/raid1/www/Hosts/bankrupt/TCRLA_Public/010730.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Monday, July 30, 2001, Vol. 2, Issue 147
Headlines
B R A Z I L
CVRD: Projects $36M Net Income Reduction Due To Energy Rationing
CVRD: Usiminas Sale Pending Better Market Conditions
TABACOW: Dismisses Nearly Half Of Workers Due To Economic Slump
VARIG: CEO Wants To Renegotiate $200M In Debts
C H I L E
BOLIDEN LIMITED: 2Q01 Results; Equity Offering; Debt Re-fi Terms
BOLIDEN LIMITED: Concludes Lomas Bayas Sale To Falconbridge
C O L O M B I A
PAZ DEL RIO: Confronting Next Crisis With Sales At 50% of Target
SEVEN SEAS: Closes $45 Million Financing
SEVEN SEAS: Provides Operations Update; 7,200 Bls Per Day
G U A T E M A L A
EMPRESARIAL/METROPOLITANO/PROMOTOR: Liquidation Starts In August
M E X I C O
CINTRA: Bidders Wearing Poker Faces About Future Plans
CORPORACION GEO: Registers 47.4% Increase In 2Q Net Profits
GALEY & LORD: Ceasing Garment Operations In Mexico To Cut Costs
GRUMA SA: Bread Business May Be Sold If Not Profitable By YE01
GRUPO PULSAR: Still Talking To Spanish Media On El Financiero
GRUPO TELEVISA: 2Q01 Results; EBITDA Down 26.5%; Net Income Up
HYLSAMEX: Posts 1H01 Net Loss Of P$248M; Sales Down 27%
SAVIA: Seminis 3QFY201 Results; Loss Up Due To Restructuring
VITRO: Unaudited 2Q201 Results; Reorg Efforts Working
VITRO: Alliance With Libbey Safe Despite Looming Acquisition
VITRO: Continues With Corporate Restructuring
- - - - - - - - - - -
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B R A Z I L
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CVRD: Projects $36M Net Income Reduction Due To Energy Rationing
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Preliminary estimates indicate that Cia. Vale do Rio Doce, the
world's No. 1 iron-ore exporter will reduce its net income this
year by 90 million reais ($36 million) due to the power rationing
in Brazil, according to a report Thursday in Bloomberg.
More than half, or 50 million reais, of the reduction will be due
to the purchase of 53 diesel oil generators to guarantee power to
its mining and transportation businesses. Another 40 million
reais will come from production cuts in its energy intensive
aluminum and iron alloy operations.
"Our intention is to reach our goal (of energy saving) and still
guarantee operations of our main activities," said Roberto
Castello Branco, the company's head of investor relations. "These
are preliminary estimates."
CVRD is investing about $850 million in the next five years in
eight electricity generating projects, generating 4 million
megawatt/hour per year when fully operational. CVRD will hold 40
percent of the equity in the power projects.
"We are not looking for self sufficiency in electricity,"
Castello Branco explained. "What we want is to guarantee power at
a reasonable cost."
CVRD: Usiminas Sale Pending Better Market Conditions
----------------------------------------------------
Roberto Castello Branco, CVRD's investor relations director,
disclosed that the Brazilian mining group will not put its stake
in Brazilian steel maker Usiminas on the auction block unless it
sees a clearer picture of the process of consolidation within the
global steel industry, O Globo reported Thursday. CVRD planned to
sell its 11 percent stake, or 22 percent of ordinary shares, in
the steel maker. The Usiminas holding is the largest to be
considered for sale by CVRD as part of its restructuring process,
which involves the sale of all interests outside the mining,
logistics and energy sectors.
Meanwhile, Branco announced that CVRD is planning to sell the 15
ships held by Doce Nave. According to him, Vale chose to sell off
the assets as it believes they are not profitable.
"To keep theses 15 ships we would have to invest a lot and we can
use services from other companies," he said.
The company expects to conclude the transaction in the next few
months.
TABACOW: Dismisses Nearly Half Of Workers Due To Economic Slump
---------------------------------------------------------------
One of Brazil's leading rug and carpet manufacturers, Tabacow,
laid off 300 of its 680 employees in mid-July, South American
Business Information reported Thursday. The company attributed
this move to the sluggish economy, which has also seen a 30-
percent reduction in its revenues this year. Tabacow is now
taking steps to combat the situation including concentration of
sales efforts on the most popular 16 products of its line of 40
and the sale of the subsequent surplus power on the wholesale
market.
Tabacow produced an average of 550,000 to 600,000 square meters
of carpet per month last year, with a turnover of R$50mil.
However, with the recent layoffs, production is expected to fall
to between 300,000 to 400,000 square meters. Sales projectiosn
have also been cut by R$50 million for the year. Last month,
Tabacow reached an agreement with its creditors to postpone for
two years the payment of R$20 million, which it owes to
suppliers.
VARIG: CEO Wants To Renegotiate $200M In Debts
----------------------------------------------
Because of great concern over the Varig's high indebtedness, CEO
Ozires Silva, intends to renegotiate US$200 million in debts
coming due this year, O Estado de Sao Paulo said Thursday in a
report. The Brazilian airline company, which has liabilities
totaling US$1.3 billion, of which US$400 million are leasing
contracts, may issue long-term paper or sell off part of
VarigLog's capital (logistics and transportation).
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C H I L E
=========
BOLIDEN LIMITED: 2Q01 Results; Equity Offering; Debt Re-fi Terms
----------------------------------------------------------------
Overview
-- Improved year over year operating results
-- Prospectus filed for $243 million fully secured equity
offerings
-- Definitive loan documentation signed to refinance existing
debt and losses incurred on the closing out of existing
foreign currency hedge contracts
-- Norzink and Chilean Assets sold
-- New credit lines to carry out foreign currency hedging at
current exchange rates
-- New President and Chief Executive Officer appointed
-- New board of directors to be appointed and Swedish
redomiciliation process to commence after completion of equity
offerings
Boliden Limited reported Thursday its operating results for the
second quarter and the first half of 2001.
The Company reported an operating loss of $11.0 million for the
quarter and $19.9 million for the half, compared with an
operating loss of $34.7 million for the second quarter and $41.1
million for the first half of 2000. The principal reasons for the
change are higher mining and smelting production offset by lower
metal and sulphuric acid prices and lower treatment and refining
charges (TC/RCs). The operating loss for the quarter compares
with an operating loss of $8.9 million for the first quarter of
2001.
The Company's foreign currency hedge contracts negatively
affected the Company's operating results by $22.4 million for the
quarter and $40.4 million for the half, $15.8 million for the
second quarter and $26.0 million for the first half of 2000 and
$18.0 million for the first quarter of 2001.
After accounting for interest expense and income taxes and the
gain realized by the Company on the sale of its 50% interest in
Norzink ($34.4 million), the Company reported net income of $8.6
million or $0.03 per common share for the quarter and a net loss
of $12.9 million or $0.07 per common share for the half, compared
with a net loss of $34.4 million or $0.17 per common share for
the second quarter and $52.7 million or $0.34 per common share
for the first half of 2000.
Cash provided by operations before non-cash working capital
changes was $2.9 million or $0.01 per common share for the
quarter and cash used in operations was $2.7 million or $0.01 per
common share for the half, compared with cash used in operations
of $15.6 million or $0.07 per common share for the second quarter
and $4.5 million or $0.03 per common share for the first half of
2000. The cash provided by operations before non-cash working
capital changes for the quarter compares with cash used in
operations of $5.6 million or $0.03 per common share for the
first quarter of 2001.
CORPORATE DEVELOPMENTS
Equity Offerings
On June 29, 2001, the Company filed a short form prospectus in
respect of its previously announced equity offerings consisting
of a $105 million common share rights offering to the Company's
existing shareholders fully secured by subscription and standby
commitments and a $138 million common share offering directed to
existing shareholders, certain Swedish investors and the
Company's lenders fully secured by purchase commitments.
The proceeds of the rights offering will be used to pay accrued
and unpaid interest on the Company's debt ($24.0 million as at
June 30, 2001) and for general corporate purposes, including the
payment of the costs of the equity offerings and the
establishment of the reserve accounts described below under New
Credit Facility. The proceeds of the directed offering will be
used to reduce the Company's debt.
The equity offerings are being completed concurrently and are
being carried out in conjunction with the refinancing of the
Company's debt and the restructuring of the Company's foreign
currency hedge contracts.
