Orbia Announces Fourth Quarter and Full-Year 2023 Financial Results
Orbia delivered EBITDA of
Q4 2023 Financial Highlights
(All metrics are compared to Q4 2022 unless otherwise noted)
-
Net revenues of
$1.8 billion decreased 16%, driven by lower sales in Polymer Solutions, Connectivity Solutions and Building & Infrastructure. -
EBITDA of
$226 million decreased 27%, driven by lower volumes and prices in certain segments, partially offset by higher profitability in Precision Agriculture and Building & Infrastructure. -
Operating Cash Flow of
$328 million decreased by$227 million due to lower EBITDA, partially offset by effective working capital management.
Full-Year 2023 Financial Highlights
(All metrics are compared to FY 2022 unless otherwise noted)
-
Net revenues of
$8.2 billion decreased 15%, with lower sales in Polymer Solutions, Building & Infrastructure, and Connectivity Solutions, partially offset by higher sales in Fluor & Energy Materials. -
EBITDA of
$1.46 billion decreased 24%, driven by lower volumes and prices, partially offset by higher profitability in Fluor & Energy Materials. -
Operating Cash Flow of
$931 million decreased 16%, driven by lower EBITDA and partially offset by effective working capital management. -
Dividends paid of
$240 million decreased by$59 million . Dividends paid in 2022 included an extraordinary additional amount related to the Company’s very strong 2021 results. - Leverage ratio (net debt-to-EBITDA) increased from 1.65x to 2.35x, due to lower EBITDA.
“We entered 2023 cautiously optimistic, with good momentum in certain business groups. By the end of the second quarter, markets had softened in the global industrial and construction sectors due to prolonged high interest rates and compounded by market weakness in
Bharadwaj continued, “Despite these headwinds, I’m proud of the progress we made on strategic and growth initiatives in 2023. We finalized a joint venture agreement with Syensqo (formerly Solvay) to create the largest polyvinylidene fluoride (PVDF) production facilities for battery materials in
Q4 and Full-Year 2023 Consolidated Financial Information 1 |
||||||||||||
(All metrics are compared to Q4 and FY 2022 unless otherwise noted) |
||||||||||||
mm US$ |
Fourth Quarter |
January - December |
||||||||||
Financial Highlights |
2023 |
2022 |
%Var. |
2023 |
2022 |
%Var. |
||||||
Net sales |
1,772 |
2,100 |
-16% |
8,204 |
9,648 |
-15% |
||||||
Selling, general and administrative expenses |
326 |
349 |
-7% |
1,323 |
1,241 |
7% |
||||||
Operating income |
55 |
160 |
-66% |
849 |
1,328 |
-36% |
||||||
EBITDA |
226 |
308 |
-27% |
1,460 |
1,909 |
-24% |
||||||
EBITDA margin |
12.8% |
14.6% |
-189 bps |
17.8% |
19.8% |
-199 bps |
||||||
Financial cost (income) |
54 |
(54) |
N/A |
366 |
160 |
128% |
||||||
Earnings before taxes |
3 |
80 |
-96% |
485 |
1,034 |
-53% |
||||||
Income tax |
54 |
101 |
-47% |
329 |
369 |
-11% |
||||||
Consolidated net (loss) income |
(51) |
(21) |
141% |
156 |
666 |
-77% |
||||||
Net majority (loss) income |
(71) |
(36) |
100% |
65 |
567 |
-89% |
||||||
Operating cash flow |
328 |
555 |
-41% |
931 |
1,107 |
-16% |
||||||
Capital expenditures |
(188) |
(221) |
-15% |
(658) |
(549) |
20% |
||||||
Free cash flow |
116 |
308 |
-62% |
176 |
466 |
-62% |
||||||
Net debt |
3,430 |
3,149 |
9% |
3,430 |
3,149 |
9% |
___________________ |
1 Unless noted otherwise, all figures in this release are derived from the Consolidated Financial Statements of the Company as of |
Net revenues of
For the fourth quarter, the decrease in revenue was driven by a weaker market and planned plant maintenance in Polymer Solutions, weaker demand in Connectivity Solutions and lower pricing in Building & Infrastructure, partially offset by higher volume and pricing in Fluor & Energy Materials and stronger Asian markets for Precision Agriculture. For the full year, revenues were higher in Fluor & Energy Materials, particularly in refrigerants, but decreased across other businesses. Primary drivers of the year-over-year decrease included lower PVC and caustic soda pricing and volumes for Polymer Solutions, weaker demand in
Cost of goods sold of
The decrease in cost of goods sold was driven primarily by lower volumes and raw material costs.
