Vitro, S.A.B. de C.V., the leading glass producer in Mexico, has announced its unaudited results for the fourth quarter 2013 and fiscal year 2013.
Fourth Quarter 2013 highlights include a solid performance across Glass Containers segments and Flat Glass exports to US, partially offset a Consolidated Net sales decline of 7.5%, derived from expected lower sales volumes in the Automotive and Beer segments at Flat Glass and Glass Containers.
Consolidated EBITDA reached USD 56 million, down 3.8% YoY, impacted by lower sales, increasing gas prices and certain non-operating effects. Despite higher natural gas prices, FY 2013 EBITDA increased 4.3%, YoY, to USD 355 million, driven by cost reduction efforts, stable price mix and lower restructuring expenses.
FY2013 Free Cash Flow before Capital Expenditures increased to USD 268 million, from USD 180 million in FY2012, boosted by a USD 20 million Working Capital Recovery, compared to a USD 48 million investment during the previous year. Incremental cash flow was used to fund Vitro’s Capital Expenditure of USD 139 million for FY2013.
Commenting on Vitro’s outlook and performance, Adrián Sada Cueva, Chief Executive Officer, said “This was a challenging year for Vitro, given the expected reduction of sales in the Automotive and Beer segments, however, our continued efforts in new client and product development allowed us to partially offset the market weakness. Further capitalizing on our existing growth opportunities, this year we regained additional Original Equipment Manufacturers business that was lost during the last part of our debt restructuring process, totalling annual revenue for approximately USD 50 million, which we expect to benefit the company starting mid-2015. Moreover, the issuance of our Ps.1.2 billion trade receivable program in November 2013, has allowed us to further strengthen our balance sheet by refinancing higher cost debt, extending debt maturities and even more, using the remaining funds to pay in advance other current debt”.
“We also continued to make progress on our strategy to further enhance operational performance, which contributed to compensate for weaker sales, higher natural gas prices and non-operating effects. Overall, we reported full-year EBITDA of USD 355 million, up 4.3% YoY, reflecting the outcome of our cost reduction efforts and lower expenses during 2013”.
On the balance sheet, Claudio Del Valle, Chief Financial Officer, noted: “On 15 November 2013, Vitro completed the issuance of a Ps.1.2 billion trade receivable securitization program for a three-year term and an interbank equilibrium interest rate (TIIE for its acronym in Spanish) plus 1.7%, rated AAA by both Standard & Poor’s and HR Ratings. Proceeds were used to pay in advance two trade receivable debt programs at Glass Containers, Senior Notes at Flat Glass and other high cost debt, thus reducing Vitro’s financial cost and extending debt maturities. As of 31 December 2013, total net debt increased by USD 127 million YoY to USD 1,071 million, reflecting the net effect of the issuance of the USD 235 million note in 2Q’13, the prepayment of the MCDs during 3Q’13 and additional debt related to strategic projects”.
“Furthermore, on 1 January 2014 we completed the simultaneous merger of our subsidiaries FIC Regiomontano, S.A.P.I. de C.V. (“FIC”) and Compañía Vidriera, S.A. de C.V. (“COVISA”) into Vitro. This allowed us to increase Vitro’s Shareholders Equity by 20%, which became property of Fintech Advisory and thus fulfil one of the commitments agreed with this financial partner. Also, this merge will provide further flexibility to the company, enhancing its operational and managerial structure” noted Del Valle.
“Looking ahead, while we face a challenging 2014, we will remain focused on enhancing operating efficiency across the company. Leveraging our solid business fundamentals and our strengthened balance sheet, we will continue to maximize the long-term growth opportunities we see in our markets offering quality products and services. We are confident we can successfully continue to gain new business from current and potential new customers” concluded Sada.
