Industrias Unidas, S.A. de C.V. Consolidated Results of Operations for Q4 2020

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 2020. 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, 2020 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. 19.95 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on December 31, 2020.

Twelve months ended December 31, 2020 compared to twelve months ended December 31, 2019.

The following table summarizes our results of operations for the twelve months ended December 31, 2020 and 2019:

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

2019

 

2020

 

Revenues

18,183.1

 

19,720.4

 

Cost of Sales

16,290.7

 

17,424.4

 

Gross Profit

1,892.3

 

2,296.1

 

Selling and Administrative Expenses

1,472.1

 

1,578.0

 

Operating Income (Loss)

420.2

 

718.0

 

Other Expenses - Net

(64.0

)

(86.8

)

Comprehensive Financing Result

(520.8

)

(831.2

)

Taxes and Statutory Employee Profit Sharing

52.8

 

75.0

 

Equity in Income (Loss) of Associated Companies

39.9

 

13.5

 

Consolidated Net Income (Loss)

(177.6

)

(261.4

)

D&A

531.0

 

435.5

 

EBITDA 1/

951.2

 

1,153.6

 

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, 2020 was Ps. 261.4 million (US$13.1 million), compared to a net loss of Ps. 177.6 million in the same period of 2019. This change is primarily due to an increase in our cost of sales due to market conditions.

Revenues

Our net revenues for the twelve months of 2020 increased 8.5% to Ps. 19,720.4 million (US$988.5 million) from Ps. 18,183.1 million in the same period of 2019. This increase was driven mainly by market conditions, and the increase of copper prices which affect directly our final selling price in the copper products segment.

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

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 61.6% of our revenues in the twelve months ended December 31, 2020 came from products manufactured in Mexico and the remaining 38.4% from products manufactured in the U.S.

In terms of sales by region during the twelve months ended December 31, 2020 we derived approximately 44.6% of our revenues from sales to customers in the United States, 53.0% from customers in Mexico and 2.4% from the rest of the world (“ROW”).

In terms of volume, consolidated sales of copper products during the twelve months ended December 31, 2020 decreased by 4.8% as compared to the same period in 2019:

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

2019

2020

USA

54,776

51,206

México

31,753

31,474

ROW

2,520

2,090

Total

89,049

84,769

2/ Includes aluminum wire and cable
 

Cost of sales

Our cost of sales in the twelve months ended December 31, 2020 increased by 7.0% to Ps. 17,424.4 million (US$873.4 million) from Ps. 16,290.7 million in the same period of 2019. As percentage of revenues, cost of sales was 88.4% and 89.6% respectively.

We do continue to reduce our cost base through several initiatives, including plant scheduling, raw material handling, and overall manufacturing overhead costs. According to our accounting policies, we make an inventory valuation at average purchase price. In the case of copper cathodes, an aftermath adjustment is required due to the quotation period agreed with the suppliers (M+1). This initiative allows us to hedge purchases for 30 days at no additional cost. The adjustment is recorded to the cost of sales in the month in which it occurs.

Gross Profit

Our gross profit in the twelve months ended December 31, 2020 increased 21.3% to Ps. 2,296.1 million (US$115.1 million) from Ps. 1,892.3 million in the same period of 2019. As percentage of sales, gross profit in 2020 was 11.6% vs 10.4% in 2019.

Selling and Administrative Expenses

Our selling and administrative expenses in the twelve months ended December 31, 2020 increased 7.2% to Ps. 1,578.0 million from Ps. 1,472.1 in the same period of 2019.

Operating Income

Our operating income in the twelve months ended December 31, 2020 increased 70.9% to Ps. 718.0 million (U.S. $36.0 million) from an operating income of Ps. 420.2 in the same period of 2019.

EBITDA

In the twelve months ended December 31, 2020 our EBITDA increased 21.3% to Ps. 1,153.6 million (or US$57.8 million), from Ps. 951.2 million in the same period of 2019. The corresponding depreciation and amortization figures are Ps. 435.5 million for January to December 2020 and Ps. 531.0 million for the same period of 2019.

Comprehensive Financing Result

The following table shows our comprehensive financing result for the twelve months ended December 31, 2019 and 2020:

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

2019

 

2020

 

Interest Expense

(646.0

)

(663.7

)

Interest Income

36.4

 

22.2

 

Exchange Gain (Loss) - Net

95.9

 

(183.9

)

Other Financing Costs

(7.2

)

(5.8

)

Comprehensive Financing Result

(520.8

)

(831.2

)

 

Our comprehensive financing result in the twelve months ended December 31, 2020 was a cost of Ps. 831.2 million, compared to a cost of Ps. 520.8 million in the same period of 2019.

Taxes and Statutory Employee Profit Sharing

The provision for current and deferred income taxes and statutory employee profit sharing in the twelve months ended December 31, 2020 was an expense of Ps. 75.0 million compared to Ps. 52.8 million in the same period of 2019.

Consolidated Net Income

Our consolidated net loss for the twelve months ended December 31, 2020 was Ps. 261.4 million (US$13.1 million), compared to a net loss of Ps. 177.6 million in the same period of 2019. The main effect derived from the increase in Comprehensive Financing Result, that in turn was impacted by an accounting exchange loss.

Liquidity and Capital Resources

Liquidity

As of December 31, 2020, we had cash and cash equivalents for Ps. 488.3 million (U.S. $24.5 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 2.8% in the twelve months ended December 31, 2020 to $2.79 US dollar per pound from $2.72 US dollar per pound in the same period of 2019.

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, 2020, our outstanding short-term debt, including the current portion of long-term debt totaled Ps. 1,428.4 million (U.S. $71.6 million), all of which was dollar denominated.

On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps. 5,123.8 million (U.S.$256.8 million), all of which was dollar denominated.

Accounts receivable from third parties as of December 31, 2020 were Ps. 3,571.0 million (U.S.$179.0 million). Days outstanding in the domestic market were 31 days as of December 31, 2020.

Debt Obligations

The following table summarizes our debt as of December 31, 2020:

Consolidated debt December 31, 2020
(In Millions of Pesos)
U.S. subsidiaries debt

1,438.1

Mexican debt

5,114.2

Total

6,552.3

This total includes the restructured debt of the Company.

Capital Expenditures

For the twelve months ended December 31, 2020, we invested Ps. 173.6 million (U.S. $8.7 million) in capital expenditure projects, mainly related to expansion of production and maintenance.

In the twelve months ended December 31, 2020 our capital expenditures were allocated by segments as follows: 34.3% to copper tubing, 8.8% to wire and cable, 14.9% to valves and controls, 4.8% to electrical products and the remaining and 37.2% to other divisions. By geographic region 67.8% of total capital expenditures were invested in our Mexican facilities and the remaining 32.2% in the U.S.

You should read this document in conjunction with the audited consolidated financial statements as of December 31, 2020, including the notes to those statements.

Contacts

Francisco Rodriguez
frodriguez@iusa.com.mx
Tel 5255 52618828

Contacts

Francisco Rodriguez
frodriguez@iusa.com.mx
Tel 5255 52618828