Alpek, S.A.B. de C.V. Class A · BMV:ALPEK/A
Alpek, S.A.B. de C.V. Class A — Q4 2019 Earnings Presentation
64 slides from Alpek, S.A.B. de C.V. Class A's earnings presentation, Jun 29, 2020
Slide 1: Corporate Presentation 4th Quarter 2019
Corporate Presentation 4th Quarter 2019 General Internal Use 1
Slide 2: Disclaimer
Disclaimer This presentation contains, or may be deemed to contain, “forward-looking statements”. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The future results of Alpek
Slide 3: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Guidance Relevant Events Appendix General Internal Use 3
Slide 4: Alpek is the largest component of ALFA's portfolio
Alpek is the largest component of ALFA’s portfolio Alfa posted US$17.5B in Revenues & US$2.3B in EBITDA1 Petrochemicals Food Products Aluminum Auto Parts IT + Telecom Oil & Gas EBITDA1 37% 31% 27% 12% - (% Alfa) 1 out every 4 new cars 8 out of 10 #1 in the production of 11 Sigma brands 728 productio
Slide 5: Alpek is one of the largest PetChems in The Americas
Alpek is one of the largest PetChems in The Americas Strong portfolio of products across two main segments Net Debt / Revenues1: US$6.2B Adjusted EBITDA1: US$850M 1.6x Adjusted EBITDA1: Polyester (76% Sales)2 Plastics & Chemicals (23% Sales)2 PTA, PET Polyester Polypropylene Expandible Caprolactam S
Slide 6: Our footprint spans 28 plants across 7 countries
Our footprint spans 28 plants across 7 countries Over 7 million tons and more than 6,000 employees worldwide Installed capacity breakdown (kta) Site PTA PET rPET Fibers PP EPS CPL Other A Monterrey 160 B Altamira 1,000 640 240 Mexico C Salamanca 85 (3,030 Kta) D Ocotlán 10 E Cosoleacaque 610 185 F L
Slide 7: Long-term strategy is based around 3 key pillars
Long-term strategy is based around 3 key pillars 1 • Global cost improvements (focused on Operations, Logistics, SG&A) Strengthen • Incorporate higher value-added products (i.e. Copolymers) Core Business • Focus on maximizing FCF (Optimize CAPEX, M&G Mexico Debt, NWC) 2 Strategic & • Increase footpr
Slide 8: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Guidance Relevant Events Appendix General Internal Use 8
Slide 9: Investment Highlights
Investment Highlights 1 Market leadership across all our products in the Americas 2 Consumer-oriented product portfolio limiting demand volatility 3 Proven track record of growth across all parts of the cycle 4 State-of-the-art technology resulting in low-cost position 5 Experienced management team
Slide 10: Market Leadership
11. Market Leadership Alpek holds #1 or #2 industry positions for all products within its portfolio Industry Position1 Comments PTA Industry #1 in the Position Americas 48% est. installed capacity share in the Americas 1 #1 in the Americas PET Industry Position 44% est. installed capacity share in t
Slide 11: Alpek is the largest PTA-PET producer in Americas
11. Market Leadership Alpek is the largest PTA-PET producer in Americas Market has consolidated & become increasingly organized over time The Americas PTA Capacity Share (%) The Americas PET Capacity Share (%) 7,375 Kta 6,953 6,260 9% Others 6,192 7% Others Kta 5,738 BP 8% M&G 15% 19% 5,382 8% 10% F
Slide 12: Resilient end-markets account for 89% of volume
21. Consumer Oriented Portfolio Resilient end-markets account for 89% of volume 97% of Alpek’s sales are dollar-based Volume by Industry 20191 Sales Geography 20191 Construction 4% Asia 0% Textiles 7% ME 0% EUR 3% 89% 71% SA 24% Sales 2019 USA/CAN 44% Volume 2019 4,384 Kta US$6,216 M Consumer Goods
Slide 13: Alpek has grown at 8.8% CAGR since 1986
31. Proven Growth Alpek has grown at 8.8% CAGR since 1986 Constant growth at different points of the industry cycle PET Sales volume 1986-2018 (Index: 1986 = 100) acquisition in UK Polyester IPO (BMV) acquisition Corpus Christi U.S. PTA/ in Brazil Polymers (JV) PET plant acquisitions rPET Acquisitio
Slide 14: Low Cost Position
41. Low Cost Position State-of-the-art tech, strategically located assets & low-cost logistics yield low cost position in industry Continuous investment in own technology has World scale production facilities make Alpek the improved Alpek’s cost position (i.e. IntegRex) low-cost producer in The Amer
