Earnings Report /
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Alfa: ALFA, Quarterly Report 1Q21: Solid year start, driven by Alpek

  • Alfa reported aligned to estimates. Alpek’s results offset Axtel’s lower performance and higher profitability in Sigma

  • In light of an improved outlook for Alpek, the company raised its EBITDA guidance 13% to US$1.6 billion

  • The report should be welcomed by the market. It continues to focus on the strategy to unlock greater shareholder value

Marissa Garza Ostos
Marissa Garza Ostos

Head of Equity Research

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Banorte
22 April 2021
Published byBanorte
  • Alfa reported in line with our estimates, with outstanding results in Alpek offsetting a lower performance in Axtel, and with Sigma showing higher profitability

  • In light of an improved outlook for Alpek, the company raised its EBITDA guidance 13% to US$1.6 billion, while it obtained approvals to expand the neutral foreign investment trust from 50% to 75%

Alpek, top-performing subsidiary in the quarter. Alfa's 1Q21 figures confirm a recovering start to the year. Consolidated revenues amounted to MXN 68.9 billion, while EBITDA reached MXN 10.9 billion, representing interannual decreases of 16.7% and 1.9%, respectively, due to the Nemak spin-off. Nevertheless, on a comparable basis, sales increased 6.3% y/y and EBITDA 33.3% y/y, similar to our estimates. Alpek stood out, with figures that surprised positively on record volumes, higher benchmark margins in polyester and polypropylene, as well as higher oil and raw material prices, reflecting a notable advance in margins. This more than offset the weakness observed in Axtel, with more than expected declines, caused by a sharp drop in Alestra -mainly in the Government segment- which offset the growth in Infrastructure. Sigma's results were supported by a good performance in the old continent and a recovery in the foodservice distribution channel due to lower mobility restrictions. Net income was MXN 3.1 billion, down 10.0% y/y, due to the absence of an important deferred tax benefit obtained in 1Q20 and related to the significant depreciation of the peso a year ago. The report should be welcomed by the market. The outlook for Alfa remains promising. The company not only revised its 2021 growth guidance, but continues to focus on the strategy to unlock greater shareholder value through (1) debt reduction (today ND/EBITDA at 2.9x), (2) focus on key businesses and (3) the independence of these. We will be incorporating the best prospects into our estimates with positive implications.  

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