corporate presentation - alfa · continue to increase efficiencies increase machining –additional...

CORPORATE PRESENTATION

This presentation 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 are likely to vary from those set forth in this presentation. Copyright © 2018 ALFA, S.A.B. de

C.V. All rights reserved. Reproduction and distribution is forbidden without the prior written consent of ALFA, S.A.B.

de C.V.

CORPORATE PRESENTATIONS E P T E M B E R , 2 0 1 8


ALFA participates in Key areas of the economy

2017 Results Guidance 2018

Revenues (US $ Billions) $16.8 $18.8

EBITDA (US $ Billions) $2.0 $2.4

Capex (US $ Millions) $1,101* $958

Net Debt/EBITDA 3.1 times 2.9 times

Interest Coverage 4.6 times 5.4 times

* Including acquisitions

SIGMA

Refrigerated Foods

ALPEK

Petrochemicals

NEMAK

Aluminum Auto Parts

AXTEL

IT + Telecom

NEWPEK

Hydrocarbons

2 ALFA


Breakdown by Business Group

Revenues 2017

US $16.8 Billion

EBITDA 2017

US $2.0 Billion

3 ALFA

Sigma

36%

Newpek

1%Axtel

5%

Nemak

27%

Alpek

31%

Sigma

33%

Axtel

14%

Nemak

35%

Alpek

18%


Ownership

100%

82%

75%

53%

100%

4

Public company since 2012.


Ford Motor Co. owns 5.4%.


ALFA


Global footprint

5

Production

Facilities in

28 countries

~65% of

sales outside

Mexico

More than

86,200

employees


Focused on long-term value creation

1.0 1.01.1

1.3

1.71.9 1.9

2.0

2.42.3

2.0

07 08 09 10 11 12 13 14 15 16 17

6

Revenues(US $ Billion)

EBITDA(US $ Billion)

ALFA

9.610.6

8.5

10.8

14.7 15.215.9

17.216.3 15.8

16.8

07 08 09 10 11 12 13 14 15 16 17


Corporate Strategy

• Strategy is bottom up.

• Strategy is formed at the subsidiary

level where the differentiated knowledge

is located.

• Our focus is on improving and

strengthening the existing businesses in

our portfolio to drive higher shareholder

returns.

• We provide the policies and guidelines.

Corporate governance practices.

Major project-approval and leverage

limits.

• Involvement and support in M&A activity.

• We have a strong board of directors with

a majority of independent members who

question decisions.

7


Refrigerated Foods

8


Multinational food company dedicated to bringing local

favorite foods to communities everywhere

2017

Revenues

US $6.0billion

EBITDA

US $676million in 2017

9 SIGMA


Region % Sales

Highly recognized branded foods in Mexico, U.S., Central &

South America and Europe

• Broad geographic footprint: 70 production plants and presence in 18 countries

• Offers quality food at a wide range of price points and across diverse

categories

10

U.S.

16%

Mexico

41%Europe

36%

LATAM

7%

SIGMA

Meats

57%Dairy

18%

Dry Meats

20%

Other Categories

5%

Mexico

United States

Dominican Rep.

El Salvador

Guatemala

Ecuador

Peru

Honduras

Nicaragua

Costa Rica

Portugal

Italy

Belgium

Germany

Netherlands

Spain

France

Romania


Diversified and strong brand portfolio in each market

PACKAGED MEATS DAIRY OTHER THIRD PARTY

MÉ

XIC

OE

UR

OP

AE

E.U

U.

LA

TA

M

11 SIGMA


Broad supply chain network

Reach, service, efficiency and knowledge

• Global processes

• Benchmarks

• Best practice implementation

• Production sharing capabilities

Safety & quality throughout the supply chain

• Sourcing development programs and

certifications

• In-store quality checks

• Customer development programs

• Certified facilities

12

70Production plants

26 Europe

13 Latam

25 Mexico

6 US

208Distribution centers

18 Europe

39 Latam

137 Mexico

14 US

+680,000Points of sale

64,000 Europe

146,000 Latam

410,000 Mexico

62,000 US

SIGMA


Product & Process Innovation

Consumer-driven innovation

• Extensive consumer research

• Proprietary mathematical models

• Sigma Innovation System

State-of-the-Art Research & Development

center

• With +160 specialists

• Leadership in food process technology

R&D Alliances

• Research agreements with educational

and governmental institutions

• Open technology

13 SIGMA


Growth strategy

14

Continue consolidating recent acquisitions while implementing best practices

Reinforce brand equity through innovation and differentiated marketing

Increase distribution to improve market share

Capture greater market share in the foodservice market

Fully leverage assets through distribution of third party leading brands

Achieve fair-share in relevant markets / categories

M&A in packaged meats and dairy

Grow exports of heritage products

Explore new categories

Enter new geographies

Complement innovation capabilities through open innovation / venture capital

Continue developing world class talent

Invest in the

Future

Expand the

Core

Strengthen Core

Business


Petrochemicals

15


One of the world’s largest integrated polyester groups

• 2017 Revenues of US $5.2 billion

• 2017 EBITDA of US $384 million

• Production facilities in key

geographic areas:

