acrofan

Industry Economy TECH GAME
Society Comfort AUTO MEDIA

Orbia Announces Second Quarter 2021 Financial Results

  • Wednesday, July 28, 2021, 4:10 pm
  • ACROFAN=Businesswire
  • webmaster@businesswire.com

MEXICO CITY--(BUSINESS WIRE)--Orbia Advance Corporation, S.A.B. de C.V. (BMV: ORBIA) (“the Company” or “Orbia”) today released unaudited results for the second quarter of 2021.



Q2 2021 Financial Highlights
(All metrics are compared to Q2 2020 unless otherwise noted)


Strong quarterly results driven by continued momentum in Polymer Solutions and Wavin, with solid top-line performance from Koura, Netafim and Dura-Line. Sequential growth in revenue and profitability driven by continued recovery in key markets, disciplined expense control and opportunities from achieving synergies across Orbia’s businesses.


  • Net revenues of $2.2 billion increased 59%, mainly driven by Polymer Solutions and Wavin; sequentially, net revenues increased 17%;
  • EBITDA of $560 million increased 113% and sequentially 24% with an EBITDA margin of 25.0%, an increase of 629 basis points, sequentially improved 140 basis points;
  • Net majority income of $193 million;
  • Free cash flow of $264 million, representing 47.3% of EBITDA;
  • Leverage ratio (Net Debt to EBITDA) decreased to 1.56x, supported by $137 million net debt reduction and sustained EBITDA growth;
  • 2021 EBITDA growth guidance raised to 32 - 35% above prior year.

I would like to thank our team for staying laser-focused on delivering value for our shareholders and customers around the world. The result is another strong quarter and promising momentum,” said Sameer Bharadwaj, CEO of Orbia. “We continued leveraging the resilience of our business groups and synergies between them to drive revenue and EBITDA expansion, as we transform basic and advanced materials into essential compounds, building and infrastructure products, modern irrigation systems and connection technologies. Our respective business groups’ performance combined with further developing areas of integration are opening up a future of organic growth opportunities which will be enhanced with selective acquisitions.”


Added Bharadwaj, “This quarter, we executed on our strategy, approved investments to increase capacity in Netafim and Dura-Line to meet growing demand and completed the acquisition of a majority ownership in Shakun Polymers Private Limited to expand Polymer Solutions’ presence in Asia. As always, sustainability remains at the top of our agenda--we are investing in processes, solutions and services that reduce our carbon footprint, water usage and waste-to-landfill to advance life around a cleaner, greener world.”


Q2 2021 Consolidated Financial Information1
(All metrics are compared to Q2 2020 unless otherwise noted)


mm US$ Second Quarter
Financial Highlights

2021


2020


%Var.


Net sales

2,243


1,412


59%


SG&A

296


228


30%


Operating income

410


126


225%


EBITDA

560


263


113%


EBITDA margin

25.0%


18.7%


629 bps


Financial Cost

72


64


13%


EBT

339


63


438%


Income tax

116


15


673%


Consolidated net income (loss)

222


42


429%


Net majority income

193


10


1830%


Cash generation

352


100


252%


CapEx

63


54


17%


Free cash flow

264


19


1289%


Net debt

2,733


2,970


-8%


 



1 Unless noted otherwise, all figures in this release are derived from the Interim Consolidated Financial Statements of the Company as of June 30, 2021 and are prepared in accordance with International Accounting Standards 34 “Interim Financial Reporting” of the International Financial Reporting Standards (IFRS), which have been published in the Bolsa Mexicana de Valores (BMV). See Notes and Definitions at the end of this release for further explanation of terms used herein.


Net revenues of $2,243 million increased 59%, driven by higher PVC prices in Polymer Solutions, while Wavin benefitted from improved pricing and higher volumes in both EMEA and LatAm supported by its ability to obtain dependable supplies of PVC from the Polymer Solutions business. Koura, Netafim and Dura-Line also experienced revenue growth due to strong market demand in North America, and Europe.


Cost of goods sold of $1,536 million increased 45%, mainly due to increased volumes as well as increases in raw materials costs and freight expenses for Dura-Line, Netafim and Wavin.


