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Alpek, S.A.B. de C.V.
Av. Gómez Morín 1111 Sur
Col. Carrizalejo San Pedro Garza García
Nuevo León, Mexico, 66254
www.alpek.com
2013 A N N U A L R E P O R T
2013 A N N U A L R E P O R T
Table of Contents
Corporate Profile
Financial Highlights
Economic and Industry Environment
Petrochemical Chains and Footprint
Letter to Shareholders
Polyester
Plastics and Chemicals
Integration, Efficiency and Technology
Sustainability
Board of Directors
Management Team
Corporate Governance
Glossary
Consolidated Financial Statements
1
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3
4
6
10
14
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22
28
29
30
31
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Investor Relations
Hernán F. Lozano
Sabino Parra
Av. Gómez Morín 1111 Sur
Col. Carrizalejo San Pedro Garza García
Nuevo León CP. 66254, Mexico
IR@alpek.com
www.alpek.com
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Corporate Profile
Alpek is Mexico’s largest petrochemical company and the second largest
in Latin America.
• Operating in two business segments: Polyester, and Plastics and
Chemicals.
• North America’s leading integrated polyester producer.
• Only manufacturer of polypropylene and caprolactam in Mexico.
• Operates the largest expandable polystyrene (EPS) plant in
the Americas.
• 16 plants and 4,550 employees in Mexico, the United States
and Argentina.
• 90% of Alpek’s products used for food, beverage and consumer
goods packaging.
• Listed on the Mexican Stock Exchange since April 2012.
CORPORATE PROFILE
1
Financial Highlights
Millions of dollars
Millions of pesos
RESULTS
Net Sales
Operating Income
EBITDA1
Majority Net Income2
Net Income per Share3
BALANCE
Assets
Liabilities
Stockholders’ Equity
Majority Interest2
Book Value per Share4
2013
7,028
228
572
21
0.01
4,445
2,374
2,071
1,837
0.87
2012
% var.
7,277
566
728
277
0.14
4,742
2,463
2,279
2,012
0.95
-3
-60
-21
-92
-6
-4
-9
-9
2013
90,061
2,926
7,344
262
0.12
58,128
31,040
27,088
24,018
11.34
2012
% var.
96,163
7,476
9,611
3,663
1.83
61,696
32,045
29,651
26,180
12.36
-6
-61
-24
-93
-6
-3
-9
-8
EBITDA1
Millions of dollars
Majority Net Income2
Millions of dollars
Assets
Millions of dollars
09
10
11
12
13
420
482
771
728
572
09
10
11
12
13
21
114
203
09
10
11
12
13
332
277
2,995
3,090
4,446
4,742
4,445
NOTE: In this annual report, monetary figures are expressed in nominal Mexican pesos ($) and in nominal dollars (US $) unless otherwise
specified. The financial information for 2013, 2012 and 2011 was prepared in accordance with IFRS, in effect in Mexico since January 2012.
Conversions from pesos to dollars were made using the weighted average exchange rate of the period in which the transactions were
carried out. The percentage variations between 2013 and 2012 are expressed in nominal terms.
1) EBITDA= operating income plus depreciation, amortization and impairment of non-current assets
2) Attributable to the controlling interest
3) Based on the weighted average number of outstanding shares (2,118 million in 2013 and 1,996 million in 2012)
4) Based on the number of outstanding shares (2,118 million at the end of 2013 and 2,118 million at the end of 2012)
2
ALPEK 2013 ANNUAL REPORT Economic and Industry Environment
The world economy grew moderately during 2013 amid vola-
Some of Alpek’s main feedstocks, such as paraxylene, are pro-
tile oil prices and margin pressure in some industries that have
duced from oil. The reference price of oil (Brent crude) ranged
been impacted by incremental capacity in Asia.
between US $95 and US $120 per barrel in 2013. The economic
GDP in the United States increased approximately 1.8% during
Middle East, caused significant oil price volatility during the
the year, compared to 2.8% in 2012, as lower government
year. However, prices stabilized at approximately US $110 per
spending and a negative trade balance moderated growth.
barrel in the latter part of 2013.
slowdown, as well as conflicts and supply disruptions in the
In Mexico, GDP grew an estimated 1.2% in 2013, pressured
Natural gas is the main fuel used in Alpek’s operations. During
by a generalized deceleration in consumption, a reduction in
2013, the cost of this energy resource remained significantly
public spending and a contraction in the construction sector.
below that of petroleum-based fuels, at an average price of US
Nevertheless, the approval of a number of structural reforms
$3.65 per million British Thermal Units (BTU).
in energy, finance and telecommunications should drive
growth in the coming years. The energy reform is particularly
Like other capital intensive industries, the petrochemical in-
important for Alpek because it promotes the exploitation of
dustry has been impacted by the increase in capacity in Asia.
energy resources and other inputs for the country’s petro-
It is estimated that Asian purified terephthalic acid (PTA) ca-
chemical industry.
pacity grew by more than 20% in 2013, while caprolactam
(CPL) capacity increased in excess of 50%. This has caused
The Chinese economy grew approximately 7.7% in 2013, which
lower margins in global polyester and CPL markets outside
is its lowest growth rate in the past decade.
North America.
ECONOMIC AND INDUSTRY ENVIRONMENT
3
PET
Fibers
Petrochemical Chains and Footprint
Oil
Refinery
Naphtha
Reformer
Paraxylene
PTA
Propane
Cracker
Ethane
Cracker
Cracker
H
H
C
C
H
CH3
Propylene
H
H
C
C
H
H
Ethylene
Cracker
Benzene
Methane
Polypropylene
H
N
H
H
Ammonia
Caprolactam
Ammonium
Sulfate
EPS
Cyclohexane
CH2
Styrene
Oil
Refinery
Naphtha
O
CH2
CH2
Ethylene
Oxide
Monoethylene
Glycol
4
ALPEK 2013 ANNUAL REPORT Oil
Refinery
Naphtha
Reformer
Paraxylene
PTA
Propane
Cracker
Polypropylene
Ethane
Cracker
Cracker
H
H
C
C
H
CH3
Propylene
H
H
H
H
C
C
Ethylene
Cracker
Benzene
Methane
N
H
H
H
Ammonia
Caprolactam
Ammonium
Sulfate
EPS
Cyclohexane
CH2
Styrene
Oil
Refinery
Naphtha
Monoethylene
Glycol
O
CH2
CH2
Ethylene
Oxide
PET
Fibers
Alpek participates in several
petrochemical chains through its two
business segments: Polyester, and
Plastics and Chemicals. It employs
4,550 workers and operates 16 plants in
Mexico, the United States and Argentina,
with a total capacity of 5.4 million tons
per year.
Segments
Polyester
Plastics and Chemicals
16 plants
in 3 countries:
Mexico, the
United States and
Argentina
PETROCHEMICAL CHAINS AND FOOTPRINT
5
Letter to Shareholders
To our Shareholders:
During 2013, we implemented projects to improve our
operating efficiency and increase our vertical integration
amid a slower-than-expected recovery in global polyes-
ter and caprolactam (CPL) markets.
2013 was a year of moderate growth across the globe,
both for developed economies and emerging markets.
Economic activity in the United States grew less than 2%,
while GDP in China increased at the lowest rate in the
past decade.
Mexico went through a year of profound change. Al-
though GDP grew below original estimates, the recent
approval of a number of structural reforms improved
the country’s outlook. The Energy Reform is particular-
ly important for our company because it promotes the
exploitation of energy resources and raw materials, such
as ethane and propane, that are fundamental to our inte-
gration strategy.
In this context, Alpek’s 2013 sales totaled US $7,028 mil-
lion, 3% below the previous year, due to a 5% decline
in volume. Operating cash flow (EBITDA) was US $572
million, 21% less than in 2012, mainly driven by lower
margins on polyester and CPL exports outside our core
North American market.
Our Polyester segment posted sales of US $5,356 million,
6% less than in 2012, due to a 7% decline in volume. Poly-
ester EBITDA totaled US $388 million, 27% below the pre-
vious year, reflecting the non-recurring provision associ-
ated with the Cape Fear plant closure and the decline in
margins on polyester exported outside North America.
6
During 2013, we implemented
projects to improve our
efficiency and integration,
amid a slower-than-expected
recovery.
Armando
Garza Sada
Chairman of
the Board
ALPEK 2013 ANNUAL REPORT Global polyester markets were affected by the startup
of new production capacity in Asia. Specifically, it is es-
timated that PTA capacity in that region has increased
by more than 15 million tons over the past two years, an
amount that is equivalent to more than double the to-
tal capacity of North America. This situation, combined
with slower demand growth in global markets, resulted
in lower polyester margins outside North America.
We invested US $179 million
in projects that enhance our
operating efficiency, integration
and geographic expansion.
Sales by our Plastics and Chemicals (P&C) segment
increased 5%, to US $1,671 million, driven by growths
of 2% in volume and 3% in average prices. P&C EBITDA
totaled US $180 million, 9% below 2012, as a result of
lower margins on the CPL that we exported to Asia.
The expansion of installed capacity in China has driven
global CPL margins to historically low levels. However, we
achieved record EBITDA in EPS (expandable polystyrene)
and polypropylene due to better margins.
In the midst of this challenging environment, we invest-
ed US $179 million in projects that enhance Alpek’s oper-
ating efficiency, integration and geographic expansion.
A key element of our strategy is to leverage North
America’s competitive natural gas and raw material
prices resulting from the recent development of shale
gas in the region. Thus, we have invested more than
US $109 million in the construction of our first cogen-
eration plant in Cosoleacaque, Veracruz. We also made
progress with two high-potential projects: vertical in-
tegration into monoethylene glycol (MEG) in alliance
with Pemex and the construction of a cogeneration
plant in Altamira, Tamaulipas.
During the year, we also implemented several proj-
ects to maximize our operating efficiency. The largest
of these was the consolidation of our polyester oper-
ations through the shutdown of our Cape Fear plant.
This was a difficult but necessary decision to improve
our cost structure and obtain annual savings of approx-
imately US $30 million.
LETTER TO SHAREHOLDERS
7
José de Jesús
Valdez Simancas
Chief Executive
Officer
DAK Americas (PTA/PET). Columbia, United States.
Other operating efficiency projects included: a PET ca-
pacity increase of 60 thousand tons per year at our Co-
lumbia site; the signing of a technology licensing agree-
ment with DSM Fibers Intermediates to strengthen our
CPL production processes and obtain approximately
US $9 million in annual savings; and the approval of an
investment project involving the construction of a pro-
pylene storage sphere that will enable us to increase the
supply of this raw material and improve the utilization of
our polypropylene plant.
We also made progress upgrading our installed PTA/
PET capacity in North America, leveraging our IntegRex®
technology to reaffirm our position as the leading low
cost producer in the region. In April, we signed IntegRex®
PTA licensing and PTA/PET supply agreements with
Gruppo M&G (M&G) for the construction of a new,
integrated PTA/PET site in Corpus Christi, Texas. Alpek
will pay M&G US $350 million over the next three years
for contractual rights to supply 400 thousand tons of
PET annually from the new plant. We are convinced
that the combination of Alpek’s IntegRex® technology,
the scale of the new site and the region’s energy and
logistics advantages will result in one of the world’s most
competitive polyester production cost structures.
In addition to its licensing and cost optimization po-
tential, this year we leveraged IntegRex® as a vehicle for
international expansion. Alpek signed a joint venture
agreement with United Petrochemical Company (UPC),
a wholly-owned subsidiary of Sistema JSFC, for the con-
struction of an IntegRex® PTA/PET site in Russia. This proj-
ect is a major step forward, because it would represent
our first incursion outside the Americas, inline with our
strategy of selectively seeking investment opportunities
in markets with good growth prospects, sustainable raw
material advantage and consolidation potential.
On the financial front, we maintained healthy leverage
and coverage ratios. Net debt to EBITDA was 1.3 times,
8
ALPEK 2013 ANNUAL REPORT A solid financial structure allows
us to continue investing in
attractive projects, even during
downturns in our industry.
while interest coverage reached 8.3 times, excluding
non-recurring financial charges. During the year, we
concluded our refinancing initiative with the issuance of
a second 10-year bond and were successful in extend-
ing the average term of our debt to more than eight
years. A solid financial structure allows us to continue
investing in attractive projects, even during downturns
in our industry.
Besides being determined to implement our investment
plans, we maintain a firm commitment to our sharehold-
ers to pay dividends. During 2013, we paid cash dividends
amounting to US $228 million: a first dividend of US $114
million paid in March and September and a second div-
idend of the same amount paid in December as an ad-
vance on the 2014 dividend.
Our business philosophy is based on the creation of eco-
nomic and social value, as well as respect for the environ-
ment in which we operate.
Results associated with sustainability are being present-
ed using the international guidelines of the Global Re-
porting Initiative for the first time. We are implementing
this framework to construct the bases through which we
will measure our sustainability initiatives in order to con-
tinuously improve our economic, social and environmen-
tal performance.
Having the most professional, efficient and committed
team is a strategic priority for our company. To ensure
this, we reinforced our training, development, health and
safety programs during the year.
In 2013, we moved forward by overcoming challenges
and creating opportunities to improve our competitive-
ness. On behalf of the Board of Directors, we would like
to thank our employees, customers, suppliers, creditors,
community and particularly you, our shareholders, for
your continued support.
Sincerely,
Armando Garza Sada
Chairman of the Board of Directors
José de Jesús Valdez Simancas
Chief Executive Officer
LETTER TO SHAREHOLDERS
9
Alpek is the only integrated manufacturer of PTA
and PET, the largest PET producer and the second
largest PTA producer in North America.
CADENA DE
POLYESTER
Our focus on the consolidated North
American market and unique position
serving stable consumer-oriented
segments differentiate us from other
petrochemical companies.
Petrotemex (PTA). Altamira, Mexico.
Through its Polyester segment, Alpek produces and mar-
line with its commitment to sustainability, Alpek also has a PET
kets PTA (purified terephthalic acid), PET (polyethylene
recycling plant in the United States with an annual capacity of
terephthalate) and polyester fibers, as North America’s only
73 thousand tons (more than three billion PET bottles).
integrated manufacturer of PTA and PET. Alpek is also the
largest PET producer and second largest PTA producer in
Beverage, food and consumer goods packaging accounts
North America on the basis of installed capacity.
for 91% of Alpek’s Polyester sales, while North America (Mex-
Our number-one product is PTA, which is produced from
segment’s revenues. Our focus on the consolidated North
paraxylene. PTA is reacted with monoethylene glycol (MEG),
American market and unique position serving stable con-
an ethylene derivative, to produce PET. Our customers are
sumer-oriented segments differentiate us from other petro-
ico, the United States and Canada) represents 81% of this
companies that purchase PTA to produce their own PET and
chemical companies.
those that buy PET to produce bottles and other containers.
Polyester fiber is used to manufacture clothing, carpets and
The Polyester segment represented 76% of Alpek’s total
furnishings, and has a number of industrial applications.
sales in 2013. Polyester revenues fell 6% year-over-year, to
US $5,356 million, driven by a 7% decline in volume. EBITDA
Our products are manufactured in the United States, Mexi-
was US $388 million, 27% less than in 2012, reflecting
co and Argentina at eleven plants with a consolidated annual
unfavorable market dynamics and the impact of the Cape
installed capacity of 4.4 million tons and 3,343 employees. In
Fear site shutdown.
12
ALPEK 2013 ANNUAL REPORT 76% of Alpek’s total 2013 revenues
came from the Polyester segment
19%
81%
North America
represents
81%
of Polyester
sales
Mexico, the United States
and Canada
Rest of the world
DAK Americas (PET). Cosoleacaque, Mexico.
POLYESTER
13
Alpek is the only producer of polypropylene
and caprolactam in Mexico, and operates
the largest EPS plant in the Americas.
CADENA DE
PLASTICS AND
CHEMICALS
Indelpro (Polypropylene). Altamira, Mexico.
Plastics and Chemicals
contributed
24%
of Alpek’s total 2013 revenues
20%
80%
80%
of Plastics and
Chemicals
sales
corresponds to
North America
Mexico, the United States
and Canada
Rest of the world
16
ALPEK 2013 ANNUAL REPORT
The Plastics and Chemicals
segment produces and markets
polypropylene, expandable
polystyrene, polyurethane and
caprolactam.
Polioles (EPS). Altamira, Mexico.
The Plastics and Chemicals (P&C) segment produces and
1,185. All our plants’ operating processes use industry-leading
markets polypropylene (PP), expandable polystyrene (EPS),
technology which is both proprietary and licensed from our
polyurethane (PURs) and caprolactam (CPL), as well as other
partners, such as Spherizone and Spheripol from Lyondell
products such as ammonium sulfate (fertilizer). Alpek is the
Basell for PP and Single Step from BASF for EPS.
only producer of polypropylene and caprolactam in Mexico,
and operates the largest EPS plant on the American continent.
Almost 80% of the Plastics and Chemicals segment’s sales
correspond to our core North American market. Alpek’s P&C
PP, a plastic made from propylene, is used in food and bev-
products are also sold in Central and South America, Asia
erage packaging, reusable containers, auto parts, medical
and Europe.
instruments and toys. EPS is a lightweight, shock-absorbing
plastic employed for packaging, construction and thermal
Plastics and Chemicals contributed 24% of Alpek’s total
insulation. CPL is the main raw material for the production
2013 revenues. The segment posted sales of US $1,671
of Nylon 6, a highly resistant plastic used in products such as
million, up 5% year-on-year as average prices and volume
clothing, industrial textiles, tire cord and engineering plastics.
increased 3% and 2%, respectively. 2013 P&C EBITDA de-
This segment operates five plants in Mexico with an annual
partially offset the decline in CPL. Excluding caprolactam, P&C
installed capacity of 1.0 million tons and a total workforce of
EBITDA grew 14% during 2013.
creased 9% to US $180 million as higher PP and EPS margins
PLASTICS AND CHEMICALS
17
In 2013, Alpek invested in projects to enhance
its integration and operating efficiency, and
capitalize on its IntegRex® technology.
INTEGRATION,
EFFICIENCY AND
TECHNOLOGY
Cogeneration. Cosoleacaque, Mexico.
In 2013, Alpek invested more than US $179 million in projects
to enhance its integration and operating efficiency, and capi-
talize on its IntegRex® technology.
Integration
Alpek’s integration strategy is largely based on leveraging
North America’s competitive natural gas and raw material
prices resulting from the recent development of shale gas in
the region. Our first integration project is the construction of
a cogeneration plant in Cosoleacaque, Veracruz for which we
have invested US $109 million. This plant will come on line
during the first half of 2014 with the capacity to generate 95
megawatts (MW) of electricity that will be used for internal
consumption and sale to third parties.
We have also advanced with a potential monoethylene
DAK Americas (PET). Cosoleacaque, Mexico.
glycol (MEG) vertical integration project in association with
Pemex and with a second cogeneration plant in Altamira,
Tamaulipas, that is expected to generate more than 260 MW
of electricity.
Efficiency
We constantly seek alternatives to increase our operating
efficiency. During 2013, we consolidated our polyester oper-
ations with the shutdown of the Cape Fear site (North Caro-
lina). This will enhance our cost structure by leveraging our
most efficient facilities, resulting in estimated annual savings
of US $30 million in conversion, logistics and fixed costs.
The debottlenecking project at our Columbia facility (South
Carolina) also contributed to enhancing efficiency by in-
creasing the site’s annual PET production capacity by 60
thousand tons.
Furthermore, Alpek signed a technology licensing agreement
with DSM Fibers Intermediates (DSM) to optimize its CPL plant.
This will result in estimated annual savings of US $9 million by
reducing raw material consumption and upgrading several
production processes.
To further enhance its operating efficiency, Alpek approved
the construction of a propylene storage sphere that is expect-
ed to increase the supply of this raw material and improve the
polypropylene plant’s utilization rate.
Cogeneration. Cosoleacaque, Mexico.
20
ALPEK 2013 ANNUAL REPORT US $109
million invested in
our first cogeneration
plant in Cosoleacaque,
Veracruz.
Cogeneration. Cosoleacaque, Mexico.
Technology
An element of growing importance in Alpek’s business mod-
million over the next three years and will obtain the right to
supply 400 thousand tons of PET per year from the site. This
el is IntegRex®, a proprietary technology for the production
initiative moves us forward with the upgrading of our installed
of PTA and PET. IntegRex® offers savings of up to 20% in con-
PTA/PET capacity and strengthens our leadership position in
version costs, eliminates eleven intermediate steps in the pro-
North America.
duction process and requires less initial investment per ton of
installed capacity.
IntegRex® also proved to be an effective vehicle for interna-
tional expansion. Alpek signed a joint-venture agreement with
In April, we signed IntegRex® PTA license and PTA/PET sup-
United Petrochemical Company (UPC), a wholly owned sub-
ply agreements with Gruppo M&G (M&G). Pursuant to these
sidiary of Sistema JSFC, for the construction of an IntegRex®
agreements, M&G will use IntegRex® in the construction of a
PTA/PET plant in Russia. This would be Alpek’s first incursion
new plant in Corpus Christi, Texas. Alpek will pay M&G US $350
into a market outside the Americas.
INTEGRATION, EFFICIENCY AND TECHNOLOGY
21
The success of our company goes
hand-in-hand with a commitment to being
key actors in promoting the comprehensive
well-being of the world in which we operate.
CADENA DE
SUSTAINABILITY
In 2013, we implemented 56 initiatives
to improve our employees’ health,
benefitting 4,138 people.
Indelpro (Polypropylene). Altamira, Mexico.
For the second consecutive year, we include a section on Sus-
tainability in the present report, this time based on the interna-
Sustainability Model
Our business philosophy is based on the creation of economic
tional reporting guidelines of the Global Reporting Initiative.
and social value while caring for the environment. We have
established four pillars of action as the bases for our strategy
We are taking an initial approach to this methodology in or-
to achieve these goals; this philosophy is the foundation of our
der to measure our actions in the area of sustainability and, as
Sustainability Model.
a result, construct the bases for a model that will allow us to
continue improving and strengthening our economic, social
• Economic: To obtain an adequate return from our business-
and environmental performance in a responsible manner.
es on the basis of the investment made and the risks taken.
• Internal well-being: To provide our employees with health,
We are very proud to be North America’s largest integrated
safety and opportunities for their development.
PTA and PET producer and are fully aware of the great respon-
• Community: To be a responsible citizen in our communities.
sibility that this implies. The success of our company goes
• Environment: To reduce our environmental impact, includ-
hand-in-hand with a commitment to being key actors in pro-
ing our emissions into the atmosphere, soil and water.
moting the comprehensive well-being of the world in which
we operate.
Corporate Governance
Alpek became a publicly traded company in 2012. We adhere
We invite you to follow the path we have covered so far,
to the Code of Best Corporate Practices of the Mexican Stock
and the one we have yet to travel, to attain our sustainabil-
Exchange and annually publish a report on our level of com-
ity objectives.
pliance with the code as part of our commitment to transpar-
ency for our shareholders and investors.
A solid business strategy depends on formal and transparent
corporate governance. Our Board of Directors is composed of
nine members without alternates, of whom four are indepen-
dent board members, four are related proprietary board mem-
bers and one is an independent proprietary board member. An
24
ALPEK 2013 ANNUAL REPORT Our Stakeholders
Inclusion and an ongoing dialogue with those who interact
with us and with the environment in which we work are ba-
sic elements for the definition of our sustainability strategy.
Based on our impact on them and their concerns about the
company, we have defined our stakeholders as follows:
Employees
Environment
Shareholders
Customers
Community
Suppliers
Audit and Corporate Practices Committee supports the Board
in its activities. Potential conflicts of interest of Directors are
• Company – employee relations
Our human resources are Alpek’s most important investment;
presented to the Chairman of the Board for resolution.
therefore, we are committed to taking concrete actions to pro-
Development of our Employees
We invested more than US $6,470,000 in development
Distribution of our workforce
mote their comprehensive development.
and training.
• Employee health and safety
Maintaining a high level of health and safety for the compa-
ny’s entire workforce is a priority for Alpek. In 2013 alone, we
invested US $3,655,179 in initiatives to assure the proper per-
formance of our equipment and systems. Our DAK Americas
Argentina and Tereftalatos Mexicanos plants have had no dis-
Total number of workers
Employees
Unionized personnel
Men
Women
2012
4,690
1,667
3,023
4,193
497
2013
4,546
1,667
2,879
4,053
493
abling accidents over the past four years.
