Alpek SAB de CV

BMV:ALPEKA

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, everyone, and welcome to Alpek's First Quarter 2020 Earnings Conference Call.

With us this morning, we have from Alpek, José Valdez, CEO; José Carlos Pons, CFO; and Alejandro Elizondo, IRO, who will discuss the company's performance and answer any questions that you may have. As a reminder, today's conference is being recorded and will be available on the company's website, www.alpek.com.

I will now hand the call over to Mr. Elizondo. Please go ahead, sir.

[Alejandro Elizondo, executive]

Thank you, operator. Good morning and welcome. We very much appreciate everyone's participation today.

This call will be divided into 2 parts. First, Mr. Valdez, our CEO; and Mr. Pons, our CFO, will provide commentaries on the COVID-19 situation, Alpek's first quarter 2020 performance and an update on relevant events. Afterwards, we will have a Q&A session.

Before we get started, let me remind everyone that the information discussed in today's call may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to rely unduly on these forward-looking statements. Alpek undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

I will now hand the call over to Mr. Pepe Valdez.

[Jose de Jesus Valdez Simancas, executive]

Thank you, Alejandro. Good morning, everyone, and thank you for joining us today. I hope this call finds all of you and your loved ones well.

The effects of coronavirus or has officially been named, COVID-19, have impacted the world over the past months. And the effort required to keep our company running at peak performance has not gone unnoticed. I would like to start by taking a moment to publicly thank all of our employees, suppliers and everyone who is currently working towards making sure Alpek can continue providing its customers with the raw materials that they need to keep their businesses operating to tackle COVID-19 through products like face masks, syringes, medical gowns, packaging for water, food and virus tests needed to keep as many people safe as possible.

Our first priority is towards the safety and well-being of our employees. As such, the company took measures, which include additional hygiene practices, safety gears and health checkpoints at plants while imposing travel restriction and enforcing home office wherever possible. As expected, the outbreak of the virus has created a volatile economic and feedstock price environment worldwide. Nonetheless, Alpek was able to achieve significantly better-than-expected results across both its business segments throughout this quarter.

Quickly looking back, the first cases of COVID-19 were reported at the end of 2019 in China. As strict stick measures were taken to control the virus from spreading, refineries and polyester producers in Asia ramped down their operations. This reduction to their output created 2 key effects related to our industry. First, due to lower demand for crude oil and the inability to reach an agreement to cut production rates globally during the quarter, average spot Brent crude oil price declined by 49% throughout the quarter to the lowest level seen in the past 20 years and far below our guidance of $59 per barrel. As a result, price of U.S. reference paraxylene, our main feedstock, also decreased by 18% over the same period. Second, lower output from polyester producers in Asia with resilient global demand for polyester end products resulted in an increase of integrating Asian polyester reference margins to $275 per ton, $21 higher quarter-on-quarter and significantly stronger than our guidance of $255 per ton.

Moving over to operations. Alpek has been able to keep its facilities running and meet its customers' demand as the company produces raw materials that serve industries like food, beverages, consumer goods and medical supplies, which have all been declared as essential activities in the countries where we operate.

Turning our attention now to first quarter results. Polyester segment performance largely reflects the effects of COVID-19 as Alpek's comparable EBITDA, excluding negative raw material carryforward effect, significantly exceeded guidance due to stronger-than-expected industry margins and volume.

Plastics & Chemicals segment performance was also better than expected driven mainly by strong polypropylene performance as volume remained strong and the company was able to maintain high margins as propylene prices declined to the lowest level since 2009.

Next, I'm turning our attention over to key developments for the quarter. First, Alpek paid out the onetime $143 million dividend related to the sale of its cogeneration asset, which was approved during extraordinary shareholders' meeting held on January 20. Second, the company placed an emphasis on significantly improving its financial stability by: first, we're improving networking capital by $100 million through better management of inventories, suppliers and customers as well as the reduction to raw material prices; reducing 2020 CapEx needs by $45 million as the preconstruction period of Corpus Christi Polymers, our JV with Indorama and Far Eastern, to build an integrated PTA-PET facility in Texas was extended through the end of 2020; and decreasing -- and decreeing a dividend of $81.6 million, which is lower than the original figure from previous years, during its Annual Shareholders' Meeting in February. This dividend is subject to review by the Board of Directors considering current market conditions.

Finally, the company has also enhanced its liquidity by drawing $240 million from short and long-term committed credit lines, increasing Alpek's cash balance to $570 million. Even after the drawdown, the company still holds over $590 million in additional committed credit lines and an additional $632 million in short-term credit lines.