SG&A of $296 million increased 30% following a very strong recovery in activity levels, primarily due to higher personnel expenses and strong local currencies vis-a-vis our functional currency (U.S. Dollar). SG&A as a percentage of sales decreased 297 basis points to 13.2% in the quarter.


EBITDA of $560 million increased 113%, due to higher PVC prices in Polymer Solutions and strong business activity and prices in Wavin. EBITDA margin was 25.0%, an expansion of 629 basis points, despite margin pressures in Dura-Line and Netafim triggered by raw material and freight cost increases.


Financial costs were $72 million in the quarter, a 13% increase, driven primarily by an additional $12.2 million net expense related to the new bonds issuance as well as a subsequent tender offer and make-whole provision, which were partially offset by a lower total debt notional and FX gain.


Taxes were $116 million, up from $15 million in 2020 as a result of significantly higher profits in the quarter and the appreciation of local currencies and inflation adjustments, particularly in Mexico. The tax rate reached 34.2% in the quarter.


Net income to majority shareholders was $193 million in the quarter, an increase of 1,830%, driven by strong profitability in several of Orbia’s businesses.


Free cash flow of $264 million, representing 47.3% of EBITDA. Orbia increased working capital by $130 million, reflecting increased business activity and robust sequential sales growth of $329 million, as well as higher raw material costs in our inventories.


Net debt of $2,733 million, comprising total debt of $3,792 million, less cash and cash equivalents of $1,059 million. A reduction of $137 million in net debt together with significant growth in profitability has contributed to a sequential reduction in our leverage ratio by 0.41x to reach 1.56x.


Q2 2021 Revenues by Region
(All metrics are compared to Q2 2020 unless otherwise noted)


Second Quarter
Region

2021


2020


% Var. Prev Year


% Revenue


Europe

827


528


57%


37%


North America

725


485


49%


32%


South America

464


198


134%


21%


Asia

171


148


16%


8%


Africa y others

56


53


6%


2%


Total

2,243


1,412


59%


100%


Q2 2021 Financial Performance by Business Group
(All metrics are compared to Q2 2020 unless otherwise noted)


Netafim (Precision Agriculture, 13% of Revenues)


Netafim is the world leader in the production and sale of intelligent precision agriculture solutions. Netafim's irrigation systems, services and digital farming technologies enable farmers and stakeholders to achieve significantly higher and better-quality yields while using less water, fertilizer and other inputs, helping to feed the planet more efficiently and sustainably.


mm US$ Second Quarter
Netafim

2021


2020


%Var.


Total sales

313


247


27%


Operating income

26


29


-10%


EBITDA

50


52


-4%


Revenue of $313 million increased 27% year-over-year, driven by strong market demand particularly in the U.S., Europe, South Africa and Turkey, which offset continued market weakness in India and parts of LatAm due to COVID-19. Commencing in this quarter, Gakon Horticultural Projects is consolidated in Netafim’s accounts.


EBITDA of $50 million decreased 4% as compared to the prior year. EBITDA margin was 16.1%, a decrease of 492 basis points mainly due to the increase in raw material costs and transportation expenses that have yet to be reflected in pricing levels.


Dura-Line (Data Communications, 10% of Revenues)


Dura-Line is the leading global producer of conduits and a global leader in HDPE products for cable and fiber optics. The company annually produces more than 1,312 million feet of essential infrastructure, including conduit, cable-in-conduit and accessories that create physical pathways for fiber and network technologies that connect cities, homes and people.


mm US$ Second Quarter
Dura-Line

2021


2020


%Var.


Total sales

239


193


24%


Operating income

23


47


-51%


EBITDA

31


55


-44%


Revenue of $239 million increased 24% year-over-year, driven by continued strong demand in North America and Europe as a result of geographic expansion, accelerated growth in value-added products and new fiber deployment projects.


