4/22/2025

speaker
Barbara Amaya Soto
Investor Relations Officer

Barbara Amaya Soto, Good morning, everyone. Welcome to Altec's first quarter 2025 earnings webcast. I am Barbara Amaya, Altec's IRO, and I am pleased to be here today with Jorge Young, our CEO, and Jose Carlos Pons, our CFO, who will be presenting today's material. Today, Jorge will provide an overview of quarterly results and how our long-term vision fits into the current environment. And we'll move on to the other relevant events, which include more information regarding Alpex spin-off from Alpha. Jose Carlos will then cover the quarterly financial results in greater detail. And then Jorge will provide information regarding our outlook for the remainder of the year. Finally, we'll continue with the Q&A session. 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 it is as a result of new information, future events, or other ones. We express our financial results 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.

speaker
Jorge Young
Chief Executive Officer

Thank you, Bárbara. Good morning, everyone. Thank you for joining us today. During the first quarter of the year, and to some extent anticipated, ALPEC navigated a challenging market environment driven mainly by ongoing global overcapacity and decreasing freight costs. These factors are pressuring regional margins, particularly for the polyester segment. Extended maintenance periods at several of our sites also affected our operations, and increased import competition in Argentina further weighed on our results. Meanwhile, the plastics and chemical segment remained stable, particularly supported by strong volume and forward buying in EPS. In response to the aforementioned factors, we continue a comprehensive assessment of our long-term vision and will be accelerating certain initiatives guiding our decision making. Let me discuss these pillars. Number one, solidifying our core business. In order to strengthen our operational foundation, Alpec remains focused on enhancing efficiency, competitiveness, and adaptability across our global operations. To achieve this, we're conducting a strategic review of our global asset footprint. This also includes advancing strategic asset divestments, particularly the former Beaver Valley and polyester fiber sites, which are currently being evaluated for real estate development for a potential land sale. We're working on this and expect to share further updates during the second half of 2025. Second, boosting growth through value-added products. We're actively focusing on expanding our presence in higher value, margin accretive, product lines and markets. This includes evaluating plans to scale bedsheets and thermal form operations, both in the Americas and in the Middle East. Additionally, in the polyester segment, a recently developed PET bottle cap product is gaining traction in the market. While in the plastics and chemical segment, we are exploring higher value added products such as specialized EPS with superior insulation and added performance features to meet evolving market demands. While some of these initiatives will take time, it is very relevant to keep nurturing them. Third, capitalizing on emerging trends. We continue investing in innovation and diversification in order to strengthen our portfolio and meet evolving market demands. For example, since its foundation in 2018, Altec's natural gas business has grown to become a leading domestic distributor in Mexico. And we are now preparing for its expansion into Brazil and into clean electricity. Added to that, the Ovento or sustainable biofertilizer recently received approval for commercialization in the state of California, thereby further enhancing our sustainable portfolio product. And finally, the last pillar is prioritizing our stability through consistent financial flexibility. Alpec's focus remains on maintaining a strong balance sheet and maximizing cash flow generation During the first quarter of 2025, we successfully refinanced a $150 million loan that was originally maturing in 2026, extending its term to 2029. These actions reinforce our ability to face the current environment while still supporting future growth initiatives. Together, these four pillars from the foundation of our long-term vision We formed the foundation of our long-term vision. With this, we are confident we will be able to navigate the near-term uncertainty and better position the company to thrive upon the gradual market recovery as new trends emerge and with the continuing evolution of the competitive landscape. Now, moving forward to recent relevant events. As you are all aware, at the end of the quarter, Controladora Alpec was listed on the Mexican Stock Exchange. On April 4th, the corresponding shares were distributed to alpha shareholders. And as of April 7th, it was listed and began trading, thereby making a significant milestone in our company's evolution. It is important to note that this transition does not affect Alpex's current operations or share composition. Rather, it simplifies for corporate governance. Our next step is to merge ALPEC and Controladora ALPEC into a single class share structure, which we are confident will enhance stock liquidity. We are targeting the conclusion of this process towards the end of 2025, after obtaining the necessary regulatory approvals. We're actively working on fulfilling the requirements and will keep the market informed as we make progress. We're excited about this new chapter and remain fully committed to delivering long-term value for our shareholders. Now, I will turn the call over to Jose Carlos to cover our financial performance in greater detail.