Looking forward, Alpek recognizes that while first quarter results were far better than expected, the uniqueness of the situation we face makes it difficult to predict how feedstock prices, demand and margins will evolve over the next months. As such, the company is withdrawing its 2020 guidance as we better understand this changing environment. We will provide updated guidance figures as soon as reliable estimates can be determined. In the meantime, we will continue to monitor how the situation progresses. We are confident in our ability to face this uncertain future in part because we know we can rely on our strong financial position. The company has and will continue to respond proactively through all actions necessary to maximize shareholder value and maintain financial stability. Thank you for your ongoing support and please stay safe.

At this point, I would like to turn the call over to José Carlos.

[José Pons, executive]

Thank you, Pepe.

Alpek's first quarter consolidated revenue was up 2% year-on-year driven mainly by record volume. It was down 13% quarter-on-quarter, given lower feedstock costs and prices across both business segments versus fourth quarter 2019. Volume increased by 12% quarter-on-quarter and 9% year-over-year, setting a record quarterly figure and driven mainly by strong demand, increases to contract volume and the acquisition of our Wilton PET facility.

First quarter consolidated EBITDA was $111 million, including a $17 million noncash inventory loss. Adjusting for this item, Alpek's comparable consolidated EBITDA was $127 million in first quarter 2020, higher than guidance but down 26% and 14% versus fourth quarter 2019 and first quarter 2019, respectively, mainly from lower margins for contractual volume. Comparable EBITDA, excluding a negative raw material carryforward effect of $20 million, would have reached $147 million in the quarter, significantly higher than guidance and only 15% and 12% lower than quarter-on-quarter and year-on-year figures, respectively.

With regards to Polyester, integrated Asian reference margins increased by 21%, reaching levels above our guidance expectations. Comparable Polyester EBITDA was $74 million, 40% lower quarter-on-quarter. The decrease versus the last quarter and year-on-year is largely based on lower margins from contractual volume, nonrecurring income from the operation of cogeneration assets in 2019 and the negative raw material carryforward effects, which were partially offset by stronger volume.

Switching over to Plastics & Chemicals. EBITDA was $50 million, 8% higher than the previous quarter due to stronger-than-expected polypropylene [ marked ] performance and 50% lower than last year due to higher PP and EPS margins at the time. Alpek's first quarter profit related to the controlling interest totaled $19 million compared to $27 million a year ago.

From a financial standpoint, net debt was $1.4 billion, 8% higher when compared to 4Q 2019 due to dividend and tax payments, was favored by free cash flow from -- free cash flow that was $181 million better than expected, given strong reduction to CapEx and net working capital. Our net leverage ratio and interest coverage were 1.7x net debt to EBITDA and 7.3x, respectively.

Regarding dividends, we made $143 million extraordinary payment in January related to the sale of our cogeneration plant.

Finally, CapEx was only $15 million during this quarter with most of the funds used for minor asset replacements.

This concludes my remarks. I would now like to open the call for questions. Operator, please instruct the participants on how to place their questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Luiz Carvalho with UBS.

[Luiz Carvalho, analyst]

I have basically 2 questions here. The first one is about the guidance for this year. We are now facing a completely different environment. And as you know better than I do, oil price impact a lot due to the results of the company. So how should we expect -- how can I put this, the year-to-year guidance, the EBITDA for this year? And the second one is about Corpus Christi. You rightly postponed, let's say, the ramp-up of the plant and initiate the beginning of the start-up of the plant. Do we have any updates on this, on how can we expect in terms of the recent developments that we are seeing globally?

[Jose de Jesus Valdez Simancas, executive]

Good morning, Luiz. I mean looking forward, I think you mentioned crude oil, I would say crude oil or uncertainty in crude oil prices is probably the main reason why we sort of suspended our guidance. As you know, impact of crude oil in our EBITDA comes mostly through inventory revaluation and carryforward cost in inventories. And that -- with the sort of reduction in crude oil that we're experiencing, that could be a very important factor. So until we have a better -- sort of a better guide for crude oil prices, we didn't want to make -- I mean to come out with a number.

We -- what I can say is that the sort of good news for us is that normally when crude oil prices go down, it has an impact in our reported EBITDA. But at the same time, our cash flow is not really impacted because a lot of this, let's say, negative impact in EBITDA, we'll recover in our investment in working capital because receivables, inventories are lower than the normal figures. So while, again, I'm saying from the point of view of EBITDA, there is an uncertainty; what I can also say is from the point of view of cash flow, we believe we're going to continue to generate strong cash flow in the continuing months.

