CORPORATE - ALFA · 171 ALFA facilities operated with renewable energy US $58 Million invested in...
Transcript of CORPORATE - ALFA · 171 ALFA facilities operated with renewable energy US $58 Million invested in...
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• General Internal Use
CORPORATEPRESENTATIONSecond Quarter 2020
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• General Internal Use
Safe HarborThis presentation contains forward-looking information based on numerous variables and assumptions
that are inherently uncertain. They involve judgments with respect to, among other things, future
economic, competitive and financial market conditions and future business decisions, all of which are
difficult or impossible to predict accurately. These uncertainties include, but are not limited to, risks
related to the impact of the COVID-19 global pandemic, such as the scope and duration of the
outbreak, government actions and restrictive measures implemented in response, availability of
workers and contractors due to illness and stay at home orders, supply chain disruptions and other
impacts to the business, or on the Company's ability to execute business continuity plans, as a result
there of. Accordingly, results are likely to vary from those set forth in this presentation. Copyright ©
2020 ALFA, S.A.B. de C.V. All rights reserved. Reproduction and distribution is forbidden without the
prior written consent of ALFA, S.A.B. de C.V.
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• General Internal Use
Index
ALFA Overview
ALFA Second Quarter Results
Appendix
Alpek – Petrochemicals
Sigma – Food Products
Nemak – Aluminum Autoparts
Axtel – IT & Telecom
Newpek – Oil & Gas
Other Information
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• General Internal Use
Investment Highlights
1. Global company with operations in 29 countries; ~70% of revenues outside Mexico
2. Focus on Safety and Business Continuity amid Covid-19
3. Diversified portfolio of leading businesses providing essential goods/services
4. Solid balance sheet with investment grade rating; Cash U.S. $2.4 B
5. Strong corporate governance and experienced management team
6. Attractive value-enhancing initiatives and long-term prospects
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• General Internal Use
ALFA has grown to become a global company
Manuf. Presence(Countries)
SalesOutside Mexico
Employees
2009 16 52% ~47,000
2019 29 67% ~83,000
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• General Internal Use
Diversified portfolio of businesses with leading industry positions
8 out of 10Mexican Corporates use Axtel’s
IT and Telecom services
#1 in the production ofPTA, PET and EPSin the Americas
11 Sigma brandssell more than
US $100 Million a year each
1 out every 4 new carssold in the world contains
at least one Nemak product
686 production wellsoperated by Newpek
in U.S. and Mexico
Petrochemicals Food Products Aluminum Autoparts IT + Telecom Oil & Gas
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• General Internal Use
Alpek, Sigma and Nemak are ALFA’s three largest businesses
Revenues 20191
US $17.5 BillionEBITDA 20191
US $2.3 Billion
35%
37%
23%
4%
37%
31%
27%
12%
1. Pie chart does not include Newpek and Others 7
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• General Internal Use
Ownership
Petrochemicals
Food Products
Aluminum Autoparts
IT + Telecom
Oil & Gas
82%
100%
75%
53%
100%
Public company since 2012
Public company since 2015Ford Motor Co. owns 4.6%
Public company since 2005
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• General Internal Use
ALFA Strategy (beyond COVID-19)
• Business Realignment
• Expansion
• Innovation in high growth segments
• Unlock / Return Value to Shareholders
• Net Debt <2.5x • ROIC >10%
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Corporate Citizenship
Leading Industry Position
Financial Discipline
Strategic Principles
Strategic Priorities
Financial Parameters
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• General Internal Use
Key initiatives (beyond COVID-19) aligned to Strategic Priorities
Business Key InitiativesInnovation in high growth segments
Business realignment
Expansion Unlock value
Expand PET recycling capabilities
Lever product innovation platform
EV & structural component incursion
Evaluation of strategic alternatives
Divestment outside of Mexico
Shift to independent businesses (e.g. Nemak spin-off)
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• General Internal Use11
Next step in ALFA business portfolio evolution
• Unlock value – valuation gap vs business’ fundamentals
• ALFA vs Sum of the Parts
• ALFA Businesses vs Global Peers
• Why now?
• Significant conglomerate discount
• Strong sequential results recovery after April/May
• Leading / independent businesses
• Gradual and orderly transition process
• Committment to maintain strong financial position throughout transformational process
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• General Internal Use
82%
Nemak to become first independent business
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Proforma ALFA structure(Post Nemak spin-off)
Current ALFA structure
Sigma Alpek Axtel Nemak
100% 53% 75%
ALFA Shareholders
ALFA
ALFA Shareholders
Nemak
75%82%
Sigma Alpek
100% 53%
ALFA Shareholders
ALFANemak1
Holding
Axtel
1. New publicly traded entity in BMV
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• General Internal Use13
ALFA - Strategic RoadmapUnlocking value while maintaining strong credit profile
Nemak Spin-off
AxtelDivestment
AlpekSpin-off
Sigma Public
ALFA
NemakAxtelAlpekSigma
ALFA
AxtelAlpekSigma
ALFA
AlpekSigma
ALFA
Sigma
1 2 3 4
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• General Internal Use
Strong management team and solid corporate governance
• C - Suite average tenure of 29 years
• Average tenure of top 170+ Executives is 21 years
• Strong Corporate Governance with 83% Independent Directors
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• General Internal Use
Experienced Management Team
Rolando ZubiránAxtel PresidentTenure 21 years
Rodrigo FernándezSigma PresidentTenure 21 years
Armando TamezNemak PresidentTenure 36 years
José de Jesús ValdezAlpek PresidentTenure 43 years
Paulino RodríguezVP Human CapitalTenure 16 years
Armando GarzaChairman of the BoardTenure 41 years
Álvaro FernándezPresidentTenure 29 years
Eduardo EscalanteCFOTenure 32 years
Carlos JiménezLegal CounselTenure 41 years
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• General Internal Use
Board of Directors
• JOSE CALDERON ROJAS (2A)Chairman of the Board and Chief Executive Officerof Franca Industrias, S.A. de C.V. and Franca Servicios, S.A. de C.V.
