Vitro Reports 2Q’13 Results; Prepays Mandatory Convertible Debentures Strengthening its Balance Sheet

Second Quarter 2013 Highlights Consolidated net sales declined 0.6 percent year-over-year. Solid performance in Glass Containers was more than offset by a decline in Flat Glass sales. Price pressure from imports and an anticipated OEM sales decline that resulted from volume resourcing made during the final stages of the restructuring process affected sales volumes in Flat Glass. Consolidated EBITDA increased 18.6 percent YoY to US$102 million, positively impacted by a solid performance in the Glass Container division and non-recurring benefits related to Tractebel settlement finalization and an employment promotion benefit, which more than offset the effect of customer claims related to the restructuring process. Consolidated Net Debt increased 12.2 percent YoY to US$1,122 million at the close of the quarter reflecting the US$235 million Note issued by a Vitro subsidiary as part of the agreements to finalize pending legal actions related to its debt restructuring process. Subsequent to quarter’s end, on July 11, 2013 Vitro prepaid its 2015 Mandatory Convertible Debentures (“MCD”), which aid the Company to strengthened its balance sheet and maintain healthy leverage ratios.Commenting on Vitro’s outlook and performance, Mr. Adrian Sada Cueva, Chief Executive Officer, said, “This quarter has been the first after closing our restructuring chapter and one with a lot of activity focused on strengthening our market leadership. The primary achievements of this quarter have been being able to deliver a strong EBITDA result, prepaying our convertible note of US$122 million and repositioning our company with our OEM customers to start regaining the lost volume.”“Our financial results during the quarter were strong, with a consolidated EBITDA for the quarter rising 18.6 percent YoY. Results benefited from a solid performance in our Glass Containers division and by two non-recurring events which more than offset the negative impact from one-time claims of some customers, related to the restructuring process, an increase in legal expenses from our debt restructuring process, an increase in cost of natural gas and a weaker performance of our Flat Glass division as a result of the decision of some customers to resource volume away at the end of our restructuring process.”“Our Glass Containers business unit reported a solid performance across all segments, except Beer. By contrast, our Flat Glass sales continued to be negatively impacted by weaker demand from certain U.S. OEMs that diverted their business during our debt restructuring process. However, we are seeing signs of improvement on a sequential basis with flat glass sales up 8.8 percent as we redirected production that was previously targeted to OEMs into domestic and export construction markets. This however negatively impacted margins as it is a more competitive market.”“This July we took another important step in significantly strengthening our balance sheet and providing greater certainty to our shareholders. In addition to maintaining healthy leverage ratios, the pre-payment of US$122.4 million Mandatory Convertible Debentures due 2015 also eliminated the risk of a potential conversion of this instrument into 20 percent of Vitro’s shares. The pre-payment was funded by internally generated funds and the sale of some real estate assets.”Commenting on the balance sheet, Mr. Claudio Del Valle, Chief Financial Officer, noted, “We continue to be very active on the financing front. As anticipated, total Net Debt as of June 30, 2013 increased year-on-year by 12.2 percent to US$1,122 million reflecting the impact of a US$235 million note issued by a Vitro subsidiary on April 8, 2013 as part of the agreements to finalize the Company’s debt restructuring process. At the same time, unrestricted cash balances improved significantly during the period – up to US$265 million at the close of the quarter, from US$123 million at the end of 2Q’12. Furthermore, after the close of the quarter, on July 11, 2013, Vitro prepaid in full its US$122.4 million 2015 Mandatory Convertible Debentures. With this step, we removed a high cost debt that carried a 12 percent annual interest rate, strengthening Vitro’s balance sheet and maintaining healthy leverage ratios.”Mr. Sada further commented, “Finally, on much sounder financial footing, we are now in a better position to begin winning back OEM business we lost as we underwent a financial restructuring. We have been in close communication with our OEM customers to reactivate new business opportunities and I am very glad to announce that as of the date of this communication we have won new OEM platform biddings with an estimated annual revenue value of US$40 million that we should start supplying by the end of 2014 and 2015.”“Having ended the restructuring process, the company is very focused at improving the market and operational performance of our business units to be able both to capitalize the new business opportunities and to face the challenges we have ahead.” noted Mr. Sada.To read the full article: please click here 27.08.2013, Vitro, S.A.B. de C.V.