We believe diversity makes us stronger. We are against any
2011
2012
2013
ilar jobs are the same across the company. In addition, a
discrimination on the basis of sex, race, nationality or reli-
gion, and compensation rates for men and women in sim-
Loss ratio
Frequency
index
Accidents
Days lost
Physical losses
51.9
2.4
21
462
0
55.4
2.6
26
554
0
98.8
2.2
22
969
0
total of twenty-five handicapped people worked at Alpek
during 2013.
• Training and development
We provide a workplace environment that is safe, friendly and
enriching. In 2013, we invested US $6,471,544 in training for
employees, with an average of 30 hours/person of training.
Just as we provide the tools for their development, we also
We have also implemented initiatives to improve our employ-
measure their performance. In 2013, 67% of the workforce was
ees’ health, with 56 programs in operation in 2013, 155% more
evaluated in some way.
than in 2012, benefitting 4,138 people. 100% of the workforce
is represented on Alpek’s Health and Safety Committees.
Protection of the Environment
We invested more than US $15,000,000 in programs to
protect the environment.
SUSTAINABILITY
25
As a result of optimization
initiatives, in 2013 we achieved
reductions in both direct and
indirect energy consumption.
Petrotemex (PTA). Cosoleacaque, Mexico.
Contributing to the environment in the areas in which we op-
erate has always been one of the key focuses of our compre-
• Water
We own ten water treatment plants that enable us to re-
hensive strategy.
Breakdown of investments in environmental protection:
Investment in 2013
Waste disposal
Treatment of emissions
Remediation costs
Preventive costs
Environmental
management costs
(in US $)
1,970,226
8,412,692
0
412,501
4,494,374
• Energy
Alpek uses natural gas, today’s cleanest fuel, as an energy
source in 93% of its facilities. In 2013, we continued with the
construction of our first cogeneration plant in Cosoleacaque,
Veracruz. This facility will reduce CO2 emissions into the atmo-
sphere by 120,000 tons per year.
cycle the water used in our operations. In 2013, Alpek con-
sumed 109,216,765m3 of water, of which 16,512,265m3 (15%)
were treated and, of that amount, 1,028,406m3 were reused
in our processes.
It is important to point out that none of our operations put
their water sources at risk.
• Emissions and waste
DAK Americas’ Zero Waste program is one of the most im-
portant elements of our environmental strategy. Four of this
company’s plants in the United States have achieved the goal
of sending zero waste to landfills this year. AKRA Polyester
and Polioles began to implement the program in 2013 and
achieved waste reductions of 45% and 50%, respectively.
Lowering the emission of harmful gases into the atmosphere is
another ongoing objective. This year we discharged 2,100,000
tons of CO2, a year-over-year reduction of 1,500 tons, equiva-
lent to 38,436 trees growing over a 10-year period.
As a result of a series of optimization initiatives, we were able
to reduce by 0.8% our total energy consumption (which was
27.26 x 106 GJ) in 2013, an amount that would cover the energy
Well-being of our Communities
More than 8,500 students from 67 schools benefited as a
needs of 2,900 Mexicans over one year.
result of Alpek companies’ support.
26
ALPEK 2013 ANNUAL REPORT • Community involvement
Understanding the needs and concerns of the communities in which we operate is of great importance in our operations. 70%
of Alpek companies are engaged in community support activities.
We are aware that our operations carry risks and this is why we work continually to mitigate those risks:
Company
Risk
Risk-mitigating actions
AKRA Polyester
Leakage of chlorine gas, ther-
Water spraying systems, valve controls and fire detection
mal oil or methanol.
systems.
DAK Americas
Emission of chemicals into the
detection and stoppage of operations in the event of a con-
atmosphere.
tingency. There is also a system to route emissions to a control
Continuous control of fire/outages/failures to assure prompt
device, even during normal operating conditions.
Indelpro
Emission of hydrocarbons or
Preventive maintenance of facilities, automatic safety system
combustion gases.
and venting control program.
Emission of hazardous
vessels. Emergency response plans. Participation in mutual as-
Process control systems. Pressure relief devices in containment
Polioles
substances, fires or explosions
sistance groups. Personnel training for emergency brigades.
of flammable materials.
Network of water sprinklers for fire control. Fire detection and
alarm system.
Univex
Leakage of hazardous
substances.
Program for monitoring the thickness and cracks in lines and
equipment. Training program for emergencies, rescue and fire.
Participation in mutual assistance groups.
• Social assistance
In 2013, we donated more than US $3,000,000 to social assis-
tance institutions, such as United Way in the United States, as
well as directly to the ALFA Foundation that, in turn, directs
funds to various charitable organizations.
SUSTAINABILITY
27
Board of Directors
Armando Garza Sada (3)
Andrés E. Garza Herrera (1A)
Chairman of the Board of Alpek, S.A.B. de C.V.
Chief Executive Officer of Qualtia Alimentos, S.A. de C.V.
Chairman of the Board of ALFA. Member of the Boards of
President of the Mexican Council of the Consumer Goods
FEMSA, Frisa, Grupo Financiero Banorte, Lamosa, Liverpool,
Industry (ConMéxico). Member of the Regional Board of
Proeza, ITESM and Stanford University.
Banorte and of the General Councils of Universidad de
Álvaro Fernández Garza (3)
President of ALFA, S.A.B. de C.V.
Monterrey, Ciudad de los Niños and Patronato Papalote Verde
in Monterrey, Nuevo León.
Member of the Boards of ALFA, Vitro, Cydsa and Universidad
Pierre Francis Haas García (1)
de Monterrey. Currently, he is President of the Chamber of
Senior Advisor of the Global Oil Practice of McKinsey & Co.
Industry of Nuevo León (CAINTRA)
Member of the Oxford Energy Policy Club, the Paris
Petroleum Club and Coloquio Mexicano de Energía.
Francisco José Calderón Rojas (2)
Chief Financial Officer of Grupo Franca Industrias, S.A. de C.V.
Jaime Serra Puche (1A)
Member of the Boards of Franca Industrias, Franca Servicios,
President of SAI Derecho & Economía
Franca Desarrollos, Capital Inmobiliario Institucional, ITESM
Member of the Boards of Chiquita Brands, Fondo México,
and Universidad de Monterrey.
Tenaris, Vitro, Grupo Modelo and Grupo Financiero
Rodrigo Fernández Martínez (3)
Marketing and Finance Director of Sigma Alimentos, S.A. de C.V.
Enrique Zambrano Benítez (1A)
Previously Sigma Alimentos, S.A. de C.V.’s Director of New
Chief Executive Officer of Grupo Proeza, S.A. de C.V.
BBVA Bancomer.
Businesses.
Merici Garza Sada (3)
Investor
Member of the Board of Alpek since April 2012.
Member of the Boards of Grupo Proeza and subsidiaries since
1988. Member of the Boards of Frisa Industrias and ITESM.
President of the Regional Board of Banco Ve por Más
Carlos Jiménez Barrera
Secretary of the Board
Key
1. Independent board member
2. Independent proprietary board member
3. Related proprietary board member
A. Audit and Corporate Practices Committee
28
ALPEK 2013 ANNUAL REPORT Management Team
José de Jesús Valdez
Simancas
Chief Executive Officer
Eduardo Escalante Castillo
Chief Financial Officer
Felipe Garza Medina
President of the PTA
Business Unit
Jorge P. Young Cerecedo
President of the PET and Staple
Fibers Business Unit
Joined ALFA in 1976. He has
a Bachelor’s in Engineering
and an MBA from ITESM, as
well as a Master’s in Industrial
Engineering from Stanford
University.
Joined ALFA in 1981. He has
a Bachelor’s in Engineering
from ITESM and a Master’s in
Engineering from Stanford
University.
Joined ALFA in 1977. He has a
Bachelor’s in Engineering from
Stanford University and an MBA
from Cornell University.
Joined ALFA in 1990. He has
a Bachelor’s in Engineering
from ITESM and an MBA from
Wharton.
Jorge González Escobedo
Alejandro Llovera Zambrano
President of the Filament Fibers
Business Unit
President of the Polypropylene
Business Unit
José Luís Zepeda Peña
President of the EPS,
Polyurethanes and Specialty
Chemicals Business Unit
Gustavo Talancón Gómez
President of the Caprolactam
and Fertilizers Businesses
Joined ALFA in 1974. He has a
Bachelor’s in Engineering and
an MBA from ITESM.
Joined ALFA in 1985. He has
a Bachelor’s in Engineering
and an MBA from ITESM, as
well as studies in business
administration from the
Instituto Panamericano de Alta
Dirección de Empresas (IPADE).
Joined ALFA in 1986. He has a
Bachelor’s in Engineering and
an Masters in Science from
UNAM and an MBA from ITESM.
Joined ALFA in 1989. He has
a Bachelor’s in Industrial
Engineering from ITESM
and studies in business
administration from the
Instituto Panamericano de Alta
Dirección de Empresas (IPADE).
MANAGEMENT TEAM
29
Corporate Governance
Alpek operates in accordance with the Mexican
Code of Best Corporate Practices (CMPC)
instituted in the year 2000 by the Mexican
securities commission. The purpose of the Code
is to establish a frame of reference for corporate
governance and thereby increase investor
confidence in Mexican companies.
E) The Audit and Corporate Practices Committee studies and issues
recommendations to the Board of Directors on matters such as se-
lecting and determining the fees to be paid to the external auditor,
coordinating with the company’s internal audit area and studying
accounting policies.
F) The company has internal control systems with general guidelines
that are submitted to the Audit and Corporate Practices Committee
Once a year, all companies that are listed on the Mexican Stock Ex-
for its opinion. In addition, the external auditor validates the effec-
change (BMV) must disclose the extent to which they adhere to the
tiveness of the internal control system and issues reports thereon.
CMPC by answering a questionnaire. The responses of the different
companies may be consulted on the BMV’s website.
G) The Board of Directors is advised by the planning and finance
A summary of Alpek’s principles of corporate governance is present-
investments, strategic positioning of the company, alignment of in-
ed below, reflecting the answers the company gave to the question-
vesting and financing policies, and review of investment projects.
naire in June 2013 and updated where necessary:
This is carried out in coordination with the planning and finance de-
department when evaluating matters relating to the feasibility of
A) The Board of Directors is made up of nine members, who have no
alternates. Of the nine directors, four are independent board mem-
H) The Audit and Corporate Practices Committee is responsible for
bers, four are related proprietary board members and one is an in-
issuing recommendations to the Board of Directors on such matters
dependent proprietary board member. This annual report provides
as employment terms and severance payments for senior execu-
partment of the holding company, ALFA, S.A.B. de C.V.
information on all the board members, identifying those who are
tives, and compensation policies.
independent and the Committees on which they sit.
B) The Board of Directors is advised by the Audit and Corporate Prac-
open line of communication between the company and its share-
tices Committee, which is made up of independent board mem-
holders and investors. This ensures that investors have the financial
bers. The Committee Chairman is an independent board member.
and general information they require to evaluate the company’s de-
I) Alpek has a department specifically dedicated to maintaining an
velopment and progress. Alpek uses press releases, notices of mate-
C) The Board of Directors meets every three months. Meetings of the
rial events, quarterly results conference calls, investor meetings, its
Board may be called by the Chairman of the Board, the Chairman of
website and other communication channels.
the Audit and Corporate Practices Committee, the Secretary of the
Board or at least 25% of its members. At least one such meeting every
J) Alpek promotes good corporate citizenship and adheres to the
year is dedicated to defining the company’s medium- and long-term
recommendations of its holding company, ALFA, S.A.B. de C.V.,
strategies.
having a mission, vision and values, and code of ethics that are
promoted within the organization.
D) Members must inform the Chairman of the Board of any conflicts
of interest that may arise, and abstain from participating in any re-
lated deliberations.
30
ALPEK 2013 ANNUAL REPORT Glossary
Caprolactam (CPL)
items and for protecting perishables. It is also widely used in con-
CPL is made by reacting cyclohexane, ammonia and sulfur and is
struction systems, to lighten floor and roof structures, and as an in-
the raw material for the production of Nylon 6 polymer. Nylon 6 is a
sulator.
synthetic resin that, because of its strength, flexibility and softness,
has a range of end uses, including for sportswear, underclothes and
Integrex®
engineering plastics.
Alpek-owned technology for producing PTA and PET from paraxy-
lene (PX) and monoethylene glycol (MEG), offering significant cost
Clean Industry Certification
savings and fewer intermediate steps in the production process.
Certification granted by the Mexican Environmental Protection
Agency (PROFEPA) to companies that comply with environmental
Investment Grade
legislation.
Rating given to a company as a result of an evaluation made by
credit-risk rating agencies such as Fitch Ratings, Standard & Poor’s
CO2 Emissions
Unit to measure the carbon dioxide produced by the burning of
and Moody’s.
solid, liquid and gaseous fuels, including natural gas.
ISO 14001 Certification
Comprehensive Responsibility Administrative System (Mexi-
vironmental Management System (EMS). The standard is designed
can National Association of the Chemical Industry, ANIQ)
to support companies’ profitability and at the same time minimize
Internationally accepted standard for establishing an efficient En-
Certification given to companies that comply with the six compre-
environmental impact.
hensive responsibility requirements established by the ANIQ, cov-
ering Process safety, Health and safety in the workplace, Product
ISO 9001 Certification
safety, Transportation and distribution, Prevention and control of
Certification issued by rating agencies to those companies that op-
environmental pollution and Community protection.
erate with proven procedures for assuring the quality of their prod-
ucts, in accordance with the standard defined by the International
Cyclohexane
Organization for Standardization (ISO).
Compound produced by the hydrogenation of benzene and used in
caprolactam production.
Megawatt (MW)
Unit of power, equal to 1 million watts.
Ethylene Oxide
Compound produced from ethylene and used as an intermediate in
Monoethylene Glycol (MEG)
the production of MEG and other chemicals.
Raw material with diverse industrial uses, especially for producing
polyester (PET and fiber), antifreeze, refrigerants and solvents.
Expandable Polystyrene (EPS)
Light, rigid, cellular plastic, product of the polymerization of styrene
Paraxylene (PX)
monomer. EPS is a versatile material because of its properties as an
Hydrocarbon in the xylene family used to produce PTA. It is also a
impact reducer and thermal insulator, and customized molding ca-
component of gasoline.
pacity. These properties, combined with the ease with which it can
be processed, make EPS a popular packaging for impact-sensitive
GLOSSARY
31
Polyester Chain
Propylene Oxide
Alpek business that comprises all the companies involved in poly-
Compound produced from propylene and used to manufacture
ester production, from the raw material (PTA) to the production of
commercial and industrial products, including polyols, glycols and
PET and fibers.
glycoethers.
Polyethylene Terephthalate (PET)
Purified Terephthalic Acid (PTA)
Material widely used in the manufacture of bottles and other con-
Aromatic dicarboxylic acid, the main raw material in polyester pro-
tainers for liquids, food and personal hygiene, household and
duction. PTA is produced by the oxidation of paraxylene. It is used
healthcare products. PET flakes and films are used to produce caps,
to manufacture PET, which is then used to make bottles for water,
trays and recipients. Because of its transparency, strength, durability
soft drinks and other beverages, containers and other packaging,
and high protection barrier, PET presents no known health risks, is
and polyester fiber for rugs, clothing, furniture and industrial appli-
light and recyclable, and has a wide range of applications in reus-
cations, as well as other consumer products.
able, temperature-sensitive packaging. PET has replaced glass and
aluminum, as well as other plastics such as PVC and polyethylene, for
Self-regulation of Health and Safety in the Workplace, Level 4
making containers.
Polypropylene (PP)
Certification
Program implemented by the Mexican Ministry of Work and Social
Welfare to verify that companies have implemented administrative
Thermoplastic polymer, produced from the polymerization of pro-
systems that promote safe, hygienic work centers.
pylene monomer. Its properties include a low specific gravity, great
rigidity, resistance to relatively high temperatures and good resis-
tance to chemicals and fatigue. PP has diverse applications, includ-
Single Step®
ing for packaging, textiles, recyclable plastic parts and different kinds
One-step technology for the production of EPS, where the EPS
of containers, auto-parts and polymer (plastic) banknotes.
pearls are impregnated with a pre-expanded agent during the po-
Polyurethanes (PURs)
Rigid, flexible or elastic, durable materials that are produced by the
Spheripol®
lymerization process.
reaction of a polyol with an isocyanate. They are very versatile, of-
LyondellBasell-owned technology which is the world’s most com-
fering the elasticity of rubber, combined with the hardness and du-
mon way of producing polypropylene.
rability of a metal. PURs may be hard like fiberglass, spongy like up-
holstery foam, protective like varnish, elastic like tire rubber or sticky
Spherizone®
like glue.
Propylene
LyondellBasell’s most recent technology, which offers great flexibility
in polypropylene production and is used to make a wide range of
products.
Unsaturated, 3-carbon hydrocarbon, co-product of the cracking
process at petrochemical complexes and a byproduct at oil refiner-
Styrene Monomer
ies. It is used in the petrochemical industry to produce PP, propylene
Unsaturated hydrocarbon used to make a variety of plastics, syn-
oxide, cumene, isopropanol, acrylic acid and acrylonitrile. It is also
thetic rubber, protective coatings and resins. It is the main raw ma-
converted into a gasoline component by alkylation with butanes or
terial in EPS production and also used as a solvent and chemical
pentanes.
32
ALPEK 2013 ANNUAL REPORT
intermediate.
Watt
Unit of power in the International System of Units (SI).
Consolidated
Financial
Statements
Management’s Discussion and Analysis
Report of the Independent Auditors
Consolidated Statements of Financial Position
Consolidated Statements of Income
Consolidated Statements of Comprehensive
Income
Consolidated Statements of Changes in
Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
34
38
39
40
41
42
43
44
33
CONSOLIDATED FINANCIAL STATEMENTS Management’s Discussion and Analysis
Management’s Discussion and Analysis
2013
This analysis complements the Letter to the Shareholders, Economic and Industry Environment, Audited Financial Statements
and Complementary Information. Unless otherwise stated, figures corresponding to the information for 2013 and 2012 are
expressed in millions of nominal pesos, with certain figures expressed in millions of dollars (US $) due to the high level of dollar-
ization of Alpek’s revenues. Percentage variations are presented in nominal terms. The information is presented on the basis of
International Financial Reporting Standards (IFRS).
2013
3,035
839
3,874
2013
68,704
21,600
(243)
90,061
2013
5,362
1,685
(19)
7,028
2012
3,263
823
4,086
VAR. %
(7)
2
(5)
2012
VAR. %
75,249
21,068
(154)
96,163
2012
5,695
1,594
(12)
7,277
(9)
3
58
(6)
VAR. %
(6)
6
63
(3)
Volume
(thousands of tons)
Polyester
Plastics and Chemicals
TOTAL VOLUME
Income
(millions of pesos)
Polyester
Plastics and Chemicals
Eliminations
TOTAL INCOME
Income
(US $ million)
Polyester
Plastics and Chemicals
Eliminations
TOTAL INCOME
34
ALPEK 2013 ANNUAL REPORT Income
Alpek’s 2013 net income totaled $90,061 million (US $7,028 million), 6% below the $96,163 million (US $7,277 million) posted in
2012. This decline reflects reductions of 5% in consolidated volume and 1% in average prices.
Sales by Business Segment
Polyester net sales in 2013 were $68,704 million (US $5,362 million), 9% lower than the net sales of $75,249 million (US $5,695 mil-
lion) in 2012, due to decreases of 7% in volume and 2% in average prices. The volume decline reflects the contraction in polyester
export markets and, to a lesser extent, the Cape Fear plant closure.
Plastics and Chemicals (P&C) 2013 net sales totaled $21,600 million (US $1,685 million), 3% above the sales of $21,068 million (US
$1,594 million) posted in 2012. P&C volume grew 2%, reflecting increased demand for polypropylene and EPS, while average
prices remained flat year-on-year.
Operating Income and Operating Cash Flow (EBITDA)
2013 operating income was $2,925 million (US $228 million), 61% below the $7,476 million (US $566 million) of 2012. The decline
was a result of $2,421 million in restructuring costs and asset impairment charges associated with the closure of the Cape Fear
site, combined with the reduction in consolidated volume and polyester and caprolactam export margins.
EBITDA was $7,344 million (US $572 million) in 2013, a 24% drop from the $9,611 million (US $728 million) registered in 2012. The
reduction largely reflects the decrease in consolidated volume and polyester and caprolactam export margins, as well as the
non-recurring charge related to the closure of the Cape Fear site.
EBITDA
(millions of pesos)
Polyester
Plastics and Chemicals
Others and Eliminations
TOTAL EBITDA
EBITDA
(US $ million)
Polyester
Plastics and Chemicals
Others and Eliminations
TOTAL EBITDA
2013
4,974
2,304
66
7,344
2013
388
180
5
572
2012
7,008
2,607
(4)
9,611
2012
531
197
0
728
VAR. %
(29)
(12)
(1,671)
(24)
VAR. %
(27)
(9)
(1,723)
(21)
MANAGEMENT’S DISCUSSION AND ANALYSIS
35
Comprehensive Financing Expense/Income (CFE/I)
In 2013, the comprehensive financing expense (CFE) was -$1,172 million (-US $91 million), 12% below the CFE of -$1,331 million
(-US $101 million) posted in 2012, because of a reduction in financial expense as a result of a year-on-year decline in interest and
refinancing expenses.
CFE/I
(US $ million)
Financial Expense
Financial Income
Foreign Exchange Gain (Loss)
Valuation of Financial Derivative Instruments
CFE/I
Income Tax
2013
(1,092)
137
(146)
(71)
(1,172)
2012
VAR. %
(1,897)
356
141
69
(1,331)
42
(62)
(203)
(203)
12
Income tax in 2013 totaled $817 million (US $63 million), 53% below the $1,723 million (US $131 million) of 2012. The reduction in
income tax largely reflects a deferred income tax benefit amounting to $920 million corresponding to the Cape Fear site closure.
Net Income attributable to the Controlling Interest
Net income attributable to the controlling portion was $262 million (US $21 million) in 2013, 93% below the figure of $3,663
million (US $277 million) posted in 2012. The decline was largely a result of the negative effect of $1,501 million (US $117 million) in
charges related to the Cape Fear closure. Excluding these charges, net income attributable to the controlling portion was $1,763
million (US $138 million).
Capital Expenditures
2013 capital expenditures totaled $2,275 million (US $179 million), 50% more than the $1,522 million (US $115 million) posted in
2012. These resources were mainly used for strategic projects, such as the Cosoleacaque cogeneration facility and the Corpus
Christi PTA/PET plant.
Net Debt1
Net debt totaled $10,015 million (US $766 million) as of December 31, 2013, 25% above the net debt of $8,011 million (US $616
million) as of year-end 2012. The increase in net debt was largely due to the payment of dividends amounting to $1,922 million
(US $148 million) in December 2013 as an advance on the 2014 dividend payment.
Financial Indicators
(times)
Net Debt / EBITDA (US $)
Interest Coverage (US $)
Total Liabilities / Capital
2013
1.3
7.1
1.1
2012
0.8
6.2
1.1
(1) Net Debt = Current Debt plus Non-Current Debt excluding debt issuance costs, plus accrued Interest Payable less (Cash and Cash Equivalents plus Restricted Cash and
Cash Equivalents)
36
ALPEK 2013 ANNUAL REPORT 2013 HIGHLIGHTS
Agreements signed with M&G for a PTA/PET plant in Corpus Christi
In April 2013, Alpek announced it had signed IntegRex® PTA license and PTA/PET sourcing agreements with the M&G Group
(M&G). Under the agreements, M&G will license Alpek’s IntegRex® PTA technology for the construction of its new integrat-
ed PTA/PET plant in Corpus Christi, Texas. Alpek will pay M&G US $350 million during the site’s construction and will receive
contractual rights to 400 thousand tons of PET per year from the Corpus Christi facility. In addition, Alpek will supply the raw
materials for its portion of PTA/PET. M&G’s Corpus Christi site is currently expected to begin operations in 2016. The benefits of
IntegRex®, the scale of the new integrated plant in Corpus Christi, and the region’s attractive energy and logistics advantages
will constitute one of the most competitive cost structures globally for PTA and PET.
Cape Fear plant closure
During 2Q13, Alpek decided to close its Cape Fear site in order to consolidate its polyester operations and enhance its cost
competitiveness by leveraging more efficient assets in its multi-site network. Cash savings in conversion, logistics and fixed costs
are estimated to be approximately US $30 million per year as of September 2013. The impact of the Cape Fear site shutdown
on Alpek’s 2013 Net Income totaled $1,501 million (US $117 million), comprising $2,421 million (US $189 million) in restructuring
charges, less $920 million (US $72 million) in deferred income tax.
