Industrias Unidas, S.A. de C.V. Consolidated Results of Operations for Q4 2021
MEXICO CITY–(BUSINESS WIRE)–Industrias Unidas, S.A. de C.V. (“IUSA” or the “Company”) has announced its unaudited results for the twelve months ended December 31 of 2021. Figures are unaudited and have been prepared in accordance with Mexican Financial Reporting Standards (“MFRS”), which are different in certain respects from Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). The results from any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. Unless stated otherwise, reference herein to “Pesos”, “pesos”, or “Ps.” are to pesos, the legal currency of Mexico and references to “U.S. dollars”, “dollars”, “U.S. $” or “$” are to United States dollars, the legal currency of the United States of America. Except as otherwise indicated, all peso amounts are presented herein in pesos with purchasing power as of December 31, 2021 and in pesos with their historical value for other dates cited. The dollar translations provided in this document are calculated solely for the convenience of the reader using an exchange rate of Ps. 20.51 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on December 31, 2021.
Twelve months ended December 31, 2021 compared to twelve months ended December 31, 2020.
The following table summarizes our results of operations for the twelve months ended December 31, 2021 and 2020:
(Figures in Millions of Pesos)
For the year ended December 31,
2020
2021
Revenues
19,720.4
28,458.2
Cost of Sales
17,424.4
22,918.8
Gross Profit
2,296.1
5,539.4
Selling and Administrative Expenses
1,578.0
2,171.3
Operating Income (Loss)
718.0
3,368.1
Other Expenses – Net
(86.8
)
(79.1
)
Comprehensive Financing Result
(831.2
)
(529.3
)
Taxes and Statutory Employee Profit Sharing
75.0
683.5
Equity in Income (Loss) of Associated Companies
13.5
13.0
Consolidated Net Income (Loss)
(261.4
)
2,089.3
D&A
435.5
390.5
EBITDA 1/
1,153.6
3,758.6
1/ EBITDA for any period is defined as consolidated net income (loss) excluding i) depreciation and amortization, ii) total net comprehensive financing result (which is comprised of net interest expense, exchange gain or loss, monetary position gain or loss and other Financing costs), iii) other expenses net, iv) income tax and statutory employee profit sharing and v) equity in income (loss) of associated companies. EBITDA should not be considered as an alternate measure of net income or operating income, as determined on a consolidated basis using amounts derived from statements of operations prepared in accordance with MFRS, or as an indicator of operating performance or to cash flows from operating activity as a measure of liquidity. EBITDA is not a recognized term under MFRS or U.S. GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activity as a measure of liquidity.
Our Consolidated Net Income for the twelve months ended December 31, 2021 was Ps.2,089.3 million (US$101.9 million), compared to a consolidated net loss of Ps. 261.4 million in the same period of 2020. This change is primarily due to an increase in revenues.
Revenues
Our net revenues for the twelve months of 2021 increased 44.3% to Ps.28,458.2 million (US$1,387.7 million) from Ps. 19,720.4 million in the same period of 2020. This increase was explained by market conditions, mainly higher copper prices which directly affect our final selling price in that family of products. Also, volume sales were higher.
Our costs and revenues follow copper prices very closely since the market practice is to pass on to the buyer changes in raw material price.
Our sales are primarily to customers engaged in the commercial, industrial and residential construction, and their related maintenance and renovation activities. We also sell to customers engaged in electrical power generation, transmission, and distribution and to the sector of gas, water and air conduction in the Heating, Ventilation, Air conditioning and Refrigeration (HVACR).
Our revenues consist mainly of sales of copper-based products (tubing, wire, cable and alloys) and electrical products.
By country of production, approximately 54.9% of our revenues in the twelve months ended December 31, 2021, came from products manufactured in Mexico and the remaining 45.1% from products manufactured in the U.S.
In terms of sales by region during the twelve months ended December 31, 2021 we derived approximately 53.6% of our revenues from sales to customers in the United States, 43.6% from customers in Mexico and 2.8% from the rest of the world (“ROW”).
In terms of volume, consolidated sales of copper products during the twelve months ended December 31, 2021, increased by 12.0% as compared to the same period in 2020:
(Metric tons)
For the year ended December 31,
Copper Products Volume Sales 2/
2020
2021
USA
51,206
57,718
México
31,474
34,301
ROW
2,090
2,937
Total
84,769
94,956
2/ Includes aluminum wire and cable
Cost of sales
Our cost of sales in the twelve months ended December 31, 2021, increased by 31.5% to Ps.22,918.8 million (US$1,117.6 million) from Ps. 17,424.4 million in the same period of 2020. As percentage of revenues, cost of sales was 80.5% and 88.4% respectively.
