Alfa SAB de CV
BMV:ALFAA
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
9.6427
16.3
|
| Price Target |
|
We'll email you a reminder when the closing price reaches MXN.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Alfa SAB de CV
You don't have any saved screeners yet
Greetings, and welcome to ALFA's Third Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.
Now I would like to turn this conference over to Mr. Hernan Lozano, Vice President of Investor Relations. Mr. Lozano, you may begin.
Thank you, Laura. Good afternoon, everyone, and welcome to ALFA's Third Quarter 2020 Earnings Conference Call. Additional details about our quarterly results can be found in our press release, which was distributed yesterday afternoon together with a summarized presentation. Both are available on our website in the Investor Relations section.
During this call, we will share forward-looking information and statements, which are based on variables and assumptions that are uncertain at this time. These uncertainties include, but are not limited to, risks related to the impact of COVID-19. Eduardo Escalante, ALFA's CFO; Carlos Jiménez, ALFA's Senior Vice President of Legal and Corporate Affairs; and representatives from each ALFA company will participate in today's call.
Before moving into our discussion and results, it is important to note changes to ALFA's consolidated figures. In accordance with IFRS, Nemak meets the definition of a discontinued operation as a result of the planned spinoff of this business. Hence, we started accounting for Nemak as a discontinued operation beginning this quarter. Detailed information related to this change can be found in our earnings report. Unless otherwise specified, all consolidated figures referenced in this call exclude Nemak.
I will now turn the call over to Eduardo.
Thank you, Hernan. Good afternoon, everyone, and thank you for joining us today. Let me begin by saying that I hope everyone is staying healthy and safe.
We are pleased to share our results with you today. This was a very important quarter for ALFA. On the one hand, we kick off a transformational process to unlock unrecognized value and on the other, our 3Q '20 results reflect a V-shaped recovery.
The last few months have been an extraordinary period and the COVID-19 situation continues to evolve daily. The results we are reporting today would not be possible without the tremendous commitment of our exceptional people. We are incredibly proud of the way all our team members and ALFA and all its businesses have stepped up to overcome this unprecedented operating environment.
Consolidated sales were up 10% quarter-on-quarter, supported by a strong growth in all our core businesses. Focus on safe packaging, cooking at home and virtual collaboration are some of the changes in underlying consumer behavior that have contributed to solid demand for our essential products and services.
In addition, the early signs of recovery in the macro environment at the end of the second quarter continued throughout the third quarter as large sectors of the global economy transition to a new normal. Our team's effective response, solid market demand and improving macro conditions boosted our fastest sequential recovery in EBITDA in more than 20 years.
Quarter-on-quarter, EBITDA growth accelerated even faster when including Nemak. Pro forma 3Q '20 EBITDA reached $621 million. This was more than 2.5x the EBITDA we reported in the second quarter, which was impacted by COVID-related distortions.
Sales growth and margin expansion strengthened our financial position at close of the third quarter. Our net debt-to-EBITDA was 3.0x, an improvement of more than 200 basis points from 2Q '20, resulting from lower net debt and higher EBITDA.
Since the beginning of the coronavirus pandemic, we have been very vocal about initiatives to maximize operating efficiency and cash flow. As a result of our proactive efforts, ALFA and all its businesses, including Nemak, are on track to capture approximately $850 million in cost savings and cash flow benefits by year-end versus our initial 2020 budget.
Year-to-date, on a consolidated basis and excluding Nemak, we have achieved an absolute change in net working capital of $176 million versus the same period in 2019. Also, accumulated CapEx is 33% lower and dividends decreased 50% year-on-year, as all companies maintained a disciplined approach to ensure we have ample financial flexibility as we navigate these uncertain times.
In terms of liquidity, we continue to hold higher-than-normal levels of cash to protect us against any potential shocks to the global economy or credit markets. However, based on recent signs of recovery, we have started to pay down some of the credit lines that have been drawn to boost liquidity in the beginning of the crisis.
