Orbia’s Earnings Call: Mixed Results Amid Challenges

Orbia Advance Corporation SAB de CV ((MX:ORBIA)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Orbia Advance Corporation SAB de CV painted a mixed picture of the company’s financial health. While there were positive strides in cost reduction and growth in sectors such as precision agriculture and fluorine energy, these were overshadowed by declines in overall revenue and EBITDA, as well as challenges in polymer solutions and building infrastructure. The company is clearly making efforts to address these issues, but significant headwinds remain.

Adjusted EBITDA Increase

The first quarter saw Orbia’s adjusted EBITDA rise to $260 million, marking a 3% increase compared to the previous year. This growth suggests a degree of resilience in the face of challenging market conditions, providing a glimmer of hope amidst broader financial struggles.

Cost Reduction Program on Track

Orbia’s cost reduction program is progressing well, with expectations to achieve cumulative annual savings of $160 million by the end of 2025. The company aims to reach a savings level of $250 million per year by 2027, demonstrating a strong commitment to financial discipline and operational efficiency.

Precision Agriculture and Fluorine Energy Growth

The precision agriculture segment reported a 6% increase in revenues and a 16% rise in EBITDA year-over-year. Similarly, the fluorine energy materials segment saw a 14% increase in revenue and an 18% growth in EBITDA, highlighting these areas as bright spots in Orbia’s portfolio.

Successful Debt Refinancing

Orbia successfully issued approximately $300 million of notes in the Mexican debt market, effectively refinancing previous debt obligations. This move is a strategic step towards strengthening the company’s financial position.

Decline in Overall Revenue and EBITDA

Despite some positive developments, Orbia faced a 3% decline in revenues to $1.8 billion and a 21% drop in EBITDA to $198 million compared to the prior year’s quarter. These figures underscore the ongoing challenges the company faces in maintaining its financial performance.

Polymer Solutions and Building Infrastructure Weakness

The polymer solutions and building infrastructure segments experienced notable declines, with revenues decreasing by 9% and 6% year-over-year, respectively. These declines were attributed to market weaknesses and operational disruptions, posing significant challenges for Orbia.

Increased Net Debt to EBITDA Ratio

Orbia’s net debt to EBITDA ratio increased from 3.3 times to 3.67 times, indicating higher leverage. This increase reflects a decrease in cash, an increase in total debt, and a reduction in EBITDA over the last 12 months.

Free Cash Flow Challenges

The company reported a negative free cash flow of $155 million, although this was an improvement of $46 million year-over-year. This continues to be a critical area of concern for Orbia as it navigates its financial landscape.

Forward-Looking Guidance

Looking ahead, Orbia provided guidance that reflects the current challenging market conditions and strategic initiatives. The company anticipates adjusted EBITDA between $1.1 billion and $1.2 billion for 2025, assuming stable market conditions. Orbia remains focused on cost optimization, non-core asset divestments, and strategic investments, with a target to reduce the net debt to EBITDA ratio below 3.0 by the end of 2025.

In conclusion, Orbia Advance Corporation SAB de CV’s earnings call highlighted a complex financial landscape, with both positive developments and significant challenges. While the company is making strides in cost reduction and growth in certain segments, declines in revenue and EBITDA, along with increased leverage, present ongoing hurdles. The forward-looking guidance suggests a proactive approach to navigating these challenges, with a focus on financial discipline and strategic investments.