Four Consecutive Quarters of Excellent Results for SANLUIS Corporacion
27 October 1999
Four Consecutive Quarters of Excellent Results for SANLUIS Corporacion
- Consolidated sales of US$ 115 million and EBITDA of US$ 24 million in
the third quarter were 31% and 68% higher, respectively, than third
quarter 1998.
- SANLUIS Rassini, increased sales 37% and EBITDA 103% over third quarter
1998.
- The ratio of net debt to EBITDA has dropped from 6.7 to 4.4 over the
last twelve months.
- SANLUIS Corporacion's net accumulated income to September was US
$66 million.
MEXICO CITY, Oct. 26 -- SANLUIS Corporacion, S.A. de C.V.
(BMV: SANLUIS), a Mexican industrial group that manufactures auto parts and
mines silver and gold, reported results for the nine months ended
September 30, 1999.
Consolidated sales for the third quarter were US$ 115 million, a
31% increase over the same period in 1998. EBITDA was US$ 24 million,
68% higher than the third quarter last year. EBITDA margin was 21%, as
compared to 16% in the third quarter 1998. These increases were achieved in
spite of the 5% appreciation of the Mexican peso in 1999 and the seasonal
weakness which normally affects the automotive industry in the third quarter
of the year.
Accumulated sales for the first nine months were US $346 million,
27% higher than the same period of last year. EBITDA of US $79 million was
48% greater than 1998 and margins improved from 20% to 23%. Net income for the
first nine months of 1999 was US $66 million.
Antonio Madero, Chairman of the Board of SANLUIS, remarked that "The solid
and continuous improvement of our operating results over the last four
quarters confirms the profitability of the plant expansion program we
undertook to meet long-term supply contracts with the world's largest
automobile manufacturers".
95% of consolidated sales for the first nine months of 1999 were
denominated in US dollars and 88% were direct export sales to the U.S.,
Canada, and Europe, which provides the Company with a natural hedge of its
dollar liabilities.
SANLUIS Rassini (Auto Parts Division)
SANLUIS Rassini produces suspensions and brake components for the global
automotive industry, with a principal focus on original equipment
manufacturers (OEM's).
Suspension products include leaf springs (parabolic and multi-leaf), coil
springs, torsion bars and stabilizer bars. The Brake Division produces disks,
drums, rotors, hubs, and bushings.
The market for light trucks, pick-ups, and sport utility vehicles in the
NAFTA countries has continued to expand in 1999. Sales of all vehicles in
Canada and the U.S. for the first nine months of the year rose 12.5% over the
same period last year, to 11.6 million. Light trucks, pick-ups and sport
utility vehicles, the segment on which the Auto Parts Division focuses its
primary attention, accounted for 6.2 million vehicles, or 53% of the total
market.
SANLUIS Rassini has a 90% share of the Mexican market for light truck
suspensions and a 62% share of the U.S. and Canadian markets, and has
benefited significantly from the continued growth in demand for vehicles in
that segment of the market.
Third quarter sales of SANLUIS Rassini were US$ 99 million, a 37% increase
over the same period last year, and export orders from the auto assemblers
continue to be strong.
SANLUIS Rassini EBITDA in the third quarter was US$ 18.5 million,
103% higher than the third quarter 1998. The significant improvement in
EBITDA and EBITDA margins is due principally to higher utilization rates of
the additional factory capacity added over the last two years, with fixed
costs spread over increasing volume from additional sales of the Ford Series F
and General Motors GMT-800 platforms.
In addition, the Brake Division, including its unconsolidated subsidiary,
has generated greater sales and income as a result of its new focus on the
original equipment market (with continued selective servicing of the market
for replacement parts). Third quarter sales in the Brake Division rose
51% over the same period last year while EBITDA increased by 486%, due
principally to export orders for the General Motors GMT-800 light truck
platform, BMW's (Z3) and domestic sales to Volkswagen, General Motors, Nissan,
and DaimlerChrysler.
According to Enrique Villasenor, General Director of Autoparts Division,
"Results show that it was the right decision to focus on the OEM market rather
than the replacement market for brakes."
Sales structure on the Brake Division was modified from 12% domestic sales
to OEM's in 1998 to 28% in 1999 and on the replacement market from 11% to 6%.
Also the most significant change was on the export market to OEM's going from
not selling anything (0%) to 55% as of September 1999, and on the other side
on the export replacement market from 77% to 11%.
