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Orbia Announces First Quarter 2021 Financial Results
[April 28, 2021]

Orbia Announces First Quarter 2021 Financial Results


Orbia Advance Corporation, S.A.B. de C.V. (BMV: ORBIA*) ("the Company" or "Orbia") today released unaudited results for the first quarter of 2021.

Q1 2021 Financial Highlights
(All metrics are compared to Q1 2020 unless otherwise noted)

Strong start to the year with double-digit growth in revenue and EBITDA, primarily from continued momentum in Polymer Solutions and Wavin, with solid performance from Netafim.

  • Net revenues of $1.9 billion increased 18%, driven by a tight PVC environment for Polymer Solutions, as well as strong demand across markets for Wavin and Netafim;
  • EBITDA of $451 million increased 46%, with an EBITDA margin of 23.6%, an increase of 455 basis points;
  • Net majority income of $141 million increased 213%;
  • Negative free cash flow of $85 million, mainly driven by an increase in working capital with higher sales activity;
  • Leverage ratio (Net Debt to EBITDA) improved to 1.97x;
  • Increased 2021 EBITDA guidance.

"Orbia continued to meet our customers' needs and saw strong quarterly financial performance despite the lingering impacts of the global pandemic, challenges resulting from extreme weather conditions in the United States' Gulf Coast region and raw material shortages," said Sameer Bharadwaj, CEO of Orbia. "We kept up our momentum in executing our growth strategy, focusing on offering value-added products, achieving operational efficiencies and pursuing geographic expansion to drive meaningful revenue and margin growth. We remain optimistic about the opportunities ahead and look forward to providing solutions that are essential to advancing life around the world. I would like to personally thank our over 21,500 associates who worked tirelessly to make these results possible," added Bharadwaj.

Q1 2021 Consolidated Financial Information1
(All metrics are compared to Q1 2020 unless otherwise noted)





mm US$ First Quarter
Consolidated Financial Highlights

2021

2020

%Var.

Net revenue

1,914

1,626

18%

SG&A

227

256

8%

Operating income

305

172

77%

EBITDA

451

309

46%

EBITDA margin

23.6%

19.0%

455 bps

Financial Costs

68

85

-20%

EBT

237

87

172%

Income tax

64

10

540%

Consolidated net income (loss)

173

77

125%

Net majority income

141

45

213%

Cash generation

(4)

189

N/A

CapEx

(53)

(60)

-12%

Free cash flow

(85)

105

N/A

Net debt

2,870

2,916

-2%


1 Unless noted otherwise, all figures in this release are derived from the Interim Consolidated Financial Statements of the Company as of March 31, 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 $1,914 million increased 18%, driven by higher sales in the Polymer Solutions, Wavin and Netafim businesses. Polymer Solutions continues to experience a strong pricing environment for its products as extreme weather events in the U.S. Gulf Coast region have constrained PVC supply. Wavin met strong demand in LatAm and EMEA. Netafim reported solid growth in all key markets.

SG&A of $277 million increased 8%, primarily due to an increase in deferred compensation provisioning.

EBITDA of $451 million increased 46%, due to higher PVC margins in Polymer Solutions; a better product mix from Wavin and robust sales performance from Netafim. EBITDA margin was 23.6%, an expansion of 455 basis points.

Financial costs were $68 million in the quarter, a decline of 20%. The decrease in financial costs was mainly driven by a lower LIBOR rate environment, a one-time cost associated with Orbia's revolving credit facility in the prior year and a reduction in FX devaluation in most of Orbia's main currencies, including the Mexican Peso and the Brazilian Real.

Taxes were $64 million, up from $10 million in 2020 as a result of significantly higher profits in the quarter and lower impact of a tax shield from the severe devaluation of the Mexican Peso in Q1 2020 with the onset of COVID-19.

Net income to majority shareholders was $141 million in the quarter, an increase of 213%, mainly driven by strong profitability in most of Orbia's segments.

Negative free cash flow of $85 million despite the strong EBITDA. Given robust sequential growth in sales, Orbia increased working capital by $257 million, reflecting a higher level of accounts receivable with a strong concentration of sales in March, rising raw material costs and inventory build-up to support higher activity levels.

Net debt of $2,870 million, comprising total debt of $3,583 million, less cash and cash equivalents of $713 million.

