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
|
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.
Good afternoon, and welcome to ALFA's Fourth 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 Fourth 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 associated to the impact of COVID-19.
Eduardo Escalante, Alfa's CFO; Carlos Jiménez, ALFA's Senior VP of Legal and Corporate Affairs; Roberto Olivares, Sigma's CFO; and representatives from each ALFA company will participate in today's call.
Before moving into our discussion and results, let me make a brief comment about the accounting treatment of Nemak. As a reminder, in accordance with IFRS, we started accounting for Nemak as a discontinued operation beginning with the third quarter 2020 results, reflecting the spin-off of this business. During the fourth quarter, Nemak's financial results were included in discontinued operations through December 14, 2020. The day Controladora Nemak shares were distributed and started trading on the Mexican Bolsa.
Detailed information related to this can be found in our earnings release. 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. I hope you and your loved ones are remaining safe and healthy. It has been about 1 full year into the pandemic. Our businesses have done well, adapting to the changes and overcoming the headwinds to deliver a solid financial performance while, at the same time, successfully executing on strategic initiatives to maximize value for our shareholders. We are pleased with our fourth quarter 2020 financial results and the steady sequential improvement we have seen since 2Q '20 across our key metrics.
On the macro front, we experienced a more stable to a slightly improving commodity and currency environment during the fourth quarter. In this context, we achieved quarter-over-quarter sales and comparable EBITDA growth. Fourth quarter 2020 net sales were $3.2 billion, a sequential improvement of 5% versus the third quarter. The top line was driven by Sigma's double-digit sales growth in Mexico together with a 5% and 6% sales increases in Europe and LatAm, respectively. Also contributing to the positive sales trend were higher average prices at Alpek, combined with a record fourth quarter volume. Adjusting for extraordinary items, comparable EBITDA of $373 million was the highest quarterly amount in 2020 driven by resilient quarter-on-quarter performance in all businesses.
Further down the P&L, we reported income tax of $554 million in the fourth quarter, including a $382 million noncash reserve for deferred income tax asset. This accounting item is associated with an investment in shares of a subsidiary and was expected to be applied in a transaction with third parties, which has not occurred in several years. In accordance with IFRS, we cannot carry this asset in our books any longer.
Fourth quarter income tax also includes a $105 million deferred tax loss, mainly resulting from the appreciation of the Mexican peso versus 3Q '20. Moreover, our P&L includes a $496 million profit from discontinued operations in 4Q '20, mainly comprised of the following 3 items: first, a $38 million profit from discontinued operations. This figure corresponds to Nemak's profit over the 2-month and 14-day period ended on December 14, 2020.
Second, a $581 million gain in translation effect resulting from the Nemak spin-off. In accordance with IFRS, ALFA recognizes exchange rate differences related to Nemak directly in its balance sheet. The gain corresponds to the reclassification of this line item from a stockholders' equity to the income statement at the time of loss of control of Nemak for accounting purposes.
The third item is a $127 million tax resulting from the Nemak spin-off. It is important to note that we expect to apply some tax losses against the tax that is being recognized in our P&L as a result of the spin-off.
ALFA has been delivering products and services to its customers for over half a century. We are extremely proud of the amazing execution we saw across the organization during 2020. I want to thank each of our team members for their hard work and dedication.
The health and well-being of our employees is our top priority. At the onset of the pandemic, we increased safety measures at all facilities, supported community relief efforts and rolled out business continuity plans to ensure our customers continue receiving essential products and services. We took immediate and decisive action as we announced and achieved more than $850 million in cost savings and cash flow benefits. All businesses enhance their cost structure, optimize net working capital, defer nonessential investments and reduce dividends.
Despite the global uncertainty of 2020, we exceeded our pre-COVID EBITDA guidance, excluding Nemak. Our net debt-to-EBITDA was 3.1x at the end of 4Q '20 compared with 3.2x at the peak of the pandemic-related shutdowns in the second quarter.
Moreover, ALFA's consolidated cash balance at the close of 2020 was $1.6 billion, up almost $600 million during the year. A strong balance sheet and ample liquidity provided the necessary support during uncertain times to move forward with our transformational strategic initiatives.
We are pleased with the progress of our transformation during 2020, as we prioritize enhancing business independence, reducing debt, and focusing on core businesses. I will touch on each of these work streams: first, enhancing business independence. The successful spin-off of Nemak was a crucial milestone on this front. We effectively transferred all of our Nemak's shares to ALFA shareholders, providing them full autonomy and optionality. In addition to reducing our conglomerate structure, the spin-off enables investors to value Nemak on its own merits and growth prospects.
Nemak holds a promising long-term outlook for all its stakeholders. Besides overcoming unprecedented challenges in 2020, its extremely talented management continued to build upon the company's unique capabilities to serve the global auto industry, growing sustainable mobility needs.
