annual report 2014

ALFA is the largest independent producer of complex aluminum components for the automotive industry in the world, and one of the world’s largest producers of polyester (PTA, PET and fibers). In addition, it leads the Mexican market in petrochemicals such as polypropylene, expandable polystyrene and caprolactam. ALFA is an important producer, marketer and distributor of highly recognized branded foods in Mexico, the United States and Europe, as well as a leading provider of information technology and telecommunications services for the enterprise segment in Mexico. ALFA also operates in the hydrocarbons industry in Mexico and the United States. In 2014, ALFA reported revenues of Ps. 229,226 million (U.S. $17.2 billion), and EBITDA of Ps. 27,116 million (U.S. $2 billion). Currently, ALFA has manufacturing facilities in 24 countries and employs more than 70,400 people. ALFA’s shares are quoted on the Mexican Stock Exchange and on Latibex, the market for Latin American shares of the Madrid Stock Exchange.

NOTE: In this annual report, monetary figures are expressed in nominal Mexican pesos (Ps.), and in nominal dollars (U.S. $) unless otherwise specified. Conversions from pesos to dollars were made using the average rate of the month in which the revenues or disbursements were made. The percentages of variation between 2014 and 2013 are expressed in nominal terms.

Contents PageLeadership 2Talent 4Technology 6Innovation 8ALFA Today 10Financial Highlights 12Letter to Shareholders 13Alpek 16Nemak 18Sigma 20Alestra 22Newpek 24Board of Directors 26Management Team 27Corporate Governance 28Consolidated Financial Statements 29

Alpek ~ petrochemical complex in Altamira, Tamaulipas, Mexico.

IN 2014, WE CONTINUED INVESTING AND LEVERAGING

ON THE STRENGTHS WE HAVE BUILT OVER TIME, LIKE OUR

TALENTED PEOPLE, CUTTING EDGE TECHNOLOGIES, A HIGH

LEVEL OF INNOVATION AND MARKET LEADERSHIP. THIS WAY,

WE EXPANDED AND OPTIMIZED OUR PRODUCTION FACILITIES,

BROADENED OUR MARKETS AND ADDED VALUE TO OUR

PRODUCTS AND SERVICES.

2

3

LEADERSHIP

Our companies are constantly striving to improve efficiency and to develop new products and ser-vices. With this, they have achieved leading po-sitions in most of the markets they serve.

Control room, cogeneration plant.

#1in the world in the production

of complex aluminum auto components

leadingintegrated producer

of polyester in North America

Alpek ~ cogeneration plant, Cosoleacaque, Ver., Mexico.

4

5

TALENT

Our work force is comprised of people from many nations, with different cultures, traditions, disciplines and working habits. This blend con-stitutes one of our greatest strengths: it allows our companies to exchange knowledge and experiences among themselves to improve their business practices day after day.

Sigma employs more than 38,000 people in 18 countries.

70,453employees

40nationalities and 15 languages

Women represent 29% of ALFA’s workforce.

6

7

Nemak ~ machining plant, García, N.L., Mexico.

TECHNOLOGY

Through investing in research and development, or through acquisitions, ALFA has been able to build a broad platform of state-of-the-art technol-ogies. This is a valuable competitive tool, as it allows our companies to exploit their potential by optimizing processes and adding value to products and services.

Product Development Center, García, N.L., Mexico.

13Technology Development

Centers

1,100employees dedicated to

research work

8

9

INNOVATION

Designing a more nutritious and healthy food product, developing a more efficient auto part molding and casting system, creating more re-silient plastic resins, and developing custom- made Information Technology solutions, are all examples of the constant process of innovation at ALFA.

Data Center, Querétaro, Qro., Mexico.

1,594proprietary patents

696patents in process

of registration

Alestra ~ Data Center, San Nicolás de los Garza, N.L., Mexico.

ALP

EKN

EMAK

SIG

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ALE

STR

AN

EWPEK

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31

428

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31

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38

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n Alpek n Nemakn Sigman Alestran Newpek

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ALFA Today

Markets: containers for food, beverages and consumer products. Textiles, construction and automotive.Plants: 17 in three countries.Capacity: 5.5 million tons per year.Revenues in 2014: U.S. $6.5 billion.Employees: 4,669.

Markets: food.Plants: 67 in 13 countries.Sales volume in 2014: 1.5 million tons.Revenues in 2014: U.S. $5.4 billion.Employees: 38,444.

Markets: automotive.Plants: 34 in 14 countries.Capacity: 56 million equivalent heads per year.Revenues in 2014: U.S. $4.6 billion.Employees: 20,700.

Markets: IT and telecommunications.Presence: 200 cities in Mexico.Revenues in 2014: U.S. $415 million.Employees: 2,287.

Markets: energy, oil and gas.Presence: U.S. and Mexico.Revenues in 2014: U.S. $170 million.Employees: 303.

MAIN PRODUCTS

• Polyester: PTA, PET and fibers.

• Plastics and Chemicals: polypropylene, expandable polystyrene (EPS) and caprolactam.

MAIN PRODUCTS

• Processed meats (ham, sausages, etc.).

• Dairy products (cheese and yogurt).

• Prepared meals.

MAIN PRODUCTS

• Aluminum heads and blocks for gas and diesel engines.

• Transmission parts.

• Structural components.

MAIN SERVICES

• Data Centers.

• Information security, managed networks and consultancy services.

• Systems integration and cloud services.

MAIN PRODUCTS

• Hydrocarbons.

• Oil and gas services.

118 manufacturing facilities

Global footprint in 24 countries in America, Europe and Asia

Revenues

U.S. $17.2 billion

Assets(%)

EBITDA(%)

Revenues(%)

11ArgentinaAustriaBelgiumBrazilCanadaChinaCosta RicaCzech Republic Dominican RepublicEcuadorEl SalvadorFranceGermanyHungary IndiaItalyMexicoNetherlandsPeruPolandPortugalSlovakiaSpainUnited States

• The largest petrochemical company in Mexico and the second largest in Latin America.

• Leading integrated producer of polyester in North America and one of the most important worldwide.

• Operates the largest expandable polystyrene plant in the Americas.

• Sole producer of polypropylene and caprolactam in Mexico.

• An important producer, marketer and distributor of widely recognized branded foods primarily in Mexico, the United States and Europe.

• Owns one of the largest refrigerated food distribution networks in Latin America.

• The world’s largest independent producer of complex aluminum components for the automotive industry.

• Leading provider of IT and telecommunications services for corporate customers in Mexico.

• Company engaged in hydrocarbons exploration and production.

• Service supplier for the oil and gas industry.

Global footprint

14

17

,22

4

14

2,0

40

14

15

,77

3

15

,87

0

13

1,9

15

13

12

,64

8

13

15

,15

2

12

1,8

54

12

11

,85

4

12

14

,74

6

11

1,6

23

11

10

,81

6

11

10

,77

3

10

1,2

60

10

9,0

84

10

12

ALFA and subsidiaries Millions of Ps. U.S. $ Millions(4)

2014 2013 % chg. 2014 2013 % chg.

Income StatementNet Sales 229,226 203,456 13 17,224 15,870 9

Operating Income 17,226 14,085 22 1,298 1,100 18

Majority Net Income -2,037 5,926 -134 -104 463 -122

Majority Net Income per Share(1)

(Ps. & U.S. $) -0.40 1.15 -135 -0.02 0.09 -122

EBITDA(2) 27,116 24,534 11 2,040 1,915 7

Balance SheetTotal Assets 232,880 165,390 40 15,773 12,648 25

Total Liabilities 163,721 100,221 63 11,074 7,664 44

Stockholders’ Equity 69,159 65,169 6 4,699 4,984 -6

Majority Interest 55,378 56,441 -2 3,763 4,316 -13

Book Value per Share(3) (Ps. & U.S. $) 10.78 10.98 -1.82 0.73 0.84 -13

(1) Based on the weighted average number of outstanding shares (5,135,480 in 2014 and 5,143,900 in 2013).(2) EBITDA = operating income + depreciation and amortization + non-recurring items.(3) Based on the number of outstanding shares (5,134,500 at the end of 2014 and 5,142,500 at the end of 2013).(4) Due to the dollarization of its revenues, which is higher than 75%, and because of the holding of shares by foreign investors, ALFA provides equivalent U.S. $ amounts for some of its most important financial data.

Financial Highlights

Revenues(U.S. $ Millions)

EBITDA(U.S. $ Millions)

Assets(U.S. $ Millions)

13

Letter to the Shareholders

New legislation paved the way for private investment in developing the Mexican energy industry. Because of the imminent opening and the attractiveness of this opportunity, ALFA decided it needed to strengthen its operating capabilities in the oil industry. It did so by purchasing shares of Pacific Rubiales Energy (PRE), a company with proven expertise in the field, to utilize it as a vehicle to invest in Mexico. In total, ALFA bought almost 19% of PRE’s capital stock.

To our Shareholders:

In 2014, ALFA successfully executed its investment program, which included acquisitions that marked its entrance into new geographic regions, expanded its production capacity and created value added to its existing product offerings. The company faced a difficult environment of price and margin volatility in petrochemicals, as well as low demand in the consumer foods market. Despite this, all of ALFA’s companies, except Alpek, were able to deliver improved results over 2013, resulting in consolidated revenues and EBITDA increasing 9% and 7%, respectively.

Armando Garza SadaChairman of the Board

Álvaro Fernández GarzaPresident

Despite a thorough risk analysis preceding the PRE investment, the possibility of an abrupt drop in oil prices, which occurred in the second half of the year, was underestimated. This reduction caused a steep decline in the price of PRE shares, causing large mark-to-market losses on the valuation of the shares acquired by ALFA, which amounted to approximately U.S. $600 million at the end of 2014.

Performance of ALFA’s business groups

AlpekAlpek’s results were impacted by the volatility of prices and margins for petrochemical feedstock, which was caused by excess capacity in Asia and the dramatic drop in oil prices. These factors largely affected the polyester business, while plastics and chemicals reported revenue growth of 3%.

Market conditions are accelerating Alpek’s cost-saving initiatives. Major progress was made, including the startup of a 95 megawatts (MW) power cogeneration plant in Veracruz, Mexico, which will produce estimated savings of U.S. $40 million per year; the technological upgrade at the caprolactam plant, which allows it to operate more efficiently; and the signing of a tolling agreement with Huntsman Petrochemical, to secure the supply of 150,000 tons of monoethyleneglycol (MEG) per year, at a price based on ethylene as the feedstock.

Alpek also signed an agreement with BASF to acquire its expandable polystyrene (EPS) business in the Americas, making Alpek the largest producer in this region. Additionally, the company acquired CabelmaPET, an Argentinian company, to integrate recycled food-grade PET resins into its virgin resin feedstock and thus strengthen the value offering for its clients.

With respect to other projects, the construction of Gruppo M&G’s PTA/PET plant in Corpus Christi, Texas, continued as planned. Alpek owns rights to 40% of the PET production of this facility. Furthermore, Alpek approved the building of a

14

new 300 MW cogeneration plant in Altamira, Tamaulipas, Mexico, with startup expected in 2017.

NemakThe company continued its strategy of reinforcing its position in high-growth areas of the auto industry. To continue to promptly respond to demand and increase the value added of its products, Nemak expanded its production and machining capacity. It established a new Product Development Center in Poland to support the launch of new products, and announced the construction of a new plant in Nuevo León, Mexico with High-Pressure Die Casting technology, which will be producing engine blocks, structural and transmission components and will open in 2016.

North America and Europe, Nemak’s main automotive markets, grew by 5% and 3% in 2014, respectively. The company benefitted from this growth and increased sales and EBITDA by 6% and 17% in the year, respectively. Operating improvements at the plant level also contributed to this achievement.

Nemak’s future growth was buttressed by the addition of 60 new contracts during the year, equivalent to U.S. $1.7 billion in annual revenues. Among these were five contracts to produce structural components for the first time.

SigmaThe company continued its internationalization strategy in 2014, by acquiring 62% of the equity of Campofrio in Europe and all of the capital stock of Fábrica Juris,

a processed meats company in Ecuador. With these acquisitions, Sigma increased scale and geographic footprint.

Sigma’s raw materials costs increased during the year, while the consumer products market remained weak. The company was able to offset these factors through higher volume and sales prices, as well as operating efficiencies, introduction of new products, expanded distribution and enhanced brand awareness, like the FUD® brand, which celebrated its 60th anniversary in the Mexican market.

Sigma’s focus on innovation continued to produce results. Among its achievements were the new individual packaging for processed meats and cheeses, and the ongoing transformation of the yogurt category. The Foodservice business was also strengthened by capitalizing on synergies resulting from the 2013 acquisition of ComNor.

In November, a fire consumed one of Campofrio’s main plants in Spain. Today, production has normalized by utilizing capacity at other plants in Campofrio’s system. However, there is still work to be done to recover shelf space. Meanwhile, the plan to identify and capture synergies in operations, marketing and product development is under way.

AlestraThe company continued to execute its strategy of focusing on information and communications technology services for the business market in Mexico. At the beginning of 2014, Alestra opened its fifth Data Center in Querétaro, Mexico, doubling its service capacity. This facility has state-of-the-art technology, and is environmentally friendly. Alestra also acquired S&C Constructores de Sistemas, broadening its offer of specialized technological solutions.

Alestra’s focus on offering value-added services (VAS) to customers continued. Services offered include managed networks, data, Internet and local services, as well as IT solutions, including hosting, systems integration, cloud applications and data security. VAS accounted for 85% of the company’s total revenues in 2014.

NewpekIn 2014, Newpek continued operating in the U.S. oil and gas industry while accelerating the pace of positioning itself to participate in the opening of the Mexican energy industry to private investment.

9%

increase in consolidated revenues, driven by strong performance at Nemak and the consolidation of Campofrio.

15

Furthermore, in November 2014, shareholders approved a capital increase through the issuance of new ALFA shares to be placed among the investing community. This offering has not taken place due to the volatility of the stock markets since late 2014.

Dear shareholders, 2015 brings opportunities and challenges to ALFA. The economy and the markets are expected to remain volatile in several of the countries in which ALFA participates, including Mexico. There is uncertainty about the sustainable price of oil in the future, while the U.S. dollar–Mx peso exchange rate remains unstable. This will require us to redouble our efforts on increasing our operating efficiency and providing higher-value products and services for our customers.

We must focus our attention on seizing new opportunities in the Mexican energy industry, as well as consolidating the operations of Campofrio, Juris and the EPS business we acquired from BASF, and achieving full operation of Alpek’s cogeneration plant and the startup of expansions at Nemak.

On behalf of the Board of Directors of ALFA, we thank you for the support we have received from all our shareholders, as well as our suppliers, customers and financial institutions. We would also like to publicly recognize the more than 70,400 employees that make up the ALFA community, whose efforts and dedication played a decisive role in the results reported for this year. O

San Pedro Garza García, N.L., Mexico March 17, 2015.

During 2014, 122 new wells were connected to sales at the Eagle Ford Shale (EFS) play in southeast Texas, where Newpek owns mineral rights. The company also continued conducting geological tests in other areas in the U.S., including northern Texas, Kansas and Oklahoma, in order to identify future drilling sites.

In Mexico, Newpek continued to operate mature oilfields in Veracruz, increasing average production per day by 33% over the amount of oil extracted at those fields before Newpek took over operations.

The reduction in oil prices in 2014 has prompted Newpek to take a more cautious approach toward new investments in the U.S. The production plan for 2015 now provides for the drilling of only 80 new wells at the EFS, down from the more than 100 wells drilled per year on average in the recent past.

Newpek continues to prepare itself for future opportunities in Mexico that will come from the opening of the oil and gas industry to private investment. One such measure was an alliance created toward the end of the year with PRE, under which the two companies will create a 50-50 joint venture to develop energy projects in Mexico.

Financial results

In 2014, ALFA’s revenues totaled U.S. $17.2 billion, 9% more than the previous year. This increase was due primarily to the strong performance at Nemak and the consolidation of results from Campofrio in the last two quarters of the year. EBITDA rose to U.S. $2 billion, 7% more than in 2013, for the same reasons.

ALFA reported a Majority Net Loss of U.S. $104 million, compared to a Net Income of U.S. $463 million in 2013. The result was due primarily to foreign-exchange losses caused by the depreciation of the Mexican peso toward the end of the year, and losses in the mark-to-market valuation of the investment in PRE shares.

In 2014, ALFA’s total capital expenditures, which included acquisitions, was U.S. $1.4 billion and was comprised of investments discussed earlier in this letter. Additionally, the company completed several financial transactions during the year to improve the terms and conditions of its debt. A key component of this program was the placement of a U.S. $1 billion long term note by ALFA, the parent company, on international markets.

Armando Garza SadaChairman of the Board

Álvaro Fernández GarzaPresident

U.S. $1.4 billion were invested in CAPEX and acquisitions in 2014.

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› Its first cogeneration plant starts up in Veracruz, Mexico.

› The caprolactam plant underwent a technology upgrade to increase efficiency.

› An agreement is signed with BASF to acquire its EPS business in the Americas.

Several projects that Alpek had been developing for some time came on stream in 2014. Others still in progress showed significant advancement in the year. The above following a cost cutting strategy in a context of volatile feedstock prices, exacerbated by the sharp decline in oil prices, which had a marked impact on the polyester business.

The cogeneration facility at Cosoleacaque, Veracruz started up in December. With an investment of U.S. $137 million, the plant can produce 95 MW of electricity. Steam and some of the power will be consumed by Alpek, and the excess power will be sold out to third parties. This facility will produce estimated savings of U.S. $40 million per year.

The caprolactam plant in Guanajuato, Mexico underwent an important technology upgrade. It will improve raw materials consumption and streamline the production process, which will result in savings estimated at U.S. $8 million per year.

Gruppo M&G’s PTA/PET plant being built in Corpus Christi, Texas, progressed according to plan. Alpek shares the investment in this facility in exchange for 40% of its estimated one million tons of PET production. Another event during 2014 was the signing of a tolling agreement with Huntsman Petrochemical, regarding 150,000 tons per year of MEG at a price based on ethylene economics.

In order to strengthen operations at the PET plant in Argentina, and to develop the capacity to integrate recycled raw material into virgin PET resins, Alpek acquired CabelmaPET, S.A., the only company that produces recycled food grade PET resins in that country. Besides improving customer process efficiency, the use of recycled PET helps preserve the environment.

In its Plastics and Chemicals business, Alpek signed an agreement to acquire BASF's EPS business in the Americas,

including its stake in Polioles’ EPS business in Mexico. This makes Alpek the largest producer of EPS in the region. In turn, BASF will acquire Polioles’ polyurethane business.

Toward the end of the year, Alpek approved the construction of a second cogeneration plant, to be built in Altamira, Tamaulipas. This facility will have an estimated capacity of 300 MW. Construction will begin in 2015.

Alpek's financial results in 2014 showed the impact of the difficult business environment the company faced, particularly in the polyester chain. Although sales volume rose 1%, revenue came to U.S. $6,471 million, 8% lower than the previous year. EBITDA was U.S. $434 million, a decline of 24% compared to 2013. The main factor affecting results was the decline in oil prices, since it provoked a softening of prices and margins along the petrochemical chains. Furthermore, as the price of oil-based feedstock declined, Alpek had to record a non-cash charge of U.S. $71 million due to inventory devaluation.

In 2015, Alpek will receive the full benefit of the projects that started at the end of 2014, like the savings produced by the cogeneration plant and the upgrade of technology at the caprolactam facility, as well as the integration of the EPS business acquired from BASF. The company has the financial condition required to continue to develop other strategic projects, like the second cogeneration plant, the investment in the Corpus Christi facility and the tolling agreement with Huntsman. O

Alpek

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6,4

71

7,0

28

13

7,2

77

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7,3

56

11

4,8

31

10

17

U.S. $320million invested in strategic projects in 2014, 79% more than in 2013.

The new cogeneration facility at Cosoleacaque, Veracruz, will produce savings estimated at U.S. $40 million per year.

Revenues(U. S. $ Millions)

PET Plant, Bay St. Louis, Miss., U.S.

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› New records are set in sales volume, revenue and EBITDA.

› First contracts for structural components are signed.

› A new plant will be built in Mexico.

In 2014, Nemak outpaced the average growth of the automotive industry by taking full advantage of the expansion of the U.S. market, the incipient recovery in Europe, and the launching of new production programs.

One ongoing trend in the automotive industry is the growing penetration of aluminum blocks into the market. According to industry experts, the light-weighting efforts pursued by all OEMs will increase aluminum penetration in multiple components, primarily engine blocks and structurals. This represents a significant short and medium-term growth opportunity for Nemak. In 2014, Nemak signed the first five contracts to produce structurals, which is a major step forward in entering this new high-potential market.

In North America, light vehicle production continued to expand, totaling 17.0 million units in the year, a 5% increase over 2013. Higher credit availability and improvement in consumer confidence were the main drivers for growth, and auto companies responded by installing new production facilities. In this region, Nemak’s sales volume grew 6%.

In Europe, vehicle production increased 3%, while Nemak’s sales volume rose at a similar rate. Nemak continues to launch new programs in the Eurozone, to serve the needs of the major European OEMs.

Nemak invested U.S. $393 million during the year. It continued to expand its production capacity in North America, Europe and China, in order to meet increased demand from its customers. A new Product Development Center was built in Poland to support the development of structural components and the launching of global programs. Additionally, Nemak expanded its machining capabilities in all regions. At the end of the year, the construction of a new

HPDC plant in Mexico was announced, which will produce engine blocks, transmission and structural components. These investments are key elements in Nemak’s strategy to strengthen its participation in high-growth markets.

Total sales volume at Nemak reached 49.4 million equivalent units in 2014, a 4% increase over 2013. Revenues totaled U.S. $4.6 billion and EBITDA was U.S. $714 million, increases of 6% and 17%, respectively.

During the year, Nemak was awarded an unprecedented amount of new contracts to produce engine heads, blocks, structural and transmission components for the major OEMs in all regions. Those contracts represent annual sales of U.S. $1.7 billion, of which U.S. $600 million are incremental revenue.

In the coming years, Nemak expects to continue to capitalize on its competitive advantages to further strengthen its leadership position in the industry. The company’s competencies include the speed with which it can develop and launch new programs; its patented state-of-the-art technologies to make high-quality products; the diversity of its technical capabilities; and its competitive costs, reputation for service and global presence. O

Nemak

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4,6

45

4,3

91

13

3,8

91

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3,6

02

11

2,8

74

10

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49.4 million equivalent units sold in 2014, a 4% increase over 2013.

Nemak was awarded an unprecedented amount of new contracts totaling U.S. $1.7 billion in annual sales, of which U.S. $600 million represent incremental revenues.

Revenues(U. S. $ Millions)

Engine block line, Nemak´s facility, García, N.L., Mexico

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› The FUD® brand celebrates its 60th anniversary.

› The acquisition of Campofrio is complete. Fábrica Juris, in Ecuador, is acquired.

› The Foodservice business is strengthened.

In 2014, Sigma transformed itself in terms of size and geographic coverage with the completion of the acquisitions in Spain and Ecuador. By doing so, it entered in seven European countries and expanded its operations in South America.

The company’s results were positive despite operating in a difficult environment characterized by higher costs of raw materials, depreciation of the peso and sluggish growth in food consumption.

FUD®, the company’s flagship brand, celebrated its 60th anniversary in Mexico. With that in mind, Sigma launched a dedicated campaign, which also helped strengthen its whole branding strategy.

In order to continue to meet consumers' needs, Sigma launched various innovative campaigns to improve the consumption experience of its products. Among these were the new individual packaging for processed meats and cheeses, and the ongoing transformation of the yogurt category, with new presentations of Greek, Disfruta and Placer products. Also, it developed a new technology to produce artisan cheeses which facilitates their marketing and distribution.

Sigma's Foodservice business completed the integration of the operations of ComNor, and a wider range of refrigerated, frozen and dry products is now being supplied to institutional clients, thus providing them a better service.

In June 2014, Sigma completed the acquisition of Campofrio. It now owns 62% of its capital stock. Campofrio has a solid position in the European processed

meats market. After assuming control, Sigma and its partner WH Group began the process of identifying and taking advantage of opportunities and synergies. Toward the end of the year, Sigma acquired Fábrica Juris, an Ecuadorian processed meats company. This is Sigma’s first venture into that country. With these two acquisitions, Sigma now operates in 18 countries, and 57% of its sales are made outside Mexico.

Sigma’s sales volume totaled 1.5 million tons, 21% more than in 2013. Revenues totaled U.S. $5,359 million and EBITDA was U.S. $636 million, increases of 40% and 22%, respectively, when compared to 2013. The consolidation of Campofrio during the second half of the year was the main driver for growth. Even without Campofrio, however, the company was able to grow in a challenging environment of higher raw material costs, a weakened peso and low food consumption.

Looking ahead, Sigma will continue to pursue value creation through synergies of operations at Campofrio and the integration of Juris. Likewise, Sigma will continue to focus on expanding its operations, both organically and in new segments and geographies. In addition, it will continue to develop strategies to maintain consumer preference for its brands, through innovation and satisfaction of their needs. O

Sigma

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5,3

59

3,8

20

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3,4

43

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3,3

08

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2,6

15

10

21

57

%of Sigma’s revenue generated outside of Mexico.

Sigma sold more than 4,000 tons of food products per day in 2014.

Revenues(U. S. $ Millions)

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› Opens Data Center in Querétaro, doubling its service capacity.

› Launches new value-added services with cutting edge technology.

› Acquires an IT company to strengthen its offering of specialized technology solutions.

In 2014, Alestra continued to expand its information and communications technology (ICT) platform and infrastructure, to serve Mexico's enterprise market. It doubled the service capacity of its data centers, increased last-mile access for connecting clients, and launched new services with cutting-edge technology.

The Querétaro Data Center was dedicated early in 2014. This is the most innovative and sustainable center in Latin America, as demonstrated by its ICREA 5 Green certification, the highest rating given to data centers. It also received the “Innovation in Mega-Datacenters" award from Datacenter Dynamics, in recognition of the innovative concepts it incorporated in its design, construction and operation.

The company continued to promote value-added services (VAS) like managed networks, data, Internet and local services. It also offered IT solutions, including hosting, systems integration, cloud applications and data security, solutions that follow the industry’s megatrends, which are key to maximizing the competitiveness of companies today.

Alestra invested U.S. $100 million in fixed assets and systems in 2014. Among projects carried out in the year were network expansion, increasing last-mile access, equipping its five data centers with state-of-the-art technology and growing its solutions portfolio. All of this enabled Alestra to strengthen its position as a leading company in the Mexican ICT market for the enterprise segment.

To add to organic growth, Alestra acquired the Mexican IT firm S&C Constructores de Sistemas, widening its offering of specialized world-class technology solutions.

In 2014, Alestra reported sales of U.S. $415 million, 5% more than in 2013. The growth of VAS, along with data security, systems integration and cloud-based services, was the main driver for the increase in revenue. VAS accounted for 85% of the company's total revenues.

EBITDA totaled U.S. $170 million, unchanged from 2013, when an extraordinary revenue of U.S. $21 million resulting from a favorable ruling on interconnection cost disputes from earlier years was reported. Excluding this one-time revenue, EBITDA would have grown 14% in 2014.

Alestra is a company that is evolving constantly based on a process of innovation aimed to keep it at the forefront of technological trends and make it the benchmark in the industry. O

Alestra

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5

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35

1

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37

9

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36

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10

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Data Center, Querétaro, Qro., Mexico.

85%

of total revenues correspond to value added services.

Alestra invested U.S. $100 million in fixed assets and systems in 2014.

Revenues(U. S. $ Millions)

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› Revenue and EBITDA grew 28% and 27%, respectively.

› Explores assets acquired in north Texas, Kansas and Oklahoma.

› Oil production in mature fields under management in Mexico rises 33%.

In 2014, Newpek continued its activities in the U.S. hydrocarbon industry, while accelerating the process of preparing itself to participate in Mexico's opening of the hydrocarbon industry to private investment.

Newpek's activities in the U.S. are concentrated at the Eagle Ford Shale (EFS) play, Edwards Trend and Wilcox in southern Texas. It also has mineral rights in other areas in the north of that state, as well as in Oklahoma, Kansas and Colorado. In 2014, 122 wells were connected to sales at the EFS play, bringing the total at that formation to 497. There are another 40 wells producing in Edwards Trend. All together, production from these plays averaged 8.2 thousand barrels of oil equivalent (BOE) per day, 21% more than in 2013.

In northern Texas, Kansas and Oklahoma, Newpek collected data on more than 150 square miles in the first phase of seismic testing. Its interpretation will enable the company to decide on the location of future drilling sites.

In Mexico, in conjunction with its partner Monclova Pirineos Gas, it manages two mature fields service contracts at San Andrés and Tierra Blanca, Veracruz. Also, together with Petrofac, it provides integrated services to the oil and gas industry.

In 2014, the mature oilfields in San Andrés and Tierra Blanca produced 4.7 thousand BOE per day, 33% more than in 2013. Likewise, Newpek and Petrofac continued their strategy of strengthening their position as providers of integrated services for oil companies. They continued the drilling work and rework of wells in southeast Mexico.

Revenues in the U.S. totaled U.S. $170 million during the year, and EBITDA came to U.S. $116 million, 28% and 27% more, respectively, than in 2013. Production

of liquids, including condensates and oil, accounted for 62% of total volume, compared to 52% in 2013. The better production mix contributed to an improvement in the company's financial results.

During the second half of the year, particularly toward the end of it, there was a sudden and sharp decline in oil prices. Today, there is considerable uncertainty regarding what the new, long-term sustainable price for oil will be. The new price environment is forcing oil companies to reduce capital expenditure programs for 2015 and beyond. Insofar as Newpek is concerned, the 2015 drilling program at EFS involves only 80 wells, compared to more than a 100 per year on average in the recent past. In other areas it is planned to continue with the analysis of geological information to select the most promising prospects, while extraction is going to be deferred until oil prices improve.

With the secondary legislation on Mexico's energy reform approved in 2014, Newpek is looking ahead to new opportunities in the opening of the energy industry to private investment. The first is the possible migration of existing mature fields service contracts into production sharing agreements in partnership with Pemex. Furthermore, the Mexican government plans to auction off blocks of hydrocarbon resources in 2015, with varying characteristics, including oil in shallow waters, mature fields, onshore and extra-heavy oil fields.

Newpek will evaluate the opportunities as they arise, benefiting from the technical and human capital it has been developing for several years. The combination of highly trained technical personnel, experienced partners, and a healthy financial condition give Newpek strong reasons to be optimistic about the success of this new activity. O

Newpek

14

17

0

13

3

13

93

12

45

11

25

122 drills were connected to sales at the Eagle Ford Shale in 2014.

Production of liquids, including condensates and oil, accounted for 62% of total volume.