• ENRIQUE CASTILLO SANCHEZ MEJORADA (1A)Managing Partner of Ventura Capital Privado, S.A. de C.V.
• FRANCISCO JAVIER FERNANDEZ CARBAJAL (1C)President of Servicios Administrativos Contry, S.A. de C.V.
• ALVARO FERNANDEZ GARZA (3C)President of ALFA, S.A.B. de C.V.
• ARMANDO GARZA SADA (3C)Chairman of the Board of ALFA, S.A.B. de C.V.
• CLAUDIO X. GONZALEZ LAPORTE (1B)Chairman of the Board of Kimberly-Clark de México, S.A.B. de C.V.
• DAVID MARTINEZ GUZMAN (1C)Chairman of the Board and Special Advisor of Fintech Advisory Inc.
• JOSE ANTONIO MEADE KURIBREÑA (1C)Board member since February 2019
• ALEJANDRO RAMIREZ MAGAÑA (1)President of Cinépolis, S.A. de C.V.
• ADRIAN SADA GONZALEZ (1B)Chairman of the Board of Vitro, S.A.B. de C.V.
• FEDERICO TOUSSAINT ELOSUA (1A)Chairman of the Board and Chief Executive Officer ofGrupo Lamosa, S.A.B. de C.V.
• GUILLERMO F. VOGEL HINOJOSA (1C)Chairman of the Board of Grupo Collado, S.A.B. de C.V., andof Exportaciones IM Promoción, S.A. de C.V.
Keys: (1) Independent Board Member / (A) Audit Committee (B) Corporate Practices Committee (C) Planning and Finance Committee 16
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• General Internal Use
ALFA Sustainability Model is based on four pillars
INTERNAL WELL-BEING
COMMUNITY
ECONOMY
ENVIRONMENT
171 ALFA facilities operated with renewable energy
US $58 Million invested in funding health, safety and employee development programs
10,845 students from 101 schools were benefited from ALFA´s support
More than 83,400 employees across 29 countries in America, Europe and Asia
In 2019, ALFA continued to deploy a broad program of actions in every aspect of its sustainability strategy
Collaborated with more than 190 institutions of social care
Nemak is the main consumer of recycled aluminum in Mexico, 80% of its aluminum usage comes from recycled sources
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• General Internal Use
Financial Highlights
15,870 17,223
16,315 15,576
16,804
19,055
17,538
13 14 15 16 17 18 19
Revenues
1,915 2,040
2,420 2,322
2,018
2,858
2,298
13 14 15 16 17 18 19
EBITDA
1,556
1,422
1,632
1,492
1,148
1,570
920
13 14 15 16 17 18 19
Capex
A. Includes US $427 Million from extraordinary items
A
Revenues(US $ Million)
EBITDA(US $ Million)
Capex & Acquisitions(US $ Million)
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• General Internal Use
Financial Highlights
5,123 4,785
5,844
6,300 6,543
6,2766,640
14 15 16 17 18 19 2Q20
Net Debt
2.12.0
2.5
3.1
2.3
2.7
3.4
14 15 16 17 18 19 2Q20
Net Debt/EBITDA
7.27.7
6.6
4.6
5.8
5.2
4.4
14 15 16 17 18 19 2Q20
Interest CoverageNet Debt(US $ Million)
Net Debt/EBITDA(Times)
Interest Coverage(Times)
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• General Internal Use
Cash dividends; +11% CAGR 2010 – 2020 (USD denominated)
70
97 104
118
154 154 170 169 168
202
100
10 11 12 13* 14* 15 16 17 18 19 20
* The 2014 dividend was paid early in 2013. The graph shows the approved amounts for each corresponding year.
Paid Dividends(US $ Million) 200
Subject to Board’s review
Paid in March
100
100
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• General Internal Use
Index
ALFA Overview
ALFA Second Quarter Results
Appendix
Alpek – Petrochemicals
Sigma – Food Products
Nemak – Aluminum Autoparts
Axtel – IT & Telecom
Newpek – Oil & Gas
Other Information
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• General Internal Use
Revenues reflect temporary distortions that resulted in lower volume at Nemak and lower average prices in Alpek
Revenues(US $ Million)
2Q20 vs 2Q19(US $ Million)
2Q20 vs 1Q20(US $ Million)
4,473 4,319 4,267 4,167
3,192
2Q19 3Q19 4Q19 1Q20 2Q20
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• General Internal Use
2Q20 EBITDA of US $231 million, including a US $70 million net loss from extraordinary items; Comparable EBITDA of US $301 million
595 548
636
563
231
2Q19 3Q19 4Q19 1Q20 2Q20
Reported EBITDA(US $ Million)
Extraordinary Items Comparable EBITDA(US $ Million)
EBITDA Margin
2Q20 vs 2Q19: -61%2Q20 vs 1Q20: -59%
2Q19 3Q19 4Q19 1Q20 2Q20
ALPEK (28) (19) 184 (17) (36)
SIGMA - - - - -
NEMAK 8 - - - (38)
AXTEL 39 - (4) 107 4
NEWPEK (1) (4) (58) - -
TOTAL 18 (23) 122 91 (70)
577 571514
473
301
12.9% 13.2%
12.1%11.3%
9.4%
2Q19 3Q19 4Q19 1Q20 2Q20
23
2Q20 vs 2Q19: -48%2Q20 vs 1Q20: -36%
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• General Internal Use24
Proforma EBITDA reflects the adjustment of extraordinary items plus COIVD-19 related impacts
ProformaEBITDA 2Q20
Reported EBITDA 2Q20
Non-recurring severance exp.
