ALPEK, S.A.B. de C.V. Annual Report 2015

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FY2015 Annual Report · ALPEK, S.A.B. de C.V.

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Annual Report
2015

Table
of contents

Corporate profile

Financial highlights

Footprint

Petrochemical chains

Letter to shareholders

Polyester

Plastics & Chemicals

Strategic investments

Sustainability

Board of Directors

Management Team

Corporate Governance

Glossary

Consolidated financial statements

Corporate profile

G4-4, 9

» Alpek is the leading petrochemical company in the Americas.
» Operating in two business segments: Polyester and Plastics & 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.
» 90% of Alpek’s products are used for food, beverage and consumer goods

packaging.

» Listed on the Mexican Stock Exchange since April, 2012.

Annual Report 2015 | ALPEKFinancial highlights

G4-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

2015

5,284

481

630

175

0.08

4,353

2,348

2,005

1,741

0.82

2014

6,471

286

434

0.03

4,442

2,414

2,028

1,763

0.83

% var.

2015

2014

% var.

(18)

171

(2)

(3)

(1)

83,590

86,072

7,590

9,974

2,748

1.30

74,894

40,395

34,499

29,954

14.14

3,739

5,710

801

0.38

65,371

35,527

29,845

25,949

12.25

(3)

103

243

EBITDA (1)
Millions of dollars

MAJORITY NET INCOME (2)
Millions of dollars

ASSETS
Millions of dollars

771

728

572

434

630

175

332

277

4,446

4,742

4,445

4,442

4,353

NOTE: In this annual report, monetary figures are expressed in nominal Mexican pesos ($) and in nominal dollars (U.S. $) unless otherwise

specified. The financial information for 2015 to 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 2015 and 2014 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.

Annual Report 2015 | ALPEKPolyester

Plastics & Chemicals

21 plants in 5 countries:
Mexico, the United States,
Brazil, Argentina and Chile

A qualified team of over 5,000 employees
operating a total capacity of 5.5 million
tons per year.

G4-6, 8

Annual Report 2015 | ALPEKOur products in
daily life

G4-4

P l a s t ics & Chemicals

l y

7:30
Juice for
breakfast

PET bottle

8:30
Safety first
on the way
to work

Polyester
filament seatbelt

6:30
Vitamins for the
little ones

PET bottle

6:00
A nice workout
to start the day

PET bottle and
polyester fiber clothes

Annual Report 2015 | ALPEK

P l a s t ics & Chemicals

17:30
Doctor’s
appointment

Polypropylene
(PP) syringe

18:00
Soccer practice

Expandable
polystyrene
(EPS) cooler

20:30
Teeth
brushing

Toothbrush with
PP handle and
Nylon bristles

10:30
Bottled
water during
a business
meeting

PET bottle

DAK Americas (PET). Pearl River, United States

Annual Report 2015 | ALPEK G4-12

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

Annual Report 2015 | ALPEK
Oil

Reﬁnery

Naphtha

Reformer

Paraxylene

PTA

Cracker

Benzene

Propane

Cracker

CH3

Propylene

Methane

Ammonia

PET

Fibers

Ethane

Cracker

Ethylene

Cracker

Cyclohexane

CH2

Styrene

CPL

Ammonium
Sulfate

EPS

Alpek products are used by

millions of people every day in a

wide range of applications.

Polyester

Plastics & Chemicals

Oil

Reﬁnery

Naphtha

Monoethylene
Glycol

CH2

Ethylene

Oxide

Annual Report 2015 | ALPEK
Letter to
shareholders

Dear shareholders:

G4-1,

2, 13

2015 marked a positive change in Alpek’s results despite the high
volatility of crude oil and feedstock prices. A number of favorable
industry events and internal initiatives enhanced the profitability of
our two business segments, driving up consolidated EBITDA 45%
year-over-year and 26% above our initial guidance.

However, 2015 Polyester EBITDA was U.S. $344 million, 27% high-
er than the previous year. This year’s decline in feedstock prices re-
sulted in a U.S. $35 million non-cash inventory devaluation charge.
Excluding this item, comparable 2015 Polyester EBITDA reached
U.S. $378 million, up 11% versus 2014.

It is important to note that these results were obtained amid an un-
stable environment, with the price of reference Brent crude falling
36% compared to the previous year’s close and fluctuating from a
minimum of U.S. $35 per barrel to a maximum of U.S. $66 per bar-
rel during the year. Besides impacting feedstock prices, such high
volatility typically causes temporary demand and margin distortions
that affect our earnings.

The events that benefited 2015 results and contribute to the recov-
ery of our Polyester segment were: i) a U.S. $66 per ton increase to
the North American PTA price formula; ii) full-year operations at the
Cosoleacaque cogeneration plant; iii) favorable preliminary deter-
minations in the U.S. PET antidumping case; and iv) the rationaliza-
tion of PTA capacity in China, including permanent and temporary
shutdowns.

Alpek’s 2015 consolidated sales totaled U.S. $5.3 billion, down 18%
year-over-year as a result of an 18% decrease in the average consol-
idated price, reflecting lower oil and feedstock prices.

EBITDA reached U.S. $630 million, 45% more than in 2014, growing
annually for the first time since 2011. Two extraordinary items are
included in this figure: a U.S. $50 million non-cash inventory deval-
uation charge; and a U.S. $26 million one-time gain from the sale of
our polyurethane business. Excluding these two items, comparable
2015 EBITDA was U.S. $654 million, up 30% year-over-year.

2015 Polyester segment sales were U.S. $3.8 billion, 19% below 2014.
Sales were impacted by a 17% drop in average price and a 2% de-
crease in volume. Alpek’s polyester product prices reflected lower
petroleum-based feedstock prices.

The Plastics & Chemicals segment posted sales of U.S. $1.4 billion
in 2015, 16% less than the previous year. A 9% increase in volume,
driven primarily by our polypropylene business, was more than
offset by a 23% decline in the average price caused by falling
feedstock prices.

In contrast, Plastics & Chemicals EBITDA grew 79% year-over-year,
to U.S. $284 million. Two extraordinary items included in this figure
are: a U.S. $15 million non-cash inventory devaluation charge; and
a one-time gain from the sale of our polyurethane business. Thus,
comparable 2015 Plastics & Chemicals EBITDA was U.S. $273 mil-
lion, up 72% versus 2014.

Polypropylene margin expansion was a key driver behind the Plas-
tics & Chemicals EBITDA growth. Favorable conditions combining
increased demand, lower feedstock costs and reduced installed ca-
pacity boosted margins during the year. This dynamic is expected to
be sustainable beyond 2015.

Annual Report 2015 | ALPEKOur expandable polystyrene (EPS) business also posted better
than expected EBITDA, driven by the successful integration of the
businesses acquired from BASF in North and South America and a
temporary upswing in margins caused by a multi-month disconnect
with Asian feedstock prices.

Following an in-depth analysis of our new Altamira cogeneration
plant that resulted in a larger project scope with higher profitability,
we began initial construction work in the fourth quarter. The new fa-
cility, which is expected to come on line in 2018, will require an invest-
ment of U.S. $350 million and have a 350 Megawatt capacity, making
it 3.5 times the size of our existing Cosoleacaque cogeneration plant.

Consolidated EBITDA growth and disciplined capital allocation fur-
ther strengthened our financial position. Net debt increased 1% at
the close of the year, with U.S. $160 million in dividends and U.S.
$317 million in Capex offset by strong operating cash flow genera-
tion. The net debt to EBITDA ratio decreased from 1.6 times in 2014
to 1.1 times in 2015, and the interest coverage ratio reached 10.7
times, up from 6.5 times in 2014.

A solid financial structure is fundamental for us to continue the im-
plementation of strategic projects that reinforce our competitive-
ness and maximize shareholder value, particularly in today’s volatile
environment. Hence, we moved forward with our investment pro-
gram and rolled out new expansion initiatives in 2015.

Progress with strategic projects
Styropek, the company responsible of our EPS operations, success-
fully integrated the businesses acquired from BASF in North and
South America, achieving better than expected results. This inte-
gration was the first step of a comprehensive process to transform
our EPS business, which evolved during the year from being a joint
venture, operating a 165 thousand ton per year plant in Mexico, to
becoming the largest EPS producer in America, operating plants in
Mexico, Brazil, Chile and Argentina with an aggregate capacity of
230 thousand tons per year.

It has been more than two years since construction at the Corpus
Christi PTA/PET plant began. We have invested U.S. $287 million
out of the U.S. $350 million commitment under the original agree-
ment. Furthermore, we increased our participation in the project
with the acquisition of additional supply rights to 100 thousand tons
per year of integrated PET. In total, we have acquired supply rights
to 500 thousand tons per year of integrated PET from what will be
the most modern and efficient plant in the region.

Huntsman advanced with the construction of the capacity expan-
sion required for our MEG supply contract. Startup is scheduled
within the next few months, and savings are expected to be reflect-
ed in 2016 EBITDA.

New projects announced in 2015
In 2015, we announced three new initiatives that will be developed
over the coming years:

•

The first is a 110 thousand ton per year polyester fiber expan-
sion at our Pearl River plant, which will increase our capacity
to 405 thousand tons per year. The incremental polyester fiber
capacity will allow us to meet the growing demand from our
customers. Investment in this project will amount to approxi-
mately U.S. $30 million and operations are expected to begin
at the end of 2016.

Annual Report 2015 | ALPEK•

•

The second is a 75 thousand tons per year EPS expansion at
the Altamira facility, which will make it one of the world’s five
largest EPS plants. After a U.S. $30 million investment, opera-
tions will start in 2017, to satisfy our growing customer base in
North America.

The third is an agreement signed with BASF to acquire its 20
thousand ton per year EPS plant in Concón, Chile, thereby
complementing recently acquired EPS assets in South Ameri-
ca. This transaction should be closed in early 2016.

Styropek’s aggregate installed capacity will grow 41%, reaching 325
thousand tons per year, once the Concón acquisition is integrated
and the Altamira expansion begins operations.

At Alpek, we understand that our actions impact society and the en-
vironment either directly or indirectly. For this reason, we maintain a
continuous improvement effort oriented towards sustainability.

In 2015, we completed a materiality analysis of social, environmen-
tal, economic and corporate governance topics, through which we
identified thirteen aspects that are particularly important to our
stakeholders.

The materiality determination process included an exhaustive
analysis of: i) our sector’s current situation in terms of sustain-
ability, ii) issues deemed important by our internal and external
stakeholders, and iii) the sustainability-related activities we un-
dertake. The analysis will serve to guide our actions towards the
issues that are most important and contribute the most to sus-
tainable long-term value creation. This report includes a total of
99 indicators related to the thirteen material aspects identified, and
48 others related to our operations.

2015 was a year that exceeded our expectations; more important-
ly, we believe that the majority of developments that favored our
results will bring positive long-term effects. However, we maintain
a conservative outlook in the short term due to the current oil and
feedstock price volatility.

We would like to take this opportunity to thank our employees, cus-
tomers, suppliers and creditors, the community and, in particular,
our shareholders, who put their trust once again in this Board of
Directors.

Sincerely,

Armando Garza Sada
Chairman of the
Board of Directors

José de Jesús Valdez Simancas
Chief Executive Officer

Annual Report 2015 | ALPEKAnnual Report 2015 | ALPEK

DAK Americas (PET). Cedar Creek, United States

Annual Report 2015 | ALPEKPolyester PTA is a product of the polyester chain made from paraxylene and is

the main raw material in the production of PET and polyester fiber.

G4-4, 8

The Polyester segment, which
accounted for 73% of our 2015
sales, manufactures PTA (purified
terephthalic acid), PET (polyethylene
terephthalate) and polyester fiber.

PET is a recyclable plastic employed primarily to manufacture
packaging for beverages, food and consumer products. Polyester
fiber is commonly used to produce clothing, safety belts and many
other everyday textile products.

Alpek is the leading integrated PTA-PET producer in North Amer-
ica and the only manufacturer of virgin PET and recycled PET
(r-PET) in Argentina. The businesses that comprise our Polyester
segment employ 3,570 workers and operate 12 plants in the United
States, Mexico and Argentina with an aggregate installed capacity
of 4.4 million tons.

Annual Report 2015 | ALPEKDAK Americas (PET). Cosoleacaque, Mexico

Annual Report 2015 | ALPEK73% of Alpek’s total 2015

revenues came from the
Polyester segment

83% of Polyester sales

came from Mexico,
the United States and Canada

83%
North America

73% Polyester

27% Plastics &
Chemicals

17% Rest of
the world

G4-

EC2,

EC8

Alpek is committed to sustainability, operating PET recycling plants
in the United States and Argentina with an installed capacity of 89
thousand tons per year, equivalent to more than 4 billion bottles.

operation of our Cosoleacaque cogeneration plant contributed
to EBITDA growth.

A total of 83% of Polyester sales are made in the NAFTA region, a
very sizable, consolidated market. Moreover, our focus on stable,
consumer-oriented segments and leading position in the North
American market contribute to stability in the demand for our poly-
ester products.

The Polyester segment posted 2015 sales of U.S. $3.8 billion and a
volume of 3.0 million tons. Year-over-year, sales decreased 19% due
to lower prices resulting from falling oil and feedstock prices.

Polyester EBITDA was U.S. $344 million, 27% above 2015. This
figure includes a U.S. $35 million non-cash charge for inventory
devaluation. Comparable EBITDA (without taking into account the
extraordinary item) reached U.S. $378 million.

During the year, a series of favorable events combined to drive prof-
itability, promote a gradual, sustainable recovery and improve the
future prospects of our Polyester segment.

The increase of ~U.S. $66/ton in the PTA price formula in
North America, which came into effect in April 2015, and the

Moreover, for the first time since 2012 when the new wave of PTA
plants began operating in China, a large Chinese producer filed for
bankruptcy and two major Chinese players announced a series of
coordinated rationalization initiatives.

In addition, during the year there was an explosion at the plant
of another important Chinese producer that will keep the facility
offline indefinitely.

Lastly, the United States Department of Commerce and the Inter-
national Trade Commission issued favorable preliminary determi-
nations in the packaging-grade PET resin antidumping case in the
United States. As a result, since October 2015 PET imports from
China, India, Oman and Canada have been subject to cash deposits
based on preliminary tariffs. Final rulings are expected in the first
half of 2016.

Thus, strategic projects, efficiency enhancing initiatives and favor-
able industry developments combined to turn around the Polyes-
ter segment’s earnings trend and point to a brighter future for our
polyester business.

Annual Report 2015 | ALPEKIndelpro (PP). Altamira, Mexico

Annual Report 2015 | ALPEKPlastics &
Chemicals

The Plastics & Chemicals (P&C)
segment, represented 27% of Alpek’s
sales in 2015

The Plastics & Chemicals segment is made up of businesses that
manufacture and market polypropylene (PP), expandable polysty-
rene (EPS), caprolactam (CPL), specialized chemicals, industrial
chemicals and ammonium sulfate (fertilizers).

PP is P&C’s main product, commanding a 44% share of the seg-
ment’s sales. It is a recyclable plastic made from propylene and
used in a wide variety of applications, such as to make containers,
food packaging, medical equipment and automobile parts.

EPS accounts for 28% of P&C sales. It is a low-density material
with insulation and impact-absorption characteristics that make it
ideal for the packaging of appliances and electronics and for ther-
mal insulation and lightening structural slabs in building works.

The remaining P&C products represent 28% of the segment’s
sales. These include: CPL, the main raw material for producing Ny-
lon 6, which is used in such products as clothing, engineering plas-
tics and tire cord, and ammonium sulfate, a by-product of the CPL

Annual Report 2015 | ALPEKStyropek (EPS). Altamira, Mexico

Annual Report 2015 | ALPEKG4-13

production process that is used as a fertilizer because of its high
nitrogen content. In addition, the specialty and industrial chemicals
that the segment produces have a wide range of applications in
sectors such as the oil, automotive, pharmaceutical and consumer
goods industries.

The P&C segment posted 2015 sales of U.S. $1.4 billion, 16% below
2014. Volume increased 9% year-over-year, however, the average
price was 23% less because of the decline in crude oil and feed-
stock prices.

All P&C products hold a leading position in their markets. In 2015,
we became the leading EPS producer in the Americas with the in-
tegration of our North and South American acquisitions, and we
are the only PP and CPL manufacturer in Mexico.

The creation of Styropek, a new, 100% Alpek-owned subsidiary,
was a major event for our Company. Styropek integrates our EPS
businesses and operates plants with an aggregate capacity of 230
thousand tons per year in Mexico, Brazil, Argentina and Chile.

Plastics & Chemicals employs 1,530 workers and operates 9 plants
in Latin America, with a total production capacity of 1.1 million
tons. More than 80% of the segment’s sales come from the North
American market, although we also serve customers in Central and
South America, Asia and Europe.

P&C EBITDA was U.S. $284 million, 79% increase over the previ-
ous year, driven by higher PP and EPS margins. Our EPS business
benefitted both from a temporary disconnect with Asian feedstock
prices due to unscheduled shutdowns in China, and from the inte-
gration of recently acquired plants, with which we increased our
annual capacity from 165 thousand to 230 thousand tons.

During 2015, the PP margin grew significantly due to the availabil-
ity and competitiveness of its main feedstock, propylene, in North
America. This new regional dynamic makes it likely that polypropyl-
ene margins will remain near current levels beyond 2015.

This combination of improved P&C product margins, the consoli-
dation of the EPS business and favorable market dynamics leads
us to expect good performance from this segment going forward.

G4-9

27% of Alpek’s total 2015

revenues came from the
Plastics & Chemicals segment

80% of Plastics & Chemicals

sales came from Mexico, the
United States and Canada

80% North America

27% Plastics
& Chemicals

73% Polyester

20% Rest of
the world

Annual Report 2015 | ALPEKGrupo Petrotemex (Cogeneration). Cosoleacaque, Mexico

Annual Report 2015 | ALPEKStrategic investments

G4-

EC2,

7, 8

Alpek’s growth strategy is based on our proactive search for new
investment opportunities, capacity to select and implement strate-
gic projects, and solid financial position.

scope and higher profitability of this plant, which will have a 350
MW capacity, require an investment of U.S. $350 million over the
next three years, and begin operations in 2018.

The discipline with which we choose where to invest ensures that
our resources are focused on the most profitable initiatives and that
financial flexibility is maintained throughout their development.

New projects announced in 2015
During 2015, we announced three new initiatives that will comple-
ment those already in progress, one in the Polyester segment and
two in Plastics & Chemicals.