The terms of the equity offerings are described in the Company's
short form prospectus which was mailed to shareholders of record
on July 12, 2001.
The equity offerings will be completed during August 2001.
New Credit Facility
On June 21, 2001, the Company settled a term sheet with the
lenders (Lenders) under its $300 million revolving credit
facility, $230 million term loan facility, $109.4 million bridge
facility and SEK 90 ($8.4) million operating facility (Credit
Facilities) and the counterparties (Hedge Counterparties) under
those external foreign currency hedge contracts that were
outstanding on March 31, 2001 (Hedge Contracts) outlining the
material business terms of the refinancing of the principal
amount of the debt outstanding under the Credit Facilities and
the losses incurred on the maturity or closing out of the Hedge
Contracts.
On July 25, 2001, the Lenders and the Hedge Counterparties as
lenders, the Company's wholly-owned subsidiary, Boliden Mineral
AB (Mineral), as borrower and the Company and Boliden Treasury AB
(Treasury) as guarantors entered into definitive loan
documentation with respect to a new credit facility (New Credit
Facility) to be used by Mineral to carry out the refinancing.
The New Credit Facility will be effective upon the completion of
the equity offerings.
Tranches
Under the New Credit Facility, Mineral will be entitled to borrow
up to the principal amount outstanding under the Credit
Facilities and the losses incurred on the maturity or closing out
of the Hedge Contracts in four tranches:
-- (a) a $380 million term tranche (Tranche A) repayable on
June 30, 2006;
-- (b) a $150 million revolving tranche (Tranche B),
including up to $20 million by way of letters of credit,
repayable on June 30, 2006;
-- (c) a $117.8 million term tranche (Tranche C), repayable
on June 30, 2003; and
-- (d) a term tranche (Tranche D) equal to the losses
incurred on the maturity or closing out of the Hedge
Contracts repayable as to 50% on June 30, 2003 and as to
the balance in six semi-annual instalments commencing on
December 31, 2003.
Tranches A and B are equal to the principal amounts outstanding
under the $300 million revolving credit facility and the $230
million term loan facility. Tranche C is equal to the principal
amounts outstanding under the $109.4 million bridge facility and
SEK 90 ($8.4) million operating facility.
Tranche D will be equal to the losses incurred on the maturity or
closing out of the Hedge Contracts. The losses incurred under the
Hedge Contracts that matured after March 31, 2001 was $27.8
million and the mark-to-market position under the Hedge Contracts
that were outstanding on June 30, 2001 was a loss of $114.3
million. The actual losses incurred on the closing out of the
Hedge Contracts that were outstanding on June 30, 2001 will
depend on the exchange rates of the Swedish krona, Canadian
dollar, Norwegian kroner and Spanish peseta relative to the U.S.
dollar on the date that those Hedge Contracts are closed out. The
losses incurred on the closing out of the Hedge Contracts that
were outstanding on June 30, 2001 will be amortized over the
periods that those Hedge Contracts were intended to hedge as a
non-cash charge to operating income.
Use of Borrowings
Mineral is required to use the amounts borrowed by it under the
New Credit Facility to repay the principal amounts outstanding
under the Credit Facilities and the losses incurred on the
maturity or closing out of the Hedge Contracts.
Debt Reduction
The proceeds of the directed offering will be used to reduce the
debt outstanding under the New Credit Facility.
The $85 million net proceeds of sale of the Company's interest in
Norzink and $23.4 million of the net proceeds of sale of the
Chilean Assets will be used to repay the balance of Tranche C in
full.
Commencing June 30, 2002, Mineral is required to complete a semi-
annual calculation of cash flow available for debt reduction and
to use such cash flow for debt reduction.
Mineral may reborrow any amounts repaid under Tranche B up to the
amount remaining outstanding after application of the proceeds of
the directed offering (approximately $135 million). Mineral may
not reborrow any amounts repaid under Tranches A, C and D.
Interest Rate
The rate of interest payable by Mineral on amounts outstanding
under the New Credit Facility will be LIBOR plus a margin of 100
basis points per annum.
SEK250 Million Medium Term Notes
Treasury's outstanding SEK250 million medium term notes (MTNs)
which mature after the New Credit Facility will remain
outstanding and will be assumed by Mineral. Part of the proceeds
of the directed offering will be used to prepay principal
outstanding under the MTNs.
The MTNs will be secured pari passu with the debt outstanding
under the New Credit Facility by the security provided under the
New Credit Facility.
New Hedging Lines of Credit
The Company has commitments from certain of its lenders to
provide additional lines of credit to permit the Company to
implement a foreign currency hedging program covering up to 60%
of three years of Swedish krona denominated exposure
(approximately $600 million) at current rates.
The new hedging lines of credit will be secured in priority to
the MTNs and the debt outstanding under the New Credit Facility
by the security provided under the New Credit Facility.
Sale of Norzink
On April 17, 2001, the Company's subsidiary, Boliden Mineral AB,
and Rio Tinto completed the sale to Outokumpu Oyj of their
respective 50% interests in Norzink A/S, the owner and operator
of the Norzink zinc smelter and refinery and aluminum floride
plant located near Odda on the west coast of southern Norway, for
a total cash purchase price of $180 million. The Company realized
net proceeds of $85 million and a net gain before tax of $34.4
million on the sale.
Sale of Chilean Assets
On June 8, 2001, the Company executed and delivered the
definitive agreement relating to the sale of its interests in
Compania Minera Lomas Bayas and Compania Boliden Westmin Chile
Limitada, the owners of the Lomas Bayas copper project and the
adjacent Fortuna de Cobre deposit (Chilean Assets), to certain
subsidiaries of Falconbridge Limited. The transaction closed in
escrow on July 20, 2001 and is scheduled to be completed on July
26, 2001. The Company will realize net proceeds of $62.3 million
on the sale. $25 million of the net proceeds will be used to
repay Tranche C and other debt under the New Credit Facility and
the balance will be used for general corporate purposes,
including establishing the Reserve Accounts required to be
established and maintained by Mineral under the New Credit
Facility.
Resignation and Appointment of President
On June 11, 2001, the Company's President and Chief Executive
Officer, Thomas Cederborg, announced his decision to resign as an
officer and director of the Company following completion of the
equity offerings. On June 27, 2001, the Company announced that
Jan Johansson has been appointed President and Chief Executive
Officer of the Company effective August 1, 2001.
Mr. Johansson, a native of Sweden, has many years experience in
the Swedish and international business communities, most recently
as Senior Vice-President, Telia AB (the Swedish
telecommunications company) and Senior Executive Vice-President
of Vattenfall AB (a major Scandinavia power company).
All dollar amounts are in United States dollars
BOLIDEN LIMITED: Concludes Lomas Bayas Sale To Falconbridge
-----------------------------------------------------------
Boliden Limited on Thursday concluded the sale of its Lomas Bayas
copper mine and adjacent Fortuna de Cobre copper deposit in Chile
to Falconbridge, according to a report in Canada NewsWire.
Falconbridge assumes 100 percent ownership.
Terms of the Agreement include the payment by Falconbridge of:
a) US$175 million plus cash balances (US$2.1 million) less
outstanding third-party debt obligations (US$112.7 million); plus
b) US$15 million if Falconbridge exercises its right to retain
the Fortuna de Cobre copper deposit before the fifth anniversary
of closing.
The Lomas Bayas copper mine, which is located in the Atacama
dessert of Northern Chile, has been in production since 1998. The
operation produced 51,292 tonnes of copper cathode in 2000.
Falconbridge expects to expand production up to its full capacity
of 60,000 tonnes annually. This project will increase
Falconbridge's total annual copper output by 20% to more than
300,000 tonnes.
===============
C O L O M B I A
===============
PAZ DEL RIO: Confronting Next Crisis With Sales At 50% of Target
----------------------------------------------------------------
Following a successful comeback from the brink of bankruptcy,
Colombian steel maker Paz del Rio is now faced with a new
challenge since politicians took over its administration,
according to a company source in a report Thursday in Business
News Americas.
"We used to have monthly sales of US$6 million, but this month
sales are close to US$3 million, so we have returned to the same
crisis as in 1999 when liquidation was decreed," the source said.
"We demonstrated the company was viable as, after nine years [of
losses], we achieved operational profits. But a new
[departmental] governor arrived and, seeing the company could
generate funds for the department, took control," the source
added.
