Download 4Q16 Financial Report

Financial Report for the Fourth Quarter
and Accumulated 2016
Comments on operations
(Millions of pesos, unless otherwise indicated)
CYDSA, S.A.B. de C.V. (MSE: CYDSASA)
EQUUS 335 Parque Corporativo
Avenida Ricardo Margain Zozaya No. 335 Torre 2
Colonia Valle del Campestre
San Pedro Garza Garcia, Nuevo Leon, Mexico C.P. 66265
www.cydsa.com
Contacts in Investor Relations:
Name
Jose Rosas Villarreal
Alberto Balderas Calderon
Oscar Casas Kirchner
E-mail
[email protected]
[email protected]
[email protected]
Telephone
+52 81 8152 4616
+52 81 8152 4608
+52 81 8152 4604
_____________________________________________________________________________________________
1
February 27, 2017
Investments for Competitiveness and Growth
CYDSA virtually concluded the first stage of the Company’s strategy aimed at increasing the
Competitiveness and Growth of its Businesses. This first stage, includes capital expenditures in
projects for US$540 million, duly approved by the Board of Directors in recent years. Some of
these investments follow:
I. Completed Projects:
 Capacity Increase in Production of Evaporated Salt: This plant, producer of evaporated salt
and located in Coatzacoalcos, Veracruz, incorporated redesigns and new equipment to the
manufacturing processes in a number of stages, with the purpose of increasing nominal
production capacity from 400,000 to 670,000 tons per year. The last phase ended in January of
2017.
 Plant I for Cogeneration of Electricity and Steam: In March of 2014 a plant located in
Coatzacoalcos, Veracruz; began the manufacturing operation of a cogeneration facility with a
potential capacity for generating 57 megawatts-hours of electricity and 660,000 annual tons of
steam, based on natural gas, and with the main objective in this first plant of supplying the
steam and electricity needs of plants located in Coatzacoalcos, Veracruz.
 Plant II for Cogeneration of Electricity and Steam: In March of 2016, generation of steam
and electricity began in a second Plant in Coatzacoalcos, Veracruz, with the same technical
specifications and production capacity of Cogeneration Plant I, with the main objective of
generating the electricity needed in the manufacture of chlorine and caustic soda in both, the
Santa Clara plant situated in the State of Mexico, and the new one located in Garcia, Nuevo
Leon, described in the following paragraph. Operations started in March of 2016. The remaining
electricity generated, permits a future participation in the national electric power market, in
accordance with the new Energy Reform.
 New Chlorine, Caustic Soda and Chemical Specialties Plant: In March of 2016 operations
started in a plant with state-of-the-art technology in order to manufacture chlorine, caustic soda
and chemical specialties, located in Garcia, Nuevo Leon. This facility counts with a nominal
annual production capacity of 60,000 tons of chlorine and 68,000 tons of caustic soda.
 Brine Extraction Wells and Caverns for Underground Storage of Hydrocarbons:
Development continued of the project started in 2012 of a new cavern zone for brine extraction
in the State of Veracruz. As of to date, the drilling of four caverns stand completed, all equipped
with the necessary technical characteristics in order to be used for the underground storage of
hydrocarbons.
II. Project in Progress:
 Underground Storage of Propane Liquid Gas (LP Gas): In November of 2014, CYDSA
announced the signing of an agreement with Pemex Gas and Basic Petrochemical in order to
develop this project, constituting the first one in Mexico and Latin America devoted to storing LP
Gas in a saline cavern.
The first phase consisted in the formation of the saline cavern and concluded in September of
2015. Nowadays the second stage is underway, consisting in the construction of the necessary
surface installations for the injection, extraction and transportation of LP Gas, with the purpose
of supplying underground storage services of LP Gas during the second half of 2017.