Our first cogeneration plant in Cosoleacaque, Veracruz, began to
produce savings in 2015. In its first full year of operations, the fa-
cility generated a total of 623 GW/h of electricity and produced
1.1 million tons of steam, resulting in benefits of U.S. $18.3 million.
This project is particularly important because it was the first ma-
jor investment we concluded since we started our strategic Capex
program in 2012.

As we moved forward with our established plan, we also announced
new initiatives in our two business segments.

Progress with strategic projects
All our projects advanced as planned during 2015, with total Capex
of U.S. $317 million. We maintain a firm commitment to implement-
ing the initiatives included in our development plan.

The integration to monoethylene glycol (MEG) through a supply
contract signed with Huntsman will be the next project to come on
line. It will result in savings as early as the first half of 2016.

The Corpus Christi PTA/PET plant was our largest investment of
2015. In addition to our commitment under the original agreement,
we increased our participation in the project through the acquisi-
tion of additional supply rights to 100 thousand tons of PET per year.
This integrated site, which will use our IntegRex® PTA technology,
will have the most competitive cost structure in North America.

In 2015, we began the construction of our second largest invest-
ment after Corpus Christi: the cogeneration plant in Altamira, Tam-
aulipas. A comprehensive analysis resulted in both a larger project

In the Polyester segment, we approved a 110 thousand tons per
year polyester fiber expansion at our Pearl River plant in the United
States. With an investment of U.S. $30 million, this project will help
to satisfy the growing market demand before the end of 2016.

The two new investments announced for the Plastics & Chemicals
segment complement the transformation process that recently
made us the leading EPS producer in America.

The first project announced was a U.S. $30 million investment in
our EPS plant in Altamira, Tamaulipas, to increase its annual capac-
ity by 75 thousand tons starting in 2017. The second was the signing
of an agreement with BASF to acquire its 20 thousand ton per year
EPS plant in Concón, Chile, thereby complementing our other EPS
facilities in South America in 2016.

These initiatives contribute to the ongoing transformation of our
EPS business, which has evolved from being a joint venture op-
erating a 165 thousand ton per year plant in a single country, to
what Styropek is today: a wholly-owned Alpek company, with a 230
thousand ton per year aggregate capacity in Mexico, Brazil, Chile
and Argentina.

The projects in progress and those announced in 2015 are a crucial
part of the growth strategy that involves more than U.S. $1 billion in
investments to capture an annual incremental EBITDA of U.S. $250
million over the next 4 years.

Annual Report 2015 | ALPEKGrupo Petrotemex (PTA). Altamira, Mexico

Annual Report 2015 | ALPEKSchool maintenance in Cosoleacaque, Mexico

Sustainability

At Alpek we understand that every
action we undertake, every product we
offer and every decision we make has a
direct or indirect impact on society and
the environment. For this reason, we
make a continuous effort to innovate,
review and improve processes to be
ever more responsible in the world in
which we operate.

G4-32

We present our fourth sustainability report with actions taken in
this area in 2015, based on the standards of the Global Reporting
Initiative, version G4. For its development we conducted a mate-
riality process through which we clearly identified the aspects of
greatest importance to our stakeholder groups. We report a total
of 99 indicators that respond to the material aspects identified as
well as 48 additional indicators relative to our operations, which are
described in this section and throughout the document. The full list
of GRI indicators and their location in the report can be found at:
http://www.alpek.com/gri-report.html

Annual Report 2015 | ALPEKForestation in Altamira, Mexico

Annual Report 2015 | ALPEKMateriality study
Material aspect: CSR management.

G4-18-21

Based on the model and actions implemented in previous years, in
2015 we conducted a materiality analysis on social, environmen-
tal, economic and corporate governance issues for our operation.
This process included approaching our stakeholder groups and the
thorough investigation of the information about our company. As a
result, we identified thirteen material aspects:

The process to determine materiality included an analysis of the
sustainability situation specific to our sector, as well as what our
internal and external stakeholder groups want to know about the
company and the actions we undertake. In addition to using the
results to organize this report in order to disclose the aspects that
are most relevant to the public, the analysis will serve to guide our
actions towards the most important areas that contribute to create
sustainable long-term value.

Material aspect

Operation and risk strategy

Investor relations

CSR management

Corporate governance

Labor practices

Distribution of wealth

Health and safety

Energy eco-efficiency

Water management

Climate change and emissions strategy

Community engagement

Relations with NGOs and regulatory agencies

Customer and supplier relations

Materiality results

100%

k
e
p
l
A
o
t

t
c
a
p
m

100%

Relevance to stakeholders

Operation and risk strategy

Investor relations

CSR management

Corporate governance

Labor practices

Distribution of wealth

Health and safety

Energy eco-efficiency

Water management

Climate change and emissions strategy

Community engagement

Relations with NGOs and regulatory agencies

Customer and supplier relations

Annual Report 2015 | ALPEK

Our Sustainability Strategy
Material aspect: Operation and risk strategy, CSR management.

G4-1,

25, 46

The sustainability model we defined in 2014 has been of enormous
value to the way in which Alpek adapts to the context of social re-
sponsibility. This model allows us to align any business decision to
the strictest sustainability standards. It exists thanks to the commu-
nication with our stakeholder groups and to our participation in the
ALFA Sustainability Committee, a body responsible for combining
the efforts of the Group’s companies to achieve the sustainability
goals we share.

Our sustainability strategy is a reflection of the ongoing commitment
of the company’s governance body to contribute to international ef-
forts in terms of environmental care, employee fairness and equality,
and active participation in community development.

COMMUNICATION WITH STAKEHOLDERS
In addition to the materiality analysis conducted this year, our com-
munication channels were kept open permanently to hear and ad-
dress any concerns expressed by our stakeholder groups.

G4-24,

26, 27

Stakeholder Group

Form of Communication

Frequency

Main Concerns

Response to Concerns

Intranet, suggestion box

Ongoing

Innovation and
improvement ideas

Review and approval of innovation ideas,
putting the best suggestions into practice.

Bulletins, e-mails, presentations
and diverse events

Ongoing

Quarterly results

Generation of reports, memos and
agreements.

Employees

Work environment diagnostics

Annual

Work environment

Informative talks

Twice a year

Business review

Results are discussed in Board meetings
and agreements are met.

Encourage personnel participation and
ideas.

Customers

Telephone calls, internet, plant
visits , surveys and e-mail.

Ongoing

Product quality, business
issues and their timely and
proper delivery; technical
services

Improve time frames and procedures that
enable quality assurance.
Technical visits and information sharing.

Shareholders

Meetings, telephone calls,
internet and e-mails.

Ongoing

Strategy, profitability,
financial situation and
operating performance

Strict follow-up of indicators compliance.
Concerns are addressed and agreements
are made at Board meetings.

Suppliers

Meetings, telephone calls,
internet, plant visits, surveys and
e-mail

Ongoing

Business and quality
aspects.
Clarifications, quotes and
deliveries.

Implementation of suppliers’ development
programs.
Agreements and delivery of detailed
.information of the company’s needs.

Communities

Meetings, perception surveys,
alliances with NGOs and
community groups like GIREL
(Grupo Industrial de Respuesta a
Emergencias Lerma)

Monthly,
quarterly, twice
a year

Industrial safety and
contingency management.
Company perception and
support.

Report on safety and emergency processes
and mechanisms.
Neighborhood evacuation brigade training.
Support civil protection activities.
Give support and training.

Annual Report 2015 | ALPEKG4-56

Both in this model and in our daily operations, our values and ethical
behavior standards are aligned with the ALFA Group Code of Ethics,
available at: http://www.alfa.com.mx/NC/filosofia.htm. Moreover, as

part of ALFA we support its adhesion to the principles of the United
Nations Global Compact.

Our Sustainability Model

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

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

l
l

n
b

o
e

n
g

C
o
m

s
i

o
n

munity

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

Sustainable Economic Value Creation
Material aspect: CSR Management.

G4-42

All our operations are carried out based on responsible practices
towards society, the environment and the economy knowing that
our long-term viability depends on it. This conviction begins with
the Board of Directors and permeates throughout the company.
Our Board is constantly driving initiatives towards sustainable op-
erations, as well as becoming involved in the evaluation, develop-
ment and approval of Alpek’s mission, vision, values and integrated
business strategy.

G4-35

GOVERNANCE OF THE ORGANIZATION
The Board of Directors is supported in many ways by the governing
body of the company to carry out activities related to the develop-
ment and fulfillment of environmental, economic and social objec-
tives. Each of these areas is dealt within specific departments, both
in Alpek and in each of its companies, and the results are evaluated
periodically in order to improve and / or continue specific strategies
accordingly.

Annual Report 2015 | ALPEKWater treatment plant at Grupo Petrotemex in Altamira, Mexico

Annual Report 2015 | ALPEKEconomic Sustainability
Material aspect: Investor relations, Distribution of wealth.

G4-EC1

The company’s primary purpose is the responsible creation of eco-
nomic value. At Alpek we do this in a sustainable way, generating
benefits for our shareholders, employees, the environment in which
we operate and the communities that welcome us.

Aspect

Quantity
(millions of dollars)

Consolidated Revenues

Consolidated Net Income

Majority Net Income

Basic and diluted earnings per share
(dollars)

Income tax

Dividends

Capital Expenditures and Acquisitions

Net Debt

Net Debt/EBITDA (times)

5,284

233

175

0.08

160

317

722

1.1

Alpek has an Investor Relations area that is dedicated to commu-
nicating the financial and operating performance of the company.

Financial Opportunities and Risks due to
Climate Change
Material aspect: Distribution of wealth, Operations and risk strate-
gy, Climate change and emissions strategy.

G4- EC2

As a company with international presence, at Alpek we work hard
to adapt to the highly dynamic world in which we operate. Through
the constant analysis of events, trends and factors that affect our
sector, we have identified the risks and competitive advantages
that climate change represents for our operation. Ever stricter en-
vironmental regulations, natural disasters and increasing sea levels
and storm intensity that affect the transportation logistics of our
product, and water and oil shortages not only represent huge chal-
lenges for our industry, but for the entire planet.

To confront these we invest in technology, the improvement of
equipment and processes and strategic acquisitions to increase
our competitiveness and optimize resources. Examples of these are
the cogeneration plant in Veracruz, which went into full operation
in 2015, and the start of the first stage of construction of the second
plant, which will be located in Tamaulipas and have 3.5 times the
capacity of the first.

These facilities allow us to reduce CO2 emissions into the at-
mosphere, significantly decrease our energy costs and assure
a constant supply. The return on investment is tangible: in 2015
the Cosoleacaque plant generated a total of 623 GigaWatts/hr of
electrical energy and produced 1.1 million tons of steam, deliver-
ing U.S. $18.3 million in benefits.

Internal well-being

We work every day to ensure the full development of our employees
since we believe that creating internal well-being is a basic con-
dition for contributing to the construction of a better future for all.

Our Employees
Material aspect: Distribution of wealth, Labor practices.

Alpek’s employees are our main strength and greatest wealth. Al-
though due to the nature of our operations our workforce consists
mainly of men, we are committed to gender equality in every sense.
The wages we pay are based on the experience and skills of each
employee and not their gender. Furthermore, growth and integrated
development opportunities are provided to all employees equally.

G4-EC5,

LA12, 13

Gender equality and diversity in Alpek are guaranteed by the
ALFA Code of Ethics and other established policies in each of
our companies, such as DAK Americas’ Equal Employment Op-
portunity Policy.

Similarly, the ratio between the basic salary of men compared to
women is 1:1, no difference whatsoever.

Diversity and inclusion are key factors in the richness of our work
culture. As a company that competes in various markets around the
world, our vision as a global citizen aligns with international trends
and allows us to strengthen our practices. This year we identified

Annual Report 2015 | ALPEK

certain factors that characterize the new generations that will join
the workforce in the short term, which are significantly different
from the traditional. We have the opportunity to develop and drive
a positive change in our operational approach and workforce de-
velopment.

Alpek’s workforce in 2015 was distributed as follows:

G4-10,11

Group

Under 30 years

Between 30 and 50 years

Over 50 years

Men

Women

Total

995

178

1,173

Type of Employment

Executives and employees

Unionized

Total

2,309

304

2,613

Men

2,031

2,468

4,499

1,195

115

1,310

Women

569

597

Total

4,499

597

5,096

Total

2,600

2,496

5,096

Each one of Alpek’s operations respect their employee’s freedom of
association. 48% of our employees are unionized.

We invested a total of U.S. $5.5 million in training during 2015,
3 times more than in 2014. The results are shown in the follow-
ing table:

Training and Development

G4-LA9,

Training and talent retention are strategic priorities. In 2015, our
companies continued to expand their initiatives in this area through
the generation and strengthening of alliances with universities
around the world; an example of this is the Masters in polymeriza-
tion in Italy, where we send our process engineers to conduct stud-
ies which help them develop professionally and Alpek to further
increase the capacity of its human capital.

In total, in 2015 Alpek granted 437 schoolarships to employees who
expressed an interest in continuing to increase their level of training
and education, in diverse disciplines.

2015 Training

Average number of training hours per
employee.

Average number of training hours per male
employee.

Average number of training hours per
female employee.

Average number of training hours per
unionized employee.

Average number of training hours per non-
unionized employee.

Annual Report 2015 | ALPEK
Control room at Styropek in Altamira, Mexico

Occupational Health and Safety
Material aspect: Health and safety.

G4-

LA5-8

The health of our employees is a priority for Alpek. We address
this issue on two fronts: the reduction of work accidents and the
creation of safer work environments; and the promotion of non
work-related health, through medical check-ups and awareness
campaigns. In 2015 we invested nearly US $15 million in this area.

Furhtermore, we have the support of our Health and Safety Com-
mitees, where 100% of our personnel are represented.

Loss Ratio

Frequency

Accidents

Days Lost

Fatalities

2014

58.7

1.3

555

2015

43.8

2.2

416

Through a total of 33 implemented programs and an investment of
more than U.S. $4.8 million, we were able to achieve positive results
such as reducing the accident rate in the Univex plant by 33%, and
completing 12 years with zero accidents in the transportation logis-
tics operations of Petrotemex.

Annual Report 2015 | ALPEK

Talk during Sustainability Day at Grupo
Petrotemex in Altamira, Mexico

32
32

Informe Anual 2015 | ALPEK

Annual Report 2015 | ALPEKEnvironment

G4-

EN27,

Alpek’s operations require the intensive use of natural resources,
and so we have the responsibility to use them sustainably so that
future generations can also benefit from them. We have a strong
commitment to the environment which extends from the constant
revision of our processes in order to make them cleaner and more
efficient, to the preservation of the natural habitats in the vicinity of
our plants.

Area of investment

Amount
(Thousands of dollars)

Reduction of emissions

Environmental management costs

Waste disposal and reduction

Prevention costs

Other environmental actions

Remediation costs

Total

19,169

7,216

1,331

961

326

29,003

In 2015 our investment in actions to
benefit the environment increased by
27% compared to the previous year.

Energy Efficiency
Material aspect: Energy eco-efficiency.

G4-EN3,

4,6

Projects like our energy cogeneration plant in Cosoleacaque, Vera-
cruz—which began operations at the end of 2014 and generated a
total of 623 GigaWatts/hr—underline the commitment we have to
eco-efficiency and a lesser dependence on non-renewable energy
sources. In addition, 97% of our energy needs comes from natural
gas, currently the cleanest fossil fuel. This represents 4% more in
comparison to 2014.

Energy source

Direct consumption
(GJ x 106)

Indirect consumption
(GJ x 106)

2014

2015

2014

2015

Natural gas

15.7

21.9

Alternative fuel

Coal

Fuel oil

Diesel

Electricity

Totals

0.2

1.0

0.1

0.0

0.9

0.5

0.2

16.9

22.6

5.9

6.0

It is important to note that even though our energy-savings initiative
yielded favorable results, the increase in direct energy consumption
was due to the expansion of our operations in 2015.

Other energy saving initiatives implemented in 2015, such as the
refrigeration optimizations for Akra and the installation of new com-
pressors for monomer processes for DAK Americas, resulted in a
reduction in consumption of more than 261,000 GJ in the year. In
addition, we were able to decrease energy use by 346 KW per ton
of polymer produced.

In our PTA and PET operations, initiatives such as the integration
with cogeneration processes and the use of steam generated con-
sumption savings of 571, 079 GJ.

Water Care
Material aspect: Water management

Water is a crucial resource for our operation and looking after it is
a priority. We are working on strategies that allow us to reduce the
water footprint of our products through reduced consumption and
the reuse and treatment of the water we use. We have 12 water
treatment plants.

G4-EN8,

Annual Report 2015 | ALPEK

Grupo Petrotemex (PTA), Altamira, Mexico

This year Grupo Petrotemex achieved savings of 1.6 million m3 of
water by optimizing its reuse systems, and Polioles implemented
broad-scope initiatives through its Water Committee that will re-
port results in the next few years. Likewise, Indelpro continued with
its inverse osmosis operation project through which it recovers
blow-down water from the cooling towers. This allowed it to reduce
water consumption by 23% compared to 2014. In addition, Akra
reduced drinking water consumption in its installations and routine
activities by 48 m3/day by optimizing its leak detection and repair
process.

Styropek Brazil has reduced its consumption by 76% since 2008.

Source

Water Consumption
(millions of m3)

Rivers, lakes and seas

Underground water

Municipal water supply

Other

Total

89.5

3.5

1.2

0.5

94.6

Due to these initiatives, our water consumption was reduced by
3%, even though our level of production increased. Moreover, we
increased the volume of treated and reused water in our processes
with respect to 2014.

Treated and reused water (m3)

10.3 million

15.1 million

2014

2015

This amount represents 16% of our total consumption.

Reduction of Emissions
Material aspect: Climate change and emissions strategy.

Climate change is a reality we have to face. Alpek joins the fight
through emission reduction programs and our participation with
carbon credis. At year-end 2014 the UNFCCC, a United Nations
international body, certified the reduction of 900 thousand ton
CO2 emissions in our operations. The 2015 results will be added
by mid-2016.

G4-

EN15,

16, 19,

Annual Report 2015 | ALPEK
Emissions of CO2 equivalent

Direct (x 106 ton CO2e)

Indirect (x 106 ton CO2e)

Total

2014

2015

1.3

0.9

2.2

0.9

1.2

2.1

Emissions of other pollutants

Pollutant

Amount

NOx

SOx

431.3 tons

766.1 tons

The increase in NOx emissions is due to the start up of the newly
acquired installations.

