Alpek, S.A.B. de C.V. Class A · BMV:ALPEK/A
Alpek, S.A.B. de C.V. Class A — Investor Presentation (February 2018)
57 slides from Alpek, S.A.B. de C.V. Class A's investor presentation, February 2018
Slide 1: Corporate Presentation 3Q17
Corporate Presentation 3Q17
Slide 2: Forward-looking statements
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, S.A.B. d
Slide 3: Index
Index • Business Overview • Consolidated Financials • Appendix
Slide 4: Business Overview
Index • Business Overview • Consolidated Financials • Appendix
Slide 5: Investment Highlights
Investment Highlights 1 Market-leading position in the Americas 2 Attractive consumer-oriented product portfolio 3 High-return integration and cost-saving projects 4 Low cost producer with leading technology 5 Experienced management team 6 Strong free cash flow and financial performance 5
Slide 6: Alpek is a leading petrochemical company focused on Polyester chain products
Alpek is a leading petrochemical company focused on Polyester chain products, mainly PTA and PET Polyester (72% of sales) Plastics & Chemicals (28% of Sales) Expandable Caprolactam PTA / PET Polyester Fibers Polypropylene Others Polystyrene & Fertilizers Alpek Polyester2 Indelpro3 Styropek Unimor Po
Slide 7: Polyester Chain
Polyester Chain Polyester Crude Oil Gasoline PET Reformer Paraxylene PTA Fibers Naphtha Ethylene Cracker Ethylene MEG Ethane Oxide Source: Alpek 7
Slide 8: Alpek's products are widely used for food packaging and consumer end-markets
Alpek´s products are widely used for food packaging and consumer end-markets Volume by Industry 2016 Sales Geography 2016 (3,938 Kta) (4,838 Kta) Europe Textiles Construction 3% Asia and Others LatAm 7% 3% 14% 1% Consumer Canada Goods 1% Food and 32% USA Beverages 44% 58% Mexico 37% Sample End Users
Slide 9: Alpek is the largest integrated polyester producer in North America
Alpek is the largest integrated polyester producer in North America (PTA-PET) North America 2016 Installed Capacity PTA PET (5,550 kta) (4,391 kta) 5% 10% Eastman NanYa BP 25% M&G 19% 41% 42% Indorama Indorama 30% 29% Source: PCI adjusted with Alpek’s official capacities 2016 Capacities, 2016 M&As 9
Slide 10: Alpek's installed capacity amounts to 5.8 M tons
Alpek’s installed capacity amounts to 5.8 M tons; 23 production facilities and ~5,200 employees Location of Production Sites Installed Capacity Breakdown (Kta) Site PTA PET rPET Fibers PP EPS CPL Other A Monterrey 160 B Altamira 1,000 640 165 K Mexico C Salamanca 85 (2,950 Kta) D Ocotlán 10 IG E Cos
Slide 11: Alpek has developed a leading position in every product of its portfolio
Alpek has developed a leading position in every product of its portfolio Alpek: Industry Position Industry Position Comments • Attractive industry structure PTA #1 in North America • 41% est. installed capacity share1 Polyester #1 in North America PET • 42% est. installed capacity share1 #2 Worldwid
Slide 12: Alpek is investing in attractive organic projects to boost profitability
Alpek is investing in attractive organic projects to boost profitability Project Overview Estimated figures and dates Strategic Guidelines Capex EBITDA Project Start-up (US$M) (US$M) ● Capture natural gas, ethane and propane 1. Cosoleacaque Cogeneration 140 30 4Q14 advantage in North America 2. MEG
Slide 13: Successful M&A track record
Alpek also holds a successful M&A track record and is constantly evaluating potential targets M&A Guidelines M&A Deals (2011-2016) Product Capacity Year Country Investment PTA / 1. Eastman 1.3 Mtons 2011 USA US $622 M Attractive Market PET Potential 2. Wellman PET 430 ktons 2011 USA US $123 M 3. Cab
