EARNINGS RELEASE 1Q17

Transcription

1 EARNINGS RELEASE 1Q17 For additional information, please visit or contact: Saltillo, Mexico April 20, 2017 Mario Guzmán CFO Phone: +52 (844) Saúl Castañeda IR Director Phone: +52 (844) Patricio González Treasury Director Phone: +52 (844)

2 Earnings Release 1Q17 1 GRUPO INDUSTRIAL SALTILLO S.A.B. DE C.V. (GISSA) REPORTS FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2017 Saltillo, Mexico, April 20, 2017 Grupo Industrial Saltillo, S.A.B. de C.V. (BMV: GISSA) ( The Company, GIS, GISSA or The Group ), a Mexican leading industrial conglomerate with a solid portfolio of products and brands, today announced its earnings results for the first quarter ended March 31, The figures in this report have been prepared in accordance with the International Financial Reporting Standards ( IFRS ), and presented in millions of nominal Mexican pesos (or millions of U.S. nominal dollars), unless otherwise stated. Totals may slightly differ from individual sums. The figures presented in U.S. nominal dollars in this report correspond to their conversion from nominal Mexican pesos or Euros, and have been calculated by dividing the figures of each quarter by the average exchange rate corresponding to such quarter. Consolidated Summary Consolidated results (millions) 1Q17 1Q16 % Net revenue (Pesos) 5,224 3,545 47% Net revenue (US$) % EBIT (Pesos) % EBIT (US$) % EBITDA (Pesos) % EBITDA (US$) % Net income (Pesos) % Net income (US$) % EPS (Pesos per share) % * EPS: calculations based on Net Income recorded during the last twelve months (LTM).

3 Earnings Release 1Q17 2 Highlights For GIS, globalization has become our new reality. On December 28, 2016, GISSA completed the acquisition of Infun Group, a company dedicated to the design, casting and machining of engine, transmission and suspension components for the automotive industry. With iron casting operations in Spain, Italy and China, and of iron machining in Spain and China, Infun Group contributes with talent, experience and skills to further strengthen our capabilities. 1Q17 results already incorporate the effect of this acquisition. 1Q17 Consolidated Revenue, expressed in Mexican pesos, reflected a growth rate of 47% compared to that recorded in 1Q16, reaching Ps.5,224 million. In addition to the acquisition effect of Infun Group, the Construction Segment increased by 8%, driven by the strong performance of Vitromex, which has consistently maintained a double-digit growth rate in revenue for the past quarters. The Housewares Segment revenue increased by 12%, largely supported by higher volume in the enamel steel (pewter) line. The acquisition of Infun Group represents a decisive step towards Globalization and the entry to the vibrant Chinese market, but foremost to consolidate a differentiated proposal of value in the Global Automotive Sector, grounded throughout: our enhanced capacity to serve global platforms, development of co-design capabilities alongside OEMs, strategic location of plants, an integrated value chain (encompassing machining operations), an efficient operating structure and competitive prices. In 1Q17, GIS was able to generate almost Ps.200 million of incremental EBIT YoY. At a consolidated level, the EBIT amounted to Ps.608 million, which represents a significant growth of 49% vs. 1Q16. This result is mainly attributed to the acquisition effect of Infun Group. 1Q17 EBITDA was Ps.844 million, 50% higher than that recorded in 1Q16. The EBITDA margin expanded from 15.9% to 16.2%. 1Q17 Net Income reached Ps.796 million, 176% higher than that reported in 1Q16. In addition to the boosted EBIT, this result was driven by a positive Comprehensive Financial Result (CFR) above the Ps.300 million mark that was related to a foreign exchange (FX) gain.

