Vitro Reports 4Q'09 Decline of 20.2% in Sales and 3.1% Increase in EBITDA

SAN PEDRO GARZA GARCIA, NUEVO LEON, Mexico, March 2 /PRNewswire/ -- Vitro S.A.B. de C.V. (BMV: VITROA) one of the world's largest producers and distributors of glass products, today announced 4Q'09 unaudited results. Year-over-year consolidated net sales declined 20.2 percent affected by lower volumes and the deconsolidation in December 2008 of Comegua --  the Company's glass container venture in Central America. Consolidated EBITDA increased 3.1 percent YoY while the consolidated EBITDA margin increased to 14.1 percent from 10.9 percent in the same period last year. On a comparable basis, excluding Comegua, consolidated net sales during 4Q'09 declined 14.4 percent YoY while EBITDA increased 13.2 percent during the same period.

    
    
    
    
      FINANCIAL HIGHLIGHTS*                               
      ---------------------                               
                                 4Q'09  4Q'08     % Change  
                                 -----  -----     --------  
      Consolidated Net Sales      430    538        -20.2%
        Glass Containers          212    275        -22.7%
        Flat Glass                213    256        -16.8%
      ------------                ---    ---        ----- 
      Cost of Sales               319    392        -18.6%
      -------------               ---    ---        ----- 
      Gross Income                111    146        -24.3%
      ------------                ---    ---        ----- 
      Gross Margins              25.8%  27.2%          pp     
      -------------              ----   ----          ---     
      SG&A                         90    132        -31.7%
      ----                         --    ---        ----- 
      SG&A % of sales            20.9%  24.5%          pp     
      ---------------            ----   ----          ---     
      EBIT                         21     15         41.8%
      ----                         --     --         ---- 
      EBIT Margins                4.8%   2.7%          pp     
      ------------                ---    ---          ---     
      EBITDA                       60     59          3.1%
        Glass Containers           53     50          6.8%
        Flat Glass                  0      7        -95.6%
      ------------                  -      -        ----- 
      EBITDA Margins             14.1%  10.9%          pp     
      Net Income (loss)            42   (340)           - 
      -----------------            --   ----            - 
      Net Income (loss) Margins   9.8% -63.2% +1594.99 pp 
      -------------------------   ---  -----  ----------- 
      Total Debt(1)             1,539  1,595         -3.5%
        Short Term Debt(2)      1,393  1,388          0.4%
        Long Term Debt            146    207        -29.6%
      Average life of debt        0.0    0.0              
                                                          
      Cash & Cash Equivalents(3)  217    128         70.3%
      Total Net Debt            1,322  1,467         -9.9%
      --------------            -----  -----         ---- 
      * Million US$ Nominal 
                                  
      (1) Total debt includes account receivables debt    
          programs debt according to a change in Mexican FRS 
      (2) Since we are not in full compliance under our   
          bond indentures, the outstanding amount of         
          the Senior Notes debt was reclassified from long-
          term to short-term                                 
      (3) Cash & Cash Equivalents include restricted cash 
          which corresponded to interest payments,           
          rent payments, and cash on our accounts receivables
          debt programs. In 4Q'08, restricted cash includes  
          interest payments and cash on our accounts         
          receivables                                        
      --------------------------------------------------  

Commenting on the quarter, Mr. Hugo Lara, Chief Executive Officer, said, "The sales declines of 23 percent in Glass Containers and 17 percent in Flat Glass reflect current market conditions of weak demand and excess capacity. At the same time, our cost reduction and productivity programs, as well as the US$10 million benefit from lower natural gas prices, support uninterrupted operations and contributed to results as evidenced by a year-on-year increase in consolidated EBITDA despite the decline in sales. During the quarter we closed two transactions to strengthen Vitro's liquidity and continue our efforts to reach a beneficial agreement with bondholders."  

Mr. Claudio Del Valle, Chief Restructuring Officer, noted, "The factors that influenced results last quarter continue to have an impact on Glass Containers' performance and are primarily the slowdown in global demand, coupled with excess capacity in some of our markets. Domestic volumes were down 19 percent, reflecting a sharp drop in beer and soft drinks volumes. Although export volumes declined by only 4.5 percent, the causes were the same -- lower volumes in food and soft drinks segments. The 6.8 percent increase in EBITDA reflected those factors, but also benefited from the cost reduction initiatives taken to enhance profitability, and the positive effect of lower energy costs which more than offset the negative impact of lower fixed cost absorption and the effect of the deconsolidation of Comegua.