Slide 14: YTD Volume, Revenues and Capex in line with guidance
YTD Volume, Revenues and Capex in line with guidance; EBITDA affected by M&G provision Sales Volume Revenues 4,106 6,471 (US$ Million) 3,931 3,937 3,938 -1% (Ktons) 5,284 5,069 +1% 3,036 3,079 4,838 3,910 3,855 2014 2015 2016 2017G YTD17 YTD17G 2014 2015 2016 2017G YTD17 YTD17G EBITDA CAPEX (US$ Mil
Slide 15: EBITDA vs. Guidance (YTD17)
EBITDA vs. Guidance (YTD17) Alpek EBITDA vs Guidance 373 US$M YTD17 YTD17G Polyester 180 225 113 -6% 260 12 12 Plastics & Chemicals 170 149 6 243 2 Comparable 351 373 Inventory gain 6 - M&G A/R Provision (113) - Reported 243 373 YTD M&G A/R YTD17 Polyester Secondary Other Inventory YTD17 Provision E
Slide 16: Lower 2017 EBITDA guidance
Lower 2017 EBITDA guidance mainly due to normalization of PP margins after 1Q16 peak Alpek: EBITDA Average Margin: (M dls) Polypropylene to Propylene (PGP) (c/lb) 26 669 24 8 637 89 18 17 23 27 11 11 11 502 4 2012 2013 2014 2015 2016 2017 30 28 26 23 20 20 18 18 18 15 11 EBITDA Inventory Non Compara
Slide 17: Relevant events – forward looking
Relevant events – forward looking ● M&G’s financial distress ▪ Support M&G Altamira PET plant restart ▪ Focus on restructuring processes for M&G Mexico and Corpus Christi) ● Sale of Cosoleacaque and Altamira power cogeneration plants ▪ Exclusivity with ContourGlobal ● CADE approval process - PQS acq
Slide 18: Consolidated Financials
Index • Business Overview • Consolidated Financials • Appendix
Slide 19: Sales Volume and Revenues
Sales Volume and Revenues Sales Volume Revenues +2% 3,931 3,937 3,938 4,006 6,471 23% +4% 22% 23% 24% 27% 5,284 5,036 4,838 27% 28% (US$ Million) 29% (Kta) 78% 77% 76% 77% 73% 73% 71% 71% 2014 2015 2016 LTM 17 2014 2015 2016 LTM 17 Polyester Plastics & Chemicals Source: Alpek estimates 19
Slide 20: Income Statement Accounts
Income Statement Accounts Operating Income EBITDA 669 532 630 481 (US$ Million) 347 ex-M&G 489 ex-M&G (US$ Million) 286 434 376 % Sales 4.4% 9.1% 11.0% -3.9% 201 % Sales 6.7% 11.9% 13.8% 7.4% 2014 2015 2016 LTM 17 2014 2015 2016 LTM 17 Financial Cost, Net (1) Majority Net Income 198 175 155 ex-M&G (
Slide 21: Balance Sheet Accounts
Balance Sheet Accounts Net Working Capital(1) Property, Plant and Equipment 685 694 2,117 632 1,955 1,861 1,820 (US$ Million) (US$ Million) 488 NWC Days 47 45 53 50 2014 2015 2016 Sep 17 2014 2015 2016 Sep 17 Net Debt(2) Stockholders’ Equity 1,192 2,028 2,005 2,019 1,042 (US$ Million) (US$ Million)
Slide 22: Financial Ratios and Other Indicators
Financial Ratios and Other Indicators Net Debt / EBITDA Interest Coverage(1) 3.2 10.7 7.0 7.0 ex-M&G 6.5 (Times) (Times) 1.6 1.6 1.1 5.4 2.4 ex-M&G 2014 2015 2016 LTM 17 2014 2015 2016 LTM 17 EBITDA / Ton CAPEX 170 345 160 320 317 280 122 ex-M&G 110 (US$ Million) (US$ / Ton) 94 2014 2015 2016 LTM 17
Slide 23: Alpek Consolidated Debt Profile
Alpek Consolidated Debt Profile September 2017 ● Gross Debt: U.S. $1,639 million ● Net Debt: U.S. $1,192 million ● Available Committed Credit Lines: U.S. $171 million (Total: U.S. $430 million) ● 99% of our debt is denominated in US dollars(1) 650 447 300 224 221 154 50 27 Cash 2017 2018 2019 2020 2
Slide 24: Dividends paid to shareholders
Dividends paid to shareholders 143 129 114 111 100 95 (US$ Million) 2012 2013 2014(1) 2015 2016 2017 24 (1) Paid in December2013
Slide 25: Appendix
