Alpek Sab De Cv Ord

Good morning everyone and welcome to Alpex third quarter 2024 earnings webcast. I am Bárbara Amaya, Alpex IRO, and I am delighted to be here today with Jorge Young, our CEO, and Jose Carlos Pons, our CFO, who will be covering the webcast presentation. For today's agenda, first Jorge will cover the quarterly overview and discuss relevant events. Next, Jose Carlos will expand upon the financial results and then Jorge will review the outlook for the remainder of the year and elaborate on the revised guidance. Finally, we will be taking any questions you may have. 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. Albeck undertakes no obligation to publicly update or revise any forward-looking statement, whether it is because of the information, future events, or otherwise. Financial results are expressed in US dollars unless otherwise specified. For your convenience, this webcast is being recorded and will be available on our website. Jorge, I'll turn the call over to you.

Thank you, Bárbara. Good morning, everyone. I'd like to begin by highlighting that the quarter surpassed our expectations. We observed high ocean container freight costs, which support our regional margins. In addition, slightly improving reference margins and stable demand led to better results. Our comparable EBITDA of $218 million is the highest since 2022. Also, in Q3, Alpec paid dividends of $132 million to its shareholders. In other news, I'm excited to announce that last week, Alfa's shareholders approved the proposal to spin off Alpec. Under this process, Alfa's entire share ownership in Alpec will be transferred to a new entity. Since its inception, Alpec has been able to position itself as an industry leader. and in recent years has made the necessary arrangements to become a standalone company. And we are fully prepared for this. The key next steps in the process is for the National Banking and Securities Commission to provide registration for the listing of the new entity, Controladora Altex. Based on the previous spin-off processes implemented by Alpha for NEMAC and Axtell, the Alpex spin-off is expected to be completed in 2025. After both entities are trading, there would be a potential to merge them into a single entity to maximize the direct float of the company, which allows us to reach a broader investor base with the potential for greater stock liquidity. I'd like to mention that our board composition and management team will remain unchanged. And this will not have any impact on Alpek's operations, customers, or suppliers. We look forward to this new phase with optimism and excitement. Being a fully independent entity represents an opportunity for Alpek to further strengthen and grow to continue to maximize shareholder value. And now I'd like to turn the call over to Jose Carlos, who will discuss financial performance as well as relevant events related to the spin-off.

Thank you, Jorge, and good morning, everyone. Thank you for joining us today. Allow me to provide greater insight for our quarterly results. Volume increased on a quarterly and annual basis, reaching 1.22 million tons. This was due to stable demand for both of our segments and the normalization of our operations in Altamira. following the temporary water shortage experience in the second quarter. Reported EBITDA reached 198 million, a significant 58% increase year over year, including a combined negative inventory adjustment and a carry forward effect of 18 million. Output generated 218 million in comparable EBITDA exceeding our expectations for the quarter. During this quarter, elevated ocean freight costs benefited the domestic market, leading to improved reference margins. These are the highest levels since 2021. However, a downward trend is already developing, with a normalization expected by 2025. Now, let's delve into the polyester segment. Volume resulted in 995,000 tons, representing a 4% increase on an annual basis due to steady demand levels. Asian integrated pet margins remain flat, averaging $297 per ton. Meanwhile, Chinese integrated pet reference margins increased to an average of $166 per ton. U.S. reference peroxidine decreased by 8%, resulting in a spread between North American and Asian prices of $250, 3% lower than in the previous quarter. Comparable levita rose to 158 million, a 50% increase from the previous quarter, mainly from high freight costs and solid reference margins. Now, looking at the plastic and chemical segment, volume was 222,000 tons, 10% higher quarter on quarter, reaching last year's levels. This was due to an improvement in regional demand, particularly for the EPS segment. Polypropylene reference margins once again remain flat at 15 cents per pound. Average reference propylene prices increased to 53 cents per pound, up 12% versus the previous quarter. Meanwhile, EPSR recovery as North American reference margins increased to an average of 36 cents per pound, 42% higher quarter over quarter. Average reference prices for styrene decreased to 57 cents per pound, down 5% from the second quarter. And finally, comparable EBITDA increased to 63 million, up 22% quarter on quarter as there was no longer an impact from the water shortage at the Altamira sites, particularly for the EPS. And reference margins recovered from the lowest level since the third quarter of 2023. Turning to free cash flow, CapEx resulted in 24 million, comprised mostly of scheduled maintenance. We remain on track to conclude the year below the original guidance as we maintain our strong commitment to discipline capital allocation. We had an investment in networking capital of 43 million, as lower raw material prices were offset by higher volume. Finally, regarding the company's financial position, net debt increased to $1.81 billion, while last 12 months reported EBITDA was $590 million, resulting in a net debt to EBITDA ratio of 3.1 times, down from 3.3 times. Dividends includes a payment of $132 million, which was approved and paid to shareholders in September. The decision to pay a dividend was carefully analyzed to ensure it didn't compromise the company's stability while enabling the spin-off of Alpec, which has the potential to generate opportunities for shareholders. The company's healthy cash flow generation allows us to continue our path towards our target and we estimate our leverage will be between 2.7 and 2.8 times by year-end. I would also like to highlight that Alpec has maintained its investment rate across all three rating agencies. Earlier this month, Fitch reaffirmed its stable rating for the company.