Issuance of US $300 million in “Senior Notes”
In August 2013, Alpek issued a US $300 million aggregate principal amount of 5.375% Senior Notes due 2023. The proceeds were
used mainly to prepay outstanding debt in order to extend the company’s average debt maturity.
Joint Venture agreement with UPC in Russia
Alpek signed a joint venture (JV) agreement with United Petrochemical Company (UPC), a wholly-owned subsidiary of Sistema
JSFC (Sistema), for the construction of an integrated PTA/PET plant in Ufa, Russia. Under the JV agreement, Alpek and UPC will
elaborate a detailed business plan to determine the project’s feasibility and invest US $10 million each in the completion of the
plant’s evaluation stage. Construction will be subject to the approval of the business plan by the Board of Directors of both
companies. The new facility would be an IntegRex® PTA/PET site dedicated to serving the Russian PET market with a maximum
installed capacity of 600 Ktons of IntegRex® PTA and 600 Ktons of IntegRex® PET. An IntegRex® license agreement is expected
to be signed upon final approval of the JV by all relevant competition authorities. Paraxylene (Px) would be sourced domesti-
cally. Px supply negotiations are underway with JSOC Bashneft, a subsidiary of Sistema and one of the largest private Russian
oil companies.
Dividends
Shareholders approved the payment of cash dividends amounting to US $228 million during 2013. The first US $114 million divi-
dend was paid in March and September 2013, and a second dividend of the same amount was paid in December as an advance
on the 2014 dividend.
MANAGEMENT’S DISCUSSION AND ANALYSIS
37
Report of the Independent Auditors
Monterrey, N. L., January 29, 2014
To the Shareholders’ Meeting of Alpek, S. A. B. de C. V.
We have audited the accompanying consolidated financial statements of Alpek, S. A. B. de C. V and subsidiaries, which comprise the
consolidated statement of financial position as at December 31, 2013 and 2012, and the consolidated statements of income, comprehensive
income, changes in stockholders’ equity and cash flows for the years ended December 31, 2013 and 2012, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial
Reporting Standards, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by
Management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position
of Alpek, S. A. B. de C.V. and subsidiaries as at December 31, 2013 and 2012, and its financial performance and its cash flows for the years
ended December 31, 2013 and 2012, in accordance with International Financial Reporting Standards.
PricewaterhouseCoopers, S. C
Héctor Rábago Saldívar
Audit Partner
38
ALPEK 2013 ANNUAL REPORT Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Financial Position
At December 31, 2013 and 2012
(In thousands of Mexican pesos)
Assets
Current assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivables, net
Inventories
Derivative financial instruments
Prepayments
Total current assets
Non-current assets:
Property, plant and equipment, net
Goodwill and intangible assets, net
Deferred taxes
Other non-current assets
Total non-current assets
Total assets
Liabilities and Stockholders’ equity
Liabilities
Current liabilities:
Current debt
Suppliers and other accounts payable
Derivative financial instruments
Income tax payable
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities:
Non-current debt
Derivative financial instruments
Deferred taxes
Provisions
Employees’ benefits
Total non-current liabilities
Total liabilities
Stockholders’ equity:
Controlling interest:
Capital stock
Share premium
Retained earnings
Other reserves
Total controlling interest
Non-controlling interest
Total stockholders’ equity
Note
2013
2012
At December 31,
6
7
8
10
16
11
12
21
13
19
17
16
18
22
19
16
21
18
20
23
23
23
23
14
Ps 4,737,088
2,840
12,834,935
11,777,714
86,492
232,720
29,671,789
24,705,889
2,906,470
216,597
627,085
28,456,041
Ps 58,127,830
Ps
753,083
9,243,781
7,315
152,951
832,632
1,315,344
Ps 6,654,561
2,992
13,368,995
11,582,045
107,297
243,991
31,959,881
26,695,410
2,243,495
504,613
292,774
29,736,292
Ps 61,696,173
Ps
500,641
9,696,234
287,510
101,807
-
1,462,261
12,305,106
12,048,453
13,756,342
25,836
4,344,268
51,682
556,932
18,735,060
31,040,166
6,051,880
9,071,074
8,292,566
602,358
24,017,878
3,069,786
27,087,664
13,939,767
208,218
4,718,445
-
1,130,128
19,996,558
32,045,011
6,051,880
9,071,074
11,006,758
50,264
26,179,976
3,471,186
29,651,162
Total liabilities and stockholders’ equity
Ps 58,127,830
Ps 61,696,173
The accompanying notes are an integral part of these consolidated financial statements.
José de Jesús Valdez Simancas
Chief Executive Officer
Eduardo Alberto Escalante Castillo
Chief Financial Officer
CONSOLIDATED FINANCIAL STATEMENTS
39
Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Revenue
Cost of sales
Gross profit
Selling expenses
Administrative expenses
Other (expenses) income, net
Operating profit before non-recurring items
Non-recurring items
Operating profit
Financial income (including foreign exchange gain)
Financial cost (including foreign exchange loss)
Financial cost, net
Share of losses of associates
Profit before income tax
Income tax
Net consolidated profit
Profit attributable to:
Controlling interest
Non-controlling interest
Note
2013
2012
25
25
25
26
2 c)
27
27
29
Ps 90,061,169
(82,436,458 )
7,624,711
Ps 96,163,456
(86,766,710 )
9,396,746
(1,077,708 )
(1,092,131 )
(107,856 )
5,347,016
(2,421,373 )
2,925,643
136,803
(1,308,737 )
(1,171,934 )
(30,249 )
(1,072,461 )
(1,158,708 )
310,836
7,476,413
-
7,476,413
424,849
(1,756,112 )
(1,331,263 )
(39,055 )
1,723,460
(817,330 )
906,130
Ps
6,106,095
(1,723,293 )
Ps 4,382,802
Ps
Ps
261,785
644,345
906,130
Ps 3,662,549
720,253
Ps 4,382,802
Basic and diluted earnings per share (in pesos)
Ps
0.12
Ps
1.83
Weighted average of outstanding shares (in thousands)
2,118,164
1,996,475
The accompanying notes are an integral part of these consolidated financial statements.
José de Jesús Valdez Simancas
Chief Executive Officer
Eduardo Alberto Escalante Castillo
Chief Financial Officer
40
ALPEK 2013 ANNUAL REPORT
Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Net consolidated profit
Other items of comprehensive income of the year,
net of taxes:
Items that will not be reclassified to the statement of income:
Note
2013
2012
Ps
906,130
Ps 4,382,802
Remeasurement of obligations for employee benefits
20, 29
377,934
(62,153 )
Items that may be reclassified to the statement of income:
Effect of derivative financial instruments
designated as cash flow hedges
Effect of translation of foreign entities
Total other comprehensive income (loss) for the year
Total comprehensive income for the year
Attributable to:
Controlling interest
Non-controlling interest
16, 29
23, 29
196,931
64,971
27,918
(1,406,694 )
602,783
Ps 1,508,913
(1,403,876 )
Ps 2,978,926
Ps
813,879
695,034
Ps 2,504,925
474,001
Total comprehensive income for the year
Ps 1,508,913
Ps 2,978,926
The accompanying notes are an integral part of these consolidated financial statements.
José de Jesús Valdez Simancas
Chief Executive Officer
Eduardo Alberto Escalante Castillo
Chief Financial Officer
41
CONSOLIDATED FINANCIAL STATEMENTS
Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Balances at January 1, 2012
Net profit
Other comprehensive income
for the year
Total comprehensive income
for the year
Others
Dividends declared
Increase in capital stock
Movements in non-controlling
interest
Balances at December 31, 2012
Net profit
Total other comprehensive income
for the year
Total comprehensive income
for the year
Dividends declared
Effects from adoption of new
accounting policies
Balances at December 31, 2013
Note
Capital stock
Ps 4,968,187
Share premium
Ps
-
23
2 b)
23
1,083,693
9,071,074
6,051,880
9,071,074
Ps 6,051,880
Ps 9,071,074
Retained
earnings
Ps 9,139,157
3,662,549
Other reserves
Ps 1,147,204
Total attributable
to controlling
interest
Ps 15,254,548
Non-controlling
interest
Ps 3,544,576
Total
stockholders’
equity
Ps 18,799,124
3,662,549
720,253
4,382,802
(60,684 )
(1,096,940 )
(1,157,624 )
(246,252 )
(1,403,876 )
3,601,865
16,167
(1,692,253 )
(58,178 )
11,006,758
261,785
261,785
(2,959,455 )
(16,522 )
Ps 8,292,566
(1,096,940 )
50,264
-
552,094
552,094
2,504,925
16,167
(1,692,253 )
10,154,767
(58,178 )
26,179,976
261,785
552,094
813,879
(2,959,455 )
474,001
-
(605,569 )
-
58,178
3,471,186
644,345
50,689
695,034
(1,093,233 )
2,978,926
16,167
(2,297,822 )
10,154,767
-
29,651,162
906,130
602,783
1,508,913
(4,052,688 )
Ps
602,358
(16,522 )
Ps 24,017,878
(3,201 )
Ps 3,069,786
(19,723 )
Ps 27,087,664
The accompanying notes are an integral part of these consolidated financial statements.
José de Jesús Valdez Simancas
Chief Executive Officer
Eduardo Alberto Escalante Castillo
Chief Financial Officer
42
ALPEK 2013 ANNUAL REPORT
Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Cash flows from operating activities
Profit before income tax
Depreciation and amortization
Impairment of property, plant and equipment
(Gain) loss on sale of property, plant and equipment
Share of losses of associates
Finance cost, net
Loss (gain) on changes in the fair value of derivative financial instruments
Employees’ profit sharing and provisions
Ps
Note
11, 12
2c)
13
Subtotal
Decrease (increase) in trade receivables
Increase in accounts receivable from related parties
Increase in other accounts receivable
(Increase) decrease in inventories
Decrease in accounts payable
Increase in accounts payable to related parties
Income tax paid
Employees’ profit sharing paid
Net liability for retirement obligation
Net cash flows generated from operating activities
Cash from investing activities
Interest received
Acquisition of property, plant and equipment
Acquisition of intangible assets
Acquisition of investments available for sale
Derivative financial instruments
Dividends received
Others
Net cash flows used in investing activities
Cash from financing activities
Proceeds from debt
Payments of debt
Interest paid
Dividends paid
Increase in capital stock
Payment on loans to ultimate parent company
Net cash flows used in financing activities
(Decrease) increase in cash and cash equivalents
Foreign exchange on cash and cash equivalents
Cash and cash equivalents at beginning of year
23
9
2013
1,723,460
2,024,584
2,394,025
(2,505 )
30,249
953,330
25,119
19,152
7,167,414
678,107
(101,764 )
(181,312 )
(478,671 )
(584,257 )
173,536
(1,093,442 )
(32,717 )
(5,063 )
5,541,831
98,156
(1,482,807 )
(792,671 )
(69,270 )
(128,399 )
1,745
(9,703 )
(2,382,949 )
7,143,535
(7,083,615 )
(1,058,968 )
(4,046,253 )
-
-
(5,045,301 )
(1,886,419 )
(31,054 )
6,654,561
Ps
2012
6,106,095
2,129,374
4,798
375
39,055
1,273,831
(221,202 )
26,979
9,359,305
(108,926 )
(440,565 )
(720,176 )
117,939
(1,236,125 )
454,186
(1,709,084 )
(103,136 )
(130,014 )
5,483,404
137,152
(1,508,221 )
(13,321 )
(54,055 )
(319,363 )
-
(47,419 )
(1,805,227 )
9,888,096
(13,918,319 )
(1,452,276 )
(2,297,822 )
10,154,767
(2,654,568 )
(280,122 )
3,398,055
(327,781 )
3,584,287
Cash and cash equivalents at end of year
Ps
4,737,088
Ps
6,654,561
The accompanying notes are an integral part of these consolidated financial statements.
José de Jesús Valdez Simancas
Chief Executive Officer
Eduardo Alberto Escalante Castillo
Chief Financial Officer
43
CONSOLIDATED FINANCIAL STATEMENTS
Alpek, S. A. B. de C. V. and subsidiaries
Notes to the consolidated financial statements
At December 31, 2013 and 2012
(In thousands of Mexican pesos, except where otherwise indicated)
Note 1 – General information
Alpek, S.A.B. de C.V. “Alpek” or the “Company” operates through two major business segments: polyester chain products and plastic products.
The polyester chain business segment, comprising the production of purified terephthalic acid (PTA), polyethylene terephthalate (PET)
and polyester fibers, serves the food and beverage packaging, textile and industrial filament markets. The plastics and chemicals business
segment, comprising the production of polypropylene (PP), expandable polystyrene (EPS), caprolactam (CPL), fertilizers and other chemicals,
serves a wide range of markets, including the consumer goods, food and beverage packaging, automotive, construction, agriculture, oil
industry, pharmaceutical markets and other markets.
Alpek is the most important petrochemical company in Mexico and the second largest in Latin America, is the leading producer of PTA and
polyester fibers in America and the second most important producer of PET. Besides, it also operates the largest EPS plant in the continent,
one of the largest Polypropylene plants in North America and is the only producer of Caprolactam in Mexico.
Alpek’s shares are traded on the Mexican Stock Exchange, S. A. B. de C. V., and its main holding company is Alfa, S. A. B. de C. V.
Alpek is located in Avenida Gómez Morín Sur No. 1111, Col. Carrizalejo, San Pedro Garza García, Nuevo León, Mexico and operates plants
located in Mexico, the United States and Argentina.
The following notes to the financial statements when referring to pesos or “Ps”, it means thousands of Mexican pesos. When referring to “US$”
or dollars, it means thousands of dollars from the United States. When referring to “€” it means thousands of euros.
Note 2 – Significant events
2013
a)
IntegRex® technology license and signature of a supply agreement with M&G
During April 2013, Alpek through its subsidiary Grupo Petrotemex, S. A. de C. V. held a licensing agreement for IntegRex® PTA technology
and another PTA-PET supply agreement with Grupo M&G (“M&G”). These agreements will allow M&G to use the IntegRex® PTA technology
in the PTA-PET integrated plant to be constructed in Corpus Christi, Texas in the United States (the Plant). On the other hand, Alpek will
pay US$350 million to M&G during the construction of the Plant and will obtain supply rights of the Plant to 400 thousand tons of PET
(manufactured with 336 thousand tons of PTA) a year. In accordance with the supply agreement, Alpek would supply raw materials for the
manufacturing of its PTA-PET volume. It is estimated that the M&G plant in Corpus Christi will start operations in 2016.
b) Intangibles from licenses with Basell
The subsidiary Indelpro held a contract in 2004, with Basell Poliolefine Italia SrL (company of the Basell Group) in relation to engineering
licenses, use of patents and technical information for the production of polypropylene, to start the construction of its second production
line of polypropylene; therefore Indelpro made an initial required payment of US$9.5 million on that date, to use such licenses, patents
and technical information for building the production line of the products under these patents (called the second production line) which
at June 30, 2013, the Company has assessed that it has an estimated remaining useful life of 21 years. This contract, which is valid for an
indefinite period, provides annual royalty payments from July 2013, which would be determined based on 1.22% of the value of net sales.
Until July 1, 2013 it was required to pay the royalties referred to in the preceding paragraph, based on 1.22% of net sales. The royalty
payments would last until Indelpro completed a total of US$11 million as compensation, this amount was calculated as the net present
value at the date the contract was signed (2004 ), using an annual discount rate of 8%, according to what was established in the contract.
The contract also includes the option for Indelpro to pay in advance the maximum amount of royalties indicated above.
In relation to the above, April 26, 2013, Indelpro decided to prepay the maximum amount of royalties and determined that the total was
US$21 million (Ps 258,480), equivalent to the value of US$11 million updated by the rate previously mentioned, from the date of conclusion
of the contract until the date of payment, as established in the contract, the amount paid to Basell Poliolefine Italy, Sr L.
44
ALPEK 2013 ANNUAL REPORT c) Closing of Cape Fear plants in North Carolina
In June 2013, the Company announced the planned closure of all its operations at its Cape Fear plant, in Wilmington, North Carolina. The
purpose of this closing was to improve cost competitivity and distribute production to the most efficient plants in its productive network.
The closing of operations took place in September 2013.
The Company had communications with authorities in North Carolina and it committed to the dismantling and demolition of assets, as
well as to the environmental remediation for damages caused prior to the plant’s starting operations. In this sense, the Company estimated
costs of Ps 487,248 and Ps 371,848, respectively, (approximately US$67 million) initially recognized as part of the assets associated to the
plant of which Ps 77,940 were spent in 2013 and the rest will be spent during the following three years.
Additionally, other direct costs attributable to the closing, mainly for indemnity concepts for dismissal and cancellation of contracts, the
Company estimated costs of Ps 197,624 (US$16 million) disbursing Ps 116,910 in 2013.
As a result of this, the Company recorded a provision for restructuring costs of Ps 1,056,720 (US$83 million). See Note 18.
The Company also performed impairment tests of assets associated to the plant and recorded a charge for impairment related to these
assets for Ps 2,223,749 (US$173 million). The total impact on the net income of the Company for this restructuring event amounted to
Ps 1,501,251 (US$117 million), composed of Ps 2,421,373 (US$189 million) for restructuring costs and impairment of assets, which were
recorded as non-recurring items within the operating income less Ps 920,122 (US$72 million) of deferred tax.
d) Issuance of debt of Alpek 144A
During August 2013, Alpek completed an issuance of debt obligations (“Senior Notes”) in international markets for a nominal amount of
Ps 3,993,120 (US$300 million) maturing in 2023. The interests of the Senior Notes will be payable semi-annually at a 5.375% annual rate
(effective interest rate of 5.479%) as from February 20, 2014. Alpek capitalized debt issuance costs of Ps 30,556. The proceeds from the
issuance were used to pay debt in advance and for general corporate purposes. This payment led to an advance amortization of issuance
expenses amounting Ps 4,104.
e) Co-investment agreement
On September 26, 2013, Alpek’s subsidiary Grupo Petrotemex, S.A. de C.V. (“GPT”), signed a co-investment agreement with United
Petrochemical Company (“UPC”), a subsidiary of JSFC System (“System”), for the construction of an integrated plant of purified terephthalic
acid (“PTA”) - polytherephthalate (“PET”) in Ufa, Baskortostan, Russia. Under the terms of the agreement, two new entities will be created:
“RusPET Holding B.V.” (“JVC”) and “RusPET Limited Liability Company” (“RusCo”) and reserved matters of operations of the entities requiring
approval by both shareholders.
On December 6, 2013 the incorporation by-laws of JVC were signed. The JVC issued initial capital of €8,000 of which UPC has 51%
(represented by Class A ordinary shares) bought with a contribution of €4,080 and GPT has 49% (represented by Class B ordinary shares)
bought with a contribution of €3,920.
In an analysis performed by Management, it was assessed whether Alpek has control over JVC in accordance with IFRS 10 “Consolidated
Financial Statements”. The conclusion of such analysis on control indicates that at the date of acquisition and at December 31, 2013, Alpek
has joint control and the investment should be treated as an investment in a joint venture, which in the opinion of Management it is not
material for the group; therefore, it will be accounted for using the equity method.
At December 31, 2013, the Company presents its investment in JVC recorded at cost including the paid consideration. Since JVC operations
have not started, the equity method has not been recorded since the acquisition date and until December 31, 2013.
2012
a)
Issuance of debt of Alpek 144A
During November 2012, Alpek completed an issuance of debt obligations (“Senior Notes”) in international markets for a nominal amount
of Ps 8,477,180 (US$650 million) maturing in 2022. The interests of Senior Notes will be payable semi-annually at a 4.5% annual rate as from
May 20, 2013.
45
CONSOLIDATED FINANCIAL STATEMENTS b) Public offer of capital of Alpek
During the months of April and May 2012, Alpek, S. A. de C. V. carried out an initial public offer (IPO) of shares in Mexico and a private offer
of shares in international markets (together “Global Offering”) as follows:
• On April 26, 2012, Alpek, S. A. de C. V. issued 330,259,322 shares at a placement price of 27.50 pesos. The offer included an
overallotment option of up to 49,038,898 shares. The amount initial offering was of Ps 9,082 million.
• On May 8, 2012, the underwriters, both in Mexico, and abroad, exercised the agreed overallotment options. The amount of
overallotments was Ps 1,349 million, corresponding to 49,038,898 shares at a placement price of 27.50 pesos each.
As a result, the total funds Alpek obtained from the Global Offering amounted to Ps 10,155 million, net of issuance costs of Ps 276 million.
Subsequent to the Global Offering, the capital subscribed and paid of Alpek, is represented by a total of 2,118,163,635 Class I, Series A shares.
c)
Incorporation of a new entity
In 2012, Alpek signed an agreement to invest approximately US$130 million, during the next two years, in a vapor and electrical energy
cogerenation project through its subsidiary Petrotemex. This cogeneration plant will generate about 95 megawatts of electricity and all
the steam necessary to meet the requirements of the PTA and PET plants located in Cosoleacaque. The cogeneration plant will also supply
energy to other ALFA entities outside Cosoleacaque.
To implement this project, on January 31, 2012, Petrotemex and its subsidiary Dak Resinas Américas México, S. A. de C. V. (both subsidiaries
of Alpek), constituted a new company called Cogeneración de Energía Limpia de Cosoleacaque, S. A. de C. V. (“Cogeneradora”). The
project will increase the competitiveness of the plant, assuring the preoperating supply of cheap energy with low emissions.
As of December 31, 2013, Cogeneradora is at the stage of construction and it is estimated that during 2014 an amount of Ps 262,000 (US $
20 million) will be incurred for its conclution.
Note 3 - Summary of significant accounting policies
The accompanying consolidated financial statements and notes were authorized for issuance on January 29, 2014, by officials with the legal
power to sign the basic financial statements and accompanying notes.
The following are the most significant accounting policies followed by the Company and its subsidiaries, which have been consistently
applied in the preparation of their financial information in the years presented, unless otherwise specified:
a) Basis for preparation
The consolidated financial statements of Alpek, S. A. B. de C. V. and subsidiaries have been prepared in accordance with the International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The IFRS include all International
Accounting Standards (“IAS”) in force and all related interpretations issued by the International Financial Reporting Interpretations
Committee (IFRIC), including those previously issued by the Standing Interpretations Committee (SIC).
In accordance with the amendments to the Rules for Mexican Public Companies and Other Securities Market Participants, issued by the
National Banking and Securities Commission (CNBV in Spanish), the Company is required to prepare its financial statements as from 2012
using IFRS as its accounting policy framework.
The consolidated financial statements have been prepared on a historical cost basis, except for the cash flow hedges which are measured
at fair value and for the financial assets and liabilities at fair value through profit or loss with changes reflected in income and for financial
assets available for sale.
The preparation of the consolidated financial statements according to IFRS requires the use of certain critical accounting estimates.
Additionally, it requires Management to exercise judgment in the process of applying the Company’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where judgments and estimates are significant to the consolidated financial
statements, are disclosed in Note 5.
46
ALPEK 2013 ANNUAL REPORT b) Consolidation
i.
Subsidiaries
The subsidiaries are all the entities over which the Company has the power to govern the financial and operating policies of the entity.
The Company controls an entity when it is exposed, or has the right to variable returns from its interest in the entity and it is capable
of affecting the returns through its power over the entity. Where the Company’s interest in subsidiaries is less than 100%, the share
attributed to outside shareholders is presented as non-controlling interest.
Subsidiaries are consolidated in full from the date on which control is transferred to the Company and up to the date it loses that
control.
The Company applies the acquisition method in accounting for business combinations. The Company defines a business combination
as a transaction in which obtains control over the business, which is defined as a set of activities and assets which are led and
managed in order to obtain benefits in the form of dividends, less costs or other economic benefits directly to investors.
The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and
the equity interests issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from
a contingent consideration arrangement. Identifiable acquired assets and liabilities and contingent liabilities assumed in a business
combination are initially measured at their fair values at the acquisition date. The Company recognizes any non-controlling interest in
the acquiree based on the share of the non-controlling interest in the net identifiable assets of the acquired entity.
The Company accounts for business combinations using the predecessor method in a jointly controlled entity. The predecessor
method involves the incorporation of the carrying amounts of the acquired entity, which includes the goodwill recognized at the
consolidated level with respect to the acquiree. Any difference between the consideration transferred and the carrying amount of
the net assets acquired at the level of the subsidiary is recognized in stockholders’ equity.
The acquisition-related costs are recognized as expenses when they are incurred.
Goodwill is initially measured as excess of the sum of the consideration transferred and the fair value of the non-controlling interest
over the net identifiable assets acquired. If the consideration transferred is less than the fair value of the net assets of the subsidiary
acquired in the case of a bargain purchase, the difference is recognized directly in the consolidated statement of income.