4 Earnings Release 1Q17 3 1Q17 Capex amounted to Ps.193 million. These funds were mainly used in capacity enhancements and Vitromex s technological upgrading. These figures neither include investments in Evercast (Joint Venture of ZF-TRW) nor in GIS Ederlan, as both operations correspond to Joint Ventures not consolidated according with IFRS. Even after closing the recent acquisitions of ACE and Infun Group, GIS maintains a solid financial position. As of March 31, 2017, Cash and Equivalents amounted to Ps.1,986 million. This balance provides sufficient flexibility to cover working capital needs and grant us confidence to better meet the challenges of today s global marketplace. On March 31 st,2017, the items that integrate the Consolidated Liabilities at cost, which are part of the bank debt and some concepts presented in Other Liabilities (Sundry Creditors), that are considered for the Financial Covenant Ratios, amounted US $456 million dollars: o o o o US $276.5 million dollars; the credit issued to acquire Infun Group, financing and M&A expenses and prepayment of two credit lines: (i)credit relative to ACE Group s acquisition and (ii) the credit issued for Cifunsa San Luis Potosi s plant expansion. US $106.8 million dollars, debt of 100 million Euros, which will be paid in 2 years to the previous owners of Infun Group. US $50.8 million dollars, of Infun Group s own Bank Debt (originated in Euros) US $21.7 million dollars, ACE Group s own Bank Debt (originated in Euros) For Financial Statement purposes, these items are presented net of expenses, commissions and other concepts to comply with the accounting standards. On March 31st,2017, the Group s leverage ratio Net Debt to EBITDA, calculated in dollars and in a Proforma basis (figuring the last 12 months EBITDA of Infun Group), was located at a level of 2.2x In the first Quarter of 2017, 14.7 million Euros of Infun Group s own Bank Debt has been paid and 1.9 million Euros in ACE Group.

5 Earnings Release 1Q17 4 Stock and Corporate GIS has undertaken a number of initiatives to improve its stock liquidity. At the end of March, its stock trading has been doubled (number of transactions, traded stock and traded amounts), when compared to that in July 2016 (kick-off our liquidity improvement action plan). At year-end 2016, GIS engaged UBS as its stock market-maker. This initiative has been instrumental to spur the stock liquidity, and thus contributing to a better stock price formation. At the end of March, GIS ranked 89 th at Mexbol Liquidity Index, within the medium liquidity category, climbing 8 positions since November 2016 (month prior to the start of the Market Maker operation). On April 25, 2017, GIS will hold its Annual Shareholders Meeting; a cash dividend proposal of Ps.1.05 per outstanding share will be voted on. A first payment-tranche of Ps.0.60 per share is planned to be settled on May 4, 2017, and a second payment of Ps.0.45 per share on November 6, Foreign Exchange Effect At the end of March, 2017, the Financial Statements of GIS reflects a significant currency fluctuation effect from the MXP appreciation vs. the USD and, which for the period of December 2016 to March 2017, already appreciated by 9% and 8%, respectively. As a result, the assets and liabilities expressed in foreign currencies (which are used to determine FX gains/losses) fueled a Ps.437 million FX gain in the CFR line. Likewise, some lines of GIS Statement of Financial Position was negatively impacted by the MXP appreciation, standing out the following: Cash (-344 million of MXP), Fixed Assets (-391 million of MXP), Bank Loans and Interest Bearing Liabilities (-835 million of MXP), and Stockholders Equity (-582 million of MXP) Pro-forma with Infun In compliance with applicable provisions, and to perform accurate comparisons, a pro-forma scenario to achieve comparability of 2017 vs figures is presented at the end of this report. Income Statement. The results of Grupo Infun are incorporated into the 2016 Income Statement of GIS as if it had been part of the Company during that period, to achieve comparability with 2017 figures. Statement of Financial Position. The Balance of Grupo Infun as of March 31, 2016, is incorporated into our Statement of Financial Position to show the acquisition effect of Grupo Infun at that date, and to achieve comparability with the Statement of Financial Position as of March 31, The goodwill shown is the preliminary recognition from the recent acquisition of Infun, Ps.4,949. This amount could be adjusted after completing de Purchase Price Allocation study. Following the normativity, these period should be no longer than one year, after the acquisition.

