Alpek, S.A.B. de C.V. (BMV:ALPEK/A) Q2 2024 Earnings Call

0:00 Good morning, everyone. Welcome to Alpex second quarter 2024 earnings webcast. I am Barbara Amaya, Alpex IRO, and I am pleased to be here today with Jorge Young, our CEO, and Jose Carlos Pons, our CFO, who will be covering today's webcast presentation. For today's presentation, first, Jorge will provide an overview for quarter, then Jose Carlos will expand upon the financial results. Finally, Jorge will review our expectations for the second half of the year prior to the Q&A session. Please note that the information discussed today may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to certain risks and uncertainties.

0:49 Actual results may differ materially, however, The company cautions the market not to rely unduly on these forward-looking statements. Alpec undertakes no obligation to publicly update or revise any forward-looking statements, whether it is because of new information, future events, or otherwise. Financial results are expressed in U.S. dollars unless otherwise specified. For your convenience, this webcast is being recorded and will be available on our website. Jorge, I'll turn the call over to you.

1:26 Thank you, Bárbara. Good morning, everyone. Let me begin today's call by stating that second quarter results were in line with our guidance expectations with an improvement in networking capital and strong cash flow generation. We witnessed a gradual demand recovery Building upon the positive trend from the first quarter. Additionally, steady margins also contributed to our overall stability during this period. Notwithstanding the above, we faced a very specific challenge within the quarter beginning in May and becoming critical in June. The cities of Tampico and Altamira in the northeast of Mexico faced low water availability because of a delayed rainfall season.

2:18 This led to temporary operating interruptions for industrial companies in the area, including three of our sites. ALPEC responded quickly effectively managing its inventory and leveraging its global footprint to partially mitigate the impact to volume supply. By the end of June, the situation was resolved as tropical storms entered the region and water levels fully recovered. I would also like to mention that the company was able to support its employees and the Altamira community During the challenging weeks of water scarcity, we appreciate the dedication of our team who managed this difficult situation successfully.

3:10 Going forward, we do not anticipate any additional impact related to this occurrence, and we are actively assessing long term solutions to prevent and mitigate future risks. Regarding structural cost reduction initiatives, during this quarter, we finalize the remaining planned organizational restructuring in the polyester business and have those achieved or planned for the year. Through the combination of these and other initiatives, such as optimizing our polyester footprint and improving some of our energy supply agreements, we will reach our goal of $75 million in annualized savings by the third quarter. With the most significant benefits already factored in since the beginning of the year.

4:02 Furthermore, we will seek to identify additional opportunities to strengthen our business. Before moving into financial results, I would like to highlight our sustainability efforts during the quarter. Earlier this month, the company published its most comprehensive sustainability report to date. Now, with additional disclosures, including the following items. A new materiality matrix, which now considers financial impacts. And a brand new roadmap to showcase our decarbonization journey, among others. You can find the complete report on our website. Furthermore, the progress in our sustainability agenda is evidenced again by stronger ratings. MSCI recently improved the company's rating for the first time since 2019 to a triple B, recognizing enhancement in our business practices as well as our carbon emissions reduction, which achieve a superior performance versus the industry average.

5:10 Alpec remains committed to enhancing its goals and strategies to ensure continued progress. At this point, I will handle the call over to Jose Carlos to cover our financial performance in greater detail.

5:24 Thank you, Jorge. Hello, everyone, and thank you for joining us. Allow me to provide more insight into our quarterly results. Volume remained flat quarter over quarter and year over year, reaching 1.2 million tons as the polyester business segment maintained volume levels. Therefore, we remain confident we will reach our guidance. Reported EBITDA reached $170 million, an improvement of 15% versus the previous year, including a combined positive inventory management and carry-forward effect of $14 million, and a $2 million non-recurrent effect mainly from organizational restructuring costs. APEC generated $158 million in comparable EBITDA in line with their guidance expectations. Now diving into specifics for the polyester segment, volume reached 1 million tons, an increase of 2% year over year and 1% quarter over quarter, resulting mostly from solid demand. The company estimates that volume would have been even higher had it not been for the scheduled maintenance early in the quarter and the temporary interruptions of PTA production in Altamira.