Because certain non-recurring costs in 1998 -- including those related to
the General Motors strike, start-up costs associated with new plant capacity,
and costs related to the decision to substantially withdraw from the
replacement parts market -- will not be repeated in 1999, and because of
increasing volume and capacity utilization rates, EBITDA and EBITDA margins in
the Division will continue to be significantly higher than last year.
In June 1996, SANLUIS Rassini acquired, together with NHK Spring Co., two
Brazilian suspension manufacturers, Fabrini of Sao Paulo and Cimebra of Rio de
Janeiro. Both firms have been restructured and merged into a new entity,
Rassini NHK Autopecas, which had sales of US26 million for the first nine
months of 1999. Rassini NHK Autopecas as of January 1st, 2000, will be
consolidated with the Auto Parts Division. SANLUIS's business is above
equilibrium point.
Rassini NHK Autopecas produces multi-leaf springs (78% of 1998 sales) and
coil springs (22% of 1998 sales) and operates at approximately 70% of
installed capacity. The company has approximately 50% of the Brazilian market
for leaf springs and approximately 20% of the market for coil springs.
Luismin (Mining Division)
Third quarter results of the Mining Division were substantially unchanged
from 1998, due principally to the forward sale of 80,000 ounces of gold at
US$ 400 per ounce and continued low production costs. Luismin also sold
forward 5.5 million ounces of silver for delivery in 1999 at a price of
US$ 5.45. Together, these hedging operations ensure stable and predictable
results in the Mining Division for 1999.
Luismin produced approximately 22,000 ounces of gold and 1.4 million
ounces of silver in the third quarter. Sales of gold and silver were
US$ 8.1 million and US$ 7.3 million, respectively.
Production costs of US$ 172 per gold equivalent ounce were substantially
unchanged from the prior year in spite of the 8% appreciation of the Mexican
peso and accumulated inflation of 16% for the last twelve months. The Mining
Division continues to be one of the most efficient and lowest-cost operators
in the world.
The Division recorded a charge to earnings of US$10 million in the
quarter, corresponding to the cancellation of twelve mining projects that the
Company considered to no longer be economically viable. The largest of the
cancelled projects accounted for US$ 3 million of the charge.
Finance
The net debt of SANLUIS Corporacion as of the end of the third quarter was
US$ 467 million, including cash of US$ 53 million. Total debt was
US$ 17 million lower than at the end of 1998.
Standard & Poor's rated SANLUIS debt for the first time, assigning a BB-
rating. S&P based its rating primarily on the Company's solid position in the
light truck suspension market in North America, long-term contracts
(8-10 years) and high EBITDA margins in the Auto Parts Division and, as a
complement, rich gold and silver mines with low costs of production. The fact
that 88% of the Company's sales are from direct exports and that 95% of sales
are denominated in dollars is an advantage in the event of a devaluation of
the peso, particularly because the Company's debt is almost entirely
denominated in dollars. Another positive aspect contributing to the S&P
rating is the diversity of platforms supplied by SANLUIS Rassini, among them
several of the most popular light truck models (pick-ups, vans, minivans, and
sport utility) manufactured by major clients including General Motors and
Ford, both rated A by Standard & Poor's, and Daimler Chrysler, rated A+.
SANLUIS expects to continue to reduce the Company's debt outstanding, with
cash flow from earnings, reduced capital expenditures and improved working
capital management. The ratio of net debt to EBITDA continues to improve
significantly, falling from 6.7 to 4.4 over the last twelve months. EBITDA
covered net interest expense 2.4 times for the first nine months of 1999.
Y2K
Because of the potential damage to computer systems from the change of
millenium, SANLUIS initiated "Project Y2K" last year with the support of Gedas
North America. The Project has now been successfully concluded, and SANLUIS
has been rated in the most favorable "Low Risk" category following an audit by
their suppliers. The Project cost US$1.7 million.
SANLUIS Corporacion S.A. de C.V. (BMV: SANLUIS) is a leading Mexican
industrial group, with two operating units: Auto Parts and Mining. SANLUIS
Rassini, the Auto Parts Division, manufactures suspension and brake components
and systems; it is a market leader in suspensions in the U.S., Mexico, Canada,
and Mercosur markets. It has operations in Mexico, the U.S. and Brazil and has
joint ventures with international technology leaders. Luismin, the Mining
Division, is one of the lowest-cost gold and silver producers in the world,
with mines in several Mexican states. More than 90% of SANLUIS's consolidated
sales are dollar denominated.