Transactions and intercompany balances and unrealized gains (losses) on transactions between Alpek companies are eliminated
in preparing the consolidated financial statements. In order to ensure consistency with the policies adopted by the Company, the
accounting policies of subsidiaries have been changed where it was deemed necessary.
47
CONSOLIDATED FINANCIAL STATEMENTS At December 31, 2013 and 2012, the principal subsidiaries of Alpek were:
Country (1)
Percentage of
Ownership
Functional currency
Alpek, S. A. B. de C. V. (Holding company)
Grupo Petrotemex, S. A. de C. V. (Holding)
DAK Americas, L.L.C.
DAK Resinas Americas México, S. A. de C. V.
DAK Americas Exterior, S. L. (Holding company)
DAK Americas Argentina, S. A.
Tereftalatos Mexicanos, S. A. de C. V.
Akra Polyester, S. A. de C. V. (2)
Indelpro, S. A. de C. V.
Polioles, S. A. de C. V.
Unimor, S. A. de C. V.
Univex, S. A.
(1) Companies incorporated in Mexico, except those indicated.
USA
Spain
Argentina
100
100
100
100
100
91
93
51
50
100
100
Mexican peso
US dollar
US dollar
US dollar
Euro
Argentine peso
US dollar
US dollar
US dollar
US dollar
Mexican peso
Mexican peso
(2) At September 1, 2012, Productora de Tereftalatos de Altamira, S. A. de C. V. (“Petal”), merged into Akra Polyester, S. A de C. V. Prior to the merger, Grupo
Petrotemex (“Petrotemex”) owned 100% of the shares of Akra and 91% of the shares of Petal and BP Amoco Chemical Company (“BP Amoco”) the
remaining 9%. After the merger, Petrotemex owns 93.35% of the shares of Akra and BP Amoco the remaining 6.65%.
ii. Absorption (dilution) of control in subsidiaries
The effect of absorption (dilution) of control in subsidiaries, i.e., an increase or decrease in the percentage of control, is recorded in
stockholders’ equity, directly in retained earnings, in the period in which the transactions that cause such effects occur. The effect of
absorption (dilution) of control is determined by comparing the book value of the investment according to percentage of ownership
before the event of dilution or absorption against the book value with the new percentage of ownership after the relevant event. In
the case of loss of control, the dilution effect is recognized in income.
iii. Sale or disposal of subsidiaries
When the Company ceases to have control any retained interest in the entity is remeasured at fair value, and the change against the
carrying amount is recognized in the income statement. The fair value is the initial carrying value for the purposes of accounting for
any subsequent retained interest in the associate, joint venture or financial asset. Any amount previously recognized in comprehensive
income in respect of that entity is accounted for as if the Company had directly disposed of the related assets and liabilities. This
implies that the amounts recognized in the comprehensive income are reclassified to income for the year.
iv. Associates
Associates are all entities over which the Company has significant influence but not control. Generally an investor must hold between
20% and 50% of the voting rights in an investee for it to be an associate. Investments in associates are accounted for using the equity
method and are initially recognized at cost. The Company’s investment in associates includes goodwill identified at acquisition, net
of any accumulated impairment loss. The Company has an investment of which it owns 50% and it is consolidated. See critical
judgment in Note 5.2.
If the equity in an associate is reduced but significant influence is maintained, only a portion of the amounts recognized in the
comprehensive income are reclassified to income for the year, where appropriate.
The Company’s share of profits or losses of associates, post-acquisition, is recognized in the income statement and its share in the other
comprehensive income of associates is recognized as other comprehensive income. The cumulative movements after acquisition
are adjusted against the carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds
its equity in the associate, including unsecured receivables, the Company does not recognize further losses unless it has incurred
obligations or made payments on behalf of the associate.
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ALPEK 2013 ANNUAL REPORT The Company assesses at each reporting date whether there is objective evidence that the investment in the associate is impaired.
If so, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its
carrying amount and recognizes it in “share of profit/loss of associates” in the income statement.
Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company´s equity in
such gains. Unrealized losses are also eliminated unless the transaction provides evidence that the asset transferred is impaired. In
order to ensure consistency with the policies adopted by the Company, the accounting policies of associates have been modified.
When the Company ceases to have significant influence over an associate, any difference between the fair value of any retained
interest plus any proceeds from disposing apart interest in the associate less the carrying amount of the investment at the date the
equity method was discontinued is recognized in the income statement.
v.
Joint arrangements
Joint arrangements are those where there is joint control since the decisions over relevant activities require the unanimous consent
of each one of the parties sharing control.
Investments in joint arrangements are classified in accordance with the contractual rights and obligations of each investor such as:
joint operations or joint ventures. When the Company holds the right over assets and obligations for the liabilities related to a joint
arrangement is classified as a joint operation. When the company holds rights over net assets of the joint arrangement, is classified as a
joint venture. The Company has assessed the nature of its joint arrangements and classified them as joint ventures and are accounted
for by using the equity method.
c) Foreign currency translation
i.
Functional and presentation currency
The amounts included in the financial statements of each of the Company’s subsidiaries and associates should be measured using the
currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial
statements are presented in Mexican pesos, which is the Company’s presentation currency.
ii. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at closing date exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized as foreign exchange gains and losses in the income statement, except when those transactions arise from
cash flow hedges, are recognized in other comprehensive income.
Foreign exchange gains and losses resulting from changes in the fair value of monetary financial assets and liabilities denominated in
a foreign currency are recognized in the consolidated income statement, except when those transactions arise from hedges of a net
investment or cash flow hedges, are presented in other comprehensive income.
Translation differences on monetary financial assets and liabilities classified as fair value through profit or loss are recognized in the
consolidated income statement as part of the fair value gain or loss. Translation differences on non-monetary financial assets classified
as available for sale are included in other comprehensive income.
iii. Consolidation of foreign subsidiaries
Translation of subsidiaries with a functional currency different from their recording currency.
The financial statements of foreign subsidiaries, having a recording currency different from their functional currency were translated into
the functional currency in accordance with the following procedure:
a. The balances of monetary assets and liabilities denominated in the recording currency were translated at the closing exchange
rates.
49
CONSOLIDATED FINANCIAL STATEMENTS b. The balances and movements of nonmonetary assets, liabilities and share holders’ equity were translated at the historical
exchange rates. In the case of the movements of non-monetary items recognized at fair value, which occurred during the period,
stated in the recording currency, these were translated using the historical exchange rates in effect on the date when the fair
value was determined.
c. The revenue, costs and expenses of the periods, expressed in the recording currency, were translated at the exchange rate of the
date they were accrued and recognized in the income statement, except when they arose from nonmonetary items, in which
case the historical exchange rate of the non-monetary items was used.
d. The differences in exchange arising in the translation from the recording currency to the functional currency were recognized as
income or expense in the income statement of the period they arose in.
Translation of subsidiaries with a functional currency different from their presentation currency.
The results and financial position of all Company entities (none of which is in a hyperinflationary environment) that have a functional
currency different from the presentation currency are translated into the presentation currency as follows:
a. Assets and liabilities at December 31, 2013 and 2012 were translated at the closing exchange rates of 13.08 mexican pesos/dollar
and 13.01 mexican pesos/dollar, respectively.
b. The stockholders’ equity of each balance sheet presented is translated at historical rates.
c.
Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions), which amounted 12.82 mexican pesos/dollar and 13.01 mexican pesos/
dollar for the years ended December 31, 2013 and 2012, respectively.
d. All resulting exchange differences are recognized in other comprehensive income.
The goodwill and adjustments to fair value arising at the date of acquisition of a foreign operation so as to measure them at fair value
are recognized as assets and liabilities of the foreign entity and translated at the exchange rate at the closing date. Exchange differences
arising are recognized in other comprehensive income.
d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank deposits available for operations and other short-term investments of high
liquidity with original maturities of three months or less, all of which are subject to insignificant risk of changes in value. Bank overdrafts
are presented as other current liabilities.
e) Restricted cash and cash equivalents
Cash and cash equivalents whose restrictions cause them not to comply with the definition of cash and cash equivalents given above,
are presented in a separate line in the statement of financial position and are excluded from cash and cash equivalents in the statement
cash flows.
f) Financial instruments
Financial assets
The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and accounts receivable,
investments held to maturity and available for sale. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets upon initial recognition. Purchases and sales of financial assets
are recognized on the settlement date.
Financial assets are written off in full when the right to receive the related cash flows expires or is transferred and the Company has also
transferred substantially all risks and rewards of ownership, as well as control of the financial asset.
50
ALPEK 2013 ANNUAL REPORT i.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short term. These assets correspond to derivative financial instruments, which are
classified as held for trading, unless they are designated as hedges.
Financial assets at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the income
statement. Gains or losses from changes in fair value of these assets are presented in the income statement as incurred.
ii. Accounts receivable
The accounts receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are
classified as non-current assets.
Accounts receivable are initially calculated at fair value plus directly attributable transaction costs and subsequently at amortized cost.
When circumstances occur that indicate that the amounts receivable will not be collected at the amounts originally agreed or will be
collected in a different period, the accounts receivable are impaired.
iii.
Investments held to maturity
If the Company intends and has the demonstrable ability to hold debt securities to maturity, they are classified as held to maturity.
Assets in this category are classified as current assets if expected to be settled within the next 12 months, otherwise they are classified
as non-current. Initially they are recognized at fair value plus any directly attributable transaction costs, and subsequently they are
valued at amortized cost using the effective interest method. Investments held to maturity are recognized or derecognized on the
day they are transferred to or by the Company. At December 31, 2013 the Company had no such investments.
iv. Financial assets available for sale
Financial assets available for sale are non-derivative financial assets that are either designated in this category or not classified in any
of the other categories. They are included in non-current assets unless their maturity is less than 12 months or Management intends
to dispose of the investment within the next 12 months after the balance sheet date.
Financial assets available for sale are initially recognized at fair value plus directly attributable transaction costs. Subsequently, these
assets are carried at fair value (unless they cannot be measured by their value in an active market and the value is not reliable, in which
case they will be recognized at cost less impairment).
Gains or losses arising from changes in fair value of monetary and non-monetary instruments are recognized directly in the consolidated
statement of comprehensive income in the period in which they occur.
When instruments classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in equity are
included in the income statement.
Financial liabilities
Financial liabilities that are not derivatives are initially recognized at fair value and are subsequently valued at amortized cost using the
effective interest method. Liabilities in this category are classified as current liabilities if expected to be settled within the next 12 months,
otherwise they are classified as non-current.
Suppliers are obligations to pay for goods or services that have been acquired or received in the ordinary course of business. Loans are
initially recognized at fair value, net of transaction costs incurred. Debt is subsequently carried at amortized cost; any difference between
the funds received (net of transaction costs) and the settlement value is recognized in the income statement over the term of the loan
using the effective interest method.
51
CONSOLIDATED FINANCIAL STATEMENTS Offsetting financial assets and liabilities
Assets and liabilities are offset and the net amount is presented in the balance sheet when there is a legally enforceable right to offset the
recognized amounts and there is an intention to settle on a net basis or to realize the asset and settle the liability simultaneously.
Impairment of financial instruments
a. Financial assets measured at amortized cost
The Company assesses at the end of each year whether there is objective evidence of impairment of each financial asset or group
of financial assets. An impairment loss is recognized if there is objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset (a “loss event”) and provided that the loss event (or events) has an impact on
the estimated future cash flows arising from the financial asset or group of financial assets that can be reliably estimated.
Aspects evaluated by the Company to determine whether there is objective evidence of impairment are:
Significant financial difficulty of the issuer or debtor.
Breach of contract, such as default in payments of interest or principal.
–
–
– Granting a concession to the issuer or debtor, by the Company, as a result of financial difficulties of the issuer or debtor and
that would not otherwise be considered.
There is likelihood that the issuer or debtor will enter bankruptcy or other financial reorganization.
–
– Disappearance of an active market for that financial asset due to financial difficulties.
–
Verifiable information indicates that there is a measurable decrease in the estimated future cash flows related to a group of
financial assets after initial recognition, although the decrease cannot yet be identified with the individual financial assets of
the Company, including:
(i) Adverse changes in the payment status of borrowers in the group of assets
(ii) National or local conditions that correlate with default on the asset in the group
Based on the items listed above, the Company assesses whether there is objective evidence of impairment. Subsequently, for
the category accounts receivable, when impairment exists, the amount of loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the original effective interest rate. The carrying amount of the asset is reduced by that amount, which is recognized
in the income statement under administrative expenses. If a held-to-maturity investment has a variable interest rate, the discount
rate for measuring any impairment loss is the current effective interest rate determined under the contract. Alternatively, the
Company could determine the impairment of the asset given its fair value determined on the basis of a current observable market
price.
If in the subsequent years, the impairment loss decreases and the decrease can be related objectively to an event occurring after
the date on which such impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the loss
impairment is recognized in the income statement
Impairment amounts of accounts receivable are mentioned in Note 8.
b. Financial assets available for sale
In the case of debt financial instruments, the Company also uses the above-listed criteria to identify whether there is objective
evidence of impairment. In the case of equity financial instruments, a significant or prolonged reduction in its fair value below its
cost is also considered objective evidence of impairment.
Subsequently, in the case of financial assets available for sale, an impairment loss determined by computing the difference
between the acquisition cost and the current fair value of the asset, less any impairment loss previously recognized, is reclassified
from the other comprehensive income to the income statement. Impairment losses recognized in the income statement related
to equity financial instruments are not reversed through the consolidated income statement. Impairment losses recognized in
the income statement related to financial debt instruments could be reversed in subsequent years, if the fair value of the asset is
increased as a result of a subsequent event.
52
ALPEK 2013 ANNUAL REPORT g) Derivative financial instruments and hedging activities
All derivative financial instruments are classified as fair value hedging hedges or cash flow hedges, for trading or the hedging of market
risks and are recognized in the balance sheet as assets and/or liabilities at fair value and similarly measured subsequently at fair value. The
fair value is determined based on recognized market prices and its fair value is determined using valuation techniques accepted in the
financial sector.
The hedging derivatives are classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12
months and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months.
Derivative financial instruments classified as hedges are contracted for risk hedging purposes and meet all hedging requirements; their
designation at the beginning of the hedging operation is documented, describing the objective, primary position, risks to be hedged
and the effectiveness of the hedging relationship, characteristics, accounting recognition and how the effectiveness is to be measured.
Fair value hedges
Changes in the fair value of derivative financial instruments are recorded in the income statement. The change in fair value of the hedging
instruments and the gain or loss on the hedged item attributable to the hedged risk are recorded in the income statement. At December
31, 2013 and 2012, the Company has no derivative financial instruments classified as fair value hedges.
Cash flow hedges
The changes in the fair value of derivative instruments associated to cash flow hedges are recorded in stockholders’ equity. The effective
portion is temporarily recorded in comprehensive income, within stockholders’ equity and is reclassified to the income statement when
the hedged item affects this. The ineffective portion is immediately recorded in income.
Net investment hedge
Net investment hedge in a foreign business is recorded similarly to cash flow hedges. Any gain or loss of the hedged instrument related
to the effective portion of the hedge is recorded in comprehensive income. The gain or loss of the ineffective portion is recorded in
the statement of income. Accumulated gains and losses in equity are transferred to the statement of income on the disposal or partial
disposal of the foreign operation. At December 31, 2013 and 2012, the Company has no derivative financial instruments classified as net
investment hedges.
Discontinuation of hedge accounting
The Company discontinues the hedges accounting when the derivative has expired, has been sold, is cancelled or exercised, or when the
hedge does not meet the criteria for hedge accounting, or when the Company decides to cancel the hedge designation.
On discontinuing hedge accounting, in the case of fair value hedges, the adjustment to the carrying amount of a hedged item for
which the effective interest rate method is used, is amortized to income over the period to maturity. In the case of cash flow hedges, the
amounts accumulated in equity as a part of comprehensive income remain in equity until the time when the effects of the forecasted
transaction affect income. In the event the forecasted transaction is not likely to occur, the income or loss accumulated in comprehensive
income are immediately recognized in the income statement. When the hedge of a forecasted transaction appears satisfactory and
subsequently does not meet the effectiveness test, the cumulative effects in comprehensive income in stockholders’ equity are transferred
proportionally to the income statement to the extent, the forecasted transaction impacts it.
The fair value of derivative financial instruments presented in the financial statements of the Company, is a mathematical approximation
of their fair value. It is computed using proprietary models of independent third parties using assumptions based on past and present
market conditions and future expectations at the respective balance sheet date.
53
CONSOLIDATED FINANCIAL STATEMENTS h) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the average cost method. The cost of finished
goods and work in process includes cost of product design, raw materials, direct labor, other direct costs and production overheads
(based on normal operating capacity). It excludes loan costs. The net realizable value is the estimated selling price in the normal course of
business, less the applicable variable selling expenses. Costs of inventories include any gain or loss transferred from equity corresponding
to raw material purchases that qualify as cash flow hedges.
i) Property, plant and equipment
Items of property, plant and equipment are recorded at cost less the accumulated depreciation and any accrued impairment losses. The
costs include expenses directly attributable to the asset acquisition.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flows to the Company and the cost of the item can be reliably measured. The
carrying amount of the replaced part is derecognized. Repairs and maintenance are recognized in the income statement during the year
they are incurred. Major improvements are depreciated over the remaining useful life of the related asset.
Depreciation is calculated using the straight-line method, considering separately each of the asset’s components, except for land, which
is not subject to depreciation. The average useful lives of assets families are as follows:
Buildings and constructions
Machinery and equipment
Transportation equipment
Furniture and laboratory equipment and information technology
40 to 50 years
10 to 40 years
15 years
2 to 13 years
The spare parts to be used after one year and attributable to specific machinery are classified as property, plant and equipment in other
fixed assets.
Borrowing costs directly attributable to the acquisition related to property, plant and equipment whose acquisition or construction
requires a substantial period (nine months or more), are capitalized as part of the cost of acquiring such qualifying assets, up to the
moment when they are suitable for their intended use or sale.
Assets classified as property, plant and equipment are subject to impairment tests when events or circumstances occur indicating that
the carrying amount of the assets may not be recoverable. An impairment loss is recognized in the income statement in other expenses,
net, for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher
of fair value less costs to sell and its value in use.
The residual value and useful lives of assets are reviewed at least at the end of each reporting period and, if expectations differ from
previous estimates, the changes are accounted for as a change in accounting estimate.
In the event that the value in books is greater than the estimated recovery value, a decrease in value is recorded in the value in books of
an asset and it is immediately recognized at its recovery value.
Gains and losses on disposal of assets are determined by comparing the sale value with the carrying amount and are recognized in other
expenses, net, in the income statement.
54
ALPEK 2013 ANNUAL REPORT j)
Intangible assets
Goodwill represents the excess of the acquisition cost of a subsidiary over the Company’s interest in the fair value of the identifiable net
assets acquired, determined at the date of acquisition. Goodwill is shown in the statement of financial position as goodwill and intangible
assets, net and is recognized at cost less accumulated impairment losses, which are not reversed. Gains or losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity sold.
Intangible assets are recognized when they meet the following features: they are identifiable, provide future economic benefits and the
Company has control over such benefits.
Intangible assets are classified as follows:
i.
Indefinite useful life. - These intangible assets are not amortized and are subject to annual impairment assessment. To date, no
factors have been identified limiting the useful life of these intangible assets.
ii. Finite useful life. -– These assets are recognized at cost less accumulated amortization and impairment losses recognized. They
are amortized on a straight line basis over their estimated useful life, determined based on the expectation of generating future
economic benefits, and are subject to impairment tests when triggering events of impairment are identified.
The estimated useful lives of intangible assets with finite useful lives are summarized as follows:
Costs of development
Trademarks
No competition agreements
Customer relations
Software and licenses
Intellectual property rights
15.5 years
10 years
10 years
6 to 7 years
3 to 7 years
20 to 25 years
Research costs are recognized in income as incurred. Expenditures on development activities are recognized as intangible assets when
such costs can be reliably measured, the product or process is technically and commercially feasible, potential future economic benefits
are obtained and the Company intends also has sufficient resources to complete the development and to use or sell the asset. Their
amortization is recognized in income by the straight-line method over the estimated useful life of the asset. Development expenditures
that do not qualify for capitalization are recognized in income as incurred.
k)
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not depreciable or amortizable and are subject to annual impairment
tests. Assets that are subject to amortization are reviewed for impairment when events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and its value in use. For the purpose
of assessing impairment, assets are grouped at the lowest levels at which separately identifiable cash flows exist (cash generating units).
Non-financial assets other than goodwill that have suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
l)
Income tax
The deferred income taxes are determined in each subsidiary by the asset and liability method, applying the tax rate enacted or
substantially enacted at the statement of financial position date. The tax rates are applied to the total of the temporary differences
resulting from comparing the accounting and tax bases of assets and liabilities in accordance with the years in which the deferred asset
tax is realized or the deferred liability tax is expected to be settled, considering, when applicable, any tax loss carry forwards expected to
be that are considered to be recoverable. The effect of a change in tax rates is recognized in the income of the period in which the rate
change is enacted.
55
CONSOLIDATED FINANCIAL STATEMENTS Management periodically evaluates the positions taken in tax returns with respect to the situations in which the applicable law is subject
to interpretation. Provisions are recognized when appropriate, based on the amounts expected to be paid to tax authorities.
Deferred tax assets are recognized only when it is probable that future taxable profits will exist against which the deductions for temporary
differences can be taken.
The deferred income tax on temporary differences arising from investments in subsidiaries and associates is recognized, unless the period
of reversal of temporary differences is controlled by ALFA and it is probable that the temporary differences will not reverse in the near
future.
Deferred tax assets and liabilities are offset when legal enforceable rights exist, and when the taxes are levied by the same tax authority,
on either: the same taxable entity; or different taxable entities which intent either to settle current tax liabilities and assets on a net basis.
m) Employee benefits
i. Pension plans
Defined contribution plans:
A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company
has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees
the benefits relating to their service in the current and past periods. The contributions are recognized as employee benefit expense
when they are due.
Defined benefit plans:
A defined benefit plan is a plan under which the Company has a legal or constructive obligation for paying a pension when the
employee reach the retirement age, considering factors such as age, years of service and compensation.
The liability recognized in the statement of financial position in respect of defined benefit plans is the present value of the defined
benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using discount rates that are denominated in the currency in which the benefits will
be paid, and have maturities that approximate the terms of the pension liability.
Remeasurments of obligations for employee benefits are recognized directly in stockholders’ equity in other items of the
comprehensive income in the year they occur.
The Company determines the net finance expense (income) by applying the discount rate to the liabilities (assets) from net defined
benefits.
Past-service costs are recognized immediately in the income statement.
ii. Other post-retirement benefits
The Company provides medical benefits to retired employees after termination of employment. The right to access these benefits
usually depends on the employee´s having worked until retirement age and completing a minimum of years of service. The expected
costs of these benefits are accrued over the period of employment using the same criteria as those described for defined benefit
pension plans.
56
ALPEK 2013 ANNUAL REPORT iii. Termination benefits
Termination benefits are payable when employment is terminated by the Company before the normal retirement date or when
an employee accepts voluntary termination of employment in exchange for these benefits. The Company recognizes termination
benefits in the first of the following dates: (a) when the Company can no longer withdraw the offer of these benefits, and (b) when the
Company recognizes the costs from restructuring within the scope of the IAS 37 and it involves the payment of termination benefits.
If there is an offer that promotes the termination of the employment relationship voluntarily by employees, termination benefits are
valued based on the number of employees expected to accept the offer. Any benefits to be paid more than 12 months after the
balance sheet date are discounted to their present value.
iv. Short-term benefits
The Company provides benefits to employees in the short term, which may include wages, salaries, annual compensation and
bonuses payable within 12 months. The Company recognizes an undiscounted provision when it is contractually obligated or when
past practice has created an obligation.
v. Employees´ profit sharing and bonuses
The Company recognizes a liability and an expense for bonuses and employees’ profit sharing when it has a legal or constructive
obligation to pay these benefits and determines the amount to be recognized based on the profit for the year after certain adjustments.
n) Provisions
Provisions represent a present legal obligation or a constructive obligation as a result of past events where an outflow of resources to
meet the obligation is likely and where the amount can be reliably estimated. Provisions are not recognized for future operating losses.
o) Sharebased payments
The Company’s compensation plans are based on the market value of shares of the holding in favor of certain senior executives of ALFA
and its subsidiaries. The conditions for granting such compensation to the eligible executives include among other things, compliance
with certain metrics such as the level of profit achieved, permanence in the Company, etc. The Board of Directors has appointed a
technical committee to manage the plan, and it reviews the estimated cash settlement of this compensation at the end of the year.