6:30 Asian integrated pet reference margins also improved, averaging $297 per ton, a 3% increase quarter over quarter. However, Chinese integrated pet reference margins remain pressured, decreasing to an average of $147 per ton, yet witnessing a slight recovery in recent weeks. On the other hand, U.S. reference paraxylene increased 4%, resulting in a spread between North American and Asian prices of $258. That is 12% higher than the previous quarter. However, consistently declining in May and June. Compatible EBITDA decreased to $102 million, a 20% reduction year-over-year as reference margins remain at lower levels.

7:17 Now delving into the plastic and chemical segment, volume reached 202,000 tons, down 4% quarter on quarter, primarily related to the temporary production interruptions from the Altamira sites, particularly for EPS. Polypropylene reference margins remain flat at 15 cents per pound, mainly from supply and demand dynamics. Average reference propylene prices decreased to 47 cents per pound, down 13% versus the previous quarter. EPS, however, saw a recovery. North American reference margins increased to an average of 26 cents per pound, 40% higher quarter over quarter. Average reference prices for styling rose to 60 cents per pound, up 3% from the first quarter.

8:04 Compatible EBITDA was 52 million, up 20% quarter on quarter. Polypropylene remained in line and EPS improved as raw material prices declined throughout the quarter. Particularly in June, a supply in North America normalizing following the effects of industry shutdowns earlier this year. In recent months, interruptions to shipping routes have led to ocean freight costs reaching levels not seen since 2022. If the trend continues, margins could improve, or it could represent a potential opportunity for upticks. Turning to free cash flow, for the second quarter, CAPEC was below expected levels of $22 million, comprised mostly of scheduled maintenance. We remain on track to conclude the year below the guidance of $200 million for the year, with a strong commitment to disciplined capital allocation.

8:56 Networking capital improved by $34 million, as polyester raw material prices rose slightly, while polypropylene raw material prices decreased, as did EPS on a month-to-month basis. And finally, regarding the company's financial position, net debt decreased 5% sequentially to $1.73 billion, as efforts to improve cash flow generation continue to yield positive results. Last 12 months reported debita was $517 million, resulting in a net debt-to-debita ratio of 3.3 times, down from 3.7 times in the previous quarter. The company also maintained its investment grade across the three rating agencies. Most notably, in May, Standard & Poor's Global reaffirmed the rating for the company as a stable and triple B-.

9:45 We're confident that APEC is still on track to lower its leverage ratio, and we remain committed to approaching our targets of 2.5 times per year. Thank you for your attention. I'll turn the call back to Jorge.

9:58 Thank you, Jose Carlos. Coming back to the priorities we established for 2024, I would like to highlight the progress we have made during the quarter. First, regarding our structural cost reduction, as we mentioned earlier, we concluded the organizational restructuring of the polyester business, indicating 100% completion of the initiatives which we have been sharing with you since the beginning of the year, reaching $75 million in annualized benefits. We remain committed to identifying further efficiency opportunities to maintain this momentum. Second, capitalizing our position as a domestic supplier by continuing our commitment to offer a reliable supply of high quality products and sustainable packaging solutions.

10:49 As an example, I'm proud to share that our polyester business just unveiled a new patented technology called Kapitol. Under such technology, we provide a resin that is suitable to make bottle caps 100% from PET resin. Thus, the bottle would be made entirely from PET, making it easier to recycle without losing any functionality. We expect to determine the commercialization timeline in the near future. And third, maximizing cash flow and further strengthening our balance sheet through disciplined capital allocation, networking capital optimization. And as mentioned before, we continue to make progress in the vestiges of non-strategic assets that we can monetize.

11:36 Looking forward to the second half of the year, we believe the industry will continue to gradually move towards more normalized demand, although we acknowledge petrochemical markets are still subject to excess capacity. Meanwhile, disruptions in trade flows across the world have led to rising ocean freight costs, which could generate potential opportunities for Alpec. Finally, I would like to reiterate that the figures for the second quarter fully met our expectations, despite the situation we face at Altamira, and we remain confident that we will meet our full year guidance for EBITDA. Barbara, I'll turn the call back to you.

