ALPEK, S.A.B. de C.V. Annual Report 2014

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FY2014 Annual Report · ALPEK, S.A.B. de C.V.

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2014
Annual
Report

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

2014
Annual Report

Table of Contents

Corporate Proﬁle
Financial Highlights
Footprint
Petrochemical Chains
Letter to Shareholders
Polyester
Plastics & Chemicals
Integration, Efficiency and Expansion
Sustainability
Board of Directors
Management Team
Corporate Governance
Glossary
Consolidated Financial Statements

1
2
3
4
6
10
14
18
22
40
41
42
43
45

Throughout the report, the blue guidelines show the Global Reporting Initiative (GRI) indicators that
are discussed in the paragraph.

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

Corporate Profile

DAK Americas (PTA/PET). Columbia, United States

2.1, 2.2,

2.5, 2.7

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 (PP) and caprolactam (CPL) in Mexico.
• Operates the largest expandable polystyrene (EPS) plant in the Americas.
• 17 plants and 4,669 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 2012.

ALPEK 2014 ANNUAL REPORT

Financial Highlights

EC1

INCOME STATEMENT

Net Sales

Operating Income

EBITDA (1)

Majority Net Income (2)

Net Income per Share (3) (5)

BALANCE SHEET

Assets

Liabilities

Stockholders’ Equity

Majority Interest (2)

Book Value per Share (4) (5)

Millions of dollars

Millions of pesos

2014

6,471

286

434

0.03

4,442

2,414

2,028

1,763

0.87

2013

7,028

228

572

0.01

4,445

2,374

2,071

1,837

0.87

% var.

2014

2013

% var.

(8)

(24)

202

(2)

(4)

86,072

90,061

3,739

5,710

801

0.38

65,371

35,526

29,845

25,949

12.25

2,926

7,344

262

0.12

58,128

31,040

27,088

24,018

11.34

(4)

(22)

206

EBITDA (1)
Millions of dollars

MAJORITY NET INCOME (2)
Millions of dollars

ASSETS
Millions of dollars

482

572

434

771

728

203

332

277

3,090

4,446

4,742

4,445

4,442

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 2014, 2013 and 2012 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 2014 and 2013 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 shares).

4) Based on the number of outstanding shares (2,118 million shares).

5) Dollars or pesos per share, accordingly.

Financial Highlights | Footprint

17 plants in 3
countries: Mexico,
the United States
and Argentina

Polyester

Plastics & Chemicals

Alpek participates in several petrochemical
chains through its two business segments:
Polyester, and Plastics and Chemicals. It
employs 4,669 workers and operates 17
plants in Mexico, the United States and
Argentina, with a total capacity of 5.5
million tons per year.

2.3, 2.7,

2.8

Petrochemical
Chains

Oil

Reﬁnery

Naphtha

Reformer

Paraxylene

PTA

Cracker

Benzene

Propane

Cracker

CH3

Propylene

Methane

Ammonia

PET

Fibers

Ethane

Cracker

H
Ethylene

Cracker

Cyclohexane

CH2

Styrene

CPL

EPS

Ammonium

Sulfate

Oil

Reﬁnery

Naphtha

CH2

Ethylene
Oxide

Monoethylene

Glycol

ALPEK 2014 ANNUAL REPORT
Oil

Reﬁnery

Naphtha

Reformer

Paraxylene

PTA

Cracker

Benzene

Propane

Cracker

CH3

Propylene

Methane

Ammonia

Ethane

Cracker

Ethylene

Cracker

Cyclohexane

CH2

Styrene

CPL

Ammonium
Sulfate

EPS

Oil

Reﬁnery

Naphtha

Monoethylene
Glycol

CH2

Ethylene

Oxide

Petrochemical Chains

PET

Fibers

Alpek products are used by
millions of people every day in a
wide range of applications.

Polyester

Plastics & Chemicals

ALPEK 2014 ANNUAL REPORT

Letter to
Shareholders

Dear Shareholders:

1.1,

1.2,

2.9

This last year was particularly challenging for our industry due
to falling oil prices and sustained pressure on polyester and
caprolactam margins. However, 2014 was also a signiﬁcant
investment year for Alpek with the completion of numerous
integration, efficiency and expansion projects which further
enhance our competitiveness.

In markets outside North America, polyester (PTA/PET) and
caprolactam (CPL) margins reached historically low levels.
Margin pressure began in 2012 with the entry of new produc-
tion capacity in China, which increased at estimated annual-
ized rates of 26% and 53% for PTA and CPL, respectively, over
the two-year period.

Events during the year which are supportive for gradual
margin recovery include: a call from major Chinese PTA
producers for greater market discipline, the slowing growth
rate of new capacity, and announced plant closures in Asia
and around the world.

However, these encouraging developments were overshadowed
by the fall in oil and feedstock prices. After posting an average
price of US $108 per barrel between January and June 2014,
Brent crude dropped 48% to US $56 per barrel at the close of
the year, reaching its lowest level in ﬁve years and driving down
prices of petroleum derivatives.

The price of paraxylene, our main feedstock, fell 34% during the
year from US $1,543 per ton to US $1,014 per ton. This decline
caused temporary distortions in margins and demand which
negatively impacted results despite our position as a low-cost
producer and “cost-plus” product pricing.

Consolidated sales in 2014 fell 8% year-on-year, to US $6.5
billion. The year’s 1% sales volume increase was more than offset
by a 9% drop in average prices, reﬂecting the lower price of oil.

Consolidated EBITDA was US $434 million, 24% less than in
2013. This reduction mainly reﬂects a US $71 million non-cash
inventory devaluation charge that was recognized as a result of
the decline in paraxylene prices.

The Polyester segment posted sales of US $4.8 billion in 2014,
11% lower than the previous year due to the 13% drop in average
prices. However, volume grew 2% year-on-year despite the
unfavorable demand environment.

Polyester EBITDA fell 30% to US $270 million. This segment was
the most affected by the falling crude price, with an estimated
total impact of US $87 million, including inventory devaluation.

The Plastics and Chemicals segment posted sales of US $1.7
billion, 3% above 2013. The rise is attributable to increases of 1%
in volume and 2% in average prices.

Plastics and Chemicals EBITDA decreased by 12%, pressured
mainly by lower margins in expandable polystyrene (EPS)
and polypropylene (PP). EPS and PP margins normalized after
reaching record highs in 2013 as a result of favorable market
dynamics. In addition, the highly volatile price of benzene and
Chinese production further reduced CPL margins in 2014.

While our results for the year were affected by external market
factors, we maintain a healthy ﬁnancial position with solid
leverage and coverage ratios based on a robust free cash ﬂow.

Letter to Shareholders

At the close of the year, net debt declined 7% compared to 2013,
the net debt to EBITDA ratio was 1.6 times and interest coverage
6.5 times. Other key ﬁnancial elements are our long-term debt
proﬁle, 86% of which matures as of 2022 with ﬁxed interest rate,
and a high dollarization of cash ﬂow that mitigates our exposure
to exchange rate volatility.

Our strong ﬁnancial position, coupled with a philosophy of
disciplined growth, support the development of investment
projects even at the bottom of the cycle in order to maximize
the beneﬁts of the eventual recovery.

Capital expenditures (Capex) in 2014 increased by 79% to US $320
million. The majority of these funds were allocated to a number
of integration, operating efficiency and expansion projects that
further enhance our competitiveness.

The startup of our cogeneration plant in Cosoleacaque, Veracruz,
marks the culmination of the ﬁrst major integration project
since we became a public company. With a total investment of
US $137 million and a 95 megawatt capacity, the new plant is
expected to generate annual savings of approximately US $40
million. In addition to the economic beneﬁt, this project has
given us valuable experience for the construction of a second
cogeneration plant in Altamira, Tamaulipas, with three times the
capacity of Cosoleacaque. We expect to break ground for the
new facility in 2015.

Our main integration project, for the production of monoeth-
yleneglycol (MEG), advanced on several fronts, including ethane
supply, technology selection and site evaluation. Supported by
the region’s competitive natural gas and ethane prices, we esti-
mate that Alpek could achieve the lowest polyester conversion
cost in the world through its investments in MEG integration and
power cogeneration.

Armando Garza Sada
Chairman of the Board

José de Jesús
Valdez Simancas
Chief Executive Officer

DAK Americas (PET). Bay St. Louis, United States

ALPEK 2014 ANNUAL REPORTLetter to Shareholders

2014 Capex was largely dedicated to further enhancing our
operating efficiency. The most important of these investments
was the construction of the integrated PTA/PET plant in Corpus
Christi, Texas, which is being developed under the agreements
signed with Gruppo M&G in 2013. This facility will use Alpek’s
IntegRex® PTA technology.

In 2014 we continued to reinforce our sustainability strategy
under a model that involves interaction with all our stakeholders,
based on four pillars: i) Internal Well-being, ii) Community, iii)
Environment, and iv) Sustainable Economic Value Creation. We
are committed to generating economic, environmental and
social beneﬁts through our operations.

In addition, the technology upgrade of our CPL plant was
successfully completed. By year-end, the facility had achieved
the expected improvements in production and raw material
consumption, which will generate estimated annual savings of
US $8 million.

In 2014 we also leveraged selected expansion opportunities.
One was the agreement signed with BASF to acquire its EPS
business in the Americas and 100% of Polioles’ EPS business,
while BASF acquired Polioles’ polyurethane business. Besides
positioning Alpek as the leading EPS producer in the Americas,
the transaction will give us full control over this business unit in
order to boost its growth. We expect to close the agreement
with BASF during the ﬁrst quarter of 2015.

Furthermore, we acquired CabelmaPET, S.A., which operates
the only food-grade recycled PET (r-PET) facility in Argentina.
The plant’s 16 thousand ton r-PET capacity will complement
Alpek’s virgin PET resin production in the country, and will
enable us to offer PET resin that incorporates virgin and recycled
material in a single pellet. Along with contributing to improved
sustainability and environmental well-being, PET resin products
with integrated recycled content will allow our customers to
streamline their operations by eliminating unnecessary feed and
blending processes.

One of the most signiﬁcant developments of the year was to
establish the medium-term objective to intensify our com-
munity engagement programs, working alongside the commu-
nities that are closest to our operations. In 2014, for example,
we helped more than 7,000 students from 53 neighboring
schools, and more than 130 students completed their intern-
ships at our companies.

Although we faced challenges in 2014, there are signs that
point to a bright future for Alpek. Among these we can high-
light the following: the start-up of our ﬁrst cogeneration proj-
ect; healthy cash ﬂow generation and a strong balance sheet
that assure the continuity of our investments in integration,
efficiency and expansion; the slowdown in Asian production
capacity growth combined with greater discipline from Chi-
nese producers; and the energy reform being implemented in
Mexico, which will increase feedstock and energy availability at
competitive prices in our country.

On behalf of the Board of Directors, we would like to thank our
employees, customers, suppliers, creditors, community and, in
particular, our shareholders who put their trust in us year after year.

Sincerely,

Armando Garza Sada
Chairman of the Board

José de Jesús Valdez Simancas
José de Jesús Valdez Simancas
Chief Executive Officer

ALPEK 2014 ANNUAL REPORT

Polyester

2.2, 2.7,

2.9, EN26

Our main business segment is Polyester, which includes the produc-
tion and marketing of PTA (puriﬁed terephthalic acid), PET (polyeth-
ylene terephthalate) and polyester ﬁbers.

PTA is manufactured from paraxylene and is reacted with
monoethylene glycol (MEG) to produce PET and polyester
ﬁbers. Our clients use PET primarily to manufacture packaging
for beverages, food and consumer products. Polyester ﬁbers are
used in the manufacture of textiles for the home, clothing and
various industrial applications such as seat belts.

Alpek is the only integrated manufacturer of PTA and PET in North
America and has the only PET plant in Argentina. Furthermore,
with the acquisition of CabelmaPET, it also operates the only
food-grade recycled PET (r-PET) plant in Argentina.

The Polyester segment consists of twelve plants located in the
United States, Mexico and Argentina, with an aggregate annual
capacity of 4.4 million tons and a workforce of 3,441.

Polyester

ALPEK 2014 ANNUAL REPORT

In line with our commitment to sustainability and environmental
well-being, we increased our recycling capacity by 22% in 2014.
We are now able to recycle up to 89 thousand tons of PET per
year (equivalent to 4.0 billion bottles).

Approximately 84% of our polyester products are sold in Mexico,
the United States and Canada, while the manufacture of
packaging for beverage, food and consumer products accounts
for 90% of the segment’s revenue. The high share of sales to
stable consumer segments within NAFTA contributes to the
steady sales volume.

Our Polyester segment represented 73% of the company’s total
income in 2014, posting sales of US $4.8 billion, with a volume
of 3.1 million tons. Sales declined 11% year-on-year, as a result of
a 13% drop in the average sales price reﬂecting the fall in crude
prices. EBITDA was US $270 million, 30% less than the previous
year, driven primarily by an estimated US $90 million impact
related to the drop in crude oil and feedstock prices in 2014.

There are elements that point to a brighter outlook in the near
future. On the one hand, leading Chinese producers called for
greater market discipline, and Asian capacity growth rate has
slowed down. Moreover, there have been capacity shutdowns in
Asia and other regions of the world.

DAK Americas (PET). Bay St. Louis, United States

Polyester

DAK Americas (PTA/PET). Columbia, United States

16% rest of the world

73%

of Alpek’s total 2014
revenues came from the
Polyester segment

Sales in Mexico,
the United States
and Canada

Polyester

27% Plastics
& Chemicals

84%

of Polyester sales came
from North America

ALPEK 2014 ANNUAL REPORT

Plastics
& Chemicals

2.2, 2.7,

EN18

Our Plastics and Chemicals segment integrates the production and
marketing of polypropylene (PP), expandable polystyrene (EPS), poly-
urethanes (PURs), caprolactam (CPL) and ammonium sulfate (fertiliz-
er), among other products. We are the only producer of PP and CPL in
Mexico and, following the acquisition agreement with BASF, will be-
come the largest EPS producer in the Americas.

PP, a plastic made from propylene, is widely used in containers
and packaging for food and consumer products. Other
applications include auto parts and medical instruments. EPS is
commonly used in packaging for impact-sensitive products, such
as televisions and other consumer electronics. Construction and
thermal insulation are also common EPS applications. CPL is the
main raw material for the production of Nylon 6, used in the
manufacture of clothing, industrial textiles, engineering plastics
and tire cord, among others.

The Plastics and Chemicals segment has an annual installed
capacity of 1.0 million tons in ﬁve plants, all of which are located
in Mexico, and are operated by a workforce of 1,209.

Plastics & Chemicals

Univex (CPL). Salamanca, Mexico

ALPEK 2014 ANNUAL REPORTPlastics & Chemicals

Although 84% of the segment’s sales are for the NAFTA region,
we also have a market presence in Central and South America,
Asia and Europe.

In 2014, Plastics and Chemicals contributed 27% of Alpek’s total
income. The segment posted sales of US $1.7 billion, 3% higher
than 2013, due to a combination of increased volume (1%) and
average price (2%).

The most noteworthy event of 2014 was the signing of
agreements with BASF to acquire its EPS operations and sell
our polyurethane business. In addition to strengthening our
Plastics and Chemicals portfolio, this transaction is an attractive
opportunity to leverage the sound operational track record of
our team and expand our presence to become the leading EPS
producer in the Americas.

Plastics and Chemicals EBITDA was US $159 million, 12% less
than the previous year. The decline mainly reﬂects a high
comparative base in 2013, a year in which, driven by favorable
market dynamics, EPS and PP margins reached record levels,
returning to normal during 2014. CPL margins also declined due
to the highly volatile price of benzene and the recent increase in
Chinese production.

Univex (CPL). Salamanca, Mexico

27%

of Alpek’s total revenues
came from Plastics &
Chemicals segment

Sales in Mexico,
the United States
and Canada

16% rest of the world

73% Polyester

84%

of Plastics & Chemicals
sales came from
North America

ALPEK 2014 ANNUAL REPORT

Integration, Efficiency
and Expansion

1.2, 2.9, 3.8, EC2, EC9,

EN6, EN7, EN14,

EN26, EN30

In 2014, we boosted our strategy based on integration, efficiency and
expansion initiatives with a Capex investment of US $320 million, 79%
more than the previous year.

Integration
Our power cogeneration and monoethyleneglycol integration
projects will give us the world’s lowest polyester cost structure.

This year, our 95 Megawatt (MW) cogeneration plant in Cosolea-
caque, Veracruz, came on line, generating a total of 98.7 Giga-
watts/h.

The construction of a second cogeneration plant in Altami-
ra, Tamaulipas, with an approximate capacity of 300 MW,
was also approved. When completed, we will have invested
around US $500 million in power cogeneration to achieve an-
nual savings in excess of US $120 million.

Integration, Efficiency

and Expansion

Integration, Efficiency and Expansion

Power cogeneration. Cosoleacaque, Mexico

ALPEK 2014 ANNUAL REPORT

During the year, we moved forward on several fronts of the MEG
integration project, which carries the highest priority, inluding
ethane supply, technology selection and site evaluation. The in-
vestment program for this major project is planned to start in
2015.

Efficiency
As a low-cost producer, efficiency is fundamental to our
operations.

The construction of the new PTA/PET complex in Corpus Chris-
ti, under agreements signed with Gruppo M&G, is the most im-
portant initiative to enhance our operating efficiency. The facil-
ity, which will use Alpek’s IntegRex® PTA technology, will have
the most competitive cost structure in North America and fur-
ther consolidate our leadership position in the region.

We also ﬁnished the technological upgrade of our CPL plant,
with which we expect to achieve savings of US $8 million per
year by reducing the consumption of raw materials and increas-
ing production.

Expansion
During 2014, we leveraged selected opportunities to expand our
international footprint and consolidate our business portfolio.

2,9

We signed an agreement with BASF that will transform our EPS
business. The agreement includes Alpek’s acquisition of BASF’s
EPS operations in America and 100% of Polioles’ EPS business,
while BASF will gain ownership of Polioles’ polyurethane business.

The transaction will position Alpek as the leading EPS producer in
the Americas, with an aggregate installed capacity of 230 thou-
sand tons per year. In addition to growing and obtaining total
control of the EPS business, Alpek will strengthen its Plastics and
Chemicals portfolio through the divestment of polyurethanes.

Moreover, we acquired CabelmaPET, S.A., which operates the
only food-grade recycled PET (r-PET) plant in Argentina.

The 16 thousand tons per year of r-PET, integrated into our virgin
PET production in Argentina, will enable us to offer virgin and
recycled material in a single pellet. This initiative will contribute
to environmental well-being and also streamline customer oper-
ations by eliminating unnecessary supply and mixing processes.

Polioles (EPS). Altamira, Mexico

Integration, Efficiency and Expansion

2014 Acquisitions

EPS: BASF (the United
States, Canada, Brazil, Chile
and Argentina)
r-PET: CabelmaPET, S.A.
(Argentina)

ALPEK 2014 ANNUAL REPORT

Sustainability

3.11

We are aware of the different challenges society faces with regard to
sustainability. In response, our business strategy integrates sustain-
able practices into daily operations and the decision-making process.

As a result, we are presenting a sustainability report based on the
Global Reporting Initiative methodology, in its G3.1 version. This
year we have complied with a total of 121 complete indicators,
allowing us to declare the reporting to be consistent with the cri-
teria for Application Level B.

For details of the GRI indicators contained in this 2014 Annual
Report, and those included within the GRI index, please refer to
the following link: www.alpek.com.