Q1 2021 Revenues by Region
(All metrics are compared to Q1 2020 unless otherwise noted)

First Quarter 2021
Region

2021

2020

% Var. Y/Y

% Revenue

Europe

668

561

19%

35%

North America

580

536

8%

30%

South America

433

295

47%

23%

Asia

187

178

5%

10%

Africa & others

46

56

-18%

2%

Total

1,914

1,626

18%

100%

Q1 2021 Financial Performance by Business Group
(All metrics are compared to Q1 2020 unless otherwise noted)

Netafim (Precision Agriculture, 14% of Revenues)

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

mm US$ First Quarter
Netafim

2021

2020

%Var.

Total revenue

275

232

19%

Operating income

29

15

93%

EBITDA

52

37

41%

Revenue of $275 million increased 19%, attributable to strong sales performance in most regions, particularly the U.S., Europe, Israel, Turkey and China. Higher commodity crop prices also supported continued strong market demand.

EBITDA of $52 million increased 41%. EBITDA margin was 19.1%, an improvement of 318 basis points, due to operational efficiencies and lower expenses, partially offset by rising raw material costs.

Dura-Line (Data Communications, 9% of Revenues)

Dura-Line believes that every organization, every community, and every person around the world deserves a chance to make the most of modern technology. The company annually produces more than 400 million meters of essential and innovative infrastructure-conduit, cable-in-conduit and accessories that create physical pathways for fiber and other network technologies that connect cities, homes, and people. Dura-Line is the leading global producer of conduits and a global leader in HDPE products for cable and fiber optics, as well as natural gas pressurized piping and solutions.

mm US$ First Quarter
Dura-Line

2021

2020

%Var.

Total revenue

184

170

8%

Operating income

21

21

0%

EBITDA

29

29

0%

Revenue of $184 million increased 8%, mainly driven by continued strong demand in North America and Europe. Results were impacted by unfavorable weather conditions in the U.S., particularly in the Midwest and Texas, that limited availability of resin as well as constrained regional fiber deployment projects.

EBITDA of $29 million was essentially flat. EBITDA margin was 15.8%, a decrease of 126 basis points, due to a significant spike in raw material costs in North America and Europe.

Wavin (Building & Infrastructure, 34% of Revenues)

Wavin is redefining today's pipes and fittings industry by creating innovative solutions that last longer and require less labor to install. Serving customers in three continents, Wavin is also developing sustainable technologies around water management and indoor climate systems. Wavin is a leading producer of above- and below-ground solutions in LatAm and Europe.

mm US$ First Quarter
Wavin

2021

2020

%Var.

Total revenue

679

512

33%

Operating income

62

20

210%

EBITDA

95

51

86%

Revenue of $679 million increased 33% from continued strong demand in both EMEA and LatAm. Raw material scarcity and associated steep increases in prices triggered some inventory build-ups in March. However, Wavin was able to meet customer demand despite raw material shortages.

EBITDA of $95 million increased 86% due to the continued transition to value-added products, effective execution of commercial strategy and operational efficiencies. Significant momentum in Germany and the UK in EMEA as well as Brazil, Mexico, and Colombia in LatAm contributed to EBITDA growth. EBITDA margin was 14.0%, an expansion of 418 basis points.

In both EMEA and LatAm, Wavin achieved a more favorable product mix with sales growth in the value-added, above-ground solutions segment.

Koura (Fluorinated Solutions, 9% of Revenues)

Koura provides fluorine and downstream products that support modern living in a vast number of ways. Koura operates the world's largest fluorspar mine and produces intermediates, refrigerants and propellants used in automotive, infrastructure, semiconductor, health, medicine, climate control, food cold chain, energy storage, computing, and telecommunications applications. Koura is the leading global producer of fluorspar and the world's largest producer of integrated hydrofluoric acid.

mm US$ First Quarter
Koura

2021

2020

%Var.

Total revenue

172

182

-5%

Operating income

38

52

-27%

EBITDA

56

68

-18%

Revenue of $172 million decreased 5%, mainly due to COVID-19 related market challenges as well as raw material supply disruptions expected to be confined to the first quarter. Metspar sales remained resilient during the quarter, as they have throughout the pandemic, while refrigerants pricing improved in Europe, Japan and North America. Recovery in acidspar and aluminum fluoride markets is anticipated later this year and into 2022, as aluminum capacity in Europe and the Americas resumes production, which is expected to bolster demand for Koura's products.

The illegal importation of refrigerants into Europe continues to have an impact on Koura's business. However, Koura is encouraged that in the most recent National Trade Estimate Report, the Office of the U. S. Trade Representative identified illegal refrigerant importation as a challenge to be addressed.

EBITDA was $56 million, a decrease of 18%. EBITDA margin was 32.4%, a reduction of 476 basis points, due to market weakness.