Index • Business Overview • Consolidated Financials • Appendix
Slide 26: Operating & Financial Highlights (3Q17)
Operating & Financial Highlights (3Q17) • One-time charges associated to Mossi & Ghisolfi (M&G): U.S. -$113 million A/R provision (EBITDA), U.S. -$435 million intangible asset impairment (Oper. Income), U.S. -$95 million financial asset impairment (Financial Cost, Net) and Alpek U.S. +$223 million d
Slide 27: Latest Quarter Results
Latest Quarter Results Alpek: Selected Financial Information (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Total Volume (ktons) 1,012 1,038 998 (2) 1 3,036 2,967 2 Polyester 788 807 757 (2) 4 2,353 2,254 4 Plastics & Chemicals 225 231 241 (3) (7) 683 713 (4) Consolidated Revenues 1,312 1,30
Slide 28: Latest Quarter Results
Latest Quarter Results Sales Volume Revenues 1,012 988 986 1,038 998 1,293 1,237 1,306 1,312 981 967 970 1,182 1,236 1,219 1,183 (US$ Million) (Ktons) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Ch.% -0.2% 5.8% 1.4% 0.3% Ch.% 9.4% 5.5% 6.1% -2.9% EBITDA Majority Net Income 208 87 72 48 50 25 29 28 171 158 157 (US$ Mill
Slide 29: Latest Quarter Results
Latest Quarter Results Alpek: Cash Flow (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% EBITDA 3 82 157 (96) (98) 243 536 (55) Net Working Capital & Others 29 156 37 (81) (21) 121 (100) 221 Capital Expenditures & Acq. (64) (65) (128) 2 50 (206) (270) 24 Financial Expenses (17) (17) (18) (5) 5
Slide 30: Comparable EBITDA and 2017 Guidance (ex-M&G)
Comparable EBITDA and 2017 Guidance (ex-M&G) Reported EBITDA 2014 2015 2016 2017G 3Q16 3Q17 2016 2017 Polyester 270 344 349 304 157 (51) 267 70 Plastics & Chemicals 159 284 322 198 83 54 270 173 TOTAL 434 630 669 502 73 3 536 243 Adjustments* 2014 2015 2016 2017G 3Q16 3Q17 2016 2017 Polyester 71 35
Slide 31: Polyester Chain: PTA, PET, and Polyester Fibers
Polyester Chain PTA, PET, and Polyester Fibers Revenues LTM 17 EBITDA LTM 17 Selenis, Quebec. PET US$ 3,103 Million US$ 152 Million General Information Employees: 3,629 Cedar Creek, NC PET, R-PET Products (Capacity): Cooper River, SC • PTA (2,250 Kta) PET & PSF • PET (2,014 Kta) Monterrey, N.L. Colu
Slide 32: Plastics & Chemicals: PP, EPS, CPL and Others
Plastics & Chemicals PP, EPS, CPL and Others Revenues LTM 17 EBITDA LTM 17 Altamira, Tamps. PP, EPS US$ 1,425 Million US$ 226 Million General Information Monterrey, N.L. Headquarters, Employees: 1,527 Ocotlán, Jal. Guaratingueta, Brazil EPS Nylon 6 Products (Capacity): Salamanca, Gto. CPL and Fertil
Slide 33: Alpek is managed by an experienced team
Alpek is managed by an experienced team focused on delivering value to shareholders Years with Name Position Alpek / Alfa José de Jesús Valdez Simancas CEO 40 Eduardo Escalante Castillo CFO 29 Felipe Garza Medina Co-President, Alpek Polyester 39 Polyester Polyester Jorge Young Cerecedo Co-President,
Slide 34: Organization Chart
Organization Chart José de Jesús Valdez CEO Eduardo Escalante CFO Polyester Chain Plastics & Chemicals Jorge Gustavo Felipe Garza Alejandro José Luis Jorge Young González Talancón Co-President Llovera Zepeda Co-President President, President, CPL Alpek Polyester President, President, EPS Alpek Polye
Slide 35: Polypropylene Chain
Polypropylene Chain Refinery Propylene Polypropylene Cracker Source: Alpek 35
Slide 36: EPS & CPL Chain
EPS & CPL Chain Refinery Ammonia Gasoline Cyclohexane Caprolactam (CPL) Crude Oil Reformer Benzene Styrene EPS Cracker Ethylene Source: Alpek 36
Slide 37: Alpek has been a reliable partner through joint ventures
