ALFA, S.A.B. DE C.V. THIRD QUARTER 2017 FINANCIAL REPORT ALFA REPORTS 3Q17 EBITDA OF U.S. $400 MILLION Monterrey, N.L., Mexico, October 16, 2017.- ALFA, S.A.B. de C.V. (ALFA), a leading Mexican industrial company, reported today its 3Q17 unaudited financial results. Total revenues were U.S. $4,278 million, up 6% year-on-year due to higher sales achieved at all major business units. EBITDA was U.S. $400 million, down 29% vis-à-vis 3Q16, mainly explained by the impact of one-time charges in Alpek, related to accounts receivable from one of its clients. Excluding this extraordinary item, EBITDA would have been U.S. $513 million, down 8% year-on-year. Alvaro Fernandez, ALFA s President, commented on the Company s results: Overall, our subsidiaries delivered solid results and performed in line with expectations. This was partially offset by one-time provisions made at Alpek due to the financial issues of one of its clients. Sigma delivered strong results in all major regions, while Nemak s results were lower year-on-year as it continues to face weaker conditions in the North American auto market. Finally, Axtel continues to increase its Enterprise and Government businesses and advanced in the sale and delivery of transmission towers. Consolidated capital expenditures and acquisitions amounted to U.S. $326 million during 3Q17. Net Debt at the quarter end of U.S. $6,545 million was 10% higher when compared to the U.S. $5,943 million in 3Q16. At the end of the quarter, financial ratios were: Net Debt to EBITDA: 3.3 times; Interest Coverage: 5.1 times. Majority Net Loss was U.S. $333 million in 3Q17, compared to Majority Net Income of U.S. $13 million in 3Q16. This decrease is mainly explained by the effects of provisions and asset impairments at Alpek which impacted both Operating Income and Comprehensive Financing Expense ( CFE ). SELECTED FINANCIAL INFORMATION (U.S. $MILLION) 3Q17 2Q17 3Q16 CH. % VS. 2Q17 CH. % VS. 3Q16 YTD. 17 YTD. 16 YTD Chg. % CONSOLIDATED REVENUES 4,278 4,232 4,023 1 6 12,507 11,882 5 Sigma 1,608 1,503 1,461 7 10 4,461 4,259 5 Alpek 1,312 1,306 1,236-6 3,910 3,655 7 Nemak 1,099 1,165 1,063 (6) 3 3,387 3,261 4 Axtel 211 203 205 4 3 596 545 9 Newpek 21 29 29 (29) (28) 76 79 (4) CONSOLIDATED EBITDA 1 400 522 560 (23) (29) 1,450 1,782 (19) Sigma 179 167 166 7 8 481 497 (3) Alpek 3 82 157 (96) (98) 243 536 (55) Nemak 153 206 182 (26) (16) 550 612 (10) Axtel 74 81 67 (9) 10 213 179 20 Newpek 1 1 1 47 (27) (1) (2) 77 MAJORITY NET INCOME (333) 76 13 (540) - (103) 201 (151) CAPITAL EXPENDITURES & ACQ. 326 227 376 43 (13) 851 1,041 (18) NET DEBT 6,545 6,401 5,943 2 10 6,545 5,943 10 Net Debt/LTM EBITDA* 3.3 3.0 2.4 LTM Interest Coverage* 5.1 5.7 6.6 * Times. UDM = Last 12 months 1 EBITDA = Operating Income + depreciation and amortization + impairment of assets. CONTENTS: Summary of Groups 2 Alfa Financial Tables 6 ALFA Groups Financial Information 10 This release may contain 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. Figures are presented in Mexican pesos or U.S. Dollars, as indicated. Where applicable, peso amounts were translated into U.S. Dollars using the average exchange rate of the months during which the 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.
ALFA S THIRD QUARTER 2017 2 SUMMARY OF GROUPS PERFORMANCE DURING 3Q17 Sigma s revenues amounted to U.S. $1,608 million, an increase of 10% from 3Q16. By region, sales in Mexico increased 13% year-on-year, reflecting higher volume and higher average prices. U.S. sales increased 6%, mainly driven by higher sales volumes. European sales continued to improve, increasing 8%. Latin America sales increased 17%, reflecting the acquisition of Supemsa at the end of 2Q17. Sigma reported 3Q17 EBITDA of U.S. $179 million, up 8% year-on-year, mainly explained by a solid performance of Mexican and U.S. operations. On September 1st, Sigma acquired the remaining 51% of the shares of Caroli Foods Group, BV. ("Caroli'), that it did not already own, for 49 million, making Sigma the sole owner. Caroli, a Romanian company, produces and markets packaged meats and ready to eat meals and generated sales of 88 million in 2016 and employs more than 1,200 people. During 3Q17, capital expenditures and acquisitions totaled U.S. $122 million, funds were utilized for the acquisitions of Caroli and Supemsa, the new plant in Burgos, Spain, other fixed assets and minor projects across the company. At the end of 3Q17, Net Debt was U.S. $2,037 million, 11% higher than in 3Q16. Financial ratios at the end of 3Q17 were: Net Debt to EBITDA, 3.1 times; Interest Coverage, 4.6 times. (See appendix A for more comprehensive analysis of Sigma s 3Q17 financial results) Alpek s third quarter 2017 financial results were impacted by full provisions and asset impairments associated with Mossi & Ghissolfi (M&G) which proceeded to shut down its operations in Altamira, Mexico due to liquidity constraints. Missed payments forced Alpek to halt PTA supply to M&G Mexico and M&G Brazil during 3Q17. Since then, Alpek and its advisors have engaged M&G and its creditors to resume PTA supply; a suitable mechanism has yet to be agreed upon. Exposure to M&G is twofold as of 3Q17: PTA accounts receivable (A/R), and funding for its integrated PTA-PET site under construction in Corpus Christi, TX. In accordance with IFRS, Alpek recognized the following non-recurring items: i) U.S. $113 million A/R provision impairment affecting EBITDA, ii) U.S. $435 million intangible asset impairment affecting Operating Income, iii) U.S. $95 million financial asset impairment affecting Financial Cost, Net, and iv) U.S. $223 million deferred tax credit benefiting Income Tax. The full amount of provisions and asset impairments is subject to restitution upon A/R collection or a definitive Corpus Christi project resolution reaffirming Alpek s capacity rights. Alpek will continue pursuing full restitution by leveraging its competitive PTA supply in Mexico and Brazil as well as its secured claim in Corpus Christi. Revenues for the third quarter totaled U.S. $1.3 billion, up 6% year-on-year, mainly due to higher average consolidated prices in both business segments. Average 3Q17 consolidated prices increased 5% when compared with 3Q16. 3Q17 consolidated volume was up 1% year-on-year. Accumulated net sales as of September 30, 2017 totaled U.S. $3.9 billion, 7% higher than the same period last year as a result of 5% and 2% increases in average prices and volume, respectively. 3Q17 EBITDA was U.S. $3 million, down 98% when compared with 3Q16. This quarter s Consolidated EBITDA includes a U.S. $113 million A/R provision impairment associated to M&G and a U.S. $9 million non-cash inventory gain. Adjusting for the M&G A/R provision and the inventory gain, comparable EBITDA was U.S. $108 million and U.S. $152 million in 3Q17 and 3Q16 respectively. EBITDA was also affected by lower PTA sales to M&G in 3Q17. Accumulated EBITDA as of September 30, 2017 was U.S. $243 million. 3Q17 Capex was U.S. $64 million, compared to U.S. $128 million in 3Q16. Most of these funds were invested in the 350 MW power cogeneration plant in Altamira, Mexico, which is advancing as planned together with other projects. An
ALFA S THIRD QUARTER 2017 3 important milestone this quarter was the completion of the Expandable Polystyrene (EPS) capacity expansion project in Altamira, Mexico. Alpek invested a total of U.S. $28 million to expand its 165 Kton per year EPS plant by 75 Kton per year, making it one of the largest in the world. The acquisition of PetroquimicaSuape and Citepe from Petrobras for U.S. $385 million is advancing. The transaction is being evaluated by the Administrative Council for Economic Defense (CADE) in Brazil. Closing is subject to CADE s approval, among other conditions. Alpek continues to move forward with the sale of power cogeneration assets in Mexico, and is engaged in the final selection stage to choose one of the offers received from potential investors for its power cogeneration facilities. Net Debt as of the end of the quarter was U.S. $1,192 million, up 30% year-on-year, driven by the aforementioned investment in strategic projects. At quarter end, financial ratios were as follows: Net Debt to EBITDA, 3.2 times; Interest Coverage, 5.4 times. Subsequent to quarter s end, Alpek acquired from Inbursa all credit rights to a U.S. $100 million secured loan with M&G Polímeros México S.A. de C.V. (M&G Mexico). The acquired credit rights are secured by a lien on M&G Mexico s PET production facility in Altamira, Mexico which has an installed capacity of approximately 560 ktons per year and is colocated with Alpek s PTA site. Alpek will continue engaging M&G and its creditors to resume M&G Mexico s operations and implement a definitive solution to M&G s financial situation. (See appendix B for Alpek s 3Q17 financial report) Nemak s 3Q17 sales volume was 11.7 million equivalent units, 4% lower than 3Q16. Sales volume declined in North America mainly due to lower vehicle production, with Ford reducing production of passenger cars and GM adjusting overall inventories. Additionally, FCA s 2016 discontinuation of its small- and- medium-size sedan lines continued to make for a difficult year-on-year comparison. Volumes in Europe increased 6% year-on-year reflecting the strength of the market. Meanwhile, in Rest of World, volumes increased 8% year-on-year mainly due to the continued ramp-up of new programs in China and improved industry performance in Brazil. Higher aluminum prices more than offset the impact of lower sales volumes, resulting in revenues of U.S. $1,099 million up 3% year-over-year. In turn, 3Q17 EBITDA totaled U.S. $153 million, down 16% year-on-year, mainly as a result of lower sales volumes, negative metal price lag, and increased expenses related to new program launches. EBITDA per unit was U.S. $13.10 in 3Q17, down from U.S. $14.90 in the same period last year. Capital expenditures in the quarter amounted to U.S. $93 million as the company continued to move ahead with strategic projects. Investments were made to expand capacity and to facilitate operational efficiency across the company s plants in all regions. Net Debt at the end of 3Q17 totaled U.S. $1,387 million, up 4% from 3Q16, reflecting the capital expenditures during the period. Financial ratios in 3Q17 were: Net Debt to EBITDA of 1.9 times, and Interest Coverage of 10.1 times. (See appendix C for Nemak s 3Q17 financial report) Axtel s revenues in the third quarter totaled U.S. $211 million, up 3% year-on-year, mainly due to higher sales to the Enterprise segment which compensated for lower revenue from legacy businesses in the Mass Market segment. In peso terms, total revenues decreased 2% in the quarter. Enterprise and government segment represented 80% of revenues in the quarter.
