Connect with us
Our website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

News

Industrias Unidas, S.A. de C.V. Consolidated Results of Operations for Q1 2020

gbafNews28

Industrias Unidas, S.A. de C.V. (IUSA or the Company) has announced its unaudited results for the first three months ended March 31 of 2020. Figures are unaudited and have been prepared in accordance with Mexican Financial Reporting Standards (MFRS), which are different in certain respects from Generally Accepted Accounting Principles in the United States (U.S. GAAP). The results from any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. Unless stated otherwise, reference herein to Pesos, pesos, or Ps. are to pesos, the legal currency of Mexico and references to U.S. dollars, dollars, U.S. $ or $ are to United States dollars, the legal currency of the United States of America. Except as otherwise indicated, all peso amounts are presented herein in pesos with purchasing power as of March 31, 2020 and in pesos with their historical value for other dates cited. The dollar translations provided in this document are calculated solely for the convenience of the reader using an exchange rate of Ps. 23.80 per U.S. dollar, the exchange rate published by Banco de Mexico, the countrys central bank, on March 31, 2020.

Three months ended March 31, 2020 compared to three months ended March 31, 2019.

The following table summarizes our results of operations for the first three months ended March 31, 2020 and 2019:

 
(Figures in Millions of Pesos)
For the first three months ended March 31,

2019

 

2020

 

Revenues

4,131.0

 

4,700.3

 

Cost of Sales

3,790.2

 

4,213.1

 

Gross Profit

340.8

 

487.2

 

Selling and Administrative Expenses

385.8

 

420.9

 

Operating Income (Loss)

(45.0

)

66.4

 

Other Expenses – Net

(16.8

)

(11.4

)

Comprehensive Financing Result

(91.1

)

(1,381.8

)

Taxes and Statutory Employee Profit Sharing

(29.5

)

(0.3

)

Equity in Income (Loss) of Associated Companies

(1.9

)

(4.8

)

Consolidated Net Income (Loss)

(125.3

)

(1,331.3

)

D&A

117.1

 

85.7

 

EBITDA 1/

72.1

 

152.0

 

 

1/ EBITDA for any period is defined as consolidated net income (loss) excluding i) depreciation and amortization, ii) total net comprehensive financing result (which is comprised of net interest expense, exchange gain or loss, monetary position gain or loss and other Financing costs), iii) other expenses net, iv) income tax and statutory employee profit sharing and v) equity in income (loss) of associated companies. EBITDA should not be considered as an alternate measure of net income or operating income, as determined on a consolidated basis using amounts derived from statements of operations prepared in accordance with MFRS, or as an indicator of operating performance or to cash flows from operating activity as a measure of liquidity. EBITDA is not a recognized term under MFRS or U.S. GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activity as a measure of liquidity.

Our consolidated net loss for the first three months ended March 31, 2020 was Ps.1,331.3 million (US$55.9 million), compared to a net loss of Ps.125.3 million in the same period of 2019. This change was due to an increase of the Comprehensive Financing Result which in turn was caused by an Exchange Loss, as the Mexican peso depreciation went from $18.89 to $23.80 on the last day of December 2019 and March 2020 respectively.

Revenues

Our net revenues for the first three months of 2020 increased 13.8% to Ps.4,700.3 million (US$197.5 million) from Ps.4,131.0 million in the same period of 2019. This increase was the result of a volume sales increment and a different product mix, which absorbed part of the copper price reduction in the period.

Our costs and revenues follow copper prices very closely since the market practice is to pass on to the buyer changes in raw material price.

Our sales are primarily to customers engaged in the commercial, industrial and residential construction, and their related maintenance and renovation activities. We also sell to customers engaged in electrical power generation, transmission and distribution and to the sector of gas, water and air conduction in the Heating, Ventilation, Air conditioning and Refrigeration (HVACR).

Our revenues consist mainly of sales of copper-based products (tubing, wire, cable and alloys) and electrical products.

By country of production, approximately 50.7% of our revenues in the first three months ended March 31, 2019 came from products manufactured in Mexico and the remaining 49.3% from products manufactured in the U.S.

In terms of sales by region during the first three months ended March 31, 2020 we derived approximately 54.9% of our revenues from sales to customers in the United States, 42.4% from customers in Mexico and 2.7% from the rest of the world (ROW).

In terms of volume, consolidated sales of copper products during the first three months ended March 31, 2020 increased by 6.8% as compared to the same period in 2019:

(Metric tons)
For the first three months ended March 31,
Copper Products Volume Sales 2/

2019

2020

USA

13,723

14,461

Mxico

7,611

8,340

ROW

659

685

Total

21,993

23,486

2/ Includes aluminum wire and cable

Cost of sales

Our cost of sales in the first three months ended March 31, 2020 increased by 11.2% to Ps.4,213.1 million (US$177.0 million) from Ps.3,790.2 million in the same period of 2020. As percentage of revenues, cost of sales was 89.6% and 91.8% respectively.

We do continue to reduce our cost base through several initiatives, including plant scheduling, raw material handling, and overall manufacturing overhead costs. According to our accounting policies, we make an inventory valuation at average purchase price. In the case of copper cathodes, an aftermath adjustment is required due to the quotation period agreed with the suppliers (M+1). This initiative allows us to hedge purchases for 30 days at no additional cost. The adjustment is recorded to the cost of sales in the month in which it occurs.