Alpek has been a reliable partner to other global industry leaders through successful joint ventures Alpek: Sample Joint Ventures 50.0% 51.0% + 1 Share + + World leader in PP production with sales Largest petrochemical company in the in more than 100 countries world with more than 370 sites Source:
Slide 38: Alpek has grown at an 8% annualized rate since 1986
Alpek has grown at a 8% annualized rate since 1986 through M&A, JVs and organic projects Sales Volume 1986-2016 (Index: 1986=100) Selenis/ Concon Acquisition PTA/PET acquisitions EPS (USA) acquisition Polypropylene expansion CabelmaPET Coso Cogen Acquisition of polyester business EPS expansion in IP
Slide 39: Organic growth and acquisitions position Alpek as a leading PTA and PET producer
Organic growth and acquisitions position Alpek as a leading PTA and PET producer in North America PTA – Installed Capacity(1) 2004 2016 (5,500 Kta) (5,550 Kta) Invista Eastman Interquisa Eastman BP BP 41% 29% Indorama PET – Installed Capacity(1) 2004 2016 (3,800 Kta) (4,931 Kta) Indorama Others NanY
Slide 40: Proprietary and third-party technologies
Alpek operates a state-of-the-art portfolio of proprietary and third-party technologies Alpek: Proprietary and Third-Party Technologies PTA PET Oilfield Chemicals • Integrex PTA • Integrex PET • In-house Proprietary Technologies technology (I&D, acquisitions) • Melt – TekTM Polypropylene EPS Caprola
Slide 41: IntegRex technology simplifies PTA and PET production
Alpek’s IntegRex® technology simplifies both PTA and PET production processes PTA / PET: Process Diagram Precursor Oxidation Feed prep Esterification Preheating Post-Oxidation Hydrogenation Pre-Poly Crystallization Crystallization Crystallization Polymerization Annealing Filtration and
Slide 42: Power cogeneration overview
Power cogeneration overview Steam Cogeneration plant 1 Hot 3 2 turbine Natural Gas gases Heat Recovery Steam turbine Steam Gas Contract-based power Electricity customers 1. Gas turbine generates electricity 2. Combustion gases produce steam 3. Steam is used to generate additional electricity and for
Slide 43: M&G's Corpus Christi site capacity breakdown
M&G’s Corpus Christi site capacity breakdown Corpus Christi Site (CC) PTA PET 1.3 M tons 1.1 M tons Raw materials 420 Ktons 500 Ktons (e.g. Px, MEG, etc.) M&G M&G Raw materials 850 Ktons 600 Ktons (e.g. Px, MEG, etc.) 350 Ktons PTA Pearl River 43
Slide 44: Alpek has effectively transformed its EPS business
Alpek has effectively transformed its EPS business Alpek: EPS capacity The Americas’ installed EPS capacity 2017E Expandable Polystyrene (EPS) Total: 600 ktons Kta 75 325 Others 17% 20 65 230 Alpek Nexkemia 8% (Styropek) 42% 165 18% Nova 15% Flint Hills 2014 Acquisition 2015 Concon Altamira 2018 Pla
Slide 45: Alpek acquired a controlling interest in Selenis Canada
Alpek acquired a controlling interest in Selenis Canada Inc. Alpek: Polyester production facilities Selenis Plant • Capacity: 144 Ktons (PET) • Location: Montreal, Canada Montreal. Canada • Rationale: • Only PET plant in Canada Columbia. USA Fayetteville. USA • Alpek to capture PTA integration syner
Slide 46: U.S.A. PET antidumping case (2016)
U.S.A. PET antidumping case (2016) Case Calendar Final Rates Countervailing Antidumping • March´15: Department of Commerce (DOC) and International Trade Commission (ITC) filing Canada N/A 14 % China 7 – 126 % 105 – 126 % • March´16: DOC issued affirmative FINAL Antidumping Duty and Countervailing Du