Changes at the company in Sogamoso, in central Colombia's Boyaca
department, included new management moving administrative
personnel to operational jobs, while changes in sales strategy
have led to revenue falls. "Now we are in a difficult situation,"
the source said.
SEVEN SEAS: Closes $45 Million Financing
----------------------------------------
Seven Seas Petroleum Inc. (Amex: SEV) announced July 24 that
after a one-day delay of the scheduled closing, it has completed
a $45 million financing with Chesapeake Energy Corporation (NYSE:
CHK) and a group of qualified investors led by Robert A. Hefner
III, the Chairman and Chief Executive Officer of Seven Seas.
Chesapeake Energy Corporation purchased $22.5 million of 12%
senior secured notes with detachable warrants to purchase
approximately 12.6 million shares of Seven Seas common stock at
an exercise price of approximately $1.78 per share.
The group of qualified investors purchased $22.5 million of 12%
short-term secured notes. As previously announced, the Company
will file a registration statement as soon as possible with the
U.S. Securities and Exchange Commission (SEC) for a shareholders
rights offering for the sale of $22.5 million of 12% senior
secured notes with detachable warrants to purchase approximately
12.6 million shares of Seven Seas common stock. Proceeds from
the rights offering will be used to redeem the $22.5 million
short-term secured notes sold to the qualified investor group.
The details concerning an offer to shareholders will be set forth
in the registration statement. Additional information on the
sale of notes to Chesapeake and the group of qualified investors
is available on a Form 8-K filed with the SEC on July 18, 2001.
"With the $45 million in hand, we can continue the development of
the Guaduas Oil Field and commence the subthrust exploration well
after we receive the one remaining environmental permit. Our
target is to commence drilling in the fourth quarter of the
year," stated Mr. Hefner.
Seas Petroleum Inc. is an independent oil and gas exploration and
production company operating in Colombia, South America. The
Company's primary emphasis is on further exploration, development
and production of the Guaduas Oil Field, located in Colombia's
prolific Magdalena Basin.
SEVEN SEAS: Provides Operations Update; 7,200 Bls Per Day
----------------------------------------------------------
Seven Seas Petroleum Inc. (Amex: SEV) announced Thursday that
gross production from the Guaduas Oil Field has increased to
approximately 7,200 barrels of oil per day, 3300 barrels per day
net to Seven Seas. The previously announced problem with the
heater treater has been fixed. The Tres Pasos 1-W, Tres Pasos 1-
E, and El Segundo 5-S wells are now on production along with the
El Segundo 1-N, El Segundo 1-S and El Segundo 2-E wells. The
recently completed El Segundo 5-S well is producing approximately
2,200 barrels of oil per day (of the 7,200 total amount)
following the replacement of the electric submersible pump. The
El Segundo 2-E is producing about 500 barrels of oil per day of
the total amount, but also about 400 barrels per day of water
from the formations above the Cimarrona that have not been
successfully shut off. The Company will continue to monitor the
production from the El Segundo 2-E before commencing additional
remedial operations. The Tres Pasos 5-W well has resumed
drilling and Seven Seas expects to have initial completion and
testing results in about three weeks.
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G U A T E M A L A
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EMPRESARIAL/METROPOLITANO/PROMOTOR: Liquidation Starts In August
----------------------------------------------------------------
Deputy banking regulator Ergas Barquin expects the Guatemalan
Central Bank to recover between 25 to 30 percent of the US$200
million it spent to reimburse depositors of three intervened
banks, Empresarial, Metropolitano and Promotor, reported Business
News Americas Thursday. The banking regulatory authority should
start at the end of August the liquidation of these three banks,
which were intervened due to liquidity, solvency and
mismanagement issues. The sale of their assets should cover a
portion of the deposit bailout, Barquin said.
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M E X I C O
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CINTRA: Bidders Wearing Poker Faces About Future Plans
---------------------------------------------------------
Mexican potential bidders, Olegario Vazquez Rana, Isaac Saba and
Jose Serrano, in government-owned holding company Cintra's
forthcoming privatization still refuse to divulge any of their
plans, reported Mexico City daily Reforma on Thursday. They have
not expressed their interests nor outlined their intentions to
the public yet.
In a related story, Merrill Lynch, which was retained earlier
this year to manage the auction process, awaits the Mexican
Communications and Transport ministry's submission of the final
version of the new airline industry policy to the country's
opposition-controlled Congress before it will be able to
establish the conditions of the privatization. The Congress
earlier this year stated that the privatization process is to
begin only when the administration of President Vicente Fox has
designed a long-term airline industry policy.
CORPORACION GEO: Registers 47.4% Increase In 2Q Net Profits
-----------------------------------------------------------
Mexican housing construction company Corporacion Geo posted
revenues of 1.024 billion pesos, gross profits of 262 million
pesos and operating profits of 141.7 million in the second
quarter of this year, South American Business Information
revealed Thursday. Its net profits during the period rose 47.4
percent, to 51.2 million pesos, while net debt was reduced by
16.7 percent.
GEO sold 5,062 homes in the second quarter of 2001, and to date,
it has built over 130,000 homes housing over 750,000 people. It
recently took measures to assure against a hostile takeover. The
group has led the sector for 27 years and has been trading on the
Mexican Bolsa for 7 years.
GALEY & LORD: Ceasing Garment Operations In Mexico To Cut Costs
---------------------------------------------------------------
Because of the continuing difficult business environment, Galey &
Lord, Inc. (NYSE: GNL) announced today that its Board of
Directors has approved the following actions:
1. The discontinuation of Galey & Lord Service Company, N.A., the
company's garment making operations in Mexico.
2. The consolidation of its greige fabrics operations which
includes the closure of its Asheboro, North Carolina weaving
facility and Caroleen, North Carolina spinning facility.
These operations will be phased out over the next several months.
In addition to these actions, the Company has undertaken
reductions of its salaried overhead of approximately 5%.
The Company anticipates pretax charges associated with these
actions to be between $70 million and $80 million, the majority
of which are related to fixed asset and goodwill impairments and
are non-cash. Charges related to these actions will occur
principally in the September quarter 2001.
Galey & Lord is a leading global manufacturer of textiles for
sportswear, including cotton casuals, denim and corduroy, as well
as a major international manufacturer of workwear fabrics. The
Company also is a manufacturer of dyed and printed fabrics for
use in home fashions.
GRUMA SA: Bread Business May Be Sold If Not Profitable By YE01
--------------------------------------------------------------
Mexico's largest producer of corn flour for tortillas Gruma SA
might sell its bread business if it still fails to generate
profits at the end of this year, Bloomberg reported Thursday.
According to Jose Maria Gonzalez, Gruma chief of staff, the bread
business is now under "total and complete review" due to losses
since it commenced operations in late 1998 with a $50-million
plant near Monterrey.
"What I can say without hesitation is that this company by the
end of this year will be either turned around or disposed of,"
Gonzalez said.
Gruma has seen losses on bread partly because of high marketing
costs to carve out share from Grupo Bimbo, which was Mexico's
only bread maker before Gruma entered the market.
Gruma rolled out its bread products in five northern states and
had planned to eventually take up to a 35 percent share of the $1
billion market for packaged bread in Mexico. Bimbo fought back
with lower bread prices where Gruma was trying to gain a toehold
and the company was only able to win 12 percent of the Monterrey
market by 1999, Gruma had said.
"It's been pretty much a bleeding war," said David Herzberg, a
debt analyst with Bear, Stearns & Co. Gruma's operating loss at
the bread unit was $11.7 million for the first half of this year,
Herzberg said. Last year, the losses were about $30 million.
GRUPO PULSAR: Still Talking To Spanish Media On El Financiero
-------------------------------------------------------------
Talks between Spanish media company Grupo Recoletos and Mexico's
Grupo Pulsar over the Monterrey-based conglomerate's sale of a
30-percent stake in Mexican financial newspaper El Financiero is
now in the advanced stages, Mexico City daily Reforma reported
Thursday. But even if the acquisition were to go ahead, the
control of El Financiero, a respected financial daily, would
remain in the hands of the Mexican investors.
Meanwhile, Pulsar is now also in the process of divesting its
holdings in Grupo Imagen, a radio broadcasting company controlled
by brothers Jose Luis and Alejandro Fernandez.
