4th Quarter and Annual. Earnings Report 2018

Transcription

1 4th Quarter and Annual Earnings Report

2 Disclaimer The material in this presentation has been prepared by [Grupo México, S.A.B. de C.V. ( GM )] and is general background information about GM s activities current as at the date of this presentation. This information is given in summary form and does not purport to be complete. Information in this presentation, including financial forecasts, should not be considered as advice or a recommendation to investors or prospective investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information regarding these matters, any relevant offer document and in particular, you should seek independent financial advice. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. This presentation may contain forward looking statements including statements regarding our intent, belief or current expectations with respect to GM s businesses and operations, market conditions, operation results and financial condition, capital adequacy, specific provisions and risk management practices. Readers are cautioned not to place undue reliance on these forward looking statements. GM does not undertake any obligation to publicly release the result of any revisions to these forward looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies beyond GM s control. Past performance is not a reliable indication of future performance. Unless otherwise specified all information is for the quarter ended on June 30th. Summary financial information This document includes summary financial information and should not be considered a substitute for our full financial statements, including footnotes, management/auditors reports, and related management s discussion and analysis. You can access our financial reports and other disclosures at our website, as well as 2

3 4 Q 1 8 Welcome Schedule Grupo Mexico s main highlights Marlene Finny. 4 Main highlights of our Infrastructure Division Octavio Ornelas 23 The Mining economic environment of this quarter and the main issues impacting the Company s profitability Xavier García de Quevedo Óscar González Main highlights of our Transportation Division Fernando López Guerra Q&A session 26 3

4 Main Highlights Grupo México 4Q18 4

5 4 Q 1 8 Scorecard Financial performance supports shareholder returns F I N A N C I A L H I G H L I G H T S Accumulated consolidated sales reached US$10.49 billion in 2018, a record figure since 2011, and 7% higher than in 2017 EBITDA for 2018 was US$4.9 billion, 8% higher than in 2017 S H A R E H O L D E R R E T U R N S On January 25, 2019, the Board of Directors approved the payment of a cash dividend of $0.80 pesos per each outstanding share, to be made in a single installment as of February 28, This implies a 7.10% dividend yield, which proves our commitment to return value to our shareholders. I N V E S T I N G F O R T H E F U T U R E We are currently developing the next phase of a growth program in the Mining Division aiming to reach a milestone of 2 million tons of copper production capacity by In the Transportation Division we will continue investing in various projects for capacity expansion, automated signaling, infrastructure, and efficiency improvement. Through the new subsidiary of fuel terminals in the Infrastructure Division, we will build and operate two fuel storage terminals in Guadalajara and Monterrey. C O S T S In the Mining Division, we consolidated ourselves as the lowest-cash-cost copper producer in the Industry, at US$1.1/lb. of copper, with the largest copper reserves worldwide. 5

6 Main Highlights SALES EBITDA Net Profit Income CAPEX 7% US$4.9bn US$1.1bn 12% Consolidated revenues reached US$10,495 a record figure since ,495 9, Net Income for 2018 was EBITDA was 8% higher than in % lower than previous year, due to non-cash accounting mark to market valuation on financial instrument in our treasury. CAPEX reached US$1.68 bn in 2018, proving our commitment to growth and value generation

7 Sales, EBITDA and CAPEX overview 2018 SALES % + USD EBITDA % + USD CAPEX % + USD Mining 75.1% Mining 73% Mining 73% Transportation 22.1% Transportation 21% Transportation 22% Infrastructure 2.8% Infrastructure 6% Infrastructure 3% 7

8 Grupo México maintains a solid balance sheet Dividend Payments + Buybacks 6.8% 7.1% With a low leverage and a net debt to EBITDA ratio of 1.4x 80% of the debt is in US Dollars, and 20% in Mexican Pesos (MXN). 78% of the debt has a fixed rate. In addition, Grupo México has a comfortable debt payment schedule. $0.80 $ x Net Debt/EBITDA ratio Buybacks Given our trust in the outlook for our divisions, during 4Q18 we carried out stock buybacks for the first time since 2011, to keep generating value for our shareholders. 8

9 Debt Maturity Profile 9

10 Social Highlights Grupo México Hospital in Juchitán, Oaxaca Through Fundación Grupo México, we have implemented social, educational, environmental, cultural, and healthcare programs, among which is the current construction of the Specialty Hospital in Juchitan, Oaxaca, to provide medical care to the population of Oaxaca Isthmus, with a total investment of $178 million pesos. Sustainable Development We have invested over US$517 million in social, healthcare, and security projects until 2017, seeking to generate value and wellbeing for our collaborators, their families and the environment of the communities where we are present. Sustainable Development is in the core of our business model. 10