6 Earnings Release 1Q17 5 Comments from the Chief Executive Officer José Manuel Arana Escobar, CEO of GISSA, stated: Today we face the challenges of globalization with firm foundations: a solid Company with access to key markets, regions and industries, which has developed a well rounded portfolio of products and brands throughout the markets where it operates. The results posted this quarter, which recorded about 50% growth rates in both Revenue and EBITDA, is yet another proof of our people s commitment to our Mission and Vision accomplishment and their superb performance. I am very proud of our team s loyalty, commitment and courage to succeed. Revenue by Segment Net revenue (millions) 1Q17 1Q16 % Mexican Ps. / Consolidated 5,224 3,545 47% Auto-Parts 3,144 1,637 92% Construction 1,678 1,557 8% Housewares % US Dollars / Consolidated % Auto-Parts % Construction (5%) Housewares (1%)

7 Earnings Release 1Q17 6 EBIT (millions) 1Q17 1Q16 % Mexican Pesos Consolidated % Margin 12% 12% Auto-Parts % Margin 16% 17% Construction % Margin 5% 5% Housewares (51%) Margin 3% 7% EBITDA (millions) 1Q17 1Q16 % Mexican Pesos Consolidated % Margin 16% 16% Auto-Parts % Margin 22% 23% Construction % Margin 8% 7% Housewares (34%) Margin 6% 10%

8 Earnings Release 1Q17 7 Quarterly Results Auto-Parts Overview Revenue from the Auto-Parts Segment represents 61% of 1Q17 Consolidated Revenue. This proportion is significantly higher than the 47% registered in 1Q16 as a result of the incorporation of Infun Group. Revenue (millions) 1Q17 1Q16 % Mexican Pesos 3,144 1,637 92% NAFTA 1,283 1,032 24% EUROPE / ASIA * 1, % US Dollars % NAFTA % EUROPE / ASIA * % * In this chart and for comparative purposes only, 1Q16 figures include ACE results for the same period. 1Q17 figures include ACE and Infun Group results for the same period. Revenue Revenue of this Segment during the first quarter of the year, calculated in US dollars, reflects a 70% growth when compared to that registered in the same period last year, mainly explained by the incorporation of Infun Group into the portfolio. The recorded revenue in the NAFTA region (Cifunsa) increased by 10%, driven by a higher volume in the Irapuato and San Luis Potosi plants. As described in the footnote of the previous chart, Europe and Asia results include ACE s in 2016, as well as ACE s and Infun Group s into 1Q17 results. It should be noted that ACE s higher volume, especially from the Czech Republic plants, contributes to the recorded revenue growth.

9 Earnings Release 1Q17 8 EBIT AND EBITDA EBIT (millions) 1Q17 1Q16 % Mexican Pesos % Margin 16% 17% NAFTA % Margin 18% 21% EUROPE / ASIA * % Margin 15% 11% US Dollars % NAFTA (4%) EUROPE / ASIA * % EBITDA (millions) 1Q17 1Q16 % Mexican Pesos % Margin 22% 23% NAFTA % Margin 24% 28% EUROPE / ASIA * % Margin 20% 15% US Dollars % NAFTA (3%) EUROPE / ASIA * % * In this chart and for comparative purposes only, 1Q16 figures include ACE results for the same period. 1Q17 figures include ACE and Infun Group results for the same period. 1Q17 EBITDA for this segment, calculated in US Dollars, increased by 61%, driven by the integration of Infun Group. In the NAFTA commercial region, EBITDA decreased by 3%, mainly due to the recognition of higher costs of scrap and a mismatch in the surcharge recovery stage. In Europe and Asia, margins were pressured by higher energy costs.

