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DCR Upgrades Grupo Condumex, S.A. de C.V.

30 July 1997

DCR Upgrades Grupo Condumex, S.A. de C.V.

    CHICAGO, July 30 -- Duff & Phelps Credit Rating Co. (DCR) has
upgraded the long-term senior unsecured peso debt of Grupo Condumex to "BBB"
(Triple-B) from "BBB-" (Triple-B-Minus).  Ratings on the company's foreign
currency obligations remain at "BB" (Double-B) and are restricted by the
sovereign ceiling.
    Condumex's product mix and diversified end markets have allowed the
company to prosper despite difficult economic conditions in its home market
since the Mexican peso crisis.  Total exports (including direct and indirect
exports) rose from approximately 17 percent of consolidated sales in 1994 to
approximately 38 percent in 1996, aided by the healthy U.S. economy
(particularly in the automotive sector) and a favorable cost position.  The
United States accounts for approximately 80 percent of Condumex's total
exports, approximately two-thirds of which are automotive parts.  Condumex has
established export market positions over the past several years, which have
largely offset weak domestic demand in the construction, energy and automotive
markets.  We note that a significant portion of the company's exports are
derived through strategic alliances with a number of OEM and primary
suppliers, further aligning Condumex with its customer base over the long
term.
    The recovering domestic market, particularly in the area of large
infrastructure projects, should enhance operating results over the near term.
Despite a potential narrowing of the company's cost advantage (which had
resulted in part from the peso devaluation) and the cyclical nature of the
majority of its end markets, growth prospects remain attractive.  Condumex's
operations in the communications cables and telecommunications equipment stand
to benefit from the increased capital investment and privatizations occurring
in the telecommunications industry throughout Latin America.
    Solid cash generation and relatively moderate capital expenditure levels
have resulted in a stable financial profile.  EBDIT/interest expense increased
to 5.6X in 1996 resulting from stronger operating results and the 1995
decision to reduce debt levels.  Conservative financial policies allowed
Condumex to weather the Mexican financial crisis without any meaningful
deterioration in financial condition, and leave the company well-positioned to
face eventual downturns in its cyclical end markets.  Additional confidence is
provided by evidence of past restraint in dividend flows to its parent
company.  Debt/EBDIT has remained within a range of 1.4X to 2.4X over the past
five years.
    Grupo Condumex is engaged in the manufacture and distribution of
mechanical and industrial products, automotive parts, electrical conductors
and equipment, and telecommunications cables and equipment.  Grupo Condumex is
100 percent owned by Carso Industrial SA, which also has interests in
retailing (including a 67 percent share of Sears de Mexico).  Carso Industrial
is affiliated with Grupo Carso (led by industrialist Carlos Slim), a leading
Mexican industrial conglomerate with holdings in telecommunications (a 10
percent share of Telmex), tobacco and financial services.

SOURCE  Duff & Phelps Credit Rating Co.