Industrias Unidas, S.A. de C.V. Consolidated Results of Operations for FY 2013

MEXICO CITY--()--Industrias Unidas, S.A. de C.V. (“IUSA” or the “Company”) has announced its audited results for the twelve months ended December 31, 2013. 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, 2013 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. 13.09 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on December 31, 2013.

Twelve months ended December 31, 2013 compared to the twelve months ended December 31, 2012.

The following table summarizes our results of operations for the twelve months ended December 31, 2013 and 2012:

    (Figures in Millions of Pesos)
For the twelve months ended December 31,

2012 (Restated)

   

2013

Revenues 12,254.1 11,246.0
Cost of Sales 10,741.4 9,781.0
Selling and Administrative Expenses 1,158.9       1,398.1  
Operating Income (Loss) 353.8 66.9
Other Expenses - Net (171.7 ) (43.9 )
Comprehensive Financing Result (286.4 ) (506.9 )
Taxes and Statutory Employee Profit Sharing 76.3 (9.4 )
Equity in Income (Loss) of Associated Companies (10.0 )     8.8  
Consolidated Net Income (Loss) (190.6 )     (465.7 )
D&A 445.9 398.2
EBITDA 1/ 799.7 465.1
 

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 loss for the twelve months ended December 31, 2013 was Ps.465.7 million (U.S.$35.6 million), compared to a net loss of Ps.190.6 million in the same period of 2012. This was primarily due to an increase in the Comprehensive Financial Result and a lower operating income driven by lower sales.

Revenues

Our net revenues for the twelve months ended December 31, 2013 decreased 8.2% to Ps.11,246.0 million from Ps.12,254.1 million in the same period of 2012. This was mainly due to a decrease of 7.6 % in the copper value (measured by the Comex monthly average) and an appreciation of 2.9% of US dollar versus Mexican peso (average prices YTD December 31, 2012 and 2013).

Our costs and revenues closely follow copper prices since the market practice is to pass on to the buyer any changes in the price of raw materials.

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 60.1% of our revenues in the twelve months ended December 31, 2013 came from products manufactured in Mexico and the remaining 39.9% from products manufactured in the U.S.

In terms of sales by region during the twelve months ended December, 2013 we derived approximately 51.5% of our revenues from sales to customers in Mexico, 46.7% from customers in the United States and 1.8% from the rest of the world (“ROW”).

In terms of volume, consolidated sales of copper products during the twelve months ended December 31, 2013 increased by 0.2% as compared to the same period in 2012:

    (Metric tons)
For the twelve months ended December 31,
Copper Products Volume Sales 2/

2012 (Restated)

   

2013

USA 42,702 42,743
México 30,130 30,215
ROW 1,576     1,620
Total 74,408 74,578
2/ Includes aluminum wire and cable
 

Cost of sales

Our cost of sales in the twelve months ended December 31, 2013 decreased by 8.9%, to Ps.9,781.0 million from Ps.10,741.4 million in the same period of 2012. As percentage of revenues, cost of sales in 2013 was 87.7% and 87.0% in the twelve months of 2012.

Copper raw material purchases accounted for approximately 82.5 % of our cost of goods sold in the twelve months ended December 31, 2013.

We do 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, 2013 decreased 3.2% to Ps.1,465.0 million from Ps.1,512.7 million in the same period of 2012, mainly due to a decreased in revenues. As a percentage of sales, gross profit was 13.0% in the twelve months ended December 31, 2013, versus 12.3% in the same period of 2012.

Selling and Administrative Expenses

Our selling and administrative expenses in the twelve months ended December 31, 2013 increased 20.6% to Ps.1,398.1 million from Ps.1,158.9 in the same period of 2012.

Operating Income

We had an operating income in the twelve months ended December 31, 2013 of Ps. 66.9 million, compared to an operating income of Ps.353.8 million in the same period of 2012. As a percentage of sales operating income was 0.6% in the twelve months ended December 31, 2013, versus 2.9% in the same period of 2012.

EBITDA

In the twelve months ended December 31, 2013 EBITDA was Ps.465.1 million (U.S.$35.5 million), compared to Ps.799.7 million in the same period of 2012. The corresponding depreciation and amortization figures are Ps.398.2 million for the twelve months ended December 31, 2013 and Ps.445.9 million for the same period of 2012.

Comprehensive Financing Result

The following table shows our comprehensive financing result for the twelve months ended December 31, 2012 and 2013:

    (Figures in Millions of Pesos)
For the twelve months ended December 31,

2012 (Restated)

   

2013

Interest Expense (566.1 ) (553.9 )
Interest Income 43.8 43.5
Exchange Gain (Loss) - Net 185.4 2.4
Other Financing Costs 50.5       1.1  
Comprehensive Financing Result (286.4 )     (506.9 )
 

Our comprehensive financing result was a cost of Ps. 506.9 million in the twelve months ended December 31, 2013 compared to a cost of Ps.286.4 million in the same period of 2012, basically due to lower exchange gain.

Taxes and Statutory Employee Profit Sharing

The provision for income taxes and statutory employee profit sharing in the twelve months ended December 31, 2013 was a benefit of Ps.9.4 million compared to a cost of Ps.76.3 million in the same period of 2012.

Consolidated Net Income (Loss)

Our consolidated net loss for the twelve months ended December 31, 2013 was Ps.465.7 million (U.S.$35.6 million), compared to a net loss of Ps.190.6 million in the same period of 2012, due to an increase in the Comprehensive Financial Result and lower operating income driven by lower sales.

Liquidity and Capital Resources

Liquidity

As of December 31, 2013, we had cash and cash equivalents for Ps.147.3 million (U.S. $11.3 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 the New York COMEX and the London Metal Exchange (“LME”). Copper prices are subject to significant market fluctuations; average copper prices decreased 7.6% in the twelve months ended December 31, 2013 to $3.3411 per pound from $3.6145 in the same period of 2012.

We can 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, 2013, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.879.5 million (U.S. $67.2 million), of which approximately 97.3% was dollar-denominated. On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.4,390.6 million (U.S.$335.4 million), approximately all of which was dollar-denominated.

Accounts receivable from third parties were Ps.1,872.8 million (U.S.$143.1 million) as of December 31, 2013. Days outstanding in the domestic private customers channel were 34 days as of December 31, 2013.

Debt Obligations

The following table summarizes our debt as of December 31, 2013:

Consolidated debt     December 31, 2013
(In Millions of Pesos)
U.S. subsidiaries debt 662.0
Mexican debt 4,608.1
Total 5,270.1
 

This total includes the restructured debt of the Company.

Capital Expenditures

For the twelve months ended December 31, 2013, we invested Ps.387.9 million (U.S. $29.6 million) in capital expenditure projects, mainly related to production expansion and maintenance.

In the twelve months ended December 31, 2013, our capital expenditures were allocated by segments as follows: 70.1% to copper tubing, 12.2% to electrical products, 3.5% to wire and cable and the remaining 14.2% to other divisions. By geographic region, 67.6% of total capital expenditures were invested in our U.S. facilities and the remaining 32.4% in Mexico.

You should read this document in conjunction with the audited consolidated financial statements as of December 31, 2013, including the notes to those statements.

Contacts

Industrias Unidas, S.A. de C.V.
Francisco Rodríguez Avendaño, (5255) 5216-4028
frodriguez@iusa.com.mx

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Contacts

Industrias Unidas, S.A. de C.V.
Francisco Rodríguez Avendaño, (5255) 5216-4028
frodriguez@iusa.com.mx