annual report

Transcription

annual report

ALFA, S.A.B. de C.V.
A N N U A L R E P O R T 2 0 15
www.alfa.com.mx
ANNUAL
REPORT
Av. Gómez Morín 1111 Sur, Col. Carrizalejo.
San Pedro Garza García, N.L.
C.P. 66254, Mexico
2 015
Nemak u
completes IPO on
the Mexican Stock
Exchange
ALFA is a company that manages a portfolio
Investor Relations
Enrique Flores
Vice-President Corporate
Communications
Phone: +52 (81) 8748 1207
[email protected]
of diversified subsidiares: Sigma, an important
producer, marketer and distributor of foods
through well recognized brands in Mexico,
the United States, Europe and Latin America;
Alpek, one of the world’s largest producers
of polyester (PTA, PET and fibers), which also
Luis Ochoa
Vice-President Investor Relations
Phone: +52 (81) 8748 2521
[email protected]
leads the Mexican market in polypropylene,
expandable polystyrene (EPS) and caprolactam;
Nemak, a leading provider of innovative
light-weighting solutions for the automotive
Raúl González
Investor Relations Manager
Phone: +52 (81) 8748 1177
[email protected]
industry, specializing in the development and
manufacturing of aluminum components for
powertrain and body structure; Alestra, a
leading provider of information technology
and communications services for the enterprise
Investor Relations
Phone: +52 (81) 8748 1676
[email protected]
in the hydrocarbons industry in Mexico and the
United States. In 2015, ALFA reported revenues
of Ps. 258,300 million (U.S. $16.3 billion), and
EBITDA(1) of Ps. 38,440 million (U.S. $2.4 billion).
ALFA’s shares are quoted on the Mexican Stock
Exchange and on Latibex, the market for Latin
American shares of the Madrid Stock Exchange.
u
DESIGN:
Sigma
NOTE: In this annual report, monetary figures are
expressed in nominal Mexican pesos (Ps.), and in
nominal dollars (U.S. $) unless otherwise specified.
Conversions from pesos to dollars were made using
the average rate of the month in which the revenues
or disbursements were made. The percentages of
variation between 2015 and 2014 are expressed in
nominal terms.
Mexican Stock Exchange
ALFA
Date listed:
August 1978
Juan Andrés Martín
segment in Mexico; and, Newpek, a company
(1)
EBITDA = operating income + depreciation and
amortization + non-recurring items.
Independent Auditor
PwC
acquires 37 percent
of the shares of
Campofrio and
assumes full control
of the company
signi.com.mx
Latibex
(Madrid Stock Exchange)
ALFA C/I-s/A
Date listed:
December 2003
HIGHLIGHTS OF THE YEAR
Alpek
u
integrates the EPS
business in the Americas
acquired from BASF
Newpek
u
explore opportunities
to strengthen its
portfolio of assets
Contents
Page
Alestra
announces its
merger with Axtel
2
Global Footprint
4
Letter to Shareholders
7
Financial Highlights
8
Sigma
10
Alpek
12
Nemak
14
Alestra
16
Newpek
18
Board of Directors
19
Management Team
20
Corporate Governance
21
Consolidated Financial Statements
106
Glossary
u
2
annual report ALFA 2015
Breakdown by business
in 2015
Alestra
2%
Newpek
1%
Nemak
Sigma
28%
36%
UNITED
STATES
CANADA
Alpek
DOMINICAN
REPUBLIC
33%
MEXICO
REVENUES
EL SALVADOR
COSTA RICA
BR A ZIL
ECUADOR
Newpek
Alestra
7% 3%
PERU
Sigma
35%
Alpek
25%
CHILE
Nemak
30%
ARGENTINA
EBITDA
An important producer, marketer
and distributor of foods through
well recognized brands in
Mexico, the United States,
Europe and Latin America.
Newpek
Alestra
4% 1%
Sigma
Nemak
35%
29%
Alpek
31%
ASSETS
GLOBAL
FOOTPRINT
3
BELGIUM
NETHERL ANDS
GERMANY
FR ANCE
PORTUGAL
SPAIN
ITALY
CZECH
REPUBLIC
SLOVAKIA
POL AND
AUSTRIA
HUNGARY
RUSSIA
CHINA
INDIA
One of the world’s largest
producers of polyester (PTA, PET
and fibers), which also leads the
Mexican market in polypropylene,
expandable polystyrene (EPS)
and caprolactam.
Leading provider of innovative
light-weighting solutions for
the automotive industry,
specializing in the development
and manufacturing of aluminum
components for powertrain
and body structure.
