Orbia Advance Corporation, S.A.B. de C.V. (BMV: ORBIA*) (“the
Company” or “Orbia”) today released unaudited results for second
quarter of 2024.
Orbia delivered revenues and EBITDA of $2.0 billion and $334
million, respectively, for the second quarter of 2024. EBITDA
included $13 million of non-operating charges. The EBITDA was $110
million below the prior year, which included a strong result of
$444 million. Demand and pricing conditions across certain markets
where Orbia participates have remained weak, especially in parts of
Europe. The year-over-year decline in EBITDA was primarily driven
by Connectivity Solutions and Fluor & Energy Materials, which
had strong results during the same quarter of last year. Second
quarter results were also impacted by temporary water challenges in
Mexico in the Polymer Solutions business group. The Company
continued to work on improving operational efficiency and is well
positioned to benefit as markets recover.
Q2 2024 Financial Highlights
(All metrics are compared to Q2 2023 unless otherwise noted)
- Net revenues of $2.0 billion decreased 9%, driven by lower
sales in Connectivity Solutions, Building & Infrastructure and
Fluor & Energy Materials.
- EBITDA of $334 million decreased 25%, primarily driven by
Connectivity Solutions and Fluor & Energy Materials.
- Operating Cash Flow of $4 million decreased by $212 million
driven by lower EBITDA and a use of cash for working capital.
“Our second quarter results delivered significant sequential
improvement across all business groups, highlighting Orbia’s
resilience despite ongoing market challenges in certain regions.
Based on recent market dynamics, we maintain cautious optimism for
continued improvement in business conditions during the remainder
of the year. We remain focused on cash generation, supported by
commercial and financial discipline while also driving operational
efficiencies. These efforts position us favorably for future
growth. We are confident we will deliver on our long-term strategic
growth projects and will fulfill our commitment to generate
sustainable shareholder value.” said Sameer Bharadwaj, CEO of
Orbia.
Q2 2024 Consolidated Financial
Information1
(All metrics are compared to Q2 2023
unless otherwise noted)
mm US$ Second Quarter
2024
2023
% Var
Net sales
1,976
2,177
-9%
Cost of sales
1,474
1,541
-4%
Selling, general and administrative expenses
329
342
-4%
Operating income
173
297
-42%
EBITDA
334
444
-25%
EBITDA margin
16.9%
20.4%
-352 bps
Financial cost
35
132
-73%
Earnings before taxes
139
161
-13%
Income tax
(85)
129
N/A
Consolidated net income
224
32
611%
Net majority income
195
8
2309%
Operating cash inflow (outflow)
4
217
-98%
Capital expenditures
(107)
(162)
-34%
Free cash inflow (outflow)
(130)
30
N/A
Net debt
3,838
3,430
12%
__________________
1 Unless noted otherwise, all figures in
this release are derived from the Consolidated Financial Statements
of the Company as of June 30, 2024 and are prepared in accordance
with International Accounting Standards 34 “Interim Financial
Reporting” of the International Financial Reporting Standards
(IFRS), which have been published in the Bolsa Mexicana de Valores
(BMV). See Notes and Definitions at the end
of this release for further explanation of terms used
herein.
Net revenues of $1,976 million decreased 9%.
The decrease in revenues for the quarter was driven by an
unfavorable mix and lower pricing in Connectivity Solutions, lower
resin prices which translate into lower selling prices in Building
& Infrastructure and lower volume of higher value refrigerants
in Fluor & Energy Materials. These factors offset volumes
increases year over year in all businesses except Connectivity
Solutions.
Cost of goods sold of $1,474 million decreased 4% due
primarily to lower raw material costs and reduced operating
costs.
Selling, general and administrative expenses of $329
million decreased 4%. As a percentage of sales, SG&A increased
94 basis points to 16.6%.
Year to date, the Company has reduced manufacturing and SG&A
costs by $35 million compared to last year through business
optimization efforts.
EBITDA of $334 million decreased 25%, while EBITDA margin
contracted 352 basis points to 16.9%.
The decrease in EBITDA and EBITDA margin was due to lower
revenues and an unfavorable product mix in Connectivity Solutions
and Fluor & Energy Materials compared to the previous year.