ALFA S THIRD QUARTER 2017 4 3Q17 EBITDA was U.S. $74 million, up 10% year-on-year, explained in part by a U.S. $9 million benefit from the second tranche of the tower sale. Excluding this effect, EBITDA decreased 3% from 3Q16, mainly due to the decline in the legacy wireless mass market business revenues and non-recurrent extraordinary revenues recorded in the year-earlier quarter. Capital expenditures totaled U.S. $34 million in 3Q17 (U.S. $42 million excluding tower sales), including investments to provide last-mile access to connect customers, to deploy IT infrastructure and to further increase data center capacity in Queretaro, Mexico. At the end of 3Q17, Net Debt was U.S. $1,029 million, up U.S. $20 million year-on-year. Financial ratios at the end of 3Q17 were: Net Debt to EBITDA of 4.0 times and Interest Coverage of 7.1 times. (See appendix D for Axtel s 3Q17 financial report) Newpek s revenues were U.S. $21 million, down 28% from 3Q16, as higher average oil and natural gas prices did not offset a decline in production. Newpek connected to sales seven new wells at the Eagle Ford Shale ( EFS ) in South Texas. This brought wells in production at EFS to 639 by the quarter s end, compared to the 628 wells in production at the end of 3Q16. Production in the U.S. averaged 4.3 million barrels of oil equivalent per day (MBOED) during 3Q17, down 35% from 3Q16 reflecting decline rates before drilling restarted in 2017. Strategic drilling and completion activities continued at EFS during the quarter. As a result, nine new wells are expected to be put into production during 4Q17, for a total of 20 new producing wells during the year. Additionally, five new wells will be drilled and completed in the Wilcox formation in South Texas, where Newpek has a 20% working interest. In Mexico, production averaged 3.4 MBOED during 3Q17, down 3% from 3Q16. 3Q17 EBITDA was U.S. $1 million, unchanged from 3Q16. Capital expenditures amounted to U.S. $11 million, while net debt was U.S. $30 million at the end of the quarter. (See appendix E for more comprehensive analysis of Newpek s 3Q17 financial results) CONSOLIDATED FINANCIAL RESULTS 3Q17 consolidated revenues were U.S. $4,278 million, up 6% from U.S. $4,023 million reported in 3Q16. The increase is the result of higher sales across all major business units and mainly reflects higher volumes and prices in Sigma, higher aluminum prices which offset lower volumes in Nemak, along with higher sales volume and prices in Alpek. During the quarter, foreign sales represented 65% of the total, in line with 3Q16. Year-to-date revenues were U.S. $12,507, up 5% from 2016, primarily for the same reasons. 3Q17 Consolidated Operating Loss totaled U.S. $302 million, down 190% from 3Q16, primarily due to the impact of account receivables provisions charges and intangible asset impairments at Alpek of U.S $113 million and U.S. $435 million, respectively, as a result of M&G s financial difficulties, as explained in the Alpek summary section above. Alpek s results were also affected by lower PTA sales to M&G in 3Q17. In Nemak, operating income was negatively impacted by lower sales volumes and negative metal price lag and decreased U.S. $37 million year-on-year. Sigma improved due to better performance in all regions. In turn, Axtel s operating income benefitted by extraordinary income of U.S. $9 million stemming from the sale of transmission towers. Accumulated Operating Income was U.S. $269 million, down 76% from 2016. 3Q17 EBITDA was U.S. $400 million, down 29% year-on-year, reflecting the lower Operating Income explained above, excluding depreciation, amortization and the aforementioned intangible asset impairment. Year-to-date EBITDA was U.S. $1,450 million, down 19% from 2016. ALFA reported 3Q17 Comprehensive Financing Expense (CFE) of U.S. $271 million, compared to U.S. $187 million in 3Q16, mainly explained by a U.S. $95 million financial asset impairment affecting Financial Cost, Net, related to an outstanding loan to M&G at Alpek.
ALFA S THIRD QUARTER 2017 5 Majority Net Loss was U.S. $333 million in 3Q17, compared to Majority Net Income of U.S. $13 million in 3Q16. This yearon-year decrease is mainly explained by the effects of provisions and asset impairments at Alpek which impacted both Operating Income and Comprehensive Financing Expense ( CFE ) already explained, and by a U.S. $223 million deferred tax credit benefiting Income Tax resulting from the same M&G-related charges. Year-to-date Majority Net Loss was U.S. $103 million, down 151% from the same period in 2016. CAPITAL EXPENDITURES AND ACQUISITIONS; NET DEBT Consolidated capital expenditures and acquisitions totaled U.S. $326 million in 3Q17. All subsidiaries continued to make progress on their investment plans as discussed in the initial section of this report. At quarter-end 3Q17, ALFA s Net Debt amounted to U.S. $6,545 million, U.S. $602 million higher than 3Q16. At the end of the quarter, financial ratios were: Net Debt to EBITDA, 3.3 times; Interest Coverage, 5.1 times. These ratios compare to 2.4 times and 6.6 times, respectively in 3Q16.
ALFA S THIRD QUARTER 2017 6 ALFA TABLE 1 VOLUME AND PRICE CHANGES (%) 3Q17 vs. YTD. 17 VS 2Q17 3Q16 YTD. 16 Total Volume (0.2) 7.1 7.5 Domestic Volume 2.6 11.8 13.9 Foreign Volume (2.9) 2.7 1.9 Avg. Ps. Prices (2.9) (5.5) 1.2 Avg. U.S. $ Prices 1.3 (0.8) (2.1) TABLE 2 REVENUES (%) 3Q17 VS. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD. 17 YTD. 16 Ch.% TOTAL REVENUES Ps. Millions 76,235 78,665 75,323 (3) 1 236,282 217,069 9 U.S. $ Millions 4,278 4,232 4,023 1 6 12,507 11,882 5 DOMESTIC REVENUES Ps. Millions 26,719 27,962 26,552 (4) 1 83,025 76,077 9 U.S. $ Millions 1,499 1,504 1,418 0 6 4,396 4,166 6 FOREIGN REVENUES Ps. Millions 49,516 50,704 48,771 (2) 2 153,257 140,992 9 U.S. $ Millions 2,779 2,728 2,604 2 7 8,111 7,716 5 Foreign / Total (%) 65 64 65 65 65 TABLE 3 OPERATING INCOME AND EBITDA (%) 3Q17 VS. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD. 17 YTD. 16 Ch.% OPERATING INCOME Ps. Millions (5,367) 5,137 6,275 (204) (186) 5,748 20,479 (72) U.S. $ Millions (302) 278 334 (209) (190) 269 1,122 (76) EBITDA Ps. Millions 7,134 9,679 10,503 (26) (32) 27,561 32,545 (15) U.S. $ Millions 400 522 560 (23) (29) 1,450 1,782 (19) TABLE 4 COMPREHENSIVE FINANCING (EXPENSE) / INCOME (CFI) (U.S. $ MILLIONS) (%) 3Q17 VS. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD. 17 YTD. 16 Ch.% Financial Expenses (114) (108) (102) (6) (13) (353) (314) (13) Financial Income 8 9 6 (8) 27 26 22 17 Net Financial Expenses (106) (99) (95) (7) (12) (327) (291) (12) Fx Gains (Losses) (74) (18) (64) (311) (14) 145 (258) 157 Financial Asset Impairment (95) 0 0 (100) (100) (95) 0 (100) PRE valuation 0 0 (28) - 100 0 (69) 100 Capitalized CFE 4 4 1 14 651 11 1 671 CFE (271) (113) (187) (139) (44) (266) (615) 57 Avg. Cost of Borrowed Funds (%) 4.8 4.6 4.7 5.0 4.4
ALFA S THIRD QUARTER 2017 7 ALFA TABLE 5 MAJORITY NET INCOME (U.S. $ MILLIONS) (%) 3Q17 VS. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD. 17 YTD. 16 Ch.% Consolidated Net Income (Loss) (417) 121 50 (446) (929) -65 330 (446) Minority Interest (83) 45 37 (287) (326) 38 128 (287) Majority Net Income (Loss) (333) 76 13 (540) (2,608) -103 201 (540) Per Share (U.S. Dollars) (0.07) 0.01 0.00 (540) (2,608) -0.02 0.04 (540) Avg. Outstanding Shares (Millions) 5,086 5,086 5,121 5,095 5,121 TABLE 6 CASH FLOW (U.S. $ MILLIONS) (%) 3Q17 VS. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD. 17 YTD. 16 Ch.% EBITDA 400 522 560 (23) (29) 1,450 1,782 (19) Net Working Capital & Others 56 (9) 65 722 (14) (218) (303) 28 Capital Expenditures & Acquisitions (326) (227) (376) (44) 13 (851) (1,041) 18 Net Financial Expenses (103) (103) (92) 0 (12) (330) (309) (7) Taxes (57) (88) (47) 35 (21) (198) (232) 15 Dividends (ALFA, S.A.B.) 0 0 0 (170) (172) 1 Other Sources / Uses (114) (137) (20) 17 (470) (384) (882) 56 Decrease (Increase) in Net Debt (144) (42) 89 (243) (262) (701) (1,158) 39 TABLE 7 SELECTED BALANCE SHEET INFORMATION & FINANCIAL RATIOS (U.S. $ MILLIONS) 3Q17 2Q17 3Q16 YTD. 17 YTD. 16 Assets 18,002 18,126 16,809 18,002 16,809 Liabilities 13,182 12,928 12,038 13,182 12,038 Stockholders Equity 4,821 5,198 4,771 4,821 4,771 Majority Equity 3,608 3,883 3,583 3,608 3,583 Net Debt 6,545 6,401 5,943 6,545 5,943 Net Debt/EBITDA* 3.3 3.0 2.4 3.3 2.4 Interest Coverage* 5.1 5.7 6.6 5.1 6.6 * Times: LTM = Last 12 months