Revenues(U. S. $ Millions)

Drilling site in southern Texas, U.S.A.

26Board of Directors

Guillermo F. Vogel Hinojosa (1C)

Chairman of the Board of Grupo Collado, S.A.B. de C.V., and of Exportaciones IM Promoción, S.A. de C.V.

Board member since April, 2008.

Member of the Boards of Tenaris, SanLuis Corporación, Corporación Mexicana de Inversiones de Capital, Innovare, Novopharm and Universidad Panamericana-IPADE. Member of the Trilateral Commission and of the International Council of the Manhattan School of Music.

Carlos Jiménez Barrera

Secretary of the Board

Keys:

(1) Independent Board member

(2) Independent Proprietary Board member

(3) Related Proprietary Board member

(A) Audit Committee

(B) Corporate Practices Committee

(C) Planning and Finance Committee

José Calderón Rojas (2A)

Chairman of the Board and Chief Executive Officer of Franca Industrias, S.A. de C.V. and Franca Servicios, S.A. de C.V.

Board member since April, 2005.

Member of the Boards of FEMSA, BBVA Bancomer (Regional Board), ITESM and UDEM. President of Asociación Amigos del Museo del Obispado, A.C. Member of Fundación UANL, A.C. and founder of Centro Integral Down, A.C.

Enrique Castillo Sánchez Mejorada (1A)

Managing Partner of Ventura Capital Privado, S.A. de C.V.

Board member since March, 2010.

Chairman of the Board of Maxcom Telecomunicaciones. Board member of Southern Copper Corporation, Grupo Herdez, Organización Cultiba and Médica Sur. Alternate Board member of Grupo Gigante.

Francisco Javier Fernández Carbajal (1C)

President of Servicios Administrativos Contry, S.A. de C.V.

Board member since March, 2010.

President of ALFA’s Planning and Finance Committee. Member of the Boards of Visa Inc., FEMSA and CEMEX.

Álvaro Fernández Garza (3C)

President of ALFA, S.A.B. de C.V.

Board member since April, 2005.

Member of the Boards of Alpek, Vitro, Cydsa, Grupo Aeroportuario del Pacífico, UDEM, Museo de Arte Contemporáneo de Monterrey and Georgetown University (Latin American Board). Currently, he is President of the Chamber of Industry of Nuevo León (CAINTRA).

Armando Garza Sada (3C)

Chairman of the Board of ALFA, S.A.B. de C.V.

Board member since April, 1991.

Chairman of the Board of Alpek, S.A.B. de C.V.Member of the Boards of FEMSA, Industrias Frisa, Grupo Financiero Banorte, Grupo Lamosa, Liverpool, Proeza, ITESM and Stanford University.

Claudio X. González Laporte (1B)

Chairman of the Board of Kimberly-Clark de México, S.A.B. de C.V.

Board member since December, 1987.

Member of the Boards of Fondo México, Grupo México and Bolsa Mexicana de Valores. Advisor to Capital Group and President of Consejo Mexicano de Hombres de Negocios, A.C.

Ricardo Guajardo Touché (1B)

Board member since March, 2000.

Member of the Boards of Liverpool, Grupo Aeroportuario del Sureste, Grupo Bimbo, FEMSA, Coca-Cola FEMSA, Grupo Coppel, Vitro and ITESM.

David Martínez Guzmán (1C)

President of Fintech Advisory Inc.

Board member since March, 2010.

Member of the Boards of Vitro, Sabadell Banc and Banca Monte dei Paschi di Siena.

Adrián Sada González (1B)

Chairman of the Board of Vitro, S.A.B. de C.V.

Board member since April, 1994.

President of ALFA’s Corporate Practices Committee.Member of the Boards of Gruma, Cydsa and Consejo Mexicano de Hombres de Negocios, A.C.

Federico Toussaint Elosúa (1A)

Chairman of the Board and Chief Executive Officer of Grupo Lamosa, S.A.B. de C.V.

Board member since April, 2008.

President of ALFA’s Audit Committee. Member of the Boards of Xignux, Grupo Iconn, Banco de México (Regional Board), UDEM and Centro Roberto Garza Sada. President of Centro de Competitividad de México and Board member of Consejo Mexicano de Hombres de Negocios, A.C.

27

José de Jesús Valdez Simancas

President of Alpek

Joined ALFA in 1976. Undergraduate degree in Engineering and Master’s degree in Management from ITESM. Master’s degree in Industrial Engineering from Stanford University.

Ramón A. Leal Chapa

Chief Financial Officer

Joined ALFA in 2009. Undergraduate degree in Accounting from Universidad de Monterrey. Master’s degree in Operations Management from ITESM. MBA from Harvard University.

Alejandro M. Elizondo Barragán

Senior Vice President, Development

Joined ALFA in 1976. Undergraduate degree in Engineering from ITESM. MBA from Harvard University.

Management Team

Armando Garza Sada

Chairman of the Board

Joined ALFA in 1978. B.S. from MIT. MBA from Stanford University.

Álvaro Fernández Garza

President

Joined ALFA in 1991. Undergraduate degree in Economics from Notre Dame University. Master’s degree in Management from ITESM and MBA from Georgetown University.

Mario H. Páez González

President of Sigma

Joined ALFA in 1974. Undergraduate degree in Accounting and Master’s degree in Management from ITESM. MBA from Tulane University.

Paulino J. Rodríguez Mendívil

Senior Vice President, Human Capital

Joined ALFA in 2004. Undergraduate degree in Engineering and Master’s degree in Energy Technology from the University of the Basque Country, Spain.

Manuel Rivera Garza

Senior Vice President, Development

Joined ALFA in 1976. Undergraduate degree in Engineering from ITESM. Master’s degree in Industrial Engineering from Stanford University.

Armando Tamez Martínez

President of Nemak

Joined ALFA in 1984. Undergraduate degree in Engineering from ITESM. Master’s degree in Administration and Engineering from George Washington University.

Carlos Jiménez Barrera

Senior Vice President, Legal and Corporate Affairs

Joined ALFA in 1976. Undergraduate degree in Law from Universidad de Monterrey. Master’s degree in Law from New York University.

Rolando Zubirán Shetler

President of Alestra

Joined ALFA in 1999. Undergraduate degree in Engineering from UNAM. Master’s degree in Operations Research from USC. Ph.D. in Philosophy from UANL with specialization in Management.

28Corporate Governance

• ALFA adheres to Mexico’s current Code of Best Corporate Practices in place in Mexico since 2000. This Code was developed at the initiative of the securities authorities of Mexico and its purpose is to establish a framework on corporate governance to increase investor confidence in Mexican companies.

• Companies whose stocks trade on the Mexican Stock Exchange must disclose the extent to which they adhere to the Code of Best Corporate Practices. This is done annually by responding to a questionnaire, which is available to the public through the Mexican Stock Exchange’s web site.

• The following is a summary of ALFA’s corporate governance as stated in the June, 2014 questionnaire, with any pertinent information updated.

A. The Board of Directors comprises 11 proprietary members who have no alternates. Of this number, 9 are independent. This annual report provides information on all of the Board’s members, identifying those who are independent and the Committees in which they participate.

B. Three Committees assist the Board of Directors in carrying out its duties: Audit, Corporate Practices, and Planning and Finance. Board members participate in at least one committee each. All three committees are headed by an independent board member. The Audit and Corporate Practices Committees are formed by independent members only.

C. The Board of Directors meets every two months. Meetings of the Board can be called by agreement of the Chairman of the Board, the President of the Audit Committee, the President of the Corporate Practices Committee, the Secretary of the Board or of at least 25% of its members. At least one of these meetings is dedicated to defining the company’s medium and long term strategy.

D. Members must inform the Chairman of any conflicts of interest that may arise, and abstain from participating in the corresponding deliberations. Average attendance at Board meetings was 94% during 2014.

E. The Audit Committee studies and issues recommendations to the Board on matters such as the selection and determination of fees to the external auditor, coordinating with the internal audit area of the company, and studying accounting policies, among others.

F. The company has internal control systems with general guidelines. These are submitted to the Audit Committee for its opinion. In addition, the external auditor validates the effectiveness of the internal control system and issues the corresponding reports.

G. The Planning and Finance Committee evaluates all matters relating to its particular area and issues recommendations to the Board on matters such as feasibility of investments, strategic positioning of the company, alignment of investment and financing policies, and review of investment projects.

H. The Corporate Practices Committee is responsible for issuing recommendations to the Board on such matters as employment terms and severance payments for senior executives, and compensation policies, among others.

I. There is a department dedicated to maintaining an open line of communication between the company and its shareholders and investors. This ensures that investors have the financial and general information they require in order to evaluate the company’s development and progress. O

2929

CONSOLIDATEDFINANCIALSTATEMENTS

PageManagement´s analysis 30Report of the independent auditors 41

Consolidated financial statements:Consolidated statements of financial position 42Consolidated statements of income 44Consolidated statements of comprehensive income 45Consolidated statements of changes in stockholders’ equity 46Consolidated statements of cash flows 48Notes to the consolidated financial statements 49Glossary 106

30

Management´s analysis

2014

The following report should be read in conjunction with the letter to the Stockholders (pages 13 – 15) and the Audited Financial Statements (pages 41 – 105). Unless otherwise indicated, the figures from 2012 to 2014 are stated in millions of nominal Mexican pesos (Ps.) Percentage fluctuations are stated in nominal terms. In addition, some figures are stated in millions of dollars from the United States (US dollar or US$) and millions of Euros (€).

The financial information contained in this Management’s Analysis corresponds to the last three years (2012, 2013 and 2014), and has been adjusted to the International Financial Reporting Standards (IFRS). Furthermore, some sections of this information have been expanded in order to include three years and adjust it to the General Regulations, applicable to the Issuers and other Securities Market Participants, issued by the National Banking and Securities Commission (CNBV by its Spanish acronym) up to September 24, 2014.

San Pedro Garza García, N. L., March 17, 2015.

ECONOMIC ENVIRONMENT

During 2014, the global economy experienced a divergence in the regional growth rates. The economy of the United States grew at a robust pace of 2.4%, while that of the Eurozone barely reached 0.9%, and that of Japan stalled with 0.1%. Given these growth rate differences, their corresponding monetary authorities implemented opposing policies, causing a strong appreciation of the U.S. Dollar against other major currencies, such as the Euro and the Japanese Yen.

Meanwhile, in emerging economies the growth decelerated. In China, the growth was one of the lowest in two decades, reaching 7.4%; and in Mexico, the growth was below trend, at 2.1%

Finally, the oversupply of oil production led to a pronounced fall of more than 50% in its prices during the second half of the year. This event boosted growth in oil-importing countries and hindered that of oil-exporting countries.

The economic indicators of Mexico relevant to understand ALFAs results, are described below:

The GDP growth of Mexico was 2.1% in 2014, slightly higher than that of 2013. The consumer inflation was 4.0% (b) in 2014, higher than the 3.8% (b) average 2013. The Mexican Peso experienced a nominal depreciation of 12.5% (c) in 2014, higher than the 0.5% (c) depreciation of 2013. In real terms, the annual average overvaluation of the Mexican peso vis-á-vis the US dollar amounted to 15.6% (d) in 2014 and 15.5% (d) in 2013.

The 28-day TIIE nominal interest rate for Mexican pesos averaged 3.5% (b) in 2014, below the 4.3% average of 2013. In real terms, the interest rates were negative, averaging 0.4% in 2013 to -0.5% in 2014.

The nominal 3-month Libor for U.S. Dollars averaged a historic low 0.2% (b) in 2014, slightly lower than the 0.3% (b) average of 2013. Taking into account the nominal depreciation of the Mexican peso and its inflation, the real rate of the 3-month Libor was 8.4% (a) in 2014, higher than the negative rate of -3.1% (a) in 2013.

Sources:

(a) National Institute of Statistics and Geography (INEGI).(b) The Bank of Mexico (Banxico).(c) Banxico. Exchange rate to liquidate liabilities denominated in foreign currency and payable in Mexico.(d) Own calculations with data from INEGI, bilateral with the United States, adjusting for consumer prices.

31

ALFA CONTINUES TO GROW

During 2014, ALFA made investments in organic growth and acquisitions in order to enter into new geographies, expand its production capacity and add value to its products. This is how ALFA successfully faced a volatile and pressure-filled environment relative to margins in some of its main businesses.

RESULTS

REVENUESThe following table shows ALFA’s revenues for the years 2014, 2013 and 2012 breaking down by volume and price components (indexes are calculated on a 2009=100 base):Concept 2014 2013 2012 Var. 2014-2013 (%) Var. 2013-2012 (%)

Consolidated Revenues 229,226 203,456 200,167 13 2Volume index 163.0 151.5 147.4 8 3Price index in Mexican pesos 116.9 112.0 113.4 4 (1)Price index in US dollars 123.1 123.0 120.7 0 2

The consolidated revenues broken down by ALFA’s business groups are as follows:Concept 2014 2013 2012 Var. 2014-2013 Var. 2013-2012

Alpek 86,072 90,061 96,163 (3,989) (6,102)Sigma 71,465 48,989 45,476 22,476 3,513Nemak 61,665 56,299 51,385 5,366 4,914Alestra 5,519 5,067 4,634 452 433Newpek 2,259 1,706 1,227 553 479Others 2,246 1,334 1,282 912 52Total 229,226 203,456 200,167 25,770 3,289

The revenues behavior is explained as follows:

14

16

3

15

2

13

14

7

12

13

3

11

11

4

10

Volumes

14

11

7

11

2

13

11

3

12

11

6

11

11

4

10

Prices

Pesos

Dollars

111 130 121 123 123

Revenue indexes(2009=100)

32

2014-2013:

Consolidated revenues in 2014 amounted to Ps229,226 (US$17,224), 12.7% higher than in 2013 (8.5% in US dollars). Following is an explanation of the performance of each of ALFA’s business groups:

Alpek’s sales in US dollars during 2014 were 8% lower than in 2013, due to an excess of capacity in Asia and the raw materials price volatility. The plastic and chemicals business showed a favorable performance, except for caprolactam, which continued to be affected by the excess capacity in China. However, the Company’s financial performance allowed it to continue implementing projects seeking to reduce costs, as well as improve the efficiency and integration of its operations.

In 2014, Sigma sold 1.4 million tons of food, 21% more than in 2013. Revenues were increased to US$5,359, 40% more than in 2013 supported by the consolidation of Campofrío beginning on July 2014. On the other hand, the Mexican consumer market showed weakness and the prices of raw materials experienced strong increases. The Company faced this environment by strengthening its marketing and distribution efforts, launching new products, investing in brand capital, as well as making operations more efficient. The Food service business was strengthened by capitalizing synergies derived from the acquisition of ComNor in 2013.

On the other hand, the sales volume of Nemak grew 4%, adding 49.8 million equivalent pieces. As a result, revenues increased to US$4,645, an increase of 6% compared to 2013. The Company took advantage of the North American automotive industry growth, a slightly better performance in Europe and its new production capacity in Asia. As evidence of the trust it has earned, during the year, Nemak got 60 new contracts, representing future revenues of US$1.7 billion. Five of these are related to the production of structural pieces, new market with a great potential.

In Alestra, revenues added up to US$415, 5% more than in 2013. The increase was due to a growth in revenues from added value services (AVS), mainly those related to IT security, integration of systems and cloud services, among others. The SVA represented 85% of the Company’s total revenues.

Finally in 2014, Newpek connected 122 new Wells to sales in the Eagle Ford Shale to add up to 497 producing Wells in such formation. In the Wilcox formation, nine exploratory wells were drilled and completed in the year. In Oklahoma, Newpek operates 29 additional wells. Overall, the production of all these formations amounted to 8.2 thousand average equivalent oil barrels per day, 21% more than in 2013. Sales amounted to US$170, 28% more than in 2013.

2013-2012:

Consolidated revenues in 2013 amounted to Ps203,456 (US$15,870), 2% higher than 2012 (5% in US dollars). Following is an explanation of the performance of each of ALFA’s companies:

Alpek’s sales in US dollars during 2013 were 3% lower than in 2012. An environment of lower prices and margins in the polyester and caprolactam global markets translated into a reduction in the sales volume. However, the Company continued to implement the projects that will improve the efficiency and the integration of its operations.

In 2013, Sigma sold 1.2 million tons of food, 4% higher than in 2012. The revenues increased to US$3,820, 11% higher than in 2012. These increases reflect higher sales in cold meats and dairy in Mexico, in addition to improvements in productivity and its distribution network.

The sales volume of Nemak increased 11%, for a total of 47.6 million equivalent pieces. As a result, revenues increased to US$4,391, a 13% progress compared to 2012. In North America, car sales grew 8%, for a total of 15.6 million vehicles. A repressed demand and the availability of consumer credit were the main drivers of this increase. In Europe, the market decreased by 2%, however, the greater concentration of Nemak with German assemblers, who have been successful in finding export opportunities outside of the Eurozone resulted in an increase of the sales volume of 3% for the Company.

Furthermore, the use of aluminum auto parts to replace iron parts continues to increase, favoring the Company.

Alestra continued to promote added value services, such as cloud applications, security and managed networks, as well as data services, local and Internet services for the business segment, which contributed 84% of the Company’s revenues in 2013. Revenues amounted to a total of US$395, 13% more than in 2012.

Finally, Newpek connected 125 new wells to sales, for a total of 411. Of these 411 wells, 371 operate in Eagle Ford Shale and 40 in Edwards Trend. The net sales production of equivalent crude barrels amounted to 6,737, 37% more than in 2012. Out of the total volume, 52% were liquids and oil with a value considerably higher than dry gas, with respect to 50% in 2012.

33

OPERATING PROFIT

The operating profit of ALFA in 2014, 2013 and 2012 is explained as follows:

2014-2013:

Operating profit Change by Group

2014 2013 Var. Alpek Sigma Nemak Alestra Newpek Other

Revenues 229,226 203,456 25,770 (3,989) 22,476 5,366 452 553 912Operating profit 17,226 14,085 3,141 813 1,159 1,203 45 (379) 300Consolidated operating margin (%) 7.5 6.9Alpek (%) 4.3 3.2Sigma (%) 9.0 10.8Nemak (%) 9.3 8.0Alestra (%) 24.9 26.2Newpek (%) 19.7 48.4

The 22% increase in consolidated operating profit from 2013 to 2014 is explained by the individual performance of the Group’s Companies, as described below:

In the case of Alpek, additionally to the lower margin environment in global markets of polyester and caprolactam, the price fall in crude oil put even more pressure on the margins and resulted in a non-cash charge of US$71 for inventory devaluation. It is important to keep in mind that the operating profit for 2013 was affected by an impairment of fixed assets due to the closing of the Cape Fear plant, amounting to $2,421. In this sense, even though the above explanation, the operating profit of 2014 is higher than of 2013.

In Sigma, the operating profit showed a strong increase mainly due to the consolidation of Campofrío beginning on July 2014. Excluding this effect, the operating profit showed a slight decrease despite the increase in prices of raw materials that had to be compensated through higher sales prices.

In Nemak, the operating profit grew 27% in pesos during the year. This was due to the increase in sales already explained above, as well as to the implementation of actions to reduce costs and increase efficiency.

In 2014, Alestra increased its operating profit by 3%, mainly derived from an increase of added value service revenues and reduced costs. It is important to point out that the operating profit of 2013 was benefited due to an extraordinary revenue amounting to US$21 as a result of a favorable resolution of disputes over interconnection costs from prior years.

The operating profit of Newpek decreased by 46% in 2014 vs 2013, mainly due to an extraordinary charge of $310 for depreciation not included in 2013. Without this charge, revenues would have increased by 47%, since the Company currently has more operating oil and gas wells. The production of liquids, including condensed and oil, represented 62% of the total volume as compared to 52% in 2013. The best production mix also contributed to a better operating profit.

2013-2012:

Operating profit Change by Group

2013 2012 Var. Alpek Sigma Nemak Alestra Newpek Other

Sales 203,456 200,167 3,289 (6,102) 3,513 4,914 433 479 52Operating profit 14,085 16,672 (2,587) (4,550) 495 961 370 148 (11)Consolidated operating margin (%) 6.9 8.1Alpek (%) 3.2 7.8Sigma (%) 10.8 10.5Nemak (%) 8.0 6.9Alestra (%) 26.2 20.8Newpek (%) 48.4 55.3

The 14% decrease in consolidated operating profit from 2012 to 2013 is explained by the individual performance of ALFA’s companies, as explained below:

In Alpek’s case, additionally to the lower margin environment in the global polyester and caprolactam markets, an item of Ps2,421 was charged related to the cost from closing the facilities and reducing fixed assets in Cape Fear, which affected the operating profit.

In Sigma, the increase in sales explained above was evident in an increase in operating profit.

34

Nemak recorded an operating profit 27% higher than in 2012. This was the result of an increase in sales volume, as well as more efficiency in the use of its assets and obtaining synergies among its 34 plants globally, and the incipient integration of some added value services, such as manufacturing of parts.

In 2013, Alestra continued to strengthen its revenue mix, increasing its margins and strengthening its infrastructure to reduce costs. Additionally, it obtained a favorable legal resolution on fixed interconnection tariffs. This allowed Alestra to increase its operating income by 43% as compared to 2012. It is important to mention that in 2012 the income included the benefit of an agreement in favor of Alestra for fixed-mobile interconnection tariffs.

Newpek’s operating profit increased 22% in 2013 vs. 2012. This was a result of having more operating wells. It is important to mention that the operating profit to sales ratio decreased in 2013 in relation to 2012 due to expenses related to new projects that the Company will start to develop in 2014.

COMPOSITION OF REVENUES AND OPERATING PROFIT

The percentage structure of revenues and operating profit of ALFA experienced changes between 2014 and 2013 mainly due to the decrease in sales and operating profit of Alpek and an increase in the operating profit of Sigma and Nemak, all of which are explained above.

The following table shows these effects: Integration % Revenues Operating profit

2014 2013 2012 2014 2013 2012Alpek 38 44 48 22 21 45Sigma 31 24 23 37 37 29Nemak 27 28 26 33 32 21Alestra 2 2 2 8 9 6Newpek 1 1 1 3 6 4Others 1 1 0 (3) (5) (5)Total 100 100 100 100 100 100

FINANCE COST

The exchange loss is explained mainly by the macroeconomic environment during the year. As explained in the beginning, the Mexican peso had an annual nominal depreciation of 12.5% in 2014. Therefore, it was a determining factor of ALFA’s finance cost during 2014. Another significant item was the impairment in fair value of the financial investment available for sale corresponding to the investment in Pacific Rubiales Energy, considered as non-cash.

Determinants of finance cost 2014 2013

General inflation (Dec.- Dec.) 4.1 4.0Variation % in nominal exchange rate at year end (12.5) (0.5)Closing exchange rate, nominal 14.72 13.08Real appreciation (depreciation)Mexican pesos / dollars with respect to the prior year: Year end (9.0) 1.9 Average of the year (1.3) 5.1Average interest rate: Nominal LIBOR 0.2 0.3 Nominal implicit, ALFA debt 5.7 5.9 LIBOR in real terms 8.4 (3.1) Real implicit, ALFA debt 14.3 2.6Average monthly debt of ALFA in US$ 5,737 4,170

35

Expressed in US$, the finance cost, net for the years 2014, 2013 and 2012 were US$328, US$295 and US$279, respectively.

Variation in finance cost, net in US $ 14/13 13/12

Due to a (higher) lower interest rate 62 (34)Due to a (higher) lower net petty cash debt (95) 18Net change (33) (16)

Net financial expenses in profit include premiums paid in operations, such as: refinancing, operating interests, in 2014, 2013 and 2012, besides financial bank expenses.

Measured in pesos, the finance cost, net was integrated as follows: Change

Finance Cost, net 2014 2013 2012 14/13 13/12

Financial expenses (4,957) (3,978) (4,412) (979) 434Financial income 222 270 719 (48) (449)Financial expenses, net (4,735) (3,708) (3,693) (1,027) (15)Result from exchange fluctuation, net of derivative financial exchange rate operations. (5,221) (349) 962 (4,872) (1,311)Impairment in the fair value of financial investments available for sale (8,665) (8,665)Total finance cost, net (18,621) (4,057) (2,731) (14,564) (1,326)

The fair value of ALFA’s derivative financial instruments at December 31, 2014 and 2013 is as follows: Fair value (Millions of US dollars)

Type of derivative, value or contract Dec. 14 Dec. 13

Exchange rate (5) 0Cross Currency Swaps (49) (29)Interest rate (1) (2)Energy (72) 2Total (127) (29)

36

INCOME TAX

Following is an analysis of the principal determinants of income tax in each one of the years in comparison, starting from the concept of taxable income defined as operating profit less finance cost and other expenses, net. Change

INCOME TAX 2014 2013 2012 14/13 13/12

Profit (loss) before income tax (1,686) 9,987 13,941 (11,673) (3,954)Share of losses of associatesRecognized by the equity method 291 41 250 41 (1,395) 10,028 13,941 (11,423) (3,913)

Statutory rate 30% 30% 30%Income tax at statutory rate 419 (3,008) (4,182) 3,427 1,174+ / (-) Tax effect of permanent tax-accounting differences:Tax vs. Accounting basis finance cost, net 875 338 652 537 (314)Other permanent differences, net (556) (139) 241 (417) (380)Total tax effect of permanent differences 319 199 893 120 (694)Income tax provision based on operations of the year 738 (2,809) (3,289) 3,547 480Recalculation of back taxes and other (181) (383) (101) 202 (282)Total income tax provision (charged) credited to income 557 (3,192) (3,390) 3,749 198Effective tax rate 39% 32% 25%Income tax : Currently payable (3,539) (3,531) (3,315) (8) (216) Deferred 4,096 339 (75) 3,757 414 Total income tax provision charged to income 557 (3,192) (3,390) 3,749 198

NET PROFIT

During the year, ALFA generated a net consolidated loss, as broken down in the table below, and it is the result of the before explained with regard to the operating profit, finance cost, net and taxes: Change

Statement of income 2014 2013 2012 14/13 13/12

Operating profit 17,226 14,085 16,672 3,141 (2,587)Finance cost, net (1) (18,621) (4,057) (2,731) (14,564) (1,326)Equity in losses of associates (291) (41) (250) (41)Taxes (2) 557 (3,192) (3,390) 3,749 198Net consolidated income (loss) (1,129) 6,795 10,551 (7,924) (3,756)Net income (loss) of the controlling interest (2,037) 5,926 9,361 (7,963) (3,435)

(1) Comprehensive financing result(2) Income tax (payable and deferred)

37

COMPREHENSIVE INCOME

Comprehensive income is shown in the statement of changes in stockholders’ equity and its objective is to show the total effect of all transactions and events which affected earned surplus, regardless of whether these were recorded in the statement of income, or directly in the capital account. Operations between the Company and its shareholders are excluded, mainly dividends paid. Comprehensive income in 2014, 2013 and 2012 was as follows: Consolidated

Comprehensive income 2014 2013 2012

Net profit (1,129) 6,795 10,551Effects of translation of foreign entities 3,679 456 (2,887)Effects of derivative financial instruments (744) 234 87Remeasurement of obligations for employees’ benefits (238) 734 (306)Consolidated comprehensive income 1,568 8,219 7,445Owners of the controlling company (315) 7,740 6,332Non-controlling interest 1,883 479 1,113

Comprehensive income for the year 1,568 8,219 7,445

A previous section of this report explains the net profit obtained in 2014, 2013 and 2012. The translation effect of subsidiaries abroad, which shows the effect from using different exchange rates between asset and liability accounts, against income and capital accounts, experienced an important change due to the volatility of the exchange rates of the currencies of different countries where ALFA has presence.

The effect in capital of derivative instruments represents the effect for energy by-products that, in accordance with International Financial Reporting Standards, is shown in stockholders’ equity. The effect of remeasurement of obligations for employees’ benefits is the gain(loss) in actuarial estimates.

DIVIDENDS DECLARED AND INCREASE IN STOCKHOLDERS’ EQUITY

• In 2014 no dividend was declared due to the extraordinary dividend paid in December 2013. In 2013, the payment of an ordinary dividend of $1,513 was approved, equal to 0.29 pesos per share, 12% higher than that paid in 2012. Furthermore, in December 2013, an additional dividend of $2,006 equal to 0.39 pesos per share was declared. In 2012 an ordinary dividend was declared for $1,348 equal to 2.60 pesos per share.

• In 2014, the stockholders’ equity was increased by 6%. On the one hand, it was decreased by the net loss, on the other, it was increased by the monetary capital of Campofrío.

INVESTMENT IN DAYS NWC (1)

In 2014, the sales to NWC ratio at a consolidated level decreased, which resulted in consolidated NWC days to decrease, from 26 in 2013 to 20 in 2014.Days in NWC 2014 2013 2012

Alpek 47 49 46Sigma 5 18 17Nemak 12 13 17Alestra (32) (32) (49)Newpek (39) (44) (12)Consolidated 20 26 28

(1) Net working capital

38

INVESTMENTS

Property, plant and equipmentThe total investments by group were as follows: % Change Last 5 years

2014 2013 14/13 Investment %

Alpek 4,191 2,275 84 8,300 18Sigma 1,871 1,522 23 6,677 14Nemak 5,254 4,336 21 19,475 42Alestra 1,310 1,538 (15) 5,140 11Newpek 1,771 2,473 (28) 6,617 14Others 33 54 (39) 603 1Total 14,430 12,198 18 46,812 100

Business acquisitionsThe acquisition process by Sigma of 58% of the shares of Campofrío concluded in 2014. In Ecuador, Sigma acquired Fábrica Juris, company engaged in the processing of cold meats in such country, expanding its presence in South America. On the other hand, Alpek acquired CabelmaPET in Argentina, company engaged in recycling PET.