Leading provider of IT and
communications services for the
enterprise segment in Mexico.
Company engaged in
hydrocarbons exploration
and production.
4
Álvaro Fernández Garza
President
Armando Garza Sada
Chairman of the Board
of Directors
L E T TER TO
SHAREHOLDERS
Dear shareholders:
For ALFA, the macroeconomic environment in 2015 was marked by low
oil prices and a stronger U.S. dollar. These factors affected the results of
the petrochemical, food and hydrocarbons operations. Nevertheless, the
company was able to offset their effects through higher product margins
and productivity improvements, along with one-time gains, all of which
drove an increase of 19% in EBITDA compared to 2014.
ALFA continued to execute its investment
plan and introduce initiatives to
make its businesses stronger. Sigma
gained full ownership of Campofrio,
which constitutes a strategic step as it
generates management autonomy, and
began building a new plant in Spain.
Alpek incorporated the EPS business
acquired from BASF, important move
to gain control of the business in the
U.S. It also approved the construction
of a second energy cogeneration plant.
Nemak started up a new production
facility in Russia and began building
another in Mexico. It also launched
an initial public offering, opening
new sources of financing for its future
projects. Alestra expanded its services
capacity and announced its merger with
Axtel. Newpek continued to prepare
itself to participate in the opening of
Mexico’s hydrocarbons industry.
PERFORMANCE OF
THE BUSINESSES
u
Sigma
The company’s performance was favored
by factors like the consolidation of a
full year of Campofrio’s operations and
lower prices of key raw materials, like
poultry, pork and milk. In Mexico, this
last factor was overshadowed by the 17%
appreciation of the dollar against the
peso, which elevated the cost of import
materials. Revaluation of the dollar also
affected the revenues of Sigma in Europe
when expressed in such currency.
In June, Sigma assumed full ownership
of Campofrio Food Group by acquiring
the 37% stake WH Group had in that
company. This is crucial to facilitate the
execution of Campofrio’s strategic plan
for improving profit margins and promote
growth in coming years.
Capital expenditures during the year
totaled U.S. $660 million and were
channeled to operating efficiency
improvements and expanding coverage
of the distribution network, as well as
acquisitions like the above-mentioned
purchase of Campofrio shares and that
of Ecarni, a processed meat company in
Ecuador, making Sigma one of the most
important producers in this country. In
November, to replace the facility that was
lost in the fire of 2014, Campofrio began
building a new plant in Burgos, Spain,
which will have cutting-edge technology
and will enable Campofrio to bolster
production capacity in its main market.
The plant is expected to start operations
in late 2016.
5
u
Alpek
The decline in global oil prices
affected petrochemical feedstock
prices throughout the industry. Alpek
was able to stabilize sales volumes
while increasing product margins and
saving costs. The result was a stronger
performance in 2015, reflected in
a 45% increase in EBITDA over the
previous year.
The Polyester business benefited from an
increase of U.S. $66 per ton in the price
of PTA in the U.S., as well as savings
from its cogeneration plant which came
online in late 2014. Favorable preliminary
rulings in PET anti-dumping cases in the
U.S., and temporary or permanent PTA
plant shutdowns in China also helped
the year’s results.
On the other hand, EBITDA in the
Plastics and Chemicals business grew
by 79% thanks to higher polypropylene
profits, which resulted from lower
feedstock prices. The integration of the
EPS plants acquired from BASF in the
Americas, at the beginning of the year,
also produced benefits.
Alpek continued its investment plan,
allocating U.S. $317 million to projects
like the Mossi & Ghisolfi PTA/PET plant
in Texas, which will supply Alpek with
500,000 tons of PET at a very competitive
price. Likewise, Alpek invested in a
monoethylene glycol tolling agreement
with Huntsman in the U.S., which will lock
in a supply of this commodity at ethanebased costs. Other projects were the start
of polyester fiber capacity expansion in
the Pearl River plant, to better serve the
U.S. market, and the acquisition of an EPS
plant in Chile.
u
Nemak
Carmakers are facing increasingly strict
emissions requirements on the vehicles
they produce. This prompts them to the
incremental use of lighter materials in the
vehicles, such as aluminum. Nemak has
taken advantage of this trend to grow,
using its knowledge in the production of
automotive parts with this raw material.
In 2015, vehicle sales in the U.S. grew
6%, fueled by availability of credit
and gasoline prices. In Europe, the
automotive market grew 3%. The above
more than offset weaker performance in
South America, resulting in an increase in
Nemak’s overall sales of 3% in the year.