The actions carried out, such as an increased use of natural gas
or the optimization in the use of combustion equipments among
others, achieved reductions of over 209 thousand CO2 tons of emis-
sions in our processes, equivalent to the yearly emissions of 43
thousand cars. It is important to note that even with the increase of
our operations, these reductions allowed us to maintain our emis-
sions on a similar level than those of 2014.

Waste and Spills
Besides being committed to the reduction of pollutants we send
into the atmosphere, we are also working to eliminate our solid
waste. DAK Americas is at the forefront of this effort with its Zero
Waste program, which enabled its plants to stop emitting waste
entirely in 2015.

G4-

EN23,

Waste

Weight (tons)

Treatment method

Non-hazardous
sludge

Hazardous sludge

9,305

471

Landfill

Reused as fuel

Annual Report 2015 | ALPEKForestation in Altamira, Mexico

36
36

Informe Anual 2015 | ALPEK

Annual Report 2015 | ALPEKIn 2015, one of our external contractors had a substance spillage
during transport operations in Veracruz, where a train used by Po-
lioles and other companies in the region to transport chemicals
derailed and ignited. Polioles, like all Alpek companies, has a strict
protocol for action in such situations, which was implemented in a
timely and proper manner.

It must be said that the contractor and local government responded
to the emergency by evacuating the nearby towns and controlling
the fire and spillage. As part of our responsibility to the health of
people and the environment, this incident has been reviewed in
order to avoid similar occurrences in the future.

• Univex grows produce like green beans, lettuce, onions and
other vegetables to test its fertilizers, and donates them to the
local community. It should be noted that these fertilizers, al-
though often still in the testing stage, are completely safe for
use in the production of food for human consumption.

• Petrotemex helped the local communities through the mainte-
nance of three schools, the construction of paved roads with
an investment of almost U.S. $250,000, and ViveVerde, a se-
ries of talks about the care of the environment in neighboring
schools.

Our Customers and Suppliers
Material aspect: Customer and supplier relations:

G4-12, EN33, LA14, LA15, HR4, HR10, HR11, SO9, SO10

Material aspect: Relations with NGOs and regulatory agencies:

G4-15, 16, 24-26

In 2015 the ALFA Sustainability Committee rolled out a project
aimed at the companies’ supply chain. The project envisages the
creation of a frame of reference and methodology to understand
the sustainability practices of the suppliers and their progress in
that area. This will enable the companies to create sustainable
development plans which are reflected in their performance and,
hence, in their economic growth.

Developing mutually beneficial relationships with our customers
and suppliers is at the center of the way we operate.

We also participated in a number of initiatives of the chambers
and associations to which we subscribe, to benefit both the par-
ticipating companies and the surrounding communities. In 2015 we
played an active role in the following:

G4-

EN27

Raw Materials and Use of Resources
Companies in the petrochemical industry are challenged with find-
ing increasingly efficient and environmentally friendly ways to ob-
tain the resources we need to manufacture the products our cus-
tomers require. This becomes even more relevant since our raw
materials derive from oil, which is non-renewable and whose ex-
traction is associated with the emission of pollutants.

Recycling is an important part of our sustainability strategy. We
have PET bottle recycling plants in the United States and Argentina
with a total annual capacity of 89 thousand tons. In 2015 our plants
recycled 53.8 thousand tons of this material.

Our Community
Material aspect: Community engagement.

G4-EC7

Our neighboring communities give us their license to operate. In
exchange, Alpek contributes to the local and national economy,
implements programs to improve the quality of life of the people
around us and promotes the sustainable development of the places
where it operates.

Alpek companies conduct programs that meet the different needs
of our communities in terms of health and safety, support for local
schools and care of the natural environment, among others. Among
the most important activities we carry out are the following:

• All subsidiaries participate in Family Day, an event that in-
cludes activities to promote family life among our employ-
ees. In addition, all our companies contribute to the ALFA
Foundation.

Annual Report 2015 | ALPEK

Company

Association

Akra

ANIQ (Asociación Nacional de la Industria Química)

ACIA (Asociación de Crédito Industrial Argentina)

AFMA (America Fiber Manufacturers Association)

CAIRPLAS (Cámara Argentina de la Industria de Reciclados Plásticos)

Chambers of commerce near our facilities

Campana - Zarate Safety-Hygiene Committee

CAPCA (Carolinas Air Pollution Control Association)

Capital Associate Industries

CCAM (Cámara de Comercio Argentina-Mexicana)

CEMPRE (Compromiso Empresario para el Reciclado)

CERA (Cámara de Exportadores de la República Argentina)

CICAZ (Comité Interindustrial de Conservación del Ambiente Zárate Campana)

CIPETAR (Cámara de la Industria del PET Argentina)

CIQyP (Cámara de la Industria Química y Petroquímica)

DAK Americas

CIRA (Cámara de Importadores de la República Argentina)

IAE (Instituto Argentino del Empaque)

INDA (Association of the Nonwoven Fabrics Industry)

IPA (Instituto Petroquímico Argentino)

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 (Unión Empresaria de Municipio Tigre)

UIZ (Unión Industrial de Zárate)

Participation
in steering
committees or
special projects

Above minimum
economic support

Participation for
reasons of strategy

Yes

Annual Report 2015 | ALPEKCompany

Association

ANIQ (Asociación Nacional de la Industria Química)

Petrotemex

Asociación de Industriales del Sur de Tamaulipas, A.C.

CRIS

Indelpro

ANIQ (Asociación Nacional de la Industria Química)

Asociación de Industriales del Sur de Tamaulipas, A.C.

Polioles

ANIQ (Asociación Nacional de la Industria Química)

ABIQUIM (Asociación Brasileña de la Industria Química)

Styropek

ANIQ (Asociación Nacional de la Industria Química)

Univex

ANIQ (Asociación Nacional de la Industria Química)

Participation
in steering
committees or
special projects

Above minimum
economic support

Participation for
reasons of strategy

Yes

Families during Sustainability Day at Grupo
Petrotemex, Indelpro and Styropek

Annual Report 2015 | ALPEKBoard of
Directors

G4-34,

Armando Garza Sada (3)
Chairman of the Board of Alpek, S.A.B. de C.V.
• Chairman of the Board of ALFA and NEMAK.
• Member of the Boards of CEMEX, FEMSA, Frisa Industrias,

Grupo Financiero Banorte, Grupo Lamosa, Liverpool, Proeza,
and ITESM.

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

• President of Mexican Consumer Products Industry Council /
Consejo Mexicano de la Industria de Productos de Consumo,
A.C. (ConMéxico). Member of the Boards of Xignux, Regional
Board of Banorte, Universidad de Monterrey (UDEM), and
Ciudad de los Niños.

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

Merici Garza Sada (4)
Investor

• Co-Chairman of the Board of Axtel. Member of the Boards of
Alfa, Nemak, Cydsa, Grupo Aeropuertario del Pacífico, Vitro,
Universidad de Monterrey (UDEM), Georgetown University
(Latin American Board), and Museo de Arte Contemporáneo de
Monterrey.

• Chairman of the Advisory Board of the Centro Roberto Garza

Sada of the UDEM.

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, and Universidad de Monterrey (UDEM), and
as Alternate Member of the Boards of FEMSA, and Coca Cola
FEMSA.

Rodrigo Fernández Martínez (3)
President of Sigma México

• Previously Marketing and Finance Director of Sigma.

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

Jaime Serra Puche (1A)
Founding Partner and Chief Executive Officer for 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 for Grupo Proeza, S.A. de C.V.

• Member of the Boards of Grupo Proeza, CFE, and ITESM.

Carlos Jiménez Barrera
Secretary of the Board

Key
1. Independent Board Member
2. Independent Patrimonial Board Member
3. Related Patrimonial Board Member
4. Patrimonial Board Member
A. Audit and Corporate Practices Committee

Annual Report 2015 | ALPEKManagement Team

G4-34,

1. José de Jesús Valdez
Simancas

Chief Executive Officer

2. Eduardo Escalante Castillo

3. Felipe Garza Medina

4. Jorge P. Young Cerecedo

Chief Financial Officer

President of the PTA

President of the PET and Staple

Business Unit

Fibers Business Unit

Chief Financial Officer of Alpek

CEO of Alpek since 1988. Former CEO

since 2013. Former President of the

President of Alpek’s PTA Business Unit

President of Alpek’s PET and Staple

of Petrocel, Indelpro, and Polioles,

Caprolactam Division of Alpek and

since 2008. Joined Alfa in 1977 and is

Fibers Business Unit since 2012.

and former Chairman of the National

President of AOL Mexico. Holds an

former CEO of Indelpro and Galvacer.

Former Executive Vice President

Association of the Chemical Industry

undergraduate degree from ITESM

Holds an undergraduate degree from

of PET Resins and Vice President

(ANIQ). Holds an undergraduate

and a Master’s in Engineering from

Stanford University and an MBA from

of Planning and Administration

degree and MBA from ITESM and a

Stanford University.

Cornell University.

Master’s in Industrial Engineering from

Stanford University.

of DAK Americas LLC. Holds an

undergraduate degree from ITESM

and an MBA from the University of

Pennsylvania.

5. Jorge González Escobedo

President of the Filament Fibers

6. Alejandro Llovera Zambrano
President of the Polypropylene

7. José Luís Zepeda Peña
President of the EPS and

8. Gustavo Talancón Gómez

President of the Caprolactam

Business Unit

Chemical Business Unit

and Fertilizers Business Unit

President of Alpek’s Filaments Fibers

President of Alpek’s Polypropylene

President of Alpek’s EPS and Chemical

Business Unit since 2005. Joined Alfa in

Business Unit since 2008. Joined

Business Unit since 1999. Joined Alpek

1974 and is a former Vice President of

Alfa in 1985, is a former Director

in 1986 and is former Vice President of

Alpek’s Industrial Filaments Business

of Human Resources at Alfa, held

Planning, Finance and Administration,

Unit. Holds an undergraduate degree

several executive positions in Alpek’s

and Sales in Grupo Petrotemex. Holds

and an MBA from ITESM.

Synthetic Fibers Business Unit and

an undergraduate degree and Master’s

was Chairman of ANIQ. Holds an

in Chemical Sciences from UNAM and

undergraduate degree and an MBA

an MBA from ITESM.

from ITESM.

President of the Caprolactam and

Fertilizer Business Unit since 2013.

Joined Alfa in 1989, is former CEO

of Terza, and held several executive

positions in Alpek’s Polypropylene

and Nylon and Polyester Filaments

Business Units. Holds an

undergraduate degree from ITESM

and a graduate degree from IPADE.

Annual Report 2015 | ALPEKCorporate
Governance

G4-38,

42, 47,

49, 58

Once a year, all companies that are listed on the Mexican Stock Ex-
change (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.

A summary of Alpek’s principles of corporate governance is present-
ed below, reflecting the answers the company gave to the question-
naire in June 2015 and updated where necessary:

• The Board of Directors is made up of nine members, who
have no alternates. Of the nine directors, four are independent
board members, four are related proprietary board members
and one is an independent proprietary board member. This
annual report provides information on all the board members,
identifying those who are independent and their participation
in the Audit and Corporate Practices Committee.

• The Board of Directors is advised by the Audit and Corporate
Practices Committee, which is made up of independent board
members. The Committee Chairman is an independent board
member.

• The Board of Directors meets every three months. Meetings
of the Board may be called by the Chairman of the Board, the
Chairman of the Audit and Corporate Practices Committee,
the Secretary of the Board or at least 25% of its members. At
least one such meeting every year is dedicated to defining the
company’s medium and long-term strategies.

• Members must inform the Chairman of the Board of any con-
flicts of interest that may arise, and abstain from participating
in any related deliberations.

• The Audit and Corporate Practices Committee studies and is-
sues recommendations to the Board of Directors on matters
such as selecting and determining the fees to be paid to the
external auditor, coordinating with the company’s internal au-
dit area and studying accounting policies.

• Additionally, the Audit and Corporate Practices Committee
is responsible for issuing recommendations to the Board of
Directors on matters related to corporate practices, such as
employment terms and severance payments for senior execu-
tives, and compensation policies.

• The company has internal control systems with general guide-
lines that are submitted to the Audit and Corporate Practic-
es Committee for its opinion. In addition, the external auditor
validates the effectiveness of the internal control system and
issues reports thereon.

• The Board of Directors is advised by the planning and finance
department when evaluating matters relating to the feasibility
of investments, strategic positioning of the company, align-
ment of investing and financing policies, and review of invest-
ment projects. This is carried out in coordination with the plan-
ning and finance department of the holding company, ALFA,
S.A.B. de C.V.

• Alpek has a department specifically dedicated to maintaining
an open line of communication between the company and its
shareholders and investors. This ensures that investors have
the financial and general information they require to evaluate
the company’s development and progress. Alpek uses press
releases, notices of material events, quarterly results confer-
ence calls, investor meetings, its website and other communi-
cation channels.

• 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
promoted within the organization.

Annual Report 2015 | ALPEK

Glossary

Caprolactam (CPL)
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, underclothes and
engineering plastics.

IntegRex®
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 environmental
legislation.

ISO 9001 Certification
Certification issued by rating agencies to those companies that op-
erate with proven procedures for assuring the quality of their prod-
ucts, in accordance with the standard defined by the International
Organization for Standardization (ISO).

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 (Na-
tional Association of the Chemical Industry, ANIQ)
Certification given to companies that comply with the six compre-
hensive responsibility requirements established by the ANIQ, cov-
ering Process safety, Health and safety in the workplace, Product
safety, Transportation and distribution, Prevention and control of
environmental pollution and Community protection.

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

Ethylene Oxide
Compound produced from ethylene and used as an intermediate in
the production of MEG and other chemicals.

Expandable Polystyrene (EPS)
Light, rigid, cellular plastic, product of the polymerization of styrene
monomer. EPS is a versatile material because of its properties 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 packaging for impact-sen-
sitive items and for protecting perishables. It is also widely used in
construction systems, to lighten floor and roof structures, and as
an insulator.

ISO 14001 Certification
Internationally accepted standard for establishing an efficient Envi-
ronmental Management System (EMS). The standard is designed
to support companies’ profitability and at the same time minimize
environmental impact.

Megawatt
Unit of power, equal to 1 million watts.

Monoethylene Glycol (MEG)
Raw material with diverse industrial uses, especially for producing
polyester (PET and fiber), antifreeze, refrigerants and solvents.

Paraxylene (pX)
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 poly-
ester production, from the raw material (PTA) to the production of
PET and fibers.

Annual Report 2015 | ALPEKSelf-regulation of Health and Safety in the Workplace, Level 4
Certification
Program implemented by the Mexican Ministry of Work and Social
Welfare to verify that companies have implemented administrative
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 po-
lymerization process.

Spheripol®
LyondellBasell-owned technology which is the world’s most com-
mon way of producing polypropylene.

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

Styrene Monomer
Unsaturated hydrocarbon used to make a variety of plastics, syn-
thetic rubber, protective coatings and resins. It is the main raw ma-
terial in EPS production and also used as a solvent and chemical
intermediate.

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

Polyethylene Terephthalate (PET)
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 produce
caps, trays and recipients. Because of its transparency, strength,
durability and high protection barriers, PET presents no known
health risks, is light and recyclable, and has a wide range of ap-
plications 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 pro-
pylene monomer. Its properties include a low specific gravity, great
rigidity, resistance to relatively high temperatures and good resis-
tance to chemicals and fatigue. PP has diverse applications, includ-
ing for packaging, textiles, recyclable plastic parts and different
kinds of containers, auto-parts and polymer (plastic) banknotes.

Polyurethanes (PURs)
Rigid, flexible or elastic, durable materials that are produced by
the reaction of a polyol with an isocyanate. They are very versatile,
offering the elasticity of rubber, combined with the hardness 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 by-product at oil re-
fineries. It is used in the petrochemical industry to produce PP,
propylene oxide, cumene, isopropanol, acrylic acid and acrylnitrile.
It is also converted into a gasoline component by alkylation with
butanes or pentanes.

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

Purified Terephthalic Acid (PTA)
Aromatic dicarboxylic acid, the main raw material in polyester pro-
duction. 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 appli-
cations, as well as other consumer products.

Annual Report 2015 | ALPEKConsolidated
Financial
Statements

Alpek, S. A. B. de C. V. and subsidiaries
At December 31, 2015 and 2014

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

Annual Report 2015 | ALPEKManagement’s
Analysis

17.0%(e) in 2015, compared to 12.5%(e) in 2014. In real terms, the av-
erage annual overvaluation of the Mexican peso against the dollar
was 11.8%(f) in 2015 and 15.6%(f) in 2014.

With regard to interest rates in Mexico, the TIIE (Interbank Equilib-
rium Interest Rate) was 3.3%(d) in 2015 in nominal terms, compared
to 3.5% in 2014. In real terms, interest rates increased from -0.5%
in 2014 to 1.9% in 2015.

The annual average nominal 3-month dollar LIBOR rate was 0.3%(d)
in 2015, above the 0.2%(d) seen of 2014. If the nominal depreciation
of the peso is included in the figure, LIBOR in constant pesos rose
from 8.4%(c) in 2014 to 14.9%(c) in 2015.

Sources:

(a) Bureau of Economic Analysis (BEA).
(b) Bureau of Labor Statistics (BLS).
(c) National Institute of Statistics and Geography (INEGI).
(d) Banco de México (Banxico).
(e) Banxico. exchange rate for liquidating liabilities

denominated in foreign currency and payable in Mexico.

(f) Own calculations with data from INEGI, bilateral with the

United States, considering consumer prices.

2015
The following analysis complements the Letter to the shareholders
and the Audited financial statements. Unless otherwise specified,
figures are expressed in millions of nominal pesos, with some fig-
ures being expressed in millions of dollars (U.S. $) due to the high
dollarization of Alpek’s revenues. Percentage variations are stated
in nominal terms and all information is presented in accordance
with International Financial Reporting Standards (IFRS).

Economic Environment
2015 was characterized by weakness in the global economy. Institu-
tions such as the International Monetary Fund and the World Bank
reduced their initial growth expectations in face of doubt about
the strength of the economic recovery. Contrasting circumstanc-
es were observed in different countries. The United States and the
United Kingdom reported improved growth figures compared to
previous years, while countries such as China and some countries
in the Euro Zone disappointed. Financial markets were volatile in
advance of the Fed’s decision on an interest-rate increase in the
United States, prompting an important appreciation of the dollar
vis-à-vis the majority of world currencies, including the Mexican
peso. In fact, the Fed began its hike in benchmark rates as expect-
ed, albeit gradually. China’s lower than expected growth and the
potential entry of Iranian oil into the market increased pressure on
oil prices, so that at year end, the price of Brent crude was 36% be-
low December 2014. Oil prices have continued to fall and the dollar
to appreciate into early 2016.

