Industrias Unidas, S.A. de C.V. (“IUSA” or the “Company”) has announced its unaudited results for the first three months ended March 31 of 2022. Figures are unaudited and have been prepared in accordance with Mexican Financial Reporting Standards (“MFRS”), which are different in certain respects from Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). The results from any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. Unless stated otherwise, reference herein to “Pesos”, “pesos”, or “Ps.” are to pesos, the legal currency of Mexico and references to “U.S. dollars”, “dollars”, “U.S. $” or “$” are to United States dollars, the legal currency of the United States of America. Except as otherwise indicated, all peso amounts are presented herein in pesos with purchasing power as of March 31, 2022, and in pesos with their historical value for other dates cited. The dollar translations provided in this document are calculated solely for the convenience of the reader using an exchange rate of Ps. 19.89 per U.S. dollar, the exchange rate published by Banco de Mexico, the country’s central bank, on March 31, 2022.

Three months ended March 31, 2022, compared to three months ended March 31, 2021.

The following table summarizes our results of operations for the first three months ended March 31, 2022, and 2021:

Our consolidated net income for the first three months ended March 31, 2022, was Ps.840.1 million (US$42.2 million), compared to a net loss of Ps.210.3 million in the same period of 2021. This change was due to a higher operating income and a positive Comprehensive Financing Result.

Revenues

Our net revenues for the first three months of 2022 increased 24.7% to Ps.7,756.7 million (US$390.0 million) from Ps.6,221.7 million in the same period of 2021. This increase was the result of a higher copper price and a different product mix in sales.

Our costs and revenues follow copper prices very closely since the market practice is to pass on to the buyer, changes in raw material price.

Our sales are primarily to customers engaged in the commercial, industrial, and residential construction, and their related maintenance and renovation activities. We also sell to customers engaged in electrical power generation, transmission, and distribution and to the sector of gas, water and air conduction in the Heating, Ventilation, Air conditioning and Refrigeration (HVACR).

Our revenues consist mainly of sales of copper-based products (tubing, wire, cable and alloys) and electrical products.

By country of production, approximately 51.8% of our revenues in the first three months ended March 31, 2022, came from products manufactured in Mexico and the remaining 48.2% from products manufactured in the U.S.

In terms of sales by region during the first three months ended March 31, 2022, we derived approximately 56.4% of our revenues from sales to customers in the United States, 40.4% from customers in Mexico and 3.2% from the rest of the world (“ROW”).

In terms of volume, consolidated sales of copper products during the first three months ended March 31, 2022, decreased by 5.5% as compared to the same period in 2021:

Cost of sales

Our cost of sales in the first three months ended March 31, 2022, increased by 18.5% to Ps.6,229.2 million (US$313.2 million) from Ps.5,255.4 million in the same period of 2021. As percentage of revenues, cost of sales was 80.3% and 84.5% respectively.

We reduce our cost base through several initiatives, including plant scheduling, raw material handling, and overall manufacturing overhead costs. According to our accounting policies, we make an inventory valuation at average purchase price. In the case of copper cathodes, an aftermath adjustment is required due to the quotation period agreed with the suppliers (M+1). This initiative allows us to hedge purchases for 30 days at no additional cost. The adjustment is recorded to the cost of sales in the month in which it occurs.

Gross Profit

Our gross profit in the first three months ended March 31, 2022, increased 58.1% to Ps.1,527.5 million (US$76.8 million) from Ps. 966.3 million in the same period of 2021. As percentage of sales, gross profit in 2022 was 19.7% vs 15.5% in 2021.

Selling and Administrative Expenses

Our selling and administrative expenses in the first three months ended March 31, 2022, increased 23.1% to Ps.521.4 million (US$26.2 million) from Ps.423.6 in the same period of 2021.

Operating Income

Our operating income in the first three months ended March 31, 2022, increased 85.4% to Ps.1,006.0 million (U.S.$50.6 million) from an operating loss of Ps.542.8 million in the same period of 2021.

EBITDA

In the first three months ended March 31, 2022, our EBITDA increased 75.2% to Ps.1,075.6 million (or US$54.1 million), from Ps.614.0 million in the same period of 2021. The corresponding depreciation and amortization figures are Ps.69.6 million for January to March 2022 and Ps. 71.2 million for the same period of 2021.

Comprehensive Financing Result

The following table shows our comprehensive financing result for the first three months ended March 31, 2021, and 2022:

Our comprehensive financing result in the first three months ended March 31, 2022, was a benefit of Ps. 84.1 million, compared to an expense of Ps.177.8 million in the same period of 2021. This increase was explained mainly by the exchange gain in the first quarter of 2022.

Taxes and Statutory Employee Profit Sharing

The provision for current and deferred income taxes and statutory employee profit sharing in the first three months ended March 31, 2022, was an expense of Ps.234.4 million compared to Ps. 134.1 million in the same period of 2021.

Consolidated Net Income

Our consolidated net income for the first three months ended March 31, 2022, was Ps.840.1 million (US$42.2 million), compared to Ps.210.3 million in the same period of 2021.

Liquidity and Capital Resources

Liquidity

As of March 31, 2022, we had cash and cash equivalents for Ps.493.8 million (U.S.$24.8 million). Our policy is to invest available cash in short-term instruments issued by Mexican and U.S. banks as well as in securities issued by the governments of Mexico and the U.S.

Our cash flow from operations and operating margins are significantly influenced by world market prices for raw copper, as quoted by COMEX and the London Metal Exchange (“LME”). Copper prices are subject to significant market fluctuations; average copper prices in our reference market increased 17.7% in the first three months ended March 31, 2022, to $4.54 US dollar per pound from $3.86 US dollar per pound in the same period of 2021.

We obtain short-term financing from various sources, including Mexican and international banks. Short-term financing consists in part of lines of credit denominated in pesos and dollars. As of March 31, 2022, our outstanding short-term debt, including the current portion of long-term debt totaled Ps.240.3 million (U.S. $12.1 million), all of which was dollar denominated.

On the same date, our outstanding consolidated long-term debt, excluding current portion thereof, totaled Ps.4,841.4 million (U.S.$243.4 million), all of which was dollar denominated.

Accounts receivable from third parties as of March 31, 2022, were Ps.4,885.5 million (U.S.$245.6 million). Days outstanding in the domestic market were 31 days as of March 31, 2022.

Debt Obligations

The following table summarizes our debt as of March 31, 2022:

This total includes the restructured debt of the Company.

Capital Expenditures

For the first three months ended March 31, 2022, we invested Ps.72.8 million (U.S.$3.66 million) in capital expenditure projects, mainly related to maintenance.

In the first three months ended March 31, 2022, our capital expenditures were allocated by segments as follows: 54.4% to copper tubing, 16.1% to valves and controls, 14.2% to wire and cable, 1.0% to electrical products and the remaining 14.3% to other divisions. By geographic region 53.0% of total capital expenditures were invested in our American facilities and the remaining 47.0% in Mexico.

You should read this document in conjunction with the unaudited consolidated financial statements as of March 31, 2022, including the notes to those statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220530005425/en/