Second, debt reduction. Maintaining a strong balance sheet throughout our transformational process is fundamental. We are committed to using the proceeds from the potential sale of Axtel's business units to further reduce debt at the ALFA level.
Axtel's successfully attracted a high number of participants to its competitive sale process. Following an exhaustive evaluation of offers received for the whole company, Axtel's Board of Directors determined it would be in the shareholders' best interest to redirect efforts towards the sale of its 2 business units separately. The company is currently engaged with potential buyers who have shown interest for either business unit, and we'll continue to provide timely updates on this important process.
Third, focus on core businesses. Specifically, Alpek and Sigma account for the most significant initiatives that are being undertaken to continue growing our core businesses. During the fourth quarter, Alpek successfully closed the acquisition of NOVA Chemicals expanded its styrenics business in the U.S. This transaction enhances Alpek's Plastics & Chemicals segment and consolidates the company position as a leading expandable polystyrene producer in the Americas and a top 3 player worldwide. Sigma's developments are also crucial on this front, and we acknowledge the need to provide additional visibility.
We are working together with the company to amplify its individual communication efforts as a nonpublic entity.
To that end, I'm delighted to share today's call with Roberto Olivares, Sigma's CFO, who will provide a more detailed overview than what has been typical of this ALFA-oriented forum. I will now turn the call over to Roberto.
Thank you, Eduardo. Good afternoon, everyone. I hope you and your families are safe and healthy.
Once again, Sigma has demonstrated its ability and determination to adapt and overcome obstacles to bring communities everywhere savory foods to love. Our top priority during the pandemic has headed straight up to the new normal has been the health and safety of our employees, suppliers, clients and consumers, which is why we implemented strict safety and quality protocols at our facilities.
I am pleased to have the opportunity to showcase our 2020 fourth quarter results and provide an update on the business. During the fourth quarter, we observed a solid performance in most regions. Particularly in the U.S., we saw a strong demand in our National and Hispanic businesses, building up to a record year for the region. Consolidated revenues were $1.7 billion, down 3% year-on-year. An EBITDA of $178 million was 1 above -- 1% above the same period of 2019 despite the challenging environment.
Our Foodservice channel, which accounts for less than 10% of total revenue, continues to be impacted by lower consumer mobility, but showed a gradual and sustained recovery since hitting its lowest point in April. Excluding Foodservice results, fourth quarter revenues and EBITDA in local currency increased 2% and 7%, respectively.
Throughout the year, we have implemented a series of comprehensive initiatives that include cost and expense reduction, a strategic rationalization of CapEx and improvements to net working capital, all while maintaining operational continuity. In line with our strategy, we continue our efforts to grow our core business, benefiting from brand, category, product and regional diversification as well as implementing new processes, optimizing the use of resources and adopting new technologies.
Innovation plays a key role in growing our core. Despite the pandemic, our iterative innovation process based on design thinking has resulted in more than 500 new product launches during 2020.
Our consumer-centric approach helped us to improve the flavor and nutritional profile of our products while maintaining quality as well as compliance with regulatory requirements. For example, in Mexico, during 2020, we adhered to the new labeling regulation, where more than 90% of our sales come from products with none or a single label. In addition, we offer product lines in our main categories with non-labels at all.
We're also focused on growth beyond our core business. As a revenue-driven company, we look to develop new sources of revenue by leveraging our capabilities, infrastructure and experience. To do so, we engaged in an agile and continuous exercise of filtering, analyzing, piloting and scaling high potential opportunities. Some recent examples include protein snacks and plant-based product. The first offers nutritious products targeting on-the-go consumption while the latter offers an option to consumers who don't eat animal protein or prefer a flexitarian diet. These new sources of revenue also include e-commerce initiatives like Grill House, a premium service app focused on consumers who love the grill, that is currently in its scaling phase after a successful pilot.
Sigma's growth efforts also include looking outside our organization in search for new products or disruptive technologies. Therefore, we continue to strengthen our relationship with the start-up ecosystem. Last week, Tastech by Sigma launched its second-generation call-out with 3 challenges: future food, green technology and power connections. In the first generation of Tastech by Sigma, 123 start-ups from 19 countries applied, 7 were selected to carry out pilot tests, and we are currently in the process of formalizing long-term relationship with 4 of them.
Our plans are ambitious and require solid foundations. This is why we continue channeling resources into transforming our culture, having a greater focus on innovation, developing our talent with entrepreneurial skills and improving the way we allocate resources. These enablers will help us reach our full potential.
As ALFA's unlocking value is already in force, and with transition from a subsidiary into a stand-alone company, we look forward to taking a more active role within the investment community, strengthening our communication efforts and reinforcing our commitment to provide clear, straightforward and insightful information to our stakeholders.
Finally, 2021 will surely bring new challenges that I'm sure -- I'm confident that we will overcome them. Being better and stronger is Sigma's new normal. I will now turn the call back to Eduardo for additional comments and closing remarks. Thank you.
