ALFA reports 2Q24 EBITDA of US $445 million and raises its 2024 Guidance
Rhea-AI Summary
ALFA reported strong 2Q24 results, with EBITDA reaching US $445 million, up 23% year-over-year. The company raised its 2024 EBITDA guidance by 5% to US $1.590 billion, driven by Sigma's exceptional performance. Sigma achieved its 13th consecutive quarter of year-on-year sales growth, with record volume of 462 ktons. Sigma's 2024 EBITDA is now expected to reach a historic US $1.0 billion, 9% higher than initially estimated.
Alpek's Comparable EBITDA of US $312 million for 1H24 is on track to meet full-year expectations, despite industry headwinds. The company completed cost reduction initiatives expected to save US $75 million annually. ALFA's consolidated Net Leverage ratio stands at 3.3 times, with Alpek at 3.3x and Sigma at 2.0x. ALFA continues to focus on debt reduction to complete its transformation process.
Positive
- EBITDA increased 23% year-over-year to US $445 million in 2Q24
- 2024 EBITDA guidance raised 5% to US $1.590 billion
- Sigma achieved 13th consecutive quarter of year-on-year sales growth
- Sigma's 2024 EBITDA expected to reach historic US $1.0 billion, 9% above initial estimate
- Alpek completed cost reduction initiatives expected to save US $75 million annually
- Sigma's Net Leverage ratio of 2.0 times is lowest in nearly 11 years
Negative
- Alpek faced headwinds such as low reference margins in the global petrochemical industry
- ALFA's consolidated debt outside of Alpek totaled US $3.251 billion at the close of 2Q24, requiring reduction for adequate post-separation leverage
Insights
ALFA's Q2 2024 results demonstrate robust performance, particularly driven by its Sigma division. The company reported an impressive
Sigma, ALFA's food division, is the star performer this quarter. With 13 consecutive quarters of year-on-year sales growth and a record volume of 462 ktons, Sigma's EBITDA reached
Alpek, the petrochemical arm, faces industry headwinds but remains on track to meet its full-year guidance. Its comparable EBITDA of
ALFA's debt reduction efforts are important for its transformation process. The company's consolidated Net Leverage ratio stands at 3.3 times, with Alpek at 3.3x and Sigma at a more comfortable 2.0x. The focus on debt reduction through non-core asset sales is critical for ALFA's planned separation of its businesses.
Overall, ALFA's Q2 results and raised guidance paint a positive picture, with Sigma's exceptional performance offsetting challenges in the petrochemical sector. The company's strategic initiatives and debt reduction focus position it well for its ongoing transformation.
ALFA's Q2 2024 results reveal intriguing market dynamics, particularly in the food sector. Sigma's outstanding performance, with 13 consecutive quarters of growth, suggests a resilient and expanding market for processed foods. This trend may be indicative of changing consumer behaviors, possibly influenced by post-pandemic habits or economic factors driving demand for convenient, packaged food options.
The contrast between Sigma and Alpek's performances highlights the divergent paths of the food and petrochemical industries. While Sigma thrives, Alpek faces "certain headwinds such as low reference margins" in the global petrochemical industry. This dichotomy underscores the importance of diversification in ALFA's portfolio, allowing it to offset challenges in one sector with strengths in another.
Sigma's success across all regions, including standout performances in Mexico and the U.S., points to effective market penetration strategies and possibly favorable macroeconomic conditions in these markets. The appointment of Juan Ignacio Amat as CEO of Sigma Europe, with his experience in implementing transformational plans, suggests a strategic focus on enhancing profitability in this key region.
Alpek's cost reduction initiatives, expected to save
ALFA's focus on debt reduction through non-core asset sales aligns with broader market trends of corporate streamlining and focus on core competencies. This strategy, coupled with Sigma's strong performance, positions ALFA favorably for its planned transformation, which could reshape its market position and investor perception in the near future.
AI-generated analysis. How Rhea-AI works. Not financial advice.
2Q24 HIGHLIGHTS
ALFA | • Accumulated EBITDA of US • ALFA actively pursuing debt reduction initiatives to complete transformation; various non-core asset sale processes advanced further • Consolidated Net Leverage ratio of 3.3 times; Alpek 3.3x and Sigma 2.0x |
Sigma | • Thirteenth consecutive quarter of year-on-year sales growth supported by record volume of 462 ktons, up • Accumulated EBITDA of US • Upward Guidance revision: Sigma's 2024 EBITDA expected to reach historic milestone of US • Net Leverage ratio of 2.0 times represents lowest level in nearly 11 years |
Alpek | • Accumulated Comparable EBITDA of US • Completed structural cost reduction initiatives which are expected to deliver US • Net Debt decreased |
Message from ALFA's Chairman & CEO
"ALFA's consolidated results exceeded our initial estimations as both business units continued to successfully capitalize on resilient demand and better-than-expected dynamics in the food sector. EBITDA grew at double-digit rates year-on-year in 2Q24 and the first half of 2024 (1H24) driven by Sigma, which is key to completing ALFA's transformational process.
Alpek's Comparable EBITDA of US
Sigma maintained its growth momentum, reporting the thirteenth consecutive quarter of year-on-year increase in Revenues. Moreover, EBITDA reached a new quarterly record-high of US
Looking ahead, Sigma expects its 2024 EBITDA to reach the historic milestone of US
During the second quarter, Sigma announced an organizational update to its European operations. The company appointed Juan Ignacio Amat as CEO of Sigma Europe, effective on June 1st. Juan Ignacio brings over 20 years of experience in large consumer goods companies across
Sigma was also active on the financial front, successfully tapping the local debt capital markets for a second time this year. The latest issuance includes the only tranche from a Mexican corporate that has a twelve-year term, with a bullet amortization and a fixed rate. The proceeds were used mainly to complete the full redemption of the remaining principal of Senior Notes due 2026, extending Sigma's average debt maturity to 5.7 years.