Slide 15: Mgmt. with 30+ years average experience in PetChem
51. Management Mgmt. with 30+ years average experience in PetChem Clear strategy & culture of empowerment ensure efficient operations José de Jesús Valdez CEO (43) José Carlos Pons CFO (23) Felipe Garza Jorge Young Gustavo Talancón Alejandro Llovera José Luis Zepeda Gustavo Talancón Co-President Co-
Slide 16: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Guidance Relevant Events Appendix General Internal Use 16
Slide 17: The Case for PET
The Case for PET Everything you should know General Internal Use
Slide 18: Plastics have been in the news a lot lately
Plastics have been in the news a lot lately… Indexed Google Searches (2009-2020) Plastic 367 Waste 100 09 10 11 12 13 14 15 16 17 18 19 20 General Internal Use 18
Slide 19: But not all plastics are the same
…But not all plastics are the same PET is 100% recyclable, recycled at high rates & can be remade back to its original use PET HDPE PVC LDPE PP PS Polyethylene High Density Low Density Others Plastic Polyvinyl Chloride Polypropylene Polystyrene Terephthalate Polyethylene Polyethylene (PC, et al.) Re
Slide 20: Hey there, I'm PET, I think we've met
Hey there, I’m PET, I think we’ve met… Polyethylene terephthalate (pol·y·eth·yl·ene·ter·eph·thal·ate) Commonly known as PET or PETE and identified by Mainly used to bottle water & carbonated beverages worldwide BPA PHTHALATE Safe for consumption. Always. FREE FREE Making the world better since 1973
Slide 21: PET is number 1 for a reason
PET is number . for a reason General Internal Use 21
Slide 22: PET is the best option because of its traits
PET is the best option because of its traits… Uses 25% Costs +50% Less Material Less 11g. 15g. 283g. 1.5¢ 3.1¢ 6.5¢ 1.0x 1.4x 25.7x 1.0x 2.1x 4.3x Convenient & Shatter Resealable Resistant Note: All figures per 355ml bottle General Internal Use Source: International Monetary Fund, CCFGroup, Bloomber
Slide 23: The most widely used beverage packaging material
…making it the most widely used beverage packaging material USA Beverage Packaging Industry Units by Substrate (B Units) 115 PET +6.2% 98 90 Aluminium -0.4% 37 27 Glass 34 -1.2% 00 05 10 15 19E General Source: Internal Use SBAcci 23
Slide 24: PET's carbon footprint is 80% lower than glass or aluminum
Aluminum Glass 1,200oF 2,800oF PET’s carbon footprint is 80% lower than glass or aluminum Carbon Footprint Over Lifecycle (gr. CO2 Eq. / 355 mL Bottle) 182 187 Recycled Virgin 90 37 10 31 PET Aluminum Glass 1.0x 4.9x 3.1x 5.1x 9.0x General Internal Use Source: EPA
Slide 25: We have a plastic waste problem
We have a plastic waste problem General Internal Use 26
Slide 26: Industry leaders agree the solution lies with increasing PET recycling
Industry leaders agree the solution lies with further increasing PET recycling rates, not imposing bans “Coca-Cola chooses plastic bottle collection “Coke, Dr Pepper, Pepsi execs: We are over aluminum cans to cut carbon committed to reducing plastic waste” Jim Dinkins, Derek Hopkins and Kirk Tanner,
Slide 27: PET already highly recycled on a worldwide basis
PET already highly recycled on a worldwide basis USA with largest potential in NA to increase recycling rates PET Recycling Very different from On par with other beverage …and with potential to continue Rate (%)… other plastics… package alternatives… growing under right incentives 98 69 65 58 46 30
Slide 28: Everyone must play a part in a circular PET recycling loop
Everyone must play a part in order to ensure a circular PET recycling loop • Increase rPET production • Consume responsibly • Meet bottlers’ needs Producers Consumers • Recycle everything • Improve rPET technology • Separate trash properly Government • Incentivize recycling • Promote use of lower CO
Slide 29: Alpek is leading the way towards a circular PET economy
Alpek is leading the way towards fostering a fully circular PET economy Among largest rPET producers in The Americas Alpek already recycling RICHMOND 115 5 Billion bottles each year 70 55 Active member of to strengthen USA recycling efforts KTon 2010 2014 2019 General Internal Use 30
Slide 30: So, what else can we do personally?
