- Volume decreased to 1.23 million tons (-10% QoQ) related to seasonality and softening of PET demand
- Comparable EBITDA of U.S. $270 million (-36% QoQ), mainly due to normalization of reference margins across all products as well as the start of operations of new Polypropylene capacity in North America
- Concluded the year with leverage at 1.3x while still delivering an extraordinary Dividend payment of U.S. $196 million to Shareholders for a total dividend in 2022 of U.S. $372 million and a payment of U.S. $94 million of an outstanding bond
- Recovered U.S. $3.5 million in debt from M&G Mexico during the quarter, totaling U.S. $26 million for the year
- CEO succession process has begun, as José de Jesús (“Pepe”) Valdez Simancas will leave his position after a remarkable 46-year tenure; he will assume the role of Senior Advisor at ALFA
- Jorge Young Cerecedo, current President of the Polyester Business, will assume the CEO position as of March 1
According to the company’s website press release on February 15, 2023, Alpek, S.A.B. de C.V., a leading petrochemical company in the Americas, announced its fourth quarter 2022 (4Q22) results.
MESSAGE FROM OUR CEO
“I am very pleased to report that AlpMESSAGE FROM OUR CEO “I am very pleased to report that Alpek experienced its best year ever. During 2022, the Company reached its highest Volume, Revenue, and Comparable EBITDA figures in its history. Alpek also made important strides regarding its long-term growth strategy with the attractive acquisition in the Middle East, and by reinitiating the construction of Corpus Christi Polymers (“CCP”) to maximize its value. All this, while still maintaining a healthy debt profile and distributing a total of U.S. $372 million to Shareholders, to reach an outstanding dividend yield of 13%. ek experienced its best year ever. During 2022, the Company reached its highest Volume, Revenue, and Comparable EBITDA figures in its history. Alpek also made important strides regarding its long-term growth strategy with the attractive acquisition in the Middle East, and by reinitiating the construction of Corpus Christi Polymers (“CCP”) to maximize its value. All this, while still maintaining a healthy debt profile and distributing a total of U.S. $372 million to Shareholders, to reach an outstanding dividend yield of 13%.
After experiencing higher-than-expected margins throughout the year, in the fourth quarter we saw that reference margins continued to normalize at a steadier pace across both the Polyester and Plastics & Chemicals segments, along with ocean freight costs. Thus, 4Q22 results remained solid, with annual Volume levels surpassing Guidance and Comparable EBITDA reaching record figures.
As you have seen in recent company announcements, in the upcoming months I will be transitioning from my current role as CEO of Alpek to becoming Senior Advisor at ALFA. I want to take a moment to thank all the people, past and present, who have been a part of my career here at Alpek. You have contributed to my growth and expertise in so many ways, and I appreciate the opportunity you have granted me to serve this great company all these 46 years.
Jorge Young will become Alpek’s new CEO. I have every confidence in Jorge, asI’ve had the pleasure of working alongside him for many years and I am certain that his experience and trajectory will enable him to lead Alpek successfully into the future.”
Overview
The fourth quarter was once again marked by a tighter macroeconomic environment and continued inflationary pressures. The petrochemical industry has started to see a gradual decline in Brent crude oil price to an average of U.S. $88 dollars per barrel, 11% lower than in 3Q22, closing the quarter at U.S. $81 dollars per barrel. U.S. average reference paraxylene (“Px”) prices decreased accordingly by 8% versus the previous quarter. In Plastics & Chemicals, average reference Propylene prices were U.S. $0.32 per pound, 31% lower than the U.S. $0.47 per pound during 3Q22.
Demand for Alpek’s products has softened towards year-end, due to typical seasonality, and as ocean freight costs have been returning to historical levels, import parity pricing has declined. Meanwhile, Asian integrated Polyester reference margins normalizing in October and November, yet rising again in December, leading to an average of U.S. $338 dollars per ton for the quarter. Reference margins ended the year higher than expected due to COVID shutdowns in China, which hindered total global production and therefore rose towards the end of the quarter. Meanwhile, in polypropylene, as new capacity has entered the market in North America, reference margins have decreased to an average of U.S. $0.23 per pound (-32% QoQ).
New Alpek CEO
Following a remarkable 46-year tenure, Pepe Valdez Simancas will be leaving his current role as Alpek’s Chief Executive Officer, effective March 1, 2023, assuming the role of Senior Advisor at ALFA. Under his leadership, Alpek achieved sustained growth and diversified its product portfolio through multiple acquisitions and strategic partnerships with other relevant players in the petrochemical industry.