Slide 47: U.S.A. and Canada PET antidumping case (2017)
U.S.A. and Canada PET antidumping case (2017) U.S. A. ● Petitions filed in September ▪ Department of Commerce (“DOC”) – initiated investigation (4Q’17) ▪ International Trade Commission (“ITC”) – initiated investigation (4Q’17) Canada ● Canada Border Services Agency (“CBSA) initiated investigation in
Slide 48: 2017 average Brent price estimated at $55/bbl
2017 average Brent price estimated at $55/bbl Brent Crude Oil Dls/Bbl 120 100 99 $/bbl 80 60 Guidance 2017 53 $/bbl ($55/bbl) 40 44 $/bbl 20 2014 2015 2016 2017 • Δ 1 US$ dollar / Bbl = ~ Δ 3 US$ Million EBITDA 48
Slide 49: Paraxylene (Px) Price
Paraxylene (Px) Price Px USA Contract Price 1,708 1,635 1,543 1,168 (US$ / Ton) 1,014 995 981 1,003 970 948 920 926 898 882 871 838 2011 2012 2013 2014 1Q’15 2Q’15 3Q’15 4Q’15 1Q’16 2Q’16 3Q’16 4Q’16 1Q’17 2Q’17 3Q’17 4Q’17 49
Slide 50: Propylene and Styrene Prices
Propylene and Styrene Prices North America Propylene Contract Price North America Styrene Spot Price 73 75 74 70 71 70 71 71 63 59 59 60 59 57 52 55 52 53 50 49 50 50 48 46 47 48 48 46 49 48 50 44 44 46 42 42 42 (c / lb) (c / lb) 38 36 39 39 39 40 39 33 31 33 31 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q E
Slide 51: PET Margin (Asia)
PET Margin (Asia) Margin: Asia PET to Px/MEG 394 276 284 270 263 250 258 260 (US$ / Ton) 240 230 232 China 210 212 210 237 222 214 200 PET 201 74 71 69 71 72 80 81 PTA 63 59 64 63 60 11 12 13 14 15 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2016 2017 51
Slide 52: Caprolactam Margin (US)
Caprolactam Margin (US) Margin: CPL Spot to Contract Benzene 2,108 (US$ / Ton) 1,181 1,192 1,108 1,013 986 985 933 797 781 819 704 641 647 637 584 2011 2012 2013 2014 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2015 2016 2017 52
Slide 53: Alpek stock highlights (BMV: ALPEK)
Alpek stock highlights (BMV: ALPEK) Daily Stock Price Daily Average Traded Shares & Value (M Shares) (U.S. $ M) 40 6 6 Shares 5 5 35 Value ($) 4 4 (Pesos) 30 3 3 25 2 2 20 1 1 15 0 0 Jun Sep Dec Mar Jun Sep Dec J A S O N D J F M A M J J A S O N D 2016 2017 2016 2017 Valuation 4Q14 4Q15 4Q16 3Q17 3Q1
Slide 54: M&G Chemicals Overview
M&G Chemicals Overview About M&G Plant locations ● Founded 1953 in Toronta, Italy ● Private company; no public debt or equity ● 20-yr comercial relationship w/Alpek Apple Grove (11% of Alpek sales) Corpus Christi1 Altamira Installed Capacity PTA PET Apple Grove (USA) 270 Suape Altamira (Mexico) 560
Slide 55: Alpek's exposure to M&G
Alpek’s exposure to M&G US$M Guarantee Capacity Reservation Corpus Christi 435 Corpus Christi assets (2nd lien) Accounts Receivable 113 Unsecured M&G Mexico Loan (Acquired) 100 M&G Mexico PET plant in Altamira (1st lien) $90 M Loan 90 Corporate guarantees 55
Slide 56: Non-recurring charges associated to M&G
Non-recurring charges associated to M&G Income Statement Balance Sheet YTD17 M&G Sep-17 M&G US$M YTD17 US$M Sep-17 (ex-M&G) Charge (ex-M&G) Charge Operating Income 250 (548) (298) Assets 5,044 (481) 4,563 Trade accounts receivable 620 (113) 507 Intangible asset impairment (435) Intangible Assets – C
Slide 57: North America PTA / PET capacity breakdown
North America PTA / PET capacity breakdown North America 2016 Installed Capacity PTA PET Ktons USA Mexico Canada Total Ktons USA Mexico Canada Total Alpek 640 1,610 - 2,250 Alpek 1,495 185 144 1,824 Indorama 1,050 - 600 1,650 Indorama 812 480 - 1,292 BP 1,400 - - 1,400 M&G 270 560 - 830 Eastman 250
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