SANLUIS Corporacion Announces Its Results for
the First Quarter 2001
* Sales and EBITDA in the first quarter were US$115.6 million and
US$19.6 million, respectively.
* Year-over-year sales in the Brake Division rose 25% in dollar terms,
confirming once again the excellent growth potential of this business.
* A study published by Stern Stewart shows that SANLUIS Corporacion had the
highest return on capital in 2000 among Mexican conglomerates, and was
the only one with a return above the cost of capital and a positive EVA.
MEXICO CITY, May 2 The following release was issued today
by SANLUIS Corporacion, S.A. de C.V.:
SANLUIS Corporacion, S.A. de C.V. (BMV: SANLUIS), a Mexican industrial
group that manufactures auto parts and mines silver and gold, today reported
results for the three months ended March 31, 2001.
(Photo: http://www.newscom.com/cgi-bin/prnh/20010502/MXW006LOGO )
Economic Environment First Quarter 2001
Annualized sales of the automotive industry in the first quarter 2001 were
17.2 million vehicles. If sales were to continue at this pace, this would be
the second best year in history for the industry. Production, however, fell to
levels not seen since the second quarter of 1993, due to excess inventories
held by OEMs at the end of 2000. Vehicle manufacturers, therefore, kept
production in the first quarter to a minimum, while selling from inventories.
If sales continue on the present trend, it is possible to anticipate that the
problem of excess OEM inventory will be resolved in the second quarter and
production levels will return to higher levels in the second half of the year.
In the case of SANLUIS, it is important to remember that the Brake
Division will begin shipping under some of its new contracts in 2001. This
will help to partially offset any reductions in contracts that were in
production last year.
In the current environment, it is important to point out again that our
strategy in recent years has centered around diversification of
Markets
* Our presence in various geographic areas of the hemisphere reduces our
dependence on a single region.
* We have established a position in different sectors of the automotive
industry, including both light and heavy vehicles.
Products
We have increased the number of products we produce. We currently provide
a number of award-winning suspension products that are being produced under
several long-term contracts. Our Brake Division offers an equally healthy
diversification of its product line, the quality of which has enabled it to
rapidly increase the number of long-term contracts and increase market share.
Clients
We have made a conscious and successful effort over the years to increase
our client base. As a result, the most prestigious OEMs are now SANLUIS
clients, and they have recognized our products with awards and long-term
contracts.
The Company has taken the following actions to deal with the temporary
weakness in the automotive sector.
* Capital expenditures by Luismin will be reduced to US$6 million in 2001
from the US$10 million that was originally budgeted.
* We reduced personnel in the Suspension Division.
* We are reviewing and reassigning production of different suspension
platforms among our plants in order to optimize overall production efficiency.
* We have begun selling shares of Teck Corporation.
* We are reviewing all components of Working Capital in order to reduce
and make more efficient its utilization.
* We froze salaries of all non-union employees.
Results for the first quarter 2001 were affected by:
* Production cutbacks by OEMs.
* Aggressive efforts by clients to reduce prices.
* Increased costs for energy (gas and electricity), which we began to feel
at the beginning of the second quarter of last year. Energy increased from
4.7% of consolidated costs at the beginning of 2000 to 6.6% at the end of the
first quarter 2001.
* Due to reduced production volumes, we decided to cut the Suspension
Division workforce by 185 in March, as it became clearer that the U.S. economy
was weakening. This represents 2.7% of the Company's total employees.
* The Brake Division increased its workforce by 15% in the first quarter
to train new workers in preparation for the new contracts that will start up
in the second half of the year. This temporarily increased labor costs
without adding revenues in the first quarter.
* Lower prices for gold and silver.
* Strength of the peso. While the peso weakened slightly in nominal terms
over the last 12 months, from 9.24 at the end of the first quarter 2000 to
9.57 at the end of the first quarter 2001, inflation was 7.1% over the same
period, resulting in a stronger peso in real, inflation-adjusted terms. This
impact is even more striking in the case of SANLUIS, as 81% of our sales are
invoiced in dollars while only 57% of our costs are dollar based.
SANLUIS Rassini
SANLUIS Rassini produces suspensions and brake components for the global
automotive industry, with a principal focus on original equipment
manufacturers (OEMs).
