Agenda. Our Businesses. Overview of Consolidated Figures. Strategy & Results. DESC - 7 Foro Latibex

Transcription

1 7 Foro Latibex

2 Agenda Our Businesses Overview of Consolidated Figures Strategy & Results

3 DESC Figures DESC is one of the largest Conglomerates in México, with 2004 sales of approximately US$ 2 billon, which through its subsidiaries is a leader in Automobile Parts, Chemical, Food and Real Estate businesses. Revenues EBITDA 2,200 2,000 Pro Forma CAGR: 11.6% 1,965 2, Pro Forma CAGR: 25.9% US$MM 1,800 1,600 1,400 1,717 US$MM , , B B Pro Forma* Pro Forma* The adjusted 2003 and 2004 information excludes the financial figures for DESC s aluminum wheel, constant velocity joint, tappet, adhesive and sealant businesses and the Chiluca real estate project, which were sold.

4 Our Businesses Chemical Real Estate Food Automotive

5 Chemical Business Highlights Only Mexican producer of synthetic rubber and carbon black Mexico s leading producer of polystyrene and phosphates Manufactures 7 product lines, in 14 plants located in 6 states of Mexico and one in Spain Products exported to 40 countries 2004 Sales of US$797 million, EBITDA of US$57 million Sales EBITDA US$MM US$MM Acum. Sept Acum. Sept Acum. Sept 2004 Acum. Sept. 2005

6 Chemical Business Overview Principal Businesses: INSA (emulsion rubber) DYNASOL (solution rubber) QUIMIR (phosphates) RESIRENE (polystyrene) PLASTIGLAS (acrylic sheets) NHUMO (carbon black) REXCEL (particle board) 1.6% 3.4% 3.3% 5.2% 16.2% 13.9% 14.1% 12.4% 82.2% 82.7% 82.6% 82.3% Acum. Sept Acum. Sept Cost of Sales Operating Expenses Operating Margin The adjusted 2003 information excludes the financial figures for DESC s adhesive and sealant business, which was sold.

7 hemical Business Principal Clients and End Products Principal Clients R End Products Solution Rubber Emulsion Rubber and Carbon Black Polystyrene Phosphates Particle Board and Laminates (Asphalt Reinforcement) (Tire Rubber Reinforcement) (Containers)

8 hemical Current Business Drivers Increase in sales volumes and prices Better performance of plants due to a greater installed capacity utilization Implementation of stricter controls on operating expenses Increase in margins Increase in domestic consumption Increase in export levels Implement strategies to pass rising raw material costs on to customers Strengthen trading of chemical products in Mexico

9 Food Business Highlights Mexico s leading producer of tomato puree (Del Fuerte 65.2%) Significant market shares in ketchup (Embasa 22.5%) and jelly (Smucker s 12.6%) Over 50% market share in pork meat products in Southeast region of Mexico First plant in Latin America with Tetra Recart packaging technology that preserves nutritional properties 2004 Sales of US$395 million, EBITDA of US$49 million Sales EBITDA US$MM US$MM Acum. Sept Acum. Sept Acum. Sept Acum. Sept. 2005

10 Food Business Overview Principal Businesses: 3.2% 8.1% 8.8% 8.9% DEL FUERTE (shelf stable branded products) NAIR (tuna) BLASON (coffee) LA VICTORIA (shelf stable life branded products) KEKEN (pork meat) EMBASA (ketchup, chilies, salsas) SMUCKERS (jelly) 23.9% 19.9% 19.7% 18.9% 72.9% 71.4% 72.2% 72.2% Acum. Sept Product Tomato Puree Ketchup Jelly Tuna Brand Del Fuerte Embasa Smuckers Nair Acum. Sept Cost of Sales Operating Expenses Operating Margin Market Share* * As of YE2004

11 Food Current Business Drivers Branded Products Increase in sales volumes, with better product mix Implementation of efficiency programs and stricter expense controls First plant in Latin America with Tetra Recart packaging technology that preserves nutritional properties Increase market presence Pork Meat Business Increase in sales prices; pork meat prices rose 31% during 2004 Better product mix with greater export sales due to a higher demand from Japan and Korea Important improvement in operating margin

12 Automotive Business Highlights One of the largest independent Mexican manufacturer of auto parts Manufactures 30 product lines across OEM and aftermarket segments in 16 plants in Mexico and 1 in the U.S. Recipient of Nissan s Supplier Master Award for excellence in quality 2004 Sales of US$660 million, EBITDA of US$51 million Sales EBITDA US$MM US$MM Acum. Sept Acum. Sept Acum. Sept Acum. Sept. 2005

13 Automotive Business Overview Principal Businesses: TREMEC (light transmissions) TSP (heavy transmissions) PEMSA (painting products) PEMSA (stamping products) DACOMSA (aftermarket) ENCO (gears) ETRAC (axles) CARDANES (propeller shafts) 3.5% % 82.6% 3.3% % 0.5% 0.9% 11. 1% % 85.9% 88.4% 88.1% Acum. Sept Acum. Sept Cost of Sales Operating Expense Operating Margin e adjusted 2003 and 2004 information excludes the financial figures for DESC s aluminum wheel, constant velocity joint and tappet businesses, which was sold

14 Automotive Business Principal Clients

15 Automotive Current Business Drivers New contracts for a total of US $263 million, mainly in the transmission, rim, axle, stamping, painting, and cardan shaft businesses New business sales in 2004 reached US $42 million, and for the annual average sales will be approximately US $227 million Implementation of productivity programs and stricter expense controls Currently exploring TIER 2 and Components opportunities through potential joint ventures Address continuing high raw material prices Expand and diversify supplier base to mitigate against fluctuations in prices Continue to focus on value added businesses

16 Real Estate Business Highlights DESC Real Estate is one of the leading real estate developers in Mexico DESC has highly attractive properties for tourist developments along Mexico s Pacific Coast and one of the largest land reserves for residential development in the Mexico City Valley 2004 Sales of US$111 million, EBITDA of US$18 million Sales EBITDA US$MM US$MM Acum. Sept Acum. Sept Acum. Sept Acum. Sept e adjusted 2003 information excludes the financial figures for the Chiluca real estate project, which was sold.

