Orbia Announces Third Quarter 2024 Financial Results

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 third quarter of 2024.

Orbia delivered EBITDA of $288 million for the third quarter of 2024. Weak market conditions persist and the Company remains cautious for the remainder of the year. Orbia continued to focus on optimizing its cost structure and managing cash flows, resulting in a strong operating cash flow conversion rate of 98% of EBITDA for the quarter.

Q3 2024 Financial Highlights
(All metrics are compared to Q3 year 2023 unless otherwise noted)

• Net revenues of $1,887 million decreased 4%, driven by lower volumes across all businesses, except for Fluor & Energy Materials and Connectivity Solutions, and lower prices in the Polymer Solutions and Connectivity Solutions business groups.
• EBITDA of $288 million decreased 10%, driven by lower revenues due to weak construction activity and infrastructure investment, as well as lower prices. This was partly offset by the benefit from cost reduction initiatives across the Company.
• Operating Cash Flow of $283 million increased by $65 million, a conversion rate of 98% of EBITDA, due primarily to lower taxes paid and an improvement in working capital compared to the same quarter of the prior year.

"Our third quarter results reflect the ongoing challenges across many of our markets. We remain committed to maintaining financial discipline and focusing on maximizing revenue and managing costs and cash flow effectively to ensure Orbia's long-term success. Our selective investments in growth initiatives will ensure that we are well-prepared to capitalize on opportunities as market conditions improve. As part of our efforts to provide more visibility into the current business conditions, the measures we are taking to address the current market and the outlook going forward, we will provide a business update in conjunction with the analyst call on October 24th" said Sameer Bharadwaj, CEO of Orbia.

Q3 2024 Consolidated Financial Information¹
(All metrics are compared to Q3 2023 unless otherwise noted)

mm US$		Third Quarter
		2024		2023		% Var
Net sales		1,887		1,976		-4%
Cost of sales		1,457		1,479		-2%
Selling, general and administrative expenses		305		319		-4%
Operating income		125		178		-30%
EBITDA		288		320		-10%
EBITDA margin		15.3%		16.2%		-89 bps
Financial cost		79		79		0%
Earnings before taxes		46		99		-53%
Income tax		(56)		4		N/A
Consolidated net income		102		95		7%
Net majority income		86		72		20%
Operating cash inflow (outflow)		283		218		30%
Capital expenditures		(107)		(166)		-36%
Free cash inflow (outflow)		142		27		428%
Net debt		3,695		3,380		9%

Net revenues of $1,887 million decreased 4%.

The decrease in revenues for the quarter was driven by lower volumes in Building & Infrastructure and Polymer Solutions, and lower prices in Connectivity Solutions and Polymer Solutions. These factors offset volume increases year over year in Fluor & Energy Materials and Connectivity Solutions.

Cost of goods sold of $1,457 million decreased 2% primarily driven by lower volumes, lower raw material costs and the results from operational cost efficiencies.

Selling, general and administrative expenses of $305 million decreased 4%. As a percentage of sales, SG&A remained flat compared to the previous year at 16.2%.

The decrease was driven by cost control actions, partially offset by restructuring charges.

EBITDA of $288 million decreased 10%, while EBITDA margin decreased 89 basis points to 15.3%.

The decrease in EBITDA and EBITDA margin was due to lower prices and an unfavorable product mix in Connectivity Solutions and lower revenues in Building & Infrastructure and Polymer Solutions compared to the previous year.

Financial costs of $79 million remained flat year-over-year. The result was driven by an FX loss, primarily related to depreciation of the Mexican Peso, and lower interest income (lower cash balances versus last year), partially offset by a decrease in interest expense.

An Income Tax Benefit of $56 million was recognized for the quarter. The effective tax rate for the quarter was negative 120.4% compared to a rate of 3.7% for the same quarter in the prior year. The decrease in the effective tax rate was driven by the depreciation of the Mexican Peso against the US Dollar in the quarter. Excluding the impact mentioned before, the effective tax rate was 27.2%.

Net income to majority shareholders of $86 million in the quarter increased by 20% compared to the prior year. The result was mainly driven by the income tax benefit.

Operating cash flow of $283 million increased 30% while free cash flow of $142 million increased by $115 million.

The increase in operating cash flow was driven by lower taxes paid and an improvement in working capital compared to the same quarter of the prior year. The increase in free cash flow was driven by higher operating cash flow and lower capital expenditures.