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

Polymer Solutions focuses on PVC general and specialty resins and zero-halogen specialty compounds with a wide variety of applications in solutions that undergird everyday life, including pipes, cables, flooring, auto parts, household appliances, clothing, packaging, and medical devices. The Polymer Solutions businesses are leading global vinyl players, with strong positions in the Americas and Europe.

mm US$ First Quarter
Polymer Solutions

2021

2020

%Var.

Total revenue*

708

583

21%

Operating income

161

62

160%

EBITDA

224

121

85%

*Intercompany sales were $79 million and $43 million in 1Q21 and 1Q20, respectively.

Revenue of $708 million increased 21%, driven by a tight PVC market environment. Due to strong global building and construction demand as well as constrained PVC and ethylene supplies triggered by adverse weather conditions in the United States' Gulf Coast region during the first quarter, PVC pricing has reached historic highs in several key markets. Strong demand in compounds was constrained by raw material availability and supply chain disruptions, including those due to the recent temporary blockage of the Suez Canal.

EBITDA of $224 million increased 85%. EBITDA margin was 31.6%, an expansion of 1,077 basis points due to higher PVC margins.

The businesses achieved these strong results despite challenging conditions due to extreme weather.

Balance Sheet, Liquidity and Capital Allocation

Orbia generated a negative free cash flow of $85 million, despite the strong EBITDA growth in the quarter. Following robust sequential sales growth of $172 million, Orbia increased working capital by $257 million reflecting a higher level of accounts receivable with a strong concentration of sales in March, rising raw material costs and inventory build-up to support higher levels of activity.

As of quarter end, net debt was $2,870 million, comprising total debt of $3,583 million less cash and cash equivalents of $713 million. The net debt-to-EBITDA ratio was 1.97x, while the interest coverage ratio was 6.99x.

Capital expenditures of $53 million were down 12%; however, Orbia expects to reach its CapEx guidance for the full year.

At the March 30, 2021 Annual General Ordinary Shareholders Meeting, Orbia shareholders approved an ordinary dividend of $0.10 per share to be paid in four installments in 2021, of which the first payment of $0.025 per share posted on April 14, 2021.

The Orbia Board of Directors has resolved to place before its Shareholders a proposal to cancel substantially all the Company shares held in treasury during the second quarter of this year.

2021 Full Year Outlook

As global economies continue to recover, we anticipate continued strong sales of our products and services as a result of consumer demand and significant government investments in infrastructure and societal needs. Accordingly, following Orbia's stronger than expected performance during the first quarter, the Company is increasing its prior 2021 guidance on EBITDA growth from 4%-7% to 15%, with potential further upside if strong market demand and pricing conditions continue in 2021. 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 Q1 2021 results on April 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 Statement2

USD in millions First Quarter
Income Statement

2021

2020

%

Total Revenue

1,914

1,626

18%

Cost of sales

1,332

1,199

11%

Gross profit

582

428

36%

SG&A

277

256

8%

Operating income (loss)

305

172

77%

Financial Costs

68

85

-20%

Equity in income of associated entity

0

0

0%

Income (loss) from continuing operations before income tax

237

87

172%

Income tax

64

10

540%

Income (loss) from continuing operations

173

77

125%

Discontinued operations

(0)

(0)

0%

Consolidated net income (loss)

173

77

125%

Minority stockholders

32

32

0%

Majority Net income (loss)

141

45

213%

 

 

 

EBITDA

451

309

46%

2 Note: During 2021 the Company performed a reclassification of criteria from SG&A to cost of goods sold for Q120 in relation to Direct Storage & Dispatch for approximately $20 million, in order to fully align criteria among all segments.

Consolidated Balance Sheet

USD in millions

Balance sheet

´Mar 2021 ´Dec 2020 ´Mar 2020

Total assets

10,231

10,211

10,775

Current assets

3,316

3,156

3,694

Cash and temporary investments

713

875

1,452

Receivables

1,322

1,093

1,212

Inventories

937

861

819

Others current assets

343

326

212

Non current assets

6,916

7,055

7,081

Property, plant and equipment, Net

3,108

3,186

3,238

Right of use Fixed Assets, Net

311

323

332

Intangible assets and Goodwill

3,171

3,225

3,198

Long term assets

325

320

312

Total liabilities

7,180

7,032

7,781

Current liabilities

2,989

2,588

2,507

Current portion of long-term debt

635

495

294

Suppliers

1,348

1,326

1,306

Short-term leasings

80

82

75

Other current liabilities

925

684

831

Non current liabilities

4,192

4,444

5,274

Long-term debt

2,948

3,131

4,074

Long-term employee benefits

271

274

221

Long-Term deferred tax liabilities

307

314

326

Long-term leasings

251

263

262

Other long-term liabilities

415

463

390

Consolidated shareholders' equity

3,051

3,180

2,994

Minority shareholders' equity

686

687

710

Majority shareholders' equity

2,365

2,493

2,284

Total liabilities & shareholders' equity

10,231

10,211

10,775

Operating Cash Flow

mm US$ First Quarter
Cash flow

2021

2020

%Var.