4.14,

41.5

Our Sustainability Approach
Based on the commitment we made in 2013, this year we struc-
tured a sustainability model that allows us to continuously adapt
to the changes in our environment. Our philosophy is based on
the generation of economic and social value, as well as on en-
vironmental care.

Sustainability

DAK Americas (PET). Bay St. Louis, United States

ALPEK 2014 ANNUAL REPORT

To implement the model, we based our actions on four speciﬁc
pillars:

• Internal well-being
• Community
• Environment
• Sustainable economic value creation

Each of the pillars focuses on one or more speciﬁc stakeholders,
which we have deﬁned according to the impact our operations
have on them and vice versa. Our commitment to our stake-
holders is clear: to operate in a way that the beneﬁts generated
are reﬂected both economically and socially.

4.16,

4.17

Our Sustainability Model
Communication with our stakeholders is key to building rela-
tionships of trust, mutual respect and long-term collaboration.
In 2014, we continued implementing different forms of commu-
nication and dialogue channels with each one, with the results
that appear in the table “Communication with our stakeholders”:

To ensure that the sustainability strategy described is implement-
ed correctly, we actively participate in ALFA’s Sustainability Com-
mittee, adding our efforts to develop joint actions that allow us
to achieve common goals in the ﬁeld. Our values and ethical
behavior guidelines strictly adhere to the ALFA’s Code of Ethics,
which can be downloaded from the following link:

4.8

http://www.alfa.com.mx/NC/ﬁlosoﬁa.htm

We also follow ALFA’s Anti-corruption and Bribery Policies and
Practices*, recognizing the importance of operating under
controls that enable us to ensure the legality of our processes.

*To ﬁnd out more about the ALFA Anti-corruption and Bribery Policies

and Practices, please download the Social Corporate Responsibility Re-

port 2013 from the following link:

http://www.alfa.com.mx/RS/reportes.htm

Our sustainability model

o m i c
n

Biene
Intern
sta
l
r
i

Internal well-being:
Provide healthy, safe working
conditions and opportunities
for employee development.
Focused on: Employees

Sustainable economic
value creation:
Obtain satisfactory returns on
business activities considering
the investment made and
risks undertaken.
Focused on: Shareholders

tainable e c
alue cre a ti o

s
u
S

n
o
i
s
s

Envir

Environment:
Decrease the impact of
our operations, reducing
emissions and conserving
resources, soil and water.
Focused on: Resources,
emissions, energy and
organic growth

l
l

n
b

o
e

n
g

C
o
m

s
i

o
n

munity

EN30

Community:
Be a responsible citizen in the
community.
Focused on: Communities,
customers and suppliers

4.8

Communication with our stakeholders

Stakeholder group

Communication

channel

Frequency

Main concerns/

Response to concerns/

suggestions

Sustainability

Review and approval of innovation

ideas, and carrying out of suggested

improvements.

Generation of reports, minutes and

agreements.

Board discussion of results and reaching

of agreements.

Encouragement of participation and

ideas from personnel.

Intranet,

suggestion box.

Ongoing

Innovation and

improvement ideas.

Employees

Bulletins, emails,

presentations and

Ongoing

Quarterly results.

diverse events.

Workplace diagnostics.

Annual

Work climate.

Informative personnel

talks.

Telephone, Internet,

Biannual

Business vision.

Clients

plant visits, surveys and

Ongoing

e-mail.

Shareholders

Meetings, telephone,

Internet, e-mail.

Ongoing

Suppliers

Internet, plant visits,

Ongoing

clariﬁcations, quotes and

Meetings, telephone,

Trade and quality issues,

surveys and e-mail.

deliveries.

Product quality, trade

Improvement of time frames and

issues and delivery in

procedures that enable quality

due time and form,

assurance, technical visits and delivery of

technical services.

requested information.

Business strategy,

proﬁtability, ﬁnancial

condition and operating

performance.

Detailed follow-up of fulﬁllment of

indicators, concerns mentioned in Board

Meetings and agreements reached.

Implementation of supplier development

programs, generation of agreements

and forwarding of detailed information

on company needs.

Meetings, perception

surveys, alliances

Monthly,

Communities

with society groups

quarterly,

such as the Industrial

biannual

Emergency Response

Group, GIREL .

Industrial safety

and contingency

management, and

processes and mechanisms, training

En 2013 aplicamos 56
Report on safety and emergency
programas para contribuir a
mejorar la salud de nuestros
colaboradores, en beneﬁcio de
4,138 personas.

of neighborhood evacuation brigades,

ongoing support and training.

support for civil protection activities, and

company perception and

support.

EN30

Nature and Sustainable Operation
Our greatest commitment is to care for the environment as we
understand its signiﬁcance in terms of permanence over time
and quality of life. Our operating capacity is closely linked to
the preservation of our surroundings.

Our approach is to optimize the consumption of natural re-
sources and raw materials, reduce emissions and waste, and
enhance process efficiency. All our companies have their own

policies that enable them to deﬁne the procedures to follow
under any given scenario. These policies are aligned to Alpek’s
environmental objectives.

Internal and external audits are carried out on a monthly, quar-
terly and/or annual basis to ensure the proper management of
all procedures. External audits are performed by government
agencies, such as SEMARNAT, and quality and environmental
certiﬁcation agencies under ISO international standards.

ALPEK 2014 ANNUAL REPORT

Environmental investments in 2014 were distributed as follows:

Investment

(Millions of US $)

For example, as part of the implementation of the Environmental
Management System in our Polyester operations, we carried out
the following activities aimed at protecting the environment:

Treatment of emissions

Environmental management

costs

Prevention costs

Waste disposal

Remediation costs

Total

8.5

7.0

4.3

20.8

During 2014, we invested
US $21 million in actions that
beneﬁt the environment.

• We identiﬁed the environmental issues applicable to each
of the company’s processes and services (generation of
air pollutants, waste management, wastewater discharge,
energy consumption, etc.), and established the operational
controls applicable to each issue in order to minimize the
environmental impact.

• We trained the personnel on said issues and on the proper
execution of the operational controls applicable to the pro-
cesses and services.

• We identiﬁed all the company’s legal requirements related
to its operations to avoid ﬁnes and environmental pollution.

DAK Americas (PTA/PET). Columbia, United States

Sustainability

Consumption of raw materials in 2014

Weight in thousand tons

Raw material

Terephthalic Acid (TPA)

Paraxylene

Monoethyleneglycol (Glycol)

Propylene

Ammonia

Sulfur

Acetic Acid

Propylene Oxide

Pentane

Ethylene

2013

1,586

1,008

633

412

112

2014

1,465

998

582

447

106

Renewable Yes/No

Raw Materials and Use of Resources
The majority of the raw materials used in our processes come
from oil, a non-renewable resource. We are, therefore, constant-
ly striving to make the best possible use of them.

EN1,

PR1,

PR3

One of the most important actions in this regard is a construc-
tion project for a storage sphere for propylene, a particularly sig-
niﬁcant commodity since it is available from a single supplier in
Mexico. The proper storage facilities will bring several beneﬁts,
including:

• Stable feedstock inventory.
• Reduction in the supplier’s emissions as we maximize the

use of this raw material.

The reuse of materials is one of our most important actions.
Our PET bottle recycling plant in the United States has a ca-
pacity to recycle up to 73 thousand tons (more than 3.4 bil-
lion PET bottles) per year, representing the annual PET bottle
consumption of more than four million Mexicans. In 2014 the
plant recycled 48.6 thousand tons of PET bottles. Further-
more, we acquired CabelmaPET, S.A., which operates the
only food-grade recycled PET (r-PET) plant in Argentina, with
an annual capacity of 16 thousand tons. In addition to com-
plementing Alpek’s capacity in Argentina for virgin PET resin,
this purchase will enable us to offer virgin and recycled resin
in a single pellet, helping to conserve the environment and
streamlining customer operations by eliminating unneces-
sary supply and mixing processes.

Life-cycle phases of products submitted to evaluation processes in 2014

DAK

Indelpro

Polioles

Univex

Akra

Petrotemex

Product development

Manufacture

Marketing and promotion

Storage, distribution and supply

Consumption and service

Disposal, reuse or recycling

Yes

NIA

Yes

Percentage of products to which
these evaluation procedures apply

100%

NIA = No info available
NA = Not applicable

ALPEK 2014 ANNUAL REPORT

We also complied with the legal regulations on the speciﬁcation of the information contained in our products’ packaging, when
applicable:

Origin of the components of the product or service

Content (if there are substances that may have an

environmental or social impact)

Safe use of the product

Method of disposal of the product and its environ-

mental or social impact

Other (specify)

DAK

Yes

Polioles

Univex

Petrotemex

Indelpro

Akra

Yes

Batch
number for
tracking

DAK Americas (PET). Bay St. Louis, United States

Sustainability

Energy Efficiency
Lower energy consumption and the constant search for alter-
native renewable sources for procurement are priority issues.
The start-up of our co-generation plant in Cosoleacaque, Ve-
racruz, is evidence of the intense efforts we are undertaking in
this issue.

EN3,

EN4,

EN5,

EN7,

EC2

The plant started operations in the last quarter of 2014 and is ex-
pected to generate approximately 2.77 million GJ of energy per
year, enough to satisfy the annual consumption needs of approx-
imately 360,000 users. It will also produce 2.1 million GJ a year
of steam, equivalent to the annual energy demand of 63,605
homes. Steam generation has also enabled us to shut off the
plant’s furnaces, reducing our environmental impact even further.

Program

Reduction of electrical
energy consumption in
polymerization plants

Reduction of electrical
energy consumption in
splitter

Result

361.6 KWh/Ton PP

161.1 KWh/Ton PP

Our EPS plant generated 50% of the electrical energy consumed
in its installations through its cogeneration plant. Similarly, at our
polypropylene production plant we were able to ﬁne-tune ener-
gy consumption in critical processes and thus achieve signiﬁcant
reductions.

Another of the opportunities arising from this project is that,
in addition to covering our own electricity needs, we can
supply the power surplus to other industrial users at more
competitive prices.

93% of our installations use natural gas as their energy source,
the cleanest fuel to date.

Water Care
We know it is impossible to maintain sustainable operations
without committing to a responsible consumption of water, one
of the most important and vulnerable natural resources. For this
reason, we are continuously implementing strategies for a con-
scientious water management.

EN8,

EN10

In 2014 our energy consumption was distributed in the fol-
lowing way:

In 2014, water in Mexico tripled in price compared to the previ-
ous year. This, together with our environmental objective, drove
us to enhance our water consumption efficiency.

Energy consumption

Direct

Indirect

(millions of GJ)

consumption

Natural gas

Electricity

Coal

Biofuel

Fuel oil

Diesel

Other

Total

15.7

1.0

0.2

0.1

0.0

16.9

5.9

Total

(%)

68.6

25.9

4.4

0.7

0.3

0.1

5.9

100

As a result of other energy saving initiatives, we recorded a sav-
ing of 815 thousand GJ at the close of the year. This represented
a 3.5% of our total consumption, equivalent to the annual con-
sumption of approximately 25,178 Mexican families.

Other undertakings in 2014 also brought positive results. In
the Plastics and Chemicals segment, for example, we were
able to reduce the energy requirement per ton of polypropyl-
ene produced:

In 2014, our total water consumption was distributed in the fol-
lowing way:

Water capture

by source

Rivers or lakes

Company’s wells

Third parties

Public services

Total

Volume in 2014

(millions of m3)

91.6

3.5

1.4

1.0

97.5

Thus, throughout the year we carried out actions that enable us
to optimize our processes and advance towards our goals to re-
duce consumption and reuse a considerable percentage of the
resource. By 2020, we expect to be recycling 90% of wastewater
at our polyester plants.

ALPEK 2014 ANNUAL REPORT

Among the initiatives put into practice during 2014 were:

•

Inverse osmosis project, which recovers water from the
cooling towers and subsequently sends it as the input
current to the ultraﬁltration section.

• Optimization of cooling tower ﬂoats, helping us to
achieve a level of 1.33 m3/t efficiency in extracted water.
100% fulﬁllment of water reuse activities through the ef-
ﬂuent treatment plant at our caprolactam plant.

•

• 25% reduction in the use of ﬁltered river water at our Coo-

per River facilities.

• Recovery of 1.8 million m3 at our PET and PTA facilities, as
a result of the reuse of output ﬂows from one area as the
input for another area.

We treated 10.3 million m3 at our ten treatment plants, reducing
total consumption by 11%, enough to cover the annual water
needs of approximately 78,300 people. We were able to reuse
19% of it in our processes.

Biodiversity Conservation
Our facilities in Columbia, in the United States, and Zárate, Ar-
gentina, are the only ones located close to natural areas of high
biodiversity. In both cases, the plants contribute economically
and with human resources to support conservation. In 2012,
the Columbia site obtained Wildlife Habitat at Work certiﬁca-
tion, granted by the association of the same name, which rec-
ognized companies that go beyond standard regulations and
coordinate efforts between the company, the community and
employees to beneﬁt biodiversity in and around the workplace.

EN11,

EN12,

EN13,

EN14

Furthermore, we carried out actions to preserve and enhance
all our green areas and participated in reforestation activities
in the different communities where we operate. The me-
dium-term commitment is to develop integrated practices
across all our facilities.

Actions carried out during the year included:

In addition, in 2014 we reduced our total water consumption by
10% year-over-year.
.

• The celebration of Earth Day, with talks on environmen-
tal care, the community helped with the reforestation of
surrounding areas and school visits were made to talk to

GPT (PTA/PET). Cosoleacaque, Mexico

the students about the importance of looking after nat-
ural resources.

• Participation in Sustainability Week in coordination with ALFA.
Invitation to employees to contribute ideas on how we
•
can improve our environmental performance.

• More intense involvement with government authori-
ties such as CONAFOR to join forces and participate in
pro-biodiversity programs.

Reduction of Emissions and Smart Waste
Management

One of the most important objectives of our sustainability
strategy is the reduction of emissions and waste that have neg-
ative impacts on the planet.

EN16,

EN17,

EN18,

EN20,

EN21,

In 2014, emissions from our operations were as follows:

EN22,

EC2

Emissions (millions of CO2e)
Indirect

0.87

Direct

1.28

Total

2.15

The following information is from the PET plant in Cosolea-
caque, Veracruz, which generates NOx emissions due to the use
of a chimney:

Total NOx emissions
(tons of CO2)
224

Measurement

factor

Direct measurement

Through our cogeneration plant in Cosoleacaque we will be
able to avoid emitting an estimated 200 thousand tons of CO2.
We will report these results in 2015.

Waste

Biological sludge

Ash

Hazardous waste

Washing of process lines (hazardous)

Urban solid waste

Mineral oil

Spent aluminum

Liquid styrene (hazardous)

Spent batteries

Fluorescent lamps

Weight

(in tons)

13,014

3,572

380

Sustainability

Through other initiatives, we covered 100% of the Manage-
ment Program to improve the air in Salamanca and eliminated
steam leakages at our caprolactam production plants, avoid-
ing the emission of 16 t/CO2 per day. All of this motivates us
to continue along the road we have taken. It is important to
note that, year after year, we have signiﬁcantly reduced our
emissions, as certiﬁed by international bodies such as ISO and
UNFCCC. Our PET and PTA operations in Mexico, for exam-
ple, maintain an average annual reduction of 100,000 t/CO2. In
2014, they certiﬁed 390,000 t/CO2 in carbon bonds, thanks to
the implementation of an Energy Integration Project, bringing
the total to 900,000 t/CO2 at year-end.

The implementation of other actions in our companies record-
ed a total of 83.6 thousand tons of CO2 that were not emitted
into the atmosphere, equivalent to taking 17,606 cars out of
circulation for one year.

Regarding responsible, proper and smart waste management,
DAK Americas continued to be a spearhead with its Zero Waste
program. During the year, all its plants in the United States,
Mexico and Argentina implemented the program, with actions
including recycling, composting and/or converting waste into
energy to meet by 90% our goal of non-delivery to more than
200 landﬁll sites. Three have fully met this goal and the three
remaining plants expect to do so by the end of 2015. In addi-
tion, a total of almost 3,175 tons of biological sludge was sent
for composting.

The total of the most signiﬁcant waste generated in 2014 was
17,216 tons, distributed as follows:

Treatment method / conﬁnement (compost, reuse,

recycling, incineration, landﬁll, etc.)

25% in landﬁll, 75% recycled

27% in landﬁll, 73% recycled

Thermal destruction for energy recovery

Co-processing

Controlled conﬁnement

Reuse as alternative fuel

Co-processing

External recycling

Controlled conﬁnement

ALPEK 2014 ANNUAL REPORT

Our objective is not only to properly manage waste, but also to
reduce waste production. At our PET and PTA production plants,
for example, we have achieved a 10% reduction in the genera-
tion of hazardous waste.

Our Employees
Employees are our most important resource. For this reason, we
make a constant effort to ensure the well-being and personal
and professional development of every one.

Results of wastewater discharge in 2014:

Water discharge into

Discharge volume in 2014 (m3)

Rivers or lakes

Sea

Other

Public drainage

Total

85,120,000

10,080,018

404,637

22,869

95,627,524

Due to the nature of our operations, there is a predominance of
male workers. However, Alpek is committed to gender equality
in terms of beneﬁts, opportunities and responsibilities. We ad-
here to the provisions of the ALFA Code of Ethics; our compa-
nies apply policies and use measurement systems and tabulators
to ensure the equitable treatment of men and women, and avoid
any gender distinction in the determination of wages or apti-
tudes when ﬁlling vacancies. One example of these policies is
DAK Americas’ Equal Employment Opportunity Policy.

One major action carried out in 2014 was the reduction of COD
(Chemical Oxygen Demand) in the wastewater we send to the
sea. This means that the water is increasingly cleaner when dis-
charged, and as a result, has less environmental impact.

Furthermore, Alpek does not discriminate on ethnic, disability,
religious or any other grounds; the only relevant criteria for se-
lecting our employees are their abilities and experience. In 2014,
15 handicapped people collaborated with us.

LA1,

LA3,

LA4,

LA5,

LA14

Short- and medium-term environmental
performance goals:

Our workforce in 2014 was distributed as follows:

• Construction of the polypropylene storage sphere.
• Development of a biodiversity policy across Alpek.
• Reaching the goal of Zero Waste in all DAK Americas

operations.

Human Value and Social Action
We are convinced that the human element is the basis of any
organization. We understand that our internal and external com-
munities are vital for ensuring our permanence over time and
obtaining a license to operate. In addition, the generation of so-
cial beneﬁts allows us to ensure that the decisions we make have
a positive impact on our people.

Employee category

Executives and
employees

Unionized

Men

1,178

Women

555

Total

1,733

2,853

2,936

Gender

Men

Women

Contract type

Permanent

Temporary

Professional fees

Totales

Number

% of total

4,031

638

Men

3,903

127

4,031

Women

633

Total

4,536

132

638

4,669

Under 30 years

Between

30 and 50 years

Over 50 years

821

174

995

2,168

361

2,529

1,042

103

1,145

Total

4,031

638

4,669

Group

Men

Women

Total

It should be noted that our commitment to the personal and
professional growth and development of our employees is on-
going. In 2014, internal mobility to cover vacancies was 66%
at our PET and PTA operations. The beneﬁts and allowances
that employees receive include an annual bonus, vacation pay,
grocery vouchers, a savings fund, long-service recognition and
a pension plan, which consists of a ﬁxed contribution by the
company which starts at 4% of the employees’ salary with a
ceiling of 17%.