Net debt of $3,695 million included total debt of $4,604 million, less cash and cash equivalents of $909 million. The Company's net debt-to-EBITDA ratio was 3.36x, below the previous quarter. Lower net debt, driven mainly by a $112 million increase in the cash balance and a $31 million decrease in gross debt due to a foreign exchange benefit (depreciation of the Mexican peso), more than offset the impact of a decrease in the last 12-month EBITDA.

Q3 Revenues by Region
(All metrics are compared to Q3 2023 unless otherwise noted)

mm US$		Third Quarter
Region		2024		2023		% Var		% Revenue
North America		678		703		-4%		36%
Europe		609		595		2%		32%
South America		391		428		-9%		21%
Asia		148		197		-25%		8%
Africa and others		62		53		16%		3%
Total		1,887		1,976		-4%		100%

Q3 2024 Financial Performance by Business Group
(All metrics are compared to Q3 2023 unless otherwise noted)

Polymer Solutions (Vestolit and Alphagary), 32.4% of Revenues
Orbia's Polymer Solutions business group (commercial brands Vestolit and Alphagary) focuses on general purpose and specialty PVC resins (polyvinyl chloride), PVC and zero-halogen specialty compounds with a wide variety of applications in everyday products for everyday life, from pipes and cables to household appliances and medical devices. The business group supplies Orbia's downstream businesses and a global customer base.

mm US$		Third Quarter
Polymer Solutions		2024		2023		% Var
Total sales*		634		677		-6%
Operating income		23		23		0%
EBITDA		90		86		5%
*Intercompany sales were $40 million and $59 million in Q3 24 and Q3 23, respectively.

Revenues of $634 million decreased 6%. EBITDA of $90 million increased 5% and EBITDA margin increased 151 basis points to 14.2%.

The decrease in revenues for the quarter was driven primarily by lower volumes in the derivatives business due to challenging business conditions and lower prices across the product portfolio.

EBITDA and EBITDA margin improved year-over-year despite lower revenues driven by lower ethylene and electricity costs coupled with management's efforts to optimize production and fixed costs.

Building & Infrastructure (Wavin), 32.3% of Revenues
Orbia's Building & Infrastructure business group (commercial brand Wavin) is redefining today's pipes and fittings industry by creating solutions that last longer and perform better, all with less installation labor required. The business group benefits from supply chain integration with the Polymer Solutions business group, a customer base spanning three continents, and investments in sustainable, resilient technologies for water and indoor climate management.

mm US$		Third Quarter
Building & Infrastructure		2024		2023		% Var
Total sales		632		694		-9%
Operating income		41		49		-16%
EBITDA		78		79		-1%

Revenues of $632 million decreased 9%. EBITDA of $78 million decreased 1% and EBITDA margin increased 97 basis points to 12.4%.

The decrease in revenues was primarily driven by weak demand in Latin America's most relevant countries due to persistent high interest rates, a competitive pricing environment and investment delays as a result of government changes. The decrease was partly offset by a slightly improved result in EMEA.

EBITDA decreased slightly year-over-year driven by lower revenue, partly offset by continued margin improvements supported by business optimization and operational cost efficiencies.

Connectivity Solutions (Dura-Line), 12.0% of Revenues
Orbia's Connectivity Solutions business group (commercial brand Dura-Line) produces more than 500 million meters of essential and innovative connectivity infrastructure per year to bring a world's worth of information everywhere. The business group produces telecommunications conduit, cable-in-conduit and other HDPE products and solutions that create physical pathways for fiber and other network technologies connecting cities, homes and people.

mm US$		Third Quarter
Connectivity Solutions		2024		2023		% Var
Total sales		235		252		-7%
Operating income		19		60		-69%
EBITDA		31		69		-55%

Revenues of $235 million decreased 7%. EBITDA of $31 million decreased 55% and EBITDA margin decreased 1,427 basis points to 13.2%.

For the third quarter, revenues were lower despite higher volumes compared to the prior year quarter. The decrease was primarily driven by lower pricing and an unfavorable product mix.

EBITDA was lower due to lower revenues and prices, partly offset by benefits from cost reduction initiatives.

Precision Agriculture (Netafim), 11.9% of Revenues
Orbia's Precision Agriculture business group's (commercial brand Netafim) leading-edge irrigation systems, services and digital farming technologies enable stakeholders to achieve significantly higher and better-quality yields while using less water, fertilizer and other inputs. By helping farmers worldwide grow more with less, the business group is contributing to feeding the planet efficiently and sustainably.

mm US$		Third Quarter
Precision Agriculture		2024		2023		% Var
Total sales		232		250		-7%
Operating income		(4)		(8)		-50%
EBITDA		24		19		28%

Revenues of $232 million decreased 7%. EBITDA of $24 million increased by $5 million and EBITDA margin increased by 281 basis points to 10.2%.

