Download - EARNINGS RELEASE 1Q16 - investor cloudcdn.investorcloud.net/GIS/InformacionFinanciera/Informes... · 2016. 5. 27. · Earnings Release 1Q16 . 7 . Mexico, April 21, 2016 | | [email protected]

EARNINGS RELEASE 1Q16

Saltillo, Mexico April 21, 2016

For additional information, please visit www.gis.com.mx or contact: Saúl Castañeda IR Director Phone: +52 (844) 411-1050 [email protected]

Patricio González Treasury Director Phone: +52 (844) 411-1041 [email protected]

Mario Guzmán CFO Phone: +52 (844) 411-1031 [email protected]

Earnings Release 1Q16

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Saltillo, Mexico, April 21, 2016 | www.gis.com.mx | [email protected]

Consolidated results (millions) 1Q16 1Q15 ∆%

Net revenue (Pesos) 3,545 2,805 26%

Net revenue (US$) 197 188 5%

EBIT (Pesos) 409 288 42%

EBIT (US$) 23 19 17%

EBITDA (Pesos) 563 398 41%

EBITDA (US$) 31 27 17%

Net income (Pesos) 288 193 49%

Net income (US$) 16 13 24%

Consolidated Summary

Saltillo, Mexico, April 21, 2016 – Grupo Industrial Saltillo, S.A.B. de C.V. (BMV: GISSA) (“The Company”, “GIS”, “GISSA” or “The Group”), a Mexican leading industrial conglomerate with a solid portfolio of products and brands, today announced its earnings results for the first quarter ended March 31, 2016.

The figures in this report have been prepared in accordance with the International Financial Reporting Standards (“IFRS”), and presented in millions of nominal Mexican pesos, unless otherwise stated (in millions of U.S. nominal dollars) and may vary due to rounding.

The figures presented in U.S. nominal dollars in this report correspond to their conversion from nominal Mexican pesos or Euros, and have been calculated by dividing the figures of each quarter by the average exchange rate corresponding to such quarter.

GRUPO INDUSTRIAL SALTILLO S.A.B. DE C.V. (GISSA) REPORTS FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2016


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Highlights

On December 23, 2015, the Company completed the acquisition of Automotive Components Europe, S.A. (ACE), a leading company engaged in the manufacture of ductile iron and aluminum castings and machining for braking systems of the automotive industry in Europe. As a result, in 1Q16 ACE results are consolidated into GISSA’s income statement.

This acquisition enhances our growth strategy, delivering a double-digit growth rate from top line to bottom line.

The 1Q16 Consolidated Revenue, expressed in Mexican pesos, reflected a growth rate of 26% when compared to 1Q15, totaling Ps.3,545 million. In addition to ACE’s incremental contribution, the Construction Segment revenue increased by 7%, supported by the strong performance of Vitromex. The Housewares Segment revenue decreased by 5%, as previous year was supported by special sales in the Promotional channel that were not replicated this year.

The acquisition of ACE represented the first step of GIS towards globalization, and at the same time,

confirmed its commitment for a sustainable and profitable growth in one of the most dynamic industries: Auto-Parts. In 1Q16, the Auto-Parts Segment contributed, at a consolidated level, with Ps.409 million of Operating Income (EBIT), representing a solid growth of 42% YoY, equal to Ps.95 million pesos of incremental EBIT.

1Q16 EBITDA reached Ps.563 million, 41% higher than 1Q15. EBITDA margin expanded from 14.2% in

1Q15 to 15.9% in this reporting quarter.

1Q16 Net Income reached Ps.288 million, 49% higher than 1Q15.

1Q16 Capex reached Ps.110 million, these funds were mainly used in maintenance programs and technological upgrading. This amount does not include the investments in Evercast, Joint Venture with ZF-TRW, nor in GIS Ederlan, as both operations correspond to Joint Ventures not consolidated according to IFRS. Details about Evercast are described below.

As of March 31, 2016, Cash and Equivalents reached Ps.2,033 million, allowing us to meet our

operational needs, and providing the required flexibility to strengthen our strategic growth efforts at the same time.

At quarter-end, Consolidated Debt totaled Ps.2,059 million. This figure includes: o Ps.1,298 million of the long-term loan subscribed to acquire ACE. o Ps.450 million of recognized debt, as a result of ACE’s consolidation. o Ps.311 million from the 2014 credit line that was used in the capacity expansion of the

Cifunsa Plant in San Luis Potosi.


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Accounting Reclassification

Subsequent Events

Contingencies

On April 12, GISSA held its Annual Ordinary Shareholders Meeting, in which its shareholders approved the payment of a cash dividend of Ps.0.60 per share (to be paid after April 20), and an additional payment of up to Ps.0.40 per share subject to further approval of the Board of Directors.