CASH FLOWS

Based on the cash flows generated by operations, the following table shows the main transactions in 2014. 2014 2013

Cash flows provided by operations 23,953 19,758Property, plant and equipment and others (14,430) (12,198)Acquisition of financial assets available for sale (14,135)Business acquisitions (1,353) (5,983)Increase in Bank Financing 15,677 4,918Dividends paid by ALFA SAB (3,510)Dividends paid to the non-controlling interest (183) (1,612)Repurchase of shares (258) (99)Net Interest Paid (4,490) (3,631)Other (707) 548Increase (decrease) in cash 4,074 (1,809)Adjustment in cash flows from changes in exchange rates 693 50Cash, cash equivalents and restricted cashAt beginning of year 11,902 13,661

Total cash at end of year 16,669 11,902

39

The principal changes in the net debt of ALFA and its groups were as follows:

Changes in net cash debt US$ Consolidated Alpek Sigma Nemak Alestra Newpek Other

Balance at December 31, 2013 3,473 766 1,319 1,140 175 83 (10)Long-term financing, net of payments:Financing 1,778 277 207 5 185 21 1,083Payments (777) (287) (132) (67) (199) (2) ( 90) 1,001 (10) 75 (62) (14) 19 993Short term financing, net of payments 207 (23) (47) 173 40 - 64 Total financing, net of payments 1,208 (33) 28 111 26 19 1,057 Translation effect (325) 7 (279) (51) (2) (1) 0Debt variation in the statement of cash flows 883 (26) (251) 60 24 18 1,057Debt from acquired companies and others 981 3 971 0 5 0 2 Total debt variation 1,864 (23) 720 60 29 18 1,059Decrease (increase) in cash and restricted cash (230) (28) (185) 71 14 (3) (99)Change in interest payable 16 0 8 (1) (8) 0 17Increase (decrease) in debt net of cash 1,650 (51) 543 130 35 15 978Balance at December 31, 2014 5,123 715 1,862 1,270 210 98 968

Alpek Sigma Nemak Alestra Others

Short and long term debt by group 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Debt balance (US$) 1,094 1,118 2,189 1,465 1,352 1,293 260 230 1,361 273

Debt balance percentageShort-term debt 2 3 1 4 15 3 13 0 26 37Long-term 1 year 0 2 2 15 8 6 1 87 0 18 2 2 6 31 0 11 8 14 0 13 34 3 2 4 14 4 11 12 3 13 1 0 4 4 0 40 0 18 13 4 0 1 9

5 years or more 90 85 12 77 37 58 65 0 59 2Total 100 100 100 100 100 100 100 100 100 100

Average life, long-term debt (years) 7.3 8.1 2.8 4.5 5.5 6.0 6.1 2.5 10.4 2.1Average life, total debt (years) 7.2 7.7 2.8 3.7 4.3 5.5 5.3 0.8 8.7 1.2

40

US$ % of total

Consolidated short and long term debt: 2014 2013 Var. 2014 2013

Short-term debt 510 243 267 8 6Long-term 1 year 147 561 (414) 2 13 2 991 271 720 16 6 3 504 286 218 8 7 4 1,180 191 989 19 4 5 years or more 2,915 2,826 89 47 64Total 6,247 4,378 1,869 100 100

Average term of, long-term debt (years) 7.3 5.9Average term of, total debt (years) 6.6 4.9

FINANCIAL RATIOS

LIQUIDITYDebt net of cash / Cash flow (in US dollars, last 12 months) Groups 2014 2013

Alpek 1.65 1.34Sigma 2.93 2.52Nemak 1.78 1.87Alestra 1.24 1.03Newpek 0.85 0.91Consolidated 2.51 1.81

Change Due to

Financial Interest coverage (in US dollars) * 2014 2013 14/13 Cash Flow expenses

Alpek 6.5 7.1 (0.6) (1.8) 1.2Sigma 5.6 6.7 (1.1) 1.4 (2.5)Nemak 9.8 6.1 3.7 1.1 2.6Alestra 7.3 7.5 (0.2) (0.1) (0.1)Consolidated 6.1 6.7 (0.6) 0.4 (1.0)

* Defined as operating profit plus depreciation and amortization, divided by net financial expense.

FINANCIAL STRUCTURE

ALFA’s financial structure indicators improved during 2014, as observed in the table below:Financial ratios 2014 2013

Total liabilities / Stockholders’ equity 2.36 1.54Long-term debt / Total debt (%) 89 82Total currency debt / Total debt (%) 94 88

41ALFA, S. A. B. de C. V. AND SUBSIDIARIES

Report of the independent auditors

Monterrey, N. L., March 17, 2015

To the Shareholders’ Meeting of Alfa, S. A. B. de C. V.

We have audited the accompanying consolidated financial statements of Alfa, S. A. B. de C. V and subsidiaries, which comprise the consolidated statement of financial position as at December 31, 2014 and 2013, and the consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years ended December 31, 2014 and 2013, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Alfa, S. A. B. de C. V. and its subsidiaries as at December 31, 2014 and 2013, and its financial performance and its cash flows for the years ended December 31, 2014 and 2013, in accordance with International Financial Reporting Standards (IFRS).

PricewaterhouseCoopers, S. C.

Alberto Cano CharlesAudit Partner

42ALFA, S. A. B. de C. V. AND SUBSIDIARIES

Consolidated statements of financial position

December 31, 2014 and 2013(Millions of Mexican pesos) Note 2014 2013

AssetsCURRENT ASSETS:Cash and cash equivalents 6 Ps 16,669 Ps 11,902 Restricted cash and cash equivalents 7 504 364Customers and other accounts receivable, net 8 30,357 23,564Inventories 9 30,758 22,692Financial assets available for sale 2.b 5,613 -Derivative financial instruments 10 23 86Other assets 11 1,419 1,043Total current assets 85,343 59,651

NON-CURRENT ASSETS:Property, plant and equipment, net 12 93,908 73,974Goodwill and intangible assets, net 13 40,452 23,906Deferred income tax 18 9,880 1,211Derivative financial instruments 10 27 -Investments accounted for using the equity method and others 14 3,270 6,648Total non-current assets 147,537 105,739

Total assets Ps 232,880 Ps 165,390

43

The accompanying notes are an integral part of these consolidated financial statements.

Álvaro Fernández Garza Ramón A. Leal ChapaPresident Chief Financial Officer

Note 2014 2013

Liabilities and Stockholders’ equityCURRENT LIABILITIES:Current debt 17 Ps 10,714 Ps 10,522Suppliers and other accounts payable 16 47,655 30,252Income tax payable 18 951 481Derivative financial instruments 10 760 78Provisions 19 1,146 833Other liabilities 20 889 534Total current liabilities 62,115 42,700

NON-CURRENT LIABILITIES:Non-current debt 17 81,489 46,932Derivative financial instruments 10 1,092 337Provisions 19 1,014 543Deferred income tax 18 10,463 3,534Non-current income tax payable 18 4,122 3,785Employees’ benefits 21 3,006 1,891Other liabilities 20, 24 420 499Total non-current liabilities 101,606 57,521Total liabilities 163,721 100,221

STOCKHOLDERS’ EQUITY:Controlling interest:Capital stock 22 207 210Retained earnings 22 52,546 55,643Other reserves 22 2,625 588Total controlling interest 55,378 56,441

Non-controlling interest 13,781 8,728Total stockholders’ equity 69,159 65,169Total liabilities and stockholders’ equity Ps 232,880 Ps 165,390

44ALFA, S. A. B. de C. V. AND SUBSIDIARIES

Consolidated statements of income

For the years ended December 31, 2014 and 2013 (Millions of Mexican pesos)

Note 2014 2013

Revenue 32 Ps 229,226 Ps 203,456 Cost of sales 25 (187,705) (166,829)Gross profit 41,521 36,627

Selling expenses 25 (13,489) (11,142)Administrative expenses 25 (10,933) (9,189)Other revenues, net 26 127 210Operating profit before non-recurring items 17,226 16,506

Non-recurring items 27 - (2,421)Operating profit 17,226 14,085

Financial income, including foreign exchange gain of Ps7,455 and Ps16 in 2014 and 2013, respectively 28 7,677 286Financial costs, including foreign exchange loss of Ps12,676 and Ps365 in 2014 and 2013, respectively 28 (17,633) (4,343)Impairment of financial assets available for sale 28 (8,665) -Financial costs, net (18,621) (4,057)

Share of losses of investments accounted for using the equity method (291) (41)(Loss) profit before income tax (1,686) 9,987

Income tax 30 557 (3,192)Net consolidated (loss) profit Ps (1,129) Ps 6,795

(Loss) profit attributable to:Controlling interest Ps (2,037) Ps 5,926

Non-controlling interest 908 869 Ps (1,129) Ps 6,795(Losses) earnings per basic and diluted share, in pesos Ps (0.40) Ps 1.15Weighted average of outstanding shares (thousands of shares) 5,143,480 5,143,886

The accompanying notes are an integral part of these consolidated financial statements.

Álvaro Fernández Garza Ramón A. Leal ChapaPresident Chief Financial Officer

45ALFA, S. A. B. de C. V. AND SUBSIDIARIES

Consolidated statements of comprehensive income

For the years ended December 31, 2014 and 2013 (Millions of Mexican pesos) Note 2014 2013

Net consolidated (loss) profit Ps (1,129) Ps 6,795

Other comprehensive income (loss) for the year, net of tax:Items not to be reclassified to income statement Remeasurement of obligations for employees’ benefits 21 (238) 734Items to be reclassified to income statement Effect of derivative financial instruments designated as cash flow hedges 10 (744) 234 Effect of translation of foreign entities 22 3,679 456Total other comprehensive income (loss) for the year 2,697 1,424Total comprehensive income for the year Ps 1,568 Ps 8,219

Attributable to:Controlling interest Ps (315) Ps 7,740Non-controlling interest 1,883 479Total comprehensive income for the year Ps 1,568 Ps 8,219

The accompanying notes are an integral part of these consolidated financial statements.

Álvaro Fernández Garza Ramón A. Leal ChapaPresident Chief Financial Officer

46ALFA, S. A. B. de C. V. AND SUBSIDIARIES

Consolidated statements of changes in stockholders’ equity

For the years ended December 31, 2014 and 2013(Millions of Mexican pesos) Total Non- Total Capital Retained Other controlling controlling stockholders’ Note Stock earnings reserves interest interest equity

Balances at December 31, 2012 Ps 211 Ps 52,106 Ps 92 Ps 52,409 Ps 8,735 Ps 61,144

Transactions with shareholders:

Dividends declared by ALFA 22 - (3,529) - (3,529) - (3,529)

Repurchase of own shares 22 (1) (98) - (99) - (99)

Dividends from subsidiaries to non-controlling interest 3.b - - - - (1,612) (1,612)

Changes in the non-controlling interest 3.b - - - - 1,133 1,133

(1) (3,627) - (3,628) (479) (4,107)

Net profit - 5,926 5,926 869 6,795

Total other comprehensive income for the year - 1,318 496 1,814 (390) 1,424

Comprehensive income - 7,244 496 7,740 479 8,219

Effects from adoption of new accounting policies - (80) - (80) (7) (87)

Balances at December 31, 2013 210 55,643 588 56,441 8,728 65,169

Transactions with shareholders:

Repurchase of own shares 22 (3) (255) - (258) - (258)

Dividends from subsidiaries to non-controlling interest 3.b - - - - (183) (183)

Changes in the non-controlling interest 2.a - (490) - (490) 3,353 2,863

(3) (745) - (748) 3,170 2,422

Net (loss) profit - (2,037) - (2,037) 908 (1,129)

Total other comprehensive income for the year - (315) 2,037 1,722 975 2,697

Comprehensive (loss) income - (2,352) 2,037 (315) 1,883 1,568

Balances at December 31, 2014 Ps 207 Ps 52,546 Ps 2,625 Ps 55,378 Ps 13,781 Ps 69,159

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For the years ended December 31, 2014 and 2013(Millions of Mexican pesos) Total Non- Total Capital Retained Other controlling controlling stockholders’ Note Stock earnings reserves interest interest equity

Balances at December 31, 2012 Ps 211 Ps 52,106 Ps 92 Ps 52,409 Ps 8,735 Ps 61,144

Transactions with shareholders:

Dividends declared by ALFA 22 - (3,529) - (3,529) - (3,529)

Repurchase of own shares 22 (1) (98) - (99) - (99)

Dividends from subsidiaries to non-controlling interest 3.b - - - - (1,612) (1,612)

Changes in the non-controlling interest 3.b - - - - 1,133 1,133

(1) (3,627) - (3,628) (479) (4,107)

Net profit - 5,926 5,926 869 6,795

Total other comprehensive income for the year - 1,318 496 1,814 (390) 1,424

Comprehensive income - 7,244 496 7,740 479 8,219

Effects from adoption of new accounting policies - (80) - (80) (7) (87)

Balances at December 31, 2013 210 55,643 588 56,441 8,728 65,169

Transactions with shareholders:

Repurchase of own shares 22 (3) (255) - (258) - (258)

Dividends from subsidiaries to non-controlling interest 3.b - - - - (183) (183)

Changes in the non-controlling interest 2.a - (490) - (490) 3,353 2,863

(3) (745) - (748) 3,170 2,422

Net (loss) profit - (2,037) - (2,037) 908 (1,129)

Total other comprehensive income for the year - (315) 2,037 1,722 975 2,697

Comprehensive (loss) income - (2,352) 2,037 (315) 1,883 1,568

Balances at December 31, 2014 Ps 207 Ps 52,546 Ps 2,625 Ps 55,378 Ps 13,781 Ps 69,159

The accompanying notes are an integral part of these consolidated financial statements.

Álvaro Fernández Garza Ramón A. Leal ChapaPresident Chief Financial Officer

48ALFA, S. A. B. de C. V. AND SUBSIDIARIES

Consolidated statements of cash flows

For the years ended December 31, 2014 and 2013(Millions of Mexican pesos)

Note 2014 2013

Cash flows from operating activities (Loss) profit before income tax Ps (1,686) Ps 9,987 Depreciation and amortization 12,13 9,607 7,932Impairment of long-lived assets 283 2,518Costs associated with seniority premiums and pension plan 287 93Gain on sale of property, plant and equipment (153) (1)Effect of changes in fair value of derivative financial instruments 397 50Foreign exchange, net 5,544 365Other non-operating expenses and finance products, net 4,157 2,808Impairment of financial assets available for sale 8,665 -Decrease (increase) in customers and other accounts receivable 357 (1,131)Increase in inventory (899) (584)Increase in suppliers and other accounts payable 1,925 2,104Income tax paid (4,531) (4,383)Net cash generated from operating activities 23,953 19,758Cash flows from investing activitiesInterest received 215 267Investments in financial assets available for sale 2.b (14,135) -Acquisition of property, plant and equipment 12 (8,824) (7,763)Purchases of intangible assets 13 (5,606) (4,435)Business acquisitions, net of cash received 2.a and 2.i 344 (7,116)Restricted cash (199) 474Dividends received 362 43Related parties (266) -Other assets (361) (373)Net cash used in investing activities (28,470) (18,903)Cash flows from financing activitiesProceeds from borrowings or debt 17 41,965 38,247Payments of borrowings or debt 17 (26,288) (33,329)Interest paid (4,490) (3,631)Dividends paid by Alfa, S. A. B. de C. V. - (3,510)Dividends paid to the non-controlling interest 3.b (183) (1,612)Repurchase of shares 22 (258) (99)Changes in the non-controlling interest (1,387) 1,133Other (768) 137Cash generated from (used) in financing activities 8,591 (2,664)Net increase (decrease) in cash and cash equivalents 4,074 (1,809)Exchange losses on cash and cash equivalents 693 50Cash and cash equivalents at beginning of year 11,902 13,661Cash and cash equivalents at end of year Ps 16,669 Ps 11,902

Transactions not requiring cash flowThe main transaction corresponded to the acquisition of the Campofrío subsidiary, see Note 2.a

The accompanying notes are an integral part of these consolidated financial statements.

Álvaro Fernández Garza Ramón A. Leal ChapaPresident Chief Financial Officer

49ALFA, S. A. B. de C. V. AND SUBSIDIARIES

At December 31, 2014 and 2013

Note 1 - ALFA companies’ activities

Alfa, S.A.B. de C.V. and subsidiaries (“ALFA” or “the Company”), is a Mexican company controlling five business groups with the following activities: Alpek, engaged in the production of petrochemicals and synthetic fibers; Sigma, a refrigerated food producer; Nemak, engaged in the manufacture of high-tech aluminum auto parts; Alestra, in the telecommunications sector, and Newpek, a natural gas and hydrocarbons company .ALFA has an outstanding competitive position globally in the auto parts segment as a producer of aluminum engine heads and blocks, as well as in the manufacture of PTA (raw material for the manufacture of polyester), and is a leader in the Mexican market for refrigerated foods. ALFA operates industrial production and distribution centers mainly in Mexico, the United States (U.S.), Canada, Germany, Slovakia, the Czech Republic, Costa Rica, the Dominican Republic, El Salvador, Argentina, Peru, Austria, Brazil, China, Hungary, Spain, India and Poland. The company markets its products in over 45 countries worldwide and employs over 70,000 people.ALFA’s shares are traded on the Mexican Stock Exchange, S.A.B. de C.V., and Latibex, the Latin American market of the Madrid Stock Exchange.ALFA is located in Avenida Gomez Morin Sur No. 1111, Col. Carrizalejo, San Pedro Garza García, Nuevo Leon, Mexico.In the following notes to the financial statements references to pesos or “Ps”, mean millions of Mexican pesos. References to “US$” or dollars, mean millions of dollars from the United States. References to “€”, means millions of euros.

Note 2 - Acquisitions and other significant events

2014a) Acquisition of CampofríoOn June 9, 2014, ALFA gained control over Campofrío Food Group, S. A. (“Campofrío) as a result of the following: i) the completion of the Public Offer of shares of Campofrío in the Spanish stock exchange and ii) the entry into force of the agreement signed on January 1, 2014 between ALFA and WH Group Ltd. (WH).This agreement establishes a series of rights and obligations of the parties involved in relation to the corporate governance and the transfer of shares of Campofrío providing ALFA the ability to manage the relevant activities. The agreement aims at reasonably anticipating probable future events of the subsidiary and its shareholders during the validity of the contract, as well as their treatment. Examples include: the approval of the business plan, the approval of ordinary and extraordinary corporate events; changes in the property of Campofrío; the need for approval of additional capital from existing stockholders or new investors and the resolution of disputes between stockholders. It also provides flexibility to face unforeseen events, as may be the ability to make quick and efficient decisions; to establish termination conditions when a stockholder wishes to terminate the relationship for any reason and bases for the solution of controversies between stockholders or to resolve an interpretation matter regarding the agreement. The agreement creates incentives so the parties can resolve the controversies through consensus, seeking they be determined as efficiently as possible so that Campofrío may continue with as little interruption as possible.Indirect equity of ALFA in Campofrío at the date the agreement became effective, accounted for using the equity method, was 45% as shown below:Equity of ALFA in Campofrío at December 31, 2013: 46.31%Acquisitions at June 9, 2014 3.29%Sales at June 9, 2014 (4.60%)Equity of ALFA in Campofrío at June 9, 2014 45.00%

Notes to the consolidated financial statements

50

Since its acquisition and up to June 9, 2014, the net income of Campofrío was not significant.For business combinations in stages, the International Financial Reporting Standards (IFRS) require any previous equity of the acquiring party be adjusted at its fair value at the date of acquisition and any resulting gain (or loss) be reported in the consolidated statement of income. The IFRS also require all amounts previously recognized in the consolidated statement of comprehensive income in relation with such investments be reclassified to the consolidated income account, as if such investment had been sold. ALFA has estimated the fair value of 45% equity in Campofrío at Ps 5,498 on June 9, 2014 date at which control is obtained. The effect of the fair value measurement of the 45% equity in Campofrío before the date at which control was obtained is immaterial in the consolidated income statements for the year ended December 31, 2014.Since no additional consideration was made by ALFA to obtain control, the 45% fair value is considered the acquisition price of Campofrío.The amount of the consideration by Campofrío at the date when control was obtained (June 9, 2014), amounted to Ps 5,498.Assets and liabilities recorded as a result of the business combination on June 9, 2014, are as follows:Fair valueCash and cash equivalents Ps 1,576Trade and other accounts receivable, net 2,830Inventory 6,948Property, plant and equipment 14,268Intangibles 8,483Investment recorded using the equity method 693Other assets 3,199Suppliers and other accounts payable (11,829)Debt (10,820)Deferred income tax and other (6,671)Employees’ benefits (1,144)Total identifiable net assets 7,533Non-controlling equity (4,143)Goodwill 2,108Total Ps 5,498

As a result of the transactions, goodwill was recorded in the amount of Ps 2,108 at December 31, 2014, which was assigned to the operating segment of Sigma. The factors contributing to the recognition of goodwill include economies of scale through combined opportunities, obtaining better operating margins on packaging material and the exchange of better practices. Goodwill associated to this business combination is not deductible for income tax purposes.The consolidated income statements include revenues from Campofrío in the amount of Ps 17,572 for the period from June 9 to December 31, 2014. Campofrío contributed to the net income for an amount of Ps 223 in the same period. If the acquisition had occurred on January 1, 2014, the contribution of Campofrío to consolidated income for the year ended December 31, 2014 would have amounted to Ps 33,972 and the net profit to Ps 226. Information on combined revenues and net profit for the period does not include any savings in costs or other effects from the integration of Campofrío in ALFA. Consequently, these amounts do not necessarily indicate the results if the acquisition had occurred on January 1, 2014, or those that might result in the future.After taking control of Campofrío, ALFA acquired additional indirect equity, as mentioned below:Indirect equity of ALFA at June 9, 2014: 45.00%Acquisitions at December 31, 2014: 12.52%Indirect equity of ALFA at December 31, 2014: 57.52%

The acquisitions item at December 31, 2014 corresponds mainly to the purchase of shares of Campofrío after the Public Offering of the non-controlling equity. Since control over Campofrío is obtained as a result of the agreement with WH, these transactions have been accounted for as acquisitions of non-controlling equity. The difference between the accounting value of the non-controlling equity acquired and the price paid was recorded in retained earnings. Additionally, expenses were incurred derived from transition costs related to the acquisition in the amount of Ps 84.The shares of Campofrío were listed in the Spanish stock market up to September 19, 2014, date at which these were unlisted.

51

b) Investment in Pacific Rubiales EnergyDuring 2014, ALFA acquired 59,897,800 ordinary shares of Pacific Rubiales Energy Corp. (PRE), representing approximately 19% of total outstanding shares in the amount of Ps 14,135. The shares were acquired in the stock market of Toronto, Canada. PRE is a public independent company engaged in the exploration and production of petroleum and gas in Colombia, listed in the stock markets of Toronto and Colombia.This investment is recorded as “Financial assets available for sale”, shown as an outstanding asset and recorded at fair value. Changes in such value are recorded directly in stockholders’ equity. Accumulated effects of changes in the fair value are reclassified to income when it is sold or there is impairment in value. At December 31, 2014, the changes in fair value of such investment generated an accumulated loss of Ps 8,665 (Ps 6,065 net of taxes ). At that date, through the analysis of available objective evidence, based on a significant decline in the list price of the share of PRE in the market, impairment in investment was concluded.Due to the situation, at December 31, 2014 an impairment loss was recorded for a total accumulated amount in the stockholders’ equity mentioned in the paragraph above corresponding to PRE’s investment. This loss is shown in the statement of income as part of the financial result , net.

c) Debt issuance of ALFA 144ADuring March 2014, ALFA issued Senior Notes in international markets, in two segments with a nominal value of US$500 each one, the first maturing in 2024 (“Senior Notes-2024); and the second maturing in 2044 (“Senior Notes-2044”). Interest of both Senior Notes will be paid half-yearly as of September 2014 at a rate of 5.250% (effective interest rate of 5.34%) for Senior Notes-2014 and 6.875% (effective interest rate of 6.94%) for Senior Notes-2044. In relation to the Senior Notes, ALFA capitalized issuance costs in the amount of Ps 193. The result of the issuance was used to fund projects related to energy, anticipate the payment of debt and general corporate purposes.

d) Extraordinary Stockholders’ MeetingOn November 4, 2014, ALFA held a General Extraordinary Meeting where stockholders unanimously approved an increase in capital through the issuance of 400 million new shares with the same characteristics as those currently outstanding, which would be placed among the investment public, both local and foreign. The stockholders also approved cancelling 65.5 million current shares kept in treasury.The date to carry out the new issuance and conditions thereof would be determined in the short term. Once the new shares are issued and those in treasury are cancelled, the capital stock of ALFA would be represented by 5’534’500,000 series “A” shares.Resolutions adopted in the aforementioned Meeting, such as the increase in capital, cancellation of shares in treasury and the offering of new shares depend upon obtaining the corresponding authorizations from authorities and organs regulating the securities market. At the date of these financial statements, the issuance of new shares has not been carried out yet.

e) Starting operations in the cogeneration plantOn December 1, 2014, Cogeneración de Energía Limpia de Cosoleacaque, S.A. de C.V. (“Cogeneradora”) started operations derived from the agreement signed in 2012 to invest approximately US$130 million in a vapor and electric energy cogeneration plant. This cogeneration plant will generate approximately 95 megawatts, as well as enough vapor to cover the requirements of the facilities of PTA and PET of ALFA located in Cosoleacaque, Veracruz, Mexico, providing electricity to other entities of ALFA in other regions.For the implementation of this project, Grupo Petrotemex and its subsidiary Dak Resinas Américas México, S.A. de C.V. (both subsidiaries of the Alpek segment) created the aforementioned company at January 31, 2012. The project will increase the efficiency of the facilities, ensuring the supply of energy at low cost and less emissions.

f) Co-investment agreementOn September 26, 2013, the subsidiary of Grupo Petrotemex signed a co-investment agreement with United Petrochemical Company (“UPC”), a subsidiary of Sistema JSFC (“Sistema”), for the construction of a plant integrated by PTA and PET in Ufa, Bashdortostán, Russia. The agreement established the creation of two new entities: “RusPET Holding B.V.” (“JVC”) and “RusPET Limited Liability Company” (“RusCo”), as well as those transactions of both entities reserved for the approval of both stockholders.On December 6, 2013, the incorporation by-laws of JVC were signed. JVC issued initial capital for €8, of which UPC owns 51% (represented by ordinary Class A shares) acquired using a contribution of €4 and Grupo Petrotemex 49% (represented by Class B ordinary shares), as compared to a contribution of €4. During 2014, additional contributions were made amounting to Ps 121.Management carried out an analysis to evaluate whether ALFA has control over JVC in accordance to IFRS 10 “Consolidated Financial Statements”. Conclusions of such analysis are as follows: at the date of acquisition at December 31, 2013, ALFA has joint control and investment shall be treated as a joint venture investment and it shall be accounted for using the equity method.Due to specific situations of UPC, during the month of December 2014, Grupo Petrotemex decided to terminate the agreement and went on to sell the shares of JVC. The settlement agreement establishes a sales price of approximately Ps 63 (€4). Based on the above, management recorded an impairment in its investment value of Ps 127 (See Note 26) and it reclassified this investment, net of impairment, as an investment available for sale, shown in the statement of financial position within the item financial assets available for sale.

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g) Construction of the plant in Russia by NemakDuring May 2014, Nemak started the construction of an aluminum auto parts plant for engines in Russia. The investment will amount to approximately US$70. The plant will supply engine heads and aluminum blocks for a new high-technology engine for group Volkswagen in Russia. The initial capacity of the plant will be 600,000 equivalent units a year and it will start production in 2015. At December 31, 2014 the Company has disbursed Ps 319 related to the construction of this plant.

h) Acquisition of Fábrica Jurís, CíaOn November 21, 2014, Sigma acquired Fábrica Jurís, LTDA (Jurís), a company dedicated to the production and marketing of meat products: sausages, salami, chorizo, blood sausage, mortadella, patés, high-quality pork cracklings, ham, cold meats, pork snacks, etc. in Ecuador. This transition allows Sigma to enter the Ecuadorian market with a leading brand.The total consideration paid by Jurís amounted to Ps 776 in cash. At the date of the acquisition, the company had determined goodwill of Ps 572. At December 31, 2014, the Company is in the process of concluding the distribution of the purchase price at the fair values of the acquired assets. This analysis will be concluded in a period not to exceed twelve months as of the acquisition date.The initial assignment is as follows:ConceptCurrent assets Ps 146Property, plant and equipment 218Deferred charges and others 1Current liabilities (114)Employees’ benefits (13)Debt (34)Goodwill 572Consideration paid Ps 776

2013i) Nemak debt refinancingIn December 2013, Nemak concluded the refinancing of its bank debt, which was authorized by the Board of Directors. This process included the bank debt of the main current contracts of Tenedora Nemak with Banks: “The Senior Unsecured Syndicated Loan Agreement”, held in August 2011 and the “Senior Unsecured Loan Agreement” in June 2012. This refinancing process involved expenses incurred by the company of Ps 51 that were recorded in the statement of financial position and will be amortized during the life of the loan.

j) Issuance of debt of Nemak 144ADuring February 2013, Nemak completed an issuance of debt obligations (“Senior Notes”) in international markets for a nominal amount of US$500 (Ps 7,367) maturing in 2023. Interests of Senior Notes will be payable semi-annually at a 5.5% annual rate (effective interest rate of 5.68%) as from September 2013. Nemak capitalized debt costs of Ps 118. The proceeds of the issuance were used partially to settle the Syndicated bank loan. This payment resulted in an advance amortization of issuance expenses amounting Ps 100.

k) LicensesLicense IntegRex® technology license and signature of a supply agreement with M&GDuring April 2013, Alpek, S.A.B. de C.V. (Alpek) through its subsidiary Grupo Petrotemex, S. A. de C. V. held a licensing agreement for IntegRex® PTA technology and another PTA-PET supply agreement with Grupo M&G (“M&G”). These agreements will allow M&G to use the IntegRex® PTA technology in the PTA-PET integrated plant to be constructed in Corpus Christi, Texas in the United States (the Plant). On the other hand, Alpek will pay US$350 to M&G during the construction of the Plant and will obtain supply rights of the Plant to 400 thousand tons of PET (manufactured with 336 thousand tons of PTA) a year. In accordance with the supply agreement, Alpek would supply raw materials for the manufacturing of its PTA-PET volume. It is estimated that the M&G plant in Corpus Christi will start operations in 2016. At December 31, 2014, the Company mode payments in the amount of US$199, see note 33.

License with BasellThe subsidiary Indelpro held in 2004, a contract with Basell Poliolefine Italia S.r.l. (a company of the Basell Group) in relation to engineering licenses, use of patents and technical information for the production of polypropylene, to start the construction of a second production line of polypropylene, therefore Indelpro on that date, made an initial required payment of US$9.5 to use such licenses, patents and technical information for building the production line of the products under these patents (called the second production line) which at June 30, 2013, the Company has estimated that it has an estimated remaining useful life of 21 years. This contract, which is valid for an indefinite period, provides annual royalty payments from July 2013 which would be determined based on 1.22% of the value of net sales. Until July 1, 2013 it was required to pay the royalties referred to in the preceding paragraph, based on 1.22% of net sales.

