MEXICO CITY--(BUSINESS WIRE)--Industrias Unidas, S.A. de C.V. (“IUSA” or the “Company”) has announced its audited results for the twelve months of 2011. Figures are audited and have been prepared in accordance with Mexican Financial Reporting Standards (“MFRS”), which are different in certain respects from Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). The results from any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. Unless stated otherwise, reference herein to “Pesos”, “pesos”, or “Ps.” are to pesos, the legal currency of Mexico and references to “U.S. dollars”, “dollars”, “U.S. $” or “$” are to United States dollars, the legal currency of the United States of America. Except as otherwise indicated, all peso amounts are presented herein in pesos with purchasing power as of December 31, 2011 and in pesos with their historical value for other dates cited. The dollar translations provided in this document are calculated solely for the convenience of the reader using an exchange rate of Ps. 13.9725 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on December 31, 2011.
Twelve Months ended December 31, 2011 compared to Twelve Months ended December 31, 2011.
The following table summarizes our results of operations for the years ended December 31, 2010 and 2011:
|
(Figures in Millions of Pesos) |
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| For the Twelve months ended December 31, | |||
| 2010 | 2011 | ||
| Revenues | 17,643.2 | 16,853.5 | |
| Cost of Sales | 15,605.8 | 14,885.4 | |
| Selling and Administrative Expenses | 1,798.4 | 1,545.2 | |
| Operating Income | 239.0 | 422.9 | |
| Other Expenses - Net | 285.7 | 3.5 | |
| Comprehensive Financing Result | 688.0 | -192.6 | |
| Taxes and Statutory Employee Profit Sharing | 27.1 | 109.3 | |
| Equity in Income (Loss) of Associated Companies | 1.3 | -0.2 | |
| Consolidated Net Income (Loss) | -760.5 | 502.5 | |
| D&A | 614.3 | 649.2 | |
| EBITDA 1/ | 853.3 | 1,072.1 | |
1/ EBITDA for any period is defined as consolidated net income (loss) excluding i) depreciation and amortization, ii) total net comprehensive financing result (which is comprised of net interest expense, exchange gain or loss, monetary position gain or loss and other Financing costs), iii) other expenses net, iv) income tax and statutory employee profit sharing and v) equity in income (loss) of associated companies. EBITDA should not be considered as an alternate measure of net income or operating income, as determined on a consolidated basis using amounts derived from statements of operations prepared in accordance with MFRS, or as an indicator of operating performance or to cash flows from operating activity as a measure of liquidity. EBITDA is not a recognized term under MFRS or U.S. GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activity as a measure of liquidity
Our consolidated net income for the twelve months ended December 31, 2011 was Ps.502.5 million (U.S.$36.0 million), or 3.0% of total revenues, compared to a net loss of Ps.760.5 million in the same period of 2010. This increase is primarily due to an increase in the Operating Income combined with the reduction in Comprehensive Financing Result and Other expenses.
Revenues
Our net revenues for the twelve months ended December 31, 2011 decreased 4.5% to Ps.16,853.5 million from Ps.17,643.2 million in the same period of 2010. This decrease was due to a lower volume of sales partly compensated by higher copper prices.
Our sales are primarily to customers engaged in the commercial, industrial and residential construction, and their related maintenance and renovation activities. We also sell to customers engaged in electrical power generation, transmission and distribution and to the sector of gas, water and air conduction in the Heating, Ventilation, Air conditioning and Refrigeration (HVACR).
Our revenues consist mainly of sales of copper-based products (tubing, wire, cable and alloys) and electrical products.
By country of production, approximately 57% of our revenues in twelve months ended December 31, 2011 came from products manufactured in the United States and the remaining 43% from products manufactured in Mexico.
In terms of sales by region during the twelve months ended December 31, 2011 we derived approximately 66.5% of our revenues from sales to customers in the United States, 33.3% from customers in Mexico and 0.2% from the rest of the world (“ROW”).
In terms of volume, consolidated sales of copper products during the twelve months ended December 31, 2011 decreased by 20% as compared to the same period in 2010:
| For the Twelve months ended December 31, | ||
| Copper Products Volume Sales 2/ | ||
| (Metric tons) | 2010 | 2011 |
| USA | 90,867 | 71,476 |
| México | 28,506 | 27,747 |
| ROW | 6,236 | 803 |
| Total | 125,609 | 100,026 |
| 2/ Includes aluminum wire and cable | ||
Cost of sales
Our cost of sales in the twelve months ended December 31, 2011 decreased by 4.6%, to Ps.14,885.4 million from Ps.15,605.8 million in the same period of 2010. As a percentage of revenues, cost of sales remained unchanged in the twelve months ended December 31, 2011 compared to the same period of 2010.
Copper raw material purchases accounted for approximately 76% of our cost of goods sold in the twelve months ended December 31, 2011.
We continue to reduce our cost base through several initiatives, including plant scheduling, raw material handling and overall manufacturing overhead costs. According to MFRS and our accounting policies, we make an inventory valuation at month end and if the original purchase price of metal is above current market prices, the difference is accounted for as cost. Therefore in a declining price environment, we record an immediate non cash effect on results, depending on inventories held and copper price variations. On the other hand, if copper prices are rising, there is no mark up or positive inventory effect, since the gain will be recorded only when the goods are sold.