Suspension products include leaf springs (parabolic and multi-leaf), coil
springs, torsion bars, bushings, and stabilizer bars. The Brake Division
produces drums, rotors, and hubs.
SANLUIS Rassini has a 90% share of the Mexican market for light truck
suspensions and a 60% share of the U.S. and Canadian market. The Division's
solid and diversified client base includes General Motors, Ford,
DaimlerChrysler, Nissan, Nummi, Navistar, Volkswagen, and Toyota.
SANLUIS Rassini's sales were US$103.5 million in the first quarter, an
11.7% decrease from the first quarter 2000. EBITDA was US$16.6 million, 36.2%
lower than the same period last year.
In addition, the Brake division continues to consolidate its position with
record sales. The Division now has an 8% market share among OEMs in the U.S.
and Canada.
Sales of brake components in the first quarter were US$19 million, 25%
higher than the same period in 2000. This reflects the Division's excellent
future prospects, which have started to crystallize with the new contracts
recently signed.
Results of our Brazilian subsidiary, Rassini NHK Autopecas, have been
consolidated into SANLUIS Corporacion since the beginning of last year. The
company produces multi-leaf springs, which account for 80% of sales, and coil
springs, which account for 20% of sales. The company has approximately 50% of
the Brazilian market for leaf springs and approximately 20% of the market for
coil springs.
Brazilian sales for the first three months of 2001 were US$10.6 million,
15.1% higher than the same period last year.
Luismin
First quarter 2001 results for Luismin were lower than those achieved in
the same period last year due principally to a reduction in the average sales
price of gold, from US$307 dollars per ounce to US$285. This was, however,
8.2% above the average market price of US$263.5 due to successful hedging
operations.
Average sales prices for silver were US$5.06 in the first quarter, 6.5%
below the prices realized in the same period last year, but 11.5% above the
average market price of US$4.54.
Luismin produced approximately 22.2 thousand ounces of gold and 1.278
million ounces of silver in the first quarter.
Average production costs of US$201 per gold equivalent ounce were 1.0%
lower in the first quarter 2001 than the same period last year (calculated
according to the methodology of the Gold Institute Standard). This shows the
continued improvements in productivity at Luismin, which successfully
countered the real appreciation of the peso noted above. As a result of
continuous improvements in productivity and good cost controls, Luismin is a
financially self-sufficient business.
Finance
Net debt outstanding as of March 31, 2001 was US$492.1 million, an
increase of US$23.3 million in the first three months of the year due to a
reduction in operating cash flow caused by temporary weakness in the auto
industry and capital expenditures required by expansion in the Brake Division.
Total debt at the end of the first quarter was US$549.1 million.
The ratio of net debt to EBITDA (last 12 months) was 5.0. EBITDA covered
net interest expense 1.8 times over the last 12 months.
In the second quarter 2001, we initiated a program to sell our 1.8 million
Teck Corporation shares. Sales proceeds will be used to reduce debt. At the
end of the first quarter 2001, the total value of Teck shares and options was
US$20.5 million.
In the first quarter, US$12.4 million were disbursed under a new
US$40 million syndicated long-term credit led by Scotiabank Inverlat. The new
loan is repayable over five years, including 18 months of grace, and has an
initial rate of 325 basis points over one-month Libor.
Capital Expenditures
Capital expenditures for the first three months of 2001 were approximately
US$13.8 million, US$11.2 million in the Auto Parts Division and
US$2.6 million in the Mining Division. This includes expenditures under the
Brake Division's capacity expansion program. As mentioned above, the Division
is building new capacity to supply several export contracts recently signed.
It is important to remember that capital expenditures in the Auto Parts
Division are being made to build the capacity required to supply contracts
which have already been signed and have committed start-up dates. Therefore,
we need to make these investments in fixed assets to meet delivery schedules
for new orders for several new platforms.
SANLUIS Corporacion, S.A. de C.V. (BMV: SANLUIS) is a leading industrial
group with two operating units: Autoparts and Mining. SANLUIS Rassini, the
autoparts division, is a leading supplier of highly engineered autoparts.
Luismin, the mining division, is one of the lowest-cost gold and silver
producers in the world.