Sigma's solid financial position and extraordinary operating performance provide essential support in the final phase of ALFA's transformation process. On the other hand, Alpek is fully capable of operating as an independent business unit. However, the aggregate debt outside of Alpek, which totaled US
To achieve the desired financial conditions, our near-term efforts remain focused on obtaining funds to pay down debt. Various formal sale processes involving non-core assets advanced further during the second quarter.
We are confident that the strategic initiatives to accelerate debt reduction, as well as the better-than-expected operating results from Sigma and Alpek put ALFA on the right path to complete the transformation process and realize its unique value potential in the near term. Thank you for your support and trust".
All the best,
Álvaro Fernández
Important note on changes to ALFA's
Consolidated Financial Statements
ALFA's shareholders approved to spin-off ALFA's share ownership of Axtel into a new, listed entity called "Controladora Axtel" on July 12, 2022. The shares of "Controladora Axtel" were distributed to ALFA shareholders and began trading on the Mexican Stock Exchange on May 29, 2023. In accordance with International Financial Reporting Standards (IFRS), Axtel meets the definition of a "Discontinued Operation" for purposes of ALFA's Consolidated Financial Statements. "Discontinued Operations" are the net results of an entity that is either being held for disposal or which has already been disposed of.
The changes in ALFA's Consolidated Financial Statements are as follows:
- The Consolidated Statement of Financial Position no longer presents Axtel's assets as "Current assets from discontinued operations" nor its liabilities as "Current liabilities from discontinued operations" at the close of 2Q23.
- The Consolidated Statement of Income presents Axtel's net revenues and expenses as a single line item "Profit (loss) from discontinued operations" as follows:
- 2Q23: accumulated figures for the one month and 29 days ended May 29, 2023
- 1Q24: no figures presented related to Axtel
- 2Q24: no figures presented related to Axtel
- 2023: accumulated figures for the four months and 29 days ended May 29, 2023
- 2024: no figures presented related to Axtel
- The Change in Net Debt no longer presents Axtel's net inflows and outflows in "Net Debt from discontinued operations"
SELECTED FINANCIAL INFORMATION (US $ MILLION)
(%) 2Q24 vs. | ||||||||
2Q24 | 1Q24 | 2Q23 | 1Q24 | 2Q23 | 2024 | 2023 | Ch. % | |
ALFA & Subs | ||||||||
ALFA Revenues | 4,197 | 4,106 | 4,221 | 2 | (1) | 8,303 | 8,306 | - |
Alpek | 1,921 | 1,903 | 2,050 | 1 | (6) | 3,825 | 4,112 | (7) |
Sigma | 2,246 | 2,170 | 2,143 | 3 | 5 | 4,416 | 4,134 | 7 |
ALFA EBITDA1 | 445 | 425 | 360 | 5 | 23 | 870 | 736 | 18 |
Alpek | 170 | 168 | 148 | 1 | 15 | 338 | 335 | 1 |
Sigma | 279 | 264 | 217 | 6 | 28 | 542 | 409 | 33 |
ALFA Comparable EBITDA2 | 433 | 411 | 425 | 5 | 2 | 844 | 821 | 3 |
Alpek | 158 | 154 | 201 | 3 | (21) | 312 | 408 | (23) |
Sigma | 279 | 264 | 229 | 6 | 21 | 542 | 421 | 29 |
Majority Net Income3 | 52 | 60 | 4 | (14) | - | 112 | (10) | - |
CAPEX & Acquisitions4 | 67 | 75 | 196 | 10 | 66 | 142 | 282 | 50 |
ALFA Net Debt | 4,977 | 5,094 | 4,994 | (2) | - | 4,977 | 4,994 | - |
Alpek | 1,726 | 1,807 | 1,879 | 5 | 8 | 1,726 | 1,879 | 8 |
Sigma | 2,019 | 2,084 | 2,012 | 3 | - | 2,019 | 2,012 | - |
ALFA Net Debt/EBITDA5 | 3.3 | 3.5 | 3.3 | |||||
ALFA Interest Coverage6 | 3.6 | 3.6 | 4.1 | |||||
1 EBITDA = Operating Income + depreciation and amortization + impairment of assets |
2 Comparable EBITDA = Operating Income + depreciation and amortization + impairment of assets + extraordinary items |
3 Majority Net Income includes Majority Net Income from Discontinued Operations (Axtel) for 2Q23 |
4 Includes divestments |
5 Times. LTM= Last 12 months. |
6 Times. LTM= Last 12 months. Interest Coverage= EBITDA/Net Financial Expenses with Discontinued Operations for all periods |
2Q24 EARNINGS CALL INFORMATION
Date: Thursday, July 25, 2024
Time: 1:30 p.m. EDT (NY) / 11:30 a.m. CST (CDMX)
Registration: https://us02web.zoom.us/webinar/register/WN_dxVDIKZLSb68HL9KGBdXMQ
Replay: https://www.alfa.com.mx/en/events/
About ALFA
ALFA is comprised mainly of two businesses with global operations: Sigma, a leading multinational food company, focuses on the production, marketing, and distribution of quality foods through recognized brands in
Disclaimer
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, future results could vary from those set forth in this release. The report presents unaudited financial information. Figures are presented in Mexican pesos or
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SOURCE ALFA, S.A.B. de C.V.