Gross Profit
Our gross profit in the twelve months ended December 31, 2011 decreased 3.4% to Ps.1,968.1 million from Ps.2,037.4 million in the same period of 2010, mainly due to lower volume sales partially compensated by higher copper prices. As a percentage of sales, gross profit increased to 11.7% versus 11.5% in the prior year.
Selling and Administrative Expenses
Our selling and administrative expenses in the twelve months ended December 31, 2011 decreased 14.1% to Ps.1,545.2 million from Ps.$1,798.4 in the same period of 2010.
Operating Income
Our operating income in the twelve months ended December 31, 2011 increased by 76.9% to Ps.422.9 million compared to Ps.239.0 million in the twelve months ended December 31, 2010. This increase was the result of the lower cost of sales and SG&A to total sales, compared to the previous year. As percentage of total revenue, operating income grew from 1.4% to 2.5% in the corresponding periods.
EBITDA
In the twelve months ended December 31, 2011 EBITDA was Ps.1,072.1 (U.S.$76.7 million), a 25.6% increase compared to Ps.853.3 million in the same period of 2010. The corresponding depreciation and amortization figures are Ps.614.3 million for the twelve months ended December 31, 2011 and Ps.649.2 million for the twelve months ended December 31, 2010.
Comprehensive Financing Result
The following table shows our comprehensive financing result for the twelve months ended December 31, 2010 and 2011:
| (Figures in Millions of Pesos) | |||
| For the Twelve months ended December 31, | |||
| 2010 | 2011 | ||
| Interest Expense | 716.7 | 543.4 | |
| Interest Income | -49.9 | -44.2 | |
| Exchange (Gain) Loss - Net | -29.7 | 118.0 | |
| Monetary Position Gain | 0.0 | 0.0 | |
| Other Financing Costs | 50.9 | -809.8 | |
| Comprehensive Financing Result | 688.0 | -192.6 | |
Our comprehensive financing result decreased in the twelve months ended December 31, 2011 to Ps.(192.6) million from Ps.688.0 million in the same period of 2010. This was explained mainly by the combined effect of lower Interest expense and Other Financing Costs. The negative amount of Other Financing cost was the result of the restructuring of debt completed on September 2011.
On September 28, 2011, Industrias Unidas, S.A. de C.V. (“IUSA”) successfully completed the sale of substantially all of the assets of one of its U.S. operating subsidiaries, United Copper Industries, Inc. ("UCI"), to a new company owned by funds managed by KPS Partners, L.P.
UCI is a leading manufacturer and distributor of building wire and cable used in the construction of industrial, residential and commercial buildings in North America.
Taxes and Statutory Employee Profit Sharing
The provision for income taxes and statutory employee profit sharing in the twelve months ended December 31, 2011 was a cost of Ps.109.3 million compared to Ps.27.1 in the same period of 2010, mainly due to the effect of past years’ loss carryovers and the difference in income tax rates in the U.S. and Mexico.
Consolidated Net Income (Loss)
Our consolidated net income in the twelve months ended December 31, 2011 was Ps.502.5 (U.S.$35.9 million), compared to a net loss of Ps.760.5 million in the same period of 2010, mainly the result of positive operating income and lower amounts in Other Expenses Net and Comprehensive Financing Result.
Liquidity and Capital Resources
Liquidity
As of December 31, 2011, we had cash and cash equivalents for Ps.455.9 million (U.S.$32.6 million). Our policy is to invest available cash in short-term instruments issued by Mexican and U.S. banks as well as in securities issued by the governments of Mexico and the U.S.
Our cash flow from operations and operating margins are significantly influenced by world market prices for raw copper, as quoted by COMEX and the London Metal Exchange (“LME”). Copper prices are subject to significant market fluctuations: average copper prices increased 17% in the twelve months ended December 31, 2011 to $4.0050 per pound from $3.4251 in the same period of 2010.
We obtain short-term financing from various sources, including Mexican and international banks. Short-term financing consists in part of lines of credit denominated in pesos and dollars. As of December 31, 2011, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.769.8 million (U.S.$55.1 million), of which approximately 73.4% was dollar-denominated. On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.4,766.1 million (U.S.$341.1 million), approximately all of which was dollar-denominated.
Accounts receivable from third parties decreased 28.8% to Ps.1,870.4 million (U.S.$135.8 million) as of December 31, 2011 from Ps.2,629.4 million as of December 31, 2010. Days outstanding in the domestic private customers channel were 38 days as of December 31, 2011 and 40 days as of December 31, 2010.
Debt Obligations
The following table summarizes our debt as of December 31, 2011:
| Consolidated debt | December 31, 2011 | ||||||
| (In Millions of Pesos) | |||||||
| U.S. subsidiaries debt | 276.6 | ||||||
| Mexican debt | 5,259.4 | ||||||
| Total | 5,536.0 |
This total includes the restructured debt of the Company.
Capital Expenditures
For the twelve months ended December 31, 2011, we invested Ps.78.7 million (U.S.$5.6 million) in capital expenditure projects, mainly related to maintenance, a decrease of 28% compared to the previous twelve months ended December 31, 2010.
In the twelve months ended December 31, 2011 our capital expenditures were allocated by segments as follows: 61.0% to copper tubing, 17.3% to valves and controls and electrical products and the remaining 21.7% to other divisions. By geographic region, 58.5% of total capital expenditures were invested in our Mexican facilities and the remaining 41.5% in the U.S.
You should read this document in conjunction with the audited consolidated financial statements as of December 31, 2011, including the notes to those statements.