Gross Profit

Our gross profit in the first three months ended March 31, 2020 increased 43.0% to Ps.487.2 million (US$20.5 million) from Ps.340.8 million in the same period of 2019. As percentage of sales, gross profit in 2020 was 10.4% vs 8.2% in 2019.

Selling and Administrative Expenses

Our selling and administrative expenses in the first three months ended March 31, 2020 increased 9.1% to Ps.420.9 million from Ps. 385.8 in the same period of 2019.

Operating Income

Our operating income in the first three months ended March 31, 2020 was positive in an amount of Ps.66.4 million (U.S.$2.8 million), a contrast with an operating loss of Ps.45.0 in the same period of 2019.

EBITDA

In the first three months ended March 31, 2020 our EBITDA increased 110.9% to Ps.152.0 million (or US$6.4 million), from Ps. 72.1 million in the same period of 2019. The corresponding depreciation and amortization figures were Ps.85.7 million for January to March 2019 and Ps. 117.1 million for the same period of 2019.

Comprehensive Financing Result

The following table shows our comprehensive financing result for the first three months ended March 31, 2019 and 2020:

(Figures in Millions of Pesos)
For the first three months ended March 31,

2019

 

2020

 

Interest Expense

(153.3

)

(162.4

)

Interest Income

6.7

 

3.6

 

Exchange Gain (Loss) – Net

59.6

 

(1,221.2

)

Other Financing Costs

(4.1

)

(1.8

)

Comprehensive Financing Result

(91.1

)

(1,381.8

)

 

Our comprehensive financing result in the first three months ended March 31, 2020 was a cost of Ps.1,381.8 million, compared to an expense of Ps. 91.1 million in the same period of 2019. This increase was explained mainly by an Exchange Loss due to the peso devaluation in the quarter an its effect in the dollar debt translation value.

Taxes and Statutory Employee Profit Sharing

The provision for current and deferred income taxes and statutory employee profit sharing in the first three months ended March 31, 2020 was a benefit of Ps.0.3 million compared to a benefit of Ps. 29.5 million in the same period of 2019.

Consolidated Net Loss

Our consolidated net loss for the first three months ended March 31, 2020 was Ps.1,331.3 million (US$55.9 million), compared to a net income of Ps. 125.3 million in the same period of 2019.

Liquidity and Capital Resources

Liquidity

As of March 31, 2020, we had cash and cash equivalents for Ps.110.0 million (U.S. $4.6 million). Our policy is to invest available cash in short-term instruments issued by Mexican and U.S. banks as well as in securities issued by the governments of Mexico and the U.S.

Our cash flow from operations and operating margins are significantly influenced by world market prices for raw copper, as quoted by COMEX and the London Metal Exchange (LME). Copper prices are subject to significant market fluctuations; average copper prices decreased 15.8% in the first three months ended March 31, 2020 to $2.37 US dollar per pound from $2.81 US dollar per pound in the same period of 2019.

We obtain short-term financing from various sources, including Mexican and international banks. Short-term financing consists in part of lines of credit denominated in pesos and dollars. As of March 31, 2020, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.59.0 million (U.S. $2.5 million), all of which was dollar denominated.

On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.7,447.7 million (U.S.$313.0 million), all of which was dollar denominated.

Accounts receivable from third parties as of March 31, 2020 were Ps.3,789.9 million (U.S.$159.3 million). Days outstanding in these receivables from clients in the domestic market were 31 days as of March 31, 2020.

Debt Obligations

The following table summarizes our debt as of March 31, 2020:

Consolidated debt March 31, 2020
(In Millions of Pesos)
U.S. subsidiaries debt

1,588.6

Mexican debt

5,918.0

Total

7,506.6

This total includes the restructured debt of the Company.

Capital Expenditures

For the first three months ended March 31, 2020, we invested Ps.76.2 million (U.S. $3.2 million) in capital expenditure projects, mainly related to expansion of production and maintenance.

In the first three months ended March 31, 2020 our capital expenditures were allocated by segments as follows: 56.6% to copper tubing, 10.8% to wire and cable, 4.4% to valves and controls, 0.3% to electrical products and the remaining 27.9% to other divisions. By geographic region 44.3% of total capital expenditures were invested in our Mexican facilities and the remaining 55.7% in the U.S.

You should read this document in conjunction with the unaudited consolidated financial statements as of March 31, 2020, including the notes to those statements.

Francisco Rodriguez

frodriguez@iusa.com.mx

Tel. 5255 5216 4028

Advertisement
Editorial & Advertiser disclosure

Call for Entries

Global Banking and Finance Review Awards Nominations 2022
2022 Awards now open. Click Here to Nominate

Newsletters with Secrets & Analysis. Subscribe Now

Recommended

Global Banking & Finance Review® is a leading financial portal and Print Magazine offering News, Analysis, Opinion, Reviews, Interviews & Videos from the world of Banking, Finance, Business, Trading, Technology, Investing, Brokerage, Foreign Exchange, Tax & Legal, Islamic Finance, Asset & Wealth Management. Copyright © 2010-2021 GBAF Publications Ltd - All Rights Reserved.