ALFA's consolidated cash balance at the end of the third quarter was $1.4 billion, down 19% versus the prior quarter. As a reminder, our pre-crisis cash levels were approximately $1 billion.
Next, I would like to share with you a few key highlights of each individual business from the third quarter. First, Alpek. Record volume in 3Q '20 and on track to post an annual record driven by the Polyester segment. A favorable resolution in the M&G Mexico bankruptcy process and the acquisition announced earlier this week, to enhance its expandable polystyrene business, in line with its long-term strategy.
Next, Sigma. Foodservice demand recovering quarter-on-quarter. Sales up more than 50% from a very low base in 2Q '20. Margin expansion quarter-on-quarter and year-on-year, despite impact from Foodservice and FX, including a 290 basis points sequential margin increase in Europe due to lower raw material costs.
Second highest recorded EBITDA in the U.S. and extended innovation capabilities by connecting with more than 120 start-ups in over 20 countries to its program called Tastech by Sigma, which kicked off in 2019. During this year, the company carried out pilot tests with several start-ups with projects that range from food snacks to software solutions.
Third, Axtel. Performance in line year-to-date as peso-denominated EBITDA reached 77% of Axtel's full year guidance. Emphasis on stability and visibility of infrastructure business unit, which is complemented by focusing on digital transformation and value-added services in the service unit, and the sale process moving forward with offers for the whole company. I will elaborate further on these key developments later in the call.
Shifting now to a more strategic discussion. We are excited about the prospects of our unlocking value initiative, complemented by a strong recovery in operating and financial results this quarter. The rationale is to eliminate the significant value gap between ALFA and the aggregate value of its individual businesses by shifting towards a fully independent business management model as opposed to the current conglomerate structure.
We anticipate this will be a medium-term journey, which requires an orderly implementation to maximize shareholder value, and at the same time, maintain a strong credit profile at the ALFA and business levels. We are pleased with the progress of today as we prioritize on enhancing business independence, strengthening our balance sheet and focusing on core businesses. The spinoff of Nemak is the first step in our plan.
We received shareholder approval in August and are currently working on the administrative and regulatory processes required to list Controladora Nemak. As a reminder, Controladora Nemak will hold ALFA's ownership stake in Nemak. ALFA shareholders will receive 1 share of Controladora Nemak for each ALFA share they hold. We expect this process to be completed in the coming weeks.
We are very proud of Nemak's leading position -- leading industry position and extraordinary turnaround as it transitions to become ALFA's first independent business. Rapid cost structure realignment and a successful production ramp-up process in all its regions contributed to record high EBITDA per equivalent unit during the third quarter.
Moving next to Axtel. The company advanced with a very successful bidding process during the quarter, and we see the high number of nonbinding offers for its infrastructure business unit or the whole company.
Axtel determined it would be in shareholders' best interest to advance to the next stage with proposals that involve the sale of the whole company. We anticipate Axtel may conclude this process in the coming months. We are committed to using the proceeds from the Axtel sale to reduce debt, which is a capital allocation priority for ALFA.
Newpek's divestment of all its assets in Texas during the third quarter also contributes to ALFA's unlocking value initiative by increasing focus on core businesses and strengthening our balance sheet. The transition has an implied value of $88 million and generated a onetime EBITDA gain of $58 million in the third quarter, resulting from the complete cancellation of Newpek's obligations in the JV and operating contracts.
Also relevant from a balance sheet standpoint, Alpek announced that it has successfully reached a restructuring agreement with M&G Mexico. Alpek will begin to recover $160 million in secured debt plus interest over a 5-time -- time frame.
Longer term, as debt reduction unfolds at the ALFA level, Alpek could also be a spun-off. At that point, Sigma would effectively become a public entity by leveraging ALFA's listing.
A final comment on guidance. While recovery trends are encouraging and we are optimistic that the worst part of the economic shutdowns may be behind us, it remains difficult to provide a reliable forecast at this time. We expect to return to our historical practice of issuing an annual outlook for 2021 early next year.