Selling, general and administrative expenses of
The decrease in selling, general and administrative expenses for the quarter was driven by lower variable compensation costs, partially offset by unfavorable exchange rate effects and restructuring costs. The increase for the full year was primarily due to inflation, investment in executing the Company’s growth strategy and the strengthening of the Mexican Peso and Colombian Peso.
EBITDA of
The decrease in EBITDA and EBITDA margin was due to lower prices and softer demand across most markets, particularly in Polymer Solutions, Building & Infrastructure and Connectivity Solutions. The decrease was partially offset by higher profitability in Fluor & Energy Materials.
Financial costs of
The increase in financial costs was largely driven by adjustments in the valuation of put options associated with non-wholly-owned businesses, which resulted in
Taxes of
Net income to majority shareholders of negative
Operating cash flow of
During the quarter, the decrease in operating cash flow was driven by lower EBITDA and higher interest paid. The decrease in free cash flow was driven by the lower operating cash flow. For the full year, the decrease in operating cash flow was driven by lower EBITDA, which was partially offset by effective working capital management and lower cash taxes paid, as well as positive currency fluctuations. The decrease in free cash flow was due to lower operating cash flow as well as higher capital expenditures driven by investments in growth.
Net debt of
Q4 and Full-Year 2023 Revenues by Region |
||||||||
(All metrics are compared to Q4 and FY 2022 unless otherwise noted) |
||||||||
mm US$ |
Fourth Quarter |
|||||||
Region |
2023 |
2022 |
% Var. Prev Year |
% Revenue |
||||
|
745 |
840 |
-11% |
42% |
||||
|
470 |
644 |
-27% |
27% |
||||
|
352 |
368 |
-4% |
20% |
||||
|
165 |
196 |
-16% |
9% |
||||
|
40 |
53 |
-25% |
2% |
||||
Total |
1,772 |
2,100 |
-16% |
100% |
||||
|
|
|
|
|
||||
|
|
|
|
|
||||
mm US$ |
January - December |
|||||||
Region |
2023 |
2022 |
% Var. Prev Year |
% Revenue |
||||
|
3,174 |
3,606 |
-12% |
39% |
||||
|
2,488 |
3,050 |
-18% |
30% |
||||
|
1,550 |
1,922 |
-19% |
19% |
||||
|
781 |
812 |
-4% |
10% |
||||
|
211 |
258 |
-18% |
3% |
||||
Total |
8,204 |
9,648 |
-15% |
100% |
Q4 and Full-Year 2023 Financial Performance by
(All metrics are compared to Q4 and FY 2022 unless otherwise noted)
Polymer Solutions (
Orbia’s Polymer Solutions business group (commercial brands Vestolit and Alphagary) focus on general purpose and specialty PVC resins (polyvinyl chloride), PVC and zero-halogen specialty compounds with a wide variety of applications in everyday products for everyday life, from pipes and cables to household appliances and medical devices. The business group supplies Orbia’s downstream businesses and a global customer base.
mm US$ | Fourth Quarter | January - December | ||||||||||
Polymer Solutions |
2023 |
2022 |
%Var. |
2023 |
2022 |
%Var. |
||||||
Total sales* |
577 |
735 |
-21% |
2,699 |
3,696 |
-27% |
||||||
Operating (loss) income |
(16) |
37 |
N/A |
128 |
549 |
-77% |
||||||
EBITDA |
47 |
101 |
-54% |
382 |
804 |
-53% |
||||||
*Intercompany sales were Full year intercompany sales were |
Fourth quarter revenues of
The decrease in revenues for the quarter was driven primarily by lower volumes due to a planned turnaround and associated delay in the Company’s ethylene joint venture plant that impacted PVC production, as well as lower specialty PVC and caustic soda prices driven by weaker demand, and excess availability in the export market. For the full year, the decrease in revenues was driven by lower volumes and prices due to weaker demand and raw material supply shortage in the
Both fourth quarter and full-year EBITDA decreased year-over-year, driven by lower PVC and caustic soda volume and prices, maintenance turnaround impacts, expenses related to strategic growth projects and the translation effect of the stronger Mexican Peso and Colombian Peso on fixed costs. These same factors drove the operating (loss) income for the quarter and year, with the fourth quarter loss primarily due to the impact of the maintenance turnaround in the quarter.