Appendix A ALFA, S.A.B. de C.V. and Subsidiaries BALANCE SHEET Information in millions of Nominal Mexican Pesos (%) Sep 17 vs. Sep-17 Jun-17 Sep-16 Jun 17 Sep 16 ASSETS CURRENT ASSETS: Cash and cash equivalents 23,646 19,598 22,655 21 4 Trade accounts receivable 26,180 26,766 30,070 (2) (13) Other accounts and notes receivable 6,816 6,279 7,644 9 (11) Inventories 40,515 39,714 39,466 2 3 Other current assets 11,633 12,580 11,832 (8) (2) Total current assets 108,790 104,938 111,667 4 (3) INVESTMENTS IN ASSOCIATES AND JOINT VENTURES 1,299 2,072 2,001 (37) (35) PROPERTY, PLANT AND EQUIPMENT 143,556 139,570 138,070 3 4 INTANGIBLE ASSETS 53,433 56,420 54,934 (5) (3) OTHER NON-CURRENT ASSETS 20,529 21,415 21,110 (4) (3) Total assets 327,607 324,414 327,783 1 (0) LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Current portion of long-term debt 2,591 1,113 1,090 133 138 Bank loans and notes payable 11,149 9,889 6,187 13 80 Suppliers 51,131 50,675 47,906 1 7 Other current liabilities 20,176 20,493 22,804 (2) (12) Total current liabilities 85,048 82,171 77,988 4 9 LONG-TERM LIABILITIES: Long-term debt 130,865 124,011 131,038 6 (0) Deferred income taxes 13,577 14,194 14,204 (4) (4) Other liabilities 5,759 6,568 7,217 (12) (20) Estimated liabilities for seniority premiums and pension plans 4,626 4,433 4,304 4 7 Total liabilities 239,876 231,377 234,750 4 2 STOCKHOLDERS' EQUITY: Controlling interest: Capital stock 212 212 213 - (1) Contributed capital 212 212 213 - (1) Earned surplus 65,445 69,281 69,657 (6) (6) Total controlling interest 65,657 69,493 69,871 (6) (6) Total Non-controlling interest 22,073 23,544 23,162 (6) (5) Total stockholders' equity 87,731 93,037 93,033 (6) (6) Total liabilities and stockholders' equity 327,607 324,414 327,783 1 (0) Current ratio 1.28 1.28 1.43 Debt to equity 2.73 2.49 2.52
Appendix B ALFA, S.A.B. DE C.V. and Subsidiaries STATEMENT OF COMPREHENSIVE INCOME Information in millions of Nominal Mexican Pesos 3Q17 vs. (%) 3Q17 2Q17 3Q16 YTD '17 YTD '16 2Q17 3Q16 Net sales 76,235 78,665 75,323 236,282 217,069 (3) 1 Domestic 26,719 27,962 26,552 83,025 76,077 (4) 1 Export 49,516 50,704 48,771 153,257 140,992 (2) 2 Cost of sales (61,368) (63,543) (58,838) (189,467) (166,649) 3 (4) Gross profit 14,867 15,122 16,485 46,815 50,420 (2) (10) Operating expenses and others (20,233) (9,985) (10,210) (41,068) (29,941) (103) (98) Operating income (5,367) 5,137 6,275 5,748 20,479 (204) (186) Comprehensive financing expense, net (4,823) (2,137) (3,566) (4,690) (11,346) (126) (35) Equity in income (loss) of associates 5 25 27 76 38 (79) (81) Income before the following provision (10,184) 3,026 2,736 1,133 9,171 (437) (472) Provisions for: Income tax 2,759 (839) (1,815) (1,720) (3,263) 429 252 Consolidated net income (7,426) 2,187 920 (587) 5,908 (440) (907) Income (loss) corresponding to minority interest (1,487) 816 686 875 2,319 (282) (317) Net income (loss) corresponding to majority interest (5,939) 1,371 234 (1,462) 3,590 (533) (2,633) EBITDA 7,134 9,679 10,503 27,561 32,545 (26) (32) Interest coverage* 5.2 5.7 6.6 5.2 6.6 * LTM
ALFA S THIRD QUARTER 2017 10 LUIS OCHOA +52 (81) 8748.2521 lochoa@alfa.com.mx JUAN ANDRÉS MARTÍN +52 (81) 8748.1676 jamartin@alfa.com.mx APPENDIX: A SIGMA 11 B ALPEK 14 C NEMAK 27 D AXTEL 35 E NEWPEK 45 MARCELA ELIZONDO +52 (81) 8748.1223 melizondo@alfa.com.mx MBS VALUE PARTNERS SUSAN BORINELLI +1 (646) 330.5907 susan.borinelli@mbsvalue.com
ALFA S THIRD QUARTER 2017 11 SIGMA REFRIGERATED FOOD PRODUCTS 38% AND 44% OF ALFA S REVENUES AND EBITDA IN 3Q17 Sigma is a leading multinational refrigerated food company that produces, markets and distributes quality branded foods, including packaged meats, cheese, yogurt and other refrigerated and frozen foods. Sigma has a diversified portfolio of leading brands and operates 69 plants in 18 countries across its four key regions: Mexico, Europe, the United States, and Latin America. INDUSTRY COMMENTS During 3Q17, consumer confidence is higher year-on-year across Sigma s main regions of operations. In Mexico, the average consumer confidence index reported by INEGI (Instituto Nacional de Estadística y Geografía National Institute for Statistics and Geography) has been recovering steadily since February and was up 2% year-on-year, while same-store sales reported by the National Association of Supermarkets and Department Stores (ANTAD) increased 4% year-on-year in nominal pesos. In Europe, according to the European Commission, the average consumer confidence index for 3Q17 improved to negative 1.5, from negative 8.2 during 3Q16, reaching a 10-year high. In the U.S., the average consumer confidence index increased to 120 in 3Q17 from 101 during 3Q16 as reported by The Conference Board, the highest since 2000. Food retail sales reported by the U.S. Census Bureau increased 2% year-on-year. Key raw material prices were mixed during the quarter and varied by region. In the Americas, most raw material prices such as pork, turkey thigh and milk were similar during 3Q17 when compared to 3Q16. In turn, turkey breast was 29% lower and chicken was 22% higher than the same period of the prior year. Compared to the previous quarter, turkey thigh and chicken have decreased 15% and 10%, respectively. In Europe, pork ham prices were 4% higher than 3Q16, with increases beginning during the second half of 2016 resulting in current prices above historical figures. In Mexico, the recent appreciation of the Peso vis-a-vis the U.S. Dollar has eased the pressure in the cost of raw materials, as the industry participants import most of its meats from the U.S. OPERATIONS During 3Q17, Sigma sold approximately 441 thousand tons of food products, up 4% from 3Q16, supported by growth in all regions. In dollar terms, average prices increased 6% year-on-year, stemming from higher prices in all regions, and a more favorable currency environment in Mexico and Europe. FINANCIAL RESULTS Sigma s revenues amounted to U.S. $1,608 million, an increase of 10% versus 3Q16. By region, sales in Mexico increased 13% year-on-year, reflecting higher volume and higher average prices. U.S. sales increased 6% driven by higher sales volumes due to increased distribution in mainstream products, and growth in the heritage premium segment. European sales continued to improve, increasing 8% in U.S. dollars, benefiting from the appreciation of the Euro. Latin America sales increased 17%, reflecting the acquisition of Supemsa at the end of 2Q17. Sales in Mexico accounted for 42% of the quarter s total, while Europe represented 35%, the U.S. 16%, and Latin America 7%. During the first three quarters of 2017, revenues were U.S. $4,461 million, up 5% when compared to the same period of 2016. Operating Income and EBITDA were U.S. $125 million and U.S. $179 million in 3Q17, up 9% and 8% year-on-year, respectively. This was primarily due to a solid performance of Mexican and U.S. operations, with sales growing this quarter
ALFA S THIRD QUARTER 2017 12 while maintaining similar margins with 3Q16, resulting in increases in EBITDA of 10% and 8% y-o-y respectively. In Europe, results from Caroli started consolidating in September. CAPITAL EXPENDITURES AND ACQUISITIONS; NET DEBT On September 1st, Sigma acquired the remaining 51% of the shares of Caroli Foods Group, BV. ("Caroli'), that it did not already own, for 49 million, making Sigma the sole owner. Caroli, a Romanian company, produces and markets packaged meats and ready to eat meals and generated sales of 88 million in 2016 and employs more than 1,200 people. During 3Q17, capital expenditures and acquisitions totaled U.S. $122 million, funds were utilized for the acquisition of Caroli and Supemsa, the new plant in Burgos, Spain, other fixed assets and minor projects across the company. At the end of 3Q17, Net Debt was U.S. $2,037 million, up 11% from 3Q16, mainly explained by the payment of the construction of the Bureba facility and the acquisitions of Supemsa and Caroli. Financial ratios at the end of 3Q17 were: Net Debt to EBITDA, 3.1 times; Interest Coverage, 4.6 times. These ratios compare with those reported in 3Q16, of 2.4 times and 7.0 times, respectively, which benefitted from the insurance gains recorded in 4Q15 related to the Bureba fire.
