33.0 Source: Actinver
Historical Multiples
Valuation is not a driver. Alfa´s 2016 EV/EBITDA of 7.4x stand 5% above its historical mean.
Historical EV/EBITDA Multiple (12M fwd) Historical P/E Multiple (12M fwd) 12x 40.0x 35.0x 10x 30.0x + 1 SD 8x 25.0x
6x 20.0x 15.0x 4x 10.0x - 1 SD 2x 5.0x
0.0x 1 3 1 3 1 3 1 3 1 3 1 3 0x Q Q Q Q Q Q Q Q Q Q Q Q 0 0 1 1 1 1 1 1 1 1 1 1 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12 3Q13 2Q14 9 9 0 0 1 1 2 2 3 3 4 4
Source: Bloomberg, Actinver
Actinver’s Equity Research 4 Comparison vs. International Peers
Price Shares Mkt. Cap EV/EBITDA P/BV P/E ND/ Autoparts (Local) Outsdng (Local) Current 2015E 2016E Current Current 2015E 2016E EBITDA ELRINGKLINGER AG 28.4 63 1,798 7.3 NA 8.3 2.4 14.9 NA 15.0 1.3 JOHNSON CONTROLS 49.1 665 32,273 13.5 9.8 9.2 3.0 14.7 13.2 11.9 2.5 VISTEON CORP 98.5 44 4,376 9.1 16.0 12.4 5.0 31.8 34.0 24.8 0.2 FOX FACTORY HOLD 15.0 37 556 14.6 9.8 8.4 4.3 18.3 15.9 13.3 1.0 LINAMAR CORP 75.6 65 4,924 6.1 6.8 6.2 3.1 15.4 13.2 12.1 0.5 MAGNA INTL 131.3 205 26,934 6.4 6.4 5.7 2.5 11.6 10.8 9.1 (0.1) TRW AUTOMOTIVE 104.5 115 12,015 13.3 6.8 6.2 3.1 36.0 12.9 11.6 0.6 FEDERAL-MOGUL HO 12.7 150 1,911 9.1 6.5 5.5 1.3 32.3 14.2 11.4 4.5 GENTHERM INC 45.0 36 1,615 9.9 10.8 9.3 5.5 22.6 19.8 16.7 0.0 NEXTEER 7.7 2,498 19,258 6.9 8.4 6.9 4.4 16.6 15.8 12.4 1.1 BORGWARNER INC 59.7 226 13,523 10.1 9.5 8.3 3.7 20.1 17.1 14.3 0.4 Median 9.1 9.0 8.3 3.1 18.3 15.0 12.4 0.6 Average 9.7 9.1 7.8 3.5 21.3 16.7 13.9 1.1
Price Shares Mkt. Cap EV/EBITDA P/BV P/E ND/ Food producers (Local) Outsdng (Local) Current 2015E 2016E Current Current 2015E 2016E EBITDA GRUPO LALA SAB D 31.1 2,474 76,905 11.6 11.9 10.1 3.3 24.9 21.9 19.2 (1.3) GENERAL MILLS IN 52.2 612 31,540 13.5 11.7 11.7 4.7 19.9 17.5 17.4 3.2 KELLOGG CO 62.7 356 22,315 19.8 12.2 11.1 8.0 25.7 17.3 16.1 4.5 NESTLE SA-REG 75.6 3,168 243,795 17.6 NA 13.9 3.4 16.7 NA 20.9 0.9 DANONE 61.3 587 39,464 12.1 NA 12.2 3.3 32.6 NA 19.3 2.6 SAPUTO INC 35.0 390 13,691 14.1 13.1 12.8 4.3 23.0 20.6 20.1 1.8 PARMALAT SPA 2.5 1,831 4,571 7.8 7.3 6.7 1.4 22.5 19.7 17.5 (2.4) DIAMOND FOODS 29.6 31 931 32.7 12.4 11.8 3.3 NA 27.0 23.3 13.2 PINNACLE FOODS I 36.8 117 4,286 10.8 12.2 11.7 2.5 26.0 19.5 17.8 3.8 TYSON FOODS-A 39.7 376 16,142 9.2 7.1 7.1 1.3 16.9 11.2 10.8 3.4 KRAFT FOODS GROU 61.7 601 36,285 20.7 12.0 11.5 8.5 33.8 19.0 17.8 3.8 PILGRIM'S PRIDE 25.8 259 6,708 6.1 4.3 5.8 3.0 9.1 8.2 11.8 (0.4) HORMEL FOODS CRP 56.8 264 14,994 12.6 12.2 11.8 4.0 24.0 21.9 20.6 (0.3) SANDERSON FARMS 83.1 23 1,925 3.3 3.9 5.9 2.0 6.7 8.2 12.3 (0.3) Median 12.4 11.9 11.6 3.3 23.0 19.2 17.8 2.2 Average 13.7 10.0 10.3 3.8 21.7 17.7 17.5 2.3
Price Shares Mkt. Cap EV/EBITDA P/BV P/E ND/ Telecom (Local) Outsdng (Local) Current 2015E 2016E Current Current 2015E 2016E EBITDA AXTEL-CPO 4.1 1,295 5,231 4.3 4.4 4.3 0.9 NA NA NA 2.8 MAXCOM TELECOMUN 1.8 3,171 1,892 16.2 4.3 3.8 1.9 NA NA 32.5 1.6 AMERICA MOVIL-L 15.4 68,150 1,041,142 6.3 5.8 5.7 5.7 23.3 13.0 12.3 2.0 AT&T INC 32.9 5,187 170,808 8.3 5.9 5.8 2.0 22.3 13.0 12.6 2.4 Median 7.3 5.1 5.0 1.9 22.8 13.0 12.6 2.2 Average 8.8 5.1 4.9 2.6 22.8 13.0 19.2 2.2
Price Shares Mkt. Cap EV/EBITDA P/BV P/E ND/ Oil & Gas (Local) Outsdng (Local) Current 2015E 2016E Current Current 2015E 2016E EBITDA PIONEER NATURAL 155.0 149 23,088 10.7 13.1 10.9 2.7 42.9 NA NA 0.7 ANTERO RESOURCES 35.8 262 9,859 17.4 12.3 8.9 2.1 44.6 NA 29.6 4.5 CABOT OIL & GAS 27.4 413 11,337 23.3 12.0 7.9 5.3 23.3 NA 29.6 2.9 RANGE RESOURCES 46.4 169 7,844 8.6 9.7 8.4 2.3 30.9 NA 47.1 2.2 CONTL RES INC/OK 43.2 372 16,070 6.4 10.4 7.0 3.2 15.6 NA 31.4 1.9 SANDRIDGE ENERGY 1.6 490 755 8.2 8.6 10.0 0.8 4.9 NA NA 3.2 LAREDO PETROLEUM 11.5 143 2,468 6.9 9.1 9.4 1.1 15.0 NA NA 3.8 CIMAREX ENERGY C 109.6 88 9,604 6.4 11.4 8.3 2.1 18.8 NA 46.1 0.7 Median 8.4 10.9 8.7 2.2 21.1 NA 31.4 2.5 Average 11.0 10.8 8.8 2.4 24.5 NA 36.8 2.5 Source: Bloomberg, Actinver
Actinver’s Equity Research 5 Consolidated Estimates Alpek´s expected recovery and the acquisition of Campo Frio will drive consolidated results. We forecast consolidated EBITDA will increase 8.0% annually in 2014-17, mainly driven by the expected recovery in Alpek and a strong 2015 in Sigma, due to the Campo Frio acquisition in June 2014. For 2016-17 the calculated CAGR declines to 3.8% .