Adjustments to this estimate are charged or credited to the income statement.
The fair value of the amount payable to employees in respect of share-based payments which are settled in cash is recognized as an
expense, with a corresponding increase in liabilities, over the period of service required. The liability is included under other liabilities and
is adjusted at each reporting date and the settlement date. Any change in the fair value of the liability is recognized as compensation
expense in the income statement.
p) Treasury shares
The Shareholders’ Meeting periodically authorizes a maximum amount for the acquisition of the Company’s own shares. Upon the
occurrence of a repurchase of its own shares, they become treasury shares and the amount is charged to stockholders’ equity at purchase
price: a portion to capital stock at its modified historical value, and the balance to retained earnings. These amounts are stated at their
historical value.
q) Capital stock
The Company’s ordinary shares are classified as capital. Incremental costs directly attributable to the issuance of new shares are included
in equity as a deduction from the consideration received, net of tax.
r) Comprehensive income
Comprehensive income is composed of net income plus other items of comprehensive income, net of taxes, which comprise the effects
of the translation of foreign subsidiaries, the effects of derivative financial instruments for cash flow hedging, remesurments of obligations
for employee benefits, the effects of changes in the fair value of financial instruments available for sale, the equity in other items of
comprehensive income of associates, and other items specifically required to be reflected in stockholders’ equity and which do not
constitute capital contributions, reductions or distributions.
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CONSOLIDATED FINANCIAL STATEMENTS s) Segment reporting
Segment information is presented consistently with the internal reporting provided to the Chief Executive Officer who is the highest
authority in operational decision-making, resource allocation and assessment of operating segment performance.
t) Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the normal course of
operations. Revenue is shown net of value added tax, customer returns, rebates and similar discounts and after eliminating intercompany
revenue.
Revenues are recognized when the following conditions are fulfilled:
–
–
–
–
–
The risks and rewards of ownership have been transferred
The amount of revenue can be reliably measured
It is likely that future economic benefits will flow to the Company
The company retains no involvement associated with ownership nor effective control of the sold goods
The costs incurred or to be incurred in respect of the transaction can be measured reasonably.
The revenue recognition criteria depend on the contractual conditions with the Company’s clients. In some cases, depending on the
agreements with each client, the risks and benefits associated to the property are transferred when the goods are taken by the clients in
the Company’s plant. In other cases, the risks and benefits associated to the property are transferred when the goods are delivered in the
plant of the clients.
Dividend income from investments is recognized once the rights of shareholders to receive this payment have been established (when it
is probable that the economic benefits will flow to the entity and the revenue can be reliably valued).
Interest income is recognized when it is likely that the economic benefits will flow to the entity and the amount of revenue can be reliably
valued by applying the effective interest rate.
Revenues from royalties are recognized using an accrued basis, in accordance with the essence of the agreement on which they are
based.
Impairment provisions for client impairment are recognized based on studies carried out by the company’s Management, considering the
type of client, the type of transaction and the specifications of each agreement.
u) Earnings per share
Earnings (losses) per share are calculated by dividing the profit (loss) attributable to the shareholders of the parent by the weighted
average number of common shares outstanding during the year. There are no dilutive effects from financial instruments potentially
convertible into shares.
v) Non-recurring items
Non-recurring items require judgment from Management to be disclosed, due to their size or incidence. These items are disclosed in the
consolidated statement of income and in Note 2.c. Operations that gave rise to non-recurring items are the restructuring activities and
impairments.
58
ALPEK 2013 ANNUAL REPORT w) Changes in accounting policies and disclosures
The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new standards
effective at January 1, 2013. The nature and impact of each new standard or modification are described as follows:
•
•
•
•
•
•
IAS 1 (amended) - “Presentation of Financial Statements” The amendment requires entities to separate the items presented in
other comprehensive income in two groups based on whether they can be recycled to the income statement in the future or
not. Items that cannot be recycled are presented separately from the items that may be recycled in the future. Entities that decide
to present items of other comprehensive income before taxes should show the taxes related to the two groups separately. For
the Company, this amendment became effective on January 1, 2013. The amendment affected the presentation only and had no
effect on the Company’s financial position or performance.
IAS 19 (Revised) - “Employee benefits” There are a number of amendments that have been applied retrospectively; these
eliminate the option to defer the recognition of actuarial gains and losses in the defined benefit post-employment plans,
known as the “corridor method”. The Company has not previously applied this option and has recognized the gains and losses
in other comprehensive income. Therefore, this change in the standard has no impact on the Company’s consolidated financial
statements. The expected returns on plan assets are no longer recognized in the statement of income for the year, instead, there
is a requirement to recognize net interest on the net defined benefit liability (asset) in the statement of income, calculated using
the discount rate used to measure the defined benefit obligation. This change had no significant impact on the consolidated
financial statements of the Company.
Past-service costs are recognized in the statement of income in the period of a plan amendment, instead of deferring the
portion related to the unvested benefits. Previously the Company recognized past-service costs immediately in income, unless
the changes to the pension plan are conditional on the employees remaining in service for a specified period (vesting period),
Management determined that the effect of the net income of the Company for 2012 is not significant. As a result of the adoption
of the amendment to IAS 19, at January 1, 2013, the Company adjusted against retained earnings, an accumulated balance for
unamortized past-service costs amounting to (Ps 27,160) and recognizes a net charge of income tax on consolidated retained
earnings of (Ps 19,723). The IAS 19 (Revised) was adopted prospectively and prior periods were not restated since Management
determined that the effect is not significant for the Company’s financial position.
IFRS 10, ‘Consolidated financial statements’ –IFRS 10 was issued in May 2011 and replaces all the guidance on control and
consolidation in IAS 27, “Consolidated and separate financial statements’, and SIC 12, “Consolidation - Special purpose entities’.
Under IFRS 10, subsidiaries are all entities (including the structured entities) over which the Company has control. The Company
controls an entity when it has power over an entity, is exposed to, or has rights to variable returns from its interest in the entity and
has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date when
the control is transferred to the Company. They are deconsolidated from the date control ceases. The Company has applied IFRS
10 retrospectively in conformity with transition provisions described in this standard. The aforementioned had no impact on the
consolidation of investments held by the Company.
IFRS 11 “Joint arrangements” The standard focuses on the rights and obligations of the parties to determine whether there is a
joint arrangement, over other factors such as the legal form. There are two types of joint arrangements: Joint operations and joint
ventures. Joint operations occur when investors have rights to the assets and obligations for liabilities of an arrangement, a joint
operator accounts for his portion of assets, liabilities, revenues and expenses. A joint venture occurs when investors have rights
over the net assets of the arrangement; joint ventures are accounted using the equity method. Proportional consolidation is not
allowed under this standard. This change had no effect on the consolidated financial statements of the Company.
IFRS 12, “Disclosure of Interests in Other Entities” requires an entity to disclose information that enables users of financial
information to evaluate the nature and risks associated with its interests in other entities, including joint arrangements, associates,
special purpose entities and other off balance sheet entities; in addition to the effects of these interests in its financial position
and performance, and its cash flows. The Company made the required disclosures in the consolidated financial statements at
December 31, 2013.
IFRS 13, “Fair Value Measurements”. The objective of IFRS 13 is to provide a precise definition of fair value and be a single source for
the measurement and disclosure requirements for fair value when it is required or permitted by other IFRS, except for transactions
within the scope of IFRS 2 “Share-based payments”, IAS 17 “Leases”, measurements that have similarities to fair value but not
considered as such, and the net realizable value under the scope of the IAS 2 “Inventories” or the value in use in IAS 36 “Impairment
of long-lived assets”. The application of IFRS 13 has not significantly impacted the fair value measurements made by the Company.
59
CONSOLIDATED FINANCIAL STATEMENTS •
2011 annual improvements include an improvement to IAS 16 “Property, plant and equipment” clarifying that main spare parts
and maintenance equipment that comply with the definition of Property, plant and equipment, are not part of the inventory,
and the improvement to IAS 32 “Financial instruments presentation” clarifies that income taxes derived from distributions to
shareholders are accounted for in accordance with IAS 12 “Taxes on gains”. These improvements had no effect on the Company.
x) New accounting pronouncements not early adopted by the Company
Following are the new pronouncements and amendments issued and effective for years subsequent to 2013 that have not been early
adopted by the Company.
•
IFRS 9, “Financial Instruments”
IFRS 9 was issued in November 2009 and included requirements for classification and measurement of financial assets. IFRS
9 maintains and simplifies the two types of measurement models and establishes two main categories of financial assets: at
amortized cost and fair value. The classification basis depends on the business model of the Company and the characteristics of
contractual cash flows of financial assets. Requirements for financial liabilities were included as part of the IFRS 9 in October 2010.
Most of the requirements for financial liabilities were taken from the IAS 39 without any changes. However, some amendments were
realized on the fair value option for financial liabilities to include the credit risk. On December 2011, the IASB made amendments
to IFRS 9 to require their application for annual periods starting in or subsequent to January 1, 2015; however, in November 2013,
amendments were issued that eliminate the effective application date of January 1, 2015. The new effective application date will
be determined once the classification and measurement phases and impairment of IFRS 9 are finished.
•
IAS 19 - Employee benefits
In November 2013, the IASB amended the IAS 19 in regards to Definite Benefit Plans, Employee Contributions. The objective of this
modification is to provide additional guidance on the accounting of employee contributions or third parties to defined benefit
plans. For the Company, this amendment is obligatory as from January 1, 2015.
•
IAS 32, “Financial instruments: presentation”
In December 2011, the IASB amended IAS 32. These amendments are in the application guide and clarify some of the requirements
for offsetting financial assets and financial liabilities in the statement of financial position. For the Company, this amendment is
obligatory as from January 01, 2014.
•
IAS 36, “Impairment of Assets”
In May 2013, the IASB modified IAS 36. This amendment indicates the disclosure of information over the recoverable value of
impaired assets if the amount is calculated based on the fair value method less the cost of sale. For the Company, this amendment
is obligatory as from Wednesday, January 01, 2014.
•
IAS 39, “Financial Instruments”: Recognition and Measurement”
In June 2013, the IASB modified IAS 39 to clarify that there is no need to suspend hedge accounting when novation of a hedging
instrument to a central counter party meets certain requirements. For the Company, this amendment is applicable to annual
periods starting on or subsequent to January 1, 2014.
At the date of the financial statements, the Company’s Management is in the process of quantifying the effects of adoption of the new
standards and amendments mentioned above.
There are no additional standards, amendments or interpretations issued but not effective that could have a significant effect on the company.
60
ALPEK 2013 ANNUAL REPORT Note 4 - Financial risk management
Note 4.1 - Financial risk factors
The Company’s activities expose it to various financial risks: market risk (including foreign exchange risk, interest rate risk on cash flows and
interest rate risk on fair value), credit risk and liquidity risk. The Company’s risk management plan considers the unpredictability of the financial
markets and seeks to minimize the potential negative effects on the financial performance of the Company. The Company uses derivative
financial instruments to hedge some risk exposures.
The objective is to protect the financial health of the business taking into account the volatility associated with exchange rates and interest
rates. Additionally, due to the nature of the industries in which it participates, the Company has entered into derivative hedges of input prices.
ALFA has a Risk Management Committee, consisting of the Chairman, the Chief Executive Officer, the Chief Financial Officer of the Company
and a financial executive of the Company who acts as technical secretary. The Committee oversees derivatives transactions proposed by
the subsidiaries of the Company in which the maximum possible loss exceeds US$1,000. This Committee supports both the Chief Excecutive
Officer and the Chairman of the holding company. All new derivative transactions that the Company proposes to make, and the renewal of
existing derivatives, require approval by both the subsidiary and ALFA in accordance with the following schedule of authorizations:
Chief Excecutive Officer
ALFA Risk Management Committee
Finance Committee
ALFA’s board of directors
Possible Maximum Loss US$ Million
Cumulative
Individual
transactions annual
transactions
1
30
100
>100
5
100
300
>300
The proposed transactions must meet certain criteria, including that the hedges are lower than exposures, and that they are the result of a
fundamental analysis and properly documented. Sensitivity analyses and other risk analyses should be performed before the operation is
carried out.
a) Market risk
i) Exchange rate risk
The Company operates internationally and is exposed to foreign exchange risk, primarily related to the Mexican peso and the US
dollar. The Company is exposed to exchange rate risk arising from future commercial transactions in assets and liabilities in foreign
currencies and investments abroad.
The respective exchange rates of the Mexican peso and the U.S. dollar are very important factors for the Company due to the effect
they have on their results. Moreover, Alpek has no influence over their movements. On the other hand, Alpek estimates that most of
its revenues are denominated in foreign currency, either because they come from products that are exported from Mexico or because
they come from products that are manufactured and sold abroad, or because even if sold in Mexico the price of such products are
set based on international prices in foreign currencies such as the U.S. dollar.
For this reason, in the past, in times when the Mexican peso has appreciated in real terms against other currencies such as
the US dollar, the Company’s profit margins have been reduced. On the other hand, when the Mexican peso has lost value, the
Company’s profit margins have been increased. However, although this factor correlation has appeared on several occasions in
the recent past, there is no assurance that it will be repeated if the exchange rates between the Mexican peso and other currencies
fluctuate again.
The Company participates in operations with derivative financial instruments on exchange rates for the purpose of controlling the
total comprehensive cost of its financing and the volatility associated with exchange rates. Additionally, it is important to note the
high “dollarization” of the Company’s revenues, since a large proportion of its sales are made abroad, providing a natural hedge
against its obligations in dollars, while at the same time its income level is affected in the event exchange rate appreciation. Based
on the overall exchange rate exposure at December 31, 2013 and 2012, a hypothetical variation of 5% in the exchange rate MXN/USD,
holding all other variables constant, would result in an effect on the income statement by Ps 7,295 and Ps 7,061, respectively.
61
CONSOLIDATED FINANCIAL STATEMENTS ii) Price risk
In carrying out its activities, the Company depends on the supply of raw materials provided by its suppliers, both in Mexico and
abroad, among which are intermediate petrochemicals, principally.
In the most recent years, the price of some inputs has shown volatility, especially those arising from oil and natural gas.
In order to fix the selling prices of certain of its products, the Company has entered into agreements with certain customers. At the
same time, it has entered into transactions involving derivatives on natural gas that seek to reduce price volatility of this input.
Additionally, it has entered into derivative financial instruments transactions to hedge purchases of certain raw materials, since these
inputs have a direct or indirect relationship with the prices of its products.
The derivative financial operations have been privately contracted with various financial institutions, whose financial strength was
highly rated at the time by rating agencies. The documentation used to formalize the contract operations is that based generally on
the “Master Agreement”, generated by the “International Swaps & Derivatives Association” (“ISDA”), which is accompanied by various
accessory documents known in generic terms as “Schedule”, “Credit Support Annex” and “Confirmation”.
Regarding natural gas, Pemex is the only supplier in Mexico. The selling price of natural gas at first hand is determined by the price of
that product on the “spot” market in the south of Texas, USA, which has experienced volatility. For its part, the CFE is a decentralized
public company in charge of producing and distributing electricity in Mexico. Electricity rates have also been influenced by the
volatility of natural gas, since most power plants are gas-based.
The Company entered into various derivative agreements with various counterparties to protect itself against increases in prices of
natural gas and other raw materials. In the case of natural gas derivatives, hedging strategies for products were designed to mitigate
the impact of potential increases in prices. The purpose is to protect the price from volatility by taking positions that provide stable
cash flow expectations, and thus avoid price uncertainty. The reference market price for natural gas is the “Henry Hub New York
Mercantile Exchange (NYMEX)”. The average price per MMBTU for 2013 and 2012 was 3.65 and 2.79 US dollars, respectively.
At December 31, 2012, the Company had hedges of natural gas prices for a portion expected of consumption needs in Mexico and
the United States. Based on the general input exposure at December 31, 2013 and 2012, a hypothetical increase (decrease) of 10%
in market prices applied to fair value and keeping all other variables constant, such as exchange rates, the increase (decrease) would
result in an immaterial effect on the income statement for 2013 and 2012.
iii)
Interest rate risk and cash flow
The interest rate risk for the Company arises from long-term loans. Loans at variable rates expose the Company to interest rate risk
on cash flows that are partially offset by cash held at variable rates. Loans at fixed rates expose the Company to interest rate risk at
fair value.
For the purpose of controlling the total comprehensive cost of its financing and the volatility of interest rates, the Company has
contracted interest rate swaps to convert certain variable rate loans to fixed rates.
At December 31, 2013 and 2012, if interest rates on variable rate loans were increased/decreased by 10%, interest expense would
increase/decrease by Ps 3,495 and Ps 1,540, respectively.
b) Credit risk
Credit risk is managed on a group basis, except for the credit risk related to accounts receivable balances. Each subsidiary is responsible
for managing and analyzing credit risk for each of its new customers before setting the terms and conditions of payment. Credit risk is
generated from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions as well
as credit exposure to customers, including receivables and committed transactions. If wholesale customers are rated by independent
62
ALPEK 2013 ANNUAL REPORT experts, these are the ratings used. If there is no independent rating, the Company´s risk control group evaluates the creditworthiness
of the customer, taking into account their financial position, past experience and other factors.
Individual risk limits are determined based on internal and external ratings in accordance with limits set by the Board. The use of credit
risk is monitored regularly. During 2013 and 2012, credit limits were not exceeded and Management does not expect losses in excess
of the impairment recognized in the corresponding periods.
The impairment provision for doubtful accounts represents estimated losses resulting from the inability of customers to make
required payments. In determining the allowance for doubtful accounts, significant estimates have to be made. The Company
performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s
current creditworthiness, as determined by a review of their current credit information. In addition, the Company considers a number
of factors to determine the size and appropriate timing for the recognition of allowances, including historical collection experience,
customer base, current economic trends and the ageing of the accounts receivable portfolio.
c) Liquidity risk
In the past, the Company has generated and expects to continue generating positive operation cash flows. Operation cash flows
represent mainly the inflow of net revenues (adjusted for depreciation and other items not related to cash) and the outflow of working
capital increases necessary to grow the business. Cash flows used in investment activities, represent the investment of capital required
for the growth, as well as business acquisitions. Financing activities cash flows are related mainly with the indebtedness changes to
grow the business or indebtedness paid with cash of operations or refinancing operations, as well as dividends paid.
The main cash flow needs of the Company are used for working capital, capital investments, maintenance, expansion of acquisitions
and payment of debt. The Company’s abilities to finance cash flow needs depend on the continuous ability to generate cash
operations, general capacity and terms of finance agreements, as well as access to capital markets. The Company believes that
the future cash of operations together with the access to funds available under such finance agreements and capital markets, will
provide it with adequate resources to finance predictable operating requirements, capital investments, acquisitions and new business
development activities.
The following tables analyze the derivative and non-derivative financial liabilities, grouped according to their maturity, from the
balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis to understand the timing
of the Company’s cash flows for these liabilities. The amounts disclosed in the table are contractual undiscounted cash flows.
63
CONSOLIDATED FINANCIAL STATEMENTS The detail of maturities of existing financial liabilities at December 31, 2013 and 2012, is as follows (1):
At December 31, 2013
Current portion of long-term debt
Short-term bank loans
Notes payable
Cumulative interest payable
Affiliated companies
Suppliers
Other accounts payable and accrued expenses
Debt (excluding issuance expenses)
Senior notes (excluding issuance expenses)
At December 31, 2012
Current portion of long-term debt
Short-term bank loans
Notes payable
Cumulative interest payable
Affiliated companies
Suppliers
Other accounts payable and accrued expenses
Debt (excluding issuance expenses)
Senior notes (excluding issuance expenses)
Less than 1 year
Between 1 and 2
years
Between 2 and 5
years
More than 5 years
Ps
261,530
447,190
44,362
139,093
395,964
8,847,817
1,176,250
-
-
Ps
-
-
-
616,478
-
-
-
873,909
-
Ps
-
-
-
1,197,653
-
-
-
588,442
-
Ps
-
-
-
3,093,232
-
-
-
-
12,400,441
Less than 1 year
Between 1 and 2
years
Between 2 and 5
years
More than 5 years
Ps
358,274
140,184
2,183
148,433
464,527
9,231,707
1,313,828
-
-
Ps
-
-
-
433,422
-
-
-
449,499
1,563,979
Ps
-
-
-
806,075
-
-
-
3,573,549
-
Ps
-
-
-
2,280,358
-
-
-
-
8,432,510
(1) Amounts included are undiscounted contractual cash flows; therefore, they differ from the amounts included in the consolidated
financial statements and in Note 19.
The Company expects to meet its obligations with cash flows generated by operations. Additionally, the Company has access to credit lines
with various banks to meet possible requirements.
At December 31, 2013 the Company has unused credit lines for a total of US$ 273 million.
4.2 Equity risk management
The Company’s objectives when managing equity are to safeguard the Company’s ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure so as to reduce
the cost of equity.
To maintain or adjust the equity structure, the Company may adjust the amount of dividends paid to shareholders, return equity to
shareholders, issue new shares or sell assets to reduce debt.
The Company monitors equity based on the degree of leverage. This percentage is calculated by dividing total liabilities by total equity.
The financial ratio of total liabilities/total equity was 1.15 and 1.08 at December 31, 2013 and 2012, respectively.
64
ALPEK 2013 ANNUAL REPORT
4.3 Fair value estimation
The following is an analysis of financial instruments measured by the fair value valuation method. The 3 different levels used are presented below:
–
–
–
Level 1: Quoted prices for identical instruments in active markets.
Level 2: Other valuations including quoted prices for similar instruments in active markets that are directly or indirectly observable.
Level 3: Valuations made through techniques wherein one or more of their significant data inputs are non-observable.
The following table presents the Company’s assets and liabilities that are measured at fair value at December 31, 2013:
Assets
Derivative financial instruments
with trading accounting treatment
Derivative financial instruments
with hedge accounting treatment
Financial assets available for sale
Total Assets
Liabilities
Derivative financial instruments
with trading accounting treatment
Derivative financial instruments
with hedge accounting treatment
Total liabilities
Level 1
Level 2
Level 3
Total
Ps
Ps
Ps
Ps
Level 1
-
-
-
-
-
-
-
Ps
58,477
Ps
-
Ps
58,477
28,015
-
-
92,581
28,015
92,581
Ps
86,492
Ps
92,581
Ps
179,073
Level 2
Level 3
Total
Ps
1,832
Ps
31,319
Ps
33,151
Ps
-
-
-
Ps
1,832
31,319
Ps
33,151
The following table presents the Company´s assets and liabilities that are measured at fair value at December 31, 2012:
Assets
Derivative financial instruments
with trading accounting treatment
Derivative financial instruments
with hedge accounting treatment
Financial assets available for sale
Total Assets
Liabilities
Derivative financial instruments
with trading accounting treatment
Derivative financial instruments
with hedge accounting treatment
Total liabilities
Level 1
Level 2
Level 3
Total
Ps
Ps
Ps
Ps
Level 1
-
-
-
-
-
-
-
Ps
35,153
Ps
-
Ps
35,153
72,144
-
-
92,208
72,144
92,208
Ps
107,297
Ps
92,208
Ps
199,505
Level 2
Level 3
Total
Ps
276,923
Ps
218,805
Ps
495,728
Ps
-
-
-
Ps
276,923
218,805
Ps
495,728
There are no transfers between Levels 1 and 2, or between Levels 2 and 3 in the reported periods.
65
CONSOLIDATED FINANCIAL STATEMENTS
Level 1
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is
considered active if quoted prices are clearly and regularly available from a stock exchange, dealer, broker, industry group, pricing service or
regulatory agency, and those prices represent actual and regular market transactions at arm-length conditions. The trading price used for
financial assets held by ALFA is the current bid price.
Level 2
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation
techniques maximize the use of observable market data when available and rely as little as possible on estimates specific to the Company. If
all significant inputs required to measure an instrument at fair value are observable, the instrument is classified at Level 2.
Level 3
If one or more of the significant inputs is not based on observable market data, the instrument is classified at Level 3.
Specific valuation techniques used to value financial instruments include:
– Market quotations or offers from retailers for similar instruments.
–
–
The fair value of swaps is calculated as the present value of future cash flows estimated in observable return curves.
The fair value of forward contracts is determined using exchange rates at the balance sheet date, when the resulting value is
discounted at present value.
– Other techniques, such as the analysis of discounted cash flows, used to determine the fair value of the remaining financial
instruments.
Financial assets included within this level are only financial assets available for sale, which correspond to investment in company’s shares that
are not quoted in the active market and therefore, the fair value may not be reliably determined.
