Mexichem Informs on the Decision of Petroquímica Mexicana de Vinilo S.A. of C.V. Not to Rebuild Its Vinyl Monochloride Production Capacity in Mexico

Mexichem, S.A.B. de C.V. (BMV: MEXCHEM*) (“The Company” or “Mexichem”) announced today that the Board of Directors of its joint venture, Petroquímica Mexicana de Vinilo S.A. of C.V. (PMV), a co-investment with PPQ Cadena Productiva S.L.,subsidiary of Pemex Etileno (PPQC), and of Mexichem’s Vinyl Business Group, has decided not to rebuild its Vinyl Monochloride (VCM) production capacity. Therefore, the joint venture’s VCM production, and the assets and liabilities associated with ethylene production and auxiliary services associated with VCM and ethylene will be classified as discontinued operations in Mexichem’s financial statements for the years 2015, 2016 and 2017. The discontinued operation will not have an impact in PMV’s cash balance or cash flow (See Annex 1). It is important to mention that Mexichem, PPQC and Pemex Etileno will continue to evaluate the possibility of investing in the future, jointly or separately, through PMV or another vehicle, in businesses related to the existing ones or in other types of businesses.

It is publicly known that on April 20, 2016 there was an explosion in the VCM plant of the Pajaritos Petrochemical Complex where two of the three plants are located, the VCM plant and the ethylene plant; as well as auxiliary services, such as energy generation and production, steam sales and water treatment. The VCM plant (Clorados III) was the one damaged. The chlorine and caustic soda production plant is located at a separate site.

This represents the exit of PMV from the VCM and ethylene businesses in Mexico, but not the chlorine-soda business, whose plant will continue to be operated by PMV, and therefore the alliance between the PPQC subsidiary of PEMEX Ethylene and Mexichem will remain in place.

PMV's decision to exit the VCM and Ethylene businesses does not impact Mexichem’s guidance for EBITDA growth for 2017, which is expected to be between 20% and 25% above the $884 million reported in 2016.

ANNEX 1

THE FINANCIAL FIGURES PRESENTED BELOW ARE NOT AUDITED.

   
mm US$ January - September
INCOME STATEMENT

     2017     

   

Discontinued
operation

 

2017 continued
operations

 

     2016     

   

Discontinued
operation

 

2016 continued
operations

  Net Sales 4,363 3 4,360 4,072 35 4,037
  Cost of Sales 3,316   27   3,289   3,094   48   3,046  
Gross Profit 1,047   (24 ) 1,071   978   (13 ) 991  
  Operating Expenses 499   (25 ) 524   580   56   524  
Operating income 548   1   547   398   (69 ) 467  
Financial cost 163 1 162 135 - 135
  Equity income of associated entities (1 ) -   (1 ) (3 ) -   (3 )
Income from continued operations before income tax 386   -   386   266   (69 ) 335  
Cash tax 104 104 128 - 128
 

Deferred tax

47   (8 ) 55   (35 ) 4   (39 )
Income tax 151   (8 ) 159   93   4   89  
Income from continued operations 235   8   227   174   (73 ) 101  
  Discontinued operations 1   180   (179 ) (10 ) 274   (284 )
Net consolidated Income (Loss) 236   188   48   164   201   (183 )
  Minority Interest 56   83   (27 ) (27 ) 89   (116 )
Net Majority Income (Loss) 180   105   75   191   112   (67 )
               
EBITDA 838   8   830   643   (55 ) 698  
 
 
 
mm US$ as of November 2017
Balance Sheet

     2017     

 

Discontinued
operation

 

2017
Continued
operations

  Current assets 3,029 - 3,029
  Non-current assets 5,759 (198 ) 5,561
Total Assets 8,788 (198 ) 8,590
Current liabilities 2,079 - 2,079
  Non-current liabilities 2,863 (10 ) 2,853
Total liabilities 4,942 (10 ) 4,932
Consolidated shareholders equity 2,150 (105 ) 2,045
  Minority shareholders equity 1,696 (83 ) 1,613
Total equity 3,846 (188 ) 3,658
Total liabilities and equity 8,788 (198 ) 8,590
 

ABOUT MEXICHEM

Mexichem is a global leader in plastic piping, one of the most cost-efficient PVC producer and one of the world’s largest chemical and petrochemical companies. Mexichem contributes to global development by delivering an extended portfolio of products to high growth sectors such as infrastructure, housing, Datacom, water management, among others. With operations in over 30 countries, Mexichem’s global footprint includes more than 18,000 employees, 120 plants, 2 fluorite mines, 15 R&D laboratories and 8 training academies. Mexichem has annual revenues of US$5.4 billion, it has over 50 years of history and more than 30 years trading on the Mexican Stock Exchange. The company is member of the Mexican Stock Exchange Sustainability Index and the sustainability emerging markets index FTSE4Good.

Forward-looking Statements

In addition to historical information, this press release contains "forward-looking" statements that reflect management's expectations for the future. The words “anticipate,” “believe,” “expect,” “hope,” “have the intention of,” “might,” “plan,” “should” and similar expressions generally indicate comments on expectations. The final results may be materially different from current expectations due to several factors, which include, but are not limited to, global and local changes in politics, the economy, business, competition, market and regulatory factors, cyclical trends in relevant sectors; as well as other factors that are highlighted under the title “Risk Factors” on the annual report submitted by Mexichem to the Mexican National Banking and Securities Commission (CNBV). The forward-looking statements included herein represent Mexichem’s views as of the date of this press release. Mexichem undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.”

Mexichem has implemented a new Code of Ethics that rules its relationships with its employees, clients, suppliers and general groups. Mexichem’s Code of Ethics is available for consulting in the following link: http://www.mexichem.com/Codigo_de_etica.html. Additionally, Mexichem Audit Committee established a mechanism of contact, which allows that any person that knows the unfulfillment of operational and accounting records guidelines and lack of internal controls of the Code of Ethics, from the Company itself or from the subsidiaries that this controls, file a complaint which is anonymously guaranteed. The whistleblower program is facilitated by a third party. The telephone number in Mexico is 01-800-062-12-03. The website is http://www.ethic-line.com/mexichem and contact e-mail is mexichem@ethic-line.com. Mexichem’s Audit Committee will be notified of all complaints for immediate investigation.