10 Earnings Release 1Q17 9 Construction Overview Construction Segment revenue in 1Q17 represented 32% of Consolidated Revenue, lower than the 44% proportion recorded in 1Q16, as a result of the strengthening of the Auto-Parts Segment following the acquisition of Infun Group. The graphs below show the revenue breakdown for the Construction Segment: Revenue Revenue (millions) 1Q17 1Q16 % Revenue (Mexican Pesos) 1,678 1,557 8% Ceramic Tiles (Vitromex) 1, % Water Heaters (Calorex) % In 1Q17, Construction Segment revenue increased by 8% when compared to that recorded in the same period last year. This result was supported by the outstanding performance of Vitromex, which has consistently maintained double-digit growth rates in recent quarters. Vitromex revenues were 10% up in 1Q17 vs. 1Q16, driven by the strong performance in the domestic market, as well as a higher volume, pricing improvements, and better product mix supported by the displacing of products of large formats.

11 Earnings Release 1Q17 10 Calorex revenues increased 4% in 1Q17 when compared to 1Q16. During the quarter, stands out the strong commercial operation performance and the higher product turnover in the distribution network that follows the successful execution of trade-marketing initiatives in our sales spots. In 1Q17, Calorex top performing product lines were the Tankless and High Recovery prototypes, particularly in the replacement market. EBIT and EBITDA EBIT (millions) 1Q17 1Q16 % Mexican Pesos % Margin 5% 5% US Dollars 4 4 1% EBITDA (millions) 1Q17 1Q16 % Mexican Pesos % Margin 8% 7% US Dollars 6 6 2% Both 1Q17 EBIT and EBITDA of the Construction Segment increased by 15% when compared to the figures recorded in 1Q16. Vitromex results were impacted by higher natural gas prices, while Calorex, on the other hand, benefited from favorable effects on volume and product mix. It is worth mentioning that year-over-year comparison is positively affected by a 1Q16 lower base that includes a Ps.31 million non-recurrent charge that was related to the allowance accrued to improve the importation process of certain machinery and equipment; and, removal, repair or replacement of certain exported units.

12 Earnings Release 1Q17 11 Overview 1Q17 revenue from Housewares Segment represented 7% of Consolidated Revenue, lower than the 9% proportion recorded in 1Q16. This contraction is mainly explained by the strengthening of the Auto-Parts Segment that follows the acquisition of Infun Group. Revenue Housewares Revenue (millions) 1Q17 1Q16 % Mexican Pesos % 1Q17 Housewares Segment revenue increased by 12% vs. 1Q16. It is important to note that all of its three most important product lines (Enamel Steel, Aluminum and Ceramic) contributed to the recorded growth, especially the Enamel Steel (pewter) line, which was supported by a higher displaced volume along the promotional and wholesale channels. EBIT and EBITDA EBIT (millions) 1Q17 1Q16 % Mexican Pesos (51%) Margin 3% 7% US Dollars 1 1 (57%) EBITDA (millions) 1Q17 1Q16 % Mexican Pesos (34%) Margin 6% 10% US Dollars 1 2 (42%) Despite a larger revenue base, 1Q17 EBIT and EBITDA of this segment showed significant decreases of 51% and 34%, respectively, when compared to 1Q16, due to higher costs of dollardenominated inputs, higher natural gas prices, and the impact from fixed costs claim payments.

13 Earnings Release 1Q17 12 Financial Statements Grupo Industrial Saltillo, S.A.B. de C.V. Statement of Comprehensive Income (Expressed in Millions of Nominal Mexican Pesos) FIRST QUARTER % Net Revenues 5,224 3,545 47% Auto-Parts 3,144 1,637 92% Construction 1,678 1,557 8% Housewares % Cost of sales 3,790 2,484 53% General expenses % Other income (expenses), net 1 1 9% Operating Income (EBIT) % Auto-Parts % Construction % Housewares (51%) EBITDA % Auto-Parts % Construction % Housewares (34%) CFR (331) 8 N/A Income Tax % Consolidated Income % Profit from non-controlling interest % Profit from controlling interest %

14 Earnings Release 1Q17 13 Grupo Industrial Saltillo, S.A.B. de C.V. Statement of Comprehensive Income (Expressed in Millions of Nominal Mexican Pesos) MARGINS FIRST QUARTER Operating Income to Net Revenue 12% 12% Auto-Parts 16% 17% Construction 5% 5% Housewares 3% 7% EBITDA to Net Revenue 16% 16% Auto-Parts 22% 23% Construction 8% 7% Housewares 6% 10% Profit from controlling interest 15% 8%