Note 5 - Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
5.1 Critical accounting estimates and judgments
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will be, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are addressed below.
a) Property, plant, equipment and finite life intangibles
The Company estimates the useful lives of its property, plant and equipment and finite life intangibles in order to determine the depreciation and
amortization expense, respectively, to be recorded during the reporting period. The useful life of these assets is calculated at the time when the
asset is acquired and is based on the past experience with similar assets, considering advance technological changes or changes of other kind. If
technological changes were not occur faster than estimated, or differently from anticipated, the useful lives assigned to these assets may need to
be reduced. This would result in the recognition in a greater depreciation and amortization expense in future periods. Alternatively, these types
of technological changes may result in recognizing a charge for impairment to show the reduction in the value of assets. The Company reviews
assets annually to know if they show signs of impairment, or when certain events or circumstances indicate that the book value cannot be
recovered during the remaining life of the assets, in case there are signs of impairment, the Company carries out a study to determine the value
in use of assets. At December 31, 2013 and 2012, there were no signs of impairment.
66
ALPEK 2013 ANNUAL REPORT b) Estimate of impairment in goodwill and other indefinite life intangible assets
The Company tests annually whether goodwill and other intangible assets have suffered any impairment, in accordance with the
established accounting policy (see Note 12). The recoverable amounts of cash-generating units have been determined based on value-
in-use calculations. These calculations require the use of estimates.
c)
Income tax
The Company is subject to income taxes in numerous jurisdictions and critical judgment is required to determine the global income tax
provisions. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes
liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets
and liabilities in the period in which such determination is made.
If income before taxes increases/decreases by 5%, income tax will be increased/decreased by Ps 40,867.
d) The fair value of derivative financial instruments
The fair value of financial instruments that are not traded in an active market is determined by using fair value hierarchies. The Company
uses its judgment to select a variety of methods and make assumptions that are based mainly on market conditions existing at the end
of each reporting period.
If the fair value estimation varies by 5%, the effect on income would be modified by Ps 65,382.
e) Pension benefits
The present value of pension obligations depends on a number of factors determined on an actuarial basis using different assumptions.
Assumptions used in the determination of the net cost (income) for pensions include the discount rate. Any change in the assumptions
will impact the value in books of pension obligations.
The Company determines the adequate discount rate at year end. This interest rate should be used to determine the present value of
future cash outflows expected required to settle pension obligations. In the determination of the appropriate discount rate, the Company
considers the discount interest rate in conformity with IAS 19 (Revised) “Employee benefits” denominated in the currency used to pay
benefits with terms at maturity that approximate the obligations terms of related pension obligations. Other key assumptions for pension
obligations are based, in part, on the current market conditions.
5.2 Critical judgments in applying the entity’s accounting policies
a) Basis of Consolidation
The financial statements include the assets, liabilities and results of all entities in which the Company has a controlling interest. The
outstanding balances and significant intercompany transactions have been eliminated in consolidation. To determine control, the
Company considers whether it has the power to govern the financial and operational strategy of the respective entity and not just the
power of the capital held by the Company. As a result of this analysis, the Company has exercised critical judgment to decide whether
to consolidate the financial statements of Polioles and Indelpro, where the determination of control is not clear. Based on the principal
substantive right of Alpek in accordance with the by-laws of Polioles to appoint the General Director, who has control over the relevant
decision making and based on the by-laws of Indelpro and supported in the General Law of Mercantile Organizations, which allow Alpek
to control the decisions over relevant activities by a simple majority through an ordinary shareholders’ meeting, where it holds 51%
of Indelpro. Management has concluded that there are circumstances and factors described in the bylaws of Polioles and applicable
standards that allow the Company to conduct the daily operations of Polioles and Indelpro, therefore, demonstrate control. The Company
will continue to evaluate these circumstances at the date of each statement of financial position to determine if this critical judgment is still
valid. If the Company determines that it has no control over Polioles and Indelpro, they will need to be deconsolidated and be recorded
using the equity method.
67
CONSOLIDATED FINANCIAL STATEMENTS Note 6 - Cash and cash equivalents
The value of restricted cash and cash equivalents are comprised as follows:
Cash and bank accounts
Short-term bank deposits
Cash and cash equivalents
(excluding bank overdrafts)
At December 31,
Ps
2013
1,790,898
2,946,190
Ps
2012
1,851,076
4,803,485
Ps
4,737,088
Ps
6,654,561
Note 7 - Restricted cash and cash equivalents
The Company has restricted cash of approximately Ps 2,840 and Ps 2,992 at December 31, 2013 and 2012. The balances are required to be held
in escrow as deposits related to workers compensation reserves. The restricted cash balance is classified as current assets in the statement of
financial position based on the maturity date of the restriction.
Note 8 - Trade and other receivables, net
Trade and other accounts receivable are comprised as follows:
At December 31,
2013
2012
Trade receivables
Provision for impairment in trade receivables
Ps 10,008,669
(332,601 )
Ps 10,707,247
(241,897 )
Trade receivables, net
9,676,068
10,465,350
Accounts receivable from related parties (Note 9)
Recoverable taxes
Interest receivable
Other debtors
1,429,908
1,402,607
940
325,412
1,292,387
1,419,531
27
191,700
Current portion
Ps 12,834,935
Ps 13,368,995
Customers and other accounts receivable include past-due balances of Ps 1,743,399 and Ps 1,981,667 at December 31, 2013 and 2012,
respectively.
The analysis by age of the balances due from customers and other receivables not covered by impairment provisions is as follows:
At December 31, 2013
Past due
1 to 30 days
30 to 90 days
90 to 180 days
More than 180 days
Trade and other accounts receivable
Ps
796,320
Ps
325,825
Ps
239,260
Ps
381,994
Trade and other accounts receivable
Ps
1,218,072
Ps
182,733
Ps
180,568
Ps
400,294
At December 31, 2012
Past due
1 to 30 days
30 to 90 days
90 to 180 days
More than 180 days
68
ALPEK 2013 ANNUAL REPORT
At December 31, 2013 and 2012, trade and other accounts receivable of Ps 332,601 and Ps 241,897, respectively were totally impaired. Trade
and other accounts receivable impaired correspond mainly to companies going through difficult economic situations. Part of the impaired
accounts is expected to be recovered.
Movements in the provision for impairment of trade and other receivables are analyzed as follows:
Initial balance (January 1)
Provision for impairment in trade receivables
Receivables written off during the year
Provision for unused written off impairment
Final balance (December 31)
2013
2012
( Ps
( Ps
241,897 )
(160,565 )
4,292
65,569
332,601 )
( Ps
( Ps
248,135 )
(99,647 )
49,110
56,775
241,897 )
The maximum risk in accounts receivable is the value in books at December 31, 2013.
Note 9 - Related party transactions
Related party transactions were carried out at market values.
Holding
Affiliates
At December 31, 2013
Loans granted to related parties
Accounts
receivable
Amount
Ps
189,782
-
231,192
-
-
-
-
Ps
312,570
93,084 (1)
321,573
56,918
13,077
13,000
13,938 (1)
Currency
USD
USD
USD
USD
USD
MXN
USD/MXN
Maturity date
DD/MM/YY
26/12/2014
16/06/2014
30/05/2014
16/06/2014
15/01/2014
Interest rate
7.33%
3.59%
2.53%
3.59%
6.87%
Partners with
significant influence
over certain
subsidiaries
184,774
-
Total
Ps
605,748
Ps
824,160
At December 31, 2012
Loans granted to related parties
Maturity date
DD/MM/YY
27/12/2013
-
26/06/2013
26/06/2013
16/12/2013
16/12/2013
21/01/2013
Interest rate
7.33%
-
3.06%
3.06%
3.59%
3.59%
7.30%
Currency
USD
USD
USD
USD
USD
USD
MXN
USD/MXN
Accounts
receivable
Amount
Ps
Holding
Affiliates
Partners with
significant influence
over certain
subsidiaries
196,094
-
227,164
-
-
-
-
-
Ps
310,983
69,499 (1)
4,589
52,040
319,941
13,010
13,000 (1)
579 (1)
85,488
-
Total
Ps
508,746
Ps
783,641
(1) Are accrued interests related to the included loans.
(2) Is an account payable related to the sale of assets.
Accounts
payable
Amount
Currency
MXN
Ps
-
-
25,622
-
-
-
-
Ps
-
-
103,586(2)
-
-
-
-
266,756
-
Ps
292,378
Ps
103,586
Accounts
payable
Amount
Currency
MXN
Ps
-
-
40,700
-
-
-
-
-
Ps
-
-
103,586(2)
-
-
-
-
-
320,241
-
Ps
360,941
Ps
103,586
69
CONSOLIDATED FINANCIAL STATEMENTS
Revenue from sales and other income with related parties
Holding
Affiliate
Shareholders with significant influence
over subsidiaries
Finished goods
-
Ps
333,122
Ps
Raw materials
-
12,805
1,960,637
-
Year ended December 31, 2013
Interest
Administrative
services
Ps
22,775
14,537
-
Ps
-
43,444
-
Ps
Lease
Other
-
-
7,035
Ps
-
1,301
275
Total
Ps 2,293,759
Ps
12,805
Ps
37,312
Ps
43,444
Ps
7,035
Ps
1,576
Holding
Affiliate
Shareholders with significant influence
over subsidiaries
Year ended December 31, 2012
Administrative
services
Interest
Ps
23,457
25,687
-
Ps
-
37,714
-
Ps
Lease
Other
-
-
5,312
Ps
-
1,807
-
Finished goods
-
Ps
321,844
1,468,410
Total
Ps 1,790,254
Ps
49,144
Ps
37,714
Ps
5,312
Ps
1,807
Cost of sales and other expenses with related parties
Holding
Affiliate
Shareholders with
significant
influence
over subsidiaries
Finished goods
Ps
-
-
Raw materials
-
Ps
15,771
Interest
Ps
1,331,934
279,083
Total
Ps 1,331,934
Ps 294,854
Ps
-
-
-
-
Year ended December 31, 2013
Administrative
services
Ps
-
133,815
Technical
assistance
-
-
Ps
Electric energy
Ps
-
227,099
Lease
Ps
-
-
Commissions
Ps
-
-
Ps
Other
-
1,308
151,713
82,753
-
2,413
32,756
22
Ps 285,528
Ps
82,753
Ps 227,099
Ps
2,413
Ps
32,756
Ps
1,330
Finished goods
Ps
-
-
Raw materials
-
Ps
14,135
Year ended December 31, 2012
Administrative
services
Ps 122,121
125,042
Ps
Technical
assistance
-
-
Interest
Ps 56,362
-
Electric energy
Ps
-
93,323
Lease
Ps
-
Commissions
Ps
-
-
Ps
1,212,510
278,133
-
146,429
59,165
-
2,406
26,985
Other
-
808
-
Holding
Affiliate
Shareholders with
significant
influence
over subsidiaries
Total
Ps 1,212,510
Ps 292,268
Ps 56,362
Ps 393,592
Ps
59,165
Ps
93,323
Ps
2,406
Ps
26,985
Ps
808
For the year ended December 31, 2013, wages and benefits received by top officials of the Company amounted to Ps 225,791 (Ps 179,858
in 2012), comprising of base salary and law benefits and supplemented by a variable compensation program that is basically based on the
performance of the Company and by the market value of its stocks.
The Company and its subsidiaries declared that neither they had significant transactions with related parties nor conflicts of interest to disclose.
70
ALPEK 2013 ANNUAL REPORT
Note 10 - Inventories
Finished goods
Raw material and other consumables
Materials and tools
Work in process
At December 31,
2013
2012
Ps
6,490,653
4,075,258
728,708
483,095
Ps 11,777,714
Ps
5,969,149
4,452,073
719,237
441,586
Ps 11,582,045
For the years ended at December 31, 2013 and 2012, the cost of raw materials used and the changes in inventories of goods in transit and
finished goods recognized in the cost of sales amounted to Ps 82,436,458 and Ps 86,766,710, respectively.
For the years ended December 31, 2013 and 2012 it was recognized in the statement of income a provision amounting to Ps 37,929 and
Ps 9,260, respectively, related to a damaged, slow-moving and obsolete inventory.
At December 31, 2013 and 2012 there were no inventories in guarantee.
71
CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Property, plant and equipment, net
Land
Buildings and
constructions
Machinery and
equipment
Transportation
equipment
Furniture, lab
and information
technology
equipment
Construction in
progress
Others fixed
assets
Total
Ps 2,827,422
Ps 9,293,248
Ps 42,884,462
Ps
197,297
Ps 1,010,718
Ps
917,729
Ps
484,069
Ps 57,614,945
-
(5,562,212 )
(22,207,064 )
(126,912 )
(755,927 )
-
(83,748 )
(28,735,863 )
2,827,422
3,731,036
20,677,398
70,385
254,791
917,729
400,321
28,879,082
(81,911 )
2,567
(7,406 )
-
5,729
(235,039 )
3,495
(213 )
(130,054 )
61,208
(1,377,180 )
57,781
(15,384 )
(1,728,360 )
879,502
2,746,401
3,430,433
18,493,757
2,746,401
8,816,950
41,050,792
-
(5,386,517 )
(22,557,035 )
(5,128 )
1,932
(175 )
(22,831 )
32,568
76,751
214,804
(138,053 )
(17,798 )
2,906
(135 )
(78,722 )
68,163
(59,494 )
1,502,862
(20 )
-
(1,030,571 )
(24,087 )
42,107
(25,236 )
-
(4,748 )
(1,800,637 )
1,613,650
(48,569 )
(1,959,967 )
11,851
229,205
1,330,506
388,357
26,695,410
903,908
1,330,506
388,357
55,451,718
(674,703 )
-
-
(28,756,308 )
Ps 2,746,401
Ps 3,430,433
Ps 18,493,757
Ps
76,751
Ps
229,205
Ps 1,330,506
Ps
388,357
Ps 26,695,410
2,290
594
(1,862 )
-
-
2,959
7,432
19,677
(1,478 )
(328,262 )
(191,571 )
(31,661 )
(24,601 )
1,003,281
(5,443 )
(1,956,524 )
(1,585,695 )
330,450
2,750,382
2,904,570
16,255,225
2,750,382
8,400,983
39,969,052
-
(5,496,413 )
(23,713,827 )
(1,194 )
2,774
(370 )
(2,000 )
(15,280 )
1,309
61,990
210,160
(148,170 )
(16 )
12,868
(160 )
-
(63,483 )
52,552
13,638
1,435,187
(91 )
(25,863 )
-
(662,916 )
4,491
34,532
(12,218 )
(81,376 )
-
78,509
2,040
2,508,913
(21,622 )
(2,394,025 )
(1,856,029 )
(228,798 )
230,966
2,090,461
412,295
24,705,889
970,629
2,090,461
412,295
54,803,962
(739,663 )
-
-
(30,098,073 )
Ps 2,750,382
Ps 2,904,570
Ps 16,255,225
Ps
61,990
Ps
230,966
Ps 2,090,461
Ps
412,295
Ps 24,705,889
At January 1, 2012
Deemed cost
Accumulated
depreciation
Carrying value at
January 1, 2012
For the year ended
December 31, 2012
Translation
adjustments
Additions
Disposals
Depreciation charge
recognized in the
year
Transfers
Balance at
December 31, 2012
At December 31,
2012
Deemed cost
Accumulated
depreciation
Carrying value at
December 31, 2012
For the year ended
December 31, 2013
Translation
adjustments
Additions
Disposals
Impairment
Depreciation charge
recognized in the
year
Transfers
Carrying value at
December 31, 2013
At December 31,
2013
Deemed cost
Accumulated
depreciation
Carrying value at
December 31, 2013
Depreciation expense of Ps 1,840,795 and Ps 1,942,073 has been charged in cost of sales, Ps 2,070 and Ps 2,306, in selling expenses and
Ps 13,164 and Ps 15,588, in administrative expenses in 2013 and 2012, respectively.
72
ALPEK 2013 ANNUAL REPORT
During 2013, impairment charge of Ps 2,223,749 related to the closing of the Cape Fear plant (See Note 2), was recorded in the income
statement within “Non-recurring items”. Additionally, within the other income (expense) items, net, a charge for impairment amounting to
Ps 170,276 (See note 26) was recorded. During 2012, Ps 4,798 for impairment were recorded in income presented in the note of other income
(expense), net (See note 26).
The Company has capitalized costs of loans in qualified assets for Ps 82,298 and Ps 2,853 for the years ended December 31, 2013 and 2012,
respectively. Costs from loans were capitalized at the weighted average rate of loans that amounts to approximately 7.64%.
Note 12 – Goodwill and intangible assets, net
Finite life
Indefinite life
Ps
Trademarks
430
(30 )
-
Ps
Non-compete
agreements
65,700
(4,552 )
-
Customer
relationships
Ps 508,126
(35,217 )
528
Ps
Software and
licenses
32,297
(2,041 )
33,415
Intellectual
property rights
and others
Ps 1,674,648
(123,682 )
7,644
Goodwill
Ps 237,175
(16,434 )
-
Ps
Others
Total
4,316
(302 )
167
Ps 2,840,801
(204,356 )
47,038
400
-
-
400
(415 )
(17 )
8
24
(400 )
-
-
(400 )
400
(400 )
-
400
(400 )
61,148
473,437
63,671
1,558,610
220,741
4,181
2,683,483
312
-
2,416
-
(1,255 )
-
21,337
527,352
1,127
-
70
1,653
42,532
792,671
61,460
475,853
62,416
2,107,299
221,868
5,904
3,518,686
(15,056 )
(15,519 )
-
1,273
(29,302 )
(15,068 )
(446 )
(29,285 )
(39,176 )
(256 )
2,584
(66,133 )
(36,997 )
(1,066 )
(27,052 )
(6,528 )
(41 )
1,121
(32,500 )
(4,631 )
(76,755 )
(79,136 )
-
6,524
(149,367 )
(76,816 )
1,190
(2,275 )
(44,816 )
(104,196 )
(35,941 )
(228,458 )
61,148
(29,302 )
473,437
(66,133 )
63,671
(32,500 )
1,558,610
(149,367 )
31,846
407,304
31,171
1,409,243
61,460
(44,816 )
475,853
(104,196 )
62,416
(35,941 )
2,107,299
(228,458 )
-
-
-
-
-
-
-
-
220,741
-
220,741
221,868
-
-
-
-
-
-
-
-
-
(291,381 )
(169,407 )
4,250
16,550
(439,988 )
(168,555 )
(3,673 )
(612,216 )
4,181
-
2,683,483
(439,988 )
4,181
2,243,495
5,904
-
3,518,686
(612,216 )
Development
costs
Cost
At January 1, 2012 Ps 318,109
(22,098 )
Translation effect
Additions
5,284
At December 31,
2012
Translation
adjustments
Additions
At December 31,
2013
18,525
263,666
583,486
301,295
Amortization
At January 1, 2012
Amortization
Transfers
Translation effect
At December 31,
2012
Amortization
Translation
adjustments
At December 31,
2013
Net carrying
value
Cost
Amortization
At December 31,
2012
Cost
Amortization
At December 31,
2013
(142,818 )
(29,031 )
4,539
5,024
(162,286 )
(35,043 )
(1,076 )
(198,405 )
301,295
(162,286 )
139,009
583,486
(198,405 )
Ps 385,081
Ps
-
Ps
16,644
Ps 371,657
Ps
26,475
Ps 1,878,841
Ps 221,868
Ps
5,904
Ps 2,906,470
Of the total amortization expense: Ps 168,384 and Ps 162,198 were charged to cost of sales, Ps 40 and Ps 7,071 to selling expenses and Ps 131
and Ps 138 to administrative expenses in 2013 and 2012, respectively.
73
CONSOLIDATED FINANCIAL STATEMENTS
Research and development expenses incurred and recorded in the statement of income in 2013 and 2012 were Ps 37,872 and Ps 40,744,
respectively.
Management assesses its operations through two business segments: the Polyester business chain and the Plastics and Chemicals business.
Likewise, Management monitors the goodwill at the operating segment level and has allocated the entire amount to the Polyester segment.
See Note 30.
Impairment testing of goodwill
Goodwill is allocated to operating segments that are expected to benefit from the synergies of the business combination, independently of
whether other assets or liabilities of the acquire entity are assigned to those units or groups of units, goodwill totally arises from the Polyester
segment amounting to Ps 221,868 and Ps 220,741 at December 31, 2013 and 2012, respectively.
The amount of recovery from the operating segments has been determined based on calculations of values in use. These calculations use
cash flow projections based on pre-tax financial budgets approved by Management covering a period of 5 years.
Key assumptions used in calculating the value in use in 2013 and 2012 were as follows:
Estimated gross margin
Growth rate
Discount rate
2013
4.0%
3.8%
10.2%
2012
3.0%
2.2%
10.0%
In relation to the calculation of the value in use of the operating segments, the Company’s Management considers that a possible change in
the key assumptions used, would not cause the carrying value of the operating segments to materially exceed their value in use.
Note 13 – Other non-current assets
Other receivables, net
Financial assets available for sale (1)
Investment in associates (2)
Joint agreements (3)
Other non-current financial assets
Total other non-current assets
1) Financial assets available for sale:
At December 31,
2013
190,513
92,581
(27,862 )
69,163
302,690
627,085
Ps
Ps
2012
190,523
92,208
1,528
-
8,515
292,774
Ps
Ps
At December 31,
2013
2012
Unlisted shares
- Investment in shares with third parties
Ps
92,581
Ps
92,208
The movement of financial assets available for sale is as follows:
Balance at January 1
Translation effect
Additions
Impairment
Balance at December 31
2013
2012
Ps
Ps
92,208
266
107
-
92,581
Ps
Ps
40,249
(2,015 )
54,055
(81 )
92,208
74
ALPEK 2013 ANNUAL REPORT
Financial assets available for sale are denominated in the following currencies:
USD
MXN
Other currencies
Total
At December 31,
2013
52,306
40,167
108
92,581
Ps
Ps
2012
52,040
40,168
-
92,208
Ps
Ps
None of the financial assets available for sale is expired or impaired.
2) Investments in associates
The accumulated summarized financial information for associated companies of the group accounted for by the equity method, not
considered material, is as follows:
Net loss
Other comprehensive income
Comprehensive loss
Investment in associates at December 31
2013
119,986 )
-
119,986 )
27,862 )
( Ps
Ps
( Ps
( Ps
2012
155,284 )
-
155,284 )
1,528
( Ps
Ps
( Ps
Ps
There are no contingent liabilities corresponding to the Company’s equity in investment of associates.
3) Joint arrangements
The accumulated summarized financial information for joint arrangements of the group accounted for by the equity method, not considered
material, is as follows:
Net profit
Other comprehensive income
Comprehensive income
Joint arrangements at December 31
2013
2012
Ps
Ps
Ps
Ps
-
-
-
69,163
Ps
Ps
Ps
Ps
-
-
-
-
Note 14 – Subsidiaries with significant non-controlling interest
The significant non-controlling interest for the year ended December 31, 2013 and 2012 is integrated as follows:
Non-controlling
ownership
percentage
Non-controlling interest income
for the period
2013
2012
Ps
334,119
Ps
317,066
Ps
Non-controlling interest at December 31,
2013
2,079,547
2012
2,231,847
Ps
Indelpro, S. A. de C. V. and subsidiary
Polioles, S. A. de C. V. and subsidiary
49%
50%
290,620
291,458
539,058
698,168
75
CONSOLIDATED FINANCIAL STATEMENTS
The summarized financial information at December 31, 2013 and 2012 and for the year then ended, corresponding to each subsidiary with a
significant non-controlling interest is shown below:
Indelpro, S. A. de C. V.
Polioles, S. A. de C. V.