GRUPO TELEVISA: 2Q01 Results; EBITDA Down 26.5%; Net Income Up
--------------------------------------------------------------
- Cost Reduction Plan On Schedule
- Net Sales increase 3.9% without the Effect of Political
Advertising
- Grupo Televisa's net sales decreased 8.0% to Ps. 4,745,646
thousand in the second quarter of 2001 from Ps. 5,160,103
thousand in the second quarter of 2000. Comparison without
political advertising reflects a real growth in net sales of
3.9% and a real growth of 16.5% in the Television Broadcasting
segment.
- Total costs of sales decreased 4.7% in the second quarter of
2001, due to the implementation of the cost reduction program.
Operating expenses also decreased 7.7%.
- EBITDA margin for 2001's second quarter decreased to 26.5%,
due to the lower sales attributed to the political campaigns
in 2000.
- Grupo Televisa reported a net income of Ps. 236,721 thousand in
the second quarter of 2001 compared to a loss of Ps. 1,739,909
thousand in the second quarter of 2000.
- National urban ratings and audience share reported by the
Instituto Brasileno de Opinion Publica y Estadistica (IBOPE)
registered that second quarter ratings were 27.3 from sign-on
to sign-off and market share was 73.3%. Televisa aired 44 of
the 50 most popular programs in the semester. Additionally,
the top 8 telenovelas with the best ratings were all produced
by Televisa.
CONSOLIDATED RESULTS
Grupo Televisa, S.A. (NYSE: TV) on Thursday announced results for
the second quarter ended June 30, 2001. Results, which are
attached, are in thousands of Mexican Pesos, in accordance with
Mexican GAAP, and have been adjusted to Pesos in purchasing power
as of June 30, 2001.
CONSOLIDATED RESULTS
Grupo Televisa, S.A. (NYSE: TV) on Thursday announced results for
the second quarter ended June 30, 2001. Results, which are
attached, are in thousands of Mexican Pesos, in accordance with
Mexican GAAP, and have been adjusted to Pesos in purchasing power
as of June 30, 2001.
Three Months Ended June 30,
2001 2000
Net Sales* Ps. 4,745,646 Ps. 5,160,103
Cost of Sales 2,785,718 2,923,252
Gross Profit 1,959,928 2,236,851
Selling Expenses 356,471 392,597
Administrative Expenses 344,265 366,428
Operating Expenses 700,736 759,025
Operating Cash Flow** 1,259,192 1,477,826
Operating Income 939,871 1,192,152
Integral Cost of Financing 98,010 529,393
Net Income (Loss) 236,721 (1,739,909)
* See "-Results by Business Segment," for information
regarding segment results.
** Operating Cash flow is defined as operating income before
depreciation and amortization.
Net sales
Net sales decreased 8.0% to Ps. 4,745,646 thousand in the second
quarter of 2001 from Ps. 5,160,103 thousand in 2000's second
quarter. The decrease in net sales is attributed to three
factors. First, during the second quarter of last year, we
received a total of Ps. 591,123 thousand in advertising revenue
from the Federal and local political campaigns that ended with
the elections in July of 2000. The comparison without this non-
recurring revenue registers an increase of 3.9% in net sales.
Second, the industry-wide slowdown in economic activity has
translated into lower sales in the Radio, Publishing
Distribution, Music Recording and Publishing segments. And third,
the strong peso and the translation effect of foreign currency
denominated sales had a negative impact in our Programming
Licensing, Publishing and Music Recording segments (excluding the
translation effect, net sales only decreased 4.4% or Ps. 226,443
thousand). For additional information regarding segment results,
see "-Results by Business Segment."
Cost of sales
Costs of sales decreased 4.7% to Ps. 2,785,718 thousand in the
second quarter of 2001 from Ps. 2,923,252 thousand in 2000's
comparable period. The decrease reflects the savings achieved
from our cost reduction program in the Television Broadcasting
segment and the closing of "ECO".
Operating Expenses
Operating expenses, including corporate expenses, decreased 7.7%
to Ps. 700,736 thousand in the second quarter of 2001 from Ps.
759,025 thousand reported in the same period of 2000, even though
we had an increase in employee wages of 10.5%. The cost reduction
program facilitated this decrease in operating expenses, which
reflects a decline of 9.2% in selling expenses, as a result of
lower expenses in the Publishing, Cable Television, Television
Broadcasting, Programming for Pay Television and Music Recording
segments, and a decrease of 6.0% in administrative expenses, due
to lower expenses in the Television Broadcasting, Programming
Licensing and Publishing Distribution segments.
Operating Cash Flow
Operating cash flow decreased to Ps. 1,259,192 thousand in the
second quarter of 2001 from Ps. 1,477,826 thousand reported in
2000's comparable period. Operating cash flow margin for the
second quarter of 2001 decreased to 26.5% from 28.6% in the same
period of last year, primarily as a result of lower net sales.
This decrease was partially offset by the reduction in costs and
operating expenses registered in the quarter.
Integral Cost of Financing
Integral cost of financing for the three months ended June 30,
2001 and 2000, consisted of (in thousands of Mexican pesos):
Increase
2001 2000 (decrease)
Interest expense Ps. 262,587 Ps. 304,681 Ps.(42,094)
Restatement of investment
units ("UDIs") 44,433 39,230 5,203
Interest income (265,931) (279,024) 13,093
Foreign exchange gain-net (118,652) 269,429 (388,081)
Foreign exchange loss from
forward contracts 45,946 88,706 (42,760)
Loss from monetary position 129,627 106,371 23,256
Ps. 98,010 Ps. 529,393 Ps. 431,383)
Integral cost of financing decreased 81.5% to Ps. 98,010
thousand during the second quarter of 2001 from Ps. 529,393
thousand during 2000's comparable period. This decrease was
primarily due to a net foreign exchange gain in the second
quarter of 2001 as compared to a net foreign exchange loss in
2000's second quarter, due principally to the 4.4% appreciation
of the Mexican peso exchange rate in respect to the U.S. dollar
in the second quarter of 2001, as compared to a 5.8% depreciation
in the second quarter of 2000; as well as lower interest expense
during the second quarter of 2001 as compared to 2000's second
quarter, due principally to the refinancing of the Company's
long-term debt in the second quarter of 2000, which decreased
the Company's weighted average annual interest rate for its
outstanding debt from 13% to 8.8%, and a reduction in foreign
exchange loss from forward contracts as a result of the
settlement of some of these contracts in the second half of 2000
and the first half of 2001.
Non-recurring Items
Non-recurring items amounted to Ps. 318,643 thousand in the
second quarter of 2001, which are basically related to personnel
layoffs in connection with the Company's cost reduction program,
which included a cutback of 750 jobs.
Other Expense-Net
Other expense -- net amounted to Ps. 155,142 thousand in the
second quarter of 2001, as compared to Ps. 282,806 thousand in
2000's comparable period. Other expense for the second quarter of
2001 primarily reflected the amortization of goodwill,
professional services in connection with certain litigation, and
donations.
Equity in Losses of Affiliates
Equity in losses of affiliates decreased to a loss of Ps. 114,870
thousand in the second quarter of 2001 from a loss of Ps. 365,265
thousand in 2000's comparable period. The decrease primarily
reflected the reduction of equity losses recognized by the
Company in its DTH joint venture in Mexico, partially offset by a
reduction in equity gains in Univision and Megavision (Chile) in
the second quarter of 2001 as compared with 2000's second
quarter. In 2001, the Company adopted the strategy of not
recognizing additional equity losses for its DTH joint venture in
Mexico in addition to the net liability recognized in connection
with this investment, which balance as of June 30, 2001, amounted
to Ps. 1,259,763 thousand.
Minority Interest
The Company's minority interest amounted to Ps. 15,106 thousand
for the second quarter of 2001, as compared to Ps. 100,545
thousand for 2000's comparable period. The decrease primarily
reflected the Company's acquisition of a 35% interest stake in
the Publishing segment in the fourth quarter of 2000, as well as
a reduction in net income in the Cable Television segment and the
nationwide paging business.
Net Income
In the second quarter of 2001, the Company had a net income of
Ps. 236,721 thousand compared to a net loss of Ps. 1,739,909
thousand in 2000's comparable period. The variance of Ps.
1,976,630 thousand is due principally to:
- A reduction in non-recurring charges of Ps. 1,233,022 thousand,
primarily due to the costs incurred in connection with the
refinancing of the Company's long-term debt in the second quarter
of 2000;
- A decrease in integral cost of financing of Ps. 431,383
thousand;
- Lower equity losses of affiliates of Ps. 250,395 thousand;
- A decrease in other expenses of Ps. 127,664 thousand;
- Lower provisions for taxes of Ps. 101,054; and
- A reduction of minority interest of Ps. 85,439.