Jorge Young Cerecedo was appointed new CEO by the Board of Directors in December 2022 and will assume his new role beginning March 1, 2023; he will also maintain his responsibilities as President of Alpek Polyester. Throughout his 32-year career at Alpek, Jorge has served in key roles of the Polyester division, including President of PET and Staple Fibers. He holds a B.S. in Chemical Engineering from Tecnológico de Monterrey and an MBA from the University of Pennsylvania, Wharton School of Business.
2023 Outlook
Looking forward into 2023, Alpek expects a solid year after extraordinary freight costs, EPS & integrated PET reference margins continue to normalize. We expect these will continue to return to historical levels, while Polypropylene margins will decrease primarily due to the added capacity in the region.
The Company will disclose full Volume, Comparable EBITDA, and CAPEX guidance tomorrow as well as review the underlying assumptions for crude oil and feedstock prices, which will be discussed in detail during the 4Q22 Webcast.
FINANCIAL RESULTS
Comparable EBITDA of U.S. $270 million, 36% lower quarter-on-quarter driven by the softness in demand, lower PET, PP and EPS reference margins as well as new PP capacity in North America. Full-year comparable EBITDA reached an all-time high of U.S. $1,396 million, 45% higher year-on-year, driven by better-than-expected margins in all segments, high freight costs, as well as incremental volume from the newly incorporated PET business.
Reported EBITDA reached U.S. $186 million, 39% lower versus 3Q22 and 31% lower versus 4Q21, due to a negative inventory adjustment of U.S. $57 million and a negative carry-forward effect of U.S. $27 million generated by declining crude oil, paraxylene and propylene prices, however, the impact was lower compared to the previous quarter. For the full year, Reported EBITDA was U.S.$1,455 million, up 27% versus 2021 mainly due to the disconnection between Paraxylene prices in North America versus Asia through several months of the year.
INCOME STATEMENT
Revenues for the fourth quarter totaled U.S. $2.457 billion, which was 17% lower than in 3Q22 due to lower prices and volume, and 14% higher than 4Q21. For the full year, Revenues increased by 37% mainly due to increased feedstock prices.
Net Income attributable to the Controlling Interest for the fourth quarter of 2022 was U.S. $37 million, compared to U.S. $110 million in 3Q22, primarily due to a lower operating income. In 2022, Net Income attributable to Controlling Interest totaled U.S. $679 million, 76% higher than in 2021, stemming from higher operating income.
CASH FLOW
Net Working Capital (NWC) was reduced by U.S. $129 million as raw material prices began to decline, especially in North America whereby Px contract prices decreased by 8% versus 3Q22. NWC for the year increased by U.S. $413 million, due to higher-than-average raw material prices and increases in inventory levels versus 2021. These levels are expected to stabilize towards 1Q23.
CAPEX for the quarter totaled U.S. $51 million, mainly allocated towardsscheduled maintenance and a portion for CCP construction. Accumulated CAPEX for the year was U.S. $862 million, mainly driven from the PET business acquisition.
Income Tax during 4Q22 was U.S. $46 million, 33% lower versus the previous quarter. For the full year, Income Tax was U.S. $283 million, 142% higher than in 2021.
Alpek distributed a total dividend of U.S. $247 million in the fourth quarter, representing U.S. $196 million for Shareholders, with the remaining amount distributed to minority shareholders. The Board of Directors approved this dividend on October 31, 2022, exercising the powers delegated at the Annual Shareholders’ Meeting earlier in the year. Alpek’s annual dividends totaled U.S. $494 million, which represented an 80% increase compared to 2021.
NET DEBT & LEVERAGE
Consolidated Net Debt as of December 31, 2022, was U.S. $1.860 billion, up 3% and 52% QoQ and YoY, respectively. Gross Debt was U.S. $2.215 billion, and Cash decreased to U.S. $355 million including restricted cash. Financial ratios for the quarter were: Net Debt to EBITDA of 1.3x and Interest Coverage of 11.4x.
RESULTS BY BUSINESS SEGMENT: POLYESTER
(Purified Terephthalic Acid (PTA), Polyethylene Terephthalate (PET), rPET, Polyester fibers – 66% of Alpek’s Net Sales)
QUARTERLY HIGHLIGHTS
• Volume of 1.01 million tons (-9% QoQ) amid typical seasonality effects and PET demand softening
• Asian reference margins averaged US$338/ton, continuing at higher-than-historical levels (-16% QoQ)
• Polyester Comparable EBITDA of U.S. $151 million (-42% QoQ) caused by normalizing PET margins, freight costs and volume
• Polyester Reported EBITDA of U.S. $82 million (-52% QoQ), with an inventory loss (U.S. -$42 million) and a negative carry-forward effect (U.S. -$23 million)
Polyester Volume was 1,013,000 tons in 4Q22, 9% lower quarter-on-quarter, characterized by seasonality, lower PET demand and maintenance at our Brazil facility.