_____________________________________________________________________________________________
2
February 27, 2017
Signing of Syndicated Loan
On November 28 of 2014, CYDSA, through its subsidiary Valores Quimicos, signed a
Syndicated Loan granted by 13 Domestic and International Financial Institutions with
Citigroup Global Markets, Inc. and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch as Lead Banks, for an amount up to US$400
million. The General Shareholders’ Meeting of November 25, 2014, authorized this
transaction.
On December 9 of 2014, the first disbursement totaled the equivalent of US$240 million.
An additional disbursement took place on April 16, 2015 for an amount equivalent to
US$30 million.
A portion of the loan liquidated all existing bank debt, while the remaining portion has
primarily financed the investments in Competitiveness and Growth mentioned previously.
Other Loans
In the fourth quarter of 2016, Cydsa, S.A.B. de C.V. and one of its subsidiaries signed
loans in the amount of $ 760 million pesos with the purpose of supporting the Group’s
Competitiveness and Growth Projects.
Derivative Financial Instruments
In order to cover interest rate volatility on the Syndicated Loan, CYDSA entered into an
interest rate swap. The contract replaced the variable three month Libor rate with a fixed
rate of 1.24% for four years, starting November 30, 2015 and ending November 29, 2019.
The agreement covers the applicable rate to US$120 million of the non-amortizable portion
of the Syndicated Loan. At the close of December of 2016, the total equivalent balance of
this loan amounted to 218.8 million. Of this amount, the dollar component represents
US$187.1 million, with the remainder peso denominated.
_____________________________________________________________________________________________
3
February 27, 2017
Closing of the Acrylic Yarns Business
On April 8, 2016, CYDSA informed investors, through the Mexican Stock Exchange, the
closing of the Acrylic Yarn Business. The cessation resulted from mounting competition of
textile products and apparel, often of Asia-Pacific origin, frequently using unfair market
practices.
According to the International Financial Reporting Standards (IFRS), starting in 2016, the
Acrylic Yarns business represents a discontinued operation and its results appear as a
separate line-item in the Income Statement under Income or Loss of Discontinued
Operations, net of taxes.
Results for the Fourth Quarter of 2016
Total Sales
CYDSA’s Net Consolidated Sales reached 1,855 million pesos during the fourth
quarter of 2016, an increase of 34.1% from the 1,383 million of the same quarter of
the prior year.
In dollar terms, Sales for the fourth quarter of 2016 totaled an equivalent of US$93 million,
up 12.0% from the US$83 million accumulated during the same period of 2015.
The difference in dollar and peso terms derives from an average 18.5% depreciation of the
Mexican peso, when comparing the average exchange rate during the fourth quarter of
2016 against that of the same quarter of 2015.
_____________________________________________________________________________________________
4
February 27, 2017
Operating Income and Operating Cash Flow (EBITDA) 1
Operating Income of the fourth quarter of 2016 reached 222 million pesos, equivalent to
12.0% of Sales, a decrease of 6.3% with respect to the 237 million or 17.1% on Sales
reported for the same period of the prior year. This decline derives mainly from the
depreciation expense of those projects that started operations in 2016, namely: The New
Chlorine, Caustic Soda and Chemical Specialties Plant, located in Garcia, Nuevo Leon
(Iquisa Noreste); and Plant II dedicated to Cogeneration of Electric Power and Steam.
Operating Cash Flow or EBITDA for the fourth quarter of 2016 added-up to 363 million
pesos representing an increase of 8.0% when compared with the 335 million reported for
the same period in 2015. In dollar terms, EBITDA for the fourth quarter of 2016 reached an
equivalent of US$18.3 million, decreasing 8.0% with respect to the US$19.9 million of the
same period of the previous year.
Net Income
The Net Financial Income, including financial expenses, interest income and foreign
exchange result, reached the sum of 366 million pesos in the fourth quarter of 2016, a
figure that compares with a positive of 170 million observed for the same quarter of the
previous year.