11 Organizational Changes We have strengthened our team with some additions from outside our Company: Mining Division Ramón Leal Chapa - Chief Financial Officer of AMC Bachelors degree in Accounting from Universidad de Monterrey (UDEM). Holds a Master's degree in Operations Management from Instituto Tecnológico y de Estudios Superiores Monterrey (ITESM) and also, a Master in Business Administration (MBA) from Harvard Business School. He has held executive positions in the financial and strategic areas of industrial and financial groups such as Grupo Pulsar / Vector Casa de Bolsa, Grupo Vitro and Grupo Alfa where he held the CFO position until As CFO of AMC, he will be responsible of: Corporate Finance and Treasury, Mergers and Acquisitions, New Business Development, Financial and Strategic Planning, Legal, Administration, Controlling and Internal Control, Information Technology and Controlling and Finance of SCC. Transportation Division Isaac Franklin Chief Commercial Officer Isaac will be heading our Commercial team, overseeing Marketing, Sales, Fleet Management and Customer Service. He served as CEO of TUMEX and had previuosly worked within our organization as Chief Financial Officer of one of our subsidiaries and as CEO of Ferrovalle where we hold a 50% stake. 11

12 Mining Division 12

13 Financial Highlights 2018 US$7.88 billion in sales In 2018, the Mining Division reached 4% increasing sales vs Due to higher metal prices for copper (+4.6), Zinc (+1.5), and Molybdenum (46%). 1,002,062 tons with greater production in the Mexican and Peruvian operations. US$3.55 billion EBITDA implying 3% growth vs with an EBITDA margin reached of 45% in US$1.3 billion CAPEX 7% higher than in

14 4 Q 1 8 Copper Outlook 2019 During 2018, LME copper prices have increased, from an average of $2.80 per pound in 2017 to $2.96 (+5.9%) per pound in For 2019, we expect to achieve 1,127,800 tons, a 12% increase, due to the start of operations of Toquepala. We expect an increase in copper prices in the coming months due to solid copper market fundamentals, and the start of talks between the US and China. We expect that refined copper demand worldwide will grow at about 2.5%, to approximately 600,000 tons of new copper demand. We expect a supply growth of approximately 1.5% in 2019, which will lend support to copper prices. Higher growth of demand than supply will yield a clear first year of market deficit that will put upward pressure on copper prices, some of the causes of this increasing demand are electric cars, renewable energies and the sustained growth of India. 14

15 Our Projects T O Q U E P A L A E X P A N S I O N T A C N A, P E R U T I A M A R I A A R E Q U I P A, P E R U S A N M A R T Í N ZACATECAS, MEXICO B U E N A V I S T A ZINC SONORA, MEXICO This US$1.25 billion project includes a new, state-of-the-art copper concentrator that will raise annual copper production to 258,000 tons by 2019 (+52% vs. 2018). Construction was completed during 4Q18, and by yearend, it was producing at roughly 60% capacity. We expect it to reach full capacity by early 2Q19. We met the Peruvian government s engineering and environmental requirements to obtain the construction permit for this expansion project, which will generate 120,000 annual tons of SX/EW metallic copper in 1H19. The investment totals US$1.4 billion. Once in operation, Tia Maria will employ 600 workers directly and 4,200 indirectly. We have continued with the works to restart operations at the San Martin Mine. We have destined an investment budget of US$87 million for Our estimates indicate that the mine will restart operations by 2Q19 with an expected annual production of 20,000 tons of zinc, 7,500 tons of copper, and 2.8 million oz. of silver. We are building a concentrator with an annual production capacity of 100,000 tons of zinc and 20,000 additional tons of copper. It should be operational by The investment budget is US$413 million. Once completed, our zinc production will double. 15

16 Transportation Division 16

17 Financial Highlights 2018 US$2.36 billion in sales A 15% increase vs 2017, due to stronger operations in Mexico, driven mainly by the Chemicals, Agricultural, Industrial, and Minerals segments. US$1.01 billion in EBITDA A 16% increase from 2017 with margin expansion of 1 bp vs last year, due to continued operating improvements, the consolidation of the changes in the organizational structure and the rest of operations. 10% higher transportation volume vs 2017 That s 64 million tons-kilometer, with 1,962 million cars hauled Net Profit Margin grew 14% compared to 2017, reaching US$362 million. 17

18 Main Variations % Revenue Growth 26% Metals: New routes due to truck conversions High 44% 21% Agricultural: Grain imports increased, including record volume of unitary and shuttle trains in May 19% Chemicals: Recovered traffic after controlling security breaches 16% Energy: New routes due to imports of diesel, gasoline, and LPG. Coal exports from USA to Guaymas port 10% Industrial: Beer exports increased. New Railcar construction was reactivated for US destinations 8% Intermodal: Domestic routes volume increased & volume consolidation from Florida operation Medium 44% 8% Minerals: Silica sand, briquette & iron ore volumes increased & volume consolidation from Florida operation 7% Cement: New routes due to truck conversions Neutral 11% 3% Automotive: Decrease in vehicle exports to the US due to drop in small vehicle sales 18