In accordance with our commitment to human rights, we re-
spect the decision of our workers to organize through collective
agreements. 63% of our employees belong to a union. As part of
our duty to keep employees informed, Alpek gives prior notice
of four to eight weeks before any important change(s).

LA7,

LA8,

LA9

Occupational Health and Safety
Ensuring a safe and healthy working environment for those
who work in our company is one of our biggest responsibil-
ities and we comply with, and go beyond, the provisions of
the law. We are constantly implementing programs aimed at
increasing safety in processes, employee training for a correct
performance in the workplace and initiatives that encourage
healthy living practices.

During the year, we invested a total of US $4.4 million in actions
to enhance the safety of the entire workforce. Several of our
facilities accomplished important results, for example:

• Indelpro reached 2.3 years without any disabling accidents.
• DAK Americas in Cosoleacaque achieved six years without

any disabling accidents.

• Petrotemex implemented more than twenty risk reduction
actions and no signiﬁcant incidents were reported in the
handling of container units.

Accident rates in 2014 compared to 2013:

Loss ratio

Frequency

Accidents

Days lost

Physical losses

2013

102.05

2.32

969

2014

58.72

1.27

555

Sustainability

It is a priority for Alpek to ensure that employees work under
the strictest protection controls, especially because some of
the activities carried out at the plants involve a certain degree of
risk. For this reason, and in adherence to ALFA practices, we are
constantly working on initiatives to reduce accidents and occu-
pational illnesses, with the support of safety, health and hygiene
committees on which employees participate. Our plants have
health units, speciﬁc programs to educate and contribute to
employee health, and vaccination, nutrition and physical activity
campaigns. These aspects are covered by internal regulations.

This year we invested US $14.3 million in close to 40 campaigns,
programs and initiatives to beneﬁt the physical and emotional
well being of the workforce. Among other activities, we gave
talks on speciﬁc topics, such as the prevention of hearing impair-
ment and osteomuscular injuries, among others. A total of 3,391
employees were beneﬁtted.

DAK Americas (PTA/PET). Columbia, United States

ALPEK 2014 ANNUAL REPORT

LA10,

LA11

Training and Development
The training of our employees is fundamental for Alpek; in 2014,
we invested US $1.4 million in this matter. A total of 2,374 em-
ployees beneﬁtted from an average of 39 training hours per
person. We provided training from induction into the company
to talks on handling retirement, through programs such as the
Employee Assistance Program in the United States, or the dis-
tribution of shares for retirement and pensions granted by the
IMSS in Mexico. In addition, during 2014 we authorized a total
of 132 scholarships for employees who wished to continue with
graduate studies.

Average training hours per
employee in the year

Average training hours per employee

in the year by gender

Men

Women

Average training hours per employee in the year by

employee category

Unionized

Employee

Alpek’s commitment to education is not limited to company em-
ployees. In 2014, 192 of our employees’ children received sup-
port and scholarships from elementary school to high school.

We also understand the need to live a balanced life and offer
ample opportunities for recreation activities and development
programs for our employees and their families. In 2014, we in-
vested US $155 thousand in this area with the participation of
4,052 people.

Our Communities
We are aware of our responsibility to the communities close to
the places where we operate. All our sites constantly evaluate
the risk of negative impacts on the communities and undertake
actions to mitigate them.

Preventing negative impacts is not enough. We strive to ensure
that our operations have a positive impact on the community
through health programs, safety training measures, meetings
with neighbors of the plants, support programs for the cre-
ation of infrastructure, and direct support for the most vulner-
able sectors.

SO1,

SO9,

SO10,

EC6,

EC7,

EC8

Univex (CPL). Salamanca, Mexico

Sustainability

Actual and/or potential risks and mitigation measures.

Company

Indelpro

Polioles

Actual or potential

impact

Impact mitigation action

Emission of hydrocarbons,
emission of combustion gases.

Maintenance of installations, instrumented safety systems and vent control
program, personnel training, audits.

Release of energy or hazardous
substances.

Compliance with regulations, implementation of the Integrated
Responsibility Administration System.

DAK Americas

Leakages, spills or system failures
that result in the emission of toxic
gases or contaminated materials.

Constant on-off-failure control which ensures prompt detection and
shutdown in case of any incident. Similarly, a system is in place to send
emissions to a control mechanism, even during normal operations.
Continuous audits, visual and technical monitoring, implementation of
new processes.

Akra Polyester

Chlorine gas or thermal oil
leakage.

Univex

Ammonia and cyclohexane
leakage.

Water sprays, control valves, and ﬁre detection systems.
Trained emergency brigades.
Participation in the Local Committee for Mutual Help (CLAMCAP) with
neighboring companies.
Coordination and implementation of the Internal Emergency Response
Plan (Emergency and Evacuation Plan).
Periodic inspection of safety devices in chlorine and dowtherm installations.
Execution of practical exercises to attend to chlorine leaks.

Automatic electronic monitoring system for cyclohexane leaks, emergency
brigade with the necessary equipment for contingency control. The
company is a member of the mutual help group SAMI.

In 2014, we invested US $31 thousand in actions to improve in-
frastructure in our neighboring communities, beneﬁtting more
than 1,650 people. Other actions carried out were:

• Petrotemex implemented its Vive Verde program, through

which it holds talks in schools on sustainability.

• Univex began to offer free medical consultations to mem-
bers of its most vulnerable communities. In addition, as
part of its process activities, it tests its fertilizer on land ac-
quired for the purpose. This year it donated the entire crop
produced as a result to neighboring communities, and will
continue to do so in the future.

• Talks were given on safety in the home, ﬁrst aid and burns.

We also implemented programs for young students in our com-
munities: more than 7,000 students beneﬁtted from support and
donations to 53 schools near our operating sites, and 135 stu-
dents completed their internships at our companies.

Furthermore, in an effort to increase local economic develop-
ment, our companies use criteria to select suppliers from the
city, state or country where they operate. Approximately 62.5%
of our suppliers are local. Alpek adheres to ALFA recruitment
practices, considering local candidates ﬁrst to cover vacancies
and keeping the workforce in the companies we acquire, as far
as possible.

One of our short- and medium-term commitments is the devel-
opment of community engagement policies at the business unit
level and as a group.

As part of the community engagement strategy we have already
implemented, we collaborate with associations, institutions and
business chambers to create strategic partnerships that enable
us to generate actions that are mutually beneﬁcial. In 2014, we
participated in the following:

ALPEK 2014 ANNUAL REPORT

Company

Association

4.12,

4.13

Does the company
participate in governing
bodies?

Does the company
provide contributions
in excess of those
required from other
members?

Is participation in
these associations
strategic?

ANIQ (National Chemi-
cal Industry Association)

ANIQ (National
Chemical Industry
Association)

ACIA (Industrial
Credit Association of
Argentina)

AFMA (America
Fiber Manufacturers
Association)

CAIRPLAS (Recycled
Plastics Chamber)

CAPCA (Carolinas
Air Pollution Control
Association)

CCAM (Argentina-
Mexico Chamber of
Commerce)

CEMPRE (Business
Commitment to
Recycling)

CERA (Chamber
of Exporters of the
Argentine Republic)

CICAZ (Zárate-
Campana Inter-
industrial Committee
for Environmental
Preservation)

CIPETAR (Chamber
of the PET Industry in
Argentina)

CIQyP (Chamber of
the Chemical and
Petrochemical Industry)

CIRA (Chamber of
Importers of the
Argentine Republic)

Yes

Akra Polyester

DAK Americas

Yes

DAK Americas

Petrotemex

Zárate-Campana
Regional Committee on
Health and Safety

IAE (Argentine
Packaging Institute)

INDA (Association of
the Nonwoven Fabrics
Industry)

IPA (Argentine
Petrochemical Institute)

MMA (Mississippi
Manufacturers
Association)

National Associate
for PET Container
Resources

NCMA (North Carolina
Manufacturers Alliance)

NCTO (National
Council of Textile
Organizations)

SCMA (South Carolina
Manufacturers Alliance)

STA (Southern Textile
Association)

SYFA (Synthetic Yarn
and Fiber Association)

The PET Resin
Association

UET (Business Union
of the Municipality of
Tigre)

UIZ (Industrial Union of
Zárate)

ANIQ (National
Chemical Industry
Association)

Association of
Industrials from the
South of Tamaulipas
C.A.

Import-Export National
Association of the
Mexican Republic, C.A.

Yes

Sustainability

ALPEK 2014 ANNUAL REPORT

Petrotemex

Mexican Arab Chamber
of Industry and
Commerce

COMCE NORESTE, A.C No

Indelpro

AISTAC

Association of
Industrials from the
South of Tamaulipas
C.A.

ANIQ (National
Chemical Industry
Association)

Polioles

Univex

Yes

Polioles (EPS). Altamira, Mexico

Sustainability

Country

Mexico

Awards and certiﬁcations 2014

2.10

Company

Recognition or certiﬁcation

Granted by

Indelpro

ISO 14001:2004

ABS Quality Evaluations, Inc

Clean Industry Certiﬁcation

Federal Environmental Protection Agency

Certiﬁcate of Comprehensive Responsibility

ISO 9001:2008

Recognition for publication of the First Guide
to Environmental Culture

Appreciation for the solidarity in emergency
care at the Madero Reﬁnery

National Chemical Industry Association
(ANIQ)

ABS Quality Evaluations, Inc

Municipal Government of Tampico

Pemex Francisco I. Madero Reﬁnery

Mexico

Voluntary Environmental Compliance

Government of the State of Tamaulipas

Petrotemex

Clean Industry Certiﬁcate

Federal Environmental Protection Agency

Safe Company Certiﬁcate

Comprehensive Responsibility

ISO-14000
Management System Certiﬁcation

Recognition Award AISTAC 2014

Ministry of Labor and Social Welfare

National Chemical Industry Association
(ANIQ)

AENOR México

Industrial Association of the South of
Tamaulipas

New Certiﬁed Company Scheme

Tax Administration Service (SAT)

Polioles

Comprehensive Responsibility Award for
Energy Efficiency

National Chemical Industry Association
(ANIQ)

Mexico

DAK Americas

CR - SC Manufacturers Alliance Award

South Carolina Department of Labor

United States

DAK Cosoleacaque – ﬁve years without
recordable OSHA

DAK Americas

Mexico

Climate Registry Certiﬁcation

Climate Registry

Zero Waste Operation Award 2014

Recycling Association of Carolina

NCDOL 3-year Award

North Carolina Department of Labor

Akra Polyester Oeko-Tex Standard 100 Certiﬁcate

Hohenstein Textile Testing Institute

ISO 14001

Bureau Veritas

United States-
Mexico

United States

Germany

France

Board of
Directors

Armando Garza Sada (3)
Chairman of the Board of Alpek, S.A.B. de C.V.

Andrés E. Garza Herrera (1A)
Chief Executive Officer of Qualtia Alimentos, S.A. de C.V.

Chairman of the Board of ALFA.
Member of the Boards of FEMSA, Frisa Industrias, Grupo
Financiero Banorte, Lamosa, Liverpool, Proeza, ITESM, and
Stanford University.

President of the Mexican Council of the Consumer Goods
Industry (ConMexico). Member of the Board of Xignux, the
Regional Board of Banorte, the General Councils of UDEM
and Ciudad de los Niños.

Álvaro Fernández Garza (3)
President of ALFA, S.A.B. de C.V.

Member of the Boards of ALFA, Vitro, Cydsa, Grupo
Aeroportuario del Pacífico, and the University of Monterrey
(UDEM). Current President of the Chamber of Industry of
Nuevo León (CAINTRA).

Francisco José Calderón Rojas (2)
Chief Financial Officer of Grupo Franca Industrias, S.A. de C.V.

Member of the Boards of Franca Industrias, Franca
Servicios, Franca Desarrollos, Capital Inmobiliario
Institucional, and UDEM.

Pierre Francis Haas García (1)
Advisory Services Director of Hess Energy Trading Company
(HETCO).

Jaime Serra Puche (1A)
Founding Partner and Chief Executive Officer of SAI
Consultores, S.C.

Member of the Boards of Fondo México, Tenaris, Vitro,
Grupo Modelo, Rotoplas, Fresnillo plc, and Grupo
Financiero BBVA Bancomer.

Enrique Zambrano Benítez (1A)
Chief Executive Officer of Grupo Proeza, S.A. de C.V.

Rodrigo Fernández Martínez (3)
Marketing and Finance Director of Sigma Alimentos, S.A. de
C.V.

Member of the Boards of Grupo Proeza, Frisa Industrias,
CFE, and ITESM.
President of the Regional Board of Banco Ve por Más.

Merici Garza Sada (3)
Investor

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

ALPEK 2014 ANNUAL REPORTBoard of Directors | Management Team

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

CEO of Alpek since 1988. Former

Chief Financial Officer of Alpek

President of Alpek’s PTA Business

President of Alpek’s PET and Staple

CEO of Petrocel, Indelpro, and Po-

since 2013. Former President of the

Unit since 2008. Joined Alfa in 1977

Fibers Business Unit since 2012.

lioles, and former Chairman of the

Caprolactam Division of Alpek and

and is former CEO of Indelpro and

Former Executive Vice President of

National Association of the Chem-

President of AOL Mexico. Holds a

Galvacer. Holds an MBA from Cor-

PET Resins and Vice President of

ical Industry (ANIQ). Holds an MBA

Master’s in Engineering from Stan-

nell University.

Planning and Administration of DAK

from ITESM and a Master’s in In-

ford University.

dustrial Engineering from Stanford

University.

Americas LLC. Holds an MBA from

the University of Pennsylvania.

Jorge González Escobedo

President of the Filament Fibers

Alejandro Llovera Zambrano

President of the Polypropylene

José Luís Zepeda Peña

President of the EPS and Chemi-

Business Unit

cal Business Unit

Gustavo Talancón Gómez

President of the Caprolactam

and Fertilizers Business Unit

President of Alpek’s Filaments Fi-

President of Alpek’s Polypropylene

President of Alpek’s EPS and Chemi-

President of the Caprolactam and

bers Business Unit since 2005.

Business Unit since 2008. Joined

cal Business Unit since 1999. Joined

Fertilizer Business Unit since 2013.

Joined Alfa in 1974 and is former

Alfa in 1985, is former Director of

Alpek in 1986 and is former Vice

Joined Alfa in 1989, is former CEO

Vice President of Alpek’s Industrial

Human Resources at Alfa, held sev-

President of Planning, Finance and

of Terza, and held several executive

Filaments Business Unit. Holds an

eral executive positions in Alpek’s

Administration, and Sales in Gru-

positions in Alpek’s Polypropylene

MBA from ITESM.

Synthetic Fibers Business Unit and

po Petrotemex. Holds a Master’s in

and Nylon and Polyester Filaments

was Chairman of ANIQ. Holds an

Chemical Sciences from UNAM and

Business Units. Holds a graduate de-

MBA from ITESM.

an MBA from ITESM.

gree from IPADE.

ALPEK 2014 ANNUAL REPORT

Corporate Governance

4.1,

4.3,

4.4,

4.6,

LA13

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.

Once a year, all companies that are listed on the Mexican Stock
Exchange (BMV) must disclose the extent to which they adhere
to the CMPC by answering a questionnaire. The responses of
the different companies may be consulted on the BMV’s website.

E) The Audit and Corporate Practices Committee studies and issues

recommendations to the Board of Directors on matters such as

selecting and determining the fees to be paid to the external audi-

tor, coordinating with the company’s internal audit area and study-

A summary of Alpek’s principles of corporate governance is pre-
sented below, reﬂecting the answers the company gave to the
questionnaire in June 2014 and updated where necessary:

ing accounting policies.

F) Additionally, the Audit and Corporate Practices Committee is re-

sponsible for issuing recommendations to the Board of Directors

on matters related to corporate practices, such as employment

A) The Board of Directors is made up of nine members, who have

terms and severance payments for senior executives, and com-

no alternates. Of the nine directors, four are independent board

pensation policies.

members, four are related proprietary board members and one

is an independent proprietary board member. This annual report

G) The company has internal control systems with general guidelines

provides information on all the board members, identifying those

that are submitted to the Audit and Corporate Practices Commit-

who are independent and their participation in the Audit and Cor-

tee for its opinion. In addition, the external auditor validates the

porate Practices Committee.

effectiveness of the internal control system and issues reports

B) The Board of Directors is advised by the Audit and Corporate Prac-

thereon.

tices Committee, which is made up of independent board mem-

H) The Board of Directors is advised by the planning and ﬁnance de-

bers. The Committee Chairman is an independent board member.

partment when evaluating matters relating to the feasibility of in-

vestments, strategic positioning of the company, alignment of in-

C) The Board of Directors meets every three months. Meetings of the

vesting and ﬁnancing policies, and review of investment projects.

Board may be called by the Chairman of the Board, the Chairman

This is carried out in coordination with the planning and ﬁnance

of the Audit and Corporate Practices Committee, the Secretary of

department of the holding company, ALFA, S.A.B. de C.V.

the Board or at least 25% of its members. At least one such meet-

ing every year is dedicated to deﬁning the company’s medium and

I) Alpek has a department speciﬁcally dedicated to maintaining an

long-term strategies.

open line of communication between the company and its share-

holders and investors. This ensures that investors have the ﬁnancial

D) Members must inform the Chairman of the Board of any conﬂicts

and general information they require to evaluate the company’s

of interest that may arise, and abstain from participating in any

development and progress. Alpek uses press releases, notices of

related deliberations.

material events, quarterly results conference calls, investor meet-

ings, its website and other communication channels.

J) Alpek promotes good corporate citizenship and adheres to the

recommendations of its holding company, ALFA, S.A.B. de C.V. It

has a mission, vision and values, and code of ethics that are pro-

moted within the organization.

Corporate Governance | Glossary

Glossary

Caprolactam (CPL)

IntegRex®

CPL is made by reacting cyclohexane, ammonia and sulfur and
is the raw material for the production of Nylon 6 polymer. Nylon
6 is a synthetic resin that, because of its strength, ﬂexibility and
softness, has a range of end uses, including for sportswear, un-
derclothes and engineering plastics.

Alpek-owned technology for producing PTA and PET from par-
axylene (PX) and monoethylene glycol (MEG), offering signiﬁcant
cost savings and fewer intermediate steps in the production pro-
cess.

Clean Industry Certiﬁcation

Certiﬁcation granted by the Mexican Environmental Protection
Agency (PROFEPA) to companies that comply with environmen-
tal legislation.

CO2 Emissions

Unit to measure the carbon dioxide produced by the burning of
solid, liquid and gaseous fuels, including natural gas.

Comprehensive Responsibility Administrative System (Mex-
ican National Association of the Chemical Industry, ANIQ)
Certiﬁcation given to companies that comply with the six com-
prehensive responsibility requirements established by the ANIQ,
covering Process safety, Health and safety in the workplace,
Product safety, Transportation and distribution, Prevention and
control of environmental pollution and Community protection.

Investment Grade

Rating given to a company as a result of an evaluation made
by credit-risk rating agencies such as Fitch Ratings, Standard &
Poor’s and Moody’s.

ISO 14001 Certiﬁcation

Internationally accepted standard for establishing an efficient
Environmental Management System (EMS). The standard is de-
signed to support companies’ proﬁtability and at the same time
minimize environmental impact.

ISO 9001 Certiﬁcation

Certiﬁcation issued by rating agencies to those companies that
operate with proven procedures for assuring the quality of their
products, in accordance with the standard deﬁned by the Inter-
national Organization for Standardization (ISO).

Cyclohexane

Megawatt (MW)

Unit of power, equal to 1 million watts.

