7/22/2025

speaker
Barbara Amaya
Investor Relations Officer, ALPEC

Good morning, everyone. Welcome to ALPEX Second Quarter 2025 Earnings Webcast. I am Barbara Amaya, ALPEX 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. First, Jorge will provide an overview of quarterly results and relevant events. Then, Jose Carlos will cover the quarterly financial results in greater detail. And afterwards, Jorge will provide greater insight into our revised guidance and how it reflects today's environment and outlook for the remainder of the year. Finally, we will continue with the Q&A session. Please note that the information disclosed 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 otherwise. We express our financial results in U.S. dollars unless otherwise specified. For your convenience, this webcast is being recorded and will be available on our website.

speaker
Jorge Young
Chief Executive Officer

Jorge, I'll turn the call over to you. Thank you, Bárbara. Good morning, everyone. Thank you for joining us today. For the second quarter of 2025, Alpex financial and operating results reflect a solid performance in the plastics and chemical segment. As margins and volume remain in line with our original guidance. This helped to partially offset continued volatility in the polyester segment, where global oversupply and trade-related disruptions continue to exert pressure on margins. In addition, a combination of extended periods of maintenance downtime and unplanned outages at our sites particularly in our PTA operations contributed to lower than expected results. With operations successfully resumed, we expect performance to trend closer to our original expectation for the second half. With respect to our long-term pillars, let me provide a quick update on two of them. First, solidifying our core business. As part of our ongoing efforts to enhance productivity and strengthen competitiveness, we're advancing proactive initiatives aligned with our long-term vision of integrated, scale-driven hubs. To achieve this, we announced the closure of the Cedar Creek facility, which will begin at the end of this month. ET production will be reallocated We will continue to enhance efficiency and ensure reliability for our customers, focusing our operations on our most competitive facilities. Additionally, progress continues on the divestiture of non-strategic assets, also aligned with our long-term financial strategy. The second pillar I want to talk to you today is stability through consistent financial flexibility. During the second quarter, we strengthened our liquidity position by successfully refinancing 340 million in debt, originally maturing in 2027 and 2028. And we expect to complete the refinancing of an additional 200 million due in 2027 by the end of July. These actions will extend our average debt maturity from 3.5 to 4.7 years, further reinforcing our commitment to financial flexibility and discipline cash flow management. As we continue to execute our strategic pillars, we are confident we will be able to navigate the new uncertainty and better position the company for long-term growth. Now I will turn the call over to Jose Carlos to provide details of our financial performance in greater detail.

speaker
Jose Carlos Pons
Chief Financial Officer

Thanks, Jorge. Good morning, everyone. Thanks for joining us today. Now allow me to cover our current financial results. Volume was 1.1 million tons, down 7% from last year and flat from the previous quarter. As Jorge mentioned, this reflects the impact of an extended period of maintenance downtime and unplanned outages in our PTA operations, which offset stabilizing demand levels. Reported EBITDA was $102 million, including a $23 million negative inventory adjustment. Notably, during the quarter we saw a significant decline in raw material prices in our plastics and chemicals segment, which accounted for $14 million of this adjustment. APEC generated 125 million in comparable EBITDA, decreasing by 21% on a yearly basis and remaining flat sequentially, reflecting the challenging environment influenced by global oversupply, trade issues, and operational disruptions, particularly in the polyester segment. We estimate that under normal production conditions, comparable EBITDA would have been approximately 15 to 20 million higher. We continue taking proactive measures to mitigate these effects and strengthen profitability. Now, moving forward with the polyester segment results. Volume was 927,000 tons, a 7% decrease year over year and a 1% sequential increase. PTA production during the quarter was affected by several factors. One, we advanced the annual maintenance outages over Brazilian facilities. which was originally planned for the third quarter. Two, our facility located in the south of Mexico was also taken offline for planned maintenance activities. And three, our largest facility in Altamira, Mexico experienced unexpected operational disruptions. All the facilities have returned to normal operations without further disruptions. Asian integrated pet reference margins averaged $308 per ton, or 11% from the previous quarter, while Chinese pet margins increased 12% to $155 per ton. While average margins improved overall, they were marked by pronounced fluctuations throughout the period. Additionally, US reference for exiling prices rose 2% from last quarter to $1,132 per ton, Yet they are 16% lower compared to the same period last year. This resulted in a spread between North American and Asian prices of $276 per ton, a 34% decrease from the previous quarter. Polyester comparable EBITDA was 71 million, a 31% decline year over year, reflecting global supply challenges and tariff related headwinds. Favorably during the quarter, the results for the plastic and chemical segment remain relatively stable. Volume total 190,000 tons, a 6% decline both year by year and quarter by quarter, reflecting a return to normalized demand levels as market players increased their inventories last quarter, anticipating a potential tariff impact amid the current political landscape. Turning to reference margins, polypropylene margins remain flat at $0.14 per pound, yet in line with our expectations for the year, while average propylene prices declined to $0.38 per pound, down 16% from the previous quarter. And North American reference margins for EPS increased slightly to $0.31 per pound, up 6% sequentially, while average starting prices decreased to $0.49 per pound, a 5% drop quarter over quarter. Plastics and chemicals comparable EBITDA was 51 million, a slight decline of 1% from last year and a decrease of 7% from last quarter, as high reference margins for EPS and stable conditions on polypropylene spreads offset the drop in volume. Turning to free cash flow and capital allocation, for the second quarter, net working capital resulted in a release of 9 million, an improvement over the previous quarter as inventory levels decreased. We continue to expect normalization in the second half of the year as raw material prices are expected to continue to increase. As a result, we forecast a net recovery for the year overall, and we remain committed to strict working capital management. Operating free cash flow reached $48 million, up $40 million from the previous quarter. APEC remains on track to deliver positive cash flow for 2025, underscoring its resiliency amid the challenging macroeconomic environment. CAPEX total $58 million during the quarter, including $21 million in maintenance CAPEX, PAC CAPEX, and $37 million in strategic CAPEX. This includes an unrecovered item of approximately $20 million from the release of an escrow account associated with the octal acquisition of a completion of agreed terms and completing our obligations related to this transaction. Additionally, we don't foresee declaring a dividend payment for 2025. We remain focused on preserving financial flexibility and prioritizing disciplined capital allocation. Moving next to a balance sheet and financial position, net debt was $1.9 billion, up 10% year-over-year and 1% from the previous quarter. Last 12 months reported EBITDA was $540 million, resulting in a net debt to EBITDA ratio of 3.5 times. On a last 12 months comparable EBITDA basis, the leverage ratio resulted in 3.0 times. ALPEC continues to implement measures to the leverage to approach a target of 2.5 times by 2026. 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.

-

-

Investor presentation