In terms of volume, we see our volumes strong, assuming again that the lockdowns that we are experiencing do not -- are not extended by a significant period of time. We are assuming that sometime in May, the U.S. is going to sort of become a little bit more flexible. And we are assuming that by the end of May, Mexico will do the same. So assuming that, we believe our volumes are going to continue strong in our most -- in our largest segments. Remember, we have approximately 80-plus percent of our sales going to consumer goods and in particularly, beverage and food. So that part, we continue to see steady, strong. And the areas that might be impacted and the impact will be very much related to the duration of the lockdowns are going to be automotive, construction and apparel, okay? These -- our customers in these areas are, as I said, less than 20%. So we might expect -- particularly as the lockdown extends, we might expect some reduction in those areas. But again, the biggest portion of our volume remains very strong.

Now crude oil prices, as I say, very difficult to predict. But I do believe that -- and why is it very difficult to predict? Particularly at this point in time, it's very difficult to predict because the duration again of the lockdown will have a big impact in demand. If the duration of the lockdown is only for the next month or this month and next month is one thing. If the duration of the lockdown extends further, then the demand for crude oil will continue to be strongly affected. And as you have seen in the last couple of days, even the historic output cost in oil, which was, let's say, approximately 15 million barrels per day, could not stop the decrease in prices. And that's because the demand, as we speak, is probably being reduced by 30 million barrels per day. So if the lockdowns were to continue, the reduction in demand will continue to put pressure on prices.

If, on the other hand, situation start to normalize, let's say, in June forward, then probably, I think this 50 million barrel reduction will help certainly the prices to rebound at least a little bit. Again, a little bit difficult to forecast precisely because of the level of inventories that is being accumulated that is becoming also very high. But that is the -- that is again the explanation why crude oil prices are not easy to determine. If anyone of you has an idea, particularly if it is an educated one, we will appreciate your guidance. But -- so right now, we have anywhere from $20 to $50 by the end of the year is -- could happen. I would say probably $20 to $40, but those are the ranges that we see possible under different scenarios. But again, that's the reason why we decided to discontinue our guidance, mostly the crude oil price, which, again, will have an impact in EBITDA, a onetime impact in EBITDA, but will not significantly impact our cash flow. In fact, it might even help our cash flow in the short term.

Now with respect to the CCP update, I mean the reason why we did not want to start construction on CCP, several reasons. Number one, of course, is the COVID-19 situation. Number two, and again, just imagine, right now the biggest reason -- I mean we have experience in the estimate to finish the CCP project, a significant increase in the cost of the project. And this increase was mostly due to higher wages and related to that, lower productivity of the workforce in construction as the resources are very limited in -- at this time.

So I think once we go through this COVID-19 situation, we are going to be reviewing again the estimate with the idea of, of course, reducing the cost significantly so we can continue to go ahead with the project. But for the time being, we determined that we will take at least from now until the end of the year to come up with new estimates or new ways of reducing the cost of the project.

I don't know if I answered your questions but...

[Luiz Carvalho, analyst]

Yes. I mean, actually, my first question was not asking for a new guidance, but exactly the view that you shared with us in terms of what you're seeing in terms of volumes and of course due to the new oil environment, but that was pretty clear.

[Operator]

Our next question comes from the line of Andres Cardona with Citi.

[Andres Cardona, analyst]

The first question is about the Asian capacity availability. You said there were some shutdowns during the first quarter. I just want to check how it has evolved in early second quarter and if you can also comment about the availability of your own facilities. And maybe I understand it's hard to commit on our full year guidance, but if you maybe can talk about short-term dynamics for margins, in particular, would be also helpful. And the last one is just out of curiosity, the sensitivity to oil price, this is more linked to Brent or WTI?

[Jose de Jesus Valdez Simancas, executive]

Okay. Well, the situation with the capacity availability in Asia, it should be normalizing relatively -- I mean or gradually, I would say, over the next couple of months, 3 months. But so far, we continue to see margins significantly higher than our original estimates. So I just saw them this morning, and they continue to remain on the high side. I think it's still a lot of logistic issues and a lot of, let's say, problems in the delivery of products. So for the time being, we see the margins higher than, again, that in our guidance. We are -- estimated that they will come down, but still remain a bit higher than what we originally considered in our budget. So that's on the Asian capacity.