Compound produced by the hydrogenation of benzene and
used in caprolactam production.

Monoethylene Glycol (MEG)

Ethylene Oxide

Raw material with diverse industrial uses, especially for produc-
ing polyester (PET and ﬁber), antifreeze, refrigerants and solvents.

Compound produced from ethylene and used as an intermedi-
ate in the production of MEG and other chemicals.

Paraxylene (pX)

Expandable Polystyrene (EPS)

Light, rigid, cellular plastic, product of the polymerization of sty-
rene monomer. EPS is a versatile material because of its proper-
ties as an impact reducer and thermal insulator, and customized
molding capacity. These properties, combined with the ease
with which it can be processed, make EPS a popular packag-
ing for impact-sensitive items and for protecting perishables. It
is also widely used in construction systems, to lighten ﬂoor and
roof structures, and as an insulator.

Hydrocarbon in the xylene family used to produce PTA. It is also
a component of gasoline.

Polyester Chain

Alpek business that comprises all the companies involved in
polyester production, from the raw material (PTA) to the produc-
tion of PET and ﬁbers.

ALPEK 2014 ANNUAL REPORT

Polyethylene Terephthalate (PET)

Puriﬁed Terephthalic Acid (PTA)

Material widely used in the manufacture of bottles and other
containers for liquids, food and personal hygiene, household
and healthcare products. PET ﬂakes and ﬁlms are used to pro-
duce caps, trays and recipients. Because of its transparency,
strength, durability and high protection barrier, PET presents no
known health risks, is light and recyclable, and has a wide range
of applications in reusable, temperature-sensitive packaging.
PET has replaced glass and aluminum, as well as other plastics
such as PVC and polyethylene, for making containers.

Polypropylene (PP)

Thermoplastic polymer, produced from the polymerization of
propylene monomer. Its properties include a low speciﬁc grav-
ity, great rigidity, resistance to relatively high temperatures and
good resistance to chemicals and fatigue. PP has diverse appli-
cations, including for packaging, textiles, recyclable plastic parts
and different kinds of containers, auto-parts and polymer (plas-
tic) banknotes.

Aromatic dicarboxylic acid, the main raw material in polyester
production. PTA is produced by the oxidation of paraxylene. It
is used to manufacture PET, which is then used to make bottles
for water, soft drinks and other beverages, containers and other
packaging, and polyester ﬁber for rugs, clothing, furniture and
industrial applications, as well as other consumer products.

Self-regulation of Health and Safety in the Workplace, Level
4 Certiﬁcation

Program implemented by the Mexican Ministry of Work and So-
cial Welfare to verify that companies have implemented adminis-
trative systems that promote safe, hygienic work centers.

Single Step®

One-step technology for the production of EPS, where the EPS
pearls are impregnated with a pre-expanded agent during the
polymerization process.

Polyurethanes (PURs)

Spheripol®

Rigid, ﬂexible or elastic, durable materials that are produced by
the reaction of a polyol with an isocyanate. They are very ver-
satile, offering the elasticity of rubber, combined with the hard-
ness and durability of a metal. PURs may be hard like ﬁberglass,
spongy like upholstery foam, protective like varnish, elastic like
tire rubber or sticky like glue.

Propylene

Unsaturated, 3-carbon hydrocarbon, co-product of the cracking
process at petrochemical complexes and a byproduct at oil re-
ﬁneries. It is used in the petrochemical industry to produce PP,
propylene oxide, cumene, isopropanol, acrylic acid and acrylo-
nitrile. It is also converted into a gasoline component by alkyla-
tion with butanes or pentanes.

LyondellBasell-owned technology which is the world’s most
common way of producing polypropylene.

Spherizone®

LyondellBasell’s most recent technology, which offers great ﬂex-
ibility in polypropylene production and is used to make a wide
range of products.

Styrene Monomer

Unsaturated hydrocarbon used to make a variety of plastics,
synthetic rubber, protective coatings and resins. It is the main
raw material in EPS production and also used as a solvent and
chemical intermediate.

Propylene Oxide

Unit of power in the International System of Units (SI).

Watt

Compound produced from propylene and used to manufacture
commercial and industrial products, including polyols, glycols
and glycoethers.

Consolidated
Financial
Statements

Alpek, S. A. B. de C. V. and subsidiaries
At December 31, 2014 and 2013

Management’s Discussion and Analysis
Report of the Independent Auditors
Statements of ﬁnancial position
Statements of income
Statements of comprehensive income
Statements of changes in stockholders’ equity
Statements of cash ﬂows
Notes to the ﬁnancial statements

46
52
53
54
55
56
57
58

ALPEK 2014 ANNUAL REPORT

Management’s Discussion and Analysis

2014
The following analysis complements the Letter to the Shareholders, the Audited Financial Statements and Complementary
Information. Unless otherwise stated, ﬁgures are expressed in millions of nominal pesos, with certain ﬁgures expressed in millions
of dollars (US $) due to the high level of dollarization of Alpek’s revenues. Percentage variations are presented in nominal terms. The
information is presented in accordance with International Financial Reporting Standards (IFRS).

Economic Environment
During 2014, the global economy experienced a divergence in regional growth rates. While in the United States, the economy
showed robust growth of 2.4%, growth in the Eurozone was 0.9%. In addition to the divergent growth rates, developed economies
implemented opposing monetary policies, causing a sharp appreciation of the United States dollar.

Meanwhile, there was a slowdown in emerging economies. In China, growth was among the lowest in the last two decades, at 7.4%,
and in Mexico growth was 2.1%.

Finally, the global surplus of oil production led to prices plummeting by more than 50% during the second half of the year.

The gross domestic product (GDP) and other economic variables in Mexico are described in the following paragraphs:

Mexico’s GDP grew 2.1% in 2014, slightly more than growth in 2013. Inﬂation to the consumer was 4.0% (b) in 2014, also higher than
the 3.8% (b) reported in 2013. The Mexican peso had an annual nominal depreciation in 2014 of 12.5% (c), compared to the 0.5 % (c)
depreciation in 2013.

As far as interest rates in Mexico, the Tasa de Interés Interbancaria de Equilibrio (TIIE) stood at 3.5% (b) in 2014 in nominal terms,
compared to 4.3% (b) in 2013. In real terms, there was a decline, going from an annual cumulative of 0.4% in 2013 to -0.5% in 2014.

The annual average nominal 3-month dollar London Interbank Offered Rate (LIBOR) stood at 0.2% (b) in 2014, similar to the 0.3% (b)
observed in 2013. If the nominal depreciation of the peso is incorporated, LIBOR in constant pesos went from -3.1% (a) in 2013 to
8.4% (a) in 2014.

Sources:

(a) National Institute of Statistics and Geography (INEGI).
(b) Banco de México (Banxico).
(c) Banxico. Exchange rate for liquidating liabilities denominated in foreign currency and payable in Mexico.
(d) Alpek calculations with data from INEGI, bilateral with the United States, considering consumer prices.

Management’s Analysis

Volume – (Thousand tons)

2014

2013

2012

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

Polyester

Plastics and Chemicals

TOTAL VOLUME

3,082

849

3,931

3,035

839

3,874

3,263

823

4,086

(7)

(5)

Income

POLYESTER

Million pesos

Million dollars

PLASTICS AND CHEMICALS

Million pesos

Million dollars

TOTAL INCOME

Million pesos

Million dollars

Price Index

POLYESTER

Pesos

Dollars

PLASTICS AND CHEMICALS

Pesos

Dollars

TOTAL

Pesos

Dollars

2014

2013

2012

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

63,228

4,752

22,844

1,719

86,072

6,471

68,636

5,356

21,425

1,671

90,061

7,028

75,200

5,691

20,963

1,586

96,163

7,277

(8)

(11)

(4)

(8)

(9)

(6)

(3)

2014

2013

2012

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

106

105

101

100

103

102

100

(9)

(13)

(6)

(9)

(2)

(1)

Revenues
Alpek’s net revenue in 2014 amounted to $86,072 million (US $6.471 billion), 4% less than the $90,061 million (US $7.028 billion)
posted in 2013. The decrease was due to a 6% drop in average prices caused by the falling price of oil and feedstocks. A 1% increase
in volume was not enough to offset the decline in price.

Revenues by Business Segment
Revenue from Polyester in 2014 was $63,228 million (US $4.752 billion), 8% less than the $68,636 million (US $5.356 billion) in 2013,
due to a decrease of 9% in average sales price and a 2% increase in volume. The lower average price reﬂects the impact from the
decline in oil price.

ALPEK 2014 ANNUAL REPORT

In 2014, revenue from Plastics and Chemicals reached $22,844 million (US $1.719 billion), 7% above the $21,425 million (US $1.671
billion) in 2013. The increase was driven by 1% and 5% growth in volume and average sales price, respectively.

Operating Proﬁt and EBITDA
The operating proﬁt for 2014 was $3,739 million (US $286 million), 28% above the $2,926 million (US $228 million) in 2013. This rise
was a result of the $2,421 million in restructuring costs and asset impairment charge associated with the closing of our Cape Fear site
in 2013. Excluding that impact, operating proﬁt was 31% lower year-on-year, mainly due to the extraordinary impact from the decline
in oil and feedstock prices, as well as lower Polyester and Plastics and Chemicals margins.

EBITDA was at $5,710 million (US $434 million) in 2014, a decrease of 22% compared to the $7,344 million (US $572 million) posted in
2013. The drop in the price of crude in 2014 is estimated to have had a negative impact on EBITDA of approximately US $90 million,
including a non-cash inventory devaluation expense.

EBITDA – (million pesos)

Polyester

Plastics and Chemicals

Others and eliminations

TOTAL EBITDA

2014

3,541

2,110

5,710

2013

4,974

2,304

7,344

2012

7,008

2,607

(4)

9,611

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

(29)

(8)

(11)

(22)

(29)

(12)

(1,671)

(24)

EBITDA – (million dollars)

2014

2013

2012

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

Polyester

Plastics and Chemicals

Others and eliminations

TOTAL EBITDA

270

159

434

388

180

572

531

197

728

(30)

(12)

(24)

(27)

(9)

100

(21)

Financial cost, net
During 2014, the ﬁnancial cost, net expense was -$1,497 million (-US $111 million), 28% more than the -$1,172 million (-US $91 million)
in 2013. This increase was mainly due to the recognition of a non-cash exchange rate loss of $629 million caused by the depreciation
of the Mexican peso against the US dollar in 2014.

Financial Cost, Net -
(million pesos)

Financial expenses

Financial income

Net Financial Expense

Foreign exchange gain (loss)

Valuation of ﬁnancial derivative
instruments

2014

(956)

166

(791)

(629)

(77)

2013

(1,114)

159

(955)

(146)

(71)

2012

(1,894)

353

(1,541)

141

FINANCIAL COST, NET

(1,497)

(1,172)

(1,331)

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

(331)

(8)

(28)

(55)

(203)

Management’s Analysis

Taxes
Income tax in 2014 was $883 million (US $68 million), 8% more than the $817 million (US $63 million) reported in 2013. It should be
noted that the tax amount for 2013 includes a $920 million deferred tax beneﬁt associated with the Cape Fear site closure.

Taxes - (million pesos)

2014

2013

2012

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

Proﬁt before income taxes

Statutory tax rate

Income tax at statutory rate

Taxes for permanent differences
between accounting and taxable
proﬁt

Income tax

Effective tax rate

Made up as follows:

Current

Adjustment to the provision of
income tax from prior years

Deferred

Income tax

2,197

30%

(659)

(224)

(883)

40%

1,723

30%

(517)

6,106

30%

(1,832)

(300)

109

(817)

47%

(1,723)

28%

(975)

(1,137)

(1,458)

(6)

(883)

(44)

364

(817)

(268)

(1,723)

(28)

(8)

(73)

(8)

(72)

(377)

(1,567)

236

Net Income Attributable to the Controlling Interest
Net income attributable to the controlling interest reached $801 million (US $65 million) in 2014, 206% above the income of $262
million (US $21 million) posted in 2013. This mainly reﬂects the negative impact of $1,501 million that the closure of the Cape Fear
site had on 2013 Net income.

Statement of income - (million
pesos)

Operating proﬁt

Financial cost, net

Share in losses of associates

Income tax

Net consolidated proﬁt

Proﬁt attributable to controlling
interest

2014

3,739

(1,497)

(45)

(883)

1,314

801

2013

2,926

(1,172)

(30)

(817)

906

262

2012

7,476

(1,331)

(39)

(1,723)

4,383

3,663

VAR. % 2014
vs 2013

VAR. % 2013
vs 2012

(28)

(48)

(8)

206

(61)

(79)

(93)

ALPEK 2014 ANNUAL REPORT

Capital Expenditures
In 2014, capital expenditures were $4,359 million (US $320 million), 92% higher than the $2,275 million (US $179 million) of 2013.
The funds were used primarily for strategic projects such as the integrated PTA/PET site in Corpus Christi, the cogeneration plant in
Cosoleacaque, the acquisition of CabelmaPET, S.A. in Argentina and the technology upgrade of the caprolactam plant.

Net Debt1
Net debt rose to $10,519 million (US $715 million) as of December 31, 2014, 5% above the net debt of $10,015 million (US $766 million)
as of December 31, 2013, due to the depreciation of the Mexican peso against the US dollar. Excluding the effect of exchange rate,
net debt decreased mainly due to the increase in Alpek’s cash balance which rose from $4,740 million (US $362 million) in 2013 to
$5,747 million (US $390 million) by year end.

Short and long-term debt

2014

2013

Var.

2014

2013

Million dollars

% integrated

Short-term debt

Long term 1 year

5 years or more

TOTAL DEBT

Avg. maturity of long-term debt
(years)

Avg. maturity of total debt (years)

978

1,094

7.3

7.2

948

1,118

8.1

7.7

(44)

(96)

(63)

(51)

100

(2)

100

Financial indicators (Times)

2014

2013

2012

Net debt / EBITDA (US$)

Interest coverage (US$)

Total liabilities / Stockholder’s
equity

1.6

6.5

1.2

1.3

7.1

1.1

0.8

6.2

1.1

(1) Net Debt = Current debt plus non-current debt excluding debt issuance costs, plus accrued payable interest less cash and cash equivalents plus restricted

cash and cash equivalents.

Management’s Analysis

2014 HIGHLIGHTS

Acquisition of CabelmaPET, S.A.
In April 2014, we ﬁnalized the acquisition of CabelmaPET, S.A. (“CabelmaPET”), which operates the only food-grade recycled PET
(r-PET) plant in Argentina. Its annual capacity of 16 thousand tons will complement the 190 thousand tons per year capacity for virgin
PET that Alpek currently operates in Zárate, Argentina. We intend to incorporate the food-grade r-PET from CabelmaPET into the
Zárate manufacturing process which will enable us to offer PET resin that incorporates virgin and recycled material in a single pellet.
In addition to contributing to sustainability and environmental well-being, the PET resin products with recycled content will help
customers streamline their operations by eliminating unnecessary supply and mixing processes.

Caprolactam Plant Technology Upgrade
In June 2014, Alpek completed the technology upgrade of its caprolactam (CPL) plant under the technology license agreement
signed with DSM Fiber Intermediates, global leader in CPL technology. By year-end, the facility had achieved the expected efficiencies
in production and raw material consumption that will generate estimated annual savings of US $8 million.

Agreement Signed with BASF for EPS and PU Business in the Americas
In July 2014, Alpek signed an agreement with BASF to acquire its expandable polystyrene (EPS) business in the Americas and 100%
of Polioles’ EPS business. BASF will acquire Polioles’ polyurethane (PU) business. In addition to positioning Alpek as the leading EPS
producer in the Americas, this transaction will give us full control over this business unit in order to boost its growth. We expect to
close the agreement with BASF during the ﬁrst quarter of 2015.

Start-up of the Cogeneration Plant in Cosoleacaque
In December 2014, Alpek’s cogeneration plant in Cosoleacaque, Veracruz began operations. With a total investment of US $137
million and a 95 megawatt capacity, the new plant is expected to generate annual savings of approximately US $40 million. The plant
will supply all the steam and electricity requirements for Alpek’s PTA and PET plants in Cosoleacaque. In addition, it will supply excess
electricity to third parties around the country.

Termination of JV agreement with UPC in Russia
In December 2014, Alpek decided to terminate the JV agreement signed with United Petrochemical Company (UPC) in 2013 to
evaluate the construction of an integrated PTA/PET plant in Ufa, Bashkortostan, Russia. The termination agreement provides for the
sale of the shares of Grupo Petrotemex, S.A. de C.V. in RusPET Holding B.V. at a price of €3.6 million ($63 million). As a result, Alpek
recognized an impairment loss on its investment of $127 million in the fourth quarter of 2014.

Dividends
Alpek’s Shareholders’ Meeting approved the payment of a cash dividend of US $114 million on December 9, 2013, as an advance on
the 2014 dividend. As a result, no dividends were paid in 2014.

ALPEK 2014 ANNUAL REPORT

Report of the Independent Auditors

Monterrey, N. L., January 28, 2015

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 statements of ﬁnancial position as at December 31, 2014 and 2013, and the consolidated statements of income,
comprehensive income, changes in stockholders’ equity and cash ﬂows for the years then ended, and a summary of signiﬁcant
accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

The Management of the Company and subsidiaries 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 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, 2014 and 2013, and its ﬁnancial performance and its cash ﬂows for the
years then ended, in accordance with International Financial Reporting Standards.

PricewaterhouseCoopers, S. C.
PricewaterhouseCoopers, S. C.