Multi-week shutdowns
Non-cash Inventory loss
Raw Material Carry-forward
FX ConversionFoodservice FX Conversion Others
UpdatePost-2Q20
Favorable rise in oil/feedstock
prices
Null severance exp.
Production ramp-up
Favorable rise in oil/feedstock
prices
Stable FXGradual hotel/rest. reopening (Sigma)
Stable FX
+US $319 M
Net COVID Impact
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• General Internal Use25
ALFA focused on Safety and Business Continuity amid COVID-19
Business ContinuitySafety
• Top priority - safety of our employees, customers, suppliers and community
• Increased hygiene/sanitization protocols
• Employee training and awareness campaigns
• Reorganization of on-site personnel
• Travel restrictions
• Closely monitoring health and government agency recommendations
• Preserve continuity and long-term sustainability
• Task forces coordinating immediate response
• Providing essential goods/services: food, packaging, IT
• Contributing to our communities
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• General Internal Use
Key financial initiatives amid COVID-19
• Maximize liquidity; contracted US $720 million new credits facilities
• Amended loan agreements; new covenant thresholds
• Reassess plan to capture approximately US $850 million in savings and cash flow benefits
• Reduce costs and expenses
• Working capital, CAPEX and dividends
• Alpek and Nemak shareholders approved the revocation of dividends (US $119 million)
• Alpek board maintains option to pay previously approved dividend
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• General Internal Use
Key underlying drivers by business amid COVID-19
Business Pros Cons
• Higher than expected reference margins (Asia) and resilient demand
• Stronger demand for PET products from increased focus on hygiene and safety
• Temporary profitability impact due to oil and feedstock price decline (Brent: -38% vs. 1Q20) though excepted to partially revert in 3Q20
• Record high-volumes in the US
• Favorable raw material environment
• FX Conversion impact due to USD strength
• Decrease in Foodservice sales across regions
• Cost reduction and operating efficiencies (US$125 million cost savings 2Q20 vs 1Q20)
• Lower light-weight vehicle production (-97% in NA and EU combined in April)
• Incremental demand for connectivity solutions due to higher virtual collaboration
• FX Conversion impact due to USD strength
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• General Internal Use
Rising Asian reference polyester margins partially offset drop in oil/feedstock prices
2Q20 Highlights
• Continuous operations, resilient demand and better-than-expected reference margins
• Strong underlying fundamentals temporarily offset by abrupt drop in oil and feedstock prices
• Alpek shareholders approved suspension of dividends (US $81.6 million)
• Alpek board maintains option to pay dividend at a later date
• Cash US $610 million, up $224 million versus year-end 2019
• Net Debt/EBITDA of 1.9 times
Paraxylene vs Brent Crude Oil Price (Base=100)
Margin: Asia PET to Px/MEG (US $ / Ton)
40
100
160
Brent Px
240276 263 284
342
478
377333 323
370304
227275
310
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20
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• General Internal Use
Outstanding performance in USA; record high EBITDA Margin of 18.7%
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0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
15.2 15.7
9.6
4.2
13.8
18.7
8.2
3.9
Mexico USA LatAm Europe
EBITDA Margin By Region2Q20 Highlights
• Continuous operations and lower-than-expected pork prices
• Low Foodservice demand and MXN depreciation weighed on 2Q20 results
• Record high-volumes in the US
• Cash US $655 million; up US $135 million versus year-end 2019
• Available committed credit lines for US $739 million
2Q19
2Q20
6.5
Pork Ham Price
Jan. Mar. Jun. Sept. Dec.
