Orbia Advance Corporation, S.A.B. de C.V. (BMV: ORBIA*) (“the
Company” or “Orbia”) today released unaudited results for the first
quarter of 2024.
Orbia’s first quarter performance reflects the continued
weakness in the market environment, primarily driven by sustained
elevated interest rates, lower prices, delays in private and public
infrastructure projects and continued subdued demand in Europe. The
Company continues to operate with strong fiscal and operational
discipline, proactively managing the factors within its control
during a challenging market environment.
Q1 2024 Financial Highlights
(All metrics are compared to Q1 2023 unless otherwise noted)
- Net revenues of $1.9 billion decreased 18%, driven primarily by
lower volumes and lower prices in Connectivity Solutions, Polymer
Solutions and Building & Infrastructure.
- EBITDA of $253 million decreased 46%, driven by lower revenues
and the negative impact from the Mexican Peso appreciation across
most business groups.
- Operating cash outflow of $50 million decreased by $217 million
due primarily to lower EBITDA.
“Our first quarter results were in line with the guidance that
we shared for the first half of the year. While we are seeing month
over month improvements in some of the businesses, interest rates
staying higher for longer may further delay demand recovery,
necessitating a continued prudent approach. Meanwhile we continue
to maintain leading market positions, exercise tight financial
discipline, and carry out business optimization actions that
position us well for when markets recover. We remain committed to
our long-term strategy, supported by the strategic growth projects
that are underway, consistent with our mandate to generate
sustainable shareholder value, while maintaining a strong balance
sheet.” said Sameer Bharadwaj, CEO of Orbia.
Q1 2024 Consolidated Financial
Information1
(All metrics are compared to Q1 2023
unless otherwise noted)
mm US$ First Quarter Financial
Highlights
2024
2023
% Var. Net sales
1,863
2,280
-18%
Cost of sales
1,431
1,620
-12%
Selling, general and administrative expenses
326
336
-3%
Operating income
106
323
-67%
EBITDA
253
469
-46%
EBITDA margin
13.6%
20.6%
-701 bps
Financial cost
139
101
37%
Earnings (Loss) before taxes
(32)
223
N/A
Income tax
15
143
-89%
Consolidated net (loss) income
(47)
80
N/A
Net majority (loss) income
(74)
55
N/A
Operating cash inflow (outflow)
(50)
167
N/A
Capital expenditures
(132)
(142)
-7%
Free cash inflow (outflow)
(201)
1
N/A
Net debt
3,678
3,246
13%
___________________
1 Unless noted otherwise, all figures in
this release are derived from the Consolidated Financial Statements
of the Company as of March 31, 2024 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 $1,863 million decreased 18%.
The decrease in revenues for the quarter was driven by
Connectivity Solutions, Polymer Solutions and Building &
Infrastructure, primarily due to the continued weak demand and
lower prices as a result of the high interest rate environment and
exports of excess PVC capacity in China and the U.S.
Cost of sales of $1,431 million decreased 12%.
The decrease in cost of goods was driven primarily by lower
volumes as well as lower raw material and input costs.
Selling, general and administrative expenses of $326
million decreased 3%. As a percentage of sales, SG&A increased
by 276 basis points to 18%.
The decrease in selling, general and administrative expenses for
the quarter was driven primarily by benefits from cost reduction
initiatives, partially offset by inflation.
EBITDA of $253 million decreased 46%, while EBITDA margin
decreased from 21% to 14%.
The decrease in EBITDA and EBITDA margin was due to lower
volumes and prices, particularly in Connectivity Solutions, Polymer
Solutions and Fluor & Energy Materials. In addition,
profitability was impacted by lower absorption of fixed costs and
the appreciation of the Mexican Peso.
Financial costs of $139 million increased by $38 million
year-over-year.
The increase in financial costs was largely driven by foreign
exchange impacts from the appreciation of the Mexican Peso and
higher interest expense due to an increase in debt. These factors
were partially offset by higher interest income earned on cash
balances.
Taxes of $15 million decreased 89% compared to the prior
year. The effective tax rate for the quarter was -47%, which was
primarily due to the earnings mix, appreciation of the Mexican Peso
against the U.S. Dollar, and inflation partially offset by a
reduction in tax reserves.
Net majority loss to shareholders of $74 million
decreased by $129 million. The decrease was primarily driven by
lower EBITDA.
Operating cash outflow of $50 million decreased by $217
million while free cash flow of negative $201 million decreased by
$202 million.
The decrease in operating cash flow and free cash flow was
driven by lower EBITDA.
Net debt of $3,678 million included total debt of $4,728
million, less cash and cash equivalents of $1,050 million. The
Company’s net debt-to-EBITDA ratio increased from 1.84x to 2.96x
year-over-year, driven by the decrease in EBITDA and higher net
debt balance driven primarily by appreciation of the Mexican
Peso.