"Flat Glass sales, down 16.8 percent this quarter, continued to reflect our participation in the automotive and construction industries, the two sectors most affected by the downturn in the NAFTA economy. In addition, Vitro has broad exposure to two of the world's poorest performing construction markets -- the US and Spain. These construction markets, were the main drivers for a 32 percent decline in sales of our foreign subsidiaries YoY. Despite the overall weakness in Flat Glass, we have experienced increased sales to the auto glass OEM market as a result of an improved sales mix skewed toward more value added products. AGR sales, in turn, experience a slight decrease in both domestic and export markets. Although prices for float glass were lower, export volumes increased 21 percent year-on-year driven by continuing demand from South American markets. Domestic float glass volumes to third parties remained stable, however, prices decreased reflecting excess capacity.

"Despite the challenging environment that affects flat glass manufacturers in general, we continue to maintain the market share of the Mexican float glass market achieved in 1Q'09. Although cost reduction steps taken during the year had an impact, lower sales volumes and soft prices resulting from the increasingly competitive environment, were largely responsible for the 95.6 percent drop in EBITDA this quarter. In addition to implementation of our cost reduction program, lower energy prices also had a positive impact on results. As we move forward, our strategy is clear: continue implementing cost reduction efforts, maintain effective working capital management, and strict cash control as we continue operations as usual during this difficult cyclical downturn and remain ready to benefit as these industries recover.

"Looking ahead, we expect EBITDA for 2010 to range between US$205-215 million reflecting continuation of many of the factors that affected 2009.  Demand, particularly in the US and Spain, is expected to remain weak which coupled with excess production capacity in many of our markets should result in continued pricing softness. In addition, natural gas prices are expected to increase from the 2009 level of US$3.7/ mmbtu having a direct impact on EBITDA. We maintain our hedges with PEMEX, 32 percent at US$6.8/mmbtu for 2010 and 19 percent at US$7.3/mmbtu for 2011, with no margin call requirements. In 2009, the total amount of settlements paid to PEMEX for natural gas hedging was approximately US$64 million. It also reflects approximately US$10 million of rent payments regarding the real estate transaction completed on December 2009."

Commenting on the restructuring process, Mr. Del Valle noted, "We remain focused on reaching a consensual agreement with our creditors with the objective of achieving an organized debt restructuring that will solve our balance sheet challenges. On October 13, Vitro submitted long-term projections to a group of restricted bondholders and in the next few days we expect to deliver a revised restructuring proposal to Chanin Capital, the financial advisor for the bondholder group, and the bondholders who sign a Confidentiality Agreement. On January 4, 2010, the Company received from a group of its bondholders a Notice of Acceleration of payment for the Senior Notes due 2012 and 2017. This is standard operating procedure when an issuer is in default and does not mean that Vitro has entered into a new litigation. This action, which could have been taken at any time since February 2009, was anticipated by the Company and does not in any way impact Vitro's ability to operate as usual while we continue the negotiation process with our bondholders. In fact, we believe there is a consensual agreement between Vitro and the majority of its creditors that negotiation is the best alternative to reach an agreement that will maximize recovery for all parties. In terms of the derivative counterparties, the judge again postponed the hearing regarding the summary judgment plead by the banks that was scheduled for February 9, 2010. A new hearing is now expected to take place on March 23, 2010."

"Maximizing liquidity remains a key priority at Vitro," Mr. Lara noted, "evidenced by our US$200 million unrestricted cash position at year-end. Our efforts to preserve strict control over our cash position and working capital management resulted in a US$48 million reduction in working capital. The closing of two important transactions in December 2009 further strengthened liquidity. A real estate transaction contributed a US$75 million cash injection into the Company, while the refinancing of the trade receivable program at Flat Glass, extended maturities by replacing the original US$21.5 million private debt issuance due August 2010 with a Ps.300 million five year maturity issuance. We believe these actions further strengthen our operations and our ability to serve our customers under any future scenario as we continue the debt restructuring process. They also will contribute to a considerably improved liquidity outlook for 2010," continued Mr. Lara.  

"As we move ahead in our negotiations with bondholders to achieve a timely and mutually satisfactory resolution, we remain committed to strengthening our operations and liquidity position while continuing to serve our valued clients as we prepare for the economic recovery," Mr. Lara concluded.

Please click on this link to view the full version of the Press Release on our Web Site http://www.vitro.com

SOURCE Vitro S.A.B. de C.V.