ALFA S THIRD QUARTER 2017 13 SIGMA TABLE 1 VOLUME AND PRICE CHANGES (%) 3Q17 vs. YTD. 17 VS 2Q17 3Q16 YTD. 16 Total Volume 1.0 3.9 3.0 Avg. Ps. Prices 1.6 0.8 4.8 Avg. U.S. $ Prices 5.9 5.9 1.6 TABLE 2 REVENUES (%) 3Q17 VS. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD.17 YTD. 16 Ch.% TOTAL REVENUES Ps. Millions 28,658 27,940 27,342 3 5 84,060 77,819 8 U.S. $ Millions 1,608 1,503 1,461 7 10 4,461 4,259 5 DOMESTIC REVENUES Ps. Millions 11,902 11,766 11,092 1 7 35,037 31,948 10 U.S. $ Millions 668 633 593 6 13 1,860 1,750 6 FOREIGN REVENUES Ps. Millions 16,757 16,175 16,250 4 3 49,024 45,871 7 U.S. $ Millions 940 871 868 8 8 2,601 2,510 4 Foreign / Total (%) 58 58 59 58 59 TABLE 3 OPERATING INCOME AND EBITDA (%) 3Q17 VS. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD. 17 YTD. 16 Ch.% OPERATING INCOME Ps. Millions 2,229 2,159 2,138 3 4 6,096 6,424 (5) U.S. $ Millions 125 116 114 7 9 326 352 (7) EBITDA Ps. Millions 3,192 3,097 3,106 3 3 9,026 9,079 (1) U.S. $ Millions 179 167 166 7 8 481 497 (3) TABLE 4 SELECTED BALANCE SHEET INFORMATION & FINANCIAL RATIOS (U.S. $ MILLIONS) 3Q17 2Q17 3Q16 YTD. 17 YTD. 16 Assets 5,365 5,207 4,935 5,365 4,935 Liabilities 4,407 4,328 4,051 4,407 4,051 Stockholders Equity 958 879 885 958 885 Majority Equity 925 847 854 925 854 Net Debt 2,037 1,940 1,843 2,037 1,843 Net Debt/EBITDA* 3.1 3.1 2.4 3.1 2.4 Interest Coverage* 4.6 4.4 7.0 4.6 7.0 * Times: LTM = Last 12 months
Third Quarter 2017 (3Q17) Monterrey, Mexico. October 16, 2017 Alpek, S.A.B. de C.V. (BMV: ALPEK) Alpek reports 3Q17 EBITDA of U.S. $3 million, including a U.S. -$113 million provision covering the full amount of M&G accounts receivable Selected Financial Information (U.S. $ Millions) (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Total Volume (ktons) 1,012 1,038 998 (2) 1 3,036 2,967 2 Polyester 788 807 757 (2) 4 2,353 2,254 4 Plastics & Chemicals 225 231 241 (3) (7) 683 713 (4) Consolidated Revenues 1,312 1,306 1,236-6 3,910 3,655 7 Polyester 945 930 885 2 7 2,791 2,593 8 Plastics & Chemicals 367 375 351 (2) 4 1,119 1,062 5 Consolidated EBITDA 3 82 157 (96) (98) 243 536 (55) Polyester (51) 33 83 (254) (161) 70 267 (74) Plastics & Chemicals 54 49 73 10 (26) 173 270 (36) Profit Attributable to Controlling Interest (400) 25 50 (1,719) (903) (289) 170 (270) CAPEX and Acquisitions 64 65 128 (2) (50) 206 270 (24) Net Debt 1,192 1,058 915 13 30 Net Debt/LTM EBITDA (1) 3.2 2.0 1.3 Interest Coverage (1) 5.4 8.0 10.8 (1) Times: Last 12 months Operating & Financial Highlights (3Q17) Alpek Polyester One-time charges associated to Mossi & Ghisolfi (M&G): U.S. -$113 million A/R provision (EBITDA), U.S. -$435 million intangible asset impairment (Oper. Income), U.S. -$95 million financial asset impairment (Financial Cost, Net) and U.S. +$223 million deferred tax 3.2 times Net Debt/LTM EBITDA; 2.4 times excluding M&G A/R provision (U.S. -$113 million) Offers for power cogeneration assets in final selection stage 3Q17 Polyester EBITDA of U.S.$ -51 million, including the U.S. -$113 million M&G A/R provision and a U.S. $9 million non-cash inventory gain PTA supply to M&G was suspended in Mexico (Sep) and Brazil (Aug) due to missed payments Alpek engaging M&G and its key creditors to resume PTA supply Plastics & Chemicals (P&C) 3Q17 P&C EBITDA of U.S. $54 million; null inventory loss/gain Volume impacted by temporary feedstock supply disruptions, mainly due to Hurricane Harvey Resilient margins in polypropylene (PP), expandable polystyrene (EPS) and caprolactam (CPL) This release contains forward looking information based on numerous variables and assumptions that are inherently uncertain. They involve judgments with respect to, among other things, future economic, competitive and financial market conditions and future business decisions, all of which are difficult or impossible to predict accurately. Accordingly, results could vary from those set forth in this release. The report presents unaudited financial information based on International Financial Reporting Standards (IFRS). Figures are stated in nominal Mexican pesos ($) 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.