In addition, 458 million pesos resulted for Income Tax and 111 million in Results of
Discontinued Operations and other line-items. Therefore, CYDSA reported a Net Income
of 241 million pesos in the fourth quarter of 2016, equivalent to 13.0% on Sales; an
improvement when compared to the 201 million Net Income of the fourth quarter of 2015.
1
Operating Cash Flow or EBITDA equals Income before: Net Financial Income (Expenses), Income Tax,
Depreciation and Amortization. EBITDA amounts to Operating Income plus non-cash items.
_____________________________________________________________________________________________
5
February 27, 2017
Accumulated Results January-December of 2016
Total Sales
CYDSA’s Net Consolidated Sales for 2016, reached 6,958 million pesos, an increase
of 24.9% from the prior year.
In dollar terms, accumulated Sales for 2016 totaled an equivalent of US$372 million, up
5.7% from the US$352 million accumulated during 2015.
The difference in dollar and peso terms derives from an average 17.8% depreciation of the
Mexican peso, when comparing the average exchange rate during 2016 against that of the
previous year.
Domestic Sales
Sales to the domestic market during 2016 reached the sum of 6,321 million pesos, an
increase of 21.7% compared to those of 2015.
The new capacity expansion projects in the Salt Business, together with the start-up of the
new Chlorine, Caustic Soda and Chemical Specialties plant in Garcia, Nuevo Leon (Iquisa
Noreste), contributed to higher 2016 sales.
The Refrigerant Gases Business Unit increased sales of both the HCFC-22 and the new
generation refrigerant gases.
Export Sales
Export Sales for 2016, reached US$33.7 million, 43.4% higher than US$23.5 million the
previous year.
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6
February 27, 2017
Sales by Business Segment
The following chart depicts Total Sales by Business Segment for the years 2015 and 2016:
Sales by Business Segment*
2015 and 2016
(millions of pesos)
24.9%
6,958
12.9%
5,569
4,240
4,787
63.3%
2,171
1,329
Chemical Products and Refrigerant Gases and
Specialties
Others
2015
Millions of dollars
Change 2016 vs. 2015
*
268
256
 4.5%
CYDSA Consolidated
2016
84
116
 38.1 %
352
372
 5.7%
Consolidated figures of Chemical Products and Specialties eliminate inter-company Sales.
Sales of the Chemical Products and Specialties Segment during 2016, reached the sum of
4,787 million, an increase of 12.9% when compared to those of the prior year. Major
activity of the Salt Business, as well as sales of the new plant Iquisa Noreste, explain the
sales increase in this Segment.
Total Sales of Refrigerant Gases and Other Businesses, added to 2,171 million during
2016 reporting a growth of 63.3%, against those of the previous year. Higher demand of
the HCFC-22 gas, as well as new generation gases, explain the improvement in sales.
_____________________________________________________________________________________________
7
February 27, 2017
Operating Income
Accumulated Gross Profit2 in 2016 reached 2,477 million, an increase of 286 million or
13.1% compared to 2,191 reported for 2015.
The main factors contributing to the improvement in Gross Profit include:
 Larger sales in the salt Business due to the expansion of manufacturing capacity.
 The start-up of the Iquisa Noreste plant.
 Increased activity in the Refrigerant Gases Business.
General Operating expenses during 2016 reached 1,440 million pesos, an increase of
3.5%% when compared with the 1,391 million observed during the prior year.
Other Expense, net, reached 1 million pesos in 2016. This figure compares with 20 million
of Other Income, net, reported for the previous year.
Therefore, CYDSA registered in 2016 an Operating Income (EBIT) of 1,036 million
(14.9% on sales), a figure that compares with an Operating Income of 820 million (14.7%
on sales) reported for 2015, representing an increase of 26.3%.
Operating Cash Flow
Operating Cash Flow (EBITDA) for 2016 reached 1,513 million pesos (21.7% on sales), an
increase of 26.9% compared to the 1,192 million (21.4% on sales) attained during the
previous year.
