Industrias Unidas, S.A. De C.V. Consolidated Results of Operations for Q4 2015

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 of 2015. 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, 2015 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. 17.2120 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on December 31, 2015.

Twelve months ended December 31, 2015 compared to twelve months ended December 31, 2014.

The following table summarizes our results of operations for the twelve months ended December 31, 2015 and 2014:

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

2014

 

2015

Revenues 13,582.6 13,888.6
Cost of Sales 11,489.4 11,867.3
Other income (costs) - Net 0.0 115.7
Gross Profit 2,093.2 2,137.0
Selling and Administrative Expenses 1,767.4 1,533.9
Operating Income (Loss) 325.8 603.1
Other Expenses - Net (78.0) (23.8)
Comprehensive Financing Result (1,222.3) (1,668.2)
Taxes and Statutory Employee Profit Sharing (58.4) (160.6)
Equity in Income (Loss) of Associated Companies 19.4 37.0

Consolidated Net Income (Loss)

(896.7) (891.3)
D&A 464.0 501.7

EBITDA 1/

789.8

1,104.8

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, 2015 was Ps.891.3 million (U.S.$51.8 million), compared to a net loss of Ps.896.7 million in the same period of 2014. This change is primarily due to an increase in the Comprehensive financial result, as consequence of the Mexican Peso devaluation.

Revenues

Our net revenues for the twelve months ended December 31, 2015 increased 2.3% to Ps.13,888.6 million (U.S.$806.9 million) from Ps.13,582.6 million in the same period of 2014. This increase was due to higher selling prices driven by market conditions and the introduction of certain new products.

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 66.6% of our revenues in the twelve months ended December 31, 2015 came from products manufactured in Mexico and the remaining 33.4% from products manufactured in the U.S.

In terms of sales by region during the twelve months ended December 31, 2015 we derived approximately 37.5% of our revenues from sales to customers in the United States, 59.8% from customers in Mexico and 2.7% from the rest of the world (“ROW”).

In terms of volume, consolidated sales of copper products during the twelve months ended December 31, 2015 increased by 1.7% as compared to the same period in 2014:

  (Metric tons)
For the twelve months ended December 31,

Copper Products Volume Sales 2/

2014

 

2015

USA 46,629 48,266
México 31,069 31,206
ROW 1,851

 

1,403
Total 79,549 80,875
2/ Includes aluminum wire and cable

 

Cost of sales

Our cost of sales in the twelve months ended December 31, 2015 increased 3.3%, to Ps.11,867.3 million (U.S.$689.5 million) from Ps.11,489.4 million in the same period of 2014. As a percentage of revenues, cost of sales in 2015 was 85.4% and 84.6% in 2014.

Copper raw material purchases accounted for approximately 77.6% of our cost of goods sold in the twelve months ended December 31, 2015.

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, 2015 increased 2.1% to Ps.2,137.0 million (U.S.$124.2 million) from Ps.2,093.2 million in the same period of 2014. As a percentage of sales, Gross profit was 15.4% in the twelve months ended December 31, 2015, versus 15.4% in the same period of 2014.

Selling and Administrative Expenses

Our selling and administrative expenses in the twelve months ended December 31, 2015 decreased 13.2% to Ps1,533.9 million from Ps.1,767.4 in the same period of 2014.

Operating Income

Our operating income in the twelve months ended December 31, 2015 increased 85.1% to Ps.603.1 million (U.S.$35.0 million) from Ps.325.8 million in the same period of 2014. As a percentage of sales, operating income was 4.3% in the twelve months ended December 31, 2015, versus 2.4% in the same period of 2014.

EBITDA

EBITDA In the twelve months ended December 31, 2015 increased 39.9% to Ps.1,104.8 million (U.S.$64.2 million) from Ps.789.8 million in the same period of 2014. The corresponding depreciation and amortization figures are Ps.501.7 million for the twelve months ended December 31, 2015 and Ps.464.0 million for the same period of 2014.

Comprehensive Financing Result

The following table shows our comprehensive financing result for the twelve months ended December 31, 2014 and 2015:

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

2014

 

2015

Interest Expense (641.1) (758.1)
Interest Income 45.7 44.8
Exchange Gain (Loss) - Net (628.2) (957.0)
Other Financing Costs 1.3 2.1
Comprehensive Financing Result (1,222.3) (1,668.2)

Our comprehensive financing result was a cost of Ps.1,668.2 million in the twelve months ended December 31, 2015 compared to a cost of Ps.1,222.3 million in the same period of 2014.

Taxes and Statutory Employee Profit Sharing

The provision for income taxes and statutory employee profit sharing in the twelve months ended December 31, 2015 was a benefit of Ps.160.6 million compared to a benefit of Ps.58.4 million in the same period of 2014.

Consolidated Net Income (Loss)

Our consolidated net loss in the twelve months ended December 31, 2015 was Ps.891.3 million (U.S.$51.8 million), compared to a net loss of Ps.896.7 million in the same period of 2014, mainly the result of the Mexican Peso devaluation.

Liquidity and Capital Resources

Liquidity

As of December 31, 2015, we had cash and cash equivalents for Ps.153.5 million (U.S. $8.9 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 decreased 19.6% in the twelve months ended December 31, 2015 to $2.51 US dollar per pound from $3.12 US dollar per pound in the same period of 2014.

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, 2015, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.6,609.4 million (U.S. $384.0 million), all of which was dollar-denominated. On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.1.5 million (U.S.$0.1 million), approximately all of which was dollar-denominated.

Accounts receivable from third parties as of December 31, 2015 were Ps.1,713.8 million (U.S.$99.6 million). Days outstanding in the domestic market were 32 days as of December 31, 2015.

Debt Obligations

The following table summarizes our debt as of December 31, 2015:

Consolidated debt   December 31, 2015
(In Millions of Pesos)
U.S. subsidiaries debt 761.9
Mexican debt 5,849.0
Total 6,610.9

This total includes the restructured debt of the Company.

Capital Expenditures

For the twelve months ended December 31, 2015, we invested Ps.140.3 million (U.S. $8.2 million) in capital expenditure projects, mainly related to expansion of production and maintenance.

In the twelve months ended December 31, 2015 our capital expenditures were allocated by segments as follows: 59.4% to copper tubing, 13.9% to diversified assets, 11.8% to copper and alloys, 8.7% to valves and controls, 5.0% to electrical products and 1.2% to wire and cable division. By geographic region, 57.9% of total capital expenditures was invested in our U.S. facilities and the remaining 42.1% in Mexico.

You should read this document in conjunction with the audited consolidated financial statements as of December 31, 2015, including the notes to those statements.

Contacts

Industrias Unidas, S.A. de C.V.
Francisco Rodríguez, 5255 5261 8828
frodriguez@iusa.com.mx

Contacts

Industrias Unidas, S.A. de C.V.
Francisco Rodríguez, 5255 5261 8828
frodriguez@iusa.com.mx