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The royalty payments would last until Indelpro completed a total of US$11 as compensation, this amount was calculated as the net present value at the date the contract was signed (2004 ), using an annual discount rate of 8%, according to what was established in the contract. The contract also includes the option for Indelpro to pay in advance the maximum amount of royalties indicated above.In relation to the above, April 26, 2013, Indelpro decided to prepay the maximum amount of royalties and determined that the total was US$21 (Ps 258), equivalent to the value of US$11 updated by the rate previously mentioned, from the date of conclusion of the contract until the date of payment, as established in the contract, the amount paid to Basell Poliolefine Italy, S.r.l. This payment was recorded as an intangible asset and amortized over the life of the contract, see Note 13.

l) Acquisition of Corporación Monteverde, C. R. Sociedad Anónima (Monteverde)On April 2, 2013, Sigma acquired all the representative shares of the capital stock of Monteverde, a company engaged in the preparation of cheese, yoghurt and meat processing in Costa Rica. The total consideration paid amounts to Ps 112 (US$9). This amount was paid in cash. The business acquisition is included in the segment of Sigma, see Note 32.During 2014 the Company ended the distribution of the purchase price to the fair values of assets acquired without identifying adjustments to the values determined as of December 31, 2013, the date on which it was in the process of concluding this distribution.The assignment is as follows:Current assets (1) Ps 111Property, machinery and equipment 120Current liabilities (2) (213)Goodwill 94Consideration paid Ps 112

(1) Current assets consist of cash and cash equivalents of Ps 4, accounts receivable of Ps 32 and inventories of Ps 65, recoverable taxes of Ps 4, advance payments of Ps 2, and other current assets of Ps 4.

(2) Current liabilities consist of suppliers and accounts payable of Ps 76, taxes payable of Ps 2 and debt of Ps 135.

No contingent liabilities have arisen from this acquisition that should be recorded. Neither are there any contingent consideration agreements.The costs related to the acquisition amounts to Ps 1 and were recorded in the statement of income under the item of other expenses.Revenues contributed by the assets of Monteverde included in the consolidated statement of income since the acquisition date up to December 31, 2013 amounted to Ps 210 and a net loss of Ps 54. If the acquisition had occurred on January 1, 2013, the revenues would have increased by Ps 105 and the net profit would have decreased by approximately Ps 27.

m) Acquisition of Comercial Norteamericana, S. de R.L. de C.V. (ComNor)On May 31, 2013, Sigma acquired the total representative shares of the capital stock of ComNor, company dedicated to process and commercialize several types of meat. The company processes and commercializes beef, poultry and pork meat. This acquisition will allow Sigma to extend the product portfolio and to reinforce its market position in the Food service segment. ComNor is based in Monterrey, where it operates a plant certified by the United States Department of Agriculture (“USDA” English acronym). It also has another plant in Hermosillo, as well as eight distribution centers in Mexico City, Cancún, Hermosillo, Monterrey, Guadalajara, Los Cabos, Puerto Vallarta and León.The total consideration paid amounts to Ps 1,557 (US$120). This amount was paid in cash. The business acquisition is included in the segment of Sigma, see Note 32.During 2014 the Company ended the distribution of the purchase price to the fair values of assets acquired without identifying adjustments to the values determined as of December 31, 2013, the date on which it was in the process of concluding this distribution.The assignment is as follows:Current assets (1) Ps 590Property, plant and equipment 267Intangible assets (brands) 109Current liabilities (2) (88)Employees’ benefits (27)Goodwill 705Consideration paid Ps 1,556

(1) Current assets consist of cash and cash equivalents of Ps 10, accounts receivable of Ps 172 and inventories of Ps 400, recoverable taxes of Ps 6, and advance payments and other current assets of Ps 2.

(2) Current liabilities consist of suppliers and accounts payable of Ps 67, taxes payable of Ps 1 and debt of Ps 20.

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No contingent liabilities have arisen from this acquisition that should be recorded. Neither are there any contingent consideration agreements.The costs related to the acquisition amounts to Ps 4 and were recorded in the statement of income under the item of other expenses.Revenues contributed by the assets of ComNor included in the consolidated statement of income since the acquisition date up to December 31, 2013 amounted to Ps 1,037 and a net profit of Ps 68. If the acquisition had occurred on January 1, 2013, the revenues would have increased by Ps 741 and the net profit would have increased by approximately Ps 39.

n) Acquisition of G Tel Comunicaciones SAPI (“G Tel”)On August 19, 2013, Alestra acquired 100% of the shares of G Tel, a company that provides integrated voice, data and video solution services through an extensive service portfolio to medium and big companies. G Tel has concessions issued by the Ministry of Communications and Transportation through the Federal Telecommunication Commission, to operate a public Telecommunications network and, consequently, offer services using point to multipoint technology in the 10,5 GHz frequency in the Northeast and Southeast of Mexico, using their own network.The total consideration paid amounts to Ps 49, this amount was paid in cash. The business acquisition is included in the segment of Alestra, see Note 32.During 2014 the Company ended the distribution of the purchase price to the fair values of assets acquired without identifying adjustments to the values determined as of December 31, 2013, the date on which it was in the process of concluding this distribution.The assignment is as follows:Current assets Ps 25Property, plant and equipment 28Other assets 48Financial liabilities (341)Other current liabilities (7)Goodwill 296Consideration paid Ps 49

No contingent liabilities have arisen from this acquisition that should be recorded. Neither are there any contingent consideration agreements.The costs related to the acquisition amounts to Ps 2 and were recorded in the statement of income under the item of other expenses.Revenues contributed by the assets of GTel included in the consolidated statement of income since the acquisition date up to December 31, 2013 amounted to Ps 105 and a net profit of Ps 23. If the acquisition had occurred on January 1, 2013, the revenues would have increased by Ps 284 and the net profit would have increased by approximately Ps 7.

o) Closing of Cape Fear plants in North CarolinaIn June 2013, Alpek announced the planned closure of all its operations at its Cape Fear plant, in Wilmington, North Carolina. The purpose of this closing was to improve cost competitively and distribute production to the most efficient plants in its productive network. The closing of operations took place in September 2013.The Company communicated with authorities in North Carolina and committed to the dismantling and demolition of assets, as well as to the environmental remediation for damage caused before the plan operations began, for which the Company estimated costs of Ps 494 and Ps 365, respectively, (US$67) that were initially recognized as part of the assets of the plant of which Ps 68 were incurred in 2013. During 2014 were spent Ps 77 for the dismantling and demolition concept and Ps 17 for environmental remediation. In addition, a reclassification was made from decommissioning provision of severance and termination of contract for an amount of up to Ps 74. At December 31, 2014, the balances of the above provisions are Ps 332 and Ps 400, respectively. These amounts are will be paid over the next two years.Additionally, other direct costs attributable to the closure, mainly by concepts of severance and termination of contracts, the Company estimated costs Ps 198 (US$16) to be paid Ps 124 in 2013. During 2014 were spent Ps 96 for this item, presenting this provision one balance at December 31 2014 Ps 57.As a result of this, the company recorded a provision for restructuring costs of Ps 1,057 (US$83), see Note 19.The Company also performed impairment tests of assets associated to the plant and recorded a charge for impairment related to these assets for Ps 2,224 (US$173). The total impact on the net income of the Company for this restructuring event amounted to Ps 1,501 (US$117), composed of Ps 2,421 (US$189) for restructuring costs and impairment of assets, which were recorded as non-recurring items within the operating income less Ps 920 (US$72) of deferred tax.

p) Issuance of debt of Alpek 144ADuring August 2013, Alpek completed an issuance of debt obligations (“Senior Notes”) in international markets for a nominal amount of US$300 (Ps 3,923) maturing in 2023. The interest of the Senior Notes will be payable semi-annually at a 5.375% annual rate (effective interest rate of 5.479%) as from February 20, 2014. Alpek capitalized debt issuance costs of Ps 31. The proceeds from the issuance were used to pay debt in advance and for general corporate purposes. This payment led to an advance amortization of issuance expenses amounting Ps 4.

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Nota 3 - Summary of significant accounting policies:

The accompanying consolidated financial statements and notes were authorized for issuance on March 17, 2015, by officials with the legal power to sign the basic financial statements and accompanying notes.The following are the most significant accounting policies followed by ALFA and its sub-sidiaries, which have been consistently applied in the preparation of their financial information in the years presented, unless otherwise specified:

a) Basis for preparationThe consolidated financial statements of ALFA, S. A. B. de C. V. and subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). IFRS include all International Accounting Standards (“IAS”) in force and all related interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), including those previously issued by the Standing Interpretations Committee (SIC).In accordance with the amendments to the Rules for Mexican Public Companies and Other Securities Market Participants, issued by the National Banking and Securities Commission (CNBV in Spanish), the Company is required to prepare its financial statements as of 2012 using IFRS as its accounting policy framework.The consolidated financial statements have been prepared on a historical cost basis, except for the cash flow hedges which are measured at fair value, and for the financial assets and liabilities at fair value through profit or loss with changes reflected in the statement of income and for financial assets available for sale.The preparation of the consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. Additionally, it requires management to exercise judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where judgments and estimates are significant to the consolidated financial statements, are disclosed in Note 5.

b) Consolidationi. SubsidiariesThe subsidiaries are all the entities over which the Company has the power to govern the financial and operating policies of the entity. The Company controls an entity when it is exposed, or has the right to variable returns from its interest in the entity and it is capable of affecting the returns through its power over the entity. Where the Company’s participation in subsidiaries is less than 100%, the share attributed to outside shareholders is reflected recorded as non-controlling interest.Subsidiaries are consolidated in full from the date on which control is transferred to the Company and up to the date it loses that control.The method of accounting used by the Company for business combinations is the acquisition method. The Company defines a business combination as a transaction in which obtains control over the business, which is defined as a set of activities and assets which are conducted and managed in order to obtain benefits in the form of dividends, less costs or other economic benefits directly to investors.The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable acquired assets and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Company recognizes any non-controlling interest in the acquiree based on the share of the non-controlling interest in the net identifiable assets of the acquired entity.The Company accounts for business combinations using the predecessor method in a jointly controlled entity. The predecessor method involves the incorporation of the carrying amounts of the acquired entity, which includes the goodwill recognized at the consolidated level with respect to the acquiree. Any difference between the carrying value of the net assets acquired at the level of the subsidiary and its carrying amount at the level of the Company are recognized in stockholders’ equity.The acquisition-related costs are recognized as expenses when incurred.Goodwill is initially measured as excess of the sum of the consideration transferred and the fair value of the non-controlling interest over the net identifiable assets and liabilities assured. If the consideration transferred is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the consolidated statement of income.If the business combination is achieved in stages, the value in books at the acquisition date of the equity previously held by the Company in the acquired entity is remeasured at its fair value at the acquisition date. Any loss or gain resulting from such remeasurement is recorded in income of the year.Transactions and intercompany balances and unrealized gains on transactions between ALFA companies are eliminated in preparing the consolidated financial statements. In order to ensure consistency with the policies adopted by the Company, the accounting policies of subsidiaries have been changed where it was deemed necessary.

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At December 31, 2014 and 2013, the principal subsidiaries of ALFA were: Percentage (%) of ownership (2) Functional Country (1) 2014 2013 currency

Alpek (Petrochemicals and synthetic fibers)Alpek, S. A. B. de C. V. (Holding company) 85 85 Mexican peso Grupo Petrotemex, S.A. de C.V. 100 100 US dollar DAK Americas, L.L.C. USA 100 100 US dollar DAK Resinas Americas México, S.A. de C.V. 100 100 US dollar DAK Americas Exterior, S. L. (Holding company) Spain 100 100 Euro DAK Americas Argentina, S. A. Argentina 100 100 Argentine peso Tereftalatos Mexicanos, S.A. de C.V. 91 91 US dollar Akra Polyester, S.A. de C.V. 93 93 Mexican peso Indelpro, S.A. de C.V. 51 51 US dollar Polioles, S.A. de C.V. (3) 50 50 US dollar Unimor, S.A. de C.V. (Holding company) 100 100 Mexican peso Univex, S. A. 100 100 Mexican peso Grupo Styropek, S.A. de C.V. (4) 100 - Mexican pesoSigma (Refrigerated food)Sigma Alimentos, S.A. de C.V. (Holding company) 100 100 Mexican peso Alimentos Finos de Occidente, S.A. de C.V. 100 100 Mexican peso Grupo Chen, S. de R. L. de C. V. 100 100 Mexican peso Sigma Alimentos Lácteos, S.A. de C.V. 100 100 Mexican peso Sigma Alimentos Centro, S.A. de C.V. 100 100 Mexican peso Sigma Alimentos Noreste, S.A. de C.V. 100 100 Mexican peso Sigma Alimentos Exterior, S. L. (Holding company) Spain 100 100 Euro Bar-S Foods Co. USA 100 100 US dollar Mexican Cheese Producers, Inc. USA 100 100 US dollar Braedt, S. A. Peru 100 100 Nuevo sol Corporación de Empresas Monteverde, S. A. Costa Rica 100 100 Colón Campofrío Food Group, S. A. (5) Spain 58 - Euro Fábrica Juris Compañía Limitada (5) Ecuador 100 - US dollar Comercial Norteamericana, S. de R.L. de C.V. 100 100 Mexican pesoNemak (Aluminum auto parts)Tenedora Nemak, S.A. de C.V. (Holding company) 93 93 US dollar Nemak, S. A. 100 100 US dollar Modellbau Schönheide GmbH Germany 90 90 Euro Corporativo Nemak, S.A. de C.V. 100 100 Mexican peso Nemak Canadá, S.A. de C.V. (Holding company) 100 100 Mexican peso Nemak of Canada Corporation Canada 100 100 US dollar Camen International Trading, Inc. USA 100 100 US dollar Nemak Europe GmbH (Holding company) Germany 100 100 Euro Nemak Exterior, S. L. (Holding company) Spain 100 100 Euro Nemak Dillingen GmbH Germany 100 100 Euro Nemak Wernigerode GmbH Germany 100 100 Euro Nemak Linz GmbH Austria 100 100 Euro Nemak Gyor Kft Hungary 100 100 Euro Nemak Poland Sp. z.o.o. Poland 100 100 Euro Nemak Nanjing Aluminum Foundry Co., Ltd. China 100 100 Yuan Nemak USA, Inc. USA 100 100 US dollar Nemak Alumínio do Brasil Ltda. Brazil 100 100 Real Nemak Argentina, S. R. L. Argentina 100 100 Argentine peso Nemak Slovakia, S.r.o. Slovakia 100 100 Euro Nemak Czech Republic, S.r.o. Czech Republic 100 100 Euro Nemak Aluminum Castings India Private, Ltd. India 100 100 Rupee Nemak Automotive Castings, Inc. USA 100 100 US dollar

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Percentage (%) of ownership (2) Functional Country (1) 2014 2013 currency

Alestra (Telecommunications)Alestra, S. de R. L. de C. V. 100 100 Mexican peso G Tel Comunicación, SAPI de C.V. 100 100 Mexican pesoNewpek (Natural gas and hydrocarbons)Oil and Gas Holding España, S.L.U. (Holding company)(formerly Alfa Energía Exterior, S.L) Spain 100 100 Euro Newpek, L. L. C. USA 100 100 US dollarAlfasid del Norte, S.A. de C.V. 100 100 Mexican pesoOther companiesColombin Bel, S.A. de C.V. 100 100 US dollarTerza, S.A. de C.V. 51 51 Mexican pesoAlfa Corporativo, S.A. de C.V. 100 100 Mexican peso

(1) Companies incorporated in Mexico, except those indicated.(2) Ownership percentage that ALFA has in the holding companies of each business group and ownership percentage that such holding

companies have in the companies integrating the groups. Ownership percentages and the right to vote are one and the same.(3) The Company owns 50% plus one share.(4) Companies incorporated in 2014.(5) Companies acquired in 2014, see comments in Note 2 paragraph a. and i.

At December 2014 and 2013, there are no significant restrictions for investment in shares of subsidiary companies mentioned above.

ii. Absorption (dilution) of control in subsidiariesThe effect of absorption (dilution) of control in subsidiaries, i.e., an increase or decrease in the percentage of control, is recorded in stockholders’ equity, directly in retained earnings, in the period in which the transactions that cause such effects occur. The effect of absorption (dilution) of control is determined by comparing the book value of the investment before the event of dilution or absorption against the book value after the relevant event. In the case of loss of control the dilution effect is recognized in income.

iii. Sale or disposal of subsidiariesWhen the Company ceases to have control any retained interest in the entity is re-measured at fair value, and the change in the carrying amount is recognized in the income statement. The fair value is the initial carrying value for the purposes of accounting for any subsequent retained interest in the associate, joint venture or financial asset. Any amount previously recognized in comprehensive income in respect of that entity is accounted for as if the Company had directly disposed of the related assets and liabilities. This implies that the amounts recognized in the comprehensive income are reclassified to income for the year.

iv. AssociatesAssociates are all entities over which the Company has significant influence but not control. Generally an investor must hold between 20% and 50% of the voting rights in an investee for it to be an associate. Investments in associates are accounted for using the equity method and are initially recognized at cost. The Company’s investment in associates includes goodwill identified at acquisition, net of any accumulated impairment loss.If the equity in an associate is reduced but significant influence is maintained, only a portion of the amounts recognized in the comprehensive income are reclassified to income for the year, where appropriate.The Company’s share of profits or losses of associates, post-acquisition, is recognized in the income statement and its share in the other comprehensive income of associates is recognized as other comprehensive income. The cumulative movements after acquisition are adjusted against the carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds its equity in the associate, including unsecured receivables, the Company does not recognize further losses unless it has incurred obligations or made payments on behalf of the associate.The Company assesses at each reporting date whether there is objective evidence that the investment in the associate is impaired. If so, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes it in “share of profit/loss of associates recognized by the equity method” in the income statement.Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company´s equity in such gains. Unrealized losses are also eliminated unless the transaction provides evidence that the asset transferred is impaired. In order to ensure consistency with the policies adopted by the Company, the accounting policies of associates have been modified. When the Company ceases to have significant influence over an associate, any difference between the fair value of the remaining investment, including any consideration received from the partial disposal of the investment and the book value of the investment is recognized in the income statement.

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v. Joint arrangementsJoint arrangements are those where there is joint control since the decisions over relevant activities require the unanimous consent of each one of the parties sharing control.Investments in joint arrangements are classified in accordance with the contractual rights and obligations of each investor such as: joint operations or joint ventures. When the Company holds the right over assets and obligations for related assets under a joint arrangement, this is classified as a joint operation. When the company holds rights over net assets of the joint arrangement, this is classified as a joint venture. The Company has assessed the nature of its joint arrangements and classified them as joint ventures. Joint ventures are accounted for by using the equity method applied to an investment in associates.

c) Foreign currency translationi. Functional and presentation currencyThe amounts included in the financial statements of each of the Company’s subsidiaries and associates should be measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). In the case of Alfa, S.A.B. de C.V., the functional currency is determined to be the Mexican peso. The consolidated financial statements are presented in Mexican pesos, which is the Company’s presentation currency.

ii. Transactions and balancesTransactions in foreign currencies are translated into the functional currency using the foreign exchange rates prevailing at the transaction date or valuation date when the amounts are re-measured. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing exchange rates are recognized as foreign exchange gain or loss in the income statement, except for those which are deferred in comprehensive income and qualify as cash flow hedges.Changes in the fair value of securities or monetary financial assets denominated in foreign currency classified as available for sale are divided between fluctuations resulting from changes in the amortized cost of such securities and other changes in value. Subsequently, currency fluctuations are recognized in income and changes in the carrying amount arising from any other circumstances are recognized as part of comprehensive income.Translation differences on non-monetary assets, such as investments classified as available for sale, are included in other comprehensive income.

iii. Consolidation of subsidiaries with a functional currency different from the presentation currencyIncorporation of subsidiaries whose functional currency is different from their recording currencyThe financial statements of foreign subsidiaries, having a recording currency different from their functional currency were translated into the functional currency in accordance with the following procedure:a. The balances of monetary assets and liabilities denominated in the recording currency were translated at the closing exchange

rates.b. To the historical balances of monetary assets and liabilities and shareholders’ equity translated into the functional currency the

movements that occurred during the period were added, which were translated at historical exchange rates. In the case of the movements of non-monetary items recognized at fair value, which occurred during the period, stated in the recording currency, these were translated using the historical exchange rates in effect on the date when the fair value was determined.

c. The income, costs and expenses of the periods, expressed in the recording currency, were translated at the historical exchange rate of the date they were accrued and recognized in the income statement, except when they arose from non-monetary items, in which case the historical exchange rate of the non-monetary items was used.

d. The differences in exchange arising in the translation from the recording currency to the functional currency were recognized as income or expense in the income statement in the period they arose.

Incorporation of subsidiaries whose functional currency is different from their presentation currencyThe results and financial position of all ALFA entities (none of which is in a hyperinflationary environment) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:a. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the balance sheet date;b. The stockholders’ equity of each balance sheet presented is translated at historical rates.c. Income and expenses for each income statement are translated at average exchange rate (when the average exchange rate is

not a reasonable approximation of the cumulative effect of the rates of the transaction, to the exchange rate at the date of the transaction is used); and

d. All the resulting exchange differences are recognized in comprehensive income.The goodwill and adjustments to fair value arising at the date of acquisition of a foreign operation so as to measure them at fair value, are recognized as assets and liabilities of the foreign entity and translated at the exchange rate at the closing date. Exchange differences arising are recognized in equity.

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Listed below are the principal exchange rates in the various translation processes: Local currency to Mexican pesos Closing exchange Average exchange rate at rate at December 31, December 31,Country Functional currency 2014 2013 2014 2013

Canada Canadian dollar 12.70 12.31 12.04 12.33USA US dollar 14.71 13.08 13.30 13.00Brazil Brazilian Real 5.55 5.53 5.66 5.57Argentina Argentine peso 1.74 2.01 1.64 2.07Peru Nuevo sol 4.93 4.68 4.68 4.68Czech Republic Euro 17.81 18.02 17.63 17.91Germany Euro 17.81 18.02 17.63 17.91Austria Euro 17.81 18.02 17.63 17.91Italy Euro 17.81 18.02 17.63 17.91France Euro 17.81 18.02 17.63 17.91Hungary Euro 17.81 18.02 17.63 17.91Poland Euro 17.81 18.02 17.63 17.91Slovakia Euro 17.81 18.02 17.63 17.91Spain Euro 17.81 18.02 17.63 17.91China RenMinBi Yuan 2.37 1.69 2.16 2.15India Indian Rupee 0.23 0.21 0.22 0.21

d) Cash and cash equivalentsCash and cash equivalents include cash on hand, bank deposits available for operations and other short-term investments of high liquidity with original maturities of three months or less, all of which are subject to insignificant risk of changes in value. Bank overdrafts are presented as loans as a part of the current liabilities.

e) Restricted cash and cash equivalentsCash and cash equivalents whose restrictions cause them not to comply with the definition of cash and cash equivalents given above, are presented in a separate line in the statement of financial position and are excluded from cash and cash equivalents in the statement cash flows.

f) Financial instrumentsFinancial assetsThe Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, investments held to maturity and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets upon initial recognition. Purchases and sales of financial assets are recognized on the settlement date.Financial assets are written off in full when the right to receive the related cash flows expires or is transferred and the Company has also transferred substantially all risks and rewards of ownership, as well as control of the financial asset.

i. Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges.Financial assets at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the income statement. Gains or losses from changes in fair value of these assets are presented in the income statement as incurred.

ii. Loans and receivablesThe receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.Loans and receivables are measured initially at fair value plus directly attributable transaction costs and subsequently at amortized cost, using the effective interest method. When circumstances occur that indicate that the amounts receivable will not be collected at the amounts originally agreed or will be collected in a different period, the receivables are impaired.

iii. Maturity investmentsIf the Company intends and has the demonstrable ability to hold debt securities to maturity, they are classified as held to maturity. Assets in this category are classified as current assets if expected to be settled within the next 12 months, otherwise they are classified as non-current. Initially they are recognized at fair value plus any directly attributable transaction costs, and subsequently they are valued at amortized cost using the effective interest method. Investments held to maturity are recognized or derecognized on the day they are transferred to or by the Company. At December 31, 2014 and 2013, the Company had no such investments.

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iv. Financial assets available for saleFinancial assets available for sale are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless their maturity is less than 12 months or management intends to dispose of the investment within the next 12 months after the balance sheet date.Financial assets available for sale are initially recognized at fair value plus directly attributable transaction costs. Subsequently, these assets are carried at fair value (unless they cannot be measured by their value in an active market and the value is not reliable, in which case they will be recognized at cost less impairment).Gains or losses arising from changes in fair value of monetary and non-monetary instruments are recognized directly in the consolidated statement of comprehensive income in the period in which they occur.When instruments classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the income statement.

Financial liabilitiesFinancial liabilities that are not derivatives are initially recognized at fair value and are subsequently valued at amortized cost using the effective interest method. Liabilities in this category are classified as current liabilities if expected to be settled within the next 12 months, otherwise they are classified as non-current.Trade payables are obligations to pay for goods or services that have been acquired or received from suppliers in the ordinary course of business. Loans are initially recognized at fair value, net of transaction costs incurred. Loans are initially recognized at fair value, net of transaction costs incurred. Loans are subsequently carried at amortized cost; any difference between the funds received (net of transaction costs) and the settlement value is recognized in the income statement over the term of the loan using the effective interest method.

Offsetting financial assets and liabilitiesAssets and liabilities are offset and the net amount is presented in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or to realize the asset and settle the liability simultaneously.

Impairment of financial instrumentsa. Financial assets carried at amortized costThe Company assesses at the end of each year whether there is objective evidence of impairment of each financial asset or group of financial assets. An impairment loss is recognized if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and provided that the loss event (or events) has an impact on the estimated future cash flows arising from the financial asset or group of financial assets that can be reliably estimated.Aspects evaluated by the Company to determine whether there is objective evidence of impairment are:• Significant financial difficulty of the issuer or debtor.• Breach of contract, such as late payments of interest or principal• Granting a concession to the issuer or debtor, by the Company, as a result of financial difficulties of the issuer or debtor and that

would not otherwise be considered.• There is a likelihood that the issuer or debtor will enter bankruptcy or other financial reorganization.• Disappearance of an active market for that financial asset due to financial difficulties.• Verifiable information indicates that there is a measurable decrease in the estimated future cash flows related to a group of

financial assets after initial recognition, although the decrease cannot yet be identified with the individual financial assets of the Company, including:(i) Adverse changes in the payment status of borrowers in the group of assets(ii) National or local conditions that correlate with breaches of noncompliance by the issuers of the asset group

Based on the items listed above, the Company assesses whether there is objective evidence of impairment. Subsequently, for the category of loans and receivables, when impairment exists, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the original effective interest rate. The carrying amount of the asset is reduced by that amount, which is recognized in the income statement.If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. Alternatively, the Company could determine the impairment of the asset given its fair value determined on the basis of a current observable market price.If in the subsequent years, the impairment loss decreases and the decrease can be related objectively to an event occurring after the date on which such impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the loss impairment is recognized in the income statement.

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b. Financial assets available for saleIn the case of debt financial instruments, the Company also uses the above-listed criteria to identify whether there is objective evidence of impairment. In the case of equity financial instruments, a significant reduction of approximately to 30% of the cost of the investment against its fair value or a reduction of the fair value against the cost for a period longer than 12 months is considered objective evidence of impairment.Subsequently, in the case of financial assets available for sale, an impairment loss determined by computing the difference between the acquisition cost and the current fair value of the asset, less any impairment loss previously recognized, is reclassified from the other comprehensive income to the income statement. Impairment losses recognized in the income statement related to equity financial instruments are not reversed through the consolidated income statement. Impairment losses recognized in the income statement related to financial debt instruments could be reversed in subsequent years, if the fair value of the asset is increased as a result of a subsequent event.

g) Derivative financial instruments and hedging activitiesAll derivative financial instruments are identified and classified as fair value hedging hedges or cash flow hedges, for trading or the hedging of market risks and are recognized in the balance sheet as assets and/or liabilities at fair value and similarly measured subsequently at fair value. The fair value is determined based on recognized market prices and its fair value is determined using valuation techniques accepted in the financial sector.The fair value of hedging derivatives is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months.Derivative financial instruments classified as hedges are contracted for risk hedging purposes and meet all hedging requirements; their designation at the beginning of the hedging operation is documented, describing the objective, primary position, risks to be hedged and the effectiveness of the hedging relationship, characteristics, accounting recognition and how the effectiveness is to be measured.

Fair value hedgesChanges in the fair value of derivative financial instruments are recorded in the income statement. The change in fair value hedges and the change in the primary position attributable to the hedged risk are recorded in the income statement in the same line item as the hedged position. At December 31, 2014 and 2013, the Company has no derivative financial instruments classified as fair value hedges.

Cash flow hedgesThe changes in the fair value of derivative instruments associated to cash flow hedges are recorded in stockholders’ equity. The effective portion is temporarily recorded in comprehensive income, within stockholders’ equity and is reclassified to profit or loss when the hedged position affects these. The ineffective portion is immediately recorded in income.

Net investment hedgeNet investment hedge in a foreign business is recorded similarly to cash flow hedges. Any gain or loss of the related hedged instrument with the effective portion of the hedge is recorded in comprehensive income. The gain or loss of the ineffective portion is recorded in the statement of income. Accumulated gains and losses in equity are recorded in the statement of income when partially the foreign operation is partially disposed of or sold. At December 31, 2014 and 2013, the Company has no derivative financial instruments classified as net investment hedges.

Suspension of hedge accountingThe Company suspends the hedges accounting when the derivative has expired, has been sold, is cancelled or exercised, when it does not reach high effectiveness to offset the changes in the fair value or the cash flow of the hedged item, or when the Company decides to cancel the hedges designation.On suspending hedge accounting, in the case of fair value hedges, the adjustment to the carrying amount of a hedged amount for which the effective interest rate method is used, is amortized to income over the period to maturity. In the case of cash flow hedges, the amounts accumulated in equity as a part of comprehensive income remain in equity until the time when the effects of the forecasted transaction affect income. In the event the forecasted transaction is not likely to occur, the income or loss accumulated in comprehensive income are immediately recognized in the income statement. When the hedge of a forecasted transaction appears satisfactory and subsequently does not meet the effectiveness test, the cumulative effects in comprehensive income in stockholders’ equity are transferred proportionally to the income statement, to the extent the forecasted transaction impacts it.The fair value of derivative financial instruments reflected in the financial statements of the Company, is a mathematical approximation of their fair value. It is computed using proprietary models of independent third parties using assumptions based on past and present market conditions and future expectations at the respective balance sheet date.