19 Full Year Overview During 2018 we managed to deliver on top-line revenue achieving: US$2.4 billion an increase of 15% over 2017 Our 2018 EBITDA reached US$1.01 billion, a 16% improvement vs We faced many external challenges such as weather, theft, vandalism and blockades. We have achieved significant improvements, our responses strengthened our capabilities to mitigate similar events in the future. We came close to achieving targeted operating efficiencies and remain confident that through the deployment of several improvement programs that will achieve higher metrics in

20 Precision Scheduled Railroad (PSR) Processes 1) Increase Train Length, Network Fluidity and Speed. Manifest over dedicated services. 2) Decrease Dwell Time at Terminals. Less switches, more outbound train alternatives. 3) Maximize Horsepower Utilization. Work locomotives at least 80% of the day and haul at least at 50% of capacity. 4) Balance Trains in each direction. No Locomotive Repo, No DHs, No taxis. 5) Clear Workflow Processes. What is to be done and when By applying these principles to our fastest growing corridor (Torreon Piedras Negras 20%+ growth 2S2018) we managed to turn our service around in two months and come out stronger, we are now applying to the rest of our network. Asset utilization improves drastically and allows us to reconsider our CAPEX programs. 20

21 Outlook 2019 Financial Outlook Volume Growth 4% - 6% Revenue Growth 9% - 12% Operating Ratio Capital Expenditures BP $406 Million USD >15.5% of revenue through 2019 Outlook 2019 Outlook Market Drivers Double Digit Growth Energy Automotive Metals Industrial Products Intermodal Coal & Fuels: Increase in imports of fuels and coal Crude oil: Increase in movements which have started in 3Q18 Higher volume of export vehicles from the assembly plants Growth in supplies for the automotive and beer industry Increase in exports via Borders and Ports Cross Border: Growth driven by Automotive Industry and truck to rail conversion Domestic USA: Continued benefits from tight truck capacity and high FEC service performance Domestic MX: Increase in market share from ports Chemicals Increase in imports of plastic resins and fertilizers Single Digit Growth Minerals Agricultural Decrease in the frac sand movements due to change of origin of the product in Texas. Iron ore and copper concentrates continue to grow Basic Grain: Steady growth of shuttle trains with grain imports Cement We keep working on changing from over the road to Rail We expect that 2019 will be another record year for us, as we have full support from the incoming Federal Government to protect the railroad and adjustment are being made on our Processes, People and Infrastructure to become best in class within the Class 1 Railroads in North America. 21

22 CAPEX GMXT 2019 Description CAPEX Million (MXN) Main Projects Other Projects MAINTENANCE US$225 $ 4,378.7 New Rail & Ties Rail maintenance Locomotive overhaul Tools and equipment Bridges Others EFFICIENCY US$66 $1,288.9 Technology and equipment Construction and reconfiguration of yards Construction / extension of sidings CTC implementation (signaling) Others GROWTH US$19 $ Locomotives Monterrey Yard 1 Piedras Negras Yard Intermodal ramps Others 2 STRATEGIC US$90 $ 1,759.3 $ 9,049.9 * US$464 Celaya bypass 3 Monterrey bypass 4 Chihuahua-Ojinaga corridor 5 Land Acquisition * Due to the new service master plan aligned with PSR, we have a possible reduction in Capex of $1,131 Million MXN. 22

23 Infrastructure Division

24 Financial Highlights 2018 US$270 million US$625 million An all-time high consolidated sales, reaching 8% more than in the previous year. EBITDA during 2018 a 24% increase vs US$47.3 million Net Profit in 2018, a 305% YOY increase. 24

25 Relevant Events N E W R E C O R D I N E N E R G Y G E N E R A T I O N N E W R E C O R D F O R T H E S A L A M A N C A - L E O N H I G H W A Y N E W F U E L T E R M I N A L S P R O J E C T During 2018, we generated 3,929,048 MWh, with an average power of 433 MW. The volume of sales to the Wholesale Electricity Market (MEM) and CFE in 2018 totaled 585,553 MWh, representing US$39.7 million in revenues. We received the approval from the Board of Directors to invest US$410 million in a new wind farm project that will produce 270MW. During 2018, the highway reported US$40 million in sales and a traffic equivalent to over 20,168 vehicles. The traffic increase of 2018 vs was 10%. The entrance to Leon was inaugurated on October 3, The Ministry of Communications and Transportation (SCT) approved the request for investment and additional costs worth P$1.75 billion; authorization of the financial recovery via the extension of the 30- year concession is still pending. Through the new subsidiary of fuel terminals, fuel transfer services are being provided to different customers. Additionally, we will build and operate two fuel storage terminals in Guadalajara and Monterrey with a total investment of US $ 180 million. 25

26 Q&A