Grupo Carso SAB de CV
BMV:GCARSOA1

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Grupo Carso SAB de CV
BMV:GCARSOA1
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Price: 117.02 MXN 1.42% Market Closed
Market Cap: 263.9B MXN
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Earnings Call Transcript

Earnings Call Transcript
2022-Q2

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Operator

Good morning, everyone, and welcome to the conference call to discuss the results of the second quarter 2022 of Grupo Carso.

Before we begin, I would like to remind you that this call is being recorded, that information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially.

Hosting this conference today, we have Mr. Arturo Spínola, CFO of Condumex and Carso Infraestructura y Construcción; and Ms. Angélica Piña of Investor Relations; and also Lourdes Barajas, Elementia's CFO. I will now turn the call over to Ms. Angélica Piña. Please go ahead.

A
Angélica Garnica
executive

Thank you, Dave. Good morning, everyone. Thank you for your interest and your participation in this conference call. I will take you briefly through the second quarter financial results, and then we will take your questions.

Since this quarter, the consolidated figures of Grupo Carso S.A.B. de C.V have been prepared including an additional sector, which is Elementia Materiales and Fortaleza Materiales, acquired through the shareholders' agreement in the respective tender offers of March 22, 2022, where Grupo Carso now owns more than 50%. The second quarter of 2021 figures were not misstated.

Consolidated sales of Grupo Carso improved 63.1% totaling MXN 49.1 billion. This was mainly due to Carso Infraestructura y ConstrucciĂłn, which posted a 58.3% increase, adding MXN 3.5 billion more due to higher drilling and infrastructure projects.

Grupo Sanborns went up 22.6% with better customer traffic at the department stores and restaurants compared to last year. Condumex also stood out by growing 20.9% related to higher cables and harnesses volumes. Carso Energy increased 6.7% mainly from recording additional revenues from the 2 hydroelectric plants in Panama.

Elementia in this quarter now contributed with 19% of consolidated sales, this coming from higher demand in Construsistemas USA and higher prices. Excluding Elementia, sales increased 32.2%, totaling MXN 39.7 billion.

Consolidated operating income increased from MXN 3.3 billion to MXN 5.2 billion, while EBITDA went up 60.8% with lower administrative and selling expenses, reducing 250 basis points as a percentage of sales from 14.8% to 12.3%. All divisions improved profitability, mainly Grupo Sanborns from a better product mix and Elementia, which increased 47.8%. Grupo Condumex improved 16.5%, then Carso Infraestructura y ConstrucciĂłn grew 25.8% and Carso Energy 7.7%.

EBITDA totaled MXN 6.7 billion, higher than MXN 4.1 billion a year ago. Excluding Elementia, the operating income and EBITDA increased 30.5% and 26%, respectively. The consolidated controlling net income increased 28.2%, reflecting mainly the improved operating results.

Explaining the performance by division, the total sales of Grupo Sanborns were MXN 14.6 billion, increasing 22.6%. Grupo Sanborns' different formats have shown a sound improvement after the effects of COVID-19. The Mother's Day and Hot Sale events contributed favorably to this recovery.

In e-commerce sales, we substantially improved our delivery times and made progress with the in-store pickup project. Sears grew 23.7% in total sales; Sanborns, 29.9%; and iShop/MixUp, 19.7%. A better performance was observed in higher-margin categories such as prepared food, casual and formal clothing and shoes.

The retail gross profit increased 24.4%, and the gross margin improved from 23.9 to 34.4 percentage of sales. Therefore, operating income totaled MXN 1 billion compared to MXN 429 million last year. EBITDA improved 64.8%, and net income reached MXN 839 million compared to MXN 199 million in the second quarter of the previous year.

Regarding the Industrial division, Grupo Condumex posted a 20.9% improvement totaling MXN 13.3 billion. This increase came from the telecom sector with higher cable sales volumes in most of the plants and other industrials with higher demand of turnkey projects.

The operating income and EBITDA of the Industrial division went up 16.5% and 14.6%, respectively. Controlling net income improved 192.1%, going from MXN 1 billion to MXN 3.1 billion this year. Carso Infraestructura y ConstrucciĂłn contributed with additional MXN 3.5 billion in revenues, increasing 58.3% and reaching MXN 9.6 billion.