Consolidated Estimates (MP million, expect EPS) 2014 2015e 2016e 2017e CAGR 203,456 228,886 239,269 245,894 6.5% Revenues Operating Income 16,886 67,653 19,756 19,930 5.7% EBITDA 26,493 31,225 32,633 33,350 8.0% 13.0% 13.6% 13.6% 13.6% Margin Net income -2,259 8,899 9,326 9,496 NA EPS -0.44 1.73 1.82 1.85 NA Source: Actinver Sigma is the new king of the house. After the acquisition of Campo Frio in June 2014, Sigma became Alfa´s most important division in terms of revenues and EBITDA generation, with 37% and 40%, respectively. Unless Nemak announces a M&A deal in the next quarters, we do not expect changes in the composition of Alfa´s results.
2015e Revenue Composition 2015e EBITDA Composition
2% 1% 4% 8% 23% 33%
37%
40% 25% 27% Alpek Nemak Sigma Alestra Newpek Alpek Nemak Sigma Alestra Newpek
Source: Actinver
Actinver’s Equity Research 6 Alpek: The “ultimate” margin recovery Oil price stabilization and the start-up of new projects will drive the recovery. After a complicated 2014 (EBITDA: -24% YoY) Actinver´s petrochemicals analyst expects a 2014- Ac nver´s petrochemicals analyst, 17 EBITDA CAGR of 14%. The oil price stabilization and the start-up of new projects such Federico Robinson, ini ated cover- as the co-generations plants and the JV with M&G explain expected results recovery. age of Alpek with BUY and a 2015 Alpek: Operting Estimates year-end price target of MP 20.5/ USD million 2014 2015e 2016e 2017e CAGR sh. Volume (´000t) 3,921 3,917 4,038 4,112 1.6% Revenues 6,470 5,899 6,288 6,752 1.4%
EBITDA 430 446 516 616 12.7% Margin 6.6% 7.6% 8.2% 9.1% Source: The Company, Actinver
Nemak: We are worried about capacity constraints The end of the double-digit growth era. We expect Nemak´s EBITDA to increase 4.2% in 2014-17, well below the 17.0% annual growth rate in 2010-14. The difference is explained mainly due to the 2.3% expected growth rate in total shipments vs. 10% in the past four years. Finally we are incorporating in our estimates an EBITDA margin of 14.9%, in line with its historical average.
Nemak: Operting Estimates Although we believe Nemak´s USD million, expect Eq. units 2014 2015e 2016e 2017e CAGR most important markets will main- Equivalent units (m) 49.4 51.3 51.8 52.9 2.3% tain a posi ve trend, Alfa gave a Revenues 4,622 4,900 5,096 5,260 4.4% modest guidance for 2015. EBITDA 691 730 758 782 4.2% margin 15.0% 14.9% 14.9% 14.9%
Source: The Company, Actinver
Is the 2015 guidance disappointing? During 4Q14 results´ conference call, Alfa´s, management anticipated 2% and 3% revenues and EBITDA growth for Nemak in 2015 and a total production of 51.5m of equivalent units (+4.0% YoY). Or is Nemak facing production capacity constraints? Considering the positive outlook for both, North American and European markets, 2015 guidance could be considered conservative. We believe production growth is limited by capacity constraints, since Nemak has an installed capacity of 55.6m equivalent units, only 7% above 2015e production.
Nemak ´s Installed Capacity Production Evolution Equivalent Assuming a 4.5% annual growth Million units (m) 55 rate in total produc on, Nemak 60 4.9 1.8 14.0 52.9 51.3 51.8 50 49.4 will reach its full capacity in 4.5 45 47.6 40 34.9 years 42.0 30 Total Capacity: 35 55.6m units 36.8 33.2 20 25 10 24.1 0 15 North America Europe South America Asia 2009 2011 2013 2015e 2017e
Source: The Company, Actinver Source: The Company, Actinver
Actinver’s Equity Research 7 Sigma: Alfa´s new giant Volume and realized prices will push operating results. We expect Sigma´s total shipments to increase 6.2% YoY in 2014-17 driven by the Campo Frio acquisition last June; however for 2016 -17 we compute a lower annual growth rate of 1.7%. In addition to volume expansion, the Campo Frio deal boosted realized prices (FX and top-end product mix) which we believe supports the EBITDA 9% annual growth rate in the next three years.