Thank you, Roberto. Let me touch on 2 other items: First, CEO succession at Axtel. As previously announced, Rolando Zubiran, who has been instrumental in transforming the business over 22 years, decided to retire. On behalf of the ALFA Executive team and the Board, we want to thank Rolando for his many years of service in the company and wish him the best in retirement.
In the meantime, Axtel's Board has appointed me as acting CEO during the succession process. The timing of this is also related to how long this sale process takes. I will remain in my role as ALFA's CFO.
In other news, effective February 3, ALFA shares were excluded from the MSCI Index, giving concerns related to the participation of foreign investors in ALFA's Neutral Investment Trust, which is also known as the NAFINSA Trust. As you are aware, since 1991, the only way for foreign investors to own ALFA shares has been via the NAFINSA Trust. The shares held in this Trust are limited to 50% of the outstanding shares. We have experienced a significant increase in the participation of foreign shareholders over the last year. Hence, the Trust reached its limit for the first time in its 30 years of existence. The participation of foreign shareholders in the Trust varies daily as ALFA shares are bought and sold. ALFA cannot guarantee whether the participation of foreign shareholders is below the Trust's limit. However, any shares held by foreign investors in excess of the above referral limit are entitled to receive any distribution authorized by ALFA's corporate governance bodies, as evidenced by the dividend payment made this past January. It is our top priority to resolve this issue as soon as possible. We are actively engaged with government authorities to complete the required proceedings for approval to increase the Trust's limit. It is important to note that this does not change the number of ALFA shares outstanding.
Let me close with a brief overview of our 2021 guidance. We are optimistic that the worst part of the COVID-related impact on the global economy may be behind us. However, we remain cautious as 2021 still represents a higher degree of uncertainty than any normal year. Our underlying macroeconomic assumptions were included in the guidance press release issued earlier today.
In summary, we anticipate year-over-year GDP growth in all regions, some peso and euro appreciation versus the U.S. dollar and higher average oil prices. On a consolidated basis, we are estimating total revenue of $13.1 billion. EBITDA is projected at $1.4 billion and CapEx of $588 million.
Consolidated revenues are expected to grow 7% year-on-year driven by growth in Sigma, Alpek and Axtel. Estimated EBITDA of $1.4 billion in 2021 excludes any effect from extraordinary items, unlike 2020, which benefited from $171 million in net extraordinary gains.
Adjusting for the extraordinary items in 2020, comparable EBITDA is expected to grow 6% in 2021 driven primarily by Sigma. Consolidated CapEx is expected to grow 47% year-over-year as Sigma and Alpek resume strategic investments.
We are confident in our ability to deliver against the guidance we have provided as our businesses are emerging from this crisis in even stronger position to capitalize on recent shifts in consumer trends around safe packaging, cooking at home and digitalization.
Before opening the call to questions, let me finish by saying that we are pleased with our performance in Q4 and full year 2020 within the context of an unprecedented environment. Going forward, we will continue to execute on our value-enhancing transition to fully independent businesses.
I would like to once again thank all our team members for their extraordinary contributions during these difficult times. Fortunately, we do see brighter days ahead. This concludes my remarks. Keep well, stay safe.
Thank you, Eduardo. 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] The first question comes from the line of Nikolaj Lippmann with Morgan Stanley.
On the tax liability side, and thanks for addressing that, is there anything that we can -- you can say in order to give us a sense of how much of your current asset -- tax assets that you will be able to use, is it the -- so you have 100 -- roughly $150 million coming from Nemak, what would be required for Axtel or Alpek on the different scenarios vis-Ă -vis the assets that you are sitting on the balance on the balance sheet? So that's question number one. Is there anything you can -- any kind of guidance you can give us in terms of assets versus liability, number one? Number two, and thanks again for addressing this in the prepared remarks, timing on that NAFINSA trust, why is it taking so long, Eduardo, to get this resolved, do you think? And when do you think that it could get resolved, your best guess?
Thank you, Nikolaj, for your questions. Regarding the tax liability, there is no impact on subsidiaries. All the impact was at the corporate -- at the holding level since it is the result of the spin-off of Nemak. So we do not foresee any impact on Sigma or Alpek or Axtel. And regarding the Trust, Carlos Jiménez, who is here on the call, he will address the -- your question on the timing issue.
Okay. Regarding the timing, Nikolaj, there is no doubt that resolving this issue has taken that much longer that what we expected initially. As you probably recall, we started this process back in August of last year. The issue has been difficult because it's been addressed by the government as a technical issue as well as a political issue, meaning -- or dealing with foreign investment. So we have spent a lot of time, we continue spending a lot of time going back and forth with them. We have not solved the issue. We continue to be optimistic. And nowadays, our estimate is that the issue will be solved for sure within first half of this year. We are hoping to solve it by the end of the first quarter, but to be honest, I think it may take a little bit longer than that.