U.S. ($/lb)
Europe (€/kg)
2018
2019
2020
0.0
0.2
0.4
0.6
0.8
1.0
1.2
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• General Internal Use30
2Q20 Sales and EBITDA reflect lower volume amid COVID-19
2Q20 Highlights
• Facilities outside China resumed operations successfully by end of May as OEMs restarted production
• US $125 million cost savings 2Q20 vs 1Q20
• Won new contracts worth US$10 million annually to supply structural applications for electric vehicles
• Received the “General Motors Supplier of the Year Award” for the 16th time
• Cash US $649 million; up US $322 million versus year-end 2019
• Net Debt/EBITDA of 4.0 times (3.6 times adjusting for non-recurring severance expenses)
Volume 2Q20 vs 2Q19(Million Equivalent Units)
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• General Internal Use31
Recovery in Auto Sales following record low levels
Vehicle SalesYoY Change
Source: IHS Markit, Automotive News, Marklines
-47%
-26%
-80%
-24%
-80%
11%*
-77%
-42%
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20
2019 2020
China
USA
Brazil
Western Europe
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• General Internal Use
2Q20 EBITDA includes a US $4 million one-time gain from the monetization of unused spectrum concessions
2Q20 Highlights
• Continuous operations and better-than-expected performance driven by Infrastructure unit
• Restarted Infrastructure unit sale process
• Monetized unused spectrum concessions
• Cash US $157 million; up $112 million versus year-end 2019
• Net Debt/EBITDA of 1.9 times
55%45%
Service Infrastructure
Current EBITDA by Business Unit(Total 2Q20: US $49 million)
EBITDA (US $ Million)
55 54 58 48 49
33
39
-4
107
4
2Q19 3Q19 4Q19 1Q20 2Q20
Extraordinary
Sold Business Contribution
Current Operations
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• General Internal Use
Index
ALFA Overview
ALFA Second Quarter Results
Appendix
Alpek – Petrochemicals
Sigma – Food Products
Nemak – Aluminum Autoparts
Axtel – IT & Telecom
Newpek – Oil & Gas
Other Information
33
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• General Internal Use34
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• General Internal Use
Leading Petrochemical company
Leading position across product portfolio:
• #1 PTA-PET producer in America
• #2 PET producer Worldwide
• #1 EPS producer in America
• Only PP producer in Mexico
2019
Revenues
US $6.2 Billion
EBITDA
US $0.9 Billion
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• General Internal Use
Business Segments
Polyester
2019
Revenues US $4.7 Billion (77%)
EBITDA US $428 Million (50%)
Products
Purified Terephthalic Acid (PTA)
Polyethylene Terephthalate (PET)
Polyester fibers
Plastics & chemicals
2019
Revenues US $1.4 Billion (23%)
EBITDA US $218 Million (26%)
Products
Polypropylene (PP)
Expandable Polystyrene (EPS)
Caprolactam (CPL)
Fertilizers and other chemicals
2019 EBITDA includes a Cogeneration Sale Gain of US $188 M 36
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• General Internal Use
Products are widely used for food packaging and consumer end-markets
Beverage
Food
Personal care
Sample end users by industry
Volume 2019 By Industry(4,384 Kta)
Construction4%Textiles
7%
ConsumerGoods
35%
Food and Beverages55%
Sales 2019 Geography(US $6,216 Million)
Asia & others0%
Europe3%
Mexico29%
U.S./CAN 44%
SA24%
Textiles
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• General Internal Use
Installed capacity amounts to 7.0 Million tons
~6,000 employees
28 Production facilities
Source: Alpek estimate| Kta: Thousand tons per year
Installed Capacity Breakdown (Kta)
SITE PTA PET rPET FIBERS PP EPS CPL OTHER
Mexico
(3,030 Kta)
Monterrey 160
Altamira 1,000 640 240
Salamanca 85
Ocotlán 10
Cosoleacaque 610 185
Lerma 100
U.S.
(2,385 Kta)
Cedar Creek 170 55
Cooper River 170 150
Columbia 640 725
Pearl River 430
Richmond 45
Canada Selenis 144
Argentina
(225 Kta)
Zárate 190
Pacheco 15
General Lagos 19
Brazil
(1,226 kta)
Guaratingueta 46
Ipojuca 640 450 90
Chile
(27 Kta)
Santiago 5
Puerto Montt 2
Concon 20
United Kingdom Wilton 350
Total Capacity: 7,386 Kta 2,890 2,814 115 400 640 325 85 117
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• General Internal Use
Strategy
FosterCircular
Economy
Strengthen CoreBusiness
Strategic& Focused
Growth
Long-term strategy is based around 3 key pillars
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• General Internal Use
Strategy
Each pillar includes set of concrete growth catalysts
• Global Cost Improvement
• Value-added Products
• FCF Generation
• Footprint Optimization
• Value Chain Integration
• Product Innovation
• Maximize CCP Value
• rPET Leadership
• Recycling Promotion
• Sustainable Product Portfolio
Growth Catalysts Details / Description
• Zero Based Budgeting & process innovation (Mainly Operations, Logistics & SG&A)
• Shift to products with higher margins & barriers to entry (Copolymers, Grey EPS)
• Reductions to CAPEX & NWC / Recover M&G Mexico debt
• Ensure global production is performed in optimal sites & logistic networks
• Grow capacity selectively & integrate into value chain (Px, Mexico EPS)
• New products & business lines (Biovento, Natural Gas Commercialization, CO2, PLA)
• Optimize project timing & minimize CAPEX
• Lead rPET supply in Americas through capital-effective investment
• Secure PET Bale & Flake supply / Equip vPET plants with single-pellet technology
• Active lobbying for circular economy via associations & The Recycling Partnership
• Develop sustainable alternatives for all our products (Biodegradable EPS & PP, etc.)