Ps
2013
3,042,245
5,046,062
1,701,750
2,142,584
4,243,973
9,092,372
681,876
732,494
358,922
512,767
942,966
(284,479 )
(796,086 )
(138,394 )
Ps
2012
2,949,172
4,972,218
1,283,654
2,082,948
4,554,788
8,270,976
647,073
328,210
160,823
262,577
707,217
(26,803 )
(705,921 )
(44,105 )
Ps
2013
2,672,088
1,037,738
1,845,783
785,928
1,078,115
9,219,839
581,240
613,699
306,849
461,536
784,186
(46,409 )
(814,885 )
(67,879 )
Ps
2012
2,709,581
1,059,016
1,605,850
766,411
1,396,336
8,903,906
582,915
470,408
235,204
293,303
906,687
(39,172 )
(692,388 )
154,142
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Stockholders’ equity
Revenue
Net profit
Comprehensive income of the year
Comprehensive income attributable to
non-controlling interest
Dividends paid to non-controlling interest
Cash flows from operating activities
Net cash used in investments activities
Net cash used in financing activities
Net increase in cash and cash equivalents
Note 15 - Financial instruments
a) Financial instruments by category
Financial assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivable, net
Derivative financial instruments with
trading accounting treatment
Derivative financial instruments with
hedge accounting treatment
Assets available for sale
Financial liabilities:
Debt
Suppliers and other accounts payable
Derivative financial instruments with
hedge accounting treatment
Derivative financial instruments with
trading accounting treatment
Trade receivables
and liabilities at
amortized cost
Available for sale
At December 31, 2013
Financial assets
and liabilities at
fair value through
profit and loss
Derivative
contracted as
hedges
Ps
4,737,088
2,840
12,834,934
Ps
-
-
-
-
-
-
-
Ps
17,574,862
Ps
92,581
92,581
Ps
753,083
9,243,781
-
-
9,996,864
Ps
Ps
-
-
-
-
-
Ps
Ps
Ps
Ps
-
-
-
58,477
-
-
58,477
-
-
-
1,832
1,832
Ps
Ps
Ps
Ps
-
-
-
-
28,015
-
28,015
-
-
31,319
-
31,319
Total
Ps
4,737,088
2,840
12,834,934
58,477
28,015
92,581
17,753,935
753,083
9,243,781
31,319
Ps
Ps
1,832
10,030,015
Ps
76
ALPEK 2013 ANNUAL REPORT
Trade receivables
and liabilities at
amortized cost
Available for sale
At December 31, 2012
Financial assets
and liabilities at
fair value through
profit and loss
Derivative
contracted as
hedges
Financial assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivable, net
Derivative financial instruments with
trading accounting treatment
Derivative financial instruments with
hedge accounting treatment
Assets available for sale
Financial liabilities:
Debt
Suppliers and other accounts payable
Derivative financial instruments with
hedge accounting treatment
Derivative financial instruments with
trading accounting treatment
b) Credit quality of financial assets
Ps
6,654,561
2,992
13,368,995
Ps
-
-
-
20,026,548
14,440,408
9,696,234
-
Ps
Ps
-
24,136,642
Ps
Ps
92,208
92,208
Ps
-
-
-
-
-
-
-
-
-
-
Ps
Ps
Ps
-
-
-
35,153
-
-
35,153
-
-
-
276,923
276,923
Ps
Ps
Ps
Ps
Ps
-
-
-
-
72,144
-
72,144
-
-
218,805
-
218,805
Total
Ps
6,654,561
2,992
13,368,995
35,153
72,144
92,208
20,226,053
14,440,408
9,696,234
218,805
Ps
Ps
276,923
24,632,370
Ps
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available)
or to historical information on non-compliance rates of the counterparty:
Trade and other receivables, net
Counterparties with external credit rating
"A+"
"A-"
"A"
"BBB+"
"BBB"
"BB"
"BB+"
"BB-"
Other categories
Counterparties without external credit rating
Type of clients X
Type of clients Y
Type of clients Z
Total unimpaired trade receivables
At December 31,
2013
2012
Ps
134,445
175,679
56,322
73,723
300,216
77,653
50,388
1,003,707
546,686
2,418,819
Ps
3,115
-
43,796
-
6,603
-
-
-
817,899
871,413
9,124,308
808,710
10,794
9,943,812
Ps 12,362,631
10,819,011
1,147,847
13,383
11,980,241
Ps 12,851,654
77
CONSOLIDATED FINANCIAL STATEMENTS
Cash and cash equivalents with or
without restriction, not including petty cash
"A+"
"A-"
"A"
"BBB+"
"BBB"
"BB+"
Other categories
Not rated
Derivative financial instruments
"AA-"
"A"
“A+”
“A-”
AA-
“BBB”
“BBB+”
Not rated
At December 31,
2013
2012
Ps
Ps
Ps
Ps
118,337
474,787
409,644
1,452,549
280,271
100,020
1,804,502
99,217
4,739,327
12,685
36,761
722
19,704
-
-
7,210
9,410
86,492
Ps
Ps
Ps
Ps
1,016,824
868,631
842,263
-
3,583,815
-
213,517
131,843
6,656,893
-
35,847
6,567
12,625
25,426
1,370
-
25,462
107,297
Group X – New trade and other receivables, net /related parties (less than 6 months).
Group Y – Current trade and other receivables, net / related parties (more than 6 months) without default in the past.
Group Z – Current trade and other receivables, net /related parties (more than 6 months) with some defaults in the past. All past-due amounts
were fully recovered.
c) Fair value of financial assets and liabilities
The amounts of cash and cash equivalents, restricted cash and cash equivalents, customers and other receivables, other current assets,
suppliers and other payables, outstanding debt, provisions and other current liabilities approximate their fair value due to their short maturity.
The carrying value of these accounts represents the expected cash flow.
The value in books and the estimated fair value of the rest of the financial assets and liabilities are presented as follows:
Financial assets
Non-current receivable
Financial liabilities
Non-current debt
At December 31, 2013
At December 31, 2012
Carrying amount
Fair value
Carrying amount
Fair value
Ps
190,513
Ps
178,724
Ps
190,523
Ps
184,521
13,862,792
13,502,707
14,019,537
14,809,233
The estimated fair values were determined based on discounted cash flows. These fair values do not consider the current portion of financial
assets and liabilities, since the current portion approximates their fair value.
78
ALPEK 2013 ANNUAL REPORT
Note 16 - Derivative financial instruments
The effectiveness of derivative financial instruments designated as hedges is measured periodically. At December 31, 2013 and 2012
the Company’s Management has assessed the effectiveness of its hedges for accounting purposes and has concluded that they are
highly effective.
Notional amounts related to derivative financial instruments reflect the contracted reference volume; however they do not reflect the
amounts at risk with respect to future cash flows. The amounts at risk are generally limited to the unrealized profit or loss from the market
valuation of such instruments, which may vary according to changes in the market value of the underlying, its volatility and the credit quality
of the counterparties.
The principal obligations which the Company is subject to depends on the type of contract and the conditions established in each one of the
derivative financial instruments in force at December 31, 2013 and 2012.
Trading derivatives are classified as current assets or liabilities. The fair value of hedges is classified as a non-current asset or liability if the
remaining maturity of the hedged item is more than 12 months and as a current asset or liability if the remaining maturity of the hedged item
is less than 12 months.
a) Exchange rate derivatives
Derivative financial instruments exchange rate positions with trading accounting treatment is summarized as follows (figures in millions of
pesos):
Underlying asset
At December 31, 2013
Type of derivative,
value or contract
US$/MXN
Notional amount
( Ps
837 )
Unit
Pesos / Dollar
Reference
13.08
Fair value
-
Ps
Maturity
2015
2014
Ps
-
Ps
-
2016+
Ps
-
Collateral/
guarantee
-
Ps
Underlying asset
At December 31, 2012
Type of derivative,
value or contract
US$/MXN
Notional amount
( Ps
325 )
Unit
Pesos / Dollar
Reference
13.01
Fair value
6
Ps
Maturity
2014
2013
Ps
6
Ps
-
2015+
Ps
-
Collateral/
guarantee
-
Ps
b) Interest rate swaps
Derivative financial instruments interest rate positions of swaps are summarized as follows (figures in millions of pesos):
Type of derivative,
value or contract
With hedge accounting treatment:
Notional amount
Underlying asset
At December 31, 2013
Unit
Reference
Fair value
2014
Maturity
2015
2016+
Collateral/
guarantee
In Libor rate (1)
Ps
785
% per year
0.49
( Ps
20 )
( Ps
12 )
( Ps
7 )
( Ps
1 )
Ps
-
Type of derivative,
value or contract
With hedge accounting treatment:
Notional amount
Underlying asset
At December 31, 2012
Unit
Reference
Fair value
2013
Maturity
2014
2015+
In Libor rate (1)
Ps 2,862
% per year
With trade accounting treatment:
In Libor rate
1,008
% per year
0.39
0.39
(1) Cash flow hedges
( Ps
200 )
( Ps
42 )
( Ps
56 )
( Ps
102 )
(36 )
236 )
( Ps
(36 )
78 )
( Ps
-
56 )
( Ps
-
102 )
( Ps
Collateral/
guarantee
Ps
Ps
Ps
-
-
-
79
CONSOLIDATED FINANCIAL STATEMENTS
c) Energy
Derivative financial instruments positions of natural gas, gasoline, ethylene, ethane, paraxylene and Brent crude, is summarized as follows
(figures in millions of pesos):
Notional amount
Type of derivative,
value or contract
With hedge accounting treatment:
Ethylene (1)
Natural gas (1)
Ps
155
345
Ethane (1)
Px (1)
With trade accounting treatment:
Gasoline
Brent Crude
23
226
923
60
Notional amount
Type of derivative,
value or contract
With hedge accounting treatment:
Ethylene (1)
Natural gas (1)
Ps
476
606
55
Ethane (1)
With trade accounting treatment:
Ethylene
Natural gas
Gasoline
4
28
1,138
Underlying asset
At December 31, 2013
Unit
Reference
Fair value
2014
Maturity
2015
2016+
Collateral/
guarantee
Cent. Dollar/lb
Dollar / MBTU
Cent. Dollar/
Gallon
Dollar/MT
Dollar / Gallon
Dollar / BBL
58.75
4.29
28.03
1,435
2.72
108.53
Ps
12
10
(3 )
(2 )
54
2
Ps
11
14
(3 )
(2 )
54
2
Ps
1
-
-
-
-
-
Ps
-
(4 )
-
-
-
-
Ps
Ps
73
Ps
76
Ps
1
( Ps
4 )
Ps
-
-
-
-
-
-
-
Underlying asset
At December 31, 2012
Unit
Reference
Fair value
2013
Cent. Dollar/lb
Dollar / MBTU
Cent. Cents/
Gallon
Cent. Dollar/lb
Dollar / MBTU
Dollar / Gallon
55.1
3.60
23.9
55.1
3.60
2.70
Ps
( Ps
40
30
(16 )
-
(226 )
14
158 )
Ps
( Ps
42
30
(16 )
-
(226 )
20
150 )
Maturity
2014
( Ps
( Ps
2 )
-
-
-
-
(6 )
8 )
2015+
Ps
Ps
-
-
-
-
-
-
-
Collateral/
guarantee
Ps
Ps
-
-
-
-
-
-
-
(1) Cash flow hedges
The main obligations to which the Company is subject, depends on the contracting mechanisms and the conditions of each derivative
financial instrument at December 31, 2013 and 2012.
At December 31, 2013 and 2012, the net fair value of derivative financial instruments above amounts to Ps 53,341 and (Ps 388,431), respectively,
which is shown in the consolidated statements of financial position as follows:
Current assets
Current liabilities
Non-current liabilities
Net position
Fair value
At December 31,
Ps
2013
86,492
(7,315 )
(25,836 )
Ps
2012
107,297
(287,510 )
(208,218 )
Ps
53,341
( Ps
388,431 )
At December 31, 2013 and 2012 there is no collateral in derivative financial instruments.
80
ALPEK 2013 ANNUAL REPORT
Note 17 - Suppliers and other accounts payable
Suppliers
Balances with related parties (Note 9)
At December 31,
2013
8,847,817
395,964
9,243,781
Ps
Ps
2012
9,231,707
464,527
9,696,234
Ps
Ps
Note 18 - Provisions
At December 31, 2012
Additions from restructuring
Translation effect
Payments
At December 31, 2013
Short-term provisions
Long-term provisions
At December 31
Ps
Ps
Restructuring y
demolition
-
487,248
6,839
(77,940 )
416,147
Environmental
remediation
-
371,848
5,287
-
377,135
Indemnities from
dismissal and others
Ps
-
197,624
10,318
(116,910 )
91,032
Total
-
1,056,720
22,444
(194,850 )
884,314
Ps
Ps
Ps
Ps
Ps
Ps
2013
832,632
51,682
2012
Ps
Ps
884,314
Ps
-
-
-
The provisions in the above table are related to the closing of the Cape Fear plant. See Note 2 for more details.
Note 19 - Debt
Current:
Bank loans (1)
Current portion of non-current debt
Notes payable (1)
Current debt
Non-current:
Senior Notes (2)
Bank loans (2)
Debt issuance costs
Total
At December 31,
2013
2012
Ps
447,190
261,530
44,363
Ps
358,274
140,184
2,183
Ps
753,083
Ps
500,641
Ps 12,400,441
1,723,881
(106,450 )
Ps
9,996,489
4,163,232
(79,770 )
Ps 14,017,872
Ps 14,079,951
Less: current portion of non-current debt
(261,530 )
(140,184 )
Non-current debt
Ps 13,756,342
Ps 13,939,767
(1) The fair value of bank loans and notes payable approximates their current book value, as the impact of discounting is not significant.
81
CONSOLIDATED FINANCIAL STATEMENTS
(2) The carrying amounts, terms and conditions of non-current debt were as follows:
Description
Senior Notes 144A/Reg. S accruing annual interest of
9.50%, with maturity in August 2014. Guaranteed by
Temex, Akra, DAK Americas and DAK Resinas.
Senior Notes 144A/Reg. S accruing annual interest of
4.50%, maturing in November 2022. Guaranteed
by Petrotemex, Temex, Akra, DAK Americas, DAK
Resinas and DAK Mississippi.
Senior Notes 144A/Reg. S accruing annual interest of
5.375%, maturing in August 2023. Guaranteed
by Petrotemex, Temex, Akra, DAK Americas, DAK
Resinas and DAK Mississippi.
Currency
Balance at
December 31, 2013
Balance at
December 31, 2012
Maturity date
DD/MM/YY
Interest rate
USD
Ps
-
Ps
1,563,979
19-Aug-14
9.50%
USD
8,477,491
8,432,510
20-Nov-22
4.50%
USD
3,922,950
-
8-Aug-23
5.375%
Total Senior Notes
12,400,441
9,996,489
Bank loan bearing annual interest of Libor + 3.07%
maturing in August 2017. Guaranteed by Temex,
Akra, DAK Resinas and DAK Americas.
Committed credit line that accrue annual interest
of Libor + 2.0%, maturing in September 2015 and
guaranteed by Petrotemex, Temex, Akra and DAK
Resinas.
Bank loan bearing annual interest of Libor + 1.80%
maturing in April 2016.
Committed credit line that accrue annual interest of
Libor + 1.60%, maturing in January 2015.
Bank loan bearing annual interest of Libor + 1.60%
maturing in August 2016.
Bank loan bearing annual interest of Libor + 2.15%
maturing in September 2015. Guaranteed by Univex
and Nyltek.
Bank loan bearing annual interest of Libor + 2.50%
maturing in February 2017. Guaranteed by Univex
and Nyltek.
USD
USD
USD
USD
USD
USD
USD
-
-
784,590
285,466
653,825
-
-
2,081,616
23-Aug-17
3.79%
65,050
24-Sep-15
780,606
01-Apr-16
-
31-Jan-15
650,505
16-Aug-16
2.31%
2.16%
1.77%
1.98%
390,303
20-Sep-15
2.46%
195,152
28-Feb-17
2.81%
Total bank loans
Total
1,723,881
4,163,232
Ps 14,124,322
Ps 14,159,721
At December 31, 2013, the annual maturities of non-current debt are as follows:
Bank loans
Senior notes
Less: debt issuance costs
Covenants:
2015
2016
2017
Ps
Ps
873,909
-
-
873,909
Ps
Ps
588,442
-
-
588,442
Ps
Ps
2018
onwards
Ps
-
12,400,441
Ps
Total
1,462,351
12,400,441
-
Ps 12,400,441
(106,450 )
Ps 13,756,342
-
-
-
-
Most of the existing debt agreements contain restrictions for the Company, mainly with respect to the compliance with certain financial ratios
among, the most important of which are:
a)
Interest hedge ratio: defined as the result of dividing the income before financial result, taxes, depreciation, amortization and impairment
of non-current assets (Consolidated EBITDA) by the net interest charges for the period. This factor cannot be less than 3.0 times for the
last four consecutive fiscal quarters.
82
ALPEK 2013 ANNUAL REPORT
b) Leverage ratio: it is defined as the result of dividing the net consolidated debt by the consolidated EBITDA of the last twelve months. This
factor may not be greater than 3.5 times.
Additionally, there are other restrictions regarding incurring additional debt or taking loans that require mortgaging assets, dividend
payments and submission of financial information, which if not met or remedied within a specified period to the satisfaction of creditors may
cause the debt to immediately mature. During 2013 and 2012, the financial ratios were calculated according to the formulas set out in the
loan agreements. At December 31, 2013 and the date of issuance of these financial statements, the Company and its subsidiaries complied
satisfactorily with such covenants and restrictions.
Relevant debt transactions:
a) On August 13, 2012, Grupo Petrotemex repurchased US$154.2 million (“Tender Offer”) of the principal amount of the Senior Notes 144A/
Reg. S issued in 2009, leaving a balance at December 31, 2012 of US$120.8 million, due in 2014. Additionally, after the Tender Offer, the
Grupo Petrotemex achieved majority consent of the holders of the Senior Notes to amend certain terms of the contract that governs
them, and as a result the Senior Notes that did not adhere to the tender offer remain in force but without the effect of the financial
covenants.
b) On November 20, 2012, Alpek completed an issuance of Senior Notes for a nominal amount of US$650 million with single maturity on
November 20, 2022. Interests of Senior Notes will be payable semi-annually at a 4.50% annual rate as from Monday, May 20, 2013. The
Senior Notes were issued through a private issuance under Rule 144A of the “Securities Act” of 1933 (“Rule 144A of the Securities Act of
1933”) of the United States of America and they are unconditionally guaranteed, in an unsubordinated manner, for the joint obligation of
certain subsidiaries of the Company.
Additionally, the issuance of Senior Notes originated issuance costs and expenses to the amount of US$6 million. Issuance of costs and
expenses, including the placement discount of Senior Notes are presented net of the debt and amortized together with the loan based
on the effective interest rate method.
c) On August 8, 2013, Alpek completed an issuance of Senior Notes for a nominal amount of US$300 million with single maturity on August
8, 2023. Interests of Senior Notes will be payable semi-annually at a 5.375% annual rate beginning on February 8, 2014. The Senior Notes
were issued through a private issuance under Rule 144A of the “Securities Act” of 1933 (“Rule 144A of the Securities Act of 1933”) of the
United States of America and they are unconditionally guaranteed, in an unsubordinated manner, for the joint obligation of certain
subsidiaries of the Company.
Additionally, the issuance of Senior Notes originated issuance costs and expenses in the amount of US$2.40 million. Issuance costs and
expenses, including the placement discount of Senior Notes are presented net of the debt and amortized together with the loan based
on the effective interest rate method.
d) On September 26, 2013, Grupo Petrotemex paid in advance the principal amount of the “Senior Notes 144A/Reg.S” issued in 2009, the
outstanding amount of principal at that date was US$120 million.
The net proceeds of the issuance of Senior Notes were used mainly to make advance debt payments of certain subsidiaries of the Company.
83
CONSOLIDATED FINANCIAL STATEMENTS Note 20 - Employee benefits
The valuation of retirement plan employee benefits (covering approximately 64% of workers in 2013 and 65% in 2012) and is based primarily
on their years of service, current age and estimated salary at retirement date.
The principal subsidiaries of the Company have established irrevocable trust funds for payment of pensions and seniority premiums and
health-care expenses. The contributions in 2013 amounted to Ps 43,844 (Ps 114,579 in 2012).
Following is a summary of the main financial information of such employee benefits:
Liabilities for employees benefits:
Pension benefits
Post-employment medical benefits
Employees benefits in the statement of financial position
Charge to the income statement for:
Pension benefits
Post-employment medical benefits
Remeasurement of obligations for employees benefits
recognized in the statement of comprehensive income
for the year
At December 31,
2013
2012
Ps
Ps
381,288
175,644
556,932
Ps
Ps
927,678
202,450
1,130,128
2013
2012
( Ps
( Ps
34,157 )
(11,112 )
45,269 )
Ps
Ps
15,717
(10,619 )
5,098
( Ps
598,160 )
( Ps
88,387 )
Remeasurement of accumulated obligations for employees
benefits
Ps
116,190
( Ps
481,970 )
Pension benefits
The Company operates defined benefit pension plans based on employees´ pensionable remuneration and length of service. Most plans are
externally funded. Plan assets are held in trusts, foundations or similar entities, governed by local regulations and practice in each country, as
is the nature of the relationship between the Company and the respective trustees (or equivalent) and their composition.
The amounts recorded in the statement of financial position, are determined as shown below:
Present value of defined benefit obligations
Fair value of plan assets
Defined benefit liability, net
Past service cost not recognized
At December 31,
Ps
2013
2,700,267
(2,318,979 )
381,288
-
Ps
2012
3,150,578
(2,195,740 )
954,838
(27,160 )
Employees benefits in the statement of financial position
Ps
381,288
Ps
927,678
84
ALPEK 2013 ANNUAL REPORT
The movement in the defined benefit obligation during the year is as follows:
At January 1
Service cost
Interest cost
Remeasurements:
Gains from changes in financial assumptions
Gains from change in demographic assumptions and
experience adjustments
Translation effect
Benefits paid (1)
Plan reductions (1)
Settlements
At December 31
Ps
2013
3,150,578
32,154
119,474
(288,066 )
(10,768 )
9,129
(280,503 )
(20,189 )
(11,542 )
Ps
2012
3,131,000
15,565
134,263
239,477
-
(192,768 )
(176,960 )
-
-
Ps
2,700,267
Ps
3,150,577
The movement in the fair value of plan assets for the year is as follows:
At January 1
Interest income
Remeasurements return on plan assets,
excluding interest income
Translation effect
Contributions
Benefits paid (1)
( Ps
2013
2,195,740 )
(85,740 )
(268,388 )
(7,590 )
(43,844 )
282,323
( Ps
2012
2,098,529 )
(167,479 )
(107,842 )
(122,239 )
(114,579 )
170,450
At December 31
( Ps
2,318,979 )
( Ps
2,195,740 )
(1) With respect to the closing of the Cape Fear plant, the Company incurred in losses from termination and a settlement agreement with the trustees,
effective as at October 10, 2013 for a total of Ps 106,533, settling all retirement benefit plan obligations in relation with the site’s employees. This resulted in
a modification to plan assets.
The amounts recorded in the statement of income for the years ended December 31 are the following:
Service cost
Net interest cost
Past service cost
Effect of reductions of plan and/or settlements
( Ps
2013
32,154 )
(33,734 )
-
31,731
( Ps
2012
15,565 )
33,216
(1,934 )
-
Total included in personal costs
( Ps
34,157 )
Ps
15,717
The principal actuarial assumptions were as follows:
Discount rate
Inflation rate
Salary increase rate
Expected return on plan assets
At December 31,
2013
MX 6.75%
US 4.65%
4.25%
5.25%
-
-
2012
MX 5.50%
US 3.80%
3.57%
5.25%
MX 9.75%
US 8.25%
The average life of defined benefit obligations is of 17.3 and 17.7 years at December 31, 2013 and 2012, respectively.
85
CONSOLIDATED FINANCIAL STATEMENTS
The sensitivity analysis of the main assumptions for defined benefit obligations were as follows:
Discount rate
Discount rate
Change
in assumption
Mx 1%
US 1%
Effect in defined benefit obligations
Increase
in assumption
Decreases by Ps 28,615
Decreases by Ps 291,356
Decrease
in assumption
Increases by Ps 33,491
Increases by Ps 243,165
Prior sensibility analyses are based on a change in assumptions, while the all other assumptions remain constant. In practice, this is slightly
probable, and the changes in some assumptions may be correlated. In the calculation of the sensibility from the defined benefit obligation,
significant actuarial assumptions the same method (present value of calculated defined benefit obligation with the projected unit credit
method at reporting period) has been applied as in the calculation of liabilities for pensions recognized within the balance sheet.
Post-employment medical benefits
The Company operates post-employment medical benefits schemes mainly in DAK Americas. The method of accounting, assumptions and
the frequency of valuations are similar to those used for defined benefit pension schemes. Most of these plans are not being funded.
In addition to the assumptions mentioned above, the main actuarial assumption in a long-term increase in health costs by 8.0% in 2013 and
8.50% in 2012.
