Orbia Announces Fourth Quarter and Full Year 2020 Financial Results

February 24, 2021 6:38 PM EST

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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 fourth quarter and full year of 2020.

Q4 2020 Financial Highlights
(All metrics are compared to Q4 2019 unless otherwise noted)

Strong recovery continues as Revenue, EBITDA and Free Cash Flow reached the highest level of the year exceeding prior year’s quarterly financial performance for the first time post-COVID

  • Net revenues of $1.7 billion increased 6% driven by strong PVC prices in Vestolit and continuous demand recovery in Wavin and Dura-Line
  • EBITDA of $383 million increased 30% propelled by the recovery of the construction sector. Vestolit delivered solid performance amidst a tightening PVC market while Wavin continued to show strong performance in EMEA and LatAm. EBITDA margin reached 22% increasing 401 basis points
  • Free cash flow of $304 million, up 38% as a result of sound profitability and working capital optimization with an improved conversion rate of 79.2%

Full Year 2020 Financial Highlights
(
All metrics are compared to FY 2019 unless otherwise noted)

Amidst the impact of the pandemic across the world, Orbia’s resilient business model delivered strong profitability and a robust free cash flow generation

  • Net revenues of $6.4 billion, decreased only 8% as the impact from the COVID pandemic in Q2 was not fully offset by the strong second half rebound
  • EBITDA of $1.3 billion, decreased 3% after declining nearly 30% in Q2. EBITDA margin of 21% increased 100 basis points
  • Consolidated net income of $319 million, decreased 2%
  • Free cash flow of $552 million driven by effective working capital management and contained CAPEX deployment reflected in a 41.9% conversion rate
  • Strong financial health reaching a leverage ratio of 2.1x with a reduction in total net debt of $114 million
  • Dividend payments of $2301 million and share repurchase of $42 million.

1 Including a $50 million extraordinary di

“At Orbia, resilience has played a central role in our transformation over the past two years. Our aim is to provide innovative solutions that help us fulfill our purpose to advance life around the world. We could not imagine the disruption we would face with COVID. But the most difficult times can be the ones in which the true bravery and grit of people emerges. In 2020, we saw both as we became more resilient in going the extra mile for our stakeholders. I must first thank and pay tribute to Orbia’s 22,000+ associates who have worked hard to keep our operations running smoothly and serve our customers. Everyone has given their all. We worked diligently to protect the health, safety and well-being of our team by applying strict COVID protocols,” said Sameer Bharadwaj, CEO of Orbia.

“We acted quickly at the onset of the pandemic, mobilizing our people, aggressively preserving capital, and increasing connectivity with our customers, which resulted in strong earnings recovery and margin expansion, as well as robust free cash flow. At the same time, we prioritized growth and critical efficiency investments, while further strengthening the balance sheet through debt reduction. Our diversified portfolio of market-leading businesses and increased focus on value-added solutions supported our resiliency positioning Orbia well for 2021. We are focused on executing our growth strategy underpinned by strong secular trends in 5G, infrastructure, and climate change, while capturing global demand across our businesses. The extent of the economic impact of COVID is still uncertain. But by staying true to our purpose, in working bravely, responsibly, and innovatively to meet global needs, we can keep contributing to sustainable development as we create value for all.”

Q4 and Full Year 2020 Consolidated Financial Information2

2 Unless noted otherwise, all figures in this release are derived from the Interim Consolidated Financial Statements of the Company as of December 31, 2020 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

(All metrics are compared to Q4 2019 unless otherwise noted)

mm US$ Fourth quarter January - December
Financial Highlights

2020

2019

%Var.

2020

2019

% Var.
Net sales

1,742

1,636

6%

6,420

6,987

-8%

Operating income

201

155

30%

720

823

-13%

EBITDA

383

294

30%

1,318

1,365

-3%

EBITDA margin

22.0%

18.0%

401 bps

20.5%

19.5%

100 bps

EBT

166

91

82%

479

533

-10%

Income (loss) from continuing operations

98

30

227%

328

327

0%

Consolidated net income (loss)

96

30

220%

319

327

-2%

Net majority income

66

(2)

N/A

195

207

-6%

Cash generation

390

312

25%

871

766

14%

CapEx

(70)

(71)

-1%

(228)

(261)

-13%

Free cash flow

304

221

38%

553

413

34%

Cash balance

876

586

49%

876

586

49%

Net revenues of $1,742 million, increased $106 million, or 6%, mainly driven by higher sales in the Vestolit, Wavin, and Dura-Line businesses. Vestolit benefitted from sustained increases in PVC prices due to the global supply-demand imbalance. Wavin experienced continued recovery in both EMEA and LatAm despite traditionally low seasonality in the fourth quarter. Dura-Line top-line improvement was driven by higher demand in the U.S. and Canada.