These variances were partially offset by a decrease in operating
income of Ps. 252,281 thousand.
Television Broadcasting
The decrease in Television Broadcasting sales of 5.9% is
attributable to the absence of Federal and local political
campaign advertising sales. In the second quarter of last year,
political campaigns were at their peak, accounting for Ps.
566,023 thousand as of June 30, 2001. A comparison without the
effect of political campaigns results in a real growth of sales
of 16.5% in real peso terms due to the ongoing effort to increase
our advertising rates.
Television Broadcasting's operating income decreased 11.2% as a
result of lower sales partially offset by a reduction in
operating expenses, due to lower production costs in the national
news division, in telenovelas and in special events. It is
important to mention that Ps. 22.5 million in 2001 and Ps. 67.9
million in 2000 of fixed costs of ECO were absorbed in this
segment, creating an impact on the EBITDA margin of Television
Broadcasting.
Programming for Pay Television
The costs related to ECO are not considered in this segment as of
May 2001. Certain fixed costs of ECO that were not eliminated
(the studios and some correspondants) are absorbed by the
national news division in the Television Broadcasting segment,
and the programming costs are recognized as Disposed Operations.
The increase in Programming for Pay Television sales of 3.9% was
due to higher advertising sales as well as a higher volume of
signals sold to the local markets. This increase was partially
offset by lower sales of programming services sold to pay
television entities servicing Spain and Latin America.
Programming for Pay Television's operating income increased by
Ps. 9,283 thousand due to higher advertising revenues and a
reduction in the cost of sales and in depreciation expense.
Programming Licensing
The decrease in Programming Licensing sales of 16.8% was due to
the translation effect of foreign-currency denominated sales of
approximately Ps. 52,143 thousands, as well as lower revenues
from programming exports to Europe, Asia and Africa. The
royalties from Univison slightly decreased 0.4% to US$ 20.5
million in the second quarter of 2001 from US$ 20.6 million in
2000's comparable period.
Programming Licensing's operating income decreased Ps. 54,036
thousand reflecting the decrease in revenues partially offset by
lower costs and operating expenses.
Publishing
Publishing sales totaled Ps. 407,792 thousand, down 9.3% due to
lower sales in the domestic and international market, derived
from slower economic activity and the negative impact of the
translation effect of foreign-currency denominated sales abroad
of approximately Ps.34,652 thousand. In the same quarter last
year, we sold 25.2 million magazines compared to 21.6 million
this year, including in the US and Latin America. The lower
volume was influenced by increased prices between 20% and 25% in
most of our magazines, at the beginning of the year. According to
IBOPE, the Publishing division has a 39% advertising market
share.
Publishing's operating income decreased by 22.7%, reflecting
lower net sales. However, this decrease was partially offset by a
decrease in the cost of sales and operating expenses.
Publishing Distribution
The decrease in Publishing Distribution sales of 3.9% was due
primarily to the translation effect of foreign-currency
denominated sales of approximately Ps. 16,101 thousand, lower
sales of magazines published by the Company in the domestic and
international market and lower distribution of magazines
published by third parties in the international market. These
decreases were partially offset by higher sales from the
distribution of magazines published by third parties in Mexico
and higher revenues from the distribution of certain products
abroad (primarily telephone cards and tax return forms).
Distribution's operating income decreased to Ps. 7,426 thousand
reflecting the decrease in sales, partially offset by lower
distribution costs and operating expenses.
Music Recording
The decrease in Music Recording sales of 24.8% was due primarily
to lower industry-wide music sales, the translation effect of
foreign-currency denominated sales of approximately Ps. 55,402
thousand and lower revenues from catalog units in the domestic
and international market. This decrease was partially offset by
releases in the domestic and international market of Marco
Antonio Solis, Conjunto Primavera and Banda el Recodo.
Music Recording's operating income decreased 15.3%, reflecting a
decrease in revenues, which was partially offset by lower
production costs, artist promotions and royalties paid to
artists. Fonovisa maintains its leadership in the US Hispanic
Record Industry with a 29% market share. During the first
semester of 2001, Fonovisa obtained 30% of the "Top 40" positions
in the US Hispanic charts.
Cable Television
The increase in Cable Television sales of 11.4% was primarily due
to an increase in basic subscribers to approximately 422,000 and
digital subscribers to over 67,000 in the second quarter of 2001,
as compared to over 407,000 and 55,000 respectively in the first
quarter of 2001, as well as to new services launchings.
Cable Television's operating income increased 54.4% due to higher
revenues and lower operating expenses. This increase was
partially offset by higher signal costs.
Radio
The decrease in Radio sales to Ps. 65,074 thousand was primarily
due to lower revenues from advertising time sold and negative
market conditions in the country's radio industry.
Radio's operating income decreased to a loss of Ps. 62 thousand
as a result of lower revenues and higher costs of sales.
In May 2001, the Mexican Antitrust Commission ratified its
opposition to the merger with Grupo Acir, at which point we and
the shareholders of Grupo Acir filed a "juicio de amparo" to seek
an injunction against this ruling in the Mexican federal courts.
We expect to have a ruling early next year.
Other Businesses
The increase in Other Businesses sales of 3.0% was primarily due
to the distribution of feature films and to the operation of the
horizontal Internet portal. This increase was partially offset by
lower revenues from the paging business and sporting events.
Other Businesses' operating loss increased to a loss of Ps.
104,773 thousand due primarily to an increase in costs related to
the distribution of feature films and the incorporation in May
28, 2000 of EsMas.com, our horizontal Internet portal. These
costs were partially offset by lower costs in sporting events and
in the paging subsidiary.
After twelve months of operations, EsMas.com has positioned
itself as one of the leaders in the Spanish speaking portal
arena. With over 600,000 registered users, over 9 million visits
per month and more than 20 million multimedia files requested
each month, EsMas.com is today a preferred destination for kids,
entertainment, sports and news content. EsMas.com has become a
prime destination with over 12 pages viewed per visit, and
according to Alexa Research EsMas.com was ranked among the three
most visited sites in Mexico during May 2001.
DIRECT TO HOME SATELLITE SERVICES
Sky
The Company's Direct to Home Satellite Services ("DTH") continues
to achieve strong subscriber growth under highly competitive
market conditions. During the second quarter of 2001 Innova added
approximately 30,800 net new customers to its gross active
subscriber base as compared with 54,600 in the previous quarter.
Gross active subscribers increased 4.8% from 644,900 as of March
31, 2001 to approximately 675,600 as of June 30, 2001. The gross
active subscriber base as of June 30, 2001 represents a 35.1%
increase, or a net gain of approximately 175,600 gross active
subscribers since June 30, 2000.
Innova continues to lead the Mexican DTH industry with
approximately 73% market share, as measured by the number of
gross active subscribers. Innova reported consolidated net
revenues of Ps. 759.2 million for the second quarter and Ps.
1,443.1 million for the six months ended June 30, 2001. Net
revenues for the second quarter and year-to-date increased by Ps.
195.0 million or 35% and Ps. 344.7 million or 31% respectively as
compared to the same periods of last year, due to the strong
growth of the subscriber base.
EBITDA of Ps. 196.0 million for the second quarter and Ps. 283.4
million for the six months ended June 30, 2001 improved by Ps.
256.6 million and Ps. 458.3 million respectively, as compared to
negative EBITDA of Ps. 60.6 million and Ps. 174.9 million for the
same periods of 2000.
Capital Expenditures, Acquisitions and Investments
In the second quarter of 2001, the Company had invested
approximately U.S.$ 40.8 million in property, plant and equipment
as capital expenditures for acquisition of technical,
transmission and computer equipment, of which approximately U.S.$
8.5 million are related to Cablevision. Additionally, in this
quarter we have invested U.S.$ 33.5 million in our DTH ventures
(U.S.$ 10.5 million in Mexico in the form of long-term loans and
U.S.$ 23.0 million in South America).
Debt
As of June 30, 2001, the Company's long-term indebtedness
amounted to Ps.10,352,990 thousand, and its current notes payable
were Ps. 376,157 thousand, as compared to Ps. 9,677,499 thousand
and Ps. 332,438 thousand, respectively, as of June 30, 2000.