Q1 Revenues by Region
(All metrics are compared to Q1 2023
unless otherwise noted)
mm US$ First Quarter Region
2024
2023
% Var. Prev Year % Revenue North America
671
869
-23%
36%
Europe
588
749
-22%
32%
South America
375
381
-2%
20%
Asia
176
223
-21%
9%
Africa and others
53
58
-8%
3%
Total
1,863
2,280
-18%
100%
Q1 Financial Performance by Business Group
(All metrics are compared to Q1 2023 unless otherwise noted)
Polymer Solutions (Vestolit and Alphagary), 34% of
Revenues
Orbia’s Polymer Solutions business group (commercial brands
Vestolit and Alphagary) focus on general purpose and specialty PVC
resins (polyvinyl chloride), PVC and zero-halogen specialty
compounds with a wide variety of applications in everyday products
for everyday life, from pipes and cables to household appliances
and medical devices. The business group supplies Orbia’s downstream
businesses and a global customer base.
mm US$ First Quarter Polymer Solutions
2024
2023
%Var.
Total sales*
658
770
-15%
Operating income
24
83
-71%
EBITDA
86
147
-41%
*Intercompany sales were $35 million and $38 million in Q1'24 and
Q1'23, respectively.
Revenues of $658 million decreased 15% year-over-year. EBITDA of
$86 million decreased 41% and EBITDA margin decreased 596 basis
points to 13%.
The decrease in revenues for the quarter was driven primarily by
lower prices in PVC and caustic soda due to increased exports from
China and the U.S. because of domestic demand slowdown in both
countries.
EBITDA decreased year-over-year, driven by lower prices in all
businesses, partly offset by lower ethane cost in the U.S. and
electricity in Europe.
Building & Infrastructure (Wavin), 32% of
Revenues
Orbia’s Building & Infrastructure business group (commercial
brand Wavin) is redefining today’s pipes and fittings industry by
creating solutions that last longer and perform better, all with
less installation labor required. The business group benefits from
supply chain integration with the Polymer Solutions business group,
a customer base spanning three continents, and investments in
sustainable, resilient technologies for water and indoor climate
management.
mm US$ First Quarter Building &
Infrastructure
2024
2023
%Var.
Total sales
622
694
-10%
Operating income
33
39
-15%
EBITDA
65
70
-7%
Revenues of $622 million decreased 10% year-over-year. EBITDA of
$65 million decreased 7% and EBITDA margin increased by 35 basis
points to slightly above 10%.
The decrease in revenues for the quarter was primarily driven by
lower volumes and prices associated with lower input costs. The
Business continued to experience challenging market conditions
across parts of Western and Northern Europe, while Latin America
remained largely stable.
EBITDA declined year-over-year mainly attributable to lower
volumes. Despite lower volumes, EBITDA margin improved slightly due
to continued business optimization and controlled discretionary
spending.
Precision Agriculture (Netafim), 13% of Revenues
Orbia’s Precision Agriculture business group’s (commercial brand
Netafim) leading-edge irrigation systems, services and digital
farming technologies enable stakeholders to achieve significantly
higher and better-quality yields while using less water, fertilizer
and other inputs. By helping farmers worldwide grow more with less,
the business group is contributing to feeding the planet
efficiently and sustainably.
mm US$ First Quarter Precision Agriculture
2024
2023
%Var.
Total sales
256
275
-7%
Operating income
2
3
-33%
EBITDA
29
28
1%
Revenues of $256 million decreased 7% year-over-year. EBITDA of
$29 million increased 1% and EBITDA margin increased 89 basis
points to 11%.
Revenues decreased due to lower volumes mainly in Turkey and the
U.S., partly offset by growth in China, India and parts of Latin
America.
EBITDA increased slightly despite lower revenues supported by
improved operational efficiencies.
Connectivity Solutions (Dura-Line), 10% of Revenues
Orbia’s Connectivity Solutions business group (commercial brand
Dura-Line) produces more than 500 million meters of essential and
innovative connectivity infrastructure per year to bring a world’s
worth of information everywhere. The business group produces
telecommunications conduit, cable-in-conduit and other HDPE
products and solutions that create physical pathways for fiber and
other network technologies connecting cities, homes and people.
mm US$ First Quarter Connectivity Solutions
2024
2023
%Var.
Total sales
197
345
-43%
Operating income
14
104
-87%
EBITDA
24
114
-79%
Revenues of $197 million decreased 43% year-over-year. EBITDA of
$24 million decreased 79% and EBITDA margin decreased to 12%.
Revenues were impacted by lower volumes due to customer
inventory management, project timing as a result of high interest
rates, and unfavorable mix. Slower rollout of public infrastructure
funding is also impacting near term demand.