12:22 Thanks, Jorge. At this time, we will be taking your questions. To ask your question live, please raise your hand. We will call on participants in the order they appear. You may also type your question through the Q&A function. We will attempt to cover as many questions as time allows. Our first question comes from Tiago Casqueiro from Morgan Stanley. Tiago, please proceed with your question.

12:53 Hey, hello. Thank you for taking my questions. I have two here. The first one is regarding global capacity. We have seen some closing of PT and PTA capacity in Europe. And I would like to take your view on this trend, especially if we should see this happening in other regions. And the second one is if you could comment if there is any update on the divestment of non non strategic assets. Thank you.

13:23 Thanks for the question. Yes, I think this is a potential, the beginning of a trend of where the least competitive assets across the world might have to shut down. I mean, we really don't have further insights of what other assets would follow or specifically when. But it would be expected that again over the next year or two, we should see some more of those announcements. I think Europe in particular is a challenge region as it faces stiff competition from imports and it has higher energy costs.

14:10 And I'll ask Jose Carlos to respond the question on the update on the non-strategic asset.

14:18 Thank you, Jorge. Thank you, Piago, for your question. Yes, we're making progress on two fronts. I mean, there are some assets that are easier to monetize, certain pieces of land, certain equipment that were in plans that are no longer used, and we've been making progress throughout the year. Well, probably 50 or 70% in concluding that activity. By the end of the year, we might see a total amount within that category of around $20 million. But as we have communicated, there's a more valuable asset that we are starting with more detail. That's the land that we have from the closure of the plant of the fiber production in Monterrey.

15:04 We already retain advisors to help us see what's the purpose of that land. And we hope that by the end of the year, we have more clarity on what's the value and what's the role that we want to have in the monetization of that asset. So we're making progress, not something that we can announce at this moment. Hopefully by the end of the year, we'll have a clear idea.

15:28 and just returning to the first question and as you know well last year in 2023 ourselves as Alpec we began the process of looking into our footprint and two of our facilities did shut down one of our PET plants where we consolidated the the production and sales from that facility into the rest of our system so that we have a more robust footprint and second or polyester textile filament facility in Monterey that we also did shut down as it was not strategic for us to continue to participate in the fiber business.

16:14 Very clear. Thank you.

16:17 You're welcome.

16:18 Thank you.

16:20 Our next question comes from Taso Vasconcelos from UES. Taso, please proceed with your question.

16:40 Hey, can you hear me?

16:43 Yes, we can hear you.

16:45 Oh, great. Hi, Jorge. Hi, Jose Carlos. Hey, Barbara. Thanks for taking my questions. I have two questions here on the CapEx front, probably for Jose Carlos. The first one, Carlos, you already said that you are on track to deliver a CAPEX in the full year below the guidance, right? But on the other side, the company didn't update the 200 million for the full year, which is the current guidance. So I think it would be great to hear your thoughts here on what should we expect for the second half of this year. Should we see an annual run rate based on the first half? Should we see an improvement in the second half? So just to get your update view here on expectations for the second half of this year. And maybe looking into 2025, how structural is this CAPEX for this year?

17:33 Can we expect a similar level for next year? Or because you guys are reducing the overall expenses for this year, should we see a revamp on the CAPEX for next year? Those are my two questions. Thank you.

17:48 Thank you, Tasso. I hope you're doing well. Well, yes, we've been very careful on capital allocation throughout the first half. We've mainly focused on keeping all of our facilities the best shape they can be. So a lot of maintenance capex has been spent throughout the first half. In the second half, we're expecting to ramp up certain strategic projects. There's an investment, for example, in recycling and EPS that will materialize in the second half of the year. There are some other strategic investments that we'll plan to materialize throughout the second half. So I say that probably will be probably 30 or 40% higher than the rhythm that you saw in the first half of the year. So yes, below the 200 million, but not at the same rate that we saw in the first half of this year.

18:45 Now, looking forward, we still have very good opportunities to invest. We're looking at opportunities to reduce costs, and there's a project ongoing that we're studying with a lot of detail. We have opportunities to improve our recycling operations. We do have opportunities to enter into adjacencies and, for example, what Jorge indicated on this pet, oil pet bottle that we're exploring. So there might be additional strategic capex throughout 2025. um not ready at the moment to give you a specific number but probably in the order of 200 plus all right that's clear thank you very much our next question comes from leonardo marcondes from bank of america leo please proceed with your question

19:42 Hi, guys. Thank you. Can you hear me?