Polyester Comparable EBITDA reached U.S. $151 million, 42% and 5% lower QoQ and YoY, respectively. This was mainly due to a decrease in Asian integrated Polyester reference margins, which averaged U.S. $338 dollars per ton (-16% QoQ) and lower freight costs. Annual Comparable EBITDA totaled U.S. $823 million, 80% higher than 2021, as there was an import parity benefit from freight costs, and the recently incorporated Middle East business.
Brent Crude oil prices declined by 11%, while average U.S. reference Px prices also declined by 8% QoQ. This resulted in a non-cash inventory loss of U.S. $42 million and a negative carry-forward effect of U.S. $23 million in 4Q22. For the full year, inventory gains totaled U.S. $43 million with a positive carry-forward effect of U.S. $51 million.
Polyester Reported EBITDA was U.S. $82 million, down 52% versus 3Q22, given the negative inventory and carryforward effects of the quarter. Full year Reported EBITDA of U.S. $886 million was 43% higher than in the prior year, due to stronger results from higher raw material prices.
RESULTS BY BUSINESS SEGMENT: PLASTICS & CHEMICALS
(P&C) (Polypropylene (PP), Expandable Polystyrene (EPS), Other products –18% of Alpek’s Net Sales)
QUARTERLY HIGHLIGHTS
• Volume of 217 ktons (-12% QoQ) due mostly to seasonality effects and additional PP capacity in the region
• Reference Polypropylene margins decreased to U.S. $0.23 per pound (-32% QoQ) due to market conditions
• P&C Comparable EBITDA of U.S. $120 million (-24% QoQ) from new PP capacity in the region and a tighter economic environment
• Reported EBITDA of U.S. $106 million (-20% QoQ), due to inventory loss (U.S. -$15 million) and a negative carryforward effect (U.S. -$4 million)
P&C Volume was 217,000 tons, down 12% QoQ and 10% YoY, due to a decline in PP and EPS demand amid new supply for PP in the Americas and seasonality leading to a slowdown in industries such as construction for EPS.
P&C Comparable EBITDA was U.S. $120 million, down 24% and 13% compared to 3Q22 and 4Q21, respectively. This was due to PP reference margins decreasing to 23 cpp (-32% QoQ), also related to new capacity in North America and lower demand influenced by inflationary pressures. Annual Comparable EBITDA totaled U.S. $567 million, 18% higher than 2021, due to high PP demand and reference margins as well as higher EPS reference margins and freight costs throughout most of the year.
Propylene prices averaged U.S. $0.32 per pound, down 31% versus 3Q22, resulting in a non-cash inventory loss of U.S. $15 million and negative carry-forward effect of U.S. $4 million.
P&C Reported EBITDA was U.S. $106 million during the quarter, down 20% QoQ and up 1% YoY, mostly due to the negative carry-forward and inventory effect.
ABOUT ALPEK
Alpek is a leading petrochemical company operating two business segments: “Polyester” (PTA, PET, rPET, and polyester fibers), and “Plastics & Chemicals” (polypropylene, expandable styrenics, and other specialty and industrial chemicals). Alpek is a leading producer of PTA, PET Resin and PET Sheet worldwide, a leading rPET producer in the Americas, the third-largest expandable polystyrene manufacturer worldwide, and the only producer of polypropylene in Mexico.
NOTE ON FORWARD LOOKING STATEMENTS
This release contains forward‐looking information based on numerous variables and assumptions that are inherently uncertain. They involve judgments with respect to, among other things, future economic, competitive, and financial market conditions and future business decisions, all of which are difficult or impossible to predict accurately. Accordingly, results could vary from those set forth in this release. The report presents unaudited financial information based on International Financial Reporting Standards (IFRS). Figures are stated in nominal Mexican pesos ($) and in current U.S. dollars (U.S. $), as indicated. Where applicable, peso amounts were translated into U.S. dollars using the average exchange rate of the months during which operations were recorded. Financial ratios are calculated in U.S. dollars. Due to the rounding up of figures, small differences may occur when calculating percent changes from one period to the other.
INVESTOR RELATIONS CONTACT INFORMATION
Antón Fernández, Investor Relations Officer
Alejandra Bustamante, Investor Relations Manager
+52 (818) 748-1146 ir@alpek.com www.alpek.com