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h) InventoriesInventories are stated at the lower of cost and net realizable value. Cost is determined using the average cost method. The cost of finished goods and work-in-progress includes cost of product design, raw materials, direct labor, other direct costs and production overheads (based on normal operating capacity). It excludes borrowing costs. The net realizable value is the estimated selling price in the normal course of business, less the applicable variable selling expenses. Costs of inventories include any gain or loss transferred from equity corresponding to raw material purchases that qualify as cash flow hedges.

i) Property, plant and equipmentItems of property, plant and equipment are recorded at cost less the accumulated depreciation and any accrued impairment losses. The costs include expenses directly attributable to the asset acquisition.Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flows to the Company and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. Repairs and maintenance are recognized in the income statement during the year they are incurred. Major improvements are depreciated over the remaining useful life of the related asset.Depreciation is calculated using the straight-line method, considering separately each of the asset’s components, except for land, which is not subject to depreciation. The average useful lives of assets families are as follows:Buildings and construction 33 to 50 yearsMachinery and equipment 10 to 14 yearsTransportation equipment 4 to 8 yearsTelecommunications network 3 to 33 yearsFurniture and laboratory equipment and information technology 6 to 10 yearsTooling and spare parts 3 to 20 yearsLeasehold improvements 3 to 20 yearsOther assets 3 to 20 years

The spare parts to be used after one year and attributable to specific machinery are classified as property, plant and equipment in other fixed assets.Borrowing costs related to financing of property, plant and equipment whose acquisition or construction requires a substantial period (nine months or more), are capitalized as part of the cost of acquiring such qualifying assets, up to the moment when they are suitable for their intended use or sale.Assets classified as property, plant and equipment are subject to impairment tests when events or circumstances occur indicating that the carrying amount of the assets may not be recoverable. An impairment loss is recognized in the income statement in other expenses, net, for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use.The residual value and useful lives of assets are reviewed at least at the end of each reporting period and, if expectations differ from previous estimates, the changes are accounted for as a change in accounting estimate.Gains and losses on disposal of assets are determined by comparing the sale value with the carrying amount and are recognized in other expenses, net, in the income statement.

j) LeasingThe classification of leases as finance or operating depends on the substance of the transaction rather than the form of the contract.Leases in which a significant portion of the risks and rewards relating to the leased property are retained by the lessor are classified as operating leases. Payments made under operating leases (net of incentives received by the lessor) are recognized in the income statement based on the straight-line method over the lease period.Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the beginning of the lease, at the lower of the fair value of the leased property and the present value of the minimum lease payments. If its determination is practical, in order to discount the minimum lease payments to present value, the interest rate implicit in the lease is used; otherwise, the incremental borrowing rate of the lessee should be used. Any initial direct costs of the leases are added to the original amount recognized as an asset.Each lease payment is allocated between the liability and finance charges to achieve a constant rate on the outstanding balance. The corresponding rental obligations are included in non-current debt, net of finance charges. The interest element of the finance cost is charged to the income for the year during the period of the lease, so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.

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k) Intangible assetsIntangible assets are recognized in the balance sheet when they meet the following conditions: they are identifiable, provide future economic benefits and the Company has control over such benefits. Intangible assets are classified as follows:i) Indefinite useful life. - These intangible assets are not amortized and are subject to annual impairment assessment. To date, no

factors have been identified limiting the life of these intangible assets.ii) Finite useful life. - These assets are recognized at cost less accumulated amortization and impairment losses recognized. They

are amortized on a straight line basis over their estimated useful life, determined based on the expectation of generating future economic benefits, and are subject to impairment tests when triggering events of impairment are identified.

The estimated useful lives of intangible assets with finite useful lives are summarized as follows:Development costs 5 to 20 yearsExploration costs (1)

Trademarks 40 yearsCustomer relationships 15 to 17 yearsSoftware and licenses 3 to 11 yearsIntellectual property rights 20 to 25 yearsOther (patents, concessions, non-compete agreements, etc.) 5 to 20 years

(1) Exploration costs are depreciated based on the unit-of-production method based on proven reserves of hydrocarbons.

a. GoodwillGoodwill represents the excess of the acquisition cost of a subsidiary over the Company’s equity in the fair value of the identifiable net assets acquired, determined at the date of acquisition, and is not subject to amortization. Goodwill is shown under goodwill and intangible assets and is recognized at cost less accumulated impairment losses, which are not reversed. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

b. Development costsResearch costs are recognized in income as incurred. Expenditures on development activities are recognized as intangible assets when such costs can be reliably measured, the product or process is technically and commercially feasible, potential future economic benefits are obtained and the Company intends also has sufficient resources to complete the development and to use or sell the asset. Their amortization is recognized in income by the straight-line method over the estimated useful life of the asset. Development expenditures that do not qualify for capitalization are recognized in income as incurred.

c. Exploration costsThe Company uses the successful efforts method of accounting for its oil and gas properties. Under this method, all costs associated with productive and non-productive wells are capitalized while non-productive and geological exploration costs are recognized in the income statement as incurred. Net capitalized costs of unproved reserves are reclassified to proven reserves when they are found. The costs of operating the wells and field equipment are recognized in the income statement as incurred.

d. Intangible assets acquired in a business combinationWhen an intangible asset is acquired in a business combination it is recognized at fair value at the acquisition date. Subsequently, such assets are as follows: trademarks, customer relations, intellectual property rights, no-competition agreements, among others, are carried at cost less accumulated depreciation and accumulated impairment losses.

l) Impairment of non-financial assetsAssets that have an indefinite useful life, for example goodwill, are not depreciable or amortizable and are subject to annual impairment tests. Assets that are subject to amortization are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels at which separately identifiable cash flows exist (cash generating units). Non-financial long-term assets other than goodwill that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

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m) Income taxThe amount of income taxes in the income statement represents the sum of the current and deferred income taxes.Until December 31, 2013, for tax purposes, the Company and its subsidiaries in Mexico consolidated results for the purposes of Income Tax. The deferred income taxes are determined in each subsidiary by the asset and liability method, applying the rate established by legislation enacted or substantially enacted at the balance sheet date wherever ALFA and its subsidiaries operate and generate taxable income. The applicable rates are applied to the total of the temporary differences resulting from comparing the accounting and tax bases of assets and liabilities in accordance with the years in which the deferred asset tax is realized or the deferred liability tax is expected to be settled, considering, when applicable, any tax loss carry forwards expected to be that are considered to be recoverable. The effect of a change in tax rates is recognized in the income of the period in which the rate change is enacted.Management periodically evaluates positions taken in tax returns with respect to situations in which the applicable law is subject to interpretation. Provisions are recognized when appropriate based on the amounts expected to be paid to the tax authorities.Deferred tax assets are recognized only when it is probable that future taxable profits will exist against which the deductions for temporary differences can be taken.The deferred income tax on temporary differences arising from investments in subsidiaries and associates is recognized, unless the period of reversal of temporary differences is controlled by ALFA and it is probable that the temporary differences will not reverse in the near future.Deferred tax assets and liabilities are offset when a legal right exists and when the taxes are levied by the same tax authority.

n) Employee benefitsi. Pension plansDefined contribution plans:A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to their service in the current and past periods. The contributions are recognized as employee benefit expense when they are due.

Defined benefit plans:A defined benefit plan is a plan which specifies the amount of the pension an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.The liability recognized in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using discount rates in conformity with the IAS 19 that are denominated in the currency in which the benefits will be paid, and have maturities that approximate the terms of the pension liability. Actuarial gains and losses from adjustments and changes in actuarial assumptions are recognized directly in stockholders’ equity in other items of the comprehensive income in the year they occur.The Company determines the net finance expense (income) by applying the discount rate to the liabilities (assets) from net defined benefits.Past-service costs are recognized immediately in the income statement.

ii. Post-employment medical, benefitsThe Company provides medical benefits to retired employees after termination of employment. The right to access these benefits usually depends on the employee´s having worked until retirement age and completing a minimum of years of service. The expected costs of these benefits are accrued over the period of employment using the same criteria as those described for defined benefit pension plans.

iii. Termination benefitsTermination benefits are payable when employment is terminated by the Company before the normal retirement date or when an employee accepts voluntary termination of employment in exchange for these benefits. The Company recognizes termination benefits in the first of the following dates: (a) when the Company can no longer withdraw the offer of these benefits, and (b) when the Company recognizes the costs from restructuring within the scope of the IAS 37 and it involves the payment of termination benefits. If there is an offer that promotes the termination of the employment relationship voluntarily by employees, termination benefits are valued based on the number of employees expected to accept the offer. Any benefits to be paid more than 12 months after the balance sheet date are discounted to their present value.

iv. Short-term benefitsThe Company provides benefits to employees in the short term, which may include wages, salaries, annual compensation and bonuses payable within 12 months. ALFA recognizes an undiscounted provision when it is contractually obligated or when past practice has created an obligation.

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v. Employee participation in profits and bonusesThe Company recognizes a liability and an expense for bonuses and employee participation in profits when it has a legal or assumed obligation to pay these benefits and determines the amount to be recognized based on the profit for the year after certain adjustments.

o) ProvisionsLiability provisions represent a present legal obligation or a constructive obligation as a result of past events where an outflow of resources to meet the obligation is likely and where the amount has been reliably estimated. Provisions are not recognized for future operating losses.Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the value of money over time and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense.When there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.Provisions for legal claims are recognized when the Company has a present obligation (legal or assumed) as a result of past events, it is likely that an outflow of economic resources will be required to settle the obligation and the amount can be reasonably estimated.A restructuring provision is recorded when the Company has developed a formal detailed plan for the restructure, and a valid expectation for the restructure has been created between the people affected, possibly for having started the plan implementation or for having announced its main characteristics to them.

p) Share-based paymentsThe Company’s compensation plans are based on the market value of its shares in favor of certain senior executives of the Company and its subsidiaries. The conditions for granting such compensation to the eligible executives include among other things, compliance with certain metrics such as the level of profit achieved, remaining in the Company for up to 5 years, etc. The Board of Directors has appointed a technical committee to manage the plan, and it reviews the estimated cash settlement of this compensation at the end of the year. The payment plan is always subject to the discretion of the senior management of ALFA. Adjustments to this estimate are charged or credited to the income statement.The fair value of the amount payable to employees in respect of share-based payments which are settled in cash is recognized as an expense, with a corresponding increase in liabilities, over the period of service required. The liability is included under other liabilities and is adjusted at each reporting date and the settlement date. Any change in the fair value of the liability is recognized as compensation expense in the income statement.

q) Treasury sharesThe Shareholders’ Meeting periodically authorizes a maximum amount for the acquisition of the Company’s own shares. Upon the occurrence of a repurchase of its own shares, they become treasury shares and the amount is charged to stockholders’ equity at purchase price: a portion to capital stock at its modified historical value, and the balance to retained earnings. These amounts are stated at their historical value.

r) Capital stockALFA’s common shares are classified as capital stock within stockholders’ equity. Incremental costs directly attributable to the issuance of new shares are included in equity as a deduction from the consideration received, net of tax. The capital stock includes the effect of inflation recognized up to December 31, 1997.

s) Comprehensive incomeComprehensive income is composed of net income plus other capital reserves, net of taxes, which comprise the effects of the translation of foreign subsidiaries, the effects of derivative financial instruments for cash flow hedging, actuarial gains or losses, the effects of changes in the fair value of financial instruments available for sale, the equity in other items of comprehensive income of associates, and other items specifically required to be reflected in stockholders’ equity and which do not constitute capital contributions, reductions or distributions.

t) Segment reportingSegment information is presented consistently with the internal reporting provided to the chief executive who is the highest authority in operational decision-making, resource allocation and assessment of operating segment performance.

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u) Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the normal course of operations. Revenue is shown net of estimated customer returns, rebates and similar discounts and after eliminating intercompany sales.The Company grants discounts and incentives to customers, which are recognized as a deduction from income or as selling expenses depending on their nature. These programs include customer discounts for sales of products based on: i) sales volume (usually recognized as a reduction of revenue) and ii) promotions in retail products (usually recognized as selling expenses).Revenue from the sale of goods and products are recognized when all and each of the following conditions are met:• The risks and rewards of ownership have been transferred• The amount of revenue can be reliably measured• It is likely that future economic benefits will flow to the Company• The company retains no involvement associated with ownership nor effective control of the sold goods• The costs incurred or to be incurred in respect of the transaction can be measured reasonably.In the Alestra segment, revenues from services are recognized as follows:• Revenue from the provision of data transmission services, internet and local services are recognized when services are rendered.• Revenues from national and international long distance outgoing and incoming services are recognized based on minutes of

traffic processed by the Company and processed by a third party, respectively. • Installation revenues and related costs are recognized as income during the period of the contract with the customers.• The estimates are based on historical results, taking into consideration the type of customer, the type of transaction and the

specifics of each arrangement.Dividend income from investments is recognized once the rights of shareholders to receive this payment have been established (when it is probable that the economic benefits will flow to the entity and the revenue can be reliably valued).Interest income is recognized when it is likely that the economic benefits will flow to the entity and the amount of revenue can be reliably valued by applying the effective interest rate.

v) Earnings per shareEarnings per share are calculated by dividing the profit attributable to the shareholders of the parent by the weighted average number of common shares outstanding during the year. There are no dilutive effects from financial instruments potentially convertible into shares.

w) Non-recurring itemsNon-recurring items are those which require judgment from management to be disclosed, due to their size or incidence. These items are disclosed in the consolidated statement of income and in Note 27. Operations that gave rise to non-recurring items are restructuring activities and impairments.

x) Changes in accounting policies and disclosuresThe accounting policies adopted are consistent with those of the previous financial year except for the adoption of new standards effective as of January 1, 2014. The nature and the impact of each new standard/amendment are described below.• IAS 32, Financial instruments: presentation. In December 2011, the IASB amended IAS 32. These amendments are in the

application guide and clarify some of the requirements for offsetting financial assets and financial liabilities in the statement of financial position. The amendment affected presentation only and had no impact on the Company’s financial position or performance.

• IAS 39, Financial Instruments: Recognition and Measurement. In September 2013, the IASB amended IAS 39 to clarify that there is no need to suspend hedge accounting when novation of a hedging instrument to a central counterparty meets certain requirements. The application of this amended had no impact on the Company’s financial position or performance.

• IFRIC Interpretation 21 Levies: In May 2013, the IASB issued IFRIC 21. The interpretation clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be recognized before the specified minimum threshold is reached. The interpretation had no impact on the Company’s financial position or performance.

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y) New accounting pronouncements effective from January 1, 2015The following sets out the new pronouncements and amendments issued, which are effective from January 1, 2015 that have not been adopted in advance by the Company.• IFRS 15, Revenue from contracts with customers. IFRS 15 was issued in May 2014. The basic principle of IFRS 15 is that

an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This basic principle is delivered in a framework of a five-step model: (1) Identify the contract (s) with a customer (2) Identify the performance obligations in the contract (3) Determine the transaction price (4) Allocate the transaction price to the performance obligations in the contract (5) Recognize revenue when (or as) the entity satisfies a performance obligation. The application of this approach will depend on the facts and circumstances present in a contract with a client and requires the exercise of judgment. The standard should be applied in the IFRS financial statements of the entity for annual periods beginning on or after January 1, 2017. Earlier application is permitted. The Company is in the process of assessing the impact on the financial statements.

• IFRS 9 - “Financial instruments “, addresses the classification, measurement and recognition of financial assets and liabilities. The complete version of the IFRS 9 was issued in July 2014. It replaces the guidelines of IAS 39 related to the classification and measurement of financial instruments. IFRS 9 keeps but simplifies the mixed measurement model and establishes three main measurement categories for financial assets: those measured at fair value with changes in the income statement, fair value with changes in other comprehensive income and those measured at amortized cost. The classification depends on the business model of the entity and the contractual characteristics of the cash flow of financial assets. Investments in equity instruments are measured at fair value with changes to income with the irrevocable option at the beginning of presenting changes in fair values in other comprehensive income without recycling. There is now a new model of expected credit losses replacing the model of impairment of losses incurred used in the IAS 39. For financial liabilities there are no changes regarding the classification and measurement except for the recognition of changes in own credit risk in other comprehensive income for liabilities classified at fair value with changes in income. IFRS 9 reduces the requirements for hedging effectiveness of effective ranges. It requires an economic relation between the hedged item and the hedging instrument and the ‘hedging ratio’ that should be equal to that used by management for risk management purposes. The present documentation is still required but it differs from the documentation currently prepared under IAS 39. The standard is effective for periods starting in or after January 1, 2018. Its early adoption is permitted. The Company is in the process of assessing the effects of IFRS 9.

There are no additional standards, amendments or interpretations issued but not effective that could have a significant effect on the company.

Nota 4 - Financial risk management:

4.1 Financial risk factorsThe Company’s activities expose it to various financial risks: market risk (including foreign exchange risk, interest rate risk on cash flows and interest rate risk on fair value), credit risk and liquidity risk. The Company’s risk management plan considers the unpredictability of the financial markets and seeks to minimize the potential negative effects on the financial performance of the Company. The Company uses derivative financial instruments to hedge some risk exposures.The objective is to protect the financial health of the business taking into account the volatility associated with exchange rates and interest rates. Additionally, due to the nature of the industries in which it participates, the Company has entered into derivative hedges of input prices.ALFA has a Risk Management Committee, consisting of the Chairman, the Chief Executive Officer, the Chief Financial Officer of the Company, and a financial executive of the Company who acts as technical secretary. The Committee oversees derivatives transactions proposed by the subsidiaries of ALFA in which the maximum possible loss exceeds US$1. This Committee supports both the Executive Director and the Chairman of the Company. All new derivative transactions that the Company proposes to make, and the renewal of existing derivatives, require approval by both the subsidiary and ALFA in accordance with the following schedule of authorizations: Possible Maximum Loss US$

Cumulative Individual transactions transactions annual

Business Group General Manager 1 5ALFA Risk Management Committee 30 100Finance Committee 100 300ALFA Board of Directors >100 >300

The proposed transactions must meet certain criteria, including that the hedges are lower than exposures, and that they are the result of a fundamental analysis and properly documented. Sensitivity analyses and other risk analyses should be performed before the operation is carried out.

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(a) Market risk(i) Exchange rate riskThe Company operates internationally and is exposed to foreign exchange risk, primarily related to the Mexican peso and the currencies other than the functional currency in which its subsidiaries operate. The Company is exposed to foreign exchange risk arising from future commercial transactions in assets and liabilities in foreign currencies and investments abroad.The respective exchange rates of the Mexican peso, the U.S. dollar and the euro are very important factors for ALFA due to the effect they have on their results. Moreover, ALFA has no influence over their movements. ALFA estimates that between 75% and 85% of its revenues are denominated in foreign currency, either because they come from products that are exported from Mexico or because they come from products that are manufactured and sold abroad, or because even if sold in Mexico the price of such products are set based on international prices in foreign currencies such as the U.S. dollar.For this reason, in the past, in times when the Mexican peso has appreciated in real terms against other currencies such as the dollar, ALFA’s profit margins have been reduced. On the other hand, when the Mexican peso has lost value, ALFA’s profit margins have been increased. However, although this factor correlation has appeared on several occasions in the recent past, there is no assurance that it will be repeated if the exchange rates between the Mexican peso and other currencies fluctuate again.The Company participates in operations with derivative financial instruments on exchange rates for the purpose of controlling the total comprehensive cost of its financing and the volatility associated with exchange rates. Additionally, it is important to note the high “dollarization” of the Company’s revenues, since a large proportion of its sales are made abroad, providing a natural hedge against its obligations in dollars, while at the same time its income level is affected in the event exchange rate appreciation. Based on the overall exchange rate exposure at December 31, 2014 and 2013, a hypothetical variation of 5% in the exchange rate MXN/USD, holding all other variables constant, would result in an effect on the income statement by Ps 76 and Ps 17, respectively.The risk management policy of the Company is to cover as a maximum the following percentages with respect to the predicted exposure: Current year Prior year

Commodities 90 90Energy costs 65 65Exchange rate for operating transactions 70 70Exchange rate for financial transactions 90 90Interest rates 90 90

The Company has certain investments in foreign operations, whose net assets are exposed to the risk of foreign currency translation. The currency exposure arising from the net assets of the Company’s foreign operations are frequently managed through borrowings denominated in the relevant foreign currency.

(ii) Price riskIn carrying out its activities, the Company depends on the supply of raw materials provided by its suppliers, both in Mexico and abroad, among which are intermediate petrochemicals, beef products, pork and poultry, dairy products and aluminum scrap, principally.In recent years, the price of some inputs have shown volatility, especially those related to oil, natural gas, food, such as meat, cereals and milk, and metals. In order to fix the selling prices of certain of its products, the Company has entered into agreements with certain customers. At the same time, it has entered into transactions involving derivatives on natural gas that seek to reduce price volatility of the prices of this input. Additionally, it has entered into derivative financial instruments transactions to hedge purchases of certain raw materials, since these inputs have a direct or indirect relationship with the prices of its products.The derivative financial operations have been privately contracted with various financial institutions, whose financial strength was highly rated at the time by rating agencies. The documentation used to formalize the contract operations is that based generally on the “Master Agreement”, generated by the “International Swaps & Derivatives Association” (“ISDA”), which is accompanied by various accessory documents known in generic terms as “Schedule”, “Credit Support Annex” and “Confirmation”.Regarding natural gas, Pemex is the only supplier in Mexico. The selling price of natural gas at first hand is determined by the price of that product on the “spot” market in South Texas, USA, which has experienced volatility. For its part, the CFE is a decentralized public company in charge of producing and distributing electricity in Mexico. Electricity rates have also been influenced by the volatility of natural gas, since most power plants are gas-based.The Company entered into various derivative agreements with various counterparties to protect it against increases in prices of natural gas and other raw materials. In the case of natural gas derivatives, hedging strategies for products were designed to mitigate the impact of potential increases in prices. The purpose is to protect the price from volatility by taking positions that provide stable cash flow expectations, and thus avoid price uncertainty. The reference market price for natural gas is the Henry Hub New York Mercantile Exchange (NYMEX). The average price per MMBTU for 2013 and 2012 was US dollars4.43 and US dollars3.65, respectively.At December 31, 2014, the Company had hedges of natural gas prices for a portion expected of consumption needs in Mexico and the United States. Based on the general input exposure at December 31, 2014 and 2013, a hypothetical increase (decrease) of 10% in market prices applied to fair value and keeping all other variables constant, such as exchange rates, the increase (decrease) would result in an immaterial effect on the income statement for 2014 and 2013.

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(iii) Interest rate and cash flow riskThe interest rate risk for the Company arises from long-term loans. Loans at variable rates expose the Company to interest rate risk on cash flows that are partially offset by cash held at variable rates. Loans at fixed rates expose the Company to interest rate risk at fair value. For the purpose of controlling the total comprehensive cost of its financing and the volatility of interest rates, the Company has contracted interest rate swaps to convert certain variable rate loans to fixed rates. At December 31, 2014 and 2013, if interest rates on variable rate loans were increased/decreased by 10%, interest expense would increase/decrease by Ps 7.4 and Ps 10.41, respectively.

(b) Credit riskCredit risk is managed on a group basis, except for the credit risk related to accounts receivable balances. Each subsidiary is responsible for managing and analyzing credit risk for each of its new customers before setting the terms and conditions of payment. Credit risk is generated from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions as well as credit exposure to customers, including receivables and committed transactions. If wholesale customers are rated independent, these are the ratings used. If there is no independent rating, the Company´s risk control group evaluates the creditworthiness of the customer, taking into account their financial position, past experience and other factors.Individual risk limits are determined based on internal and external ratings in accordance with limits set by the Board. The use of credit risk is monitored regularly. Sales to retail customers are in cash or by credit card.During 2014 and 2013, credit limits were not exceeded and management does not expect losses in excess of the impairment recognized in the corresponding periods.The impairment provision for doubtful accounts represents estimated losses resulting from the inability of customers to make required payments. In determining the allowance for doubtful accounts, significant estimates have to be made. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by a review of their current credit information. In addition, the Company considers a number of factors to determine the size and appropriate timing for the recognition of allowances, including historical collection experience, customer base, current economic trends and the ageing of the accounts receivable portfolio.

(c) Liquidity riskProjected cash flows are determined at each operating entity of the Company and subsequently the finance department consolidates this information. The finance department of the Company continuously monitors the cash flow projections and liquidity requirements of the Company ensuring that sufficient cash and highly liquid investments are maintained to meet operating needs, and it’s that some flexibility is maintained through open and committed credit lines. The Company regularly monitors and makes decisions ensuring that the limits or covenants set forth in debt contracts are not violated. The projections consider the financing plans of the Company, compliance with covenants, compliance with minimum liquidity ratios and internal legal or regulatory requirements.The Company’s treasury invests those funds in time deposits and marketable securities whose maturities or liquidity allow flexibility to meet the cash needs of the Company. At December 31, 2014 and 2013, the Company had time deposits of Ps 11,934 and Ps 6,639, respectively, which are considered sufficient to adequately manage liquidity risk.The following table analyzes the derivative and non-derivative, grouped according to their maturity, from the balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are required to understand the timing of the Company’s cash flows. The amounts disclosed in the table are contractual undiscounted cash flows. From From Less than 1 to 2 2 to 5 More than 5 one year years years years

At December 31, 2014Suppliers and other accounts payable Ps 47,655 Ps - Ps - Ps -Current and non-current debt (excludingdebt issuance costs) 13,842 29,448 43,450 41,357Derivative financial instruments 760 1,092 - -Other liabilities 899 420 - -

At December 31, 2013Suppliers and other accounts payable Ps 30,252 Ps - Ps - Ps -Current and non-current debt (excludingdebt issuance costs) 10,522 3,542 8,719 34,854Derivative financial instruments 78 337 - -Other liabilities 534 500 - -

ALFA expects to meet its obligations with cash flows generated by operations. Additionally ALFA has access to credit lines with various banks to meet possible requirements.

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4.2 Equity risk managementThe Company’s objectives when managing equity are to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure so as to reduce the cost of equity.To maintain or adjust the equity structure, the Company may adjust the amount of dividends paid to shareholders, return equity to shareholders, issue new shares or sell assets to reduce debt.ALFA monitors equity based on the degree of leverage. This percentage is calculated by dividing total liabilities by total equity.The financial ratio of total liabilities/total equity was 2.36 and 1.54 at December 31, 2014 and 2013, respectively.

4.3 Fair value estimationThe following is an analysis of financial instruments measured by the fair value valuation method. The 3 different levels used are presented below:• Level 1: Quoted prices for identical instruments in active markets.• Level 2: Other valuations including quoted prices for similar instruments in active markets that are directly or indirectly observable.• Level 3: Valuations made through techniques wherein one or more of their significant data inputs are unobservable.The following table presents the ALFA’s assets and liabilities that are measured at fair value at December 31, 2014:Assets Level 1 Level 2 Level 3 Total

Financial assets available for sale current Ps 5,472 Ps 141 Ps - Ps 5,613Financial assets at fair value through profit or loss:- Trading derivatives - 35 - 35Derivatives used for hedging - 15 - 15Financial assets available for sale non-current - - 268 268Total assets Ps 5,472 Ps 191 Ps 268 Ps 5,931

Liabilities

Financial liabilities at fair value through profit or loss:- Trading derivatives Ps - Ps 85 Ps - Ps 85Derivatives used for hedging - 1,834 - 1,834Employees’ benefits based on shares 622 - - 622Total liabilities Ps 622 Ps 1,919 Ps - Ps 2,541

The following table presents the ALFA’s assets and liabilities that are measured at fair value at December 31, 2013:Assets Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or loss:- Trading derivatives Ps - Ps 58 Ps - Ps 58Derivatives used for hedging - 28 - 28Financial assets available for sale non-current - - 227 227Total assets Ps - Ps 86 Ps 227 Ps 313

Liabilities

Financial liabilities at fair value through profit or loss:- Trading derivatives Ps - Ps 157 Ps - Ps 157Derivatives used for hedging - 258 - 258Employees’ benefits based on shares 702 - - 702Total liabilities Ps 702 Ps 415 Ps - Ps 1,117

There are no transfers between levels 1 and 2, or between levels 2 and 3 in the reported periods.

Level 1The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is considered active if quoted prices are clearly and regularly available from a stock exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regular market transactions at arm-length conditions. The trading price used for financial assets held by ALFA is the current bid price.

Level 2The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data when available and rely as little as possible on estimates specific to the Company. If all significant inputs required to measure an instrument at fair value are observable, the instrument is classified at Level 2.

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Level 3If one or more of the significant inputs is not based on observable market data, the instrument is classified at Level 3.Specific valuation techniques used to value financial instruments include:• Market quotations or offers from retailers for similar instruments.• The fair value of interest rate swaps calculated as the present value of estimated future cash flows based on observable yield

curves.• The fair value of forward exchange contracts determined using the exchange rates on the balance sheet date, with the resulting

value discounted to present value.• Other techniques, such as the analysis of discounted cash flows, which are used to determine fair value for the remaining

financial instruments.The following table presents the movement in Level 3 instruments for the year ended December 31, 2014 and 2013: Financial assets available for sale

Initial balance at January 1, 2013 Ps 234Disposals (7)Final balance at December 31, 2013 227Purchases 41Final balance at December 31, 2014 Ps 268

Note 5 - Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

5.1 Critical accounting estimates and judgmentsThe Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Estimated impairment of goodwillThe Company tests annually whether goodwill has suffered any impairment, in accordance with the established accounting policy (see Note 13). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates.

(b) Income taxThe Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. If income before taxes increases/decreases by 5%, income tax will be increased/decreased by Ps 33.

(c) Fair value of derivativesThe fair value of financial instruments that are not traded in an active market is determined by using fair value hierarchies. The Company uses its judgment to select a variety of methods and make assumptions that are based mainly on market conditions existing at the end of each reporting period. If the fair value estimation varies by 5%, the effect on income would be modified by Ps 92.

(d) Contingent lossesManagement also makes judgments and estimates in recording provisions for matters relating to claims and litigation, primarily in relation to rates of interconnection services. Actual costs may vary from estimates for several reasons, such as changes in cost estimates for resolution of complaints and disputes based on different interpretations of the law, opinions and evaluations concerning the amount of loss.Contingencies are recorded as provisions when it is likely that a liability has been incurred and the amount of the loss is reasonably estimable. It is not practical to estimate sensitivity to potential losses if other assumptions were used to record these provisions, due to the number of underlying assumptions and the range of possible reasonable outcomes regarding potential actions by third parties, such as regulators, both in terms of loss probability and estimates of such loss.

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5.2 Critical judgments in applying the entity’s accounting policies(a) Revenue recognitionThe Company has recognized revenue amounting to Ps 218,595 for sales of goods to third parties in the Nemak, Sigma and Alpek segments during 2014. The buyer has the right to return the goods if their customers are dissatisfied. The Company believes that, based on past experience with similar sales, the dissatisfaction rate will not exceed 2.5%. The Company has, therefore, recognized revenue on this transaction with a corresponding provision against revenue for estimated returns. If the estimate changes by 10%, the revenue will be reduced/increased by Ps 545.