Amounts recognized in the balance sheet are determined as follows:
Present value of defined benefit obligations
Fair value of plan assets
Defined benefit liability, net
Past service cost not recognized
At December 31,
2013
2012
Ps
175,644
-
175,644
-
Ps
202,450
-
202,450
-
Employees benefits in the statement of financial position
Ps
175,644
Ps
202,450
The movements of defined benefit obligations are as follows:
At January 1
Service cost
Interest cost
Employee contributions
Remeasurements:
Gain from changes in financial assumptions
Gains from changes in demographic assumptions
and experience adjustments
Translation effect
Plan reductions
Benefits paid
At December 31
Ps
2013
202,450
2,195
6,352
7,625
(2,716 )
(28,222 )
916
2,565
(15,521 )
Ps
2012
259,351
2,542
7,152
9,657
(43,248 )
-
(17,991 )
-
(15,013 )
Ps
175,644
Ps
202,450
86
ALPEK 2013 ANNUAL REPORT
The amounts recorded in the statement of income for the years ended December 31 are the following:
Service cost
Net interest cost
Effect of reductions on plan and/or settlements
2013
2012
( Ps
2,195 )
(6,352 )
(2,565 )
( Ps
2,542 )
(8,077 )
-
Total included in personal costs
( Ps
11,112 )
( Ps
10,619 )
At December 31, 2013, the effect of a 1% in the incremental of medical expenses, as follows:
Effect of the sum of the current service cost and interest cost
Effect in defined benefit obligation
Ps
641
863
( Ps
731 )
(1,225 )
Increase
Decrease
Employee benefits
Plan assets are comprised as follows:
Equity instruments
Cash and cash equivalents
Note 21 - Deferred taxes
At December 31,
2013
2012
Ps
1,115,852
1,203,127
Ps
1,036,816
1,158,924
The analysis of the deferred tax asset and deferred tax liability is as follows:
Deferred tax asset:
- To be recovered for more than 12 months
- To be recovered within 12 months
Deferred tax liability:
- To be recovered in more than 12 months
- To be recovered within 12 months
Deferred tax, net
At December 31,
2013
2012
Ps
163,515
53,082
216,597
Ps
700,264
418,243
1,118,507
(3,912,960 )
(431,308 )
(4,344,268 )
4,127,671 )
( Ps
The gross movement in the deferred income tax account is as follows:
At January 1
Translation effect
To retained earnings
Credit (charge) to income statement
(Charge) credit to other items of comprehensive income
At December 31
2013
4,213,832 )
20,445
7,550
363,587
(305,421 )
4,127,671 )
( Ps
( Ps
(3,787,918 )
(1,544,421 )
(5,332,339 )
4,213,832 )
2012
4,185,690 )
236,309
-
(268,017 )
3,566
4,213,832 )
( Ps
( Ps
( Ps
87
CONSOLIDATED FINANCIAL STATEMENTS
The change of the temporary differences that require recognition of deferred income tax for the year ended December 31, is as follows:
Assets:
Inventories
Trade and other receivables, net
Property, plant and equipment, net
Tax loss carryforwards
Derivative financial instruments
2013
2012
Ps
175,090
(3,695 )
3,946,048
(552,325 )
(30,562 )
Ps
18,659
89,453
3,787,918
(635,022 )
(122,266 )
Total
Ps
3,534,556
Ps
3,138,742
Liabilities:
Provisions
Other temporary differences, net
Total
Net deferred tax liability
687,890
(94,775 )
914,092
160,998
Ps
Ps
593,115
4,127,671
Ps
Ps
1,075,090
4,213,832
Tax loss carry forwards are recognized as a deferred tax asset to the extent that realization of the related tax benefit through future taxable
profits is probable. In September 2012, AKRA Polyester recorded a deferred tax asset amounting to Ps 351,166 in relation with losses amounting
to Ps 1,254,165 due to the merger with Petal.
At December 31, 2013, the subsidiaries have accumulated tax loss carryforwards for a total of Ps 1,836,359 expiring as shown below:
Loss incurred in
the year
2004
2005
2006
2007
2008
2009
2010
2011
2012
Ps
Tax loss
carryforwards
216,765
227,583
92,890
10,978
321,813
6,148
1,110
874,420
84,652
1,836,359
Ps
Year of
maturity
2014
2015
2016
2017
2018
2019
2020
2021
2022
Note 22 – Other current liabilities
Taxes
Accumulated expenses
Accrued interest payable
Short-term employee benefits
Employees’ profit sharing
Prepayments from costumers
Other
At December 31,
Ps
2013
516,251
300,719
139,093
324,416
7,108
15,231
12,526
Ps
2012
401,406
522,942
148,433
295,497
32,710
6,943
54,330
Total other current liabilities
Ps
1,315,344
Ps
1,462,261
88
ALPEK 2013 ANNUAL REPORT
Note 23 - Stockholders’ equity
At December 31, 2013 the capital stock is variable, with a fixed minimum of Ps 6,051,880 represented by 2,118,163,635 ordinary, nominative
shares, “Class I” Series “A”, with no par value, fully subscribed and paid in. The variable capital entitled to withdrawal will be represented, if
issued, by registered “Class II” Series “A” shares without par value.
The net income of the year is subject to decisions made by the General Stockholders’ Meeting, the Company’s by-laws and the General Law
of Mercantile Corporations. In accordance with the General Law of Mercantile Corporations, the legal reserve should be increased annually by
5% of the net annual income until it reaches 20% of the fully paid in capital stock.
The movements in other reserves for 2013 and 2012 are shown as follows:
At January 1, 2012
Gains on fair value
Deferred tax asset on fair value gains
Loss in translation of foreign entities
At December 31, 2012
Gains on fair value
Deferred tax asset on fair value gains
Loss in translation of foreign entities
Effect from foreign
currency translation
Effect of cash flow
hedge derivative
instruments
Ps
Ps
1,716,956
-
-
(1,406,694 )
310,262
-
-
27,918
( Ps
( Ps
196,985 )
87,638
(22,667 )
-
132,014 )
282,016
(85,085 )
-
Ps
Ps
Total
1,519,971
87,638
(22,667 )
(1,406,694 )
178,248
282,016
(85,085 )
27,918
At December 31, 2013
Ps
338,180
Ps
64,917
Ps
403,097
In the Ordinary General Meeting of Alpek, held on December 9, 2013, the stockholders agreed to declare dividends in cash for a total of
Ps 1,487,603.
In the Ordinary General Meeting of Alpek, held on February 28, 2013, the stockholders agreed to declare dividends in cash for a total of
Ps 1,471,852.
In the Ordinary General Meeting of Alpek, held on August 30, 2012, the stockholders agreed to declare dividends in cash for a total of
Ps 910,810.
In the Ordinary General Meeting of Alpek, held on February 20, 2012, the stockholders agreed to declare dividends in cash for a total of
Ps 641,470.
In the Ordinary General Meeting of Alpek, held on January 10, 2012, the stockholders agreed to declare dividends in cash for a total
of Ps 139,973.
Dividends paid are not subject to income tax when arising from the net tax profit account (CUFIN). Any dividend paid in excess of this account
will be subject to a tax equal to 42.86% if paid in 2013. The Company must pay the tax and it may be credited against the income tax of the
Company during the year or in the immediately following two years or, when applicable, against the flat tax of the year. Dividends paid from
retained earnings previously subject to taxes are not subject to tax withholding or payment.
In the event of a reduction in capital, the Income Tax Law provisions establish that any excess of stockholders’ equity over capital contributions
should be accorded the same tax treatment as dividends.
89
CONSOLIDATED FINANCIAL STATEMENTS
Note 24 - Share-based payments
Alpek has a compensation scheme referenced to the value of shares of its holding company for executives of the Company and its
subsidiaries. According to the terms of the plan, eligible executives will receive a cash payment subject to the achievement of certain
quantitative and qualitative metrics based on the following financial measures:
•
•
•
Improvement in the share price
Improvement in net profit
Permanence of the executives in the Company
The program consists in determining a number of shares on which the executives will have a right to. The bonus will be paid in cash over the
next five years; i.e., 20% every year at the average price of the share at the end of each year. The average price of the share in 2013 and 2012
was Ps 38.86 and Ps 27.8, respectively.
The short-term and long-term liability was analyzed as follows:
Short-term
Long-term
Total carrying value
At December 31,
2013
32,393
23,170
55,563
Ps
Ps
2012
24,047
63,410
87,457
Ps
Ps
Note 25 - Expenses classified by their nature
The cost of sales and selling and administrative expenses, classified by their nature, are comprised of:
Raw materials and others
Employee benefit expenses (Note 28)
Human resource expenses
Maintenance
Depreciation and amortization
Advertising expenses
Freight charges
Energy consumption and fuel (gas, electricity, etc.)
Travel expenses
Operating lease expenses
Technical assistance, professional fees
and administrative services
Other
Total
2013
2012
( Ps 69,019,660 )
(2,909,920 )
(17,796 )
(858,716 )
(2,024,584 )
(2,037 )
(3,211,218 )
(3,115,816 )
(102,370 )
(371,723 )
( Ps 73,584,231 )
(2,860,519 )
(21,034 )
(921,734 )
(2,129,374 )
(2,145 )
(3,400,967 )
(2,861,575 )
(106,059 )
(263,785 )
(875,522 )
(2,096,935 )
( Ps 84,606,297 )
(920,204 )
(1,926,252 )
( Ps 88,997,879 )
90
ALPEK 2013 ANNUAL REPORT
Note 26 - Other (expenses) income, net
Other income (expenses) for the years ended December 31, are comprised as follows:
Loss on sale of wastes
Gain on sale of property, plant and equipment
Impairment of property, plant and equipment (See Note 11)
Valuation of derivative financial instruments
Indemnity from insurance recovery
Taxes and surcharges
Other income, net
( Ps
2013
542 )
2,505
(170,276 )
45,882
-
-
14,575
Ps
2012
1,136
375
(4,798 )
152,275
6,009
9,204
146,635
Total
( Ps
107,856 )
Ps
310,836
Note 27 - Financial cost, net
Financial cost, net for the years ended December 31, are comprised as follows:
2013
2012
Financial income:
Interest income on short-term bank deposits
Interest income on loans from related parties
Interest income on employees benefits
Others
Foreign exchange gain
Gain for changes in the fair value of financial assets at fair value
through profit or loss
Ps
95,245
37,313
-
4,245
-
-
Ps
133,569
49,144
23,027
8,958
141,224
68,927
Total financial income
Ps
136,803
Ps
424,849
Financial expenses:
Interest expense on bank loans
Interest expenses on loan to related parties
Non-bank interest expense
Interest cost on employees benefit
Other
Foreign exchange loss
Loss for changes in the fair value of financial assets at fair value
through profit or loss
( Ps
212,820 )
-
(735,068 )
(40,086 )
(103,863 )
(145,898 )
(71,002 )
( Ps
751,306 )
(56,362 )
(619,700 )
-
(328,744 )
-
-
Total financial cost
Financial cost, net
( Ps
1,308,737 )
( Ps
1,756,112 )
( Ps
1,171,934 )
( Ps
1,331,263 )
Note 28 - Employee benefits expenses
Employee benefits expenses for the years ended December 31, are comprised as follows:
Salaries, wages and benefits
Social security contributions
Employee benefits (Note 20)
Other contributions
( Ps
2013
2,122,757 )
(197,794 )
(5,183 )
(584,186 )
( Ps
2012
2,091,768 )
(187,301 )
(18,461 )
(562,989 )
Total
( Ps
2,909,920 )
( Ps
2,860,519 )
91
CONSOLIDATED FINANCIAL STATEMENTS
Note 29 - Income taxes
New Income Tax Law
On December 11, 2013 the decree for the new Income Tax Law was published (new LISR) becoming effective on January 1, 2014, repealing
the LISR published as of January 1, 2002 (former LISR). The new LISR maintains the essence of the former LISR, however, it makes significant
amendments among which the most important are:
i.
Limiting deductions in contributions to pension and exempt salary funds, automobile leases, restaurant consumption and social
security fees; it also eliminates the immediate deduction in fixed assets.
ii. Amending the mechanics to accumulate revenues derived from the term alienation and generalizing the procedure to determine
the gain in alienation of shares.
iii. Amending the procedure to determine the taxable basis for the Employees’ Profit Sharing (PTU), establishing the mechanics to
determine the initial balance of the capital contribution account (CUCA) and the CUFIN and establishing new mechanics for the
recovery of Asset Tax (IA).
iv. Establishing an ISR rate applicable for 2014 and the following years of 30%. In contrast to the LISR above that established a 30%,
29% and 28% rate for 2013, 2014 and 2015, respectively.
The Company has reviewed and adjusted the deferred tax balance at December 31, 2013, considering in the determination of temporary
differences, the application of these new provisions, the impacts of which are detailed in the reconciliation of the effective rate as follows.
However, the effects in deduction limitations and others indicated previously will be applied as from 2014 and will mainly affect the tax
incurred as of such year.
Income tax for the years ended December 31, are integrated as follows:
Total current income tax
Adjustment to the provision of income tax from prior years
Total deferred tax
( Ps
2013
1,136,767 )
(44,149 )
363,586
( Ps
2012
1,458,257 )
2,982
(268,018 )
Income tax expense
( Ps
817,330 )
( Ps
1,723,293 )
92
ALPEK 2013 ANNUAL REPORT
The reconciliation between the statutory and effective income tax rates for the years ended December 31, is as follows:
Profit before income tax
Statutory tax rate
Income tax at statutory rate
Add (deduct) effect of income tax on:
Inflationary tax adjustment
Non-deductible expenses
Non-taxable income
Tax losses for which no deferred income tax assets were recognized
Effects of translation from functional currency to reporting currency
Effect of different tax rates in countries other than Mexico
Adjustment to the income tax liability from prior years
Effect from reactivation of tax losses
Effect in change of rate
Effect in deferred tax for the non-deductibility of labor obligations
Share of losses of associates
Ps
2013
1,723,460
30%
(517,038 )
Ps
2012
6,106,095
30%
(1,831,829 )
(70,330 )
(18,643 )
5,511
(10,274 )
4,196
84,814
(44,149 )
-
(231,854 )
(10,489 )
(9,074 )
(71,823 )
(32,673 )
30,392
-
(105,801 )
(85,088 )
8,880
376,366
-
-
(11,717 )
Total income tax
Effective tax rate
( Ps
817,330 )
( Ps
1,723,293 )
47%
28%
The charge (credit) to income tax related to other items of the comprehensive income for the years ending December 31, are as follows:
Translation effect of foreign currency
Remeasurement of obligations for
employee benefits
Effect of derivative financial instruments
for hedging purposes of cash flow
Other comprehensive income items
Before taxes
27,918
Ps
598,160
2013
Tax charge
(in favor)
Ps
-
(220,226 )
Ps
After taxes
27,918
377,934
Before taxes
( Ps 1,406,694 )
(88,386 )
2012
Tax charge
(in favor)
Ps
-
26,233
After taxes
( Ps 1,406,694 )
(62,153 )
282,016
Ps 908,094
(85,085 )
( Ps 305,311 )
196,931
Ps 602,783
87,638
( Ps 1,407,442 )
(22,667 )
3,566
Ps
64,971
( Ps 1,403,876 )
Deferred tax
( Ps 305,311 )
Ps
3,566
Note 30 - Segment reporting
Segment reporting is presented, consistently with the internal report provided to the Chief Operating Officer, who has been identified as the
Company’s Executive Director, and represents the highest authority in operational decision making, allocation of resources and performance
assessment of operating segments.
An operating segment is defined as a component of an entity on which separate financial information is regularly being evaluated.
Management assesses its operations through two business segments: the Polyester business chain and the Plastics and Chemicals business.
These segments are administered separately since its products vary and targeted markets are different. Their activities are performed through
various subsidiaries.
The operations between operating segments are carried out at market value and the accounting policies with which the financial information
by segments is prepared, are consistent with those described in Note 3.
93
CONSOLIDATED FINANCIAL STATEMENTS
The Company evaluates the performance of each of the operating segments based on income before financial cost net, income taxes,
depreciation, amortization, impairment of non-current assets and share in losses of associates (Adjusted EBITDA), considering that this
indicator is a good metric to evaluate operating performance and the ability to meet principal and interest obligations with respect to
indebtedness, and the ability to fund capital expenditures and working capital requirements. Nevertheless, Adjusted EBITDA is not a measure
of financial performance under IFRS and should not be considered as an alternative to net income as a measure of operating performance or
cash flows as a measure of liquidity.
The Company has defined the Adjusted EBITDA as consolidated income (loss) before taxes after adding or deducting, accordingly: (1)
depreciation, amortization and impairment of non-current assets; (2) the financial cost, net (including interest expense, interest income,
exchange gains or losses, net and gains or losses from derivative financial instruments and (3) share in losses of associates.
Following is the condensed financial information of these operating segments (in millions of pesos):
For the year ended December 31, 2013
Statement of income:
Revenue by segment
Inter-segment revenue
Revenue from external costumers
Operating profit
Depreciation, amortization and impairment of
non-current assets
Adjusted EBITDA
Capital investment (Capex)
For the year ended December 31, 2012:
Statement of income:
Revenue by segment
Inter-segment revenue
Revenue from external costumers
Operating profit
Depreciation, amortization and impairment of
non-current assets
Adjusted EBITDA
Capital investment (Capex)
Polyester
Plastics and
Chemicals
Other
Total
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Ps
68,704
(68 )
68,636
977
3,997 (1)
4,974
1,845
Polyester
75,249
(49 )
75,200
5,319
1,689
7,008
1,400
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Ps
21,600
(175 )
21,425
1,882
422
2,304
431
Plastics and
Chemicals
21,068
(105 )
20,963
2,161
446
2,607
122
( Ps
Ps
Ps
Ps
Ps
( Ps
Ps
Ps
( Ps
Ps
243 )
243
-
66
-
66
-
Ps
Ps
Ps
Ps
Ps
90,061
-
90,061
2,925
4,419
7,344
2,276
Other
Total
154 )
154
-
(4 )
-
4 )
-
Ps
Ps
Ps
Ps
Ps
96,163
-
96,163
7,476
2,135
9,611
1,522
(1) In 2013, within the polyester segment, the impairment effect of fixed assets mainly related to the closing of the Cape Fear plant is integrated. See Notes
2 and 18.
The reconciliation between adjusted EBITDA and profit before taxes for the years ended December 31 is as follows (in million of pesos):
Adjusted EBITDA
Depreciation, amortization and impairment of non-current
assets
Operating profit
Financial cost, net
Share of losses in associates
Income before taxes
2013
2012
Ps
7,344
Ps
9,611
(4,419 )
2,925
(1,172 )
(30 )
1,723
Ps
(2,135 )
7,476
(1,331 )
(39 )
6,106
Ps
94
ALPEK 2013 ANNUAL REPORT
Following is a summary of revenues per country of origin for the years ended December 31 (in millions of pesos):
Mexico
United States
Argentina
Revenue
Ps
2013
49,276
36,331
4,454
Ps
2012
53,456
38,609
4,098
Ps
90,061
Ps
96,163
The Company’s main costumer generated revenue amounting to Ps 10,116 and Ps 10,121 for the years ended December 31, 2013 and 2012,
respectively. This revenue is obtained from the Polyester reporting segment and represent 11% for both years of the consolidated revenue
with external costumers.
The following table shows the intangible assets and property, plant and equipment by the country of origin (in millions of Mexican pesos):
Mexico
United States
Argentina
At December 31,
2013
2012
Ps
1,727
1,179
-
Ps
1,552
690
1
Total intangible assets
Ps
2,906
Ps
2,243
Mexico
United States
Argentina
At December 31,
Ps
2013
18,818
5,703
185
Ps
2012
18,439
7,985
271
Total property, plant and equipment
Ps
24,706
Ps
26,695
Note 31 - Contingencies and commitments
During 2013, the Company through its subsidiary Grupo Petrotemex, signed an agreement with M&G for the rights to obtain the supply of 400
thousand tons of PET (manufactured with 336 thousand tons of PTA) a year, by which it is obliged to pay an amount of Ps 4,576,775 (US$350
million) during the construction of the plant. At December 31, 2013 Alpek had made a payment amounting to Ps 454,650 (US$35 million),
which is presented within the goodwill and intangible assets, net caption. See Note 12.
At December 31, 2013 and 2012, the subsidiaries had entered into various agreements with suppliers and customers for purchases of raw
materials used for production and the sale of finished goods, respectively. The term of these agreements varies between one and five years
and generally contain price adjustment clauses.
Some of the subsidiaries use hazardous materials to manufacture polyester filaments and staple fibers, polyethylene terephthalate (PET),
terephthalatic acid (PTA), Caprolactam (CPL), polypropylene (PP), chemical specialties and they generate waste, such as catalysts and glycols.
These and other activities of the subsidiaries are subject to various federal, state and local laws and regulations governing the generation,
handling, storage, treatment and disposal of hazardous substances and wastes. According to such laws, the owner or lessor of real estate
property may be liable for, among other things, (i) the costs of removal or remediation of certain hazardous or toxic substances located on,in,
or emanating from, such property, as well as the related cost of investigation and property damage and substantial penalties for violations of
such law, and (ii) environmental contamination of facilities where its waste is or has been disposed of. Such laws often impose such liability
without regard to whether the owner or lessee knew of, or was responsible for, the presence of such hazardous or toxic substances.
95
CONSOLIDATED FINANCIAL STATEMENTS
Although the subsidiaries estimate that there are no existing material liabilities relating to noncompliance with environmental laws and
regulations, there can be no assurance that there are no undiscovered potential liabilities related to historic or current operations that will
require investigation and/or remediation under environmental laws, or that future uses or conditions will not result in the imposition of an
environmental liability or expose them to third-party or related parties actions, such as tort suits. Furthermore, there can be no assurance
that changes in environmental regulations in the future will not require the subsidiaries to make significant capital expenditures to change
methods of disposal of hazardous materials or otherwise alter aspects of their operations.
DAK Americas, L. L. C. provided corporate guarantees to Clear Path Recycling, L. L. C. in favor of Shaw Industries Group, Inc. At December 31,
2013 and 2012, this guarantee amounts to US$ 6,790 and US$ 5,928, respectively.
In September 2007, the subsidiary Indelpro renewed an agreement it had held with PEMEX Refinación to cover the supply of polypropylene
for the chemical and refining area maturing in 2018. Acquisitions during the year ended December 31, 2013 and 2012 under this contract
amounted Ps 4,379,430 and Ps 4,532,035, respectively and there are purchase commitments for approximately Ps 5,395,419 for the year 2014.
On February 1, 2005, the subsidiary Polioles and BASF Corporation (the other partner of the Affiliate) signed a licensing agreement related to
the use of patents and technical information for the production of polystyrene pearl in the Altamira plant located in Tamaulipas. According
to the aforementioned agreement, Polioles pays BASF Corporation the difference between the annual minimum of US$9 million and the gain
before financing and taxes plus depreciation and amortization generated by the polystyrene pearl line. This agreement will be effective until
Polioles has paid a consideration of US$15 million over an accumulated basis. For the years ended December 31, 2013 and 2012 the agreed
parameter was not reached and therefore, a payment obligation was not generated.
The Company leases equipment under non-cancellable operating lease agreements, related mainly to transportation equipment for the
PTA and PET businesses, which normally include renewal options. These renewal operations are generally under the same effective rental
conditions.
Future payments under these operating lease agreements with non-cancellable terms greater than a year, are summarized below:
2014
2015
2016
2017
Onwards
Ps
168,325
128,504
101,066
74,733
296,071
Note 32 – Subsequent events
In preparing the financial statements, the Company has evaluated events and transactions for recognition or disclosure subsequent to
December 31, 2013 and up to the date of issuance of the financial statements, and has concluded that there are no significant subsequent
events that affect these.
José de Jesús Valdez Simancas
Chief Executive Officer
Eduardo Alberto Escalante Castillo
Chief Financial Officer
96
ALPEK 2013 ANNUAL REPORT
2013 A N N U A L R E P O R T
Table of Contents
Corporate Profile
Financial Highlights
Economic and Industry Environment
Petrochemical Chains and Footprint
Letter to Shareholders
Polyester
Plastics and Chemicals
Integration, Efficiency and Technology
Sustainability
Board of Directors
Management Team
Corporate Governance
Glossary
Consolidated Financial Statements
1
2
3
4
6
10
14
18
22
28
29
30
31
33
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Investor Relations
Hernán F. Lozano
Sabino Parra
Av. Gómez Morín 1111 Sur
Col. Carrizalejo San Pedro Garza García
Nuevo León CP. 66254, Mexico
IR@alpek.com
www.alpek.com
P R I N T ED WIT
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1
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% WIND E N E
Y
R G
Supplied by Community Energy
2
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Alpek, S.A.B. de C.V.
Av. Gómez Morín 1111 Sur
Col. Carrizalejo San Pedro Garza García
Nuevo León, Mexico, 66254
www.alpek.com
2013 A N N U A L R E P O R T