In order to adequately reflect the financial information contained in the income statement of the Company, the financial profit/loss (operative CFR) related to working capital will no longer be included in Operating Income, and will be reclassified to CFR (below the EBIT line).

This accounting criteria is applied effective this first quarter 2016. For consistency and comparability purposes, 2015 figures are also restated under this standard.

The effects of the aforementioned reclassification are not material to the financial statements.

The Company has learned about the need of improving its importation procedures related to certain machinery and equipment. Besides, the Company is addressing the removal, repair or replacement of certain exported units that were detected outside quality standard. As a result of both processes, a Ps.31 million allowance was accrued in 1Q16. The estimated actual economic impact related to these developments is not expected to be significant for GISSA’s financial statements.


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Net revenue (millions) 1Q16 1Q15 ∆%

Mexican Ps. / Consolidated 3,545 2,805 26%

Auto-Parts 1,637 992 65%

Construction 1,557 1,462 7%

Housewares 330 346 (5%)

US Dollars / Consolidated 197 188 5%

Auto-Parts 91 66 37%

Construction 86 98 (12%)

Housewares 18 23 (21%)

Revenue by Segment

Comments from the Chief Executive Officer

José Manuel Arana Escobar, CEO of GISSA, stated: “In GIS we are living a process of evolution and change, with the daily contribution of more than 7,500 associates that joint efforts to the achievement of meaningful results. Our financial results confirm our progress in strategy, and encourage us to build a more dynamic, focused and efficient organization”. “We are building a new management culture driven by the joint effort of our associates constitute the cornerstone for a more effective execution, accelerate innovation, foster the growth and development of our customer base and improve the service level to our clients. We will maintain our efforts to accelerate growth while continuing our discipline in controlling costs and expenses”.

Revenue by Segment


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EBIT (millions) 1Q16 1Q15 ∆%

Mexican Pesos

Consolidated 409 288 42%

Margin 12% 10%


Margin 17% 19%


Margin 5% 8%

Housewares 24 12 105%

Margin 7% 3%

EBITDA (millions) 1Q16 1Q15 ∆%

Mexican Pesos

Consolidated 563 398 41%

Margin 16% 14%


Margin 23% 25%


Margin 7% 10%

Housewares 34 21 60%

Margin 10% 6%


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The following charts show a pro-forma scenario* in which the combined results of GIS + Evercast are presented. Evercast is a Joint Venture (JV) between Grupo Industrial Saltillo (70%) and ZF-TRW (30%) that is dedicated to the casting and machining of ductile iron auto-parts for braking systems.

It is important to note that within a few months of operation, Evercast already reflects positive operating result, although the standard of the industry marks higher losses at the beginning of the ramp.

If we completely consolidate into GISSA, growth rates in Net Revenue and EBITDA would reach 33% and 68%, respectively.

In 1Q16, Evercast recorded Cash and Cash Equivalents of Ps.419 million and Banking Debt of Ps.852 million.

Currently, it operates a castings line of 26k tons, and is about to develop a second line, with expected startup in this year, to reach 52k tons per year, as planned.

* In compliance with accounting standards, Evercast cannot be consolidated into GISSA.

1Q16

Mexican pesos (millions) GIS Evercast Combined

Net Revenue 3,545 173 3,718

EBIT 409 34 443

Margin 12% 20% 12%

EBITDA 563 61 624

Margin 16% 35% 17%

1Q15

Mexican pesos (millions) GIS Evercast Combined

Net Revenue 2,805 1 2,806

EBIT 288 (27) 262

Margin 10% 9%

EBITDA 398 (27) 371

Margin 14% 13%

Pro-forma results: GIS + Evercast


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Overview

Revenue from the Auto-Parts Segment represents 47% of the Consolidated Revenue of 1Q16.

This proportion is significantly higher than the 36% registered in 1Q15, as a result of the

incorporation of Automotive Components Europe (ACE).

*For comparison purposes, and only in this line, 2015 figures of ACE are presented. The acquisition of ACE is consolidated in results since 1Q16, therefore it is not included in figures of 2015 (for both Mexican pesos and US dollars). Revenue

The revenue for this Segment during the first quarter of the year, calculated in US Dollars,

reflects a 37% growth when compared to that recorded in the same period last year, as a result

of the incorporation of ACE in the portfolio. In contrast, Cifunsa revenue decreased by 14% YoY,

which is largely explained by the transfer of volume to Evercast, a reduction in the “surcharge”

pricing formulas, and a lower price-mix.

