Alpek, S.A.B. de C.V. Class A · BMV:ALPEK/A
Alpek, S.A.B. de C.V. Class A — Q1 2020 Earnings Presentation
62 slides from Alpek, S.A.B. de C.V. Class A's earnings presentation, Jul 1, 2020
Slide 1: Corporate Presentation 1st Quarter 2020
Corporate Presentation 1st Quarter 2020
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 Relevant Events Appendix 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 Comparable Net Debt / Revenues1: US$6.2B US$722M 1.6x EBITDA1: Adjusted EBITDA1: Polyester (76% Sales)2 Plastics & Chemicals (23% Sales)2 PTA, PET Polyester Polypropylene Expandible Caprolactam
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: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Relevant Events Appendix 7
Slide 8: 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 Clear strategy & catalysts e
Slide 9: Alpek holds leading industry positions for all its products
11. Market Leadership Alpek holds leading industry positions for all its products Polyester Industry Positon1 by Product P&C Industry Positon1 by Product PTA 1 The Americas PP 1 Mexico 1 The Americas EPS 1 The Americas PET 2 Worldwide CPL 1 Mexico rPET 1 The Americas PSF2 2 The Americas (1) Industry
Slide 10: 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 (%) 7,240 6,781 Kta 9% Others Kta 7% Others 6,190 5,681 8% 5,940 5,494 M&G 14% 19% BP 8% 11% F
Slide 11: 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 12: 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 13: State-of-the-art tech, strategically located assets & low-cost logistics
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 14: Long-term strategy is based around 3 key pillars
51. Strategy & Mgmt. Team Long-term strategy is based around 3 key pillars Foster Strategic Circular & Focused Economy Growth Strengthen Core Business 14
Slide 15: Each pillar includes set of concrete growth catalysts
51. Strategy & Mgmt. Team Each pillar includes set of concrete growth catalysts Growth Catalysts Details / Description • Global Cost Improvement • Zero Based Budgeting & process innovation (Mainly Operations, Logistics & SG&A) Strengthen • Value-added Products • Shift to products with higher margins
Slide 16: Mgmt. with 30+ years average experience in PetChem
51. Strategy & Mgmt. Team Mgmt. with 30+ years average experience in PetChem Clear strategy & culture of empowerment ensure efficient operations José de Jesús Valdez CEO (44) José Carlos Pons CFO (24) Felipe Garza Jorge Young Gustavo Talancón Alejandro Llovera José Luis Zepeda Gustavo Talancón Co-Pr
Slide 17: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Relevant Events Appendix 17
Slide 18: The Case for PET
The Case for PET Everything you should know
Slide 19: 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 19
Slide 20: …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 21: 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 Extremely versatile and used for many other consumer goods too BPA PHTHALATE Safe for con
Slide 22: PET is number 1 for a reason
\ } PET is \ number 745 for a reason
Slide 23: 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 Source: International Monetary Fund, CCFGroup, Bloomberg, SBAcci 23
Slide 24: …making it 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) 116 PET +6.3% 98 94 Aluminum -0.2% 37 37 Glass +0.4% 34 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Source: SBAcci 24
Slide 25: PET's carbon footprint is 60-80% lower than glass or aluminum
1,200oF 2,800oF PET’s carbon footprint is 60-80% lower than glass or aluminum Carbon Footprint Over Lifecycle (lbs. CO2 Eq. / 100k oz.) 4,848 2,766 1,125 PET Aluminum Glass 1.0x 2.5x 4.3x Photo: Aluminum making process Photo: Glass making process Source: Franklin Associates
Slide 26: We have a plastic waste problem
We have a plastic waste problem 27
Slide 27: Industry leaders agree the solution lies with increasing PET recycling rates
Industry leaders agree the solution lies with further increasing PET recycling rates, not imposing bans “Coke, Dr Pepper, Pepsi execs: We are “Coca-Cola chooses plastic bottle collection committed to reducing plastic waste” Jim Dinkins, Derek Hopkins and Kirk Tanner over aluminum cans to cut carbon
Slide 28: 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 29: Everyone must play a part in order to incentivize recycling
Everyone must play a part in order to incentivize recycling and ensure a circular PET usage loop • Increase rPET production • Consume responsibly • Meet bottlers’ needs Producers Consumers • Recycle everything • Improve rPET technology • Separate trash properly Government • Promote recycling • Promo
Slide 30: Alpek is leading the way towards a fully 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 5 Billion Richmond, IN, USA 115 Gral. Pacheco, BA, Fayetteville, NC USA Argentina bottles each year 70 55 Active member of to strengthen USA recycling efforts
Slide 31: So, what else can we do personally?
So, what else can we do personally? Share this information 3R Reduce, reuse & recycle Separate waste properly 32
Slide 32: The Case for PET (in short)
The Case for PET (in short) 1. PET is an unrivaled product for CPG 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, hygienic & shatter-resistant packaging option 2.