Revenues decreased due to continued soft demand in the U.S. and Turkey, despite higher volumes driven by continued growth in China, Africa and Latin America due to increased penetration in extensive crops.

EBITDA and EBITDA margin improved due to significant cost saving efforts.

Fluor & Energy Materials (Koura), 11.3% of Revenues
Orbia's Fluor & Energy Materials business group (commercial brand Koura) provides fluorine and downstream products that support modern, efficient living. The business group owns and operates the world's largest fluorspar mine and produces intermediates, refrigerants and propellants used in automotive, infrastructure, semiconductor, health, medicine, climate control, food cold chain, energy storage, computing and telecommunications applications.

mm US$		Third Quarter
Fluor & Energy Materials		2024		2023		% Var
Total sales		221		187		18%
Operating income		47		54		-12%
EBITDA		66		67		-2%

Revenues of $221 million increased 18%. EBITDA of $66 million decreased by 2% and EBITDA margin decreased 615 basis points to 29.7%.

Revenues for the quarter increased year-over-year driven by higher minerals volumes. The revenue growth was mainly due to management's focus on maximizing volumes and optimizing quota restrictions.

EBITDA decreased driven by product mix because of lower revenues from refrigerant gases due to lower quota and customer inventory management initiatives, partly offset by higher minerals revenues and lower operating costs.

Balance Sheet, Liquidity and Capital Allocation

Orbia's net debt-to-EBITDA ratio decreased slightly compared to the previous quarter at 3.36x due to an increase in the cash balance. The Company had cash on hand of $909 million, an increase of $112 million compared to the previous quarter. The gross debt decreased by $31 million due to a foreign exchange benefit (depreciation of the Mexican peso) partly offset by an increase in borrowings of $40 million. The net debt improvement helped to offset the impact of a decrease in the last 12-month EBITDA.

Working capital decreased by $111 million during the quarter compared to a decrease of $80 million in the prior-year quarter. Capital expenditures of $107 million decreased 35% year-over-year, including ongoing maintenance spending and investments to support the Company's growth initiatives.

During the quarter, Orbia paid $40 million as the third installment of the ordinary dividend approved at the Annual Shareholders Meeting held on April 2024.

2024 Outlook

The market hasn't recovered in the second half of the year as the Company had expected at the end of the prior quarter. As a result, the updated EBITDA guidance for 2024 is $1.10 to $1.15 billion. The capital expenditures are expected to be between $450 and $480 million, and the effective tax rate between 27% and 31%, excluding the impact of inflation and foreign exchange rate changes in Mexico.

Orbia is continuing to take proactive steps to improve its balance sheet and position the Company to execute on announced strategic growth opportunities. The Company will share more details on its October 24 Business Update.

Conference Call Details

Orbia will host a conference call to discuss third quarter results and to provide a business update on October 24, 2024, at 9:00 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 www.orbia.com/this-is-orbia/newsroom.

Consolidated Income Statement

mm US$		Third Quarter								January - September
		2024		2023		%				2024		2023		%
Net sales		1,887		1,976		-4%				5,726		6,432		-11%
Cost of sales		1,457		1,479		-2%				4,362		4,641		-6%
Gross profit		430		497		-13%				1,364		1,791		-24%
Selling, general and administrative expenses		305		319		-4%				960		993		-3%
Operating income		125		178		-30%				404		798		-49%
Financial cost		79		79		0%				253		312		-19%
Equity income from associated entities		0		0		704%				2		-
Impairment expense		-		0		N/A				-		4		N/A
Income from continuing operations before income tax		46		99		-53%				153		482		-68%
Income tax		(56)		4		N/A				(126)		275		N/A
Consolidated net income		102		95		7%				279		207		35%
Minority stockholders		16		23		-28%				72		72		1%
Majority Net income		86		72		20%				207		135		53%
EBITDA		288		320		-10%				875		1,234		-29%

