Industrias Unidas, SA de CV Consolidated operating results for the financial year 2021

MEXICO–(BUSINESS WIRE)–Industrias Unidas, SA de CV (“IUSA” or the “Company”) has announced its audited results for the twelve months ended December 31, 2021. Figures are audited and have been prepared in accordance with Mexican Financial Reporting Standards (“MFRS”), which differ in certain respects from United States Generally Accepted Accounting Principles (“US GAAP”). Results for any interim period are not necessarily indicative of results that may be expected for any given financial year. Unless otherwise specified, references herein to “pesos”, “pesos” or “Ps” are pesos, the lawful currency of Mexico and references to “US dollars”, “dollars”, “US$” or “$ are in US dollars, the legal tender of the United States of America. Unless otherwise specified, all peso amounts are presented here in pesos with purchasing power as of December 31, 2021, and in pesos with their historical value for other dates cited. The dollar translations f Provided herein are calculated solely for the convenience of the reader using an exchange rate of Ps. 20.51 per US 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 operating results for the twelve months ended December 31, 2021 and 2020:

(figures in millions of pesos)
For the year ended December 31,

2020

2021

Revenue

19,720.4

28,604.8

Cost of sales

17,424.4

23,188.5

Gross profit

2,296.1

5,416.4

Selling and administrative expenses

1,578.0

1,912.3

Operating profit (loss)

718.0

3,504.1

Other Expenses – Net

(86.8

)

(84.0

)

Overall financing result

(831.2

)

(572.4

)

Taxes and statutory employee profit-sharing

75.0

817.2

Equity in income (loss) of associated corporations

13.5

11.0

Consolidated net profit (loss)

(261.4

)

2,041.5

D&A

435.5

369.5

EBITDA 1/

1,153.6

3,873.6

1/ EBITDA for any period is defined as consolidated net income (loss) excluding i) amortization, ii) total net comprehensive financial income (which includes net interest expense, foreign exchange gain or loss, gain or loss of currency position and other Funding costs), iii) other net charges, iv) income taxes and employee profit-sharing and v) equity in the result of associates. EBITDA should not be considered as another measure of net profit or operating profit, as determined on a consolidated basis using amounts derived from income statements prepared in accordance with IFRS, or as an indicator of operating performance or cash flow from operating activity such as a measure of liquidity. EBITDA is not a recognized term under MFRS or US GAAP and is not intended to be an alternative to net income as a measure of operating performance or cash flow from operating activities as a measure. liquidity.

Our consolidated net income for the twelve months ended December 31, 2021 amounted to 2,041.5 million pesos (99.5 million US dollars), compared to a consolidated net loss of 261.4 million pesos during the same period of 2020. This variation is mainly due to a significant increase in income (and therefore taxes) and a lower overall financial result, due to market conditions.

Revenue

Our net income for the twelve months of 2021 increased by 45.1% to reach 28,604.8 million pesos (1,394.8 million dollars) compared to 19,720.4 million pesos during the same period of 2020 This increase is mainly due to market conditions, relatively high copper prices compared to previous years, which directly affect our final selling price in our copper products segment and the 12.0% increase in the volume of sales.

Our costs and revenues track copper prices very closely since market practice is to pass commodity price changes on to the buyer.

Our sales are primarily to customers engaged in commercial, industrial and residential construction and related maintenance and renovation activities. We also sell to customers engaged in the production, transmission and distribution of electrical energy and to the gas, water and air conduction sector in the field of heating, ventilation, air conditioning and refrigeration (HVACR).

Our revenues come mainly from sales of copper-based products (tubes, wires, cables and alloys) and electrical products.

By country of production, approximately 55.1% of our revenues in the twelve months ended December 31, 2021 came from products manufactured in Mexico and the remaining 44.9% from products manufactured in the United States.

In terms of sales by region during the twelve months ended December 31, 2021, we derived approximately 53.3% of our revenue from sales to customers in the United States, 43.9% from customers in Mexico and 2.8 % of 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% compared to the same period in 2020:

(Metric Tons)
For the year ended December 31,
Volume sales of copper products 2/

2020

2021

UNITED STATES

51 206

57,718

Mexico

31,474

34,301

ROW

2,090

2,937

Total

84,769

94,956

2/ Includes wire and aluminum cable

Cost of sales

Our cost of sales during the twelve months ended December 31, 2021 increased by 33.1% to 23,188.5 million pesos ($1,130.7 million) from 17,424.4 million pesos during the same period of 2020. As a percentage of revenue, the cost of sales improved and was 81.1% and 88.4% respectively.