Nemak’s capital expenditures amounted
to U.S. $460 million in 2015. One of its
biggest projects was the opening of a
new cylinder heads and engine blocks
plant in Russia, to serve markets in that
country and elsewhere in Europe. It
also began building an engine blocks,
transmission cases and structural
components plant in Mexico, to increase
its production capacity in order to handle
recently obtained contracts. Lastly, it
expanded machining capacity in all the
regions it serves, adding value to the
components it makes.
EBITDA for the year
was U.S. $2.4
billion, up 19%
compared to 2014.
6
FI N A N C I A L R AT I OS
Net Debt to
EBITDA
Interest
Coverage
2.0 times
7.7 times
During the year, the company won new
contracts in all its product lines. In total,
these contracts represent U.S. $1.2 billion
in annual revenues. Almost half of them
correspond to incremental programs.
In July, Nemak launched an initial public
offering, placing 19% of its shares
through the Mexican Stock Exchange.
Access to the equity market diversified
Nemak’s funding sources, improved its
financial condition and enabled it to push
forward with its growth plans.
u
Alestra
The company expanded its infrastructure
and broadened the offer of information
technology and communications (ITC)
services, the volume of which grew
45% in the year. With this, Alestra
strengthened its leadership in the
Mexican ITC business segment.
Alestra invested U.S. $101 million in
projects like expanding data center
capacity and increasing the coverage
of its last-mile access network for
clients. Another key project was the
opening of an Innovation Hub, a space
where innovative solutions are created,
expanded and shared, to the benefit
of its clients.
In December, ALFA signed the definitive
agreement on the merger of Alestra
with Axtel, creating a more solid
company with increased capacity to
supply ITC services to business clients,
as well as triple-play services for the
high-end residential segment. ALFA
will own 51% of the shares of the new
company. The merger will be effective in
February 15, 2016.
u
Newpek
In the U.S., the company operated in
an environment of weakening oil prices,
which prompted it to scale back the
drilling of new wells. At the Eagle Ford
Shale, Edwards and Wilcox plays, all in
southern Texas, 113 wells were connected
to sales, compared to 122 connected in
2014. Production totaled 8.2 thousand
barrels of oil equivalent per day (MBOED)
in 2015, same as 2014.
In Mexico, Newpek continued operating
two mature oil fields in Veracruz under
service contracts with Pemex. In this
case, production totaled 4.8 MBOED, an
increase of 1% over 2014.
Favorable operating results in the year
more than offset financial expenses,
foreign exchange losses and a M-to-M loss
on ALFA´s holdings of Pacific Exploration &
Production.
With Mexico’s hydrocarbons industry
recently opened to private investment,
Newpek continued analyzing
opportunities for participation in this
process. This included the analysis
of potential alliances with strategic
partners to reduce risks and take
advantage of economies of scale.
In 2015, the Mexican government
organized three public auction
processes, and Newpek submitted bids
for the third auction in the process.
Although it was not among the winning
companies, it will continue evaluating
its participation in forthcoming
auctions. At the same time, it is working
in the process of migrating existing
service contracts with Pemex into full
production-sharing agreements.
In 2015, ALFA invested U.S. $1.6 billion
in fixed assets and acquisitions, the
most important of which are detailed
in the first part of this letter. ALFA’s key
financial ratios were the following in
2015: Net Debt to EBITDA 2.0 times;
Interest Coverage, 7.7 times. These
ratios compare to 2.5 and 6.1 in 2014,
respectively. Despite the strong capital
expenditures of the year and the volatile
conditions in oil prices and the exchange
rate, ALFA continues to have a solid
financial condition.
FINANCIAL RESULTS
In 2015, ALFA’s revenues totaled U.S.
$16.3 billion, down 5% from the previous
year. This is attributed to the weakness
of petrochemical feedstock prices,
which affected Alpek’s revenues. The
appreciation of the U.S. dollar against the
peso and the Euro in the year also had
an impact, dampening results for Sigma,
Nemak and Alestra. Lastly, the decline
in hydrocarbon prices was reflected in
lower revenues at Newpek.
EBITDA for the year was U.S. $2.4 billion,
up 19% when compared to 2014. The
reasons were better results from Nemak
and Alpek, the consolidation of a full year
of operations at Campofrio, and one-time
gains at Sigma. Alestra and Newpek both
reported weaker EBITDA in dollars due
to the appreciation of this currency and
lower oil prices, respectively.