Financial costs of $35 million decreased by $97 million
year-over-year. The decrease in financial costs was largely driven
by foreign exchange impacts from the depreciation of the Mexican
Peso. This was partially offset by lower interest income earned on
cash balances and higher interest expenses.
An Income Tax Benefit of $85 million was recognized for
the quarter. The effective tax rate for the quarter was negative
61% compared to a rate of 80% for the same quarter in the prior
year. The change in the effective tax rate was primarily due the
depreciation of the Mexican Peso against the U.S. Dollar. Excluding
the impact of the Mexican Peso depreciation in the quarter, the
effective tax rate was 22%.
Net income to majority shareholders of $195 million
increased by $187 million from the previous year quarter. The
increase was driven by lower income tax and financial costs.
Operating cash flow of $4 million decreased $212 million
while the free cash flow of negative $130 million decreased by $160
million.
The decreases in operating cash flow and free cash flow were
driven by lower EBITDA and investment in working capital.
Net debt of $3,838 million includes total debt of $4,635
million, less cash and cash equivalents of $797 million. The
Company’s net debt-to-EBITDA ratio increased from 2.96x to 3.39x
compared to the previous quarter, driven by reductions in the cash
balance and in the cumulative trailing 12-month EBITDA.
Q2 Revenues by Region
(All metrics are compared to Q2 2023
unless otherwise noted)
mm US$ Second Quarter Region
2024
2023
% Var
% Revenue
North America
728
858
-15%
37%
Europe
582
673
-14%
29%
South America
387
390
-1%
20%
Asia
217
196
11%
11%
Africa and others
62
60
2%
3%
Total
1,976
2,177
-9%
100%
Q2 Financial Performance by Business Group
(All metrics are compared to Q2 2023 unless otherwise noted)
Polymer Solutions (Vestolit and Alphagary), 31% of
Revenues
Orbia’s Polymer Solutions business group (commercial brands
Vestolit and Alphagary) focus on general purpose and specialty PVC
resins (polyvinyl chloride), PVC and zero-halogen specialty
compounds with a wide variety of applications in everyday products
for everyday life, from pipes and cables to household appliances
and medical devices. The business group supplies Orbia’s downstream
businesses and a global customer base.
mm US$ Second Quarter Polymer Solutions
2024
2023
% Var
Total sales*
644
645
0%
Operating income
39
38
2%
EBITDA
107
102
4%
*Intercompany sales were $51 million and $46 million in Q2 24 and
Q2 23, respectively.
Revenues of $644 million were flat year over year. EBITDA of
$107 million increased 4% compared to last year and EBITDA margin
increased 68 basis points to 16.6%.
Revenue was flat year-over-year, driven by higher volumes, which
were offset by lower prices across the product portfolio,
especially in derivatives. Volumes increased despite the temporary
shutdown at the Company’s Altamira 1 facility because of the water
drought in the Northeast of Mexico, which has now been
resolved.
EBITDA increased year-over-year driven by lower raw material
costs and growth in the U.S. and U.K. wire and cable markets in the
compounds business. The improved margin was due to the lower raw
material costs as well as to benefits from optimizing production
and controlling spending.
Building & Infrastructure (Wavin), 32% of
Revenues
Orbia’s Building & Infrastructure business group (commercial
brand Wavin) is redefining today’s pipes and fittings industry by
creating solutions that last longer and perform better, all with
less installation labor required. The business group benefits from
supply chain integration with the Polymer Solutions business group,
a customer base spanning three continents, and investments in
sustainable, resilient technologies for water and indoor climate
management.
mm US$ Second Quarter Building &
Infrastructure
2024
2023
% Var
Total sales
665
698
-5%
Operating income
42
42
0%
EBITDA
78
74
4%
Revenues of $665 million decreased 5% year-over-year. EBITDA of
$78 million increased 4% and EBITDA margin increased 102 basis
points to 11.7%.
The decrease in revenues was primarily driven by continued weak
volume activity in certain parts of Europe and Latin America.
Revenues were also impacted by lower resin prices and unfavorable
product mix.
EBITDA and EBITDA margin increased driven by operational costs
optimization, which was partially offset by an unfavorable product
mix.