17 Real Estate Business Overview Projects: Residential Developments: La Punta Bosques, México, D. F. Bosques de Santa Fe, México, D. F. Tourists Development: Punta Ixtapa, Guerrero Punta Mita, Nayarit Punta Gorda, Baja California Commercial Development: Arcos Bosques, México, D. F.

18 Real Estate Assets REAL DEC-04 CONCEPT (Amounts in US$MM) REAL SEPT-05 VAR CLIENTS INVENTORIES (22.1) ASSETS (20.4) Inventories by Project (Amounts in US$MM) Punta Mita Bosques de Santa Fe Punta Ixtapa Lagos de la Estadia Others TOTAL SEPT Real Estate Inventories are at historical value

19 Real Estate Current Business Drivers Higher sales in the Punta Mita project Growing interest in luxury developments primarily from the North American market Progress in the Bosques de Santa Fe project; as of 2Q05, 93% of the available single-family homes had been sold Capitalize on the global base of investors drawn to Punta Mita Development of the St. Regis hotel, Casas Four Seasons, and Four Seasons Residence Club

20 Agenda Our Businesses Overview of Consolidated Figures Strategy & Results

21 Consolidated Figures 2.0% 4.3% 3.7% 4.7% 18.3% 15.1% 15.0% 14.1% Cost of Sales Operating Expenses 79.7% 80.6% 81.3% 81.2% Operating Margin Acum. Sept Acum. Sept e adjusted 2003 and 2004 information excludes the financial figures for DESC s aluminum wheel, constant velocity joint, tappet and adhesive and seala sinesses and the Chiluca real estate project, which were sold.

22 Sales Evolution 1,717 1,965 US$MM 14.4% % % 11.7% % DESC Chemical Food Automotive Real Estate e adjusted 2003 and 2004 information excludes the financial figures for DESC s aluminum wheel, constant velocity joint, tappet and adhesive and seala sinesses and the Chiluca real estate project, which were sold.

23 Sales Breakdown by Business Q05 6% 5% 5% 38% 36% 37% 39% 34% 42% 20% 19% 19% Automotive Chemical Food Real Estate

24 EBITDA Evolution US$MM 36.0% % % 81.5% % DESC Chemical Food Automotive Real Estate e adjusted 2003 and 2004 information excludes the financial figures for DESC s aluminum wheel, constant velocity joint, tappet and adhesive and seala sinesses and the Chiluca real estate project, which were sold.

25 EBITDA Breakdown by Business Q05 3% 25% 9% 28% 10% 24% 40% 55% 17% 39% 24% 26% Automotive Chemical Food Real Estate

26 Decrease in Net Debt Equity Increase 1, Sale of Constant Velocity Joint business Acquisition of Particle Board business US$MM Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 Net Debt Cash Total Debt

27 Improvement in Credit Ratios Leverage Ratio Interest Coverage Ratio Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q Debt Cash / EBITDA for the last 12 months. 2 Interest Expenses / EBITDA 1.5 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

28 Agenda Our Businesses Overview of Consolidated Figures Strategy & Results

29 Strategy Optimize DESC s Capital Structure Reduce net debt Reduce financing costs Improve average tenor of debt Consolidated leverage ratio to reach a healthy financial structure Simplify and consolidate capital structure Continue Reducing Operating Expenses Proceed with Phase II of Project Evolución to reduce operating expenses from 15.1% to 13.9% of sales Concentrate Business Portfolio on Value-Added Operations Sell or discontinue unprofitable businesses and sell unproductive assets Reinvest the proceeds from asset sales into value-added businesses Continue to pursue joint ventures in areas that hold opportunities for synergies Increase market share in most profitable sectors Strengthen position in businesses that have a dominant position

30 Refinancing Optimizing DESC s Debt Structure Equity capital increase of US$248MM executed in April 2004 Total Debt has decreased US$406MM from December 2003 to September 2005 Public exchange offering completed in July 2005 to refinance MXP953MM in UDI bonds Additional proceeds from this Facility will be used to refinance remaining UDI bonds By the end of 2004, revolving facility was fully repaid Results Annual interest payments have been reduced and average debt maturity has been extended Refinancing of remaining UDI bonds will essentially eliminate refinancing risk LTM Net Debt/EBITDA fell to 3.04x as of 3Q05, as seen below Net Debt / EBITDA Covenant 6.0x 5.5x x 4.5x x 3.5x 3.0x 2.5x Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05

31 Administrative Restructure Project Evolución Reducing Operating Costs Administrative restructure initiated at every level of the organization to reduce operating expenses Personnel reduced across the entire group from more than 23,000 in 1998 to less than 14,000 in 2004 Stricter controls on operating expenses implemented during 2004 Results Reduction of operating costs from 19.5% in to 14.1% of sales from 4Q03 to 3Q05 (surpassing original objective of 15.5%) Lower Operating Expenses as % of Sales 18.7% 18.1% 19.5% 16.9% 15.6% 15.3% 14.8% 14.6% 14.4% 13.6% 14.1% 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05