In terms of our U.S. facilities, I would say, pretty much all of our U.S. facilities are operational, as we speak. Most of them are operating. We have had, I mean, the normal plant shutdowns in some of the plants, but all of the plants are working.

In Mexico, pretty much the same. We have a plant down -- EPS plant down in Argentina due to regulatory situation. And again, in Mexico, we have only 1 plant that is operating at reduced capacity, which is the EPS plant. Some of our customers have been -- have had to shut down their plants again due to the COVID-19 restrictions. So that -- again, I think we've been lucky to be able to operate most of our plants in all of our countries. Again, the EPS plant in Argentina that I mentioned that is down is really very small. So it's, I don't know, not even 1% of the total capacity of Alpek.

In terms of margins, your third question, short-term margins, again, I think I sort of answered the question. I think margins, we are assuming that they will go down a bit from the levels we see today. But again, we believe they're going to be higher than our original estimate. And then, sensibility of WTI, Brent, I think I mentioned before about that. I don't know exactly what your question would be. The difference?

[Alejandro Elizondo, executive]

No. I think the question was more Brent or WTI. And the question is, we track Brent mainly, that's what the price, the reference.

[Jose de Jesus Valdez Simancas, executive]

That's correct. The price of our raw materials are usually fixed or set in Asia. And in Asia, Brent is the most relevant market -- is a much more relevant market than WTI.

[Operator]

Our next question comes from the line of Vanessa Quiroga with Crédit Suisse.

[Vanessa Quiroga, analyst]

Pepe, José, Alejandro, congrats on the results for the first quarter. I have a couple of questions. The first one is about the uncertainty in the outlook for the rest of the year that led to the removal of guidance. Would you -- do I understand correctly that the main uncertain factor is in Plastics & Chemicals, depending on the extent of the lockdown and the economic impact that will be reflected afterwards? Is that correct?

And the second question is regarding positive free cash flow, could you give more details by each line? I mean how does your lower oil prices affect the receivables, inventory and suppliers?

[Jose de Jesus Valdez Simancas, executive]

Okay. Look, in terms of the guidance, Vanessa, in reality, the -- I'm even going to say this. I mean when we were looking at the numbers and we've made our estimate with of course certain assumptions, we believe that the biggest impact on the guidance has to do again with the price of crude oil. Most of the change in the guidance is going to depend on how much inventory revaluation and cost carryforward in the inventories will impact our numbers. That is by far the biggest factor. I can even tell you that if we exclude that factor, we were right on target. I mean we were right -- I mean we're very close to the guidance. Our estimate if we don't consume -- let's say, we assume that crude oil price will go back to the $59 that we -- that I was saying in Brent, the -- I would say the guidance, we would meet guidance or even exceed guidance.

But it's a very different story if it goes to $20 or if it goes to $30 or to $40, which are the ranges that I think are more realistic, probably around $30; optimistic, $40; pessimistic, $20. So that is the main factor. And in a sense, you are right. The duration of the lockdowns might impact our results, but mostly through the impact in prices of crude oil. If the duration of lockdowns is longer than we're now assuming, then demand for crude oil would be again lower and then price of crude oil will be lower. So the main impact of the shutdowns is really going to be through the impact that we'll have on crude oil.

The volume we have that is subject to shutdowns, as I mentioned, is less than 20%. And then assume -- let's assume that 20% of those segments, again, automobile, apparel and construction, let's assume they go down to 50% than normal, then the impact in our volume would be 5%, 10%, assuming that situation for the remaining of the year. And we certainly don't see that. As I mentioned, our expectation today is that probably the lockdowns will remain for April and end of May and will gradually recover after that.

But even if you take the extreme case -- and of course, I don't want to tell you if the lockdowns remain for more time, I don't know, we'll probably have some other very important things to worry about I mean in terms of impact on the general economy, and -- but for us, the biggest uncertainty is crude oil. And again, as one of the factors that would implant the -- that will impact the supply/demand of crude oil, the duration of lockdowns is an important consideration.

But I don't know if that answers your question.

[Vanessa Quiroga, analyst]

Yes. Yes. It makes more clear. And about the impact of oil prices on each line of the working capital, just to understand better?

[Jose de Jesus Valdez Simancas, executive]

Yes. Well, it's relatively very straightforward. As crude oil prices come down, raw material prices come down and our sales prices come down. So normally, what we have in our working capital -- let's say, our working capital is -- we normally have, let's say, 60-day sales as an investment in working capital, 60 days of sales, which includes inventories, includes receivables and supplier. So if prices, sales prices and raw material prices come down, our sales come down. And if you keep this ratio of 60-day fixed, then again, automatically your investment in net working capital goes down.