speaker
Jose Carlos Pons
Chief Financial Officer

Thanks, Jorge. Good morning, everyone. Thanks for joining us today. Now, I'll go to our quarterly results. Volume reached 1.1 million tons, decreasing by 7% on a yearly basis and remaining flat quarter on quarter, reflecting softer demand largely driven by ongoing market uncertainty and import activity. I would like to highlight that while volumes remain below the typical first quarter levels, we anticipate a gradual recovery in demand throughout the following quarters. Reported EBITDA was $131 million. which included an inventory adjustment of 15 million, particularly from the polyester as raw material prices declined, as well as a 10 million in others, which was mainly comprised of shutdown costs from Beaver Valley site and reorganization and costs in the polyester business. Alpek generated 126 million in comparable EBITDA, decreasing by 18% year over year, primarily due to weaker demand in the polyester segment and a decrease in reference margins. Now, let me delve deeper into the polyester segment results. Polling resulted in 917,000 tons, a 7% decrease from the previous year, primarily due to continued market overcapacity and a sequential 1% decrease from seasonal trends during the first quarter. In addition to this, operations in the UK side, and to a lesser extent Brazil, experienced extended shutdowns. It is important to note that these sites have already resumed operations. In Argentina, there has been an increase in import activity driven by recent market liberalization, thereby influencing local demand. Asian integrated pet reference margins decreased to an average of $278 per ton, down 9% from the previous quarter, in line with our expectations for the year. In addition, Chinese integrated pet reference margins resulted in $138 per ton, down 18% quarter on quarter. However, US reference by exciting prices saw a 4% increase quarter over quarter, resulting in a spread of $206 per ton between the North American and Asian prices. That's 7% higher than the previous quarter. Thus, Comparable EBITDA was 68 million down 37% year over year and 32% from the previous quarter. The results of the plastic and chemical segment remained stable as evidenced by volume was 202,000 tons, a decrease of 5% year over year as there was a higher supply in the region, which pressured the market. However, volume was 2% higher than in the previous quarter due to continued demand levels for the segment. Looking at the reference margins, as expected, polypropylene margins experienced a slight decrease to 14 cents per pound, down 7% from the previous quarter, with average reference propylene prices decreasing to 42 cents per pound, down 21% from the previous quarter. As for EPS, North American reference margins also declined to an average of 30 cents per pound, 31% lower quarter over quarter. Yet significantly higher compared to the same period last year. As for average reference starting prices, this decreased to 45 cents per pound, 21% on a quarterly basis. Comparable EBITDA was 55 million, an increase of 28% year over year and 60% lower than in the previous quarter, even by the fluctuations in reference margins for EPS. Turning to free cash flow, in the first quarter, we experienced a net working capital investment of 57 million, mainly due to investor shifts, inventory shifts, given the trade uncertainty. We anticipate normalization to take place in the second half of the year, and we maintain our commitment to strict working capital management. CapEx totaled 30 million during the quarter, including 21 million in maintenance CapEx, and 9 million in strategic CapEx. APEC remains focused on maintaining its disciplined capital allocation with a focus on asset efficiency. Thus, operating free cash flow for the quarter resulted in an 8 million, a positive result given the challenging global conditions faced during the period. And finally, regarding the company's financial position, I would like to highlight that we continue to prioritize balance sheet discipline. Our debt profile remains at healthy levels and we have no upcoming material. Net debt levels remained flat compared to the previous quarter at $1.85 billion. However, this was up 4% year over year. Last 12 months reported de vida was $609 million, resulting in a net debt to vida ratio of 3.1 times even the last 12 months de vida. We continue to implement measures to deliver and get closer to our target by 2026 as global macroeconomics ease and the industry works to overcapacity. With that, I'll turn the call back to Jorge.

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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