Héctor Rábago Saldívar
Héctor Rábago Saldívar
Audit Partner
Audit Partner

Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Financial Position
At December 31, 2014 and 2013

(In thousands of Mexican pesos)

Asset
Current asset:
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivables, net
Inventories
Derivative ﬁnancial instruments
Prepayments an others

Total current asset

Non-current asset:
Property, plant and equipment, net
Goodwill and intangible assets, net
Deferred income tax
Other assets

Total non-current asset

Total asset

Liability and Stockholders’ equity
Liability
Current liability:
Debt
Suppliers and other accounts payable
Derivative ﬁnancial instruments
Income tax payable
Provisions
Other liabilities

Total current liability

Non-current liability:
Debt
Derivative ﬁnancial instruments
Deferred income tax
Provisions
Employee beneﬁts

Total non-current liability

Total liability

Stockholders’ equity:
Controlling interest:

Capital stock
Share premium
Retained earnings
Other reserves

Total controlling interest

Non-controlling interest

Total stockholders’ equity

Consolidated Financial Statements

Note

2014

2013

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

5,743,816
3,185
13,246,370
11,485,908
-
461,870

30,941,149

27,392,275
6,082,910
256,997
697,879

34,430,061

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 65,371,210

Ps 58,127,830

326,914
10,564,770
757,011
78,100
761,652
1,836,744

14,325,191

15,665,652
287,925
4,255,606
28,243
963,983

21,201,409

35,526,600

6,051,880
9,071,074
8,880,764
1,945,717

25,949,435

3,895,175

29,844,610

753,083
9,243,781
7,315
152,951
832,632
1,315,344

12,305,106

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

Total liability and stockholders’ equity

Ps 65,371,210

Ps 58,127,830

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

José de Jesús Valdez Simancas
José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Eduardo Alberto Escalante Castillo
Chief Financial Officer
Chief Financial Officer

ALPEK 2014 ANNUAL REPORT

Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2014 and 2013

(In thousands of Mexican pesos)

Revenue
Cost of sales

Gross proﬁt

Selling expenses
Administrative expenses
Other expenses, 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 in losses of associates

Proﬁt before income tax

Income tax

Net consolidated proﬁt

Proﬁt attributable to:
Controlling interest
Non-controlling interest

Note

2014

2013

25
25
26

2 c)

27
27

Ps 86,072,058
( 79,757,100 )

Ps 90,061,169
( 82,436,458 )

6,314,958

7,624,711

( 1,218,824 )
( 1,325,744 )
( 31,807 )

3,738,583

( 1,077,708 )
( 1,092,131 )
( 107,856 )

5,347,016

( 2,421,373 )

3,738,583

2,925,643

135,437
( 1,632,107 )

( 1,496,670 )

( 44,779 )

2,197,134

( 883,032 )

136,803
( 1,308,737 )

( 1,171,934 )

( 30,249 )

1,723,460

( 817,330 )

1,314,102

906,130

800,901
513,201

261,785
644,345

1,314,102

906,130

Basic and diluted earnings per share (in Mexican pesos)

0.38

0.12

Weighted average of outstanding shares (in thousands)

2,118,164

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

José de Jesús Valdez Simancas
José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Eduardo Alberto Escalante Castillo
Chief Financial Officer
Chief Financial Officer

Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2014 and 2013

(In thousands of Mexican pesos)

Consolidated Financial Statements

Note

2014

2013

Net consolidated proﬁt

1,314,102

906,130

Other items of comprehensive income of the year, net of taxes:

Items that will not be reclassiﬁed to the statement of income:

Remeasurement of obligations for employee beneﬁts

20, 29

( 217,489 )

377,934

Items that will be reclassiﬁed to the statement of income:

Effect of derivative ﬁnancial instruments
designated as cash ﬂow hedges

Translation effect

Share on other comprehensive income
of associates and joint ventures

16, 29

23, 29

( 674,507 )

2,416,988

1,694

196,931

27,918

Total other comprehensive income for the year

1,526,686

602,783

Total comprehensive income for the year

2,840,788

1,508,913

Attributable to:
Controlling interest
Non-controlling interest

1,931,557
909,231

813,879
695,034

Total comprehensive income for the year

2,840,788

1,508,913

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

José de Jesús Valdez Simancas
José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Eduardo Alberto Escalante Castillo
Chief Financial Officer
Chief Financial Officer

ALPEK 2014 ANNUAL REPORT

Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2014 and 2013

(In thousands of Mexican pesos)

Note

Capital stock

Share premium Retained earnings

Other reserves

Total attributable
to controling
interest

Non- controlling
interest

Total
stockholders’
equity

Balances at January 1,
2013

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

Net proﬁt
Total other
comprehensive
income for the year

Total comprehensive
income for the year

Dividends declared to
the non-controlling
interest
Changes of the
non-controlling
interest

Balances at December
31, 2014

6,051,880

9,071,074

11,006,758

50,264

26,179,976

3,471,186

29,651,162

261,785

644,345

906,130

552,094

50,689

602,783

261,785

552,094

813,879

695,034

1,508,913

( 2,959,455 )

( 1,093,233 )

( 4,052,688 )

( 16,522 )

( 3,201 )

( 19,723 )

6,051,880

9,071,074

8,292,566

602,358

24,017,878

3,069,786

27,087,664

800,901

513,201

1,314,102

( 212,703 )

1,343,359

1,130,656

396,030

1,526,686

588,198

1,343,359

1,931,557

909,231

2,840,788

6,051,880

9,071,074

8,880,764

1,945,717

Ps 25,949,435

3,895,175

Ps 29,844,610

( 96,129 )

12,287

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

José de Jesús Valdez Simancas
José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Eduardo Alberto Escalante Castillo
Chief Financial Officer
Chief Financial Officer

Alpek, S. A. B. de C. V. and subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2014 and 2013

(In thousands of Mexican pesos)

Cash ﬂows from operating activities

Proﬁt before income tax
Depreciation and amortization
Impairment of property, plant and equipment
Impairment of investment in joint ventures
Gain on sale of property, plant and equipment
Share in losses of associates
Finance cost, net
Loss on changes in the fair value
of derivative ﬁnancial instruments
Employees’ proﬁt sharing and provisions

Subtotal

Decrease in trade receivables
Decrease (increase) in accounts receivable from related parties
Decrease (increase) in other accounts receivable
Decrease (increase) in inventories
Increase (decrease) in accounts payable
(Decrease) 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 ﬂows from investing activities

Interest received
Acquisition of property, plant and equipment
Acquisition of intangible assets
Business acquisitions, net of cash acquired
Investment in joint ventures and associates
Derivative ﬁnancial instruments
Dividends received
Others

Net cash ﬂows used in investing activities

Cash ﬂows from ﬁnancing activities

Proceeds from debt
Payments of debt
Interest paid
Dividends paid
Dividends paid to the non-controlling interest
Changes in the non-controlling interest
Payment on loans to related parties

Net cash ﬂows used in ﬁnancing activities

Increase (decrease) in cash and cash equivalents

Foreign exchange on cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Consolidated Financial Statements

Note

2014

2013

11, 12
2c), 11, 26

23
9

2,197,134
1,839,420
4,948
126,906
( 286 )
44,779
1,293,363

95,366
( 193,331 )

5,408,299

978,763
724,793
106,652
695,120
171,404
( 130,155 )
( 1,337,962 )
( 6,528 )
( 17,398 )

6,592,988

102,485
( 1,437,108 )
( 2,753,643 )
( 170,200 )
( 352,481 )
( 23,346 )
927
216,863

( 4,416,503 )

4,637,739
( 5,083,537 )
( 870,239 )
-
( 96,129 )
12,287
( 103,586 )

( 1,503,465 )

673,020

333,708

4,737,088

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 )
( 2,953,020 )
( 1,093,233 )
-
-

( 5,045,301 )

( 1,886,419 )

( 31,054 )

6,654,561

5,743,816

4,737,088

The accompanying notes are an integral part of these consolidated ﬁnancial statements.

José de Jesús Valdez Simancas
José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Eduardo Alberto Escalante Castillo
Chief Financial Officer
Chief Financial Officer

ALPEK 2014 ANNUAL REPORT

Alpek, S. A. B. de C. V. and subsidiaries
Notes to the consolidated ﬁnancial statements
At December 31, 2014 and 2013

(In thousands of Mexican pesos, except where otherwise indicated)

Note 1 – General information

Alpek, S. A. B. de C. V. and subsidiaries (“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), polyurethane (PU), 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 second largest in Latin America, is the leading producer of PTA
and polyester ﬁbers in America and 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 Alfa, S. A. B. de C. V. (“Alfa”) is its main controlling
company.

The Company 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 of America and Argentina.

The following notes to the ﬁnancial statements when referring to peso or “Ps”, it means thousands of Mexican pesos. When referring
to dollars or “US$”, it means thousands of dollars from the United States. When referring to euros or “€” it means thousands of euros.

Note 2 – Signiﬁcant events

2014

a) Buy/sale of assets agreement of Polyurethane (PU) business in the Americas

During the month of July 2014, Alpek and BASF (“BASF”) announced the signature of agreement related to their business of EPS
and PU of their joint venture Polioles, S. A. de C. V. (“Polioles”) in Mexico, as well as the EPS business of BASF in North and South
America, excluding the business Neopor ® (grey EPS). Afterwards, in December 2014, in order to carry out the transactions the
ﬁnal agreements were signed considering March 31, 2015 as the closing date.

Consolidated Financial Statements

Start-up of the operations of the cogeneration plant

On December 1, 2014, Cogeneración de Energía Limpia de Cosoleacaque, S. A. de C. V. (“Cogeneradora”) began operations,
this was derived from the agreement signed by Alpek in 2012 to invest approximately US$130 million in an electrical and steam
energy cogeneration project through its subsidiary Grupo Petrotemex, S. A. de C. V. (“Grupo Petrotemex”). This cogeneration
plant, which will supply its PTA and PET plants located in Cosoleacaque, Veracruz, Mexico, will generate approximately 95
megawatts of electricity as well as all the steam needed to cover the requirements of these plants. The cogeneration plant will
also supply energy to other Alfa entities outside of Cosoleacaque.

In order to implement this project, Grupo Petrotemex and its subsidiary Dak Resinas Americas México, S. A. de C. V. (both
subsidiaries of Alpek) formed a corporation named Cogeneración de Energía Limpia de Cosoleacaque, S. A. de C. V. The project
will increase the plant’s efficiency by ensuring a supply of low cost energy with low emissions.

c) Joint venture agreement

On September 26, 2013, the subsidiary Grupo Petrotemex, signed a joint venture agreement with United Petrochemical
Company (“UPC”), a subsidiary of Sistema JSFC (“Sistema”), for the construction of an integrated plant of puriﬁed terephthalic
acid (“PTA”) - and polyethylene terephthalate (“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) acquired with a contribution of €4,080 and GPT has 49% (represented by Class B
ordinary shares) acquired 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 as of the date of the acquisition
and at December 31, 2013, Alpek has joint control and the investment should be treated as a joint venture, which in the opinion
of Management it is not material for the group; therefore, it is accounted for using the equity method. During 2014, Alpek made
payments amounting to Ps 121,014.

Due to particulars circumstances of UPC during the month of December 2014, Grupo Petrotemex decided to terminate the
agreement with UPC and proceed to sell the shares of JVC. The Deed of settlement and termination establishes a selling price
of the shares of approximately Ps 63,271 (€3,552). According to this, Management recorded an impairment of its joint venture
amounting to Ps 126,906 (see Note 26) and reclassiﬁed this investment, net of impairment, as an asset held for sale and it is
presented in the consolidated statement of ﬁnancial position within the line of prepayments and other.

ALPEK 2014 ANNUAL REPORT

2013

IntegRex® technology license and signature of a supply agreement with M&G

During April 2013, Alpek through its subsidiary Grupo Petrotemex 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
for 400 thousand tons of PET (manufactured with 336 thousand tons of PTA) a year. In accordance with the supply agreement,
Alpek will 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. At December 31, 2014, Alpek has made payments amounting to US$198.8 million. See Note 31.

Intangibles from licenses with Basell

The subsidiary Indelpro, S. A. de C. V. (Indelpro) held a contract in 2004, with Basell Polioleﬁne Italia S. r. l. (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 net sales value.

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 be made 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. On April 26, 2013, Indelpro decided to prepay to Basell Polioleﬁne Italy, S. r. l. 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 the contract conclusion until the date of payment. This payment was recorded
as an intangible asset and will be amortized according to the useful life of the contract. See Note 12.

Consolidated Financial Statements

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 thru distributing 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 after the starting plant’s operations. In this sense, the
Company estimated costs of Ps 859,096 (approximately US$67 million) initially recognized as part of the assets associated to the
plant, additionally, for costs attributable to the closing, such as restructuring costs, the Company estimated Ps 197,624 (US$15.5
million) resulting in a total of Ps 1,056,720 (US$82.2 million) as a provision for dismantling and demolition, environmental
remediation and restructuring costs. Out of this amount, the Company has disbursed Ps 190,551 (US$ 13.9 million) and
Ps 191,413 (US$ 14.7 million) in 2014 and 2013, respectively. At December 31, 2014, the balance of this provision amounts
to Ps 789,895 (US$ 53.6 million). This amount will be disbursed during the following two years.

During 2013, 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.

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.

Note 3 - Summary of signiﬁcant accounting policies

The accompanying consolidated ﬁnancial statements and notes were authorized for issuance on January 28, 2015, 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, 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 (“IFRS IC”), including those previously issued by the Standing Interpretations Committee
(“SIC”).

ALPEK 2014 ANNUAL REPORT

The consolidated ﬁnancial statements have been prepared on a historical cost basis, except for the derivative ﬁnancial instruments
designated as 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.

b) Consolidation

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 since the date on which the Company obtains the control 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 conducted 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
with the ex-owners of the acquired business 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 of entities under common control using the predecessor method. 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.

Consolidated Financial Statements

At December 31, 2014 and 2013, the mains subsidiaries of Alpek were:

Country (1)

Percentage of
Ownership

Alpek, S. A. B. de C. V. (Holding company)

Grupo Petrotemex, S. A. de C. V. (Holding company)

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.

USA

Spain

Argentina

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.

ii.

Absorption (dilution) of control in subsidiaries

100

Functional
currency

Mexican peso

US dollar

Euro

Argentine peso

US dollar

Mexican peso

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 carrying amount of the investment according to
percentage of ownership before the event of dilution or absorption against the carrying amount 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 amount 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.

ALPEK 2014 ANNUAL REPORT

The Company’s share in 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.

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 in 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
share 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.

Joint arrangements

Joint arrangements are those where the parties have 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

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 re-measured. 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 cash
ﬂow hedges or hedges of a net investment in a foreign operation.

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.

Consolidated Financial Statements

iii. Consolidation of foreign subsidiaries

Translation of subsidiaries with a functional currency different from their recording currency.

The ﬁnancial statements of 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.

b. The balances and movements of non-monetary assets, liabilities and stockholders’ 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.

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 non-
monetary 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) with a functional
currency different from the presentation currency are translated into the presentation currency as follows:

a. Assets and liabilities at December 31, 2014 and 2013 were translated at the closing exchange rates of 14.72 and 13.08

mexican pesos/dollar, respectively.

b. The stockholders’ equity of each statement of ﬁnancial position presented is translated at historical exchanges rates.

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 exchanges rates prevailing on the transaction dates, in which
case income and expenses should be translated at these exchanges rates), which amounted 13.30 and 12.82 mexican
pesos/dollar for the years ended December 31, 2014 and 2013, 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.

ALPEK 2014 ANNUAL REPORT

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.

Financial instruments

Financial assets

The Company classiﬁes its ﬁnancial assets in the following categories: at fair value through proﬁt or loss, loans and receivables,
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.

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. Derivative ﬁnancial instruments are classiﬁed in
this category, 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 receivables 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 statements of
ﬁnancial position 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 receivables are impaired.

Consolidated Financial Statements

iii.

Investments held to maturity

If the Company intends and has the demonstrable ability to hold debt securities to maturity, they are classiﬁed as investments
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, 2014 and 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 statement of ﬁnancial
position 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.

Offsetting ﬁnancial assets and liabilities

Assets and liabilities are offset and the net amount is presented in the statements of ﬁnancial position 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.

ALPEK 2014 ANNUAL REPORT

Impairment of ﬁnancial instruments

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 otherwise would not 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)
(ii)

Adverse changes in the payment status of borrowers in the group of assets
National or local conditions that correlate with default on the assets 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 reduction of approximately to
30% of the cost of the investment against its fair value or a reduction of the fair value against the cost for a period longer
than 12 months is considered objective evidence of impairment.

Consolidated Financial Statements

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.

g) Derivative ﬁnancial instruments and hedging activities

All derivative ﬁnancial instruments are identiﬁed and classiﬁed as fair value hedges or cash ﬂow hedges, or for trading and are
recognized in the statement of ﬁnancial position 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, hedge item, 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, 2014 and 2013, 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 operation 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 other 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, 2014 and 2013, the Company has no
derivative ﬁnancial instruments classiﬁed as net investment hedges.

ALPEK 2014 ANNUAL REPORT

Discontinuation of hedge accounting

The Company discontinues the hedge accounting when the derivative has expired, has been sold, 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 statement of ﬁnancial position date.

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-progress 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.

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.

Consolidated Financial Statements

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 carrying amount of the asset is greater than its recoverable amount, a decrease in value is recorded for
presenting at its recoverable amount.

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.

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:

ii.

Indeﬁnite useful life. - These intangible assets are not amortized and are subject to annual impairment assessment. As of
December 31, 2014 and 2013, no factors have been identiﬁed limiting the useful life of these intangible assets.

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:

Development costs
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

ALPEK 2014 ANNUAL REPORT

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 will be obtained and the Company intends and 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.

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.

Income tax

The amount of the income tax reﬂected in the consolidated income statement represents the current tax in the year, as well as
the effects of deferred income tax, which is determined in each subsidiary using the asset and liability method, applying the tax
rate established by legislation enacted or substantially enacted at the date of the statement of ﬁnancial position to the total of the
temporary differences resulting from comparing the carrying amounts and tax bases of assets and liabilities that are expected to
be applied when the deferred asset tax is realized or the deferred liability tax is settled, considering the tax losses carry forward
to be recoverable. The effect of a change in current tax rates is recognized in income of the period in which the rate change
is enacted.

Management periodically evaluates positions taken in tax returns with respect to situations in which the applicable law is subject
to interpretation. Provisions are recognized when it is appropriate, based on the amounts expected to be paid to the tax
authorities.

Deferred income tax assets are recognized only to the extent that is probable that future taxable proﬁt will be available against
which the temporary differences can be utilized.

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 the Company and it is probable that the temporary differences
will not reverse in the in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right, and when the Company intends,
either to settle on net basis or to realize the asset and settle the liability simultaneously.

m) Employee beneﬁts

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.

Consolidated Financial Statements

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 statement of ﬁnancial position 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 according
to IAS 19 that are denominated in the currency in which the beneﬁts will be paid, and have maturities that approximate the
terms of the pension liability.

Actuarial gains and losses from adjustments and changes in remeasurement of the net deﬁned beneﬁt liability (asset) 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 net deﬁned beneﬁt liability
(asset) liabilities (assets) from net deﬁned beneﬁts.

Past-service costs are recognized immediately in the income statement.

ii. Other post-employment beneﬁts

The Company provides post-employment medical beneﬁts. 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.

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 statements of ﬁnancial position 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.

ALPEK 2014 ANNUAL REPORT

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 obligation, legal or constructive as a result of past events, where an outﬂow of resources to meet
the obligation is likely and the amount can be reliably estimated. Provisions are not recognized for future operating losses.

Provisions are measured at the present value of the expenses that are expected to be required to settle the obligation using a
pre-tax rate that reﬂects current market value considerations, the time value of money and the speciﬁc risk of the obligation. The
increase in the provision over the course of time is recognized as interest expense.

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. At December 31, 2014 and 2013, there aren’t shares in treasury.

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,
remeasurments 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.

Consolidated Financial Statements

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 costumers. In some cases,
depending on the agreements with each costumer, the risks and beneﬁts associated to the property are transferred when the
goods are taken by the costumers 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 costumers.

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 substance of the agreement on which
they are based.

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. At December 31, 2014 and 2013, 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 relevance and / or incidence. These items
are disclosed in the consolidated statement of income and in Note 18. Operations that gave rise to non-recurring items were the
restructuring activities and impairments.

ALPEK 2014 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, 2014. The nature and impact of each new standard or modiﬁcation are described as follows:

•

IAS 32, ‘Financial instruments: Presentation’ on December 2011, the IASB modiﬁes the IAS 32. This amendment clariﬁes
that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties
in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also
considers settlement mechanisms. The amendment did not have a signiﬁcant effect on the consolidated ﬁnancial
statements.

IAS 39, ‘Financial instruments: Recognition and measurement’ on September 2013, the IASB modiﬁes the IAS 39 on
the novation of derivatives and the continuation of hedge accounting. This amendment considers legislative changes
to ‘over-the-counter’ derivatives and the establishment of central counterparties. Under IAS 39 novation of derivatives
to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from
discontinuing hedge accounting when novation of a hedging instrument meets speciﬁed criteria. The Company has
applied the amendment and there has been no signiﬁcant impact on the consolidated ﬁnancial statements.

IFRIC 21, ‘Levies’ on May 2013, the IASB modiﬁes the IFRIC 21 the interpretation addresses what the obligating event
is that gives rise to pay a levy and when a liability should be recognized. The Company is not currently subjected to
signiﬁcant levies so the impact on the Company is not material.

x) New accounting pronouncements not early adopted by the company

Following are the new pronouncements and amendments issued and effective for years subsequent to 2014 that have not been
early adopted by the Company.

