Alfa SAB de CV (ALFFF) Q2 2024 Earnings Call Highlights: Strong EBITDA Growth and Revised Guidance

GuruFocus News
4 min read

In This Article:

  • Consolidated EBITDA Growth: Double-digit growth in Q2 and first half of 2024.

  • Alpek Comparable EBITDA: $312 million, on track for full-year guidance.

  • Alpek Volume Increase: 2% increase in the first half of the year.

  • Alpek Annualized Savings: $75 million from cost reduction initiatives.

  • Alpek Leverage Ratio: Improved to 3.3x at the end of Q2 2024.

  • Sigma Revenue Growth: 13th consecutive quarter of year-on-year growth.

  • Sigma Quarterly EBITDA: Achieved an all-time high.

  • Sigma Full-Year Revenue Guidance: Revised to $8.85 billion.

  • Sigma Full-Year EBITDA Guidance: Revised to $1.0 billion.

  • Sigma Net Leverage Ratio: Improved to 2x, the lowest in nearly 11 years.

  • Consolidated EBITDA Guidance: Increased 5% to $1.59 billion.

  • Consolidated Revenue Guidance: Adjusted up 1% to $16.78 billion.

  • Consolidated Net Debt (Excluding Alpek): $3.25 billion at the end of Q2 2024.

Release Date: July 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Alfa SAB de CV (ALFFF) reported better than expected results, with double-digit EBITDA growth in the second quarter and first half of the year.

  • Sigma achieved an all-time high quarterly EBITDA, marking its 13th consecutive quarter of year-on-year revenue growth.

  • Alpek completed a comprehensive plan to capture $75 million in annualized savings, improving its leverage ratio to 3.3x.

  • Sigma's performance was bolstered by strong consumer demand and favorable currency exchange rates, particularly in Mexico, the US, and Latin America.

  • The company raised its 2024 guidance, anticipating full-year revenues of $8.85 billion and EBITDA of $1.0 billion, reflecting a 2% and 9% increase, respectively, over original projections.

Negative Points

  • Alpek continues to face headwinds in the global petrochemical industry, with polyester margins still under pressure.

  • Despite strong performance, Alfa SAB de CV (ALFFF) faces a significant discount in its stock price, with Sigma's implied value within Alfa being undervalued.

  • The company needs to reduce its consolidated net debt from $3.25 billion to closer to $2.5 billion to maintain a healthy leverage level post-separation.

  • There is ongoing pressure from raw material costs and currency volatility, which could impact margins in the second half of the year.

  • Alpek's guidance already considers low levels of polyester margins, indicating ongoing challenges in the market.

Q & A Highlights

Q: Can you discuss the options for non-core asset sales or divestments at Sigma to unlock value? A: Eduardo Alberto Escalante Castillo, Chief Financial Officer, explained that Alfa is committed to completing the separation process while maintaining a solid financial position for both Alpek and Sigma. The goal is to reduce debt to around $2.5 billion to achieve a healthy leverage level. Various options, including real estate and non-core asset monetization, are being considered, but specific details are not yet available.

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