Revenue (millions) 1Q16 1Q15 ∆%

Mexican Pesos 1,637 992 65%

Cifunsa 1,032 992 4%

ACE* 605 506 20%

US Dollars 91 66 37%

Cifunsa 57 66 (14%)

ACE * 34 34 (1%)

Auto-Parts

Quarterly Results


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EBIT AND EBITDA

*For comparison purposes, and only in this line, 2015 figures of ACE are presented. The acquisition of ACE is consolidated in results since 1Q16, therefore it is not included in figures of 2015 (for both Mexican pesos and US dollars).

EBITDA margin decreased from 25% to 23%, as a result of the incorporation of ACE that

operates under lower margins. Some positive drivers that supported Cifunsa’s margins (in

Mexican Pesos) were:

A higher average exchange rate Greater efficiency and productivity


Mexican Pesos 282 187 51%

Margin 17% 19%

Cifunsa 217 187 16%

Margin 21% 19%

ACE* 69 42 65%

Margin 11% 8%


Cifunsa 12 13 (4)%

ACE* 4 3 36%



Margin 23% 25%

Cifunsa 286 245 17%

Margen 28% 25%

ACE* 94 62 50%

Margin 15% 12%


Cifunsa 16 16 (3%)

ACE* 5 4 24%


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Overview

The Construction Segment revenue in 1Q16 represented 44% of the Consolidated Revenue,

lower than the 52% proportion recorded in 1Q15, as a result of higher Auto-Parts revenues from

the ACE acquisition in this quarter.

The graphs below show the breakdown of revenue for the Construction Segment:

Revenue

In 1Q16, the revenue of the Construction Segment increased by 7% when compared to that

recorded in 1Q15, supported by the Vitromex growth that has maintained a dynamic

performance.

Vitromex revenue recorded an increase of 14% when compared to the same period last year,

driven by the reactivation of the construction channel, higher volume in Home Centers, and a

favorable performance with US dealers.


Revenue (Mexican Pesos) 1,557 1,462 7%

Ceramic Tiles (Vitromex) 938 824 14%

Water Heaters (Calorex) 476 485 (2%)

Pipe Fittings (Fluida) 156 167 (6%)

Construction


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Calorex revenue decreased by 2% vs. 1Q15, mainly impacted by declining sales in the US. It is

important to note that the operation in Mexico recorded growth in all its channels, including

construction, the modern and traditional channels (dealers and department stores).

The Pipe Fittings Business revenue posted a decline of 6% YoY, mainly due to delayed projects

in the construction channel.

EBIT AND EBITDA

1Q16 EBIT and EBITDA of the Construction Segment registered a significant drop of 35% and 24% when compared to the same period last year, respectively.

This variation is mainly explained by the Ps.31 million non-recurrent charge related to the allowance accrued to improve the importation process of certain machinery and equipment; and, removal, repair or replacement of certain exported units that were detected outside quality standard. The estimated economic impact related of this non-recurrent item are not expected to be significant for GISSA’s results.

Additionally, the Sector was negatively obstructed by the devaluation of the Mexican Peso, which adversely affects our US Dollar denominated costs.


Mexican Pesos 74 113 (35%)

Margin 5% 8%

US Dollars 4 8 (46%)



Margin 7% 10%

US Dollars 6 10 (37%)


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Overview

1Q16 revenue from the Housewares Segment represented 9% of the Consolidated Revenue, lower than the 12% registered in 1Q15, mainly as a result of the higher Auto-Parts Segment revenue from the acquisition of ACE.

Revenue

The Housewares Segment revenue for 1Q15 decreased by 5% when compared to the same

period last year. This effect is mainly explained by the 2015 extraordinary sales recorded in the

promotional channel. As previously mentioned, these sales are subject to client programs that

are not seasonal, recurring or repeatable.

EBIT AND EBITDA

Despite having a lower income base, EBIT and EBITDA of the Housewares Segment posted a solid YoY growth of 105% and 60%, respectively, supported by lower costs of supplies and productive efficiencies.





Margin 7% 3%

US Dollars 1 1 69%



Margin 10% 6%

US Dollars 2 1 32%

Housewares


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Grupo Industrial Saltillo, S.A.B. de C.V. Statements of Comprehensive Income

(Expressed in Millions of Nominal Mexican Pesos) FIRST QUARTER 2016 2015 ∆% Net Revenues 3,545 2,805 26%

Auto-Parts 1,637 992 65% Construction 1,557 1,462 7% Housewares 330 346 (5%)

Cost of sales 2,486 2,031 22% General expenses 651 482 35% Other income (expenses), net (0) 4 N/A Operating Income (EBIT) 409 288 42%

Auto-Parts 282 187 51% Construction 74 113 (35%) Housewares 24 12 105%

EBITDA 563 398 41% Auto-Parts 380 245 55% Construction 114 151 (24%) Housewares 34 21 60%