The divisions that had the best performance were manufacturing and services for the oil and chemical industry, where land drilling increased 104.1% from fluids, directional drilling and repair of oil wells; infrastructure with a 228.7% increase due to the progress in the construction of the second section of the Maya Train and 2 highways; and pipeline installations, which grew 21.4% due to telecom projects.

Civil construction and housing decreased since works were at a high point of execution last year and now have concluded. The operating income and EBITDA in Carso Infraestructura y ConstrucciĂłn increased 25.8% and 23.6%, respectively. Controlling net income increased 37.4% from the sound operating results.

The projects currently in place are the Las Varas-Vallarta and Mitla-Tehuantepec highway, telecom installation services, equipment for the petrochemical industry, deep well drilling for Pemex, various services and equipment for the oil industry and the Escárcega-Calkiní Section 2 of the Mayan Train.

The backlog totaled MXN 49.7 billion compared to MXN 34.5 billion a year ago, mainly included additional drilling services for Pemex. The sales of Elementia increased 13.4% from MXN 8.4 billion in the second quarter of 2021 to MXN 9.5 billion in the second quarter of 2022. This increase was driven by the continued price increase strategy in all business units as well as the increase in volume [ holding ] Construsistemas and metals, mainly in the Construsistemas U.S. operations.

The metal sector reflected an increase of 16.1% compared to the second quarter of 2021 due to the focus on the sale of products with higher levels of profitability. Elementia's operating income increased 47.8% from MXN 640 million to MXN 946 million in the second quarter 2022.

Despite representative increase in sales in the second quarter of 2022 in to -- in the second quarter of 2021, there was a negative effect in depreciation due to accounting movements caused by one of the U.S. cement plants that went from available-for-sale assets to fixed assets, which is one of the reasons for the large variation in operating income. On the other hand, EBITDA decreased 7.3% from MXN 1.5 billion to MXN 1.4 billion mainly due to increases in electric and thermal energy costs, particularly in U.S. cement.

Controlling net income in Elementia increased 5.5% to MXN 259 million compared to MXN 245 million in the previous year. The sales of Carso Energy totaled MXN 1 billion, where additional revenues came from the 2 hydroelectric plants in Panama, where more rain and higher spot prices of energy were recorded coupled with revenue from the Samalayuca-Sásabe pipeline.

The Waha-Presidio and Waha-San Elizario gas pipelines in Texas, U.S., where we have a 51% participation, received rents from gas transportation. However, the revenues are not reflected in consolidated sales. The operating income and EBITDA of Carso Energy went up 7.7% and 6.9%, respectively.

Lastly, in the gas pipeline business, we have initiated an investment in a compression station for the Samalayuca-Sásabe pipeline, which will significantly increase the capacity.

With this, I finish my general comments to proceed to a Q&A session. Thank you.

Operator

[Operator Instructions] And our first question today comes from Laisha Zaack from GBM.

L
Laisha Zaack Carrillo
analyst

I just want to know if you can share a little bit more color on how much CapEx or how -- what was the amount that you used for the stake in Elementia? And the second question would be if you have invested any of the $80 million in the compressor for Carso Energy and if you can disclose the amount?

A
Angélica Garnica
executive

Hello, Laisha. This is Angélica. The variation or the increase in the CapEx is mainly due to the incorporation of Elementia because it's MXN 481 million; then CICSA, MXN 234 million; Sanborns, MXN 121 million; and others by MXN 1.4 billion. And it was a decrease in Condumex for MXN 95 million. So that was the main variation that you see in the cash flow statement of the CapEx.

A
Arturo GarcĂ­a
executive

Maybe it's important to say that in the case of Carso Energy, we have a meeting around MXN 2 billion CapEx because of the compression extension in the Samalayuca-Sásabe pipeline. But we are going to accomplish our budget around MXN 5 billion for this year as was commented in the last conference call.

Operator

[Operator Instructions] And ladies and gentlemen, in showing no additional questions, I'd like to turn the floor over to management for closing remarks.

A
Angélica Garnica
executive

Thank you, everyone, for your interest in this conference call. If you need additional information, please contact us. Have a nice week.

Operator

Ladies and gentlemen, with that, we'll conclude today's presentation. We do thank you for joining. You may now disconnect your lines.