Second Quarter 2018 Earnings Conference Call
Forward-Looking Statements In addition to historical information, this presentation Mexichem has implemented a Code of Ethics that rules its contains "forward-looking" statements that reflect relationships with its employees, clients, suppliers and general groups. Mexichem ’ s Code of Ethics is available for management's expectations for the future. The words “ anticipate, ” “ believe, ” “ expect, ” “ hope, ” “ have the intention consulting in the following link: of, ” “ might, ” “ plan, ” “ should ” and similar expressions http://www.mexichem.com/Codigo_de_etica.html. generally indicate comments on expectations. The final results may be materially different from current expectations Additionally, according to the terms contained in the due to several factors, which include, but are not limited to, Securities Exchange Act No 42, Mexichem Audit Committee global and local changes in politics, the economy, business, established a mechanism of contact, which allows that any competition, market and regulatory factors, cyclical trends in person that knows the un-fulfilment of operational and relevant sectors; as well as other factors that are highlighted accounting records guidelines and lack of internal controls of under the title “ Risk Factors ” on the annual report submitted the Code of Ethics, from the Company itself or from the by Mexichem to the Mexican National Banking and subsidiaries that this controls, file a complaint which is Securities Commission (CNBV). anonymously guaranteed. The whistleblower program is facilitated by a third party. The telephone number in Mexico The forward-looking statements included herein represent is 01-800-062-12-03. Mexichem ’ s views as of the date of this press release. Mexichem undertakes no obligation to revise or update The website is: http://www.ethic-line.com/mexichem and publicly any forward-looking statement for any reason unless contact e-mail is: mexichem@ethic-line.com. required by law. ” Mexichem ’ s Audit Committee will be notified of all complaints for immediate investigation. 2 Second Quarter 2018 Earnings
▪ Opening Remarks ▪ Business Highlights ▪ Financial Highlights ▪ Closing Remarks 3 Second Quarter 2018 Earnings
Brief Summary of Results EBITDA by Quarter (US mm) 1 2 2013 2014 2015 2016 2017 2018 Second Quarter mm US$ $450 Selected Financial Results 2018 2017 %Var. $400 $350 1,968 1,463 35% Net sales $300 Operating income 317 224 42% $250 EBITDA 423 327 29% $200 EBITDA margin 21.5% 22.3% -84 bps $150 $100 Net majority income 162 67 142% $50 Cash Flow before dividends 150 76 97% $- Free cash flow 88 50 76% 1 2 3 4 Quarter Sales EBITDA 3 mm US$ 2Q17 2Q18 %Var. 2Q17 2Q18 %Var. Vinyl 571 642 12% 141 161 14% Fluent 770 1,144 49% 124 180 45% Fluor 179 230 28% 73 105 44% Eliminations/ Holding (57) (48) -16% (11) (23) 109% Mexichem Consolidated 1,463 1,968 35% 327 423 29% 4 Second Quarter 2018 Earnings
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We Have Created The World ’ s First Agricultural Brain Based on 50 Years of Agricultural and Hydraulic Knowledge, NetBeat ™ is the World ’ s First Automated Precision Irrigation System NetBeat ™ combines real -time data with Dynamic Crop Models™ while minimizing water to personalize irrigation and resource use programs and optimize yields 8 Second Quarter 2018 Earnings
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Strong Performance by Business Group EBITDA margin X% 3.30 Revenues * Organic Revenues Vinyl Fluent Fluor 3.72 15% 30% 2.86 US$Billion 434 419 2.86 318 318 1.82 1.97 1.46 1.73 24% 2.09 35% 225 1.47 1.46 230 1.47 179 179 1.02 1.14 770 770 1.24 1.17 1.29 1.17 624 642 571 571 2Q17 2Q18 IH17 2H18 2Q17 2Q18 IH17 2H18 20.2% 25.6% EBITDA * Organic EBITDA Vinyl Fluent Fluor 59% 42% 843 753 US$mm 18.5% 182 18.5% 43.4% 60% 43.5% 29% 28.7% 21.5% 189 529 529 522 22.3% 423 22.3% 38.7% 102 386 22.4% 123 123 38.7% 13.5% 327 283 45.3% 45.7% 327 105 202 40.8% 202 40.8% 13.7% 13.7% 73 73 286 28.1% 15.7% 180 124 124 16.1% 16.1% 313 307 24.8% 19.1% 224 24.3% 224 19.1% 25.1% 161 158 141 141 25.3% 24.7% 24.7% 2Q17 2Q18 IH17 2H18 2Q17 2Q18 IH17 2H18 Note: Breakdowns consider figures before eliminations. Total figures consider eliminations. Organic Revenues: Exclude: i) Netafim´s results and ii) FX translation effect. Organic EBITDA: Exclude: i) CADE and Netafim Ltd. Acquisition related expenses, ii) Brazil tax legal settlement benefit and iii) the same items mentioned in organic revenues 16 Second Quarter 2018 Earnings