In 2020 overall, net revenues of $6,420 million decreased 8% as compared to 2019 levels due to the negative impact of COVID, particularly in Q2.

Operating Expenses of $342 million include $64 million non-recurring charges of which $43 million are non-cash, mainly related to the accelerated depreciation of IT licenses. Other non-recurring charges also include write-offs associated with footprint optimization at Wavin and Dura-Line and legal claims settlements. In Q4 2019, we recorded a $25 million one-off related to the Vestolit settlement in Germany.

EBITDA of $383 million, increased 30% driven largely by a strong performance in Vestolit and Wavin. Vestolit benefitted from higher prices of PVC and specialty products. Wavin enjoyed favorable market conditions while successfully introducing new products.

EBITDA margin of 22.0% expanded 401 basis points primarily driven by better price environment in Vestolit and operational excellence initiatives across all businesses.

In 2020 overall, EBITDA of $1,318 million was only 3% below 2019 levels due to a sustained recovery starting in Q3 led by Vestolit and Wavin which was complemented with cost management initiatives across all businesses. EBITDA margin increased 100 basis points reaching 20.5%.

Financial costs were $34 million in the quarter, down $30 million or 47%. The decrease was due to a positive mix of factors such as lower overall leverage in a depressed interest rate environment and FX gains resulting from the appreciation of Mexican Peso and Brazilian Real.

For full year 2020 financial costs were $242 million, down 18% from 2019. This reduction was mainly due to more efficient financing strategy in terms of costs, lower leverage at the end of 2020, and a significant reduction in rates since the COVID crisis started, together with the absence of “one-off” charges related to existing financing lines that Orbia reflected in 2019.

Taxes were $69 million, up 11% reflecting a higher tax rate mostly due to impact of MXN Peso appreciation on USD denominated debt (taxable profit).

For full year 2020, taxes of $151 million decreased 27% in comparison to 2019.

Net Income to majority shareholders of $66 million, a significant increase from a $2 million loss. In 2020 overall, Orbia posted $195 million in net majority income equivalent to a 6% annual decrease. Annual earnings per share3 (EPS) were $0.097.

3 Earnings per share are calculated excluding the shares that Orbia has in its share buyback program. As of December 31, 2020, we had 2,016,795,733 shares outstanding.

Q4 and Full Year 2020 Revenues by Region

(All metrics are compared to Q4 2019 unless otherwise noted)

Region Fourth Quarter 2020
mm US$

2020

% Var. Y/Y

% Revenue

Europe

560

7%

32%

North America

542

9%

31%

South America

410

10%

24%

Asia

182

-3%

10%

Africa and others

48

-9%

3%

Total

1,742

6%

100%

 

 

 

Region

Full Year 2020

mm US$

2020

% Var. Y/Y

% Revenue

Europe

2,169

-9%

34%

North America

2,081

-3%

32%

South America

1,254

-13%

20%

Asia

707

-10%

11%

Africa and others

208

-14%

3%

Total

6,420

-8%

100%

Q4 and Full Year 2020 Financial Performance by Business Group

(All metrics are compared to Q4 2019 unless otherwise noted)

Netafim (Precision Agriculture, 15% of Revenues)

The Precision Agriculture group helps the world grow more with less. Netafim's leading-edge irrigation systems, services and digital farming technologies enable growers 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 enabling farmers worldwide to feed the planet more efficiently and sustainably.

mm US$ Fourth quarter January - December
Netafim

2020

2019

%Var.

2020

2019

% Var.

Total Revenue

270

269

0%

972

1,063

-9%

Operating income

29

26

12%

89

92

-3%

EBITDA

53

49

8%

181

179

1%

For the quarter, net revenues of $270 million were flat, as a rebound across most major markets in North America, Europe, MEA and Asia offset continued COVID-related challenges in LatAm. Key agricultural prices such as sugar, cotton, almonds, and coffee improved during Q4.