Third Quarter 2017 (3Q17) Message from the CEO Alpek s third quarter 2017 financial results include full provisions and asset impairments associated to Mossi & Ghisolfi (M&G) which proceeded to shut down its operations in Altamira, Mx due to liquidity constraints. Missed payments forced Alpek to halt PTA supply to M&G Mexico and M&G Brazil during 3Q17. Since then, Alpek and its advisors have engaged M&G and its creditors to resume PTA supply; a suitable mechanism may be implemented soon. Exposure to M&G is twofold as of 3Q17: i) PTA accounts receivable (A/R) and ii) funding for its integrated PTA-PET site under construction in Corpus Christi, TX. In accordance with IFRS, Alpek recognized the following non-recurring items: i) U.S. -$113 million provision for A/R impairment affecting EBITDA, ii) U.S. -$435 million intangible asset impairment affecting Operating Income or EBIT, iii) U.S. -$95 million financial asset impairment affecting Financial Cost, Net, and iv) U.S. +$223 million deferred tax benefiting Income Tax. The full amount of provisions and asset impairments is subject to restitution upon A/R collection or a definitive Corpus Christi project resolution reaffirming Alpek s capacity rights. Alpek will continue pursuing full restitution by leveraging its competitive PTA supply in Mexico and Brazil as well as its secured claim in Corpus Christi. In addition to its A/R claim as an M&G Mexico supplier, Alpek acquired from Inbursa all credit rights to a U.S. $100 million secured loan with M&G Polímeros México S.A. de C.V. (M&G Mexico) earlier this month. Alpek paid a lump sum of U.S. $101 million for the loan s principal and accrued interest. The acquired credit rights are secured by a first lien on M&G Mexico s PET production facility in Altamira, Mexico which has an installed capacity of approximately 560 Kton per year and is located next to Alpek s largest PTA site. Alpek will continue engaging M&G and its creditors to resume M&G Mexico s operations and implement a restructuring plan for M&G Mexico. Alpek s Consolidated 3Q17 EBITDA was U.S. $3 million. Adjusting for the U.S. -$113 million M&G A/R provision and a U.S. $9 million inventory gain, Comparable 3Q17 Consolidated EBITDA was U.S. $108 million, 9% higher than 2Q17 driven mainly by sequential improvement in the Polyester segment. Polyester EBITDA was U.S. -$51 million in 3Q17. Adjusting for the M&G A/R provision and inventory gains, Comparable 3Q17 Polyester EBITDA was U.S. $54 million, up 20% when compared with 2Q17 despite lower PTA sales to M&G. Stable plant operations following multiple unplanned outages in 2Q17 as well as the recent recovery in oil and feedstock prices contributed to sequential Polyester EBITDA growth. Relevant polyester industry events in 3Q17 include petitions from domestic polyester producers to investigate unfairly traded PET resin imports into the United States and Canada. In the U.S., petitions were filed with the United States Department of Commerce (USDOC) and the United States International Trade Commission (USITC) against five countries: Brazil, Indonesia, Korea, Pakistan and Taiwan. Separately, the Canada Border Services Agency (CBSA) launched an investigation into PET resin imports from China, India, Oman and Pakistan. Before year-end, the USDOC will determine whether to initiate an investigation, the USITC will reach a preliminary determination on whether there is material injury, and the CBSA could apply preliminary import duties. Plastics & Chemicals (P&C) segment EBITDA posted its third consecutive quarter above Alpek s 2017 Guidance. 3Q17 P&C EBITDA and Comparable P&C EBITDA were U.S. $54 million as lower volume was more than offset by robust margins. P&C volume was down 3% quarter-on-quarter due to temporary feedstock supply disruptions; most of which were associated to Hurricane Harvey. ir@alpek.com www.alpek.com 2
Third Quarter 2017 (3Q17) Capex totaled U.S. $64 million in 3Q17 as progress is ongoing in the development of strategic projects such as the 350 MW Altamira power cogeneration plant. An important milestone this quarter was the completion of the Expandable Polystyrene (EPS) capacity expansion project in Altamira, Mexico. Alpek invested a total of U.S. $33 million to expand its EPS plant by 75 Kton per year to reach 240 Kton per year, making it one of the top five in the world. The additional production unit started its gradual ramp up process in September 2017, a few months ahead of schedule. The acquisition of PetroquimicaSuape and Citepe from Petrobras for U.S. $385 million is being evaluated by the Administrative Council for Economic Defense (CADE) in Brazil. Recently, CADE declared this case as complex which is a procedural act that allows a 90-day extension to the initial 240-day term for its analysis. Alpek will continue working closely with CADE and Petrobras to obtain approval of the transaction. Closing is subject to CADE s approval, among other conditions. Another initiative that continued moving forward is the sale of power cogeneration assets in Mexico. Alpek is engaged in the final selection stage to choose one of the offers received from potential investors for its power cogeneration facilities. Alpek maintains a solid financial position supported by a strong balance sheet and liquidity. At the close of 3Q17, Net Debt totaled U.S. $1.192 billion and Net Debt to LTM EBITDA was 3.2 times or 2.4 times when adjusted for the U.S. -$113 million M&G A/R provision that affected EBITDA. Furthermore, the balance of Cash and Cash Equivalents was U.S. $447 million as of 3Q17. The recent events associated to M&G s financial situation were not considered in Alpek s 2017 Guidance. Volume, Revenues and EBITDA were negatively impacted in 3Q17 by the current M&G shutdown. However, the total impact in 2017 may vary depending on a number of variables such as the duration of the M&G shutdown or potential impairment restitution, among others. Alpek has limited visibility at this time to provide a reliable 4Q17 outlook. Looking ahead, the base scenario is for Alpek to resume PTA supply to M&G in the short term. However, even in an extreme full M&G shutdown scenario for 2018, Alpek expects its EBITDA to recover within a range of at least U.S. $450 to $500 million based on preliminary estimations. Lost PTA sales to M&G would be partially offset with higher internal PTA consumption, higher domestic PET sales, savings from strategic projects and higher PTA exports. Additionally, 2018 EBITDA would not be affected by the non-recurring M&G A/R provision recognized in 2017. ir@alpek.com www.alpek.com 3
Third Quarter 2017 (3Q17) Results by Business Segment Polyester (Purified Terephthalic Acid (PTA), Polyethylene Terephthalate (PET), Polyester fibers 72% of Alpek s Net Sales) Third quarter 2017 Polyester revenue was up 7% year-on-year and 2% quarter-on-quarter as mixed volume growth was more than offset by higher average prices. Average 3Q17 Polyester prices increased 3% when compared with 3Q16 and 4% versus 2Q17, reflecting the oil and feedstock price recovery observed after 2Q17 as well as a shift in Polyester sales mix caused by lower PTA sales to M&G. 3Q17 Polyester volume increased 4% when compared with 3Q16 but decreased 2% versus 2Q17. The sudden halt of PTA supply to M&G negatively impacted Polyester volume. Year-to-date, Polyester volume is 4% higher than 2016 driven mainly by growth associated to the integration of Selenis Canada Inc. (PET). Third quarter 2017 segment EBITDA was U.S. -$51 million, including the U.S. -$113 million M&G A/R provision and a U.S. $9 million non-cash inventory gain. Adjusting for the impairment and inventory gain, Comparable 3Q17 Polyester EBITDA was U.S. $54 million, 36% lower than 3Q16 but up 20% when compared with 2Q17. Comparable Polyester EBITDA posted solid growth quarter-on-quarter driven mainly by the recent recovery in feedstock prices (e.g. paraxylene and monoethylene glycol) as well as restored plant operations after multiple unplanned outages in 2Q17. Lower PTA sales to M&G and incremental secondary feedstock (i.e. isophthalic acid - IPA) costs that have not been fully transferred to PET prices weighed on sequential Comparable Polyester EBITDA growth. Plastics & Chemicals (P&C) (Polypropylene (PP), Expandable Polystyrene (EPS), Caprolactam (CPL), Other products 28% of Alpek s Net Sales) 3Q17 P&C revenue increased 4% year-on-year but decreased 2% quarter-on-quarter as lower volume was partially offset by higher average prices. Average third quarter 2017 P&C prices were up 12% and 1% when compared with 3Q16 and 2Q17 respectively, driven mainly by higher feedstock prices. Third quarter 2017 P&C volume was down 7% and 3% when compared with 3Q16 and 2Q17, respectively. P&C volume was negatively impacted by feedstock supply disruptions in Mexico and the United States. In the case of Mexico, unplanned refinery outages weighed on domestic propylene supply and Alpek s specialty chemical business was subject to lower ethylene oxide supply. Moreover, temporary disruptions associated to Hurricane Harvey affected the supply of certain feedstocks that are imported from the U.S. Gulf Coast. 3Q17 P&C EBITDA and Comparable P&C EBITDA were U.S. $54 million as lower volume was more than offset by better-than-expected margins. PP margins have been resilient to high feedstock price volatility, while EPS and CPL margins posted sequential improvement after 2Q17. Year-to-date, P&C EBITDA has consistently been above guidance. ir@alpek.com www.alpek.com 4
