Orbia Advance Corporation SAB de CV ((MXCHF)) has held its Q4 earnings call. Read on for the main highlights of the call.
Orbia Faces a Challenging Year with Revenue and EBITDA Declines
The latest earnings call for Orbia Advance Corporation revealed a challenging year marked by declines in revenue and EBITDA across most of its segments. Despite successful cost optimization efforts and improvements in areas like Precision Agriculture, the company continues to face significant challenges, particularly in Connectivity Solutions and managing high debt levels. Orbia is prioritizing cost control and deleveraging strategies to navigate a difficult economic environment.
Cost Optimization Achievements
Orbia has made significant strides in its cost optimization efforts, achieving a benefit of approximately $108 million. In 2024 alone, the company realized $104 million, surpassing its initial target of $85 million. This success underscores the company’s commitment to improving its financial health through strategic cost-saving measures.
Improved EBITDA in Precision Agriculture
The Precision Agriculture segment reported a 6% increase in full-year EBITDA, reaching $125 million. This growth was driven by cost-saving efforts and enhanced operational efficiencies, showcasing the potential of this segment to contribute positively to Orbia’s overall financial performance.
Free Cash Flow Increase
In the fourth quarter, Orbia saw an increase in free cash flow to $124 million, up by $8 million year-over-year. This improvement was attributed to tight management of capital expenditures, highlighting the company’s focus on financial prudence.
Polymer Solutions Profitability
The Polymer Solutions segment experienced a notable increase in fourth quarter EBITDA by 56% year-over-year. This growth was fueled by higher resin volumes and reduced raw material and fixed costs, indicating strong performance despite broader challenges.
Overall Revenue and EBITDA Decline
Orbia’s full year 2024 revenues totaled $7.5 billion, marking a 9% decrease, with a 25% decline in EBITDA compared to the previous year. These declines were impacted by reduced revenues across all business groups, reflecting the challenging market conditions the company faces.
Challenges in Connectivity Solutions
Connectivity Solutions encountered significant headwinds, with a 25% decrease in full-year revenues and a dramatic 67% drop in EBITDA. These declines were primarily due to lower volumes, prices, and an unfavorable product mix.
Underperformance in Building & Infrastructure
The Building & Infrastructure segment also underperformed, with full-year revenues decreasing by 7%. This was driven by lower volumes in Europe and weak demand in Latin America, further contributing to the company’s financial struggles.
Fluor and Energy Materials Segment Decline
The Fluor and Energy Materials segment experienced a 6% decrease in full-year revenues and a 34% drop in EBITDA. These declines were attributed to lower refrigerant volumes and increased raw material costs.
High Debt Levels
Orbia’s net debt stood at $3.617 billion, with a net debt-to-EBITDA ratio of 3.30x, indicating increased leverage compared to the previous year. Managing this high debt level remains a critical focus for the company.
Forward-Looking Guidance
Looking ahead to 2025, Orbia anticipates EBITDA to reach approximately $1.25 billion, maintaining a cautious outlook amid limited market recovery. The company projects capital expenditures to decline to around $400 million, focusing on safety, operational integrity, and strategic growth projects. Orbia aims to fortify its financial position by continuing cost reduction initiatives, optimizing working capital, divesting non-core assets, and enhancing profitability across segments.
In summary, Orbia faced a tough year with notable declines in revenue and EBITDA across its segments. While the company has made important strides in cost optimization and seen improvements in certain areas, significant challenges remain, particularly with high debt levels and struggles in Connectivity Solutions. Forward-looking guidance suggests a cautious approach as Orbia focuses on strengthening its financial health amid ongoing economic and geopolitical uncertainties.