EBITDA of $53 million increased 8%. EBITDA margin of 19.5% improved 150 basis points, supported by operational efficiencies in spite of unfavorable FX and raw material costs environment.

For the year, net revenues of $972 million decreased 9%, mainly due to the impact of COVID, particularly during the first half of the year which were partly offset by solid growth in the U.S., Middle East, Africa, China and Australia.

EBITDA of $181 million increased 1%, primarily driven by higher gross margins, reflecting commercial and operational excellence initiatives and lower operating expenses. EBITDA margin of 18.6% expanded 178 basis points.

Dura-Line (Data Communications, 11% 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 produces more than 400 million meters of essential and innovative infrastructure – conduit, FuturePath, cable-in-conduit, and accessories annually which create the physical pathways for fiber and other network technologies that connect cities, homes, and people. Dura-Line is the leading global manufacturer and distributor in a highly dynamic industry.

mm US$ Fourth quarter January - December
Dura-Line

2020

2019

%Var.

2020

2019

% Var.

Total Revenue

176

162

9%

732

749

-2%

Operating income

26

25

4%

140

116

21%

EBITDA

34

34

0%

173

149

16%

For the quarter, net revenues of $176 million increased 9%, mainly driven by higher order volume in the U.S. and Canada partly offset by lower volume in Europe, Middle East, Africa and LatAm as the pace of recovery was slower in these regions.

EBITDA of $34 million was flat and includes non-recurring restructuring costs of $3 million. A more favorable mix shift toward higher-margin advanced products and accessories was partly offset by higher raw material costs. EBITDA margin was 19.3%, a decrease of 149 basis points. Excluding restructuring costs, EBITDA margin would have been 21.3%, up 46 basis points.

For the year, net revenues of $732 million decreased 2%, reflecting COVID-related project delays in Europe, India, Middle East, and LatAm partially offset by higher sales in the U.S. and Canada.

EBITDA of $173 million increased 16%, driven by a favorable product mix and lower raw material costs in the first half of the year. EBITDA margin of 23.7% expanded 381 basis points.

Wavin (Building & Infrastructure, 32% of Revenues)

The Building and Infrastructure group is redefining today’s pipes and fittings industry by creating innovative solutions that last longer and require less labor to install. Serving customers in five continents, this group is also developing sustainable technologies around water management, and Indoor Climate Systems.

mm US$ Fourth quarter January - December
Wavin

2020

2019

%Var.

2020

2019

% Var.

Total Revenue

582

521

12%

2,071

2,239

-8%

Operating income

46

19

142%

127

142

-11%

EBITDA

88

52

69%

261

269

-3%

Net revenues of $582 million increased 12%, reflecting a continued recovery since June while improving our positioning in key markets. The increase was driven by strong demand in several key countries across Europe (Germany, France, and the Nordics) as well as LatAm (Mexico, Ecuador, Brazil, and Argentina)

EBITDA of $88 million increased 69%, amid a significant sales recovery, delayed impact of higher raw material costs, and a positive mix shift to value-add products. EBITDA margin of 15.1% expanded 526 basis points.

For the year, net revenues of $2,071 million decreased 8%, on the back of severe COVID-related impacts in the second quarter, which partially reversed in the second half of 2020.

EBITDA of $261 million decreased 3% while margin of 12.6% increased 58 basis points. Second-half EBITDA performance was better year-over-year, driven by costs savings, effective price management, and a continued mix shift to value-add products.

Koura (Fluor, 11% of Revenues)

Koura is the world’s leading provider of the element fluorine and downstream products that support modern living in a vast number of ways. Koura operates the world’s largest fluorspar mine and produces value added intermediates, refrigerants and propellants that serve automotive, infrastructure, semiconductor, health, medicine, climate control, food cold chain, energy storage, computing, and telecommunications applications.

mm US$ Fourth quarter January - December
Koura

2020

2019

%Var.

2020

2019

% Var.

Total Revenue

182

187

-3%

698

805

-13%

Operating income

40

58

-31%

193

267

-28%

EBITDA

58

75

-23%

254

325

-22%

For the quarter, Koura recorded revenue of $182 million, a 3% reduction versus Q4 2019, amid the continued impact of COVID on our markets and partially offset by strong fluorspar shipments in December.