Consolidated Net Sales decreased 7.5% to USD 391 million in 4Q’13, from USD 423 million during 4Q’12, mainly reflecting lower sales volumes in the Automotive segment at Flat Glass, derived from sales volume shifted away during the last part of Vitro’s debt restructuring process; and in the Beer segment at Glass Containers, as 2012 Beer segment volume was boosted by non-recurrent additional demand.
Despite factors previously mentioned, Consolidated Net Sales for fiscal year 2013 decreased at a lesser pace, by 4.8% YoY to USD 1,675 million, from USD 1,759 million in 2012, a decline narrowed by a strong demand across Glass Containers segments, and higher exports in Flat Glass.
Glass Containers sales decreased 10.3% in 4Q’13 to USD 266 million, from USD 297 million in 4Q’12, while sales for fiscal year 2013 reported a lower decline of 3.3% to USD 1,148 million, from USD 1,188 million in 2012. 4Q’13 domestic sales volumes increased across all segments, driven by new clients in the CFT segment as well as higher sales of non-returnable glass containers in Soft Beverages, benefiting price mix and partially compensating for a sharp decline in the Beer segment, when compared to 2012 sales volumes boosted by non-recurrent additional demand from one client.
Export sales increased 1.6% to USD 95 million in 4Q’13, from USD 93 million in 4Q’12. Increasing sales in the Beer and Wine & Spirits segments into Caribbean markets, coupled with higher CFT sales into the US, compensated for the impact of decreasing CFT sales to Latin American markets. During fiscal year 2013 export sales increased 0.2% to USD 423 million, from USD 422 million in 2012 while foreign subsidiaries’ sales decreased 3.3% during the same period.
Flat Glass sales decreased 8.2% to USD 125 million, from USD 136 million in 4Q’12. Sales drop was shrunken by a good performance in the domestic market and a very competitive price mix, despite continued impact by lower float glass sales to the automotive market derived from volume shifted away during last part of restructuring process. These factors pushed domestic sales down 3.8% to USD 85 million in 4Q’13, from USD 88 million during 4Q’12.
Export sales showed a solid performance in the US markets due to increasing sales volumes and a better price mix, coupled with higher AGR sales in the automotive segment. These factors lessen the decreased in sales to USD 31 million, from USD 39 million in 4Q’12, mainly derived from the anticipated lower sales of automotive glass to OEM and a capacity shift from South and Central American markets into the domestic market. Foreign subsidiaries’ sales increased 1.8% to USD 10 million, from USD 9 million in 4Q’12.
During 4Q’13, consolidated EBIT increased to USD 20 million, from USD 10 million in 4Q’12, while the margin gained 260 basis points increasing to 5.0%, from 2.4% in 4Q’12. EBITDA decreased 3.8% to USD 56 million, from USD 58 million in 4Q’12, while the margin raised 50 basis points to 14.2% compared to 13.7% in 4Q’12.
During the 2Q’13, and according to the information available at that moment, the Company recognized a non-recurring benefit related to an employment promotion benefit. As of 4Q’13, and according with the information available at that time, Vitro reduced the amount previously recognized. This factor caused a negative effect, particularly on the EBIT and EBITDA of Glass Containers business unit.
For fiscal year 2013 EBIT increased 16.8% to USD 210 million, from USD 179 million in 2012, while EBITDA increased 4.3% to USD 355 million, from USD 341 million in the previous year, benefited by a leaner management structure, cost reduction efforts and lower legal expenses.
Glass Containers EBIT decreased 12% to USD 22 million in 4Q’13, from USD 25 million in 4Q’12 while EBITDA decreased 14% to USD 49 million, from USD 57 million in 4Q’12. Nonetheless, FY2013 EBIT increased 24% to USD 188 million, from USD 151 million in 2012, while EBITDA increased 12% to USD 296 in FY2013, from USD 265 in 2012.
The positive impact of a solid performance across all segments, a strong price mix resulting from increasing sales of value added products, particularly in the CFT segment, and cost reduction efforts throughout all facilities partially offset the impact of a reduction in the amount of the employment promotion benefit previously recognized in the 2Q’13, coupled with the negative effect of increasing natural gas prices and a weak performance in the Beer segment.