In dollar terms, EBITDA for 2016 amounted to an equivalent of US$81 million, representing
an increase of 8.0% versus the US$75 million reported in 2015.
Net Financial Income
Net Financial Income for 2016, including financial expenses, interest income and foreign
exchange result, reached 180 million compared to Net Financial Expenses of 187 million
pesos registered the prior year. The foreign exchange fluctuation accounts for the
difference.
2
Gross Profit is defined as Sales less Cost of Sales.
_____________________________________________________________________________________________
8
February 27, 2017
Share in Results of Associates
The line-item Share in Results of Associates reached an expense of 2 million in 2016,
compared with an expense for 3 million reported for the prior year. These figures derive
from results of service companies where CYDSA holds a non-controlling interest.
Income Tax
Income Tax for 2016 amounted to 677 million pesos, a 401 million increase against the
276 million reported for the previous year.
Income from Discontinued Operations, Net
As explained earlier in this Report, the Acrylic Yarns now constitutes a discontinued
operation. In 2016, this Business reported income in the amount of 118 million pesos
derived mainly from the sale of non-productive fixed assets.
Net Consolidated Income
In 2016, CYDSA registered a Net Consolidated Income in the amount of 655 million
(9.4% on Sales), increasing by 301 million or 85.3% when compared to the Net Income of
354 million (6.4% on Sales) for 2015.
_____________________________________________________________________________________________
9
February 27, 2017
Financial Condition
A summary of the relevant Balance Sheet items as of December 31, 2016 and 2015 follow:
December
2016
2,826
17,416
20,242
December
2015
3,325
13,460
16,785
Current Liabilities
Non-Current Liabilities
Total Liabilities
2,461
7,382
9,843
1,872
5,660
7,532
589
1,722
2,311
Shareholders’ Equity
10,399
9,253
1,146
Current Assets
Non-Current Assets
Total Assets
Change
(499)
3,956
3,457
Explanations of the major changes in the Balance Sheet accounts as of December 31,
2016 compared to those of December 31, 2015 appear below.
Current Assets
The table above reflects that Current Assets decreased of 499 million pesos, from 3,325
million as of December 31, 2015 to 2,826 million at the close of 2016. The main cause for
said decrease in Current Assets derives from the use of Cash for the Group’s
Competitiveness and Growth Investments.
Non-Current Assets
Non-Current Assets of 17,416 million as of December 31, 2016, grew by 3,956 million
pesos, from the close of December, 2015, due largely to Investments in Fixed Assets for
Competitiveness and Growth; and the revaluation of assets denominated in foreign
currencies, net of depreciation.
Total Liabilities
CYDSA’s Total Liabilities as of December 31, 2016 9,843 million, increased by 2,311
million from the previous year-end. The following items detail the most relevant changes:
New Debt
Payment of Bank Debt
Increase in pesos of debt balance committed in Dollars, mainly due to the
Depreciation of the Mexican peso
Increase in deferred Income Tax Liabilities, derived from the revaluation
of Fixed Assets
Suppliers
Other Liabilities, net
Increase in Total Liabilities
760
(541)
702
716
393
281
2,311
_____________________________________________________________________________________________
10
February 27, 2017
CYDSA closed the year 2016 with a Bank Debt, net of cash and cash equivalents
amounting to 4,904 million pesos, an increase of 1,773 million pesos from the prior year’s
3,131 million. In dollar terms, at the close of 2016, Net Bank Debt reached US$237.8
million, an increase of US$56.3 million from the Net Bank Debt of US$181.5 million at the
close of December, 2015.
CYDSA’s Bank Debt to EBITDA ratio of 3.24 times at the close of December, 2016,
compares with 2.63 times as of December 31, 2015.
