ALFA reports 2Q22 EBITDA of US $706 million, highest second quarter result in its history

MONTERREY, Mexico, July 20, 2022 /PRNewswire/ -- ALFA, S.A.B. de C.V. (BMV: ALFAA) ("ALFA"), a company that has developed a diversified portfolio of leading businesses with global operations, announced today its unaudited results for the second quarter of 2022 ("2Q22"). All figures have been prepared in accordance with International Financial Reporting Standards ("IFRS").

"We hope you and your families are remaining safe and healthy. The second quarter was marked by exciting developments on the strategic front, including the announcement of the Axtel spin-off and Alpek´s closing on the previously announced OCTAL acquisition. We are also pleased to report strong consolidated performance with quarterly EBITDA of US $706 million and six consecutive quarters of year-over-year improvement in the net leverage ratio.

ALFA's 2Q22 revenue increased 30% year-over-year and EBITDA surged 42% driven once again by a better-than-expected performance at Alpek. The petrochemical business continued to capitalize on strong reference margins in its core products plus solid demand. In addition, Alpek's results benefitted from the integration of the OCTAL acquisition in June.

Sigma was negatively impacted by the ongoing headwinds in its European operations, primarily higher energy prices and input costs as well as lower pork exports. Noteworthy, Sigma Europe EBITDA was up 20% quarter-on-quarter as operating efficiencies and pricing actions have been implemented to mitigate inflationary pressures. Meanwhile, lower sales from the Government segment, project delays caused by the global semiconductor shortage, and lower revenues from a large wholesale customer continued to weigh on Axtel's results. It is important to note that the large wholesale customer´s "concurso mercantil" process reached a financing agreement which provides certainty going forward to its creditors and suppliers like Axtel.

ALFA is fully committed to continue transferring value to its shareholders through a balanced approach which includes dividends, share repurchases, improvement in credit metrics and the transformational efforts underway to address the conglomerate discount.

We took a decisive step forward during the quarter when we announced the plan to spin-off Axtel to the ALFA shareholders. As approved by ALFA's shareholders on July 12^th, we are following virtually the same structure and process implemented when we spun off Nemak in 2020. ALFA will transfer its entire stake in Axtel to ALFA's shareholders via a new, Bolsa-listed entity named Controladora Axtel.

By spinning-off Axtel, ALFA further simplifies its corporate structure and enhances its financial position as the two remaining subsidiaries, Alpek and Sigma, have investment grade credit ratings. In addition, ALFA's shareholders gain autonomy as we advance, holding separate stakes in ALFA, Nemak and soon in Axtel. Also, as an independent business, Axtel will drive strategic initiatives to boost growth without the influence of ALFA's transformational process.

Another key value-enhancing event during the quarter was Alpek closing the OCTAL acquisition ahead of plan. For 2022, Alpek is projecting an EBITDA contribution of US $120 million from OCTAL supported by better-than-expected reference margins and overall favorable industry conditions. In turn, Alpek increased its 2022 EBITDA guidance to US $1.600 billion, up from US $1.365 billion announced in 1Q22.

ALFA has also adjusted its 2022 guidance to reflect three significant items. First, the accounting effect resulting from Axtel being presented as a discontinued operation beginning in 3Q22. Second, Alpek raising guidance driven by the integration of OCTAL plus a solid reference margin outlook. Third, lower guidance from Sigma due to subpar performance from its European operations partially offset by solid results in Mexico, U.S. and Latam. The net result is ALFA's 2022 Consolidated EBITDA Guidance adjusted slightly to US $2.280 billion, compared with US $2.283 billion announced in 1Q22.

On the ESG front, Alpek became the first ALFA subsidiary to receive approval from the Science Based Targets initiative (SBTi) for its greenhouse gas emissions reduction target. Alpek is committed to reducing scope 1 and 2 emissions by 27.5% versus a 2019 baseline by 2030, which is in line with the Paris Agreement to combat climate change. Transitioning to renewable sources of electricity, improving energy usage, and producing emission-free steam are some of the initiatives Alpek will implement to meet its targets and reach carbon neutrality by 2050.

Looking to the remainder of the year, ALFA will prioritize the successful execution of the Axtel spin-off. Sigma will continue driving growth initiatives and mitigating inflationary pressures through operating efficiencies and revenue management. Alpek will focus on effectively integrating OCTAL to capture the full potential of this transformational acquisition and continue capitalizing on favorable industry dynamics.

In closing, we would also like to extend our condolences to the family of José Calderón Rojas who recently passed away. Mr. Calderón was a member of ALFA's Board of Directors since 2005 and dear friend with a long family legacy as an ALFA shareholder. We are grateful for his many years of dedicated service and valuable insight. Our thoughts and prayers go out to his family and loved ones. ALFA will be undertaking a search for a new Board member in due course."

Keep well/Stay safe,  
Álvaro Fernández

ALFA manages a diversified portfolio of leading businesses with global operations: Sigma, a leading multinational food company, focused on the production, marketing and distribution of quality foods through recognized brands in Mexico, Europe, United States and Latin America. Alpek, one of the world's leading producers of polyester (PTA, PET, rPET and fibers), and the leader in the Mexican market for polypropylene and expandable polystyrene (EPS). Axtel, a provider of Information Technology and Communication (ITC) services for the enterprise and government segments in Mexico. In 2021, ALFA reported revenues of Ps. 308,060 million (US $15.2 billion), and EBITDA of Ps. 41,050 million (US $2.0 billion). ALFA's shares are quoted on the Mexican Stock Exchange and on Latibex, the market for Latin American shares of the Madrid Stock Exchange. For more information, please visit www.alfa.com.mx

This release may contain forward-looking information based on numerous variables and assumptions that are inherently uncertain. They involve judgments with respect to, among other things, future economic, competitive and financial market conditions and future business decisions, all of which are difficult or impossible to predict accurately. These uncertainties include, but are not limited to, risks related to the impact of the COVID-19 global pandemic, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response, availability of workers and contractors due to illness and stay at home orders, supply chain disruptions and other impacts to the business, or on the Company's ability to execute business continuity plans, as a result thereof. Accordingly, results could vary from those set forth in this release. The report presents unaudited financial information. Figures are presented in Mexican Pesos or US dollars, as indicated. Where applicable, Peso amounts were translated into US dollars using the average exchange rate of the months during which the operations were recorded. Financial ratios are calculated in US dollars. Due to the rounding up of figures, small differences may occur when calculating percent changes from one period to the other.

SOURCE ALFA, S.A.B. de C.V.

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