EARNINGS RELEASE 2Q14

Transcription

1 EARNINGS RELEASE 2Q14 For additional information, please visit or contact: Saul Castañeda IR & Financial Information Director Phone: +52 (844) Patricio Gonzalez Treasury Director Phone: +52 (844) Jose Antonio Lopez CFO Phone: +52 (844) Saltillo, Mexico july 28, 2014

2 Earnings Release 2Q14 1 GRUPO INDUSTRIAL SALTILLO S.A.B. DE C.V. (GISSA) 2Q14 EARNINGS RELEASE Saltillo, Mexico, July 28, 2014 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, announced today its 2014 second quarter earnings results. 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, unless otherwise stated (in millions of U.S. nominal dollars) and can vary due to rounding. Consolidated Summary Consolidated results (millions) 2Q14 2Q13 % 6M14 6M13 % Net revenues (Pesos) 2,294 2,141 7% 4,709 4,327 9% Net revenues (US$) % % EBIT (Pesos) % % EBIT(US$) % % EBITDA (Pesos) % % EBITDA (US$) % % Net income (Pesos) % % Net income (US$) 7 6 6% %

3 Earnings Release 2Q14 2 Highlights During the second quarter of the year, the revenues presented a 7% growth when compared to the 2Q13. The Auto Parts Segment presented a solid growth of 30% YoY, as a result of our investments in capacity expansions, in response to the dynamic growth of the Automotive Industry in the region. Construction and Housewares Segments presented a 5% and 2% decrease, respectively, given the weak consumption environment present in the Mexican economy. The consolidated export sales represented 53% of the total revenues. The operating income, EBIT, in 2Q14 presented a 33% growth when compared to the same period of last year, reaching Ps.129 million. It is important to note that all three Business Segments of the Company report favorable results versus 2Q13. The Auto Parts Segment EBIT increased by 25%, mostly driven by a higher volume demand, higher efficiencies and a favorable exchange rate; Construction Segment reverted the Ps.10 million loss recorded in the 2Q13, to reach a profit of Ps.11 million; and finally, Housewares showed a 31% growth, the performance of the last two segments was mostly supported by operational efficiencies. 2Q14 EBITDA result was Ps.232 million, 24% higher when compared to 2Q13. The EBITDA margin to sales presented a significant expansion in a yearly basis, going from 8.8% to 10.1%. The cash flow generation, before investments for expansions, reached Ps.276 million. Net Income for the 2Q14 reached Ps.90 million, 11% higher when compared to 2Q13. This improvement is more significant considering the Ps.18 million of benefits recorded in the 2Q13 from the Comprehensive Financing Result (CFR), while in 2Q14 CFR results were only Ps.4 million. As of June 30, 2014, cash & equivalents amounted to Ps.2,037 million and bank debt registered Ps.385 million. In 2Q14 CAPEX reached Ps.134 million. It is important to emphasize that, in compliance of the accounting and financial standards, cash & equivalents corresponding to the entity constituted by the JV with TRW, Ps.150 million, were not integrated into the consolidated cash & equivalents of the Company since this amount was recorded as an investment in associates and joint ventures. On June 10 th the joint venture (JV) established with Kelsey Hayes Company, subsidiary of TRW Automotive Holdings was duly formalized. The total investment in this JV will be approximately US$120 million dedicated to a green field foundry project which, once completed, will reach a volume of 52,000 metric tons of high integrity ductile iron castings; this investment considers the construction of a machining shop as well. The start of production of the JV is expected to occur by 3Q15. On June 16 th we started the operations of a new production line for assembling domestic Tankless Water Heaters (Calentadores Instantáneos), becoming the first manufacturer of this type of products in Mexico. On June 26 th the new Auto Parts foundry plant in S.L.P., Mexico, was inaugurated. The amount invested was US$65. This new plant has 60,000 metric tons of foundry capacity for the production of grey and ductile iron castings. GIS foundry capacity now reaches a total of 240,000 metric tons including this new plant.

4 Earnings Release 2Q14 3 Comments from the Chief Executive Officer Jose Manuel Arana Escobar, CEO of GIS, stated: In this my first quarter at GIS, I see a strong commitment to planning and executing the strategy that will allow us to generate value and to grow at an accelerated rhythm. The productivity, savings and efficiencies that we have reached in the Construction and Houseware Segments allowed us to reduce the effects of a slow recovery of the consumption in México. We are responding to NAFTA s Automotive Segment momentum by taking advantage of our installed capacity and recent expansions. We will maintain our focus on customer satisfaction by delivering quality and service. We will also continue to be alert for exploring alternatives that may bring additional profitable growth to the Company Revenues by Segment Net revenues (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos 2,294 2,141 7% 4,709 4,327 9% Auto Parts % 1,840 1,392 32% Construction 1,055 1,105 (5%) 2,264 2,288 (1%) Housewares (2%) (5%) US Dollars % % Auto Parts % % Construction (8)% (5)% Housewares (6)% (9)%