In conclusion, third quarter results reflect our business' ability to adapt rapidly and emerge strongly upon the first signs of recovery in macro conditions, reaffirm our commitment to realizing the full potential of each individual business through solid execution and our transformational unlocking value initiative.
This concludes my remarks. Keep well and stay safe. We are now ready to take your questions. Please, Hernan?
Sure. We would like to begin the Q&A session with questions on ALFA. Eduardo, Carlos Jiménez, and I will take questions on ALFA or corporate matters. Operator, please instruct participants to queue for questions on ALFA.
[Operator Instructions] Our first question comes from the line of Vanessa Quiroga with Crédit Suisse.
My question is regarding the Alpek's spinoff -- on Alpek's conference call, if we heard correctly, they said that it could be expected in a time frame of 2 to 3 years. Is that something that you would confirm or also guide to or maybe qualitatively, you can provide us with the milestones that would be needed for Alpek's spinoff to happen? And if you could comment about ALFA's leverage situation in the process, how it affects your decision of timing for Alpek's spinoff, that would be great.
Vanessa, thank you for the question. I think it is very difficult at this time to define a date for the spinoff of Alpek. Sincerely, it is way too early. I think we have to wait to see how the conclusion of Axtel divestment unfolds both in terms of timing as well as in terms of how much it will allow us to deliver ALFA. In addition to that, I think we have to look also at the results of Sigma and Alpek going forward before we can even begin to discuss a time frame for Alpek's spinoff. So I will ask you to wait until -- let's see what happens with Phase 1 of the unlocking value initiative that we are undertaking.
Yes. Regarding the ALFA leverage in the process, the target continues to be for ALFA on a consolidated level to be below 2.5x net leverage. Of course, that will be evolving when you consider the changes in ALFA structure. Now we are maintaining the target to be 2.5x even after the Nemak spinoff and the Axtel divestment. So holding Sigma and Alpek, still we will maintain that 2.5x target.
Our next question comes from the line of Nikolaj Lippmann with Morgan Stanley.
Congrats on the numbers. Two questions, if I may. First, on -- for you, Eduardo, on the balance sheet. So if we assume that when you're collapsing into Sigma, you're bringing, say, $250 million, $300 million of liabilities. On the asset side, what is the thinking? If we -- it will be the headquarter maybe at a similar level of valuation? How would that increase net debt? Would you net some of the value of the headquarter up against the debt so that deal would be 0 of the headquarter value? Would it be partial? Would it be the full value when you would be calculating kind of the net debt increase as Sigma? So that's question #1. I hope that was clear.
Question #2 is, when we look at the cost and expenses at the whole core level today, how would you recommend us to sort of break that out to the different subsidiaries? And how much do you think would remain at Sigma/ALFA level?
Sure. I don't know if I understood right, the -- your first question, Nikolaj. You didn't mean when Sigma is -- when we are in the final stage, and Sigma is the only company within the ALFA structure?
Yes. I'm sorry if I'm not being clear, Eduardo. That's what I mean. My thinking is, and I'm trying to figure out at what stage would you be able to collapse ALFA into Sigma, right? So I'm looking at what you have on the asset side and on the liability side of holdco. And you've been providing guidance of how much net debt-to-EBITDA you would have at Sigma level post that collapse? So my question is, how do you -- do you net the value out? If I'm showing some numbers around. But if you're bringing $200 million of both assets and liabilities, is that a net 0 number? Is that a -- do you only or would you count that the debt 100% of the asset 0 as you're looking at net debt-to-EBITDA?
The way we look at it, Nikolaj, is each one of the businesses, even the ones that still remain in ALFA are making a move towards being -- more and more independent businesses. So they are -- as we have mentioned before, they are absorbing some of the functions that have been provided by ALFA corporate in the different areas, legal, human resources, some finance, IT and the like. Each one of the businesses will make a decision on the best way to go. If they want to take some of the people from the corporate or if they want to hire their own people or hire outside firms to receive those services.
