By ADAM WILLIAMS
Mexichem is planning to pursue more joint ventures as Mexico
opens its energy industry and returns from existing
partnerships help the company beat petrochemical peers in the
Mexichem, which has acquired more than 15 companies since
2007, is a candidate for further ventures with companies such
as state-run Petroleos Mexicanos, Fernando Perez, an analyst
with Corporativo GBM SAB in Mexico City, said in an
Pemex, as the oil producer is known, on May 6 said it plans
to quadruple petrochemical investment to 50.4 billion pesos
($3.89 billion) over the next four years to boost output. The
companies formed an alliance to revamp the Pajaritos petrochemical
plant last year.
One of the strategies that Mexichem has carried out is
successful growth from acquisitions looking for vertical integration
, Juan Francisco
Sanchez, director of Mexichems investor relations, said
in an e-mailed response to questions. This strategy is
part of our DNA and one which we will continue to carry
Latin Americas biggest plastic pipe maker partnered in
2013 with Occidental Petroleums chemical unit to build
a $1.5 billion ethylene plant in southern Texas and is
producing vinyl chloride with Pemex. Teaming up with other
companies positions Mexichem to benefit from petrochemical
growth fueled by
energy reforms approved in December, said Jean-Baptiste
Bruny, a BBVA Research analyst.
Mexichem is a company that has grown organically and
inorganically by making good purchases at low prices,
Bruny said by telephone from Mexico City. There are
several more options available to establish joint ventures
with other companies in the mid- to long-term.
Mexichem sees multiple options for petrochemical
secondary energy laws are approved, Sanchez said. Secondary
legislation to energy overhaul approved last year by
President Enrique Pena Nieto was presented April 30 to
Mexicos congress. The laws, which could be approved as
soon as next month, will determine tax rates for private
companies that set up energy project
in Mexico as well as
Pemexs participation in projects such as cross-border
Pemexs petrochemical branch is pursuing three alliances
with private companies to increase fertilizer and ethylene
production that will probably be announced this year, Manuel
Sanchez Guzman, general director of Pemex Petrochemical, said
in an interview last month in Mexico City. Pemex is actively
seeking alliances with private companies as the energy
overhaul opens an enormous market for
petrochemical output, he said.
Mexichem will consider further acquisitions for petrochemical expansion
, Sanchez said. The
company is analyzing the creation of a 500-megawatt
that would be used to sell
electricity to third parties, he said.
Mexichems sales rose 8.5% in the first quarter from a
year ago, exceeding analysts estimates. Revenue was
boosted by the Pemex venture and higher sales of vinyl
chloride monomer known as VCM, CEO Antonio Carrillo said
during a April 30 earnings conference call.
Mexichems credit rating was lifted to BBB from BBB- on
Nov. 15 by Fitch Ratings, which cited the companys
continued business position strengthening through
organic growth and acquisitions and further growth
Shares rallied 17% in the past two months, the steepest gain
among 15 similar stocks tracked by Bloomberg. In the
previous year, the Tlalnepantla, Mexico-based company was the
worst performer with a 36% loss.
It seems feasible that the company has the potential to
return to a historic level of 15 to 20 percent growth,
said BBVAs Bruny, who has a hold rating on the stock.
Mexichems higher sales came after last years
company restructuring and increased demand in Latin America
, CEO Carrillo said on the
earnings call. Company sales in Latin America and Europe
gained 13% in the first
quarter from the previous year.
For the past two months, Latin American peers Braskem of
Brazil rose 10% while Mexicos Alpek was little changed.
Mexichem gained 18% in the period. Sixteen of 18 analysts
surveyed by Bloomberg have either a buy or hold
rating on Mexichems shares.
Mexichems first-quarter profit of $51.4 million missed
analysts forecasts, partially on a 36% decline in
earnings before interest, taxes, depreciation and
amortization, or Ebitda, in the companys fluorine unit
as output fell, according to an April 30 research report led
by Credit Suisse analyst Vanessa Quiroga, who rates the stock
First-quarter Ebitda slid 7.4% to $198 million, the company
said April 29 in a regulatory filing. Ebitda is seen
improving in the second half of the year on better prices
expected in the fluoride chain and the start of new fluorite
contracts, Mexichems Sanchez said.
Mexichem is the worlds biggest producer of the
fluorine- rich mineral used in refrigerants, unleaded
gasoline and toothpaste, and owner of the largest fluorite
mine in the world, located in San Luis Potosi state in
Mexichems shares look good over the last two
months, but that is not the case if you look at them over the
last six months, Fernando Bolanos, an analyst with
Monex Casa de Bolsa, said in an interview from Mexico City.
The returns are still very small and this year is
likely to continue to be rather complicated.
The company in March formed Mexichem Energy to participate in
s such as electricity
generation as the countrys energy industry opens to
allow increased private investment.
The solid balance that Mexichem has allows them to
continue acquiring and remain effective in regards to mergers
and acquisitions, Perez, who has a hold rating on the
stock, said in a phone interview. They would
definitively be able to acquire another company soon to
maintain inorganic growth.