5 Earnings Release 2Q14 4 EBIT (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos Consolidated % % Margin 6% 5% 7% 6% Auto Parts % % Margin 13% 13% 14% 10% Construction 11 (10) N/A % Margin 1% (1%) 3% 3% Housewares % (22%) Margin 9% 7% 7% 8% EBITDA (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos Consolidated % % Margin 10% 9% 11% 10% Auto Parts % % Margin 18% 18% 19% 15% Construction % % Margin 5% 3% 7% 6% Housewares % (16%) Margin 12% 9% 9% 11%

6 Earnings Release 2Q14 5 Quarter Results Auto Parts Overview Auto Parts revenues represented 40% of the consolidated revenues during the 2Q14. This segment s contribution is higher than the 33% registered in the 2Q13, driven by the utilization of our capacity expansions. On June 26 th the Mexican Minister of Economy, Mr. Ildefonso Guajardo Villarreal, and the Governor of San Luis Potosi, Mr. Fernando Toranzo Fernandez, attended the inauguration ceremony of our new foundry plant as honored guests. The US$65 million investment for the construction of this plant will allow us to generate 220 new jobs, as well as reach 240 thousand metric tons of total foundry capacity for the group. As mentioned before,, the expansion of the plant in San Luis Potosi will have a utilization ramp up, a common standard in the automotive sector. Revenues (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos % 1,840 1,392 32% US Dollars* % % *Consolidated sales of the Auto Parts Segment are 100% dollarized Revenues The revenues for this Segment during the quarter, measured in US dollars, reflected a 25% increase when compared to the 2Q13. When measured in Mexican pesos, the increase amounts to 30%, mostly explained by: (i) a higher volume, (ii) a better exchange rate, and (iii) favorable prices and sales mix. The increase in the sales volume is related to the expansions over the recent years in the plants located in Saltillo and Irapuato, and recently in San Luis Potosi.

7 Earnings Release 2Q14 6 EBIT and EBITDA EBIT (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos % % Margin 13% 13% 14% 10% US Dollars % % EBITDA (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos % % Margin 18% 18% 19% 15% US Dollars % % The Auto Parts operating profit, EBIT, for 2Q14, reached US$9 million, a 20% increase when compared to the same period last year. The Auto Parts EBITDA for the 2Q14 was US$13 million, a 24% increase when compared to the 2Q13. The margin expansion over this reporting quarter is mainly explained by: Higher volume sales Better exchange rate, 2Q14 vs. 2Q13 Favorable price and sales mix Operational efficiencies

8 Earnings Release 2Q14 7 Construction Outlook The Construction Segment revenues during the 2Q14 represented 46% of the consolidated revenues, a lower proportion compared to the 52% registered in 2Q13. This reduction is mostly a result of the higher participation of the Auto Parts Segment in our business portfolio. The graphs below show the breakdown of revenues for the Construction Segment: Revenues Revenues (millions) 2Q14 2Q13 % 6M14 6M13 % Revenues (Mexican Pesos)* Ceramic Tiles Water Heaters Pipe Fittings 1,055 1,105 (5%) 2,264 2,288 (1%) (6%) 1,396 1,414 (1%) (0%) (1%) (8%) % *Figures presented in millions of Mexican Pesos, given that sales in the domestic market represented 75% of the total sales of this Segment in the 2Q14 During the 2Q14, the revenues of the Construction Segment decreased by 5% when compared to 2Q13. Ceramic Tiles and Pipe Fittings Businesses decreased by 6% and 8%, respectively, when compared to 2Q13, as a consequence of the contraction that has prevailed in the new housing construction sector. The Water Heaters business maintained its revenue level, supported by a strong marketing and sales strategy geared towards servicing new small and medium regional builders.

9 Earnings Release 2Q14 8 On June 16th we started the operations of a new production line for assembling domestic Tankless Water Heaters (Calentadores Instantáneos ), becoming the first manufacturer of this type of products in Mexico. In this line, exhaustive inspections and testing are performed to validate the safety and expected performance of the product s components. This production line will allow us to replace most of the volume of this type of products that the Company has been importing, and will result in a significant decrease in transportation costs. EBIT and EBITDA EBIT (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos 11 (10) N/A % Margin 1% (1%) 3% 3% US Dollars 1 (1) N/A % EBITDA (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos % % Margin 5% 3% 7% 6% US Dollars % % During 2Q14, the operating income, EBIT, of the Construction Segment reached US$11 million, which represents a solid recovery when compared to the operating loss registered in the same period last year. This progress is explained by the optimization of the production levels that were matched to a low growth environment. The results from this measure were enhanced by favorable effects in price and sales mix, as well as for reductions in operating expenses. As a consequence, the 2Q14 EBITDA reflected a significant growth of 74%, going from Ps.28 million in the 2Q13 to Ps.49 million in the 2Q14. The projects implemented to increase the productivity should generate higher benefits during the next two quarters of the year due to a greater seasonality demand of our products.