EBITDA decreased driven by lower volume, unfavorable product
mix, and higher fixed costs due to lower cost absorption in
existing and new facilities. These factors were partly mitigated by
benefits from tight cost controls.
Fluor & Energy Materials (Koura), 10% of Revenues
Orbia’s newly renamed Fluor & Energy Materials business
group (commercial brand Koura) provides fluorine and downstream
products that support modern, efficient living. The business group
owns and operates the world’s largest fluorspar mine and produces
intermediates, refrigerants and propellants used in automotive,
infrastructure, semiconductor, health, medicine, climate control,
food cold chain, energy storage, computing and telecommunications
applications.
mm US$ First Quarter Fluor & Energy
Materials
2024
2023
%Var.
Total sales
190
242
-22%
Operating income
40
87
-54%
EBITDA
54
102
-47%
Revenues of $190 million decreased 22% year-over-year. EBITDA of
$54 million decreased 47% and EBITDA margin was 29%.
Revenues for the quarter decreased due to lower refrigerant
volumes, which were partly due to step-down in F-gas quotas in the
U.S. and Europe, and timing of mineral shipments, partly offset by
pricing resilience across all product groups.
EBITDA decreased due to lower revenues and adverse effects from
the continued strength of the Mexican Peso, which was partly offset
by cost control efforts.
Balance Sheet, Liquidity and Capital Allocation
Orbia’s net debt-to-EBITDA ratio increased from 1.84x to 2.96x
year-over-year. The increase was primarily due to the lower EBITDA
as well as an increase in net debt primarily attributable to the
appreciation of the Mexican Peso and seasonal working capital
needs.
On April 2, 2024, Orbia entered into a new US$1.4 billion
revolving credit facility with a 5-year maturity and terms in line
with its investment grade ratings. The facility replaces the
revolving credit facility dated June 2019, which was nearing
maturity. The facility provides Orbia with additional flexibility
through: (I) dual currency tranches that provide for increased
diversification and risk mitigation opportunities, and (II) the
possibility for additional subsidiaries to participate in the
structure, enabling broader access to funds across the
organization.
During the quarter Orbia paid down $173 million of short-term
debt, leading to a net reduction in debt of $158 million after
currency adjustments.
Working capital increased by $193 million during the quarter, as
compared to an increase of $181 million in the prior year quarter.
The increase in the current quarter was primarily due to
seasonality, with stronger sequential quarter sales and a related
increase in accounts receivables across all business groups.
Capital expenditures of $132 million decreased 7% year-over-year,
including ongoing maintenance spending and investments to support
the Company’s growth initiatives.
During the quarter Orbia did not pay dividends due to the timing
of their approval in the annual shareholder meeting, which was held
on April 9, 2024.
Q1 2024 Sustainability Highlights
Orbia released its 2023 Impact Report in early March. This
year’s issue prived details regarding the Company’s overall
performance as well as key updates in advancing sustainability
solutions along its three strategic pillars: low impact operations,
sustainability solutions and investments in high impact ventures,
including:
- More detailed information on clean technology investments
across the business groups and through Orbia Ventures;
- The results of Orbia’s first double materiality assessment in
accordance with new emerging ESG regulation;
- Updated climate risk and opportunity assessment;
- Details on the Company’s net-zero roadmap;
- New Water Positive framework and
- New Orbia Supplier Code of Conduct
Orbia is also proud of the continued expansion of its
sustainable solutions portfolio, including Fluor & Energy
Material’s new low global warming potential refrigerants, Precision
Agriculture’s innovative digital farming add-ons and Connectivity
Solutions’ launch of the FuturePath ECO and MicroDuct ECO conduit
in North America, among others.
Demonstrating the Company’s commitment to sustainability, three
Orbia Venture’s portfolio companies (Ascend Elements, Verdagy, and
Tortuga AgTech) earned recognition from TIME magazine as top
GreenTech innovators for 2024. Furthermore, Orbia completed
follow-on investments in Greeneye (AgTech) and Chloris (carbon
measurement), indicating its focus on addressing climate change and
related challenges.
2024 Outlook
During the first quarter of 2024, Orbia performed according to
expectations shared in the fourth quarter 2023 update, with soft
demand present across the Company’s end markets. Nevertheless, the
Company remains cautious due to the limited visibility around
inflation persistence and the possibility of interest rates staying
higher for longer across the globe. Therefore, the current EBITDA
guidance for the full year 2024 is $1.3 billion to $1.4 billion,
which will be updated as the year progresses. Capital expenditures
are expected to be approximately $600 million for 2024, which
includes maintenance spending and growth-related investments. The
effective tax rate for the year is expected to be in the range of
29% to 32%2.
Conference Call Details
Orbia will host a conference call to discuss Q1 2024 results on
April 26, 2024, at 9:00 AM Central Time (CT; Mexico City) / 11:00
AM Eastern Time (ET; New York). To access the call, please dial
001-855-817-7630 (Mexico), 1-888-339-0721 (United States) or
1-412-317-5247 (International).