Sigma: Operting Estimates A er Campo Frio´s incorpora on, USD million 2014 2015e 2016e 2017e CAGR 1,444 1,673 1,700 1,730 6.2% we expect a moderate growth for Tons (million) Sigma´s volumes Revenues 5,358 6,618 6,821 7,049 9.6% EBITDA 636 771 795 822 8.9% margin 11.9% 11.6% 11.7% 11.7% Source: The Company, Actinver
Population dynamics and economic expansion will drive volume growth... Considering the processed food industry´s characteristics: mature, highly penetrated and exposed to regional / international competition, we do not expect significant organic growth in the next years. We are including an annual growth rate of 1.7% from 2016 for Sigma´s total volume. For Mexico (41% of total volume), the expected middle-class expansion, the fact that approx. 50% of total population stands between 20-60 years, and an expected GDP hike of 3.4%, support our 4.0% annual growth rate. For North American and European markets (54% of total volume), we are including the expected GDP and population growth rates (approx. 1%) to compute Sigma´s 2.4% shipments evolution.
Mexico's population Expected GDP Growth Total Volume Evolution Age % NA 4.0 3.8 (´000t) 3.6 80 - 84 Women 3.4 Campo Frio 3.5 3.3 3.3 450 Men Aquisition 70 - 74 3.0 2.8 400 Bar-S 60 - 64 2.5 350 Aquisition 50 - 54 2.0 300 1.6 1.5 40 - 44 1.5 1.2 250 30 - 34 1.0 200 20 - 24 0.5 150 10 - 14 0.0 100 1 1 1 1 1 1 1 1 1 2015e 2016e 2017e Q Q Q Q Q Q Q Q Q 0 - 4 0 1 1 1 1 1 1 1 1 9 0 1 2 3 4 5 6 7 Mn . Mexico EU US e e e Source: Bloomberg, Actinver Source: Bloomberg, Actinver Source: The Company, Actinver
Expected CPI Evolution % 3.8 … and inflation will determine prices. Considering industry´s elevated price-elasticity, 4.0 3.7 3.5 3.5 we prefer to maintain a conservative price increase scenario. We project an annual 3.0 increase of 1.5% for realized prices, based in blend of estimated CPIs of each major region 2.5 2.0 in which Sigma has presence. 2.0 1.8 1.5 1.5 1.2 1.0 0.8 0.5 0.0
-0.5 -0.1 2015e 2016e 2017e
Mexico EU US
Source: Bloomberg, Actinver
Actinver’s Equity Research 8 Alestra: Not a mom & pop telecom company We are incorporating management´s cautious view into Alestra´s estimates. We expect 2014-17 EBITDA will be anchored at USD 170 million, reflecting a decrease in USD denominated results, but a flat scenario in MP.
We do not expect Alfa to pursue an Alestra: Operting Estimates Axtel acquisi on given PRE´s in- USD million 2014 2015e 2016e 2017e CAGR vestment results, however the pos- EOS (m) 6.4 7.3 7.4 7.4 4.8% sibility that Alestra will be acquired Revenues 415 415 416 413 -0.2%
by a major company remains on EBITDA 170 169 171 171 0.1% the table. margin 41.0% 40.7% 41.1% 41.3% Source: The Company, Actinver What if Alestra: acquires Axtel? Is acquired by a major company? Considering the reported loss in the mark-to-market i nvestment in PRE of MP 8.6 billion in 4Q14, we do not expect Alfa to increase leverage — the company issued USD 1 billion in March 2014 to fund energy related projects — or worst, to proceed with the approved follow-on (holding level) to acquire of Axtel. Alfa has been able to differentiate Alestra from national peers due to its focus in corporate networks, which we believe could be an important advantage, given the consolidation Once the favorite division, New- efforts in Mexican telecom industry. pek´s short-term opera ng outlook is unappealing, due to low oil pric- Newpek: Headwinds in the short/medium-term es and limited produc on growth. Oil price scenario is dragging Newpek´s operating results estimates. We forecast an annual EBITDA contraction of 4.9% annually in 2014-17, mainly driven by the expected decline of 30% YoY in 2015.
Newpek: Operting Estimates USD million 2014 2015e 2016e 2017e CAGR MBOEPD 9.2 9.4 9.4 9.4 0.7% Revenues 170 139 143 146 -4.9% EBITDA 116 84 86 88 -8.8%
margin 68% 60% 60% 60%
*thousand of equivalent barrels of oil p/day Source: The Company, Actinver
Pioneer guidance is demotivating .... In the 4Q14 results´ presentation, Pioneer Natural Resources — Newpek´s operating partner — guided for a flat year in terms of production (2015 avg. vs. 4Q14), a scenario that could change “only if margins improve”, the company said. We are using Pioneer´s guidance (YoY growth) to estimate Newpek´s production.
Actinver’s Equity Research 9
Pioneer vs. Newpek Production (MBOEPD ) Production Evolution MBOEPD Pioneer Newpek 60 10 10 9.2 9.4 9.4 9.4
50 8 8 6.6 40 5.9 6 6 30 4 3.8 20 4
10 2 2 2 2 2 3 3 3 3 4 4 4 4 e e e e 2 1 1 1 1 1 1 1 1 1 1 1 1 5 5 5 5 Q Q Q Q Q Q Q Q Q Q Q Q 1 1 1 1 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q 1 2 3 4 0 Pioneer Newpek 2011 2012 2013 2014 2015e 2016e 2017e Source: The Company, Actinver Source: The Companies, Actinver
… and oil price estimates are no exception. We are including Bloomberg´s oil and natural gas price projections to compute Newpek´s realized prices, which reflect a 30% annual avg. decrease vs. 2014 price. We are using a 60% / 40% WTI / Henry Hub NG price blend, based in Newpek´s reported liquid content as % of total production.
