SECOND QUARTER 2020 EARNINGS WEBCAST
Transcript of SECOND QUARTER 2020 EARNINGS WEBCAST
SECOND QUARTER 2020EARNINGS WEBCAST
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Today’s Speakers
Alejandro Elizondo
IRO
José Carlos Pons
CFO
José de Jesús Valdez
CEO
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Topics for Today’s Webcast
I. COVID-19 Update
II. Financial Performance
III. Long-term Growth Strategy
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Feedstock
Prices
Polyester
Margins
Operations
Demand
• Lower crude oil demand in Asia results in
historically low prices for Crude Oil and Px
• Resulting in negative Inventory loss & RMCF
effects in 2Q20, with potential to revert in 3Q20
• Solid demand and lower Asian PTA/PET output
improved margins (+13% QoQ)
• Alpek’s businesses deemed as essential / No
adverse effect to operations
• Increased safety measures for employees at
plants and home-office whenever possible
• Strong PET volume, particularly due to emphasis
on hygiene and safety
• EPS volume from Construction segment impacted
in Mexico, though rebounded in June
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COVID-19 Update
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2Q20 Financial Highlights
Strong Alpek performance QoQ best explained through Comparable EBITDA
excluding RMCF result (US$149M / +1% QoQ)
Polyester margins increased by 13% QoQ and Volume on record-setting pace
(+4% YTD) but lower vs. 1Q20 record high (-6% QoQ)
Temporary negative Inventory Adjustment (-US$42M) and Raw Material Carry-
forward (-US$39M) effects in 2Q20 as feedstock prices fell to historical lows
Focus on FCF as Net Debt reduced (-31% YoY) and CAPEX lowered (-61% YoY)
US$81.6M dividend suspended, but open for review by Board of Directors in 2H20
Liquidity strength continues as cash balance improved (+7% QoQ) and US$1.4B
in total credit lines were maintained
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140161
194167
11174
188
148
189172
110
167
217231
173
147 149
1Q19 2Q19
356
127
3Q19
213
4Q19 1Q20 2Q20
Comp. EBITDA
ReportedEBITDA
Comp. EBITDAexcl. RMCF1
+1.4%
CoGen
Sale
Alpek EBITDA (US$M)
EBITDA Evolution
(1) Raw Material Carry-forward
• Comparable EBITDA excluding
RMCF1 of US$149M (+1% QoQ)
• Quarter on quarter improvement
as stronger Polyester margins
(+13%) more than offset lower
volume (-6% QoQ)
• Comparable EBITDA and
Reported EBITDA lower QoQ due
to larger Inventory Losses &
RMCF effects
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Feedstock CostsCrude Oil, Px and Propylene all reached record lows in April/May 2020
Brent Crude Oil Price NA Paraxylene Contract Price NA Propylene Contract Price
1,1651,077
955 937876
590
0
500
1,000
1,500
2,000
4Q3Q1Q
US$/Ton
2Q 1Q 2Q
-33%
38 3738
35
31
26
0
5
10
15
20
25
30
35
40
1Q
cpp
2Q1Q 2Q 3Q 4Q
-16%
2019 2020 2019 2020
17
41
0
80
40
20
60
US$/Bbl
1Q 2Q 3Q 4Q 1Q 2Q
2019 2020
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EBITDA Breakdown
151
94 102
63
33
62
5046
39
46
40
2Q20
Reported
EBITDA
Polyester
2Q20
Comparable
EBITDA
2Q19
Comparable
EBITDA
excl. RMCF
Inventory
Adjustment
RMCF1
74
110
1Q20
Comparable
EBITDA
excl. RMCF
2Q20
Comparable
EBITDA
excl. RMCF
P&C
42
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Others
Others
149
217
147
+1%
Alpek 2Q20 EBITDA (US$M)
(1) Raw Material Carry-forward
• Polyester Comp. EBITDA excl.
RMCF of US$102M (+9% QOQ)
• Negative RMCF & Inventory
Adjustment effects from Px and
Propylene price decline
• P&C Comp. EBITDA of US$46M
(-7% QoQ)
• Strong PP margins, but volume
decrease from EPS (-19% QoQ)
• One-time US$6M gain from
insurance payout related to 3Q18
fire at Altamira PTA facility
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Free Cash Flow Generation
185
127
51
10142
163
53
NWCEBITDA
1,428
CAPEXNet Debt
Dec’19
Financial
Expenses
Taxes Dividends Others Net Debt
Jun’20
1,330
US$M
FCF: US$118M
• Alpek with emphasis on financial
stability and strong liquidity
• FCF year-to-date of US$118M
(+US$189M vs. Guidance)
• NWC +US$127M year-to-date
(+US$203M vs. Guidance)
• CAPEX of US$42M (-61% YoY &
-US92M vs. Guidance)
• US$81.6M Dividend suspended
but open for review by Board of
Directors
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Long-term Growth Strategy
• Global Cost Improvement
• Value-added Products
• FCF Generation
• Footprint Optimization
• Value Chain Integration
• Product Innovation
• Maximize CCP Value
• rPET Leadership
• Recycling Promotion
• Sustainable Product Portfolio
Growth Catalysts
Strengthen
Core
Business
Strategic &
Focused
Growth
Foster
Circular
Economy
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2H20 OUTLOOK
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Q&A
José de Jesús Valdez
CEO
José Carlos Pons
CFO
APPENDIX
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Disclaimer
This presentation contains, or may be deemed to contain, “forward-looking
statements”. By their nature, forward looking statements involve risks and
uncertainties because they relate to events and depend on circumstances that may
or may not occur in the future. The future results of Alpek, S.A.B. de C.V. and its
subsidiaries may differ from the results expressed in, or implied by the forward-
looking statements set out herein, possibly to a material degree.