[José Pons, executive]

Maybe just to complement, Pepe. As you see -- as you saw in the quarter, we had $100 million positive inflow from working capital.

[Jose de Jesus Valdez Simancas, executive]

Reduction.

[José Pons, executive]

Yes. You saw a positive cash flow reduction that was coming really from what Pepe was indicating, the changing in feedstocks. So that could give you a good proxy of what the effect of the changes in the feedstocks that we have, have on working capital.

[Jose de Jesus Valdez Simancas, executive]

Another way you can look at this, Vanessa. Let's assume raw material prices come down, then our inventory will come down in approximately the same amount, I mean the same amount of the reduction in raw materials, so our inventory will come down. And then on top of that, our receivables will also come down. So that's what I -- and then -- but then on the other hand, our suppliers, which is -- helps reduce working capital investment will also come down. So the net effect is a little positive because receivables are higher than supplier and inventory is normally similar to the purchase. So again, normally -- in normal situations, if you don't change the turnover of working capital, you will even have a net positive effect.

[Operator]

Our next question comes from the line of Frank McGann with Bank of America.

[Frank McGann, analyst]

I was just wondering if maybe you could provide your views at this point on how the current situation -- obviously, there's a huge impact on demand and uncertainty. How do you think that can affect the medium and long term for the business in terms of what you think your competitors might do or the competitiveness of imports or overall supply/demand? How -- what different factors you think could be affected or decisions could be made based on what's going on that could affect your business over the medium and long term?

[Jose de Jesus Valdez Simancas, executive]

Well, I again believe that probably, the -- perhaps the biggest impact long term I think, if anything, I think the consumers are going to start seeing not only the negatives of PET or plastics, they are also going to start seeing the advantages of plastics. And I think this has been very clear over the last 5, 6 weeks.

If people talking about reusing the same container to drink water, particularly water, particularly for the water, or you seeing they're drinking from public fountains or things like that, I think people are going to really rethink and reconsider. And again, I think it's going to give them a more balanced view about the value of plastics. Again, everybody has been concentrating on the minuses of plastics, but very few people see the advantages. And I think this is probably going to help us to have people looking at a more -- in a more factual basis to the pluses than the minuses.

And as I have expressed before to all of you, I think the minus of -- particularly for PET not to talk about all the plastic, but the minus, the big minus for PET is the waste management, which is something that has -- is being addressed in a very important way. And I think it is something that 2, 3, 4 years from now will become a much less important issue as people will see that we are recycling a significant quantity of the PET bottles that we use. And once that happened, then I think you're going to see the benefit so far again -- of PET again would be the -- one of the most important benefits, I've also conveyed to you, is the lower carbon footprint, which is extremely important.

Another one, if I might say, it might sound perhaps not too relevant, but it is relevant, the cost. I mean the cost of PET, particularly if crude oil prices remain lower than the long-term trend is significantly lower than what it used to be. And the other more important factor that is relatively now going to, I think, gain weight as a result of COVID-19 is the hygiene factor. I mean I don't know how you feel, but we've seen people moving from other, as I say, reusable containers or public fountains and even from aluminum. I mean when you are drinking something, you'd much rather be drinking a bottle than from aluminum can, okay? And again, this is not my perception, this is something that our customers are conveying to us. And we start to see these advantages. So again, to your question, I think the most important factor that I see would be that, that perhaps it want to help us or to help PET maintain its growth and leadership position in the marketplace.

[Frank McGann, analyst]

Do you see any impact in terms of capacity globally that could -- additions could slow beyond your Corpus Christi plant, of course, or you could have more extended shutdowns of some existing capacity? Do you think that is possible?

[Jose de Jesus Valdez Simancas, executive]

I really could say perhaps, it might be a little bit of it. I think a lot of people would think -- I think this situation will impact the finance -- the financial, let's say, health of a lot of companies. And also, I mean I don't know how long term that is going to be. But try to get a loan these days to finance new projects, then you will find out, extremely difficult and much more expensive. I think everybody is going to be more cautious in financing projects, particularly projects that do not make economic sense.

So to your point, I think, yes, it might, in some way, have an impact on new capacity additions at least for a period of time, okay?

[Operator]

Our next question comes from the line of Leonardo Marcondes with Itaú.