We think there's going to be a significant efficient -- efficiency movement when those -- when those functions are distributed in each one of the companies. At the end of the day, when Sigma remains in ALFA, the plan is to have what only what Sigma needs as operational assets in order to perform the business. The rest of the assets that we have at the corporate level, real estate is a good example. We are looking forward to monetize as well before the process in order to continue reducing the debt at the holding company.
At the end of the day, of course, Sigma will have to take upon the debt of its own as well as the remaining debt at the holding company. So before moving into the corporate expenses -- I don't know if that answers your question, Nikolaj?
I think it does. But can you provide -- can you give a sense of sort of the amounts or percentages of those expenses that will stay at what level? Or is that just too early?
I think it's too early. I can tell you that we are in the process now of analyzing with each one of the businesses, how we are going to do that transition and how those functions are going to move if and which functions are going to move to each one of the businesses. Now all in all -- and now going to the second part of the question, and this will complement the answer. All in all, the corporate expenses year-to-date are about $40 million, okay? That is a significant reduction from past few years. Of course, some of it is COVID related since there are some savings from expenses like travel and the like. But also, as we have discussed before, we have undertaken several corporate cost savings initiatives that we will continue doing.
So all in all, I don't think that, that will be very significant. I mean if you're talking about $40 million divided between the 5 -- 4, 5 large businesses that we have, and I don't think that's going to be significantly impacting the results of the businesses.
Our next question comes from the line of Eric Neguelouart with Bank of America.
So we all basically have the same questions. So I'm going to try at it from another angle. You have $1.1 billion in net debt at holding level, should we expect you to draw down the entire debt in order for Alpek to be spun off? And if not, which is what I understand from your previous answer, what would be a level you'd be comfortable with passing onto Sigma? That's my first question.
And my second question is, out of the $850 million, you said you're having cost savings for this year, how much have you executed by now?
Sure. Sure. Eric, thanks for your questions. Let me begin by saying, the target for Sigma is also to be at 2.5x at the end of the day. So when Sigma has to take over -- in addition to some debt -- the data, the holding company, we expect Sigma to be around that figure of 2.5x.
It is true. Today, we have more than $1 billion debt at the holding company. But remember, we are expecting to receive a significant amount from the Axtel divestment as well as from dividends, both from Alpek and Sigma next year. So I think you also have to consider, in addition to that, that we do expect Sigma to increase, as they have done in the past, is EBITDA in the coming years, which should allow them to be around the net leverage target.
Regarding your second question, the EUR 850 million target, as was originally stated, progress to date, let me give you some figures. Regarding net working capital, we already have year-to-date recovery of about $175 million. Regarding CapEx, year-to-date, we are 33% below what we expected. And also, we have significant savings from Nemak. Remember, the $850 million figure includes Nemak.
From Nemak, as they have stated, they have about $180 million savings in SG&A and fixed costs year-to-date. So we are very happy with the progress to date, and we think we are on target to achieve the $850 million by year-end.
Our next question comes from the line of Alejandro Azar with GBM.
Just 2 quick ones. Is there any way you could share with us ALFA's tax credits at the holding level? If I'm not mistaken, in your other report, appears to be around $1 billion, $1.2 billion. My question goes in the line of, if you could use those tax credits to offset any gains regarding your transformational process.
You said, you had a couple of questions or just that one?
Yes. Yes. This is the first one. The second one, I'll wait.
Okay. What I can tell you is, it is very, very difficult to calculate the tax assets from our financial statements. Because as you know, we have multiple entities and geographies. So it's very hard, just looking at the financial statements to do that calculation. We will not disclose what the tax assets are. But what I can tell you is that the number is evolving since it is based on this year's exchange rate as well as corporate expenses and interest payments. So at this time, I'm still not knowing what will happen with the Nemak spinoff and Axtel sale in terms of timing. It is difficult to give you a number.