(b) Basis of consolidationThe financial statements include the assets, liabilities and results of all entities in which the Company has a controlling interest. The outstanding balances and significant intercompany transactions have been eliminated in consolidation. To determine control, the Company considers whether it has the power to govern the financial and operational strategy of the respective entity and not just the power of the capital held by the Company. As a result of this analysis, the Company has exercised critical judgment to decide whether to consolidate the financial statements of Polioles and Indelpro, where the determination of control is not clear. Based on the principal substantive right of Alpek in accordance with the by-laws of Polioles to appoint the General Director, who has control over the relevant decision making and based on the by-laws of Indelpro and supported in the General Law of Mercantile Organizations, which allow Alpek to control the decisions over relevant activities by a simple majority through an ordinary shareholders’ meeting, where it holds 51% of Indelpro. Management has concluded that there are circumstances and factors described in the bylaws of Polioles and applicable standards that allow the Company to conduct the daily operations of Polioles and Indelpro, which therefore demonstrate control. The Company will continue to evaluate these circumstances at the date of each statement of financial position to determine if this critical judgment is still valid. If the Company determines that it has no control over Polioles and Indelpro, Polioles and Indelpro will need to be deconsolidated and be recorded using the equity method.The consolidated financial statements include assets, liabilities and results of Campofrío since the Company has control. To exercise control, the Company considers whether it has the ability to manage the relevant activities and if it is exposed, or has the right to variable returns derived from its involvement with Campofrío and the ability to affect those returns due to its authority over Campofrío. As a result of this analysis, the Company has used its critical judgment to decide if it should consolidate the financial statements of Campofrío, where the determination of control is not clear. In accordance with the main substantive rights of ALFA, based on the agreement signed between ALFA and WH, which became effective on June 9, 2014 and granted ALFA the right to manage relevant activities significantly affecting variable returns derived from its involvement with Campofrío, including, among others: the approval of the business plan, the approval of recurring corporate events as extraordinary, changes in the entity’s ownership; the need for additional capital from current shareholders or investors, and the resolution of disputes between shareholders. Based on these rights and the 45% indirect equity of ALFA on June 9, 2014 in Campofrío, ALFA controls the decisions on relevant activities through a simple majority in the board meetings, as well as in the stockholders’ meeting. Management has concluded that there are circumstances and factors in the aforementioned agreement between ALFA and WH that allows the Company to currently have the ability to manage activities and transactions relevant to Campofrío, demonstrating control. The Company will continue assessing these circumstances in each report date to determine if this critical judgment continues to be valid.

(c) Impairment in financial assets available for saleThe IFRS standards require that when there are objective signs of impairment in an investment available for sale, the corresponding loss be recorded in the income statement; however, it does not establish the item within the income statement where this loss has to be presented.The Company considers the nature and objective for which it made the investment in Pacific Rubiales Energy (PRE), which was initially acquired as a strategic financial investment for ALFA and as of the date of acquisition and up to December 31, 2014, the different options held by the Company have been assessed. Based on the market conditions and the energy sector and corporate plans of ALFA, the investment in PRE, could be increased, sold or it could establish joint ventures with PRE to perform joint operations in the energy sector in Mexico, which is estimated to happen in a period not to exceed twelve months. ALFA has 19% of the capital of PRE and has publicly declared its intention to participate jointly with PRE in projects in he energy sector in Mexico; however, these intentions are subject to future not yet established. Due to the aforementioned situations, ALFA considers that this investment is not part of its operations with the Energy sector and that the most adequate presentation in the statement of income of the loss incurred in this investment (see Note 28), is as part of the financial income (loss), net.

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(d) Recognition of deferred tax assetsALFA, individually, has tax losses to be applied arising mainly from significant losses in transactions with derivative financial instruments in 2008 and 2009, which may be used in the following years and whose maturity starts in 2018.Based on the projections of tax income and gains to be generated by ALFA individually in the following years through a structured and solid business plan, including the sale of non-strategic assets, new services to be provided to entities of the group, among others, becoming effective as of 2015, management has considered that the current tax losses will be used before they expire; therefore, it has considered appropriate to recognize a deferred tax asset for such losses.

Note 6 - Cash and cash equivalents

Cash and cash equivalents presented in the statements of financial position consist of the following: December 31, 2014 2013

Cash and bank accounts Ps 4,735 Ps 5,263Short-term bank deposits 11,934 6,639Total cash and cash equivalents Ps 16,669 Ps 11,902

Note 7 - Restricted cash and cash equivalents

The value of restricted cash and cash equivalents are composed as follows: December 31, 2014 2013

Current (a) Ps 504 Ps 364Non-current (see Note 14) (b) 198 153Restricted cash and cash equivalents Ps 702 Ps 517

a. Applies to deposits relating to lawsuits with authorities arising from differences in the interpretation of some laws in countries where two subsidiaries operate relating to Nemak segment.

b. This restricted cash is for proceedings before The Mexican Federal Telecommunications Commission in connection with a dispute arising from a resale of interconnection rates that Alestra has with Teléfonos de Mexico, S.A. de C.V. (“Telmex”) and Teléfonos del Norte (“Telnor”, a subsidiary of Telmex). The parties request a resolution regarding tariff rates for interconnection of traffic telecommunication networks applicable during 2010 and the interconnection traffic of long distance (interurban transport) during 2009 and 2008. On September 8, 2009, the Company and Telmex created a trust with BBVA Bancomer (as trustee) to ensure the payment of fixed interconnection services on the dispute applicable to 2008. The trust agreement was amended to include the amounts in dispute for 2009 and 2010.

The restricted cash representing the balance of the trust is presented in the statement of financial position within non-current assets. At December 31, 2014, the balance of the trust was Ps 145 (Ps 153 in 2013), composed of contributions by Alestra and corresponding yields.

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Note 8 - Customers and other accounts receivable, net

December 31, 2014 2013

Customers Ps 22,805 Ps 18,979Recoverable taxes 2,186 344Interest receivable 5 2Other debtors: Short-term notes receivable - 100 Sundry debtors 6,430 4,731 Long-term notes receivable 904 212Provision for impairment of customers and other accounts receivable (1,069) (592) 31,261 23,776Less: non-current portion (1) 904 212Current portion Ps 30,357 Ps 23,564

(1) The non-current accounts receivable represent long-term receivables and other non-current assets, and are presented in the statement of financial position in other noncurrent assets.

Customers and other accounts receivable include past-due balances of Ps 4,418, Ps 3,157 at December 31, 2014 and 2013, respectively.The analysis by age of the balances due from customers and other receivables not covered by impairment provisions is as follows: December 31, 2014 2013

1 to 30 days Ps 1,896 Ps 1,70830 to 90 days 840 63290 to 180 days 302 373More than 180 days 1,380 444 Ps 4,418 Ps 3,157

At December 31, 2014 and 2013, trade and other accounts receivable of Ps 29,235 and Ps 23,710, respectively have an impairment provision (represented by customers and sundry debtors). The amount of the impairment provision at December 31, 2014 and 2013 amounts to Ps 1 ,069 and Ps 592, respectively. Trade and other accounts receivable impaired correspond mainly to companies going through difficult economic situations. Part of the impaired accounts is expected to be recovered.Movements in the provision for impairment of customers and other receivables are analyzed as follows: 2014 2013

Initial balance (January 1) Ps 592 Ps 467Provision for impairment of customers and other receivables 604 224Receivables written off during the year (127) (99)Final balance (December 31) Ps 1,069 Ps 592

Increases in the provision for impairment of customers and other receivables are recorded in the statement of income under sales expenses.

Note 9 - Inventories

December 31, 2014 2013

Finished goods Ps 10,110 Ps 9,152Raw material and other consumables 13,343 10,639Work in process 7,305 2,901 Ps 30,758 Ps 22,692

The cost of inventories recognized as an expense and included in “cost of sales” amounted to Ps 187,705 and Ps 166,829 for 2014 and 2013, respectively.In the years ended on December 31, 2014 and 2013, damaged, slow-moving and obsolete inventory was charged to cost of sales in the amount of Ps 167 and Ps 654, respectively.At December 31, 2014 there were no inventories pledged and December 31, 2013 inventories amounting to Ps 87 guarantee bank loans as described in Note 17.

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Note 10 - Financial instruments

a) Financial instruments by category At December 31, 2014 Accounts Financial assets receivable and and liabilities at Derivative liabilities at Available fair value contracted amortized for through as cost sale profit and loss hedges Total

Financial assets:Cash and cash equivalents Ps 16,669 Ps - Ps - Ps - Ps 16,669Restricted cash and cash equivalents 702 - - - 702Customers and other accounts receivable 30,357 - - - 30,357Derivative financial instruments - - 35 15 50Financial assets available for sale - 5,881 - - 5,881Other non-current assets 921 - - - 921 Ps 48,649 Ps 5,881 Ps 35 Ps 15 Ps 54,580

Financial liabilities:Debt Ps 92,203 Ps - Ps - Ps - Ps 92,203Suppliers and other accounts payable 47,655 - - - 47,655Derivative financial instruments - - 85 1,767 1,852Other non-current liabilities 479 - 420 - 899 Ps 140,337 Ps - Ps 505 Ps 1,767 Ps 142,609

At December 31, 2013 Accounts Financial assets receivable and and liabilities at Derivative liabilities at Available fair value contracted amortized for through as cost sale profit and loss hedges Total

Financial assets:Cash and cash equivalents Ps 11,902 Ps - Ps - Ps - Ps 11,902Restricted cash and cash equivalents 517 - - - 517Customers and other accounts receivable 23,564 - - - 23,564Derivative financial instruments - - 58 28 86Financial assets available for sale - 227 - - 227Other non-current assets 212 - - - 212 Ps 36,195 Ps 227 Ps 58 Ps 28 Ps 36,508

Financial liabilities:Debt Ps 57,453 Ps - Ps - Ps - Ps 57,453Suppliers and other accounts payable 30,954 - - - 30,954Derivative financial instruments - - 157 258 415Other non-current liabilities 1,165 - 702 - 1,867 Ps 89,572 Ps - Ps 859 Ps 258 Ps 90,689

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b) Credit quality of financial assetsThe credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: December 31, 2014 2013

Counterparties with external credit rating“A” Ps 62 Ps 62“A+“ 676 207“A-“ 116 362“BB+” 375 780“BBB+” 350 74“BBB” 97 300“BBB-” 1,193 216“BB” 159 78“BB-“ 185 1,004Other categories 4,681 925 7,894 4,008

Counterparties without external credit rating:Group X 1,452 9,434Group Y 8,072 4,995Group Z 461 11 9,985 14,440Total unimpaired trade receivables Ps 17,879 Ps 18,448

December 31, 2014 2013

Cash and cash equivalents with and without restrictions, except for cash in hand“A” Ps 8,749 Ps 704“A+” 455 163“A-” 787 1,124“BB” - 27“BB-” - 18“BB+” - 129“BBB” - 2,065“BBB+” - 2,403“BBB-” 520 183Other categories - 2,072Not rated - 1,034 Ps 10,511 Ps 9,922

Group X – new customers/related parties (less than 6 months).Group Y – customers/current related parties (more than 6 months) without default in the past.Group Z – current customers/related parties (more than 6 months) with some defaults in the past. All past-due amounts were fully recovered.

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c) Fair value of financial assets and liabilities valued at amortized costThe amounts of cash and cash equivalents, restricted cash and cash equivalents, customers and other receivables, other current assets, suppliers and other payables, outstanding debt, provisions and other current liabilities approximate their fair value due to their short maturity. The carrying value of these accounts represents the expected cash flow at December 31, 2014 and 2013.The carrying value and estimated fair value of financial assets and financial liabilities carried at amortized cost are as follows: At December 31, 2014 At December 31, 2013

Carrying Fair Carrying Fair amount value amount value

Financial assets:Non-current accounts receivable Ps 921 Ps 921 Ps 212 Ps 200Financial liabilities:Non-current debt 81,489 87,075 46,413 50,294

The estimated fair values were determined based on discounted cash flows. These fair values do not consider the current portion of financial assets and liabilities, since the current portion approximates their fair value. This is a level 3 fair value measurement.

d) Derivative financial instrumentsThe effectiveness of derivative financial instruments designated as hedges is measured periodically. At December 31, 2014 and 2013 the Company’s management has assessed the effectiveness of its hedges for accounting purposes and has concluded that they are highly effective.Notional amounts related to derivative financial instruments reflect the contracted reference volume; however they do not reflect the amounts at risk with respect to future cash flows. The amounts at risk are generally limited to the unrealized profit or loss from the market valuation of such instruments, which may vary according to changes in the market value of the underlying, its volatility and the credit quality of the counterparties.The principal obligations which the Company is subject to depends on the type of contract and the conditions established in each one of the derivative financial instruments in force at December 31, 2014 and 2013.Trading derivatives are classified as current assets or liabilities. The fair value of hedges is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months.In the year ended December 31, 2014 and 2013, the Company had no effects from ineffective portions of fair value and cash flows hedges.During the year, the Company’s derivative financial instruments were novated to a central counterparty following the changes established by law. This had no effect in the Company’s hedging accounting.

(a) Forward exchange contractsPositions in foreign currency derivative financial instruments are summarized as follows: At December 31, 2014 Value of underlying asset Maturity by yearType of derivative, Notional Fair Collateral / value or contract amount Units Reference value 2015 2016 2017+ guarantee

For hedging purposes:USD/MXN (CCS1)2 Ps (3,500) Peso / Dollar 14.72 Ps (755) Ps (38) Ps (340) Ps (377) Ps -For trading purposes:EUR/USD (CCS1) Ps 925 Dollar / Euro 1.21 35 14 21 - -USD/MXN (986) Peso / Dollar 14.72 (73) (73) - - - Ps (793) Ps (97) Ps (319) Ps (377) Ps -

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At December 31, 2013 Value of underlying asset Maturity by yearType of derivative, Notional Fair Collateral / value or contract amount Units Reference value 2014 2015 2016+ guarantee

For hedging purposes:USD/MXN (CCS1) 2 Ps (3,500) Peso / Dollar 13.08 Ps (279) Ps - Ps (14) Ps (265) Ps -For trading purposes:EUR/USD (CCS1) Ps 1,023 Dollar / Euro 1.38 (102) (20) (32) (50) - Ps (381) Ps (20) Ps (46) Ps (315) Ps -

1 Cross currency swaps2 Fair value hedges

(b) Interest rate swapsPositions in interest rate derivative financial instruments are summarized as follows: At December 31, 2014 Value of underlying asset Maturity by yearType of derivative, Notional Fair Collateral / value or contract amount Units Reference value 2015 2016 2017+ guarantee

For hedging purposes:On Libor 1 Ps 589 % per year 0.90 Ps (10) Ps (8) Ps (2) Ps - Ps - Ps (10) Ps (8) Ps (2) Ps - Ps -

At December 31, 2013 Value of underlying asset Maturity by yearType of derivative, Notional Fair Collateral / value or contract amount Units Reference value 2014 2015 2016+ guarantee

For hedging purposes:On Libor 1 Ps 785 % per year 0.49 Ps (20) Ps (12) Ps (7) Ps (1) Ps - Ps (20) Ps (12) Ps (7) Ps (1) Ps -

1 Cash flow hedges

(c) CommoditiesPositions in derivative financial instruments covering natural gas, gasoline and ethylene are summarized as follows:

At December 31, 2014 Value of underlying asset Maturity by yearType of derivative, Notional Fair Collateral / value or contract amount Units Reference value 2015 2016 2017+ guarantee

For hedging purposes:Ethylene 1 Ps 7 Dollar cents/lb 45.38 Ps (1) Ps (1) Ps - Ps - Ps -Natural gas 1 3,802 Dollar / MBTU 3.08 (379) (18) (144) (217) -Ethane 1 2 Dollar Cents/ Gallon 17.59 (1) (1) - - -Px 1 1,585 Dollar/MT 884 (308) (308) - - -Gasoline 1,023 Dollar/Gallon 1.62 (380) (380) - - -Crude WTI 1 39 Dollar/BBL 59.29 15 15 - - -For trading purposes:Crude Brent 46 Dollar / BBL 63.27 (12) (12) - - - Ps (1,066) Ps (705) Ps (144) Ps (217) Ps -

79

At December 31, 2013 Value of underlying asset Maturity by yearType of derivative, Notional Fair Collateral / value or contract amount Units Reference value 2014 2015 2016+ guarantee

For hedging purposes:Ethylene 1 Ps 155 Dollar cents/lb 58.75 Ps 12 Ps 11 Ps 1 Ps - Ps -Natural gas 1 444 Dollar / MBTU 4.29 7 15 - (8) -Ethane 1 23 Dollar Cents/ Gallon 28.03 (3) (3) - - -Px1 226 Dollar/MT 1.435 (2) (2) - - -Crude WTI 1 417 Dollar/BBL 93.33 (3) (3) - - -For trading purposes:Gasoline 923 Dollar / Gallon 2.72 54 54 - - -Natural gas 25 Dollar / MBTU 4.29 (53) (53) - - -Crude Brent 60 Dollar / BBL 108.53 2 2 - - - Ps 14 Ps 21 Ps 1 Ps (8) Ps -

1 Cash flow hedges

At December 31, 2014 and 2013, the net fair value of derivative financial instruments above amounts to Ps 1,802 and Ps 329, respectively, which is shown in the consolidated statements of financial position as follows: At December 31, 2014 Fair Initial Net value value position recorded

Current assets Ps 23 Ps - Ps 23Non-current assets 27 - 27Current liabilities (760) - (760)Non-current liabilities (1,159) 67 (1,092)Net position Ps (1,869) Ps 67 Ps (1,802)

At December 31, 2013 Fair Initial Net value value position recorded

Current assets Ps 86 Ps - Ps 86Current liabilities (78) - (78)Non-current liabilities (395) 58 (337)Net position Ps (387) Ps 58 Ps (329)

Note 11 – Other current assets

Other current assets consist of the following: December 31, 2014 2013

Advance payments (1) Ps 1,242 Ps 822Accounts receivable – affiliates (Note 8) 177 184Other current assets - 37Total other current assets Ps 1,419 Ps 1,043

(1) This item comprises mainly advertising and insurance paid in advance.

80

Of the total depreciation expense, Ps 6,764 and Ps 6,237 were charged to cost of sales, Ps 440 and Ps 305 to selling expenses and Ps 412 and Ps 427 to administrative expenses in 2014 and 2013, respectively.At December 31, 2014 and 2013 there were no property, plant and equipment pledged as collateral.Assets under finance leases comprise the following amounts in which the Company is the lessee: December 31, 2014 2013

Cost - capitalized financial lease Ps 1,648 Ps 647Accumulated depreciation (343) (332)Carrying value, net Ps 1,305 Ps 315

The Company has entered into various non-cancellable lease agreements as lessee. The lease terms are between 2 and 3 years, and the ownership of the assets lies with the Company.

Note 12 – Property, plant and equipment

Furniture, Telecommuni fittings and Tooling Improvements Buildings and Machinery Transportation cation information and Construction to leased Other Land constructions and equipment equipment network technology spare parts in process property fixed assets Total

Year ended December 31, 2013Opening net book amount Ps 6,963 Ps 11,907 Ps 42,777 Ps 1,238 Ps 3,956 Ps 850 Ps 233 Ps 5,890 Ps 282 Ps 147 Ps 74,243Exchange differences 3 43 (39) (3) - 5 4 53 - - 66Additions 72 135 1,714 390 33 142 98 6,656 46 26 9,312Additions from business combinations 116 107 84 24 26 12 - - 5 - 374Disposals (17) (18) (168) (43) (13) (10) (6) (157) (4) (4) (440)Impairment charge recognized in the year (Note 2.p) - (328) (2,044) (2) - 3 (1) (30) - (17) (2,419)Depreciation charge recognized in the year - (605) (4,919) (308) (699) (296) (102) - (27) (13) (6,969)Transfers (15) 496 3,629 18 801 185 (34) (5,271) 27 (29) (193)Carrying amount at December 31, 2013 Ps 7,122 Ps 11,737 Ps 41,034 Ps 1,314 Ps 4,104 Ps 891 Ps 192 Ps 7,141 Ps 329 Ps 110 Ps 73,974

At December 31, 2013 Deemed cost Ps 7,122 Ps 21,730 Ps 89,885 Ps 3,179 Ps 12,364 Ps 3,587 Ps 512 Ps 7,141 Ps 648 Ps 204 Ps 146,372Accumulated depreciation - (9,993) (48,851) (1,865) (8,260) (2,696) (320) - (319) (94) (72,398)Carrying amount at December 31, 2013 Ps 7,122 Ps 11,737 Ps 41,034 Ps 1,314 Ps 4,104 Ps 891 Ps 192 Ps 7,141 Ps 329 Ps 110 Ps 73,974

Year ended December 31, 2014Opening net book amount Ps 7,122 Ps 11,737 Ps 41,034 Ps 1,314 Ps 4,104 Ps 891 Ps 192 Ps 7,141 Ps 329 Ps 110 Ps 73,974Exchange difference 273 886 3,602 20 2 50 14 314 - 6 5,167Additions 364 390 1,217 115 46 137 1 7,853 18 32 10,173Additions from business combinations 1,681 5,320 6,092 31 - 192 - 820 - (42) 14,094Disposals (101) (284) (800) (33) (6) (10) (1) (476) (61) (8) (1,780)Impairment charge recognized in the year (1) - (15) - - - - (2) - (5) (23)Depreciation charge recognized in the year - (791) (5,254) (313) (697) (363) (171) - (31) 3 (7,617)Transfers (312) 1,249 6,052 83 704 389 267 (8,528) 30 (14) (80)Carrying amount at December 31, 2014 Ps 9,026 Ps 18,507 Ps 51,928 Ps 1,217 Ps 4,153 Ps 1,286 Ps 302 Ps 7,122 Ps 285 Ps 82 Ps 93,908

At December 31, 2014 Deemed cost Ps 9,026 Ps 31,694 Ps 115,741 Ps 3,291 Ps 13,039 Ps 5,007 Ps 996 Ps 7,122 Ps 545 Ps 249 Ps 186,710Accumulated depreciation - (13,187) (63,813) (2,074) (8,886) (3,721) (694) - (260) (167) (92,802)Carrying amount at December 31, 2014 Ps 9,026 Ps 18,507 Ps 51,928 Ps 1,217 Ps 4,153 Ps 1,286 Ps 302 Ps 7,122 Ps 285 Ps 82 Ps 93,908

81

Note 12 – Property, plant and equipment

Furniture, Telecommuni fittings and Tooling Improvements Buildings and Machinery Transportation cation information and Construction to leased Other Land constructions and equipment equipment network technology spare parts in process property fixed assets Total

Year ended December 31, 2013Opening net book amount Ps 6,963 Ps 11,907 Ps 42,777 Ps 1,238 Ps 3,956 Ps 850 Ps 233 Ps 5,890 Ps 282 Ps 147 Ps 74,243Exchange differences 3 43 (39) (3) - 5 4 53 - - 66Additions 72 135 1,714 390 33 142 98 6,656 46 26 9,312Additions from business combinations 116 107 84 24 26 12 - - 5 - 374Disposals (17) (18) (168) (43) (13) (10) (6) (157) (4) (4) (440)Impairment charge recognized in the year (Note 2.p) - (328) (2,044) (2) - 3 (1) (30) - (17) (2,419)Depreciation charge recognized in the year - (605) (4,919) (308) (699) (296) (102) - (27) (13) (6,969)Transfers (15) 496 3,629 18 801 185 (34) (5,271) 27 (29) (193)Carrying amount at December 31, 2013 Ps 7,122 Ps 11,737 Ps 41,034 Ps 1,314 Ps 4,104 Ps 891 Ps 192 Ps 7,141 Ps 329 Ps 110 Ps 73,974

At December 31, 2013 Deemed cost Ps 7,122 Ps 21,730 Ps 89,885 Ps 3,179 Ps 12,364 Ps 3,587 Ps 512 Ps 7,141 Ps 648 Ps 204 Ps 146,372Accumulated depreciation - (9,993) (48,851) (1,865) (8,260) (2,696) (320) - (319) (94) (72,398)Carrying amount at December 31, 2013 Ps 7,122 Ps 11,737 Ps 41,034 Ps 1,314 Ps 4,104 Ps 891 Ps 192 Ps 7,141 Ps 329 Ps 110 Ps 73,974

Year ended December 31, 2014Opening net book amount Ps 7,122 Ps 11,737 Ps 41,034 Ps 1,314 Ps 4,104 Ps 891 Ps 192 Ps 7,141 Ps 329 Ps 110 Ps 73,974Exchange difference 273 886 3,602 20 2 50 14 314 - 6 5,167Additions 364 390 1,217 115 46 137 1 7,853 18 32 10,173Additions from business combinations 1,681 5,320 6,092 31 - 192 - 820 - (42) 14,094Disposals (101) (284) (800) (33) (6) (10) (1) (476) (61) (8) (1,780)Impairment charge recognized in the year (1) - (15) - - - - (2) - (5) (23)Depreciation charge recognized in the year - (791) (5,254) (313) (697) (363) (171) - (31) 3 (7,617)Transfers (312) 1,249 6,052 83 704 389 267 (8,528) 30 (14) (80)Carrying amount at December 31, 2014 Ps 9,026 Ps 18,507 Ps 51,928 Ps 1,217 Ps 4,153 Ps 1,286 Ps 302 Ps 7,122 Ps 285 Ps 82 Ps 93,908

At December 31, 2014 Deemed cost Ps 9,026 Ps 31,694 Ps 115,741 Ps 3,291 Ps 13,039 Ps 5,007 Ps 996 Ps 7,122 Ps 545 Ps 249 Ps 186,710Accumulated depreciation - (13,187) (63,813) (2,074) (8,886) (3,721) (694) - (260) (167) (92,802)Carrying amount at December 31, 2014 Ps 9,026 Ps 18,507 Ps 51,928 Ps 1,217 Ps 4,153 Ps 1,286 Ps 302 Ps 7,122 Ps 285 Ps 82 Ps 93,908

82

Other intangible assets consist mainly of patents, concessions and agreements not to compete.Of the total amortization expense, Ps 1,525 and Ps 658, were charged to cost of sales, Ps 97 and Ps 87 to selling expenses and Ps 367 and Ps 218 to administrative expenses in 2014 and 2013, respectively.Research expenses incurred and recorded in the results of 2014 and 2013 were Ps 45 and Ps 77, respectively. Certain client relationships capitalized on in the past as a result of the business combinations, have been eliminated due to the termination of these relationships and are shown as disposals.Goodwill was increased in 2014 for the acquisition of Campofrío in the Sigma segment and in 2013 due to the acquisition of ComNor and Monteverde in the Sigma segment and to the acquisition of G Tel in the Alestra segment.

Note 13 – Goodwill and intangible assets

Finite life Indefinite life

Intellectual Development Exploration Customers Software property rights costs costs Trademarks relationships and licenses and others Other Goodwill Trademarks Other Total

CostAt January 1, 2013 Ps 2,130 Ps 1,510 Ps 109 Ps 2,474 Ps 1,385 Ps 1,440 Ps 958 Ps 10,305 Ps 2,607 Ps 17 Ps 22,935Exchange differences 42 59 - 42 4 - 53 - 8 1 209Additions 1,236 1,704 - 155 171 - 1,256 - 109 - 4,631Additions from business combinations - - 8 51 - - - 1,120 - - 1,179Impairment charge for the year - (8) - - - - - - - - (8)Transfers (1) (2) - 17 6 - (3) - - (13) 4Disposals - - - (51) (1) - (15) - - - (67)At December 31, 2013 3,407 3,263 117 2,688 1,565 1,440 2,249 11,425 2,724 5 28,883Exchange differences (266) 1,742 13 220 17 - 157 80 86 1 2,050Additions 625 1,752 - 102 302 2,789 - - 12 1 5,583Additions from business combinations 18 - 8 - 2,020 - 299 2,937 4,091 3,110 12,483Impairment charge for the year - - - - - - - - - - -Transfers 9 - 40 226 1 - (27) - - - 249Disposals - - (8) - (28) - (60) (108) - - (204)At December 31, 2014 Ps 3,793 Ps 6,757 Ps 170 Ps 3,236 Ps 3,877 Ps 4,229 Ps 2,618 Ps 14,334 Ps 6,913 Ps 3,117 Ps 49,044

Accumulated amortizationAt January 1, 2013 Ps (1,210) Ps (645) Ps (33) Ps (614) Ps (1,091) Ps (68) Ps (542) Ps - Ps - Ps - Ps (4,203)Amortizations (192) (49) (39) (188) (94) (68) (92) - - - (722)Additions - - (3) - - - - - - - (3)Disposals - - - 1 1 - 4 - - - 6Transfers (1) - 4 (13) (10) - 14 - - - (6)Exchange differences (14) (4) (1) (24) (4) - (2) - - - (49)At December 31, 2013 (1,417) (698) (72) (838) (1,198) (136) (618) - - - (4,977)Amortizations (260) (1,084) (19) (190) (205) (68) (163) - - - (1,989)Additions (18) - (3) - (1,079) - (35) - - - (1,135)Disposals - - 3 - 10 - 57 - - - 70Transfers (2) - (1) (5) - - (4) - - - (12)Exchange differences 141 (537) (10) (63) (13) - (67) - - - (549)At December 31, 2014 Ps (1,556) Ps (2,319) Ps (102) Ps (1,096) Ps (2,485) Ps (204) Ps (830) Ps - Ps - Ps - Ps (8,592)

Net carrying valueCost Ps 3,407 Ps 3,263 Ps 117 Ps 2,688 Ps 1,565 Ps 1,440 Ps 2,249 Ps 11,425 Ps 2,724 Ps 5 Ps 28,883Accumulated amortization (1,417) (698) (72) (838) (1,198) (136) (618) - - (4,977)At December 31, 2013 Ps 1,990 Ps 2,565 Ps 45 Ps 1,850 Ps 367 Ps 1,304 Ps 1,631 Ps 11,425 Ps 2,724 Ps 5 Ps 23,906

Cost Ps 3,793 Ps 6,757 Ps 170 Ps 3,236 Ps 3,877 Ps 1,440 Ps 5,407 Ps 14,334 6,913 Ps 3,117 Ps 49,044Accumulated amortization (1,556) (2,319) (102) (1,096) (2,485) (204) (830) - - - (8,592)At December 31, 2014 Ps 2,237 Ps 4,438 Ps 68 Ps 2,140 Ps 1,392 Ps 1,236 Ps 4,577 Ps 14,334 Ps 6,913 Ps 3,117 Ps 40,452

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Note 13 – Goodwill and intangible assets

Finite life Indefinite life

Intellectual Development Exploration Customers Software property rights costs costs Trademarks relationships and licenses and others Other Goodwill Trademarks Other Total

CostAt January 1, 2013 Ps 2,130 Ps 1,510 Ps 109 Ps 2,474 Ps 1,385 Ps 1,440 Ps 958 Ps 10,305 Ps 2,607 Ps 17 Ps 22,935Exchange differences 42 59 - 42 4 - 53 - 8 1 209Additions 1,236 1,704 - 155 171 - 1,256 - 109 - 4,631Additions from business combinations - - 8 51 - - - 1,120 - - 1,179Impairment charge for the year - (8) - - - - - - - - (8)Transfers (1) (2) - 17 6 - (3) - - (13) 4Disposals - - - (51) (1) - (15) - - - (67)At December 31, 2013 3,407 3,263 117 2,688 1,565 1,440 2,249 11,425 2,724 5 28,883Exchange differences (266) 1,742 13 220 17 - 157 80 86 1 2,050Additions 625 1,752 - 102 302 2,789 - - 12 1 5,583Additions from business combinations 18 - 8 - 2,020 - 299 2,937 4,091 3,110 12,483Impairment charge for the year - - - - - - - - - - -Transfers 9 - 40 226 1 - (27) - - - 249Disposals - - (8) - (28) - (60) (108) - - (204)At December 31, 2014 Ps 3,793 Ps 6,757 Ps 170 Ps 3,236 Ps 3,877 Ps 4,229 Ps 2,618 Ps 14,334 Ps 6,913 Ps 3,117 Ps 49,044

Accumulated amortizationAt January 1, 2013 Ps (1,210) Ps (645) Ps (33) Ps (614) Ps (1,091) Ps (68) Ps (542) Ps - Ps - Ps - Ps (4,203)Amortizations (192) (49) (39) (188) (94) (68) (92) - - - (722)Additions - - (3) - - - - - - - (3)Disposals - - - 1 1 - 4 - - - 6Transfers (1) - 4 (13) (10) - 14 - - - (6)Exchange differences (14) (4) (1) (24) (4) - (2) - - - (49)At December 31, 2013 (1,417) (698) (72) (838) (1,198) (136) (618) - - - (4,977)Amortizations (260) (1,084) (19) (190) (205) (68) (163) - - - (1,989)Additions (18) - (3) - (1,079) - (35) - - - (1,135)Disposals - - 3 - 10 - 57 - - - 70Transfers (2) - (1) (5) - - (4) - - - (12)Exchange differences 141 (537) (10) (63) (13) - (67) - - - (549)At December 31, 2014 Ps (1,556) Ps (2,319) Ps (102) Ps (1,096) Ps (2,485) Ps (204) Ps (830) Ps - Ps - Ps - Ps (8,592)

Net carrying valueCost Ps 3,407 Ps 3,263 Ps 117 Ps 2,688 Ps 1,565 Ps 1,440 Ps 2,249 Ps 11,425 Ps 2,724 Ps 5 Ps 28,883Accumulated amortization (1,417) (698) (72) (838) (1,198) (136) (618) - - (4,977)At December 31, 2013 Ps 1,990 Ps 2,565 Ps 45 Ps 1,850 Ps 367 Ps 1,304 Ps 1,631 Ps 11,425 Ps 2,724 Ps 5 Ps 23,906

Cost Ps 3,793 Ps 6,757 Ps 170 Ps 3,236 Ps 3,877 Ps 1,440 Ps 5,407 Ps 14,334 6,913 Ps 3,117 Ps 49,044Accumulated amortization (1,556) (2,319) (102) (1,096) (2,485) (204) (830) - - - (8,592)At December 31, 2014 Ps 2,237 Ps 4,438 Ps 68 Ps 2,140 Ps 1,392 Ps 1,236 Ps 4,577 Ps 14,334 Ps 6,913 Ps 3,117 Ps 40,452

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Impairment testing of goodwillGoodwill is allocated to operating segments that are expected to benefit from the synergies of the business combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units, as follows: December 31, 2014 2013

Alpek Ps 250 Ps 221Sigma 8,904 6,057Nemak 4,538 4,494Alestra 286 297 (1)

Other segments 356 356 Ps 14,334 Ps 11,425

(1) This goodwill was generated during 2013, so no key assumptions were determined for evaluation at the end of 2013.