IFRS 15, ‘Revenue from contracts with customers’ issued on May 2014, deals with revenue recognition and establishes principles
for reporting useful information to users of ﬁnancial statements about the nature, amount, timing and uncertainty of revenue
and cash ﬂows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a
good or service and thus has the ability to direct the use and obtain the beneﬁts from the good or service. The standard replaces
IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods
beginning on or after 1 January 2017 and earlier application is permitted. The Company is in the process of assessing the impact
on the consolidated ﬁnancial statements.

IFRS 9, ‘Financial instruments’, addresses the classiﬁcation, measurement and recognition of ﬁnancial assets and ﬁnancial
liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classiﬁcation
and measurement of ﬁnancial instruments. IFRS 9 retains but simpliﬁes the mixed measurement model and establishes three
primary measurement categories for ﬁnancial assets: amortized cost, fair value through OCI and fair value through P&L. The
basis of classiﬁcation depends on the entity’s business model and the contractual cash ﬂow characteristics of the ﬁnancial
asset. Investments in equity instruments are required to be measured at fair value through proﬁt or loss with the irrevocable
option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that
replaces the incurred loss impairment model used in IAS 39. For ﬁnancial liabilities there were no changes to classiﬁcation and
measurement except for the recognition of changes in the Company’s own credit risk in other comprehensive income, for
liabilities designated at fair value through proﬁt or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the
bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument
and for the ‘hedged ratio’ to be the same as the one Management used for risk management purposes. Contemporaneous

Consolidated Financial Statements

documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting
periods beginning on or after 1 January 2018. Early adoption is permitted. The Company is in the process of assessing the
impact of the IFRS 9’s on the consolidated ﬁnancial statements.

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.

Note 4 - Financial risk management

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.

Alpek’s controlling company has a Risk Management Committee, constituted by the Chairman, the Chief Executive Officer, the
Chief Financial Officer and the ﬁnancial executive who acts as technical secretary. The Committee oversees derivative transactions
proposed by the Company in which the maximum possible loss exceeds US$1,000. This Committee supports both the Executive
Director and the Chairman of the Company. All new derivative transactions that the Company proposes to make, and the renewal
of existing derivatives, require approval by both the Company and ALFA in accordance with the following schedule of authorizations:

Company’s Chief Executive Officer
ALFA Risk Management Committee
Finance Committee
ALFA’s Board of Directors

Possible Maximum Loss US$

Individual
transactions

Annual cumulative
transactions

100

>100

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

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 foreign exchange risk arising from future commercial transactions in assets and
liabilities in foreign currencies and investments abroad.

ALPEK 2014 ANNUAL REPORT

The respective exchange rates of the Mexican peso and the US dollar are very important factors for the Company due to
the effect they have on their results. Moreover, Alpek has no inﬂuence whatsoever, 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 US dollar.

For this reason, in the past, when the Mexican peso has appreciated in real terms against other currencies such as the U.
S. 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, 2014 and 2013, 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 31,465 and Ps 7,295, respectively. See Note 16.

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.
The practice in the industry in North America has been to set prices on a cost plus margin basis, by reference to a price
formula for transferring the variations in the costs of the main raw materials and energy to achieve a predictable margin.
At the same time, the Company has entered into transactions involving derivatives on natural gas, gasoline, ethylene,
ethane, paraxylene and brent crude seeking to reduce the volatility of prices of these inputs, the Company does not suffer
ﬂuctuations upward or downward.

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 South Texas, USA, which has experienced the 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.

Consolidated Financial Statements

The Company entered into various derivative agreements with various counterparties to protect it 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 2014 and 2013
was 4.32 and 3.72 US dollars, respectively.

At December 31, 2014, the Company had hedges of natural gas, gasoline, ethylene, ethane, paraxylene and brent crude
prices for a portion expected of consumption needs in Mexico and the United States. Based on the general input exposure
at December 31, 2014 and 2013, 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 2014 and 2013.

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, 2014 and 2013, if interest rates on variable rate loans were increased/decreased by 10%, interest expense,
in the income statement, would increase/decrease by Ps 3,920 and Ps 3,495, 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 independently, 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 credit
risk analysis is performed regularly.

During 2014 and 2013, 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.

ALPEK 2014 ANNUAL REPORT

Liquidity risk

In the past, the Company has generated and expects to continue generating positive operation cash ﬂows. Operation cash
ﬂows mainly represent the inﬂow of net income (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 capital
expenditures (Capex) 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, Capex, maintenance, business combinations 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 ﬂows 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, Capex, acquisitions and new
business development activities.

The following tables analyze the derivative and non-derivative ﬁnancial liabilities, grouped according to their maturity, from the
statements of ﬁnancial position date to the contractual maturity date. Derivative ﬁnancial liabilities are included in the analysis
to know the timing of the Company’s cash ﬂows for these liabilities. The amounts disclosed in the table are contractual
undiscounted cash ﬂows.

Consolidated Financial Statements

The detail of maturities of existing ﬁnancial liabilities at December 31, 2014 and 2013, is as follows(1):

Less than
1 year

Between 1
and 2 years

Between 2
and 5 years

More than
5 years

At December 31, 2014

Current portion of long-term debt

11,166

Short-term bank loans

Notes payable

Cumulative interest payable

Affiliated companies

Suppliers

290,388

25,360

160,689

683,196

9,881,575

Other accounts payable and accrued expenses

1,676,055

Derivative ﬁnancial instruments

796,283

Debt (excluding issuance expenses)

Senior notes (excluding issuance expenses)

746,381

1,451,067

2,827,257

100,271

360,147

148,382

1,026,459

432,156

13,959,263

Less than
1 year

Between 1
and 2 years

Between 2
and 5 years

More than
5 years

At December 31, 2013

Current portion of long-term debt

Ps 261,530

Short-term bank loans

Notes payable

Cumulative interest payable

Affiliated companies

Suppliers

Other accounts payable and accrued expenses

Derivative ﬁnancial instruments

Debt (excluding issuance expenses)

Senior notes (excluding issuance expenses)

447,190

44,363

139,093

395,964

8,847,817

1,176,250

19,352

616,478

1,197,653

3,093,232

6,559

873,909

7,240

588,442

12,400,441

(1) Amounts included are undiscounted contractual cash ﬂows; therefore, they differ from the amounts included in the consolidated ﬁnancial

statements and in Note 19.

ALPEK 2014 ANNUAL REPORT

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, 2014 and 2013 the Company has unused committed credit lines for a total of 345 and 273 million of US dollars,
respectively.

4.2 Capital 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 modify 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 ratio is calculated by dividing total liabilities by total equity.

The ﬁnancial ratio of total liabilities/total equity was 1.19 and 1.15 at December 31, 2014 and 2013, respectively.

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, 2014:

Assets

Derivative ﬁnancial instruments
with trading accounting treatment

Derivative ﬁnancial instruments
with hedge accounting treatment

Financial assets available for sale

Total

Liabilities

Derivative ﬁnancial instruments
with trading accounting treatment

Derivative ﬁnancial instruments
with hedge accounting treatment

Total

Level 1

Level 2

Level 3

Total

128,475

85,113

959,823

Ps 1,044,936

85,113

959,823

Ps 1,044,936

Consolidated Financial Statements

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

Liabilities

Derivative ﬁnancial instruments
with trading accounting treatment

Derivative ﬁnancial instruments
with hedge accounting treatment

Total

Level 1

Level 2

Level 3

Total

58,477

28,015

92,581

58,477

28,015

92,581

86,492

92,581

179,073

1,832

31,319

33,151

1,832

31,319

33,151

There are no transfers between levels 1 and 2, or between levels 2 and 3 in the reported periods.

Level 1

The fair value of ﬁnancial instruments traded in active markets is based on quoted market prices at the statement of ﬁnancial
position 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 Alpek 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 statements of ﬁnancial position 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.

ALPEK 2014 ANNUAL REPORT

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 assumptions

The Company makes estimates based on assumptions concerning the future. The resulting accounting estimates will be, by deﬁnition,
seldom equal to 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 the following:

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 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 would 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 carrying amount 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, 2014 and 2013, there were no signs of impairment.

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 could be
uncertain. The Company recognizes liabilities in anticipation of a tax audit based on estimates of whether additional taxes will be
paid. When 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 32,957.

c) 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 52,247.

Consolidated Financial Statements

d) 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 carrying amounts 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. See analysis of sensibility
in Note 20.

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 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.

Note 6 - Cash and cash equivalents

The cash and cash equivalents are comprised as follows:

At December 31,

2014

2013

Cash and bank accounts

Short-term bank deposits

1,792,869

1,790,898

3,950,947

2,946,190

Cash and cash equivalents

5,743,816

4,737,088

ALPEK 2014 ANNUAL REPORT

Note 7 - Restricted cash and cash equivalents

The Company has restricted cash of approximately Ps 3,185 and Ps 2,840 at December 31, 2014 and 2013. 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,

2014

2013

Trade receivables

Ps 10,169,506

Ps 10,008,669

Provision for impairment in trade receivables

( 392,579 )

( 332,601 )

Trade receivables, net

9,776,927

9,676,068

Accounts receivable from related parties (Note 9)

Recoverable taxes

Interest receivable

Other debtors

Current portion

1,389,713

1,819,293

260,422

1,429,908

1,402,607

940

325,412

Ps 13,246,370

Ps 12,834,935

Customers and other accounts receivable include past-due balances of Ps 1,476,294 and Ps 1,743,399 at December 31, 2014 and
2013, 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, 2014

Past due balances

1 to 30 days

30 to 90 days

90 to 180 days

More than 180
days

Trade and other accounts receivable

Ps 688,165

154,115

24,421

Ps 609,593

At December 31, 2013

Past due balances

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

At December 31, 2014 and 2013, trade and other accounts receivable of Ps 392,579 and Ps 332,601, 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:

Consolidated Financial Statements

2014

2013

Initial balance (January 1)

( Ps

332,601 )

( Ps

241,897 )

Provision for impairment in trade receivables

Receivables written off during the year

Provision for unused written off impairment

( 87,495 )

23,928

3,589

( 160,565 )

4,292

65,569

Final balance (December 31)

( Ps

392,579 )

( Ps

332,601 )

The maximum risk in accounts receivable is the carrying amount at December 31, 2013.

Note 9 - Related party transactions

Related party transactions were carried out at market values.

At December 31, 2014

Loans granted to related parties

Accounts
receivable

Amount

Currency

Maturity
date
DD/MM/YY

Interest
rate

Accounts
payable

189,781
-
228,051
-
-

121,316

351,807
130,914 (1)
361,941
5,887
16 (1)

USD
USD
USD
USD
USD

23/12/2015

7.33%

29/05/2015
29/05/2015

1.61%
1.61%

-
-
40,028
-
-

643,168

Alfa

Affiliate

Partners with signiﬁcant inﬂuence
over certain subsidiaries

Total

539,148

850,565

683,196

Loans granted to related parties

At December 31, 2013

Accounts
receivable

Amount

Currency

Maturity
date
DD/MM/YY

Interest
rate

Accounts
payable

189,782
-
231,192
-
-
-
-

184,774

USD
USD
USD
USD
USD
USD
USD / MXN

312,570
93,084 (1)
321,573
56,918
13,077
13,000
13,938 (1)

26/12/2014

7.33%

16/06/2014
30/05/2014
15/01/2014
16/06/2014

3.59%
2.53%
3.59%
6.87%

-
-
25,622
-
-
-

266,756

Amount

Currency

-
-

103,586 (2)

MXN

-
-
-

Alfa

Affiliate

Partners with signiﬁcant inﬂuence
over certain subsidiaries

Total

605,748

824,160

292,378

103,586

(1) Are the interests accrued corresponding to the loans included.

(2) Is an account payable from a sale of assets.

ALPEK 2014 ANNUAL REPORT

Revenue and other with related parties

Finished
goods

Raw
materials

Interest

Year ended December 31, 2014
Administrative
services

Dividends

Energetics

Lease

Other

Alfa
Affiliate
Associated
Shareholders with signiﬁcant
inﬂuence over subsidiaries

-
267,274
-

1,981,823

-
4,860
-

23,731
8,602
165

-
-
927

-
84,863
-

-
56,129
-

-
-
-

9,009

Total

Ps 2,249,097

4,860

32,498

927

84,863

56,129

9,009

-
-
-

144

Finished
goods

Raw
materials

Interest

Year ended December 31, 2013
Administrative
services

Dividends

Energetics

Lease

Other

Alfa
Affiliate
Associated
Shareholders with signiﬁcant
inﬂuence over subsidiaries

-
333,122
-

1,960,637

-
12,805
-

22,775
14,537
-

-
-
1,745

-
43,444
-

Total

Ps 2,293,759

12,805

37,312

1,745

43,444

-
-
-

7,035

-
1,301
-

275

7,035

1,576

Cost of sales and expenses with related parties

Affiliate
Shareholders with signiﬁcant
inﬂuence over subsidiaries

Finished
goods

Raw
materials

Administrative
services

Technical
assistance

Energetics

Lease

Commissions

Other

17,446

174,206

167,667

Year ended December 31, 2014

1,580,553

685,610

106,947

69,087

2,433

25,905

68,696

Total

Ps 1,580,553

703,056

281,153

69,087

167,667

2,433

25,905

68,696

Affiliate
Shareholders with signiﬁcant
inﬂuence over subsidiaries

Finished
goods

Raw
materials

Administrative
services

Technical
assistance

Energetics

Lease

Commissions

Other

15,771

133,815

227,099

1,308

Year ended December 31, 2013

1,331,934

279,083

151,713

82,753

2,413

32,756

Total

Ps 1,331,934

Ps 294,854

285,528

82,753

227,099

2,413

32,756

1,330

For the year ended December 31, 2014, wages and beneﬁts received by top officials of the Company were Ps 250,921 (Ps 225,791 in
2013), 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 report that they had no signiﬁcant transactions with related parties or conﬂicts of interest to
disclose at December 31, 2014 and 2013.

The conditions of the above considerations are equivalent to those of similar transactions with independent parties and the entity.

Consolidated Financial Statements

Note 10 - Inventories

At December 31,

2014

2013

Finished goods

5,937,774

6,490,653

Raw material and other consumables

Materials and tools

Work in process

4,175,773

877,025

495,336

4,075,258

728,708

483,095

Ps 11,485,908

11,777,714

For the years ended at December 31, 2014 and 2013, the cost of raw materials used and the changes in inventories of work in process
and ﬁnished goods recognized in the cost of sales amounted to Ps 79,757,100 and Ps 82,436,458, respectively.

For the years ended December 31, 2014 and 2013 it was recognized in the statement of income a provision amounting to
Ps 18,894 and Ps 37,929, respectively, related to damaged, slow-moving and obsolete inventory.

At December 31, 2014 and 2013 there were no inventories in guarantee.

ALPEK 2014 ANNUAL REPORT

Note 11 – Property, plant and equipment, net

Land

Buildings and
constructions

Machinery
and equipment

Transportation
equipment

Furniture,
lab and
information
technology
equipment

Construction
in process

Others ﬁxed
assets

Total

Ps 2,746,401

Ps 8,816,950

Ps 41,050,792

214,804

903,908

Ps 1,330,506

388,357

Ps 55,451,718

( 5,386,517 )

( 22,557,035 )

( 138,053 )

( 674,703 )

( 28,756,308 )

Ps 2,746,401

Ps 3,430,433

Ps 18,493,757

76,751

229,205

Ps 1,330,506

388,357

Ps 26,695,410

At January 1, 2013

Deemed cost

Accumulated depreciation

Carrying amount at January 1, 2013

For the year ended December 31, 2013

Translation effect

Additions

Disposals

Impairment

Depreciation charge recognized in the year
Transfers

2,290

594

( 1,862 )

7,432

19,677

( 1,478 )

( 24,601 )

1,003,281

( 5,443 )

( 328,262 )

( 1,956,524 )

( 191,571 )

( 1,585,695 )

2,959

( 31,661 )

330,450

( 1,194 )

2,774

( 370 )

( 2,000 )

( 15,280 )

1,309

61,990

210,160

( 148,170 )

( 16 )

13,638

12,868

1,435,187

4,491

34,532

2,040

2,508,913

( 160 )

( 91 )

( 12,218 )

( 21,622 )

( 25,863 )

( 81,376 )

( 2,394,025 )

( 63,483 )

52,552

230,966

( 1,856,029 )

( 662,916 )

2,090,461

78,509

412,295

( 228,798 )

24,705,889

970,629

2,090,461

412,295

54,803,962

( 739,663 )

( 30,098,073 )

Carrying amount at December 31, 2013

2,750,382

2,904,570

16,255,225

At December 31, 2013

Deemed cost

Accumulated depreciation

2,750,382

8,400,983

39,969,052

( 5,496,413 )

( 23,713,827 )

Carrying amount at December 31, 2013

Ps 2,750,382

Ps 2,904,570

Ps 16,255,225

61,990

230,966

Ps 2,090,461

412,295

Ps 24,705,889

Additions

Disposals

Impairment

Translation effect

Depreciation charge recognized in the year
Transfers

78,806

( 1,907 )

21,767

255,207

( 217 )

( 4,649 )

159,770

338,058

1,900,474

1,153

( 177,545 )

( 1,375,170 )

536,758

2,029,669

3,198

( 3,301 )

( 269 )

6,629

( 11,147 )

12,014

7,246

1,385,181

( 52 )

( 30 )

24,742

( 62,202 )

( 4,905 )

84,957

24,746

( 15,950 )

1,776,151

( 26,332 )

( 4,948 )

51,818

2,566,448

( 1,626,064 )

36,999

( 2,636,933 )

21,471

1,131

Carrying amount at December 31, 2014

2,988,204

3,623,608

19,060,539

69,114

237,669

918,761

494,380

27,392,275

At December 31, 2014

Deemed cost

Accumulated depreciation

2,988,204

9,965,060

47,019,030

243,598

1,131,484

918,761

494,380

62,760,517

( 6,341,452 )

( 27,958,491 )

( 174,484 )

( 893,815 )

( 35,368,242 )

Carrying amount at December 31, 2014

Ps 2,988,204

Ps 3,623,608

Ps 19,060,539

69,114

237,669

918,761

494,380

Ps 27,392,275

Depreciation expense of Ps 1,608,083 and Ps 1,840,795 has been charged in cost of sales, Ps 1,811 and Ps 2,070, in selling expenses
and Ps 16,170 and Ps 13,164, in administrative expenses in 2014 and 2013, respectively.

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 expenses items, net, a charge for impairment amounting to
Ps 170,276 (See note 26) was recorded.

The Company has capitalized costs of loans in qualiﬁed assets for Ps 90,064 and Ps 82,298 for the years ended December 31, 2014
and 2013, respectively. Costs from loans were capitalized at the weighted average rate of loans that amount to approximately 6.42%.

