ALPEK (ALPEKA) Q2 2024 earnings summary

Executive summary

• Second quarter results met guidance, with stable volumes at 1.2M tons and improved net working capital, supported by resilient polyester demand despite temporary Altamira disruptions; water levels normalized by June.

• Structural cost reduction initiatives in the polyester business were completed, achieving $75M in annualized savings effective by 3Q24, with further efficiency opportunities under review.

• Sustainability efforts advanced, including the publication of a comprehensive 2023 report and an MSCI ESG rating upgrade to BBB, reflecting superior carbon emissions performance.

• Leverage ratio improved to 3.3x from 3.7x, with a year-end target of 2.5x and continued focus on deleveraging.

Financial highlights

• Volume was flat year-over-year and quarter-over-quarter at 1.2M tons; polyester segment volume up 2% year-over-year.

• Reported EBITDA reached $170M, up 15% year-over-year, including $14M from inventory management and $2M in non-recurrent restructuring costs.

• Comparable EBITDA was $158M, down 21% year-over-year but up 3% sequentially, in line with guidance.

• Net debt decreased by $82M in the quarter to $1.73B, down 8% year-over-year and 5% quarter-over-quarter.

• Operating free cash flow reached $116M, with net working capital improving by $34M.

Outlook and guidance

• Full-year 2024 EBITDA guidance is reaffirmed, with gradual industry recovery and stable demand expected.

• Structural cost reduction initiatives are on track, with additional cost-saving opportunities being pursued.

• Rising ocean freight costs could present margin opportunities if trends persist.

• CapEx for the year will remain below $200M, with a ramp-up in strategic projects in the second half.

• Targeting a net debt-to-EBITDA ratio of 2.5x by year-end, with no dividends planned for 2024.