So, what else can we do personally? Share this information 3R Reduce, reuse & refuse Recycle everything Separate waste properly General Internal Use 31
Slide 31: The Case for PET (in short)
The Case for PET (in short) 1. PET is an unrivaled product for beverage packaging ▪ 100% recyclable and already 58% recycled worldwide ▪ Only plastic that can be 100% recycled to its same use ▪ 50% cheaper & 25% lighter than glass & aluminum ▪ Resealable & shatter-resistant packaging option 2. PET i
Slide 32: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Guidance Relevant Events Appendix General Internal Use 33
Slide 33: Results & Guidance
Results & Guidance Sales Volume (K Ton) Revenues (US$ M) 4,652 6,991 4,402 4,384 3,937 3,938 4,012 6,216 5,677 5,284 5,231 P&C 4,838 P&C Polyester Polyester 2015 2016 2017 2018 2019 2020G 2015 2016 2017 2018 2019 2020G Reported EBITDA (US$ M) CAPEX (US$ M) 1,063 826 Business 220 850 Combination 630
Slide 34: EBITDA Breakdown
EBITDA Breakdown Alpek exceeded 2019 EBITDA Guidance figures 188 Others 11 173 6 172 2 2 167 6 1 P&C 52 EBITDA 46 46 42 4Q19 vs. 4Q19G 135 125 123 122 Polyester (US$M) 4Q19G Polyester P&C Others 4Q19 RMCF1 4Q19 Inventories Others 4Q19 Comparable Comparable Reported (w. RMCF)1 789 11 718 41 67 722 Ot
Slide 35: Leverage
Leverage Net debt reduced by U.S. $706 million resulting in 1.6x leverage Net Debt (US$M) LTM EBITDA (US$M) Net Debt/EBITDA (Times) 2,200 1,063 3.1 2,084 2,036 1,022 2.9 944 1,832 864 834 850 1,637 1,603 2.4 2.2 2.2 1,330 1.9 1,270 564 1.7 1.6 407 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q18 2Q18 3Q
Slide 36: Balance Sheet Accounts
Balance Sheet Accounts Net Working Capital1 (US$ M) Property, Plant and Equipment (US$ M) 955 2,390 856 2,105 1,955 1,968 694 497 NWC Days 53 44 41 54 2016 2017 2018 20192 2016 2017 2018 20192 Net Debt3 (US$ M) Stockholders’ Equity (US$ M) 1,832 2,391 2,193 2,019 1,262 1,330 1,604 1,042 IFRS 2016 20
Slide 37: Debt Profile
Debt Profile Debt maturity improved to 5.3 years after income from Cogen sale • Net Debt: U.S. $1,330 million / Gross Debt: U.S. $1,716 million • Available Committed Credit Lines: U.S. $740 million (Total: U.S. $740 million) • 99% of our debt is denominated in US dollars1,2 Consolidated Debt Profile
Slide 38: Dividends to Shareholders
Dividends to Shareholders 5.9 150 6 5.11 Dividend Yield (%) 4.71 5 3.4 3.4 4 100 3.0 2.1 3 143 143 143 2 114 111 50 100 95 1 (US$ M) 0 0 -1 2013 20141 2015 2016 2017 2018 2019 General (1) Internal Paid in January Use 2020 39
Slide 39: Results by Quarter
Results by Quarter Sales Volume (K Ton) Revenues (US$ M) 1,151 1,121 1,174 1,118 1,941 1,087 1,061 1,059 1,759 1,758 1,016 1,642 1,643 1,532 1,523 1,407 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Reported EBITDA (US$ M) Majority Net Income (US$ M) 369 356 393 M&G Recovery 136 274 Business Comb. Business 220 239 220 18
Slide 40: Comparable EBITDA
Comparable EBITDA Reported EBITDA 2015 2016 2017 2018 2019G 4Q19 4Q18 2019 2018 (US$ M) Polyester 344 349 147 788 723 122 316 428 788 Plastics & Chemicals 284 322 237 276 191 42 52 218 276 - Cogeneration Plant’s Sale - - - - 188 - 188 - TOTAL 630 669 384 1,063 9181 356 369 850 1,063 Adjustments* 201
Slide 41: Extraordinary Effects on EBITDA
Extraordinary Effects on EBITDA Comparable EBITDA + RMCF1 almost matched 2018 record figures 2019 2018 Delta US$M 1Q 2Q 3Q 4Q2 Total 1Q 2Q 3Q 4Q3 Total 1Q 2Q 3Q 4Q Total Reported EBITDA 140 161 194 167 662 181 239 274 149 843 (41) (78) (80) 18 (181) Inventory Adjustment (19) (27) (16) (6) (68) 16 20