Slide 33: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Relevant Events Appendix 34
Slide 34: Results & Guidance
Results & Guidance Sales Volume (K Ton) Revenues (US$ M) 4,652 6,991 4,402 4,384 3,938 4,012 6,216 5,677 5,231 P&C 4,838 P&C Polyester 1,184 Polyester 1,433 2016 2017 2018 2019 2020 YTD 2020G 2016 2017 2018 2019 2020 YTD 2020G Reported EBITDA (US$ M) CAPEX (US$ M) 1,063 826 Business Combination 220
Slide 35: EBITDA Breakdown
EBITDA Breakdown Both Polyester and P&C exceeded Comparable 1Q EBITDA Guidance1 (exc. RMCF) Alpek 1Q20 EBITDA vs. Guidance1 (US$M) +26% 147 1 10 20 127 20 116 50 17 Others 111 50 P&C 40 49 94 Polyester 74 74 58 1Q20G Polyester P&C Others 1Q20 Comparable RMCF2 1Q20 Comparable Inventory 1Q20 Reported
Slide 36: Leverage
Leverage Alpek maintains low leverage despite payment of dividend from Cogen sale Net Debt (US$M) LTM EBITDA (US$M) Net Debt/EBITDA (Times) 2,200 1,022 2.4 2,084 2,036 2.2 944 2.2 864 850 821 1.7 1,436 1.6 1,330 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 37
Slide 37: Balance Sheet Accounts
Balance Sheet Accounts Net Working Capital1 (US$ M) Property, Plant and Equipment (US$ M) 951 2,390 2,105 774 1,955 1,968 1,876 694 634 497 NWC Days 53 44 43 53 51 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Net Debt2 (US$ M) Stockholders’ Equity (US$ M) 1,832 2,391 2,193 2,019 1,436 1,847 1,2
Slide 38: Debt Profile
Debt Profile 99% of Debt denominated in USD1,2 / Debt average life @ 4.3 years Available Comm. Net Debt: US$1,436M Gross Debt: US$2.006B US$590M Credit Lines US$M Consolidated Debt Profile2 (Mar. 2020) 900 Cash 800 Bonds Coupon 700 Bank Debt 675 4.500% 600 570 Coupon 4.250% 500 500 400 Coupon 650 30
Slide 39: Dividends to Shareholders
Dividends to Shareholders 5.9 150 5.6 6 4.72 Dividend Yield (%) 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 40 (1) Paid in December 2013 (1)Showing (2) Paid in January US$143M 2020 Dividend in 2018 (Paid in 2020)
Slide 40: Results by Quarter
Results by Quarter Sales Volume (K Ton) Revenues (US$ M) 1,151 1,121 1,174 1,118 1,184 1,941 1,061 1,059 1,087 1,759 1,758 1,643 1,642 1,523 1,433 1,407 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Reported EBITDA (US$ M) Majority Net Income (US$ M) 369 356 393 M&G Recovery 136 274 Business Cogen Business 239 Comb. 220
Slide 41: Comparable EBITDA
Comparable EBITDA Reported EBITDA 2015 2016 2017 2018 2019 1Q20 1Q19 (US$ M) Polyester 344 349 147 788 428 58 80 Plastics & Chemicals 284 322 237 276 218 49 54 Cogeneration Plant’s Sale - - - - 188 TOTAL 630 669 384 1,063 850 111 140 Adjustments* 2015 2016 2017 2018 2019 1Q20 1Q19 (US$ M) Polyester
Slide 42: Raw Material Carry Forward Effect (RMCF) Breakdown
Raw Material Carry Forward Effect (RMCF1) Breakdown Smaller YoY & QoQ difference in EBITDA when excluding extraordinary effects 2020 2019 Delta US$M 1Q 1Q 4Q 1Q 4Q Reported EBITDA 111 140 167 (29) (57) Inventory Adjustment (17) (19) (6) 2 (11) Others - 11 1 (11) (1) Comparable EBITDA 127 148 172 (20
Slide 43: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Relevant Events Appendix 44
Slide 44: Relevant Events & Updates
Relevant Events & Updates 1 Corpus Christi Polymers (CCP) integrated PTA/PET facility • Pre-construction period extended through end of 2020 2 COVID-19 • Alpek products are considered essential as they serve Food / Beverage / CPG packaging & medical supplies • Operations not affected as Alpek contin
Slide 45: Corpus Christi Polymers extended its pre-construction period
Corpus Christi Polymers extended its pre-construction period Highlights CCP capacity share by partner • JV between Alpek, Indorama & Far Eastern (FENC) PTA PET • Acquired Corpus Christi PTA/PET assets on Dec. 28, 1.3 M tons 1.1 M tons 2018 for US$1.2B (Alpek US$266M in cash and • PET (Int.): 367 Kta
Slide 46: COVID-19
