Despite healthy growth in Europe, Nemak profits fall 10.4% during 2017
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Despite a healthy growth in Europe and operations in North America and the rest of the world remaining stable, Nemak S.A.B. de C.V. saw its quarterly earnings (EBITDA) fell 10.8% at the end of 2017 to US$ 166 million, due to fluctuations in aluminum prices and expenses from the launch of new programs. EBITDA for the full year was US$ 715 million, 10.4% lower than last year due to the same factors.
Grupo Alfa's automotive subsidiary, dedicated to the production of engine heads and structural components, reported a 9.8% increase in quarterly revenue to US$ 1.09 billion on the back of higher average aluminum prices plus higher volumes. Full-year revenues were US$ 4.48 billion, up 5.3% again due to higher aluminum prices.
In Europe, fourth quarter revenues increased 19.4% while quarterly earnings increased 12.7%. For the full year, revenues increased 9.8%,but full-year EBITDA decreased 1.3% as higher revenues were not enough to offset negative metal price lag.
In North America the company faced an even more complex scenario. Quarterly revenues increased 7.3%, but the adverse impact of metal price lag and increased launching expenses were the main causes of a 22.7% decrease on earnings. For full-year 2017, revenues increased 0.2% compared to 2016 while EBITDA decreased 17.2%, for the same reasons.
"Vehicle production in North America and vehicle production of Nemak customers decreased 4.1% and 5.8%, respectively, as OEMs (car manufacturers) reduced inventories," the company reported in its earnings report.
Nemak was awarded new contracts across all business lines worth a total of US$ 130 million in annual revenues in the quarter. For the full 2017-year, new contract wins totaled US$ 830 million in annual revenues, similar to the amount secured the previous year.
“We also took important steps to strengthen our financial position, issuing a US$500 million bond in the international debt markets in January, 2018 that will enable us to lower our financial costs and to extend the average life of our debt. The notes featured the all-time lowest coupon —4.75%— for a Ba1/BB+/BB+ rated issuance from a Latin American company,” said the company in its quarterly and full-year report.