EM LATAM CREDIT: Mexico's Alpek SA (ALPEKA; Baa3/BBB-/BBB-) 1Q Earnings

“Alpek 1Q Net Income Misses Estimates” – BBG

Neutral for spreads

• Mexico based polyester and plastics producer Alpek reported disappointing earnings with both volumes and margins falling, especially in the polyester segment.

• Polyester volume was down 7% while polyester revenue fell 14% YoY. Reported overall EBITDA fell 22% YoY while polyester EBITDA dropped 39%.

• Net debt grew by 4% while trailing twelve months EBITDA fell 6% and that resulted in net debt leverage rising sequentially from 2.9x to 3.1x but that was a substantial improvement from 3.7x at year end 2023.

• Alpek has a substantial global presence which is especially strong in the Americas. Foreign revenues comprise 77% of total polyester sales and 63% of plastic and chemicals sales.

• We don’t expect US tariffs to have a big impact as the company has significant production facilities in the U.S.

• ALPEKA 2031 notes were last quoted T+251bps, widening 45bps MTD and 75bps wider YTD. Bonds look interesting at these wider spreads given the company’s stable credit profile.

• Net leverage has been elevated in the past year but appears to be improving with the company managing to be free cash flow neutral this past quarter amidst a difficult operating environment.