On May 15, 2001, the Company redeemed all of the remaining Senior
Discount Debentures outstanding which were originally due in
2008, at 106.625% of their principal amount of approximately
U.S.$32.5 million in accordance with the terms of the related
debt securities indenture. The premiums for redeeming this debt
amounted to approximately U.S.$2.2 million (approximately
Ps.20,500 thousand), and were accounted for, together with
related costs, as a non-recurring charge of Ps. 31,150 thousand
in the Company's results for 2001.
This U.S. dollar denominated debt was refinanced through an
unsecured Mexican peso loan of Ps.320,000 thousand, granted by a
commercial Mexican bank with principal and interest thereof
payable on a quarterly basis through May 15, 2006, and bearing an
annual interest rate of the Mexican interbank rate plus 30 basis
points.
Television Ratings and Market share.
National urban ratings and audience share data produced by IBOPE,
certify that total Television market share was 71.5% in weekday
prime time; 71.0% from 16:00 to 23:00; and 73.3% from sign-on to
sign-off. Total Televisa ratings are 43.3 points in weekday prime
time; 38.1 points from 16:00 to 23:00; and 27.3 points from sign-
on to sign-off. In the past semester, we aired 44 of the 50 most
popular programs.
Through Channel 2, Televisa continues to transmit the highest
rated telenovelas. The most popular telenovelas were: Amigas y
Rivales, El Derecho de Nacer, El Noveno Mandamiento, La Intrusa,
Mujer Bonita, Sin Pecado Concebido, Aventuras en el Tiempo, and,
Esmeralda, all produced by Televisa.
Outlook for 2001.
Comparison between the third quarter of 2001 and 2000 will be
affected by the 2000 Summer Olympic Games and the slowdown in the
advertising market.
At this time we are projecting that for the full year, Television
Broadcasting revenues will be in the range of flat growth to a 3%
decline, based on the US $1 billion in upfront sales that has
already been committed for 2001.
Taking the cost reduction plan into account, we expect costs for
2001 to be stable compared with 2000 on an annualized basis.
HYLSAMEX: Posts 1H01 Net Loss Of P$248M; Sales Down 27%
-------------------------------------------------------
Hylsamex, a steel maker subsidiary of Mexican industrial holding
company Grupo Alfa, posted a 248.3-million-peso net loss for the
first-half of this year, compared to a net loss of 205 million
pesos in the same period in the previous year, according to a
report Thursday in Mexico City daily Reforma.
During the second quarter, the steel maker registered sales of
5.61 billion pesos, down 27.1 percent from a year earlier.
Operating profit was down 95.1 percent, to 48.2 million dollars.
According to Hylsamex, integrated financial costs for the period
were negative, with a surplus of 70.1 million dollars, as
compared to integrated financial costs of 809.3 million pesos in
the same period last year.
SAVIA: Seminis 3QFY201 Results; Loss Up Due To Restructuring
------------------------------------------------------------
In a company press release, Seminis, Inc. (Nasdaq: SMNS) the
world's leading developer, producer and marketer of vegetable and
fruit seeds, announced Thursday results for the three-month
period ended June 29, 2001.
Alfonso Romo, Chairman and CEO of Seminis, commented: "I am
pleased to report our financial results for the third quarter
2001. Our operating numbers demonstrate that we are reaching a
healthy and profitable position as a result of our internal re-
engineering and our ongoing Global Optimization Plan. The cash
flow generated during this quarter not only proves that the
Company is self-sufficient, but allowed us to reduce our
liabilities, including a of $11.5 million reduction in bank
debt."
NET SALES
Net sales for the quarter were $106.4 million compared to $114.4
million last year. Excluding $5.7 million of sales in the third
quarter 2000 from discontinued operations (divestitures of non-
core businesses) and a $5.2 million negative currency impact
against the U.S. dollar, sales for the quarter increased 3
percent, from $108.6 million to $111.4 million.
GROSS MARGINS
As announced on June 1st, and as a further initiative related to
Seminis' Global Optimization Plan, the Company recorded a non-
cash inventory write-off of $53.9 million. Excluding the write-
offs recorded in this year's and last year's third quarters,
gross margin improved to 60.2 percent from 53.7 percent.
Eugenio Najera said: "The initiatives in place will allow us to
properly control the inventory levels of the Company's inventory
levels. Going forward, we expect to be within industry write-off
standards."
OPERATING EXPENSES
Total operating expenses for the period, including restructuring
charges of $13.8 million in connection with the consolidation of
worldwide facilities and headcount reduction, reached $74.8
million. This represents a decline in operating expenses of $8.9
million, or 10.6 percent, from the same quarter last year.
Excluding the restructuring charges recorded in both periods,
operating expenses for the quarter declined year-over-year by
$8.5 million, or 12 percent, to $61 million. The actions taken to
optimize costs and expenses have been executed with careful
consideration of the Company's medium and long term growth.
OPERATING INCOME
Excluding non-recurring restructuring charges and non-cash
charges for inventory write-offs in both periods, Seminis
recorded operating income of $3.2 million for the quarter,
compared with a loss of $8 million for the same period last year.
Including these charges, the Company posted a loss from
operations of $64.5 million compared with a loss of $28.9 million
the same quarter last year.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) for the quarter, excluding inventory write-offs,
restructuring and non-recurring charges, were $14.5 million,
compared with $3.9 million for the same quarter last year, an
increase of 3.7 times.
Eugenio Najera, President and COO of Seminis, commented, "In line
with the second stage of the Global Optimization Plan, we decided
to accrue $12 million for restructuring costs related to its
continued consolidation of facilities worldwide and headcount
reduction that will ultimately bring us annual savings of
approximately $9 million. Also, as part of our Plan, we recorded
a non-cash charge of $53.9 million for inventory write-offs to
rationalize the Company's product portfolio and to comply with
more stringent seed quality standards. These actions will allow
us to continue showing improvements in our cash generating
capabilities and operating numbers as we move forward."
NET INCOME
The Company posted a net loss of $64.5 million for the quarter,
compared with a loss of $19.2 million for the same period last
year. Excluding non-recurring charges, non-cash inventory write-
offs and other non-recurring income, net loss was $8.2 million
compared to a loss of $15.2 million last year.
Eugenio Najera, President and COO, said "Going forward, our
bottom line will continue to benefit from more efficient
operations and a healthier financial structure. Accounts
receivable days outstanding in our seed business have been
reduced by 24 days compared with the same period last year. Our
seed purchase plans are in line with our sales and turnover
objectives for the next two years, resulting in a properly
managed inventory level. Additionally, the Company is no longer
in a liquidity crunch, and has been able to reduce its accounts
payable by $8.7 million during this quarter. Also, during the
quarter, the Company was able to reduce its outstanding bank debt
by $11.5 million."
BANK DEBT
As announced on June 1, 2001, after its lending banks agreed to
the Company's business plan, Seminis obtained a permanent
amendment to the terms and conditions under its outstanding $310
million syndicated credit facility.
Under the agreement, the maturity date has been established at
December 2002, with interim principal payments of $35 million due
in 2001 and $49 million in 2002. The Company expects to fund
these principal payments through improved operating cash flows
and the sale of non-strategic assets.
Alfonso Romo, concluded: "So far, the Company has exceeded the
requirements set forth in the business plan presented to our
lending banks. It is encouraging to see the efforts of all
Seminis employees being materialized into positive results both
at the bottom line and in terms of our cash flow generation."
About Seminis
Seminis (Nasdaq: SMNS) is the largest developer, producer and
marketer of vegetable seeds in the world. The company uses seeds
as the delivery vehicle for innovative agricultural technology.
Its products are designed to reduce the need for agricultural
chemicals, increase crop yield, reduce spoilage, offer longer
shelf life, and create better tasting foods and foods with better
nutritional content. Seminis has established a worldwide presence
and global distribution network that spans 120 countries. Seminis
is a majority owned subsidiary of Savia (NYSE: VAI), a Mexico-
based leading conglomerate.
VITRO: Unaudited 2Q201 Results; Reorg Efforts Working
-----------------------------------------------------
Vitro, S.A. de C.V. announced Thursday unaudited financial
results for the three-month period ended June 30, 2001.