Precision Agriculture (Netafim), 14% of Revenues
Orbia’s Precision Agriculture business group’s (commercial brand
Netafim) leading-edge irrigation systems, services and digital
farming technologies enable stakeholders to achieve significantly
higher and better-quality yields while using less water, fertilizer
and other inputs. By helping farmers worldwide grow more with less,
the business group is contributing to feeding the planet
efficiently and sustainably.
mm US$ Second Quarter Precision Agriculture
2024
2023
% Var
Total sales
284
288
-2%
Operating income
13
15
-15%
EBITDA
39
41
-3%
Revenues of $284 million decreased 2% year-over-year. EBITDA of
$39 million decreased by $2 million and EBITDA margin decreased
from 14.2% to 13.9%.
Revenues were lower due to soft activity levels in Turkey, the
U.S. and India, partially offset by higher revenues in China,
Middle East and Africa.
EBITDA declined because of lower revenues partly offset by cost
saving efforts.
Connectivity Solutions (Dura-Line), 12% of Revenues
Orbia’s Connectivity Solutions business group (commercial brand
Dura-Line) produces more than 500 million meters of essential and
innovative connectivity infrastructure per year to bring a world’s
worth of information everywhere. The business group produces
telecommunications conduit, cable-in-conduit and other HDPE
products and solutions that create physical pathways for fiber and
other network technologies connecting cities, homes and people.
mm US$ Second Quarter Connectivity Solutions
2024
2023
% Var
Total sales
236
338
-30%
Operating income
29
100
-71%
EBITDA
41
109
-63%
Revenues of $236 million decreased 30% year-over-year. EBITDA of
$41 million decreased by 63% and EBITDA margin decreased from 32.3%
to 17.2%.
Revenues declined due to lower volumes, an unfavorable mix of
products sold, and weaker prices compared to the high levels
achieved during last year. The decrease in volumes was caused by a
combination of the ongoing high interest rate environment as well
as customers reducing excess levels of inventory in the supply
chain.
EBITDA decreased due to lower revenues and less absorption of
fixed costs. This was partly offset by lower input costs and the
continued benefits of cost management measures.
Fluor & Energy Materials (Koura), 11% of Revenues
Orbia’s newly renamed Fluor & Energy Materials business
group (commercial brand Koura) provides fluorine and downstream
products that support modern, efficient living. The business group
owns and operates the world’s largest fluorspar mine and produces
intermediates, refrigerants and propellants used in automotive,
infrastructure, semiconductor, health, medicine, climate control,
food cold chain, energy storage, computing and telecommunications
applications.
mm US$ Second Quarter Fluor & Energy
Materials
2024
2023
% Var
Total sales
230
263
-13%
Operating income
64
102
-37%
EBITDA
81
116
-30%
Revenues of $230 million decreased 13%. EBITDA of $81 million
decreased 30% and EBITDA margin decreased 893 basis points to
35.2%.
Revenues for the quarter decreased year-over-year driven
primarily by lower refrigerant volumes due to a quota phase-down in
the U.S. and Europe and high customer inventory levels in the
U.S.
EBITDA decreased compared to last year due to the lower volumes
of refrigerant gases, which were partially offset by cost control
measures.
Balance Sheet, Liquidity and Capital Allocation
Orbia’s net debt-to-EBITDA ratio increased from 2.96x to 3.39x
from previous quarter due to a reduction in the cumulative trailing
12-month EBITDA. At the end of the second quarter the Company had
cash on hand of approximately $800 million.
During the quarter Orbia increased debt by approximately $26
million before currency adjustments.
Working capital increased by $56 million during the quarter
compared to a decrease of $41 million in the prior-year quarter.
This increase was partially driven by a reduction in trade payables
in Polymer Solutions as a result of the temporary shutdown at the
Company’s Altamira 1 facility. Capital expenditures of $107 million
decreased 34% year-over-year and included ongoing maintenance
spending and investments to support the Company’s growth
initiatives. The reduction in capital expenditures year over year
reflects the Company’s initiatives to actively manage cash.
During the quarter, Orbia returned $80 million to shareholders,
consisting of the first and second installments of the ordinary
dividend approved at the Annual Shareholders Meeting held on April
9, 2024.