Flat Glass EBIT increased to USD 8 million in 4Q’13, from a negative EBIT of USD 8 million in 4Q’12, while EBITDA increased to USD 17 million, from USD 6 million in the same period last year. The EBIT and EBITDA margins increased to 6.5% and 13.4%, respectively.
During 4Q’13 EBIT and EBITDA were boosted by the cost reduction efforts, better average price mix and lower legal expenses. These factors more than compensated for the negative effect of lower OEM automotive glass sales, higher natural gas prices and price pressure particularly in one of the company’s export markets.
Total Financing Result for 4Q’13 was an expense of USD 36 million, 13% down from an expense of USD 41 million in 4Q’12, mainly reflect a Foreign Exchange (“FX”) Gain of USD 2 million, versus a FX Loss of USD 27 million during the same period in 2012, which more than compensated for higher Other Financial Expenses of USD 14 million during 4Q’13 and flat Net Interest Expenses of USD 24 million for both 4Q 2013 and 2012 periods.
Total Financing Result for the fiscal year 2013 was an expense of USD 130 million, 31% down from an expense of USD 190 million in 2012, primarily driven by a decrease in FX Loss Year-over-Year to USD 6 million, from USD 34 million in 2012, lower Net Interest Expenses of USD 91 million, compared to USD 109 million in 2012, and Other Financial Expenses of USD 34 million down from USD 47 million in the previous year, reflecting lower expenses related to the company’s restructuring process.
Total Income Tax for the 4Q’13 was a benefit of USD 15 million, down from a Total Income Tax benefit of USD 128 million in 4Q’12. During fiscal year 2013, Total Income Tax was USD 18 million, compared to a benefit of USD 100 million for the same period last year.
Despite a lower Accrued Income Tax for the 2013 periods, 4Q’12 and fiscal year 2012 reflect a higher gain in the Deferred Income Tax as a result of the debt restructuring process, which benefited 4Q’12.
For the 4Q’13 the company registered a Consolidated Net Loss of USD 15 million, mainly derived from the impact of a USD 36 million Total Financing Result expense primarily due to higher other financial expenses, counterweighting the positive effect of USD 20 million of EBIT and a USD 15 million tax benefit.
As of 31 December 2013, the company had a cash balance of USD 191 million, of which USD 23 million was restricted cash including collateralized lease contracts and cash related to Vitro’s accounts receivable financing program, resulting in a unrestricted cash balance of USD 168 million.
Total Net Debt, which is calculated by deducting cash and cash equivalents, increased by USD 127 million to USD 1,071 million, from USD 944 million at the end of 4Q’12, reflecting the net effect of the issuance of a USD 235 million Note by a Vitro subsidiary according to the settlement agreement with Fintech, the prepayment of the company’s 2015 Mandatory Convertible Debentures on 11 July 2013 for USD 122.4 million, as previously communicated, as well as additional debt related to strategic projects. Consolidated Total Debt as of 31 December 2013 was USD 1,262 million, up USD 109 million from USD 1,153 million at the end of 4Q’12.
During 4Q’13 Vitro reported negative Net Free Cash Flow of USD 35 million, compared to Net Free Cash Flow of USD 32 million in 4Q’12. Net Free Cash Flow was impacted mainly by a higher Capital Expenditure as the company started major repairs at a furnace in its Guadalajara facility. Increasing Net Interest Paid of USD 49 million reflecting 2018 note and 2015 note interest payments, compared to USD 24 million in 4Q’12 and a lower Working Capital recovery also impacted Net Free Cash Flow result.
For the Fiscal year 2013, Net Free Cash Flow was USD 129 million, compared to USD 94 million in 2012, primarily reflecting a Working Capital recovery of USD 20 million, compared to a USD 48 million Working Capital investment in the prior year, and a lower Net Interest Paid, offsetting the effect of a higher CapEx.
