Vitro Reports 2Q'10 Increase of 2.2% in Sales and 26.7% in EBITDA

SAN PEDRO GARZA GARCIA, NUEVO LEON, Mexico, July 28 /PRNewswire-FirstCall/ -- Vitro S.A.B. de C.V. (BMV: VITROA) one of the world's largest producers and distributors of glass products, today announced 2Q'10 unaudited results. Year-over-year consolidated net sales increased 2.2 percent benefited by a 4.1 percent peso appreciation during last twelve months. Consolidated EBITDA increased 26.7 percent YoY while the consolidated EBITDA margin increased to 15.3 percent from 12.4 percent in the same period last year.

Commenting on the quarter's results, Mr. Hugo Lara, Chief Executive Officer, said, "While performance continued to benefit from the peso appreciation, the results in each business unit reflect the varying stages of a slow economic recovery in specific markets, the effect of changes in demand on volumes as well as the impact of the steps Vitro has taken over the past year to improve profitability and service its clients."

"Domestic Glass Containers sales volumes declined by 3 percent YoY driven by lower demand in the beer and to a lesser extent the food segment. A weaker overall product mix also affected sales. We continued to defend our market share at the expense of price and margin erosion as excess capacity in local markets increased competition.  Export volumes for Glass Containers fell by 1 percent primarily driven by lower demand in the Wine & Liquor segment."

"In the Flat Glass business unit, domestic and exports sales volumes for both construction and auto glass rose although foreign subsidiary sales fell 25 percent reflecting the weak Spanish and US construction markets."

"Although EBITDA was affected by price weakness and declining volume in Glass Containers, poor performance from our foreign subs at Flat Glass and a 17 percent natural gas price increase, the impact was offset by the strong delivery from both our domestic float glass and auto glass operations. EBITDA also benefited from inventory fluctuation in the income statement by approximately US$7 million during the quarter versus 2Q'09 along with the fully implemented cost reduction program, concluded in 3Q'09, and a peso appreciation when measured in dollars," continued Mr. Lara.  

"As you know, our float glass, automotive glass and Industria del Alcali manufacturing facilities in the Municipality of Garcia, Nuevo Leon, Mexico, were temporarily closed following the severe flooding and damage caused by Hurricane Alex on July 1, 2010. Today, Industria del Alcali and our automotive glass manufacturing facilities have been completely restored and are operating under normal conditions. One of the two float glass furnaces closed is now operating as normal and the second is expected to be fully operational around the first week of September. Meanwhile, Vitro's float glass facility in Mexicali, which is operating at a 100 percent capacity, will continue to temporarily supply glass to the OEM glass processing plants," continued Mr. Lara.

Mr. Claudio Del Valle, Chief Restructuring Officer, noted, "Looking forward, our 2010 consolidated EBITDA guidance range of between US$205-215 million appears to fall short when viewed in the context of Vitro's 2Q'10 LTM EBITDA. However, strength in the domestic auto and construction markets are likely to be more than offset by continued weakness in foreign subsidiaries and a possible reduction in demand of Glass Containers as a consequence of a rainy summer.  Ongoing increases in natural gas prices, as reflected in the price differential between the forward curve and last year prices are also expected to impact results in the second half of the year. In addition, we have not yet determined the full impact on EBITDA of the damage caused by Hurricane Alex. As a result, we plan to review and if necessary will adjust guidance in 3Q'10.  We maintain our natural gas 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."

Commenting on the restructuring process, Mr. Del Valle noted, "On July 20, 2010 we met with representatives of the Ad Hoc Bondholder Committee. At this meeting, we presented a revised counterproposal and outlined the process we envision to reach a consensual restructuring agreement. The cornerstone of this process is a broad creditor outreach effort through a consent solicitation for a debt restructuring expected to be launched early in August 2010. This consent solicitation is anticipated to assure the medium and long term sustainability of the Company, significantly enhancing the value of Vitro's restructured debt. We believe that the consent solicitation represents a higher recovery value than the average market price for the last six months of the senior notes due 2012, 2013 and 2017. Simultaneously, we plan to continue negotiations with the Ad Hoc Bondholder Committee in an effort to obtain its support for the consent solicitation in advance of its launch. We remain committed to a consensual restructuring process and are working diligently to launch the consent as quickly as possible. We also made progress on the derivatives front. On April 12, 2010 the judge granted a motion as to liability and denied amounts sought by counterparties and a Special Referee was appointed to determine the ultimate amount of damages. However, we have obtained a 'stay' until September 2010 with all counterparties in order to try and reach a consensual agreement. In fact, we have already reached a final agreement with one of the six counterparties."

"We continue our efforts to maximize liquidity through strict control of our cash position," Mr. Lara noted. "And this was again evidenced by the US$44 million cash flow from operations and US$7 million net free cash flow generated this quarter. This was achieved after investing US$28 million in working capital mainly related to an increase in account receivables due to higher sales, QoQ, coupled with increased inventory value due to change in mix to larger more expensive bottles. On Flat Glass, domestic and export sales growth, also had an effect on increased account receivables. The successful refinancing, in June 2010, of a US$32.5 million line of credit at Vitro America also contributed to strengthen liquidity."

"Two important corporate events have further strengthened Vitro this quarter," continued Mr. Lara. "The first is the three-year shareholder agreement between Mr. Alfredo Harp Helu and Vitro's control group to unify during its term consolidated voting rights. As part of the agreement, Mr. Harp Helu who at the time held a 9.86 percent equity stake in Vitro was authorized by the board to increase his ownership stake in the Company up to 15 percent. The second is that we have further reinforced corporate governance with the addition of two renowned businessmen as members of Vitro's Board of Directors. Mr. Guillermo Ortiz, former governor of the Mexican Central Bank between 1998 and 2009 and Secretary of Finance, and Mr. Mario Laborin, former Director of Nacional Financiera and Bancomext have joined the Board. Mr. Ortiz was appointed as member of Vitro's Audit Committee and both were appointed members of the Finance and Planning Committee. Today, approximately 40 percent of our board members are independent, exceeding the 25 percent mandatory under Mexican Law."

"We are pleased that the addition of new board members, new shareholders, financial institutions and clients all reflect the confidence we believe about Vitro's future," Mr. Lara noted.

"As the world recovers from the global recession, Vitro continues to meet the many challenges it faces and along with the rest of the business community is making the necessary changes to fully benefit from the expected economic growth.  Our goal continues to be to serve our valued clients and move ahead with our creditors, with the goal to achieve a resolution that supports our future growth," concluded Mr. Lara.

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.