Oil Price Estimates Liquid content as % of total USD/bbl 70% 90 78.9 60% 80 74.7 72.7 68.3 70 62.7 61.8 50% 60 55.6 52.4 40% 50 30% 40 30 20% 20 10%
10 0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1Q152Q153Q154Q15 2015 2016 2017 2018 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4
Source: The Company, Actinver Source: Bloomberg, Actinver
Energy industry related themes (PRE, round 1, etc.) With no updates regarding Alfa´s plans for PRE´s investment, we only expect another mark-to-market loss in 1Q15. Management stated during 4Q14 results´ conference call, that they are in a “wait and see” mode regarding its investment in PRE and the planned joint venture with the latest.
Pacific Rubiales will report 4Q14 results next March 18, which we believe will determine the short-term future of the joint venture this Colombian company signed with Alfa.
Actinver’s Equity Research 10 Balance Sheet & Others Leverage has been increasing, but nothing to be concerned about. The great majority of the Alfa´s debt is public (65%), with bank loans making up most of the remainder and other types of cost-bearing debt representing only 2% of the total. While the company’s net debt/EBITDA ratio has been increasing and getting closer to 3.0x. Finally, we believe Alfa´s debt maturity profile does not represent any risk, with no mayor maturities in under six years.
Net Debt & Net Debt/EBITDA Evolution (x) Financial Debt by Origin MXNm Maturity Profile MP million 2% 50,000 80,000 3.0
2.5 40,000 42,619 60,000 33% 2.0 30,000 40,000 1.5
1.0 20,000 20,000 0.5 17,319 65% 10,000 14,416 0 1 3 1 3 1 3 1 3 1 3 1 3 0.0 Q Q Q Q Q Q Q Q Q Q Q Q 9,532 0 0 1 1 1 1 1 1 1 1 1 1 7,350 9 9 0 0 1 1 2 2 3 3 4 4 0 Banks Public Other Net Debt ND/EBITDA 1Y 2Y 3Y 4Y > 6Y Source: The Company, Actinver Source: The Company, Actinver Source: The Company, Actinver
Only maintenance capex in our estimates, for now. We are assuming the company will not make any acquisitions in coming years, therefore we expect that capex will only be allotted toward maintenance, as specified in the company’s 2015 guidance.
Estimated Capex 2015 Capex Composition MP million 6% 20,000 9% 31% 16,000 17,983 16,304
12,000 12,872 20%
8,000 9,409
4,000
34% 0 2014 2015e 2016e 2017e Alpek Nemak Sigma Alestra Newpek Source: The Company, Actinver Source: The Company, Actinver
We are very conservative regarding dividends. After the 2014 bottom line loss of MP 2.2 billion, we are not including dividend payments in 2015. For 2016 and 2017 we project a dividend yield of only 0.8%.
Actinver’s Equity Research 11 Company Description Alfa is a Mexican conglomerate founded in 1974 by Roberto Garza Sada and is formed by: Alfa´s three main subsidiaries, 1) Nemak: producer of aluminum engine components, 2) Alpek: polyester (PTA, PET and fibers) and petrochemicals (polypropylene, expandable polystyrene and caprolactam) Alpek, Nemak and Sigma, stand producer, 3) Sigma: maker of cold cuts (North America and Europe), cheese and dairy among the largest in their markets (Mexico and LATAM), 4) Alestra: IT& Communication services company focused on the Mexican business segment, and 5) Newpek: oil and gas exploration and production company in the US and Mexico. After experiencing financial difficulties in the 1980s, Alfa´s stock was delisted in the middle of the decade. The company was re-listed again in the Mexican stock exchange in 1994. Its float currently stands at 45%. Largest Minority Shareholders Blackrock 2.2% Dimensional Fund. 1.3% NAFIN 1.8% Banamex 1.1% 45% Vanguard Group 1.6% BBVA Bancomer 0.8% Source: Bloomberg, Actinver
18% 7% 100% 82% 100% 93% 100%
Source: The Company, Actinver
Nemak Nemak specializes in the production of highly complex aluminum components for the automotive industry. Its product portfolio includes cylinder heads, engine blocks, transmission parts, and structural components.
The company has over 20,000 employees, 34 manufacturing plants and is present in 14 Revenues by Region countries. Nemak produces approx. 50 million equivalent parts a year
8% 11% Revenues are well diversified. While 51% of Nemak’s sales are concentrated in the U.S. and Canada (mostly attributed to the fact that Ford, GM and Chrysler account for 68% of its sales), it remains diversified with 30% of sales in Europe, 11% in Mexico, and 8% in 30% South America and Asia.
On the other hand, this subsidiary generates 54% of its revenues from cylinder heads, 51% 33% from
Mexico US & Canada Revenues by Client Europe South America & Asia 40% 34%
Revenues by Product 30% 3% 23% 10% 20% 11% 9% 10% 6% 5% 5% 4% 54% 1% 1% 1% 33% 0% F G C H V B R N F D P O o h - y W M i i a S r M u e s a ht d yr K n W n s t mi A e s i d a a l r el a a u n e s Cylinder Head Engine Block Transmission Other r i tl - r Source: The Company, Actinver Source: The Company, Actinver
Actinver’s Equity Research 12 Global production footprint. Nemak has a total of 34 plants in six regions: Mexico (10), South America (3), U.S. (6), Canada (1), Europe (11) and Asia (3). The plants have an average age of 18 years, and are an average of 27,800 m 2. The Asian plants are the youngest with a 3.3-year average age. We see potential for further expansion into Asia since the company only has investments in China and India.
Aluminum will gain presence in vehicle production. In previous years there has been a noticeable increase in the amount of aluminum used in vehicles and Nemak expects the Nemak expects an increase in alu- usage of this commodity (lbs/vehicle) will almost double 2002 levels by 2020, reaching minum component usage in vehi- 445lbs per vehicle in North America and 407lbs per vehicle in Europe. cles in the coming years. Supporting the above mentioned, the company expects the most drastic aluminum use The company expects average alu- surge will occur in structural components, while other parts would only have moderate minum content per vehicle in 2020 increases .