Shareholders’ Equity
Shareholders’ Equity reached the sum of 10,399 million as of the close of December of
2016, an increase of 1,146 million pesos when compared with the amount reported for
December 31, 2015. The main causes for this increase in Shareholders’ Equity follow:
Net Income for 2016
Dividend paid to Shareholders of Cydsa, S.A.B. de C.V. 3
Dividend paid to Shareholders with non-controlling interest
Foreign Exchange Conversion Effect in the Chlorine-Caustic Soda;
Cogeneration of Electricity and Steam and Refrigerant Gases
Businesses4
Increase in Shareholders’ Equity
655
(120)
(121)
732
1,146
Book Value per Share as of December 31, 2016 of 16.80 pesos per share, compares with
14.86 pesos per share at the close of December of 2015.
Security Analysis Coverage
Cydsa, S.A.B. de C.V. (MSE:CYDSASA) receives coverage from the following Brokerage
Firms: GBM Grupo Bursatil Mexicano, INTERACCIONES and BURSAMETRICA.
Financial Information follows
3
4
Decreed in CYDSA’s General Shareholders’ Meeting of March 30, 2016.
In accordance to IFRS standards, the US dollar represents the functional currency for these Businesses,
due to the fact that such currency constitutes the reference for their main income items and/or operating
costs.
_____________________________________________________________________________________________
11
February 27, 2017
CYDSA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2016 and December 31, 2015
(Millions of pesos)
December
2016
ASSETS
Cash and cash equivalents
Trade receivables, net
Other receivables, net
Inventories
Discontinued Current Assets
Current assets
Property, plant and equipment, net
Other non-current Assets
Discontinued non-current Assets
Non-current assets
LIABILITIES
Bank debt
Trade payables
Other current liabilities
Taxes payable
Discontinued current liabilities
Current Liabilities
$
13,460
- 49%
- 8%
- 18%
+ 29%
+100%
- 15%
+ 29%
+ 22%
+100%
+ 29%
$
20,242
$
16,785
+ 21%
$
665
1,199
388
184
25
2,461
$
466
806
241
359
+ 43%
+ 49%
+ 61%
- 49%
+100%
+ 31%
Bank Debt
Other non-current liabilities
Employee benefits
Discontinued non-current liabilities
1,216
945
484
680
Change
%
624
869
398
878
57
2,826
16,976
350
90
17,416
$
Total assets
December
2015
3,325
13,172
288
1,872
4,785
2,135
445
17
3,809
1,411
440
+ 26%
+ 51%
+ 1%
+100%
Total non-current liabilities
7,382
5,660
+ 31%
Total liabilities
9,843
7,532
+ 31%
2,825
1,129
(294)
4,246
2,825
1,129
(294)
3,748
+ 13%
2,174
1,509
+ 44%
10,080
319
10,399
8,917
336
9,253
+ 13%
- 5%
+ 12%
16,785
+ 21%
SHAREHOLDER’ EQUITY
Capital stock
Additional paid-in capital
Repurchase of own shares
Retained earnings
Accumulated other comprehensive income,
net of tax
Shareholders’ equity of controlling
interest
Non-controlling interest
Shareholders’ equity
Liabilities and shareholders' equity
$
20,242
$
_____________________________________________________________________________________________
12
February 27, 2017
CYDSA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the fourth quarter of 2016 and 2015 (October 1st. to December 31)
(Millions of pesos)
4Q16
$ 1,855
(1,212)
643
(428)
7
Net Sales
Cost of Sales
Gross Profit
General Expenses
Other (Expenses) Income, net
Operating Income
Net Financial (Expenses) Income:
Financial Expenses
Interest Income
Foreign Exchange Result, net
Net Financial (Expenses) Income
4Q15
$ 1,383
(698)
685
(451)
3
222
237
(17)
14
369
366
(172)
46
296
170
Change
%
+ 34%
+ 74%
- 6%
- 5%
-
6%
- 90%
- 70%
+ 25%