CFR 8 (7) N/A

Income Tax 128 88 45% Consolidated Income 273 207 31%

Profit from non-controlling interest 15 (14) N/A Profit from controlling interest 288 193 49%

Financial Statements


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Grupo Industrial Saltillo, S.A.B. de C.V. Statements of Comprehensive Income

(Expressed in Millions of Nominal Mexican Pesos)

MARGINS

FIRST QUARTER

2016 2015 Operating Income to Net Revenue 12% 10%

Auto-Parts 17% 19% Construction 5% 8% Housewares 7% 3%

EBITDA to Net Revenue 16% 14% Auto-Parts 23% 25% Construction 7% 10% Housewares 10% 6%

Profit from controlling interest 8% 7%


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Grupo Industrial Saltillo, S.A.B. de C.V. Statements of Financial Position

(Expressed in Millions of Nominal Mexican Pesos)

mar-16 dic-15 ASSETS Current assets

Cash and equivalents 2,033 2,370 Accounts receivable, net 2,818 2,633 Other receivables 303 182 Inventories 1,856 1,892

Property, plant & equipment, net 6,329 6,353 Investments in associates and JV 845 791 Other assets 2,115 2,118 TOTAL ASSETS 16,300 16,339

LIABILITIES Current liabilities

Bank debt & current maturities 276 202 Trade payables 1,752 1,743 Other current liabilities 1,140 1,398

Non-current liabilities

Bank debt 1,782 1,935 Deferred taxes 806 773 Other non-current liabilities 328 338

TOTAL LIABILITIES 6,085 6,390 TOTAL SHAREHOLDERS’ EQUITY 10,216 9,950 TOTAL LIABILITIES AND EQUITY 16,300 16,339


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Grupo Industrial Saltillo manufactures and markets products for Auto-Parts (grey and ductile iron castings, as well as casting and machining of aluminum parts), Construction (water heaters, fluid handling systems, wall and floor ceramic and porcelain tiles) and Housewares Segments (kitchenware and tableware).

This press release may contain certain forward-looking statements and information related to Grupo Industrial Saltillo, S.A.B. de C.V. and its subsidiaries (collectively, the “Company”), which is subject to risks and uncertainties that could cause actual results to differ materially from current expectations of the Company’s management. These risks and uncertainties include, without limitation: new product development and marketing; demand and acceptance of the Company's products; competing products and pricing; economic conditions in the Company’s product and geographic markets, and fluctuations in foreign currency.

Given that Grupo Industrial Saltillo, S.A.B. de C.V. (“GISSA”), has issued securities under Section I of the List referred by the 4.002.00 mandate of the Mexican Stock Exchange Internal Bylaws (the “Bylaws”), and given the importance of keeping an active participation in the stock market, it reports in accordance with the 4.033.10 mandate of these Bylaws, that the financial institutions providing analyst coverage over GISSA’s stock are GBM Grupo Bursatil Mexicano, S.A. de C.V., Casa de Bolsa (“GBM”) and Actinver Casa de Bolsa (“Actinver”), part of Grupo Financiero Actinver, S.A. de C.V.

Institution Analyst

GBM Lilian Ochoa Guerra

Actinver Pablo Abraham Peregrina

Relevant Information

Forward-Looking Statements

Analyst Coverage

About Grupo Industrial Saltillo


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Figures expressed in U.S. dollars: The figures presented in the Statements of Comprehensive Income have been calculated by dividing the figures of each quarter, expressed in nominal Mexican Pesos or Euros, by the average exchange rate registered for that quarter.

Allocation of corporate services: In order to perform an accurate evaluation of the results by Business Segment, as well as to avoid comparability distortions, the Management of the Company uses a methodology based on current services provided to each Business Unit, which applies a standardized percentage to allocate the corporate services to achieve its proper normalization.

In order to adequately reflect the financial information contained in the income statement of the Company, the financial profit/loss (operative CFR) related to working capital will no longer be included in Operating Income, and will be reclassified to CFR (below the EBIT line). For compatibility purposes, this criteria is applied to restate the figures of 2015, carrying out reclassifications that are not material to the financial statements.

Notes to the Financial Statements: For a greater depth of analysis, in addition to reviewing the contents of this Earnings Release, we recommend you to go in detail on the Notes of our Financial Statements on our website: www.gis.com.mx

Sector Hogar

Additional Information

http://www.gis.com.mx/informacion_financiera.php?categoria=4

Download - EARNINGS RELEASE 1Q16 - investor cloudcdn.investorcloud.net/GIS/InformacionFinanciera/Informes... · 2016. 5. 27. · Earnings Release 1Q16 . 7 . Mexico, April 21, 2016 | | [email protected]

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