StrengthenCore Business
Strategic &Focused Growth
Foster Circular
Economy
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• General Internal Use
PET - high recycling rate versus Other Plastics and lower carbon footprint than Aluminum and Glass
58
69
16
46
PET Other Plastics
PET already highly recycled % Worldwide
41
Alum.WW
GlassUSA
Carbon Footprint Over Lifecycle(gr. CO2 Eq. / 355 mL Bottle)
37
182 187
10
31
90
PET Aluminum Glass
5.1x4.9x 9.0x3.1x1.0x
Vir
gin
Rec
ycle
d
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• General Internal Use42
PET's traits make it the most widely used beverage packaging material
PET’s Main Product Advantages
’00 ’15 ´19’05 ’10
116
PETGlass
Aluminum
37
94
#1 Beverage Packaging MaterialBillion beverages (USA)
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• General Internal Use43
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• General Internal Use
Multinational food company dedicated to bringing local favorite foods to communities everywhere
• +640,000 points of sale
• 11% of its sales came from innovation
2019
Revenues
US $6.5 Billion
EBITDA
US $703 Million
44
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• General Internal Use
Highly recognized branded foods in Mexico, U.S., Central & South America and Europe
Sales by Region (%)
LatAm8%
U.S.15%
Europe36%
Mexico41%
• Broad geographic footprint: 70 manufacturing facilities and operations in 18 countries
• Offers quality food at a wide range of price points and across diverse categories
Cooked meats 60%
Dairy 19%
Dry meats 16%
Other categories 5%
Sales by Category (%)
Mexico
United States
Dominican Rep.
El Salvador
Guatemala
Ecuador
Italy
Belgium
Germany
Netherlands
Spain
France
Peru
Honduras
Nicaragua
Costa Rica
Portugal
Romania
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• General Internal Use
Diversified and strong brand portfolio in each market
PACKAGED MEATS DAIRY OTHER THIRD PARTY
MEXICO
EUROPE
U.S.
LATAM
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• General Internal Use
Broad supply chain network
Reach, service, efficiency and knowledge
• Global processes
• Benchmarks
• Best practice implementation
• Production sharing capabilities
Safety & quality throughout the supply chain
• Sourcing development programs and
certifications
• In-store quality checks
• Customer development programs
• Certified facilities
70
Production
facilities
25 Europe
13 Latam
26 Mexico
6 USA210
Distribution
centers
18 Europe
39 Latam
139 Mexico
14 USA640,000
Points of sale
62,000 Europe
111,000 Latam
345,000 Mexico
105,000 USA
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• General Internal Use
Consumer oriented innovation
Health & Nutrition
Heritage
Indulgence
Convenience
Trust & Sustainability
Innovation Platforms
• Based on “Design Thinking”
• Consumer research (260K contacts/year)
• 2 Research & Development Centers (+200 specialists)
• Innovations represent 11% of sales
• +250 new products launched during 1H20
• Innovation pipeline of +750 products
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• General Internal Use
Growth strategy
49
Explore the future
Defend current sources of profitability
High potential
opportunities
Protect Core
Margin expansion
Explore new categories
globallyNew business models
Strengthen organization
Enablers to accelerate organization
potential
Take advantage of global capabilities
as One Single Company
Strengthen competences to
face challenges in each
business unit
New sources of revenues
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• General Internal Use
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• General Internal Use
Leading provider of lightweighting solutions for the automotive industry
• Global footprint, cost competitiveness, R&D, skilled labor force
• One out of every four new vehicles sold worldwide has at least one Nemak component
• Sole supplier in ~90% of sales volume
2019
Revenues
US $4.0 Billion
EBITDA
US $621 Million
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• General Internal Use
Focused on broad portfolio of highly-engineered solutions
Combustion Engine• Heads
• Blocks
• Transmissions
Electric Vehicles• Battery Housings
• E-Motor Housings
Vehicle Structures• Longitudinal Members
• Sub-Frames
• Pillars & others
52
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• General Internal Use
Diversified customer base
• More than 50 customers worldwide
• Nemak supplies ~650 out of ~1,300 vehicle
nameplates platforms worldwide
53
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• General Internal Use
Solid customer relationships; diversified revenue stream
28%
18%
14%
13%
6%
5%
4%3%
3%5%
North
America
55%
Europe
36%
Others
9%
2019Volume distributionBy Customer
2019Revenue distributionBy Region
Otros
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• General Internal Use
Global footprint with facilities close to customers
16Countries
Russia
Slovakia
Spain
38Manufacturing facilities• North America (18)
• Europe (14)
• South America (3)
• Asia (3)
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• General Internal Use
Combustion Engine Hybrid Pure Electric
US $450 – 500 US $480 – 580 US $550 – 700
Heads, Blocks & Trans Heads & Blocks E-Motor Housings
Structural Components Structural Components Structural Components
Battery Housings Battery Housings
Hybrid Trans Other EV Components
Awarded business for ~US$830 M in structural & EV applications
Increased value added to sales
56
Potential Nemak content (US $ per vehicle)
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• General Internal Use
Sample awarded programs involving electric vehicles and structural components
57
BMW iNext
Mercedes-Benz GLE
Jaguar I-Pace
BMW i8
BMW i4
AMG SL232
Electric Vehicles
Battery Housings
E-motor Housings