Share in Results of Associates
Income (Loss) before
Income Tax
(1)
(3)
587
404
+ 45%
Income Tax
Income of Continuing Operations
(458)
129
(203)
201
- 36%
112
241
0
201
+ 20%
Income from Discontinued Operations, net
Net Income
Controlling Interest Share in Net Income
Non-Controlling Interest Share in Net Income
$
266
(25)
$
200
1
_____________________________________________________________________________________________
13
February 27, 2017
CYDSA, S.A.B. DE C.V. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS AND RATIOS
Fourth Quarter, 2016 and 2015
4Q16
Change
%
4Q15
Income Statement data
(Millions of pesos)
Net Sales
Net Sales
(Equivalent in millions of US dollars)
Export Sales (Millions of US dollars)
Operating Income
Net Income
1,855
1,383
+ 34%
93
12.0
222
241
83
6.2
237
201
+ 12%
+ 94%
- 6%
+ 20%
Operating Cash Flow (Income after general
expenses plus depreciation and other noncash items), EBITDA
363
335
+ 8%
Operating Cash Flow
(Equivalent in millions of US dollars)
18.3
19.9
12.0%
19.6%
17.1%
24.2%
Cash Flow data
(Millions of pesos)
-
8%
Operating Ratios
(Percentage)
Operating Income (EBIT) / Sales
Operating Cash Flow (EBITDA) / Sales
_____________________________________________________________________________________________
14
February 27, 2017
CYDSA, S.A.B. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
From January 1st. To December 31, 2016 and 2015
(Millions of pesos)
Net Sales
Cost of Sales
Gross Profit
General Expenses
Other (Expenses) Income, net
2016
2015
$ 6,958
(4,481)
2,477
(1,440)
(1)
$ 5,569
(3,378)
2,191
(1,391)
20
Operating Income
Net Financial (Expenses) Income:
Financial Expenses
Interest Income
Foreign Exchange Result, net
Net Financial (Expenses) Income
Share in Results of Associates
Income before Income Tax
Income Tax
Income of Continuing Operations
Income from Discontinued Operations, net
Net Income
Controlling Interest Share in Net Income
Non-Controlling Interest Share in Net Income
$
Change
%
+ 25%
+ 33%
+ 13%
+ 4%
1,036
820
(176)
58
298
180
(300)
68
45
(187)
(2)
1,214
(3)
630
+ 93%
(677)
537
(276)
354
+145%
+ 52%
118
655
0
354
618
37
$
+ 26%
- 41%
- 15%
+ 85%
336
18
_____________________________________________________________________________________________
15
February 27, 2017
CYDSA, S.A.B. DE C.V. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS AND RATIOS
Accumulated January-December of 2016 and 2015
2016
2015
Change
%
Income Statement data
(Millions of pesos)
Net Sales
Net Sales
(Equivalent in millions of dollars)
6,958
5,569
+ 25%
372
352
+ 6%
Export Sales (Millions of dollars)
33.7
23.5
+ 43%
1,036
820
+ 26%
654
353
+ 85%
1,513
1,192
+ 27%
81.1
74.8
+ 8%
14.9%
21.7%
14.7%
21.4%
Operating Income
Net Income
Cash Flow data
(Millions of pesos)
Operating Cash Flow (Income after general
expenses plus depreciation and other
non-cash items), EBITDA
Operating Cash Flow
(Equivalent in millions of US dollars)
Operating Ratios
(Percentage)
Operating income (EBIT) / Sales
Operating Cash Flow (EBITDA) / Sales
As of the close of December, 2016 and December, 2015
December
2016
December
2015
3.24
2.63
Bank debt / Shareholders’ equity
0.53
0.47
Current assets / Current liabilities
1.15
1.78
16.80
14.86
Financial indicators
(Times)
Net bank debt / EBITDA(1)
Book value per share (pesos) (2)
(1)
(2)
Last 12 months
Based on 600'000,000 shares outstanding.
_____________________________________________________________________________________________
16
February 27, 2017