2024 Outlook
The Company remains cautious about an economic recovery later
this year as some headwinds persist. Interest rates are staying
high for longer delaying demand recovery, despite strong long-term
fundamentals. Additionally, government infrastructure fund
deployment has been slower than anticipated. Considering these
factors and building upon the Company's positive sequential
momentum, the current full-year 2024 EBITDA guidance is
approximately $1.3B. Adapting to market conditions, the capital
expenditures are expected to be in the range of $500 million to
$540 million, including both maintenance spending and targeted
strategic growth investments. The effective tax rate guidance for
the year is 29% to 32%2. Orbia expects that by the end of the year
the net debt-to-EBITDA ratio will decrease to between 2.70x and
2.85x.
The Company remains committed to commercial excellence, fiscal
responsibility, operational efficiency, and continuous business
optimization, strengthening its position to benefit as market
conditions improve.
__________________
2 Excluding the impact of inflation and
foreign exchange rate changes in Mexico.
Conference Call Details
Orbia will host a conference call to discuss Q2 results on July
25, 2024, at 9:00 AM Central Time (CT; Mexico City)/11:00 AM
Eastern Time (ET; New York). To access the call, please dial
001-855-817-7630 (Mexico), 1-888-339-0721 (United States) or
1-412-317-5247 (International).
Participants may pre-register for the conference call here.
The live webcast can be accessed here.
A recording of the webcast will be posted several hours after
the call is completed on Orbia’s website.
For all company news, please visit
www.orbia.com/this-is-orbia/newsroom.
Consolidated Income Statement
mm US$ Second Quarter January - June
2024
2023
%
2024
2023
%
Net sales
1,976
2,177
-9%
3,839
4,457
-14%
Cost of sales
1,474
1,541
-4%
2,905
3,162
-8%
Gross profit
502
635
-21%
934
1,295
-28%
Selling, general and administrative expenses
329
342
-4%
655
678
-3%
Operating income
173
297
-42%
279
621
-55%
Financial cost
35
132
-73%
174
233
-26%
Equity income from associated entities
1
(0)
N/A
2
0
1521%
Impairment expense
-
4
N/A
-
4
N/A
Income from continuing operations before income tax
139
161
-13%
107
384
-72%
Income tax
(85)
129
N/A
(70)
272
N/A
Consolidated net income
224
32
611%
177
112
58%
Minority stockholders
29
23
23%
56
49
14%
Majority Net income
195
8
2309%
121
63
92%
EBITDA
334
444
-25%
587
913
-36%
Consolidated Balance Sheet
mm US$
June 2024
Dec 2023
June 2023
Total assets
11,214
11,552
11,707
Current assets
3,800
4,170
4,499
Cash and temporary investments
797
1,456
1,283
Receivables
1,733
1,461
1,470
Inventories
1,186
1,200
1,238
Others current assets
84
53
508
Non current assets
7,414
7,382
7,208
Property, plant and equipment, net
3,316
3,370
3,261
Right of use fixed assets, net
476
469
361
Intangible assets and goodwill
3,069
3,148
3,130
Long-term assets
553
395
456
Total liabilities
8,156
8,334
8,476
Current liabilities
2,515
2,537
3,305
Current portion of long-term debt
317
466
890
Suppliers
1,191
1,228
1,273
Short-term leasings
118
106
94
Other current liabilities
889
737
1,047
Non current liabilities
5,641
5,797
5,171
Long-term debt
4,318
4,420
3,823
Long-term employee benefits
134
139
137
Long-term deferred tax liabilities
335
359
372
Long-term leasings
376
383
276
Other long-term liabilities
478
496
563
Consolidated shareholders'equity
3,058
3,218
3,231
Minority shareholders' equity
601
604
637
Majority shareholders' equity
2,457
2,614
2,594
Total liabilities & shareholders' equity
11,214
11,552
11,707
Cash Flow Statement
mm US$ Second Quarter January - June
2024
2023
% Var
2024
2023
% Var
EBITDA
334
444
-25%
587
913
-36%
Taxes paid, net
(48)
(160)
-70%
(94)
(224)
-58%
Net interest / bank commissions
(92)
(72)
27%
(156)
(146)
7%
Change in trade working capital
(56)
41
N/A
(249)
(140)
77%
Others (other assets - provisions, Net)
(98)
(55)
78%
(89)
(74)
21%
CTA and FX
(36)
18
N/A
(45)
54
N/A
Operating cash inflow (outflow)
4
217
-98%
(46)
383
N/A
Capital expenditures
(107)
(162)
-34%
(239)
(304)
-21%
Leasing payments
(27)
(24)
11%
(46)
(48)
-4%
Free cash inflow (outflow)
(130)
30
N/A
(331)
31
N/A
Dividends to shareholders
(80)
(120)
-33%
(80)
(120)
-33%
Buy-back shares program
-
6
N/A
-
8
N/A
Debt
26
29
-11%
(147)
(99)
49%
Minority interest payments
(32)
(32)
0%
(59)
(63)
-7%
Mergers & acquisitions
(0)
(8)
-97%
(0)
(8)
-97%
Financial instruments and others
(37)
(7)
413%
(42)
(14)
205%
Net change in cash
(253)
(101)
151%
(659)
(264)
150%
Initial cash balance
1,050
1,384
-24%
1,456
1,546
-6%
Cash balance
797
1,283
-38%
797
1,283
-38%
Notes and Definitions
The results contained in this release have been prepared in
accordance with International Financial Reporting Standards (“NIIF”
or “IFRS”) with U.S. Dollars as the reporting currency. Figures are
presented in millions, unless specified otherwise.