During 4Q’13 CapEx totalled USD 58 million, compared to USD 38 million in 4Q’12. Glass Containers represented 84% of total CapEx, mainly invested in furnace capacity improvements, maintenance in various facilities and manufacturing of moulds used in production of glass containers. Flat Glass accounted for the remaining 16%, utilized for a new furnace capacity expansion and racks and tooling for the auto glass segment, improvements in value-added lines and maintenance and diverse repairs. On November 15, 2013 Vitro successfully completed its new issuance programme (VTOSCB 13) guaranteed by the trade receivable of its subsidiaries Compañía Vidriera, S.A. de C.V. (COVISA), Vitro Automotriz, S.A. de C.V. (VAU), Vitro Vidrio y Cristal, S.A. de C.V. (VVC), and Vitro Flotado Cubiertas, S.A. de C.V. (VFC).
The issuance, with a face value of MXN 1,200 million, a maturity of 3 years, and an interbank equilibrium interest rate (TIIE for its acronym in Spanish) plus 1.7%, has two AAA ratings given by Standard & Poor's and HR Ratings respectively, and was placed by Casa de Bolsa Banorte Ixe and Casa de Bolsa BBVA Bancomer as leaders and Actinver as co-leader.
The proceeds served to pay in advance its two current programs guaranteed by the trade receivable of the Glass Containers business unit: VENACB 09 and VENACB 11, as well as a private issuance of Senior Notes guaranteed by the trade receivable of the Flat Glass business unit: VPLANO. The remaining fund served to prepay other current debt, reducing debt costs related and increasing its maturity.
This new issuance combines both strength and diversification due to Vitro’s diverse market portfolio and to the great number of clients that are leaders in their sectors, resulting in a solid trade receivable securitization programme.
On 1 January 2014, in fulfilment of the agreements adopted by the General Extraordinary Shareholders’ Meetings held on 5 September and on 11 December 2013, the simultaneous merger of FIC and COVISA into Vitro had full effect.
This merger was performed inasmuch all the terms for the merger of FIC and all the conditions for the merger of COVISA have been fulfilled according to the resolutions of the General Extraordinary Shareholders’ Meeting held on 5 September 2013.
As a result of the merger, Vitro’s Shareholders Equity increased 20%, some which became property of Fintech Advisory Ltd. (“Fintech”) to fulfil the agreements reached on 1 March 2013 with such financial partner. As a consequence, the total number of Vitro’s shares now amounts to 483’571,429.
Texas Court formally concludes the insolvency proceedings of Vitro’s subsidiaries in the United States of America
On 21 February 2014, the Company announced that the Bankruptcy Court for the Northern District of Texas entered the order to formally conclude the insolvency proceedings of its subsidiaries in the United States, which underwent Chapter 11 proceedings in that country.
Judge Harlin D. Hale granted the motion to close the insolvency proceedings of Vitro’s subsidiaries located in the US, given that all requirements of the restructuring plan approved by the creditors were met on 19 December 2013.
With this action, the companies Vitro Asset Corp (n/k/a American Asset Holdings Limited), Vitro Chemicals, Fibers & Mining, LLC, Troper Services, Inc. (n/k/a Danim Inc.), Amsilco Holdings, Inc. (n/k/a Amsilco Holdings Limited), B.B.O. Holdings, Inc. (n/k/a B.B.O. Holdings Limited), Binswanger Glass Company (n/k/a Bellaboo Inc.), Crisa Corporation (n/k/a Glazet Limited), V-MX Holdings, LLC (n/k/a V-MX Holdings Limited), and Vitro Packaging, LLC., all Vitro’s subsidiaries, conclude the insolvency process started on 17 November 2010.
With this order, Vitro formally concludes these legal proceedings in the United States without affecting its customers, as its companies maintained the normal course of their operations during this process.