15 Earnings Release 1Q17 14 Grupo Industrial Saltillo, S.A.B. de C.V. Statements of Financial Position (Expressed in Millions of Nominal Mexican Pesos) mar-17 dec-16 ASSETS Current Assets Cash and cash equivalents 1,986 3,255 Accounts receivable, net 4,154 3,782 Other receivables Inventories 2,269 2,000 Property, plant & equipment, net 8,196 8,628 Investments in associates and JV Goodwill 1 5,899 5,923 Other assets 1,211 1,559 TOTAL ASSETS 25,257 26,526 LIABIITIES Current liabilities Current Liabilities at Cost Trade payables 2,718 2,918 Other current liabilities 1,455 1,729 Non-current liabilities Non-current liabilities at Cost 2 7,987 9,234 Deferred taxes Other non-current liabilities TOTAL LIABILITIES 13,573 15,057 TOTAL SHAREHOLDERS EQUITY 11,684 11,469 TOTAL LIABILITIES AND EQUITY 25,257 26,526 1 The decrease in goodwill recognized in foreign subsidiaries is attributed to the appreciation of the Mexican Pesos against Euro. 2 Includes the 100 million debt to the former owners of Infun Group, which are recorded under Other Liabilities.

16 Earnings Release 1Q17 15 Relevant Information About Grupo Industrial Saltillo Grupo Industrial Saltillo manufactures and markets products for the Auto-Parts (grey and ductile iron castings, as well as casting and machining of aluminum parts), Construction (water heaters, fluid handling systems, wall and floor ceramic and porcelain tiles) and Housewares Segments (kitchenware and tableware). Forward-Looking Statements This press release may contain certain forward-looking statements and information related to Grupo Industrial Saltillo, S.A.B. de C.V. and its subsidiaries (collectively, the Company ) which is subject to risks and uncertainties that could cause actual results to differ materially from current expectations of the Company s management. These risks and uncertainties include, without limitation: new product development and marketing; demand and acceptance of the Company's products; competing products and pricing; economic conditions in the Company s product and geographic markets, and fluctuations in foreign currency. Analyst Coverage Given that Grupo Industrial Saltillo, S.A.B. de C.V. ( GISSA ), has issued securities under Section I of the List referred by the mandate of the Mexican Stock Exchange Internal Bylaws (the Bylaws ), and given the importance of keeping an active participation in the stock market, it reports in accordance with the mandate of the Bylaws, that the financial institutions that provide analyst coverage over GISSA s stock are GBM Grupo Bursátil Mexicano, S.A. de C.V., Casa de Bolsa ( GBM ) and Actinver Casa de Bolsa ( Actinver ), part of Grupo Financiero Actinver, S.A. de C.V. Institution GBM Actinver Analyst Lilian Ochoa Guerra Pablo Abraham Peregrina

17 Earnings Release 1Q17 16 Additional Information Figures expressed in U.S. dollars: The figures presented in the Statements of Comprehensive Income have been calculated by dividing the figures of each quarter, expressed in nominal Mexican Pesos or Euros, by the average exchange rate registered for that quarter. Allocation of corporate services: In order to perform an accurate evaluation of the results by Business Segment, as well as to avoid comparability distortions, the Management of the Company uses a new methodology, which applies a specific percentage to allocate the corporate services and royalties along each Business Segment to achieve its proper normalization. Starting 4Q16, the Water Heaters and Pipe Fittings business ("Calorex"), which have been administratively merged, will be grouped in the Construction Segment. Under the same General Management, these lines will seek to achieve process simplification, commercial synergies, and savings in fixed costs and structure. Notes to the Financial Statements: For a greater depth of analysis, in addition to reviewing the contents of this Earnings Release, we recommend you go in detail through the Notes to our Financial Statements on our website:

18 Earnings Release 1Q Pro-forma with Infun In compliance with applicable provisions, and to perform accurate comparisons, a pro-forma scenario to achieve comparability of 2017 vs figures is presented at the end of this report. Income Statement. The results of Infun Group are incorporated into the 2016 Income Statement of GIS as if it had been part of the Company during that period, to achieve comparability with the 2017 figures. Statement of Financial Position. The Balance of Infun Group as of March 31, 2016, is incorporated into our Statement of Financial Position to show the acquisition effect of Infun Group at that date and achieve comparability with the Statement of Financial Position as of March 31, 2017.