Figures and percentages have been rounded and may not add
up.
About Orbia
Orbia Advance Corporation, S.A.B. de C.V. (BMV: ORBIA*) is a
company driven by a shared purpose: to advance life around the
world. Orbia operates in the Polymer Solutions (Vestolit and
Alphagary), Building & Infrastructure (Wavin), Precision
Agriculture (Netafim), Connectivity Solutions (Dura-Line) and Fluor
& Energy Materials (Koura) sectors. The five Orbia business
groups have a collective focus on expanding access to health and
well-being, reinventing the future of cities and homes, ensuring
food, water and sanitation security, connecting communities to
information and enabling the energy transition with basic and
advanced materials, specialty products and innovative solutions.
Orbia has a global team of over 24,000 employees, commercial
activities in more than 100 countries and operations in over 50,
with global headquarters in Boston, Mexico City, Amsterdam and Tel
Aviv. The company generated $8.2 billion in revenue in 2023. To
learn more, visit: orbia.com
Prospective Information
In addition to historical information, this press release
contains "forward-looking" statements that reflect management's
expectations for the future. The words “anticipate,” “believe,”
“expect,” “hope,” “have the intention of,” “might,” “plan,”
“should” and similar expressions generally indicate comments on
expectations. The forward-looking statements included in this press
release are subject to a number of material risks and
uncertainties, and our results may be materially different from
current expectations due to factors, which include, but are not
limited to, global and local changes in politics, economic factors,
business, competition, market and regulatory factors, cyclical
trends in relevant sectors as well as other factors affecting our
operations, markets, products, services and prices that are
highlighted under the title “Risk Factors” in the annual report
submitted by Orbia to the Mexican National Banking and Securities
Commission (CNBV) and available on our website at
https://www.orbia.com/investor-relations/financial-reports/annual-reports-and-filings/.
The forward-looking statements included herein represent Orbia’s
views as of the date of this press release. Orbia undertakes no
obligation to revise or update publicly any forward-looking
statement for any reason unless required by law.”
Orbia has implemented a Code of Ethics that helps define our
obligations to and relationships with our employees, clients,
suppliers, and others. Orbia’s Code of Ethics is available for
consultation at the following link:
http://www.Orbia.com/Codigo_de_etica.html. Additionally, according
to the terms contained in the Mexican Securities Exchange Act No
42, the Orbia Audit Committee has established a “hotline” system
permitting any person who is aware of a failure to adhere to
applicable operational and accounting records guidelines, internal
controls or the Code of Ethics, whether by the Company itself or
any of its controlled subsidiaries, to file a complaint (including
anonymously). This system is operated by an independent third-party
service provider. The system may be accessed via telephone in
Mexico, via internet at www.ethics.orbia.com or via email at
ethics@orbia.com. Orbia’s Audit
Committee has oversight responsibility for ensuring that all such
complaints are appropriately investigated and resolved.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240724983065/en/
Investors Diego Echave, Vice President of Investor Relations +1
858-283-6201 investors@orbia.com Media Kacy Karlen, Chief
Communications Officer +1 865-410-3001 kacy.karlen@orbia.com