Building & Infrastructure (Wavin), 31% of Revenues
Orbia’s Building & Infrastructure business group (commercial brand Wavin) is redefining today’s pipes and fittings industry by creating solutions that last longer and perform better, all with less installation labor required. The business group benefits from supply chain integration with the Polymer Solutions business group, a customer base spanning three continents, and investments in sustainable, resilient technologies for water and indoor climate management.
mm US$ |
Fourth Quarter |
January - December |
||||||||||
Building & Infrastructure |
2023 |
2022 |
%Var. |
2023 |
2022 |
%Var. |
||||||
Total sales |
595 |
661 |
-10% |
2,678 |
2,926 |
-8% |
||||||
Operating income |
11 |
12 |
-7% |
142 |
193 |
-27% |
||||||
EBITDA |
59 |
47 |
0 |
284 |
321 |
-12% |
Fourth quarter revenues of
The decrease in revenues for the quarter was primarily driven by lower volumes in EMEA and lower prices due to lower raw material costs. For the full year, the decrease in revenues was primarily driven by lower demand in EMEA which was partially offset by volume improvements in
Fourth quarter EBITDA increased year-over-year mainly driven by improved margins and cost optimization across the business. Full year EBITDA declined due to lower volumes, higher logistics and transportation costs and one-time costs related to business optimization.
Connectivity Solutions (Dura-Line), 13% of Revenues
Orbia’s Connectivity Solutions business group (commercial brand Dura-Line) produces more than 500 million meters of essential and innovative connectivity infrastructure per year to bring a world’s worth of information everywhere. The business group produces telecommunications conduit, cable-in-conduit and other HDPE products and solutions that create physical pathways for fiber and other network technologies connecting cities, homes and people.
mm US$ |
Fourth Quarter |
January - December |
||||||||||
Connectivity Solutions |
2023 |
2022 |
%Var. |
2023 |
2022 |
%Var. |
||||||
Total sales |
188 |
317 |
-41% |
1,125 |
1,370 |
-18% |
||||||
Operating income |
14 |
76 |
-82% |
279 |
321 |
-13% |
||||||
EBITDA |
34 |
84 |
-60% |
327 |
357 |
-8% |
Fourth quarter revenues of
For the fourth quarter, revenues were lower, primarily driven by lower demand, lower prices and an unfavorable product mix. For the full year, revenues were lower due to lower demand driven by higher interest rates. These elevated interest rates correlated with customer project delays as well as inventory buildup in the supply chain.
Fourth quarter EBITDA was lower due to weak demand, lower pricing, and lower absorption of fixed operating costs. This was partially offset by lower raw material costs and cost controls. For the full-year, the decrease in EBITDA was driven by a slowdown in demand in the second half due to high interest rates and the timing of availability of public funding, coupled with lower prices.
Precision Agriculture (
Orbia’s Precision Agriculture business group’s (commercial brand
mm US$ |
Fourth Quarter |
January - December |
||||||||||
Precision Agriculture |
2023 |
2022 |
%Var. |
2023 |
2022 |
%Var. |
||||||
Total sales |
250 |
229 |
9% |
1,063 |
1,085 |
-2% |
||||||
Operating income (loss) |
3 |
(29) |
N/A |
13 |
19 |
-32% |
||||||
EBITDA |
30 |
(4) |
N/A |
118 |
119 |
-1% |
Fourth quarter revenues of
Quarterly revenues increased due to strong performance in certain Asian and Latin American markets. Full-year revenues were lower, driven by a slowdown in demand in
For the quarter, EBITDA improved, driven by higher revenues and lower raw material costs as compared to last year, as well as the absence of one-time costs included in the prior year. For the full year and despite the slight decrease in revenues year-over-year, EBITDA remained flat, driven by favorable raw material prices and tight cost control.