EBITDA of $31 million decreased 44% as compared to the prior year. EBITDA margin was 13.0%, compared to 28.7% last year, as prior year margins were positively impacted from historically low raw material costs. EBITDA and EBITDA margin decline were primarily due to raw material cost increases, higher freight expenses and conversion costs from limited availability of labor resources in North America and Europe that have yet to be reflected in pricing levels. As a result of this, Dura-Line also experienced extended lead times and delays in shipments of higher-priced orders.


Wavin (Building & Infrastructure, 33% of Revenues)


Wavin is a leading producer of above- and below-ground solutions in LatAm and Europe, redefining today’s pipes and fittings industry by creating innovative solutions that last longer and require less labor to install. Benefitting from PVC supply chain integration with Orbia’s Polymer Solutions businesses and serving customers in three continents, Wavin is also developing sustainable technologies around water management and indoor climate systems.


mm US$ Second Quarter
Wavin

2021


2020


%Var.


Total sales

788


409


93%


Operating income

104


(3)


N/A


EBITDA

140


27


419%


Revenue of $788 million increased 93% year-over-year, driven by an improved product mix, strong pricing management and increased sales volume in both EMEA and LatAm.


EBITDA of $140 million increased 419% as compared to the prior year. EBITDA margin was 17.8%, an expansion of 1,116 basis points mainly due to Wavin’s higher operating volumes, continued transition to value-added products, an effective commercial strategy and operational efficiencies. In addition, Wavin effectively responded to raw material shortages and price surges by executing price management and cost initiatives which resulted in top line and profitability expansion.


Koura (Fluorinated Solutions, 9% of Revenues)


Koura is the leading global producer of fluorspar and the world’s largest producer of integrated hydrofluoric acid. Koura operates the world’s largest fluorspar mine and provides fluorine and downstream products that support modern living. The company’s intermediates, refrigerants and propellants are used in numerous automotive, infrastructure, semiconductor, health, climate control, food cold chain, energy storage, computing and telecommunications applications.


mm US$ Second Quarter
Koura

2021


2020


%Var.


Total sales

202


167


21%


Operating income

53


52


2%


EBITDA

70


66


6%


Revenue of $202 million increased 21% year-over-year, driven by improving performance across key product lines including HF and refrigerants while fluorspars and AIF3 sales remained relatively flat, maintaining low levels.


EBITDA of $70 million increased 6% as compared to the prior year. EBITDA margin was 34.4%, a decrease of 496 basis points mainly due to lower acidspar and AlF3 prices in an environment of rising raw material costs and freight expenses.


Polymer Solutions (Vestolit & Alphagary, 35% of Revenues)


The Polymer Solutions businesses are leading global vinyl players, with strong positions in the Americas and Europe. Vestolit and Alphagary focus on PVC general and specialty resins and zero-halogen specialty compounds that supply Orbia’s downstream businesses and have a wide variety of applications in solutions for life, including pipes, cables, flooring, auto parts, household appliances, clothing, packaging and medical devices.


mm US$ Second Quarter
Polymer Solutions

2021


2020


%Var.


Total sales*

822


427


93%


Operating income

223


3


7333%


EBITDA

287


64


348%


*Intercompany sales were $86 million and $20 million in 2Q21 and 2Q20, respectively.

Revenue of $822 million increased 93% year-over-year, driven primarily by higher PVC prices resulting from the global supply and demand imbalance. Robust PVC demand from the building and construction industries worldwide and force majeures among PVC suppliers continued into the second quarter, complemented by strong demand in compounds—especially plasticizers—and demand in the LatAm region.


EBITDA of $287 million increased 348% as compared to the prior year. EBITDA margin was 34.9%, an expansion of 1,998 basis points mainly due to historically high PVC prices (which peaked globally in May) and higher volumes driven by gradual supply recovery. Europe continues to experience a tight market while Brazil and India are experiencing demand curtailment to varying degrees due to COVID-19.


Balance Sheet, Liquidity and Capital Allocation


In the quarter, Orbia continued to strengthen its balance sheet, generating a free cash flow of $264 million, representing 47.3% of EBITDA, and reaching one of the lowest leverage ratios (1.56x) seen by the Company in recent years. Orbia increased working capital by $130 million, reflecting increased business activity and robust sequential sales growth of $329 million, as well as higher raw material costs in inventory. Capital expenditures of $63 million increased 17% year-over-year.