Consolidated Financial Statements

Note 12 – Goodwill and intangible assets, net

Finite life

Indeﬁnite life

Development
costs

Trademarks

Non-compete
agreements

Customer
relationships

Software and
licenses

Intellectual
property rights
and others

Goodwill

Others

Total

Cost

At January 1, 2013

301,295

400

61,148

473,437

63,671

Ps 1,558,610

220,741

4,181

Ps 2,683,483

Translation effect

Additions

18,525

263,666

At December 31, 2013

583,486

Additions

Translation effect

Additions through
business combination

Transfers

5,710

73,599

400

At December 31, 2014

662,795

400

Amortization

At January 1, 2013

( 162,286 )

( 400 )

Amortization

Translation effect

( 35,043 )

( 1,076 )

312

61,460

94,387

10,324

31,709

197,880

( 29,302 )

( 15,068 )

( 446 )

Amortization

Transfers

( 39,454 )

Translation effect

( 28,663 )

At December 31, 2014

( 266,522 )

( 400 )

Net carrying amount

Cost

Amortization

583,486

( 198,405 )

400

( 400 )

2,416

( 1,255 )

21,337

527,352

1,127

1,653

42,532

792,671

475,853

62,416

2,107,299

221,868

5,904

3,518,686

59,735

21,316

6,422

2,703,416

429,031

27,760

27,851

310

777

2,825,139

607,739

31,709

27,760

535,588

90,154

5,267,506

249,719

6,991

7,011,033

( 66,133 )

( 36,997 )

( 1,066 )

( 32,500 )

( 149,367 )

( 4,631 )

1,190

( 76,816 )

( 2,275 )

( 45,515 )

( 38,363 )

( 3,607 )

( 17,180 )

( 3,651 )

( 86,417 )

( 7,425 )

( 37,187 )

( 159,739 )

( 43,199 )

( 359,487 )

( 8,445 )

( 98,776 )

( 439,988 )

( 168,555 )

( 3,673 )

( 612,216 )

( 213,356 )

( 7,425 )

( 95,126 )

( 928,123 )

61,460

475,853

62,416

2,107,299

221,868

5,904

3,518,686

( 44,816 )

( 104,196 )

( 35,941 )

( 228,458 )

( 612,216 )

At December 31, 2013

( 198,405 )

( 400 )

( 44,816 )

( 104,196 )

( 35,941 )

( 228,458 )

At December 31, 2013 Ps

385,081

16,644

371,657

26,475

Ps 1,878,841

221,868

5,904

Ps 2,906,470

Cost

Amortization

662,795

( 266,522 )

400

( 400 )

197,880

( 98,776 )

535,588

90,154

5,267,506

249,719

6,991

7,011,033

( 159,739 )

( 43,199 )

( 359,487 )

( 928,123 )

At December 31, 2014 Ps

396,273

99,104

375,849

46,955

Ps 4,908,019

249,719

6,991

Ps 6,082,910

Of the total amortization expenses: Ps 213,223 and Ps 168,384 were charged to cost of sales, Ps 97 and Ps 40 to selling expenses
and Ps 36 and Ps 131 to administrative expenses in 2014 and 2013, respectively.

Research expenses and development incurred and recorded in the results of 2014 and 2013 were Ps 40,994 and Ps 37,872, respectively.

Management assesses its operations through two business segments: the Polyester business chain and the Plastics and Chemicals
business, see Note 30. The goodwill was originated and is presented in the Polyester segment.

ALPEK 2014 ANNUAL REPORT

Impairment testing of goodwill

Goodwill is allocated to operating segments that are expected to beneﬁt from the synergies of the business combination, irrespective
of whether other assets or liabilities of the acquiree are assigned to those units or groups of units, goodwill arising from the Polyester
segment for a total of Ps 249,719 and Ps 221,868 at December 31, 2014 and 2013, 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.

The key assumptions used in calculating the value in use in 2014 and 2013 were as follows:

Estimated gross margin

Growth rate

Discount rate

2014

4.0%

3.8%

9.8%

2013

4.0%

3.8%

10.2%

With regard 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 amounts of the operating segments exceed materially their
value in use.

Note 13 – Other non-current assets

At December 31,

2014

2013

Other receivables, net

103,202

190,513

Financial assets available for sale (1)

Investment in associates (2)

Joint agreements (3)

Other non-current ﬁnancial assets

128,475

149,931

316,271

92,581

( 27,862 )

69,163

302,690

Total other non-current assets

697,879

627,085

(1) Financial assets available for sale:

Unlisted shares

Investment in shares with third parties

128,475

92,581

At December 31,

2014

2013

Consolidated Financial Statements

The movement of ﬁnancial assets available for sale is as follows:

Balance at January 1

Translation effect

Additions

Disposals

2014

2013

92,581

10,089

25,912

( 107 )

92,208

266

107

Balance at December 31

128,475

92,581

Financial assets available for sale are denominated in the following currencies:

USD

MXN

Other currencies

Total

At December 31,

2014

2013

88,308

40,167

52,306

40,167

108

128,475

92,581

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:

2014

2013

Net loss

( Ps

155,528 )

( Ps

119,986 )

Other comprehensive income

Comprehensive income

( Ps

155,528 )

( Ps

119,986 )

Investment in associates at December 31

( Ps

149,931 )

( Ps

27,862 )

There are no contingent liabilities corresponding to the Company’s equity in investment of associates.

(3) Joint arrangements

As indicated in Note 2 2014 c) the investment in RusPet began in 2013 and corresponds to the construction of a plant, which
had no operations in 2014.

ALPEK 2014 ANNUAL REPORT

Note 14 – Subsidiaries with signiﬁcant non-controlling interest

The signiﬁcant non-controlling interest for the year ended December 31, 2014 and 2013 is integrated as follows:

Non-controlling
ownership
percentage

49%

50%

Non-controlling interest
income for the period

Non-controlling
interest
at December 31,

2014

2013

2014

2013

Ps 303,590

Ps 334,119

Ps 2,574,644

Ps 2,079,547

226,241

290,620

829,038

539,058

Indelpro, S. A. de C. V.
and subsidiary

Polioles, S. A. de C. V.
and subsidiary

The summarized ﬁnancial information at December 31, 2014 and 2013 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. and subsidiary

Polioles, S. A. de C. V. and subsidiary

2014

2013

2014

2013

Ps 3,908,340

Ps 3,042,245

Ps 3,295,428

Ps 2,672,088

5,492,256

5,046,062

1,822,647

2,323,573

1,701,750

2,142,584

5,254,376

4,243,973

1,181,138

1,906,511

911,978

1,658,077

1,037,738

1,845,783

785,928

1,078,115

10,297,976

9,092,372

9,646,578

9,219,839

619,570

1,206,585

681,876

732,494

452,482

579,961

581,240

613,699

591,227

358,922

289,981

306,849

96,129

512,767

461,536

645,248

( 122,026 )

( 543,624 )

942,966

( 284,479 )

( 796,086 )

447,201

( 101,431 )

( 255,926 )

784,186

( 46,409 )

( 814,885 )

( 14,488 )

( 138,394 )

142,357

( 67,879 )

Current asset

Non-current asset

Current liability

Non-current liability

Stockholders’ equity

Revenues

Net proﬁt

Comprehensive income for the year

Comprehensive income attributable to
non-controlling interest

Dividends paid to non-controlling
percentage

Cash ﬂows from operating activities

Net cash used in investing activities

Net cash used in ﬁnancing activities

Net (decrease) increase
in cash and cash equivalents

Consolidated Financial Statements

Note 15 - Financial instruments

Financial instruments by category

Trade
receivables and
liabilities, at
amortized cost

Available
for sale

At December 31, 2014

Financial assets
and liabilities at
fair value through
proﬁt and loss

Derivative
designated for
hedging

Total

128,475

92,581

5,743,816

3,185

13,246,370

128,475

19,121,846

326,914

10,564,770

959,823

85,113

959,823

11,936,620

At December 31, 2013

Financial assets
and liabilities at
fair value through
proﬁt and loss

Derivative
designated for
hedging

Total

58,477

28,015

4,737,088

2,840

12,834,934

58,477

28,015

92,581

58,477

28,015

17,753,935

Financial assets:

Cash and cash equivalents

5,743,816

Restricted cash and cash equivalents

Trade and other receivable

Derivative ﬁnancial instruments
with trading accounting treatment

Derivative ﬁnancial instruments
with hedge accounting treatment

Assets available for sale

Financial liabilities:

Debt

3,185

13,246,370

18,993,371

326,914

Suppliers and other accounts payable

10,564,770

Derivative ﬁnancial instruments
with hedge accounting treatment

Derivative ﬁnancial instruments
with trading accounting treatment

10,891,684

Trade
receivables and
liabilities, at
amortized cost

Available
for sale

Financial assets:

Cash and cash equivalents

4,737,088

Restricted cash and cash equivalents

Trade and other receivable

Derivative ﬁnancial instruments
with trading accounting treatment

Derivative ﬁnancial instruments
with hedge accounting treatment

Assets available for sale

Financial liabilities:

Debt

2,840

12,834,934

17,574,862

753,083

Suppliers and other accounts payable

9,243,781

Derivative ﬁnancial instruments
with hedge accounting treatment

Derivative ﬁnancial instruments
with trading accounting treatment

9,996,864

1,832

753,083

9,243,781

31,319

1,832

31,319

10,030,015

ALPEK 2014 ANNUAL REPORT

b) Credit quality of ﬁnancial assets

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
Counterparties with external credit rating

"A+"

"A-"

"A"

“AAA”

“AA”

“AA-“

“B”

“B+”

"BBB+"

"BBB"

"BBB-"

"BB"

"BB+"

"BB-"

Other categories

Counterparties without external credit rating

Type of costumers X

Type of costumers Y

Type of costumers Z

At December 31,

2014

2013

633

124

45,518

97,023

159,072

15,543

58,729

325,326

1,908

8,718

1,180,048

461,277

2,353,951

9,208,510

907,124

22,493

10,138,127

134,445

175,679

56,322

73,723

300,216

77,653

50,388

1,003,707

546,686

2,418,819

9,124,308

808,710

10,794

9,943,812

Total unimpaired trade receivables

Ps 12,492,078

12,362,631

Consolidated Financial Statements

At December 31,

2014

2013

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-”

“BBB+”

Not rated

931,412

118,337

559,217

1,868,851

1,317,396

194,785

80,916

276,986

516,495

474,787

409,644

1,452,549

280,271

100,020

1,804,502

99,217

5,746,058

4,739,327

12,685

36,761

722

19,704

7,210

9,410

86,492

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
asset, suppliers and other payables, current debt and other current liability approximate to their fair value due to their short maturity.
The carrying amount of these accounts represents the expected cash ﬂow.

ALPEK 2014 ANNUAL REPORT

The carrying amount 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, 2014

At December 31, 2013

Carrying amount

Fair value

Carrying amount

Fair value

103,202

91,612

190,513

178,724

15,778,025

16,107,121

13,862,792

13,502,707

The estimated fair values were determined based on discounted cash ﬂows. These fair values consider the non-current portion, of
ﬁnancial assets and liabilities, since the current portion approximates to their fair value. This is a fair value measurement of level 3.

Note 16 - Derivative ﬁnancial instruments

The effectiveness of derivative ﬁnancial instruments designated as hedges is measured periodically. At December 31, 2014 and 2013
the Company’s Management 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 stipulated in each one
of the derivative ﬁnancial instruments in force at December 31, 2014 and 2013.

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 maturity of the hedged item is greater than 12 months and as a current asset or liability if the maturity of the hedged item is
lesser 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):

Type of derivative,
value or contract

Notional
amount

At December 31, 2014

Underlying asset

Unit

Reference

Fair value

2015

Maturity

2016

2017+

US$/MXN

( Ps

986 )

Pesos / Dollar

14.72

( Ps

73 )

( Ps

73 )

Type of derivative,
value or contract

Notional
amount

At December 31, 2013

Underlying asset

Unit

Reference

Fair value

2014

Maturity

2015

2016+

US$/MXN

( Ps

837 )

Pesos / Dollar

13.08

Consolidated Financial Statements

Interest rate swaps

Positions of derivative ﬁnancial instruments interest rate swaps are summarized as follows (ﬁgures in millions of pesos):

Type of derivative,
value or contract

Notional
amount

With hedge accounting treatment:

At December 31, 2014

Underlying asset

Unit

Reference

Fair value

2015

Maturity

2016

2017+

In Libor rate 1

589

% per year

0.90

( Ps

10 )

( Ps

8 )

( Ps

2 )

Type of derivative,
value or contract

Notional
amount

With hedge accounting treatment:

At December 31, 2013

Underlying asset

Unit

Reference

Fair value

2014

Maturity

2015

2016+

In Libor rate 1

785

% per year

0.49

( Ps

20 )

( Ps

12 )

( Ps

7 )

( Ps

1 )

1 Cash ﬂow hedges

c) Energy

Positions of derivative ﬁnancial instruments natural gas, gasoline, ethylene, ethane, paraxylene and brent crude, are summarized as
follows (ﬁgures in millions of pesos):

Type of derivative,
value or contract

Notional
amount

With hedge accounting treatment:

At December 31, 2014

Underlying asset

Unit

Reference

Fair value

2015

Maturity

2016

Ethylene 1

Cent. Dollar / lb

45.38

( Ps

1 )

( Ps

1 )

Natural gas 1

2,600

Dollar / MBTU

Ethane 1

Px 1

Gasoline 1

1,585

1,013

Cent. Dollar /
Gallon

Dollar / MT

Dollar / Gallon

3.08

17.59

884

1.62

( 260 )

( 1 )

( 308 )

( 380 )

With trade accounting treatment:

Brent crude

Dollar / BBL

63.27

( 12 )

( Ps

962 )

( Ps

( 13 )

( 1 )

( 308 )

( 380 )

( 12 )

715 )

2017+

( 149 )

( 98 )

( Ps

98 )

( Ps

149 )

ALPEK 2014 ANNUAL REPORT

Type of derivative,
value or contract

Notional
amount

With hedge accounting treatment:

At December 31, 2013

Underlying asset

Unit

Reference

Fair value

2014

Ethylene 1

Natural gas 1

Ethane 1

Px 1

155

345

226

Cent. Dollar / lb

Dollar / MBTU

Cent. Dollar / Gallon

Dollar / MT

With trade accounting treatment:

Gasoline

Brent crude

923

Dollar / Gallon

Dollar / BBL

1 Cash ﬂow hedges

58.75

4.29

28.03

1,435

2.72

108.53

( 3 )

( 2 )

( 3 )

( 2 )

Maturity

2015

2016+

( 4 )

( Ps

4 )

At December 31, 2014 and 2013, the net fair value of derivative ﬁnancial instruments, above mentioned amounts to (Ps 1,044,936)
and Ps 53,341, respectively, which is shown in the consolidated statements of ﬁnancial position as follows:

Current asset

Current liability

Non-current liability

Fair value at December 31,

2014

2013

86,492

( 757,011 )

( 287,925 )

( 7,315 )

( 25,836 )

Net position

( Ps 1,044,936 )

53,341

At December 31, 2014 and 2013 there is no collateral in derivative ﬁnancial instruments.

Note 17 - Suppliers and other accounts payable

At December 31,

2014

2013

Suppliers

9,881,574

8,847,817

Balances with related parties (Note 9)

683,196

395,964

10,564,770

9,243,781

100

Consolidated Financial Statements

Note 18 - Provisions

At January 1, 2013

Restructuring and
demolition

Environmental
remediation

Indemnities from
dismissal and others

Total

Additions from restructuring

Translation effect

Payments

At December 31, 2013

Transfers

Payments

Translation effect

At December 31, 2014

Short-term provisions

Long-term provisions

At December 31

493,891

7,225

( 67,762 )

433,354

( 73,590 )

( 76,799 )

49,395

365,205

6,406

371,611

( 17,383 )

46,170

197,624

5,376

( 123,651 )

79,349

73,590

( 96,369 )

567

1,056,720

19,007

( 191,413 )

884,314

( 190,551 )

96,132

332,360

400,398

57,137

789,895

2014

2013

761,652

832,632

28,243

51,682

789,895

884,314

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 (3)

Unsecured Bank loans (3)

Total (2)

At December 31,

2014

2013

290,388

447,190

11,166

25,360

261,530

44,363

326,914

753,083

Ps 13,846,890

12,293,991

1,829,928

15,676,818

1,723,881

14,017,872

Less: current portion of non-current debt

( 11,166 )

( 261,530 )

Non-current debt

Ps 15,665,652

Ps 13,756,342

(1) The fair value of bank loans and notes payable approximates their current carrying amount, due to the impact of

discounting is not signiﬁcant.

101

ALPEK 2014 ANNUAL REPORT

(2) These amounts are the amortized cost and include debt issuance cost of Ps 112,373 and Ps 106,450, for 2014 and 2013,

respectively.

(3) The carrying amounts, terms and conditions of non-current debt are as follows:

Description

Senior Notes 144A/Reg. S accruing annual
interest of 4.50%. Guaranteed by Grupo
Petrotemex, Temex, Akra, DAK Americas, DAK
Resinas and DAK Mississippi
Senior Notes 144A/Reg. S accruing annual
interest of 5.375%. Guaranteed by Grupo
Petrotemex, Temex, Akra, DAK Americas, DAK
Resinas and DAK Mississippi

Total Senior Notes

Currency

Contractual
value of debt

Debt
issuance cost

Balance at
December 31,
2014

Balance at
December 31,
2013

Maturity date
DD/MM/YY

Interest
rate

USD

9,566,700

74,645

9,469,218

8,405,182

20-Nov-22

4.50%

USD

4,415,400

37,728

4,377,672

3,888,809

8-Aug-23

5.38%

Ps 13,846,890 Ps 12,293,991

Balance at
December 31,
2014

Balance at
December 31,
2013

Currency

Maturity date
DD/MM/YY

Interest
rate

Description

Bank loan bearing annual interest of Libor + 1.60%

Bank loan bearing annual interest of Libor + 1.18%

Bank loan bearing annual interest of Libor + 1.10%

USD

735,900

294,360

Bank loan bearing annual interest of BADLAR +2.00%

Argentine Peso

43,455

Bank loan bearing annual interest of 19%

Argentine Peso

167,493

19-Dec-19

01-Apr-17

02-Apr-18

1.93%

1.49%

1.43%

03-Oct-16

25.83%

01-Apr-20

19.00%

Bank loan bearing annual interest of Libor + 1.50%.

Committed credit line that accrue annual interest of Libor + 1.60%

Bank loan bearing annual interest of Libor + 1.60%

Total unsecured bank loans

TOTAL

USD

294,360

784,590

01-Apr-16

285,466

31-Jan-15

653,825

16-Aug-16

1.76%

1.77%

1.84%

Ps 1,829,928

Ps 1,723,881

Ps 15,676,818

Ps 14,017,872

At December 31, 2014, the annual maturities of non-current debt are as follows:

2016

2017

2018

2019 onwards

Total

Bank loans

Senior Notes

360,147

325,067

701,392

432,156

1,818,762

13,846,890

360,147

325,067

701,392

14,279,046

15,665,652

102

Consolidated Financial Statements

Covenants:

Most of the existing debt agreements contain restrictions for the Company, mainly with respect to compliance with certain ﬁnancial
ratios among, the most important of which are:

Interest hedge ratio: deﬁned as the result of dividing the consolidated net income excluding income taxes, share in net
income of associates, ﬁnancial cost net, depreciation, amortization and impairment of non-current assets (EBITDA)
by the consolidated net interest charges for the period. This factor cannot be lesser than 3.0 times for the last four
consecutive ﬁscal quarters.

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 become payable immediately. During 2014 and 2013, the ﬁnancial ratios were calculated according
to the formulas set out in the loan agreements. At December 31, 2014 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 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.

b. 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
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 is presented net of the debt and
amortized together with the loan based on the effective rate method.

c. 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.

103

ALPEK 2014 ANNUAL REPORT

Note 20 - Employee beneﬁts

The valuation of retirement plan employee beneﬁts includes formal plans (covering approximately 64% of workers in 2014 and 2013) and
constructive obligations that covers all employees 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 2014 amounted to Ps 74,899 (Ps 43,844 in 2013).