Participants may pre-register for the conference call here.
The live webcast can be accessed here.
A recording of the webcast will be posted several hours after
the call is completed on Orbia’s website.
For all company news, please visit
www.orbia.com/this-is-orbia/newsroom.
__________________
2 Excluding the impact of inflation and
foreign exchange rate changes in Mexico.
Consolidated Income Statement
mm US$ First Quarter Income Statement
2024
2023
%
Net sales
1,863
2,280
-18%
Cost of sales
1,431
1,620
-12%
Gross profit
432
660
-35%
Selling, general and administrative expenses
326
336
-3%
Operating income
106
323
-67%
Financial cost (income)
139
101
37%
Equity income from associated entities
1
1
55%
Impairment expense
-
-
N/A
Income (loss) from continuing operations before income tax
(32)
223
N/A
Income tax
15
143
-89%
Income (loss) from continuing operations
(47)
80
N/A
Discontinued operations
-
-
N/A
Consolidated net income (loss)
(47)
80
N/A
Minority stockholders
27
25
6%
Majority Net income (loss)
(74)
55
N/A
EBITDA
253
469
-46%
Consolidated Balance Sheet
mm US$
Balance sheet
Mar 2024
Dec 2023
Mar 2023
Total assets
11,274
11,552
11,777
Current assets
4,006
4,170
4,649
Cash and temporary
investments
1,050
1,456
1,384
Receivables
1,688
1,461
1,528
Inventories
1,212
1,200
1,279
Others current assets
56
53
458
Non current assets
7,268
7,382
7,128
Property, plant and equipment,
net
3,365
3,370
3,199
Right of use fixed assets,
net
473
469
361
Intangible assets and
goodwill
3,090
3,148
3,134
Long-term assets
340
395
434
Total liabilities
8,153
8,334
8,603
Current liabilities
2,485
2,537
3,330
Current portion of long-term
debt
295
466
691
Suppliers
1,256
1,228
1,311
Short-term leasings
115
106
90
Other current liabilities
819
737
1,238
Non current
liabilities
5,668
5,797
5,273
Long-term debt
4,433
4,420
3,938
Long-term employee benefits
137
139
137
Long-term deferred tax
liabilities
240
359
388
Long-term leasings
378
383
281
Other long-term liabilities
480
496
530
Consolidated shareholders'
equity
3,121
3,218
3,174
Minority shareholders' equity
608
604
657
Majority shareholders'
equity
2,513
2,614
2,517
Total liabilities &
shareholders' equity
11,274
11,552
11,777
Cash Flow Statement
mm US$ First Quarter Cash Flow
Statement
2024
2023
%Var.
EBITDA
253
469
-46%
Taxes paid, net
(46)
(64)
-28%
Net interest / bank commissions
(64)
(74)
-14%
Change in trade working capital
(193)
(181)
6%
Others (other assets - provisions, Net)
9
(19)
N/A
CTA and FX
(9)
36
N/A
Operating cash inflow (outflow)
(50)
167
N/A
Capital expenditures
(132)
(142)
-7%
Leasing payments
(19)
(24)
-20%
Free cash inflow (outflow)
(201)
1
N/A
Dividends to shareholders
-
-
Buy-back shares program
-
2
N/A
Debt
(173)
(128)
35%
Minority interest payments
(27)
(31)
-14%
Mergers & acquisitions
-
-
Financial instruments and others
(5)
(7)
-24%
Net change in cash
(406)
(163)
149%
Initial cash balance
1,456
1,546
-6%
Cash balance
1,050
1,456
-28%
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 Advance Corporation, S.A.B. de C.V. (BMV: 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 & Infrastructure (Wavin), Precision
Agriculture (Netafim), Connectivity Solutions (Dura-Line) and Fluor
& Energy Materials (Koura) sectors. The five Orbia business
groups have a collective focus on expanding access to health and
well-being, reinventing the future of cities and homes, ensuring
food, water and sanitation security, connecting communities to
information and enabling the energy transition with basic and
advanced materials, specialty products and innovative solutions.
Orbia has a global team of over 24,000 employees, commercial
activities in more than 100 countries and operations in over 50,
with global headquarters in Boston, Mexico City, Amsterdam and Tel
Aviv. The company generated $8.2 billion in revenue in 2023. To
learn more, visit: orbia.com
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 forward-looking statements included in this press
release are subject to a number of material risks and
uncertainties, and our results may be materially different from
current expectations due to 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 affecting our
operations, markets, products, services and prices 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 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/20240425794193/en/
Investors Diego Echave, Vice President of Investor Relations +1
858-283-6201 investors@orbia.com
Media Kacy Karlen, Chief Communications Officer +1 865-410-3001
kacy.karlen@orbia.com