10/20/2022

speaker
Antón
Investor Relations / Moderator

Our CEO, Pepe Valdez, and our CFO, Jose Carlos Pons. This presentation is divided into two parts. First, Pepe and Jose Carlos will comment on Alpec's third quarter performance, recent events, and our outlook for the remaining months of the year. Afterwards, we will move on to Q&A. Please note that the information discussed today may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to certain risks and uncertainties. Actual results may differ materially, and the company cautions the market not to rely unduly on these forward-looking statements. Alpek undertakes no obligation to publicly update or revise any forward-looking statements, whether it is a result of new information, future events, or otherwise. I'd like to remind everyone that today's webcast has been recorded and will be available on our website at alpek.com. I will now turn the call over to Pepe.

speaker
Pepe Valdez
CEO

Thank you, Antoine. Good morning, everyone, and thank you for joining us today. I am very pleased to mention that in these last few months, APEC had yet another successful quarter. Third quarter 22 was the first quarter in which with the new PET sheet and resin business located in Oman was fully consolidated and we are very pleased with the seamless transition thus far. We have already seen synergies between this and our existing business. and we look forward to continuing to integrate best practices towards the future. From a financial perspective, this new business has experienced strong results, leading Alpec towards the highest quarterly comparable EBITDA in its history. Let's start off by reviewing the main topics we will cover today. First, APEC financial performance was slightly above our expectations for the third quarter, which Jose Carlos will review in greater detail later in this presentation. And then we will discuss APEC's progress towards product circularity and outlook for the rest of the year. Let me provide some context for the results. The quarter was marked by a tighter economic environment and elevated energy prices, which primarily affected conversion costs in the United States, Mexico, and the United Kingdom. At the same time, Asian integrated polyester reference margin averaged $400 per ton for the quarter. higher than expected and only two percent lower than in the previous quarter with the spread between chinese and asian margins narrowing to 77 dollars per ton however it's worth noting that reference margins have begun to normalize reaching an average of 356 dollars per ton in september meanwhile polypropylene reference margins declined to an average of 34 uh cents per pound 13 percent lower quarter on quarter mainly due to to following uh weakening demand towards the end of the quarter leading to higher inventory levels in the industry and second an addition of polypropylene capacity that is coming in in north america also in north america eps average reference margins remain strong during the third quarter At this point, Jose Carlos will take over and delve into more detail regarding the specific impact these changes had on the financial results.

speaker
Jose Carlos Pons
CFO

Thanks, Pepe. And thank you all for being here with us today. I would like to highlight some of OPEC's main achievements during the quarter. Overall volume increased to 1.36 million tons. We reached the highest ever quarterly comparable levita of $424 million with both the polyester and plastic and chemical segments posting their best figures ever as well. Levers remain at 1.2 times. Delving deeper into volume, Alpec reached 1.36 million tons in this period, 8% higher than in the previous quarter, largely due to the recently incorporated pet chip and resin business. In the polyester segment, volume was 1.1 million tons, 10% higher quarter on quarter. In plastics and chemicals, volume was 2% lower quarter on quarter due to the fact that there was a slight decline in polypropylene demand and a maintenance at one of our EPS facilities. Moving on to raw material price dynamics, average spot print crude oil price decreased to $99 per barrel, 12% lower than in the previous quarter, largely due to a tighter macroeconomic environment. US reference paraxylene prices decreased by 18%, in line with crude oil. In plastics and chemicals, propylene prices declined, averaging 47 cents per pound, a 23% decrease when compared to the second quarter. Switching over to the EBITDA breakdown for the quarter, we can see that overall comparable EBITDA reached a new high of $424 million. This was 15% higher than in the previous quarter, primarily due to better than expected margins for pet and EPS and the newly incorporated volume from the pet business. Meanwhile, reported EBITDA was $306 million. 40% lower quarter on quarter. This results included a non-cash inventory loss of $70 million and the negative carry forward effect of $46 million. If we look at results by key segments, Polyester Compatible Levidad reached $261 million, 20% higher quarter on quarter and 144 higher year on year, making this the strongest quarter ever for this segment. This was due to solid volume demand and the resiliency of the Asian polyester reference margins, which remained higher than expected, averaging $400 per ton, 26% higher year-on-year. In plastics and chemicals, comparable EBITDA set a new quarterly record of $158 million, an 8% increase quarter-on-quarter and a 28% year-on-year. This was mainly due to the improvement in EPS business. With regards to free cash flow generation, networking capital investment increased by $111 million, yet at lower levels than the previous quarter, largely due to declining raw material prices during the quarter. CapEx totaled $93 million and was mainly allocated towards scheduling maintenance, as well as a portion of CCP's construction. This all resulted in a negative free cash flow of $6 million. Finally, Alpex net debt increased to $1.8 billion, and last 12 months EBITDA increased to $1.54 billion, resulting in a leverage ratio of 1.2 times net debt to EBITDA. That concludes my comments. Thank you for your attention. I will now turn the call back to Pepe.

Disclaimer

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