19:46 Yes.

19:47 Okay, great. So hi, everyone. Jorge, Paul, Bárbara, Alejandra. Thanks for picking my questions here. I have two for my end. The first one is on spreads, but maybe a bit more focused on the plastic and chemical segment. It has been a while that polypropylene spreads have been very tight in North America as operating rates remain very, very low, right? So my question for you is, when do you guys expect PP producers in the US to be able to set higher prices and increase margins? My second question here is regarding the capital allocation. Despite the challenging environment, OPEC has been able to deliver positive cash flows, right? So my question here is how should we think in terms of capital allocation in the short to mid term?

20:46 Is the focus to bring leverage maybe a bit more down, or could we expect any sort of, I don't know, dividends or any kind of remuneration this year? Thank you.

21:02 Okay, thanks for the question, Leonardo. I'll start with the question on spreads, and you were more interested in particularly on polypropylene spreads. We think right now the spreads have been relative to the cycle at a very low point and they have been steady. I think there is still some level of overcapacity in the North American industry that is keeping the spread at those levels. There have been attempts from the more established, the larger I think we might be one event, you know, one tropical storm or one supply disruption from potentially the spreads moving moving higher.

22:07 but but so far um they they're they're steady and and and again we might still have uh at least for the balance of the year some level of over capacity but again one one event in the industry could could change that um but that's that's the view so generally speaking we continue to you know Prepare and operate as if the low spreads will last for longer. I mean, that has to be the nature of our strategy. But also remain agile and ready to capitalize should spreads improve by natural improvement in the supply-demand ratio or by the result of industry-specific events that may again bring disruptions and opportunities.

23:08 Maybe Leo, I can jump in regarding your question on capital allocation. I'll state as we have stated before that we're committed to coming closer to the 2.5 times net debt to EBITDA. That's our target. With the numbers that we're reporting as of today, it seems doable by the end of the year. or something very close to that. So at this moment, we announced that there will be no dividends in 2024. However, that's a situation that we're always evaluating. And if there's room, well, we'll propose something to our shareholders. But at the moment, I'll say we're targeting the 2.5 times net debt to be done. And with that, we'll evaluate if there are any further opportunities going forward.

23:56 Perfect. Thank you guys. Thank you.

24:00 Our next question comes from Pablo Ricardo from Santander. Pablo, please proceed with your question.

24:06 I don't know if you can hear me now.

24:13 Yes.

24:14 I have two questions. One is related to those questions on the real estate divestment. I was wondering in case you manage to sell the asset before year end, if it's fair to assume maybe you can pay an extraordinary dividend this year or you will wait until 2025 to maybe restart the dividend program. That's my first question. Another one is from the working capital. How should we see working capital for the second half of the year?

24:45 Yes, Pablo Jorge here. Well, the real estate for all the priorities to maximize the value that we can, you know, get from from that asset. You know, it's a very nice piece of real estate in the center of the city. And, and obviously, we want to capitalize and monetize it. But right now we're in the middle of a study. and we will have probably not until the end of towards the end of the year that analysis that will provide us with the you know with a potential roadmap to on the best way to capitalize that asset i don't think we want to rush to any decision um Probably we don't want to hold into the asset for too long either, but there has to be the right time. And for that, we just need more information.

25:44 We are not experts on real estate matters. And I think we can take that time to evaluate the opportunity to maximize the value for the shareholders. So it's less likely that something will happen before the end of the year. And most likely something we will carry into next year. Regarding working capital levels for the second half, I would say at this moment, probably not a very significant change going forward. I mean, there is always volatility in the working capital. We are close to the number of days of working capital. So depending on if prices go up or down, we will see a fluctuation on the cash flow. But assuming steady prices, We would expect steady working capital, maybe a slight, still some slight opportunities to continue to recover and improve on working capital, but more moderate from what we have seen in the last 18 months, for example.

26:54 I hope that answers the questions, Pablo.

26:57 Yes, perfect. Thanks, Alberto. Congrats on the results.

27:01 Thank you. Thank you.