Structural Components
Subframes
Longitudinal MembersVolvo Polestar
Mercedes-Benz EQS
Porsche TaycanBMW X5
Ford Mustang Mach-E
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• General Internal Use
Strong track record of agile cost structure adjustments and operating efficiencies to maximize profitability
$2,958 $2,955
$1,950
$2,880
$308 $309 $260
$365
$0
$100
$200
$300
$400
$500
$600
$700
$800
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2007 2008 2009 2010
Revenues
EBITDA
Headcount rightsizing
Optimization of work shifts
Increase equipment output
Volume reallocation
Key InitiativesSales vs. EBITDA
Revenues 2009 vs 2008: -34%EBITDA 2009 vs 2008: -16%
EBITDA Margin 10.4% 10.5% 13.3% 12.7%
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• General Internal Use
Differentiated approach by business segment
59
• Operational efficiencies
• Increase in secondary processes (e.g. machining)
• Cash Flow generation
• Growing business
• Greater margins & value added
• New competencies
• Assembly
• Design engineering
Environmental regulations drive lightweighting and electrification
Combustion engineStructural & EV components
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General Internal Use
60 60
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• General Internal Use
IT and Telecom services for the enterprise and government segments
Main Services
Services:
• Managed networks
• System integration
• Collaboration
• Cloud solutions
• Cybersecurity
Infrastructure:
• Fiber to the Tower
• Fiber to the Data Center
• Spectrum
• Wholesale access
2019
Revenues
US $680 Million
EBITDA
US $265 Million
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• General Internal Use
Sales and EBITDA Breakdown by Business Unit
80%Services
20%Infrastructure
1. Excludes Mass Market
EBITDASales 1
46%Services
54%Infrastructure
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• General Internal Use
Strategic evolution
• Start up local Mass Market «Fixed Wireless»
• Avantel acquisition (´06)
• Broad band Mass Market
• Vertical markets
• Cloud services
• App management
• Data center
• Enterprise strategy
• Value added services – Data IP
• Start up LD services
ALESTRA CONVERGENCE
• Unified communications
• Managed networks
• Security
• Large Scale Solutions
• Systems integration
• Data center
• IPTV (´13)
• Cloud services & managed IT
1997
1999
2000
2008
2011
2008
2011
• Value added services Mass Market– Wimax
• Enterprise integration Telco / IT
• FTH
2015 2015
TELECOMM MARKET OPENED
IP PROTOCOL, INTERNET BUBBLE
VOICE AND DATA NET CONVERGENCE LAN/WAN
TELECOM / IT CONVERGENCE
DATA CENTER CONVERGENCE
MEGER 2016
2018
2019
• Sale of mass-market FTTH
business to Televisa and
Megacable • Data Center Partnership
REALIGNMENT PROCESS
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• General Internal Use
Strategy: Strong Positioning in IT & Telecom
Specialization and automation of strategic
services’ value chain
Accelerate market penetration on digital
innovation services
Digitalization to improve efficiency
Main connectivity provider for mobile networks and data
centersMaximize
Value
Be theprincipal digital transformation
enabler of enterprise and
government segments
Be the leading neutral
fiber optic network operator in a high growth
market
ServiceUnit
Infrastructure UnitSeparation in 2
business units:
- Differentiation
- Maximize value & growth potential
Organic and inorganic growth of
cybersecurity and IT services
Long-term solid profitability vehicle
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• General Internal Use
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• General Internal Use
Exploration & Production (E&P) operations in the U.S. and Mexico
• Involvement in the E&P industry began in 2006
• Operating mature fields in Mexico since 2013
2019
Revenues
US $76 Million
EBITDA
US $(91) Million1
1. 2019 EBITDA Includes US $63 M in non-cash provisions due to lower production outlook in the coming years 66
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• General Internal Use
Current U.S. Operations – 616 wells
Technology
• Fracking for horizontal drilling
• Mature fields optimization
• World-class sub-surface analysis
capabilities
Net production(MBOED)
Involvement in the E&P industry began in 2006
• JV with Ensign Natural Resources (8.6%)
• Development of Eagle Ford Shale with 557 wells in production
67
0.9 1.1 1.0
2.7
4.7
6.4
8.2 8.37.2
4.9 4.4
2.53.9
3.0
08 09 10 11 12 13 14 15 16 17 18 19 1Q20 2Q20
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• General Internal Use
Activities in Mexico – 70 wells
• Service contracts in San Andrés and Tierra Blanca fields with Pemex (CIEPs)
• Producing over 1.8 MBOED
• Optimization of existing wells
• Development of new wells in conventional formation
• JV with Verdad Exploration, won contracts to operate two wet gas fields in Tamaulipas, Mexico
• Area of 363 Km2
• Minimum required investment of US $4 Million
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• General Internal Use
Strategy
• Evaluate strategic alternatives for its assets outside of
Mexico
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• General Internal Use
Index
ALFA Overview
ALFA Second Quarter Results
Appendix
Alpek – Petrochemicals
Sigma – Food Products
Nemak – Aluminum Autoparts
Axtel – IT & Telecom
Newpek – Oil & Gas
Other Information
70
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• General Internal Use
ALFA's heritage goes back to 1890
1979Nemak is founded
2008Sigma invest in
Perú
2018Alpek acquires
PQS (Brazil)
1993 1997
ALFA Invest US $3,200 Million in modernization and expansion
2000Nemak invests in Canada
2005Hylsamex is divested
2005Nemak acquiresRautenbach
2007Nemak acquires Teksid and Hydro assets
2001Alpek expands
to the U.S.