Second Quarter of Year 2001 Highlights:
Sales
Consolidated net sales for the second quarter of 2001 reached
US$784 million, representing an increase of 7.5% in dollar terms,
compared with US$729 million for the second quarter of 2000. In
peso terms, sales reached Ps$7,183 million, representing a slight
1.6% decrease compared with Ps$7,298 million for the second
quarter of 2000. Glass Containers, Flat Glass and Acros Whirlpool
were the main drivers of Grupo Vitro's sales performance for the
quarter.
EBITDA
Grupo Vitro's EBITDA was maintained at a stable level in dollar
terms on a YoY basis, notwithstanding the continued strength of
the peso against the U.S. dollar and the slowdown of the Mexican
and United States economies. IIQ'01 EBITDA was US$148 million, a
3.4% increase against the same quarter last year. For the first
semester EBITDA remained at the same level; US$278 million during
IH'01 vs. US$280 million during IH'00.
Debt Levels
Debt was reduced on a quarter over quarter basis by US$17
million, by using internally generated funds. Additionally, the
Company's financial ratios improved on a quarter over quarter
basis; financial leverage (Debt/EBITDA) stood at 2.8 times, while
interest coverage was 3.3 times as of June 30, 2001.
Net Income
The Company posted a Net Majority Income of US$36 million for the
quarter, which compares favorably with the Net Majority Loss for
IIQ'00 of US$18 million.
All figures provided in this communication are in accordance with
Generally Accepted Accounting Principles in Mexico. All figures
are unaudited and are presented in constant Mexican pesos as of
June 30, 2001. Dollar figures are in nominal US dollars and are
obtained by dividing nominal pesos for each month by the
applicable exchange rate as of the end of that month.
Consolidated Results
Sales
The positive sales performance in U.S. dollar terms, when
compared against the same period of last year, was driven mainly
by the businesses of Glass Containers, Flat Glass and Acros
Whirlpool. At Glass Containers and Acros Whirlpool, volume
increases were the main drivers for the growth in sales, both
domestically and in the export markets, offsetting price
pressures. Sales in peso terms at the Flat Glass unit remained
practically at the same level on a YoY basis, overcoming the
pressure that a strong peso puts on prices and the slowdown of
the U.S. and Mexican economies. At the same time, Flat Glass was
able to increase sales in dollar terms, mainly as a result of the
consolidation of Cristalglass, the recently acquired European-
based processor and distributor of construction glass. In the
case of Glassware and Diverse Industries, sales for the quarter
decreased YoY, as result of a decline in demand in the retail and
industrial sectors in connection with the slowdown of the U.S.
and Mexican economies, and, in the specific case of Diverse
Industries, as a consequence of the closing last year of a Joint
Venture with General Electric (MEF), which accounted for 7% of
sales of this unit for the IIQ'00.
EBIT and EBITDA
EBIT margins for the quarter increased by 50 basis points when
compared to IQ'01, driven mainly by operating improvements at the
Glass Containers and Diverse Industries business units. YoY
margins have continued to decline as a result of lower sales and
pricing pressures in some of the businesses due to the slowdown
of the U.S. and Mexican economies. Also, the strength of the
peso, which appreciated YoY by 7.7% vs. an annual inflation of
6.5%, negatively affected the competitiveness of the Company's
exports while promoting imports into the domestic market.
Additionally, lower production levels, as a result of lower
sales, and a strategy to increase cash flow generation by
reducing inventories, has resulted in an increase in the
proportion of fixed costs as a percentage of sales.
The Company recognized an aggregate benefit for the semester of
US$10 million, resulting from its natural gas hedging strategy
consisting of entering into hedging agreements with PEMEX and
other suppliers. At the beginning of IIQ'01, the Company decided
to cancel 70% of its hedging arrangements with PEMEX, which
currently covers around 30% of its consumption needs.
It's worth noting that EBITDA was maintained at a stable level in
dollar terms on a YoY basis, notwithstanding the continued
strength of the peso against the U.S. dollar and the slowdown of
the Mexican and U.S. economies. IIQ'01 EBITDA was US$148 million,
a 3.4% increase against the same quarter last year. For the first
semester EBITDA remained at the same level; US$278 million during
IH'01 vs. US$280 million during IH'00.
Total Financing Cost
The decrease in interest expense for the quarter was due to a
lower weighted average cost of debt arising from interest, which
declined to 9.2%, from 10.2% for IIQ'00. The weighted average
cost for fiscal 2000 was 10.3%. The decrease in the cost of debt
for the quarter was principally attributable to lower interest
rates in U.S. dollars with respect to U.S. dollar denominated
debt, and a swap made to change UDI denominated debt to U.S.
dollars at a fixed rate, taking advantage of the low market
rates. Currently, fixed rates stand at 41% of total debt held by
the Company.
Due to the 4.5% appreciation of the peso during IIQ'01, the
Company recorded a non-cash exchange gain for the period. As a
result of a lower inflation for the quarter on a YoY basis (0.9%
during IIQ'01 vs. 1.5% in IIQ'00), the Company recorded a lower
gain from monetary position for the second quarter, also non-cash
item. Overall, the Company recorded for the quarter a Total
Financing Gain of Ps$311 mill. (US$34 mill.), compared with a
Total Financing Cost of Ps$ 1,035 mill. (US$ 101mill.) for the
second quarter of last year.
Taxes
YoY, the Company posted taxable income for IIQ'01 vs. a net loss
for IIQ'00, mainly as a result of the exchange gain referred
above.
Net Majority Income
Net Majority Income for the quarter was Ps$334 mill. (US$36
mill.), compared with a Net Majority Loss for IIQ'00 of Ps$185
mill. (US$18 mill.), mainly as a result of a financing gain due
to a considerable, non-cash, exchange gain (see above section of
Total Financing Cost). The Other Income (expense) item shown,
includes severance payments as a result of an ongoing
reorganization program and non-cash losses related to relation
with the sale of certain assets and write-offs of obsolete
assets.
Capital Expenditures
In the aggregate, CAPEX for IH'01 remained flat vs. the same
period last year. CAPEX for the quarter was mainly used for
maintenance purposes. As mentioned in the IQ'01's release, the
majority of the 2001 CAPEX is expected to be incurred during the
second half of the year, for a total estimated amount of US$ 100-
110 mill., an amount that is 15% lower than the originally
budgeted US$ 120-130 million.
Financial Position
Quarter over quarter debt decreased by US$17 mill. This reduction
was achieved with internally generated funds, notwithstanding the
payment of approximately US$17 mill. in dividends, the
acquisition of Cristalglass, and other disbursements. This debt
reduction, along with the stable EBITDA and the lower interest
expense, improved the Company's financial ratios on a quarter
over quarter basis; financial leverage (Debt/EBITDA) stood at 2.8
times, while interest coverage was 3.3 times as of June 30, 2001.
Debt Profile as of June 30, 2001
- 60% of debt is long-term and
- Average life of debt is 2.7 years.
- 53% of debt maturing within the period July'01 - June'02 is
related to trade finance (US$348 million).
- Current maturities of long-term debt include a public debt
maturity of US$175 million on May'02 in the international
markets.
- Debt composition: Fixed rate = 41%; Floating rate and Fixed
spread = 27%; Short-term debt subject to market conditions = 32%.
Cash Flow
Year over year, lower interest expense and better working capital
management, along with lower taxes and dividends paid, resulted
in a better net free cash flow position. The main uses for the
net free cash flow during the quarter were debt reduction, the
Cristalglass acquisition, severance payments as part of the
ongoing reorganization program and the contribution to the
Company's stock option plan by the cancellation of an equity swap
transaction contracted last year.
As a percentage of sales, working capital investments for IIQ'01
were reduced to 11.3% from 13.3% for IIQ'00.
Flat Glass
(35% of Sales)
Sales
Sales during the quarter increased 6.5% in dollar terms and
decreased slightly in peso terms, as approximately 90% of
business' revenues are denominated in U.S. dollars. During the
quarter, the economic slowdown in the U.S. and Mexican economies
continued to affect the demand in the auto OEM segment, specially
the export market, as reflected in the YoY 8.3% decrease in
exports for this business unit. Sales to the construction market,
which were stable in the period, additional sales of value added
products, and increased sales to the auto replacement market,
offset lower sales to the OEM auto segment. On a QoQ basis,
volumes for both construction and automotive glass improved by
4.5%, even though they decreased when compared to IIQ'00.
EBIT and EBITDA
EBIT and EBITDA margins for the quarter were affected YoY mainly
by a strong peso that promoted imports and pressured prices in
the domestic market, extraordinary charges resulting from the
write-off of obsolete inventories, and the decline in demand in
the auto segment that increased the proportion of fixed costs as
a percentage of sales.