Fluor & Energy Materials (
Orbia’s newly renamed Fluor & Energy Materials business group (commercial brand
mm US$ |
Fourth Quarter |
January - December |
||||||||||
Fluorinated Solutions |
2023 |
2022 |
%Var. |
2023 |
2022 |
%Var. |
||||||
Total sales |
226 |
201 |
12% |
918 |
852 |
8% |
||||||
Operating income |
54 |
51 |
6% |
297 |
248 |
20% |
||||||
EBITDA |
69 |
65 |
7% |
354 |
305 |
16% |
Fourth quarter revenues of
Revenues for the quarter increased year-over-year driven by higher volumes and favorable pricing conditions in refrigerants and medical propellants. For the full year, revenues increased year-over-year, reflecting strong pricing across the product portfolio combined with higher volumes.
Fourth quarter EBITDA increased driven by higher volumes and prices, which offset higher labor costs and unfavorable currency fluctuations. For the full year, EBITDA increased due to strong pricing across the product portfolio.
Balance Sheet, Liquidity and Capital Allocation
Orbia continued to maintain a strong balance sheet throughout 2023. The net debt-to-EBITDA ratio increased from 1.65x to 2.35x year-over-year due to a reduction in EBITDA and increase in debt, mainly driven by the appreciation of the Mexican Peso during the year. The Company had cash on hand of approximately
During the quarter, Orbia paid down approximately
Working capital decreased by
During the quarter, Orbia paid
2023 Sustainability Highlights
Orbia continued to deliver on the 3 pillars of its sustainability strategy – low impact and resilient operations, sustainable solutions and impactful ventures. In 2023, we increased renewable energy consumption by 52% year over year and reduced our scope 1 & 2 emissions by 28% compared to baseline, making progress towards our 2030 commitments of 47% reduction. Additionally, we surpassed our commitment to the Sustainability Linked Bond framework by 25%, decreasing SOx emissions by 85%.
Recognition from well-known third parties in 2023 continued to be encouraging. We maintained our position in the Dow Jones Sustainability Indices (DJSI). We were upgraded by MSCI for the second consecutive year, for our sustainability performance, improved our Sustainalytics rating and earned a gold medal from
Through our operations, solutions and investments we aspire to maximize our positive impact and help our customers do the same.
2024 Outlook
As a global company with a strong presence in the building, infrastructure and construction markets, Orbia is affected by world events, interest rate levels and the performance of major economies. Despite weak volumes and pricing, the Company maintained or improved its market positions across our businesses in 2023. The Company’s 2024 outlook reflects some anticipated recovery in industrial and construction activity in certain regions late in the year, tied to an expected reduction in interest rates. The Company will continue to focus on revenue generation, operational and commercial excellence, cash generation and managing performance factors within its control.
For 2024, full-year EBITDA is likely to be in the range of
Capital investments will be managed tightly during the year, ensuring that spending related to safety and integrity of operations is a priority, as well as that dedicated to a limited number of critical growth projects. The Company anticipates capital expenditures to be in the
We would also like to update our views on PVC supply and demand, and the impact on our current view on potential capacity expansion investments. Given the weak real estate and construction markets in
The Company estimates an effective tax rate of 29% to 32%2 in 2024.
For each of Orbia’s businesses the Company is assuming the following:
- Polymer Solutions: We expect the challenging market environment to continue in 2024, with slow housing demand and oversupplied export markets, but anticipate the market trending upwards in the second half of the year. Lower interest rates late in the year are expected to drive some improvement in PVC volumes and prices, which are expected to be partially offset by low caustic soda prices.
- Building & Infrastructure: We expect continued challenges across parts of EMEA in 2024, partially mitigated by demand recovery due to expected lower interest rates. We expect profitability improvements from cost optimization initiatives, overall growth in market share and, continued product portfolio expansion.
-
Connectivity Solutions:
Fiber deployment is expected to accelerate in the second half of 2024 and beyond, as
U.S. federal investment incentive funds are deployed and private investment ramps up with the anticipated easing of inflationary pressures.
-
Precision Agriculture:
We expect improvement in demand in EMEA, while
China andIndia are expected to remain strong in 2024. We will continue to focus on developing growth initiatives particularly in extensive crops, digital farming and cross business integration, while optimizing production and managing costs. - Fluor & Energy Materials: Volumes are expected to be lower in 2024 compared to 2023 as a result of a quota step-down of refrigerant gases in certain regions. We will optimize value realization of our quota in regulated markets and from existing products and applications. We will also continue introducing new, lower global warming potential, refrigerants and medical propellants. In addition, we will maintain control on spending and capital investments, only dedicating resources to critical initiatives.