Consolidated Balance Sheet

		mm US$
		Sep-24		Dec 2023		Sep-23
Total assets		11,478		11,552		11,625
Current assets		3,893		4,170		4,468
Cash and temporary investments		909		1,456		1,486
Receivables		1,686		1,461		1,358
Inventories		1,231		1,200		1,193
Others current assets		67		53		432
Non current assets		7,585		7,382		7,156
Property, plant and equipment, net		3,340		3,370		3,265
Right of use fixed assets, net		464		469		352
Intangible assets and goodwill		3,100		3,148		3,142
Long-term assets		681		395		398
Total liabilities		8,280		8,334		8,370
Current liabilities		2,558		2,537		2,730
Current portion of long-term debt		273		466		496
Suppliers		1,271		1,228		1,261
Short-term leasings		115		106		91
Other current liabilities		899		737		882
Non current liabilities		5,722		5,797		5,639
Long-term debt		4,331		4,420		4,370
Long-term employee benefits		136		139		136
Long-term deferred tax liabilities		347		359		373
Long-term leasings		369		383		267
Other long-term liabilities		539		496		492
Consolidated shareholders' equity		3,198		3,218		3,255
Minority shareholders' equity		562		604		623
Majority shareholders' equity		2,636		2,614		2,632
Total liabilities & shareholders' equity		11,478		11,552		11,625

Cash Flow Statement

mm US$		Third Quarter								January - September
		2024		2023		% Var				2024		2023		% Var
EBITDA		288		320		-10%				875		1,234		-29%
Taxes paid, net		(26)		(118)		-78%				(120)		(342)		-65%
Net interest / bank commissions		(58)		(65)		-11%				(214)		(211)		1%
Change in trade working capital		111		80		39%				(138)		(60)		128%
Others (other assets - provisions, Net)		(25)		(37)		-32%				(114)		(111)		3%
CTA and FX		(7)		39		N/A				(52)		93		N/A
Operating cash inflow (outflow)		283		218		30%				237		603		-61%
Capital expenditures		(107)		(166)		-35%				(346)		(470)		-26%
Leasing payments		(34)		(25)		38%				(79)		(73)		9%
Free cash inflow (outflow)		142		27		425%				(188)		60		N/A
Dividends to shareholders		(40)		(60)		-33%				(120)		(180)		-33%
Buy-back shares program		(4)		13		N/A				(4)		21		N/A
Debt		40		197		-80%				(106)		98		N/A
Minority interest payments		(38)		(37)		4%				(97)		(100)		-3%
Mergers & acquisitions		-		-						(0)		(8)		-97%
Financial instruments and others		12		61		-80%				(32)		47		N/A
Net change in cash		112		202		-44%				(547)		(61)		799%
Initial cash balance		797		1,283		-38%				1,456		1,546		-6%
Cash balance		909		1,486		-39%				909		1,486		-39%

Notes and Definitions

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

Figures and percentages have been rounded and may not add up.

About Orbia

Orbia Advance Corporation, S.A.B. de C.V. (BMV: ORBIA*) is a company driven by a shared purpose: to advance life around the world. Orbia operates in the Polymer Solutions (Vestolit and Alphagary), Building & Infrastructure (Wavin), Precision Agriculture (Netafim), Connectivity Solutions (Dura-Line) and Fluor & Energy Materials (Koura) sectors. The five Orbia business groups have a collective focus on expanding access to health and well-being, reinventing the future of cities and homes, ensuring food, water and sanitation security, connecting communities to information and enabling the energy transition with basic and advanced materials, specialty products and innovative solutions. Orbia has a global team of over 24,000 employees, commercial activities in more than 100 countries and operations in over 50, with global headquarters in Boston, Mexico City, Amsterdam and Tel Aviv. The company generated $8.2 billion in revenue in 2023. To learn more, 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 forward-looking statements included in this press release are subject to a number of material risks and uncertainties, and our results may be materially different from current expectations due to factors, which include, but are not limited to, global and local changes in politics, economic factors, business, competition, market and regulatory factors, cyclical trends in relevant sectors as well as other factors affecting our operations, markets, products, services and prices that are highlighted under the title "Risk Factors" in the annual report submitted by Orbia to the Mexican National Banking and Securities Commission (CNBV) and available on our website at https://www.orbia.com/investor-relations/financials/annual-reports/. 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 consultation at 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, via internet at www.ethics.orbia.com or via email at [e-mail]. Orbia's Audit Committee has oversight responsibility for ensuring that all such complaints are appropriately investigated and resolved.

1. Unless noted otherwise, all figures in this release are derived from the Consolidated Financial Statements of the Company as of September 30, 2024 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).

Contacts

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Media
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