Okay. And Eduardo, maybe a follow-up on the fiscal side. So if I go through your -- the asset side of your fiscal credits at holding company level, can I then just deduct whatever you have at subsidiary level? So I have to consolidate it, I can deduct the subsidiary levels. It's going to leave me with, say, $700 million of credits. Most of those would probably come from the Pacific Rubiales. Is that fair to assume that most of that credit can just be used against any kind of liabilities that arise from the sale of Axtel -- from Nemak and the spin-off, the percent of spin-off of Alpek?
It really depends, Nikolaj, on where those tax credits are located in one legal entity. We do not consolidate those credits. So it really depends on who does the future transactions that we may do and what credit -- credits we have in those entities. In the case of the spin-off of Nemak, we are using tax losses, we will apply tax losses that we have at the holding level since the shares, Nemak shares, were owned by the holding company.
Our next question comes from the line of Vanessa Quiroga with Credit Suisse.
I guess my questions are all related to details regarding topics that you already touched on, starting with the guidance. Could you give us an idea of what you're expecting in terms of corporate expenses or holding company expenses for 2021? And the second one would be related to the Axtel sale. If -- I mean, what are the different options really that you are considering at this point in terms of selling both divisions or would you be okay just selling one or would you be okay just selling the stake of ALFA in all of Axtel?
Thank you, Vanessa, for your questions. And let me talk a little bit about corporate expenses, and thanks for the opportunity of doing so. We had a significant reduction in 2020 coming from -- regarding our corporate expenses. We had a reduction of 19% in 2020. And by the way, this was the second year in a row when -- that we had a significant reduction. In 2019 versus the previous year, the reduction was 13%. Of course, there were significant drivers in the reduction in 2020. In addition to corporate cost savings initiatives and rationalization, we also had COVID-related savings, mainly from travel expenses and other items, and we also have the exchange rate since we do have peso-denominated expenses -- significant peso-denominated expenses.
We continue -- I can tell you, for 2021, we continue doing an ongoing analysis with the subsidiaries of all corporate services as the company seek to gain independence in the medium term as part of our unlocking value initiative. So we do expect to see a little bit of a reduction still in 2021.
And regarding your other question of Axtel, the way we see it is since we were unable to attract adequate offers for the whole company in the case of Axtel, we decided to pursue the effort -- the Axtel's Board asked us to pursue the effort to look for investors for each one of the individual business units. We are doing so. We see more appetite for the infrastructure side of the business than for the service side of the business, but still, we are looking for investors for both. Timing is very difficult to estimate when we are going to be able to close the transaction, but we are pursuing it strongly. I can tell you that, that was the first priority that was given to me by Axtel's Board when I took over as acting CEO.
Would you -- I mean, is ALFA considering the scenario where the company just sells its stake in Axtel? And then a follow-up on the corporate expenses. Do you have a dollar amount that is included in your guidance for 2021?
Let me begin by the second part. We do have a reduction of single -- low single-digit percentage reduction in our corporate expenses for this year in addition to the reduction we had in 2020. And regarding Axtel...
Yes, hello?
Yes, sorry, I got interrupted in the line. Yes, regarding Axtel, we do not include in the guidance for this year, the closing of the transaction for Axtel. Again, it's difficult to estimate a time. We will do a transaction when the value that is -- that we are obtaining is in accordance to what we expect for our shareholders. Certainly, we are not looking to sell only the position of ALFA. We are looking for a transaction for the whole -- each one of the business units.
Our next question comes from the line of Eric Neguelouart with Bank of America.
So just to finish up Vanessa's question, which was interesting, the dollar amount of the expenses in 2020. If I go from the roughly $60 million in previous years and take out the 19% you said, would that be around $48 million or $50 million for 2020? And my second question is regarding CapEx. You are guiding for a 47% increase in CapEx this year. It comes mostly from Sigma, but I would like to understand a little bit of the rationale as the CapEx for 2021 is 40% higher than the 2019 number as well. I'm guessing you deferred some of the 2020 CapEx, but it's considerably higher. So I'm trying to understand where it comes from?
Sure. Thank you, Eric. And you're right. The order of magnitude of the corporate expenses that you mentioned is right. It is a little below $48 million, but in the ballpark for 2020, the figure you referred to. Regarding the CapEx, yes, mainly during 2020, we deferred some of the nonurgent and essential CapEx since we were very mindful of the cash flow of the company since we're in the middle -- we were in the middle of the pandemia, and we didn't know in reality how bad the impact was going to be on our results. So we decided to be very, very cautious regarding our investments. We did the essential ones, but we tried to defer as much as possible. We are doing a little bit of a catch-up this year-round. In the case of Sigma, we guided -- or Sigma guided for $270 million. So let me turn this to Roberto so he can give you some details of what is included in the Sigma's CapEx for the year.