1996Alestra is founded
(Telecom)
2004Sigma expands in cheese
2007Alpek acquires Eastman PET Mexico & Argentina
2010Sigma
acquires Bas-S
2013Sigma
acquires Campofrio
2016Alestra/Axtel
merger
2011Alpek acquires
Eastman Columbia and
Wellman
1890Brewery is founded
1974Grupo Monterrey
Splits
1975First investment in
petrochem
1980ALFA invest
in food
1982Mexican crisis and
financial restructuring
2019Alpek acquires a PET facility (UK)
& rPET plant (USA)
2019Alpek sells its Cogeneration Power Plants
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• General Internal Use
M&A is an important element of our strategy
2010Sigma
Bar-S
2011Alpek
Columbia siteEastman Chemical
2011Alpek
Wellman
2013Sigma
CampofrioFood Group
2016Alestra
Axtel merger
2018Alpek
Petroquímica Suapeand Citepe
2007Nemak
Teksid & HydroCasting assets
2005ALFA
DivestedHylsamex
2001Alpek
DAK Americas
2020Alpek
Lotte UK PET Plant
Wilton, UK
72
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• General Internal Use
ROIC 2015 - 2019
13
9
6
12
6
2015 2016 2017 2018 2019
ROIC = NOPAT / Invested Capital | NOPAT = EBIT – Taxes | Invested Capital = Stockholder’s Equity + Debt 73
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• General Internal Use
Breakdown by Region
Mexico
33%
U.S. & Canada
31%
Europe
22%
South & Central America
12%
Asia & Others
2%
Revenues 2019US $17.5 Billion
74
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• General Internal Use
Outstanding bonds - ALFA
75
Val
ue
85
90
95
100
105
110
115
120
125
130
20
/9/2
01
9
4/1
0/2
01
9
18
/10
/20
19
1/1
1/2
01
9
15
/11
/20
19
29
/11
/20
19
13
/12
/20
19
27
/12
/20
19
10
/1/2
02
0
24
/1/2
02
0
7/2
/20
20
21
/2/2
02
0
6/3
/20
20
20
/3/2
02
0
3/4
/20
20
17
/4/2
02
0
1/5
/20
20
15
/5/2
02
0
29
/5/2
02
0
12
/6/2
02
0
26
/6/2
02
0
10
/7/2
02
0
24
/7/2
02
0
7/8
/20
20
21
/8/2
02
0
4/9
/20
20
18
/9/2
02
0
2044
2024
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• General Internal Use
Outstanding bonds – ALFA Subsidiaries
76
Val
ue
Val
ue
Sigma
Axtel
Alpek
Nemak
70
75
80
85
90
95
100
105
110
115
20
/9/2
01
9
4/1
0/2
01
9
18
/10
/20
19
1/1
1/2
01
9
15
/11
/20
19
29
/11
/20
19
13
/12
/20
19
27
/12
/20
19
10
/1/2
02
0
24
/1/2
02
0
7/2
/20
20
21
/2/2
02
0
6/3
/20
20
20
/3/2
02
0
3/4
/20
20
17
/4/2
02
0
1/5
/20
20
15
/5/2
02
0
29
/5/2
02
0
12
/6/2
02
0
26
/6/2
02
0
10
/7/2
02
0
24
/7/2
02
0
7/8
/20
20
21
/8/2
02
0
4/9
/20
20
18
/9/2
02
0
2023
2022
2029
85
90
95
100
105
110
115
20
/9/2
01
9
4/1
0/2
01
9
18
/10
/20
19
1/1
1/2
01
9
15
/11
/20
19
29
/11
/20
19
13
/12
/20
19
27
/12
/20
19
10
/1/2
02
0
24
/1/2
02
0
7/2
/20
20
21
/2/2
02
0
6/3
/20
20
20
/3/2
02
0
3/4
/20
20
17
/4/2
02
0
1/5
/20
20
15
/5/2
02
0
29
/5/2
02
0
12
/6/2
02
0
26
/6/2
02
0
10
/7/2
02
0
24
/7/2
02
0
7/8
/20
20
21
/8/2
02
0
4/9
/20
20
18
/9/2
02
0
2028
2026
2024
70
75
80
85
90
95
100
105
110
20
/9/2
01
9
4/1
0/2
01
9
18
/10
/20
19
1/1
1/2
01
9
15
/11
/20
19
29
/11
/20
19
13
/12
/20
19
27
/12
/20
19
10
/1/2
02
0
24
/1/2
02
0
7/2
/20
20
21
/2/2
02
0
6/3
/20
20
20
/3/2
02
0
3/4
/20
20
17
/4/2
02
0
1/5
/20
20
15
/5/2
02
0
29
/5/2
02
0
12
/6/2
02
0
26
/6/2
02
0
10
/7/2
02
0
24
/7/2
02
0
7/8
/20
20
21
/8/2
02
0
4/9
/20
20
18
/9/2
02
0
2025
2024
70
75
80
85
90
95
100
105
110
20
/9/2
01
9
4/1
0/2
01
9
18
/10
/20
19
1/1
1/2
01
9
15
/11
/20
19
29
/11
/20
19
13
/12
/20
19
27
/12
/20
19
10
/1/2
02
0
24
/1/2
02
0
7/2
/20
20
21
/2/2
02
0
6/3
/20
20
20
/3/2
02
0
3/4
/20
20
17
/4/2
02
0
1/5
/20
20
15
/5/2
02
0
29
/5/2
02
0
12
/6/2
02
0
26
/6/2
02
0
10
/7/2
02
0
24
/7/2
02
0
7/8
/20
20
21
/8/2
02
0
4/9
/20
20
18
/9/2
02
0
2024
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• General Internal Use
ALFA & Subsidiaries Outstanding Bonds
77
CompanyAmount(M US)
RateYTM
(Sept/22/2020)Maturity
Ratings
S&P Fitch Moody’s
Alfa 500 5.250% 3.543% March 25, 2024BBB-; SO
(issue level BB+) BBB- ; SO Baa3 ; SO
Alfa 500 6.875% 5.683% March 25, 2044BBB-; SO
(issue level BB+) BBB- ; SO Baa3 ; SO