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Raw Material Carry-forward Effect (RMCF) BreakdownSmaller YoY & QoQ difference in EBITDA when excluding extraordinary effects
2020 2019 Delta
M dls 1Q 2Q YTD 1Q 2Q YTD 1Q 2Q YTD
Reported EBITDA 111 74 185 140 161 301 (29) (87) (116)
Inventory Adjustment (17) (42) (59) (19) (27) (46) 2 (15) (13)
Others 0 6 6 11 (1) 10 (11) 7 (4)
Comparable EBITDA 127 110 238 148 189 337 (20) (79) (99)
Raw Material Carry-forward (20) (39) (59) (19) (28) (47) (1) (11) (12)
Comparable EBITDA excl. RMCF 147 149 296 167 217 384 (20) (68) (88)
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Relevant References: Crude OilHistorical lows in April before rebound after OPEC production cuts
Brent Crude Oil Price
53
44
54
71
6460
0
20
40
100
80
120
US$/Bbl
Avg.99
2014 2015 2016 2017 20192018 2020
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Relevant References: ParaxylenePx prices continued to fall in 2Q20 following their correlation with Crude Oil
1,7081,635 1,641
1,382
992876
989924 924
9771,056 1,100
1,258 1,2821,165
1,077955 937
876
590
0
500
1,000
1,500
2,000
2011
US$/Ton
2012 2013 2014 2015 2016 2Q1Q 2Q 3Q 4Q 4Q1Q 3Q 4Q 1Q 2Q 3Q 1Q 2Q
2017 2018 2019
NA Px Contract Price
US$143/ton
decrease
from Mar.’20
to Jun.’20
2020
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Integrated PET MarginsMargins improved by 13% based on resilient demand and lower Asian production
200
74 69 69 62 64 60 72 80 81 104133 135 117 110
155 14082 78 83
193
174 186 208165 159 180
204 184 202
238
346
242
215 214
214
164
145196
227
0
100
200
300
400
500
600
2012 2013
227
US$/Ton
PET
2015
277
2011
377
1Q3Q2014 2016 1Q
275304
2Q2Q 4Q 1Q 2Q 3Q 4Q 1Q 3Q
227
4Q 2Q
PTA
310333
393
248 255
223240
276263
284
342
478
324
370
China
2017 2018 2019
Asian Margins (Px / MEG to PET)
2020
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NA Propylene Contract Price (PGP) NA Polypropylene Margin (PP to PGP)
12 1213
15
24
27
19
22 22 2221
20
1516
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
16 2Q1511
cpp
1412 13 17 18 1Q 3Q 4Q 1Q 2Q
76
60
6971
39
34
45
54
38 37 3835
31
26
0
10
20
30
40
50
60
70
80
17 1Q
cpp
1211 1513 4Q14 16 18 2Q 3Q 1Q 2Q
2019 2020 2019 2020
Relevant References: Propylene & PolypropyleneDecrease in PGP contract prices, but Alpek PP margins remain strong
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Continuously improving financial performanceNet Debt decreased by 1% as Leverage remains at strong levels
Net Debt (US$M) LTM EBITDA (US$M) Net Debt/EBITDA (Times)
944
864 850821
735
2Q202Q19 3Q19 1Q204Q19
2.22.4
1.6
1.7
1.9
1Q203Q192Q19 4Q19 2Q20
2,084 2,036
1,3301,436 1,428
2Q19 3Q19 4Q19 1Q20 2Q20
-1%
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• Global Cost Improvement
• Value-added Products
• FCF Generation
• Footprint Optimization
• Value Chain Integration
• Product Innovation
• Maximize CCP Value
• rPET Leadership
• Recycling Promotion
• Sustainable Product Portfolio
Growth Catalysts Details / Description
• Zero Based Budgeting & process innovation (Mainly Operations, Logistics & SG&A)
• Shift to products with higher margins & barriers to entry (Copolymers, Grey EPS)
• Reductions to CAPEX & NWC / Recovery of M&G Mexico debt
• Ensure global production is performed in optimal sites & logistic networks
• Grow capacity selectively & integrate into value chain (EPS, Px)
• New products & business lines (Biovento, Natural Gas Commercialization, CO2, PLA)
• Optimize project timing & minimize CAPEX
• Lead rPET supply in Americas through capital-effective investment
• Secure PET Bale & Flake supply / Equip vPET plants with single-pellet technology
• Active lobbying for circular economy via associations & The Recycling Partnership
• Develop sustainable alternatives for all our products (Biodegradable EPS & PP, etc.)
Strengthen
Core
Business
Strategic &
Focused
Growth
Foster
Circular
Economy
Alpek Growth Strategy
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For Additional InformationEmail: [email protected] / Phone: +52 (818) 748-1146
• 8 Years at Alfa/Alpek
• Previously held roles in Human Capital, Talent & Culture at Alfa and Axtel
• BA in International Relations from ITESM
Alejandra
Bustamante
IR Manager
• 9 Years at Alfa/Alpek
• Previously held roles as Director of Logistics & Procurement at Indelpro, Director of Energy Markets at
Alfa, and Project Leader at The Boston Consulting Group
• BS in Industrial Engineering from Cornell University and MBA from Stanford Graduate School of Business
Alejandro
Elizondo
IRO
SECOND QUARTER 2020EARNINGS WEBCAST