Thank you, Eduardo. Hi, Eric. Yes, as Eduardo mentioned, we're doing some of the catch-up on CapEx. As you know, we did some strategic rationalization last year. And the idea is to start to catch up on these strategic and maintenance projects. So we do expect to have a higher expense on CapEx. If you look at -- I mean what we usually have -- our depreciation is around $200 million. So this year, we definitely underspent. We ended up with around $120 million of CapEx. So we're trying to do some catch-up in order to continue our productivity projects now.
And just by the way, we will have a Sigma section Q&A later on for any questions you might have or any additional questions you might have on Sigma's guidance, Eric.
Our next question comes from the line of Alfonso Salazar with Scotiabank.
The question I have is regarding the trust, the neutral trust. If I understand correctly, if you increase the neutral trust program limit, then the number of voting shares is going to decline and as that would be further away from a desirable 1 share, 1 vote structure. So if you increase the numbers of a limit now, it seems to me like a temporary solution to the problem, but how do you see and when do you expect a final solution to these legacy problems, let me call it that way?
And the second question I have is regarding the unlocking value strategy. From the time when you announced the strategy until now, what has been your experience? Probably, if you can comment on the new challenges that you have faced, and you didn't foresee. And also, on the expected timeline as we speak at this time -- at this point in time, if you can give us any color on that?
So let me turn the trust question to Carlos, and then I will take the unlocking value question, Alfonso.
Yes, Alfonso, so let me try to explain because I believe I did not quite understood your argument, but let me try to address your question by saying that the limit that presently is, in effect, it's some sort of a 2-tiered limit. On the one hand, it's a 50% limit. And on the second one, it's the number of shares, and the number of shares is defined as the number of shares that were outstanding at the time we amended the NAFINSA Trust for the last time, which took place in 2013. So the limit officially is 50% of the equity and 2.6 billion shares, which now are exceeded both of those limits. So what we are trying to accomplish is to move up the 2 of them to have a higher percentage, and in fact, what we have requested is to increase the number from 50% to 75% and to use the number of shares that nowadays represent that 75% as the limit. So once we accomplish that, we believe that we have created very or enough room to continue having space for the foreign investment to continue flowing into our equity.
I see, but when you increase that number or that percentage, wouldn't that mean that those foreign investors wouldn't have voting rights limits, and therefore ...
That's correct. That's correct, Alfonso, the restriction on the voting rights, its part of the nature of the NAFINSA Trust. And it's part of the nature of being the investment, what is called by the Mexican law as neutral investment. So it has full rights, economic rights, so it doesn't have voting rights.
With this unlocking of value strategy, at some point in time, I would imagine that you know, this neutral trust will no longer be necessary or am I wrong with that?
That might be the case, but nowadays, what we are focused on is on expanding the limits that presently are in effect within the trust.
Fair enough. And I don't know if you can comment on the unlocking of value timeline?
Sure, Alfonso, this is Eduardo. First of all, regarding your question about the experience so far, I think it has been very positive. The way we look at it is the Nemak spin-off was very successful for ALFA shareholders. So we think so far, so far, so good regarding Nemak. I think the flexibility and autonomy that the ALFA shareholders now have regarding owning both shares of ALFA and shares of Controladora Nemak has been highly valued by our shareholders. Certainly, we do have new challenges ahead or challenges ahead of us, in particular, regarding the sale of Axtel, which as we have announced since the beginning, the objective was to use those proceeds in order to deleverage ALFA at the holding company level. So I would say that still remains a challenge.
Regarding the timeline, it is difficult to define the date at this time since it really depends on several factors: One is the one I mentioned, the conclusion of Axtel and some other divestments, which certainly the time to being able to close those transactions is very much uncertain and also, how much it will allow us to delever -- to delever ALFA since we don't know if we are going to be able to sell -- to close the transaction for just one of the business units or both.
And another important element of the timing is how Sigma and Alpek's results look going forward. We would expect both companies to improve in the results in the coming years, and that will also help in order to move along the unlocking value strategy.
Our next question comes from the line of Andres Cardona with Citi Group.
I have 2 questions. The first one is understanding there is a lot of uncertainty about the extent of the divestment process. Should we understand that the process starts from 0 after the decision the Board of Directors took in December or is the process starting from the progress you were able to until December? And the second one is have you considered to update your dividend policy after the spin-off of Nemak. Have you -- think about the potential dividend payment in this year?
Thank you, Andres, for both questions. Regarding the Axtel divestment, certainly, we are not starting from 0. Let me remind everyone how we did the process last year. We -- on Phase 1, early in the year and by mid-2020, we asked investors to present nonbinding offers for both infraco as well as the whole company. And after we received a significant number of offers for both, the Board decided to pursue the offers for the whole company. So that's the route we took in the later part of 2020. Since we were not able to close an attractive transaction for the whole company, we were now instructed to look for investors for the business units by themselves. So we are picking up from where we ended up on Phase 1. At mid-2020, we have identified the -- a large number of investors who are interested in the infrastructure side of the business, and we are also talking to some who show interest in the service business unit. So I think the progress we made last year is certainly positive regarding how we are moving along this time.