We continue to reduce our cost base through several initiatives, including plant planning, raw material handling and manufacturing overhead. In accordance with our accounting policies, we value inventory at the average purchase price. In the case of copper cathodes, an a posteriori adjustment is necessary due to the quotation period agreed with the suppliers (M+1). This initiative allows us to cover purchases for 30 days at no additional cost. The adjustment is recorded in cost of sales for the month in which it occurs.

Gross profit

Our gross profit in the twelve months ended December 31, 2021 increased twofold to Ps. 2,296.1 million from 11.6% in 2020.

Selling and administrative expenses

Our selling and administrative expenses in the twelve months ended December 31, 2021 increased by 21.2% to Ps.1,912.3 million from Ps.1,578.0 in the same period of 2020 As a percentage of total sales, this item was 6.0% and 8.7% in the corresponding periods.

Operating result

Our operating profit for the twelve months ended December 31, 2021 increased fourfold to Ps3,504.1 million (US$170.9 million) from an operating profit of 718, 0 Ps during the same period of 2020. As a percentage of sales, this element was 12.3% and 3.6% in the corresponding years.

EBITDA

In the twelve months ended December 31, 2021, our EBITDA increased three times, from Ps. 1,153.6 million for January to December 2021 and Ps. 435.5 million for the same period of 2020.

Overall financing result

The following table presents our overall 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 charges

(663.7

)

(477.5

)

interest income

22.2

18.5

Foreign exchange gain (loss) – Net

(183.9

)

(96.2

)

Other financing costs

(5.8

)

(17.2

)

Overall financing result

(831.2

)

(572.4

)

Our overall financing result during the twelve months ended December 31, 2021 represented a cost of Ps 572.4 million, compared to a cost of Ps 831.2 million for the same period of 2020.

Taxes and statutory employee profit-sharing

The provision for current and deferred taxes and statutory employee profit sharing during the twelve months ended December 31, 2021 represented an expense of Ps 817.2 million, compared to a cost of Ps 75.0 million for the same period of 2020.

Consolidated net income

Our consolidated net profit for the twelve months ended December 31, 2021 amounted to 2,041.5 million pesos (99.5 million US dollars), compared to a consolidated net loss of 261.4 million pesos during the same period of 2020.

Cash and capital resources

Liquidity

As of December 31, 2021, we had cash and cash equivalents of Ps348.7 million (US$17.0 million). Our policy is to invest available cash in short-term instruments issued by Mexican and US banks and in securities issued by the governments of Mexico and the United States.

Our operating cash flow and operating margins are strongly influenced by world market prices for raw copper, as quoted by COMEX and the London Metal Exchange (“LME”). Copper prices are subject to significant market fluctuations; Average copper prices increased 51.6% in the twelve months ended December 31, 2021 to US$4.24 per pound from US$2.79 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 partly 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, amounted to Ps591.7 million (US$28.8 million), all of which was denominated in dollars.

As of the same date, our consolidated long-term debt outstanding, excluding the current portion thereof, amounted to Ps5,001.9 million (US$243.9 million), entirely denominated in dollars.

Accounts receivable from third parties as of December 31, 2021 amounted to 4,346.9 million pesos ($211.9 million). The days remaining in the domestic market was 31 days as of December 31, 2021.

Debt securities

The following table summarizes our debt as of December 31, 2021:

Consolidated debt December 31, 2021
(In millions of pesos)
Debt of US subsidiaries

531.6

Mexican debt

5,062.0

Total

5,593.6

This total includes the Company’s restructured debt.

Capital expenditure

For the twelve months ended December 31, 2021, we invested Ps236.8 million (US$11.5 million) in capital expenditure projects, primarily related to production and maintenance expansion.

During the twelve months ended December 31, 2021, our capital expenditures were allocated by segment as follows: 31.1% to copper tubes, 13.5% to wires and cables, 13.2% to valves and controls, 3.2% to electrical products and the rest and 39.0% to other divisions. By geography, 70.7% of total capital expenditures were invested in our Mexican facilities and the remaining 29.3% in the United States

You should read this document in conjunction with the audited consolidated financial statements as at December 31, 2021, including the accompanying notes thereto.

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