The amount of recovery from the operating segments has been determined based on calculations of values in use. These calculations use cash flow projections based on pre-tax financial budgets approved by management covering a period of 5 years.The key assumptions used in calculating the value in use in 2014 and 2013 were as follows: 2014 Other Alpek Sigma Nemak Alestra segments

Estimated gross margin 3.0% 7.0% 21.3% 67.0% 7.0%Growth rate 3.8% 5.0% 3.7% 1.2% 3.5%Discount rate 9.8% 9.3% 11.1% 10.6% 11.3%

2013 Other Alpek Sigma Nemak segments

Estimated gross margin 3.0% 7.3% 14.5% 6.4%Growth rate 3.8% 3.8% 1.5% 3.9%Discount rate 10.2% 9.5% 10.6% 11.5%

With regard to the calculation of the value in use of the operating segments, ALFA Management considers that a possible change in the key assumptions used, would not cause the carrying value of the operating segments to materially exceed their value in use.

Note 14 - Investments accounted for using the equity method and others

December 31, 2014 2013

Non-current portion of customers and other accountsreceivable (Note 8) Ps 904 Ps 212Financial assets available for sale 268 227Accounts receivable from related parties 17 -Other assets 686 110Restricted cash (Note 7) 198 153Other non-current financial assets 2,037 702Investment in associates (1) 943 5,660Joint arrangements 254 286Total other non-current assets Ps 3,270 Ps 6,648

(1) Since June 2014, the Company consolidates Campofrío; therefore, it no longer uses the equity method for this investment. See Note 2(a) for more information.

Financial assets available for saleThese assets are investments in shares of companies not listed on the market, representing less than 1% of their capital stock and equity investments in social clubs. No impairment loss was recognized at December 31, 2014.The movement of financial assets available for sale was as follows: 2014 2013

Balance at January 1 Ps 227 Ps 234Acquisitions (disposals) 41 (7)Balance at December 31 Ps 268 Ps 227

Financial assets available for sale are denominated in Mexican pesos.

85

Investments in associatesThe accumulated summarized financial information for associates of the group accounted for by the equity method, not considered material, is as follows: 2014 2013

Operating profit Ps (233) Ps (131)Other items of comprehensive income - -Comprehensive income (loss) (233) (131)Investment in associates at December 31 943 28

There are no contingent liabilities related to the investment of the group in associates.The Company has no commitments in relation with associates at December 31, 2014.

Joint ventureThe accumulated summarized financial information for associates of the group accounted for by the equity method, not considered material, is as follows: 2014 2013

Operating profit Ps (290) Ps (129)Other items of comprehensive income - -Comprehensive income (290) (129)Joint agreements (not material) at December 31 254 286

There are no contingent liabilities related to the investment of the group in joint agreements.The Company has no commitments with respect to joint agreement at December 31, 2014.

Note 15 – Subsidiaries with significant non-controlling interest

The non-controlling interest for the year ended December 31, 2014 and 2013 is integrated as follows: Non-controlling Non-controlling interest interest Non-controlling income for the period at December 31, ownership percentage 2014 2013 2014 2013

Alpek, S. A. B. de C. V. 18% Ps 657 Ps 689 Ps 8,542 Ps 7,173Campofrío (1) 42% 95 - 3,470 -Tenedora Nemak, S.A. de C.V. 7% 240 181 1,451 1,256Non-controlling interestof non-significant subsidiaries (84) (1) 318 299 Ps 908 Ps 869 Ps 13,781 Ps 8,728

(1) See Note 2.a

The summarized financial information at December 31, 2014 and 2013 and for the year then ended, corresponding to each subsidiary with a significant non-controlling interest is shown below: Campofrío Tenedora Food Group Nemak, S.A. de C.V. Alpek, S.A.B. de C.V. 2014 2014 2013 2014 2013

Statement of financial positionCurrent assets Ps 11,750 Ps 16,999 Ps 15,347 Ps 30,941 Ps 29,672Non-current assets 22,074 42,092 37,923 34,430 28,456Current liabilities 13,421 19,000 15,212 14,325 12,305Non-current liabilities 12,233 18,593 19,603 21,201 18,735Stockholders’ equity 8,170 21,498 18,455 29,845 27,088

Statement of incomeRevenues 17,572 61,665 56,299 86,072 90,061Net profit 223 3,517 2,615 1,314 1Comprehensive income for the year 276 - 3,173 2,841 1,509Comprehensive income attributable to non-controlling interest 118 - 4 513 644Dividends paid to non-controlling interest - - - - (1,093)

Cash flowsCash flows from operating activities 1,964 7,090 8,380 6,593 5,542Net cash used from investments activities 2,277 (5,246) (4,426) (4,417) (2,382)Net cash used from financing activities (904) (2,651) (2,887) (1,170) (5,045)Net increase in cash and cash equivalents 3,318 (807) 1,067 1,007 (1,885)

The information above does not include the elimination of intercompany balances and transactions.

86

Note 16 - Suppliers and other accounts payable

December 31, 2014 2013

Suppliers Ps 35,167 Ps 20,934Short-term employee benefits 1,980 914Advance payments from customers 1,378 1,578Taxes other than income tax 2,745 2,210Other accounts payable and accrued expenses 6,385 4,616 Ps 47,655 Ps 30,252

Note 17 - Debt

December 31, 2014 2013

Current:Bank loans (1) Ps 7,251 Ps 3,015Current portion of non-current debt 3,403 7,340Notes payable (1) 60 167Current debt Ps 10,714 Ps 10,522

Non-current:In dollars:Senior Notes Ps 46,627 Ps 30,793Secured bank loans 1,678 1,210Unsecured bank loans 19,821 13,885Finance leases 73 51Other 222 92In Mexican pesos:Unsecured stock certificates 5,228 6,844In euros:Senior Notes 9,085 -Unsecured bank loans 1,617 1,227Finance leases 147 24Other currencies:Unsecured bank loans 214 -Finance leases 180 146 84,892 54,272Less: current portion of non-current debt (3,403) (7,340)Non-current debt (2) Ps 81,489 Ps 46,932

(1) At December 31, 2014 and 2013, short-term bank loans and notes payable bore interest at an average rate of 2.68%, and 5.46%, respectively.

The fair value of bank loans and notes payable approximates their current book value, as the impact of discounting is not significant.(2) The carrying amounts, terms and conditions of non-current debt were as follows:

87

Costs of Balance at Balance at Maturity Contractual debt Interest December 31, December 31, date Interest Description Currency value issuance payable 2014 2013 DD/MM/AAAA rate

Directo TF USD 1,678 - - Ps 1,678 Ps 1,210 31/12/2015 3.25%Secured bank loans 1,678 1,210

Club Deal-Dls (Citi) USD 4,599 (40) 7 4,566 4,822 05/12/2018 1.73%Club Deal-Eur (Citi) EUR 1,028 (10) 1 1,019 1,227 05/12/2018 1.56%Bilateral USD 441 (2) 4 443 391 10/07/2016 2.62%Directo TF USD 2,796 (11) 19 2,804 - 10/07/2024 3.23%Bilateral USD 294 - 3 297 392 01/04/2016 1.76%Bilateral USD 294 - 2 296 - 03/04/2017 1.49%Bilateral USD 294 - 2 296 - 02/04/2018 1.43%Bilateral Libor +1.25 USD 2,718 - 3 2,721 3,944 13/11/2018 1.47%Bilateral USD 112 - - 112 98 22/10/2018 2.3%Directo Libor USD 736 - - 736 - 16/08/2019 1.93%Bilateral ARS 43 - 1 44 - 03/10/2016 25.83%Bilateral ARS 167 - 3 170 - 01/04/2020 19.0%ECA - Dls USD 19 (4) - 15 - 15/04/2024 2.62%ECA - Eur EUR 73 (16) - 57 - 15/04/2024 2.28%Bilateral USD 2 - - 2 - 30/09/2017 4.55%Bilateral USD 147 - - 147 - 17/12/2017 4.99%Bancario USD 7,386 - - 7,386 - 13/11/2018 1.49%Sigma EUR EUR 539 (2) 4 541 - 01/10/2015 2.96%Directo/ Libor+337.5 bp USD 581 - - - 581 17/10/2014 3.63%Bilateral Libor +1.30 USD 262 - - - 262 15/09/2014 1.59%Bilateral Libor +1.30 USD 458 - - - 458 15/09/2014 1.58%Bilateral Libor +1.30 USD 458 - - - 458 08/09/2014 1.57%Directo Libor +1.80 USD 794 - - - 794 01/04/2016 2.05%Libor +1.60 USD 286 - - - 286 31/01/2015 1.77%Directo Libor +1.60 USD 656 - - - 656 16/08/2016 1.84%Bilateral Libor +1.20 USD 392 - - - 392 17/06/2016 1.47%Others USD 24 - - - 24 15/06/2015 2.00%Directo/Libor +275bp USD 327 - - - 327 15/01/2017 2.93%Unsecured bank loans 21,652 15,112

Stock Certificate/ TIIE+20 bps MXN 1,000 - 2 - 1,002 08/12/2014 5.04%Stock Certificate/ TF MXN 1,000 - 48 1,048 1,047 12/07/2018 10.25%Stock Certificate/ TF MXN 635 - 3 - 638 08/12/2014 8.75%Stock Certificate/ UDIS MXN 654 - 16 670 644 12/07/2018 5.32%TIIE+280 bp MXN 3,500 - 10 3,510 3,513 10/11/2017 6.10%Unsecured stock certificates 5,228 6,844

Bono 144A/ TF USD 2,730 - - - 2,730 11/08/2014 11.75%Bono 144A/ TF USD 9,544 (75) 48 9,667 8,448 20/11/2022 4.50%Bono 144A/ TF USD 4,415 (38) 94 4,547 3,971 08/08/2023 5.38%Bono 144A/ TF USD 7,344 (75) 102 7,371 - 08/08/2024 5.25%Bono 144A/ TF USD 7,323 (75) 133 7,381 - 08/08/2044 6.88%Bono 144A/ TF USD 7,359 (126) 149 7,382 6,547 28/02/2023 5.50%Bono 144A/ TF USD 3,638 (24) 14 3,628 3,202 16/12/2019 6.88%Bono 144A/ TF USD 6,594 (27) 84 6,651 5,895 14/04/2018 5.63%Bono 144A/ TF USD 9,043 (78) 120 9,085 - 08/08/2016 8.25%Senior Notes 55,712 30,793

Others/ TF USD 222 - - 222 143Others 222 143

China Leasing RMB 180 180 138 28/02/2026 7.16%Others Finance leases USD 73 73 24 Several SeveralOthers Finance leases EUR 147 147 8 Several SeveralFinance leases 400 170

Total Ps 84,892 Ps 54,272

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At December 31, 2014, the annual maturities of non-current debt (excluding issuance debt costs) are as follows: 2019 2016 2017 2018 onwards Total

Bank loans and others Ps 3,817 Ps 5,619 Ps 9,098 Ps 3,133 Ps 21,667Senior Notes 9,043 - 6,594 39,623 55,260Stock certificates 1,575 1,750 1,654 - 4,979Finance leases 144 50 18 130 342 Ps 14,579 Ps 7,419 Ps 17,364 Ps 42,886 Ps 82,248

At December 31, 2013, the annual maturities of non-current debt are as follows: 2018 2015 2016 2017 onwards Total

Bank loans and others Ps 3,351 Ps 2,149 Ps 734 Ps 7,219 Ps 13,453Senior Notes - - - 28,018 28,018Stock certificates 175 1,575 1,750 1,628 5,128Finance leases 16 9 9 106 140 Ps 3,542 Ps 3,733 Ps 2,493 Ps 36,971 Ps 46,739

At December 31, 2014 and 2013, the Company has contractual credit lines unused for a total of US$835 and US$785, respectively.

Covenants:Loan contracts and debt agreements contain restrictions, primarily relating to compliance with financial ratios, incurring additional debt or making loans that require mortgaging assets, dividend payments and submission of financial information, which if not met or remedied within a specified period to the satisfaction of creditors may cause the debt to become payable immediately.Financial ratios to be fulfilled include the following:a) Interest coverage ratio: which is defined as EBITDA for the period of the last four complete quarters divided by financial expenses,

net or gross as appropriate, for the last four quarters, which shall not be less than 3.0 times.b) Leverage ratio: which is defined as consolidated debt at that date, being the gross debt or net debt appropriate, divided by

EBITDA for the period of the last four complete quarters, which shall not be more than 3.5 times.During 2014 and 2013, the financial ratios were calculated according to the formulas set out in the loan agreements.Currently, the company is in compliance with all obligations and covenants contained in the credit agreements of its subsidiaries; such obligations, among other conditions and subject to certain exceptions, require or limit the ability of the subsidiaries to:• Provide certain financial information;• Maintain books and records; • Maintain assets in appropriate conditions;• Comply with applicable laws, rules and regulations;• Incur additional indebtedness;• Pay dividends;• Grant liens on assets;• Enter into transactions with affiliates;• Perform a consolidation, merger or sale of assets, and• Carry out sale and lease-back operationsAt December 31, 2014 and the date of issuance of these financial statements, the Company and its subsidiaries complied satisfactorily with such covenants and restrictions.

Pledge assets:At December 31, 2014 Newpek is assets were pledged as collateral under a line of credit for an amount up to US$140, maturing on December 31, 2015 (as at December 31, 2014 US$112 had been used).

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Relevant debt transactions:2014a. On February 24, 2014, Alestra S. de R. L. de C.V. (subsidiary of ALFA) paid in advance the principal amount of the “Senior

Notes 144A/Reg. S” issued in 2009. The outstanding payment of the principal at that date amounted to US$ 200.b. In March 2014, ALFA issued a Senior Note in the international market under Rule 144A, Reg-S, the Senior Note amounted to

US$1,000 in two equal “segments”. The first shall be paid in 10 years and the second in 30 years and their interest rates are 5.25% and 6.875%, respectively. The Company capitalized costs of debt issuance of Ps 145. It was used for a partial debt payment, energy projects and general corporate uses.

c. On May 12, 2014, Sigma requested an additional amount from Bank of Tokyo-Mitsubishi UFJ, LTD (Broker Bank), in the amount of US$325. The loan bears monthly interest based on the LIBOR rate plus annual 1.25%, with four equal repayments in May 2017, May 2018 and November 2018, maturing on November 13, 2018. At December 31, 2014, the balance amounted to Ps 4,783.

d. With the acquisition of Campofrío, ALFA assumed certain obligations related to the debt it held with the company. These obligations amounted to Ps 9,043, which consist primarily of an issuance of convertible bonds in 2009 with a nominal amount of €500 at an interest rate of 8.250% maturing on October 31, 2016.

e. On December 17, 2007, Sigma subscribed Ps 1,000 and Ps 635, Sigma 07 and Sigma 07-2, respectively, in stock certificates maturing in 2014 at interest rates of monthly TIIE + 20 base points and fixed half-yearly of 8.75%, respectively, mainly to pay the debt in the short term. The UDIs are instruments denominated in Mexican pesos that automatically adjust the principal value of an obligation using the inflation rate officially published by Banco de México.

On December 8, 2014 the stock certificates of Sigma 07 y Sigma 07-2 were paid at maturity in the amount of Ps 1,000 and Ps 635, respectively.

2013a. In February 2013, Nemak issued a bond in the international market under standard 144A, Reg-S. The amount of the bond was

of US$500. The issued bond should be settled in 10 years and an interest rate of 5.50% (effective interest rate of 5.68%). The Company capitalized debt issuance costs for Ps 118. The proceeds were used for the partial payment of the bank debt of the “Senior Unsecured Syndicated Loan Agreement” effective at that date. This payment led to an advance amortization of issuance expenses amounting Ps 100.

b. On August 8, 2013, Alpek completed an issuance of Senior Notes for a nominal amount of US$300 with a single maturity of August 8, 2023. Interests of Senior Notes will be payable semi-annually at a 5.375% annual rate from February 8, 2014. The Senior Notes were issued through a private issuance under Rule 144A of the “Securities Act” of 1933 (“Rule 144A of the Securities Act of 1933”) of the United States of America and they are unconditionally guaranteed, in an unsubordinated manner, for the joint obligation of certain subsidiaries of the Company.

Additionally, the issuance of Senior Notes originated issuance costs and expenses in the amount of US$2. Issuance costs and expenses, including the placement discount of Senior Notes is presented net of debt and amortized together with the loan based on the effective rate method.

c. On September 26, 2013, Grupo Petrotemex, S.A. de C.V. (subsidiary of Alpek) settled in advanced the principal amount of “Senior Notes 144A/Reg. S” issued in 2009, the amount of principal pending payment at that date was US$120.

The proceeds of the issuance of Senior Notes were used mainly to make advance debt payments of certain subsidiaries of the Company.

d. In December 2013, Nemak concluded the refinancing of its bank debt, which was authorized by the Board of Directors. This process included the bank debt of the main current contracts of Tenedora Nemak with Banks: The Senior Unsecured Syndicated Loan Agreement, held in August 2011 and the Senior Unsecured Loan Agreement” in June 2012. This refinancing process involved expenses incurred by the company of Ps 51 that were recorded in the statement of financial position and will be amortized during the life of the loan.

e. On November 13, 2013, Sigma obtained a syndicated loan with the Bank of Tokyo-Mitsubishi UFJ, Ltd. as global coordinator and administrative agent together with a group of banks (the “Syndicated Loan”) for the amount of up to US$1,000 maturing on November 13, 2018, with four equal repayments in May 2017, November 2017, May 2018 and November 2018 (US$301.5 had been used as at December 31, 2013). Syndicated Loan interest will be payable monthly at LIBOR plus 1.250% of surtax. The proceeds of the syndicated loan are being used by the Company to complete the acquisition of Campofrío Food Group, SA (“Campofrío”).

This loan has no specific guarantees but there is joint and several liability and endorsement by certain subsidiaries.

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The finance lease liabilities are effectively secured as the rights to the leased asset which revert to the lessor in the event of default. December 31, 2014 2013

Obligation for financeleases - minimal payments, gross - Less than 1 year Ps 59 Ps 30 - More than 1 year and less than 5 years 212 132 - More than 5 year 129 -Total 400 162Future financial charges from finance leases - -Present value of finance less liabilities Ps 400 Ps 162

The present value of finance lease liabilities is analyzed as follows: December 31, 2014 2013

Less than 1 year Ps 59 Ps 30More than 1 year and less than 5 years 212 42More than 5 years 129 90 Ps 400 Ps 162

Note 18 – Income taxes

Deferred income taxThe analysis of the deferred tax asset and deferred tax liability is as follows: December 31, 2014 2013

Deferred tax asset: - To be recovered in more than 12 months Ps (9,571) Ps (11,087) - To be recovered within 12 months (1,102) (813) (10,673) (11,900)Deferred tax liability: - To be covered in more than 12 months 8,079 12,370 - To be covered within 12 months 3,177 1,853 11,256 14,223Deferred tax liabilities, net Ps 583 Ps 2,323

The gross movement in the deferred income tax account is as follows: 2014 2013

At January 1 Ps 2,323 Ps 2,311Exchange differences (122) (64)Credit to income statement (4,096) (339)Business acquisition 2,899 -Tax related to components of other comprehensive income (421) 415At December 31 Ps 583 Ps 2,323

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The composition of the deferred income tax assets and liabilities was as follows: (Asset) liability December 31, 2014 2013

Inventories Ps (50) Ps (22)Advance payments - (72)Intangible assets (470) (395)Property, plant and equipment (9,101) (8,443)Tax loss carryforwards - (2,249)Other temporary differences, net (1,052) (719)Deferred tax assets (10,673) (11,900)

Customers - 333Financial assets available for sale 2,635 -Net liability for employee retirement 902 567Valuation of derivative instruments 312 114Provisions 2,605 218Tax loss carryforwards 7,177 11,803Other temporary differences, net (2,375) 1,188Deferred tax liabilities 11,256 14,223Deferred tax liabilities, net Ps 583 Ps 2,323

Changes in deferred tax assets and liabilities during the year were as follows: (Charged) credited Balance at credited to other Balance at December 31, Business to income comprehensive December 31, 2013 acquisitions statement income 2014

Inventories Ps (22) Ps - Ps (28) Ps - Ps (50)Advance payments (72) - 72 - -Intangible assets (395) 297 (372) - (470)Property, plant and equipment (8,443) 2,590 (3,248) - (9,101)Tax loss carryforwards (2,249) - 2,249 - -Other temporary differences, net (719) 765 (1,098) - (1,052)Deferred tax assets (11,900) 3,652 (2,425) - (10,673)

Customers 333 - (333) - -Financial assets available for sale - - 2,635 - 2,635Net liability for employee retirement 567 (59) 496 (102) 902Valuation of derivative instruments 114 (463) 980 (319) 312Provisions 218 (231) 2,618 - 2,605Tax loss carryforwards 11,803 - (4,626) - 7,177Other temporary differences, net 1,188 - (3,563) - (2,375)Deferred tax liabilities 14,223 (753) (1,793) (421) 11,256Deferred tax liabilities, net Ps 2,323 Ps 2,899 Ps (4,218) Ps (421) Ps 583

(Charged) credited Balance at credited to other Balance at December 31, Business to income comprehensive December 31, 2012 acquisitions statement income 2013

Inventories Ps (83) Ps - Ps 61 Ps - Ps (22)Advance payments (96) - 24 - (72)Intangible assets (110) - (285) - (395)Property, plant and equipment (7,201) - (1,242) - (8,443)Tax loss carryforwards (2,588) - 339 - (2,249)Other temporary differences, net (617) - (102) - (719)Deferred tax assets (10,695) - (1,205) - (11,900)Customers 282 - 51 - 333Net liability for employee retirement 753 - 129 (315) 567Valuation of derivative instruments 248 - (34) (100) 114Provisions 230 - (12) - 218Tax loss carryforwards 10,568 - 1,235 - 11,803Other temporary differences, net 925 - 263 - 1,188Deferred tax liabilities 13,006 - 1,632 (415) 14,223Deferred tax liabilities, net Ps 2,311 Ps - Ps 427 Ps (415) Ps 2,323

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Tax loss carry forwards are recognized as a deferred tax asset to the extent that realization of the related tax benefit through future taxable profits is probable. Tax losses amounted to Ps 10,211 in 2014 and Ps 7,497 in 2013.Tax losses at December 31, 2014 and 2013 expire in the following years: Year of Year of loss 2014 2013 expiration

2008 and prior Ps 4,974 Ps 4,781 2018 2009 297 285 2019 2010 162 155 2020 2011 105 101 2021 2012 1,018 970 2022 2013 1,268 1,205 2023 2014 2,387 - 2024 Ps 10,211 Ps 7,497

New Mexican Income Tax LawOn December 11, 2013 the decree for the new Income Tax Law was published (new LISR) becoming effective on January 1, 2014, repealing the LISR published as of January 1, 2002 (former LISR). The new LISR maintains the essence of the former LISR; however, it makes significant amendments among which the most important are:i. Limiting deductions in contributions to pension and exempt salary funds, automobile leases, restaurant consumption and social

security fees; it also eliminates the immediate deduction in fixed assets.ii. Amending the mechanics to accumulate revenues derived from the term alienation and generalizing the procedure to determine

the gain in alienation of shares.iii. Amending the procedure to determine the taxable basis for the Employees’ Profit Sharing (PTU Spanish acronym), establishing the

mechanics to determine the initial balance of the capital contribution account (CUCA Spanish acronym) and the Net Tax Profit Account (CUFIN Spanish acronym) and establishing new mechanics for the recovery of Asset Tax (IA Spanish acronym)

iv. Establishing an ISR rate applicable for 2014 and the following years of 30%. In contrast to the LISR above that established a 30%, 29% and 28% rate for 2013, 2014 and 2015, respectively.

v. The tax provisions for tax consolidation regime purposes of 2014 are reformed, added and revoked.The Company has reviewed and adjusted the deferred tax balance at December 31, 2013, considering in the determination of temporary differences, the application of these new provisions. However, the effects in deduction limitations and others indicated previously will be applied from 2014 and will mainly affect the tax incurred as of that year.

Income tax payableThe income tax payable is as follows: December 31, 2014 2013

Income tax incurred Ps 358 Ps 130Income tax from tax consolidation (regime until December 31, 2014) 3,979 4,136Income tax from optional regime for groups of companies in Mexico 736 -Income tax payable Ps 5,073 Ps 4,266Current portion Ps 951 Ps 481Non-current portion 4,122 3,785Income tax payable Ps 5,073 Ps 4,266

Income tax under tax consolidation regime in MexicoIn 2013, the Company determined consolidated taxable income of Ps 4,351. The consolidated tax result differs from the accounting profit principally in respect of items which are taxed or reduced in different periods for accounting and tax purposes, due to the recognition of the effects of the inflation for tax purposes, as well as due to items only affecting either the accounting or tax result.ALFA incurred consolidated income tax up to 2013 with its Mexican subsidiaries. Since the effective Income Tax Law effective up to December 31, 2013 was revoked, the tax consolidation regime was eliminated; therefore, ALFA is obliged to make a deferred tax payment determined at that date during the following ten years as from 2014, as shown below.In accordance with paragraph d) of section XVIII of the ninth transitory article of the 2014 Law, and provided that the Company at December 31, 2013 was acting as the controlling company and was subject, at that date, to the payment system contained in section VI of the fourth article of the transitory provisions of the Income Tax Law published in the federal official gazette on December 7, 2009, or article 70-A of the 2013 Income Tax Law that was revoked, shall continue paying the tax consolidation deferred tax in fiscal years 2007 and prior years in conformity with the abovementioned provisions, until payment is concluded.

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Income tax from deferred tax consolidation at December 31, 2014 and 2013 amounts to Ps 3,979 and Ps 4,136, respectively and will be paid off in installments in accordance with the table shown below: Year of payment 2019 2015 2016 2017 2018 onwards Total

Tax losses Ps 520 Ps 646 Ps 606 Ps 545 Ps 1,444 Ps 3,761Dividends distributed by the controlled companies that do not come from CUFIN and the reinvested CUFIN 73 57 44 43 1 218Total Ps 593 Ps 703 Ps 650 Ps 588 Ps 1,445 Ps 3,979

Optional regime for groups of companies in Mexico (incorporation regime)Derived from the elimination of the tax consolidation regime in Mexico, the Company chose to incorporate to the new optional regime for groups of companies as of 2014. This regime consists in grouping companies with specific characteristics, which are able to defer part of the income tax payable in three years in March 2018. The deferral percentage is calculated using a factor determined in accordance to the amount of tax profit and losses in 2014.

Note 19 - Provisions

Restructuring Indemnities and Environmental for dismissal Disputes demolition (1) (2) remediation (2) and others (2) Total

At December 31, 2012 Ps 716 Ps - Ps - Ps - Ps 716Additions 67 487 372 198 1,124Exchange effects - 7 5 10 22Payments (291) (78) - (117) (486)At December 31, 2013 492 416 377 91 1,376Business acquisition (1) 29 696 - 55 780Additions - - - 370 370Exchange effects - - - 96 96Payments (72) (77) (17) (296) (462)At December 31, 2014 Ps 449 Ps 1,035 Ps 360 Ps 316 Ps 2,160

2014 2013

Short-term provisions Ps 1,146 Ps 833Long-term provisions 1,014 543At December 31, Ps 2,160 Ps 1,376

(1) This provision comes from Campofrío and its strategic redefinition process to obtain, among others, efficiencies and a higher level of specialization in the production and logistics centers, as well as strengthening synergies.