The GDP and other economic variables in Mexico and the United
States, which are part of the context for Alpek’s earnings, are de-
scribed below:

Gross Domestic Product (GDP) in the United States grew 2.4%(a)
(estimated) in 2015, the same as the previous year. 2015 consumer
inflation was 0.7%(b), below the 0.8%(b) reported in 2014.

Mexico’s GDP grew 2.5% (estimated) in 2015, slightly more than in
2014. Consumer inflation was 2.1%(d) in 2015, lower than the 4.0%(d)
reported in 2014. The Mexican peso depreciated nominally by

Annual Report 2015 | ALPEKVolume – (thousand tons)

Polyester

Plastics & Chemicals

TOTAL VOLUME

2015

3,015

922

3,937

2014

3,082

849

3,931

2013

3,035

839

3,874

Revenue

2015

2014

2013

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

(2)

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

Polyester

Million pesos

Million dollars

Plastics & Chemicals

Million pesos

Million dollars

TOTAL REVENUE

Million pesos

Million dollars

60,769

3,840

22,821

1,444

83,590

5,284

63,228

4,752

22,844

1,719

86,072

6,471

68,636

5,356

21,425

1,671

90,061

7,028

(4)

(19)

(16)

(3)

(18)

(8)

(11)

(4)

(8)

Price Index

2015

2014

2013

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

Polyester

Million pesos

Million dollars

Plastics & Chemicals

Million pesos

Million dollars

TOTAL

Million pesos

Million dollars

105

102

100

(2)

(17)

(8)

(23)

(3)

(18)

(9)

(13)

(6)

(9)

Annual Report 2015 | ALPEKRevenue

Net revenue in 2015 amounted to $83,590 million (U.S. $5.284 billion), 3% less than the $86,072 million (U.S. $6.471 billion) of 2014, reflect-
ing a 3% drop in average prices, which were mainly affected by the decline in oil prices. The average dollar-denominated price fell by 18%
but was offset by the depreciation of the peso against the dollar.

Revenue by Business Segment
In 2015, Polyester’s net revenue was $60,769 million (U.S. $3.840 billion), 4% less than the $63,228 million (U.S. $4.752 billion) of 2014. The
Polyester segment posted a decline of 2% in both average sales prices and volume, which reduced revenue year-over-year. In dollar terms,
the average price of Polyester fell 17% in 2015, driven by the downward trend in crude and feedstock prices. However, the depreciation of
the peso against the dollar offset this effect.

The Plastics & Chemicals segment had a revenue of $22,821 million (U.S. $1.444 billion) in 2015, compared to $22,844 million (U.S. $1.719
billion) the previous year. In 2015, a volume growth of 9%, driven primarily by the demand for polypropylene, offset the 8% decline in av-
erage sales price. Excluding the foreign exchange rate effect, the average price of this segment’s products was 23% less than in 2014 due
to the fall in crude and feedstock prices.

Operating Profit and EBITDA
2015 operating profit was $7,590 million (U.S. $481 million), 103% more than the $3,739 million (U.S. $286 million) of 2014. Our two business
segments posted year-over-year operating profit improvement.

In 2015, EBITDA reached $9,974 million (U.S. $630 million), 75% above the $5,710 million (U.S. $434 million) of 2014.

Polyester EBITDA grew by $1,878 million (U.S. $74 million) in 2015, mainly due to the increase in the North American PTA price formula
and the benefits generated by the operation of the cogeneration plant in Cosoleacaque, Veracruz. Plastics & Chemicals EBITDA rose by
$2,399 million (U.S. $125 million), reflecting enhanced margins for polypropylene and expandable polystyrene (EPS) compared to 2014.

EBITDA growth in 2015 also reflected two extraordinary items: a gain of $394 million (U.S. $26 million) from the sale of our polyurethane
business and an inventory devaluation of $181 million (U.S. $21 million) below 2014.

Annual Report 2015 | ALPEKOperating Income (EBITDA) –
(million pesos)

Polyester

Plastics & Chemicals

Others and eliminations

TOTAL EBITDA

Operating Income (EBITDA) –
(million dollars)

Polyester

Plastics & Chemicals

Others and eliminations

TOTAL EBITDA

2015

5,420

4,508

9,974

2015

344

284

630

2014

3,541

2,110

5,710

2014

270

159

434

2013

4,974

2,304

7,344

2013

388

180

572

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

114

(22)

(29)

(8)

(11)

(22)

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

(35)

(30)

(12)

(11)

(24)

Finance cost, net
The finance cost, net was -$1,862 million (-U.S. $116 million) in 2015, 24% more than in 2014. The finance expense increased from -$791 mil-
lion (-U.S. $59 million) in 2014 to -$933 million (-U.S. $59 million) in 2015, due to the depreciation of the peso against the dollar. The higher
exchange rate also resulted in the recognition of a non-cash exchange rate loss of -$1,114 million (-U.S. $68 million) in 2015, compared to
an exchange rate loss of -$629 million (-U.S. $46 million) in 2014.

Finance cost, Net
(million pesos)

Finance expense

Finance income

Net Finance Expense

Foreign exchange gain (loss)

Valuation of financial derivative instruments

2015

(1,177)

244

(933)

(1,114)

184

2014

(956)

166

(791)

(629)

(77)

2013

(1,114)

159

(955)

(146)

(71)

FINANCE COST, NET

(1,862)

(1,497)

(1,172)

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

(23)

(18)

(77)

340

(24)

(331)

(8)

(28)

Annual Report 2015 | ALPEKTaxes

Income tax in 2015 totaled $2,040 million (U.S. $130 million), 131% more than the $883 million (U.S. $68 million) reported in 2014. The in-
crease is due to a 160% growth in before-tax income.

Taxes - (million pesos)

2015

2014

2013

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

Income tax

Profit before income taxes

Statutory tax rate

Income tax at statutory rate

Taxes for permanent differences between
accounting-taxable profit

Total income tax

Effective tax rate

Made up as follows:

Current

Adjustment to the provision of income tax from
prior years

Deferred

Total income tax

5,704

30%

(1,711)

(328)

(2,040)

36%

2,197

30%

(659)

(224)

(883)

40%

1,723

30%

(517)

(300)

(817)

47%

(2,252)

(975)

(1,137)

203

(7)

(2,040)

(883)

(44)

364

(817)

160

(160)

(27)

(47)

(131)

235

108

(131)

(8)

(73)

(8)

Net Income Attributable to the Controlling Interest

The net income attributable to the controlling interest of $2,748 million (U.S. $175 million) in 2015 was 243% higher than the net income of
$801 million (U.S. $65 million) posted in 2014. Increases in finance cost, net and taxes were more than offset by the growth in operating
profit.

Statement of income - (million pesos)

Operating profit

Finance cost, net

Share in losses of associates

Income tax

Net consolidated profit

Profit attributable to controlling interest

2015

7,590

(1,862)

(23)

(2,040)

3,665

2,748

2014

3,739

(1,497)

(45)

(883)

1,314

801

2013

2,926

(1,172)

(30)

(817)

906

262

VAR. % 2015
vs 2014

VAR. % 2014
vs 2013

103

(24)

(131)

179

243

(28)

(48)

(8)

206

Annual Report 2015 | ALPEKInvestment in Fixed and Intangible Assets

In 2015, investments in fixed and intangible assets totaled $4,482 million (U.S. $275 million), 7% more than the $4,191 million (U.S. $307
million) reported in 2014. During the year, resources were used primarily for strategic projects such as the integrated PTA/PET plant in
Corpus Christi, the MEG supply agreement signed with Huntsman, and the construction of two propylene spheres. In addition to its in-
vestments in fixed and intangible assets, Alpek also invests in shares, as in the case of the acquisition of the EPS businesses in North and
South America which is not included in these figures.

Net Debt1

As of December 31, 2015, net debt was $12,420 million (U.S. $722 million), 18% higher than the $10,519 million (U.S. $715 million) as of De-
cember 31, 2014. Excluding the effect of the depreciation of the peso against the dollar, the net debt balance increased 1% year-over-year.
Alpek’s cash balance at the close of 2015 was $6,653 million (U.S. $387 million).

million dollars

% integrated

Short and long-term debt

2015

2014

Short-term debt

Long-term debt, 1 year

2 years

3 years

4 years

5 years or more

TOTAL DEBT

Avg. maturity long-term debt (years)

Avg. maturity total debt (years)

FINANCIAL INDICATORS - (Times)

Net Debt / EBITDA (U.S.$)

Interest Coverage (U.S.$)

Total Liabilities / Stockholder’s equity

949

1,108

6.3

6.1

2015

1.1

10.7

1.2

Var.

2,000

196

(98)

(3)

2015

2014

100

978

1,094

7.3

7.2

2014

2013

1.6

6.5

1.2

1.3

7.1

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.

Annual Report 2015 | ALPEK
2015 HIGHLIGHTS

Acquisition of EPS business from BASF

On April 2015, the expandable polystyrene (EPS) businesses acquired from BASF in North and South America were successfully integrat-
ed. Styropek, S.A. de C.V., the new, wholly-owned Alpek subsidiary created for this purpose, is now the leading EPS producer in America,
with an aggregate annual capacity of 230,000 tons in Mexico, Brazil, Argentina and Chile.

Acquisition of additional PET supply rights from the integrated plant in Corpus Christi

Alpek acquired additional rights to supply 100,000 tons of integrated PET per year from the M&G plant in Corpus Christi. As reference,
on April 16, 2013, Alpek announced it had acquired contractual supply rights for 400,000 tons of integrated PET per year from this facility.
Alpek’s contractual supply rights increased to 500,000 tons of integrated PET per year from the M&G plant in Corpus Christi, once con-
struction is completed.

Construction of the cogeneration plant in Altamira

A comprehensive analysis of an alternative configuration for Alpek’s cogeneration plant in Altamira, Tamaulipas, resulted in enhanced prof-
itability from lower investment and greater generation capacity. Construction began in December 2015. Approximately U.S. $350 million
will be invested in the new plant, which will have a capacity of 350 MW and start operations during the first half of 2018.

MEG supply agreement with Huntsman

The contract signed with Huntsman consists of a U.S. $65 million investment for annual supply rights to approximately 150,000 tons of
monoethylene glycol (MEG) from its site in Port Neches, Texas. The agreement assures a portion of our MEG needs at a cost based on
ethylene prices.

Acquisition of new EPS plant in Chile

Alpek signed an agreement with BASF Chile, S.A. to acquire its EPS plant in Concón, Chile, which has an annual capacity of 20,000 tons.
The transaction should be closed during the first half of 2016.

Annual Report 2015 | ALPEKExpansion Projects

Pearl River
A 110,000 tons per year polyester fiber expansion was initiated at Alpek’s Pearl River plant (in the United States) to meet growing customer
demand. The project, which leverages existing on-site infrastructure, is expected to come on line before the end of 2016.

EPS Altamira
An expansion project of 75,000 tons of EPS per year was started at our Altamira plant (in Mexico). Through this investment, the Altamira
EPS plant will become one of the world’s five largest. The plan envisages that the new capacity will begin operations before year-end 2017.

Dividends

On April 15, 2015, the Ordinary Shareholders’ Meeting approved the payment of a cash dividend of U.S. $95 million, which was paid as of
April 24, 2015.

Annual Report 2015 | ALPEKReport of the Independent Auditors

Monterrey, N. L., February 2, 2016

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, 2015 and 2014, 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 reason-

able 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 ac-

counting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the con-

solidated 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, 2015 and 2014, and its financial performance and its cash flows for the years then ended, in accordance with International

Financial Reporting Standards.

PricewaterhouseCoopers, S. C.

Héctor Rábago Saldívar

Audit Partner

Annual Report 2015 | ALPEK
Alpek, S. A. B. de C. V. and subsidiaries

Consolidated Statements of Financial Position
At December 31, 2015 and 2014
In thousands of Mexican pesos

At December 31,

Note

2015

2014

Asset
CURRENT ASSET:
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivables, net
Inventories
Derivative financial instruments
Prepayments and others

Total current asset

NON-CURRENT ASSET:
Property, plant and equipment, net
Goodwill and intangible assets, net
Deferred income taxes
Other assets

Total non-current asset

Total asset

Liability and Stockholders' equity

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
Provisions
Deferred income taxes
Employee benefits
Deferred credits and others

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

6
7
8
10
16

11
12
21
13

19
17
16

18
22

19
16
18
21
20

23
23
23
23

6,649,904
2,753
13,383,935
12,086,117
203,356
337,943

32,664,008

31,321,771
8,812,066
361,187
1,734,562

42,229,586

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

74,893,594

65,371,210

678,331
9,800,552
848,301
1,370,491
338,411
1,891,472

14,927,558

18,275,740
711,342
184,748
4,707,030
1,108,066
480,353

25,467,279

40,394,837

6,051,880
9,071,074
10,009,224
4,822,051

29,954,229

4,544,528

34,498,757

487,604
10,564,770
757,011
78,100
761,652
1,676,054

14,325,191

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

Total liability and stockholders' equity

74,893,594

65,371,210

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

José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Chief Financial Officer

Annual Report 2015 | ALPEK

Alpek, S. A. B. de C. V. and subsidiaries

Consolidated Statements of Income
For the years ended December 31, 2015 and 2014
In thousands of Mexican pesos

Revenue
Cost of sales

Gross profit

Selling expenses
Administrative expenses
Other income (expenses), net

Operating profit

Finance income
Finance cost

Finance cost, net

Share of losses of investments
accounted for the equity method

Profit before income taxes

Income taxes

Net consolidated profit

Profit attributable to:
Controlling interest
Non-controlling interest

Note

3.u
25

25
25
26

27
27

2015

2014

83,590,460
( 73,029,596 )

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

10,560,864

6,314,958

( 1,377,196 )
( 1,839,073 )
244,993

7,589,588

2,795,360
( 4,657,563 )

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

3,738,583

135,437
( 1,632,107 )

( 1,862,203 )

( 1,496,670 )

( 22,976 )

( 44,779 )

5,704,409

( 2,039,745 )

2,197,134

( 883,032 )

3,664,664

1,314,102

2,748,400
916,264

800,901
513,201

3,664,664

1,314,102

Basic and diluted earnings per share in pesos

1.30

0.38

Weighted average of outstanding shares (in thousands of shares)

2,118,164

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

José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Chief Financial Officer

Annual Report 2015 | ALPEK

Alpek, S. A. B. de C. V. and subsidiaries

Consolidated Statements of Comprehensive Income
For the years ended December 31, 2015 and 2014
In thousands of Mexican pesos

Net consolidated profit

3,664,664

1,314,102

Note

2015

2014

Other items of comprehensive income of the year:

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

Remeasurement of obligations for employee benefits, net of taxes

20, 29

( 2,921 )

( 217,489 )

Items that will be reclassified to the statement of income:

Effect of derivative financial instruments designated as cash flow hedges,
net of taxes
Translation effect of foreing entities
Share of other comprehensive results of associates

16, 29
23, 29

Total other comprehensive income for the year

( 399,710 )
3,843,118
-

( 674,507 )
2,416,988
1,694

3,440,487

1,526,686

Total comprehensive income for the year

7,105,151

2,840,788

Attributable to:
Controlling interest
Non-controlling interest

5,627,892
1,477,259

1,931,557
909,231

Total comprehensive income for the year

7,105,151

2,840,788

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

José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Chief Financial Officer

Annual Report 2015 | ALPEK

Alpek, S. A. B. de C. V. and subsidiaries

Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 2015 and 2014
In thousands of Mexican pesos

Note

Capital stock

Share premium

Retained
earnings

Other reserves

Total controlling
interest

Non-controlling
interest

Total stockholders'
equity

Balances at January 1, 2014

6,051,880

9,071,074

8,292,566

602,358

24,017,878

3,069,786

27,087,664

Net profit
Total other comprehensive
income for the year

Total comprehensive income for
the year

Dividends from subsidiaries
to the non-controlling interest

Changes in the non-controlling
interest

800,901

( 212,703 )

1,343,359

1,130,656

513,201

396,030

1,314,102

1,526,686

588,198

1,343,359

1,931,557

909,231

2,840,788

( 96,129 )

12,287

Balances at December 31, 2014

6,051,880

9,071,074

8,880,764

1,945,717

25,949,435

3,895,175

29,844,610

Net profit
Total other comprehensive
income for the year

Total comprehensive income for
the year

Dividends declared
Dividends from subsidiaries
to the non-controlling interest

Effect of business transference
under common control

2 b)

2,748,400

3,158

2,876,334

2,879,492

916,264

560,995

3,664,664

3,440,487

2,751,558

2,876,334

5,627,892

1,477,259

7,105,151

( 1,472,825)

( 150,273 )

( 1,472,825 )

( 1,472,825)

( 978,179 )

( 978,179)

( 150,273 )

150,273

Balances at December 31, 2015

6,051,880

9,071,074

10,009,224

4,822,051

29,954,229

4,544,528

34,498,757

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

José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Chief Financial Officer

Annual Report 2015 | ALPEK

Alpek, S. A. B. de C. V. and subsidiaries

Consolidated Statements of Cash Flows
For the years ended December 31, 2015 and 2014
In thousands of Mexican pesos

Note

2015

2014

Cash flows from operating activities

Profit before income tax
Depreciation and amortization
Impairment of property, plant and equipment
Impairment of investment in joint ventures
Impairment of doubtful trade receivables
Gain on sale of property, plant and equipment
Share of losses of investments accounted for the equity method
Finance cost, net
(Gain) loss on changes in the fair value of derivative financial instruments
Employees' profit sharing and provisions

11, 12
26

2 b)
13

Subtotal

Decrease in trade receivables
Decrease in accounts receivable from related parties
Decrease in other accounts receivable
(Increase) decrease in inventories
(Decrease) increase in accounts payable
Decrease in accounts payable to related parties
Employees' profit sharing paid
Net liability for retirement obligation
Prepayment of inventory
Income tax paid
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 by Alpek, S. A. B. de C. V.
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 in cash and cash equivalents
Foreign exchange fluctuations on cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

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

2 a) y 2 c)
2 b)

23
9

5,704,409
2,253,783
130,166
-
( 272,552 )
( 381,585 )
22,976
1,907,772
( 178,004 )
( 384,272 )

8,802,693

2,765,126
572,466
61,095
( 102,678 )
( 1,220,341 )
( 697,656 )
( 3,927 )
( 22,032 )
( 1,101,666 )
( 874,804 )
8,178,276

202,110
( 1,523,217 )
( 1,857,461 )
( 605,230 )
( 26,809 )
( 167,137 )
-
( 21,072 )

( 3,998,816 )

1,912,804
( 1,949,882 )
( 1,016,769 )
( 1,472,825 )
( 978,179 )
-
-

( 3,504,851 )

674,609
231,479
5,743,816

2,197,134
1,839,420
4,948
126,906
48,575
( 286 )
44,779
1,293,363
95,366
( 193,331 )

5,456,874

930,188
724,793
106,652
695,120
171,404
( 130,155 )
( 6,528 )
( 17,398 )
-
( 1,337,962 )
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

6,649,904

5,743,816

José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Chief Financial Officer

Annual Report 2015 | ALPEK

Alpek, S. A. B. de C. V. and subsidiaries

Notes to the Consolidated Financial Statements
At December 31, 2015 and 2014
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 & Chemicals business segment, comprising the production of polypropylene (PP), expandable polystyrene (EPS), caprolac-
tam (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 others.