27:05 Our next question comes from Andres Cardona from City. Andres, please proceed with your question.

27:13 Hi, good morning, Jorge, Jose Carlos. I have two questions. The first one is if you can help us to understand how big the oversupply coming from China is perhaps as a reference of total supply or demand. And the second one, on the other hand, Given the delay of Corpus Christi, could you help us to understand how the US structural deficit has evolved over time? I remember last time it was around 1 million tons, but just wanted to make sure it is the accurate and most updated number for the Americas or USA. Thank you.

27:53 Yes, Andres. You know, the first question on the oversupply from China, I think the answer varies by product. I think, for example, EPS and polyester, the excess capacity in China that is earmarked for export is probably more than 50% of the installed capacity. So you're talking, you know, several million tons per year of capacity that is available for exports. In our key markets, specific imports from China are relatively low because in our key markets, most of our key markets, there are anti-dumping duties in place versus China that have been in place for a long time.

28:48 Notwithstanding, China exports to many other regions and displaces other countries. Other Asian countries mainly, and those other countries are the ones that bring most of the import volumes to our key regions. So it's indirect, the pressure. The prices from the non-China origins are not as low as the China. But we still need to be very sharp in our cost to compete effectively with those imports, not only through cost, but also through innovation and good service with the customers.

29:34 But all in all, Asia still has a relatively high percentage of their capacity. that is again available for export so it's not new i mean it's been happening for for a while but right now i would say this year perhaps next year um the situation is uh is probably somewhat more acute than what we have seen in the past and on on the north american deficit yes the deficit probably peaked in 2022 with more than 1 million tons of PET deficit in the Americas. It's been trending down slightly. I think what happened in 2022, we enjoyed a peak of demand with the COVID issues and the implications for packaging demand and and with people building up inventories significantly in 21 and 22.

30:37 So that was the peak of demand and imports were again north of 1 million tons. Right now they are at 1 million or slightly below 1 million tons. So not significant change and if at all some slight reduction from in the last couple of years.

30:58 Thank you, Jorge.

31:00 You're welcome.

31:04 Our next question comes from Karim Zawadini from Moon Capital. Karim, please proceed with your question.

31:11 Yeah, I don't know if you can hear me. Hi, Jorge. Hi, Jose Carlos. My questions are two things. One is on shipping costs. Obviously, shipping costs have been elevated for a few months. I was wondering, when do you think that starts to kick in into some of the pricing you see in your markets? One and two, if you can just give us an update on any tariff news or

31:35 Thank you for your questions. Yes, as you mentioned, the shipping costs have been increasing recently. It's been, you know, they increased in the beginning of the year, then they came down. And over the last two or three months, they have gone higher. The last couple of weeks, they have either stabilized or began to come down slightly, but they remain at an elevated level. It takes some time for us to see the effects in our business. In these regions, especially North America, some of the agreements tend to be of annual nature, so if the higher freights persist, And persists, let's say towards the end of the year, then we might see some of those improvements more into 2025.

32:40 In some other of our regions like South America, the import price model applies and we tend to update the freights more often. But notwithstanding that, there is always a lag. So maybe in our South American business, we will see the effects in the second half and in North America probably more towards next year. It will depend a lot on how long they last and the numbers we tend to show in the charts are the numbers that are more representative of spot rates and because those are already available from various sources of information.

33:26 In real life, in practice, some customers tend to do contracts and those could be six-month contracts, 12-month contracts. So it varies. So it takes time, but most definitely container freights staying high is a step in the right direction for a result. So we expect to see again some Some partial benefits in the second half, and to the extent they last, more into next year.

33:58 Great. Just on tariffs as well, if there's any new color?

34:04 Yes, during the quarter, I think in May, I think in April, Mexico didn't move on rates, on import tariff rates for some years. or from a long list of products, several hundred tariff rates. In the products that are relevant for ALPEC, with higher rates, we have PET resin and EPS. So those have, for countries where there is no free trade agreement, 35% import duty rate. Now, at the same time as we have mentioned in previous calls, obviously we support fair trade and those are welcome relief measures, especially from some countries that we believe shape with levels that do not represent fair trade, like China. But at the same time, there is stiff regional local competition.