We do continue to reduce our cost base through several initiatives, including plant scheduling, raw material handling, and overall manufacturing overhead costs. According to our accounting policies, we make an inventory valuation at average purchase price. In the case of copper cathodes, an aftermath adjustment is required due to the quotation period agreed with the suppliers (M+1). This initiative allows us to hedge purchases for 30 days at no additional cost. The adjustment is recorded to the cost of sales in the month in which it occurs.
Gross Profit
Our gross profit in the twelve months ended December 31, 2021, increased 141.4% to Ps.5,539.4 million (US$270.1 million) from Ps. 2,296.1 million in the same period of 2020. As percentage of sales, gross profit in 2021 was 19.5% vs 11.6% in 2020.
Selling and Administrative Expenses
Our selling and administrative expenses in the twelve months ended December 31, 2021, increased 37.6% to Ps.2,171.3 million from Ps. 1,578.0 in the same period of 2020.
Operating Income
Our operating income in the twelve months ended December 31, 2021, increased four times, to Ps.3,368.1 million (U.S. $164.2 million) from an operating income of Ps. 718.0 in the same period of 2020.
EBITDA
In the twelve months ended December 31, 2021, our EBITDA increased three times to Ps.3,758.6 million (or US$183.3 million), from Ps. 1,153.6 million in the same period of 2020. The corresponding depreciation and amortization figures are Ps.390.5 million for January to December 2021 and Ps. 435.5 million for the same period of 2020.
Comprehensive Financing Result
The following table shows our comprehensive financing result for the twelve months ended December 31, 2020, and 2021:
(Figures in Millions of Pesos)
For the year ended December 31,
2020
2021
Interest Expense
(663.7
)
(441.1
)
Interest Income
22.2
24.1
Exchange Gain (Loss) – Net
(183.9
)
(95.2
)
Other Financing Costs
(5.8
)
(17.1
)
Comprehensive Financing Result
(831.2
)
(529.3
)
Our comprehensive financing result in the twelve months ended December 31, 2021, was a cost of Ps.529.3 million, compared to a cost of Ps. 831.2 million in the same period of 2020.
Taxes and Statutory Employee Profit Sharing
The provision for current and deferred income taxes and statutory employee profit sharing in the twelve months ended December 31, 2021, was an expense of Ps.683.5 million compared to the Ps.75.0 million in the same period of 2020.
Consolidated Net Income
Our consolidated net income for the twelve months ended December 31, 2021, was Ps.2,089.3 million (US$101.9 million), compared to a net loss of Ps.261.4 million in the same period of 2020.
Liquidity and Capital Resources
Liquidity
As of December 31, 2021, we had cash and cash equivalents for Ps.348.7 million (U.S. $17.0 million). Our policy is to invest available cash in short-term instruments issued by Mexican and U.S. banks as well as in securities issued by the governments of Mexico and the U.S.
Our cash flow from operations and operating margins are significantly influenced by world market prices for raw copper, as quoted by COMEX in New York and the London Metal Exchange (“LME”). Copper prices are subject to significant market fluctuations; average copper prices increased 51.4% in the twelve months ended December 31, 2021, to $4.24 US dollar per pound from $2.80 US dollar per pound in the same period of 2020.
We obtain short-term financing from various sources, including Mexican and international banks. Short-term financing consists in part of lines of credit denominated in pesos and dollars. As of December 31, 2021, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.585.7 million (U.S. $28.6 million), all of which was dollar denominated.
On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.5,001.9 million (U.S.$243.9 million), all of which was dollar denominated.
Accounts receivable from third parties as of December 31, 2021, were Ps.3,998.4 million (U.S.$194.0 million). Days outstanding in the domestic market were 31 days as of December 31, 2021.
Debt Obligations
The following table summarizes our debt as of December 31, 2021:
Consolidated debt
December 31, 2021
(In Millions of Pesos)
U.S. subsidiaries debt
525.6
Mexican debt
5,062.0
Total
5,587.6
This total includes the restructured debt of the Company.
Capital Expenditures
For the twelve months ended December 31, 2021, we invested Ps.181.1 million (U.S. $8.4 million) in capital expenditure projects, mainly related to expansion of production and maintenance.
In the twelve months ended December 31, 2021, our capital expenditures were allocated by segments as follows: 12.8% to copper tubing, 17.6% to wire and cable, 17.3% to valves and controls, 4.2% to electrical products and the remaining and 48.1% to other divisions. By geographic region 89.5% of total capital expenditures were invested in our Mexican facilities and the remaining 10.5% in the U.S.
You should read this document in conjunction with the unaudited consolidated financial statements as of December 31, 2021, including the notes to those statements.
Contacts
Francisco Rodriguez
frodriguez@iusa.com.mxTel. (5255) 51181500