• North America: the

biggest market for

beverages

• Availability of low-cost

raw materials

• Logistics

16 ALPEK


Business Segments

Polyester chain

2017

Revenues US $3.7 billion (71%)

EBITDA US $147 million (38%)

Products

PTA

PET

Polyester fibers

Plastics & chemicals

2017

Revenues US $1.5 billion (29%)

EBITDA US $237 million (62%)

Products

PP

EPS

CPL

Fertilizers and other chemicals

17 ALPEK


Alpek´s products are widely used for food packaging and

consumer end-markets

Beverage Food Personal care Textiles

Sample end users by industry

18 ALPEK

Sales 2017

GeographyVolume 2017

By end market(4,012 KTA)

Asia & others

2%Europe

3%Latam

13%

Mexico

35%

USA &

Canada

47%

Construction

2%Textiles

7%

Consumer

Goods

25%

Food and

Beverages

66%


Alpek’s installed capacity amounts to 7.0 million tonsInstalled Capacity Breakdown (Kta)

SITE PTA PET rPET FIBERS PP EPS CPL OTHER

Mexico

(2,950

Kta)

Monterrey 160

Altamira 1,000 640 240

Salamanca 85

Ocotlán 10

Cosoleacaque 610 185

Lerma 100

USA

(2,343

Kta)

Cedar Creek 170 73

Cooper River 170 150

Columbia 640 725

Pearl River 430

Canadá Selenis 144

Argentina

(225

Kta)

Zárate 190

Pacheco 16

General Lagos 19

Brasil Guaratingueta 46

Ipojuca 640 450 90

Chile

(27

Kta)

Santiago 5

Puerto Montt 2

Concon 20

Capacidad Total: 7,010 Kta 2,890 2,464 89 400 640 325 85 117

Mexico

United Sates

Argentina

Chile

Brazil

More than

5,900employees

26 Production

facilities

Source: Alpek estimates Kta: Thousand tons per year

(1) Includes industrial and specialty chemicals and recycled PET capacities

19 ALPEK


Alpek is investing in attractive organic projects to boost

profitability

Project Overview estimated figures and dates

Project

Capex

(US $M)

EBITDA

(US$M) Start-up

1. Cosoleacaque Cogeneration (85 MW) 140 30 4Q14

2. MEG Tolling Agreement 65 20 2Q16

3. Propylene Spheres 23 10 2Q17

4. EPS Expansion Altamira 30 10 3Q17

5. Altamira Cogeneration (350 MW) 350 90 2018

6. PTA/PET Site (Corpus Christi) TBD TBD TBD

Total ~ $580 ~$160

US $537 million invested up to Mar-18

Source: Alpek estimates

20 ALPEK


Alpek’s strategy

• Enhance value creation across product portfolio through:

i. Selective vertical integration

ii. Operating efficiency

iii. Capacity / geographic expansion

• Solution-based focus on customer needs

21 ALPEK


Aluminum auto parts

22


The leading lightweighting solutions provider for the auto

industry

• 2017 Revenues of US $4.5 billion

• 2017 EBITDA of US $715 million

• Global footprint, cost

competitiveness, R&D, skilled

labor force

• One out of every four new

vehicles sold worldwide has a

Nemak component

• Sole supplier in ~90% of sales

volume

23 NEMAK


Focused on innovative lightweighting solutions for the

automotive industry

Powertrain

• Heads

• Blocks

• Transmission

EV Components

• E-Motor housings

• Battery housings

Structural Components

• Longitudinal members

• Shock towers

• Cross members

24 NEMAK


Diversified customer base

• More than 50 customers worldwide

• Nemak supplies ~650 out of 1,200 vehicle platforms worldwide

25 NEMAK

http://www.opel.com/

http://www.opel.com/

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Solid customer relationships; diversified revenue stream

North

America

55%

Europe

35%

Others

10%

2017

Volume distributionBy Customer

2017

Revenue distributionBy Region

26 NEMAK

24%

13%

11%

6%4%

4%

4%

4%

3%

3%

3%

21%

North America

North America

Europe

Others


Global footprint with modern facilities near key customers

• Global footprint serving all major markets

• 38 manufacturing facilities strategically located close to customer sites

• North America (18), Europe (14), South America (3), Asia (3)

27

Canada

United States

Mexico

Brazil

Argentina

Spain

Germany

Hungary

Russia

Slovakia

Poland

Austria

Czech Republic

India

China

Turkey

NEMAK


Aluminum components expected to grow due to stricter

environmental standards

NA and EU LV Aluminum Content(Pounds per vehicle)