19 Earnings Release 1Q17 18 Grupo Industrial Saltillo, S.A.B. de C.V. & Subsidiaries (GISSA) Audited Pro forma Consolidated Balance Sheet March 31st 2016 and 2017 Thousand of Mexican Pesos Assets March 31st 2016 March 31st Pro forma Adjustments (Unaudited) 2017 Acquisition Transaction GISSA GISSA Consolidated Pro forma Consolidated as reported Infun Group Pro forma as adjusted as reported (unaudited) (unaudited) Adjustments (unaudited) (unaudited) Current Assets Cash and equivalents 2,032, ,782 (1,217,304) 3b 1,432,245 1,985,560 Net accounts receivable 2,818, ,821 3,763,280 4,153,779 Inventory 1,856, ,787 2,028,052 2,269,380 Other current assets 303, , , ,445 Total Current Assets 7,010,916 1,905,176 (1,217,304) 7,698,788 8,995,164 Fixed Assets Buildings, plant &equipment 6,329,470 1,229,143 7,558,613 8,196,496 Intangible assets and Other Assets 1,612,736 58,630 4,895,064 3a 6,566,430 6,564,702 Long-term investments 845, , , ,156 Accrued income tax 501, , ,574 Total Net Fixed Assets 9,289,561 1,430,042 4,895,064 15,614,666 16,261,928 Total Assets 16,300,477 3,335,218 3,677,760 23,313,455 25,257,092 Current Liabilities Current portion of long-term debt 276, , , ,467 Accounts payable 2,681, ,527 3,320,640 3,860,682 Acrrual and other payables 210, , , ,109 Total Current Liabilities 3,168,426 1,205,351 4,373,777 4,518,258 Long Term Liabilities Debt 1,782, ,968 4,818,236 3b 7,589,464 5,883,648 Employee benefits 291, , ,298 Other long-term liabilities 37, ,611 2,183,056 Accrued income tax 805, , ,097 Total Long Term Liabilities 2,916, ,390 4,818,236 8,724,051 9,055,099 Total Liabilities 6,084,851 2,194,742 4,818,236 13,097,829 13,573,357 Shareholder's Equity Capital Stock 3,343, ,909 (210,909) 3c 3,343,895 3,343,895 Premium on issuance of shares 236,350 46,686 (46,686) 3c 236, ,350 Shares repurchase reserve 492,757 54,113 (54,113) 3c 492, ,000 Other equity 1,494,904 80,212 (80,212) 3c 1,494,904 1,632,084 Retained earnings 4,610, ,556 (748,556) 3c 4,610,180 5,932,821 Equity attributable to owners of parent 10,178,086 1,140,476 (1,140,476) 10,178,086 11,645,150 Non-controlling interest 37, c 37,540 38,585 Total Shareholder's Equity 10,215,626 1,140,476 (1,140,476) 10,215,626 11,683,735 Total Liabilities and Shareholder's Equity 16,300,477 3,335,217 3,677,760 23,313,455 25,257,092