Slide 42: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Guidance Relevant Events Appendix General Internal Use 43
Slide 43: 2020 Guidance
2020 Guidance Macroeconomics & Key Assumptions 2020G 2019 Ch. % Crude Oil US$/Bbl 59.0 63.8 (8) General Asia PTA/PET Margin US$/Ton 255 306 (17) MXN / USD (Avg.) MXN 20.2 19.3 5 Volume Kton 4,652 4,384 6 Net Sales US$M 5,677 6,216 (9) Business EBITDA1 US$M 547 850 (36) CAPEX US$M 277 270 3 1.General
Slide 44: 2020 Guidance: Majority of EBITDA reduction from industry margins
2020 Guidance Majority of EBITDA reduction from industry margins 850 2020 Guidance Bridge (US$M) Cogeneration 188 Plants’ Sale 241 Industry 201 547 Wilton PET Margins 32 ~30 Business 65 Combination ’19 CoGen Effect (best • Inventory Adj. ‘19 EBITDA 40 estimate) • Non-Recurring • Higher Volume • Othe
Slide 45: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Guidance Relevant Events Appendix General Internal Use 46
Slide 46: Relevant Events & Updates
Relevant Events & Updates 1 Sale of Cosoleacaque & Altamira power cogeneration plants (US$801M) • Sale finalized on November 25th / Proceeds used for debt reduction & one-time dividend payment 2 Acquired a 350,000-ton PET facility in Wilton, United Kingdom from Lotte Chemical • Marking Alpek’s first
Slide 47: Sale of Cogeneration plants finalized in 4Q19
Sale of Cogeneration plants finalized in 4Q19 Asset Description Alpek sold its two Cogeneration plants for US$801M CELCSA • Cosoleacaque, Veracruz Sale finalized on November 25th • 95MW • Started operations in 2014 Proceeds used to pay down debt and pay a US$143M dividend Alpek companies to keep att
Slide 48: Alpek acquires 350KTA PET facility in Wilton, U.K.
Alpek acquires 350KTA PET facility in Wilton, U.K. First Alpek acquisition outside of the Americas Only PET producer in United Kingdom, mainly serving domestic demand Improved PTA/PET capacity net balance and reduction to PTA spot sales Line 1 Line 2 Capacity 200KTA 150KTA PTA will be sourced from e
Slide 49: Alpek issued bond for U.S. $500 million
Alpek issued bond for U.S. $500 million Details Alpek Bonds on Emission (%) Coupon 5.375 4.500 Amount US$500M 4.250 1.586 2.638 10Y UST 1.735 Coupon 4.250% (Yield 4.285%) 2.550 2.950 2.737 Spread Maturity 10 Years (2029) Alpek ’29 Alpek ’22 Alpek ’23 Spread 255 bps Alpek Debt Profile - Proforma 2Q19
Slide 50: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Guidance Relevant Events Appendix General Internal Use 53
Slide 51: Polyester Value Chain
Polyester Value Chain Crude Oil Refinery Naphtha Reformer/BTX PET rPET 0.84 ton PTA per ton PET 0.66 ton PX per ton PTA PX PTA 0.34 ton MEG per ton PET Fibers & Filaments 0.80 ton Ethylene 0.72 ton EO per ton EO por ton MEG Ethane Cracker Ethylene Ethylene Oxide MEG (From Natural Gas) General Source
Slide 52: Polypropylene (PP) Value Chain
Polypropylene (PP) Value Chain Ethane / Propane General Source: Internal Alpek, Nexant Use 55
Slide 53: Expandable Polystyrene (EPS) Value Chain
Expandable Polystyrene (EPS) Value Chain Crude Oil Refinery Naphtha Reformer Pentane Benzene 0.06 ton Pentane per ton EPS 0.79 ton Benzene per ton Styrene 0.29 ton Ethylene 0.94 ton Styrene per ton Styrene per ton EPS Ethane Cracker Ethylene Styrene EPS (From Natural Gas) General Source: Internal Al
Slide 54: Caprolactam (CPL) Value Chain
