Alpek Sab De Cv Ord

Hi everyone, welcome to Alpec's third quarter 2023 earnings webcast. I am Antón Fernández, IRO, and here with us today we have Jorge Young, our CEO, and José Carlos Pons, our CFO. Let's begin by reviewing today's agenda. First, Jorge will discuss overall context of the quarter and results, Then, José Carlos will cover Alpec financial performance followed by recent events and outlook for the remaining of the year. And finally, we will open the call for questions from the audience. 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. ALPEC undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For your convenience, this webcast is being recorded and will be available on our website. Jorge, I will turn the call over to you.

Thank you, Anton. Good morning and thank you for joining us. Let me start off by providing some context for the quarterly performance. The macroeconomic environment we have experienced throughout the year remains with China's economy impacting the petrochemical industry. In turn, the influence of Asian imports and Asian offers into the Americas persists, particularly for PET and EPS. Meanwhile, Regional market demand remains soft, affected by a high inflationary environment, which has deterred consumer spending, particularly for EPS. I would like to highlight that we have continued our focus on cash generation. In Q3, we achieved a strong operational free cash flow of 221 million. As efforts to optimize working capital, capex, and other elements continue to yield solid results. Now, let's discuss reference margins for our main product. For polyester, Asian integrated PET reference margins declined by 18% quarter on quarter, averaging $272 per ton, slightly below our expectation. Meanwhile, Chinese integrated PET reference margins averaged $146 per ton, declining by 35%. For polypropylene, due to the supply and demand dynamics in the region, North American reference margins remain flat, continue to average 17 cents per pound as expected. And for EPS, North American reference margins averaged 19 cents per pound, 58% lower quarter on quarter, primarily due to higher raw material prices and a lack in EPS reference prices. Now, Jose Carlos will review the financial performance.

Thanks, Jorge. Hi, everyone. It's great to be here with you. To begin with, I'd like to discuss the quarter's financial highlights. We achieved overall volume of 1.2 million tons and a comparable EBITDA of $160 million. A robust free cash flow generation resulting mainly from the net working capital improvement and a capex optimization. Now, let's look at the results by segment. For polyester, volume was 955,000 tons, 3% lower quarter on quarter, partially due to Asian imports in the Americas and soft demand in the region. In plastic and chemicals, volume was 222,000 tons, an increase of 4% versus the previous quarter. We saw overall high polypropylene demand in the quarter and particularly lower demand in the EPS from the construction industry in the US. Moving on to key fits of dynamics, the US reference paraxylene prices increased by 8%. with the disconnection between the North American and Asian prices growing by 20% to $339 per ton. In the plastic and chemical segment, average reference propylene prices decreased to 36 cents per pound, a 10% decrease quarter on quarter, yet rising in September to 39 cents per pound. Meanwhile, average reference prices for styrene rose to 53 cents per pound, an 11% increase compared to the second quarter, with greater disconnection between North American and Asian prices. In terms of EBITDA breakdown, overall comparable EBITDA was $160 million, 21% lower than in the previous quarter. This was mainly due to a decrease in reference margins and a higher fee strike cost, particularly for PET and EPS. Reporte de Vida was $126 million, 50% lower quarter on quarter, which includes the following. An $18 million one-time loss related to the filament facility shutdown costs. A non-cash hyperinflation effect in Argentina, as well as, to a lesser degree, a combined positive carry forward and inventory effect of $1 million. If we take a closer look back segment, polyester comparable levita was $114 million, 11% lower versus second cube. And in plastic and chemicals, comparable levita was $42 million, a 40% decrease quarter on quarter from lower reference margins in EPS and raw material prices rising for polypropylene towards the end of the quarter. Regarding free cash flow generation, CapEx totaled $38 million, mainly due to maintenance. Networking capital investment improved by $214 million, which continues to surpass our initial target for the year and resulted in a positive operating free cash flow of $221 million, which quarterly represents $407 million year-to-date. Considering the company's financial position, Alpek's net debt decreased to $1.7 billion, while last 12 months reported EBITDA was $646 million, which led to a net debt to EBITDA ratio of 2.6 times. I'd like to reaffirm that Alpek remains committed to leverage levels below the target of 2.5 times. It is worth mentioning that if we were to exclude both the filament site and the Cooper River shutdown from the first quarter, there'd be a leverage ratio of 2.3 times. And finally, in terms of financial performance, let me take a moment to highlight our healthy debt profile, which offers us flexibility for the future. During the quarter, we announced a successful refinancing of the outstanding balance from the 2023 bond that was due in August with bank debt. This includes our first ever ESG sustainability linked loan, a $200 million facility maturing in 2028. Additionally, we currently have over $500 million in available cash and available committed credit lines of over $600 million. Thank you for your attention, Jorge. I'll turn back the call to you.