NA & EU LV Aluminum Content will reach 445lbs in North America Aluminum per Vehicle (lbs) (lbs per vehicle) and 407lbs in Europe as compared 500 500 445 450 407 395 400 to 2002 when the composi on was 400 338 343 350 311 271lbs and 217lbs respec vely. 295 296 309 300 300 271 267 250 217 200 200 100 150
100 0 50 2009 2012 2015e 2018e 2021e 2025e 0 2002 2006 2010 2013 2015e 2020e Cylinder Heads Engine Blocks Transmissions Wheels & Brakes North America Europe Heat Transfers Others Structural Components Source: The Company, Actinver Source: The Company, Actinver
The auto industry regains traction. After the Great Recession’s effects, the auto industry has drastically recovered since. In Newpek’s case, revenues and EBITDA increased 19% and 22% annually in 2009-14. The EBITDA margin has seen moderate growth in the last few years; it began at 13% in 2009, hit a 10% minimum in 2011, and has recovered to 14% in 2013, and 15% last year.
Nemak: Revenues & EBITDA Evolution USDm 5,000 4,622 4,392 3,892 4,000 3,601
2,875 3,000
1,950 2,000
691 1,000 505 610 260 364 373 0 2009 2010 2011 2012 2013 2014 Revenues EBITDA
Source: The Company, Actinver
Actinver’s Equity Research 13 Sigma
Founded in 1980, Sigma has become a dominant producer of cheese, yogurt and premade food, among others. The company distributes and markets its portfolio of approx. 65 brands. Sigma has 71 food processing plants and 151 distribution centers in 18 countries in North America, Central America and Europe. The company distributes its products through more Between November 2013 and June than 440,000 points of sale throughout the countries in which it operates, and claims 2014 Sigma acquired 62% of Cam- having a diversified client base. In 2013, 63% of sales were made through traditional po Frio, while the WH Group main- stores and 37% through supermarket chains. tained ownership of 37% of the
Sigma: Revenue Composition by Region company. Sigma: Revenue Composition by 2015e Product 2015e 5% Both Sigma and WH Group delisted 9% Campo Frio’s shares effec ve Sep- tember 19th, 2014. 41% 19% 39% 55%
17% 15% Mexico US Europe Other Chilled Processed Meats Dairy Dry Meats Other
Source: The Company, Actinver
Since its creation, Sigma has participated in 24 total M&A and JV transactions. An initial strategy (1980-1999) was to expand its operations in Mexico, to then gain presence in Central America and the Caribbean between 2002 and 2006. Sigma entered the US market in 2007 and South America in 2008. Throughout the years, the company continued acquisitions and JVs in markets where it already operates, and most recently expanded into Europe through the 2014 Campo Frio acquisition. EBITDA trails revenue surge. Sigma has witnessed solid growth in the past few years, mostly driven by M&A with the Bar-S Foods acquisition in 2010 and the Campo Frio deal in 2014. Revenues and EBITDA increased 20% and 18% annually in 2009-14. After seeing an uptick in the EBITDA Margin in 2012-13 and reaching 14%, it returned to 12% after the Campo Frio acquisition.
Sigma: Revenues & EBITDA Evolution USDm 6,000 5,358 5,000 3,820 4,000 3,309 3,443 3,000 2,615 2,186 2,000
1,000 471 523 636 273 309 390 0 2009 2010 2011 2012 2013 2014
Revenues EBITDA
Source: The Company, Actinver
Actinver’s Equity Research 14 Alestra
Alestra began as a telecommunications company focused only on long distance. Today, it has evolved into an information technology and communications leader in Mexico. The company focuses on database, cloud, collaboration, security, mobility, and other solutions for corporate clients from all sectors. As of 2013 Alestra had five data centers, including Queretaro, which worth highlighting Alestra has five data centers, the given it is the first of its kind to use energy cogeneration in Latin America. This facility uses Queretaro one being the most in- the generated heat for cooling purposes, making it the most innovative and sustainable nova ve and sustainable data cen- data center in the region. ter of its kind in La n America. Sales by Service Type Sales by Market Segment 5% 4% 2% The data center uses energy cogen- 14% era on to use generated heat for 41% cooling purposes.
40% 94%
MN & IT Enterprise Data, Internet & Local Enterprise Residential International Enterprise LD Consumer and Intl Source: The Company, Actinver Source: The Company, Actinver
Significant margin expansion. Alestra revenues grew at a 4% 2009-14 CAGR, while EBITDA has expanded at 10% in the period. The EBITDA margin however, has expanded from 30% in 2009 to 41% in 2014, hitting a 43% maximum in 2013.
Alestra: Revenues & EBITDA Evolution USDm 450 415 396 380 400 360 345 350 350 300 250 200 170 170 137 150 126 104 116 100 50 0 2009 2010 2011 2012 2013 2014 Revenues EBITDA Source: The Company, Actinver
Actinver’s Equity Research 15 Newpek
Newpek is engaged in the exploration and exploitation of natural gas and hydrocarbons and is currently developing the Eagle Ford Shale (EFS) and Edwards Trend (ET) plays in South Texas. Newpek's strategy has been to focus its efforts on the EFS play, which has the greatest potential for the production of a liquids-rich mix.