Alpek 650 4.500% 2.691% November 20, 2022 BB+ ; SO BBB- ; SO Baa3 ; SO
Alpek 300 5.375% 2.866% August 08, 2023 BB+ ; SO BBB- ; SO Baa3 ; SO
Alpek 500 4.250% 4.286% September 10, 2029 BB+ ; SO BBB- ; SO Baa3 ; SO
Sigma €600 2.625% 1.303% February 02, 2024 BBB- ; SO BBB ; SO Baa3 ; SO
Sigma 1,000 4.125% 2.771% May 02, 2026 BBB- ; SO BBB ; SO Baa3 ; SO
Sigma 500 4.875% 3.227% March 22, 2028 BBB- ; SO BBB ; SO Baa3 ; SO
Nemak 500 4.750% 4.099% January 11, 2025 BB+ ; NO BBB- ; NO Ba1 ; NO
Nemak €500 3.250% 3.663% February 28, 2024 BB+ ; NO BBB- ; NO Ba1 ; NO
Axtel 500 6.375% 5.059% November 14, 2024 BB ; SO BB- ; PO Ba3 ; SO
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• General Internal Use
Stock Highlights (BMV: ALFAA)
Daily Average Traded Shares & Value
Daily Stock Price (MXN)
3
12
00
12
3
15
66
15
9 9
F M AJ A M J J A S O N SD J F M A J JM
2019
10
0
5
20
DecJan Jun
(M Shares) (US$ M)
2018 2019
Valuation 2017 2018 2019 1Q20 2Q20
Market Cap. (US$ B) 6,637 6,056 4,875 3,300 2,311
Net Debt (US$ M) 6,300 6,543 6,276 6,323 6,640
EBITDA LTM (US$ M) 2,018 2,858 2,298 2,342 1,978
Enterprise Value /
EBITDA7.0 4.8 5.4 4.6 5.1
Price / Earnings N/A 8.9 16.2 6.0 7.9
Price per Share
(MXN)24.7 23.0 18.6 12.8 10.9
Exchange Rate
(MXN/USD)18.9 19.2 19.3 19.9 23.4
2018
15
O N D
2020
2020
FJ M
78
30
25
DecJan Jun Jan Jun
A M J
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• General Internal Use
Debt by Currency
US 60%
EUR33%
Other 6%
US100%
US100%
US52%
EUR28%
MXN 18%
US 75%
MXN25%
US $1,398 Million US $2,021 Million US $2,630 Million
US $2,147 Million US $744 Million
*Includes currency hedging
Other 2%
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• General Internal Use
Debt by Fixed and Variable Interest Rate
Fix92%
Var8%
Fix62%
Var38%
Fix80%
Var20%Fix
71%
Var 13%
US $1,398 Million US $2,021 Million
US $2,147 Million US $744 Million
*Includes currency hedging
Fix87%
Var13%
US $2,630 Million
80
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• General Internal Use
Brent Crude Oil
120
100
80
60
40
20
US $/Bbl
Brent Crude Oil
99 $/bbl
53 $/bbl 44
$/bbl
54 $/bbl71
$/bbl 64 $/bbl
59 $/bbl
0
81
2014 2015 2016 2017 20192018 2020
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• General Internal Use
PET Margin (Asia)
201
74 71 69 63 59 71 64 63 60 72 80 81104
133 135 118 110155 140 PTA
PET
2011
210
2012 3Q2015
258
2013 2014 1Q
260
4Q 1Q 2Q 3Q 4Q
478
4Q1Q2Q 3Q 1Q
394
270
2Q
230210
284
212240
276 263
342
377
324333
370
2Q
China
2016 2017 2018 2019
Margin: Asia PET to Px/MEG (US $/Ton)
250304
3Q 4Q
227
78
2020
1Q
275
83
82
2Q
310
82
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• General Internal Use
Pork Ham Price in Europe and U.S.
€/kgPork Ham Price in Europe
US $/lbPork Ham Price in U.S.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2018
2019
2020
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2018
2019
2020
83
Feb. Apr. Jun. Aug. Oct. Dec.Feb. Apr. Jun. Aug. Oct. Dec.
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• General Internal Use
Nemak Shareholder Structure – before and after proposed spin-off
84
Proforma Nemak Shareholder Structure(Post Nemak spin-off)
Current Nemak Shareholder Structure
75%
ALFA Shareholders
ALFA
25%
Nemak Shareholders
ALFA Shareholders
Nemak Shareholders
Nemak1
Holding
1. New publicly traded entity in BMV
Nemak
75% 25%
Nemak
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• General Internal Use
Business Key Events Timing / Comments
Spin-off Process expexted to conclude within 60 days
Divestment Divested all assets in TX (August 2020)
DivestmentTransaction expected by 1Q21; proceeds to be usedentirely for debt reduction
Independent businessSubject to debt reduction and appropriate marketconditions
Independent business To be effectively concluded together with Alpek
Key events and timing
85
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• General Internal Use
T. +52 (81) [email protected]
Contact
Hernán F. LozanoV.P. of Investor Relations
86