EBITDA Evolution EBITDA 2Q'18 EBITDA 2Q'17 11% 23% 31% 37% 57% 67% of Group EBITDA of Group EBITDA 29% produced in Specialty 10% produced in Specialty Products Products 12% 13% 9% 11% 14% Resins, Derivatives and PMV Upstream Resins, Derivatives and PMV Upstream Specialty Resins and Compounds Downstream Specialty Resins and Compounds Downstream Fluent Netafim Fluent 17 Second Quarter 2018 Earnings
Strong Cash Generation Despite Seasonality Second Quarter January - June 2018 2017 %Var. 2018 2017 % Var. mm US$ EBITDA 423 327 29% 753 529 42% Taxes paid (78) (40) 95% (132) (70) 89% Net interest paid (49) (36) 36% (94) (72) 31% Bank commissions (11) (8) 38% (22) (13) 69% Exchange rate gains (losses) (22) (16) 38% (32) (12) 167% Change in trade working capital (1) (2) (44) (91) -52% (261) (233) 12% 1) PMV's insurance A/R is not Operating cash flow before capex 219 135 62% 212 129 64% included in trade working capital calculation. (65) (46) 41% (126) (95) 33% CAPEX (Organic) CAPEX (Total JV) (5) (24) -79% (11) (86) -87% 2) Trade working capital variation (Jun 18 vs Dec 17) - 11 -100% - 39 -100% CAPEX JV (OXY share) includes Netafim ’ s proforma NET CAPEX JV (5) (13) -62% (11) (47) -77% results for comparative purposes. Total CAPEX (organic & JV) (70) (60) 17% (136) (142) -4% Cash flow before dividends 150 76 97% 76 (12) N/A Shareholders' dividend (62) (26) 138% (136) (53) 157% Free cash flow 88 50 76% (60) (65) -8% PMV's insurance A/R 268 - 268 - Free cash flow after Insurance 355 50 610% 207 (65) N/A 18 Second Quarter 2018 Earnings
Investment Grade Rating and Balance Sheet Strength Last Twelve Months Jun 2018 Dec 2017 2,748 1,356 Net Debt USD million 1.98x 1.23x Net Debt/EBITDA 12 M 6.21x 5.67x Interest coverage Net debt USD includes $0.6 million of letters of credit with maturities of more than 180 days that for covenant purposes are considered gross debt, although they are not booked in the accounting debt. 19 Second Quarter 2018 Earnings
Manageable Debt Profile & Long-Term Maturity Profile Investment Grade Fitch Ratings BBB S&P BBB- Moody ’ s Baa3 Long-Term Debt Schedule US$MM, as of June 30 th , 2018 ▪ Debt Average Life 901 14.3 years ▪ Weighted Average 750 Netafim Cost of Debt 5.11% 500 500 400 328 151 151 26 10.34 0.05 0.34 107.88 14.00 68.94 2018 2019 2020 2021 2022 2023 2027 2042 2044 2048 Most Debt at Hold Co Level Alignment of Debt to Revenue Currency Conservative Leverage Ratios Debt by Division (2Q18) Debt by Currency (Swapped, 2Q18) 3%2% 0% 2% 3.0x 2.9x 2.8x 25% 2.6x 2.6x 2.4x 2.0x 1.9x 1.8x 1.98x 1.2x 73% 95% 1.0x US$ Euro Others Holding Vinyl Fluor Fluent 2013 2014 2015 2016 2017 2Q18 US$1.5B revolving credit facility (100% available) Source: Company filings 20 Second Quarter 2018 Earnings
Profitability ROE (%) ROIC (%) Mexichem Group Mexichem Group 14.4 8.7 8.2 7.5 11.5 7.2 6.8 9.8 7.7 7.6 J UN-17 S E P -17 DE C-17 MA R-18 J UN-18 J UN-17 S E P -17 DE C-17 MA R-18 J UN-18 ROE: Income from continuing operations / Adjusted Average Equity from continuing operations ROIC: Adjusted NOPAT for continuing operations/Adjusted Equity from continuing operations + Liabilities with cost – Cash. Income from continuing operations and NOPAT (EBIT-taxes) consider trailing twelve months. 21 Second Quarter 2018 Earnings
Ending a Capital Cycle (in USD terms) Capex 666 460 414 302 289 253 251 2011 2012 2013 2014 2015 2016 2017 22 Second Quarter 2018 Earnings
In 2017 We Achieved Record Results and Expect Another Year of Strong Growth in 2018 ▪ In 2017 we met high-end of EBITDA guidance range ▪ For 2018 we expect an EBITDA growth to be between 25%-30% Adj EBITDA ($mm) and Margin (%) Revenue ($mm) 19.0% 16.7% 16.0% $5,828 14.8% $5,584 $5,485 $5,344 $1,106 $895 $895 $814 EBITDA +9% Margin +223bps 2014 2015 2016 2017 2014 2015 2016 2017 EBITDA 1 – non-M&A capex ($mm) and Conversion (%) 2 78.0% 74.0% 74% 69.7% ▪ Our cash conversión is above 70% $817 asd $722 $657 $634 ▪ In 2017 FCF increased 123% from (EBITDA – non $90m to $201m M&A capex) / EBITDA 2014 2015 2016 2017 23 Second Quarter 2018 Earnings
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