Caprolactam (CPL) Value Chain Crude Oil Refinery Naphtha Reformer Cyclohexane Caprolactam Benzene 0.94 ton Bz per ton Cyclohexane 0.99 ton CX per ton CPL Nylon Natural Gas Syngas Ammonia Ammonium Sulfate Fertilizers General Source: Internal Alpek, Nexant Use 57
Slide 55: Latest Quarter Results
Latest Quarter Results Alpek: Selected Financial Information (%) 4Q19 vs. 4Q19 3Q19 4Q18 3Q19 4Q18 2019 2018 Ch.% Total Volume (ktons) 1,059 1,118 1,061 (5) - 4,384 4,402 - Polyester 851 895 851 (5) - 3,490 3,490 - Plastics & Chemicals 208 223 210 (7) (1) 895 912 (2) Consolidated Revenues 1,407 1,52
Slide 56: Latest Quarter Results: Cash Flow and Net Income
Latest Quarter Results Alpek: Cash Flow (%) 4Q19 vs. 4Q19 3Q19 4Q18 3Q19 4Q18 2019 2018 Ch.% EBITDA 356 194 369 83 (4) 850 1,063 (20) Net Working Capital & Others (67) (2) (45) (3,711) (48) (2) (321) 99 Capital Expenditures & Acq. (115) (49) (262) (133) 56 (270) (826) 67 Financial Expenses (39) (34)
Slide 57: Relevant References: Crude Oil
Relevant References: Crude Oil Crude Oil prices remained stable during 4Q19 US$/Bbl Brent Crude Oil Price 4Q 120 100 Avg. 99 80 71 Guidance 64 68 60 53 54 44 40 20 2014 2015 2016 2017 2018 2019 General Source: Internal Use Bloomberg 60
Slide 58: Relevant References: Paraxylene
Relevant References: Paraxylene Px prices were stable during 4Q19 US$/Ton NA Px Contract Price 2,000 1,708 1,635 1,641 1,500 1,382 1,258 1,282 1,165 1,056 1,100 1,077 992 989 977 955 937 1,000 898 878 900 924 924 829 500 0 2011 2012 2013 2014 2015 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2016
Slide 59: Relevant References: Integrated PET Margins
Relevant References: Integrated PET Margins ’19 Avg. of U.S. $306/ton exceeded guidance, but declined in 4Q US$/Ton Asian Margins (Px / MEG to PET) 600 China 500 478 393 400 377 370 342 333 324 304 300 193 277 276 284 346 255 260 263 248 240 214 227 242 227 211 212 210 238 215 164 214 200 208 204 18
Slide 60: Relevant References: Propylene & Polypropylene
Relevant References: Propylene & Polypropylene Slight decrease in both PGP contract prices & PP margins in 4Q19 NA Propylene Contract Price (PGP) NA Polypropylene Margin (PP to PGP) cpp cpp 80 76 28 27 71 26 70 69 24 24 22 23 23 22 22 60 60 22 21 60 20 20 53 20 19 52 51 50 18 45 15 16 39 38 37 38 13
Slide 61: Relevant References: Caprolactam
Relevant References: Caprolactam US$/Ton Asian Caprolactam to NA Benzene Spread (Contract) 2,400 2,100 2,100 1,800 1,500 1,281 1,240 1,216 1,231 1,272 1,200 1,141 1,137 1,069 1,075 934 976 862 897 900 840 839 684 699 692 630 644 600 300 0 2011 2012 2013 2014 2015 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Slide 62: Stock Highlights (BMV: ALPEK)
Stock Highlights (BMV: ALPEK) Daily Stock Price (MXN) 35 2019 30 Valuation 2017 2018 4Q’19 25 4Q’19 Proforma 20 Market Cap. (US$ B) 2,951 2,916 2,307 2,307 15 Jan May Sep Jan May Sep Net Debt (US$ M) 1,262 1,832 1,330 1,330 2018 2019 EBITDA LTM (US$ M) 384 1,063 850 662 Enterprise Value / Daily Aver
Slide 63: Alpek's Investor Relations Team
Alpek’s Investor Relations Team 23 Years at Alfa/Alpek José Carlos Prior to being Alpek CFO, held roles as VP of Business Development and Director of South America Pons Business at Nemak CFO BS in Mechanical Engineering from ITESM, MBA from ITESM & Executive Management Program from IPADE Alejandro 8
Slide 64: General Internal Use
General Internal Use 67
Alpek, S.A.B. de C.V. — Q4 2019 Earnings Presentation on 6ix