Regarding your question about dividends in ALFA, let me make a couple of comments. We do expect to continue paying dividend to shareholders at the ALFA level. The ALFA Board of Directors is very mindful of the trade-off between dividend payments and reducing debt, but we think we have to find the right balance of moving towards a net leverage level of 2.5x, which as we have discussed, is the target to be below 2.5x. But still, we think current cash flow will allow us to continue paying dividends. Of course, we have to consider also the additional benefit that shareholders are getting from the unlocking value initiatives. So I think we still have to see the results, but I think we can expect the dividend from ALFA likely -- it is likely to decrease versus historical levels mainly because shareholders will now receive a portion of dividends directly from Nemak, which in the past, the dividends were paid to ALFA shareholders going through ALFA. I would say that is the main change. No other change in terms of the -- our dividend policy going forward.
Our next question comes from the line of Gilberto Garcia with Barclays.
A couple of questions on taxes. Can you -- do you have an estimate on the cash taxes that you will effectively pay related to the Nemak spin-off once you apply the tax carryforwards that you have? And on the charge that you recognized in the quarter, just to understand, this was related -- or due to IFRS regulations, since you haven't used those tax assets, but they -- you could still use them later on if you were to need them. It's not that the tax assets expired, correct?
The second question, Gilberto, and thanks for both, is correct. We can use them later on. It is just a matter of following IFRS guidance. Regarding the taxes, as I mentioned before, we expect to apply previous tax losses. At this time, we will not disclose the amount that we are going to apply, and therefore, the amount of cash taxes that we are going to pay this year, but it is a significant amount of tax losses that we plan to apply.
Okay. Understood. And on the NAFINSA trust issue, and following up on the previous quarter, is the option to change your bylaws to solve this issue something that you could evaluate if, by the time of your next shareholders' meeting, you still do not have approval from the Ministry of the Economy to increase the 50% threshold?
As we said earlier in the call, we are focusing on expanding the limits of the trust. So that means that when we call for the next shareholders' meeting, which is very likely to take place early in March, it means that we are not going to be amending the bylaws by then. We will continue pursuing our efforts to amend the NAFINSA Trust. Once we have realized that the NAFINSA Trust might not be amended or may not be amended, probably we'll be moving back and reconsider whether a change in bylaws is the proper alternative, but nowadays, that is not an alternative that we have in the horizon.
At this time, there are no further questions on ALFA. I would like to turn the call back over to Hernan.
Thank you, Laura. We will then take questions on Sigma. Roberto Olivares, Sigma's CFO, will answer your questions. Please prompt for questions on Sigma, Laura.
[Operator Instructions] Our first question comes from the line of Alejandro Chavelas with Credit Suisse.
Regarding Sigma, so I am looking at volumes in the fourth quarter and the volumes were down 5.5%. I think you mentioned, mostly because of Europe. So perhaps if you could provide some color on this volume decline. And this flows into the next question into guidance. So it appears to me that your guidance, at least on margin, is quite conservative. So you're expecting roughly similar margins to 2020, even though you have lower pressure for prices and a better FX rate for Sigma Mexico and LatAm. So perhaps you could provide more color -- and obviously, the recovery in full service. So if you could provide some color about the headwinds that Sigma is facing that leads us to the conservative guidance, that would be great?
Sure. Thank you, Alejandro, for your question. Let me start with the second one about guidance. Our sales guidance considered among other factors that consumption at home continues to shrunk during the first half of the year. And also we expect the gradual recovery on our Foodservice channel in -- in the second half of 2021 as the vaccine rollout continues.
Regarding specifically margin, as you mentioned, it's quite similar to the one in 2020. And as a result of higher Foodservice sales are in the mix, if you remember, Foodservice sales usually have slightly lower margins than the rest of our business. That is what has increased the mix of Foodservice sales, the margin does not grow that much. Also, we are -- although we continue working on keeping the strong margins and working initiatives to reduce our expenses, we're also increasing our investment dedicated to our new areas that -- our growth area to look for new sources of revenues. And that investment, we're confident, will yield interesting results in the future.
And regarding volume by region, as you mentioned, volume in the quarter is around 5% below last year. If you exclude Foodservice, that volume is around 2% above last year. So the main impact in the quarter is Foodservice. Specifically about Europe, what happened is that, during the quarter, you may know that Europe was going through a second wave of COVID and the authorities were evaluating whether to apply strict containment measures for the holiday season. So this incentive fee impacted on mix because consumers were delaying the process of the seasonal products and as a result of what they thought could happen now. At the end, the measures implemented were not as strict, and sales picked up again, but we're not able to fully compensate the impact. I don't know if that's it.