Koura recorded Q4 EBITDA of $58, a 23% decrease versus prior year, due primarily to the continued impact of COVID on prices and volumes. Q4 results include an increase in provisions for 13 million (one off) related to commercial legal issues. EBITDA margin of 32.0% decreased by 833 basis points.

For the full fiscal year, Koura recorded revenue of $698 million, a 13% reduction versus prior year. In 2020 Koura experienced the full year impact of illegal imports on our refrigerants business in Europe and the impact of COVID on global volumes and prices.

Koura reported 2020 EBITDA of $254 million, a reduction of 22% versus 2019. EBITDA margin of 36.4% decreased by 389 basis points. Throughout the year, Koura made significant operational improvements and closely managed costs to offset challenging market conditions.

Polymer Solutions (Vestolit & Aphagary, 34% of Revenues)

The Polymer Solutions group is as adaptable and dynamic as the materials it produces. It focuses on PVC general and specialty resins and PVC 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.

mm US$ Fourth quarter January - December
Vestolit

2020

2019

%Var.

2020

2019

% Var.

Total Revenue*

617

549

12%

2,171

2,334

-7%

Operating income

103

26

296%

224

210

7%

EBITDA

158

85

86%

462

443

4%

*Intercompany sales were $66 million and $38 million in 4Q20 and 4Q19, respectively. And as of December 2020 and 2019 were $174 million and $144 million, respectively.

For the quarter, net revenues of $617 million increased 12%, amid high PVC prices driven by the global supply-demand imbalance.

EBITDA of $158 million increased 86%, with all PVC sites operating at full capacity. EBITDA margin of 25.7% increased 1,020 basis points, driven by higher PVC margins and significant energy costs savings. Of note, Q4 2019 included non-recurring charges of $25.4 million.

For the year, net revenues of $2,171 million decreased 7% amid lower volume due to the pandemic ealier in the year and VCM availability, partially offset by increased Derivatives volume mainly in sanitation markets.

EBITDA of $462 million increased 4%. EBITDA margin of 21.3% expanded 229 basis points due to higher PVC margins primarily in the last quarter and lower electricity costs.

Balance Sheet, Liquidity and Capital Allocation

Orbia generated strong free cash flow of 304 million in the fourth quarter and $552 million in the year. In December 2020, the Company fully repaid the remaining $600 million outstanding of its $1 billion revolving credit facility, which will remain available until June 2024.

As of year-end, Orbia’s net debt was $2,751 million comprising total debt of $3,626 million plus cash and cash equivalents of $875 million. Orbia’s Net Debt-to-EBITDA ratio was 2.09x, while the Company’s interest coverage ratio was 6.26x. Orbia will seek to maintain a strong balance sheet and our investment grade status. Management is comfortable with our debt level at 2.1x, which is within the targeted range.

In 2020, the Company paid $230 million in dividends and repurchased $42 million under the share buy-back program. On February 24, 2021, Orbia’s Board of Directors agreed to propose for approval at the Annual Shareholders Meeting, convened on March 30, 2021, an ordinary dividend of $0.10 per share to be paid in four installments in 2021.

Full year capex of $228 was down 13%, reflecting a conservative investment approach in response related to the COVID pandemic. Capex was directed mostly toward critical maintenance of facilities and, beginning the Q3, selected strategic growth investments.

2021 Business Outlook

Assuming no significant unexpected disruptions related to COVID, Orbia expects EBITDA to increase between 4 to 7% in 2021 driven by recovery in demand in several of our businesses. We are also expecting CAPEX in the range of $350 million to $400 million for next year.

Conference Call Details

Orbia will host a conference call to discuss Q4 2020 results on February 25, 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 Fourth Quarter January - December
Income Statement

2020

2019

%

 

2020

2019

%

Net sales

1,742

1,636

6%

 

6,420

6,987

-8%

Cost of sales

1,200

1,176

2%

 

4,574

5,029

-9%

Gross profit

542

460

18%

 

1,846

1,958

-6%

Operating expenses

342

305

12%

 

1,126

1,135

-1%

Operating income (loss)

201

155

30%

 

720

823

-13%

Financial Cost, net

34

64

-47%

 

242

295

-18%

Equity in income of associated entity

(0)

0

N/A

 

(1)

(4)