Following is a summary of the main ﬁnancial information of such employee beneﬁts:

At December 31,

2014

2013

Liability for employees’ beneﬁts:

Pension beneﬁts

764,780

381,288

Post-employment medical beneﬁts

Deﬁned contribution liability

Employees’ beneﬁts in the statement of ﬁnancial
position

Charge to the income statement for:

154,349

919,129

44,854

175,644

556,932

963,983

556,932

Pension beneﬁts

( Ps

42,629 )

( Ps

34,157 )

Post-employment medical beneﬁts

( 7,466 )

( 50,095 )

( 11,112 )

( 45,269 )

Remeasurement of obligations for employees’
beneﬁts recognized in the statement of
comprehensive income for the year

( Ps

343,760 )

598,160

Remeasurement of accumulated obligations for
employees beneﬁts

( Ps

227,570 )

116,190

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.

104

The amounts recorded in the statement of ﬁnancial position, are determined as shown below:

Consolidated Financial Statements

At December 31,

2014

2013

Present value of deﬁned beneﬁt obligations

Ps 3,288,794

Ps 2,700,267

Fair value of plan assets

( 2,524,014 )

( 2,318,979 )

Employees’ beneﬁts in the statement of ﬁnancial
position

764,780

381,288

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

2014

2013

Ps 2,700,267

Ps 3,150,578

34,622

128,846

32,154

119,474

183,286

( 288,066 )

221,456

286,754

( 261,005 )

( 1,280 )

( 4,152 )

( 10,768 )

9,129

( 280,503 )

( 20,189 )

( 11,542 )

Ps 3,288,794

Ps 2,700,267

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

Paid beneﬁts (1)

At December 31

2014

2013

( Ps 2,318,980 )

( Ps

2,195,740 )

( 115,407 )

( 85,740 )

( 26,394 )

( 228,358 )

( 74,899 )

240,023

( 268,388 )

( 7,590 )

( 43,844 )

282,323

( Ps

2,524,015 )

( Ps 2,318,979 )

(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.

105

ALPEK 2014 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 of plan and/or settlements

2014

2013

( Ps

34,622 )

( Ps

32,154 )

( 13,439 )

5,432

( 33,734 )

31,731

Total included in personal costs

( Ps

42,629 )

( Ps

34,157 )

The principal actuarial assumptions are as follows:

Discount rate

Inﬂation rate

Salary increase rate

At December 31,

2014

MX 6.75%

US 3.75%

4.25%

5.25%

2013

MX 6.75%

US 4.65%

4.25%

5.25%

The average life of deﬁned beneﬁt obligations is of 15.6 and 17.3 years at December 31, 2014 and 2013, respectively.

The sensitivity analysis of the main assumptions for deﬁned beneﬁt obligations is as follows:

Discount rate

Effect in deﬁned beneﬁt obligations

Change in
assumption

Mx 1%

US 1%

Increase
in assumption

Decreases by
Ps 33,148

Decreases by
Ps 329,288

Decrease
in assumption

Increases by
Ps 28,530

Increases by
Ps 402,666

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 statements of ﬁnancial position.

Post-employment medical beneﬁts

The Company has 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 7.5% in
2014 and 8.0% in 2013.

106

Consolidated Financial Statements

Amounts recognized in the statements of ﬁnancial position are determined as follows:

At December 31,

2014

2013

Present value of deﬁned beneﬁt obligations

154,349

175,644

Fair value of plan assets

Employees’ beneﬁts in the statement of ﬁnancial
position

154,349

175,644

The movements of deﬁned beneﬁt obligations are as follows:

At January 1

Service cost

Interest cost

Employee contributions

Remeasurements:

2014

2013

175,644

202,450

1,391

6,075

8,926

2,195

6,352

7,625

Gain from changes in ﬁnancial assumptions

4,084

( 2,716 )

Gains from changes in demographic

assumptions and experience adjustments

Translation effect

Plan reductions

Beneﬁts paid

At December 31

( 38,672 )

20,629

( 23,728 )

( 28,222 )

916

2,565

( 15,521 )

154,349

175,644

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

2014

2013

( Ps

1,391 )

( Ps

2,195 )

( 6,075 )

( 6,352 )

( 2,565 )

Total included in personal costs

( Ps

7,466 )

( Ps

11,112 )

At December 31, 2014, 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

641

863

( Ps

731 )

( 1,225 )

Increase

Decrease

107

ALPEK 2014 ANNUAL REPORT

Employee beneﬁts

Plan assets are comprised as follows:

At December 31,

2014

2013

Equity instruments

Cash and cash equivalents

1,633,198

1,115,852

890,816

1,203,127

Note 21 - Deferred taxes

The analysis of the deferred tax asset and deferred tax liability is as follows:

At December 31,

2014

2013

Deferred tax asset:

- To be recovered for more than 12 months

178,117

163,515

- To be recovered within 12 months

78,880

256,997

53,082

216,597

Deferred tax liability:

- To be payable in more than 12 months

- To be payable within 12 months

( 3,699,349 )

( 556,257 )

( 4,255,606 )

( 3,912,960 )

( 431,308 )

( 4,344,268 )

Deferred tax, net

( Ps 3,998,609 )

( Ps

4,127,671 )

The gross movement in the deferred income tax account is as follows:

At January 1

Translation effect

To retained earnings

Business acquisitions

Credit to income statement

Credit (charge) to other items of
comprehensive income

2014

2013

( Ps

4,127,671 )

( Ps 4,213,832 )

( 421,032 )

( 777 )

( 23,919 )

97,746

20,335

7,550

363,587

477,044

(305,311)

At December 31

( Ps 3,998,609 )

( Ps

4,127,671 )

108

The change of the temporary differences that requires deferred income tax recognition for the year ended December 31, as follows:

Consolidated Financial Statements

Asset:

Inventories

Trade and other receivables, net

Property, plant and equipment, net

Tax loss carryforwards

Derivative ﬁnancial instruments

Total

Liability:

Provisions

Derivative ﬁnancial instruments

Other temporary differences, net

Total

2014

2013

25,308

175,090

4,767

5,790,754

( 715,750 )

5,105,079

( 817,352 )

( 229,375 )

( 59,743 )

( 1,106,470 )

( 3,695 )

3,946,048

( 552,325 )

( 30,562 )

3,534,556

687,890

( 94,775 )

593,115

Net deferred tax liability

Ps 3,998,609

4,127,671

At December 31, 2014, the subsidiaries have accumulated tax loss carryforwards for a total of Ps 2,385,834 expiring as shown below:

Loss incurred
in the year

Tax loss
carryforwards

Year of
maturity

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

19,605

10,613

63,427

6,152

6,835

967,242

4,601

271,894

1,035,465

2,385,834

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

109

ALPEK 2014 ANNUAL REPORT

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,

2014

2013

683,972

516,251

429,593

160,689

388,733

4,069

18,375

151,311

300,719

139,093

324,416

7,108

15,231

12,526

Total other current liabilities

1,836,744

1,315,344

Note 23 - Stockholders’ equity

At December 31, 2014 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. At December 31, 2014
and 2013 the legal reserve amounts Ps 337,007 and Ps 182,032, respectively.

The movements in other reserves for 2014 and 2013 are shown as follows:

Effect from foreign
currency
translation

Effect of cash ﬂow
hedge derivative
instruments

Total

At January 1, 2013

310,262

( Ps

132,014 )

178,248

Gains on fair value

Deferred tax asset on fair value gains

Effect in translation of foreign entities

27,918

282,016

( 85,085 )

282,016

( 85,085 )

27,918

At December 31, 2013

338,180

64,917

403,097

Gains on fair value

Deferred tax asset on fair value gains

Effect in translation of foreign entities

2,416,988

( 1,025,280 )

350,773

2,416,988

At December 31, 2014

2,755,168

( Ps

609,590 )

2,145,578

110

Consolidated Financial Statements

During 2014 Alpek has not declared dividends.

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 October 2013 the Chambers of Senators and Deputies approved the issuance of a new Law on Income Tax (Income Tax Law)
which is effective January 1, 2014. Among other things, this law establishes a tax rate of 10% to the dividends paid to foreign residents
and Mexican individuals derived from the proﬁts generated since 2014, also provides that for the years 2001-2013, the net taxable
proﬁt will be determined in terms of the Income Tax Law in force in the ﬁscal year concerned.

Dividends paid are not subject to income tax if they derived from the Net Tax Proﬁt Account (CUFIN spanish acronym). Any dividends
paid in excess of this account will cause a tax equivalent to 42.86% if they are paid in 2014. This tax is payable by the Company and
may be credited against its income tax in the same year or the following two years. Dividends paid from proﬁts which have previously
paid income tax are not subject to tax withholding or to any additional tax payment. At December 31, 2014, the tax value of the
consolidated CUFIN and value of the Capital Contribution Account (CUCA spanish acronym) amounted to Ps 175,896 and Ps 17,088
respectively.

Note 24 - Sharebased payments

Alpek has a compensation scheme with reference to the value of shares of its holding company for executives of both, 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:

•
•
•

Improved share price
Improvement in net income
Permanence of the executives in the Company

The program consists in determining a number of shares which the executives will have a right to, that 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 2014
and 2013 was 33.83 and 38.86, respectively.

The short-term and long-term liability was analyzed as follows:

Short-term

Long-term

Total carrying amount

December 31,

2014

2013

21,257

38,249

59,506

32,393

23,170

55,563

111

ALPEK 2014 ANNUAL REPORT

Note 25 - Expenses classiﬁed by their nature

The total cost of sales and selling and administrative expenses, classiﬁed by the nature of the expense, are comprised as follows:

2014

2013

Raw materials and others

( Ps 66,910,490 )

( Ps 69,019,660 )

Employee beneﬁt expenses (Note 28)

( 2,845,866 )

( 2,909,920 )

Human resource expenses

Maintenance

( 22,543 )

( 917,758 )

( 17,796 )

( 858,716 )

Depreciation and amortization

( 1,839,420 )

( 2,024,584 )

Advertising expenses

Freight charges

Energy consumption and fuel (gas,
electricity, etc.)

Travel expenses

Operating lease expenses

Technical assistance, professional fees and
administrative services

Others

Total

( 2,229 )

( 3,380,333 )

( 3,294,676 )

( 113,923 )

( 495,350 )

( 794,478 )

( 1,684,602 )

( 2,037 )

( 3,211,218 )

( 3,115,816 )

( 102,370 )

( 371,723 )

( 875,522 )

( 2,096,935 )

( Ps 82,301,668 )

( Ps 84,606,297 )

Note 26 - Other expenses, net

Other income and expenses for the years ended December 31, are comprised as follows:

Gain (loss) on sale of wastes

3,509

( Ps

542 )

2014

2013

Gain on sale of property, plant and equipment

286

( 126,906 )

( 4,948 )

( 18,669 )

114,921

2,505

( 170,276 )

45,882

14,575

( Ps

31,807 )

( Ps

107,856 )

Impairment of investment in joint ventures (See Note
2 2014 c)

Impairment of property, plant and equipment

Valuation of derivative ﬁnancial instruments

Other income, net

Total

112

Note 27 - Financial cost, net

Financial cost, net for the years ended December 31, are comprised as follows:

Consolidated Financial Statements

Financial income:

Interest income on short-term bank deposits

100,611

95,245

2014

2013

Interest income on loans from related parties

Others

Total ﬁnancial income

Financial expenses:

32,498

2,328

37,313

4,245

135,437

136,803

Interest expense on bank loans

( Ps

134,642 )

( Ps

212,820 )

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

Total ﬁnancial cost

Financial cost, net

( 648,787 )

( 19,964 )

( 122,719 )

( 629,298 )

( 735,068 )

( 40,086 )

( 103,863 )

( 145,898 )

( 76,697 )

( 71,002 )

( 1,632,107 )

( 1,308,737 )

( Ps 1,496,670 )

( Ps

1,171,934 )

Note 28 - Employee beneﬁt expenses

Employee beneﬁts expenses for the years ended December 31, are integrated as follows:

Salaries, wages and beneﬁts

Social security contributions

Employee beneﬁts (Note 20)

Other contributions

2014

2013

( Ps

2,101,118 )

( Ps

2,122,757 )

( 211,667 )

( 30,580 )

( 502,501 )

( 197,794 )

( 5,183 )

( 584,186 )

Total

( Ps 2,845,866 )

( Ps 2,909,920 )

Note 29 - Income tax expense

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:

113

ALPEK 2014 ANNUAL REPORT

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 income tax 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:

2014

2013

Total current income tax

( Ps

974,546 )

( Ps

1,136,767 )

Adjustment to the provision of income tax from prior
years

Total deferred tax

Income tax expense

( 6,232 )

97,746

( 44,149 )

363,586

( Ps

883,032 )

( Ps

817,330 )

114

Consolidated Financial Statements

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

2014

2013

2,197,134

1,723,460

30%

Income tax at statutory rate

( 659,140 )

( 517,038 )

Add (deduct) effect of income tax on:

Differences resulting from the ﬁnancial cost, net

Non-deductible expenses

Non-taxable income

Tax losses for which no deferred income tax assets
were recognized

Effect of different tax rates of countries other than
Mexico

Adjustment to the income tax liability of prior years

Effect in change of rate

Effect in deferred taxes for the
non-deductibility of labor obligations

( 137,375 )

( 22,400 )

1,574

( 66,134 )

( 18,643 )

5,511

( 10,274 )

( 46,024 )

( 6,232 )

84,814

( 44,149 )

( 231,854 )

( 10,489 )

( 9,074 )

Share of losses of associates

( 13,434 )

Total income tax

Effective tax rate

( Ps

883,032 )

( Ps

817,330 )

40%

47%

The charge (credit) to income tax related to other items of the comprehensive income for the years ending December 31, are as
follows:

Before
taxes

2014

Tax charge
(credit)

After
taxes

Before
taxes

2013

Tax charge
(credit)

After
taxes

Translation effect of foreign currency

2,416,988

27,918

Remeasurement of obligations
for employee beneﬁts

Effect of derivative ﬁnancial
instruments for hedging
purposes of cash ﬂow

Other comprehensive income items

1,047,948

Deferred tax

Note 30 - Segment reporting

( 343,760 )

126,271

( 217,489 )

598,160

( 220,226 )

377,934

( 1,025,280 )

350,773

477,044

( 674,507 )

282,016

( 85,085 )

196,931

1,524,992

908,094

( Ps

305,311 )

602,783

305,311 )

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.

115

ALPEK 2014 ANNUAL REPORT

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 managed separately since its products vary and targeted markets are different. Their activities are
performed through various subsidiaries.

The operations between operating segments are performed at market value and the accounting policies with which the ﬁnancial
information by segments is prepared, are consistent with those described in Note 3.

The Company evaluates the performance of each of the operating segments based on net income excluding income taxes, share in
net income of associates, ﬁnancial cost net, depreciation, amortization and impairment of non-current assets (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 the result of adding to the operating proﬁt, the depreciation, amortization and
the impairment of non-current assets.

Following is the condensed ﬁnancial information of these operating segments (in millions of pesos):

For the year ended December 31, 2014

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

Capex

Polyester

Plastics and
Chemicals

Other

Total

63,316

23,071

( Ps

315 )

86,072

( 88 )

63,228

2,006

1,535

3,541

3,803

( 227 )

22,844

1,674

436

2,110

388

315

86,072

3,739

1,971

5,710

4,191

116

For the year ended December 31, 2013:

Consolidated Financial Statements

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

Capex

Polyester

Plastics and
Chemicals

Other

Total

68,704

21,600

( Ps

243 )

90,061

( 68 )

68,636

977

3,997 (1)

4,974

1,845

( 175 )

21,425

1,882

422

2,304

431

243

90,061

2,925

4,419

7,344

2,276

(1) In 2013, within the polyester segment is integrated the impairment effect of ﬁxed assets related to the closing of the Cape Fear plant, see Notes 2
2013 c) and 18.

The reconciliation between adjusted EBITDA and proﬁt before taxes for the years ended December 31 is as follows:

2014

2013

Adjusted EBITDA

5,710

7,344

Depreciation, amortization and impairment of
non-current assets

Operating proﬁt

Financial cost, net

Share of losses in associates

( 1,971 )

3,739

( 1,497 )

( 45 )

( 4,419 )

2,925

( 1,172 )

( 30 )

Income before taxes

2,197

1,723

Following is a summary of revenues per country of origin for the years ended December 31:

Mexico

United States

Argentina

Revenues

2014

2013

48,056

33,836

4,180

49,276

36,331

4,454

86,072

90,061

The Company’s main costumer generated revenue amounting to Ps 8,488 and Ps 10,116 for the years ended December 31, 2014 and
2013, respectively. This revenue is obtained from the Polyester reporting segment and represent 11% for both years of consolidated
revenue with external costumers.

117

ALPEK 2014 ANNUAL REPORT

The following table shows the intangible assets and property, plant and equipment of the country of origin:

Mexico

United States

Argentina

At December 31,

2014

2013

1,986

4,061

1,727

1,179

Total intangible assets

6,083

2,906

Mexico

United States

Argentina

At December 31,

2014

2013

20,981

6,045

366

18,818

5,703

185

Total property, plant and equipment

27,392

24,706

Note 31 - Contingencies and commitments

At December 31, 2014, the Company has the following commitments:

• During 2013, the Company through its subsidiary Grupo Petrotemex, signed an agreement with M&G for the rights
to supply the plant for 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 subject to the
fulﬁllment of predeﬁned milestones. At December 31, 2014 Grupo Petrotemex had made a payment of Ps 2,925,938
(US$198.8 million), presented within goodwill and intangible assets, net. See Note 12.

•

At December 31, 2014 and 2013, 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.

• On February 1, 2005, the subsidiary Polioles and BASF Corporation (the other partner of the Affiliate) signed a licensing
agreement in relation with 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, 2014 and 2013 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 options are generally
under the same conditions of the existing leases.

118

Future payments under these operating lease agreements with non-cancellable terms greater than a year are
summarized below:

Consolidated Financial Statements

2015

2016

2017

2018

Onwards

169,766

138,219

109,971

93,159

401,234

At December 31, 2014, the Company has the following contingencies:

•

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 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.

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.

Note 32 – Subsequent events

In preparing the ﬁnancial statements the Company has evaluated events and transactions for recognition or disclosure subsequent to
December 31, 2014 and up to January 28, 2015 (date of issuance of the ﬁnancial statements), and has identiﬁed the next subsequent
event:

In the Ordinary General Meeting of Indelpro, held on January 28, 2015, the stockholders agreed to declare and pay dividends in cash
for a total of US$ 9,800 to the non-controlling portion.

José de Jesús Valdez Simancas
José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Eduardo Alberto Escalante Castillo
Chief Financial Officer
Chief Financial Officer

119

2014

Annual Report

Table of Contents

Corporate Proﬁle

Financial Highlights

Footprint

Petrochemical Chains

Letter to Shareholders

Polyester

Plastics & Chemicals

Sustainability

Board of Directors

Management Team

Corporate Governance

Glossary

Consolidated Financial Statements

Integration, Efficiency and Expansion

Throughout the report, the blue guidelines show the Global Reporting Initiative (GRI) indicators that

are discussed in the paragraph.

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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

2014

Annual

Report

Alpek, S.A B. de C.V.
Av. Gómez Morín 1111 Sur
Col. Carrizalejo, San Pedro Garza García
Nuevo León, Mexico, 66254