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Nemak Report Nemak Reports 3Q21 EBITDA Of USD115 M

Editor: Nicole Kareta

Monterrey, Mexico. October 18, 2021. Nemak, S.A.B. de C.V. announced today its operational and financial results for the third quarter of 2021 (“3Q21”). The following is a summary of the key figures for the period:

Related Companies

Nemak Reports 3Q21.
Nemak Reports 3Q21.
(Source: gemeinfrei / Pexels )

Overview USD Millions, except Volume.
Overview USD Millions, except Volume.
(Source: Nemak)

Message from the CEO

Our third-quarter results were impacted by the global semiconductor shortage, which limited our customers’ light-vehicle production, and therefore our volume in comparison to the previous year. In response to this situation, we continued implementing measures focused on improving operational efficiency and flexibility, which in turn facilitated our efforts to adapt quickly to meet customer requirements amidst evolving supply chain conditions.

Regarding strategy execution, I am pleased to share that we reinforced our position as a leading independent supplier of e-mobility and structural applications (EV/SC), securing contracts during the quarter to produce these parts worth USD150 million annually, which enabled us to surpass our goal of USD1 billion in contracts in this segment earlier than anticipated. We also built on our leadership track record in traditional powertrain applications, winning incremental business to supply parts for high-volume vehicle platforms in North America.

Furthermore, we maintained production of EV/SC applications well above previous-year levels, despite a more challenging industry backdrop. During the quarter, we accelerated the expansion of this business in Europe, North America, and Asia, harnessing our technology portfolio to deliver tailor-made solutions for customers’ electric vehicles. As a result, we remain on track to achieve substantial growth in this segment, as compared to the previous year.

We are confident that our financial position, ability to adapt our operations, and the experience we have accumulated over previous business cycles give us a solid foundation from which to manage periods of volatility, while we simultaneously continue our efforts towards driving long term value creation in sustainable mobility.

Recent Developments

  • During 3Q21, Nemak won contracts worth approximately USD500 million annually, of which approximately USD150 million was in incremental business to produce e-mobility and structural applications.
  • On September 6, the merger of Controladora Nemak, S.A.B. de C.V. into Nemak was concluded successfully, representing the culmination of a multi-step process to make Nemak into a fully independent company trading under a single listed entity. The transaction had been approved at the respective Extraordinary General Shareholders’ Meetings held on July 29.
  • On October 13, Nemak announced that it had been recognized as a top-performing global supplier at the 23rd annual Ford World Excellence Awards. Nemak was selected as a Turn Around Automotive Operations and Compete like a Challenger winner as well as a recipient of the Gold Quality Award at the Ford Motor Company event, which was held virtually this year.

Automotive Industry

(Source: Nemak)

For the quarter, SAAR for U.S. light-vehicle sales was 13.3 million units, a 13.2 % year-over year ("y-o-y") decline driven by a 23.2 % y-o-y drop in light-vehicle production in North America resulting from global semiconductor supply disruptions. Meanwhile, in Europe, light-vehicle SAAR sales and production declined 16.3 % and 21.9 % y-o-y, respectively; these trends were also largely a result of semiconductor supply constraints. Notwithstanding a more challenging short-term outlook for the global automotive industry compared to the previous quarter, demand fundamentals remain strong in the U.S. and Europe, the Company’s main markets, which could potentially support recovery once semiconductor supply begins to normalize.

Financial Results Summary

USD Millions, except Volume and EBITDA/ Eq.Unit.
USD Millions, except Volume and EBITDA/ Eq.Unit.
(Source: Nemak)

Volume in 3Q21 decreased 22.8 % y-o-y, reflecting production reductions among Nemak customers across regions, in the wake of tightened global semiconductor supply.Revenue in 3Q21 dropped by 4.0 % y-o-y, as higher aluminum prices partially offset effects of

lower volume.

Third-quarter EBITDA was USD115 million, down 35.4 % against the same period last year, largely due to volume effects. In turn, 3Q21 EBITDA per equivalent unit finished at USD14.7, which was lower y-o-y, but remained higher compared to pre-pandemic levels, thanks in part to an improved product mix, and to operating efficiencies achieved over the last six quarters. Operating Income in 3Q21 was USD28 million, which compares against USD100 million in the same period last year.

In 3Q21, Nemak recorded a net loss of USD29 million, compared to net income of USD90 million in the same period of 2020; this result was attributable to the same factors that affected operating income, in combination with non-recurring financial expenses of USD35 million associated with the prepayment of bonds issued in 2017 and 2018 and to non-cash foreign exchange effects. Excluding the bond prepayments, net income for the period would have been slightly positive.

Capital expenditures totaled USD82 million in 3Q21; these funds were mainly used to support new product launches in the Company’s EV/SC segment. On September 30, 2021, Nemak reported Net Debt of USD1.45 billion. Financial ratios for the last 12 months were: Net Debt to LTM EBITDA, 2.5 times; and Interest Coverage, 5.2 times.Excluding the above-mentioned bond prepayments, Interest Coverage would have been 6.9 times. These ratios compare with 3.4 and 5.4 times, respectively, at the end of 3Q20.

Regional Results

North America

In 3Q21, revenue decreased 5.4 % y-o-y as higher aluminum prices partially offset effects of lower customer light-vehicle production on Nemak's volume. EBITDA recorded a 46.7 % y-o-ydecline due mainly to volume effects.

Europe

Third-quarter revenue fell 4.3 % y-o-y, with higher aluminum prices partially offsetting the effects of customer light-vehicle production reductions on Nemak’s volume. During the period, EBITDA declined 23.5 % y-o-y, due mainly to volume effects.

Rest of the World

In 3Q21, revenue increased 4.8 % y-o-y, as higher aluminum prices outweighed effects of lower customer light-vehicle production on Nemak’s volume. EBITDA in 3Q21 grew 6.0 % y-o-y, driven by a non-recurring gain of USD3 million.

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