Nevertheless, I would like to point out a couple of issues. With Nemak's spinoff, ALFA will be subject to income tax based on the 30% rate on gains, however, there is not an immediate tax impact for ALFA shareholders nor for Nemak itself. In the case of ALFA shareholders, the shareholders will be subject to capital gain tax, but at the time they sell their Controladora Nemak shares, of course, they will have to pay the 10% rate on the gains at that time, but not at the time of Nemak's spinoff.
Understood, Eduardo. And the second one, if I may please. You mentioned that if you sell Axtel, your focus would be to pay down debt. And by that, I guess you mean at the holding level, I'm looking at your bond -- the 2024 bond, callable on late 2023. Have you guys analyzed what to do with -- how paying that bond in 2021? I don't know. That would be the second and last question.
Sure. Sure, Alejandro. At this time, we haven't decided what that we are going to pay. The commitment is to use the proceeds from Axtel divestment, as you mentioned, to reduce the overall debt, which we will be paying, depends on the amount that we receive as well as how the market is at the time we get those proceeds. So it's something that -- it is again too early to define.
What I can tell you is, at the end of the day, Sigma will take up on the debt -- the remaining debt at the holding company as well as its own -- its own debt. So one option is what you mentioned, look at the debt at the holding company and think of reducing that. But we could also look at the -- we'll look at the alternative of reducing debt at Sigma's level. Again, at the end of the day, what is important is that Sigma carries on with the consolidated debt between Sigma and the holding company.
Our next question comes from the line of Alfonso Salazar with Scotiabank.
I have questions regarding the spinoff of Alpek as well. When you first announced the transformation of Alpek to unlock value, did you have this medium-term journey in sight? Or this is probably something that you thought it was going to happen faster back then and if you have changed? And also apart from the need to reduce the debt, is there any other reason why Alpek's spinoff may not take place sooner, probably in '21 that investors need to be aware of? Those are the 2 questions that I have.
Sure, Alfonso. No. We really haven't changed the timing of Alpek's spinoff. Since the beginning, when we defined the different steps of this project, we were very careful of looking at maintaining a strong credit profile both for ALFA on a consolidated level as well as for each one of the companies. And that is why we decided to start with the first phase, that included Nemak's spinoff as well as Axtel divestment. And then since the beginning, we explained the project that after Phase 1, we will need to look at where we stand and see how things evolve in order to define the timing for Alpek's spinoff. Of course, as we have discussed before, in addition to the level of debt that Sigma will need to take upon to be able to do Alpek's spinoff, we also have to look at how the results evolve of both Sigma and Alpek going forward because we expect Sigma results to improve as they have been doing year-over-year.
And is there any reason that could delay Alpek's spinoff beyond '21 apart from that or you don't see anything?
I don't know if it is going to be delayed beyond 2021 because we don't have that time frame. But I would say those are the main factors that we will be looking -- look into.
Our next question comes from the line of Gilberto Garcia with Barclays.
I have a follow-up question on taxes. Can you provide us with an estimate on what your potential tax gain from -- capital gains from an Axtel sale would be? Or what is the acquisition cost of your Axtel stake for tax purposes?
Thank you, Gilberto, for the question. We will not disclose what our fiscal cost is for Axtel. And of course, at this time, again, it's too early to determine the tax impact since we don't know the value at what the Axtel monetization is going to be. We'll need to wait, definitely.
Okay. That's understandable. And on a different subject on the NAFINSA trust, do you have an estimate on when that situation will be resolved? And would it be possible for you to simply change your bylaws so that the trust is not necessarily at all?
Let me turn the question down to Carlos Jiménez. He will address that.
Good afternoon, Gilberto, and good afternoon to everyone. Regarding the NAFINSA trust, we continue following the process with NAFINSA, particularly with the Ministry of Economy in Mexico, which is the authority with competence of our foreign investment. We have presented a very large number of documents and arguments to request the authorization to extend the threshold that now it's in effect, which, as you know, with 50%. We have asked for a new threshold around 75%. We continue following the process with them. We have not received any final determination. We hope to receive a positive answer within the next month.