20 Earnings Release 1Q17 19 Grupo Industrial Saltillo, S.A.B. de C.V. & Subsidiaries (GISSA) Audited Pro forma Consolidated Income Statements For the quarter ended in March 31st 2016 & Thousands of Mexican Pesos From January 1st to March 31st 2016 Pro forma Adjustments (Unaudited) From January 1st to March 31st 2017 Acquisition Transaction GISSA GISSA Consolidated Pro forma Consolidated as reported Infun Group Pro forma as adjusted as reported (unaudited) (unaudited) Adjustments (unaudited) (unaudited) Revenue 3,545,081 1,086,673 4,631,754 5,224,166 Cost of Sales 2,337, ,399 3,110,796 3,605,752 Gross Profit 1,207, ,273 1,520,957 1,618,414 SG&A Expenses 806, , ,765 1,063,145 Other expenses (income), net (7,391) (44,636) (52,027) (52,560) Operating Income 408, , , ,829 Financial income 35,099 (546) 34, ,668 Financial cost (10,933) 48,500 3d 37,567 (16,426) Foreign currency effects (20,401) (20,401) (437,335) Other financial expenses 4,427 4,427 4,523 Comprehensive financial expense, net 8,192 (546) 48,500 56,146 (330,570) Income before tax 400, ,975 (48,500) 567, ,399 Income tax 127,968 46,705 (14,550) 3e 160, ,460 Consolidated net income 272, ,270 (33,950) 406, ,939 Income (loss) corresponding to minority interest (15,446) 0 (15,446) (64,451) Net income corresponding to majority interest 288, ,270 (33,950) 422, ,390

21 Earnings Release 1Q17 20 Pro-forma financial statements incorporating the Income Statement and Statements of Financial Position of Infun Group as of March 31, 2016 In the scenario presented in the previous pages, 2016 Income Statement of Infun Group is incorporated, for illustrative purposes, to reflect the impact on the Income Statement for that period, in order to achieve comparability with the 2017 figures where it is already consolidated. On the other hand, the balance sheet of Infun Group as of March 31, 2016, as well as the corresponding acquisition effect, is incorporated into the Statement of Financial Position of GISSA, as if the transaction had occurred in that period. With this exercise, comparability is achieved with the figures from the 2017 Statement of Financial Position where this acquisition is already consolidated. Pro-forma Statement of Financial Position a. As of March 31, 2016 Integrates the Consolidated Statement of Financial Position of GIS on March 31, 2016, prepared in accordance with the International Financial Reporting Standards (IFRS), adding the Consolidated Statement of Financial Position of Infun Group as of the same date, and, lastly, pro-forma adjustments are included to illustrate the effect of the acquisition during that period. Pro-forma Consolidated Income Statement b. For the first three months of 2016 Integrates the Consolidated Income Statement of GIS, as well the Income Statement of Infun Group for the same period, both prepared in accordance with IFRS. In addition to these figures, the pro-forma adjustments applicable to the transaction are incorporated. c. The financial information of Infun Group is presented in Euros, and GIS has converted it from Euros into Mexican Pesos for pro-forma financial statement purposes only, using the following exchange rates: Statements of Financial Income Statement Position Closing Exchange Rate (MXP/EUR) Average Exchange Rate of the Year (MXP/EUR) March 31,

22 Earnings Release 1Q17 21 To incorporate the acquisition effects of Infun Group in the 2016 pro-forma scenario (purchase, credit subscription, and interest calculations), the exchange rates used are those published by the Banco de Mexico (Mexico s Central Bank), and the European Central Bank for November 18, 2016: MXP/EUR and MXP/USD. These parities correspond to those reported to the market, through the Corporate Restructuring Handbook ("Annex P"), published November 24, Pro-forma Adjustments The pro-forma adjustments as of March 31, 2016, included in the unaudited pro-forma consolidated statements of financial position, represent the acquisition of the totality of the shares of Infun Group, the debt subscribed to finance the transaction, the cash outflow, as well as the recognition of interests and the income tax effect arising from such interests. The pro - forma financial information is not intended to represent the results of operations or financial position of GIS under the assumption that the consolidation of Infun Group and the related transactions took place on the dates indicated. Likewise, the pro-forma financial information is not intended to project the results of operations or financial position of GIS in the future or fo r any given future period. The effects of the pro forma adjustments are as follows: Statements of Financial Position - a. Corresponds to the goodwill ($4,895,064) registered in the acquisition of Infun Group. Total cash consideration paid by the Company amounted to $6,035,540, which can be broken down as follows: mar-16 Current Assets 1,905,176 Property, equipment and intangible assets 1,430,042 Current and non-current liabilities 2,194,742 Fair value of the net assets acquired 1,140,476 Consideration given in cash 6,035,540 Goodwill 4,895,064 b. As of March 31, 2016, a $4,818,236 long-term loan is recognized, comprised of bank and seller financing. The remainder of the transaction was financed with GISSA s funds with the settlement of a $1,217,304 payment. c. For illustrative purposes, corresponds to the consolidation adjustment concerning the write-off of Infun Group s stockholders equity as of March 31, 2016.