Alpek is the most important petrochemical company in Mexico and the second largest in Latin America, is the main integrated producer of
polyester in North America. Besides, it operates the largest EPS plant in the continent, and one of the largest PP plants in North America
and is the only producer of Caprolactam in Mexico.

The shares of Alpek, S. A. B. de C. V. are traded on the Mexican Stock Exchange, and has Alfa, S. A. B. de C. V. (“Alfa”) as its main holding
company.

Alpek, S. A. B. de C. V. 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, Argentina, Chile and Brazil.

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.

2 – Significant events

Note

2015

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

During 2015, 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, Grupo Petrotemex will pay US$ 435 million to M&G during the construction of the Plant according to an established
calendar and in compliance with certain milestones, by which Grupo Petrotemex will obtain supply rights of the Plant for 500 thousand
tons of PET (manufactured with 420,000 tons of PTA) per year for a period of five years starting from the first day of the month in which
the plant is completed and ready to manufacture and sale their products. In accordance to the supply agreement, Grupo Petrotemex
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 at the beginning of 2017.

At December 31, 2015, Grupo Petrotemex has made payments amounting to US$ 371 million, of which US$ 307 million are recorded
in the intangible assets caption and correspond to the before mentioned supply rights and will be amortized once the PET supply
begins, and US $ 64 million as a prepayment of inventory within the non-current asset caption.

Annual Report 2015 | ALPEK
b) Agreements between Alpek and BASF for the expanded polystyrene (EPS) and polyurethane (PU) businesses

During July 2014, Alpek (“Alpek”) and BASF (“BASF”) signed the agreements related to the expanded polystyrene (EPS) and
polyurethane (PU) businesses previously held through 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, except for the Neopor ® (gray EPS) of BASF business.

Alpek acquired all EPS business activities from Polioles, including an EPS plant in Altamira, Mexico. Likewise, BASF acquired all PU
business activities from Polioles, including certain assets located in Lerma, Mexico´s facility, as well as all marketing and sales rights
for the PU, isocyanate and polyol systems. Once the transaction was completed, Polioles continued operating as a joint venture
between Alpek and BASF, with a product portfolio comprising of industrial chemicals and specialties.

Alpek also acquired the EPS business of BASF in North and South America, including:

• EPS sales and distribution channels of BASF in North and South America
• The EPS plants of BASF in Guaratinguetá, Brazil and General Lagos, Argentina, and
• The EPS transformation business of BASF in Chile (Aislapol, S. A.)

The combined capacity of all EPS production units acquired by Alpek is approximately 230,000 tons a year. This figure includes 165,000
tons a year of Polioles plant in Altamira, Mexico. Approximately 440 employees work in the businesses subject to the agreements, 380
of them in the EPS businesses and 60 in the PU businesses. Most of them continue performing their roles under the new ownership
framework.

Transactions included in this agreement were as follows:

PU business sale to BASF
In March 2015, through its subsidiary Polioles, Alpek completed the sale to BASF MEXICANA of all the polyurethane (PU) business
activities, including assets selected in the Lerma, Mexico plant, as well as all marketing and sales rights of PU, isocyanate and polyol
systems. From Alpek’s standpoint, the PU business sold was not considered as a business line or segment; therefore, IFRS 5 “Non-
current Assets Held for Sale and Discontinued Operations” dispositions respect to the presentation as a discontinued operation,
are not applicable. Rather, the transaction was carried out through the sale of a group of assets at market terms, and the total
consideration received was Ps 407,152, which it is outstanding at December 31, 2015, and the net book value transferred was
Ps 26,428, this transaction resulted in a gain of Ps 380,724 and was recorded in the income statement as other income (expense), net.

Mexico EPS business sale to Styropek
On March 31, 2015, Alpek transferred all its EPS business activities of Polioles, including the EPS plant in Altamira, Mexico to its
subsidiary Grupo Styropek, S. A. de C. V. (Styropek). Since BASF has 50% equity in Polioles, the transaction between stockholders
for the EPS business resulted in a Ps 150,273 reduction in the controlling interest and an increase in the non-controlling interest for
the same amount.

This transaction had no accounting effects over the financial statements of Alpek, since they were transactions among entities under
common control, except for the increase in non-controlling interest of Ps 150,273.

EPS business acquisition from BASF
On March 31, 2015, through Styropek, Alpek finalized the acquisition of BASF´s EPS business in Argentina, Brazil, USA, Canada, and
Chile. This acquisition included the working capital. A total of 450 employees work in the EPS line of business. The consolidated
financial statements include the financial information of BASF’s EPS business starting in March 31, 2015. This acquisition is included
in the Plastics & Chemicals segment. See Note 30.

Annual Report 2015 | ALPEKAt December 31, 2015, provisional purchase price allocation to fair values of acquired assets and assumed liabilities is as follows:

Current assets (1)
Property, plant and equipment
Current liabilities (2)
Other current liabilities

Deferred income tax

Other liabilities

Consideration paid

622,520

424,940

( 183,078 )

( 140,002 )

( 88,867 )

( 30,283 )

605,230

(1) Current assets consist mainly of accounts receivable and inventories amounting to Ps 333,318 and Ps 289,202, respectively.

(2) Current liabilities consist mainly of suppliers in the amount of Ps 100,643.

Total purchase consideration was paid in cash.

Value of accounts receivable acquired approximates fair value due to its short-term maturity. Accounts receivable acquired are
estimated to be recovered in the short term.

No contingent liability has resulted from this acquisition that requires recognition. Neither are there contingent consideration
agreements.

Costs related to the acquisition amounted to Ps 22,153 and were recorded in income as “other expense, net”.

Revenues contributed by BASF assets included in the consolidated statement of income since the acquisition date through December
31 amounted to Ps 5,482,042 and net income to Ps 731,952. If the acquisition had taken place on January 1, 2015, revenues would have
increased by Ps 1,600,000 and net income by Ps 185,000, approximately.

At December 31, 2015, the Company is in the process of concluding the final purchase price allocation to fair values of acquired assets
and assumed liabilities. This analysis will be concluded within a period not to exceed twelve months as of the acquisition date.

c) Monoethylene Glycol (MEG) manufacturing agreement

On December 15, 2014 the Company through its subsidiary DAK Americas LLC (“DAK”) entered into a Toll Manufacturing Agreement
with Huntsman Petrochemical LLC (“Huntsman”) in which will obtain the supply rights of Monoethylene Glycol (MEG), which is used
in the production of PET polyester, at a preferred toll rate. Huntsman will develop, own and operate the equipment for the production
of MEG in its Port Neches, Texas plant and DAK will supply the raw materials for the production. The installation of equipment and
beginning of production will take place in 2016.

On the other hand, DAK will pay Ps 1,118,422 (US$ 65 million) to Huntsman during the installation of the equipment according to a
established calendar and in compliance with certain milestones; therefore, DAK will obtain the supply rights up to 28.8 million of
pounds of product per year for a 15 years period commencing on the first day of the month in which the equipment is installed. At
December 31, 2015, DAK has made payments amounting to Ps 568,589 (US$ 39 million), which are recorded under the intangible
assets caption and will be amortized within the cost of sales once the MEG supply begins.

Annual Report 2015 | ALPEK

2014

d) 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
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.

e) 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") -
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. During 2014, 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. At December 31, 2015, this transaction was
concluded with the sale of this investment.

Note

3 - Summary of significant accounting policies

The accompanying consolidated financial statements and notes were authorized for issuance on February 2, 2016, 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 prepara-
tion 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”).

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.

Annual Report 2015 | ALPEKThe 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.

The subsidiaries are consolidated from the date on which control is transferred to the Company and until 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.

If the business combination is achieved in stages, the value in books at the acquisition date of the equity previously held by the Company
in the acquired entity is remeasured at its fair value at the acquisition date. Any loss or gain resulting from such remeasurement is
recorded in income of the year.

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.

Annual Report 2015 | ALPEKAt December 31, 2015 and 2014, the main companies that comprise the consolidated of the Company are as follows:

Country (1)

Percentage of
Ownership (2)

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.
Cogeneración de Energía Limpia
de Cosoleacaque, S. A. de C. V.

Indelpro, S. A. de C. V. (Indelpro)

Polioles, S. A. de C. V. (Polioles)

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

Styropek México, S. A. de C. V.
Styropek, SA. (3)
Aislapol, SA. (3)
Styropek do Brasil, LTD (3)

Unimor, S. A. de C. V. (Holding company)

Univex, S. A.

USA

Spain

Argentina

Chile

Brazil

100

100
51

100

Functional currency

Mexican peso

US dollar

Euro

Argentine peso

US dollar

Mexican peso
US dollar

US dollar

Mexican peso

US dollar

Argentine peso

Chilean peso

Brazilian real

Mexican peso

(1) Companies incorporated in Mexico, except those indicated.

(2) Ownership percentage that Alpek has in the holding companies which in turn has in other companies. Ownership percentages and the voting rights are

the same.

(3) Companies acquired in 2015, See Note 2 b).

At December 2015 and 2014, there are no significant restrictions for the investment in shares of the subsidiaries companies above
mentioned.

ii. Absorption (dilution) of control in subsidiaries

The effect of absorption (dilution) of control in subsidiaries, i.e., an increase or decrease in the percentage of control, is recorded in
stockholders' equity, directly in retained earnings, in the period in which the transactions that cause such effects occur. The effect
of absorption (dilution) of control is determined by comparing the 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.

Annual Report 2015 | ALPEKiv. Associates

Associates are all entities over which the Company has significant influence but not control. Generally an investor must hold between
20% and 50% of the voting rights in an investee for it to be an associate. Investments in associates are accounted for using the equity
method and are initially recognized at cost. The Company's investment in associates includes goodwill identified at acquisition, net
of any accumulated impairment loss. The Company has an investment of which it owns 50% and it is consolidated. See critical
judgment in Note 5.2.

If the equity in an associate is reduced but significant influence is maintained, only a portion of the amounts recognized in the
comprehensive income are reclassified to income for the year, where appropriate.

The Company's share 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.

Annual Report 2015 | ALPEKii.

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.

iii. 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 nonmonetary 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.

c. The revenue, costs and expenses of the periods, expressed in the recording currency, were translated at the exchange rate of
the date they were accrued and recognized in the income statement, except when they arose from 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 in the period they arose.

iv. 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 for each balance sheet presented are translated at the closing exchange rate at the balance sheet date;

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 rate (when the average exchange rate
is not a reasonable approximation of the cumulative effect of the rates of the transaction, to the exchange rate at the date of
the transaction is used); and

Annual Report 2015 | ALPEKd. 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.

Listed below are the principal exchange rates in the various translation processes:

Local currency to Mexican pesos

Closing exchange rate
at December 31,

Average exchange rate
at December 31,

Country

USA

Argentina

Brazil

Chile

Functional currency

US dollar

Argentine peso

Brazilian real

Chilean peso

2015

17.21

1.33

4.34

0.02

2014

14.71

1.74

5.55

0.02

2015

15.85

1.72

4.80

0.02

2014

13.30

1.64

5.66

0.02

(*) This data is informative, for purposes of conversion monthly average exchange rates are used.

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.

Annual Report 2015 | ALPEKi.

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.

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, 2015 and 2014 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.

Annual Report 2015 | ALPEKSuppliers 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.

Impairment of financial instruments

a. Financial assets measured at amortized cost

The Company assesses at the end of each year whether there is objective evidence of impairment of each financial asset or group
of financial assets. An impairment loss is recognized if there is objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset (a "loss event") and provided that the loss event (or events) has an impact
on the estimated future cash flows arising from the financial asset or group of financial assets that can be reliably estimated.

Aspects evaluated by the Company to determine whether there is objective evidence of impairment are:

Significant financial difficulty of the issuer or debtor.
Breach of contract, such as default in payments of interest or principal.

•
•
• Granting a concession to the issuer or debtor, by the Company, as a result of financial difficulties of the issuer or debtor and

that 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. Adverse changes in the payment status of borrowers in the group of assets
ii. 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.

Annual Report 2015 | ALPEKb. 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.

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, 2015 and 2014, the Company has no derivative financial
instruments classified as net investment hedges.

Annual Report 2015 | ALPEKDiscontinuation 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
Others

40 to 50 years
10 to 40 years
15 years
2 to 13 years
3 to 20 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.

Annual Report 2015 | ALPEKBorrowing 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.

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.

Leases

The classification of leases as finance or operating depends on the substance of the transaction rather than the form of the contract.

Leases in which a significant portion of the risks and rewards relating to the leased property are retained by the lessor are classified
as operating leases. Payments made under operating leases (net of incentives received by the lessor) are recognized in the income
statement based on the straight-line method over the lease period.

Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Finance
leases are capitalized at the beginning of the lease, at the lower of the fair value of the leased property and the present value of the
minimum lease payments. If its determination is practical, in order to discount the minimum lease payments to present value, the
interest rate implicit in the lease is used; otherwise, the incremental borrowing rate of the lessee should be used. Any initial direct
costs of the leases are added to the original amount recognized as an asset.

Each lease payment is allocated between the liability and finance charges to achieve a constant rate on the outstanding balance. The
corresponding rental obligations are included in non-current debt, net of finance charges. The interest element of the finance cost is
charged to the income for the year during the period of the lease, so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. Property, plant and equipment acquired under finance leases are depreciated over the shorter
of the asset's useful life and the lease term.

k) Goodwill and intangible assets

Intangible assets are recognized in the balance sheet when they meet the following conditions: 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, 2015 and 2014, no factors have been identified limiting the 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.

Annual Report 2015 | ALPEKThe 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
Others

(a) Goodwill

15.5 years
10 years
10 years
6 to 7 years
3 to 7 years
20 to 25 years
20 years

Goodwill represents the excess of the acquisition cost of a subsidiary over the Company's equity in the fair value of the identifiable
net assets acquired, determined at the date of acquisition, and is not subject to amortization. Goodwill is shown under goodwill and
intangible assets 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.

(b) Development costs

Research costs are recognized in income as incurred. Expenditures on development activities are recognized as intangible assets
when such costs can be reliably measured, the product or process is technically and commercially feasible, potential future economic
benefits are obtained and the Company intends also has sufficient resources to complete the development and to use or sell the
asset. Their amortization is recognized in income by the straight-line method over the estimated useful life of the asset. Development
expenditures that do not qualify for capitalization are recognized in income as incurred.

(c)

Intangible assets acquired in a business combination

When an intangible asset is acquired in a business combination it is recognized at fair value at the acquisition date. Subsequently,
such assets are as follows: trademarks, customer relations, intellectual property rights, no-competition agreements, among others,
are carried at cost less accumulated depreciation and accumulated impairment losses.

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 taxes

The amount of income taxes in the income statement represents the sum of the current and deferred income taxes.

Annual Report 2015 | ALPEKThe 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.

n) 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.

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.

Annual Report 2015 | ALPEKii. 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.

v. Employees' profit sharing and bonuses

The Company recognizes a liability and an expense for bonuses and employees' profit sharing when it has a legal or constructive
obligation to pay these benefits and determines the amount to be recognized based on the profit for the year after certain
adjustments.

o) 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.

When there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.

Provisions for legal claims are recognized when the Company has a present obligation (legal or assumed) as a result of past events, it
is likely that an outflow of economic resources will be required to settle the obligation and the amount can be reasonably estimated.

A restructuring provision is recorded when the Company has developed a formal detailed plan for the restructure, and a valid
expectation for the restructure has been created between the people affected, possibly for having started the plan implementation or
for having announced its main characteristics to them.

Annual Report 2015 | ALPEKp) Share-based payments

The Company's compensation plans are based on the market value of shares of the holding until December 31, 2014, from 1 January
2015 compensation refers to 50% to the value of the shares of its holding and 50% to the value of the shares of Alpek, S. A. B. de C. V.,
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.

q) 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, 2015 and 2014, there aren’t shares in treasury.

r) 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.

s) 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.

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.

u) 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.

Annual Report 2015 | ALPEKRevenue from the sale of goods and products are recognized when all and each of the following conditions are met:

•
•
•
•
•

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

Revenues from services are recognized as follows:

•
•
•
•

The amount of revenue can be reliably measured
It is likely that future economic benefits will flow to the Company
The stage of completion of the service, on the date of the statement of financial position can be measured reliably
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.

v) 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, 2015 and 2014, there are no dilutive effects from
financial instruments potentially convertible into shares.

w) Changes in accounting policies and disclosures

The following accounting policies were adopted by the Company beginning January 1, 2015 and did not have a material impact on
the Company:

•

Annual improvements to the IFRS - cycle 2010-2012 and cycle 2011-2013

• Defined benefit plans: Contributions - Changes to IAS 19

The adoption of these changes had no impact in the current period or any previous periods and it is not likely to affect future periods.

x) New accounting pronouncements not early adopted by the company

Following are the new pronouncements and amendments issued and effective for years subsequent to 2015 that have not been early
adopted by the Company.

Annual Report 2015 | ALPEKIFRS 9 - "Financial instruments ", addresses the classification, measurement and recognition of financial assets and liabilities and
introduces new rules for hedge accounting. In July 2014, the IASB made additional changes to the classification and measurement
rules and also introduced a new impairment model. These last changes now comprise the entire new financial instruments standard.
Following the approved changes, the Company no longer expects any impact from the new rules of classification, measurement and
decrease of its financial assets or liabilities. There will be no impact on the Company’s accounting from financial liabilities, since the
new requirements only affect financial liabilities at fair value through income and the Company has no such liabilities. The new hedge
rules pair up the Company’s hedge accounting and risk management. As a general rule, the hedge accounting will be much easier to
apply since the standard introduces an approach based on principles. The new standard introduces extensive disclosure requirements
and changes in presentation, which will continue to be assessed by the Company. The new impairment model is a model of expected
credit losses; therefore, it would result in advance recognition of credit losses. The Company continues assessing how its hedge
agreements and impairment provisions are affected by the new rules. The standard is effective for the periods beginning on or after
January 1, 2018. Early adoption is allowed.

IFRS 15 - "Revenue from contracts with customers”, is a new standard issued by the IASB for revenue recognition. This standard
replaces IAS 18 “Revenues”, IAS 11 “Construction contracts”, as well as the interpretations to the aforementioned standards. The new
standard is based on the fact that revenue should be recorded when the control over the good or different service is transferred to the
customer, so that this control notion replaces the existing notion of risks and benefits.

The standard allows for a complete retrospective approach and a modified retrospective approach for its adoption. The Company is
assessing which of the two approaches it can use and to date, it considers that the modified retrospective approach might be used for
adoption. Under this approach the entities will recognize adjustments from the effect of initial application (January 1, 2018) in retained
earnings in the financial statements at December 2018 without restating comparative periods, by applying the new rules to contracts
effective as of January 1, 2018 or those that even when held in prior years continue to be effective at the date of initial application.

For disclosure purposes in the financial statements at 2018, the amounts of affected items must be disclosed, considering the
application of the current revenue standard, as well as an explanation of the reason for the significant changes made.

The main areas that are being reviewed are the transfer of control of the products and their obligations have with customers based
on contracts and agreements made, and how they could impact revenue recognition based on the new guidelines of this rule. At this
stage it is not possible for the Company to estimate the impact of this new standard on its financial statements. The Company will
make a more detailed assessment of the impact in the next 12 months.

The standard is effective for periods beginning on or after January 1, 2018. Early adoption is permitted.

IFRS 16 - “Leases”. The IASB issued in January 2016 a new standard for lease accounting. This standard will replace current standard IAS
17, which classifies leases into financial and operating. IAS 17 identifies leases as financial in nature when the risks and benefits of an asset
are transferred, and identifies the rest as operating leases. IFRS 16 eliminates the classification between financial and operating leases
and requires the recognition of a liability showing future payments and assets for “right of use” in most leases. The IASB has included
some exceptions in short-term leases and in low-value assets. The aforementioned amendments are applicable to the lease accounting
of the lessee, while the lessor maintains similar conditions to those currently available. The most significant effect of the new requirements
is shown in an increase in leasing assets and liabilities, also affecting the statement of income in depreciation expenses and financing
of recorded assets and liabilities, respectively, and decreasing expenses relative to leases previously recognized as operating leases. At
the date of issuance of these financial statements, the Company has not quantified the impact of the new requirements. The standard is
effective for periods starting on or after January 1, 2019, allowing for the advance adoption if the IFRS 15 is also adopted.

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.

Annual Report 2015 | ALPEKNote

4 - 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

Cumulative annual
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.

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.

Annual Report 2015 | ALPEKFor this reason, in the past, when the Mexican peso has appreciated in real terms against other currencies such as the US dollar, the Com-
pany'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 "dollar-
ization" 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 con-
stant, would result in an effect on the income statement by Ps 55,696 and Ps 31,465, 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.

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 2015 and 2014 was 2.6 and 4.32 US dollars,
respectively.

At December 31, 2015, 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, 2015 and 2014, 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 2015
and 2014.

Annual Report 2015 | ALPEK
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.

At December 31, 2015 and 2014, if interest rates on variable rate loans were increased/decreased by 10%, interest expense, in the
income statement, would increase/decrease by Ps 7,473 and Ps 3,920, 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 2015 and 2014, credit limits were not exceeded and Management does not expect losses in excess of the impairment recognized
in the corresponding periods.

The impairment provision for doubtful accounts represents estimated losses resulting from the inability of customers to make required
payments. In determining the allowance for doubtful accounts, significant estimates have to be made. The Company performs ongoing
credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current creditworthiness,
as determined by a review of their current credit information. In addition, the Company considers a number of factors to determine
the size and appropriate timing for the recognition of allowances, including historical collection experience, customer base, current
economic trends and the ageing of the accounts receivable portfolio.

c) Liquidity risk

In the past, the Company has generated and expects to continue generating positive operation cash flows. Operation cash flows
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.

Annual Report 2015 | ALPEKThe detail of maturities of existing financial liabilities at December 31, 2015 and 2014, 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, 2015

Current portion of long-term debt

50,342

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)

439,713

6,273

1,053,742

279,116

9,521,436

1,885,523

848,301

867,207

2,491,911

1,857,704

204,674

367,628

506,668

1,699,395

5,267

16,322,035

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

Other accounts payable and accrued expenses

Derivative financial instruments

Debt (excluding issuance expenses)

Senior notes (excluding issuance expenses)

290,388

25,360

905,388

683,196

9,881,575

1,676,055

796,283

746,381

2,118,897

2,159,428

100,271

360,147

134,152

1,026,459

14,230

432,156

13,959,263

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

and in Note 19.

The Company expects to meet its obligations with cash flows generated by operations. Additionally, the Company has access to credit
lines with various banks to meet possible requirements.

At December 31, 2015 and 2014, the Company has unused committed credit lines for a total of US$346 and US$345 million, respectively.

Annual Report 2015 | ALPEK

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 re-
duce 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 share-
holders, 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 1.17 and 1.19 at December 31, 2015 and 2014, respectively.

4.3 Fair value estimation

The following is an analysis of financial instruments measured by the fair value valuation method. The three different levels used are pre-
sented 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, 2015:

Level 1

Level 2

Level 3

Total

Assets

Financial assets at fair value
through profit or loss with
trading accounting treatment

Derivative with hedge accounting treatment

Financial assets available for sale

Total

Liabilities

Financial liabilities at fair value
through profit or loss with
trading accounting treatment

203,236

120

143,407

203,236

120

143,407

203,356

143,407

346,763

17,166

Employees' benefits based on shares

Derivative with hedge accounting treatment

54,700

1,542,477

Total

54,700

Ps 1,559,643

17,166

54,700

1,542,477

Ps 1,614,343

Annual Report 2015 | ALPEK

The following table presents the Company's assets and liabilities that are measured at fair value at December 31, 2014:

Level 1

Level 2

Level 3

Total

Assets

Financial assets at fair value
through profit or loss with
trading accounting treatment

Derivative with hedge accounting treatment

Financial assets available for sale

Total

Liabilities

Financial liabilities at fair value
through profit or loss with
trading accounting treatment

Employees' benefits based on shares

Financial assets available for sale

128,475

Total

59,506

Ps 1,044,936

85,113

59,506

959,823

85,113

59,506

959,823

Ps 1,104,442

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.

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.

Annual Report 2015 | ALPEK

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, 2015 and
2014, there were no signs of impairment.

Income taxes

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 101,987.

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 9,304 and
the equity by Ps 77,118.

Annual Report 2015 | ALPEKd) 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 for 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,

2015

2014

Cash and bank accounts

Short-term bank deposits

3,225,765

1,792,869

3,424,139

3,950,947

Cash and cash equivalents

6,649,904

5,743,816

Annual Report 2015 | ALPEK

Note

7 - Restricted cash and cash equivalents

The Company has restricted cash of approximately Ps 2,753 and Ps 3,185 at December 31, 2015 and 2014. 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,

2015

2014

Trade receivables

8,351,069

10,169,506

Provision for impairment of trade receivables

( 155,365 )

( 392,579 )

Trade receivables, net

8,195,704

9,776,927

Accounts receivable from related parties (Note 9)

Recoverable taxes

Interest receivable

Other debtors

Current portion

2,954,039

1,977,585

256,594

1,389,713

1,819,293

260,422

Ps 13,383,935

13,246,370

Trade receivables and other accounts receivable include past-due balances not impaired of Ps 1,433,439 and Ps 1,476,294 at December
31, 2015 and 2014, respectively.

As of December 31 2015 and 2014, the balance of other debtors comprises primarily by travel expenses, customs expenses and
reimbursements.

The aging analysis of the balances due from customers and other receivables not impaired is as follows:

1 to 30 days

30 to 90 days

90 to 180 days

More than 180 days

At December 31,

2015

2014

586,939

688,165

183,297

56,810

606,393

154,115

24,421

609,593

1,433,439

1,476,294

At December 31, 2015 and 2014, trade and other accounts receivable of Ps 155,365 and Ps 392,579, 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.

Annual Report 2015 | ALPEK

Movements in the provision for impairment of trade and other receivables are analyzed as follows:

2015

2014

Initial balance (January 1)

( Ps

392,579 )

( Ps

332,601 )

Provision for impairment in trade receivables

Receivables written-off during the year

Provision for unused written-off impairment

( 22,714 )

259,928

( 87,495 )

23,928

3,589

Final balance (December 31)

( Ps

155,365 )

( Ps

392,579 )

The maximum risk in accounts receivable is the carrying amount at December 31, 2015 and 2014. Increases in the provision for impair-
ment of trade and other receivables are recognized in the income statement under the caption selling expenses.

Note

9 - Related party transactions

Related party transactions were carried out at market values.

At December 31, 2015

Loans granted to related parties

Accounts
receivable(2)

Amount

Currency

Maturity date
DD/MM/YY

Interest
rate

Accounts
payable (2)

Holding

Affiliate

Partners with Significant influence
over certain subsidiaries

189,781
-
141,634
-
-
-
-
-
-
-

257,239

411,290
183,615 (1)
423,137
6,883

792 (1)

28,000
4,500
2,500
1,400

240 (1)

1,303,028

USD
USD
USD
USD
USD
MXN
MXN
MXN
MXN
MXN

USD

Total

588,654

2,365,385

22/12/2016

7.33% (3)

23/05/2016
23/05/2016

1.79% (4)
1.79% (4)

23/05/2016
25/01/2016
27/05/2016
17/06/2016

4.76% (4)
4.61% (4)
4.76% (4)
4.86% (4)

269
-
59,587
-
-
-
-
-
-
-

31/03/2016

6.50% (4)

219,260

279,116

At December 31, 2014

Loans granted to related parties

Accounts
receivable(2)

Amount

Currency

Maturity date
DD/MM/YY

Interest
rate

Accounts
payable (2)

Holding

Affiliate

Partners with Significant influence
over certain subsidiaries

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% (3)

29/05/2015
29/05/2015

1.61% (4)
1.61% (4)

Total

539,148

850,565

-
-
40,028
-
-

643,168

683,196

(1) Are the interests accrued corresponding to the loans included.
(2) These balances correspond to the sale / purchase of products and / or services rendered that do not accrue interest.
(3) Loans bearing fixed interest rate.
(4) Loans bearing variable interest rate (libor).

Annual Report 2015 | ALPEK

Revenue and other with related parties

Year ended December 31, 2015

Finished goods

Raw materials

Interests

Dividends

Holding
Affiliate
Associated
Shareholders with significant influence
over subsidiaries

-
69,996
-

1,225,025

-
5,090
-

28,377
7,781
-

5,423

Total

1,295,021

5,090

41,581

-
-
-

Administrative
services

-
115,608
-

Energetics

Leases

Others

-
194,948
-

-
132
-

-
4,940
-

12,433

676,241 (5)

115,608

194,948

12,565

681,181

Finished goods

Raw materials

Interests

Dividends

Administrative
services

Energetics

Leases

Others

Year ended December 31, 2014

Holding
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

2,249,097

4,860

32,498

927

84,863

56,129

9,009

-
-
-

144

Cost of sales and expenses with related parties

Finished goods

Raw materials

Administrative
services

Technical
assistance

Energetics

Leases

Commissions

Others

Year ended December 31, 2015

Affiliate
Shareholders with significant influence
over subsidiaries

21,432

197,977

4,205

685,343

631,422

38,733

9,656

Total

685,343

652,854

236,710

9,656

4,205

5,817

297,919 (5)

5,817

297,919

Year ended December 31, 2014

Finished goods

Raw materials

Administrative
services

Technical
assistance

Energetics

Leases

Commissions

Others

17,446

174,206

167,667

68,696

Affiliate
Shareholders with significant influence
over subsidiaries

1,580,553

685,610

106,947

69,087

2,433

25,905

Total

1,580,553

703,056

281,153

69,087

167,667

2,433

25,905

(5) Under the caption of others, the effects of the agreements between Alpek and BASF Polyurethane (PU businesses) are included. See Note 2 b).

Annual Report 2015 | ALPEK

For the year ended December 31, 2015, wages and benefits received by top officials of the Company were Ps 266,014 (Ps 250,921 in 2014),
comprising of base salary and law benefits and supplemented by a variable compensation program that is basically based on the perfor-
mance 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, 2015 and 2014.

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

Note

10 - Inventories

At December 31,

2015

2014

Finished goods

5,794,742

5,937,774

Raw material and other consumables

Materials and tools

Work in process

5,081,622

792,721

417,032

4,175,773

877,025

495,336

12,086,117

11,485,908

For the years ended at December 31, 2015 and 2014, the cost of raw materials consumed and the changes in inventories of work in process
and finished goods recognized in the cost of sales amounted to Ps 73,029,596 and Ps 79,757,100, respectively.

For the years ended December 31, 2015 and 2014, it was recognized in the Consolidated Statement of income a provision amounting to
Ps 27,841 and Ps 18,894, respectively, related to damaged, slow-moving and obsolete inventory.

At December 31, 2015 and 2014, there were no inventories in guarantee.

Annual Report 2015 | ALPEK

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

Other fixed
assets

Total

Year ended December 31, 2014

Beginning balance

Additions

Disposals

Impairment

Translation effect

Depreciation charge recognized in the year

Transfers

2,750,382

2,904,570

16,255,225

61,990

230,966

2,090,461

412,295

Ps 24,705,889

78,806

( 1,907 )

159,770

1,153

21,767

255,207

( 217 )

( 4,649 )

338,058

1,900,474

( 177,545 )

( 1,375,170 )

536,758

2,029,669

3,198

( 3,301 )

( 269 )

6,629

( 11,147 )

12,014

7,246

( 52 )

( 30 )

24,742

( 62,202 )

36,999

1,385,181

( 4,905 )

84,957

24,746

( 15,950 )

51,818

1,776,151

( 26,332 )

( 4,948 )

2,566,448

( 1,626,064 )

( 2,636,933 )

21,471

1,131

Carrying value at December 31, 2014

2,988,204

3,623,608

Ps 19,060,539

69,114

237,669

918,761

494,380

Ps 27,392,275

At December 31, 2014

Cost

2,988,204

9,965,060

47,019,030

243,598

1,131,484

918,761

494,380

62,760,517

Depreciation charge recognized in the year

( 6,341,452 )

( 27,958,491 )

( 174,484 )

( 893,815 )

( 35,368,242 )

Carrying value at December 31, 2014

2,988,204

3,623,608

Ps 19,060,539

69,114

237,669

918,761

494,380

Ps 27,392,275

Year ended December 31, 2015

Beginning balance

Additions

Additions through business acquisitions

Disposals

Impairment

Translation effect

Depreciation charge recognized in the year

Transfers

2,988,204

3,623,608

Ps 19,060,539

69,114

237,669

918,761

494,380

Ps 27,392,275

36,773

236,463

2,740

7,077

103,746

534,133

( 221,908 )

88,872

47,493

257,130

( 27,911 )

( 13,816 )

2,856,459

( 1,696,600 )

661,134

3,157

2,671

( 1,280 )

8,515

( 11,958 )

4,518

6,596

16,010

( 303 )

( 82 )

37,228

( 76,078 )

67,082

1,477,320

8,610

( 994 )

( 27,449 )

121,353

36,465

( 10,717 )

(1,291 )

101,773

1,578,108

424,940

( 41,205 )

( 42,638 )

3,895,924

( 2,006,544 )

( 850,178 )

146,743

120,911

Carrying value at December 31, 2015

3,264,180

4,135,528

Ps 21,144,428

74,737

288,122

1,647,423

767,353

Ps 31,321,771

At December 31, 2015

Cost

Accumulated depreciation

3,264,180

11,763,540

55,398,958

283,283

1,410,940

1,647,423

767,353

74,535,677

( 7,628,012 )

( 34,254,530 )

( 208,546 )

( 1,122,818 )

( 43,213,906)

Carrying value at December 31, 2015

3,264,180

4,135,528

Ps 21,144,428

74,737

288,122

1,647,423

767,353

Ps 31,321,771

Depreciation expense of Ps 1,980,616 and Ps 1,608,083 were recorded in cost of sales, Ps 4,635 and Ps 1,811, in selling expenses and
Ps 21,293 and Ps 16,170, in administrative expenses in 2015 and 2014, respectively.

The Company has capitalized costs of loans in qualified assets for Ps 2,025 and Ps 90,064 for the years ended December 31, 2015 and 2014,
respectively. Costs from loans were capitalized at the weighted average rate of loans that amount to approximately 2.40%.

Annual Report 2015 | ALPEK

Note

12 - Goodwill and intangible assets, net

Finite life

Indefinite life

Development
costs

Supply rights

Non-complete
agreements

Customer
relationships

Software and
licenses

Intellectual
property rights
and others

Goodwill

Others

Total

Cost

At January 1, 2014

583,486

540,735

61,460

475,853

62,416

1,566,964

221,868

5,904

3,518,686

Additions

Translation effect

Additions through
business combination

Transfers

At December 31, 2014

Aditions

Translation effect

5,710

73,599

662,795

5,485

111,693

2,155,469

230,494

2,926,698

1,741,330

619,968

94,387

10,324

31,709

59,735

197,880

535,588

( 1,940 )

90,557

21,316

6,422

90,154

11,498

9,730

547,947

198,537

27,760

27,851

2,341,208

249,719

99,148

391,975

4,702

42,222

310

777

6,991

1,182

2,825,139

607,739

31,709

27,760

7,011,033

1,862,163

1,265,387

At December 31, 2015

779,973

5,287,996

195,940

626,145

111,382

2,832,331

296,643

8,173

Ps 10,138,583

Amortization

At January 1, 2014

( Ps

198,405 )

Amortization

Transfers

Translation effect

( 39,544 )

( 28,663 )

At December 31, 2014

( 266,522 )

Amortization

Translation effect

( 47,923 )

( 47,673 )

At December 31, 2015

( Ps

362,118 )

( Ps

44,816 )

( Ps

104,196 )

( Ps

35,941 )

( Ps

228,858 )

( 45,515 )

( 8,445)

( 38,363 )

( 3,607 )

( 17,180 )

( 3,651 )

( 86,417 )

( 7,425 )

( 37,187 )

( 98,776 )

( 159,739 )

( 43,199 )

( 359,887 )

( 44,085 )

( 54)

( 45,723 )

( 30,926 )

( 4,267 )

( 5,985 )

( 105,241 )

( 66,517 )

( Ps

142,915 )

( Ps

236,388 )

( Ps

53,451 )

( Ps

531,645 )

( Ps

612,216 )

( 213,356 )

( 7,425 )

( 95,126 )

( 928,123 )

( 247,239 )

( 151,155 )

( Ps

1,326,517 )

Net carrying amount

Cost

Amortization

662,795

2,926,698

197,880

535,588

90,154

2,341,208

249,719

6,991

7,011,033

( 266,522 )

( 98,776)

( 159,739 )

( 43,199 )

( 359,887 )

( 928,123 )

At December 31, 2014

396,273

2,926,698

99,104

375,849

46,955

1,981,321

249,719

6,991

6,082,910

Cost

779,973

5,287,996

195,940

626,145

111,382

2,832,331

296,643

8,173

Ps 10,138,583

Amortization

( 362,118 )

( 142,915 )

( 236,388 )

( 53,451 )

( 531,645 )

( 1,326,517 )

At December 31, 2015

417,855

5,287,996

53,025

389,757

57,931

2,300,686

296,643

8,173

8,812,066

Of the total amortization expense, Ps 247,097 and Ps 213,223 have been recorded in cost of sales, Ps 39 and Ps 97 in selling expenses and
Ps 103 and Ps 36 in administrative expenses in 2015 and 2014, respectively.

Incurred research and development expenses that have been recorded in the Consolidated Statement of Income were Ps 54,939 and
Ps 40,994, respectively.

Annual Report 2015 | ALPEK

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 296,643 and Ps 249,719 at December 31, 2015 and 2014, 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 2015 and 2014 were as follows:

Estimated gross margin

Growth rate

Discount rate

2015

6.8%

6.5%

10.05%

2014

4.0%

3.8%

9.8%

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,

2015

2014

Other receivables, net

109,796

103,202

Financial assets available for sale (1)

Investment in associates (2)

Other non-current financial assets (3)

143,407

253,387

1,227,972

128,475

149,931

316,271

Total other non-current assets

1,734,562

697,879

(1) Financial assets available for sale:

These assets relate to investments in companies not listed on the market representing less than 1% of its share capital and equity
investments in social clubs. We did not recognize any impairment loss at December 31, 2015.

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

Balance at January 1

Translation effect

Additions

Disposals

2015

2014

128,476

14,931

92,581

10,089

25,912

( 107 )

Balance at December 31

143,407

128,475

Annual Report 2015 | ALPEK

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

USD

MXN

Total

At December 31,

2015

2014

103,239

40,168

88,308

40,167

143,407

128,475

None of the financial assets available for sale is expired or impaired.

(2)

Investments in associates

The accumulated summarized financial information for associated companies of the group accounted for by the equity method,
not considered material, is as follows:

Net loss

Other comprehensive income

Comprehensive income

Investment in associates at December 31

2015

2014

( Ps

70,896 )

( Ps

155,528 )

( 70,896 )

253,387

( 155,528 )

149,931

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

(3) Other non-current assets

At December 31, 2015, this caption includes an amount of Ps 1,101,666 (US$ 64 million) related to a prepayment of inventory,
which is explained in Note 2 a).

Note

14 – Subsidiaries with significant non-controlling interest

The significant non-controlling interest, is integrated as follows:

Non-controlling
ownership
percentage

Non-controlling interest income
for the period

Non-controlling interest
at December 31,

2015

2014

2015

2014

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

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

49%

50%

699,007

303,590

Ps 2,917,152

Ps 2,574,644

215,676

226,241

1,153,410

829,038

Non-controlling portion
of non-significant subsidiaries

1,581

( 16,630 )

473,966

491,493

916,264

513,201

Ps 4,544,528

Ps 3,895,175

Annual Report 2015 | ALPEK

The summarized financial information at December 31, 2015 and 2014 and for the year then ended, corresponding to each subsidiary with
a significant non-controlling interest is shown below:

Statements of financial position

Current asset

Non-current asset

Current liability

Non-current liability

Stockholders' equity

Statements of income

Revenues

Consolidated net profit

Comprehensive income for the year

Comprehensive income attributable to
non-controlling interest

Dividends paid to the non-controlling
interest

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

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

2015

2014

2015

2014

Ps 3,527,423

Ps 3,908,340

Ps 3,975,571

Ps 3,295,428

6,393,022

1,619,233

2,347,840

5,953,372

5,492,256

1,822,647

2,323,573

5,254,376

10,034,028

10,297,976

1,426,545

2,254,269

619,570

1,206,585

876,245

1,267,920

1,277,076

2,306,820

4,898,744

431,352

648,831

1,181,138

1,906,511

911,978

1,658,077

9,646,578

452,482

579,961

1,104,592

591,227

324,416

289,981

762,084

96,129

150,317

Statements of cash flows

Net cash flows generated in operating activities

Net cash flows used in investing activities

Net cash flows used in financing activities

Net increase (decrease)
in cash and cash equivalents

2,613,464

( 440,539 )

( 1,909,065 )

645,248

( 122,026 )

( 543,624 )

( 47,617 )

( 80,989 )

( 319,374 )

447,201

( 101,431 )

( 255,926 )

301,769

( 14,488 )

( 417,898 )

142,357

Annual Report 2015 | ALPEK

Note

15 - Financial instruments

a) Financial instruments by category

Trade receivables
and liabilities at
amortized cost

Available for sale

At December 31, 2015

Financial assets
and liabilities fair
value through
profit and loss

Derivative
designated for
hedging

Total

Financial assets:

Cash and cash equivalents

Restricted cash and cash equivalents

Trade and other receivable

Derivative financial instruments

Assets available for sale

Financial liabilities:

Debt

Suppliers and other accounts payable

Shared-based payments

Derivative financial instruments

6,649,904

2,753

13,383,935

20,036,592

678,331

9,800,552

10,478,883

143,407

203,236

54,700

17,166

71,866

120

1,542,477

6,649,904

2,753

13,383,935

203,356

143,407

20,383,355

678,331

9,800,552

54,700

1,559,643

1,542,477

12,093,226

Trade receivables
and liabilities at
amortized cost

Available for sale

At December 31, 2014

Financial assets
and liabilities fair
value through
profit and loss

Derivative
designated for
hedging

Total

Financial assets:

Cash and cash equivalents

Restricted cash and cash equivalents

Trade and other receivable

Assets available for sale

Financial liabilities:

Debt

5,743,816

3,185

13,246,370

18,993,371

487,604

Suppliers and other accounts payable

10,564,770

Shared-based payments

Derivative financial instruments

11,052,374

128,475

59,506

85,113

144,619

959,823

5,743,816

3,185

13,246,370

128,475

19,121,846

487,604

10,564,770

59,506

1,044,936

12,156,816

Annual Report 2015 | ALPEK

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 avail-
able) 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 customers X

Type of customers Y

Type of customers Z

At December 31,

2015

2014

22,666

26,245

32,367

42,628

8,394

18,848

34,044

509,813

111

2,989

7,748

913,720

235,040

1,854,723

7,774,909

95,916

7,870,825

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

Total not impaired trade receivables

9,725,548

12,492,078

Annual Report 2015 | ALPEK

Cash and cash equivalents with or
without restriction, not including petty cash

"A+"

"A-"

"A"

"BBB+"

"BBB"

"BBB-"

"BB+"

Other categories

Not rated

Derivative financial instruments

“A-”

“BBB+”

“CCC”

“CCC+”

At December 31,

2015

2014

34,228

931,412

762,203

2,485,325

2,470,120

147,686

1,442

11,896

732,218

559,217

1,868,851

1,317,396

194,785

80,916

276,986

516,495

6,645,118

5,746,058

1,713

6,279

162,792

32,572

203,356

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 carry-
ing amount of these accounts represents the expected cash flow at December 31, 2015 and 2015.

The carrying amount and the estimated fair value of the rest of the financial assets and liabilities are presented as follows:

At December 31, 2015

At December 31, 2014

Carrying amount

Fair value

Carrying amount

Fair value

Financial assets

Non-current receivable

109,796

99,712

103,202

91,612

Financial liabilities

Non-current debt

18,394,325

17,964,918

15,778,025

16,107,121

Annual Report 2015 | ALPEK

The estimated fair values as of December 31, 2015 and 2014 were determined based on discounted cash flows using rates that reflect a
similar credit risk depending on the currency, maturity period and country where the debt was incurred. As part of the main rates used are
the interbank equilibrium interest rate ("TIIE") for the instruments in pesos and Libor for instruments held in dollars. These fair values do
not consider the current portion of financial assets and liabilities, as the current portion approximates their fair value. This is a measure of
fair value of Level 3.

Note

16 - Derivative financial instruments

The effectiveness of derivative financial instruments designated as hedges is measured periodically. At December 31, 2015 and 2014
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 mar-
ket 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, 2015 and 2014.

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.

100

Annual Report 2015 | ALPEKa) Exchange rate derivatives

Derivative financial instruments related to exchange rate positions with trading accounting treatment are summarized as follows (figures
in millions of pesos):

At December 31, 2015

Underlying asset

Notional amount

Unit

Reference

Fair value

2016

Type of derivative,
value or contract

Maturity

2017

2018+

USD/MXN

( Ps

ARS/USD

688 )

800

Pesos / Dollar

Ps Arg. / Dollar

17.21

12.94

( Ps

13 )

( Ps

13 )

202

189

202

189

At December 31, 2014

Underlying asset

Notional amount

Unit

Reference

Fair value

2015

Type of derivative,
value or contract

Maturity

2016

2017+

USD/MXN

( Ps

986 )

Pesos / Dollar

14.72

( Ps

73 )

( Ps

73 )

Interest rate swaps

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

At December 31, 2015

Underlying asset

Notional amount

Unit

Reference

Fair value

2016

Type of derivative,
value or contract

Maturity

2017

2018+

With hedge Accounting treatment

In Libor rate 1

% per year

1.18

At December 31, 2014

Underlying asset

Notional amount

Unit

Reference

Fair value

2015

Type of derivative,
value or contract

Maturity

2016

2017+

With hedge Accounting treatment

In Libor rate 1

589

% per year

0.90

( Ps

10 )

( Ps

8 )

( Ps

2 )

1 Cash flow hedges

101

Annual Report 2015 | ALPEK

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 or derivative,
value or contract

At December 31, 2015

Underlying asset

Notional mount

Unit

Reference

Fair value

2016

Maturity

2017

2018+

With hedge accounting treatment

Ethylene 1

Natural gas 1

Ethane 1

Px 1

Gasoline 1

809

2,923

Cent Dollar/lb

Dollar / MBTU

Cent Dollar/Gallon

3,252

Dollar/MT

Dollar / Gallon

With trade accounting treatment:

Brent crude

Dollar / BBL

19.22

2.32

15.05

772

1.25

38.91

( Ps

230 )

( Ps

230 )

( 961 )

( 5 )

( 309 )

( 38 )

( 250 )

( 5 )

( 309 )

( 38 )

( 2 )

( 204 )

( 507 )

( Ps

1,545 )

( Ps

834 )

( Ps

204 )

( Ps

507 )

Type or derivative,
value or contract

At December 31, 2014

Underlying asset

Notional mount

Unit

Reference

Fair value

2015

Maturity

2016

2017+

With hedge accounting treatment

Ethylene 1

Natural gas 1

Ethane 1

Px 1

Gasoline 1

Cent Dollar/lb

2,600

Dollar / MBTU

Cent Dollar/Gallon

1,585

1,013

Dollar/MT

Dollar / Gallon

With trade accounting treatment:

Brent crude

Dollar / BBL

45.38

3.08

17.59

884

1.62

63.27

1 Cash flow hedges

( Ps

1 )

( Ps

1 )

( 260 )

( 1 )

( 308 )

( 380 )

( 12 )

962 )

( Ps

( 13 )

( 1 )

( 308 )

( 380 )

( 12 )

715 )

( 98 )

( 149 )

( Ps

98 )

( Ps

149 )

At December 31, 2015 and 2014, the net fair value of derivative financial instruments, above mentioned amounts to Ps 1,356,287 and
Ps 1,044,936, respectively, which is shown in the consolidated statements of financial position as follows:

Current asset

Current liability

Non-current liability

Net position

Fair value at December 31,

2015

2014

203,356

( 848,301 )

( 711,342 )

( 757,011 )

( 287,925 )

( Ps

1,356,287 )

( Ps

1,044,936 )

At December 31, 2015 and 2014, there are no collaterals in derivative financial instruments.

102

Annual Report 2015 | ALPEK

Note

17 – Suppliers and other accounts payable

At December 31,

2015

2014

Suppliers

9,521,436

9,881,574

Balances with related parties (Note 9)

279,116

683,196

9,800,552

10,564,770

Note

18 - Provisions

Restructuring and
demolition

Environmental
remediation

Indemnities from
dismissal and others

Other

Total

At January 1, 2014

433,354

371,611

Transfers

Payments

Translation effect

At December 31, 2014

Additions

Payments

Translation effects

( 73,590 )

( 76,799 )

49,395

332,360

( 249,138 )

30,171

( 17,383 )

46,170

400,398

( 102,663 )

59,724

79,349

73,590

( 96,369 )

567

57,137

( 29,077 )

6,956

32,554

( 10,659 )

( 4,604 )

884,314

( 190,551 )

96,132

789,895

32,554

( 391,537 )

92,247

At December 31, 2015

113,393

357,459

35,016

17,291

523,159

Short-term provisions

Long-term provisions

At December 31, 2015

2015

2014

338,411

761,652

184,748

28,243

523,159

789,895

The provisions shown in the above table are mainly related to the closure of the plant in Cape Fear located in Wilmington, North Carolina
carried out in June 2013. The purpose of this closure was to improve cost competitivity, through distributing production to the most efficient
plants in its productive network.

During 2015, the Company continued the works of dismantling and demolition of the plant in Cape Fear, as was originally announced
during 2013. At December 31, 2015, the balance of this provision amounts to Ps 505,868 (US$ 29.4 million) , which is in line with the initial
estimate made by the Management will be disbursed over the next two years according to the plan of dismantling and demolition of the plant.

103

Annual Report 2015 | ALPEK

Note

19 – Debt

Current:

Bank loans (1)

Current portion of non-current debt

Interest payable

Notes payable (1)

Current debt

Non-current:

Senior Notes (3)

Unsecured Bank loans (3)

Total (2)

At December 31,

2015

2014

439,713

290,388

50,342

182,004

6,272

11,166

160,689

25,360

678,331

487,604

16,203,450

13,846,890

2,122,632

18,326,082

1,829,928

15,676,818

Less: current portion of non-current debt

( 50,342 )

( 11,166 )

Non-current debt

18,275,740

15,665,652

(1) The fair value of bank loans and notes payable approximates their current carrying amount, as the impact of discounting is not

significant.

(2) The total amounts are the amortized cost and include debt issuance costs of Ps 118,585 and Ps 112,373, for 2015 and 2014,

respectively.

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Annual Report 2015 | ALPEK

Description

Senior Notes
144A/Reg. S fixed rate

Total Senior Notes

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%.

Bank loan bearing annual
interest of BADLAR +2.00%.

Bank loan bearing annual
interest of BADLAR + 1%

Bank loan bearing annual
interest of 19%

Bank loan bearing annual
interest of Libor + 1%

Bank loan bearing annual
interest of Libor + 1.50%.

USD

ARS

USD

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

Currency

Outstanding
credit balance

Debt issuance
costs

Interest
payable

Balance at
December 31,
2015

Balance at
December 31,
2014

Maturity date
DD/MM/YY

Interest
rate

USD

Ps 11,160,085

( Ps

78,750 )

55,921

Ps 11,137,256

9,517,052

20-Nov-22

4.50%

5,161,950

( 39,835 )

109,441

5,231,556

4,471,284

8-Aug-23

5.38%

16,322,035

( 118,585 )

165,362

16,368,812

13,988,336

860,325

344,130

33,252

119,624

13,168

408,003

630

1,630

1,556

796

2,384

208

1,732

860,955

736,416

19-Dec-19

2.40%

345,760

295,759

01-Apr-17

1.51%

345,686

296,561

02-Apr-18

1.43%

34,048

44,315

03-Oct-16

29.72%

122,008

170,109

01-Apr-20

22.45%

13,376

409,735

02-Dec-22

19.00%

14-Aug-18

1.40%

297,246

01-Apr-16

1.76%

8,936

2,131,568

1,840,406

Total unsecured bank loans

2,122,632

Total

Ps 18,444,667

( Ps

118,585 )

174,298

Ps 18,500,380

Ps 15,828,742

At December 31, 2015, the annual maturities of non-current debt are as follows:

2017

2018

2019

2020 onwards

Total

Bank loans

Senior notes

367,628

1,214,835

469,110

20,717

2,072,290

16,203,450

367,628

1,214,835

469,110

16,224,167

18,275,740

105

Annual Report 2015 | ALPEK

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 pay-
ments 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 2015 and 2014, 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.

During the years ended December 31 2015 and 2014, there were not significant debt transactions, the main increase is generated due to
the exchange rate of the debt held in US dollars. The amounts shown in the Consolidated Statements of Cash Flows correspond to credit
lines utilized and paid during the year.

106

Annual Report 2015 | ALPEKNote

20 - Employee benefits

The valuation of retirement plan employee benefits includes formal plans 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 2015 amounted to Ps 62,454 (Ps 74,899 in 2014).

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

Liability for employees’ benefits:

Pension benefits

Post-employment medical benefits

Defined contribution liability

At December 31,

2015

2014

857,942

764,780

168,283

1,026,225

81,841

154,349

919,129

44,854

Employees’ benefits in the statement of financial position

1,108,066

963,983

Charge to the income statement for:

Pension benefits

Post-employment medical benefits

( Ps

61,385 )

( Ps

( 6,706 )

( 68,091 )

42,629 )

( 7,466 )

( 50,095 )

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

( Ps

3,050 )

( Ps

343,760 )

Remeasurement of accumulated obligations for employees benefits

( Ps

230,620 )

( Ps

227,570 )

107

Annual Report 2015 | ALPEK

Pension benefits

The Company operates defined benefit pension plans based on employees´ pensionable remuneration and length of service. Most plans
are externally funded. Plan assets are held in trusts, foundations or similar entities, governed by local regulations and practice in each
country, as is the nature of the relationship between the Company and the respective trustees (or equivalent) and their composition.

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

At December 31,

2015

2014

Present value of defined benefit obligations

3,545,493

3,288,794

Fair value of plan assets

( 2,687,551 )

( 2,524,014 )

Employees’ benefits in the statement
of financial position

857,942

764,780

The movement in the defined benefit obligation during the year is as follows:

At January 1

Service cost

Interest cost

Remeasurements:

(Losses) gains from changes in financial
assumptions

(Losses) gains from change in demographic
assumptions and experience adjustments

Translation effect

Benefits paid

Plan reductions

Settlements

At December 31

2015

2014

3,288,794

2,700,267

40,397

138,029

34,622

128,846

( 120,021 )

183,286

( 17,078 )

482,191

( 261,637 )

( 1,415 )

( 3,767 )

221,456

286,754

( 261,005 )

( 1,280 )

( 4,152 )

3,545,493

3,288,794

108

Annual Report 2015 | ALPEK

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

At December 31

2015

2014

( Ps

2,524,015 )

( Ps

2,318,980 )

( 111,858 )

( 115,407 )

119,432

( 344,998 )

( 62,454 )

236,342

( 26,394 )

( 228,358 )

( 74,899 )

240,023

( Ps

2,687,551 )

( Ps

2,524,015 )

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

2015

2014

( Ps

40,397 )

( Ps

34,622 )

( 26,171 )

5,183

( 13,439 )

5,432

Total included in personal costs

( Ps

61,385 )

( Ps

42,629 )

The principal actuarial assumptions are as follows:

Discount rate

Inflation rate

Salary increase rate

At December 31,

2015

MX 6.75%

US 4.08%

4.25%

5.25%

2014

MX 6.75%

US 3.75%

4.25%

5.25%

The average life of defined benefit obligations is of 15.7 and 15.6 years at December 31, 2015 and 2014, respectively.

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

Effect in defined benefit obligations

Change in assumption

Increase in assumption

Decrease in assumption

Discount rate

Mx 1%

US 1%

Decreases by Ps 30,826

Increases by Ps 35,717

Decreases by Ps 278,042

Increases by Ps 336,862

109

Annual Report 2015 | ALPEK

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 6.7% in 2015
and 7.5% in 2014.

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

At December 31,

2015

2014

168,283

154,349

168,283

154,349

2015

2014

154,349

175,644

1,777

4,929

15,539

25,371

23,718

( 52,746 )

1,391

6,075

8,926

4,084

( 38,672 )

20,629

( 23,728 )

168,283

154,349

Present value of defined
benefit obligations

Fair value of plan assets

Employees’ benefits in the statement
of financial position

The movements of defined benefit obligations are as follows:

At January 1

Service cost

Interest cost

Employee contributions

Remeasurements:

Gains from changes in demographic

assumptions and experience adjustments

Translation effect

Plan reductions

Benefits paid

At December 31

110

Gain from changes in financial assumptions

( 4,654 )

Annual Report 2015 | ALPEK

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

2015

2014

( Ps

1,777 )

( Ps

1,391 )

( 4,929 )

( 6,075 )

Total included in personal costs

( Ps

6,706 )

( Ps

7,466 )

At December 31, 2014, the effect of a 1% in the incremental of medical expenses, as follows:

Effect in defined benefit obligation

( 8,627 )

10,046

Increase

Decrease

Employee benefits

Plan assets are comprised as follows:

At December 31,

2015

2014

Investment funds (listed)

Cash and cash equivalents

1,738,467

1,633,198

949,084

890,816

Note

21 – Deferred income taxes

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

At December 31,

2015

2014

Deferred tax asset:

- To be recovered for more than 12 months

243,581

178,117

- To be recovered within 12 months

117,606

361,187

78,880

256,997

Deferred tax liability:

- To be payable in more than 12 months

- To be payable within 12 months

( 4,579,487 )

( 127,543 )

( 4,707,030 )

( 3,699,349 )

( 556,257 )

( 4,255,606 )

Deferred tax, net

( Ps

4,345,843 )

( Ps

3,998,609 )

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Annual Report 2015 | ALPEK

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 to other items of comprehensive income

2015

2014

( Ps

3,998,609 )

( Ps

4,127,671 )

( 596,323 )

( 83,550 )

202,947

129,692

( 421,032 )

( 777 )

( 23,919 )

97,746

477,044

At December 31

( Ps

4,345,843 )

( Ps

3,998,609 )

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

2015

2014

Provisions

261,988

817,352

Derivative financial instruments

Tax loss carryforwards

Other temporary differences, net

3,958

1,499,783

229,375

715,750

59,743

Total deferred tax asset

1,765,729

1,822,220

Inventories

Trade receivables, net

Property, plant and equipment, net

Intangible assets, net

Other temporary differences, net

Total deferred tax liability

Net deferred tax liability

( Ps

52,340 )

( Ps

( 5,464,127 )

( 289,233 )

( 305,872 )

( 6,111,572 )

25,308 )

( 4,767 )

( 5,790,754 )

( 5,820,829 )

( Ps

4,345,843 )

( Ps

3,998,609 )

At December 31, 2015, the Company has accumulated tax loss carryforwards for a total of Ps 4,999,275 expiring as shown below:

Loss incurred
in the year

Tax loss
carryforwards

Year of maturity

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

115,345

83,250

83,363

875,121

80,002

85,899

969,597

2,540,198

4,999,275

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

112

Annual Report 2015 | ALPEK

Note

22 - Other current liabilities

At December 31,

2015

2014

Taxes different than income tax

658,681

683,972

Accumulated expenses

Short-term employee benefits

Employees' profit sharing

Prepayments from costumers

Others

463,683

596,170

5,949

66,382

100,607

429,593

388,733

4,069

18,375

151,312

Total other current liabilities

1,891,472

1,676,054

Note

23 - Stockholders' equity

At December 31, 2015 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, 2015 and 2014 the legal
reserve amounts Ps 377,052 and Ps 337,007, respectively.

In the Ordinary General Meeting of Alpek, held on April 15, 2015, the stockholders agreed to declare dividends in cash for a total of
Ps 1,472,825.

During 2014, Alpek S. A. B. de C. V. did not declared dividends.

113

Annual Report 2015 | ALPEK

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 deter-
mined in terms of the Income Tax Law in force in the fiscal year concerned.

The movements in other reserves for 2015 and 2014 are shown as follows:

At January 1, 2014

Losses on fair value

Deferred tax asset on fair value gains

Effect in translation of foreign entities

At December 31, 2014

Losses on fair value

Deferred tax asset on fair value gains

Effect from foreign
currency translation

Effect of cash flow
hedge derivative
instruments

Total

338,180

64,917

403,097

2,416,988

2,755,168

( 1,025,280 )

350,773

( 609,590 )

( 529,273 )

129,563

350,773

2,416,988

2,145,578

( 529,273 )

129,563

3,843,118

Effect in translation of foreign entities

3,843,118

At December 31, 2015

6,598,286

( Ps

1,009,300 )

5,588,986

Foreign currency translation

In this caption the effect of foreign exchange differences arising from the translation of financial statements of foreign subsidiaries are
recorded.

Effect of derivative financial instruments

The effect of derivative financial instruments contracted as cash flow hedges contains the effective portion of cash flow hedges at the
reporting date.

The Board of Directors and Executive Officers of the Company do not own more than 1% of its capital. Furthermore, none of the share-
holders own more than 10% of its capital, or have significant influence or control or have power to govern the company.

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 2016. 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, 2015, 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.

114

Annual Report 2015 | ALPEK

Note

24 – Share-based payments

Until December 31, Alpek had a compensation scheme for executives referenced to the value of the shares of the holding. Beginning of Jan-
uary 1, 2015, the compensation is referenced in 50% to the value of the shares of the holding and the other 50% to the value of the shares
of Alpek, S. A. B. de C. V. According to the terms of the plan, eligible executives will receive a cash payment conditional on the achievment
of certain quantitative and qualitative metrics based on the following financial mesures:

•
•
•

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 and will be paid at the average price of the share at the end of each year.

The average price of the shares in pesos used as reference is:

Alfa, S. A. B. de C. V.

Alpek, S. A. B. de C. V.

2015

2014

34.30

23.48

33.83

The short-term and long-term liability are comprised as follows:

Short-term

Long-term

At December 31,

2015

2014

17,833

36,867

21,257

38,249

Total carrying amount

54,700

59,506

115

Annual Report 2015 | ALPEK

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:

Raw materials and others

( Ps

58,781,952 )

( Ps

66,910,490 )

2015

2014

Employee benefit expenses (Note 28)

Human resource expenses

Maintenance

Depreciation and amortization

Advertising expenses

Freight charges

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

Travel expenses

Operating lease expenses

( 3,799,459 )

( 75,985 )

( 1,092,973 )

( 2,253,783 )

( 2,185 )

( 3,864,535 )

( 2,884,788 )

( 131,647 )

( 639,433 )

( 2,845,866 )

( 22,543 )

( 917,758 )

( 1,839,420 )

( 2,229 )

( 3,380,333 )

( 3,294,676 )

( 113,923 )

( 495,350 )

Technical assistance, professional fees and
administrative services

Others (insurance and finance, water, containers
and packaging, etc.)

( 1,042,131 )

( 794,478 )

( 1,676,994 )

( 1,684,602 )

Total

( Ps

76,245,865 )

( Ps

82,301,668 )

Note

26 - Other income (expenses), net

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

2015

2014

Gain on sale of wastes

8,558

Gain on sale of property, plant and equipment

Impairment of investment in joint ventures

Impairment of property, plant and equipment (1)

Valuation of derivative financial instruments

Other (expenses) income, net

381,585

( 130,166 )

( 6,267 )

( 8,717 )

3,509

286

( 126,906 )

( 4,948 )

( 18,669 )

114,921

Total

244,993

( Ps

31,807 )

(1) This caption includes Ps 87,528 related to the assets disposal of the Cape Fear site.

116

Annual Report 2015 | ALPEK

Note

27 - Finance income and cost

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

Finance income:

Interest income on short-term bank deposits

187,639

100,611

2015

2014

Interest income on loans from related parties

Others

Foreign exchange gains

Gains for changes in the fair value of financial
assets at fair value through profit or loss

Total finance income

Finance expenses:

Interest expense on bank loans

Non-bank interest expense

Interest cost on employees benefit

Other finance expenses (factoring and others)

Foreign exchange loss (1)

Loss for changes in the fair value of financial
assets at fair value through profit or loss

Total finance cost

Finance cost, net

41,581

14,977

2,366,892

184,271

32,498

2,328

2,795,360

135,437

( Ps

128,023 )

( Ps

134,642 )

( 787,463 )

( 31,155 )

( 230,107 )

( 3,480,815 )

( 648,787 )

( 19,964 )

( 122,719 )

( 629,298 )

( 76,697 )

( Ps

4,657,563 )

( Ps

1,632,107 )

( Ps

1,862,203 )

( Ps

1,496,670 )

(1) For the year ended 2014, includes a foreign exchange gain amounting to Ps 1,598,851 and a foreign exchange loss amounting

to (Ps 2,228,149).

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

2015

2014

( Ps

2,853,545 )

( Ps

2,101,118 )

( 262,450 )

( 36,991 )

( 646,473 )

( 211,667 )

( 30,580 )

( 502,501 )

Total

( Ps

3,799,459 )

( Ps

2,845,866 )

117

Annual Report 2015 | ALPEK

Note

29 - Income taxes

Income tax for the years ended December 31, are integrated as follows:

2015

2014

Total current income tax

( Ps

2,251,532 )

( Ps

974,546 )

Adjustment to the provision of income tax
from prior years

Total deferred tax

Income taxes

8,840

202,947

( 6,232 )

97,746

( Ps

2,039,745 )

( Ps

883,032 )

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

2015

2014

5,704,410

2,197,134

30%

Income tax at statutory rate

( 1,711,323 )

( 659,140 )

Add (deduct) effect of income tax on:

Differences resulting from the financial cost, net

Non-deductible expenses

Non-taxable income

Effect of different tax rates of countries
other than Mexico

Adjustment to the income tax liability of prior years

Share in losses of associates

( 235,313 )

( 20,554 )

4,739

( 79,241 )

8,840

( 6,893 )

( 137,375 )

( 22,400 )

1,574

( 46,024 )

( 6,232 )

( 13,434 )

Total income tax

Effective tax rate

( Ps

2,039,745 )

( Ps

883,032 )

36%

40%

118

Annual Report 2015 | ALPEK

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

2015

Tax charge
(credit)

Before taxes

After taxes

Before taxes

2014

Tax charge
(credit)

After taxes

Translation effect of foreign currency

3,843,118

2,416,988

Remeasurement of obligations
for employee benefits

Effect of derivative financial instruments
for hedging purposes of cash flow

Other comprehensive income items

3,310,795

Deferred tax

Note

30 - Segment reporting

( 3,050 )

129

( 2,921 )

( 343,760 )

( 529,273 )

129,563

129,692

( 399,710 )

( 1,025,280 )

3,440,487

1,047,948

126,271

350,773

477,044

( 217,489 )

( 674,507 )

1,524,992

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 per-
formance assessment of operating segments.

An operating segment is defined as a component of an entity on which separate financial information is regularly being evaluated.

Management assesses its operations through two business segments: the Polyester business chain and the Plastics & Chemicals busi-
ness. 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 informa-
tion 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.

119

Annual Report 2015 | ALPEK

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

For the year ended December 31, 2015:

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

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

Plastic and
Chemicals

Others

Total

60,852

23,070

( Ps

332 )

83,590

( 83 )

60,769

3,583

1,837

5,420

3,979

( 249 )

22,821

3,961

547

4,508

503

332

83,590

7,590

2,384

9,974

4,482

Polyester

Plastic and
Chemicals

Others

Total

63,316

23,071

( Ps

( 88 )

63,228

2,006

1,535

3,541

3,803

( 227 )

22,844

1,674

436

2,110

388

315 )

315

86,072

3,739

1,971

5,710

4,191

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

Adjusted EBITDA

9,974

5,710

2015

2014

Depreciation, amortization and impairment
of non-current assets

Operating profit

Financial cost, net

Share of losses in associates

( 2,384 )

7,590

( 1,862 )

( 23 )

( 1,971 )

3,739

( 1,497 )

( 45 )

Income before taxes

5,705

2,197

120

Annual Report 2015 | ALPEK

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

Mexico

United States

Argentina

Brazil

Chile

Canada

Revenues

2015

2014

40,986

36,455

4,762

853

369

165

48,056

33,836

4,180

83,590

86,072

The Company's main costumer generated revenue amounting to Ps 5,706 and Ps 8,488 for the years ended December 31, 2015 and 2014,
respectively. This revenue is obtained from the Polyester reporting segment and represents 7% and 11% for both years of the consolidated
revenue with external costumers.

The following table shows the intangible assets and property, plant and equipment by country (in millions of pesos):

Mexico

United States

Argentina

Total intangible assets

Mexico

United States

Argentina

Chile

Brazil

At December 31,

2015

2014

2,132

6,675

8,812

1,986

4,061

6,083

23,791

6,863

328

233

107

20,981

6,045

366

Total property, plant and equipment

31,322

27,392

121

Annual Report 2015 | ALPEK

Note

31 - Commitments and contingencies

At December 31, 2015, the Company has the following commitments:

a) The Company through its subsidiary Grupo Petrotemex signed an agreement with M&G (See Note 2) related to supply rights of
the plant for 500 thousand tons of PET (manufactured with 360 thousand tons of PTA) per year, by which it is obligated to pay
an amount of US$ 435 million during the construction of the plant and subject to the compliance of predefined milestones. At
December 31, 2015 Grupo Petrotemex has made payments amounting to Ps 6,383,612 (US$371 million), which are presented in
the goodwill and intangible assets caption, as well as inventory prepayment in other non-current assets. See Note 12 and 13.”

b) On December 15, 2014 the Company through its subsidiary DAK Americas LLC (“DAK”) entered into a Toll Manufacturing
Agreement with Huntsman Petrochemical LLC (“Huntsman”) in which will obtain the supply rights of Monoethylene Glycol (MEG).
On the other hand, DAK will pay $1,118,422 (US$ 65 million) to Huntsman during the installation of the equipment according to a
established calendar and in compliance with certain milestones; therefore, DAK will obtain the supply rights up to 28.8 million of
pounds of product per year for a 15 years period commencing on the first day of the month in which the equipment is installed. At
December 31, 2015, DAK has made payments amounting to $568,589 (US$ 39 million), which are recorded under the intangible
assets caption and will be amortized within the cost of sales once the MEG supply begins (see Note 2).

c) At December 31, 2015 and 2014, 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.

In September 2007, Indelpro renewed an agreement it had held with PEMEX Refinación to cover the supply of propylene for
the chemical and refining area maturing in 2018, such agreement establishes the obligation to purchase the maximum level of
production available at a referenced market prices. Purchases of propylene during the years ended December 31, 2015 and 2014
amounted to Ps 2,895,870 and Ps 5,619,612, respectively. The purchase commitment for the year 2016 amounts to approximately
Ps 3,000,000 and is based on the volume of purchases made during 2015.

e) 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.

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

2016

2017

2018

2019

Onwards

203,809

166,356

145,894

125,038

543,338

122

Annual Report 2015 | ALPEK

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

a) During the normal course of the business, the Company may be involved in disputes and litigations. While the results of these
can’t be predicted, the Company does not believe that there are actions pending to apply, claims or legal proceedings against or
affecting the Company which, if determined adversely to the Company, would significantly damage individually or in general the
results of its operations or its financial position.

b) 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 the events and transactions for their recognition or disclosure subse-
quent to December 31, 2015 and through February 2, 2016 (date of issuance of the financial statements), and has concluded that there are
no subsequent events affecting them.

José de Jesús Valdez Simancas
Chief Executive Officer

Eduardo Alberto Escalante Castillo
Chief Financial Officer

123

Annual Report 2015 | ALPEK

124

Annual Report 2015 | ALPEKInvestor Relations

Hernán F. Lozano

Sabino Parra

Av. Gómez Morín 1111 Sur

Col. Carrizalejo, San Pedro Garza García

Nuevo León, Mexico, 66254

IR@alpek.com

www.alpek.com

P R I N T ED WIT

% WIND E N E

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Supplied by Community Energy

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