COVID-19 Alpek posted better-than-expected 1Q results amid volatile environment Industry Impact 1Q20 Effects on Alpek Company Reaction • Lower crude oil demand in Asia =• No adverse effect to Alpek’s • Increased hygiene measures & resulted in decreases to Crude Oil business continuity from COVID-19
Slide 47: Other Relevant Events
Other Relevant Events • First Alpek acquisition outside of the Americas • Only PET producer in UK, mainly serving domestic demand • Increasing PET production capacity by 15% • Improved PTA/PET capacity net balance and reduction to PTA spot sales • Took over operations as of January 1st, 2020 UK PET
Slide 48: Index
Index Alpek at a Glance Key Investment Highlights The Case for PET Financials Relevant Events Appendix 49
Slide 49: 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 per ton MEG Ethane Cracker Ethylene Ethylene Oxide MEG (From Natural Gas) 50 Source: Alp
Slide 50: Polypropylene (PP) Value Chain
Polypropylene (PP) Value Chain Ethane / Propane 51 Source: Alpek, Nexant
Slide 51: 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) 52 Source: Alpek, Nexant
Slide 52: 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 53 Source: Alpek, Nexant
Slide 53: Latest Quarter Results
Latest Quarter Results Alpek: Selected Financial Information (%) 1Q20 vs. 1Q20 4Q19 1Q19 4Q19 1Q19 Total Volume (ktons) 1,184 1,059 1,087 12 9 Polyester 967 851 857 14 13 Plastics & Chemicals 217 208 230 4 (6) Consolidated Revenues 1,433 1,407 1,642 2 (13) Polyester 1,094 1,075 1,239 2 (12) Plastics
Slide 54: Latest Quarter Results
Latest Quarter Results Alpek: Cash Flow (%) 1Q20 vs. 1Q20 4Q19 1Q19 4Q19 1Q19 EBITDA 111 356 140 (69) (21) Net Working Capital & Others 100 (67) (24) 249 520 Capital Expenditures & Acq. (15) (115) (69) 87 79 Financial Expenses (26) (39) (31) 32 16 Income tax (64) (29) (30) (120) (111) Dividends (163
Slide 55: Relevant References: Crude Oil
Relevant References: Crude Oil Price reduction from demand reduction & no agreement to reduce output in 1Q20 US$/Bbl Brent Crude Oil Price 120 100 Avg. 99 80 71 60 64 53 54 44 40 20 2014 2015 2016 2017 2018 2019 2020 56 Source: Bloomberg
Slide 56: Relevant References: Paraxylene
Relevant References: Paraxylene Px prices also fell in 1Q20 following their correlation with Crude Oil US$/Ton NA Px Contract Price 2,000 1,708 1,635 1,641 1,500 US$165/ton 1,382 decrease from 1,258 1,282 Dec.’19 to Mar.’20 1,165 1,056 1,100 1,077 992 989 977 955 1,000 924 924 937 876 876 500 0 2011
Slide 57: Relevant References: Integrated PET Margins
Relevant References: Integrated PET Margins Margins have already risen above Guidance levels in low-demand quarter US$/Ton Asian Margins (Px / MEG to PET) 600 China 500 478 393 400 377 370 342 333 324 304 300 193 277 276 284 346 275 255 263 248 240 214 Guidance 227 223 242 227 255 238 215 214 164 20
Slide 58: Relevant References: Propylene & Polypropylene
Relevant References: Propylene & Polypropylene Decrease in both PGP contract prices & industry PP margins in 1Q20 NA Propylene Contract Price (PGP) NA Polypropylene Margin (PP to PGP) cpp cpp 80 76 28 27 71 26 70 69 24 24 22 22 22 Alpek able to 60 22 21 maintain 60 20 20 margins in 1Q 54 19 50 18 45
Slide 59: Relevant References: Caprolactam
Relevant References: Caprolactam US$/Ton Asian Caprolactam to NA Benzene Spread (Contract) 2,400 2,100 2,100 1,800 1,500 1,281 1,240 1,216 1,231 1,272 1,200 1,141 1,137 1,069 1,075 934 976 900 840 862 839 727 692 644 600 549 300 0 2011 2012 2013 2014 2015 2016 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Slide 60: Stock Highlights (BMV: ALPEK)
Stock Highlights (BMV: ALPEK) Daily Stock Price (MXN) 40 30 Valuation 2017 2018 2019 1Q20 20 10 Market Cap. (US$ B) 2,951 2,916 2,307 1,657 0 Jan May Sep Jan May Sep Jan Net Debt (US$ M) 1,262 1,832 1,330 1,436 2018 2019 2020 EBITDA LTM (US$ M) 384 1,063 850 821 Enterprise Value / 11.6 4.7 4.6 4.1 D
Slide 61: Alpek's Investor Relations Team
Alpek’s Investor Relations Team 24 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 9
Slide 62: alpek.com
alpek.com