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 2024. 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, 2024, 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. 16.56 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on March 31, 2024.
Three months ended March 31, 2024, compared to three months ended March 31, 2023.
The following table summarizes our results of operations for the first three months ended March 31, 2024, and 2023:
(Figures in Millions of Pesos) |
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For the first three months ended March 31, |
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2023 |
|
|
2024 |
|
|
| Revenues | 7,240.6 |
|
6,236.3 |
|
|
| Cost of Sales | 5,525.2 |
|
4,803.3 |
|
|
| Gross Profit | 1,715.4 |
|
1,433.0 |
|
|
| Selling and Administrative Expenses | 646.1 |
|
630.8 |
|
|
| Operating Income | 1,069.2 |
|
802.2 |
|
|
| Other Expenses - Net | (35.6 |
) |
51.2 |
|
|
| Comprehensive Financing Result | 292.1 |
|
63.8 |
|
|
| Taxes and Statutory Employee Profit Sharing | 215.8 |
|
180.9 |
|
|
| Equity in Income (Loss) of Associated Companies | 1.6 |
|
(16.0 |
) |
|
| Consolidated Net Income | 1,111.5 |
|
720.3 |
|
|
| D&A | 68.2 |
|
71.5 |
|
|
| EBITDA 1/ | 1,137.5 |
|
873.7 |
|
|
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. |
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Our consolidated net income for the first three months ended March 31, 2024, was Ps.720.3 million (US$43.5 million), compared to a net income of Ps.1,111.5 million in the same period of 2023. This change was the result of lower Operating Income and Comprehensive Financing Result for this period compared to the first quarter in the previous year.
Revenues
Our net revenues for the first three months of 2024 decreased 13.9% to Ps.6,236.3 million (US$376.5 million) from Ps.7,240.6 million in the same period of 2023. This decrease was the result of lower copper prices and a reduction in sales volumes.
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 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 61.5% of our revenues in the first three months ended March 31, 2024, came from products manufactured in Mexico and the remaining 38.5% from products manufactured in the U.S.
In terms of sales by region during the first three months ended March 31, 2024, we derived approximately 47.9% of our revenues from sales to customers in the United States, 49.6% from customers in Mexico and 2.5% from the rest of the world (“ROW”).
Cost of sales
Our cost of sales in the first three months ended March 31, 2024, decreased by 13.1% to Ps.4,803.3 million (US$290.0 million) from Ps.5,525.2 million in the same period of 2023. As percentage of revenues, cost of sales was 77.0% and 76.3% respectively.
We 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, 2024, decreased 16.5% to Ps.1,433.0 million (US$86.5 million) from Ps.1,715.4 million in the same period of 2023. As percentage of sales, gross profit in 2024 was 23.0% vs 23.7% in 2023.
Selling and Administrative Expenses
Our selling and administrative expenses in the first three months ended March 31, 2024, decreased 2.4% to Ps.630.8 million from Ps.646.1 in the same period of 2023.
Operating Income
Our operating income in the first three months ended March 31, 2024, decreased 25.0% to Ps.802.2 million (U.S.$48.4 million) from our operating income Ps.1,069.2 in the same period of 2023.
EBITDA
In the first three months ended March 31, 2024, our EBITDA decreased 23.2% to Ps.873.7 million (or US$52.8 million), from Ps.1,137.5 million in the same period of 2023. The corresponding depreciation and amortization figures are Ps.68.2 million for January to March 2023 and Ps.69.6 million for the same period of 2023.
Comprehensive Financing Result
The following table shows our comprehensive financing result for the first three months ended March 31, 2023, and 2024:
(Figures in Millions of Pesos) |
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For the first three months ended March 31, |
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2023 |
|
|
2024 |
|
|
| Interest Expense | (72.3 |
) |
(69.4 |
) |
|
| Interest Income | 16.6 |
|
51.3 |
|
|
| Exchange Gain - Net | 353.8 |
|
88.7 |
|
|
| Other Financing Costs | (6.0 |
) |
(6.8 |
) |
|
| Comprehensive Financing Result | 292.1 |
|
63.8 |
|
|
Our comprehensive financing result in the first three months ended March 31, 2024, was a cost of Ps.63.8 million, compared to a cost of Ps.292.1 million in the same period of 2023. This decrease was explained mainly by the lower exchange rate.
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, 2024, was an expense of Ps.180.9 million compared to an expense of Ps. 215.8 million in the same period of 2023.
Consolidated Net Income
Our consolidated net income for the first three months ended March 31, 2024, was Ps.720.3 million (US$43.5 million), compared to a net income of Ps.1,111.5 million in the same period of 2023.
Liquidity and Capital Resources
Liquidity
As of March 31, 2024, we had cash and cash equivalents for Ps.3,986.8 million (U.S.$240.7 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 5.5% in the first three months ended March 31, 2024, to $3.86 US dollar per pound from $4.09 US dollar per pound in the same period of 2023.
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, 2024, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.302.2 million (U.S.$18.2 million), all of which was dollar denominated.
On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.3,633.1 million (U.S.$219.4 million), all of which was dollar denominated.
Accounts receivable from third parties as of March 31, 2023, were Ps.4,168.7 million (U.S.$251.7 million). Days outstanding in the domestic market were 31 days as of March 31, 2024.
Debt Obligations
The following table summarizes our debt as of March 31, 2024:
| Consolidated debt | March 31, 2024 | |
| (In Millions of Pesos) | ||
| U.S. subsidiaries debt | 65.6 |
|
| Mexican debt | 3,869.8 |
|
| Total | 3,935.3 |
|
This total includes the restructured debt of the Company.
Capital Expenditures
For the first three months ended March 31, 2024, we invested Ps.63.6 million (U.S.$3.8 million) in capital expenditure projects, mainly related to expansion of production and maintenance.
In the first three months ended March 31, 2024, our capital expenditures were allocated by segments as follows: 23.2% to copper tubing, 30.2% to wire and cable, 8.8% to valves and controls, 5.5% to electrical products and the remaining 32.3% to other divisions. By geographic region 77.1% of total capital expenditures were invested in our Mexican facilities and the remaining 22.9% in the U.S.
You should read this document in conjunction with the unaudited consolidated financial statements as of March 31, 2024, including the notes to those statements.
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Contacts
Francisco Rodriguez
frodriguez@iusa.com.mx
52 55 5261 8800
