EM LATAM CREDIT: Mexico's Alfa, SAB (ALFAA; Baa3 /BBB /BBB) 1Q Earnings

Alfa First Quarter 2025 Earnings Results

Neutral for spreads

• Alfa, formerly a Mexican conglomerate and now the holding company for processed foods producer Sigma Alimentos (SIGMA; Baa3/BBB-*+/BBB) reported lackluster results dragged down by higher raw material costs worldwide and a one-time effect from flooding at the company’s plant in Spain.

• Mexico comprised 49% of total Revenues; followed by Europe at 25%; the U.S. at 19%; and Latin America at 7%.

• Europe sales fell 13% QoQ due to the flooding while total sales fell 5% globally with Mexico and the rest of Latin America weaker as well. US sales up 2% and EBITDA up 22% QoQ were supportive.

• Net debt/EBITDA of 2x was higher than 1.7x the previous quarter but improved from 2.2x YoY.

• ALFAA 2044 bonds were last quoted T+170bps, 7 bps wider MTD and 4 bps wider YTD.

• The company spun off its telecom company Axtel in May 2023 and spun off its chemical subsidiary Alpek last month so now it is left with its main subsidiary Sigma which will guarantee its debt. Alfa is in the process of a name change appropriate for its new corporate structure.

• Alfa now more closely resembles higher rated Grupo Bimbo (BIMBOA; Baa1/BBB+/BBB+), the Mexican bread maker, which has 2044 bonds quoted 28bps tighter.