Regarding the second part of your question whether we should be considering amending the bylaws? Of course, there's an alternative, but we are not -- at the present time, we are not evaluating that alternative. We are focusing on extending the threshold of the existing NAFINSA trust.
Our next question comes from the line of Andres Cardona with Citigroup.
Yes, I only have 1 question left and it is how to balance the desire to deleverage the holding and the potential dividend payments from ALFA to shareholders in 2021? And taking into account the unlocking value strategy that [ bill ] value structure for next year would be without Axtel and Nemak, is it reasonable to think on dividend payments in 2021 from ALFA to shareholders?
Andres, thank you for the question. I think as you mentioned, it will -- we will need to balance both things. The idea is to make a significant reduction of debt using the proceeds from Axtel divestment. But we also expect Alpek and Sigma to improve the results next year and be able to pay dividends as they have done in the past. That in addition to a reduction in the corporate expenses and costs, as we have discussed, should allow us both to pay dividends at the ALFA level as well as to reduce debt. We'll be providing a guidance early next year and hopefully that will, at that time, provide a clear picture. Today, I cannot give you any figures, but certainly, we are aiming at doing both.
There are no further questions on us at this time. I would like to turn it back over to Hernan.
Thank you, Laura. We will then take questions on Sigma. Roberto Olivares, Sigma's CFO, will answer your questions.
Operator, please prompt for questions on Sigma.
[Operator Instructions] Our first question comes from the line of Eric Neguelouart with Bank of America.
A quick question here. So we've heard of the new second wave in Europe. Have you started seeing any decrease in demand, especially from the Foodservice business or in any other way? Just any comments you may have will be really helpful.
Sure. Eric, thank you for your question. I would say not at this time. Actually, we have been improving a lot the numbers in Foodservice, and let me give you some examples. Sales in September were around 20% below 2019 levels. At the lowest point of the pandemic, sales were around -- in April, 60% -- 65% below 2019 levels. So we have been improving since. And as of right now, we have not seen any significant drawback in volume again.
Our next question comes from the line of Alejandro Chavelas with Crédit Suisse.
Just very quickly on U.S. and on the strong margins we have seen recently. We have also seen a significant increase in pork prices in the U.S. in recent days. I was wondering if you could provide some color on this and how are you prepared from an inventory standpoint for such a rise? How much inventory do you have? What are you doing to prepare for a possible more challenging scenario in terms of raw material prices there?
Sure. Thank you, Alejandro, for your question. Yes, I would say that raw material has been very volatile in the last couple of months. But let me go back a little bit and pork prices decreased year-over-year due to the lower demand of the pandemic. And last month, ASF case happened in Germany. And that impact, again, all the global raw material environment. And retailers in the U.S. start increasing a little bit their inventories as they anticipate greater demand from China, following the restrictions on Germany. I will say that it was something that was more on cash base. Price increased a little bit, but then decreased. And right now, it's leveling off around $0.70 per pound. This is the pork ham and $0.70 per pound is actually an average number for the historical period now. We do have inventories, Alejandro. We do have inventories both in the U.S. and Mexico. In the case of Mexico, we've most exposure to pork. In the Americas, we have around 6 months of inventory that we are decreasing, as we speak. And in the case of the U.S., we may have -- we're less impacted there by pork. We have around 1 to 2 months of inventory.
Our next question comes from the line of Jean Bruny with BBVA.
Yes. I'm sorry, the question was relating to ALFA. I don't know if you want me to expect until the end of the conference call or ask it now.
Jean, if you like, we can take it now. We don't have an issue.
Okay, sure. So sorry about that. Yes, just -- I mean you've been quite precise and given a lot of details on what is happening. Just maybe to have an idea of the process on Nemak. When you first announced the spinoff in early August, I think you were expecting the spinoff to happen in the first fortnight of October. Just to know why you have some delays? In the communiqué, you also say that you do expect in the coming weeks not really for the spinoff to happen. Can you give us probably more idea if it's late October, sometime in November or in December?