Newpek's strategy has been to In the past, Newpek has strengthened its position through land acquisitions and experienced technical staff recruitment. As of the 4Q14, company has 497 wells in focus its efforts on the EFS play, operation vs. 411 and 286 in 4Q13 and 4Q12, respectively. which has the greatest poten al
for the produc on of a liquids-rich Newpek: Revenues & EBITDA Evolution USDm mix. 200 170 160 The company has 497 wells in op- 133 116 120 era on. Daily produc on in 2013 92 91 stood at 6,737 equivalent barrels 80 66 45 of oil, 37% greater than in 2012. 40 30 0 2011 2012 2013 2014
Revenues EBITDA Source: The Company, Actinver
Actinver’s Equity Research 16 ALFA — Financial Statements
Income Statement 2012 2013 2014E 2015E 2016E 2017E 2014E 2015E 2016E 2017E CAGR Sales 200,167 203,456 228,886 254,470 261,883 263,469 12% 11% 3% 1% 7% Cost of Sales (164,598) (166,829) (187,704) (155,262) (213,477) (214,134) 13% (17%) 37% 0% 6% Gross Profit 35,568 36,627 41,181 99,208 48,406 49,335 12% 141% (51%) 2% 8% Gross Margin 17.8% 18.0% 18.0% 39.0% 18.5% 18.7% (0%) 117% (53%) 1% 1% SG&A (19,214) (20,331) (24,422) (27,091) (27,821) (27,907) 20% 11% 3% 0% 8% Operating Profit 16,246 14,078 16,886 72,117 20,585 21,428 20% 327% (71%) 4% 11% Operating Margin 8.1% 6.9% 7.4% 28.3% 7.9% 8.1% 7% 284% (72%) 3% 4% Depreciation and Amortization (7,962) (7,932) (9,607) (11,648) (11,919) (11,922) 21% 21% 2% 0% 11% EBITDA 24,209 22,009 26,493 31,150 32,503 33,350 20% 18% 4% 3% 11% EBITDA Margin 12.1% 10.8% 11.6% 12.2% 12.4% 12.7% 7% 6% 1% 2% 4% Interest expense (2,569) (1,775) (1,644) (2,667) (2,532) (2,486) (7%) 62% (5%) (2%) 9% Other income (expense) (493) (2,489) (17,214) 0 0 0 592% (100%) NA NA (100%) Interest income 330 207 127 101 76 123 (39%) (20%) (25%) 62% (12%) Pre-Tax Profit 13,515 10,021 (1,845) 69,551 18,129 19,065 (118%) (3,869%) (74%) 5% 17% Taxes 3,390 3,192 (660) 5,928 6,345 6,673 (121%) (999%) 7% 5% 20% Tax rate 25.1% 31.9% 35.8% 8.5% 35.0% 35.0% 12% (76%) 311% 0% 2% Net Profit Before Minorities 10,125 6,829 (1,186) 11,009 11,784 12,392 (117%) (1,029%) 7% 5% 16% Minority Interest 58 (34) (291) (936) (963) (969) 756% 222% 3% 1% 131% Net Profit 8,992 5,926 (2,259) 9,015 9,732 10,328 (138%) (499%) 8% 6% 15% N° of Shares 5,146 5,143 5,135 5,135 5,135 5,135 (0%) 0% 0% 0% Average N° of Shares 5,173 5,144 5,139 5,135 5,135 5,135 (0%) (0%) 0% 0% EPS 1.747 1.152 (0.440) 1.756 1.895 2 (138%) (499%) 8% 6% Balance Sheet 2012 2013 2014E 2015E 2016E 2017E 2014E 2015E 2016E 2017E CAGR TOTAL ASSETS 153,858 165,390 232,540 227,348 231,810 235,333 41% (2%) 2% 2% 9% Current Assets 58,974 59,651 85,219 75,371 81,036 89,150 43% (12%) 8% 10% 11% Cash and Temporary Investments 13,661 11,902 22,141 14,845 18,480 27,027 86% (33%) 24% 46% 23% Accounts Receivable 21,903 23,564 30,233 29,186 30,228 30,087 28% (3%) 4% (0%) 6% % of Sales 11% 12% 13% 11% 12% 11% 14% (13%) 1% (1%) (0%) Inventories 21,728 22,692 30,758 29,325 30,232 29,950 36% (5%) 3% (1%) 7% % of COGS (13%) 14% 16% 19% 14% 14% 20% 15% (25%) (1%) 1% TOTAL LIABILITIES 93,081 100,221 163,619 154,632 154,697 153,252 63% (5%) 0% (1%) 11% Suppliers 19,868 20,934 35,167 33,529 34,961 34,634 68% (5%) 4% (1%) 13% % of COGS (12%) 13% 19% 22% 16% 16% 49% 15% (24%) (1%) 7% Long Term Liabilities 59,449 57,521 101,504 101,504 101,504 101,504 76% 0% 0% 0% 15% TOTAL DEBT 51,275 57,454 91,920 85,362 83,288 82,327 60% (7%) (2%) (1%) 9% NET DEBT 37,615 45,552 75,251 75,990 70,280 60,772 65% 1% (8%) (14%) 7% TOTAL CAPITAL 60,777 65,169 68,921 72,716 77,113 82,081 6% 6% 6% 6% 6% Shareholder's Equity 52,042 56,441 55,156 58,192 61,711 65,687 (2%) 6% 6% 6% 4% Minority Interest 8,735 8,728 13,765 14,523 15,401 16,394 58% 6% 6% 6% 17% Cash Flow Statement 2012 2013 2014E 2015E 2016E 2017E 2014E 2015E 2016E 2017E CAGR OPERATING ACTIVITIES Net income 10,183 6,795 (1,476) 10,073 10,821 11,423 (122%) (782%) 7% 6% 14% Depreciation, amortization and depletion 7,962 7,932 9,607 11,648 11,919 11,922 21% 21% 2% 0% 11% Cash used for operating assets and liabilities (5,118) (4,017) (2,187) 122 110 (51) (46%) (106%) (10%) (147%) (66%) Other, net 6,264 (40,475) 17,989 0 0 0 (144%) (100%) NA NA (100%) Net cash provided from operating activities 19,291 (29,766) 23,932 21,843 22,849 23,294 (180%) (9%) 5% 2% NA INVESTING ACTIVITIES NA NA NA NA NA Capital expenditures (7,774) (13,638) (9,323) (16,304) (10,715) (7,332) (32%) 75% (34%) (32%) (14%) Other, net (2,579) (5,264) (19,147) 0 0 0 264% (100%) NA NA (100%) Net cash used for investing activities (10,352) (18,903) (28,470) (16,304) (10,715) (7,332) 51% (43%) (34%) (32%) (21%) FINANCING ACTIVITIES NA NA NA NA NA Change in Debt (4,378) 4,918 15,677 (6,558) (2,075) (960) 219% (142%) (68%) (54%) NA Dividends paid (2,138) (5,117) (183) (1,284) (1,284) (1,284) (96%) 601% 0% 0% (29%) Distributions to non-controlling interest (3,796) (3,631) (4,490) (4,995) (5,140) (5,171) 24% 11% 3% 1% 9% SCC common shares buyback (1,074) (98) (257) 0 0 0 163% (100%) NA NA (100%) Other 7,673 1,158 (2,134) 0 0 0 (284%) (100%) NA NA (100%) Net cash used for financing activities (3,713) (2,770) 8,612 (12,836) (8,499) (7,415) (411%) (249%) (34%) (13%) 28% Effect of exchange rate changes on cash (596) 49,680 693 0 0 0 (99%) (100%) NA NA (100%) Increase (decrease) in cash and cash equivalents 4,629 (1,759) 4,767 (7,297) 3,635 8,547 (4) (3) (1) 1 NA Source: The Company, Actinver
Actinver’s Equity Research 17
Appendix
Actinver’s Equity Research 18 Appendix A. Management Team
Armando Garza joined Alfa in 1978 and is the Chairman of the Board. Prior to holding his current position, Mr. Garza was Vice Chairman of the Board and Senior VP of Development at Alfa. Additionally, Mr. Garza has been President of Versax, President of Sigma Alimentos, VP of Corporate Planning, and President of Polioles and Selther. He has a bachelor’s degree from MIT and an MBA from Stanford University.