Yes. Perhaps just a follow-up on the margin question. You did point to perhaps higher expenses from the new initiatives, Tastech and plant-based meat. Could you provide some -- perhaps an amount or something that could give us a sense of how much this explains of the margin?
Sure. So mostly, this is -- I mean, all of these initiatives are growing. So we're investing in marketing, in doing some tests of piloting, testing a lot of stuff, staffing as well. They're roughly a little bit above $10 million for this year.
Our next question comes from the line of Nikolaj Lippmann with Morgan Stanley.
So -- and it's a very similar question, but when I look at the guidance for next -- for 2021. As far as I remember, Foodservice is about 20% of the Mexico business. It's mainly in Mexico. So that's about $500 million. I signed a -- if you would do a 10% margin on that $50 million, that's basically already there in excess of the delta that you're getting at the EBITDA level. Take the FX, add to that, it looks like your guidance is somewhat conservative. Can you try to maybe reflect on that? And also maybe address the issue -- what you're assuming with regards to input prices, pulp prices, et cetera?
Sure. Thanks, Nikolaj. Yes. So again, Foodservice margin -- and let me go back to 2019 because last year was something that it was not common. Foodservice margin in a normal year will be around probably below 10%; in Mexico, for example, around 8%, 9%. And the rest of our business in Mexico is close to 15%, even a little bit above 15%. So that's why as we change the mix to more Foodservice sales, that is kind of why the margin is not necessarily growing. As I also mentioned, we include in guidance -- in EBITDA guidance for next year, the investment in the new source of revenue initiatives and that amounts to a little bit above $10 million.
In terms of raw material and let me -- I think it will be -- vary if I talk by region. Let me start by the U.S. In the U.S., in 2020, we saw historical low pork prices with average ham prices reaching as low as $0.35 per pound, but they recovered towards the end of the year partially to seasonality. During 2021, we expect a modest growth in domestic demand in the U.S. and, with this, pork prices to return to a more normal level at historical -- level, say, about $0.60 to $0.70 per pound of pork ham as people continue up into a new normal and start going out more now. Having said that, we need to keep in mind that demand from China will continue to be a strong driver of pork prices in the U.S. We know that China is rebuilding their herd faster than expected. Currently, it's about 80% of pre-ASF levels in China, a lot thanks to strong government support and incentives.
Meanwhile, in Europe, prices have remained low because 3 things: The first one, as you may remember, Germany had some ASF cases. And because of that, China imposed a ban or imposed restrictions to German pork; the second one is Foodservice demand. Demand is still recovering, but I mean, conditions may not normalize until the second half of the year. And as the U.S. market, Chinese demand will also play a significant role in the European market during the year.
So having said that, as of right now, we expect to continue having a neutral raw material environment for the rest of the year. And I think that is about what I can mention. I don't know if you have any other question.
Our next question comes from the line of Alejandro Azar with GBM.
A quick one. Sigma didn't pay dividends in 2020 to ALFA. Does this mean or represent a change in strategy where you will seek to deleverage the company faster or we could think that this was just a decision as a result of the pandemic?
Let me answer that, Alejandro, and thanks for the question. In last year, the general strategy across the board in ALFA, as I mentioned, was to be very mindful of cash flow items until we saw that the results going into the year -- into the second half of 2020, were good. And we were, as you know, overcoming the challenges regarding the COVID pandemia. So that is why you saw a reduction in most cash flow items. We already talked about CapEx and something similar happened with dividends. Going forward, the plan is to continue reducing the leverage of Sigma towards the target of 2.5x, being below 2.5x for Sigma itself, but we do plan to continue receiving dividends from Sigma for ALFA in the future.
Excellent. And one more, if I may. I don't know if Roberto already answered this. In -- we have seen that raw material prices, especially pork prices, in Europe have declined pretty hard. We have not seen Sigma Europe margins recover or show that resilience that your Mexico operations or the U.S. operations have shown in the past, also in the past year. Could you comment a bit more on this? Could you give us more color on why Europe margins have not -- take the benefit from the lower raw material prices?
Sure, Alejandro. Thank you for the question. I mean although, as you mentioned, we continue benefiting from the friendly raw material environment, this only helped compensate the lower sales volume related to the evolution of the pandemic. As you may remember, we are exposed to Foodservice in Europe. And as I had mentioned, especially for the fourth quarter, we have some products that are seasonal for Christmas, the dry ham and all of these products that, because of the pandemic and the uncertainty, given the potential containing measures, volume did not flow as expected. I would say that, that was the main reason. In the future, we do expect this to change. We see definitely a sustained recovery on Foodservice. And although we're not -- I mean, we're not out of the pandemic, we definitely see a more optimistic view out of this. So we do expect to have a positive raw material environment to at least the first half of this year. And as volume continues to pick up, we will definitely start to see margins growing.