23 Earnings Release 1Q17 22 Income Statement - d. Corresponds to the adjustment to recognized interests from the loan subscribed to acquire Infun Group, which amounts to $48,500 for the first quarter The currency fluctuation effect is not considered for the purposes of the Pro-forma Financial Statements as the loan was US dollar denominated. e. A current income tax effect is recognized in the Consolidated Income Statement from the interests on the long-term loan and the fee described in the previous point, using a corporate income tax rate of 30%. Management s Comments and Analysis of Results of Operations and Financial Position of the Company The following analysis is intended to provide a detailed description of the most relevant aspects of GIS s base financial statements and pro-forma, with the understanding that the proforma statements incorporate the effects of the acquisitions described in this section. Therefore, it is not intended to provide an exhaustive description of the effects resulting from said acquisitions. The following analysis must be read in conjunction with GIS s Annual Report and Quarterly Earnings Report.

24 Earnings Release 1Q17 23 Financial Position, Liquidity and Capital Resources Balance Sheet In all cases, March 2017 vs. March 2016 figures are compared with 2016 Infun Group s proforma figures. Cash and Cash Equivalents Cash and Cash Equivalents recorded an increase of 39%, as a result of the cash flow generated from strong operating performance. Accounts Receivable Inventory Accounts receivable recorded an increase of 10% due to more commercial activity. Inventory recorded an increase of 12%, mainly attributable to more intensive operation activity. Fixed Assets GIS s Fixed Assets recorded an increase of 8%, mainly derived from capital expenditures. Long-term Liabilities Long-term Liabilities recorded an increase of 4%, mainly explained by bank debt increase on Infun Group from 2016 to Stockholders' Equity Stockholders' Equity remained unchanged.

25 Earnings Release 1Q17 24 Operating Results Comparative analysis of the pro-forma financial statements as of March 31, 2016 vs. the financial statements reported as of March 31, Income Statement Net Revenues GIS Net Revenue would have increased by 13% in 1Q17 vs. 1Q16, as a result of strong growth in the operations of both GIS and Infun Group. Operating Income (EBIT) By incorporating 1Q16 Infun Group operating profit from 1Q16, GIS EBIT would have totaled $623,220, or 52% above that recorded in the period. Including Infun Group figures for both periods, 1Q17 EBIT would have decreased by 2% when compared to that recorded in the same quarter last year. Comprehensive Financial Result By incorporating the CFR of ACE Group recorded from January 31, 2016, to March 31, 2016, the interests on the bank loans used to acquire ACE Group and the fees to acquire Infun Group, GIS s Comprehensive Financial Result would have amounted to a $56,146 loss compared to the $8,192 loss which was originally recorded in 1Q16. In 1Q17, the CFR was Ps.331 million gain, impacted by a foreign exchange gain of more than Ps.300 million. Taxes The increase in this line for both periods mainly corresponds to an increase in pre -tax earnings caused by the consolidation of the operations of Infun Group into GIS, net of deferred taxes. Profit (Loss) Attributable to Controlling Interest By incorporating the previously described effects, the net profit attributable to controlling interest of GIS as of March 31, 2016 would have been $422,396, which represents an increase of 47% when compared to the same period. Including Infun Group figures for both periods, net profit attributable to controlling interest would have increased by 89% when compared to 1Q16.