EBITDA

451

309

46%

Taxes paid, net

(77)

(30)

157%

Net interest / Bank commissions

(80)

(89)

-10%

Change in trade working capital

(257)

45

N/A

Others (Other assets - provisions, Net)

(15)

10

N/A

CTA and FX

(27)

(57)

-53%

Cash generation

(4)

189

N/A

CapEx

(53)

(60)

-12%

Leasing payments

(28)

(24)

17%

Free cash flow

(85)

105

N/A

FCF conversion (%)

-18.9%

33.9%

N/A

Dividends to Shareholders

(0)

(95)

-100%

Buy-back shares program

(1)

(34)

-97%

New debt (paid)

(40)

929

N/A

Minority interest payments

(31)

(39)

-21%

Others

(6)

-

N/A

Net change in cash

(162)

866

N/A

Initial cash balance

875

586

49%

Cash balance

713

1,452

-51%

Notes and Definitions

The results contained in this release have been prepared in accordance with International Financial Reporting Standards ("NIIF" or "IFRS") with U.S. Dollars as the functional and reporting currency. Figures are presented in millions, unless specified otherwise.

Since Q1 2019, Business Group level EBITDA figures include corporate charges; comparable prior year figures have been adjusted accordingly.

Reflective of Orbia's continuous efforts to better inform the market and become a more customer-centric organization, beginning in Q1 2020, the Company is presenting the revenues, operating incomes and EBITDAs of each of its five businesses as such: Netafim (Precision Agriculture), Dura-Line (Data Communications), Wavin (Building & Infrastructure)-all of which previously were combined and presented as "Fluent" for reporting purposes only-Koura (Fluorinated Solutions) and Vestolit & Alphagary (Polymer Solutions).

Figures and percentages have been rounded and may not add up.

About Orbia

Orbia is a community of companies united by a shared purpose: to advance life around the world. The Orbia companies have a collective focus on ensuring food security, reducing water scarcity, reinventing the future of cities and homes, connecting communities to data infrastructure, and expanding access to health and wellness with advanced materials. Orbia operates in the Precision Agriculture, Data Communications, Building and Infrastructure, Fluorinated Solutions and Polymer Solutions sectors. The Company has commercial activities in more than 110 countries and operations in over 50, with global headquarters in Mexico City, Boston, Amsterdam and Tel Aviv. To learn more, please visit orbia.com.

Prospective Information

In addition to historical information, this press release contains "forward-looking" statements that reflect management's expectations for the future. The words "anticipate," "believe," "expect," "hope," "have the intention of," "might," "plan," "should" and similar expressions generally indicate comments on expectations. The final results may be materially different from current expectations due to several factors, which include, but are not limited to, global and local changes in politics, economic factors, business, competition, market and regulatory factors, cyclical trends in relevant sectors as well as other factors that are highlighted under the title "Risk Factors" in the annual report submitted by Orbia to the Mexican National Banking and Securities Commission (CNBV) and available on our website at https://www.orbia.com/investor-relations/financial-reports/annual-reports-and-filings/. The forward-looking statements included herein represent Orbia's views as of the date of this press release. Orbia undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law."

Orbia has implemented a Code of Ethics that helps define our obligations to and relationships with our employees, clients, suppliers, and others. Orbia's Code of Ethics is available for consulting in the following link: http://www.Orbia.com/Codigo_de_etica.html. Additionally, according to the terms contained in the Mexican Securities Exchange Act No 42, the Orbia Audit Committee has established a "hotline" system permitting any person who is aware of a failure to adhere to applicable operational and accounting records guidelines, internal controls or the Code of Ethics, whether by the Company itself or any of its controlled subsidiaries, to file a complaint (including anonymously). This system is operated by an independent third-party service provider. The system may be accessed via telephone in Mexico, at http://www.ethic-line.com/Orbia or via e-mailing Orbia@ethic-line.com. Orbia's Audit Committee has oversight responsibility for ensuring that all such complaints are appropriately investigated and resolved.


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