Third Quarter 2017 (3Q17) Consolidated Financial Results Net Sales: Net Sales for the third quarter totaled U.S. $1.3 billion, up 6% year-on-year and flat quarter-on-quarter, mainly due to higher average consolidated prices in both business segments. Average 3Q17 consolidated prices increased 5% and 3% when compared with 3Q16 and 2Q17, respectively. 3Q17 consolidated volume was up 1% yearon-year and down 2% on a quarterly basis. Accumulated net sales as of September 30, 2017 totaled U.S. $3.9 billion, 7% higher than the same period last year as a result of 5% and 2% increases in average prices and volume respectively. EBITDA: 3Q17 EBITDA was U.S. $3 million, down 98% and 96% when compared with 3Q16 and 2Q17 respectively. This quarter 2017 Consolidated EBITDA includes a U.S. -$113 million provision for A/R impairment associated to M&G and a U.S. $9 million non-cash inventory gain. Adjusting for the M&G A/R impairment and the inventory gain, Comparable Consolidated EBITDA was U.S. $108 million, U.S. $99 million and U.S. $152 million in 3Q17, 2Q17 and 3Q16 respectively. Comparable 3Q17 Consolidated EBITDA decreased 29% year-on-year but increased 9% versus 2Q17 supported by the recent recovery in oil and feedstock prices, better-than-expected P&C margins and improved polyester plant operations following multiple unplanned outages in 2Q17. Accumulated EBITDA as of September 30, 2017 was U.S. $243 million and accumulated Comparable Consolidated EBITDA totaled U.S. $338 million. Profit (Loss) Attributable to Controlling Interest: Loss Attributable to Controlling Interest for the third quarter of 2017 was U.S. -$400 million, compared to U.S. $50 million and U.S. $25 million Profit in 3Q16 and 2Q17 respectively. 3Q17 Loss Attributable to Controlling Interest includes an aggregate net impact of U.S. -$416 million from non-recurring charges associated to M&G affecting EBITDA, Operating Income, Financial Cost, Net and Income Tax. Adjusting for the non-recurring M&G items, the Profit Attributable to Controlling Interest was U.S. $16 million for the quarter and U.S. $127 million year-to-date. Capital Expenditures and Acquisitions (Capex): 3Q17 Capex was U.S. $64 million, compared to U.S. $128 million and U.S. $65 million in 3Q16 and 2Q17 respectively. Year-to-date Capex of U.S. $206 million is 24% lower than the same period last year as investment ramps down due to completion of strategic projects. The majority of these funds were invested in the 350 MW power cogeneration plant in Altamira, Mexico, which is advancing as planned together with other projects. An important milestone this quarter was the completion of the Expandable Polystyrene (EPS) capacity expansion project in Altamira, Mexico. Alpek invested a total of U.S. $33 million to expand its EPS plant by 75 Kton per year to reach 240 Kton per year. The additional production unit started its gradual ramp up process in September 2017, a few months ahead of schedule. Net Debt: Consolidated Net Debt as of September 30, 2017 was U.S. $1.192 billion, up 30% and 13% year-on-year and quarter-on-quarter, respectively. On an absolute basis, Net Debt increased U.S. $135 million in 3Q17. Dividends and CAPEX were the two largest cash flow line items this quarter. Dividends include U.S. $72 million paid to shareholders in September, as approved at Alpek s Annual Shareholders Meeting. As of September 30, 2017, Gross Debt was U.S. $1.639 billion and the Cash balance totaled U.S. $447 million. Financial ratios at the close of 3Q17 were: Net Debt to LTM EBITDA of 3.2 times and Interest Coverage of 5.4 times. Adjusting for the U.S. -$113 million M&G A/R provision, Net Debt to LTM EBITDA was 2.4 times and Interest Coverage was 7.0 times. ir@alpek.com www.alpek.com 5
Third Quarter 2017 (3Q17) Appendix A - Tables TABLE 1 VOLUME (KTONS) (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Total Volume 1,012 1,038 998 (2) 1 3,036 2,967 2 Polyester 788 807 757 (2) 4 2,353 2,254 4 Plastics and Chemicals 225 231 241 (3) (7) 683 713 (4) TABLE 2 PRICE CHANGES (%) Polyester (%) 3Q17 vs. YTD17 vs. 2Q17 3Q16 YTD16 Avg. Ps. Prices - (2) 7 Avg. U.S. $ Prices 4 3 3 Plastics and Chemicals Avg. Ps. Prices (3) 7 14 Avg. U.S. $ Prices 1 12 10 Total Avg. Ps. Prices (1) - 8 Avg. U.S. $ Prices 3 5 5 TABLE 3 INCOME STATEMENT (U.S. $ Millions) (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Total Revenues 1,312 1,306 1,236-6 3,910 3,655 7 Gross Profit 126 85 164 48 (24) 382 573 (33) Operating expenses and others (596) (36) (42) (1,560) (1,310) (680) (138) (393) Operating income (470) 49 122 (1,062) (485) (298) 435 (169) Financial cost, net (130) (6) (28) (2,013) (367) (119) (98) (22) Share of losses of associates - - - 142 630 - - 28 Income Tax 206 (5) (30) 4,484 795 168 (97) 272 Consolidated net income (394) 38 65 (1,140) (709) (251) 240 (205) Controlling Interest (400) 25 50 (1,719) (903) (289) 170 (270) ir@alpek.com www.alpek.com 6
Third Quarter 2017 (3Q17) TABLE 4 REVENUES (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Total Revenues Ps. Millions 23,374 24,275 23,132 (4) 1 73,988 66,764 11 U.S. $ Millions 1,312 1,306 1,236-6 3,910 3,655 7 Domestic Revenues Ps. Millions 8,060 9,098 8,407 (11) (4) 26,791 25,134 7 U.S. $ Millions 452 489 449 (8) 1 1,414 1,377 3 Foreign Revenues Ps. Millions 15,314 15,176 14,724 1 4 47,198 41,630 13 U.S. $ Millions 859 816 787 5 9 2,495 2,278 10 Foreign / Total (%) 66 63 64 64 62 TABLE 5 OPERATING INCOME AND EBITDA (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Operating Income Ps. Millions (8,377) 904 2,292 (1,027) (465) (4,938) 7,919 (162) U.S. $ Millions (470) 49 122 (1,062) (485) (298) 435 (169) EBITDA Ps. Millions 59 1,524 2,938 (96) (98) 4,824 9,778 (51) U.S. $ Millions 3 82 157 (96) (98) 243 536 (55) TABLE 6 COMPARABLE EBITDA 3Q17 2Q17 3Q16 (%) 3Q17 vs. 2Q17 3Q16 YTD17 YTD16 Ch.% EBITDA Ps. Millions 59 1,524 2,938 (96) (98) 4,824 9,778 (51) U.S. $ Millions 3 82 157 (96) (98) 243 536 (55) Adjustments* Ps. Millions 1,863 318 (89) 486 2,201 1,631 (296) 651 U.S. $ Millions 105 17 (4) 522 2,437 95 (16) 698 Comparable EBITDA Ps. Millions 1,922 1,841 2,849 4 (33) 6,454 9,482 (32) U.S. $ Millions 108 99 152 9 (29) 338 520 (35) *Adjustments: Inventory and non-operating, one-time (gains) losses ir@alpek.com www.alpek.com 7
Third Quarter 2017 (3Q17) TABLE 7 FINANCIAL COST, NET (U.S. $ Millions) (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Financial Expenses (19) (19) (19) (1) 3 (55) (59) 7 Financial Income 2 3 3 (46) (39) 8 11 (23) Net Financial Expenses (17) (15) (16) (10) (3) (46) (48) 4 Financial Assets Impairment (95) - - (100) (100) (95) - (100) Fx Gains (Losses) (18) 9 (11) (290) (57) 22 (49) 145 Financial Cost, Net (130) (6) (28) (2,013) (367) (119) (98) (22) TABLE 8 NET INCOME (U.S. $ Millions) 3Q17 2Q17 3Q16 (%)3Q17 vs. 2Q17 3Q16 YTD17 YTD16 Ch.% Consolidated Net Income (394) 38 65 (1,140) (709) (251) 240 (205) Non-Controlling Interest 6 13 15 (53) (58) 38 70 (45) Controlling Interest (400) 25 50 (1,719) (903) (289) 170 (270) Earnings per Share (U.S. Dollars) (0.19) 0.01 0.02 (1,719) (903) (0.14) 0.08 (270) Avg. Outstanding Shares (Millions)* 2,117 2,117 2,118 2,117 2,118 * The same number of equivalent shares are considered in the periods presented TABLE 9 CASH FLOW (U.S. $ Millions) (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% EBITDA 3 82 157 (96) (98) 243 536 (55) Net Working Capital & Others 29 156 37 (81) (21) 121 (100) 221 Capital Expenditures & Acq. (64) (65) (128) 2 50 (206) (270) 24 Financial Expenses (17) (17) (18) (5) 5 (50) (41) (21) Income tax (19) (33) (23) 43 18 (78) (142) 45 Dividends (71) (9) - (712) (100) (168) (205) 18 Payment affiliated companies - 1 (4) (100) 100 1 60 (99) Other Sources / Uses 5 3 (25) 76 119 (13) (32) 60 Decrease (Increase) in Net Debt (135) 118 (4) (214) (2,947) (151) (193) 22 ir@alpek.com www.alpek.com 8
Third Quarter 2017 (3Q17) TABLE 10 STATEMENT OF FINANCIAL POSITION & FINANCIAL RATIOS (U.S. $ Millions) (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 Assets Cash and cash equivalents 447 188 240 138 86 Trade accounts receivable 507 577 555 (12) (9) Inventories 726 732 694 (1) 5 Other current assets 296 276 308 7 (4) Total current assets 1,975 1,773 1,796 11 10 Investment in associates and others 33 29 44 11 (26) Property, plant and equipment, net 2,117 2,088 1,872 1 13 Goodwill and intangible assets, net 211 574 590 (63) (64) Other non-current assets 227 234 128 (3) 77 Total assets 4,563 4,698 4,430 (3) 3 Liabilities & stockholders' equity Debt 380 236 97 61 291 Suppliers 741 763 624 (3) 19 Other current liabilities 186 186 206 - (10) Total current liabilities 1,307 1,184 927 10 41 Debt 1,254 1,004 1,051 25 19 Employees benefits 61 61 67 1 (8) Other long term liabilities 312 371 354 (16) (12) Total liabilities 2,935 2,620 2,400 12 22 Total stockholders' equity 1,628 2,079 2,031 (22) (20) Total liabilities & stockholders' equity 4,563 4,698 4,430 (3) 3 Net Debt 1,192 1,058 915 13 30 Net Debt/EBITDA* 3.2 2.0 1.3 Interest Coverage* 5.4 8.0 10.8 * Times: last 12 months ir@alpek.com www.alpek.com 9