Absolutely. We will also ask Carlos to address that question, please.
Jean, this is Carlos. You are certainly right that it's taking longer than what we expected initially. And this basically -- it's due to the process within the CNBV, the Mexican Securities Commission. As you all know, the commission went through a major restructuring. It did lose a lot of people, and especially the people that had the best knowledge and experience in handling the processes. It has taken us quite some time to clear the process and to get the authorization to list the Controladora Nemak shares in the market. So we continued pressing every day with them, continued answering their comments and questions and filing new documents with complementary information. And today, our expectation is to be able to close the process by mid-November. So we are very positive that the process will be completed within the month of November, and our objective is to do it by mid-November.
Our next question comes from the line of Nikolaj Lippmann with Morgan Stanley.
Just a very simple question. Can you remind us the importance of Foodservice in Mexico, Canada -- Europe and the United States as a percentage of sales on a normalized basis? And also whatever you can say in terms of the margin impact it is having in 2020, the slowdown in Foodservice, just to be able to get a sense or try to handicap the kind of improvement that we might be able to see in some of these regions as things normalized?
Sure, Nikolaj. Thank you so much for your question. So in the case of Mexico and Latin America, around 20% of their sales come from Foodservice. And in the case of Europe, around 20% -- around 10%, I'm sorry, of their sales come from Foodservice. I don't know if that was...
Yes. And in the United States, do you do much Foodservice at all?
Yes. It's very small portion. It's around 2%, something like that. It's not material.
And can you give a sense of the kind of drag on your margins in year-to-date on 2020 that you've experienced on the back of that slowdown? Is it 20 bps? Is it 50 bps in Mexico and Europe?
Sure. So it will be -- I will say that Mexico is the one that has been impacted the most. And it will be around 20 to 30 bps, yes.
Our next question comes from the line of Andres Cardona with Citigroup.
Roberto, also very simple question and maybe following on the previous one. Can you remind us the long-term EBITDA margins per region for Sigma, the same for Mexico, USA and Europe?
Sure. So in the case of Mexico, it will be around -- an average, it will be around north of 15%. In the case of the U.S., with these levels of this year, I will say that we will try to reach something north of 16%, maybe 17%. In the case of Latin America, it will be a little bit below 10%. And I think Europe is the one that has changed the most, and we wanted to -- we long that to bring it back to double-digit now. So close to 10%. We're working a lot through that. We're doing our revenue management strategies. We're working on footprint optimization, working on cost and expense control and also doing a lot of things on initiatives outside the core and inside the core in order to increase profitability in that particular region.
There are no further questions at this time on Sigma. I would like to turn it back over to Hernan.
Thank you, Laura. We will move forward and take questions on Newpek. Rodolfo Gamboa, Senior Vice President of Oil and Gas, will answer your questions.
Laura, please prompt for questions on Newpek.
[Operator Instructions] Our first question comes from the line of Alejandro Azar with GBM.
I'm sorry. My question is on Sigma. May I?
Sure. Sure, Alex. We can go back to Sigma for 1 question.
Roberto, it's very simple. If you can share with us some color on the dynamics of the markets in Mexico, and I mean traditional mom-and-pops, and the mother channel?
Sure. Thank you, Alejandro. In terms of mom-and-pops, we have seen a slight decrease versus 2Q '19, around very low single digit decrease. And I think it has stayed like that in the past months. In case of modern channel, I would say, it depends a lot on the category. For example, our yogurt category has had an impact because of drinkable yogurt. There's also -- we saw an effect on September given the back-to-school effect and families having less disposable income on their budget. So we have seen recently a slight decrease as well in the case of modern trade.
And one more, if I may, Roberto. Have you seen any trade down or loss of volumes regarding the new norm?
Sure. I think it's right now difficult to tell, Alejandro, we have not as of this moment -- people are kind of confused, but we have not seen anything as of right now. Nothing significant.