During the quarter, Netafim closed the acquisition of Gakon Horticultural Projects, which will enable the Company to expand its offerings in the production and supply of top-tier greenhouse projects. Polymer Solutions also announced the acquisition of a majority ownership in Shakun Polymers Private Limited, a market leader in the production of compounds for the wire and cable markets in India, the Middle East, Southeast Asia and Africa, to expand the Company’s presence in those regions.


On May 6, 2021, Orbia issued two sustainability-linked senior notes: a 5-year $600 million note and a 10-year $500 million note at an annual cost of 1.875% and 2.875%, respectively. Orbia used proceeds to repay its £300 million UK commercial paper program, completed a partial tender for $328 million from its $750 million 2022 senior note and exercised the make-whole provision of the Mexican Peso denominated bond (MXN Certificado Bursátil) for MXN 3,000 million.


Orbia also completed its first European Commercial paper program for up to €750 million. As of the end of Q2 2021, Orbia has no issuances under this program.


The Company has announced its intention to execute the make-whole provision on the remainder of its former $750 million 2022 senior note. Once the liquidation of these notes is completed, Orbia will have extended its debt average maturity from 12.6 to 14.1 years while reducing its average cost of debt from 4.6% to 4.1%. Consequently, Orbia’s next relevant maturity has been extended to 2026.


During the quarter, the Company completed $31 million in share buybacks as part of its repurchase program and paid $50 million as the first installment of the dividend approved at the Shareholders Meeting held on March 30, 2021.


The Company convened a Special Meeting of Shareholders on July 21, 2021 during which -among other matters- the Company's shareholders approved a proposal to cancel up to 90 million shares of Orbia stock repurchased by the Company and held in treasury.


2021 Revised Outlook


The Company now expects EBITDA growth for the full year of 2021, to be in the range of 32 - 35% above 2020 EBITDA. This revised guidance reflects the strong performance observed in 1H 2021, mainly in Polymer Solutions and Wavin, and expected continued momentum, although to a lesser extent, during the 2H of 2021. CAPEX guidance remains unchanged for the year in the range of $350 - $400 million.


Looking forward, the Company’s management is confident in the continued execution of Orbia’s strategic plans driven by organic growth and selective acquisitions that will generate sustainable and profitable growth. This revised outlook assumes no pandemic-related or other material disruptions to Orbia’s businesses.


Conference Call Details


Orbia will host a conference call to discuss Q2 2021 results on July 29, 2021 at 10:00 am Central Time (CT; Mexico City)/11:00 am Eastern Time (ET; New York). To access the call, please dial 001-855-817-7630 (Mexico), 1-888-339-0721 (United States) or 1-412-317-5247 (International).


Participants may pre-register for the conference call here.


The live webcast can be accessed here.


A recording of the webcast will be posted several hours after the call is completed on Orbia’s website.


For all company news, please visit Orbia’s newsroom.


Consolidated Income Statement


USD in millions Second Quarter January - June
Income Statement

2021


2020


%


 


2021


2020


%


Net sales

2,243


1,412


59%


 


4,157


3,039


37%


Cost of sales

1,536


1,058


45%


 


2,868


2,257


27%


Gross profit

706


355


99%


 


1,289


782


65%


SG&A

296


228


30%


 


573


484


18%


Operating income (loss)

410


126


225%


 


715


298


140%


Financial Costs

72


64


13%


 


140


149


-6%


Equity in income of associated entity

(0)


(1)


-100%


 


0


(1)


N/A


Income (loss) from continuing operations before income tax

339


63


438%


 


576


150


284%


Income tax

116


15


673%


 


180


25


620%


Income (loss) from continuing operations

222


48


363%


 


396


125


217%


Discontinued operations

(0)


(5)


-100%


 


(0)


(5)


-100%


Consolidated net income (loss) [ Copyright © Acrofan/Business Wire All Right Reserved ]