Vitro S.A.B. de C.V. recently announced its unaudited results for the first quarter of 2010. Year-over-year consolidated net sales increased 1.2% and benefited by a 13% peso appreciation during last 12 months. Consolidated EBITDA declined 5% compared to the 2009 first quarter, while the consolidated EBITDA margin decreased to 11.9% from 12.7% in the same period last year.
“The peso appreciation resulted in stronger sales in the first quarter,” said Hugo Lara, CEO. “However, as expected, excess capacity and increased competition caused price and margin erosion as we took the necessary steps to maintain market share in major markets. And while our cost reduction program concluded in 3Q'09 contributed to EBITDA, nevertheless overall price weakness and declining volumes, principally in Glass Containers, reduced margins. A 21% increase in natural gas prices also negatively impacted EBITDA by approximately $3.5 million. During the quarter, we achieved positive free cash flow, closed two financing transactions to further strengthen Vitro’s liquidity, and continued working towards reaching a beneficial agreement with bondholders.”
According to Claudio Del Valle, chief restructuring officer, “Glass Containers performance continues to reflect the loss in 2009 of our main domestic beer client, which resulted in a 90% decline in domestic beer volumes and a 5% drop in total domestic volumes. Even though excess capacity in local markets increased competition and weakened prices, domestic volumes increased in all segments, except in beer. Export volumes fell 1%, declining in all segments except for CFT (Cosmetics, Fragrances & Toiletries) and Soft Drinks. These factors, in addition to higher energy costs, more than offset the benefits from the cost cutting program and resulted in a 12.6%, or $6 million, decrease in EBITDA.
“At Flat Glass, sales were negatively affected by a 27% decline in our foreign subsidiaries, reflecting weak construction markets in Spain and the U.S., two of the world’s poorest-performing construction markets. However, domestic and export float glass and auto glass volumes increased. Domestic float glass volumes increased as a result of higher demand in retail and distribution, although prices, measured in pesos, were lower than those of last year. Float glass export sales rose 70% year-on-year, reflecting extraordinary demand from South American markets and a better price mix. Sales to the auto glass OEM market increased 99% this quarter, driven by an important pick-up in industry demand coupled with a better sales mix. AGR sales also showed a slight increase in both domestic and export markets. As a result, EBITDA increased by $4 million, principally driven by higher volumes and a healthier price mix in the OEM and Domestic Float Glass markets, although penalized somewhat by negative EBITDA at our U.S. and Spanish subsidiaries.
“Looking ahead, we reiterate our 2010 consolidated EBITDA guidance range of between $205-215 million. We expect many of the factors that influenced the first quarter to continue to impact results for the rest of the year, particularly low demand for flat glass in the U.S. and Spain and weak domestic sales to the beer segment. Guidance is also influenced by excess production capacity in some of our markets, leading to pricing softness. Higher natural gas prices are also expected to continue to have a direct impact on EBITDA. We maintain our natural gas hedges with PEMEX, 32% at $6.8/mmbtu for 2010 and 19% at $7.3/mmbtu for 2011, with no margin call requirements.”
“The past year has been one of many challenges for Vitro and the entire business community,” said Lara. “However, our goals have not changed. We will continue to serve our many valued clients as we move ahead with negotiations with bondholders to achieve a mutually satisfactory resolution. This environment has also given us an opportunity to focus on improving production and operating efficiency that will benefit us as we move into a better economy over the next years.”
Additional details are available at www.vitro.com