-75%

Income (loss) from continuing operations before income tax

166

91

82%

 

479

533

-10%

Cash tax

75

72

4%

 

246

171

44%

Deferred taxes

(6)

(10)

-40%

 

(95)

(27)

252%

Income tax

69

62

11%

 

151

206

-27%

Income (loss) from continuing operations

98

30

227%

 

328

327

0%

Discontinued operations

(1)

1

N/A

 

(10)

(0)

 

Consolidated net income (loss)

96

30

220%

 

319

327

-2%

Minority stockholders

30

32

-6%

 

124

120

3%

Majority Net income (loss)

66

(2)

N/A

 

195

207

-6%

 

 

 

 

 

 

 

EBITDA

383

294

30%

 

1,318

1,365

-3%

Consolidated Balance Sheet

USD in millions
Balance sheet

2020

2019

Total assets

10,211

10,057

Current assets

3,156

2,852

Cash and temporary investments

875

586

Receivables

1,093

1,158

Inventories

861

834

Others current assets

326

274

Non current assets

7,055

7,205

Property, plant and equipment, Net

3,186

3,349

Right of use Fixed Assets, Net

323

337

Intangible assets and Goodwill

3,225

3,257

Long term assets

320

262

Total liabilities

7,032

6,963

Current liabilities

2,588

2,577

Current portion of long-term debt

495

322

Suppliers

1,326

1,264

Short-term leasings

82

78

Other current liabilities

684

913

Non current liabilities

4,444

4,386

Long-term debt

3,131

3,129

Long-term employee benefits

274

229

Long-Term deferred tax liabilities

314

335

Long-term leasings

263

267

Other long-term liabilities

463

426

Consolidated shareholders'equity

3,180

3,094

Minority shareholders' equity

687

719

Majority shareholders' equity

2,493

2,375

Total liabilities & shareholders' equity

10,211

10,057

Operating Cash Flow

mm US$ Fourth quarter January - December
Cash Flow

2020

2019

%Var.

2020

2019

% Var.

EBITDA

383

294

30.3%

1,318

1,365

-3.4%

Taxes paid, net

(86)

(52)

65.4%

(264)

(233)

13.3%

Net interest / Bank commissions

(18)

(28)

-35.7%

(196)

(261)

-24.9%

Change in trade working capital

89

120

-25.8%

32

(112)

N/A

Others (Other assets - provisions, Net)

(28)

(21)

33.3%

4

36

-88.9%

CTA and FX

49

(1)

N/A

(24)

(29)

-17.2%

Cash generation

390

312

25.0%

871

766

13.7%

CapEx

(70)

(71)

-1.4%

(228)

(261)

-12.6%

Leasing payments

(16)

(19)

-15.8%

(90)

(92)

-2.2%

Free cash flow

304

221

37.6%

552

413

33.7%

FCF conversion (%)

79.2%

75.2%

406 Bps

41.9%

30.3%

1,159 bps

Dividends to Shareholders

(45)

(59)

-23.7%

(230)

(218)

5.5%

Buy-back shares program

-

(1)

-100.0%

(42)

(41)

2.4%

New debt (paid)

(597)

(127)

370.1%

178

(125)

N/A

Minority interest payments

(26)

(42)

-38.1%

(141)

(151)

-6.6%

Minority interest acquisition

(5)

-

N/A

(27)

8

N/A

Others

(369)

(8)

4512.5%

289

(114)

N/A

Net change in cash

1,245

594

109.6%

586

700

-16.3%

Initial cash balance

875

586

49.3%

875

586

49.3%

Cash balance

876

586

49.5%

876

586

49.5%

Note: Change in trade working capital includes certain other receivables for proper comparison purposes.

Notes and Definitions

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

Since Q1 2019, Business Group EBITDAs are being reported inclusive of 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: Wavin (Building & Infrastructure), Dura-Line (Data Communications), Netafim (Precision Agriculture)—all of which previously were presented as Fluent (for reporting purposes only)— Polymer Solutions (Vestolit & Alphagary) and Koura (Fluor).

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, Building and Infrastructure, Fluor, Polymer Solutions and Data Communications 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, the economy, 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). 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.

Investors
Javier Luna, Capital Markets and Investor Relations Director
+52 55 5366 4151
javier.luna@orbia.com

Source: Orbia Advance Corporation, S.A.B. de C.V.



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