Alvaro Fernandez Garza has been at Alfa since 1991 and is the company’s current President. Before serving as President, Mr. Fernandez was President of Sigma Alimentos, where he has held several various executive positions. He earned a degree in Economics from Notre Dame, has a Master’s in Management from Tecnologico de Monterrey, and an MBA from Georgetown University.
Jose de Jesus Valdez joined Alfa in 1976 and is Alpek’s President. He has formerly serves as President of Petrocel, Polioles, and Indelpro. Mr. Valdez earned a dual degree in Mechanical Engineering and Management at Tecnológico de Monterrey, and a Master’s degree in Industrial Engineering from Stanford University.
Armando Tamez joined Alfa in 1984 and is the President of Nemak. Previously, he has served as Nemak’s COO, CEO of North America, and CEO of Mexico. Mr Tamez holds a BSc in Industrial and Systems Engineering from Tecnologico de Monterrey and a Master’s degree in Management and Engineering from George Washington University.
Mario Paez has been with Alfa since 1974 and currently serves as Sigma’s President. Prior to his current position, Mario has been Senior VP of finance at Alfa, VP of Operations and VP of Administration at Sigma Alimentos, President of Total Home, and President of Empaques de Carton Titan. Mr. Paez studied Public Accounting at Tecnologico de Monterrey, where he also earned his MBA. He holds a second MBA from Tulane University.
Rolando Zubiran is President of Alestra and has been at Alfa since 1999. He was previously President of Matec in Brazil, President of Sistemas Ericsson in Mexico, and President of Ericsson Argentina. Mr. Zubiran studied Industrial Engineering at UNAM, holds a Master’s degree in Operations Research from the University of Southern California, and a PH.D. in Philosophy UANL, specializing in Management.
Carlos Jimenez joined Alfa in 1976 and is the company’s Senior VP of Legal and Corporate Affairs. Prior to his current position, Mr. Jimenez has served as Alfa’s Legal VP, and Legal VP of Corporate Affairs. Additionally, he served as Legal VP at Hylsamex and was Partner at Canales y Jiménez, S.C. law firm.
Ramon Leal is Alfa´s CFO and joined the company in 2009. He was previously Treasurer at Alfa, held several positions at Vitro, and held executive positions at Pulsar, Vector, and Violy & Partners in NYC. Mr. Leal studied Public Accounting at Universidad de Monterrey, earned a Master’s degree in Operations Management from Tecnologico de Monterrey, and an MBA from Harvard.
Corporate Governance
Chairman Jose Calderon
Board of Directors Enrique Castillo, Francisco Javier Fernandez, Alvaro Fernandez, Armando Garza, Claudio Gonzalez, Ricardo Guajardo, David Martinez, Adrian Sada, Federico Toussaint, Guillermo Vogel, and Carlos Jimenez.