2012

324

2015e

350

301

2009

24

2018e

426

2021e

475

2025e

380

Structural

Components

Others

Heat Transfers

Wheels & Brakes

Transmissions

Engine Blocks

Cylinder Heads

Source: Ducker, Nemak

109

28 NEMAK


Nemak’s strategy

29

• Maximize powertrain business

Capture growth – aluminum penetration in blocks

Focus on high complexity products

Continue to increase efficiencies

Increase machining – additional value added, margin expansion

• Invest in development of structural components and parts for EVs

High-growth segment

Lightweighting key for EV performance

Complex products

Attractive profitability


IT + Telcomm

30


IT and Communication services for the enterprise,

government and mass markets

Main Services

• Data centers

• Information security

• Managed networks

• Consultancy services

• Systems integration

• Cloud services

• Internet

• Pay-TV

31 AXTEL


Diversified revenue stream; focused on the enterprise

market

2017Revenues

U.S. $822million

EBITDA

U.S. $290Million in 2017

32 AXTEL

Sales

Breakdown(By type of service)

17%Government

19%Mass

market

64%Enterprise

By

Market Segment

5%Wireless

14%FTTH

14%IT

67%Telecomm


Strategic evolution

• Start up local mass market «Fixed Wireless»

• Avantel acquisition (´06)

• Broad band mass market

• Vertical markets

• Cloud services

• App management

• Data center

• Enterprise strategy

• Value added services – Data IP

• Start up LD services

ALESTRA CONVERGENCE

• Unified communications

• Managed networks

• Security

• Large Scale Solutions

• Systems integration

• Data center

• IPTV (´13)

• Cloud services & managed IT

1997

1999

2000

2008

2011

2008

2011

• Value added services mass market– Wimax

• Enterprise integration Telco / IT

• FTH

2015 2015

TELECOMM MARKET OPENED

IP PROTOCOL, INTERNET BUBBLE

VOICE AND DATA NET CONVERGENCE LAN/WAN

TELECOM / IT CONVERGENCE

DATA CENTER CONVERGENCE

MEGER 2016

33 AXTEL


Infrastructure provides access to +90% of Mexican market

• 42,100 km of long-haul

fiber optics

• 23,100 km of long

distance

• 12,800 km of metro

rings

• 6,200 km of FTTH

network

• Six data centers

• 7,200 m2

• FTTH in major cities

34 AXTEL


Axtel’s strategy

• Focused on providing IT and Telecommunications (ICT) managed

solutions to increase the productivity of core Enterprise and

Government segments

• Further increase the penetration of IT solutions to consolidate leading

position in core Enterprise and Government segments

• Enhanced integrated ICT offers with cloud-based solutions from global

technology partners

• Deploy a multi-platform mobility solution to complement portfolio of

services to Enterprise and Government customers, as well as enable

third-party mobile offers for other customers

• Maximize value from fiber-based (FTTx) services serving mass

market customers

35 AXTEL


Hydrocarbons

36


E&P operations in the U.S. and Mexico

Involvement in the E&P industry

began in 2006

• JV with Pioneer (8.6%)

• Development of Eagle Ford Shale

Operating mature fields in Mexico

since 2013

• Service contracts with Pemex

(CIEPs)

37 NEWPEK


Newpek fields

KS

TX

OK

CO

Eagle Ford

Current U.S. Operations

Talent

• Team of experience

people in the US.

• World-class partners (e.g.

Pioneer Natural

Resources)

Technology

•Fracking for horizontal drilling

in Eagle Ford – 648 wells in

operation

•Mature fields optimization

•World-class sub-surface

analysis capabilities

38

Successful transition to

operations

• Experienced transition to

operations

• Mineral rights on leases

over 220,000 acres

3 14 7 830

6691

116

409 3

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 17

0.3 0.9 1.1 12.7

4.76.4

8.2 8.37.2

4.9

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 17

Net production

(mboed)EBITDA

(US $ million)

NEWPEK


Activities in Mexico

• Service contracts in San Andrés and Tierra Blanca fields

• Producing over 3.5 mboed on 128 wells

• Optimization of existing wells

• Development of new wells in conventional formation

• In a JV with Verdad Exploration, won contracts to operate two wet gas fields in Tamaulipas, Mexico

• Area of 363 Km2

• Minimum required investment of US $4 million

39 NEWPEK


Newpek’s Strategy

40

• Divest assets outside of Mexico

• Continue to assess opportunities in Mexico

Find unique opportunities in current market

Migrations and farm-ins

• Leverage partnerships

• Evaluate infrastructure investments


Guidance ALFA 2018

(US $Millions) Revenues EBITDA Capex

2017 2018e 2017 2018e 2017 2018e

ALFA 16,804 18,825 2,018 2,365 1,101 958

Sigma 6,054 6,500 676 715 276 204

Alpek 5,231 6,825 384 750 236 167

Nemak 4,481 4,490 715 700 431 384

Axtel 822 816 290 277 121 174

Newpek 107 73 3 17 34 25

Assumptions:

• Mx GDP growth: 2.3%

• USA GDP growth: 2.4%

• Eurozone GDP Growth: 2.2%

• Avg. exchange rate Mx Peso to USD: $19.25

• Avg. exchange rate Euro to USD: $1.20

• Avg. oil price (Brent): US $57/barrel

41 Note: Guidance as of July 19, 2018

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