[Leonardo Marcondes, analyst]

I have 2 questions. First, you guys mentioned that some clients have requested higher volumes than expected. I would like to know if you could provide a little bit more color on that, on what projects are you seeing a stronger demand and also what projects are you seeing a lower demand. My second question is regarding the acquisition of the PET plant in the U.K. Could you please provide an update on that, on how is the operation of the recent acquisition under the crisis?

[Jose de Jesus Valdez Simancas, executive]

Your question about volume, I will try to be perhaps more specific. I mean when you look at PET only, I think the biggest increase in volume is coming from water, water bottles more than CSD. I think the biggest factor has been water on the positive side. On the negative side, which, of course, the increase in water -- so far is the decreases that we have experienced in other sectors.

One of the sectors that have not -- that have actually showed some decrease, at least temporarily because of the lockdowns, is, for example, PET that is used for carpet. We -- there is an important volume of PET that goes in to the Bcf, Polyester Bcf market. And we have seen -- and this is very recent. We've seen for the last few weeks, the last couple of weeks, a reduction in the consumption of PET to produce fibers. Again, this will not -- I don't think this is a permanent situation, but it is one of the sectors that has decreased.

And long term, if you want to consider long term -- not long term, midterm, let's say, second half of the year or for now until the end of the year, the other decrease in consumption of PET would be the sort of massive events, sport events, concerts, things like that, that we, or a lot of public gathers. So we are assuming that for the remaining of the year, there are going to be very little events like that. So that will have some impact on PET demand. But as I said, so far, the demand for water has been larger or the increase in water demand has been larger than the decrease in this other segment.

And I will ask José Carlos to answer your question about the U.K.

[José Pons, executive]

Thank you, Pepe. Well, as you know, we've made the acquisition and closed the transaction in the very beginning of this year. This facility provided very strong value creation short term because of the usage of PTA that we had available and we were selling to the market, to the open market. So that provided for a use of that PTA directly into the U.K. facility. So that has immediately created value for our ourselves.

Volumes so far have been on the right level, I guess, I would say, according to what we originally expected.

And now with respect to the integration, I think we have been very favorable -- impressed on the capabilities of the team that we have there. And also on the technical capabilities, we have been able to benchmark some opportunities, even some cross-fertilization of best practices.

So I guess so far, so good. And I think there will be value creation, as I said, in the short term because of the PTA. Long term, we will see cross-fertilization of best practice.

[Operator]

Our next question comes from the line of Eduardo Altamirano with HSBC.

[Eduardo Altamirano, analyst]

I'm on the line. Can you hear me?

[Jose de Jesus Valdez Simancas, executive]

Yes.

[Eduardo Altamirano, analyst]

So 2 questions for you. I have one on the CapEx outlook. Basically, it looks like you're going to basically the bare minimum required maintenance. At what point would you have to make up for that shortfall of CapEx as well as what -- how, let's say, much lower can you even go for the full year?

And also, I understand you had a dividend announcement earlier in the year. But given the changing environment, is this still looked to be paid? Or would you reconsider that at some point?

[Jose de Jesus Valdez Simancas, executive]

Okay. Maybe let me just take that. I'm going to ask José Carlos to answer your CapEx and dividend questions.

[José Pons, executive]

Yes. Thank you. Thank you, Eduardo. Regarding the CapEx for the year, as you know, we guided for $277 million. We have worked diligently through the first quarter to optimize that in perspective of what we're seeing in the market. What we already announced is the deferral of investment in Corpus Christi, so that provides more or less $45 million of improvement.

In addition, we said that a good portion of the remaining strategic CapEx was going to be or is going to be invested into recycling projects. And what I can tell you is that we have found many ways to improve the efficiency of those CapEx. And what I can tell you is, more or less, we will be able to reduce another $30 million of investment there. So all in all, not yet confirmed, just preliminary figures, we'll be around $200 million, including maintenance in our strategic CapEx. That's more or less where we are. So -- and we will continue to invest in maintenance CapEx so that we will not create any issues in that facility.

With respect to dividend, yes, we have still the $86 million decreased dividend that is expected to be paid on June 1. But as we announced, we will have a Board meeting and review and ask for a recommendation from the Board on what to expect and what to do on that dividend. From the liquidity point of view, we don't have any issue. As we indicated, we have sufficient cash on hand to -- if the decision from the Board is to pay the dividend, we will not have an issue on paying it.

[Jose de Jesus Valdez Simancas, executive]

If anything, I would say, perhaps, I think the Board will probably -- it's been very prudent. It will ask us to perhaps defer the payment a little bit until we have a better grasp of the situation. But I mean again, if things go as expected, we have the liquidity to pay the dividend. And I think worst case, I think we could...

