MEXICO CITY--(BUSINESS WIRE)--Industrias Unidas, S.A. de C.V. (“IUSA” or the “Company”) has announced its unaudited results for the first nine months ended September 30, 2021. Figures are unaudited 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 September 30, 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. 20.64 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on September 30, 2021.
Nine months ended September 30, 2021, compared to nine months ended September 30, 2020.
The following table summarizes our results of operations for the first nine months ended September 30, 2021, and 2020:
| (Figures in Millions of Pesos) | ||||||
| For the first nine months ended September 30, | ||||||
2020 |
|
2021 |
|
|||
| Revenues | 13,864.5 |
|
20,811.6 |
|
||
| Cost of Sales | 12,306.3 |
|
17,091.3 |
|
||
| Gross Profit | 1,558.2 |
|
3,720.3 |
|
||
| Selling and Administrative Expenses | 1,180.8 |
|
1,375.3 |
|
||
| Operating Income (Loss) | 377.4 |
|
2,345.1 |
|
||
| Other Expenses - Net | (30.3 |
) |
(33.8 |
) |
||
| Comprehensive Financing Result | (1,278.5 |
) |
(540.7 |
) |
||
| Taxes and Statutory Employee Profit Sharing | (270.0 |
) |
536.3 |
|
||
| Equity in Income (Loss) of Associated Companies | 11.3 |
|
(13.2 |
) |
||
| Consolidated Net Income (Loss) | (650.1 |
) |
1,221.1 |
|
||
| D&A | 266.9 |
|
212.3 |
|
||
| EBITDA 1/ | 644.3 |
|
2,557.4 |
|
||
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 first nine months ended September 30, 2021, was Ps.1,221.1 million (US$59.2 million), compared to a net loss of Ps. 650.1 million in the same period of 2020. This change is primarily due to higher Revenues, Operating Income and lower Comprehensive Financing Result.
Revenues
Our net revenues for the first nine months of 2021 increased 50.1% to Ps.20,811.6 million (US$1,008.2 million) from Ps. 13,864.5 million in the same period of 2020. This was due to higher volume sales and copper price increases.
Normally, 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 52.8% of our revenues in the first nine months ended September 30, 2021, came from products manufactured in Mexico and the remaining 47.2% from products manufactured in the U.S.
In terms of sales by region during the first nine months ended September 30, 2021, we derived approximately 55.3% of our revenues from sales to customers in the United States, 42.1% from customers in Mexico and 2.6% from the rest of the world (“ROW”).
In terms of volume, consolidated sales of copper products during the first nine months ended September 30, 2021, increased by 15.4% as compared to the same period in 2020:
| (Metric tons) | ||||
| For the first nine months ended September 30, | ||||
| Copper Products Volume Sales 2/ | 2020 |
2021 |
||
| USA | 22,706 |
26,580 |
||
| México | 38,890 |
44,256 |
||
| ROW | 1,517 |
1,965 |
||
| Total | 63,113 |
72,802 |
||
| 2/ Includes aluminum wire and cable | ||||
Cost of sales
Our cost of sales in the first nine months ended September 30, 2021, increased by 38.9% to Ps.17,091.3 million (US$828.0 million) from Ps. 12,306.3 million in the same period of 2020. As percentage of revenues, cost of sales was 82.1% and 88.8% respectively.
We 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 first nine months ended September 30, 2021, increased 138.8% to Ps.3,720.3 million (US$180.2 million) from Ps. 1,558.2 million in the same period of 2020. As percentage of sales, gross profit in 2021 was 17.9% vs 11.2% in 2020.
Selling and Administrative Expenses
Our selling and administrative expenses in the first nine months ended September 30, 2021, increased 16.5% to Ps.1,375.3 million from Ps.1,180.8 in the same period of 2020. As a percentage of sales, it was 6.6% in 2021 and 8.5% in the same period of 2020.
Operating Income (Loss)
Our operating income in the first nine months ended September 30, 2021, increased 521.4% to Ps.2,345.1 million (U.S. $ 113.6 million) from Ps. 377.4 in the same period of 2020, due to the higher Gross Profit.
EBITDA
In the first nine months ended September 30, 2021, our EBITDA increased 296.9% to Ps.2,557.4 million (or US$123.9 million), from Ps. 644.3 million in the same period of 2020. The corresponding depreciation and amortization figures are Ps.212.3 million for January to September 2021 and Ps.266.9 million for the same period of 2020.
Comprehensive Financing Result
The following table shows our comprehensive financing result for the first nine months ended September 30, 2020, and 2021:
| (Figures in Millions of Pesos) | ||||||
| For the first nine months ended September 30, | ||||||
2020 |
|
2021 |
|
|||
| Interest Expense | (481.4 |
) |
(335.2 |
) |
||
| Interest Income | 10.9 |
|
10.6 |
|
||
| Exchange Gain (Loss) - Net | (800.9 |
) |
(203.8 |
) |
||
| Other Financing Costs | (7.0 |
) |
(12.3 |
) |
||
| Comprehensive Financing Result | (1,278.5 |
) |
(540.7 |
) |
||
Our comprehensive financing result in the first nine months ended September 30, 2021, was a cost of Ps.540.7 million compared to a cost of Ps. 1,278.5 million in the same period of 2020. This accounting effect of a lower exchange loss was explained mainly by the relative appreciation of the Mexican peso against the US dollar. The exchange rate at the end of 2020 was $22.10 pesos per USD and at the end of September of 2021 was $20.64.
Taxes and Statutory Employee Profit Sharing
The provision for current and deferred income taxes and statutory employee profit sharing in the first nine months ended September 30, 2021, was a benefit of Ps.536.3 million compared to an expense of Ps.270.0 million in the same period of 2020.
Consolidated Net Income (Loss)
Our consolidated net Income for the first nine months ended September 30, 2021, was Ps.1,221.1 million (US$59.2 million), compared to a net loss of Ps.650.1 million in the same period of 2020. This was explained by higher Revenues and Operating Income.
Liquidity and Capital Resources
Liquidity
As of September 30, 2021, we had cash and cash equivalents for Ps.243.4 million (U.S. $11.8 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 58.7% in the first nine months ended September 30, 2021, to $4.19 US dollar per pound from $2.64 US dollar per pound in the same period of 2020.
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 September 30, 2021, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.627.0 million (U.S. $30.4 million), all of which was dollar denominated.
On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.5,169.0 million (U.S.$250.4 million), all of which was dollar denominated.
Accounts receivable from third parties as of September 30, 2021 were Ps.4,873.5 million (U.S.$236.1 million). Days outstanding in the domestic market were 31 days as of September 30, 2021.
Debt Obligations
The following table summarizes our debt as of September 30, 2021:
| Consolidated debt | September 30, 2021 | |
| (In Millions of Pesos) | ||
| U.S. subsidiaries debt | 599.7 |
|
| Mexican debt | 5,196.3 |
|
| Total | 5,796.0 |
This total includes the restructured debt of the Company.
Capital Expenditures
For the first nine months ended September 30, 2021, we invested Ps.148.4 million (U.S.$7.2 million) in capital expenditure projects, mainly related to plants maintenance.
In the first nine months ended September 30, 2021, our capital expenditures were allocated by segments as follows: 30.5% to copper tubing, 14.8% to wire and cable, 17.6% to valves and controls, 3.3% to electrical products and the remaining 33.8% to other divisions. By geographic region 70.8% of total capital expenditures were invested in our Mexican facilities and the remaining 29.2% in the U.S.
Note: You should read this document in conjunction with the unaudited consolidated financial statements as of September 30, 2021, including the notes to those statements.