Third Quarter 2017 (3Q17) Polyester TABLE 11 REVENUES (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Total Revenues Ps. Millions 16,836 17,303 16,559 (3) 2 52,808 47,378 11 U.S. $ Millions 945 930 885 2 7 2,791 2,593 8 Domestic Revenues Ps. Millions 4,108 4,652 4,418 (12) (7) 13,766 12,618 9 U.S. $ Millions 230 250 236 (8) (2) 726 691 5 Foreign Revenues Ps. Millions 12,727 12,651 12,141 1 5 39,042 34,760 12 U.S. $ Millions 714 680 649 5 10 2,065 1,902 9 Foreign / Total (%) 76 73 73 74 73 TABLE 12 OPERATING INCOME AND EBITDA (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Operating Income Ps. Millions (9,208) 118 1,052 (7,919) (976) (7,837) 3,409 (330) U.S. $ Millions (517) 7 56 (8,032) (1,024) (450) 187 (341) EBITDA Ps. Millions (899) 607 1,563 (248) (158) 1,503 4,874 (69) U.S. $ Millions (51) 33 83 (254) (161) 70 267 (74) TABLE 13 COMPARABLE EBITDA EBITDA 3Q17 2Q17 3Q16 (%) 3Q17 vs. 2Q17 3Q16 YTD17 YTD16 Ch.% Ps. Millions (899) 607 1,563 (248) (158) 1,503 4,874 (69) U.S. $ Millions (51) 33 83 (254) (161) 70 267 (74) Adjustments* Ps. Millions 1,864 234 26 697 7,162 1,703 (43) 4,106 U.S. $ Millions 105 12 2 751 6,542 98 (2) 4,666 Comparable EBITDA Ps. Millions 965 841 1,589 15 (39) 3,206 4,832 (34) U.S. $ Millions 54 45 85 20 (36) 168 265 (37) *Adjustments: Inventory and non-operating, one-time (gains) losses ir@alpek.com www.alpek.com 10
Third Quarter 2017 (3Q17) Plastics & Chemicals TABLE 14 REVENUES (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Total Revenues Ps. Millions 6,538 6,972 6,573 (6) (1) 21,180 19,386 9 U.S. $ Millions 367 375 351 (2) 4 1,119 1,062 5 Domestic Revenues Ps. Millions 3,952 4,447 3,990 (11) (1) 13,024 12,515 4 U.S. $ Millions 222 239 213 (7) 4 688 686 - Foreign Revenues Ps. Millions 2,587 2,525 2,583 2-8,156 6,870 19 U.S. $ Millions 145 136 138 7 5 430 376 15 Foreign / Total (%) 40 36 39 38 35 TABLE 15 OPERATING INCOME AND EBITDA (%) 3Q17 vs. 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 Ch.% Operating Income Ps. Millions 832 780 1,234 7 (33) 2,894 4,516 (36) U.S. $ Millions 47 42 66 11 (29) 151 248 (39) EBITDA Ps. Millions 959 910 1,369 5 (30) 3,316 4,909 (32) U.S. $ Millions 54 49 73 10 (26) 173 270 (36) TABLE 16 COMPARABLE EBITDA EBITDA 3Q17 2Q17 3Q16 (%)3Q17 vs. 2Q17 3Q16 YTD17 YTD16 Ch.% Ps. Millions 959 910 1,369 5 (30) 3,316 4,909 (32) U.S. $ Millions 54 49 73 10 (26) 173 270 (36) Adjustments* Ps. Millions (2) 84 (114) (102) 99 (72) (253) 71 U.S. $ Millions - 5 (6) (102) 98 (3) (14) 77 Comparable EBITDA Ps. Millions 958 994 1,254 (4) (24) 3,244 4,656 (30) U.S. $ Millions 54 54 67 - (20) 170 256 (34) *Adjustments: Inventory and non-operating, one-time (gains) losses ir@alpek.com www.alpek.com 11
Third Quarter 2017 (3Q17) Appendix B Financial Statements ALPEK, S.A.B. DE C.V. and Subsidiaries STATEMENT OF FINANCIAL POSITION Information in Millions of Mexican Pesos (%) Sep 17 vs. Sep 17 Jun 17 Sep 16 Jun 17 Sep 16 ASSETS CURRENT ASSETS: Cash and cash equivalents 7,427 2,675 4,674 178 59 Trade accounts receivable 9,222 10,325 10,820 (11) (15) Other accounts and notes receivable 3,938 3,703 3,601 6 9 Inventories 13,204 13,105 13,536 1 (2) Other current assets 2,145 1,922 2,400 12 (11) Total current assets 35,936 31,730 35,031 13 3 Investment in associates and others 594 524 855 13 (31) Property, plant and equipment, net 38,518 37,375 36,511 3 5 Goodwill and intangible assets,net 3,845 10,276 11,497 (63) (67) Other non-current assets 4,138 4,181 2,501 (1) 65 Total assets 83,031 84,086 86,395 (1) (4) LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Debt 6,910 4,218 1,893 64 265 Suppliers 13,493 13,651 12,165 (1) 11 Other current liabilities 3,385 3,323 4,021 2 (16) Total current liabilities 23,788 21,192 18,079 12 32 NON-CURRENT LIABILITIES: Debt (include debt issuance cost) 22,818 17,973 20,503 27 11 Deferred income taxes 4,136 5,022 5,327 (18) (22) Other liabilities 1,549 1,609 1,585 (4) (2) Employees benefits 1,118 1,089 1,303 3 (14) Total liabilities 53,409 46,885 46,797 14 14 STOCKHOLDERS EQUITY: Controlling interest: Capital stock 6,048 6,048 6,050 - (0) Share premium 9,071 9,071 9,071 - (0) Contributed capital 15,119 15,119 15,121 - (0) Earned surplus 10,153 17,916 19,843 (43) (49) Total controlling interest 25,272 33,035 34,964 (23) (28) Non-controlling interest 4,350 4,166 4,634 4 (6) Total stockholders equity 29,622 37,201 39,598 (20) (25) Total liabilities and stockholders equity 83,031 84,086 86,395 (1) (4) ir@alpek.com www.alpek.com 12
Third Quarter 2017 (3Q17) ALPEK, S.A.B. DE C.V. and Subsidiaries STATEMENT OF INCOME Information in Millions of Mexican Pesos 3Q17 vs.(%) YTD17 vs. (%) 3Q17 2Q17 3Q16 2Q17 3Q16 YTD17 YTD16 YTD16 Revenues 23,374 24,275 23,131 (4) 1 73,988 66,764 11 Domestic 8,061 9,098 8,408 (11) (4) 26,791 25,134 7 Export 15,313 15,177 14,723 1 4 47,197 41,630 13 Cost of sales (21,133) (22,698) (20,050) 7 (5) (66,657) (56,328) (18) Gross profit 2,241 1,577 3,081 42 (27) 7,331 10,436 (30) Operating expenses and others (10,618) (673) (790) (1,478) (1,245) (12,269) (2,517) (387) Operating income (8,377) 904 2,291 (1,027) (466) (4,938) 7,919 (162) Financial cost, net (2,312) (119) (526) (1,847) (339) (2,115) (1,790) (18) Share of losses of associates 1 (3) - 141 536 (4) (5) 22 Profit (loss) before income tax (10,688) 782 1,765 (1,467) (706) (7,057) 6,124 (215) Income tax 3,668 (89) (555) 4,219 761 2,887 (1,776) 263 Consolidated (loss) net income (7,020) 693 1,210 (1,113) (680) (4,170) 4,348 (196) Profit (loss) attributable to Controlling interest (7,130) 452 932 (1,680) (864) (4,910) 3,081 (259) Profit attributable to Non-controlling interest 110 241 278 (54) (60) 740 1,267 (42) ir@alpek.com www.alpek.com 13
Nemak reports 3Q17 results - Quarterly revenues and EBITDA of US$1.1 billion and US$153 million - Won new contracts worth US$570 million in annual revenues Monterrey, Mexico. October 16, 2017. - Nemak, S.A.B. de C.V. ( Nemak ) (BMV: NEMAK), a leading provider of innovative lightweighting solutions for the global automotive industry, announced today its operational and financial results for the third quarter of 2017 ("3Q17"). What follows is an overview of the quarter s main highlights: Key Figures For 3Q17, volumes were 11.7 million equivalent units ("MEU"), 4.1% lower year-over-year ("y-o-y"), with Europe ("EU") and Rest of World ("RoW") showing healthy growth while North America ("NA") reporting a decrease. Nonetheless, revenues were US$1,099 million up 3.4% y-o-y, as higher average aluminum prices passed on to customers more than compensated for lower volumes. Volumes for the first nine months of 2017 were 37.9 MEU, down slightly vis-a-vis 2016, while revenues were US$ 3,387 million, 3.9% higher mainly due to the same factors affecting quarterly comparisons. 3Q17 EBITDA was US$153 million, a 15.9% y-o-y decrease mainly due to the effect on operating income of the reduction in volumes already explained, plus negative metal price lag and increased launching expenses associated with new programs. On the positive side, EU and RoW reported solid results, driven mainly by new program launches. On a cumulative basis, EBITDA for the first nine months was US$550 million, 10.1% lower than the same period last year primarily due to the effect of lower volumes, negative metal price lag, foreign exchange, and higher launching expenses. 3Q17 capex was US$93 million as the company continued with investments to increase and adapt production capacity to meet new demand related to recently won contracts. Likewise, resources were invested in the continued ramp-up of new programs to produce structural and electric vehicle components in NA and EU. For the first nine months of 2017, capex amounted to US$324 million. October 16, 2017 1
Message from the CEO We saw mixed results this quarter, as our Europe and Rest-of-World regions showed healthy growth while lower volumes weighed on North America. Nonetheless, we remained on track to meet our targets for the year, successfully launching new, high-volume programs and advancing as planned with additional efficiency initiatives. At the same time, we continued to grow our sales backlog, winning new business in the quarter across our product lines worth a total of approximately US$570 million in annual revenues. I am also pleased to share that we started ramping up production at our new plant in Slovakia, which is wholly dedicated to structural and electric vehicle components. This is our third facility in Europe serving these businesses. Lastly, we provided a detailed overview of our long-term outlook at our Investor Day presentations in Mexico City and New York City on September 27 and 28, respectively. We focused on opportunities to drive growth in our core powertrain business while tapping into new trends towards vehicle lightweighting and electrification. Given our technological leadership, global reach, human capital, and financial condition, we are well positioned to successfully execute on our strategy for reaching our growth targets across our product lines. Automotive Industry In the quarter, SAAR for U.S. vehicle sales was down 2.0% y-o-y, with retail sales remaining stable while fleet sales decreased. Meanwhile, North America vehicle production and Nemak customers vehicle production decreased 8.0% and 7.0%, respectively, mainly due to inventory reductions by GM combined with lower passenger car production by Ford and FCA. In Europe, vehicle sales SAAR in 3Q17 increased 4.0% y-o-y, with increased sales across Western and Eastern Europe. In turn, vehicle production and Nemak customers production increased 5.4% and 4.0%, respectively, which was in-line with industry demand. October 16, 2017 2