[José Pons, executive]

And we have a good reasonable leverage on the cost.

[Jose de Jesus Valdez Simancas, executive]

Yes. But again, we -- it will be the Board that will decide -- that will make that decision.

[Operator]

Our next question comes from the line of João Rosado with Finantia.

[João Rosado;Bank Finantia;Executive Director, analyst]

I just had the -- but I just had a couple of few questions that just have been previously asked in the -- before me, so apologies.

[Operator]

Our next question comes from the line of Ron Dadina with MUFJ.

[Ron Dadina, analyst]

I basically have 2 questions. One is that your business is primarily a pass-through business, i.e., you pass on the cost of raw materials whether they are high or low to your customers. Hence, overall, from a margin perspective, do you expect your margins this year in 2020 to remain more or less stable and along the lines of previous years? That's one question.

My second question is, can you again just let me know of the cash on hand? I think you mentioned $500 million. Is that right? And you also mentioned that you have unused committed bank lines of $590 million. Is that right? Can you just confirm those 2 figures, please?

[Jose de Jesus Valdez Simancas, executive]

Okay. Thank you, Ron. I will ask José Carlos to answer your questions again.

[José Pons, executive]

Thank you. As already indicated, with respect to margins, what we're seeing is margins are better today than we were originally forecasting. What we're expecting is that they will decrease a little bit, but probably remain higher than our original guidance. So that's more or less what we're thinking that will happen.

With respect to cash on hand, yes, we can confirm that we have $570 million in cash available to be used in every -- any emergency that we will have. We're not foreseeing any use for it at the moment. And we have above $500 million of committed credit lines available and above $600 million of short-term credit lines that are also unused and available. So we will say that we have more than $1.5 billion of available liquidity altogether.

[Operator]

Our next question comes from the line of Jean Bruny with BBVA.

[Jean Baptiste Bruny, analyst]

I have a couple. First one, maybe to give a follow-on on Vanessa question regarding working capital. Do you need -- do you see any pressure on your working capital side, either from the suppliers in terms of delays, customers are asking for more delays or -- to pay?

The second question was regarding the timing of the guidance. You say in the press release that you will be reporting the guidance as soon as you can. Can we expect you in time, I don't know, let's say, that the first half of this year is stabilizing and you can come back to the market? Or is it probably better to wait for the second quarter results by the end of July?

And on the corporate side, about 2 questions. This is one on -- can you give us an update from Altamira, M&G Altamira? And the second one on the $30 million you were excluding in your guidance for the Lotte U.K. plant. What is maybe the -- if we can expect this number to be a contributor in the second quarter or, let's say, in the second half of this year?

[Jose de Jesus Valdez Simancas, executive]

Okay. Jean, just to make sure we got the questions right. Your first question is related to whether we're seeing any pressure on net working capital, particularly from customers not paying. Your second one is related to when we might be providing an updated guidance. And the third one, in particular, is an update on Altamira's M&G situation. Correct?

[Jean Baptiste Bruny, analyst]

That's it. Yes.

[Jose de Jesus Valdez Simancas, executive]

Perfect. Thank you. José Carlos, please answer.

[José Pons, executive]

Okay. Thank you. Jean, at the moment, fortunately enough, we have very responsible customers. We have not seen any major deviation from agreed payment terms. So, so far, as you saw in our report, we had $100 million positive cash flow from working capital coming from many different fronts in working capital, but there was not an issue on the receivables that we had from our suppliers. And we have an ongoing conversation with all of them. So not at the moment, we are not -- fortunately not.

With respect to giving you an update on guidance, well, hopefully, by -- Pepe indicated, these shutdowns and lockdowns will end during May. Hopefully, that will provide us with some better visibility on what the crude might do, as Pepe already indicated. So hopefully, before the end of the quarter, we can give you a guidance, but this depends on really having better visibility on the markets and volumes and the market we participate in.

M&G process, it's, as we have already represented to you, an ongoing process that's going well. What we can tell you is that all creditors have been very actively participating in preparing all the required agreements and trusts and everything so that the company can exit from the concurso mercantil that it is today in. We are not seeing any major delays from that front. However, we might see some delay, which is out of our hands, because of many legal institutions at the moment are operating at not the full capacity. So that might delay for a month or a couple of months to process. But so far, we don't see any deviation to what we represented to you.

[Operator]

Our next question comes from the line of Alejandro Chavelas with Crédit Suisse.