35:15 There are still significant imports from countries that do not have or the ability to the customers who have the ability to bring imports from countries that do not have that have free trade agreements with with Mexico for example this example of 35% again is is Mexico and and again it's it's a step in the right direction and but there are still plenty of of supply options, competitive prices for our customers, and we compete on those. And from other countries, no significant changes. Last, and back to Mexico, the industry did present, before knowing these import duties, or besides this effort on these import duties, because these are temporary.

36:11 Initially, these duties established in 2024 are for a two-year period. But in parallel, the PET industry did apply for a review of the imports from China for potential anti-dumping duties that might last longer than two years. But that one still under review the case and we expect to hear from the authorities that are reviewing the case in the second half, whether there is any preliminary determination or anti dumping duty. So we'll It remains an active focus for us to follow all the trade activity in the products that are relevant for us.

37:07 So we are on top of it. But those are the key updates, Karim.

37:11 Thank you. Hopefully this answers your two questions.

37:14 Yeah, thank you very much.

37:18 Our next question comes from Alejandra Andrade from JP Morgan. Alejandra, please proceed with your question.

37:25 Hi, good morning. Thank you for taking my question. I just wanted to follow up on the working capital release that you saw in the second quarter. You mentioned a decline in raw material costs for one of your businesses, but I'm seeing a build up in accounts payable, slightly lower inventories. Could you just give a little bit more detail of what happened in the quarter? Thank you.

37:48 Yes, I mean, in the quarter, I think we probably, if you remember in the first quarter, we had a more significant investment in working capital. So in the second quarter, we saw, again, some adjustments from that first quarter increase. And then in the second quarter, we had a moderate recovery. I think sitting here today, I think our finished product inventories are maybe a little bit on the low side because of the Altamira water scarcity situation. But our raw material inventories are on the high side because of the same reason.

38:33 It takes time. We have long supply pipelines for raw materials. I think our payables, I mean, I will need to see the detail. I mean, nothing, I mean, no changes in, no significant changes in terms of payment. And that's probably the normal volatility of that line from the balance sheet. But as I mentioned in an earlier question, when you put everything on the table, we are close to the number of days of operating working capital that we target. Maybe we're still a couple of days above, so we expect to be steady, but we remain focused, try to, you know, try to improve on working capital at least a little bit during the second half.

39:26 Thank you so much.

39:27 You're welcome.

39:32 Our next question comes from Emilio Anton Antor from JVM. Emilio, please proceed with your question.

39:40 Hello, can you guys hear me?

39:43 Yes.

39:44 Perfect. First of all, hello, Jorge. Hello, Jose. My question is, can you provide a breakdown of the 200 million in CapEx, specifically talking for how much is allocated for maintenance CapEx?

40:05 Thank you Emilio for your question yes out of the 200 million I'll say that 70 to 80 percent is related to maintenance and the remaining would be no I'm sorry in absolute probably it's 120 million would be maintained yeah I was giving you the wrong percentage 120 million it's related to maintenance and 80 million are related to strategic investments from the guidance from the guidance yeah

40:34 And from the actual, I would say the percentage has been higher on for maintenance campus. Correct. So far.

40:42 Exactly. The number that I was giving you, the 80% that's related to the first half campus has been 80% related to maintenance.

40:52 Perfect. And you guys expect to reach it?

40:56 No, we're not expecting to reach guidance for the 200 million. We're probably below, but we do expect an increase in capex in the second half as some strategic projects will materialize. Some will be, for example, installing some portion of the capacity for recycling in EPS, and that was expected in the second half. So there's an increase in the rate or the run rate that we have for capex.

41:28 Thank you. That will be all.

41:30 Thank you.

41:36 We have a couple of questions from the Q&A chat. I will proceed to read them. The first question is from Melissa Marcos from Jefferies. Could you please comment on the expected timing for the spin up from Alpha?

41:55 No, I think as ALPEC, we cannot comment on the timing from that spin-off. That's an alpha project and the timing and the process is defined by them. Notwithstanding, ALPEC has been preparing over the last several years to be ready for when that moment comes. And I think, again, ALPEC has been working on its functional independence from systems and many perspectives. But the specific timing of when that happens is is not is not Alpex decision.