In order to maintain the flexibility to invest in critical growth projects, especially in energy materials, while preserving a healthy balance sheet, the Company's Board of Directors has approved and intends to recommend to its shareholders for their approval at Orbia's next Annual General Meeting of Shareholders, an aggregate ordinary dividend payment of
The Company’s Board of Directors has also approved and intends to recommend for shareholder approval to establish a fund for the repurchase of shares for an amount equal to the total balance of the Company's net profits as of
__________________ |
2 Excluding the impact of inflation and foreign exchange rate changes in |
Conference Call Details
Orbia will host a conference call to discuss Q4 and Full Year 2023 results on
Participants may pre-register for the conference call here.
The live webcast can be accessed here.
A recording of the webcast will be posted several hours after the call is completed on Orbia’s website.
For all company news, please visit www.orbia.com/this-is-orbia/newsroom.
Consolidated Income Statement
mm US$ | Fourth Quarter | January - December | ||||||||||
Income Statement |
2023 |
2022 |
% |
2023 |
2022 |
% |
||||||
Net sales |
1,772 |
2,100 |
-16% |
8,204 |
9,648 |
-15% |
||||||
Cost of sales |
1,391 |
1,591 |
-13% |
6,032 |
7,079 |
-15% |
||||||
Gross profit |
381 |
509 |
-25% |
2,172 |
2,569 |
-15% |
||||||
Selling, general and administrative expenses |
326 |
349 |
-7% |
1,323 |
1,241 |
7% |
||||||
Operating income |
55 |
160 |
-66% |
849 |
1,328 |
-36% |
||||||
Financial cost (income) |
54 |
(54) |
N/A |
366 |
160 |
128% |
||||||
Equity in income of associated entity |
2 |
1 |
144% |
2 |
3 |
-21% |
||||||
Impairment expense |
- |
136 |
N/A |
- |
136 |
N/A |
||||||
Income from continuing operations before income tax |
3 |
80 |
-96% |
485 |
1,034 |
-53% |
||||||
Income tax |
54 |
101 |
-47% |
329 |
369 |
-11% |
||||||
Income (loss) from continuing operations |
(51) |
(21) |
141% |
156 |
666 |
-77% |
||||||
Discontinued operations |
- |
- |
N/A |
- |
(1) |
N/A |
||||||
Consolidated net (loss) income |
(51) |
(21) |
141% |
156 |
665 |
-77% |
||||||
Minority stockholders |
20 |
15 |
34% |
91 |
99 |
-7% |
||||||
Majority Net (loss) income |
(71) |
(36) |
100% |
65 |
567 |
-89% |
||||||
|
|
|
|
|
|
|||||||
EBITDA |
226 |
308 |
-27% |
1,460 |
1,909 |
-24% |
Consolidated Balance Sheet
mm US$ | ||||
Balance sheet |
|
|
||
Total assets |
11,552 |
11,624 |
||
Current assets |
4,170 |
4,584 |
||
Cash and temporary investments |
1,456 |
1,546 |
||
Receivables |
1,461 |
1,229 |
||
Inventories |
1,200 |
1,320 |
||
Others current assets |
53 |
489 |
||
Non current assets |
7,382 |
7,040 |
||
Property, plant and equipment, net |
3,370 |
3,170 |
||
Right of use fixed assets, net |
469 |
358 |
||
Intangible assets and goodwill |
3,148 |
3,105 |
||
Long-term assets |
395 |
408 |
||
Total liabilities |
8,334 |
8,301 |
||
Current liabilities |
2,537 |
3,045 |
||
Current portion of long-term debt |
466 |
760 |
||
Suppliers |
1,228 |
1,279 |
||
Short-term leasings |
106 |
84 |
||
Other current liabilities |
737 |
923 |
||
Non current liabilities |
5,797 |
5,256 |
||
Long-term debt |
4,420 |
3,936 |
||
Long-term employee benefits |
139 |
137 |
||
Long-term deferred tax liabilities |
359 |
373 |
||
Long-term leasings |
383 |
285 |
||
Other long-term liabilities |
496 |
525 |
||
Consolidated shareholders'equity |
3,218 |
3,324 |
||
Minority shareholders' equity |
604 |
655 |
||
Majority shareholders' equity |
2,614 |
2,668 |
||
Total liabilities & shareholders' equity |
11,552 |
11,624 |
Cash Flow Statement
