Industrias Unidas, S.A. de C.V. (“IUSA” or the “Company”) has
announced its unaudited results for the first six months ended June
30 of 2014. 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 June 30, 2014 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. 12.9865 per U.S.
dollar, the exchange rate published by Banco de Mexico, the
country’s central bank, on June 30, 2014.
First six months ended June 30, 2014 compared to first six
months ended June 30, 2013.
The following table summarizes our results of operations for the
first six months ended June 30, 2014 and 2013:
(Figures in Millions of
Pesos)For the first six months ended June 30,
2013
2014
Revenues 5,508.1 5,717.8 Cost of Sales 4,786.6 4,945.7 Selling and
Administrative Expenses 752.9 943.2
Operating Income (Loss) (31.4 ) (171.1 ) Other Expenses - Net (38.3
) (22.8 ) Comprehensive Financing Result (248.2 ) (273.0 ) Taxes
and Statutory Employee Profit Sharing 15.8 (25.0 ) Equity in Income
(Loss) of Associated Companies 0.0 (6.1 )
Consolidated Net Income (Loss) (333.7 )
(448.0 ) D&A 207.6 223.3
EBITDA 1/
176.2 52.2
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 first six months ended June
30, 2014 was Ps.448.0 million (U.S.$34.5 million), compared to a
net loss of Ps.333.7 million in the same period of 2013. This
increase is primarily due to an increase in SG&A expenses and
comprehensive financing results.
Revenues
Our net revenues for the first six months ended June 30, 2014
increased 3.8% to Ps.5,717.8 million from Ps.5,508.1 million in the
same period of 2013. This increase was due to higher selling prices
driven by market conditions.
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 57.5% of our revenues in
the first six months ended June 30, 2014 came from products
manufactured in Mexico and the remaining 42.5% from products
manufactured in the U.S.
In terms of sales by region during the first six months ended
June 30, 2014 we derived approximately 49.4% of our revenues from
sales to customers in the United States, 48.0% 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 six months ended June 30, 2014 increased by 4.7% as
compared to the same period in 2013:
(Metric tons)For the first
six months ended June 30,
Copper Products Volume Sales 2/
2013
2014
USA 21,509 23,956 México 15,049 14,117 ROW 814 1,040
Total 37,372 39,113 2/ Includes aluminum wire and cable
Cost of sales
Our cost of sales in the first six months ended June 30, 2014
increased 3.3%, to Ps.4,945.7 million from Ps.4,786.6 million in
the same period of 2013. As a percentage of revenues, cost of sales
in 2014 was 86.5% and 86.9% in the first six months of 2013.
Copper raw material purchases accounted for approximately 82.5 %
of our cost of goods sold in the first six months ended June 30,
2014.
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 first six months ended June 30, 2014
increased 7.0% to Ps.772.1 million from Ps.721.5 million in the
same period of 2013. As a percentage of sales, Gross profit was
13.5% in the first six months ended June 30, 2014, versus 13.1% in
the same period of 2013.
Selling and Administrative Expenses
Our selling and administrative expenses in the first six months
ended June 30, 2014 increased 25.3% to Ps.943.2 million from
Ps.752.9 in the same period of 2013.
Operating Income (Loss)
We had an operating loss in the first six months ended June 30,
2014 of Ps. 171.1 million, compared to an operating loss of Ps.31.4
million in same period of 2013.
EBITDA
In the first six months ended June 30, 2014, EBITDA was Ps.52.2
million (U.S.$4.0 million), compared to an EBITDA of Ps.176.2
million in the same period of 2013. The corresponding depreciation
and amortization figures are Ps.223.3 million for the first six
months ended June 30, 2014 and Ps.207.6 million for the same period
of 2013.
Comprehensive Financing Result
The following table shows our comprehensive financing result for
the first six months ended June 30, 2013 and 2014:
(Figures in Millions of Pesos)For the first
six months ended June 30,
2013
2014
Interest Expense (269.8 ) (301.0 ) Interest Income 20.3 18.2
Exchange Gain (Loss) - Net 9.4 11.9 Other Financing Costs (8.1 )
(2.1 )
Comprehensive Financing Result
(248.2 ) (273.0 )
Our comprehensive financing result was a cost of Ps. 273.0
million in the first six months ended June 30, 2014 compared to a
cost of Ps.248.2 million in the same period of 2013.
Taxes and Statutory Employee Profit Sharing
The provision for income taxes and statutory employee profit
sharing in the first six months ended June 30, 2014 was a benefit
of Ps.25.0 million compared to a cost of Ps.15.8 million in the
same period of 2013.
Consolidated Net Income (Loss)
Our consolidated net loss in the first six months ended June 30,
2014 was Ps.448.0 million (U.S.$18.6 million), compared to a net
loss of Ps.333.7 million in the same period of 2013, mainly the
result of lower operating income and comprehensive financial
result.
Liquidity and Capital Resources
Liquidity
As of June 30, 2014, we had cash and cash equivalents for
Ps.91.1 million (U.S. $7.0 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 7.5% in the first six months ended June 30,
2014 to $3.1687 per pound from $3.4260 in the same period of
2013.
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
June 30, 2014, our outstanding short-term debt, including the
current portion of long-term debt totaled Ps.1,082.1 million (U.S.
$83.3 million), of which approximately 97.6% was
dollar-denominated. On the same date, our outstanding consolidated
long-term debt, excluding current portion thereof, totaled
Ps.4,367.3 million (U.S.$336.3 million), approximately all of which
was dollar-denominated.
Accounts receivable from third parties were Ps.2,124.8 million
(U.S.$163.6 million) as of June 30, 2014. Days outstanding in the
domestic private customers channel were 35 days as of June 30,
2014.
Debt Obligations
The following table summarizes our debt as of June 30, 2014:
Consolidated debt June
30, 2014(In Millions of Pesos) U.S. subsidiaries debt
735.1 Mexican debt 4,714.3 Total 5,449.4
This total includes the restructured debt of the Company.
Capital Expenditures
For the first six months ended June 30, 2014, we invested
Ps.61.8 million (U.S. $4.7 million) in capital expenditure
projects, mainly related to expansion production and
maintenance.
In the first six months ended June 30, 2014 our capital
expenditures were allocated by segments as follows: 57.7% to copper
tubing, 11.5% to electrical products, 10.5% to copper and alloys,
8.1% to wire and cable, 6.9% to valves and controls and the
remaining 5.3% to other divisions. By geographic region, 44.0% of
total capital expenditures were invested in our Mexican facilities
and the remaining 56.0% in the U.S.
You should read this document in conjunction with the
internal consolidated financial statements as of June 30, 2014,
including the notes to those statements.
Industrias Unidas, S.A. de C.V.Francisco Rodríguez Avendaño,
(5255) 5216 4028frodriguez@iusa.com.mx