42:35 The next question is from second Helen from Santander. Can you update us on the amount available on their credit facilities now?

42:46 Yeah, in some previous calls we've shared the maturity profile of our debt. I don't know if we have it here, but you'll be able to go consult it in our presentations. As you will see there, we have a small facility that matures in 26. It's bilateral with one bank. Then we have a larger facility in the 27 that consists of several bilaterals. And then we have some bonds that are standing for 29 and 31. At this moment, we don't have any relevant maturity that is due in the next 24 months. So we're feeling very comfortable with where we are with our debt profile. That's one of the key selling topics that we've discussed with our rating agencies. And I'll also indicate that we have cash on hand.

43:33 Close to $600 million of available committed credit lines that are unused. So fortunately enough, we do have a good maturity profile for our debt and a lot of cash available to us. And that's something that we're continuously monitoring and see if there's any opportunity to refinance. But at this moment, we're comfortable where we are.

44:01 The next question relates to the Altamira situation. What actions were implemented or are expected to be implemented to mitigate the risk of water use restrictions in Altamira or in general in the facilities that ALPEC operates?

44:18 Yes, I think in the, you know, to mitigate the specific event that already happened, I think, again, as I mentioned earlier, we were very proud of for The agility and the communion from our people, in spite of the crisis, we were able to, we had three facilities, three or four businesses are in the area, but one of our businesses fortunately consumes little water, so we managed to, through some actions, to find enough to run one of our businesses. And again to mitigate through other actions the effect of the water scarcity during this second quarter of 2024.

45:08 I think what is important to mention is the amount of rain and water that was collected in the lagoon system in the area. did reach a level that we probably had not seen in 15 years so right now the system is full and so we would expect that next year I mean the probability of facing issues next year is significantly less given the current level but notwithstanding we we have already taken actions in the past from previous events and we have been investing in our facility this was unprecedented And right now we are reviewing some other projects that will deal with the risk of not having water in the future. So again, we have several long-term alternatives.

46:05 I mean, we have been talking about accessing The treated water from the municipalities in the area, that's potentially one source for us. Desalination plants is another possibility, although we would consider that as the last resource given the capital requirements, so we don't think we will have to go that far. And from some of our facilities, wells, especially those that use relatively smaller amounts of water, wells in our sites could be also a possibility to mitigate risk. So we will, again, we are already reviewing all those alternatives.

46:51 I think the infrastructure in the area can also be improved. That would be a government project with support from the industry. And by infrastructure, I mean ways to retain the water better in the lagoon system. So I think there is a long list of activities. I think it's we're fully committed to reduce and eliminate that risk. And right now I believe or we believe that Given the recovery of the levels that we have seen now, that we should have enough time to implement the best long-term solution. So we are diligently working on that so that it's not an issue going forward.

47:38 Our next question relates to our delivery plan. It says, what actions do you plan to take to reach the goal of 2.5 times in relation to debt?

47:49 Thank you. Very good question. As a reminder, we're targeting 2.5 times by the end of the year. The actions, many of them have already been implemented. First of all, improving our EBITDA and achieving the $600 million target or guidance that we've been. We've done. I think it's that's doable. There's even a little bit of upside, but that's one of the basis that we have for the leveraging. Second, capital allocation, a lot of discipline. We already commented on our capex and what we've done in the last few months to improve and reduce the capex that we're investing. However, not stopping any relevant maintenance and ensuring the operation from our facilities. Second, Jorge already commented on working capital.

48:36 There's been a lot of measures. We expect to improve even further on working capital. And third, we're not paying a dividend this year that will allow us to preserve cash and improve our chances of getting closer to the 2.5 times. And finally, I'll say the cost reduction initiatives Jorge already commented, we have achieved the majority of them. We're looking for additional opportunities, but that's one of the key elements of improving our performance. So we feel comfortable that we'll be closer to the 2.5 times by the end of the year.

49:18 Our next question is about Corpus Christi. Is there any update on the Corpus Christi project?

49:26 No, no updates yet. I think it is the intention of the owners of Corpus Christi to meet sometime later in the year to assess the situation of Corpus Christi. So right now, no significant changes from what we have shared recently.

49:53 That was the last question on the queue. Thanks everyone for joining our webcasts. Have a great day.