[Alejandro Chavelas, analyst]

Congratulations on the results. Just to talk to you about polypropylene. We have been reading reports that polypropylene prices in Asia have been rising due to demand for medical supplies. Could you comment if you have seen something similar in polypropylene in North America? Or could we see something similar? And the second question would be related to BASF. Perhaps the lower demand for fashion, we could see in lower prices for PTA. What are your thoughts on that?

[Jose de Jesus Valdez Simancas, executive]

Well, let me say, polypropylene prices in the U.S. -- let me not talk about prices, let me talk about margin better. As you know, prices of propylene, which is the raw material for polypropylene, have also come down significantly over the last months. So the prices of polypropylene are following that. The demand of polypropylene is not as steady or has not been as steady as the demand for PET because in polypropylene, you do have some exposure to particularly automotive. And that is the sector that particularly during the last month has been shut down both in the U.S. and Mexico. So we estimate that the demand for polypropylene, year-to-year, NAFTA will be like 4% lower than last year, year-over-year. And -- but the good news has been that propylene prices in the U.S. have reduced a lot. And at least for the time being, we do have a very competitive price of propylene relative to other countries.

So we've been able to even export some polypropylene because we have a competitive price of propylene. And we estimate this will continue being the case in the next month. So I think again not as solid as the situation for PET, but polypropylene is doing well. And the reduction in propylene prices has allowed us in some -- in part of our sales to improve the margin versus the expectation in the guidance. We are not as high as -- last year was very good. We're not as high as last year in margins. But the reduction in margins, imagine that we were considering in the guidance, we've been able to do better than that because, as I mentioned, reduction in raw material, we have some price -- some sales or, let's say, 50% of our sales in polypropylene are not following a formula, are more based on spot prices. So on those spot prices, we have observed a better margin than we anticipated.

So the business -- actually, in terms of EBITDA, polypropylene business is doing significantly better than the guidance. It's perhaps in terms of percentage probably the one that's doing the best, polypropylene.

Okay. And now you mentioned apparel demand, polyester staple fiber demand. Well, we were doing okay up until March. But this is one of the sectors that again with these lockdowns that we have experienced in April have been reduced. The demand for staple fiber over the -- in this one, in particular, has been reduced, let's say, 30%, 40%. So that is an area that is causing the -- I mean it's part of the 20% that I mentioned before that is not growing as much.

But again, as we hope that -- I don't know if you've seen the sectors. I mean, so for you to understand, when you look at the different sectors that are performing this year, I mean one of the best-performing sectors has been the food and beverage sector. And again, that's where most of our PET goes. But one of the weakest sectors in terms of performance this year has been apparel with almost 50%. And this has to do a lot -- I guess people don't buy as much apparel online. So I guess when you buy clothes, you still have to sort of go to the mall, or go to the retail stores and buy there. So it has been impacted. But again, as the lockdowns are lifted, I would expect that there's going to be some pent-up demand and probably this apparel sector will also improve.

[Operator]

Our next question comes from the line of Andres Cardona with Citi.

[Andres Cardona, analyst]

One more from my side. You have a strong balance sheet position. By the end of last year, you engaged with the acquisition of the U.K. PET plant. And I was wondering if you remain evaluating inorganic growth opportunities of -- given the high uncertainty, you try to stay on the sideline?

[Jose de Jesus Valdez Simancas, executive]

Well, I mean again, I don't think we'll do anything in the next 2 to 3 months. We are looking at opportunities, but we will not make any decision in the very short term. I think, again, same as with the dividends, we want to have a better visibility before committing more capital into -- to the business. I think we want to be now very, how do we say, very conservative until we better understand what's coming, okay?

And again, when you think what's coming, I mean, I think the biggest uncertainty is what's coming. We are not saying this is the case or this is the base case. But from time to time, you start to hear the possibility of these lockdowns being lifted and then imposed again. And if that is the situation, we might have a very complicated year or 1.5 years in front of us. So we don't believe that is going to be the case, again. But certainly, we want to wait a couple of months, 3 months before we embark in any new acquisition. The priority for us now is, of course, maintenance CapEx and projects that we already have ongoing and the other priority, of course, as José Carlos mentioned, is recycling.

[Operator]

We have no further questions in the queue. I'd like to turn the conference back over to Mr. Elizondo for any additional or closing remarks.

[Alejandro Elizondo, executive]

I would just like to thank everyone for participating in today's call and reiterate Pepe's message to stay safe. Please feel free to contact us if you have any follow-up questions or comments.

[Operator]

Ladies and gentlemen, that does conclude today's teleconference. Thank you all for joining us.