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Article Excerpt
OPERATOR: Good afternoon, and welcome to Alfa's Third Quarter 2008 Earnings Conference Call. (Operator Instructions). As a reminder, today's conference call is being recorded.
Now I'd like to turn the conference over to Mr. Alejandro Elizondo, Chief Financial Officer. Mr. Elizondo, you may begin.
ALEJANDRO ELIZONDO, CFO, ALFA SA: Thank you very much, and good afternoon to everybody. Welcome to our third quarter '08 conference call.
Before taking your questions, let me make some general remarks about our consolidated performance.
Our results for the quarter showed the negative impact of some seasonal and temporary factors but also reflect the more complex business environment. We reported lower EBITDA figures than the preceding quarter and similar to the one a year ago.
Alpek reported lower sales volume and financial results due to lower PET and PTA sales. In the case of PET, the reduction was temporary and had to do with lower purchases from our customers on the expectation that prices will come down. In the case of PTA, there was a reduction in the availability of raw materials caused by Hurricane Ike. Despite [of the loss], Alpek's EBITDA was only 6% lower than the same year-ago quarter.
Nemak sold a lower number of equivalent heads in the quarter due to a reduction in demand by OEMs, both for seasonal reasons because of the change of model and because of lower sales, given the problems faced by the auto industry in North America. However, Nemak continued to report positive figures and EBITDA per unit in line with previous quarters.
On the other hand, Sigma reported a very good quarter with higher sales volume, revenues, and EBITDA. This is the second quarter in a row that Sigma shows improving trends. As explained in past reports, the Company committed to take action to improve results, and it is being very successful.
Finally, Alestra was also able to report a similar amount of EBITDA than in the previous quarter by continuing to focus on offering increased value-added services to its clients.
Now let me cover an issue that has gained a lot of relevance since the peso began to slide a few weeks ago - our FX derivative position. As we first reported on October 10 and then in our release yesterday, Alfa and its companies have used derivative instruments regularly as a way to reduce the overall cost of financing and the volatility of foreign currencies. We'll report the results of these transactions within comprehensive financial costs in our income statement. Given the rapid and unexpected depreciation of the peso, we incur in losses from our derivative position. A charge in the amount of $191 million was registered in the third quarter of '08. As it was evident that the situation could aggravate, we devoted ourselves to cancel or neutralize the risk that the depreciation of the peso imposed on us through the financial derivative contracts. We closed some contracts - some transactions - and entered into others to neutralize existing ones. We did so until we reached a position in which our exposure to exchange risk from derivatives is insignificant. We estimate that a net cost of $250 million, considering the cost of unwinding some contracts, the mark to market of the ones remaining, which, by the way, are no longer affected by further peso fluctuations and the positive effect in dollar terms of the devaluation in our peso-denominated debt. It is important also to mention that the holding company was able to increase its liquidity through some new facilities with debt recently to an amount of $225 million dollars.
Now, in order to begin today's question and answer session, and assuming there might be a lot of interest in the derivative issue, let's cover it first. And, once we're through with that, we will take questions on our Group companies, starting with Alpek. But, for the time being, let's take questions on the financial issues and derivatives.
OPERATOR: (Operator Instructions). Our first question comes from Vanesa at Credit Suisse.
VANESA QUIROGA, ANALYST, CREDIT SUISSE: My question is regarding the cash impact that you mentioned of a total of almost $400 million. Could you break down what was the impact as of September in the third quarter so that we can know what is the impact to be expected in the fourth quarter?
Also, my question regarding the information that you gave about a positive impact on debt because of the derivatives - a reduction in debt. Could you explain what type of instruments delivered this positive impact and if they are still outstanding or if they are part of the ones that you canceled? Thanks.
ENRIQUE FLORES, VP CORPORATE COMMUNICATIONS, ALFA SA: Let me answer your first question. Cash involved as of September was $60 million.
OPERATOR: (Operator Instructions). Our next question comes from Luis at Santander.
LUIS MIRANDA, ANALYST, SANTANDER: Alejandro, just to follow up (inaudible), just $60 million in September, and then $300 million should be cash output on the fourth quarter - basically, October?
And my other question...
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