Actinver’s Equity Research 19
Appendix B. Additional support graphs & charts —
USD million YoY % Revenues EBITDA Revenues EBITDA Alpek 4,950 500 -24% 15%
Nemak 4,730 710 2% 3% Sigma 6,330 730 18% 15% Alestra 415 160 0 -6%
Newpek 110 60 -51% -50 Alfa 16,535 2,160 -3% 3% Source: The company, Actinver
Appendix B. Additional support graphs & charts —
Alpek: Operting & Financial Estimates USD million 2014 2015e 2016e 2017e CAGR Volume (´000t) 3,921 3,917 4,038 4,112 1.6% Polyester 3,082 3,082 3,174 3,222 1.0% P&C 839 849 878 904 3.7% Revenues 6,470 5,899 6,288 6,752 1.4% Polyester 4,752 3,474 3,681 3,925 -0.4% P&C 1,718 1,354 1,461 1,598 6.2% EBITDA 430 446 516 616 12.7% Polyester 271 301 351 411 14.9% P&C 159 150 175 205 8.8% Margin 6.6% 7.6% 8.2% 9.1% Source: Bloomberg, Actinver
Actinver’s Equity Research 20 Appendix B. Additional support graphs & charts —
Facility Description Region Facility Age (years) Dimensions (m 2) Mexico Plant 1. García, N.L. 32 19,403 Plant 2. García, N.L. 22 28,631
Plant 3. García, N.L. 16 45,000 Plant 4. García, N.L. 15 34,860 Plant 5. García, N.L. 13 45,630
Plant 6. García, N.L. 8 45,600 Plant 1. Monclova, Coahuila 17 28,800 Plant 2. Monclova, Coahuila 12 21,600 Plant 1. Ramos Arizpe, Coahuila 15 30,000 Plant 2. Ramos Arizpe, Coahuila 11 12,500 South America Córdoba, Argentina 38 8,900 Plant 1. Betim, Brazil 38 52,000 Plant 2. Betim, Brazil 36 48,824 U.S. Dickinson, TN 27 26,700 Plant 1. Sylacuaga, AL 10 20,300 Plant 2. Sylacuaga, AL 10 7,430
Plant 1. Sheboygan, WI 19 21,368 Plant 2. Sheboygan, WI 19 35,768 Glasgow, KY 14 42,271 Canada Windsor, Ontario 22 24,000 Europe Most, Czech Republic 11 34,565 Plant 1. Wernigerode, Germany 21 33,900 Plant 2. Wernigerode, Germany 21 14,530 Ziar, Slovaquia 14 18,319 Bielsko Biala, Poland 38 62,000 Dillingen, Germany 22 38,000 Dillingen, Germany 10 25,300
Györ, Hungary 21 24,900 Linz, Austria 32 13,000 Etxebarria, Spain 15 15,886
Ulyanovsk, Russia 0 N.A. Asia Nanjing, China 8 11,250 Chennai, India 1 17,235 Chongqing, China 1 9,000 Source: The company, Actinver
Production Process Description
Aluminum Smelting
Molding Finish Final Product
Resin & Sands Hearts
Sand Recycling
Source: The company, Actinver
Actinver’s Equity Research 21 Appendix B. Additional support graphs & charts —
Aluminum Usage
Source: The Company
Aluminum Usage
US Auto Sales and Unemployment Rate m vehicles Vehicle Sales Evolution (2003-14) 24 22.0 20.8 19.8 20 20.0 19.4 18.9 18.5 18.2 18.0 17.6 16 18.0 16.8
16.0 15.3 Auto sales (m) sales Auto 12
8 14.0
4 12.0 0.04 0.05 0.06 0.07 0.08 0.09 0.1 2013 2014 2015e 2016e 2017e Unemployment rate US Europe
Source: Bloomberg, Actinver Source: Bloomberg, Actinver
Actinver’s Equity Research 22 Appendix B. Support graphs & charts — Sigma Product´s Portfolio: Segment, Region and Brands
Source: The Company
Main Corporate Transactions. 1980 - 2014
Year Transaction Company Country 1980 Acquisition Grupo Brener Mexico 1993 JV Oscar Mayer Mexico 1994 JV Yoplait Mexico 1997 Acquisition San Antonio Mexico 1999 Acquisition Tangamanga Mexico Acquisition Zar Costa Rica 2002 Acquisition Inlatec Costa Rica Acquisition Checo Dominican Republic 2003 Acquisition Productos Carnicos El Salvador JV Grupo Chen Mexico 2004 Acquisition Sosua Dominican Republic 2005 Acquisition New Zealand Milk Mexico Mexico Acquisition Nayar Mexico 2006 JV Yoplait Central America JV Bernia Mexico 2007 Acquisition Mexican Cheese Producers US Acquisition Industria Alimentaria del Sureste Mexico Acquisition Braedt Peru 2008 Acquisition Longmont Mexico 2010 Acquisition Bar-S Foods US Acquisition Hidalmex Mexico 2012 Acquisition Supremo Mexico 2013 Acquisition Monteverde Costa Rica 2014 Acquisition Campo Frio Europe Source: The Company, Actinver
Actinver’s Equity Research 23
Equity, Economic, Quantitative and Fixed Income Research Departments
Equity Research Gustavo Terán Durazo, Head of EquityResearch (52) 55 1103-6600 x1193 [email protected] CFA Senior Analysts Telecommunications, Media and Martín Lara (52) 55 1103-6600x1840 [email protected] Financials Carlos Hermosillo Bernal Consumption (52) 55 1103-6600 x4134 [email protected]
Pablo Duarte de León FIBRAs (REITs) (52) 55 1103-6600 x4334 [email protected]
Mining, Metals, Paper and Pablo Abraham Peregrina (52) 55 1103-6600x1395 [email protected] Conglomerates
Ramón Ortiz Reyes Cement, Construction and Concessions (52) 55 1103-6600 x1835 [email protected]
Federico Robinson Bours Energy, Chemicals and Industrial (52) 55 1103-6600 x4127 [email protected] Carrillo Junior Analysts Telecommunications, Media and Juan Ponce (52) 55 1103-6600x1693 jponce@actinver,com.mx Financials Enrique Octavio Camargo Energy, Chemicals and Industrial (52) 55 1103-6600x1836 [email protected] Delgado José Antonio Cebeira Consumption (52) 55 1103-6600x1394 [email protected] González
Mining, Metals, Paper Conglomerates , Mauricio Arellano Sampson (52) 55 1103-6600 x1835 [email protected] Cement, Construction and Concessions Economic and Quantitative Research
Head of Economic and Quantitative Ismael Capistrán Bolio [email protected] Research (52) 55 1103-6600 x6636
Jaime Ascencio Aguirre Economy and Markets [email protected] (52) 55 1103-6600 x1100
Santiago Hernández Morales Quantitative Research [email protected] (52) 55 1103-6600 x4133
Roberto Ramírez Ramírez Quantitative Research (52) 55 1103-6600x1672 [email protected]
Roberto Galván González Technical Research [email protected] (52) 55 1103 -66000 x5039
Fixed Income Research
Araceli Espinosa Elguea Head of Fixed Income Research (52) 55 1103 -66000 x6641 [email protected]
Jesús Viveros Hernández Fixed Income Research (52) 55 1103 -66000 x6649 [email protected]
Actinver’s Equity Research 24 Actinver’s Equity Research 25