Fourth Quarter |
January - December |
|||||||||||
mm US$ |
2023 |
2022 |
%Var. |
2023 |
2022 |
% Var. |
||||||
EBITDA |
226 |
308 |
-27% |
1,460 |
1,909 |
-24% |
||||||
Taxes paid, net |
(67) |
(70) |
-5% |
(409) |
(504) |
-19% |
||||||
Net interest / bank commissions |
(84) |
(48) |
76% |
(296) |
(205) |
45% |
||||||
Change in trade working capital |
198 |
289 |
-32% |
138 |
(33) |
N/A |
||||||
Others (other assets - provisions, Net) |
39 |
16 |
150% |
(71) |
(38) |
85% |
||||||
CTA and FX |
16 |
61 |
-74% |
110 |
(21) |
N/A |
||||||
Operating cash flow |
328 |
555 |
-41% |
931 |
1,107 |
-16% |
||||||
Capital expenditures |
(188) |
(221) |
-15% |
(658) |
(549) |
20% |
||||||
Leasing payments |
(25) |
(26) |
-5% |
(98) |
(92) |
7% |
||||||
Free cash flow |
116 |
308 |
-62% |
176 |
466 |
-62% |
||||||
FCF conversion (%) |
51.3% |
100.0% |
|
12.1% |
24.4% |
|
||||||
Dividends to shareholders |
(60) |
(75) |
-20% |
(240) |
(299) |
-20% |
||||||
Buy-back shares program |
(13) |
(0) |
N/A |
8 |
(142) |
N/A |
||||||
Debt |
(31) |
465 |
N/A |
67 |
1,135 |
-94% |
||||||
Minority interest payments |
(29) |
(36) |
-20% |
(129) |
(141) |
-9% |
||||||
Mergers & acquisitions |
- |
(8) |
-100% |
(8) |
(225) |
-96% |
||||||
Financial instruments and others |
(13) |
(4) |
190% |
35 |
(28) |
N/A |
||||||
Net change in cash |
(30) |
649 |
N/A |
(91) |
765 |
N/A |
||||||
Initial cash balance |
1,486 |
897 |
66% |
1,547 |
782 |
98% |
||||||
Cash balance |
1,456 |
1,546 |
-6% |
1,456 |
1,546 |
-6% |
Notes and Definitions
The results contained in this release have been prepared in accordance with International Financial Reporting Standards (“NIIF” or “IFRS”) with
Figures and percentages have been rounded and may not add up.
About Orbia
Prospective Information
In addition to historical information, this press release contains "forward-looking" statements that reflect management's expectations for the future. The words “anticipate,” “believe,” “expect,” “hope,” “have the intention of,” “might,” “plan,” “should” and similar expressions generally indicate comments on expectations. The forward-looking statements included in this press release are subject to a number of material risks and uncertainties, and our results may be materially different from current expectations due to factors, which include, but are not limited to, global and local changes in politics, economic factors, business, competition, market and regulatory factors, cyclical trends in relevant sectors as well as other factors affecting our operations, markets, products, services and prices that are highlighted under the title “Risk Factors” in the annual report submitted by Orbia to the
Orbia has implemented a Code of Ethics that helps define our obligations to and relationships with our employees, clients, suppliers, and others. Orbia’s Code of Ethics is available for consultation at the following link: http://www.Orbia.com/Codigo_de_etica.html. Additionally, according to the terms contained in the Mexican Securities Exchange Act No 42, the Orbia Audit Committee has established a “hotline” system permitting any person who is aware of a failure to adhere to applicable operational and accounting records guidelines, internal controls or the Code of Ethics, whether by the Company itself or any of its controlled subsidiaries, to file a complaint (including anonymously). This system is operated by an independent third-party service provider. The system may be accessed via telephone in
View source version on businesswire.com: https://www.businesswire.com/news/home/20240221707370/en/
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