And let me talk about Europe margin because I think that is very relevant. We continue working on Europe now. Last year, we sat down and revisited all of our European plants, and we identified a lot of initiatives that we have begun implemented. These initiatives include product portfolio optimization, to increase the capacity of our plants, to concentrate some of the production and to look for more efficiencies, and our goal is to reach high single-digit margins and eventually reaching double-digit margins by 2025. We expect this to happen gradually as we are able to implement the initiatives.
Excellent, Roberto. And one more, if I may. Your impairment during the fourth quarter, could you comment on which region it was and related to which type of assets?
Yes. So there was an impairment. The most important one was specifically in Europe related to real estate of 2 plants.
There are no further questions at this time on Sigma. I would like to turn this call back over to Hernan.
Thank you. We will now 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] There are no questions for Newpek. I would like to turn this call back over for -- to Hernan.
Thank you. Now let's move on and questions for Alpek, Nemak or Axtel. These companies held their earnings conference call earlier this morning or yesterday, in the case of Nemak. José Carlos Pons, Alpek's CFO; Adrian de los Santos, Axtel's CFO; and Alberto Sada, Nemak's CFO, are all here with us to answer any additional questions.
Please, Laura instruct participants to queue for questions on Alpek, Nemak or Axtel.
[Operator Instructions] Our first question comes from the line of Vanessa Quiroga with Credit Suisse. .
Sorry, it's actually about Newpek because I don't know if I missed it, but do you have a guidance in terms of EBITDA for Newpek?
Vanessa, we did not disclose a guidance for Newpek separately. Since the business has become much smaller, you will see that change in the breakdown in our earnings reports in 2021, but what I can share with you is that it is still a mid-single-digit type negative EBITDA figure that's already included in ALFA's consolidated EBITDA numbers.
Okay. So it's going to be disclosed going forward as part of the eliminations aligned together with the holding company expenses?
That is the plan, yes.
Our next question comes from the line of Carlos LeGarreta with GBM.
It's actually addressed to Eduardo, please. Eduardo, I would like to know your vision for Axtel in terms of the general strategy and challenges and opportunities that you're seeing, and the second part is how should we think about Axtel's shareholder distribution policy after the sale of Axtel Networks?
Sure, Carlos. And I'm sorry, I missed your question in the earlier call this morning. Thanks for bringing that up again. The objectives that I receive as acting CEO of Axtel were basically 3. First of all, continue with the priority of achieving the monetization of the business units of Axtel, which we are pursuing strongly at this time, as we have discussed during the call.
The second objective was to continue with the separation of the 2 business units. Regardless of the monetization project, we think it would be in Axtel's best interest to move ahead with the separation and continue operating into separate units. So we will move ahead with that. Certainly, that should help for a transaction on each one of them, but regardless, we will -- even if we don't do a transaction, we'll move ahead with that.
And third, we are moving ahead with the selection of a definite CEO, of course, based on the timing of the monetization project. So when you consider those 3 objectives, if the -- which we think we are going to be successful with the monetization of the business units, in particular, of infraco, which I mentioned before, we have seen significant appetite for it. Then later on, we plan to move towards a net leverage target for the company to be between 2x and 2.5x. I would say that is the objective. If we continue holding the whole company or if we continue holding only one of the business units, that will be our leverage target. Considering that, we plan to return value to shareholders via dividends or share buybacks in the future. Certainly, if we are able to do a monetization of the whole company or of each one of the business units, we'll be in a very good position in order to be able to pay dividends in the future. So I think we have to adjust accordingly depending on what happens with the monetization project, but in general, the plan is to continue moving towards transferring value to shareholders of Axtel.
Our next question comes from the line of Andres Cardona with Citigroup.
The question is for Nemak. Apologies, I wasn't able to connect, a very simple one. It's -- how much was -- were the revenues for the structural and electric components in 2020, and how much of the CapEx is associated to this business line in 2021?
Hi, Andres. Thank you for your question. This is Alberto. Related to the revenue on structural components and EVs, and we highlighted that on our conference call yesterday, that is an important growth for 2021. 2020 was affected by the pandemic shutdowns. So that was around $175 million in 2020 and it's expected to be twice as much in 2021. And related to the CapEx, I think that's also a good question since as we're moving forward with more into this new segment, that line of products will have a higher share of our investments. For 2021, half of our strategic investments, a little bit more than half of that is now -- into the -- to this new line of business.
Alberto, that level of CapEx is sustainable for the long term? Should we be thinking about that amount for the long run?
Well, it depends on how we are launching new products, but certainly, it is an amount which is going to be similar to what we are seeing in total for 2021, but again, the mix of that is going to be subject on the amount of business that we launched and how much new additions we add into the segment.
There are no further questions at this time. I would like to turn this call back over to Hernan for closing remarks.
Thanks, and thank you for your interest in ALFA. If you have any additional questions, please feel free to reach out to us. We would 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 nice weekend.
This concludes today's conference. You may disconnect your lines at this time.