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GIS keeps posting sequential consolidated ebitda growth

GIS, the Mexican multinational primarily focused on the automotive market, reported its results for the three-and-nine months that ended on September 30, 2022, highlighting that the Company was able to post a quarterly consolidated EBITDA increase for the third time straight, heavily supported by the performance of Draxton, its largest business unit. 

In this wise, amid a harsh environment marked by historically high energy prices in Europe and spikes in the raw material prices due to the political conflict afflicting Eastern Europe, Draxton has drawn from a well-executed price indexing strategy to mitigate such impacts, significantly improving its EBITDA per ton (+58% YoY; overall EBITDA increased 80% to USD$34 million). Moreover, so far this year, it has secured won new contracts worth ~USD$153 million and is moving forward as planned with the opening of the first phase of the San Luis Potosi plant expansion which will start producing validation components this December.

Vitromex, GIS’ ceramic floor and wall coverings division, is making strides in optimizing processes and improving product mix towards the higher-margin segment, as well as in the execution of its strategy to expand its US footprint. For the 3Q22, Vitromex reported USD$59 million of revenue (+12% YoY), mainly following the introduction of large-sized items, and following a scheduled plant shutdown, a slight drop in EBITDA, which virtually sat unchanged YoY at USD$6 million.

While the quarterly performance of Cinsa, the kitchenware division that had been experiencing a strong momentum supported by favorable export dynamics and a wider e-commerce outreach, was affected by the domestic market´s inflation-related slowdown, which weighed down on revenues, dropping them 19% YoY to USD$21 million regardless of a larger market share.

Consequently, driven by Draxton’s higher sales volume and the positive effect of the indexation of raw material and energy costs to the sales price, GIS consolidated revenue and EBITDA rose 23% and 69% to USD$305 million and USD$38 million, respectively, leading to a net income of USD$8 million. For the 9M, revenues stand at USD$906 million (+21% YoY), EBITDA at USD$105 million (+7% YoY), and net income amounts to USD$20 million (-1% YoY).

Wrapping up, it is worth recalling that in the past quarter, GIS announced an agreement with Mohawk Industries to sell Vitromex for USD$293 million, proceeds that will be used to bolster the financial position, thus paving the road for further growth.

In this regard, Mr. Manuel Rivera, Chief Executive Officer of the Company stated, ¨Vitromex’s divestment, is still under review by the authorities. At quarter-end, net leverage was 1.8 times, and with the potential divestment, the resulting leverage would be minimal. With this, GIS seeks to focus on auto parts, strengthen Draxton's positioning and grow further in compatible components for electric vehicles.”

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Author: Ricardo Avila