10 Earnings Release 2Q14 9 Overview Revenues from the Housewares Segment for 2Q14 represented 14% of the consolidated revenues, almost in line with the 15% registered in the 2Q13. Revenues Housewares Revenues (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos* (2%) (5%) *Figures presented in millions of Mexican Pesos, given that sales in the domestic market represented 94% of the total sales of this Segment in 2Q14 During 2Q14, the Housewares Segment had a 2% decrease in its revenues when compared to the same period last year. This decrease is linked to the weakness of the internal consumption in Mexico, as well as the effect of the dynamism recorded in the 2Q13 of the promotional and catalogue channel sales. It is important to mention that the promotional and catalogue channel sales demand depends upon the programs of our customers. EBIT and EBITDA EBIT (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos % (22%) Margin 9% 7% 7% 8% US Dollars % 3 4 (25%) EBITDA (millions) 2Q14 2Q13 % 6M14 6M13 % Mexican Pesos % (16%) Margin 12% 9% 9% 11% US Dollars % 4 6 (20%) The Segment s EBIT and EBITDA presented a relevant increase, when compared to the 2Q13; which was supported by operational efficiencies and operating expenses savings.

11 Earnings Release 2Q14 10 Financial Statements Grupo Industrial Saltillo, S.A.B. de C.V. Statements of Comprehensive Income (Expressed in Millions of Nominal Mexican Pesos) (Unaudited) SECOND QUARTER AS OF JUNE % % Net Revenues 2,294 2,141 7% 4,709 4,327 9% Auto Parts % 1,840 1,392 32% Construction 1,055 1,105 (5%) 2,264 2,288 (1%) Housewares (2%) (5%) Cost of sales 1,766 1,637 8% 3,584 3,309 8% General expenses (0%) % Operating CFR 4 9 (59%) 5 7 (21%) Other income (expenses), net 3 3 (9%) 8 16 (49%) Operating Income (EBIT) % % Auto Parts % % Construction 11 (10) N/A % Housewares % (22%) EBITDA % % Auto Parts % % Construction % % Housewares % (16%) CFR (4) (18) (8) 17 Participation in subsidiaries Income tax Profit from continuing operations % % Profit from discontinuing operations Net result % % Profit from the non controlling interest (0) 0 N/A (0) 0 N/A Profit from the controlling interest % %

12 Earnings Release 2Q14 11 Grupo Industrial Saltillo, S.A.B. de C.V. Statements of Financial Position (Expressed in Millions of Nominal Mexican Pesos) (Unaudited) jun 14 dec 13 ASSETS Current assets Cash and equivalents 2,037 1,911 Accounts receivable, net 2,043 1,963 Other receivables Inventories 1,367 1,305 Property, plant & equipment, net 4,641 4,754 Investments in associates and JV Other assets 1,534 1,504 TOTAL ASSETS 12,218 11,855 LIABILITIES Current liabilities Bank debt & current maturities Trade payables 1,320 1,128 Other current liabilities Non current liabilities Bank debt Diferred taxes 1, Other non current liabilities TOTAL LIABILITIES 3,593 3,433 TOTAL SHAREHOLDERS EQUITY 8,625 8,422 TOTAL LIABILITIES AND EQUITY 12,218 11,855

13 Earnings Release 2Q14 12 Relevant Information About Grupo Industrial Saltillo Grupo Industrial Saltillo manufactures and markets products for the Auto Parts (grey and ductile iron castings), Construction (water heaters, 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 informs in accordance with the mandate of this Bylaws, that the financial institutions that provide analyst coverage over GISSA s stock are GBM Grupo Bursatil 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 José Juan Carreño Moreno Federico Robinson Bours Carrillo

14 Earnings Release 2Q14 13 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, by the average exchange rate registered for that quarter. The export sales are integrated by: (i) direct exports and (ii) sales billed in U.S. dollars in Mexico. 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 standardized percentage to allocate the corporate services along each Business Segment, to achieve its proper normalization. This methodology has been applied since 1Q13. Notes to the Financial Statements: for a greater depth in the analysis, in addition to reviewing the contents of this Earnings Release, we recommend you to go in detail on the Notes of our Financial Statements visiting our Website: