ANNUAL
REPORT 2022
TABLE OF
TABLE OF
CONTENTS
CONTENTS
Message from our
Management
ARMANDO GARZA SADA
CHAIRMAN OF THE BOARD
3
“
This message highlights
the key developments
that contributed to Alpek’s
success during 2022.
Dear Shareholders,
2022 marked quite the year for Alpek, reaching all-time
historical highs.
Our exceptional performance was favored by a continued
strength in demand during the first half of the year, as well
as tight global supply amid high marine freight costs. As
margins began to gradually normalize during the second half,
demand for our products remained strong, enabling us to
conclude the year with solid results, thus confirming Alpek’s
strong financial performance and the business resiliency.
Herein we hope to highlight the key developments that
contributed to Alpek’s success during 2022.
4
5,065
T H O U S A N D TO N S VO LU M E
U.S.
$1,396
million
COMPARABLE EBITDA
In 2022 Alpek once again demonstrated
the strength of its products, the
efficiency of its business model, and
capacity to maintain financial stability.
ALPEK
CAPITALIZED
ON MARKET
CONDITIONS
GENERATING
EXCEPTIONAL
RESULTS
Alpek revised its guidance figures twice
during the year due to outstanding
results across our segments and higher-
than-expected margins for PET, PP and
EPS. In the Polyester segment, volume
primarily rose from the PET Sheet &
Resin acquisition in the Middle East that
was finalized in May 2022, as well as
from demand, which remained steady.
Asian integrated PET reference margins
exceeded expectations, remaining at
historically high levels throughout the
first three quarters, with a normalization
occurring later than expected.
In the Plastics & Chemicals segment,
reference margins for Polypropylene
remained elevated throughout the
majority of 2022. Here the adjustment
took place closer to the end of the year,
primarily as new capacity was added in
the Americas, while margins for EPS had
a notable increase, gradually coming
back towards year-end.
Thus, results for the period were
outstanding: 2022 Comparable EBITDA
reached U.S. $1,396 million, 45% greater
than in 2021, and the highest ever
recorded for Alpek. Overall volume
levels rose by 6% year over year
reaching 5,065 thousand tons.
ALPEK TOOK
ADVANTAGE
OF GROWTH
OPPORTUNITIES
TO OFFER MORE
VALUE-ADDED
PRODUCTS
01
5
Alpek has been growing to offer additional downstream value chain
integration and ESG-related opportunities according to its long-term
strategy by:
Acquiring OCTAL, a major PET
sheet producer with its main
facilities in the Middle East.
Financing for the acquisition was
secured through cash on the
Company’s balance sheet, free
cash flow generated from existing
businesses, and dedicated bank
loans. This acquisition adds over
one million tons of installed
capacity, spread across four
sites: a main production facility
with both PET Sheet and Resin
in Salalah Free Zone, Oman, a
PET Sheet Recycling facility
in Cincinnati, USA and a PET
Thermoform Packaging facility in
Riyadh, Saudi Arabia.
This transaction brought Alpek
into the PET Sheet business
segment, thereby expanding its
product portfolio. Alongside its
economic potential, OCTAL’s
state-of-the art Direct-to-PET
(DPET®) technology has the
lowest conversion cost and lowest
carbon footprint in the Sheet
industry. Since Alpek has taken
control of the operations, the
Company has already benefited
from logistics and allocation
optimization. We also foresee
growth opportunities for PET
Sheet in new geographies.
JOSÉ DE JESÚS VALDEZ SIMANCAS
CHIEF EXECUTIVE OFFICER
+46%STOCK PRICE
PE R FO RMANCE (including dividends)
6
04
Continuing to make progress in PET
recycling, delving into new technologies and
efficiencies in our network. With the OCTAL
acquisition, we now have the capability for
PET Sheet recycling and will continue to
explore possible projects in this segment,
additionally, we incorporated single pellet
production capacity at our Pearl River
facility.
Confirming its commitment to achieve its
circularity target of increasing its recycling
content in select products to a minimum of
30% by 2030, the Company’s EPS division
is working on expanding its recycling
capacity at one of its facilities in the United
States. Among its initiatives to achieve its
target, Alpek joined Cyclyx International,
LLC, a consortium focused on establishing
a circular pathway for plastic recycling.
Through technology, the Company will
gain access to custom feedstock batches
from waste with the necessary chemical
and physical properties that ensure their
recyclability. Having greater access to raw
material will significantly support Alpek’s
EPS projected recycling capacity.
02
Resuming construction of Corpus
Christi Polymers (CCP), the joint
venture with an integrated PTA-
PET plant in Texas that is expected
to begin operations in early 2025.
CCP seeks to become the most
competitive state-of-the-art site in
the Americas, functioning as a tolling
company where each of the three
partners will procure its own raw
materials and receive one third of the
PTA and PET produced at the facility
to independently sell and distribute.
This facility will raise Alpek’s annual
capacity and allow the Company
to continue supplying increasing
customer demand.
03
Receiving approval from the SBTi
(Science Based Target Initiative) for
our GHG emissions reduction targets,
in which we commit to reduce our
scope 1 and 2 emissions by 27.5% by
2030 and scope 3 by 13.5% during
the same time frame, becoming
one of the few companies in Mexico
to have this validation. Our CO2
emissions have decreased in total by
19% vs. our 2019 SBTi base, putting
us well on track to achieve our target.
Additionally, we managed to increase
the consumption of renewable energy
by 7% compared to the previous
year, and we will continue working on
alternatives to increase consumption
of cleaner energy in our processes.
7
13%
Dividend yield
05
Demonstrating our commitment and
transparency towards our clients and
investors, the Company improved its
ESG ratings performance with S&P
Global, CDP, and Sustainalytics. We
are diligently progressing towards our
objectives and still growing as leader in
the market, while remaining committed
to the environment, our communities,
and our employees.
ALPEK WAS
ABLE TO MAKE
A SIGNIFICANT
ACQUISITION AND
REACH ITS HIGHEST
DIVIDEND YIELD,
WHILE MAINTAINING
FINANCIAL
STABILITY
The solid operational results and cash
flow generation obtained throughout
the year more than offset the higher
CAPEX utilized primarily for the OCTAL
acquisition and the Net Working Capital
increase during the year. The financial
results also enabled Alpek to pay
out an ordinary and an extraordinary
dividend to Shareholders, considering
the Company’s performance, totaling
U.S. $372 million to shareholders,
reaching a dividend yield of 13%, while
still obtaining a Net Leverage ratio of
1.3x at year-end. It is worth noting that
Alpek’s Total Shareholder Return (TSR),
including dividends, also reached 46%
in 2022, resulting in the best annual
performance compared to industrial
companies in the Mexican Stock Price
Index (IPC).
Credit rating agencies, Moody’s and
Fitch, both upgraded their outlook
on Alpek from ‘Stable’ to ‘Positive’
and maintained their investment
grade ratings, while S&P confirmed its
investment grade rating and ‘Stable’
outlook for the Company.
Our outstanding
performance
was favored
during the
year’s first half
by a continued
strength of the
global economy.
maintaining its strong financial standing,
which has been significantly enhanced by
its 2022 performance.
The exceptional commitment and loyalty
of Alpek’s employees, customers, suppliers,
and Board members inspire the Company’s
great expectations and offer us strong
confidence for the years to come. Our
heartfelt acknowledgment to all of them.
OUTLOOK
In 2022, Alpek once again demonstrated
the demand resilience of its products, the
efficiency of its business model, and its
capacity to maintain financial stability. As
margins continue to normalize in 2023, Alpek
expects to maintain strong results, capitalizing
on investments made during the previous year.
Looking forward, the combination of stable
results, a healthy debt profile, low leverage
levels, and cash on hand of U.S. $355 million,
could empower the Company to pursue any
of the following: additional EBITDA-accretive
projects in 2023, M&A opportunities associated
with vertical integration, recycling or value-
added products, and an extraordinary dividend
payout. Above all, Alpek is committed to
8
Armando Garza Sada
Chairman of the Board
José de Jesús Valdez Simancas
Chief Executive Officer
9
ABOUT ALPEK
WE CREATE THE BUILDING BLOCKS
WE CREATE THE BUILDING BLOCKS
our customers need to improve everyday lives
ABOUT ALPEKABOUT ALPEKABOUT ALPEKABOUT ALPEKABOUT ALPEK 10
Working to meet global societal
and environmental everyday
needs has been, and will always
be, essential to Alpek’s purpose
and values.
We develop products and technologies to
help enrich people’s lives and deliver real-
world innovations in very diverse and essential
applications. This is how we confirm our even
more meaningful role as a supplier for resolving
the current global challenges.
Amidst the extraordinary conditions in which we
have been operating since 2020, it is through a
robust governance structure, focused leadership,
and our evolutionary nature that, in 2022, we
continued delivering solutions to transform the
present into a better future.
ALPEK IN OUR DAILY LIVES
PARKS
FOOD
CONTAINERS
CONSTRUCTION
HOMES
PERSONAL HYGIENE
PRODUCTS
11
VACCINE BOXES
HOSPITALS
MEDICAL
EQUIPMENT
12
OMAN
SAUDI ARABIA
MARKET
PRESENCE
UNITED KINGDOM
CANADA
UNITED STATES
MEXICO
35
p l a n t s
9
c o u n t r i e s
+7,000
e m p l o y e e s w o r l d w i d e
BRAZIL
CHILE
ARGENTINA
Mexico
3,310 Kta
USA
2,745 Kta
Canada
144 Kta
Argentina
246 Kta
Brazil
1,226 Kta
Chile
28 Kta
Oman
1,024 Kta
Saudi Arabia
11 Kta
United
Kingdom
220 Kta
PET
PET
rPET
rPET
rPET
PTA
Resin
Sheet
Flake
Pellet
SPT
Fibers
PP
EPS
Arcel
Other
LONG-TERM GROWTH STR ATEGY
1
STRENGTHEN CORE BUSINESS
3
STRATEGIC & FOCUSED GROWTH
13
Global Cost
Improvement
Zero-Based
Budgeting &
process innovation
(Mainly Operations,
Logistics & SG&A)
Value-added
Products
Shift to
products with
higher margins
& barriers to
entry (PET,
Copolymers
and others)
FCF Generation
Reductions to
CAPEX & NWC
/ Recover M&G
Mexico debt
G
r
o
h cataly s t s
t
w
o
r
G
rowth catalysts
2
w
t
h
c
a
t
a
l
y
s
t
s
G
Value Chain
Integration
Grow capacity
selectively &
integrate into value
chain (Px, EPS)
Product
Innovation
New products
& business lines
(Natural Gas
Commercialization,
Biovento, PLA &
others)
Maximize Value
from Corpus
Christi Polymers
(CCP)
Optimize
project timing &
minimize CAPEX
Footprint
Optimization
Ensure global
production grows
across optimal
sites & logistic
networks
CAPTURE ESG-RELATED OPPORTUNITIES
Foster Product Circularity
Increase mechanical (PET) &
chemical recycling (PP, EPS)
capacity through organic
growth, M&A and Open
Innovation to reach ESG goals.
Offer biodegradable
alternatives for EPS & PP
Value-Creation in CO2 Emissions
Reduction
Pursue opportunities & participate
in new markets associated with
reaching carbon neutrality before
2050 (Renewable energy, Green
hydrogen, CO2 capture, Carbon
offsetting)
1414
2022 PERFORMANCE
OUR TWO BUSINESS UNITS
OUR TWO BUSINESS UNITS
achieved exceptional operating results
2022 PERFORMANCE2022 PERFORMANCE2022 PERFORMANCE2022 PERFORMANCE FINANCIAL H IGH LIGHTS
15
V O L U M E ( K T O N S )
2022
4,099
966
5,065
2021
3,796
1,002
4,798
2020
3,918
883
4,802
2019
3,490
895
4,384
2018
3,490
912
4,402
Polyester
Plastics & Chemicals
D E B T & L E V E R A G E
( D E B T U S $ , M I L L I O N S & L E V E R A G E T I M E S )
C O M P A R A B L E E B I T D A
( U S $ , M I L L I O N S )
Debt
Leverage
2.1
1.7
1.6
0
6
8
1
,
1.3
2
3
8
1
,
0
3
3
1
,
5
8
1
,
1
1.1
5
2
2
1
,
2018
2019
2020
2021
2022
R E V E N U E S ( U S $ , M I L L I O N S )
5
5
5
0
1
,
1
9
9
6
,
6
1
2
6
,
6
2
3
5
,
7
9
6
7
,
2018
2019
2020
2021
2022
+46%
ALPEK´S TOTAL SHAREHOLDER RETURN (TSR)
862 CAPEX (US $, MILLIONS)
ALPEK EXCEPTIONAL YEA R
2022
1,396
1,455
567
823
962
1,145
601
565
789
850
800
1,063
2021
480
458
2020
218
372
2019
231
353
2018
275
526
Polyester
Reported EBITDA
Plastics & Chemicals
Others
ALPEK EXCEPTIONAL YEARALPEK EXCEPTIONAL YEAR 2ND LARGEST PET
PRODUCER
WORLDWIDE
LEADING PTA, PET AND
PSF PRODUCER ACROSS
THE AMERICAS
LARGEST PET
RECYCLER IN
THE AMERICAS
16
POLYESTER
POLYESTER
7,319
5,466
22
p l a n t s
e m p l o y e e s
t h o u s a n d t o n s
i n c a p a c i t y
USA
Brazil
Canada
UK
Mexico
Argentina
Oman
Saudi Arabia
17
the acquisition was secured through
cash on our balance sheet, free
cash flow generated from existing
businesses, and dedicated bank loans.
With this acquisition, we added over
one million tons of installed capacity
to the existing footprint in four
facilities: a production site with both
PET Sheet and Resin in Salalah Free
Zone, Oman, a PET Sheet Recycling
facility in Cincinnati, USA and a PET
Thermoform Packaging facility in
Riyadh, Saudi Arabia.
Furthermore, the partners of Corpus
Christi Polymers LLC have resumed
construction of the integrated PTA-
PET plant in Corpus Christi, Texas
and expect to begin operating in
early 2025. CCP will function as
an independent tolling company
where each of the three partners will
procure their own raw materials and
receive one third of the PTA and PET
produced at the facility to sell and
distribute independently, which means
Alpek will have approximately 367,000
tons of PET and 433,000 tons of PTA
capacity. CCP expects to have the
most competitive state-of-the-art site
in the Americas. The strategic location
on the U.S. Gulf Coast will facilitate
competitive raw material procurement
and distribution cost, as well as
scalability across Alpek’s sites in the
Americas.
In the coming years, expectations
remain positive for this segment and
Alpek as a whole. We will continue
creating value and synergies with our
newly acquired OCTAL plants and will
explore opportunities in recycling and
PET Sheet, among other prospects.
The PET-Sheet business segment has
a projected growth of 6%, almost twice
as much as PET Resin; hence this deal
puts our Company at the forefront for the
coming years.
During 2022, demand remained steady
for the polyester segment. Meanwhile,
high freight costs due to low vessel
availability throughout most of the
year, and COVID shutdowns in China
leading to lower production, drove
reference margins to remain higher
than expected.
Asian integrated PET reference
margins exceeded expectations as
they maintained average levels over
U.S. $392 dollars per ton throughout
the year, surpassing original Guidance
figures of U.S. $315 dollars per ton,
with the normalization occurring later
than anticipated during the fourth
quarter. Therefore, we obtained a
Polyester EBITDA of U.S. $886 million
in 2022.
Volume increased 8% as demand
remained steady and as a result of
the PET Sheet & Resin acquisition’s
consolidation in June, which led to
incremental production during the
remaining months of the year.
In line with our long-term strategy,
we acquired OCTAL –a major PET
sheet producer– for U.S. $620 million
on a debt-free basis. Financing for
PLASTICS &
PLASTICS &
CHEMICALS
CHEMICALS
18
13
p l a n t s
1,724
e m p l o y e e s
1,637
t h o u s a n d t o n s
i n c a p a c i t y
WE PRODUCE POLYPROPYLENE
(PP), EXPANDABLE STYRENICS
(EPS & ARCEL®), FERTILIZERS AND
SPECIALTY CHEMICALS
LEADING EPS PRODUCER
IN THE AMERICAS AND 3RD
LARGEST WORLDWIDE
ONLY PP
PRODUCER IN
MEXICO
In the Plastics & Chemicals
segment, reference margins
remained steady throughout most
of the year, with Polypropylene
reference margins averaging above
30 cpp during the majority of
2022, declining towards the end of
the year. Meanwhile, EPS reference
margins reached record highs of
80 cpp and an average of 56 cpp
for 2022. Combined with strong
demand for our products during
most of the year, we were able
to post record P&C Comparable
EBITDA of U.S. $567 million, an
increase of 18% year over year.
Volume decreased 4% during the
year due to lower demand towards
the end of 2022, which led to
higher inventory levels, as well as
new capacity of more than 1 million
tons installed in North America.
In August, Alpek’s EPS subsidiary
joined Cyclyx International, a
consortium that, along with other
initiatives, will allow the Company
to reach its EPS circularity target
of raising recycling content in
select products to at least 30%
by 2030. This consortium’s
technology identifies custom
feedstock batches from waste
with the necessary chemical
and physical properties, thereby
ensuring their recyclability.
Alpek continues to establish its role as a leading
recycler, now through growth in Expandable
Styrenics recycling.
19
Currently, more than 50% of EPS
production is consumed for the
construction industry, due to
its thermal insulation properties
which reduce the carbon footprint
of homes and buildings. However,
we are exploring recycling and
biodegradable options for our
short-term usage products, which
represent approximately 35% of
EPS sales volume.
Looking ahead, Polypropylene
reference margins will remain at
normalized levels due to additional
capacity installed in the Americas,
mainly in USA and Canada, but
will continue at higher-than-
historical levels. Our expectations
for the P&C segment remain
positive, as strong demand for
our products, along with more
sustainable options will maintain
our leadership in the industry.
20
ESG
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
STRONGER PERFORMANCE
STRONGER PERFORMANCE
& clearer path to further improvement
ESGESGESGESG 2022 H IGH LIGHTS
268
KTON OF BOTTLE TO
PELLET CAPACITY
CO 2 EM ISS IONS
REDUCTION O F 19%
VS. SBTI BASE 2019
SCIENCE BASED
TARGET APPROVED
BY SBTI
“ALPEK COMM ITS TO
REDUCE ABSO LUTE SCO PE
1 AND 2 GHG EM ISS IONS
BY 27.5% BY 2030 FROM
A 2019 BASELINE . ALPEK
ALSO COMM ITS TO REDUCE
SCO PE 3 EM ISS IONS BY
1 3.5% WITH IN THE SAME
TIME FR AME .”
21
12 ESG SPECIFIC
COMMITTEE MEETINGS
DURING THE YEAR
OF REDUCTION IN OUR
TOTAL RECORDABLE
INCIDENT RATE
5%
137
INNOVATION
PROJECTS
in progress during the year
18%
OF FEMALE
REPRESENTATION
IN THE BOARD,
9% more than last year, strengthening the
diversity of Alpek’s corporate governance
Alpek’s
ESG Ratings
Alpek seeks to increase performance transparency in ESG through
various platforms. The following graphs show Alpek’s progress from
the most relevant rating agencies from 2020 to 2022.
22
E S G S CO R E |
C L I M AT E C H A N G E
(Score Improve ment YoY)
B
C
C
2020
2021
2022
Chemical Ind.
average
C
B
B
E S G S CO R E
(Score improvement YoY)
E S G R I S K R AT I N G
(Risk reduction YoY.
The less risk, the better)
54
32
51
44
29
26
2020
2021
2022
2020
2021
2022
Percentile
Chemical Ind.
89
90
91
Risk percentile
Chemical Ind.
31
25
25
IN 2022, ALPEK
PARTICIPATED IN
45 CHAMBERS,
ASSOCIATIONS
AND INITIATIVES.
ALLIANCES AND COMMITMENT
Alpek seeks to strengthen its alliances with entities and organizations that promote
sustainable development.
In 2022, Alpek became one of only seven Mexican companies to get approval and
validation by the Science Based Target Initiative for it’s science-based emission
reduction goal. This reaffirms Alpek’s commitment to the Sustainable Development
Goals and the mitigation of climate change.
23
Since 2021 Alpek has been
committed to the UN Global
Compact’s corporate responsibility
initiative and its principles in the
areas of human rights, labor, the
environment and anticorruption.
ESG
MODEL
24
GRI Standards: 2-22 to 24 | TCFD: Governance
FTSE4Good: ECC50_1
Alpek’s ESG Model is an internal platform to launch programs and initiatives that allows
the tracking and development of our environmental, social, and governance objectives.
Involving different functions at all levels of the organization, Alpek embraces a shared
focus on its economic growth, development of stakeholders, promotion of social equity
and the protection of the environment.
• Circularity
• Carbon Emissions &
Energy Eco-efficiency
• Water Management
• Cybersecurity
• Pollution
• Relationship with
Customers & Suppliers
• Occupational Safety
• Diversity, Equity &
Inclusion (DEI)
• Community Engagement
MAXIMIZE RESOURCE EFFICIENCY
GROW RESPONSIBLY
LEAD WITH EMPATHY
EMBRACE CHANGE
EMBRACE CHANGE
EMBRACE CHANGE
Innovation | Active ESG Risk Management | Sustainable Corporate Governance
ESG OPERATIVE
FRAMEWORK
25
GRI Standards: 2-22 | TCFD: Governance, Strategy &
risk management | FTSE4Good: ECC76
ESG STRATEGY
As part of Alpek’s ESG Risk Management,
the Company has adopted a dynamic
materiality approach through which it
conducts a comprehensive analysis of
ESG and industry trends, and how it is
perceived by our stakeholders.
This process includes ongoing dialogue
with stakeholders, which allows an
adequate response to be given to
their demands and expectations, while
also managing the impact to their
organization.
ESG RISK
IDENTIFICATION
& ANALYSIS
• Identify ESG Risks and
Opportunities (R&O)
• Implement a dynamic
materiality analysis
• Embed ESG R&O
into our business risk
management strategy
STRATEGY &
EXECUTION
• Identify the level of change
needed to establish best-in-
class standards
• Build and improve internal
capabilities to react
• Implement the right
initiatives to address R&O
• Identify partnerships that
support improvement
COMMITMENT &
OVERSIGHT
• Assign the appropriate
people for decision making
• Set mechanisms to ensure
the achievement of targets
• Communicate and report
progress at organizational
level
• Review and improve
TARGETS & METRICS
• Define key performance
indicators (KPIs) and
set targets to measure
success for each initiative
• Measure result impact
• Establish proper
initiatives for targets to
be achieved
12 MATERIAL ISSUES
ESG MATERIALITY MATRIX
GRI Standards: 2-22 | TCFD: Governance,
strategy, risk management | CSA S&P: 1.2
26
MAXIMIZE RESOURCE EFFICIENCY
1 Circularity
3 Carbon Emissions & Energy
Eco-efficiency
4 Water Management
LEAD WITH EMPATHY
7 Occupational Safety
11 Diversity, Equity & Inclusion (DEI)
12 Community Engagement
EMBRACE CHANGE
5 Innovation
10 Active ESG Risk Management
9 Sustainable Corporate Governance
GROW RESPONSIBLY
6 Cybersecurity
2 Pollution
8 Relationship with Customers
& Suppliers
T
S
E
H
G
H
I
R
E
H
G
H
I
H
G
H
I
S
R
E
D
L
O
H
E
K
A
T
S
O
T
E
C
N
A
T
R
O
P
M
I
2
1
3
7
4
11
10
12
6
5
9
8
H IGH
H IGHER
H IGHEST
I M PAC T O N A L P E K
EMBRACE CHANGE We actively monitor our changing environment and develop
new ways to tackle emerging challenges through our enablers.
27
GRI Standards: 2-12 to 14, 2 17
TCFD: Governance, strategy, risk
management | |CSA S&P: 1.1
Sustainable
Corporate Governance
STRATEGY AND EXECUTION
Alpek’s ESG governance structure
was strengthened in 2022. In previous
years, a taskforce was appointed
to identify improvements in its
sustainability management and climate
change related risks. As a result, Alpek
developed a comprehensive ESG
structure and strategy for its governing
body and its committees.
PROGRESS 2022
In accordance with the commitment
to increase the effectiveness of the
Board of Directors, in 2022, Ana Laura
Magaloni joined as an independent
director. The experience and trajectory
of the new member is aligned with
Alpek’s long term growth strategy, as
well as with its ESG objectives. As a
result, the participation of independent
members increased to 67% and the
percentage of women on the Board is
now 18%.
Committees
BU CEOs
ESG PMOs
ESG DATA
Alpek Board
Alpek CEO
CFO
Corporate ESG Team
Board
Executive
Operations
Human Capital
All ESG Material Issues, plus:
• Sustainable Corporate Governance
• Active ESG Risk Management
All ESG Material Issues
• Carbon Emissions &
Energy Eco-efficiency
• Water Management
• Pollution
• Occupational Safety
• Diversity, Equity & Inclusion
(DEI)
• Community Engagement
Circularity
IT
• Circularity
• Relationships with
Customers and Suppliers
• Innovation
• Cybersecurity
OUR TARGET
Alpek is
committed
to further
improving
the composition and
effectiveness of its
Board by increasing
the frequency ESG
topics & metrics are
reviewed, as well as
enhancing the diversity
and experience of its
members.”
EMBRACE CHANGE We actively monitor our changing environment and develop
new ways to tackle emerging challenges through our enablers.
28
GRI Standards: 2-23 to 25
TCFD: Risk Management
FTSE4Good: SHS03_1
CSA S&P: 1.3
Active ESG
Risk Management
STRATEGY AND EXECUTION
Alpek has an ESG risk identification
strategy that includes evaluating the
potential impact of the company’s
activities on climate change, human
rights, labor practices and its value
chain. Through various processes such
as materiality with a dynamic approach,
Alpek prioritizes the initiatives and
programs that must be implemented in
the short, medium and long term.
PROGRESS 2022
In 2022 Alpek made significant progress
in the identification of ESG-related risks,
specially those derived from climate
change due to the establishment of
its science-based emission reduction
targets. Based on the TCFD risk matrix
and incorporating those identified by the
WEF in 2022, Alpek has identified the
following risks related to its operation.
Category
Global Risk according to the TCFD and the WEF
Economic
• Debt crisis in large economies
• Severe commodity shocks
Environmental
Geopolitical
Societal
Technological
Transition:
• Current and emerging regulations
• Market and change in customers preferences
• Reputational
Physical:
• Extreme weather events (Acute)
• Climate action failure (Chronicle)
• Fracture of interstate relations
• Pollution driven harms to human health
• Failure of cybersecurity measures
OUR TARGET
Alpek will
continue
to reinforce
its Governance
practices and
organization so
it may reach the
various targets
set for each of
its ESG Material
Issues.”
EMBRACE CHANGE We actively monitor our changing environment and develop
new ways to tackle emerging challenges through our enablers.
29
SASB: RT-CH-410a.1
CSA S&P: 1.8
Innovation
STRATEGY AND EXECUTION
Innovation is key to value creation and to continuously find opportunities to
grow, optimize and reinvent.
At Alpek, we work in three areas: culture, internal innovation and external
innovation. The latter through the creation of an open innovation program that
allows us to connect with global talent to achieve our objectives.
INNOVATION AT ALPEK
I N T E R N A L
I N N O V A T I O N
SUSTAINABILITY
PROCESS
PRODUCT
BUSINESS
MODEL
STRATEGY
O P E N
I N N O V A T I O N
WATER
MANAGEMENT
PRODUCT
IMPROVEMENT
CIRCULARITY
ECOEFFICIENCY
PROGRESS 2022
In 2022, our open innovation program
allowed us to connect with +120
companies with potential solutions
to the selected issues and 12 new
solution routes are in the process of
being deployed in Alpek.
In internal innovation, 137 projects
were addressed in the areas of process
(64%), sustainability (16%), strategy
(9%), new products or services (9%)
and business model (2%).
Our culture has been strengthened
by providing innovation methodology
training to key employees at all levels
of the company who are in charge of
running our operations and sites.
OUR TARGET
We
focus on
improving
our current
products and
processes while
discovering more
environmentally-
friendly
alternatives for
both.”
MAXIMIZE RESOURCE EFFICIENCY We strive to minimize any adverse
effects from our products and processes.
30
GRI Standards: 302-1 to 4, 305-1 to 4
TCFD: All elements | SASB: RT-CH-110a-1
FTSE4Good: ECC01, ECC31 | CSA S&P: 2.3
Carbon Emissions &
Energy Eco-efficiency
CO2 Emissions & Energy Consumption
OV E R A L L C O 2 E M I S S I O N S ( S 1/S 2 )
Million Tons
OV E R A L L E N E R GY
CO N S U M P T I O N X 10 6 G J
0.3
0.4
0.4
5.2
5.5
5.3
2.6
2.2
2.4
2.1
33
35
31
3
1
.
3
1
.
3
1
.
.
1
1
3
1
.
9
0
.
3
1
.
8
0
.
1
7
2
1
3
1
0.4
8
1
1
5
1
0.2
7
2
1
2
1
SBTi Base
2020
2021
2022
2020
2021
2022
Scope 1
Scope 2
Other Fuels
Steam
Electricity
Natural Gas
CO2 Emissions Intensity: (Ton CO2/Ton Produced)
Energy Consumption Intensity (GJ/Ton Produced)
Note:
1.- The figures above may vary due to the integration of the emissions of all plants acquired (regardless of the year), to meet
the SBTi criteria.
2.- This base does not reflect the history nor the 2022 figures from the newly acquired OCTAL sites.
3.-OCTAL integration and Scope 3 to be published in our official 2022 ESG booklet
STRATEGY AND EXECUTION
Alpek is confident that through the
transition to renewable energy sources,
process and energy optimizations, among
other initiatives, it will be able to meet
its objectives and continue its efforts to
achieve carbon neutrality by 2050.
PROGRESS 2022
The Science Based Targets (SBTi)
initiative’s approval of Alpek’s emission
reduction goals was one of the
company’s most significant Sustainability
achievements, contributing to combat
climate change. In addition, the acquisition
of OCTAL, will allow us save several energy
intensive conversion steps thanks to its
direct to sheet (DPET®) technology.
By the end of 2022, Alpek has reduced
19% of its absolute Scope 1 and 2 emissions
from 2019 (SBTi base).
OUR TARGET
Alpek
commits to
reduce
absolute
scope 1 and 2 GHG
emissions by 27.5%
by 2030 from a 2019
base year. Alpek also
commits to reduce
scope 3 emissions by
13.5% within the same
time frame.
Alpek also commits to
reach carbon neutrality
by 2050.”
MAXIMIZE RESOURCE EFFICIENCY We strive to minimize any adverse
effects from our products and processes.
31
GRI Standards: 303-1 to 5
SASB: RT-CH-140a.13
FTSE4Good: EPR10
CSA S&P: 2.4.1, 2.4.2, 2.4.4
Circularity
STRATEGY AND EXECUTION
Circularity is an enabler of Alpek’s long term growth strategy. It represents one
of its most important activities since Alpek has a strong commitment to reduce
its environmental footprint.
r - P E T C A P A C I T Y
T H O U S A N D T O N S
Bottle to Flake
Flake to Pellet
Pellet to Single
Pellet
r-PET-Sheet
268
268
95
137
30
70
00
33
2021
2022
2021
2022
2021
2022
2021
2022
PROGRESS 2022
In 2022, Alpek convened regular
Circularity committee meetings
on a quarterly basis, aimed at
strengthening discussions around
recycling technologies and developing
circularity-focused strategies for EPS,
PP, and PET.
Regarding its EPS recycling goals,
Alpek joined Cyclyx, a company that
focuses on establishing a circular
pathway for plastic recycling through
innovative methods.
Through these and other initiatives,
Alpek is on its path to operate in a
circular modality and contribute to
minimize its raw materials usage.
OUR TARGET
PET:
Alpek plans to increase its PET
bottle recycling capacity to
300 thousand annual metric
tons by 2025 to meet its
customers’ recycled content
needs.
PP:
Alpek will leverage its
partnerships to develop
recycling solutions for
Polypropylene and increase its
share of Copolymers, employed
in long-term usage applications.
EPS:
Alpek commits to grow its long-
term usage and sustainable
applications for EPS, work on
biodegradable alternatives, and
increase recycling content in
select products to at least 30%
by 2030.”
MAXIMIZE RESOURCE EFFICIENCY We strive to minimize any adverse
effects from our products and processes.
32
GRI Standards: 303-1 to 5
SASB: RT-CH-140a.13
FTSE4Good: EPR10
CSA S&P: 2.4.1, 2.4.2, 2.4.4
Water Management
OUR TARGET
W A T E R I N T A K E B Y E N D - U S E
M i l l i o n m 3
18.0
24.0
25
STRATEGY AND EXECUTION
In line with the commitment to
continuously improve water withdrawal
and consumption processes, Alpek
implemented several initiatives
aimed at reducing water usage in its
operations.
PROGRESS 2022
The company owns 12 water treatment
facilities to treat its own water, while
the remaining plants utilize third-
party services to meet water quality
standards.
4.3
116
8.4
9.1
153
147
3
5
0
0
1
3
5
4
9
7
2
9
8
2020
2021
2022
Consumed
Discharged
Water Intake Intensity (m3/Ton Produced)
Water Consumption Intensity (m3/Ton Produced)
The strategy is based on identifying
improvement areas, installation of
new equipment, and water recovery
and reuse management. Alpek has
also identified the facilities located
in water stressed areas through the
WRI Aqueduct tool and has started
developing optimization plans to
address the identified risks.
Note:
1.-This base does not reflect the history nor the 2022
figures from the newly acquired OCTAL sites.
2.-OCTAL figures to be published in our official 2022
ESG booklet.
Among the implemented initiatives, the
installation of new water recirculation
centrifugal pumps, steam traps, an
effluent recovery biofilter, and a closed
reactor cooling circuit were executed.
The Company implemented several
actions such as managing stormwater
for flood control, and fixing water
pipelines leakages, among others.
This led to a 4 percent reduction in
water withdrawals compared to 2021.
Closely
monitor
our water
consumption
intensity,
particularly
in water-
stressed areas,
and identify
opportunities to
reduce it.”
LEAD WITH EMPATHY We empower our people to create value
for our company and communities.
33
GRI Standards: 405-1 to 2
FTSE4Good: SLS16-1, 3, 7
CSA S&P: 3.2.2, 3.2.3
Diversity, Equity &
Inclusion (DEI)
14%
1%
STRATEGY AND EXECUTION
A diverse workforce strengthens
Alpek’s overall growth strategy.
Being inclusive and providing
all employees with the same
opportunities will help the
Company enhance decision-making
processes as well as its growth as a
more responsible organization.
G E N D E R D I V E R S I T Y
5,359
1,037
2021
2022
6,396
6,068
1,191
7,259
PROGRESS 2022
In 2021, we identified these issues
as material to our operations.
Consequently, we implemented the
first stage of analysis.
In 2022, Alpek published its DEI
policy in 4 different languages. In
addition, Alpek’s Business Units
continued to expand the level of
detail in their analysis with the
implementation of various initiatives,
such as:
0.1%
0.1%
4%
22%
R A C E
D I V E R S I T Y
57%
• Creating DEI Committees and
Hispanic or Latino
Caucasian
Black or African American
Indigenous or Native American
Asian
Others
Not defined
Women Networks.
• Enabling lactation rooms, women
bathrooms and dressing rooms.
• Making some of its parking lots
and bathrooms accessible for
people with disabilities.
Note:
1.- Races classified according to S&P CSA report.
2.- Including OCTAL figures after acquisition.
3.- There is an increase in “Others” Category due to the
integration of the new sites of Octal located mostly in Oman
and Riyadh.
OUR TARGET
Alpek is
committed
to further
diversifying
its workforce
through more
equitable hiring,
retention and
development
strategies.”
GRI Standards: 403-1 to 403-10
SASB: RT-CH 320a.1
FTSE4Good: SHS01,04,12,38,40
CSA S&P: 3.7
OV E R A L L R E CO R DA B L E I N C I D E N T S |
T R I R & LT I R
0.73
0.61
0.57
0.43
0.40
66
64
7
2
9
3
2
2
2
4
0.36
66
4
2
2
4
2020
2021
2022
Non-Lost Time Incidents
Lost Time Incidents
TRIR
LTIR
LEAD WITH EMPATHY We empower our people to create value
for our company and communities.
34
Occupational Safety
OUR TARGET
STRATEGY AND EXECUTION
All of Alpek’s facilities have a Health
and Safety Management System
based on international standards or
national regulations.
PROGRESS 2022
By the end of 2022, a total of 246
different programs and training
initiatives were carried out to boost
health and safety in operations, with
more than 25,000 attendees.
This led to a 5% TRIR reduction vs.
our 2021 results.
Among the most relevant ones, were
the implementation of the NOM-035
in Mexico, a standard aimed to ensure
employee’s mental and emotional
health. Other programs ranged from
safety equipment correct use training,
correct use of safety equipment,
enhancement of safety rules in
facilities, to talks and workshops
on harassment and bullying in the
workplace.
Even though safety is a top
priority, regrettably, in 2022, Alpek
experienced its first fatality in the
last 6 years. All serious injuries
are thoroughly reviewed up to the
executive level and special high focus
will be given to future new sites
added to Alpek’s network. Alpek
strives to learn from all incidents
and improve our standard ways of
working across our organization.
Note:
1.- Including Alpek’s employees and contractors working
in all our sites
2.- Including OCTAL figures after acquisition
Alpek plans to
reach a Total
Recordable
Incident Rate
(TRIR) for
its employees and
contractors in the top
decile of its industry,
though its goal remains
to achieve zero accidents
every single day.”
LEAD WITH EMPATHY We empower our people to create value
for our company and communities.
35
GRI Standards: 413-1, 413-2
SASB: RT-CH 320a.1
FTSE4Good: SHR16_1
CSA S&P: 3.6
Community Engagement
OUR TARGET
STRATEGY AND EXECUTION
The current strategy has a mainly
philanthropic perspective, aimed at
boosting education and health of
neighbors.
2022 was a year when almost all in
person activities got back to normal
in Alpek’s facilities. This allowed
the Company to reach out to its
communities and contribute to their
integral development more fruitfully.
PROGRESS 2022
During 2022, Alpek promoted
education by constructing and
rehabilitating five and two classrooms,
respectively, and a multipurpose dome.
Additionally, it donated furniture to
schools in Mexican communities,
which benefited over 6,800 students.
Alpek also performed several social
assistance activities to support blood
donation institutions, promote breast
cancer prevention, donate bicycles for
the “Toys for Tots” campaign, beach
cleaning, reforestation activities, and
promote environmental stewardship.
Alpek also attended 10 career fairs in
several states to talk with students
about the benefits of a STEM-related
career path, and held 32 research
agreements with universities. A
total of 93 students performed their
internships in the Company’s facilities.
Donations and Volunteering
Social assistance institutions benefited
Volunteer employees
People benefited
Number of schools benefited
2022
17
1,785
+13,000
20
Cash donations
+33,000 USD
Alpek cares
about all its
local communities
and is committed to
investing its time and
profits on activities
that contribute to
its neighbors’ safety,
education, access to
services, and quality
of life.”
GROW RESPONSIBLY We increasingly rely on sustainable business practices across
our entire value chain to create value for our shareholders.
36
GRI Standards: 2-6, 204-1,
308-1, 2, 412-2
TCFD Risk management
Relations with Customers
and Suppliers
OUR TARGET
STRATEGY AND EXECUTION
Across the whole organization, Alpek is
committed to aligning its supply chain and
corporate values. The Company expects
its suppliers to be transparent about
their environmental and social practices,
offer suggestions for improvement, and
collaborate with them to transform its
shared value chain.
PROGRESS 2022
In 2022, Alpek finished its first Scope
3 emissions screening, representing a
deeper engagement with suppliers.
Other initiatives to strengthen its value
chain relationships were the improvement
of the B2B portal to boost customer
engagement, working with three main
customers to test biodegradable origin
materials, and increase transparency on
the Company’s reporting regarding ESG
performance in several platforms and
questionnaires.
Alpek will
work with its
customers
and suppliers
in an effort to actively
identify ESG-related
risks and the corrective
actions needed to make
our entire value chain
more sustainable.”
GROW RESPONSIBLY We increasingly rely on sustainable business practices across
our entire value chain to create value for our shareholders.
37
GRI Standards: 306-1 to 6
FTSE4Good: EPR01, 02, 24,
25, 26, EPR13
CSA S&P: 2.4.2-3
Pollution
STRATEGY AND EXECUTION
Alpek is fully cognizant of its
responsibilities as a company
that handles chemicals and other
substances that could pose a risk if
its waste process and disposal are not
properly managed. Therefore, all post
industrial waste is handled under the
strictest conditions and complying
with all applicable regulations.
W A S T E G E N E R A T I O N
K t o n s
80
85
90
5
3
5
4
7
3
8
4
5
5
5
3
2020
2021
2022
Disposed
Recycled/Reused
Intensity (kg/Ton Produced)
PROGRESS 2022
During 2022, Alpek invested more
than U.S. $28 million in waste
handling and disposition, including
PET bottles recycling, since it
recognizes PET is an infinitely
recyclable material.
More than 3,900 tons of waste,
plus 35,000 super bags were sent
to recycling or were reused in
Alpek’s operations. The company
also implemented an EPS
Management Plan, which entailed
a pilot project to collect used EPS
directly from the market.
Note:
1.-This base does not reflect the history nor the
2022 figures from the newly acquired OCTAL
sites.
2.-OCTAL figures to be published in our official
2022 ESG booklet.
OUR TARGET
Alpek is
committed to
enforcing and
exceeding all
regulatory requirements
on pollution. We are
constantly looking for
new ways to reduce
post industrial waste,
wastewater discharge,
and air pollutants
from our products and
processes.”
GROW RESPONSIBLY We increasingly rely on sustainable business practices across
our entire value chain to create value for our shareholders.
38
TCFD: Risk Management
CSA S&P: 1.7
Cybersecurity
OUR TARGET
PROGRESS 2022
In 2022, Alpek continued to carry out several campaigns
and training to improve cybersecurity awareness.
STRATEGY AND EXECUTION
Alpek’s cybersecurity strategy is
spearheaded by the Chief Information
Security Officer, who ensures robust
governance of the subject matter.
There is a thorough structure of
measures and processes that shield
the Company’s systems in case of
cyberattacks, but it is a priority to
always be learning and upgrading
our systems. Through the correct
implementation of Alpek’s Information
Security policy and programmed
campaigns, the Company ensures its
employees have the proper and timely
training regarding data security.
Alpek is
committed to
securing its
information
and guaranteeing
the continuity of
its business by
maintaining state-of-
the-art cybersecurity
systems, employee
training, and incident
response capabilities.”
39
GOVERNANCE
GOVERNANCE
GOVERNANCEGOVERNANCEGOVERNANCEGOVERNANCE 40
GRI Standards: 2-9, 2-,10, 2-11
BOARD OF DIRECTORS:
11
proprietary
directors with
no alternates
7
independent
board members
Corporate Governance
64% of our Board members are
independent, and 100% of the
committee members are independent
The Board of Directors together with
the Audit and Corporate Practices
Committee implement and maintain the
best practices and highest standards of
Corporate Governance in the Company.
As a public company, we have the
obligation to keep our investors
informed of all our financial activities
under required standards, thus ensuring
full transparency.
Our Board of Directors is our highest
governing body. Its members are
chosen based on the alignment of their
skills and previous experience with
Alpek’s strategic and ESG needs, as well
as their integrity and standing in the
global community.
AUDIT AND CORPORATE PRACTICES
COMMITTEE supports the Board, and is
composed of independent members.
They oversee, among others, the
following topics:
• Selection and determination of fees
for the external auditor
• Coordination with the Company’s
internal audit committee
• Assessment of accounting policies,
employment terms and severance
payments, as well as compensation
for senior executives
• Recommendations for succession
plans and replacement options
• ESG issues review
4 BOARD MEETINGS called by the
Secretary in 2022. Annual meetings
may be called by the Board’s chairman,
the Audit and Corporate Practices
Committee’s chairman, the secretary
or at least 25% of its members. At least
one meeting is dedicated to defining
the Company’s medium- and long-
term strategies.
Any conflict of interest must be
disclosed by INVOLVED PARTIES and
they must abstain from participating.
41
98% meeting attendance
during 2022
• The company has internal control
systems with general guidelines that
are submitted to the Audit and Cor-
porate Practices Committee for its
opin ion. In addition, the external au-
ditor validates the effectiveness of
the internal control system and is-
sues the corresponding reports.
• The Board of Directors is advised by
the planning and finance department
when evaluating matters related to
the feasibility of investments, stra-
tegic positioning of the company,
alignment of invest ing and financing
policies, and reviewing invest ment
projects. This is carried out in coordi-
nation with the finance and planning
department of the holding company,
Alfa, S.A.B. de C.V.
• Alpek has a department that is spe-
cifically re sponsible for maintaining
open communication with its sha-
reholders and investors. This ensu-
res that they have the financial and
general informa tion required to as-
sess the Company’s progress in de-
veloping its activities. This function
makes use of press releases, notifica-
tions of relevant events, conference
calls for quarterly reports, investor
meetings, its website, and other
communication channels.
• Alpek promotes good corporate
citizenship and adheres to the re-
commendations issued by its holding
company, Alfa, S.A.B. de C.V. It has a
mis sion, vision, values and a code of
ethics that are promoted within the
organization.
42
BOARD OF DIRECTORS
ARMANDO GARZA SADA
Age: 65 | Board Tenure: 11 years (2011)
ANA LAURA MAGALONI
Age: 59 | Board Tenure: 1 year (2022)
ÁLVARO FERNÁNDEZ GARZA
Age: 54 | Board Tenure: 11 years (2011)
RODRIGO FERNÁNDEZ MARTÍNEZ
Age: 46 | Board Tenure: 10 years (2012)
Chairman of the Board of Alpek
Partner at Magaloni Abogados | Academic |
Editorialist at Grupo Reforma | Independent
President of ALFA, S.A.B. de C.V.
PUBLIC BOARDS:
7 Total | ALFA (Chairman) | Nemak (Co-
Chairman) | Axtel | Grupo Lamosa | Liverpool |
CEMEX | BBVA México
PUBLIC BOARDS:
1 Total | BBVA México
EDUCATION:
BA from MIT | MBA from Stanford
EDUCATION:
BA from ITAM | Ph.D. from Universidad
Autónoma de Madrid | Studies from the Judicial
Specialization Center of the Mexican Supreme
Court
PUBLIC BOARDS:
5 Total | Axtel (Co-Chairman) | Nemak (Co-
Chairman) | Cydsa | Vitro | Grupo Aeroportuario
del Pacifico
EDUCATION:
BA from Notre Dame University | MBA from
ITESM & Georgetown University
Chief Executive Officer of Sigma Alimentos S.A.
de C.V. | President of Comisión de PYMEs del
Consejo Coordinador Empresarial
PUBLIC BOARDS:
1 Total | Grupo Lamosa
EDUCATION:
BA from UVA | MBA from Wharton
RELEVANT EXPERTISE
Petrochemicals
Automotive
ESG
Operations
Public Policy
Constitutional rights
Consumer Goods
Construction
Audit & Risk
Management
Finance
Strategic Planning
Regulatory &
Legal Matters
43
FRANCISCO JOSÉ CALDERON ROJAS
Age: 56 | Board Tenure: 10 years (2012)
ANDRÉS E. GARZA HERRERA
Age: 54 | Board Tenure: 10 years (2012)
MERICI GARZA SADA
Age: 64 | Board Tenure: 10 years (2012)
PIERRE FRANCIS HAAS GARCÍA
Age: 70 | Board Tenure: 10 years (2012)
Chief Financial Officer of Grupo Franca
Industrias S.A. de C.V. | Independent | Audit
and Corporate Practices Committee
Chief Executive Officer of Qualtia Alimentos
| Independent | Audit and Corporate
Practices Committee
PUBLIC BOARDS:
3 Total | BBVA México (Regional Advisor)
| Citibanamex (Regional Advisor) | FEMSA
(Alternate Member)
EDUCATION:
BA from ITESM | MBA from UCLA
PUBLIC BOARDS:
0 Total
EDUCATION:
BA from ITESM | MBA from San Diego
University | Global Leadership Program IMD
Switzerland
Investor
PUBLIC BOARDS:
0 Total
Managing Director of Energy at NAX Group |
Independent
EDUCATION:
BA from ITESM | MA from Stanford
PUBLIC BOARDS:
0 Total
EDUCATION:
BA from ITESM | MBA from IPADE | Ph.D. in
Economics from Cambridge University
JOSÉ ANTONIO RIVERO LARREA
Age: 69 | Board Tenure: 4 years (2018)
ENRIQUE DE JESÚS ZAMBRANO BENÍTEZ
Age: 66 | Board Tenure: 10 years (2012)
JAIME ZABLUDOVSKY KUPER
Age: 66 | Board Tenure: 3 years (2019)
FRANCISCO GARZA EGLOFF
Chairman of the Board of Compañía Minera
Autlán | CEO and Chairman of the Board of
SFMH | Independent
Chairman of Grupo Proeza, S.A. de C.V. |
Independent | Audit and Corporate Practices
Committee
PUBLIC BOARDS:
1 Total | Compañía Minera Autlán (Chairman)
PUBLIC BOARDS:
1 Total | BBVA México
EDUCATION:
BA from ITESM | MBA from ITESM
EDUCATION:
BA from ITESM & MIT | MBA from Stanford
Investor
PUBLIC BOARDS:
1 Total | Fibrahotel
EDUCATION:
BA from ITAM | Ph.D. from Yale
RELEVANT EXPERTISE
Petrochemicals
Automotive
ESG
Operations
Public Policy
Consumer Goods
Audit & Risk
Management
Finance
Strategic Planning
Energy
Agribusiness
Real Estate
M&A
44
MANAGEMENT
MANAGEMENT
Chief
Financial Officer
JOSÉ CARLOS PONS
DE LA GARZA
President of Polypropylene
Business
ALEJANDRO LLOVERA
ZAMBRANO
Chief Executive
Officer
JOSÉ DE JESÚS
VALDEZ SIMANCAS
President of
Polyester Business
JORGE P. YOUNG
CERECEDO
President of Expandable
Styrenics Business
ANDREAS PLETTNER
RUTISHAUSER
Senior Vice President,
Human Capital
ARMANDO RAMOS
CANTÚ
Our Management Team establishes the
guidelines and general strategy for
CONDUCTING THE BUSINESS WITH
THE HIGHEST ETHICAL STANDARDS.
TEAM
TEAM
President of Polyester
Filament and Fertilizer
Business
GUSTAVO TALANCÓN
GÓMEZ
President of Specialty
Chemicals Business
DAVID COINDREAU
GARZA
President of
Natural Gas Business
ROBERTO BLANCO
SÁNCHEZ
45
Code of Conduct
We have a code of conduct for all employees, suppliers and any third
party involved in our business. This document establishes the core values,
standards and culture that regulate our daily behaviors.
The most relevant topics the Code addresses are anticorruption practices
(including bribes and gift policies), conflict of interests, proprietary
information, intellectual property, Human Rights, environmental
protection, community relations, and occupational health and safety.
For more information on our Code of Conduct, please visit our website.
All of Alpek’s operations are carried out
under a framework of legality, respect for
human rights and ethical conducts.
46
FINANCIAL REVIEW
FINANCIAL REVIEW
FINANCIALFINANCIALFINANCIALREVIEWREVIEW 47
Financial Review
Unless otherwise specified, figures are expressed in millions
of nominal pesos, while certain figures are expressed as
millions of dollars (US$) due to the high dollarization
of Alpek’s revenues. Percentage variations are stated in
nominal terms. All information is presented in accordance
with International Financial Reporting Standards (IFRS).
Volume
[thousand of tons]
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
Polyester
4,099
3,796
3,918
Plastics & Chemicals
966
1,002
883
Total Volume
5,065
4,798
4,802
8
(4)
6
(3)
13
(0)
VOLUMES
Alpek surpassed its annual volume record reaching 5,065 thousands of tons in
2022, 6% higher than the 4,798 thousands of tons in 2021, and setting a new
historical high for its Polyester segment.
Price Index
POLYESTER
Millions of Pesos
Millions of Dollars
PLASTICS & CHEMICALS
Millions of Pesos
Millions of Dollars
TOTAL
Millions of Pesos
Millions of Dollars
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
158
168
169
178
177
188
119
125
165
173
137
145
100
100
100
100
100
100
33
34
2
3
29
30
19
25
65
73
37
45
48
Revenues
POLYESTER
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
Millions of Pesos
140,717
98,000
85,280
Millions of Dollars
6,991
4,828
3,976
PLASTICS & CHEMICALS
Millions of Pesos
46,804
47,470
25,349
Millions of Dollars
2,321
2,342
1,192
OTHERS
Millions of Pesos
24,914
10,754
3,360
Millions of Dollars
1,243
528
158
TOTAL REVENUES
Millions of Pesos
212,435
156,224
113,989
Millions of Dollars
10,555
7,697
5,326
44
45
(1)
(1)
132
135
36
37
15
21
87
97
220
234
37
45
REVENUES
Alpek’s total revenue in 2022 was
$212,435 million (US $10,555 million),
36% higher than the $156,224 million
(US $7,697 million) in 2021. This increase
was primarily driven by a rise in average
prices of 29% and 30% in pesos and
dollars, respectively, and increased
feedstock prices along with a stronger
consolidated volume.
REVENUES BY BUSINESS SEGMENT
Polyester’s net revenues in 2022 were
$140,717 million (US $6,991 million),
44% more than the $98,000 million (US
$4,828 million) in 2021. This segment
posted an increase of 33% and 34% in
average sale prices in pesos and dollars,
respectively. Volume increased 8%
when compared to 2021 mainly due to
the incorporation of the PET Sheet and
PET Resin facilities in the Middle East,
accompanied by a solid demand.
Plastics & Chemicals posted revenues
of $46,804 million (US $2,321 million)
in 2022, in comparison to the $47,470
million (US $2,342 million) in 2021.
The average sale prices in pesos and
in dollars increased by 2% and 3%,
respectively, whereas volume decreased
by 4% year-over-year, resulting in an
overall 1% decrease in revenues.
EBITDA
[Millions of Pesos]
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
Polyester
17,923
12,560
6,842
Plastics & Chemicals
11,391
10,173
4,920
Others
110
501
231
Total EBITDA
29,424
23,234
11,993
43
12
(78)
27
84
107
117
94
EBITDA
[Millions of Dollars]
Polyester
Plastics & Chemicals
Others
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
886
564
5
618
503
25
324
229
12
43
12
(78)
27
90
119
121
103
Total EBITDA
1,455
1,145
565
49
OPERATING PROFIT AND EBITDA
In 2022, the operating income was
$24,539 million (US $1,212 million), 40%
higher than the $17,494 million (US
$864 million) in 2021. As of December
31, 2022, consolidated EBITDA was
$29,424 million (US $1,455 million)
an increase of 27% compared to the
$23,234 million (US $1,145 million)
of 2021. The consolidated EBITDA
includes a net positive effect from
extraordinary items of $1,308 million
(US $60 million), resulting in a
Comparable EBITDA of $28,116 million
(US $1,396 million), 44% higher than
in 2021, making this a record year with
the highest figure in Alpek’s history.
OPERATING PROFIT AND EBITDA
BY BUSINESS SEGMENT
In 2022, the EBITDA for the Polyester
segment increased by 43% to $17,923
million (US $886 million), including a
net positive effect from extraordinary
items of $1,346 million (US $63
million). Adjusting for these items, the
Comparable EBITDA for the Polyester
segment was $16,577 million (US $823
million), an increase of 78% year-over-
year as there was an import parity
benefit from freight costs, as well as
incremental volume from the acquired
PET business.
The EBITDA for the Plastics &
Chemicals segment increased 12%
to $11,391 million (US $564 million),
compared to $10,173 million (US
$503 million) in 2021, including a net
negative effect from extraordinary
items of $38 million (US $3 million).
Adjusting for these items, the
Comparable EBITDA for the Plastics
& Chemicals segment was $11,429
million (US $567 million), an increase
of 17% year-over-year, due to high PP
demand and reference margins, as
well as higher EPS reference margins
and freight costs throughout most of
the year.
50
Financial result, net
[Millions of Pesos]
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
Taxes
[Millions of Pesos]
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
Financial expense
(3,224)
(3,082)
(2,497)
Financial income
922
590
525
Financial expenses, net
(2,302)
(2,492)
(1,972)
Loss due to exchange
fluctuation, net
(695)
(652)
(113)
Financial result, net
(2,997)
(3,144)
(2,085)
(5)
56
8
(6)
5
(23)
12
(26)
(480)
(51)
NET FINANCIAL RESULT
In 2022, the net financial cost was
-$2,997 million (US -$148 million),
5% lower than in 2021. The net
financing expenses that comprise
this item decreased from -$2,492
million (-$122 million) in 2021, to
-$2,302 million (US -$114 million)
in 2022. In addition, variations in
exchange rates resulted in the
recognition of a non-cash foreign
exchange loss of -$695 million (US
-$34 million) in 2022, versus -$652
million (US -$32 million) in 2021.
Income (loss) before taxes
21,475
14,311
5,323
50
169
Income tax rate
30%
30%
30%
Statuory income tax rate
(expenses) benefit
Taxes for permanent differences
between accounting-taxable profit
(6,443)
(4,293)
(1,597)
(50)
(169)
934
178
395
423
(55)
Total income tax
(5,509)
(4,115)
(1,202)
(34)
(242)
Effective tax rate
26%
29%
23%
Comprised as follows:
Current income tax
(5,345)
(4,304)
(1,933)
(24)
Deferred income tax
(164)
189
731
(187)
(123)
(74)
Total income tax
(5,509)
(4,115)
(1,202)
(34)
(242)
TAXES
In 2022, an income tax was posted for -$5,509 million (US -$272 million) as a result
of the increased pretax income, while 2021 posted an income tax of -$4,115 million
(US -$202 million).
51
Statement of income
[Millions of Pesos]
2022
2021
2020
‘22 vs ‘21
[%]
‘21 vs ‘20
[%]
Operating income
24,539
17,494
7,493
Financial result, net
(2,997)
(3,144)
(2,085)
40
5
Equity in income of associates
and joint ventures
(67)
(39)
(85)
(74)
133
(51)
54
Income tax
(5,509)
(4,115)
(1,202)
(34)
(242)
Consolidated net income
15,966
10,196
4,121
Income attributable to
Controlling interest
13,744
7,756
3,123
57
77
147
148
NET INCOME ATTRIBUTABLE TO THE
CONTROLLING INTEREST
In 2022, consolidated net income attributable
to the controlling interest was $13,744 million
(US $679 million), 77% higher than the $7,756
million (US $385 million) in the previous year,
stemming from higher operating income.
INVESTMENTS IN FIXED AND INTANGIBLE
ASSETS
In 2022, investments in fixed and intangible
assets totaled $17,339 million (US $862 million),
279% higher than the $4,580 million (US $227
million) posted in 2021. The resources were
mainly allocated to the OCTAL acquisition
and a portion for CCP’s construction, as well
as scheduled maintenance and minor asset
replacements.
THE EBITDA FOR THE PLASTICS &
CHEMICALS SEGMENT INCREASED
12% TO $11,391 MILLION (US $564
MILLION), COMPARED TO $10,173
MILLION (US $503 MILLION) IN 2021,
INCLUDING A NET NEGATIVE EFFECT
FROM EXTRAORDINARY ITEMS OF
$38 MILLION (US $3 MILLION).
NET DEBT1
Net debt was $36,005 million (US $1,860 million) as of December
31, 2022, 43% above the $25,219 million (US $1,225 million) as of
December 31, 2021. The cash balance and cash equivalents totaled
$6,872 million (US $355 million) including restricted cash at year-
end 2022.
52
Financial Indicators
[Times]
Net Debt / EBITDA
Interest Coverage
Total liabilities / Stockholders’ equity
2022
2021
2020
1.3
11.4
1.6
1.1
8.7
1.5
2.1
6.0
1.3
Short and long term debt2
[Millions of Dollars]
2022
2021
‘22 vs ‘21
[%]
Integrated
‘22
[%]
Integrated
‘21
[%]
Short-term debt
Current portion of LT debt
2 years
3 years
4 years
5 years
6 years
7 years
8+ years
Total
38
219
-92
-100
100
100
-
100
-45
30
2
15
1
-
2
25
-
25
30
100
2
6
19
2
-
-
-
-
71
100
49
300
25
-
50
500
-
499
605
2,027
5.4
5.5
35
94
300
30
-
-
-
-
1,103
1,563
6.8
6.7
(1) Net Debt = Current debt plus non-current debt (excluding debt issuance costs), plus accrued
interest payable, less cash and cash equivalents, less restricted cash and cash equivalents.
(2) Excludes leases and lease interests.
Avg. Maturity long-term debt (years)
Avg. Maturity total debt (years)
53
APPENDIX
APPENDIX
APPENDIXAPPENDIXAPPENDIXAPPENDIXAPPENDIXAPPENDIX ARCEL®
A Polystyrene (PS) &
Polyethylene (PE) copolymer
used in protective packaging
for high-end products like
electronics. Due to its resistance
to tearing, puncturing,
cracking, and flaking, it absorbs
shocks without decreasing its
protection.
A
C
CIRCULARITY
All products that have a circularity
focus are manufactured in a way
so they can be disassembled or
come to their end-of-life and their
materials will either be broken
down by nature or returned to
production. It means that these
products are designed, and
developed with their end-of-life
taken into consideration.
CLEAN INDUSTRY
CERTIFICATION
Certification granted by
the Mexican Environmental
Protection Agency (PROFEPA)
to companies that comply with
environmental legislation.
CO2 EMISSIONS
Unit to measure the carbon
dioxide produced by the burning
of solid, liquid and gaseous fuels,
including natural gas.
COMPREHENSIVE
RESPONSIBILITY
ADMINISTRATIVE SYSTEM
(NATIONAL ASSOCIATION OF
THE CHEMICAL INDUSTRY, ANIQ)
Certification given to companies
that comply with the six
comprehensive responsibility
requirements established by
the ANIQ, covering Process
safety, Health and safety in
the workplace, Product safety,
Transportation and distribution,
Prevention and control of
environmental pollution and
Community protection.
CYCLOHEXANE
Compound produced by the
hydrogenation of benzene and
used in caprolactam production.
E
ESG
Environmental, Social and
Governance.
ETHANE
Hydrocarbon part of the natural
gas liquids, which at room
temperature is colorless and
odorless. It is used as a raw
material to produce ethylene.
ETHYLENE
Compound produced from
ethane. It is the raw material
used to produce vinyl acetate,
ethyl chloride, styrene, ethylene
oxide and polyethylenes.
54
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, with customized molding
capacity. These properties,
combined with the ease with
which it can be processed, make
EPS a popular packaging for
impact-sensitive items and for
protecting perishables. It is also
widely used in construction
systems, to lighten floor and roof
structures, and as an insulator.
GLOSSARY
AEC 55
G
GREENHOUSE GASES (GHG)
Components of the atmosphere
that absorb and emit radiation
within the infrared range, causing
the Earth’s surface temperature to
increase.
L
LTIR
Lost Time Incident Rate is a
standard OSHA metric that
calculates the number of incidents
that result in time away from work.
M
MEGAWATT (MW)
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.
P
PARAXYLENE (PX)
Hydrocarbon in the xylene family used
to produce PTA. It is also a component
of gasoline.
POLYETHYLENE TEREPHTHALATE
(PET/vPET)
Material widely used to
manufacture 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 applications in reusable,
temperature-sensitive packaging.
PET has replaced glass and
aluminum, as well as other plastics
such as PVC and polyethylene, for
making containers.
RECYCLED POLYETHYLENE
TEREPHTHALATE (rPET)
PET bottles are cleaned and
crushed to produce new PET
products. Other rPET uses include
carpets, fabrics for the clothing
industry, and fibers.
POLYPROPYLENE (PP)
Thermoplastic polymer, produced
from the polymerization of
propylene monomer. Its properties
include a low specific gravity, great
rigidity, resistance to relatively high
temperatures and good resistance
to chemicals and fatigue. PP has
diverse applications, including
for packaging, textiles, recyclable
plastic parts and different kinds of
containers, autoparts and polymer
(plastic) banknotes.
PROPYLENE
Unsaturated, 3-carbon hydrocarbon,
coproduct of the cracking process
at petrochemical complexes and
a by-product at oil refineries. It is
used in the petrochemical industry
to produce PP, propylene oxide,
cumene, isopropanol, acrylic acid
and acrylonitrile. It is also converted
into a gasoline component by
alkylation with butanes or pentanes
GLPM PROPYLENE OXIDE
Compound produced from propylene
and used to manufacture commercial
and industrial products, including
polyols, glycols and glycol-ethers.
PURIFIED TEREPHTHALIC ACID (PTA)
Aromatic dicarboxylic acid, the main
raw material in polyester production.
PTA is produced by the oxidation of
paraxylene. It is used to manufacture
PET, which is then used to make
bottles for water, soft drinks and
other beverages, containers and other
packaging, and polyester fiber for
rugs, clothing, furniture and industrial
applications, as well as other consumer
products.
SBTi
Science Based Targets initiative (SBTi)
is a collaboration between the Climate
Disclosure Project (CDP), the United
Nations Global Compact, World
Resources Institute (WRI) and the
World Wide Fund for Nature (WWF)
to help companies define a target of
emissions reduction.
S
Scope 1, 2 and 3
Scope 1 are emissions directly
related to the operations, Scope
2 are emissions related to utilities
(indirectly) and scope 3 are emissions
that are generated up and down the
chain of a product creation and use
(suppliers and customers).
SDGs
Sustainable Development Goals.
SINGLE-PELLET TECHNOLOGYTM
Single Pellet Technology™(SPT)
creates a pellet where mechanically
Recycled PET (rPET) flake is used
as a raw material feedstock in the
virgin PET production process. Once
injected into the PET manufacturing
process, the rPET flake melts
and the polymer is chemically
integrated allowing the rebuilding
of polymer chains to create a new
PET resin pellet with an integrated
recycle content of up to 25% with
performance equal to that of virgin
PET.
STYRENE MONOMER
Unsaturated hydrocarbon used to
make a variety of plastics, synthetic
rubber, protective coatings and
resins. It is the main raw material
in EPS production and used as a
solvent and chemical intermediate.
56
T
TRIR
“Total Recordable Incident Rate.” It is a
calculation that takes into account how
many OSHA recordable incidents your
company has per number of hours
worked.
WATT
Unit of power in the International
System of Units (SI).
W
STW Country
Site
PTA
Resin
Sheet
Flake
Pellet
SPT
Fibers
PP
EPS
Arcel
Other
57
160
640
240
Our
Footprint
Note: rPET flake capacity was modified to reflect inputs /
totals and may reflect rounding.
Kta: Thousand tons per year
Source: Alpek estimates
Monterrey
Altamira
1,000
Mexico (3,310)
Salamanca
Cosoleacaque
610
185
Lerma
Fayetteville, NC
Charleston, SC
Columbia, SC
640
Bay St. Louis, MS
USA (2,745)
Richmond, IN
Darlington, SC
Monaca, PA
Cincinnati, OH
Reading, PA
Canada (144)
Montreal
Zárate
170
170
725
430
144
190
15
15
15
64
66
31
26
33
115
41
Argentina (246)
Pacheco
22
15
Brazil (1,226)
Chile (28)
Oman (1,024)
General Lagos
Guaratingueta
Ipojuca
Santiago
Puerto Montt
Punta Arenas
Concon
Salalah
640
450
90
576
400
24
24
Saudi Arabia (11)
Riyadh
UK (220)
Wilton
220
TOTAL CAPACITY: 8,954 Kta
2,890
3,260
433
268
137
70
250
640
493
36
479
360
100
5
2
1
11
36
123
45
19
46
20
OUR VALUE CHAINS
58
PET SHEET
THERMOFORM
PACKAGING
rPET SHEET
OIL
NAPHTHA
REFINERY
R
E
M
R
O
F
E
R
PARAXYLENE
PTA
PET
ETHANE
ETHYLENE
CRACKER
R
E
K
C
A
R
C
OIL
NAPHTHA
REFINERY
R
E
K
C
A
R
C
PROPANE
PHD
PROPYLENE
BENZENE
PENTANE
STYRENE
POLYETHYLENE
EPS
ARCEL
ETHYLENE OXIDE
MONOETHYLENE GLYCOL
POLYPROPYLENE
rPET FLAKE
rPET PELLET
FIBERS
Alpek’s products
are used by
millions of people
daily, IN A WIDE
VARIETY OF
APPLICATIONS.
OUR APPROACH TO REPORTING
59
Through our 2022 Annual Report, we share with our stakeholders
the economic, corporate governance, labor, social, environmental
and financial results, for the period from January 1st to December
31, 2022. We compiled the information reported based on the
data analyzed from all our operations in the countries and regions
where we have operations.
This report was prepared in reference to
the GRI Standards 2021 and 2016 versions.
The contents used were defined based on
our ESG assessment, Project Evergreen,
which ensued 12 priority issues for our
company. The information that has been
restated is indicated throughout the text
in every case.
Likewise, we maintain our commitment
to contribute to the Sustainable
Development Goals (SDG) of the United
Nations, 2030 Agenda.
Striving to improve how we manage
ESG issues, in addition to the GRI
contents and our contributions
to the Sustainable Development
Goals, we include information to
meet the Sustainability Accounting
Standards Board (SASB) applicable
to Chemicals and our performance
within the framework developed by
the Task Force for Climate-related
Financial Disclosures (TCFD).
For additional information, we prepared an ESG Booklet
available on: https://www.alpek.com/esg/governance/
CONSOLIDATED
F I N A N C I A L
STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020,
AND INDEPENDENT AUDITORS’ REPORT DATED JANUARY 31, 2023
Alpek, S. A. B. de C. V. and Subsidiaries
(Subsidiary of Alfa, S. A. B. de C. V.)
61
Independent Auditors’ Report
65
Consolidated Statements of Financial Position
66
Consolidated Statements of Income
67
Consolidated Statements of Comprehensive Income
68
69
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
70
Notes to the Consolidated Financial Statements
60 Independent Auditors’ Report
to the Board of Directors and Stockholders
of Alpek, S. A. B. de C. V. and Subsidiaries
(Figures in millions of Mexican pesos “$” and millions of U.S. dollars “US$”)
Opinion
We have audited the consolidated financial statements of Alpek, S. A. B. de C. V. and Subsidiaries (“Alpek” or the “Company”), which
comprise the consolidated statements of financial position as of December 31, 2022, 2021 and 2020, and the consolidated statements
of income, the consolidated statements of comprehensive income, the consolidated statements of changes in stockholders’ equity and
the consolidated statements of cash flows for the years then ended, and the notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial posi-
tion of Alpek, as of December 31, 2022, 2021 and 2020, and their consolidated financial performance and their consolidated cash flows for
the years then ended, in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting
Standards Board.
Basis for Opinion
We conducted our audits in accordance with International Standards on Auditing (“ISA”). Our responsibilities under those standards are
further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (“IESBA Code”) together with the Code of Ethics issued by the Mexican Institute of Public Accountants (“IMCP Code”), and
we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and with the IMCP Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Matters
As mentioned in Note 2 a. in the consolidated financial statements, derived from the acquisition of Octal, Alpek assumed control on June 1,
2022, consolidating its operations as of that date, therefore, the consolidated financial statements as of and for the year ended December
31, 2022 are not comparable with previous years.
The accompanying consolidated financial statements have been translated from Spanish to English for the convenience of readers.
These matters have not changed our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements for the year 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Business Combination – Acquisition and allocation of the purchase price of OCTAL
As mentioned in Note 2 a. to the accompanying consolidated financial statements, on January 31, 2022, a subsidiary of the Company
entered into an agreement to acquire Octal business. The initial consideration amounted to $12,147 (US$620). On June 1, 2022, Alpek
assumed control of Octal’s operations. As of the acquisition date, working capital and recovery of cost adjustments related to the transac-
tion were made, and together reduced the initial consideration by $186.1 (US$9.5); additionally, an adjustment was made for cash surplus
against debt which increased the initial consideration by $1,782.9 (US$91). The contract includes a contingent consideration based on
future business results and other considerations, which in compliance with the requirements of IFRS 3, Business Combinations, (“IFRS 3”)
was valued at $914.9 (US$46.7) and together with the aforementioned adjustments resulted in a total consideration that was equivalent
to $14,658.7 (US$748.2).
61 The acquisition of Octal met the criteria for a business combination in accordance with the requirements of IFRS 3; therefore, the Company
applied the acquisition method to measure the acquired assets and the assumed liabilities in the transaction, as a result, the fair value of the
net acquired assets amounted to $15,087.3 (US$769.9) and the Company recognized a gain on business combination for $425.0 (US$21.7).
Due to the significant judgments used by management in the valuation models for determining the consideration transferred, the fair
values of the acquired assets and assumed liabilities, which resulted in a gain on business combination, we consider this transaction to be
a key audit matter. Therefore, in order to perform the audit procedures that reasonably mitigates the identified risk, we engaged a team
of valuation experts to evaluate the premises and criteria used by Management and its independent expert, within which the following
procedures are included, among others:
•
We reviewed the contractual agreements of the transaction to identify the date of acquisition of control, the consideration
transferred, the acquired entities and the acquiring entity, contingent considerations, among other agreements.
•
•
•
•
We assessed the capacity and independence of the independent expert.
We verified that the methodologies and models used by Management to determine the fair values were those used and recog-
nized to value assets with similar characteristics in the industry.
We challenged Management’s financial projections and compared them with business performance indicators.
We reviewed the most relevant valuation assumptions (discount rate and long-term growth rate), as well as the assumptions used
in the valuation of long-lived assets and compared them with independent market and industry sources.
•
We reviewed compliance with the presentation and disclosure requirements established by IFRS 3.
The results of our procedures were satisfactory.
Information Other Than the Consolidated Financial Statements and Auditor’s Report Thereon
The Company’s management is responsible for the additional information presented. Additional information includes: (i) the Annual Stock
Exchange Filling, (ii) the information that will be incorporated in the Annual Report that the Company is required to prepare in accordance
with Article 33, section I, subsection b) of Title Four, Chapter One of the General Provisions Applicable to Issuers and other Participants of
the Stock Market in México and the Instructions that accompany these provisions (the “Provisions”).
It is expected that the Annual Stock Exchange Filling and the Annual Report to be available for reading after the date of this audit report;
and (iii) other additional information, which is a measure that is not required by IFRS, and has been incorporated for the purpose of
providing additional explanation to its investors and main readers of its consolidated financial statements to evaluate the performance
of each of the operating segments and other indicators on the capacity to meet obligations regarding the earnings before interest,
taxes, depreciation, amortization and non-current asset impairment (“adjusted EBITDA”) of the Company; this information is presented in
Note 29.
Our opinion of the consolidated financial statements does not cover the other information and we will not express any form of assurance
about it.
In connection with our audit of the consolidated financial statements, our responsibility will be to read the additional information, when
it becomes available, and when we do so, to consider whether the additional information contained therein is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit or appears to contain a material misstatement. When
we read the Annual Report, we will issue the declaration on its reading, required in Article 33, Section I, subsection b) number 1.2 of the
Provisions. Also, and in connection with our audit of the consolidated financial statements, our responsibility is to read and recalculate the
additional information, which in this case is the annual report and the measure not required by IFRS, and in doing so, consider whether
the other information contained therein is materially inconsistent with the consolidated financial statements or our knowledge obtained
during the audit, or appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement in the additional information; we would be required to report that fact. As of the date of this report, we have nothing to
report in this regard.
62 Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s consolidated financial reporting process.
Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level
of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the
audit. We also:
–
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
–
Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.
–
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
–
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify
our opinion.
Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
–
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
–
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Company and subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision, and performance of the audit of the consolidated financial statements of the Company. We remain solely responsible
for our audit opinion.
63
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding inde-
pendence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu Limited
C. P. C. Jesús Israel Almaguer Gámez
Monterrey, Nuevo León, México
January 31, 2023
64 ALPEK, S. A. B. DE C. V. AND SUBSIDIARIES (Subsidiary of Alfa, S. A. B. de C. V.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As of December 31, 2022, 2021 and 2020
In millions of Mexican pesos
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Trade and other accounts receivable, net
Inventories
Derivative financial instruments
Prepayments
Total current assets
Non-current assets:
Restricted cash
Property, plant and equipment, net
Right-of-use asset, net
Goodwill and intangible assets, net
Deferred income taxes
Derivative financial instruments
Prepayments
Investments accounted for using the equity method
and other non-current assets
Total non-current assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Debt
Lease liability
Trade and other accounts payable
Income taxes payable
Derivative financial instruments
Provisions
Total current liabilities
Non-current liabilities:
Debt
Lease liability
Derivative financial instruments
Provisions
Deferred income taxes
Income taxes payable
Employee benefits
Other non-current liabilities
Total non-current liabilities
Total liabilities
Stockholders’ equity
Controlling interest:
Capital stock
Share premium
Retained earnings
Other reserves
Total controlling interest
Non-controlling interest
Total stockholders’ equity
Note
2022
2021
2020
6
6
7
8
4
9
6
10
11
12
20
4
9
13
16
17
15
20
4
18
16
17
4
18
20
20
19
21
22
14
$
$
$
$
$
$
6,319
193
23,248
33,893
7
765
64,425
360
48,451
3,452
4,425
1,709
3
7
13,987
72,394
136,819
7,712
821
31,985
1,410
1,220
794
43,942
31,369
2,803
21
1,060
3,845
-
1,025
560
40,683
84,625
6,021
8,917
31,032
933
46,903
5,291
52,194
10,541
13
24,502
25,705
333
686
61,780
-
39,405
3,554
3,348
1,630
18
31
14,179
62,165
123,945
2,660
733
29,853
1,630
248
546
35,670
29,333
2,875
6
835
4,124
241
1,029
246
38,689
74,359
6,028
8,976
24,591
4,121
43,716
5,870
49,586
$
$
$
10,144
12
17,050
17,447
454
442
45,549
-
38,579
2,991
3,637
1,506
70
15
14,006
60,804
106,353
456
704
19,545
531
66
50
21,352
30,196
2,306
-
1,120
4,092
170
1,316
289
39,489
60,841
6,035
9,025
21,035
4,291
40,386
5,126
45,512
Total liabilities and stockholders’ equity
$
136,819
$
123,945
$
106,353
The accompanying notes are an integral part of these consolidated financial statements.
65
ALPEK, S. A. B. DE C. V. AND SUBSIDIARIES (Subsidiary of Alfa, S. A. B. de C. V.)
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2022, 2021 and 2020
In millions of Mexican pesos, except for earnings per share amounts
Note
2022
2021
2020
Revenues
Cost of sales
Gross profit
Selling expenses
Administrative expenses
Other income (expenses), net
Operating income
Financial income
Financial expenses
Loss due to exchange fluctuation, net
Financial result, net
Equity in loss of associates and joint ventures
recognized using the equity method
Income before taxes
Income taxes
Net consolidated income
Income attributable to:
Controlling interest
Non-controlling interest
29
24
24
24
25
26
26
26
20
Earnings per basic and diluted share, in Mexican pesos
Weighted average outstanding shares (millions of shares)
The accompanying notes are an integral part of these consolidated financial statements.
$
212,435
$
156,224
$
113,989
(181,401)
(131,537)
(102,283)
31,034
(3,144)
(3,799)
448
24,539
922
(3,224)
(695)
(2,997)
(67)
21,475
(5,509)
24,687
(2,570)
(3,466)
(1,157)
17,494
590
(3,082)
(652)
(3,144)
(39)
14,311
(4,115)
11,706
(2,136)
(3,260)
1,183
7,493
525
(2,497)
(113)
(2,085)
(85)
5,323
(1,202)
$
$
$
$
15,966
$
10,196
$
4,121
$
$
$
13,744
2,222
15,966
6.52
2,108
$
$
$
7,756
2,440
10,196
3.67
2,111
3,123
998
4,121
1.48
2,113
66
ALPEK, S. A. B. DE C. V. AND SUBSIDIARIES (Subsidiary of Alfa, S. A. B. de C. V.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2022, 2021 and 2020
In millions of Mexican pesos
Note
2022
2021
2020
Net consolidated income
Other comprehensive (loss) income for the year:
Equity in other comprehensive income of associates and
joint ventures recognized through the equity method
$
15,966
$
10,196
$
4,121
1
(1)
3
Items that will not be reclassified to the statement of income:
Remeasurement of employee benefit obligations, net of taxes
19, 20
(19)
344
(30)
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 foreign entities
4, 20
4, 20
Total other comprehensive (loss) income for the year
Consolidated comprehensive income
Attributable to:
Controlling interest
Non-controlling interest
Comprehensive income for the year
(855)
(2,652)
(3,525)
(431)
110
22
614
(767)
(180)
12,441
$
10,218
$
3,941
10,556
1,885
$
7,586
2,632
$
2,663
1,278
12,441
$
10,218
$
3,941
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
67
ALPEK, S. A. B. DE C. V. AND SUBSIDIARIES (Subsidiary of Alfa, S. A. B. de C. V.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the years ended December 31, 2022, 2021 and 2020
In millions of Mexican pesos
Capital
stock
Share
premium
Retained
earnings
Other
reserves
Total
controlling
interest
Non-
Total
controlling stockholders’
interest
equity
Balance as of January 1, 2020
$ 6,045 $
9,059
$ 20,625 $
4,751
$ 40,480
$
4,578
$ 45,058
3,123
-
3,123
998
4,121
Net income
Total other comprehensive loss
for the year
Comprehensive income
Dividends declared
Reissuance of shares
Repurchase of shares
-
-
-
-
1
-
-
-
-
1
(11)
(35)
Balance as of December 31, 2020
6,035
9,025
Net income
Total other comprehensive income
for the year
Comprehensive income
Dividends declared
Reissuance of shares
Repurchase of shares
Other
-
-
-
-
30
(37)
-
-
-
-
-
206
(255)
-
3,123
(2,713)
-
-
21,035
7,756
-
7,756
(3,806)
-
-
-
(394)
(460)
(460)
-
-
-
(460)
2,663
(2,713)
2
(46)
4,291
40,386
-
7,756
(170)
(170)
(170)
7,586
280
1,278
(180)
3,941
(730)
(3,443)
-
-
5,126
2,440
192
2,632
2
(46)
45,512
10,196
22
10,218
-
-
-
-
(3,806)
(1,889)
(5,695)
236
(292)
(394)
-
-
1
236
(292)
(393)
Balance as of December 31, 2021
6,028
8,976
Net income
Total other comprehensive income
for the year
Comprehensive income
Dividends declared
Reissuance of shares
Repurchase of shares
Other
-
-
-
-
19
(26)
-
-
-
-
-
161
(220)
-
24,591
13,744
4,121
-
43,716
13,744
5,870
49,586
2,222
15,966
-
(3,188)
(3,188)
(337)
(3,525)
13,744
(7,515)
-
-
212
(3,188)
10,556
1,885
12,441
-
-
-
-
(7,515)
(2,464)
(9,979)
180
(246)
212
-
-
-
180
(246)
212
Balance as of December 31, 2022
$
6,021
$
8,917
$ 31,032
$
933
$ 46,903
$
5,291
$ 52,194
The accompanying notes are an integral part of these consolidated financial statements.
68
ALPEK, S. A. B. DE C. V. AND SUBSIDIARIES (Subsidiary of Alfa, S. A. B. de C. V.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2022, 2021 and 2020
In millions of Mexican pesos
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Impairment of long-lived assets
Allowance for doubtful accounts
Financial result, net
Gain on business combinations
Gain on business sale
Loss on sale of property, plant and equipment
Statutory employee profit sharing, provisions and other items
Subtotal
Movements in working capital
(Increase) decrease in trade receivables and other assets
(Increase) decrease in inventories
Increase (decrease) in trade and other accounts payable
Income taxes paid
Net cash flows generated from operating activities
Cash flows from investing activities
Interest collected
Cash flows in acquisition of property, plant and equipment
Cash flows in sale of property, plant and equipment
Cash flows in acquisition of intangible assets
Cash flows in business acquisition, net of cash acquired
Cash flows in business sale, net of cash transferred
Cash flows (paid) collected in investment in associates and joint ventures
Loans collected from related parties
Notes receivable
Collection of notes
Restricted cash
2022
2021
2020
$
$
21,475
4,639
246
(163)
2,699
(425)
-
74
764
14,311
4,280
1,460
25
2,951
(29)
-
29
302
$
5,323
4,486
14
77
1,772
(657)
(89)
74
(500)
29,309
23,329
10,500
365
(5,525)
(3,218)
(5,721)
15,210
511
(3,068)
93
(11)
(10,198)
-
(831)
-
(35)
883
(252)
(8,159)
(8,994)
9,448
(2,394)
13,230
322
(4,418)
5
(18)
78
-
(227)
-
-
398
-
894
2,522
659
(2,641)
11,934
197
(2,543)
18
(45)
(921)
108
15
10
-
845
228
Net cash flows used in investing activities
(12,908)
(3,860)
(2,088)
Cash flows from financing activities
Proceeds from debt
Payments of debt
Lease payments
Interest paid
Dividends paid by Alpek, S. A. B. de C. V.
Dividends paid by subsidiaries to non-controlling interest
Repurchase of shares
Reissuance of shares
Loan payments to related parties and others
Net cash flows used in financing activities
(Decrease) increase in cash and cash equivalents
Effect of changes in exchange rates
Cash and cash equivalents at the beginning of the year
15,600
(7,474)
(1,109)
(2,541)
(7,443)
(2,464)
(246)
180
(118)
(5,615)
(3,313)
(909)
10,541
13,038
(12,708)
(1,049)
(2,566)
(3,710)
(1,889)
(292)
236
(46)
13,044
(12,550)
(1,083)
(1,954)
(2,713)
(730)
(46)
2
-
(8,986)
(6,030)
384
13
10,144
3,816
(731)
7,059
Cash and cash equivalents at the end of the year
$
6,319
$
10,541
$
10,144
The accompanying notes are an integral part of these consolidated financial statements.
69
ALPEK, S. A. B. DE C. V. AND SUBSIDIARIES (Subsidiary of Alfa, S. A. B. de C. V.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of and for the years ended December 31, 2022, 2021 and 2020
Millions of Mexican pesos, except where otherwise indicated
1 . GENER AL INFORMATION
Alpek, S. A. B. de C. V. and subsidiaries (“Alpek” or the “Company”) is a petrochemical company with operations through two
major business segments: “Polyester” and “Plastic and Chemicals”. The Polyester segment comprises the production of purified
terephthalic acid (“PTA”), polyethylene terephthalate (“PET”), recycled PET (“rPET”), and polyester fibers, which are mainly used
for food and beverage packaging, textile and industrial filament markets. The Plastics & Chemicals business segment comprises the
production of polypropylene (“PP”), expandable styrene (“EPS” and “Arcel®”), fertilizers and other chemicals, which serves a wide
range of markets, including the consumer goods, automotive, construction, agriculture, pharmaceutical and other markets.
Alpek is one of the largest petrochemical companies in México and the second largest in Latin America. Additionally, it is the main
integrated producer of polyester and one of the main producers of rPET in America. It operates the largest EPS plant in the conti-
nent, and one of the largest PP plants in North America.
When reference is made to the controlling entity Alpek, S.A.B. of C.V. as an individual legal entity, it will be referred to as “Alpek SAB”.
The shares of Alpek SAB are traded on the Mexican Stock Exchange (“MSE”) and has Alfa, S. A. B. de C. V. (“Alfa”) as its main holding
company. As of December 31, 2022, 2021 and 2020, the percentage of shares that traded on the MSE was 17.39%, 17.51% and 17.63%,
respectively.
Alpek SAB is located at Avenida Gómez Morín Sur No. 1111, Col. Carrizalejo, San Pedro Garza García, Nuevo León, México and oper-
ates productive plants located in México, the United States of America, Oman, Saudi Arabia, Canada, Argentina, Chile, Brazil and
United Kingdom.
In the following notes to the financial statements when referring to pesos or “$”, it means millions of Mexican pesos. When referring
to dollars or “US$”, it means millions of dollars from the United States of America. When referring to Euros or “€” it means millions
of Euros.
2 . SIGNIFICANT EVENTS
2022
a. OCTAL Acquisition
On January 31, 2022, a subsidiary of Alpek signed an agreement to acquire the Octal business (see Note 3b). This acquisition
represents a growth through vertical integration for Alpek into the high value PET sheet business. Octal is a major global producer
of PET sheet through a strategically centered logistics position in Oman.
Alpek acquired Octal for a consideration of $12,147 (US$620). On June 1, 2022, Alpek assumed control of Octal’s operations.
From the acquisition date, working capital and recovery of cost adjustments related to the transaction were made, and together
reduced the initial consideration by $186.1 (US$9.5); additionally, an adjustment was made for cash surplus against debt which
increased the initial consideration by $1,782.9 (US$91). The contract includes a contingent consideration based on future business
results and other considerations, which, in compliance with the requirements of IFRS 3, Business Combinations (“NIIF 3”), was valued
at $914.9 (US$46.7) and that together with the aforementioned adjustments derived in a total consideration that was equivalent to
$14,658.7 (US$748.2).
Total cash flows paid for the acquisition amounted to $13,397.1 (US$682.9), which were made by wire transfer. Financing for the
acquisition was through a combination of free cash flow generated from existing businesses and dedicated bank loans.
70 The amount pending payment as of December 31, 2022 retained by Alpek pursuant to the agreement for possible litigation is $360.1
(US$18.6), was deposited in a trust, and is presented within restricted cash and its corresponding liability.
The acquisition of Octal met the criteria for a business combination in accordance with the requirements of IFRS 3; therefore, the
Company applied the acquisition method to measure the acquired assets and assumed liabilities in the transaction. The fair values
are as follows:
Current assets (1)
Non-current assets (2)
Intangible assets (3)
Current liabilities (4)
Non-current liabilities (5)
Net assets acquired
Gain on business combination
Final consideration
Cash surplus net of debt
Total consideration net of cash surplus
US$ 551.4
604.8
83.4
(432.2)
(37.5)
769.9
(21.7)
748.2
(91)
US$ 657.2
(1) Current assets consist of cash, restricted cash, accounts receivable, inventories and other assets for US$160.6, US$14.9 US$118.8,
US$252.7 and US$4.4, respectively.
(2) Non-current assets consist of property, plant and equipment and right of use assets of US$591.6 and US$13.2, respectively.
(3) Intangible assets consist of patents.
(4) Current liabilities consist of suppliers and other accounts payable, current portion of debt, and other liabilities for US$388.2, US$41.0 and
US$3.0, respectively.
(5) Non-current liabilities consist of debt, lease liability and other liabilities for US$20.6, US$13.7 and US$3.2, respectively.
As a result of this transaction, a gain associated with the business combination was recognized for an amount of $425.0 (US$21.7),
recognized in 2022 in the other income (expenses), net item (see Note 25). Under the terms of IFRS 3, the gain associated with the
business combination was primarily generated because the sale of the business followed the strategy maintained by the selling
shareholders of taking the opportunity to exit, even sacrificing the value of the assets at that time.
Revenues and net income for the seven-month period ended December 31, 2022, contributed by Octal amounted to $17,174 (US$858)
and $3,013 (US$150), respectively.
The results of the acquired operations have been included in the consolidated financial statements since the acquisition date, there-
fore, the consolidated financial statements as of and for the year ended December 31, 2022 are not comparable with previous years.
The consolidated statement of cash flows for the year ended December 31, 2022, presents the disbursement for the acquisition of
Octal in a single line within investment activities, net of the cash acquired.
If the acquisition had occurred on January 1, 2022, proforma consolidated revenues and net income for the year ended December 31,
2022, would have been $29,317 (US$1,455) and $4,805 (US$238), respectively. These amounts were calculated using the results of
the subsidiary and adjusting them for the additional depreciation and amortization that would have been recognized assuming the
fair value of the adjustments of property, plant and equipment and intangible assets as of January 1, 2022.
b. Corpus Christi Polymers resumes construction
On July 18, 2022, Alpek announced that the three partners of Corpus Christi Polymers LLC (“CCP”) would resume the construction
of the plant in August 2022 with completion expected in early 2025. The project will have a total capacity of 1.1 million tons and 1.3
million tons per year of PET and PTA, respectively, with which Alpek would have approximately 367,000 tons of PET and 433,000
tons of PTA. CCP expects to have the most competitive state-of-the-art plant in the Americas, which will use Alpek’s IntegRex
technology for PTA processes, among others.
During the year ended December 31, 2022, the investments made were for $733 (US$36.5).
71
2021
c. Debt issuance
On February 18, 2021, Alpek SAB issued Senior Notes, on the Irish Stock Exchange, to qualified institutional investors under the Rule
144A and other investors outside the United States of America under Regulation S, for an amount of US$600, gross of issuance costs
of US$5 and discounts of US$2. The Senior Notes have a ten-year maturity and a 3.25% coupon payable semi-annually. Proceeds
from the transaction were primarily used to prepay debt including accrued and unpaid interest.
d. Acquisition of a rPET plant from CarbonLITE
On June 10, 2021, the Company acquired a PET recycling and pelletizing facility from CarbonLite Recycling LLC (“CarbonLITE”) in
Reading, Pennsylvania in the United States. The plant was acquired, free of debt, for US$96, plus working capital.
CarbonLITE Reading facility is equipped with incoming bottle handling, washing and solid-state polymerization (“SSP”) systems,
which enable the production of food-grade pellets and are required for bottle-to-bottle recycling. The site has a bottle-to-flake and
flake-to-pellet capacity of 60,000 tons and 40,000 tons of production per year, respectively.
This acquisition is in line with the objective of promoting a circular economy in accordance with the Company´s long-term strategic
growth plan. Additionally, it increases Alpek´s installed rPET capacity to 160,000 tons of production per year and advance towards
the Company´s goal of supplying certain customers with 25% rPET content by 2025.
The Company´s consolidated financial statements include the financial information of the acquired assets.
The Company applied the optional test established in IFRS 3, Business Combinations, to assess the concentration of the fair value
of the acquired assets and determine whether such fair value is substantially concentrated in a group of similar identifiable assets.
In line with the above, the Company determined that the transaction did not meet the criteria of a business combination, therefore
it was classified as an asset acquisition. In the initial recognition of the operation, the Company identified and recognized all the
assets, allocating the purchase price to the individual assets identified, on a proportional basis in relation to their fair values at the
acquisition date. Consequently, the transaction did not give rise to goodwill or gain from a bargain purchase.
e. Impairment in Univex
In November 2021, the Company decided to close its caprolactam production area (raw material for the production of Nylon 6)
of its Univex, S.A. de C.V. plant., subsidiary of Unimor, S.A. de C.V., as well as its affiliate Sales del Bajío, S.A. de C.V. that produces
carbonates; the aforementioned, derived from the fall in the market prices and profit margins worldwide.
The Company is in process of evaluating the future use of the Univex, S.A. de C.V. facilities since they continue to be used for fertilizer
production line, which continues in operation.
As a result, the Company recognized an impairment of long-lived assets for $936, deferred income tax asset for $257, other liabilities
for $308 and early insurance cancellation for $8, approximately.
f. Announcement of closure of the staple fibers operations in Cooper River
On May 4, 2021, the Company through its subsidiary Dak Americas LLC, announced the closure of its polyester staple fiber opera-
tions at its Copper River site, in Charleston, SC.
As a result, the impact was $679 (US$33), approximately, recognized in the statement of income.
The plant ceased operations of staple fiber during the month of December 2021.
g. Adjustments from previous years in Univex
During 2021 in Univex S. A. de C. V. adjustments from previous years were identified and corrected in such subsidiary, the net effect
of these adjustments is reflected in the consolidated statement of changes in stockholders’ equity of Alpek in “others”.
h. Acquisition of a styrenics business from NOVA Chemicals
On October 19, 2020, the Company announced that one of its subsidiaries signed an agreement with NOVA Chemicals Corpora-
tion (“NOVA Chemicals”) for the purchase of its expanded styrenics business, through the acquisition of a 100% interest in BVPV
Styrenics LLC, owner and operator of two facilities in the United States. The first facility, located in Monaca, Pennsylvania, has an
annual capacity of 123,000 tons of EPS and 36,000 tons of ARCEL®, in addition to a world-class research and development (R&D)
pilot plan; and a second facility located in Painesville, Ohio, with an annual capacity of 45,000 tons of EPS.
72 The initial value of the consideration amounted to US$50, which was paid in cash by means of a transfer on the closing date of
the transaction, which occurred on October 30, 2020, which corresponds to the date on which the Company acquired control of
the business. During 2021, net working capital adjustments were made that resulted in a recovery of US$4 on the purchase price,
resulting in a final consideration of US$46.
The acquisition of BVPV Styrenics LLC met the criteria of a business combination in accordance with the requirements of IFRS 3,
Business Combinations; therefore, the Company applied the acquisition method to measure the acquired assets and the assumed
liabilities in the transaction. The purchase price allocation was determined in 2021, and the adjustments derived from the acquisition
method were not material, therefore were recognized in 2021. The fair values of the acquired assets, and assumed liabilities as a
result of this acquisition are as follows:
Current assets (1)
Non-current assets (2)
Intangible assets (3)
Current liabilities
Non-current liabilities
Acquired net assets
Gain from a bargain purchase
Paid consideration
(1) Current assets consist of accounts receivable of US$18, inventories of US$38
(2) Non-current assets consist of fixed assets of US$14 and right-of-use assets of US$1
(3) Intangible assets consist of trademarks for US$1 and patents for US$1
US$
56
15
2
(17)
(9)
47
(1)
46
$
$
As a result of this transaction, a gain from a bargain purchase of $29 (US$1.3), was recognized in 2021 under other income, net (Note
25). In terms of IFRS 3, the gain from a bargain purchase was mainly generated because the disposal was due to strategic plans of
the seller.
2020
i. Acquisition of Lotte Chemical PET business in UK
On October 29, 2019, the Company announced an agreement with Lotte Chemical Corporation (“Lotte”) for the purchase of all the
shares of Lotte Chemical UK Limited (“Lotte UK”), which is the owner of a PET production plant located in Wilton, United Kingdom.
The acquisition is aligned with Alpek’s growth strategy, expanding its reach outside the Americas and better integrating its PTA and
PET capabilities.
During the month of December 2019, the Company made advance payments for the acquisition of Lotte UK for a total amount of
US$69 (Note 9); however, the final acquisition of the business occurred on January 1, 2020, considered as the date in which Alpek
obtained control of Lotte UK, now called Alpek Polyester UK LTD (“Alpek Polyester UK”). During May 2020, the final adjustments to
the purchase price were made resulting in a recovery of US$1 from the advance payments for a final purchase price of US$68. Such
recovery is presented as a cash inflow in the consolidated statement of cash flows in the business acquisition line, together with the
incorporation of Alpek Polyester UK’s cash held at the time of acquisition.
The Company’s consolidated financial statements include financial information of the entity from the acquisition date. The business
acquired is included in the Polyester segment.
The acquisition of Alpek Polyester UK met the criteria of a business combination in accordance with the requirements of IFRS 3,
Business Combinations; therefore, the Company applied the acquisition method to measure the assets acquired and the liabilities
assumed in the transaction. The purchase price allocation was determined in 2020, and the adjustments derived from acquisition
method accounting were recognized from the date of acquisition. The fair values of the acquired assets and assumed liabilities as a
result of this acquisition are as follows:
73
Inventories
Other current assets (1)
Property, plant and equipment
Current liabilities (2)
Net identifiable assets
Bargain purchase gain
Consideration paid
US$
48
63
43
(51)
103
(35)
68
$
$
(1) Current assets consist of cash and cash equivalents for US$6, accounts receivable for US$55 and others for US$2.
(2) Current liabilities consist of suppliers and other accounts payable of US$47 and provisions of US$4.
As a result of this transaction, a gain associated with the business combination was recognized for an amount of $657 (US$35),
recorded in 2020 (Note 25). Under the terms of IFRS 3, the gain associated with the business combination was mainly generated
because the disposals took place due to strategic plans of the seller.
j. Impacts of COVID-19
As a result of the outbreak of coronavirus (COVID-19) and its global outreach, on March 11, 2020, the World Health Organization
declared the infectious disease a pandemic. Health actions have been taken in México and other countries, including those where
Alpek operates, to limit the spread of this virus, including, but not limited to, social distancing and closure of educational facilities
(schools and universities), commercial establishments and non-essential businesses. The following is a breakdown of the main impli-
cations for the Company:
•
•
At the ordinary stockholders’ meeting of the Company on February 27, 2020, the stockholders agreed to declare dividends in
cash of approximately US$81.6. On May 21, 2020, the stockholders of the Company approved the revocation of the dividend
payment as one of the decisions taken in order to prioritize its financial stability due to the emergence of COVID-19. It also
approved delegating authority to the Board of Directors to monitor how the situation evolves, and at its sole discretion, set a date
and an amount for a dividend payment, for an amount equal to or less than the one previously authorized.
On March 18, 2020, the Company announced that its joint venture investment Corpus Christi Polymers extended the pre-con-
struction period of its plant through the end of 2020 to help optimize project costs and maximize returns to the three joint
venture shareholders. Alpek did not have to make capital contributions in the extended pre-construction period. During 2021,
preparation tasks prior to construction resumed and the Company made additional capital contributions of US$11.
The Company has taken actions to counteract the effects that COVID-19 has had on the economic markets in which it participates,
focusing on strengthening operating and financial performance, by constant monitoring its cost structure, key business processes
and a commitment to its employees.
At the date of issuance of the consolidated financial statements, the Company continues to monitor the development of its business
by complying with the governmental regulations of the different countries in which it operates and responding in a timely manner
to any changes that may arise.
k. Approval of the restructuring plan for the recovery of financing to M&G México
On September 4, 2020, the Company announced the final approval of the financial restructuring agreement between M&G Polímeros
México, S. A. de C. V. (“M&G México”) and the majority of its creditors, including certain subsidiaries of Alpek. In accordance with the
agreement, as of the end of 2020, the Company started the recovery of US$160 of debt guaranteed by a first and second degree
lien on M&G México’s PET plant in Altamira by receiving a payment of US$40 in December 2020. Additionally, during 2022 and 2021,
the Company continued to receive interest payments related to this debt and a principal payment of US$26 and US$8, respectively.
74
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following are the most significant accounting policies followed by the Company and its subsidiaries, which have been consistently
applied in the preparation of their financial information in the years presented, unless otherwise specified:
a) Basis of preparation
The consolidated financial statements of Alpek have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) issued by the International Accounting Standards Board (“IASB”). IFRS include all International Accounting Standards
(“IAS”) in force and all related interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”),
including those previously issued by the Standing Interpretations Committee (“SIC”).
The consolidated financial statements have been prepared on a historical cost basis, except for the cash flow hedges, which are
measured at fair value, and for the financial assets and liabilities at fair value through profit or loss with changes reflected in the
consolidated statement of income and for financial assets available for sale.
The preparation of the consolidated financial statements in conformity with 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
i. Subsidiaries
The subsidiaries are all the entities over which the Company has control. 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.
When the Company’s participation in subsidiaries is less than 100%, the share attributed to outside stockholders is reflected as
non-controlling interest. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and up to
the date it loses such control.
The accounting method used by the Company for business combinations is the acquisition method. The Company defines a busi-
ness combination as a transaction through which it obtains control over a business, whereby it has the power to steer and manage
the relevant operations of all assets and liabilities of the business with the purpose of providing a return in the form of dividends,
lower costs or other economic benefits directly to investors.
The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and
the equity interests issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Identifiable acquired assets and liabilities and contingent liabilities assumed in a
business combination are initially measured at their fair values at the acquisition date. The Company recognizes any non-controlling
interest in the acquiree based on the share of the non-controlling interest in the net identifiable assets of the acquired entity.
The Company accounts for business combinations of entities using the predecessor method in a jointly controlled entity. The
predecessor method involves the incorporation of the carrying amounts of the acquired entity, which includes the goodwill
recognized at the consolidated level with respect to the acquiree. Any difference between the carrying value of the net assets
acquired at the level of the subsidiary and its carrying amount at the level of the Company is recognized in stockholders’ equity.
The acquisition-related costs are recognized as expenses in the consolidated statement of income when 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 and liabilities assured. 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 the consolidated income of the year.
Transactions, intercompany balances and unrealized gains on transactions between Alpek’s companies are eliminated in preparing
the consolidated financial statements. Alpek’s subsidiaries consistently apply the accounting policies as those disclosed in these
consolidated financial statements.
75
As of December 31, 2022, 2021 and 2020, the main companies that comprise the consolidated financial statements of the
Company are as follows:
Shareholding (%)(2)
Country(1)
2022
2021
2020
Alpek, S. A. B. de C. V. (Holding Company)
Alpek Polyester, S. A. de C. V. (Holding Company) (3)
DAK Americas LLC
USA
Dak Resinas Américas México, S. A. de C. V.
DAK Américas Exterior, S. L. (Holding Company)
Spain
Alpek Polyester Argentina S. A. (4)
Argentina
Compagnie Alpek Polyester Canada (Selenis) (5) (6)
Canada
Tereftalatos Mexicanos, S. A. de C. V. (Temex)
Akra Polyester, S. A. de C. V.
Alpek Polyester Pernambuco S. A. (7)
Alpek Polyester Brasil S. A. (8)
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, S. A.
Aislapol, S. A.
Styropek do Brasil, LTD
Unimor, S. A. de C. V. (Holding Company)
Univex, S. A.
Alpek Polyester UK LTD (9)(11)
BVPV Styrenics LLC (10)
OCTAL (12)
Brazil
Brazil
Argentina
Chile
Brazil
United
Kingdom
USA
Oman
100
100
100
100
100
100
91
93
100
100
51
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
91
93
100
100
51
50
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
50
91
93
100
100
51
50
100
100
100
100
100
100
100
100
100
-
Functional
Currency
Mexican peso
US dollar
US dollar
US dollar
US dollar
Argentine peso
US dollar
US dollar
US dollar
Brazilian real
Brazilian real
US dollar
US dollar
Mexican peso
US dollar
Argentine peso
Chilean peso
Brazilian real
Mexican peso
Mexican peso
Pound sterling
US dollar
US dollar
(1)
(2)
Companies incorporated in México, except those indicated.
Ownership percentage that Alpek has in the holding companies and ownership percentage that such holding companies have in the companies integrating the groups.
Ownership percentages and the voting rights are the same.
(3) On July 31, 2021, Grupo Petrotemex, S.A. de C.V. (Grupo Petrotemex), changed its company name to Alpek Polyester S.A. de C.V.
(4) During 2022, DAK Américas Argentina, S. A. changed its legal name to Alpek Polyester Argentina S. A.
(5)
The sale and purchase agreement of this entity included a clause for the payment of future benefits (earn-out) for the production of PETG, which was still in force as
of December 31, 2021 and 2020. Under said clause, the shares not acquired for legal purposes by Alpek are deposited in favor of the selling party or to Alpek, based
on results obtained from the potential production of PETG. At the end of 2021 and 2020, Alpek held 50% + 1 share of the legal shareholding. On August 25, 2022,
Alpek acquired the remaining 50% - 1 share of the shareholding in this entity in exchange for a consideration of $119.6 (US$6); derived from the negotiation for the
acquisition of the remaining shares, the contingent liability that Alpek had for the earn-out for 149.5 (US$7.5) was canceled, together with a compensation asset for
$25.9 (US$1.3), both came from the sale and purchase agreement. The net effects of these transactions were recognized within “Other income (expenses), net” in the
consolidated statement of comprehensive income for the year ended December 31, 2022.
(6) During 2022, DAK Compagnie Selenis Canada changed its legal name to Compagnie Alpek Polyester Canada.
(7) During 2022, Companhia Petroquímica de Pernambuco-PetroquímicaSuape changed its legal name to Alpek Polyester Pernambuco S. A.
(8) During 2022, Companhia Integrada Têxtil de Pernambuco- CITEPE changed its legal name to Alpek Polyester Brasil S. A.
(9) During 2020 Lotte Chemical UK Limited (“Lotte UK”) changed its legal name to Alpek Polyester UK LTD.
(10) Entity acquired in 2021. (Note 2 h ).
(11) Entity acquired in 2020. (Note 2 i ).
(12) Group of entities acquired in 2022 and integrates the following entities: Octal Holding UK LTD, Octal Holding SAOC, Octal (FZC) SAOC, Crystal Pack FZC LLC, Crystal
Packing Solutions LLC, Octal DMCC, Octal Inc, Octal Extrusion Corp, Octal Saudi Arabia Plant LLC and OCTAL FINANCE BV. (Note 2 a )
76
As of December 31, 2022, 2021 and 2020, there are no significant restrictions for investment in shares of subsidiary companies
mentioned above.
ii. Absorption (dilution) of control in subsidiaries
The effect of absorption (dilution) of control in subsidiaries, in example, an increase or decrease in the percentage of control,
is recorded in stockholders’ equity, directly in retained earnings, in the period in which the transactions that cause such effects
occur. The effect of absorption (dilution) of control is determined by comparing the book value of the investment before the
event of dilution or absorption against the book value after the relevant event. In the case of loss of control, the dilution effect is
recognized in the consolidated income.
When the Company issues purchase obligations on certain non-controlling interests in a consolidated subsidiary and non-con-
trolling stockholders retain the risks and awards on these shares in the consolidated subsidiary, these are recognized as financial
liabilities for the present value of the refundable amount of the options, initially recorded with a corresponding reduction in the
stockholders’ equity, and subsequently accruing through financial charges to income during the contractual period.
iii. Sale or disposal of subsidiaries
When the Company ceases to have control any retained interest in the entity is re-measured at fair value, and the change in
the carrying amount is recognized in the consolidated statement of income. The fair value is the initial carrying value for the
purposes of accounting for any subsequent retained interest in the associate, joint venture or financial asset. Any amount previ-
ously 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 results in the amounts previously recognized in the consolidated comprehensive income
being reclassified to the consolidated income for the year.
iv. Associates
Associates are all entities over which the Company has significant influence but not control. Generally, an investor must hold
between 20% and 50% of the voting rights in an investee for it to be an associate. Investments in associates are accounted for
using the equity method and are initially recognized at cost. The Company’s investment in associates includes goodwill identified
at acquisition, net of any accumulated impairment loss.
If the equity in an associate is reduced but significant influence is maintained, only a portion of the amounts recognized in the
consolidated comprehensive income are reclassified to the consolidated income for the year, where appropriate.
The Company’s share of profits or losses of associates, post-acquisition, is recognized in the consolidated statement of income
and its share in the consolidated other comprehensive income of associates is recognized as other consolidated comprehensive
income. 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 value and recognizes it in “equity in results of associates and joint ventures recognized using the equity method” in
the consolidated statement of income.
Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s equity in
such gains. Unrealized losses are also eliminated unless the transaction provides evidence that the asset transferred is impaired.
In order to ensure consistency with the policies adopted by the Company, the accounting policies of associates have been
modified. When the Company ceases to have significant influence over an associate, any difference between the fair value of the
remaining investment, including any consideration received from the partial disposal of the investment and the book value of the
investment is recognized in the consolidated statement of income.
v. Joint ventures
Joint arrangements are those where there is joint control since the decisions over relevant activities require the unanimous
consent of each one of the parties sharing control.
77
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 related assets under a
joint arrangement, this is classified as a joint operation. When the company holds rights over net assets of the joint arrangement,
this is classified as a joint venture. The Company has assessed the nature of its joint arrangements and classified them as joint
ventures. Joint ventures are accounted for by using the equity method applied to an investment in associates.
c) Foreign currency translation
i. Functional and presentation currency
The amounts included in the financial statements of each of the Company’s subsidiaries, associates and joint ventures 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.
When there is a change in the functional currency of one of the subsidiaries, according to International Accounting Standard 21,
Effects of Changes in Foreign Exchange Rates (“IAS 21”), this change is accounted for prospectively, translating at the date of the
functional currency change, all assets, liabilities, equity, and income items at the exchange rate of that date.
ii. Transactions and balances
Transactions in foreign currencies are translated into the functional currency using the foreign exchange rates prevailing at
the transaction date or valuation date when the amounts are re-measured. Gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing
exchange rates are recognized as foreign exchange gain or loss in the consolidated statement of income, except for those which
are deferred in comprehensive income and qualify as cash flow hedges.
Changes in the fair value of securities or monetary financial assets denominated in foreign currency classified as available for
sale are divided between fluctuations resulting from changes in the amortized cost of such securities and other changes in
value. Subsequently, currency fluctuations are recognized in income and changes in the carrying amount arising from any other
circumstances are recognized as part of comprehensive income.
iii. Translation of subsidiaries with recording currency other than the functional currency
The financial statements of foreign subsidiaries having a recording currency different from their functional currency were trans-
lated 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
rate.
b) To the historical balances of monetary assets and liabilities and stockholders’ equity translated into the functional currency the
movements that occurred during the period were added, which were translated at the historical exchange rates. In the case
of the movements of non-monetary items recognized at fair value, which occurred during the period, stated in the recording
currency, these were translated using the historical exchange rates in effect on the date when the fair value was determined.
The income, costs and expenses of the periods, expressed in the recording currency, were translated at the historical exchange
rate of the date they were accrued and recognized in the consolidated statement of income, except when they arose from
non-monetary items, in which case the historical exchange rate of the non-monetary items was used.
c)
d) The exchange differences arising in the translation from the recording currency to the functional currency were recognized as
income or expense in the consolidated statement of income in the period they arose.
iv. Translation of subsidiaries with functional currency other than the presentation currency
The results and financial position of all Company entities that have a functional currency different from the presentation currency
are translated into the presentation currency as follows, depending on whether the functional currency comes from a non-hyper-
inflationary or hyperinflationary environment:
Non-hyperinflationary environment
a)
Assets and liabilities for each statement of financial position presented are translated at the closing exchange rate at the date
of the statement of financial position;
b) Stockholders’ equity of each statement of financial position presented is translated at historical exchange rate;
c)
Income and expenses for each statement of income 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, the exchange rate at the date
of the transaction is used); and
d) The resulting exchange differences are recognized in the consolidated statement of other comprehensive income as transla-
tion effect.
78
Hyperinflationary environment
a)
Assets, liabilities and equity in the statement of financial position, as well as income and expenses in the income statement, are
translated at the closing exchange rate of the statement of financial position, after being restated in its functional currency (Note
3d); and
b) Assets, liabilities, equity, income and expenses of the comparative period, are maintained according to the amount obtained in
the translation of the year in question, that is, the financial statements of the preceding period. These amounts are not adjusted
to subsequent exchange rates because the Company presents its financial information in Mexican pesos, which correspond to a
currency of a non-hyperinflationary environment.
The primary exchange rates in the various translation processes are listed below:
Currency
US dollar
Argentine peso
Brazilian real
Chilean peso
Pound sterling
d) Hyperinflationary effects
Local currency to Mexican pesos
Closing exchange rate
at December 31,
Average annual
exchange rate
2022
2021
2020
2022
2021
2020
19.36
0.11
3.66
0.02
23.29
20.58
0.20
3.69
0.02
27.88
19.95
0.24
3.84
0.03
27.26
20.06
0.15
3.91
0.02
24.71
20.38
0.21
3.77
0.03
28.02
21.59
0.30
4.12
0.03
27.87
As of July 1, 2018, the cumulative inflation from the prior 3 years in Argentina exceeded 100%; consequently, the Argentine peso was
classified as a currency of a hyperinflationary economic environment. As a result, the financial statements of the subsidiaries located
in that country, whose functional currency is the Argentine peso, have been restated and adjusted for inflation in accordance with
the requirements of the International Accounting Standard 29, Financial Information in Hyperinflationary Economies (“IAS 29”), and
have been consolidated in compliance with the requirements of IAS 21. The purpose of applying these requirements is to consider
changes in the general purchasing power of the Argentine peso in order to present the financial statements in the measuring unit
current at the date of the statement of financial position. The financial statements before including any inflation adjustments were
prepared using the historical cost method.
The Company determined the inflation adjustments in its consolidated financial statements in the following manner:
a.
The amounts corresponding to non-monetary items of each statement of financial position, which are not measured at the date
of the statement of financial position at their fair value or net realizable value, as the case may be, are restated by applying to
their historical cost the change of a general price index from the date of acquisition or the date of its last measurement at fair
value, to the date of the statement of financial position;
b. The amounts corresponding to monetary items of the statement of financial position are not restated;
c. The components of stockholders’ equity of each statement of financial position are restated:
1)
At the beginning of the first period of application of IAS 29, except for retained earnings, by applying the change of a general
price index from the dates the components were originated to the date of restatement. Restated retained earnings are
derived from all the other balances in the statement of financial position;
2) At the end of the first period and in subsequent periods, all components of stockholders’ equity are restated by applying a
general price index from the beginning of the period or the date of contribution, if later.
d.
e.
Revenues and expenses are restated by applying the change in the general price index, from the date on which the expenses and
revenues were recognized, up to the reporting date.
Gains or losses arising from the net monetary position are recognized in the consolidated statement of income.
The Company reflects the effects of hyperinflation on the financial information of its subsidiaries in Argentina using price indexes that
are considered appropriate in accordance with Resolution JG 539/18 (the “Resolution”) of the Argentine Federation of Professional
Councils of Economic Sciences. This resolution establishes that a combination of price indexes should be used in the calculation of
the effects of restatement of financial statements. Therefore, the Company has decided to use the Consumer Price Index (“CPI”) to
restate balances and transactions.
The effects of the restatement of the financial statements of the subsidiaries located in Argentina were not material and were
included in the “Financial result, net” line item for the years ended December 31, 2022, 2021 and 2020.
79
e) 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 and high credit quality 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 loans as part of the current liabilities.
f) Restricted cash
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 consolidated statement of financial position and are excluded from cash and cash
equivalents in the consolidated statement cash flows. The classification in the consolidated statement of financial position will
depend on the restriction that originates it, being that restriction greater than 12 months will lead to the classification of restricted
cash as non-current.
g) Financial instruments
Financial assets
The Company subsequently classifies and measures its financial assets based on the Company’s business model to manage financial
assets, and on the characteristics of the contractual cash flows of such assets. This way financial assets can be classified at amor-
tized cost, at fair value through other comprehensive income, and at fair value through profit or loss. Management determines the
classification of its financial assets upon initial recognition. Purchases and sales of financial assets are recognized at settlement date.
Financial assets are entirely written off when the right to receive the related cash flows expires or is transferred, and the Company
also has substantially transferred all the risks and rewards of its ownership, as well as the control of the financial asset.
Classes of financial assets
i. Financial assets at amortized cost
Financial assets at amortized cost are those that i) are held within a business model whose objective is to hold said assets in order
to collect contractual cash flows; and ii) the contractual terms of the financial asset give rise, on specified dates, to cash flows
that are solely payments of principal and interest on the amount of outstanding principal.
ii. Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income are those whose business model is based on both collecting
contractual cash flows and selling the financial assets; and their contractual terms give rise, on specified dates, to cash flows that
are solely payments of principal and interest on the amount of outstanding principal. As of December 31, 2022, 2021 and 2020,
the Company does not hold financial assets to be measured at fair value through other comprehensive income.
iii. 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 cate-
gory if it is mainly acquired for the purpose of being sold in the short term.
Derivatives are also classified as held for trading unless they are designated as hedges. In addition are those that do not meet the
characteristics to be measured at amortized cost or fair value through other comprehensive income, since: i) they have a busi-
ness model different to those that seek to collect contractual cash flows, or collect contractual cash flows and sell the financial
assets, or otherwise ii) the generated cash flows are not solely payments of principal and interest on the amount of outstanding
principal.
Despite the previously mentioned classifications, the Company may make the following irrevocable elections in the initial recognition
of a financial asset:
a.
b.
Disclose the subsequent changes in the fair value of an equity instrument in other comprehensive income, only if such investment
(in which no significant influence, joint control or control is maintained) is not held for trading purposes, or is a contingent
consideration recognized as a result of a business combination.
Assign a debt instrument to be measured at fair value in profit or loss, if such election eliminates or significantly reduces an
accounting mismatch that would arise from the measurement of assets or liabilities or the recognition of profits and losses on
them in different basis.
80
As of December 31, 2022, 2021 and 2020, the Company has not made any of the irrevocable designations described above.
Impairment of financial assets
The Company uses an impairment model based on expected credit losses rather than losses incurred, applicable to financial assets
subject to such assessment (i.e. financial assets measured at amortized cost and at fair value through other comprehensive income),
as well as lease receivables, contract assets, certain written loan commitments, and financial guarantee contracts. The expected
credit losses on these financial assets are estimated from the initial recognition of the asset at each reporting date, using as a refer-
ence the past experience of the Company’s credit losses, adjusted for factors that are specific to the debtors or groups of debtors,
general economic conditions, and an assessment of both the current direction and the forecast of future conditions.
a. Trade receivables
The Company adopted the simplified expected loss calculation model, through which expected credit losses during the account
receivable’s lifetime are recognized.
The Company performs an analysis of its portfolio of customer receivables, in order to determine if there are significant customers
for whom it requires an individual assessment; meanwhile, customers with similar characteristics that share credit risks (partic-
ipation in the portfolio of accounts receivable, type of market, sector, geographic area, etc.), are grouped to be evaluated
collectively.
In its impairment assessment, the Company may include indications that the debtors or a group of debtors are experiencing
significant financial difficulties, and also observable data indicating that there is a significant decrease in the estimated cash flows
to be received, including arrears. For purposes of the historical estimate, the Company considers that the following constitutes
an event of default, since historical experience indicates that financial assets are not recoverable when they meet any of the
following criteria:
• The debtor does not fulfill its financial agreements; or
•
Information obtained internally or from external sources indicates that it is unlikely that the debtor will pay its creditors,
including the Company, in its entirety (without considering any guarantee held by the Company).
The Company defined the breach threshold as the period from which the recovery of the account receivable subjected to analysis
is marginal, considering the internal risk management customers with similar characteristics sharing credit risks (participation in
trade receivables portfolio, type of market, sector, geographic area, etc.), are grouped to be evaluated collectively.
b. Other financial instruments
The Company recognizes credit losses expected during the asset’s lifetime of all financial instruments for which credit risk has
significantly increased since its initial recognition (assessed on a collective or individual basis), considering all the reasonable and
sustainable information, including the one referring to the future. If at the presentation date, the credit risk a financial instrument
has not significantly increased since its initial recognition, the Company calculates the loss allowance for that financial instrument
as the amount of expected credit losses in the following 12 months.
In both cases, the Company recognizes in profit or loss of the period the decrease or increase in the expected credit loss allow-
ance at the end of the period.
Management assesses the impairment model and the inputs used therein at least once every 3 months, in order to ensure that
they remain in effect based on the current situation of the portfolio.
Financial liabilities
Non-derivative financial liabilities 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.
Trade payables are obligations to pay for goods or services that have been acquired or received from suppliers in the ordinary course
of business. Loans are initially recognized at fair value, net of transaction costs incurred. Loans are subsequently carried at amortized
cost; any difference between the funds received (net of transaction costs) and the settlement value is recognized in the consolidated
statement of income over the term of the loan using the effective interest method.
81
Derecognition of financial liabilities
The Company derecognizes financial liabilities if, and only if, the obligations of the Company are fulfilled, cancelled or have expired.
The difference between the carrying amount of the derecognized financial liability and the consideration paid and payable is recog-
nized in profit or loss.
Additionally, when the Company carries out a refinancing transaction and the previous liability qualifies to be derecognized, the costs
incurred in the refinancing are recognized immediately in profit or loss at the date of termination of the previous financial liability.
Offsetting financial assets and liabilities
Assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position when the right
to offset the recognized amounts is legally enforceable and there is an intention to settle on a net basis or to realize the asset and
settle the liability simultaneously.
h) Derivative financial instruments and hedging activities
All derivative financial instruments are identified and classified as fair value hedges or cash flow hedges, for trading or the hedging
of market risks and are recognized in the consolidated 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 fair value of hedging derivatives is classified as a non-current asset or liability if the remaining maturity of the hedged item is
more than 12 months and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months.
Derivative financial instruments classified as hedges are contracted for risk hedging purposes and meet all hedging requirements;
their designation at the beginning of the hedging operation is documented, describing the objective, primary position, risks to be
hedged and the effectiveness of the hedging relationship, characteristics, accounting recognition and how the effectiveness is to
be measured.
Fair value hedges
Changes in the fair value of derivative financial instruments are recorded in the consolidated statement of income. The change in fair
value hedges and the change in the primary position attributable to the hedged risk are recorded in the consolidated statement of
income in the same line item as the hedged position. As of December 31, 2022, 2021 and 2020, the Company does not hold 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 profit or loss
when the hedged position affects these. The ineffective portion is immediately recorded in income.
Net investment hedge in a foreign transaction
The Company applies the hedge accounting to currency risk arising from its investments in foreign transactions for variations in
exchange rates arising between the functional currency of such transaction and the functional currency of the holding entity, regard-
less of whether the investment is maintained directly or through a sub-holding entity. Variation in exchange rates is recognized in the
other items of comprehensive income as part of the translation effect, when the foreign transaction is consolidated.
To this end, the Company designates the debt denominated in a foreign currency as a hedging instrument; therefore, the exchange
rate effects caused by the debt are recognized in other components of comprehensive income, on the translation effects line item,
to the extent that the hedge is effective. When the hedge is not effective, exchange differences are recognized in profit or loss.
Suspension of hedge accounting
The Company suspends hedge accounting when the derivative financial instrument or the non-derivative financial instrument has
expired, is cancelled or exercised, when the derivative or non-derivative financial instrument is not highly effective to offset the
changes in the fair value or cash flows of the hedged item. The replacement or successive renewal of a hedging instrument for
another one is not an expiration or resolution if such replacement or renewal is part of the Company’s documented risk management
objective and it is consistent with this.
82 On suspending hedge accounting, in the case of fair value hedges, the adjustment to the carrying amount of a hedged amount 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 consolidated statement of income. 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 consolidated statement of income, to the extent the forecasted
transaction impacts it.
The fair value of derivative financial instruments reflected in the consolidated 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 closing date.
i) Inventories
Inventories are stated at the lower of cost or 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 borrowing 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 trans-
ferred from other comprehensive income corresponding to raw material purchases that qualify as cash flow hedges.
j) 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 flow 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 consolidated
statement of income during the year they are incurred. Major improvements are depreciated over the remaining useful life of the
related asset.
When the Company carries out major repairs or maintenance of its property, plant and equipment assets, the cost is recognized in
the book value of the corresponding asset as a replacement, provided that the recognition criteria are met. The remaining portion
of any major repair or maintenance is derecognized. The Company subsequently depreciates the recognized cost in the useful life
assigned to it, based on its best estimate of useful life.
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 estimated useful lives of the classes of assets are as follows:
Buildings and constructions
Machinery and equipment
Vehicles
Furniture and lab and IT equipment
Other
40 to 50 years
10 to 40 years
15 years
2 to 13 years
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.
Borrowing costs related to financing of property, plant and equipment whose acquisition or construction requires a substantial
period (nine months), 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 consolidated statement
of income 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 value in use.
83 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 consolidated statement of income.
k) Leases
The Company as lessee
The Company evaluates whether a contract is or contains a lease agreement at inception of a contract. A lease is defined as an
agreement or part of an agreement that conveys the right to control the use of an identified asset for a period of time in exchange
for a consideration. The Company recognizes an asset for right-of-use and the corresponding lease liability, for all lease agreements
in which it acts as lessee, except in the following cases: short-term leases (defined as leases with a lease term of less than 12 months);
leases of low-value assets (defined as leases of assets with an individual market value of less than US$5,000 (five thousand dollars));
and, lease agreements whose payments are variable (without any contractually defined fixed payment). For these agreements,
which exempt the recognition of an asset for right-of-use and a lease liability, the Company recognizes the rent payments as an
operating expense in a straight-line method over the lease period.
The right-of-use asset comprises all lease payments discounted at present value; the direct costs to obtain a lease; the advance lease
payments; and the obligations of dismantling or removal of assets. The Company depreciates the right-of-use asset over the shorter
of the lease term or the useful life of the underlying asset; therefore, when the lessee will exercise a purchase option, the lessee shall
depreciate the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Depreciation
begins on the lease commencement date.
The lease liability is initially measured at the present value of the future minimum lease payments that have not been paid at that
date, using a discount rate that reflects the cost of obtaining funds for an amount similar to the value of the lease payments, for
the acquisition of the underlying asset, in the same currency and for a similar period to the corresponding contract (incremental
borrowing rate). When lease payments contain non-lease components (services), the Company has chosen, for some class of assets,
not to separate them and measure all payments as a single lease component; however, for the rest of the class of assets, the Company
measures the lease liability only considering lease payments, while all of the services implicit in the payments, are recognized directly
in the consolidated statement of income as operating expenses.
To determine the lease term, the Company considers the non-cancellable period, including the probability to exercise any right to
extend and/or terminate the lease term.
Subsequently, the lease liability is measured increasing the carrying amount to reflect interest on the lease liability (using the effec-
tive interest method) and reducing the carrying amount to reflect the lease payments made.
When there is a modification in future lease payments resulting from changes in an index or a rate used to determine those payments,
the Company remeasures the lease liability when the adjustment to the lease payments takes effect, without reassessing the
discount rate. However, if the modifications are related to the lease term or exercising a purchase option, the Company reassesses
the discount rate during the liability’s remeasurement. Any increase or decrease in the value of the lease liability subsequent to this
remeasurement is recognized as an adjustment to the right-of-use asset to the same extent.
Finally, the lease liability is derecognized when the Company fulfills all lease payments. When the Company determines that it is
probable that it will exercise an early termination of the contract that leads to a cash disbursement, such disbursement is accounted
as part of the liability’s remeasurement mentioned in the previous paragraph; however, in cases in which the early termination does
not involve a cash disbursement, the Company cancels the lease liability and the corresponding right-of-use asset, recognizing the
difference immediately in the consolidated statement of income.
The Company as lessor
Leases, determined based on the definition of IFRS 16, for which the Company acts as lessor, are classified as financial or operating.
As long as the terms of the lease transfer substantially all the risks and rewards of the property to the lessee, the contract is classified
as a finance lease. The other leases are classified as operating leases.
84 Income from operating leases is recognized in straight line during the corresponding lease term. Initial direct costs incurred in
negotiating and arranging and operating lease are added to the carrying amount of the leased asset and are recognized straight- line
over the term of the lease. The amounts for finance leases are recognized as accounts receivable for the amount of the Company’s
net investment in the leases.
l) Intangible assets
Intangible assets are recognized in the consolidated statement of financial position 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:
i.
ii.
Indefinite useful life
These intangible assets are not amortized and are subject to annual impairment assessment. As of December 31, 2022, 2021 and
2020, no factors have been identified limiting the life of these intangible assets.
Finite useful life
These assets are recognized at cost less the accumulated amortization and impairment losses recognized. They are amortized on
a straight line basis over their estimated useful life, determined based on the expectation of generating future economic benefits,
and are subject to impairment tests when triggering events of impairment are identified.
The estimated useful lives of intangible assets with finite useful lives are summarized as follows:
Development costs
Non-compete agreements
Customer relationships
Patents
Software and licenses
Intellectual property
Defined life brands
15.5 years
5 to 10 years
6 to 7 years
10 years
3 to 7 years
20 to 25 years
5 to 22 years
Development costs
Research costs are recognized in income as incurred. Expenditures for 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 and 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. Devel-
opment expenditures that do not qualify for capitalization are recognized in income as incurred.
Licenses
Licenses acquired in a separate transaction are recorded at acquisition cost, while those acquired in a business combination are
recognized at fair value at acquisition date.
Licenses that have a defined useful life are presented at cost less accumulated amortization. Amortization is recorded by the straight-
line method over its estimated useful life.
The acquisition of software licenses is capitalized based on the costs incurred to acquire and use the specific software.
Software development
Costs associated with the maintenance of software are recorded as expenses as incurred.
Development costs directly related with the design and tests of unique and identifiable software products controlled by the Company
are recorded as intangible assets when they fulfill the following criteria:
- Technically, it is possible to complete the intangible asset so that it may be available for its use or sale;
- The intangible asset is to be completed for use or sale;
- The ability to use or sell the intangible asset;
- The way in which the intangible asset is to generate probable future economic benefits;
85
-
The availability of adequate technical, financial or other type of resources, to complete the development and use or sell the
intangible asset; and
- The ability to reliably calculate the disbursement attributable to the intangible asset during its development.
The amount initially recognized for an intangible asset generated internally will be the sum of disbursements incurred from the
moment the element fulfills the conditions for recording, as established above. When no intangible asset internally generated may
be recognized, the disbursements for development are charged to income in the period they are incurred.
m) Goodwill
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.
n) Impairment of non-financial assets
Assets that have an indefinite useful life, for example, goodwill, are not depreciable 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 long-term assets other than goodwill that have suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.
When an impairment loss is reversed, the carrying amount of the asset or cash generating unit, is increased to the revised estimated
value of its recoverable amount, in such a way that the adjusted carrying amount does not exceed the carrying amount that would
have been determined if an impairment loss had not been recognized for that asset or cash generating unit in previous years. The
reversal of an impairment loss is recognized immediately in the consolidated statement of income.
o) Income tax
The amount of income taxes in the consolidated statement of income represents the sum of the current and deferred income taxes.
The amount of income taxes included in the consolidated statement of income represents the current tax and the effects of deferred
income tax assets determined in each subsidiary by the asset and liability method, applying the rate established by the legislation
enacted or substantially enacted at the consolidated statement of financial position date, wherever the Company operates and gener-
ates taxable income. The applicable rates are applied to the total temporary differences resulting from comparing the accounting
and tax bases of assets and liabilities, and that are expected to be applied when the deferred tax asset is realized or the deferred tax
liability is expected to be settled, considering, when applicable, any tax-loss carryforwards, prior to the recovery analysis. The effect
of the change in current tax rates is recognized in current income of the period in which the rate change is determined.
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 appropriate, based on the amounts expected to be paid to the tax authorities.
Deferred tax assets are recognized only when it is probable that future taxable profits will exist against which the deductions for
temporary differences can be taken.
The deferred income tax on temporary differences arising from investments in subsidiaries and associates is recognized, unless the
period of reversal of temporary differences is controlled by the Company and it is probable that the temporary differences will not
reverse in the near future.
Deferred tax assets and liabilities are offset when a legal right exists, and when the taxes are levied by the same tax authority.
86 p) Employee benefits
i. Pension plans
Defined contribution plans:
A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The
Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to their service in the current and past periods. The contributions are recognized as employee
benefit expense on the date that is required the contribution.
Defined benefit plans:
A defined benefit plan is a plan, which specifies the amount of the pension an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the consolidated statement of financial position in respect of defined benefit plans is the present value
of the defined benefit obligation at the consolidated 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 in
conformity with IAS 19, Employee Benefits, 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 actuarial assumptions are recognized directly in other items of the
comprehensive income in the year they occur and will not be reclassified to the results of the period.
The Company determines the net finance expense (income) by applying the discount rate to the liabilities (assets) from net
defined benefits.
Past-service costs are recognized immediately in the consolidated statement of income.
ii. Post-employment medical benefits
The Company provides medical benefits to retired employees after termination of employment. The right to access these bene-
fits 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. The benefits that will be paid in the long
term are discounted at their present value.
iv. Short-term benefits
The Company grants 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. Employee participation in profit and bonuses
The Company recognizes a liability and an expense for bonuses and employee participation in profits when it has a legal or
assumed obligation to pay these benefits and determines the amount to be recognized based on the profit for the year after
certain adjustments.
q) Provisions
Provisions represent a present legal obligation or a constructive obligation as a result of past events where an outflow of resources to
meet the obligation is likely and where the amount has been reliably estimated. Provisions are not recognized for future operating losses.
87
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the value of money over time and the risks specific to the obligation. The increase in the
provision due to the passage 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 consid-
ering 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.
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.
r) Share based payment
The Company’s compensation plans are based 50% on the market value of the shares of its holding entity and the other 50% on the
market value of the shares of Alpek SAB, granted to certain senior executives of the Company and its subsidiaries. The conditions
for granting such compensation to the eligible executives include compliance with certain financial metrics such as the level of profit
achieved and remaining in the Company for up to 5 years, among other requirements. The Board of Directors of Alfa 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.
The payment plan is subject to the discretion of Alfa’s senior Management. Adjustments to this estimate are charged or credited to
the consolidated statement of income.
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 within 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 consolidated statement of income.
s) Treasury shares
Alpek SAB’s stockholders periodically authorize 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 presented as a reduction to stock-
holders’ equity at the purchase price. These amounts are stated at their historical value.
t) Capital stock
Alpek SAB’s common shares are classified as capital stock within stockholders’ equity. Incremental costs directly attributable to the
issuance of new shares are included in equity as a reduction from the consideration received, net of tax.
u) Comprehensive income
Comprehensive income is composed of net income plus the annual effects of their capital reserves, net of taxes, which are comprised
of the translation of foreign subsidiaries, the effects of derivative cash flow hedges, actuarial gains or losses, the effects of the
change in the fair value of financial instruments available for sale, the equity in other items of comprehensive income of associates
and joint ventures as well as other items specifically required to be reflected in stockholders’ equity, and which do not constitute
capital contributions, reductions and distributions.
v) Segment reporting
Segment information is presented consistently with the internal reporting provided to the chief operating decision maker who is the
highest authority in operational decision-making, resource allocation and assessment of operating segment performance.
w) Revenue recognition
Revenues comprise the fair value of the consideration received or to receive for the sale of goods and services in the ordinary course
of the transactions, and are presented in the consolidated statement of income, net of the amount of variable considerations, which
comprise the estimated amount of returns from customers, rebates and similar discounts and payments made to customers with the
objective that goods are accommodated in attractive and favorable spaces at their facilities.
To recognize revenues from contracts with customers, the comprehensive model for revenue recognition is used, which is based on
a five-step approach consisting of the following: (1) identify the contract; (2) identify performance obligations in the contract; (3)
determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize
revenue when the Company satisfies a performance obligation.
88 i. Revenue from the sale of goods and products
Contracts with customers are formalized by commercial agreements complemented by purchase orders, whose costs comprise
the promises to produce, distribute and deliver goods based on the contractual terms and conditions set forth, which do not
imply a significant judgment to be determined. When there are payments related to obtaining contracts, they are capitalized and
amortized over the term of the contract.
Performance obligations held by the Company are not separable, and are not partially satisfied, since they are satisfied at a
point in time, when the customer accepts the products. Moreover, the payment terms identified in most sources of revenue are
short-term, with variable considerations including discounts given to customers, without financing components or guarantees.
These discounts are recognized as a reduction in revenue; therefore, the allocation of the price is directly on the performance
obligations of production, distribution and delivery, including the effects of variable consideration.
The Company recognizes revenue at a point in time, when control of sold goods has been transferred to the customer, which
is given upon delivery of the goods promised to the customer according to the negotiated contractual terms. The Company
recognizes an account receivable when the performance obligations have been met, recognizing the corresponding revenue;
moreover, the considerations received before completing the performance obligations of production and distribution are recog-
nized as customer advances.
Dividend income from investments is recognized once the rights of stockholders to receive this payment have been established
(when it is probable that the economic benefits will flow to the Company and the revenue can be reliably determined).
x) Earnings per share
Earnings per share are calculated by dividing the profit attributable to the stockholders of the controlling interest by the weighted
average number of common shares outstanding during the year. As of December 31, 2022, 2021 and 2020, there are no dilutive
effects from financial instruments potentially convertible into shares.
y) Changes in accounting policies and disclosures
i. New standards and changes adopted
In the current year, the Company has applied a number of amendments to IFRS issued by the IASB that are mandatorily effective
for an accounting period that begins on or after January 1, 2022. The conclusions related to their adoption are described as
follows:
Amendments to IFRS 3, Business Combination – Reference to the Conceptual Framework
The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They also add
to IFRS 3 a requirement that, for obligations within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets,
an acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For
a levy that would be within the scope of IFRIC 21, Levies, the acquirer applies IFRIC 21 to determine whether the obligating event
that gives rise to a liability to pay the levy has occurred by the acquisition date.
The Company applied these amendments to business combinations completed during the year ended December 31, 2022, which
are described in Note 2, without having an impact on its consolidated financial statements.
Amendments to IAS 16, Property, plant and equipment - Proceeds before intended use
The amendments prohibit deducting from the cost of an item of property, plant, and equipment any proceeds from selling items
produced before that asset is available for use, for example, proceeds while bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management. Consequently, an entity recognizes such
sales proceeds and related costs in profit or loss for the period. The Company measures the cost of those items in accordance
with IAS 2 Inventories.
The amendments also clarify the meaning of ‘testing whether an asset is functioning properly’. IAS 16 now specifies this as
assessing whether the technical and physical performance of the asset is such that it is capable of being used in the production
or supply of goods or services, for rental to others, or for administrative purposes.
89
The Company evaluated the amendments to IAS 16 and determined that the implementation of these amendments had no effect
on its financial information, since it currently does not have product sales before the property, plant and equipment are ready
for use.
Amendments to IAS 37, Provisions, Contingent Liabilities and Contingents Assets - Onerous Contracts - Cost of fulfilling a
contract
The amendments specify that the “cost of fulfilling” a contract comprises the costs that relate directly to the contract. Costs that
relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labor or
materials) and an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the
depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
The Company evaluated the amendments to IAS 37 and determined that the implementation of these amendments had no effect
on its financial information, since it does not have onerous contracts.
Annual Improvements to IFRS Accounting Standards 2018–2021 Cycle
The Company has adopted the amendments included in the Annual Improvements to IFRS Accounting Standards 2018-2021
Cycle for the first time in the current year. The Annual Improvements include amendments to four standards, which did not have
an impact on the financial information, as they were not of significant applicability:
• Amendments to IFRS 1, First time adoption of International Financial Reporting Standards
• Amendments to IFRS 9, Financial instruments
• Amendments to IFRS 16, Leases
• Amendments to IAS 41, Agriculture
ii. New, revised and issued IFRS, but not yet effective
As of the date of these consolidated financial statements, the Company has not applied the following new and revised IFRS, that
have been issued but not yet effective, of which the adoption of these is not expected to a material impact on the consolidated
financial statements in future periods, considering that they are not of significant applicability:
• Amendments to IFRS 17, Insurance contracts (1)
• Amendments to IAS 1 and Practice Statement 2 - Disclosure of accounting policies (1)
• Amendments to IAS 8 - Definition of accounting estimates (1)
• Amendments to IAS 12 – Income taxes - Deferred taxes related to assets and liabilities arising from a single transaction (1)
• Amendments to IAS 1 – Classification of liabilities as current and non-current (1)
• Amendments to IAS 1 – Classification of debt with covenants (2)
• Amendments to IFRS 10 and IAS 28 - Sale or contribution of assets between an investor and its associate or joint venture (2)
• Amendments to IFRS 16 - Lease liability in a sale and leaseback (3)
(1) Effective for annual reporting periods beginning on January 1, 2023
(2)
(3) Effective date of the amendments has yet to be set by the IASB
Effective for annual reporting periods beginning on January 1, 2024
4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company’s activities expose it to various financial risks: market risk (including exchange rate risk, price risk and interest rate
variation risk), credit risk and liquidity risk.
The Company has a general risk management program focused on the unpredictability of financial markets and seeks to minimize
the potential adverse effects on its financial performance.
The objective of the risk management program is to protect the financial health of its business, taking into account the volatility
associated with foreign exchange and interest rates. Sometimes, the Company uses derivative financial instruments to hedge certain
exposures to risks. In addition, due to the nature of the industries in which it participates, the Company has performed hedges of
input prices with derivative financial instruments.
Alfa has a Risk Management Committee (“RMC”), comprised of the Board’s Chairman, the Chief Executive Officer (“CEO”), Chief
Financial Officer (“CFO”) and a Risk Management Officer (“RMO”) acting as technical secretary. The RMC reviews derivative trans-
actions proposed by the subsidiaries of Alfa, including Alpek, in which a potential loss analysis surpasses US$1. This Committee
90
supports both the CEO and the President of Board of Alfa. All new derivative transactions which the Company proposes to enter
into, as well as the renewal or cancellation of derivative arrangements, must be approved by both Alpek’s and Alfa’s CEO, according
to the following schedule of authorizations:
Chief Executive Officer of the Company
Risk Management Committee of Alfa
Finance Committee
Board of Directors of Alfa
Maximum possible
loss US$1
Individual
transaction
Annual
cumulative
transactions
1
30
100
>100
5
100
300
>300
The proposed transactions must meet certain criteria, including that the hedges are lower than established risk parameters, and that
they are the result of a detailed analysis and properly documented. Sensitivity analysis and other risk analyses should be performed
before the operation is entered into.
Alfa’s risk management policy indicates that hedging positions should always be less than the projected exposure to allow an
acceptable margin of uncertainty. Exposed transactions are expressly prohibited. The Company’s policy indicates that the further
the exposure is, the lower the coverage, based on the following table:
Maximum coverage (as a percentage of the projected exposure)
Commodities
Energy costs
Exchange rate for operating transactions
Exchange rate for financial transactions
Interest rates
Current year
100
75
80
100
100
Capital management
The Company’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can continue
to provide returns to stockholders and benefits to other stakeholders, as well as maintaining an optimal capital structure to reduce
the cost of capital.
To maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to stockholders, return equity to
stockholders, issue new shares or sell assets to reduce debt.
Alpek reviews capital based on a leverage ratio. This percentage is calculated by dividing total liabilities by total stockholders’ equity.
The financial ratio of total liabilities/total equity was 1.62, 1.50 and 1.34 as of December 31, 2022, 2021 and 2020, respectively,
resulting in a leverage ratio that meets the Company’s management and risk policies.
Financial instruments by category
The following are the Company’s financial instruments by category.
91
As of December 31, 2022, 2021 and 2020, financial assets and liabilities consist of the following:
Cash and cash equivalents
Restricted cash
Financial assets measured at amortized cost:
Trade and other accounts receivable
Other non-current assets
Financial assets measured at fair value through profit or loss
Derivate financial instruments (1)
Financial liabilities measured at amortized cost:
Debt
Trade and other accounts payable
Lease liability
Financial liabilities measured at fair value:
Derivative financial instruments (1)
$
$
$
2022
6,319
553
19,669
3,960
10
30,511
39,081
30,505
3,624
As of December 31,
2021
2020
$
10,541
13
$
20,725
4,085
351
10,144
12
12,726
4,518
524
$
$
35,715
$
27,924
31,993
27,657
3,608
$
30,652
17,991
3,010
1,241
254
66
$
74,451
$
63,512
$
51,719
(1) The Company designated the derivative financial instruments that comprise this balance as accounting hedges, in accordance with what is described later in this Note.
Fair value of financial assets and liabilities valued at amortized cost
The amount of cash and cash equivalents, restricted cash, trade and other accounts receivable, other current assets, trade and other
accounts payable, current debt and other current liabilities approximate their fair value, due to their short maturity. The net carrying
amount of these accounts represents the expected cash flows to be received as of December 31, 2022, 2021 and 2020.
The carrying amount and estimated fair value of assets and liabilities valued at amortized cost is presented below:
As of December 31,
2022
2021
2020
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Financial assets:
Non-current accounts receivable
Financial liabilities:
Non-current debt
$
3,344
$
3,339
$
3,471
$
3,469
$
3,942
$
3,941
37,344
34,519
31,436
32,724
30,335
32,701
The carrying amount of the debt, for the purpose of computing its fair value, is presented gross of interest payable and issuance
costs.
The estimated fair values as of December 31, 2022, 2021 and 2020 were determined based on discounted cash flows and with
reference to the yields at the closing of the debt securities, using rates reflecting a similar credit risk, depending on the currency,
maturity period and country where the debt was acquired. The primary rates used are the Interbank Equilibrium Interest Rate
(“TIIE” for its acronym in Spanish) for instruments in Mexican pesos, London Interbank Offer Rate (“LIBOR”) and Secured Overnight
Financing Rate (“SOFR”), for instruments in U.S. dollars. Measurement at fair value for non-current accounts receivable is deemed
within Level 3 of the fair value hierarchy, while, for the financial debt, the measurement at fair value is deemed within Levels 1 and 2
of the hierarchy, as described herein below.
Market risks
(i) Exchange rate risk
The Company is exposed to foreign exchange risk, primarily derived from the transactions and balances that the subsidiaries
conduct and have in foreign currency, respectively. A foreign currency is that which is different from the functional currency
of an entity. In addition, the Company is exposed to changes in the value of foreign investments (subsidiary entities that have
a functional currency different from that of the ultimate holding company), which arise from changes in the exchange rates
between the functional currency of the foreign operation and the functional currency of the holding company (pesos); therefore,
92
the Company applies hedge accounting to mitigate this risk, designating financial liabilities as hedging instruments, regardless
of whether the foreign investment is directly or indirectly maintained through a subholding.
The behavior of the exchange rates fluctuations between the Mexican peso, U.S. dollar and the euro represents an important
factor for the Company due to the effect that such currencies have on its consolidated results, and because, in addition, Alpek
has no interference in its determination. Historically, in certain times when the Mexican peso has appreciated against other
currencies, such as the U.S. dollar, the Company’s profit margins have been reduced. On the other hand, when the Mexican peso
has lost value, Alpek’s profit margins have been increased. However, there is no assurance that this correlation will be repeated in
case the exchange rate between the Mexican peso and any other currency fluctuates again, because these effects also depend
on the balances in foreign currency that the entities of the Company hold.
Accordingly, the Company sometimes enters into derivative financial instruments in order to keep under control the integrated
total cost of its financing and the volatility associated with exchange rates. Additionally, as most of the Company’ revenues are
in U.S. dollars, there is a natural hedge against its obligations in U.S. dollars.
The Company has the following assets and liabilities in foreign currency in relation to the functional currency of the subsidiary
entities, translated to millions of Mexican pesos at the closing exchange rate as of December 31, 2022:
Financial assets
Financial liabilities
Foreign exchange financial position
MXN
USD
$
$
21,404
(21,167)
$
32,629
(46,207)
237
$
(13,578)
$
$
EUR
1,299
(325)
974
The exchange rates used to translate the foreign currency financial positions to Mexican pesos are those described in Note 3 c.
Based on the financial positions in foreign currency maintained by the Company, a hypothetical variation of 10% in the MXN/USD
and MXN/EUR exchange rate and keeping all other variables constant, would result in an effect of $(1,237) on the consolidated
statement of income and consolidated stockholders’ equity.
Financial instruments to hedge net investments in foreign transactions
The Company designated certain non-current debt instruments as hedging instruments to net investments in foreign transac-
tions, in order to mitigate the variations in exchange rates arising between the functional currency for such transactions and the
functional currency of the holding or sub-holding company that maintains these investments.
The Company formally designated and documented each hedging relationship establishing objectives, strategy to hedge the
risk, the identification of the hedging instrument, the hedged item, the nature of the risk to be hedged, and the methodology to
assess the effectiveness. Given that the exchange rate hedging relationship is clear, the method that the Company used to assess
the effectiveness consisted of a qualitative effectiveness test by comparing the critical terms between the hedging instruments
and the hedged items.
The hedge will be effective as long as the notional debt designated as a hedging instrument is equal to or less than the value
of the net assets of the covered foreign operation. On the other hand, when the value of the net assets of the foreign operation
is less than the notional value of the designated debt, the Company rebalances the hedging relationship and recognizes the
ineffectiveness in the income statement.
93
As of December 31, 2022, 2021 and 2020, Alpek maintains the following hedging relationships:
As of December 31, 2022
Holding
Functional Currency
Hedging Instrument
Notional Value
Hedged Item
Alpek SAB
MXN
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
US$
-
300
22
100
Indelpro
Temex
Dak Americas Ms
Dak Resinas Americas
Akra Polyester
US$
422
As of December 31, 2021
Holding
Functional Currency
Hedging Instrument
Notional Value
Hedged Item
Alpek SAB
MXN
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
US$
49
267
22
100
Indelpro
Temex
Dak Americas Ms
Dak Resinas Americas
Akra Polyester
US$
438
As of December 31, 2020
Holding
Functional Currency
Hedging Instrument
Notional Value
Hedged Item
Alpek SAB
MXN
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
Senior Notes 144A fixed rate
US$
72
267
22
Indelpro
Temex
Dak Americas Ms
Dak Resinas Americas
Akra Polyester
US$
361
Net assets of the
hedged item
US$
US$
240
68
232
82
195
817
Net assets of the
hedged item
US$
US$
261
42
240
101
179
823
Net assets of the
hedged item
US$
US$
232
69
223
98
159
781
For the years ended December 31, 2022, 2021 and 2020, the Company’s average hedging ratio amounted to 48.9%, 54.9% and 49.5%,
respectively. Therefore, the exchange rate fluctuation generated by the hedging instruments for the years ended December 31, 2022,
2021 and 2020 amounted to a net gain (loss) of $545, $(238) and $(403), respectively, which was recognized in other comprehensive
income, offsetting the translation effect generated by each foreign investment. The hedging effectiveness results confirm that the
hedging relationships are highly effective due to the economic relationship between the hedging instrument and the hedged items.
Derivative financial instruments to hedge exchange rate risks
As of December 31, 2022, 2021 and 2020, the Company holds forwards (EUR/USD) to hedge different needs. For 2022, 2021 and
2020, these forwards are mirrored to an entity with the functional currency of pound sterling (GBP), because part of its revenue is
received in euros and part of its purchases are made in US dollars. Therefore, a highly probable forecasted transaction related to
budgeted sales and purchases in each corresponding currency has been documented as a hedged item.
For accounting purposes, the Company has designated such forwards as cash flow hedging relationships to hedge the aforemen-
tioned items, and has formally documented these relationships, setting the objectives, management’s strategy to hedge the risk,
identification of hedging instruments, hedged items, the nature of the risk to be hedged and the methodology of the effectiveness
assessment.
94
The conditions of the derivative financial instruments and the considerations of their valuation as hedging instruments are
mentioned below:
Characteristics
Currency
Notional amount
Strike (average)
Maturity
Carrying amount
Change in the fair value to measure ineffectiveness
Reclassification from OCI to profit or loss
Recognized in OCI, net of reclassifications
Change in the fair value of the hedged item
to measure ineffectiveness
Change in the fair value of the forward
Forwards EUR/USD
2022
EUR
24
1.0738
2021
EUR
8.1
1.2421
2020
EUR
39.9
1.2169
Monthly through
Monthly through
Monthly through
December 30, 2023 December 30, 2022
December 30, 2022
$(2.3)
$1.6
-
$(2.3)
$(1.6)
$(18.8)
$16.5
15.9
-
16.5
(15.9)
28.4
$ (11.9)
(11.9)
-
(11.9)
11.9
(13.3)
As of December 31, 2022, 2021 and 2020, the Company held EUR/USD forwards that were contracted with the objective of
reducing transaction costs; therefore, for accounting purposes and for hedge evaluation, derivatives are divided into synthetic
derivatives to hedge each hedged item individually (revenue in euros and purchases in dollars). The Company determined that
they are highly effective according to the characteristics and modeling of both hedged items, resulting in 99% effectiveness
for 2022, 2021 and 100% effectiveness for 2020. Furthermore, both the credit profile of the Company and the counterparty are
adequate and are not expected to change in the medium term, so the credit risk component is not considered to dominate the
hedging relationship.
In accordance with the reference amounts described and the way in which the flows of the derivatives are exchanged, the average
coverage ratio for the EUR/USD exchange rate for 2022 is 25%, 55% for 2021 and 100% for 2020. If necessary, a rebalancing will
be done to maintain this relationship for the strategy.
The source of ineffectiveness may be caused by the difference in the settlement date of the derivative and the hedged item, and
that the expected amount becomes a lower amount than the hedging instruments, as well as the credit risk. For the years ended
December 31, 2022, 2021 and 2020, no ineffectiveness was recognized in profit or loss.
(ii) Price risk
In carrying out its activities, the Company depends on the supply of raw materials provided by its suppliers, both in México and
abroad, among which are intermediate petrochemicals, principally.
In recent years, the price of certain inputs has shown volatility, especially those related to oil and natural gas.
In order to fix the selling prices of certain of its products, the Company has entered into agreements with certain customers. At
the same time, it has entered into transactions involving derivatives on natural gas that seek to reduce price volatility of the prices
of this input.
Additionally, the Company 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 Appendix” and “Confirmation”.
95
Regarding natural gas, Pemex is the only supplier in México. The selling price of natural gas is determined based by the price of that
product on the “spot” market in South Texas, USA, which has experienced volatility. For its part, the Mexican Electric Commission
is a decentralized public company in charge of producing and distributing electricity in México. 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 in US dollars per MMBTU for 2022, 2021 and 2020 was $6.4, $3.8 and $2.0, respectively.
As of December 31, 2022, 2021 and 2020, the Company had hedges of natural gas prices for a portion expected of consumption
needs in México and the United States.
Derivative contracts to hedge adverse changes in commodity prices
The Company uses natural gas to operate, and some of its main raw materials are paraxylene, ethylene and monoethylene glycol
(MEG), ethane and terephthalic acid (PTA). Therefore, an increase in the price of natural gas, paraxylene, ethylene, monoethylene
glycol (MEG), ethane or terephthalic acid (PTA), would have a negative impact on the operating cash flows. The objective of the
hedge designated by the Company is to mitigate against the exposure in the price increase of the aforementioned commodities, for
future purchases by contracting swaps where a variable price is received and a fixed price is paid. In the case of PET, the Company
uses these derivatives to hedge against sales related to this commodity. The Company has implemented strategies called roll-over,
through which it analyzes on a monthly basis if more derivatives are contracted to expand the time or the amount of coverage;
currently, the Company has contracted hedges until December 2023. Raw material derivatives are mirrored to DAK Americas and
DAK Resinas Américas México and Alpek Polyester UK, as the risk lies in such entities, and derivative financial instruments are
contracted by Alpek Polyester; this process is carried out through the formalization of internal derivatives to be able to apply
hedging accounting.
These derivative financial instruments have been classified as cash flow hedges for accounting purposes. In this sense, manage-
ment has documented, as a hedged item, a highly probable transaction in relation to the budget for purchases of these commod-
ities. The conditions of the derivative financial instruments and the considerations of their valuation as hedging instruments are
mentioned below:
Characteristics
Total notional
Units
Price received
Price paid (average)
Maturity (monthly)
Net position of the swap (1)
Ineffectiveness recognized in the statement of income
Change in the fair value to measure ineffectiveness
Reclassification from OCI to profit or loss
Balance recognized in OCI, net of reclassifications
Change in the fair value to measure ineffectiveness of hedge item
Effectiveness test results
As of December 31, 2022
Natural
Gas Swaps
Paraxylene
Swaps
MEG
Swaps
70,973,855
MMBtu
Fair value
$4.43/MMBtu
272,650
MT
Fair value
$970/MT
136,350
MT
Fair value
$586/MT
December 2024
January 2024
January 2024
$(950.3)
$(140.8)
-
(1,086.2)
-
(950.3)
1,086.5
99.97%
-
(219.1)
31.2
(172.0)
219.3
99.92%
$(137.6)
-
(213.8)
(49.6)
(88.1)
213.9
99.92%
(1) Due to the high volume of operations, the net position of derivative financial instruments is presented; however, since these instruments do not meet the criteria for the
offsetting of financial instruments, they are presented in their gross amounts in the consolidated statement of financial position.
96
Characteristics
Total notional
Units
Price received
Price paid (average)
Maturity (monthly)
Net position of the swap (2)
Ineffectiveness recognized in the statement of income
Change in the fair value to measure ineffectiveness
Reclassification from OCI to profit or loss
Balance recognized in OCI, net of reclassifications
Change in the fair value to measure ineffectiveness
of hedge item
Effectiveness test results
MMBtu
Fair value
$1.69/MMBtu
June 2024
$ (154.8)
-
(147.2)
-
(154.8)
147.2
99.96%
As of December 31, 2021
Natural
Gas Swaps
Paraxylene
Swaps
Ethylene
Swaps
57,025,808
274,000
2,000,000
MT
Fair value
$821/MT
Lb
Fair value
$0.1544/lb
MEG
Swaps
174,400
MT
Fair value
$658/MT
January 2023
January 2022
January 2023
$ 317.5
$ 6.4
$ (88.8)
-
363.7
87.9
229.4
(363.8)
99.99%
-
7.7
6.4
-
(7.7)
100%
-
(96.9)
32.2
(121)
96.9
99.99%
(2) Due to the high volume of operations, the net position of derivative financial instruments is presented; however, since these instruments do not meet the criteria for the
offsetting of financial instruments, they are presented in their gross amounts in the consolidated statement of financial position.
Natural Gas
Swaps
Paraxylene
Swaps
PTA
Swaps
Ethylene
Swaps
PET
Swaps
MEG
Swaps
Ethane
Swaps
As of December 31, 2020
Characteristics
Total notional
Units
Price received
3,474,000
338,750
MMBtu
MT
2,000
MT
37,500,000
Lb
220
MT
MT
184,500
600,000
Fair value
Fair value
Fair value
Fair value
Fair value
Fair value
gal
Fair value
$0.21/gal
Price paid (average)
$2.73/MMBtu
$635/MT
$627/MT
$0.1567/lb
$910/Lbs
$501/MT
Maturity (monthly)
February 2022
January 2023
January 2021
January 2022
January 2021 January 2023
January 2021
Net position of the swap (3)
$ (5.4)
$ 121.5
$ (6.1)
$ 98.3
$ 0.8
$ 260.5
$ (0.2)
Ineffectiveness recognized in
the statement of income
-
-
-
-
Change in the fair value to
measure ineffectiveness
(4.2)
132.7
(6.1)
103.9
Reclassification from OCI to
profit or loss
-
(109.5)
(6.1)
Balance recognized in OCI, net
of reclassifications
(5.4)
231
-
39.9
58.4
-
0.8
0.8
-
-
273.3
2.1
-
(0.2)
(0.2)
258.4
-
Change in the fair value to
measure ineffectiveness
of hedge item
Effectiveness test results
4.2
99.91%
(132.8)
99.95%
6.1
99.96%
(103.9)
99.95%
(0.8)
99.96%
(273.4)
99.94%
0.4
99.96%
(3) Due to the high volume of operations, the net position of derivative financial instruments is presented; however, since these instruments do not meet the criteria for the
offsetting of financial instruments, they are presented in their gross amounts in the consolidated statement of financial position.
Additionally, as of December 31, 2020, the Company maintains an additional balance in other comprehensive income for an amount
of $31.2, due to the fact that derivatives contracted for hedging gasoline were settled in advance. Given that the forecasted trans-
action that was being hedged, future purchases, is still expected to occur, such balance will be recognized in the income statement
as the transaction occurs.
The change in the fair value of the derivative financial instruments recognized in OCI for the year ended December 31, 2022, 2021
and 2020 is $(1,182), $(592) and $885, respectively.
97
The fair value of the derivate financial instruments according to their classification in the consolidated statement of financial position
is as follows:
As of December 31, 2022
Asset
Liability
Natural Gas
Paraxylene
MEG
Forward
Total
As of December 31, 2021
Natural Gas
Paraxylene
Ethylene
MEG
Forward
Total
As of December 31, 2020
Natural Gas
Paraxylene
Ethanol
Ethylene
MEG
PTA
PET
Forward
Total
$
$
$
$
$
$
(950)
(151)
(138)
(2)
-
10
-
-
10
$
(1,241)
$
(1,231)
$
Total
(950)
(141)
(138)
(2)
Asset
Liability
Total
-
323
6
5
17
351
$
(155)
(5)
-
(94)
-
$
(155)
318
6
(89)
17
$
(254)
$
97
Asset
Liability
Total
-
164
-
98
261
-
1
-
$
(5)
(42)
(1)
-
-
(6)
-
(12)
$
(5)
122
(1)
98
261
(6)
1
(12)
$
524
$
(66)
$
458
With the reference amounts of these derivative financial instruments, the Company offsets the fluctuation of the prices of these
commodities that are used as raw material in the production processes of the entities.
For commodity hedging relationships, management is designating as a hedged item a specific risk, which is defined by the under-
lying assets that are clearly determined that the risk component is separable, it can be reliably measured and is also highly correlated.
On the other hand, in the measurement of the effectiveness of these hedges, the Company determined that they are highly effective
because the changes in the fair value and cash flows of each hedged item are compensated within the range of effectiveness estab-
lished by management. Due to the results shown on the effectiveness tests, it is confirmed that there is an economic relationship
between the hedging instruments and the hedged item. The method used by the Company is to offset cash flows using a hypothet-
ical derivative, which consists of comparing the changes in the fair value of the hedging instrument with the changes in the fair value
of the hypothetical derivative that would result in a perfect hedge.
98
As of December 31, 2022, according to the reference amounts described and the way in which the flows of the derivatives are
exchanged, the average coverage ratio for the natural gas, paraxylene, ethylene and ethane, PTA and PET for 2022, 2021 and
2020 are shown below and, if necessary, a rebalancing will be done to maintain this relationship for the strategy.
Average coverage ratio
Natural gas
Paraxylene
Ethylene/MEG
Ethane
Terephthalic acid (PTA)
PET
2022
29%
45%
37%
-
-
-
2021
21%
44%
47%
-
-
-
2020
6%
54%
58%
2%
5%
0.2%
The source of ineffectiveness can be caused mainly by the difference in the settlement date of the hedging instruments and the
hedged items, and that the budget becomes less than the hedging instruments. For the years ended December 31, 2022, 2021
and 2020, there was no ineffectiveness recognized in profit or loss.
(iii) Interest rate risk
The Company is exposed to interest rate risk mainly for long-term loans bearing interest at variable rates. Fixed-interest loans
expose the Company to interest rate risk at fair value, which reflects that Alpek might be paying interest at rates significantly
different from those of an observable market.
As of December 31, 2022, 70% of the financing is denominated at a fixed rate, and 30% at a variable rate.
As of December 31, 2022, if interest rates on variable rate loans are increased or decreased by 100 basis points in relation to the
rate in effect, the income and stockholders’ equity of the Company would change by $116.
Credit risk
Credit risk represents the potential loss due to non-compliance of counterparts in their payment obligations. 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.
The Company determines, from a business standpoint and credit risk profile, the significant customers with whom it maintains an
account receivable, distinguishing those that require an individual credit risk assessment. For the rest of the customers, the company
carries out its classification according to the type of market in which they operate (domestic or foreign), according with the business
and internal risk administration. Each subsidiary is responsible for managing and analyzing credit risk for each of its new customers
before setting the terms and conditions of payment. If wholesale customers are rated independent, 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. The maximum exposure to credit risk is given by the balances of these
items as presented in the consolidated state of financial position.
Individual risk limits are determined based on internal and external ratings in accordance with limits set by the Board of Directors.
The use of credit risk is monitored regularly. Sales to retail customers are in cash or by credit card. During the years ended December
31, 2022, 2021 and 2020, credit limits were not exceeded.
In addition, the Company performs a qualitative evaluation of economic projections, with the purpose of determining the possible
impact on probabilities of default and the rate of recovery that it assigns to its clients.
During the year ended December 31, 2022, there have been no changes in the techniques of estimation or assumption.
Liquidity risk
Projected cash flows are determined at each operating entity of the Company and subsequently the finance department consolidates
this information. The finance department of the Company continuously monitors the cash flow projections and liquidity require-
ments of the Company ensuring that sufficient cash and highly liquid investments are maintained to meet operating needs, and it’s
that some flexibility is maintained through open and committed credit lines. The Company regularly monitors and makes decisions
ensuring that the limits or covenants set forth in debt contracts are not violated. The projections consider the financing plans of
the Company, compliance with covenants, compliance with minimum liquidity ratios and internal legal or regulatory requirements.
99
The Company’s treasury department invests those funds in time deposits and marketable securities whose maturities or liquidity
allow flexibility to meet the cash needs of the Company.
The following table analyzes the derivative and non-derivative financial liabilities of the Company, grouped according to their matu-
rity, from the date of the consolidated statement of financial position to the contractual maturity date. Derivative financial liabilities
are included in the analysis if their contractual maturities are required to understand the timing of the Company’s cash flows. The
amounts disclosed in the table are contractual undiscounted cash flows.
As of December 31, 2022
Suppliers and other accounts payable
Current and non-current debt (excluding debt issuance costs)
Derivative financial instruments
As of December 31, 2021
Suppliers and other accounts payable
Current and non-current debt (excluding debt issuance costs)
Derivative financial instruments
As of December 31, 2020
Suppliers and other accounts payable
Current and non-current debt (excluding debt issuance costs)
Derivative financial instruments
Less than
a year
From
1 to 5 years
More than
5 years
$
$
$
30,505
8,445
1,220
27,657
3,519
248
17,991
1,508
66
$
$
$
-
19,183
21
-
10,540
6
-
23,252
-
$
$
$
-
23,515
-
-
25,828
-
-
11,796
-
Fair value hierarchy
The following is an analysis of financial instruments measured in accordance with the fair value hierarchy. The 3 different levels used
are presented below:
-
-
-
Level 1: Quoted prices for identical instruments in active markets.
Level 2: Other valuations including quoted prices for similar instruments in active markets that are directly or indirectly observable.
Level 3: Valuations made through techniques where one or more of their significant data inputs are unobservable.
The derivative financial instruments of the Company that are measured at fair value as of December 31, 2022, 2021 and 2020, are
located within Level 2 of the fair value hierarchy.
There were no transfers between Level 1 and 2 or between Level 2 and 3.
The specific valuation techniques used to value financial instruments include:
-
-
Market quotations or trader quotations for similar instruments.
The fair value of interest rate swaps is calculated as the present value of estimated future cash flows based on observable yield
curves.
The fair value of forward exchange agreements is determined using exchange rates at the closing balance date, with the resulting
value discounted at present value.
Other techniques such as the analysis of discounted cash flows, which are used to determine fair value of the remaining financial
instruments.
-
-
100
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 and 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 adjust-
ment to the carrying amounts of assets and liabilities within the next financial year are addressed below:
a) Estimated impairment of goodwill and intangible assets with indefinite useful lives
The Company performs annual tests to determine whether goodwill and intangible assets with indefinite useful lives have suffered
any impairment (see Note 12). For impairment testing, goodwill and intangible assets with indefinite lives are allocated to those
groups of cash-generating units (“CGUs”) from which the Company has considered that economic and operational synergies of
business combinations are generated. The recoverable amounts of the CGUs have been determined based on the calculations of
their value in use, which require the use of estimates. The most significant of these estimates are as follows:
-
Estimates of future gross and operating margins, according to the historical performance and industry expectations for each
CGU group.
- Discount rate based on the weighted average cost of capital (WACC) of each CGU or group of CGUs.
- Long-term growth rates.
b) Recoverability of deferred tax assets
Alpek has tax loss carryforwards, which can be used in the following years until maturity expires. Based on the projections of
taxable income that Alpek will generate in the subsequent years through a structured and robust business plan, management has
determined that current tax losses will be used before they expire and, therefore, it was considered probable that the deferred
tax assets for such losses will be recovered.
c) Long-lived assets
The Company estimates the useful lives of long-lived assets in order to determine the depreciation and amortization expenses to
be recorded during the reporting period. The useful life of an asset is calculated when the asset is acquired and is based on past
experience with similar assets, considering anticipated technological changes or any other type of changes; or in the case of the
right-of-use assets, based on the term of the lease agreement. Were technological changes to occur faster than estimated, or
differently than anticipated, the useful lives assigned to these assets could have to be reduced. This would lead to the recognition
of a greater depreciation and amortization expense in future periods. Alternatively, these types of technological changes could
result in the recognition of a charge for impairment to reflect the reduction in the expected future economic benefits associated
with the assets.
The Company reviews depreciable and amortizable assets on an annual basis for signs of impairment, or when certain events or
circumstances indicate that the book value may not be recovered during the remaining useful life of the assets. For intangible
assets with an indefinite useful life, the Company performs impairment tests annually and at any time that there is an indication
that the asset may be impaired.
To test for impairment, the Company uses projected cash flows, which consider the estimates of future transactions, including
estimates of revenues, costs, operating expenses, capital expenses and debt service. In accordance with IFRS, discounted future
cash flows associated with an asset or CGU are compared to the book value of the asset or CGU being tested to determine if
impairment or a reversal of impairment exist.
d) Estimation of default probabilities and recovery rate to apply the model of expected losses in the calculation of impairment of
financial assets
The Company assigns to customers with whom it maintains an account receivable at each reporting date, either individually or
as a group, an estimate of the probability of default on the payment of accounts receivable and the estimated recovery rate, with
the purpose of reflecting the cash flows expected to be received from the outstanding balances on such reporting date.
e) Business combinations
When business combinations are concluded, the acquisition method is required to recognize the identifiable net assets acquired
at fair value, at the date of acquisition; any excess of the consideration paid, which may include over the identified net assets, is
recognized as goodwill, which is subject to impairment tests at least once a year. On the other hand, any excess of the net assets
acquired over the consideration paid is recognized as a gain in profit or loss.
101
To estimate the fair value of the assets acquired and liabilities assumed, the Company uses observable market data to the extent
it is available. When the input data of Level 1 is not available, the Company hires an independent qualified appraiser to perform
the valuation. Management works closely with the independent qualified appraiser to establish the valuation techniques, the
premises, the appropriate input data and the criteria to be used in the valuation models.
f) Estimation of the discount rate to calculate the present value of future minimum lease payments
The Company estimates the discount rate to be used in determining the lease liability, based on the incremental borrowing
rate (“IBR”).
The Company uses a three-tier model, with which it determines the three elements that make up the discount rate: (i) reference
rate, (ii) credit risk component and (iii) adjustment for characteristics of the underlying asset. In this model, management also
considers its policies and practices to obtain financing, distinguishing between that obtained at the corporate level (that is,
by the parent), or at the level of each subsidiary. Finally, for real estate leases, or, in which there is significant and observable
evidence of the residual value, the Company estimates and evaluates an adjustment for characteristics of the underlying asset,
taking into account the possibility that said asset is granted as collateral or guarantee against the risk of default.
g) Estimation of the lease term
The Company defines the lease term as the period for which there is a contractual payment commitment, considering the
non-cancelable period of the contract, as well as the renewal and early termination options that are likely to be exercised. To
measure the lease liability, the Company estimates the term of the contracts considering their contractual rights and limitations,
their business plan, as well as management’s intentions for the use of the underlying asset.
Additionally, the Company considers the early termination clauses of its contracts and the probability of exercising them, as part
of its estimate of the lease term.
5.2 Critical judgments in applying the entity’s accounting policies
a) Determination of exercise of control over certain investments in shares
The Company has evaluated critical control factors and has concluded that it should consolidate the financial statements of its
subsidiaries Polioles and Indelpro. The analysis performed by the Company included the assessment of the substantive decision
making rights of the respective shareholders set forth in their bylaws, resulting in management’s conclusion that it has the power
to govern their relevant activities.
b) Acquisitions of assets and business combinations
Management uses its professional judgment to determine whether the acquisition of a group of assets represents a business
combination or an acquisition of assets. Such determination could have a significant impact on how acquired assets and assumed
liabilities are accounted for, both in their initial recognition and in subsequent years.
6. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
The cash and cash equivalents are comprised as follows:
Cash on hand and in banks
Short-term bank deposits
Total cash and cash equivalents
2022
4,787
1,532
6,319
$
$
As of December 31,
2021
2020
$
$
7,784
2,757
10,541
$
$
7,016
3,128
10,144
102
Restricted cash
As of December 31, 2022, 2021 and 2020, the Company has restricted cash of approximately $553, $13 and $12, respectively. As of
December 31, 2022, the increase is primarily related to funds that were restricted as part of the Octal acquisition. The restricted cash
balance is classified as current and non-current assets in the consolidated statement of financial position, based on the expiration
date of the restriction.
7. TR ADE AND OTHER RECEIVABLES , NET
Trade and other accounts receivable, net are comprised as follows:
Trade accounts receivable
Trade and other accounts receivable from related parties (Note 28)
Recoverable taxes
Notes receivable
Interest receivable
Sundry debtors
Allowance for impairment of trade and other accounts receivable
Total
As of December 31,
2022
2021
2020
$
21,377
497
3,579
12
14
300
(2,531)
$
22,003
622
3,777
776
1
251
(2,928)
$
13,985
588
4,324
532
1
334
(2,714)
$
23,248
$
24,502
$
17,050
The changes in the impairment allowance for trade and other receivables in 2022, 2021 and 2020, with the expected losses model
used by the Company, are as follows:
For the year ended December 31, 2022:
Default
Opening
balance –
Cancellations
Ending
balance –
Customers or
customer groups
probability
Loss given
Impairment
Increases in
in the
Translation
Impairment
range
default range
allowance
the allowance
allowance
effect
allowance
Alpek Polyester (1)
Grupo Styropek (1)
Polioles
Indelpro and other (1)
0%-81%
0%
0%
.81%
0%-99%
0%-10%
0%-5%
8.22%
$
(2,596) $
(232)
(23)
(77)
(87) $
(25)
(7)
-
$
159
115
-
46
162
33
1
-
$
(2,362)
(109)
(29)
(31)
Total
$
(2,928) $
(119) $
320
$
196
$
(2,531)
(1) The default probability range does not consider customers and groups of customers for which the probability is 100%.
For the year ended December 31, 2021:
Default
Opening
balance –
Cancellations
Ending
balance –
Customers or
customer groups
probability
Loss given
Impairment
Increases in
in the
Translation
Impairment
range
default range
allowance
the allowance
allowance
effect
allowance
Alpek Polyester (1)
Grupo Styropek (1)
Polioles
Indelpro and other (1)
0% - 81%
0%
0%
1.23%
0% - 98%
0%- 10%
0% - 10%
0.25%
$
$
(2,521)
(99)
(28)
(66)
$
(42)
(129)
-
(17)
$
41
-
6
6
$
(74)
(4)
(1)
-
(2,596)
(232)
(23)
(77)
Total
$
(2,714) $
(188) $
53
$
(79) $
(2,928)
(1) The default probability range does not consider customers and groups of customers for which the probability is 100%.
103
For the year ended December 31, 2020:
Default
Opening
balance –
Cancellations
Ending
balance –
Customers or
customer groups
probability
Loss given
Impairment
Increases in
in the
Translation
Impairment
range
default range
allowance
the allowance
allowance
effect
allowance
Grupo Petrotemex (1)
Grupo Styropek (1)
Polioles
Indelpro and other (1)
0% - 80%
0%
0%
1.92%
0% - 34%
0%- 10%
0% - 10%
0.47%
$
$
(2,320)
(71)
(28)
(67)
(122) $
(26)
(1)
-
$
39
-
1
1
$
(118)
(2)
-
-
(2,521)
(99)
(28)
(66)
Total
$
(2,486) $
(149) $
41
$
(120) $
(2,714)
(1) The default probability range does not consider customers and groups of customers for which the probability is 100%.
As of December 31, 2022, 2021 and 2020, the Company has guaranteed accounts receivable of $2,322, $3,506 and $2,184, respectively.
The net change in the allowance for impairment of trade and other receivables of $(397) in the year ended December 31, 2022, was
primarily due to the decrease in the probability of default in certain customers compared to the beginning of the year. The change
in the estimate of impairment of trade and other receivables of $214 and $228, as of December 31, 2021 and 2020, respectively, was
mainly due to the increase in the probability of default in certain customer groups, as well as the translation effect.
The Company has long-term receivables that are guaranteed with the properties of M&G México’s PET production plant in Altamira,
México, which have been used by management to mitigate the exposure to credit risk of such financial assets, and therefore has not
recognized an impairment in their carrying amount.
8.
INVENTORIES
Finished good
Raw material and other consumables
Materials and tools
Production in progress
As of December 31,
2022
2021
2020
$
16,229
14,320
2,585
759
$
12,269
10,746
2,255
435
$
8,189
6,896
1,912
450
$
33,893
$
25,705
$
17,447
For the years ended December 31, 2022, 2021 and 2020, a provision amounting to $255, $94 and $72, respectively, related to
damaged, slow-moving and obsolete inventory was recognized in the consolidated statement of income.
As of December 31, 2022, 2021 and 2020, there were no inventories pledged as collateral.
9. PREPAYMENTS
The current portion and non-current portion of prepaid expenses is summarized as follows:
Current portion (1)
Non-current portion
Total prepayments
(1) This item mainly consists of advance payments for raw materials and prepaid insurance.
As of December 31,
2022
765
7
772
$
$
2021
686
31
717
2020
442
15
457
$
$
$
$
104
10. PROPERTY, PLANT AND EQUIPMENT, NET
For the year ended December 31, 2020
Opening balance
Additions
Additions for business acquisitions
Disposals
Impairment
Restatement and translation effect
Depreciation charges recognized in the year
Transfers
Land
Buildings and
constructions
Machinery
and
equipment
Vehicles
Furniture,
lab and
information
technology
equipment
Construction
in progress
Other
fixed
assets
Total
$
3,732
$
5,810
$
23,091
$
58
$
331
$
2,837 $
1,223 $
37,082
4
159
-
-
61
-
-
1
5
(1)
(11)
(138)
(315)
93
8
1,039
(52)
(2)
897
(2,710)
1,617
1
-
(1)
-
7
(17)
64
112
2
3
(1)
-
32
(92)
118
2,506
158
(29)
(2)
(123)
-
(1,933)
143
-
(23)
-
24
-
5
2,665
1,364
(107)
(15)
760
(3,134)
(36)
$
393
$
3,414 $
1,372 $
38,579
Ending balance as of December 31, 2020
$
3,956
$
5,444
$
23,888
$
As of December 31, 2020
Cost
Accumulated depreciation and
accumulated impairment
3,956
16,854
78,944
379
2,103
3,414
1,372
107,022
-
(11,410)
(55,056)
(267)
(1,710)
-
-
(68,443)
Net carrying amount as of December 31, 2020
$
3,956
$
5,444
$
23,888
$
112
$
393
$
3,414 $
1,372 $
38,579
For the year ended December 31, 2021
Opening balance
Additions
Additions for business acquisitions
Disposals
Impairment (1)
Restatement and translation effect
Depreciation charges recognized in the year
Transfers
$
3,956
$
5,444
$
23,888
$
112
$
393
$
3,414 $
1,372 $
38,579
-
(36)
-
-
70
-
5
1
-
(1)
(256)
18
(290)
357
1,691
(162)
(23)
(965)
542
(2,554)
2,164
1
-
(1)
(2)
4
(16)
41
272
2,561
-
-
(7)
4
(97)
170
(28)
(7)
(111)
193
-
(2,746)
112
-
(88)
4,638
(226)
(120)
(23)
(1,364)
31
-
2
862
(2,957)
(7)
Ending balance as of December 31, 2021
$
3,995
$
5,273
$
24,581
$
139
$
735
$
3,276 $
1,406 $
39,405
As of December 31, 2021
Cost
Accumulated depreciation and
accumulated impairment
3,995
16,716
79,876
404
2,519
3,276
1,406
108,192
-
(11,443)
(55,295)
(265)
(1,784)
-
-
(68,787)
Net carrying amount as of December 31, 2021
$
3,995
$
5,273
$
24,581
$
139
$
735
$
3,276 $
1,406 $
39,405
For the year ended December 31, 2022
Opening balance
Additions
Additions for business acquisitions
Disposals
Impairment
Restatement and translation effect
Depreciation charges recognized in the year
Transfers
$
3,995
$
5,273
$
24,581
$
139
$
735
$
3,276 $
1,406 $
39,405
-
-
-
-
(142)
-
-
-
11
4,569
6,904
-
(6)
(327)
(352)
199
(150)
(135)
(1,574)
(2,756)
2,599
1
2
-
-
(9)
(16)
14
4
10
(1)
-
(64)
(110)
2,986
335
(10)
(5)
413
-
(80)
-
3,415
11,820
(241)
(146)
(322)
(101)
(2,539)
-
161
(3,002)
-
-
(3,234)
(29)
Ending balance as of December 31, 2022
$
3,853
$
9,356
$
29,480
$
131
$
735
$ 3,258 $
1,638 $
48,451
As of December 31, 2022
Cost
Accumulated depreciation and
accumulated impairment
3,853
23,569
88,533
440
2,617
3,258
1,638
123,908
-
(14,213)
(59,053)
(309)
(1,882)
-
-
(75,457)
Net carrying amount as of December 31, 2022
$
3,853
$
9,356
$
29,480
$
131
$
735
$ 3,258 $
1,638 $
48,451
(1) Mainly corresponds to $433 from the closure of the polyester staple fiber operations at the Cooper River site, $829 from the shutdown of Univex, $10 from the shutdown of
Sales del Bajío and the remainder to the normal operations of the Company.
Depreciation expenses of $3,176, $2,905 and $3,075 were recorded in cost of sales, $11, $10 and $16, in selling expenses and $47, $42
and $43, in administrative expenses in 2022, 2021 and 2020, respectively.
105
11 . RIGHT- OF- USE ASSET, NET
Alpek has leases of fixed assets including buildings, machinery and equipment, transportation equipment, and computer equipment.
The average term of the lease contracts is 8 years.
The right-of-use recognized in the consolidated statement of financial position as of December 31, 2022, 2021 and 2020, is integrated
as follows:
Net carrying amount:
Balance as of December 31, 2020
Balance as of December 31, 2021
Balance as of December 31, 2022
Depreciation for the year 2020
Depreciation for the year 2021
Depreciation for the year 2022
Land
Buildings
Machinery
and
equipment
Ships and
other leased
assets
Total
Rail cars
$
$
$
$
$
$
110
109
368
$
$
$
124 $
799 $
661 $
790
934
781
$
$
$
1,924 $
1,666 $
1,584 $
43
46
58
$ 2,991
$ 3,554
$ 3,452
(8) $
(46) $
(303) $
(470) $
(151) $
(978)
(7) $
(54) $
(296) $
(437) $
(163) $
(957)
(29) $
(60) $
(309) $
(426) $
(166) $
(990)
During the years ended December 31, 2022, 2021 and 2020, the Company recognized a lease expense of $780, $693 and $810,
respectively, related to low value and short-term lease agreements.
Additions derived from business acquisitions, new contracts and modifications to the lease liability, reflected in the net book value
of the right-of-use asset as of December 31, 2022, 2021 and 2020 amounted to $1,075, $1,452 and $486, respectively.
As of December 31, 2022, 2021 and 2020, the Company does not have any commitments related to short-term lease agreements.
The Company has not signed lease contracts, which at the date of the consolidated financial statements have not started.
During the year, the Company did not execute significant extensions to the term of its lease contracts.
106
12 . GOODWILL AND INTANGIBLE ASSETS , NET
Development
costs
Non-
compete
Customer
agreements relationships
Patent
Software
and
licenses
Trademarks
with definite
life
Intellectual
property,
and others Goodwill
Other
Total
Definite life
Indefinite life
$
887
$
81
$
1,059
$
12
-
-
1
50
-
-
-
-
-
-
-
-
(2)
(27)
$
950
$
79
$
1,032
$
10
-
-
-
5
30
-
-
-
-
-
-
-
-
-
-
(2)
12
$
995
$
77
$
1,044
$
10
5
-
-
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,638
-
-
-
(63)
(3)
(47)
(30)
$ 604
$
68 $ 3,568 $
377
$
9 $ 6,653
70
6
-
(157)
(22)
-
-
-
160
(13)
4
-
(1)
-
-
-
-
-
188
22
-
-
-
-
1
86
6
(1)
4
197
$
501
$
215 $ 3,759 $
399
$
10 $ 6,945
7
18
-
(221)
-
2
-
23
-
-
-
2
-
(1)
-
-
-
-
-
-
-
(3)
138
13
-
-
-
-
-
-
19
41
(1)
(221)
5
190
$
307
$
235 $ 3,898 $
412
$
10 $ 6,978
1
3
(31)
(53)
60
(10)
-
-
-
-
(30)
(7)
1
-
-
(16)
-
-
-
-
-
-
-
-
-
-
-
12
1,646
(31)
(69)
35
(215)
(25)
(1)
(401)
$
952
$
74
$
997
$ 1,608
$
277
$
198 $ 3,668 $
387
$
9 $ 8,170
$
(531) $
(81) $
(484) $
(26)
-
-
(29)
-
-
-
2
(63)
-
-
(14)
$
(28) $
-
-
(18)
-
-
-
2
$
(59) $
-
-
(15)
$
(632) $
(77) $
(635) $
-
-
-
-
-
-
-
-
-
-
-
$
(435) $
(4) $ (1,335) $
(49)
(6)
160
25
(5)
-
(160)
17
(231)
-
-
(59)
$
(305) $
(152) $ (1,625) $
$
(55) $
(5) $
(219) $
-
125
(1)
-
-
4
-
-
(53)
$
(236) $
(153) $ (1,897) $
(26)
-
-
-
(4)
43
-
-
-
-
-
3
(59)
(98)
-
-
-
-
37
-
-
-
(7)
12
(11)
(30)
31
53
(2)
9
(5)
30
-
-
-
3
(216)
-
-
4
-
118
$
(619) $
(74) $
(657) $
(93) $
(186) $
(125) $
(1,991) $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
- $ (2,870)
-
-
-
-
(374)
(6)
-
(58)
$
$
- $ (3,308)
- $ (366)
-
-
-
-
125
(81)
$
- $ (3,630)
-
-
-
-
-
-
(415)
-
31
57
(13)
225
$
- $ (3,745)
Cost
As of January 1, 2020
Additions
Additions for business acquisitions
Disposals
Transfers
Translation effect
As of December 31, 2020
Additions
Additions for business acquisitions
Disposals
Impairment
Transfers
Translation effect
As of December 31, 2021
Additions
Additions for business acquisitions
Disposals
Impairment
Transfers
Translation effect
As of December 31, 2022
Amortization and Impairment
As of January 1, 2020
Amortization
Additions for business acquisitions
Transfers
Translation effect
Amortization
Transfers
Impairment
Translation effect
As of December 31, 2021
Amortization
Transfers
Disposals
Impairment
Additions for business acquisitions
Translation effect
As of December 31, 2022
Net carrying amount
Cost
Amortization
$
950
$
79
$
1,032
$
(586)
(79)
(561)
As of December 31, 2020
$
364
$
-
$
471
$
Cost
Amortization and impairment
995
(632)
77
(77)
1,044
(635)
As of December 31, 2021
$
363
$
-
$
409
$
-
-
-
-
-
-
$
501
$
215 $ 3,759 $
399
$
10 $ 6,945
(305)
(152)
(1,625)
-
-
(3,308)
$
196
$
63 $
2,134 $
399
$
10 $ 3,637
307
(236)
235
3,898
(153)
(1,897)
412
-
10
6,978
-
(3,630)
$
71
$
82 $
2,001 $
412
$
10 $ 3,348
Cost
Amortization and impairment
952
(619)
74
(74)
997
1,608
(657)
(93)
277
(186)
198
3,668
(125)
(1,991)
387
-
9
-
8,170
(3,745)
As of December 31, 2022
$
333
$
-
$
340
$
1,515
$
91
$
73 $
1,677 $
387
$
9 $ 4,425
As of December 31, 2020
$
(586) $
(79) $
(561) $
107
Of the total amortization expense, $401, $352 and $363 have been recorded in cost of sales and $14, $14 and $11 in administrative
and selling expenses in 2022, 2021 and 2020, respectively.
Incurred research and development expenses that have been recorded in the 2022, 2021 and 2020 consolidated statements of
income were $68, $67 and $74, respectively.
Impairment testing of goodwill and indefinite lived intangible assets
As mentioned in Note 5, 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 acquirer are assigned to those units or groups of units. As of
December 31, 2022, 2021 and 2020, goodwill of $387, $412 and $399, respectively, arises primarily from the Polyester segment.
The recoverable amount from each group of CGU has been determined based on calculations of values in use, which are formed by
after-tax cash flow projections based on financial budgets approved by Management covering a period of 5 years.
The gross and operating margins included in the estimates of value in use have been estimated based on the historical performance
and the growth expectations of the market in which each group of CGUs operates. The long-term growth rate used in estimating the
value in use is consistent with the projections included in industry reports. The present value of the cash flows was discounted using
a specific discount rate after taxes for each group of CGU and reflects the specific risks associated with each of them.
The Company performed a sensitivity analysis considering a possible increase of 100 basis points in the discount rate and a possible
decrease in the long-term growth rate at a similar level. As a result of this analysis, the Company concluded that there are no signif-
icant variations compared to the impairment calculation prepared as of December 31, 2022.
The key assumptions used in calculating the value in use in 2022, 2021 and 2020, were as follows:
Estimated gross margin
Growth rate
Discount rate
2022
8.3%
2.1%
8.9%
2021
8.6%
1.9%
8.5%
2020
5.0%
2.0%
8.4%
13.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD AND OTHER NON - CURRENT ASSETS
Notes receivable (1)
Due from related parties (Note 28)
Trade receivables related with business acquisitions
Total other non-current financial assets
Investment in associates and joint ventures (2)
Recoverable taxes
Other
Total investments accounted for using the equity
method and other non-current assets
As of December 31,
2022
2021
2020
$
$
$
$
2,495
849
616
3,960
9,162
765
100
2,595
876
614
4,085
9,045
906
143
$
$
3,119
823
576
4,518
8,586
724
178
$
13,987
$
14,179
$
14,006
(1) As of December 31, 2022, 2021 and 2020, this item mainly consisted of the financing provided to M&G Polímeros México, S.A. de C.V.
(2) Investment in associates and joint ventures
108
The Company’s account of investments in associates and joint ventures consists of the following:
Shareholding %
2022
2021
2020
Clear Path Recycling, LLC
Terminal Petroquímica Altamira, S.A. de C.V.
Agua Industrial del Poniente, S.A. de C.V.
Corpus Christi Polymers LLC
$
49.90%
42.04%
47.59%
33.33%
201
55
88
8,818
$
251
43
81
8,670
$
246
42
76
8,222
Investment in associates and joint ventures as of December 31
$
9,162
$
9,045
$
8,586
Below is summarized the net loss of investments in associates and joint ventures, which are accounted for by the equity method:
2022
2021
2020
Net comprehensive loss
$
(175)
$
(121)
$
(12)
There are neither commitments nor contingent liabilities regarding the Company’s investment in associates and joint ventures as of
December 31, 2022, 2021 or 2020.
14. SUBSIDIARIES WITH SIGNIFICANT NON - CONTROLLING INTEREST
The significant non-controlling interest is integrated as follows:
Non-controlling
ownership
percentage
Non-controlling
net interest
income for
the period
Non-controlling
interest as of
December 31,
2022
2021(1)
2020
2022
2021(1)
2020
Indelpro, S. A. de C. V. and subsidiary
Polioles, S. A. de C. V. and subsidiary
Other
49%
50%
$
$
1,967
120
135
2,341 $
53
46
981
30
(13)
$
4,461 $
438
392
5,160
366
344
$ 4,453
319
354
$
2,222
$ 2,440 $
998
$
5,291 $
5,870
$ 5,126
(1) During 2021, these entities merged their subsidiaries due to the effects of the labor reform in México.
109
The summarized consolidated financial information as of December 31, 2022, 2021 and 2020, and for the years then ended, corre-
sponding to each subsidiary with a significant non-controlling interest is shown below:
Statement of financial position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Stockholders’ equity
Statements of income
Revenues
Consolidated net income
Total comprehensive income of the year
Comprehensive income attributable
to non-controlling interest
Dividends paid to non-controlling interest
Statements of cash flows
Net cash flows generated by
operating activities
Net cash flows (used in) generated
by investing activities
Net cash flows used in financing activities
Net increase (decrease) in cash
Indelpro, S. A. de C. V. and subsidiary
Polioles, S. A. de C. V. and subsidiary
2022
2021(1)
2020
2022
2021(1)
2020
$
4,210
7,769
1,038
1,836
9,105
$ 6,790 $
8,372
2,638
1,993
10,531
18,553
4,015
3,459
22,589
4,778
5,150
1,695
2,394
2,524
1,816
5,238
8,055
2,223
1,982
9,088
11,841
2,003
2,493
1,222
670
$
1,250 $
932
648
659
875
3,546
240
164
82
10
1,451
998
867
850
732
$
1,325
959
521
1,124
639
2,954
107
113
2,409
59
81
57
10
40
-
5,215
4,156
2,423
346
133
196
(193)
(5,162)
(446)
(3,988)
(572)
(1,645)
(64)
(164)
57
(261)
(26)
(123)
and cash equivalents
(132)
(226)
365
90
(66)
28
(1) During 2021, these entities merged their subsidiaries due to the effects of the labor reform in México.
15. TR ADE AND OTHER ACCOUNTS PAYABLE
Trade accounts payable
Short-term employee benefits
Advances from customers
Taxes other than income taxes
Due to related parties (Note 28)
Other accrued accounts and expenses payable
As of December 31,
2022
2021
$
$
28,493
827
76
577
224
1,788
$
25,595
1,263
242
691
261
1,801
2020
16,173
984
117
453
286
1,532
$
31,985
$
29,853
$
19,545
110
16. DEBT
Current:
Bank loans (1)
Current portion of non-current debt
Notes payable (1)
Interest payable
Current debt (2)
Non-current:
Senior Notes
Unsecured bank loans
Other loans
Total
Less: current portion of non-current debt
Less: interest generated by non-current debt
$
$
$
As of December 31,
2022
2021
2020
$
1,466
5,803
-
443
279
1,931
42
408
$
98
-
42
316
7,712
$
2,660
$
456
27,271
10,177
147
37,595
(5,803)
(423)
$
30,895
619
156
31,670
(1,931)
(406)
$
29,061
1,299
151
30,511
-
(315)
Non-current debt
$
31,369
$
29,333
$
30,196
(1) As of December 31, 2022, 2021 and 2020, short-term bank loans and notes payable incurred interest at an annual average rate of 6.15%, 1.40% and 1.87%, respectively.
(2) The fair value of bank loans and notes payable approximates their current carrying amount because of their short maturity.
The carrying amounts, terms and conditions of non-current debt are as follows:
Debt
Balance as
Balance as
Balance as
Description
Value in
issuance
Currency MX pesos
costs
Interest
payable
of December of December of December
31, 2021(1)
31, 2020(1)
31, 2022
Maturity
Interest
date
rate
Senior Notes 144A/Reg. S / fixed rate
USD
$
-
$
-
$
-
$
- $
1,941 $ 12,977
20-nov-22 4.50%
Senior Notes 144A/Reg. S / fixed rate
USD
5,808
Senior Notes 144A/Reg. S / fixed rate
USD
9,662
Senior Notes 144A/Reg. S / fixed rate
USD
11,562
(5)
(57)
(70)
123
117
131
5,926
9,722
11,623
6,290
10,324
12,340
6,090 08-aug-23 5.38%
9,994
18-sep-29 4.25%
-
25-feb-31 3.25%
Total Senior Notes
$ 27,032
$ (132)
$ 371
$ 27,271 $ 30,895 $ 29,061
Bank loan, LIBOR + 2.60%
Bank loan, LIBOR + 2.05%
Bank loan, SOFR +1.00%
Bank loan, SOFR +1.05%
Bank loan, SOFR +1.00%
Bank loan, SOFR +1.00%
Total unsecured bank loans
Other loans
Total
Less: current portion and interest of
non-current debt
Non-current debt
USD
USD
USD
USD
USD
USD
484
-
1,936
3,872
1,936
1,936
10,164
-
-
(10)
(10)
(10)
(9)
(39)
USD
147
-
2
-
10
20
10
10
52
-
486
-
1,936
3,882
1,936
1,937
10,177
619
800 03-dec-24 2.77%
-
-
-
-
-
500
11-dec-24 2.27%
-
-
06-apr-24 5.39%
07-apr-24 5.44%
- 06-may-24 5.39%
-
06-apr-24 5.39%
619
1,300
147
156
150
Various Various
$ 37,343
$
(171)
$ 423
$ 37,595 $ 31,670 $ 30,511
(5,808)
5
(423)
(6,226)
(2,337)
(315)
$ 31,535
$ (166)
$
-
$ 31,369 $ 29,333 $ 30,196
(1) As of December 31, 2022, 2021 and 2020, issuance costs of the debt pending amortization were $171, $172 and $139, respectively.
111
As of December 31, 2022, the annual maturities of non-current debt, including current portion and interest payable, and gross from
issuance costs are as follows:
Senior Notes
Bank loans
Other loans
$
2023
6,179
52
-
$
$
6,231
$
2024
2025
thereafter
Total
2026 and
-
484
-
484
$
$
-
-
-
-
$
21,224
9,680
147
$
27,403
10,216
147
$
31,051
$
37,766
As of December 31, 2022, 2021 and 2020, the Company has committed unused lines of credit totaling US$610, US$560 and US$680,
respectively.
Covenants:
Loan contracts and debt agreements contain restrictions, primarily relating to compliance with financial ratios, which include the
following:
a)
Interest hedge ratio: it is calculated by dividing the profit before financial result, net, share of result of associates and joint
ventures, income taxes, depreciation and amortization (EBITDA) by the net interest charges for the last four quarters of the
analyzed period. This ratio cannot be less than 3.0 times.
b) Leverage ratio: defined as the result of dividing the consolidated net debt (current and non-current debt, excluding debt issuance
costs less restricted and unrestricted cash and cash equivalents) by the EBITDA of the last four quarters of the period analyzed.
This ratio cannot be greater than 3.5 times.
Additionally, there are other restrictions in regards of incurring additional debt or making loans that require mortgaging assets,
dividend payments and submission of financial information, which if not met or remedied within a specified period to the satis-
faction of creditors may cause the debt to become payable immediately. During 2022, 2021 and 2020, the financial ratios were
calculated according to the formulas set forth in the loan agreements. As of December 31, 2022 and the date of issuance of these
consolidated financial statements, the Company complied satisfactorily with such covenants and restrictions.
17. LEASE LIABILITY
Current portion:
USD
MXN
Other currencies
Current lease liability
Non-current portion:
USD
MXN
Other currencies
Less: Current portion of lease liability
Non-current lease liability
As of December 31,
2022
2021
2020
$
$
$
$
$
$
$
$
$
537
121
163
821
2,686
308
630
3,624
(821)
462
123
148
733
2,641
304
663
3,608
(733)
454
123
127
704
2,280
288
442
3,010
(704)
$
2,803
$
2,875
$
2,306
112
As of December 31, 2022, 2021 and 2020, respectively, changes in the lease lability related to finance activities in accordance with
the consolidated statement of cash flow are integrated as follows:
Beginning balance
New contracts (1)
Write-offs
Adjustment to liability balance
Interest expense from lease liability
Lease payments
Exchange (loss) gain
Ending balance
(1) Includes lease liabilities assumed in business acquisitions.
2022
2021
2020
$
$
3,608
1,147
(8)
(23)
206
(1,109)
(197)
3,010
1,435
(32)
9
178
(1,049)
57
$
3,368
420
(45)
40
193
(1,083)
117
$
3,624
$
3,608
$
3,010
The total of future minimum payments of leases that include non-accrued interest is analyzed as follows:
Less than a year
Over 1 year and less than 5 years
Over 5 years
Total
18. PROVISIONS
As of December 31,
$
2022
821
1,669
1,134
$
2021
733
1,681
1,194
$
2020
704
1,701
605
$
3,624
$
3,608
$
3,010
Dismantling,
demolition and
environmental
remediation
Legal
contingencies
Warranties
Other (1)
Total
As of January 1, 2020
Increases
Payments
Write-offs
Translation effect
As of December 31, 2020
Increases
Payments
Write-offs
Translation effect
As of December 31, 2021
Increases
Payments
Write-offs
Translation effect
$
$
$
6
183
(3)
-
1
187
131
(2)
(193)
11
134
-
(74)
-
(4)
$
$
662
12
-
-
(100)
$
544
-
(563)
(67)
124
442
15
(2)
(39)
(45)
$
1,654
210
(568)
(106)
(20)
$
574
$
38
$
371
$
1,170
342
(3)
(10)
(25)
$
878
$
78
(145)
(214)
8
-
(38)
-
-
-
-
-
-
-
-
152
-
(154)
-
625
(43)
(357)
(14)
$
369
$
1,381
1,166
(235)
(76)
(31)
1,244
(454)
(290)
(27)
$
1,193
$
1,854
As of December 31, 2022
$
56
$
605
$
(1) As of December 31, 2022, the increases in “others” are mainly made up of the contingent consideration for the acquisition of Octal businesses for $904 (see Note 2), as well
as reimbursement for taxes to be recovered from Petrobras $215.
113
Short-term provisions
Long-term provisions
As of December 31
2022
794
1,060
1,854
$
$
2021
546
835
1,381
2020
50
1,120
1,170
$
$
$
$
As of December 31, 2022, 2021 and 2020, the provisions shown in the table above mainly include $215 (US$11), $48 (US$2) and
$206 (US$10), respectively, related to the obligation to give back to Petrobras certain tax credits, in case they are recovered by
Petroquímica Suape and Citepe, as well as $595 (US$31), $605 (US$29) and $574 (US$29) for labor, civil and tax contingencies also
derived from the acquisition of Petroquímica Suape and Citepe, for which the Company holds an account receivable, included in
other non-current assets, for $616 (US$32), $614 (US$30) and $576 (US$29) as of December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2021 and 2020, $153 (US$7.5) and $149 (US$7.5), respectively, were related to the contingent liability for the
earn-out payment related to the acquisition of Selenis. As of December 31, 2022 there is no balance for this concept.
Additionally, as of December 31, 2022, $904 (US$46.7) were mainly related to the contingent consideration for the payment of
future benefits (earn-out) related to the acquisition of Octal.
19. 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 subsidiaries of the Company have established irrevocable trust funds for payment of pensions and seniority premiums and
health-care expenses.
Below is a summary of the main financial data of such employee benefits:
As of December 31,
2022
2021
2020
Employee benefit obligations:
Pension benefits
Post-employment medical benefits
Defined contribution plans
$
$
612
64
676
349
598
99
697
332
$
Employee benefits in the consolidated statement of financial position
$
1,025
$
1,029
$
Charge to the consolidated statement of income for:
Pension benefits
Post-employment medical benefits
Remeasurements of employee benefit obligations recognized
in other comprehensive income of the year
Remeasurements of accrued employee benefit obligations
recognized in other comprehensive income
$
$
$
$
(76)
(3)
(79)
$
$
(79)
(4)
(83)
(39)
$
453
290
$
329
$
$
$
$
956
105
1,061
255
1,316
(62)
(5)
(67)
(39)
(124)
Pension and post-employment medical 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 Company operates post-employment medical benefit schemes mainly in its subsidiary 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.
114
Amounts recognized in the consolidated statement of financial position are determined as follows:
Present value of defined benefit obligations
Fair value of plan assets
Liability in the statement of financial position
The movements of defined benefit obligations are as follows:
As of January l,
Service cost
Interest cost
Contributions from plan participants
Remeasurements:
(Gains) losses from changes in financial assumptions
Losses (gains) from changes in demographic assumptions
and experience adjustments
Translation effect
Benefits paid
Liability acquired in business combination
Transfer of personnel
Plan curtailments
$
$
$
As of December 31,
2022
2021
2020
3,107
(2,431)
676
$
$
4,329
(3,632)
697
$
$
4,455
(3,394)
1,061
2022
2021
2020
$
$
4,329
69
98
4
(715)
1
(219)
(461)
-
2
(1)
4,455
69
100
6
(154)
-
148
(299)
-
18
(14)
3,813
50
107
6
329
42
198
(284)
195
-
(1)
As of December 31,
$
3,107
$
4,329
$
4,455
The movement in the fair value of plan assets for the year is as follows:
As of January 1
Interest income
Remeasurements – return on plan assets,
excluding interest income
Translation effect
Contributions
Benefits paid
2022
2021
2020
$
(3,632)
(87)
$
(3,394)
(73)
$
(2,940)
(89)
754
183
-
351
(299)
(96)
(14)
244
(332)
(153)
(96)
216
As of December 31
$
(2,431)
$
(3,632)
$
(3,394)
The amounts recorded in the consolidated statement of income for the years ended December 31 are the following:
Service cost
Interest cost, net
Effect of plan curtailments and/or settlements
Total included in personnel cost
2022
2021
2020
$
$
$
(69)
(10)
-
$
(69)
(28)
14
(79)
$
(83)
$
(50)
(18)
1
(67)
115
The principal actuarial assumptions are as follows:
Discount rate Mexico
Discount rate United States
Inflation rate
Wage increase rate
Medical inflation rate Mexico
As of December 31,
2022
2021
2020
9.25%
4.96%-5.06%
3.50%
5.00%
7.00%
7.75%
2.42%-2.64%
3.50%
4.50%
7.00%
6.75%
1.99%-2.30%
3.50%
4.50%
6.50%
The sensitivity analysis of the discount rate for defined benefit obligations is as follows:
Discount rate
Effect in defined benefit obligations
Change in
assumption
Increase in
assumption
Decrease in
assumption
MX 1%
Decrease by
$82
Increase by
$89
Sensibility analyses are based on a change in assumptions, while all the other assumptions remain constant. In practice, this is slightly
probable, and the changes in some assumptions may be correlated. In calculating the sensitivity of the defined benefit obligation to
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 consolidated
statement of financial position.
Defined benefit plan assets
Plan assets are comprised as follows:
Equity instruments
Fixed income
Fair value of plan assets
20. INCOME TA XES
As of December 31,
2022
1,899
532
2,431
2021
1,341
2,291
3,632
2020
2,290
1,104
3,394
$
$
$
$
$
$
The Company is subject to income tax, whose rate is 30% in México. The statutory income tax rates applicable to the main foreign
subsidiaries were as follows:
United States
Brazil
Argentina
Chile
Canada
Spain
United Kingdom
Oman(1)
2022
21%
34%
35%
27%
26.5%
25%
19%
15%
2021
21%
34%
30%
27%
26%
25%
19%
-
2020
21%
34%
30%
27%
25%
25%
17%
-
(1) Octal’s production facility (Octal SAOC FZC) is registered in the Salalah Free Zone; therefore, it is exempt from corporate tax for a period of 30 years from November 25,
2006, the date it began activities.
116
a. Income taxes recognized in the consolidated statement of income are as follows:
Current income tax
Deferred income taxes
Income taxes expenses
2022
2021
2020
$
(5,345)
(164)
$
(4,304)
189
$
(5,509)
$
(4,115)
$
$
(1,933)
731
(1,202)
b. The reconciliation between the statutory and effective income tax rates is as follows:
Income before income taxes
Income tax rate
Statutory income tax rate expense
(Less) add income tax effect on:
Annual adjustment for inflation
Cancellation of tax losses
Non-deductible expenses
Non-taxable income
Effect of different tax rates of other countries other than Mexico
True up with respect to prior years’ current income tax
Translation effect from the functional currency
Investments in associates and joint ventures
Total income taxes
Effective tax rate
c. The breakdown of the deferred tax asset and deferred tax liability is as follows:
Property, plant and equipment
Intangible assets
Debt issuance costs
Provisions
Derivative financial instruments
Tax loss carryforwards
Tax credits, impairment allowance and other
Effect of tax rates of other countries and changes in tax rates
2022
2021
2020
$
21,475
30%
(6,443)
$
14,311
30%
(4,293)
$
5,323
30%
(1,597)
(896)
-
22
1,493
200
(52)
147
20
(189)
(805)
(18)
934
179
101
(36)
12
(186)
-
(13)
642
(33)
(35)
45
(25)
$
(5,509)
$
(4,115)
$
(1,202)
26%
29%
23%
Asset (liability)
December 31,
$
2022
2021
2020
$
(80)
(131)
(11)
174
286
652
828
(9)
$
9
(94)
(20)
306
46
601
805
(23)
(155)
(137)
(16)
275
2
889
669
(21)
Deferred tax asset
$
1,709
$
1,630
$
1,506
Inventories
Property, plant and equipment, net
Intangible assets
Tax loss carryforwards
Non-deductible interest, provision allowance and others
Effect of tax rates of other countries and changes in tax rates
Deferred tax liability
Asset (liability)
December 31,
2022
2021
2020
$
$
(22)
(5,753)
(143)
250
1,498
325
(72)
(6,601)
(282)
780
1,815
236
$
(121)
(5,999)
(280)
752
1,414
142
$
(3,845)
$
(4,124)
$
(4,092)
117
Deferred income tax assets are recognized on tax loss carryforwards to the extent the realization of the related tax benefit through
future tax income is probable. Tax losses amount to $25,062, $26,843 and $29,312 in 2022, 2021 and 2020, respectively.
Tax losses as of December 31, 2022 expire in the following years:
Loss for the year
incurred
Tax-loss
carryforwards
Expiration
year
2014
2015
2016
2017
2018
2019
2020
2021
2022
Other
$
1
15
13
54
27
17
345
851
1,682
22,057
$
25,062
2024
2025
2026
2027
2028
2029
2030
2031
2032 and thereafter
No maturity
As of December 31, 2022, the Company holds tax losses to be amortized in Brazil, through Suape and Citepe, for an amount of
$22,057, which have no expiration date. The Company has decided to reserve the total amount of the tax losses, according to
management’s estimate of future reversals of temporary differences; thus, as of December 31, 2022, they do not generate deferred
tax assets.
d. Income tax related to other comprehensive income is as follows:
2022
2021
2020
Before
taxes
Tax
charged
After
taxes
Before
taxes
Tax
charged
After
taxes
Before
taxes
Tax
charged
After
taxes
Equity in other
comprehensive income of
associates and joint ventures
recognized through the
equity method
$
1 $
- $
1 $
(1) $
- $
(1) $
3 $
- $
3
Foreign currency translation effect
(2,652)
-
(2,652)
110
-
110
(767)
(39)
20
(19)
453
(109)
344
(39)
-
9
(767)
(30)
Remeasurement of employee
benefit obligations
Effect of derivative financial
instruments designated as
cash flow hedges
Other comprehensive income
$ (3,872) $
347 $ (3,525) $
(30) $
52 $
22 $
82 $
(262) $
(180)
(1,182)
327
(855)
(592)
161
(431)
885
(271)
614
118
e. Income tax payable consists of the following:
Current portion
Non-current portion (1)
Total income tax payable
2022
1,410
-
1,410
$
$
As of December 31,
2021
2020
$
$
1,630
241
1,871
$
$
531
170
701
(1) During the year ended December 31, 2022, Alfa made the decision to voluntarily and spontaneously abandon this regime for a group of companies in México (Incorporation
Regime), which will remain the obligation to pay full taxes. The profit that has been deferred for the years 2019 and 2021 for $375, which will have to be paid during 2023.
21 . OTHER NON - CURRENT LIABILITIES
Advances from customers (1)
Other (2)
Total other liabilities
As of December 31,
2022
2021
2020
$
$
128
432
560
$
$
196
50
246
$
$
249
40
289
(1) This item corresponds to revenues charged in advance and relates to the future delivery of goods.
(2) As of December 31, 2022, is mainly related to the amount pending of payment for the acquisition of Octal (see Note a).
22 . STOCKHOLDERS’ EQUITY
As of December 31, 2022, capital stock is variable, with a fixed minimum of $6,052 represented by 2,107,246,568 outstanding, ordi-
nary, 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.
As of December 31, 2022, Alpek SAB had 10,917,067 treasury shares. As of such date, the market value per share was $27.59
Mexican pesos.
From February to December 2022, the Company purchased 9,095,421 shares in the amount of $246 and sold 6,560,342 shares in
the amount of $180 in connection to a repurchase program approved by the Company´s stockholders and exercised discretionally by
Management. From March to December 2021, the Company purchased 12,879,634 shares in the amount of $292 and sold 10,363,950
shares in the amount of $236 in connection to the same repurchase program. From January to March 2020, the Company purchased
3,544,763 shares in the amount of $46 and sold 175,000 shares in the amount of $2 in connection with the same program.
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. As of December 31, 2022,
2021 and 2020, the legal reserve amounts to $1,210, $1,210 and $1,200, respectively.
On October 31, 2022, the Company’s Board of Director, through the powers delegated at the ordinary stockholders’ meeting held
on March 3, 2022, approved the payment of a cash dividend per share of $0.093 US dollars, equivalent to the aggregate amount of
$3,887(US$196), approximately, which were paid on November 9, 2022.
At the ordinary stockholders’ meeting of Alpek on March 3, 2022, the stockholders agreed to declare dividends in cash per share
of $0.0820 US dollars, equivalent to the aggregate amount of $3,628 (US$173), approximately, which were paid on March 14, 2022.
On October 26, 2021, the Company’s Board of Director, through the powers delegated at the ordinary stockholders’ meeting held
on March 9, 2021, approved the payment of a cash dividend per share of $0.0265 US dollars, equivalent to the aggregate amount of
$1,129(US$56), approximately, which were paid on November 10, 2021.
119
At the ordinary stockholders’ meeting of Alpek on March 9, 2021, the stockholders agreed to declare dividends in cash per share
of $0.0596 US dollars, equivalent to the aggregate amount of $2,677 (US$126), approximately, which were paid on April 6 in the
same year.
At the ordinary stockholders’ meeting of Alpek on January 20, 2020, the stockholders agreed to declare dividends in cash per share
of $0.0677 US dollars, equivalent to the aggregate amount of $2,713 (US$143), approximately, which were paid on January 29 in the
same year.
The Income Tax Law establishes a tax rate of 10% to the dividends paid to foreign residents and Mexican individuals derived from
the profits generated since 2014, also provides that for the years 2001-2013, the net taxable profit will be determined in terms of the
Income Tax Law in force in the fiscal year concerned.
Dividends paid are not subject to income tax if they derived from the Net Tax Profit Account (CUFIN Spanish acronym). Any divi-
dends paid in excess of this account will cause an income tax charge based on the tax rate valid in the period in which they are paid.
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. As of
December 31, 2022, the value of the Capital Contribution Account (CUCA Spanish acronym) amounted to $24,893. The tax value of
the CUFIN amounted to $2,302.
23. SHARED - BASED PAYMENTS
Alpek has a stock based compensation scheme referred to at 50% of the value of stock of Alfa and the other 50% of the value of the
shares of Alpek SAB for directors of the Company and its subsidiaries. In accordance with the terms of the plan, the eligible directors
will obtain a cash payment contingent upon achieving both quantitative and qualitative metrics derived from the following financial
measures:
Improved share price
Improvement in net income
•
•
• Permanence of the executives in the Company
The program consists in determining a number of shares which the executives will have a right to, that will be paid in cash over the
next five years; i.e., 20% every year and will be paid with reference at the average price of the shares during the year. These payments
are measured at the fair value of the consideration, therefore, because they are based on the price of Alfa and Alpek shares, the
measurement is considered to be within level 1 of the fair value hierarchy.
The average price of the shares in pesos considered for the measurement of the executive incentive is:
Alfa, S. A. B. de C. V.
Alpek, S. A. B. de C. V.
The short-term and long-term liabilities are comprised as follows:
Short term
Long term
Total carrying amount
2022
15.80
27.64
2021
15.26
22.25
2020
15.39
17.60
As of December 31,
2022
2021
2020
$
$
11
28
39
$
$
12
25
37
$
$
8
20
28
120
24. EXPENSES CLASSIFIED BY THEIR NATURE
The total cost of sales and selling and administrative expenses, classified by the nature of the expense, for the years ended December
31, are comprised as follows:
Raw material and other
Employee benefit expenses (Note 27)
Human resources
Maintenance
Depreciation and amortization
Advertising expenses
Freight expenses
Consumption of energy and fuel (gas, electricity, etc.)
Travel expenses
Lease expenses
Technical assistance, professional fees and administrative services
Other (insurance and bonds, water, containers and packing, etc.)
2022
2021
2020
$
(150,143)
(7,538)
(69)
(2,833)
(4,639)
(2)
(9,993)
(6,628)
(188)
(780)
(2,216)
(3,315)
$
(105,257)
(7,348)
(51)
(2,301)
(4,280)
(1)
(6,931)
(5,264)
(66)
(722)
(1,839)
(3,513)
$
(79,743)
(6,319)
(40)
(1,991)
(4,486)
(2)
(5,949)
(4,544)
(71)
(810)
(1,694)
(2,030)
Total
$
(188,344)
$
(137,573)
$
(107,679)
25. OTHER INCOME (EXPENSES), NET
Other income (expense) for the years ended December 31, are comprised as follows:
Gain on business combination (1)
Gain on business sale
Other income, net (2)
Impairment of property, plant and equipment and other
Total
2022
2021
2020
$
$
425
-
269
(246)
29
-
274
(1,460)
$
657
89
451
(14)
$
448
$
(1,157)
$
1,183
(1) For the year ended December 31, 2022, corresponds to the gain on the acquisition of Octal. See Note 2a.
(2) For the year ended December 31, 2021, includes $8.7 from the cancellation of ContourGlobal joint venture.
26. FINANCE INCOME AND COSTS
Financial result, net for the years ended December 31, are comprised as follows:
Financial income:
Interest income on short-term bank deposits
Interest income on loans from related parties
Other financial income
Total financial income
Financial expenses:
Interest expense on loans to related parties
Interest expense on bank loans
Non-bank interest expense
Lease interest expense
Interest cost on employee benefits, net
Other financial expenses
Total financial expense
Loss in exchange fluctuation, net
Foreign exchange gain
Foreign exchange loss
Loss in exchange fluctuation, net
Financial result, net
2022
2021
2020
$
$
$
$
$
271
26
625
922
-
(392)
(1,422)
(206)
(16)
(1,188)
(3,224)
8,585
(9,280)
(695)
(2,997)
$
$
$
$
$
140
26
424
590
-
(86)
(2,284)
(178)
(59)
(475)
(3,082)
1,614
(2,266)
(652)
(3,144)
$
$
$
$
$
105
28
392
525
(1)
(183)
(1,588)
(193)
(44)
(488)
(2,497)
4,653
(4,766)
(113)
(2,085)
121
27. EMPLOYEE BENEFIT EXPENSES
Employee benefits expenses for the years ended December 31, are as follows:
Salaries, wages and benefits
Social security fees
Employee benefits
Other fees
Total
2022
2021
2020
$
(5,660)
(608)
(95)
(1,175)
$
(5,766)
(426)
(53)
(1,103)
$
(4,780)
(380)
(49)
(1,110)
$
(7,538)
$
(7,348)
$
(6,319)
Labor Reform Related to Vacations
On December 27, 2022, a decree was published by means of which articles 76 and 78 of the Federal Labor Law (“LFT” for its acronym
in Spanish) for México were reformed, which will be effective on January 1, 2023. The main change resulting from this labor reform
considers the increase in the minimum annual vacation period for workers with more than one year of service.
The Company evaluated the accounting impacts generated by this labor reform and determined that the increases in the vacation
and vacation premium provision, as a result of the increase in vacation days, were not significant as of December 31, 2022.
28. RELATED PARTY TR ANSACTIONS
Transactions with related parties during the years ended December 31, 2022, 2021 and 2020 were as follows:
Income
Income from sale of goods:
Stockholders with significant influence over subsidiaries
Income from services:
Affiliates
Stockholders with significant influence over subsidiaries
Income from financial interest:
Alfa
Income from leases:
Stockholders with significant influence over subsidiaries
Income from sale of energetic:
Affiliates
Stockholders with significant influence over subsidiaries
Affiliates outside Alfa (Nemak)
Other income:
Affiliates
Stockholders with significant influence over subsidiaries
2022
2021
2020
$
1,903
$
1,576
$
1,155
12
207
26
38
156
31
-
2
2
13
198
26
38
121
29
288
-
-
60
197
28
28
408
28
36
3
-
122
Costs / expenses
Purchase of finished goods and raw materials:
Stockholders with significant influence over subsidiaries
Expenses from services:
Alfa
Affiliates
Stockholders with significant influence over subsidiaries
Affiliates outside Alfa (Nemak)
Financial interest expenses:
Associates and joint ventures
Commission expenses:
Stockholders with significant influence over subsidiaries
Other expenses:
Affiliates
Associates and joint ventures
Stockholders with significant influence over subsidiaries
Affiliates outside Alfa
Dividends paid to Alfa
Dividends of subsidiaries to shareholders with significant influence
2022
2021
2020
(764)
(2,120)
(1,454)
(338)
(86)
(14)
(4)
-
-
(28)
(59)
-
(43)
(6,138)
(2,404)
(16)
(252)
(14)
(6)
-
-
(30)
(77)
-
-
(3,055)
(1,826)
-
(315)
(13)
(1)
(1)
(1)
(22)
(38)
(6)
(36)
(2,230)
(670)
For the year ended December 31, 2022, the remunerations and benefits received by the top officers of the Company amounted
to $424 ($409 in 2021 and $347 in 2020), comprising of base salary and social security benefits, and supplemented by a variable
consideration program based on the Company’s results and the market value of the shares thereof and of its holding company.
As of December 31, balances with related parties are as follows:
Short-term accounts receivable:
Holding company
Alfa, S. A. B. de C. V.
Affiliates
Innovación y Desarrollo de Energía
Alfa Sustentable, S. A. de C. V.
Newpek, LLC
Newpek, S.A. de C.V.
Terza, S. A. de C. V.
Sigma Alimentos Lácteos, S.A. de C.V.
Sigma Alimentos Centro, S.A. de C.V.
Sigma Alimentos Noreste, S.A. de C.V.
Alimentos Finos Occidente, S.A. de C.V.
Affiliates outside Alfa
Nemak México, S.A. de C.V.
Stockholders with significant influence on subsidiaries
BASF
Basell
Basell
Nature of the transaction
2022
2021
2020
As of December 31,
Administrative services
$
140
$
174
$
190
Administrative services
Administrative services
Administrative services
Sale of goods
Energetics
Energetics
Energetics
Energetics
Energetics
Sale of goods
Sale of goods
Energetics
115
1
-
1
3
5
1
1
-
184
40
6
115
1
-
1
4
6
1
1
1
286
26
6
115
-
1
1
2
3
-
1
35
193
44
3
$
497
$
622
$
588
123
Long-term accounts receivable:
Holding company
Alfa, S. A. B. de C. V. (1)
Short-term accounts payable:
Holding Company
Alfa, S. A. B. de C. V. (1)
Affiliates
Alliax, S. A. de C. V.
Alfa Corporativo, S. A. de C. V.
Axtel, S.A.B. de C.V.
Proyectos Ejecutivos Profesionales, S.A. de C.V.
Servicios Eficientes de R.H., S.A. de C.V.
Transportación Aérea del Norte, S.A. de C.V.
Newpek, S. A. de C. V.
Servicios Empresariales del Norte, S. A. de C. V.
Affiliates outside Alfa
Nemak Exterior, LTD
Associates
Clear Path Recycling, LLC
Tepeal
Stockholders with significant influence
over subsidiaries
BASF
BASF
Nature of the transaction
2022
2021
2020
As of December 31,
Financing and interest
$
849
$
876
$
823
$
849
$
876
$
823
Administrative services
$
65
$
19
$
-
Administrative services
Administrative services
Administrative services
Administrative services
Administrative services
Administrative services
Administrative services
Administrative services
Administrative services
Financing and interest
Administrative services
4
-
6
-
-
-
8
2
-
-
1
2
-
8
-
2
1
-
-
1
-
-
Purchase of raw materials
Purchase of goods
138
-
202
26
3
10
3
12
2
-
-
-
4
50
-
202
-
$
224
$
261
$
286
(1) As of December 31, 2022, 2021 and 2020, the loans granted bore interest at average fixed interest rate of 5.34%, 5.34% and 5.34%, respectively.
29. SEGMENT REPORTING
Segment reporting is presented consistently with the financial information provided to the Chief Executive Officer, who is the highest
authority in operational decision making, allocation of resources and performance assessment of operating segments.
An operating segment is defined as a component of an entity on which separate financial information is regularly evaluated.
Management controls and assesses its operations through two business segments: the Polyester business and the Plastics and
Chemicals business. These segments are managed separately since its products vary and targeted markets are different. Their
activities are performed through various subsidiaries.
The operations between operating segments are performed at market value and the accounting policies with which the financial
information by segments is prepared, are consistent with those described in Note 3.
The Company has defined Adjusted EBITDA as the calculation of adding operating income, depreciation, amortization, and impair-
ment of long-lived assets.
The Company evaluates the performance of each of the operating segments based on Adjusted EBITDA, considering that this
indicator is a good metric to evaluate operating performance and the ability to meet principal and interest obligations with respect
to indebtedness, and the ability to fund capital expenditures and working capital requirements. Nevertheless, Adjusted EBITDA is
not a measure of financial performance under IFRS and should not be considered as an alternative to net income as a measure of
operating performance or cash flows as a measure of liquidity.
124
Following is the condensed financial information of the Company’s operating segments:
For the year ended December 31, 2022:
Statement of income:
Income by segment
Inter-segment income
Income from external customers
Operating income
Depreciation and amortization
Impairment of long-lived assets
Adjusted EBITDA
Investments in fixed and intangible assets
For the year ended December 31, 2021:
Statement of income:
Income by segment
Inter-segment income
Income from external customers
Operating income
Depreciation and amortization
Impairment of long-lived assets
Adjusted EBITDA
Investments in fixed and intangible assets
For the year ended December 31, 2020:
Statement of income:
Income by segment
Inter-segment income
Income from external customers
Operating income
Depreciation and amortization
Impairment of long-lived assets
Adjusted EBITDA
Investments in fixed and intangible assets
Polyester
Plastics and
Chemicals
Other
Total
$
$
$
$
$
$
$
$
$
$
140,837
(120)
140,717
13,966
3,713
244
17,923
2,487
$
$
$
$
$
46,878
(74)
46,804
10,464
925
2
11,391
497
Polyester
Plastics and
Chemicals
98,103
(103)
98,000
8,801
3,235
524
12,560
3,774
$
$
$
$
$
47,533
(63)
47,470
8,192
1,045
936
10,173
653
Polyester
Plastics and
Chemicals
$
$
$
$
$
85,350
(70)
85,280
3,401
3,426
14
6,841
1,855
$
$
$
$
$
25,403
(54)
25,349
3,860
1,060
-
4,920
715
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
24,720
194
24,914
109
1
-
110
3
$
$
$
$
$
212,435
-
212,435
24,539
4,639
246
29,424
2,987
Other
Total
10,588
166
10,754
501
-
-
501
4
$
$
$
$
$
156,224
-
156,224
17,494
4,280
1,460
23,234
4,431
Other
Total
3,236
124
3,360
232
-
-
232
-
$
$
$
$
$
113,989
-
113,989
7,493
4,486
14
11,993
2,570
125
The reconciliation between adjusted EBITDA and income before taxes for the years ended December 31, is as follows:
Adjusted EBITDA
Depreciation and amortization
Impairment of long-lived assets
Operating income
Financial result, net
Equity in loss of associates and joint ventures
2022
2021
2020
$
29,424
(4,639)
(246)
24,539
(2,997)
(67)
$
23,234
(4,280)
(1,460)
17,494
(3,144)
(39)
$
11,993
(4,486)
(14)
7,493
(2,085)
(85)
Income before income taxes
$
21,475
$
14,311
$
5,323
The Company’s main customer generated revenues amounting to $9,230, $11,403 and $10,426 for the years ended December 31,
2022, 2021 and 2020. These revenues are resulted from the polyester reporting segment and represent 4.0%, 7.3% and 9.1% of the
consolidated revenues with external costumers for the years ended December 31, 2022, 2021 and 2020.
Following is a summary of revenues per country of origin for the years ended December 31:
Mexico
United States
Argentina
Brazil
Chile
Canada
United Kingdom
Oman
Saudi Arabia
Total revenues
2022
2021
2020
$
88,922
64,383
8,867
23,303
1,325
3,627
5,648
16,086
274
$
71,646
49,710
7,255
18,090
1,413
3,143
4,967
-
-
$
44,189
45,113
4,303
12,649
936
1,966
4,833
-
-
$
212,435
$
156,224
$
113,989
The following table shows the intangible assets and property, plant and equipment by country:
Mexico
United States
Canada
Brazil
Oman
Total intangible assets
Mexico
United States
Canada
Argentina
Chile
Brazil
United Kingdom
Oman
Saudi Arabia
$
$
$
2022
1,312
1,375
4
214
1,520
4,425
21,285
9,769
471
128
276
4,926
667
10,598
331
As of December 31,
$
$
$
2021
1,575
1,521
20
232
-
3,348
23,157
9,821
775
163
267
4,356
866
-
-
$
$
$
2020
1,741
1,616
22
258
-
3,637
23,737
8,090
865
111
316
4,538
922
-
-
Total property, plant and equipment
$
48,451
$
39,405
$
38,579
126
30. COMMITMENTS AND CONTINGENCIES
As of December 31, 2022, the Company has the following commitments:
a.
As of December 31, 2022, 2021 and 2020, the Company’s 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. These agreements are
effective between one and five years and generally contain price adjustment clauses.
b.
A subsidiary of the Company entered into agreements to cover the supply of propylene, which establish the obligation to
purchase the product at a priced referenced to market values for a specific period.
As of December 31, 2022, the Company has the following contingencies:
a.
b.
During the normal course of the business, the Company is involved in disputes and litigations. While the results of these may
not 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 it were to result in an adverse resolution to the Company, would negatively impact the results of
its operations or its financial position.
Some of the Company’s subsidiaries use hazardous materials to manufacture polyester filaments and staple fibers, polyeth-
ylene terephthalate (PET) and terephthalic acid (PTA) resin, polypropylene (PP) resin, expandable polystyrene (EPS), chemical
specialties and they generate and dispose of 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.
c.
As of December 31, 2022, the Company is in a process of fiscal litigation in one of its subsidiaries in Brazil, in relation to the
demand for payment of the Tax on the Circulation of Goods and Services (“ICMS”) that the Ministry of Finance of the State of Sao
Paulo (“SFSP”, for its initials in Portuguese) has raised against the Company, due to differences in the criteria for the calculation
and crediting of such tax. Considering all the circumstances and precedents of jurisprudence available at that date, management
and its advisors have determined that it is probable that the Superior Court of Justice of Brazil will issue a judgment in favor of
the Company for the amount related to differences in the calculation, which would exempt it from paying $455 in taxes, fines and
interest that the SFSP demands; therefore, as of December 31, 2022, the Company has not recognized any provision related to
this concept.
On the other hand, for the concept of ICMS crediting, the demanded amount is $91, and management and its advisors consider
that it is not probable that the authorities will issue an unfavorable resolution for the Company; thus, it has not recognized any
provision related to this concept as of December 31, 2022.
d. Anti-Dumping of PET Resin
In March 2015, in response to requests from PET resin manufacturers in the United States of America (“USA”), the International
Trade Commission (“ITC”) and the United States Department of Commerce The USA (“USDOC”) initiated an Anti-Dumping
investigation on imports of PET resin from China, India, Oman and Canada, resulting in the imposition of a tariff (percentage on
export sales of resin of PET to the US) which is reviewed annually during the month of May at the request of either Octal or US
manufacturers, the rate has fluctuated based on annual reviews and is currently 3.96%.
127
e. Anti-Dumping of PET Sheet
In July 2019, in response to requests made by PET sheet manufacturers in the US, the ITC and the USDOC initiated an Anti-
Dumping investigation on PET sheet imports from Oman, Korea and México, resulting in the imposition of a tariff (percentage on
PET sheet export sales to the US) of 4.74%, which is currently in a review process.
31 . SUBSEQUENT EVENTS
In preparing the financial statements the Company has evaluated the events and transactions for their recognition or disclosure
subsequent to December 31, 2022, and through January 31, 2023 (date of issuance of the consolidated financial statements), and no
significant subsequent events have been identified.
32 . AUTHORIZATION TO ISSUE THE CONSOLIDATED FINANCIAL STATEMENTS
On January 31, 2023, the issuance of the accompanying consolidated financial statements was authorized by José de Jesús Valdez
Simancas, General Director and José Carlos Pons de la Garza, Administration and Finance Director.
These consolidated financial statements are subject to the approval of the Company’s ordinary shareholders’ meeting.
128
CONTACT US
CONTACT US
Alpek, S.A.B. de C.V.
Av. Gómez Morín 1111 Sur
Col. Carrizalejo, San Pedro
Garza García
Nuevo León, CP. 66254, México
www.alpek.com
Investor Relations
Antón Fernández
Alejandra Bustamante
IR@alpek.com
CONTACT USCONTACT USCONTACT USCONTACT US