(2) Corresponds to the closing of the cape fear plant, as mentioned in Note 2.o.

Note 20 - Other liabilities

December 31, 2014 2013

Share-based employee benefits (Note 24) Ps 622 Ps 701Dividends payable 58 65Accounts payable – affiliates (Note 31) 629 267Total other liabilities Ps 1,309 Ps 1,033

Current portion Ps 889 Ps 534Non-current portion 420 499Total other liabilities Ps 1,309 Ps 1,033

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Note 21 - Employee benefits

The valuation of employee benefits for retirement plans (covering approximately 80% of workers in 2014 and in 2013) and is based primarily on their years of service, current age and estimated salary at retirement date.The principal subsidiaries of the Company have established funds for the payment of retirement benefits through irrevocable trusts. The employee benefit obligations recognized in the statement of financial position, by country, are shown below: December 31,Country 2014 2013

Mexico Ps 1,079 Ps 801United States 1,009 644Others 918 446Total Ps 3,006 Ps 1,891

Following is a summary of the main financial information of such employee benefits: December 31, 2014 2013

Liabilities in the balance sheet for: Pension benefits Ps 2,365 Ps 1,229 Post-employment medical benefits 641 662Liabilities in the balance sheet Ps 3,006 Ps 1,891

Charge in the income statements for: Pension benefits Ps (261) Ps (265) Post-employment medical benefits (37) (54) (298) (319)

Actuarial losses recognized in the statement of other comprehensive income for the period Ps (340) Ps 1,049

Cumulative actuarial losses recognized other comprehensive income Ps 155 Ps 495

Pension benefitsThe Company operates defined benefit pension plans based on employees’ pensionable remuneration and length of service. Most plans are externally funded. Plan assets are held in trusts, foundations or similar entities, governed by local regulations and practice in each country, as is the nature of the relationship between the Company and the respective trustees (or equivalent).Amounts recognized in the balance sheet are determined as follows: December 31, 2014 2013

Present value of defined benefit obligations Ps 7,926 Ps 5,371Fair value of plan assets (5,561) (4,142)Present value of unfunded obligations 2,365 1,229Past service cost not recognized - -Liabilities in the balance sheet Ps 2,365 Ps 1,229

The movement in the defined benefit obligation during the year was as follows: 2014 2013

At January 1 Ps 5,371 Ps 5,920Current service cost 198 215Interest cost 306 251Employee contributions 1 1Remeasurements: Demographic actuarial losses/(gains) 629 (350) Financial actuarial losses/(gains) - (191)Exchange differences 623 35Benefits paid (1) (444) (457)Liabilities acquired in business combinations 1,260 -Reductions (12) (35)Settlements (6) (18)At December 31 Ps 7,926 Ps 5,371

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The movement in the fair value of plan assets for the year was as follows: 2014 2013

At January 1 Ps (4,142) Ps (3,878)Expected return on plan assets (195) (178)Remeasurements - expected return on plan assets,excluding interest income (246) (327)Exchange differences (265) (17)Employer contributions (118) (62)Employee contributions (1) (1)Benefits paid (1) 295 308Liabilities acquired in business combinations (889) 13At December 31 Ps (5,561) Ps (4,142)

(1) With respect to the closing of the Cape Fear plant, the Company incurred in losses from termination and a settlement agreement with the trustees, effective as at October 10, 2013 for a total of Ps 107, settling all retirement benefit plan obligations in relation with the site’s employees, which resulted in an amendment to plan assets.

Amounts recorded in the statement of income are as follows: 2014 2013

Current service cost Ps (198) Ps (215)Financial revenues (costs), net (60) (73)Loss from reduction (3) 23Total included in personal costs Ps (261) Ps (265)

The principal actuarial assumptions were as follows: December 31, 2014 2013

Discount rate MX 6.75% MX 6.75% US 3.75% US 4.65%Inflation rate 4.25% 4.25%Salary increase rate 5.25% 5.25%Future salary increase 4.25% 4.25%Medical inflation rate 7.50% 7.50%

The average life of defined benefit obligations is 13 and 14 years at December 31, 2014 and 2013, respectively.The sensitivity analysis of the main assumptions for defined benefit obligations were as follows: Effect in defined benefit obligations Change in Increase in Decrease in assumptions assumptions assumptions

Discount rates +1% Increases by Ps 192 Decreases by Ps 226

Pension benefit assetsPlan assets are comprised as follows: December 31, 2014 2013

Equity instruments Ps 3,233 Ps 1,911Short and long-term securities 2,328 2,231

Post-employment medical benefitsThe Company operates post-employment medical benefits schemes mainly in Mexico and the United States. The method of accounting, assumptions and the frequency of valuations are similar to those used for defined benefit pension schemes. Most of these plans are not being funded.Amounts recognized in the balance sheet are determined as follows: December 31, 2014 2013

Present value of defined benefit obligations Ps 644 Ps 666Fair value of plan assets (4) (4)Deficit in funded plans 640 662Present value of unfunded obligations - -Liabilities in the balance sheet Ps 640 Ps 662

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The movements of defined benefit obligations are as follows: 2014 2013

At January 1 Ps 666 Ps 770Current service cost 14 19Interest cost 36 35Employee contributions 9 8 Demographic actuarial losses/(gains) (52) (97) Financial actuarial losses/(gains) - (42)Exchange differences 28 -Reductions (13) 3Benefits paid (44) (30)At December 31 Ps 644 Ps 666

The movement in the fair value of plan assets for the year was as follows: 2014 2013

At January 1 Ps (4) Ps (4)Expected return on plan assets without interest income - -Benefits paid - -At December 31 Ps (4) Ps (4)

Amounts recorded in the statement of income are as follows: 2014 2013

Current service cost Ps (14) Ps (19)Interest cost (36) (35)Curtailment gain 13 -Total included in personal costs Ps (37) Ps (54)

The sensitivity analysis of the main assumptions for defined benefit obligations were as follows: Effect in defined benefit obligations Change in Increase in Decrease in assumptions assumptions assumptions

Medical inflation rate +1% Increases by Ps 56 Decreases by Ps 72

Note 22 - Stockholders’ equity

At December 31, 2014, the capital stock is variable, with a fixed minimum without withdrawal rights of Ps 207, represented by 5,200,000,000 “Class I” Series “A” shares, without par value, fully subscribed and paid. The variable capital entitled to withdrawal will be represented, if issued, by registered “Class II” Series “A” shares without par value.During 2014 and 2013 the Company repurchased 8,000,000 and 3,500,000, shares respectively, for a total of Ps 258 and Ps 99, in connection with a share repurchase program that was approved by the shareholders of the Company and carried out at the discretion of the Administration. At December 31, 2014 and 2013, the Company held 65,500,000 and 57,500,000 treasury shares and the market value of the share was 32.94 and 36.62 pesos, respectively.The profit for the period is subject to the legal provision requiring at least 5% of the profit for each period to be set aside to increase the legal reserve until it reaches an amount equivalent to 20% of the capital stock. At December 31, 2014 and 2013, the legal reserve amounted to Ps 60, which is included in retained earnings.In October 2013 the Chamber of Senators and Deputies approved the issuance of a new Income Tax Law becoming effective on January 1, 2014. Among other aspects, this law establishes a 10% tax on income generated as of 2014 on dividends paid to foreign residents and Mexican individuals when these correspond to tax profits generated as of 2014. It also establishes that for fiscal years 2001 to 2013, the net tax profit will be determined as established in the Income Tax Law effective in the corresponding fiscal year.Dividends paid are not subject to income tax if paid from the Net Tax Profit Account (CUFIN). Any dividends paid in excess of this account will cause a tax equivalent to 42.86%if they are paid in 2014. This tax is payable by the Company and may be credited against its income tax in the same year or the following two years or, if applicable, against the flat tax of the period. Dividends paid from profits which have previously paid income tax are not subject to tax withholding or to any additional tax payment. At December 31, 2014, the tax value of the CUFIN and tax value of the Capital Contribution Account (CUCA) amounted to Ps 26,714 and Ps 34,953 respectively.

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In the event of a capital reduction, the Income Tax Law provides that any excess of stockholders’ equity over adjusted capital contribution will receive the same tax treatment as dividends.The movements in cumulative other comprehensive income for 2014 and 2013 are presented below: Effect of Effect from cash flow foreign hedge currency derivative translation instruments Total

At December 31, 2012 Ps 221 Ps (129) Ps 92Gains (losses) on fair value - 334 334Tax on gain (loss) on fair value - (100) (100)Gains (losses) on translation of foreign entities 456 - 456At December 31, 2013 677 105 782Gains (losses) on fair value - (1,063) (1,063)Tax on gain (loss) on fair value - 319 319Gains (losses) on translation of foreign entities 3,679 - 3,679At December 31, 2014 Ps 4,356 Ps (639) Ps 3,717

Foreign currency translationThe foreign exchange differences arising from the translation of financial statements of foreign subsidiaries are recorded.Effect of derivative financial instrumentsThe effect of derivative financial instruments contracted as cash flow hedges contains the effective portion of cash flow hedges in force at the reporting date.The directors and executive officers of the Company do not own more than 1% of its capital. Furthermore, no shareholder owns more than 10% of its capital, or has significant influence or control or has power to govern the company.

Note 23 - Foreign currency position

At March 13, 2015, last date of financial activity before of the issuance of these financial statements, the exchange rate was 15.40 Mexican pesos per dollar.The figures below are expressed in millions of dollars, since this is the prevailing foreign currency for the Company.At December 31, 2014 and 2013 had the following assets and liabilities in foreign currencies: December 31, 2014 Dollars (USD) Other currencies

Total Mexican Mexican Mexican USD pesos USD pesos pesos

Monetary assets Ps 3,746 Ps 55,137 Ps 548 Ps 8,069 Ps 63,206LiabilitiesCurrent (2,254) (33,180) (222) (3,273) (36,453)Non-current (5,159) (75,936) (96) (1,411) (77,347)Monetary position in foreign currencies Ps (3,667) Ps (53,979) Ps 230 Ps 3,385 Ps (50,594)

December 31, 2013 Dollars (USD) Other currencies

Total Mexican Mexican Mexican USD pesos USD pesos pesos

Monetary assets Ps 2,021 Ps 26,427 Ps 533 Ps 6,972 Ps 33,399LiabilitiesCurrent (1,234) (16,132) (573) (7,489) (23,621)Non-current (3,057) (39,977) (94) (1,228) (41,205)Monetary position in foreign currencies Ps (2,270) Ps (29,682) Ps (134) Ps (1,745) Ps (31,427)

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Note 24 - Share-based payments

ALFA has a compensation scheme referenced to the value of its own shares for senior executives of ALFA and its subsidiaries. According to the terms of the plan, eligible executives will receive a cash payment conditional on the achievement of certain quantitative and qualitative metrics based on the following financial measures:• Improved share price• Improvement in net income• Permanence of the executives in the CompanyThe program consists of determining a number of shares on which the executives shall be based. The bonus will be paid in cash over the next five years, i.e. 20% each year at the average price of the share at the end of each year. The average price of the share in 2014 and 2013 was 37.32 and 38.86 pesos, respectively.At December 31, 2014 and 2013 the liability for share-based payments amounted to Ps 622 and Ps 702, respectively.The short-term and long-term liability was analyzed as follows: December 31, 2014 2013

Short-term Ps 202 Ps 203Long-term 420 499Total carrying value Ps 622 Ps 702

Note 25 - Expenses classified by their nature

The total cost of sales and selling and administrative expenses, classified by the nature of the expense, were as follows: 2014 2013

Raw materials Ps (137,552) Ps (121,374)Outsourced production (6,194) (5,357)Employee benefit expenses (Note 29) (28,328) (24,459)Maintenance (6,791) (5,658)Depreciation and amortization (9,607) (7,932)Freight charges (5,131) (4,309)Advertising expenses (1,591) (1,261)Lease expenses (1,252) (947)Consumption of energy and fuel (8,106) (6,775)Travel expenses (656) (617)Technical assistance, professional fees and administrative services (3,411) (4,143)Other (3,508) (4,328)Total Ps (212,127) Ps (187,160)

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Note 26 - Other expenses, net

2014 2013

Reimbursement from insurance (1) Ps 1,766 Ps -Refinancing expenses 3 19Gain from sale of assets 153 1(Loss) gain from sale of shares (1) 326Valuation of derivative financial transactions - 41Other 325 207Other income 2,246 594Damage to property, plant, equipment, inventory and others (1) (1,858) -Expenses from acquisition projects (55) (29)Valuation of derivative financial transactions (15) -Reorganization expenses - (5)Loss from impairment of assets (191) (294)Loss on sale of scrap - (56)Other expenses (2,119) (384)Total other income, net Ps 127 Ps 210

(1) In November 2014 there was a fire in one of the production plants of the Sigma segment, specifically in the Campofrío plant, located in the city of Burgos, Spain (“Accident”). At December 31, 2014 the losses recorded as a consequence of the accident amounted to Ps 1,858, affecting property, plant and equipment, inventory and other costs.

These assets are covered by an insurance policy. Based on the analysis and confirmations made by the Company’s management, it has concluded that such policy covers material damages, loss of benefits resulting from the reduction of revenues and additional costs that the Company may incur in to recover sales for a period of twelve months as of the date of the accident. At December 31, 2014, the Company has recorded an income from reimbursement of accident amounting Ps 1,766, of which Ps 1,275 were collected in cash.

At the date of issuance of these consolidated financial statements, 90% of the lost production capacity has been assigned to other plants, considering that at the beginning of 2015 a production volume similar to the one before the accident may be reached. Additionally, special commercial, promotion and communication measures will be implemented in order to normalize operations and minimize the future effects for the Company due to the Accident.

Note 27 - Non-recurring items

2014 2013

Charges of property, plant and equipment from operation restructuring (1) Ps - Ps (2,421)Total non-recurring items Ps - Ps (2,421)

(1) These expenses correspond to the closing of the Cape Fear plant as mentioned in Note 2.o.

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Note 28 - Financial cost, net

2014 2013

Financial income: - Interest income on short-term bank deposits Ps 176 Ps 206 - Other finance income 46 64Financial income, excluding foreign exchange loss 222 270Gain on foreign exchange 7,455 16Total financial income Ps 7,677 Ps 286

Financial expenses: - Interest expense on bank loans Ps (1,691) Ps (1,775) - Interest expense on exchange - traded debt certificates (2,208) (1,609) - Interest expense on sale of receivables (159) (172) - Interest cost on benefit to employees (89) (105) - Interest expense of suppliers (44) (5) - Interest rate swaps: fair value hedging (382) (107) - Other financial expenses (474) (290)Finance costs (5,047) (4,063)Less: amounts capitalized on qualifying fixed assets 90 85Interest expense, excluding foreign exchange loss (4,957) (3,978)Foreign exchange loss (12,676) (365)Total finance cost Ps (17,633) Ps (4,343)Impairment of financial asset available for sale Ps (8,665) -Financing cost, net Ps (18,621) Ps (4,057)

Note 29 - Employee benefit expenses

2014 2013

Salaries, wages and benefits Ps 24,620 Ps 21,107Contributions to social security 2,852 2,604Employees’ benefits 643 570Other contributions 213 178Total Ps 28,328 Ps 24,459

Note 30 - Income tax for the year

2014 2013

Tax currently payable:Income tax on profits of the period Ps (3,358) Ps (3,202)Adjustment for previous years (181) (383)Total tax currently payable (3,539) (3,585)

Deferred tax:Origination and reversal of temporary differences 4,096 339Total deferred tax 4,096 339Effect of tax consolidation on income tax - 54Income taxes credited (charged) to income Ps 557 Ps (3,192)

101

The reconciliation between the statutory and effective rates of income tax was as follows: 2014 2013

(Loss) profit before taxes Ps (1,686) Ps 9,987Share in losses of associates recognized through equity method 291 41Income before equity in associates (1,395) 10,028Statutory rate 30% 30%

Tax at statutory rate 419 (3,008)(Add) deduct tax effect of:Differences in calculating interest deductions 875 338Other permanent differences, net (556) (139)Provision based on operations of the year 738 (2,809)Recalculation of back taxes and other (181) (383)Total provision for income taxes credited (charged) to income Ps 557 Ps (3,192)Effective rate 39% 32%

The tax charge/(credit) relating to components of other comprehensive income was as follows: 2014 2013

Tax Tax Before charged After Before charged After tax (credited) tax tax (credited) tax

Effect of derivative financial instruments hired as cash flow hedges Ps (1,063) Ps 319 Ps (744) Ps 334 Ps (100) Ps 234Actuarial losses on labor liabilities (340) 102 (238) 1,049 (315) 734Translation effect of foreign entities 3,679 - 3,679 456 - 456Other items of comprehensive income Ps 2,276 Ps 421 Ps 2,697 Ps 1,839 Ps (415) Ps 1,424Deferred taxes Ps 421 Ps (415)

Note 31 - Related party transactions

Transactions with related parties during the years ended December 31, 2014 and 2013, which were carried out in terms similar to those of arm’s-length transactions with independent third parties, were as follows: 2014 2013

Sale of goods and services:Affiliates Ps 22,312 Ps 20,478

Purchase of goods and services:Affiliates Ps 17,228 Ps 16,014

For the year ended December 31, 2014, wages and benefits received by top officials of the company were Ps 754 (Ps 741 in 2013), an amount comprising base salary and legal benefits, supplemented by a variable compensation program primarily based on the results of the Company and the market value of its shares.At December 31, 2014 and 2013, the balances with related parties were as follows: December 31, Nature of the transaction 2014 2013

Receivables:Affiliates Sales of products Ps 1,302 Ps 1,355Shareholders with significant influence over subsidiaries Service rendering Ps 23 Ps 185

Payable:Affiliates Purchase of raw materials Ps 629 Ps 266

Balances payable to related parties at December 31, 2014 are payable in 2015 and do not bear interest.The Company and its subsidiaries report that they had no significant transactions with related parties or conflicts of interest to disclose.

102

Note 32 - Segment reporting

Segment information is presented consistently with the internal reporting provided to the chief executive who is the highest authority in operational decision-making, resource allocation and assessment of operating segment performance.An operating segment is defined as a component of an entity on which separate financial information is regularly being evaluated.The company manages and evaluates its operation through 5 basic operating segments which are:• Alpek: This segment operates in the petrochemical and synthetic fibers industry, and its revenues are derived from sales of its main

products: polyester, plastics and chemicals.• Sigma: This segment operates in the refrigerated food sector and its revenues are derived from sales of its main products: deli

meats, dairy and other processed foods.• Nemak: This segment operates in the automotive industry and its revenues are derived from sales of its main product: aluminum

engine heads and blocks.• Alestra: This segment operates in the telecommunications sector and its revenues are derived from the provision of data transmission

services, Internet and long distance phone service.• Newpek: This segment is dedicated to the exploration and exploitation of natural gas and oil fields.• Other segments: includes all other companies operating in business services and others which are non-reportable segments

and do not meet the quantitative limits in the years presented and, therefore, are presented in aggregate, as well as being substantially eliminated in consolidation.

These operating segments are managed and controlled independently because the products and the markets they serve are different. Their activities are performed through various subsidiaries.The operations between operating segments are performed at market value and the accounting policies with which the financial information by segments is prepared, are consistent with those described in Note 3.The Company evaluates the performance of each of the operating segments based on income before financial results, income taxes, depreciation and amortization (“EBITDA”), considering that this indicator is a good metric to evaluate operating performance and the ability to meet principal and interest obligations with respect to indebtedness, and the ability to fund capital expenditures and working capital requirements. Nevertheless, EBITDA is not a measure of financial performance under IFRS and should not be considered as an alternative to net income as a measure of operating performance or cash flows as a measure of liquidity.The Company has defined the ADJUSTED EBITDA as the result of adding to the operating profit depreciation and amortization and asset impairment.Following is the condensed financial information of these operating segments:

Year ended December 31, 2014 Other segments and Alpek Sigma Nemak Alestra Newpek eliminations Total

Statement of incomeRevenue by segment Ps 86,072 Ps 71,465 Ps 61,665 Ps 5,519 Ps 2,259 Ps 4,476 Ps 231,456Intersegment revenue (267) - - (129) - (1,834) (2,230)Revenue from external customers Ps 85,805 Ps 71,465 Ps 61,665 Ps 5,390 Ps 2,259 Ps 2,642 Ps 229,226

Adjusted EBITDA Ps 5,710 Ps 8,495 Ps 9,479 Ps 2,260 Ps 1,540 Ps (368) Ps 27,116Depreciation and amortization (1,839) (1,931) (3,747) (877) (1,092) (121) (9,607)Asset impairment (132) (128) (12) (9) (2) - (283)Operating profit 3,739 6,436 5,720 1,374 446 (489) 17,226Finance cost, net (1,497) (4,623) (700) (717) (45) (11,039) (18,621)Share of losses of associates (45) (249) 39 (1) - (35) (291)Profit or loss before tax Ps 2,197 Ps 1,564 Ps 5,059 Ps 656 Ps 401 Ps (11,563) Ps (1,686)

Statement of financial positionInvestment in associates Ps 150 Ps 695 Ps 218 Ps 8 Ps - Ps 126 Ps 1,197Other assets 65,222 70,794 58,873 9,241 5,223 22,330 231,683Total assets 65,372 71,489 59,091 9,249 5,223 22,456 232,880Total liabilities 35,527 55,547 37,593 5,721 2,851 26,482 163,721Net assets Ps 29,845 Ps 15,942 Ps 21,498 Ps 3,528 Ps 2,372 Ps (4,026) Ps 69,159

Capital expenditures (Capex) Ps (4,191) Ps (1,871) Ps (5,254) Ps (1,310) Ps (1,771) Ps (33) Ps (14,430)

103

Year ended December 31, 2013 Other segments and Alpek Sigma Nemak Alestra Newpek eliminations Total

Statement of incomeRevenue by segment Ps 90,061 Ps 48,989 Ps 56,299 Ps 5,067 Ps 1,706 Ps 3,322 Ps 205,444Intersegment revenue (243) - - (113) - (1,632) (1,988)Revenue from external customers Ps 89,818 Ps 48,989 Ps 56,299 Ps 4,954 Ps 1,706 Ps 1,690 Ps 203,456

Adjusted EBITDA Ps 7,344 Ps 6,710 Ps 7,823 Ps 2,166 Ps 1,166 Ps (674) Ps 24,535Depreciation and amortization (2,025) (1,353) (3,282) (828) (330) (114) (7,932)Asset impairment (2,394) (80) (24) (9) (11) - (2,518)Operating profit 2,925 5,277 4,517 1,329 825 (788) 14,085Finance cost, net (1,172) (1,039) (1,456) (309) (18) (63) (4,057)Share of losses of associates (30) (4) 19 - 8 (34) (41)Profit or loss before tax Ps 1,723 Ps 4,234 Ps 3,080 Ps 1,020 Ps 815 Ps (885) Ps 9,987

Statement of financial positionInvestment in associates Ps 41 Ps 5,632 Ps 174 Ps 10 Ps - Ps 89 Ps 5,946Other assets 58,086 32,753 52,684 8,332 3,955 3,634 159,444Total assets 58,127 38,385 52,858 8,342 3,955 3,723 165,390Total liabilities 31,040 26,002 34,432 4,649 2,133 1,966 100,221Net assets Ps 27,087 Ps 12,383 Ps 18,426 Ps 3,693 Ps 1,822 Ps 1,757 Ps 65,169

Capital expenditures (Capex) Ps (2,276) Ps (1,522) Ps (4,336) Ps (1,538) Ps (2,473) Ps (53) Ps (12,198)

Revenue to external customers, as well as property, plant and equipment, goodwill and intangible assets by geographic area are shown below. The sale to external customers was classified based on their origin:

Year ended December 31, 2014 Revenue to Property, external plant, and Intangible customers equipment Goodwill assets

Mexico Ps 92,301 Ps 52,830 Ps 4,717 Ps 6,656United States 85,153 12,464 247 9,365Canada 1,629 989 - 46Central and South America 10,708 3,066 - 160Other countries 39,435 24,559 9,370 9,891Total Ps 229,226 Ps 93,908 Ps 14,334 Ps 26,118

Year ended December 31, 2013 Revenue to Property, external plant and Intangible customers equipment Goodwill assets

Mexico Ps 78,302 Ps 48,553 Ps 3,776 Ps 5,819United States 57,585 11,231 219 5,345Canada 1,632 969 - 47Central and South America 13,563 2,896 - 27Other countries 52,374 10,325 7,336 1,337Total Ps 203,456 Ps 73,974 Ps 11,331 Ps 12,575

104

The revenue to external customers by product or service was as follows: 2014 2013

AlpekPolyester-Pet/PTA Ps 62,961 Ps 68,636Plastics and chemicals 22,844 21,425Total 85,805 90,061

SigmaProcessed meats 50,460 31,672Dairy 17,105 14,270Other refrigerated products 3,900 3,047Total 71,465 48,989

NemakAluminum automotive products 61,665 56,299Total 61,665 56,299

AlestraBusiness segment 4,991 4,825Other segments 399 242Total 5,390 5,067

NewpekHydrocarbons 2,259 1,706Total 2,259 1,706

Other segments 2,642 1,334Total Ps 229,226 Ps 203,456

Energy reformIn December 2013, the Congress of the Union of Mexico approved the constitutional reform allowing the private investment in certain areas of the energy sector for the first time in 76 years, creating a more competitive energy sector, especially in the industries of the generation of petroleum, gas and electricity (the Energy Reform). In August 2014 the legislation relative to the Energy Reform was approved. The first bids for new petroleum exploration and production contracts, known as the First Round, with the private sector, are expected to start during the first quarter of 2015 and to be completed in the fourth quarter of 2015.The company is assessing the opportunities created by the Energy Reform and figuring out how to benefit from its experience in the exploration and production operations.

Note 33 - Contingencies and commitments

At December 31, 2014, the Company had the following contingencies:a. In the normal course of its business, the Company is involved in disputes and litigations. While the results of the disputes cannot

be predicted, the Company does not believe that there are current or threatened actions, claims or legal proceedings against or affecting the Company which, if determined adversely to it, would damage significantly its individual or overall results of operations or financial position.

At December 31, 2014, the Company and its subsidiaries had the following commitments:a. During 2013, the Company through its subsidiary Grupo Petrotemex, signed an agreement with M&G for the rights to supply

the plant for 400 thousand tons of PET (manufactured with 336 thousand tons of PTA) a year, by which it is obliged to pay an amount of Ps 4,577 (US$350) during the construction of the plant, subject to compliance with pre-established progress. At December 31, 2014 Alpek had made a payment of Ps 2,926 (US$199), presented within goodwill and intangible assets, net. See Note 13.

b. At December 31, 2014 and 2013, the subsidiaries had entered into several agreements with suppliers and customers for the purchase of raw materials used in the production and sale of finished products, respectively. These agreements have a maturity of between one and five years, and generally comprise price adjustment clauses.

c. In September 2007, a subsidiary renewed a contract with PEMEX Refinacion, for the supply of raw materials maturing in December 2018.

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Note 34 - Subsequent events

In preparing the financial statements the Company has evaluated the events and transactions for recognition or disclosure subsequent to December 31, 2014 and through March 17, 2015 (date of issuance of the financial statements), and has identified the following subsequent events:a. The investment in shares of PRE that the Company recorded as assets available for sale during 2015 has been decreasing in

market value, which in accordance with IFRS and the Company’s accounting policy would have to be recorded as an additional impairment. The reduction in value of the market price since the end of December 2014 and up to the date of issuance of these financial statements would be 65%, which would represent an amount of Ps 2,480, net of taxes.

b. During March 2015, the subsidiary Campofrío Food Group, SA, belonging to the business segment Sigma, (producer of refrigerated food), completed an issuance of debt obligations (“Senior Notes”) for a nominal amount of $8,375 (€500), at an annual rate of 3.375% and maturing in 2022.

The net proceeds of Senior Notes shall be for the prepayment of Senior Notes of the subsidiary, contracted at a rate of 8.25%, maturing in 2016.

Álvaro Fernández Garza Ramón A. Leal ChapaPresident Chief Financial Officer

106 Glossary

Last-mile access: The physical link between the location of the customer and the nearest node of Alestra’s telecommunications network.

Caprolactam (CPL): Product derived from oil (cyclohexane), used as raw material to produce nylon.

Cloud applications: Business model where applications are accessed through the Internet, and are not physically present in the customer’s facilities.

Computer security: A practice that includes techniques, applications, and devices responsible for ensuring availability, integrity and confidentiality of the data of information systems, data and telecommunications networks.

Expandable polystyrene (EPS): Thermoplastic used for insulation and packaging.

HPDC: High-Pressure Die Casting.

Hosting: Service where applications and websites are placed on a server.

Independent Board Member: A Board member who does not owns company shares and is not involved in the day-to-day management of the company.

Independent Proprietary Board Member: A Board member who owns company shares but is not involved in the day-to-day management of the company.

Managed Services: Services provided by an external supplier to operate, monitor, configure and provide support in case of failure of telecommunications equipment and their value-added services.

Monoethylene Glycol (MEG): Raw material used in various industrial applications, mainly to manufacture polyester (PET and fibers).

Megawatt (MW): Measurement of power that is equal to one million watts.

OEMs: Original Equipment Manufacturers.

PET (Polyethylene Terephtalate): Plastic resin mostly used to manufacture bottles.

Polyester: Plastic resin used to manufacture textile fibers, films, and containers.

Polypropylene: Propylene byproduct used to make plastics and fibers, among other products.

Polyurethanes: Chemical compounds derived from oil, used to manufacture plastic foam.

PTA (Purified Terephtalic Acid): Raw material used to manufacture polyester.

Related Proprietary Board Member: A Board member who owns company shares and is involved in the day-to-day management of the company.

Systems integration: practice of service which consists in designing and building customized computer solutions, combining and connecting hardware and/or software of one or several manufactureres products.

Independent AuditorPwC

Mexican Stock Exchange

ALFADate listed

August 1978

Latibex (Madrid Stock Exchange)

ALFA C/I-s/ADate listed

December 2003

Investor RelationsEnrique Flores

Vice-President Corporate Communications

Phone: +52 (81) 8748 1207

eflores@alfa.com.mx

Luis OchoaInvestor Relations Director

Phone: +52 (81) 8748 2521

lochoa@alfa.com.mx

Raúl GonzálezInvestor Relations Manager

Phone: +52 (81) 8748 1177

rgonzale@alfa.com.mx

Juan Andrés MartínInvestor Relations

Phone: +52 (81) 8748 1676

jamartin@alfa.com.mx

design: signi.com.mx

www.alfa.com.mx

ALFA, S.A.B. de C.V.

Av. Gómez Morín 1111 SurCol. Carrizalejo

San Pedro Garza García, N.L.C.P. 66254, Mexico