Recent Developments During the quarter, Nemak won new contracts across its main product lines worth US$570 million in annual revenues. So far in 2017, it has won new contracts worth US$695 million in annual revenues. Successfully completed the ramp-up of a new program to produce structural components for the Audi Q5 in Mexico. Won a new program to produce battery housings for a high-performance hybrid platform of a North American OEM. Financial Results Summary What follows is an explanation of the results shown in the table above: 3Q17 total volume decreased by 4.1% y-o-y mainly due to lower demand for Nemak components from Ford and GM, with the former reducing production of small vehicles and the latter adjusting overall inventories. Another factor explaining the volume decrease was the comparative impact of FCA s 2016 discontinuation of its small- and- medium-size sedan lines, as explained in past reports. Regarding Europe, 3Q17 volume increased 5.9% y-o-y reflecting the strength of the market. Meanwhile, RoW reported a strong y-o-y volume increase mainly due to the continued ramp-up of new programs in China and improved industry performance in Brazil. For the first nine months, Nemak s overall volume was slightly lower compared to the same period in 2016 with EU and RoW showing healthy growth while NA recording a decrease. Turning to revenues, the effect of higher aluminum prices more than compensated for declining volumes, causing Nemak s 3Q17 consolidated revenues to increase 3.4% y-o-y. Similarly, rising aluminum prices brought revenues 3.9% higher year to date ("YTD"). 3Q17 operating income decreased 35.9% y-o-y, mainly as a result of lower sales volumes, negative metal price lag, and increased expenses related to new program launches. In turn, lower operating income translated into an operating margin of 6.0%, 360 basis points below 3Q16. On a cumulative basis, operating income was 20.1% lower than the same period in 2016, for the reasons already explained. October 16, 2017 3
The above-mentioned decrease in operating income resulted in a 15.9% y-o-y reduction in EBITDA. 3Q17 EBITDA margin was 13.9%, down from the 17.1% reported in 3Q16. 3Q17 EBITDA per equivalent unit was US$13.10, down from US$14.90 in 3Q16. On a cumulative basis, the lower YTD operating income affected YTD EBITDA, which was 10.1% lower than the same period in 2016 for the reasons already mentioned. YTD EBITDA margin and EBITDA per equivalent unit were 16.2% and US$14.50, respectively, which compared to 18.8% and US$16.00 in the same period last year. 3Q17 net income decreased 81.0% compared to 3Q16 mainly due to lower operating income combined with higher interest expenses and foreign exchange losses. YTD net income was 32.8% lower than the same period in 2016. Capital expenditures totaled US$93 million during 3Q17. As explained, investments were made to expand capacity and to facilitate operational efficiency across the company s regions. For the first nine months of the year, capital expenditures amounted to US$324 million. As of September 30, 2017, Nemak reported Net Debt in the amount of US$1.4 billion, including Cash and Marketable Securities worth US$130 million. Financial ratios were: Debt, net of Cash, to EBITDA, 1.9 times; Interest Coverage, 10.1 times. These ratios are similar to those reported at the end of 3Q16. Regional Results North America In 3Q17, revenues decreased 4.9% y-o-y as the impact of lower volumes in the region more than offset higher selling prices. Turning to EBITDA, lower volumes was the main cause of the 26.8% decrease y-o-y; the adverse impact of metal price lag was also a factor, albeit to a lesser extent. Europe In 3Q17, revenues in Europe increased 11.2% y-o-y mainly due to new program launches and higher selling prices. Meanwhile, 3Q17 EBITDA increased 6.3% y-o-y, as higher volumes and a more favorable sales mix more than compensated for the effects of negative metal price lag and increased expenses related to new programs brought on stream in the quarter. Rest of the World (RoW) In 3Q17, revenues in RoW increased by 29.7% y-o-y reflecting a solid performance in China and industry recovery in Brazil, with sales volumes growing 8.3%. 3Q17 EBITDA in RoW increased US$2 million in 3Q17 compared to 3Q16 due primarily to higher profitability in South America. ------------------ October 16, 2017 4
Methodology for presentation of results The report presents unaudited financial information. Figures are in Mexican pesos or U.S. dollars, as indicated. For income statements, peso amounts were translated into dollars using the average exchange rate of the months during which the operations were recorded. For balance sheets, peso amounts were translated into dollars using the end-of-period exchange rate. Financial ratios were calculated in dollars. Due to rounding, small differences may occur when calculating percent changes from one period to another. Conference call information Nemak s Third Quarter 2017 Conference Call will be held on Tuesday, October 17, 2017, 11:30 a.m. Eastern Time (10:30 a.m. Mexico City Time). To participate in the conference call, please dial: Domestic U.S.: (877) 407-0784; International: 1-201-689-8560; Mexico Toll Free: 01 800 522 0034. The conference call will be webcast live through streaming audio. If you are unable to participate, the conference call audio and script will be available on Nemak s website. For more information, please visit investors.nemak.com Forward-looking statements This report may contain certain forward-looking statements concerning Nemak s future performance that should be considered as good faith estimates made by the Company. These forward-looking statements reflect management s expectations and are based upon currently available data and analysis. Actual results are subject to future events and uncertainties, which could materially impact Nemak s actual performance and results. About Nemak Nemak is a leading provider of innovative lightweighting solutions for the global automotive industry, specializing in the development and manufacturing of aluminum components for powertrain and body structure applications. The company employs more than 23,000 people at 38 facilities worldwide, generating annual revenues of US$4.3 billion in 2016. For more information about Nemak, visit http://www.nemak.com Three pages of tables to follow October 16, 2017 5
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3rd Quarter 2017 San Pedro Garza Garcia, Mexico, October 16, 2017 - Axtel, S.A.B. de C.V. ( Axtel or the Company ), a Mexican Information and Communications Technology company, announced today its unaudited third quarter results ended September 30, 2017 (1). Results presented on this report reflect figures consolidated under Alfa S.A.B. de C.V. The complete unaudited third quarter results of Axtel have been filed with the Mexican Stock Exchange and are also available at the Company s website, axtelcorp.mx. (%) 3Q17 vs. YTD 3Q17 2Q17 3Q16 YTD'17 YTD'16 In millions 2Q17 3Q16 D% Revenues (Ps.) 3,764 3,780 3,836 0% -2% 11,227 9,960 13% In USD 211 203 205 4% 3% 596 545 9% EBITDA (Ps.) (5) 1,317 1,507 1,265-13% 4% 4,001 3,267 22% In USD 74 81 67-9% 10% 213 179 20% Net (loss) Income (Ps.) -632 598-451 n.a. -40% 985-1,228 n.a. In USD -36 33-23 n.a. -52% 50-65 n.a. Capital Expenditures (Ps.) 748 652 942 15% -21% 2,248 3,030-26% In USD 42 35 50 20% -17% 119 165-28% Net Debt (In USD) 1,029 1,027 1,010 0% 2% Net Debt / EBITDA (6) 4.0x 4.1x 4.2x Note: Financial information presented throughout this report includes unaudited consolidated results for Alestra S. de R.L. de C.V. and its subsidiaries ( Alestra ) up to February 14th, 2016, and for Axtel and its subsidiaries, including Alestra, from February 15th, 2016, and thereafter. Highlights: Third quarter results continued demonstrating Axtel s commitment to deliver IT and Telecom solutions to enterprise and government customers under the highest standards of quality and service. Axtel s core segments posted positive results during the quarter. In peso terms, Enterprise and Government recurring revenues increased 5% year-over-year, contributing to a 6% year to date revenues growth, on a pro forma basis and excluding the negative effect from the legacy mass market wireless segment. In the quarter, recurrent revenues represented 95 and 87% of total Enterprise and Government segments, respectively. In the third quarter, Axtel executed the second tranche of the Tower Sale agreement with American Tower Corporation reflecting a net benefit of $9 million, expecting to receive regulatory approvals to conclude the transaction in the fourth quarter 2017. During the quarter, relevant progress was accomplished in the business strategy towards the Red Compartida project. Axtel continued implementing infrastructure and capacity under its vendor agreement with ALTAN, supplying metropolitan links, fiber capacity, collocation and data center services to support ALTAN s initial population coverage obligation due in March 2018. These investments should be translated in revenues in excess of $14 million in 2018. The positive trend in Axtel s performance and the benefits from the tower divestiture have contributed to the 7% and 17% increases, in peso terms, in the quarterly and pro forma YTD EBITDA, excluding merger-related expenses. Media Relations: Julio Salinas contacto@axtel.com.mx +52(81) 8114-1144 Investor Relations: Adrian de los Santos IR@axtel.com.mx +52(81) 8114-1128 Nancy Llovera IR@axtel.com.mx +52(81) 8114-1128