Management of the Flat Glass business continues to work on
improving the unit's sales mix toward more profitable market
segments; this measures include the acquisition of Cristalglass,
which processes and transforms value-added products for the
construction market, and improved synergies and practices between
Harding Glass and VVP America by closing approximately 35 retail
stores, the former Corporate Headquarters of Harding Glass and
overall operational efficiencies.
Acros Whirlpool
(21% of Sales)
Sales
During the quarter, domestic demand continued being positive,
specially for washers and refrigerators, driving the increase in
sales in both peso and dollar terms. Exports also increased,
mainly driven by refrigerator shipments to the US, which
increased significantly despite of the U.S. economic downturn,
since Acros Whirlpool's export models represent a more affordable
option for the U.S. consumers.
EBIT and EBITDA
Profitability continued to be affected by the continuing pricing
pressures, mostly from Korean imports into the domestic markets,
and the strategy implemented by the business in order to improve
its cash flow generation by reducing inventories. It's worth
noting that on June 22, the Mexican Ministry of Economy published
a preliminary resolution on the antidumping investigation against
refrigerators imported from Korea, establishing a preliminary
antidumping duty of 35.30% on 16' - 18' refrigerators
manufactured by LG Electronic, Inc., one of Acros Whirlpool's
competitors in Mexico. A final resolution to this issue is
expected by IQ'02.
Glassware
(7% of Vitro's Sales)
Sales
Consolidated net sales decreased YoY mainly as a result of the
decline in demand. The industrial sector's decision to reduce
their inventories magnified the impact of lower sales. The
decline in demand was primarily a consequence of the slowdown of
the U.S. and Mexican economies. In the domestic sector, direct
sales to niche markets helped to partially offset the decreases.
In the export market, sales to the unit's joint venture partner,
Libbey, were slightly higher YoY. Volumes for IIQ'01 showed and
increase of 6.7% over IQ'01, but decreased YoY by 13%.
EBIT and EBITDA
EBIT decreased YoY by 36.8% but increased slightly QoQ. The main
factors that continued to contribute to the unit's decrease in
EBIT and margins were higher YoY energy prices, higher fixed
costs as a percentage of sales and additional costs and expenses
when compared with the second quarter of last year in connection
with the improvement of the business distribution network, as
mentioned in releases for previous quarters. Management, in an
effort to increase cash flow generation, is reducing inventories.
Glass Containers
(28% of Sales)
Sales
The YoY increase in volumes for the domestic market, and the
unit's distribution company in the U.S., Vitro Packaging, drove
the YoY sales increase, offsetting continuous price pressures. On
the domestic front, the increase in the wine, soft drink and beer
segments helped offsetting the decrease in the generic food and
pharmaceutical lines. In the export market, volumes at Vitro
Packaging increased approximately 5%, specially in the niche
markets, driving the 10.1% increase in export sales.
EBIT and EBITDA
Margins rose quarter over quarter by 60 basis points,
representing the third consecutive quarter in which margins of
this unit increased with respect to the previous quarter. YoY
EBIT continued to be affected by price pressures and certain cost
increases, like those experienced with energy and freights.
Freights have increased mainly as a result of a higher proportion
of export sales.
Diverse Industries
(9 % of Sales)
Sales
Sales for the quarter decreased 10.9% in peso terms, as
approximately 85% of the business sales are in U.S. dollars or
directly linked to the dollar. Also, the closing of MEF, the
former joint venture with General Electric, on August 2000,
affected the YoY comparison as sales for this business
represented close to 7% of the unit's revenues for last year's
second quarter. The retail sector of the business, primarily
aluminum cans, ampoules and plastics, experienced a decline in
demand as a result of the decline in consumption in this sector
due to the slowdown of the U.S. and Mexican economies. On the
other hand, the unit's chemical operations benefited from a cold
winter and posted strong sales results year-to-date, and the
capital goods segment is capitalizing on its strategy to move
into other markets outside the glass industry.
EBIT and EBITDA
EBIT margins improved on a YoY basis by 290 basis points and on a
QoQ basis by 260 basis points, despite the negative effect of the
strong peso and higher YoY natural gas prices. The closing of MEF
in this case impacted positively the YoY EBIT comparison, as this
business profitability was marginal. The capital goods operations
posted also higher EBIT as higher sales contributed to a decrease
in fixed costs as a percentage of sales. Businesses considered of
strategic importance within the Diverse Industries unit, will be
integrated by October 2001 into the four remaining business
units, while the others will be considered for divestiture.
Key Developments
REORGANIZATION
Grupo Vitro recently announced a reorganization that involved the
creation of an Executive Committee comprising Mr. Federico Sada,
as Chief Executive Officer, Mr. Jose Domene, as Chief Operating
Officer (COO), and Mr. Luis Nicolau, as Chief Corporate Officer
(CCO) (which comprises financial, accounting and legal matters).
As part of the effort to improve Grupo Vitro's performance and
competitiveness, Grupo Vitro reduced its corporate and
administrative staff by over 1000 employees, which will require
approximately US$15 million in severance payments, and is
estimated to reflect savings of approximately US$40 million
within the next year.
As has been announced in the past to the investor community,
Grupo Vitro intends to consolidate in four business units: Flat
Glass, Glassware, Glass Containers and Acros Whirlpool.
Businesses considered of strategic importance within the Diverse
Industries unit, will be integrated into the four remaining
business units. These changes will take effect by October, 2001.
SYNDICATED LOAN
Grupo Vitro is in the final stages of completing a securitized
credit facility to be led by Citibank and HSBC, in an amount at
least equal to 200 million dollars, which is intended to
refinance short-term debt and to improve the average life of
Grupo Vitro's debt.
ACQUISITION OF CRISTALGLASS VIDRIO AISLANTE IN EUROPE
On May 2001, Grupo Vitro, through its Flat Glass business unit,
completed the acquisition of the 60% interest of Cristalglass
Vidrio Aislante in Spain, a company with annual sales of
approximately US$60 million. The company processes, distributes
and sells flat glass for the construction industry, is well
positioned within the European market and will improve Flat
Glass' ability to export and distribute float glass in Europe.
DIVESTITURE PLAN UPDATE
As part of Grupo Vitro's plan to divest non-core businesses, the
Company sold its 50% interest in Regioplast to Owens Illinois,
for US$8 million. Grupo Vitro continues to consider other
possible divestitures. As of the end of June 2001, aggregate
proceeds received by Grupo Vitro from divestitures amount to
US$55.6 million.
VITRO: Alliance With Libbey Safe Despite Looming Acquisition
------------------------------------------------------------
Alberto Chico Smith, a spokesman from the Mexican glass
manufacturer Vitro, denied reports that U.S. glass maker Libbey
Inc.'s forthcoming $330-million acquisition of Anchor Hocking, a
unit of Newell Rubbermaid, will jeopardize the association Libbey
has with Vitro, COMTEX reported Thursday. According to the
spokesman, the relationship between the two companies has two
dimensions, neither of which will be impacted.
In August 1997, Vitro ceded Libbey a 49-percent stake in
subsidiaries Vitro Crisa and Crisa industrial, for $100 million
in cash. As part of the deal, Vitro agreed to distribute and
market Libbey products in Mexico, Central America and South
America, while Libbey agreed to do the same for Vitro Crisa
products in the United States and Canada.
VITRO: Continues With Corporate Restructuring
---------------------------------------------
Vitro, which is currently confronted with a series of industrial
and operational challenges, is in the process of conducting a
corporate restructure aimed at combating such troubles, according
to a COMTEX report published Thursday. From the restructuring
rumor mill, speculation continues that Vitro executive Raul
Rangel Hinojosa with close ties to company CEO Federico Sada, may
be about to depart. Rangel's rumored exit could be a sequel to
the arrival of Jose Domene at Vitro and a result of tensions
between Rangel and some Vitro shareholders.
Most recently, Juan Manuel Denigris has replaced Pablo Mier y
Teran as head of Public Relations at Vitro. At the company's flat
glass division, Fernando Flores is to replace Roberto Rubio.
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter Latin American is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ,
and Beard Group, Inc., Washington, DC. John D. Resnick, Edem
Psamathe P. Alfeche and Janice Mendoza, Editors.
Copyright 2001. All rights reserved. ISSN 1529-2746.
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