[Operator Instructions]
Thank you, Laura.
There are no further questions at this time on Newpek. I would like to turn it back over to Hernan.
Let's move on with questions on Alpek, Nemak or Axtel. These companies held their earnings conference call earlier this morning or last week in the case of Axtel. José Carlos Pons, Alpek's CFO; Alberto Sada, Nemak's CFO; and Adrian de los Santos, Axtel's CFO, are all here with us to answer any additional questions.
Laura, please instruct participants to queue for questions on Alpek, Nemak or Axtel.
[Operator Instructions] Our first question comes from the line of Manuela Echavarría with Credicorp Capital.
Yes. I do have a quick question on Nemak and it's -- we've seen the EBITDA expansion in a per unit basis, you have posted a really stunning result. So can you break down on that and on what should we [indiscernible] of the sustainability of those levels?
Manuela, your line is breaking up a little bit. Did you understand that question, Alberto?
No. Manuela, could you please repeat the question? Because we couldn't hear you, it was breaking up.
Yes. Sure. Can you hear me now, well?
Yes. I think that's going to be a little bit better.
Okay. So my question was related to the EBITDA expansion on a per unit basis on the Europe operations for Nemak. So you posted a really like kind of stunning results. So my question was related, if you can kind of break down on that on what should be like kind of the sustainability of that result?
Manuela, it's still a little bit not very clear, but let me try to see if I understood your question. I'm just going to repeat it. So you want to understand the EBITDA of Europe?
Sure. Yes. In a per unit basis, the expansion you posted there?
Yes. Well, yes, as we described earlier today in our call, we had -- in all regions, very good -- on all major regions, North America and Europe, very good performance improvement measures. So Europe was no exception. To the contrary, we had a very good performance in that region on the cost side. And we also had a onetime effect related to increase of inventories of products that we make. So yes, that was a mid-single-digit effect. And that was associated with that, the increase in inventory that were depleted on the previous quarter for -- during the pandemic as we were in the lockdowns. So it's mainly that inventory effect, a little bit of FX, still very small and efficiencies.
[Operator Instructions] Our next question comes from the line of Alejandro Chavelas with Crédit Suisse.
So just a follow-up from Nemak's recently published guidance. It would appear that EBITDA per unit really declined significantly versus the third quarter's levels. I would perhaps like to understand a little bit why the unit economics would deteriorate versus the third quarter? Is it [indiscernible] you mentioned some inventory effects. If you could quantify what explains this reduction, it would be great.
Yes, Alejandro. As we highlighted, we have our full year guidance established at $425 million for the year. Remember that this guidance includes the effect of the severance payments that we had to pay and book on the second and a little bit on the third quarter. So that's all together included. And yes, when you look at the sequential EBITDA, the fourth quarter does reflect a reduction. But that's very well aligned with the seasonality effect that we traditionally see on a quarterly basis. So on the fourth quarter, traditionally, we do production stoppages. Those are scheduled stoppages in December for maintenance. And that's totally aligned also with the production schedules from our customers.
So in those months, primarily, in December, normally engage in higher than normal maintenance expenses and some retoolings that we do on our operations to prepare for next year. So traditionally, those are a little bit higher expense months. And for that reason, the EBITDA per unit drops on the fourth quarter. But certainly, that's seasonal. And we will see that, obviously, as we move along next year, our first quarter will be obviously higher than that and gradually, we will be stabilizing those margins to the new cost structure that we are very -- that we have explained before, that we'll be getting after all these adjustments that we did in the last months.
Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Hernan Lozano for closing remarks.
I would just like to thank everyone for your interest in ALFA. If you have any additional questions, please feel free to reach out to us. We will be pleased to assist you. We also extend our best wishes to you and your families to stay safe and healthy. Thank you very much for joining us today, and have a great day.
Thank you for joining us on today's conference. This concludes. You may disconnect your lines at this time. Thank you for your participation. Have a great rest of your evening.