The company reported a majority net
income of U.S. $223 million, compared
to a loss of U.S. $104 million in 2014.
Dear shareholders, the macroeconomic
difficulties of 2015 once again put ALFA
to the test. The talent of its people and
the investments made in previous years
to expand capacity, improve efficiency
and add value to its products and
services enabled it to face the difficulties
and deliver results.
The year 2016 presents us a new scenario
of challenges. The global macroeconomic
environment shows signs of instability, the
price of oil continues to fall and the dollar
to appreciate. These are obstacles to
generate sustained growth. In response,
we reaffirm our commitment to continue
to maintain the course through hard work,
dedication and discipline.
On behalf of the Board of Directors, we
are grateful for the trust and support you
have given us. We thank our clients and
suppliers as well, along with the financial
community, for their collaboration.
Special recognition is due to our more
than 72,800 employees in 26 countries,
for their efforts and contribution to the
results reported here.
Dear shareholders, ALFA is ready to
meet the challenges and seize the
opportunities that arise to continue to
generate value.
San Pedro Garza García, N.L., Mexico, February 2, 2016.
Armando Garza Sada
Chairman of the Board of Directors
President
7
FINANCIAL
HIGHLIGHTS
ALFA AND SUBSIDIARIES
Millions of Ps.
U.S. $ Millions (4)
2015
2014
% chg.
2015
2014
% chg.
258,300
229,226
13%
16,315
17,224
-5%
24,058
17,226
40%
3,778
-2,037
0.74
INCOME STATEMENT
Net Sales
1,518
1,298
17%
(5)
223
-104
N.A.
-0.40
N.A.
0.04
-0.02
N.A.
38,440
27,116
29%
2,420
2,040
19%
Total Assets
266,705
232,880
15%
15,501
15,773
-2%
Total Liabilities
186,890
163,721
14%
10,862
11,074
-2%
79,815
69,159
15%
4,639
4,699
-1%
62,191
55,378
12%
3,614
3,763
-4%
12.12
10.78
12%
0.70
.73
-4%
Operating Income
Majority Net Income
Majority Net Income per Share
(Ps. & U.S. $)
EBITDA
N.A.
(1)
(2)
BALANCE SHEET
Stockholders’ Equity
Majority Interest
Book Value per Share
(Ps. & U.S. $)
(3)
Based on the weighted average number of outstanding shares (5,129,888 in 2015 and 5,135,480 in 2014).
EBITDA = operating income + depreciation and amortization + non-recurring items.
(3)
Based on the number of outstanding shares (5,120,500 at the end of 2015 and 5,134,500 at the end of 2014).
(4)
Due to the dollarization of its revenues, which is higher than 75%, and because of the holding of shares by foreign investors, ALFA
provides equivalent U.S. $ amounts for some of its most important financial data.
(5)
N.A. = Not applicable
(1)
15,501
15,773
12,648
11,854
10,816
2,420
2,040
1,915
1,854
1,623
16,315
17,224
15,879
15,152
14,746
(2)
‘11 ‘12 ‘13 ‘14 ‘15
‘11 ‘12 ‘13 ‘14 ‘15
‘11 ‘12 ‘13 ‘14 ‘15
REVENUES
EBITDA
ASSETS
U.S. $ Millions
U.S. $ Millions
U.S. $ Millions
869
636
524
470
390
8
‘11 ‘12 ‘13 ‘14 ‘15
EBITDA
U. S. $ Millions
T
he company’s results in 2015
benefited from the consolidation of
a full year of results of Campofrio Food
Group (CFG), the decline in the prices of
raw materials like poultry, pork and milk,
and the good performance of its U.S.
operations. However, in Mexico the drop
in raw materials was offset by the U.S.
dollar appreciation, which affected the
local cost of imported inputs.
Sigma continued promoting the
innovation of their products. In Mexico
introduced sliced panela cheese under
the FUD® brand and in the U.S. the
“Grill Mates Sausages”, partnered with
McCormick. In Europe it continued to
reinforce its most recent growth product
lines: Traditional, Healthy and Snacking.
In addition, it continued strengthening its
brand equity in all its operating regions.
For the first time in the U.S., it launched
a campaign for Bar-S®, the best-selling
brand of sausages in that country for nine
years in a row. In Mexico, it launched the
campaign “No housewife has it easy”
for FUD®, and in Europe it released
“Despertar”, its expected Campofrio®
Christmas campaign.
With the full consolidation of CFG and
actions taken by Sigma, revenues and
EBITDA grew 10% and 37% over 2014 to
U.S. $5.9 billion and U.S. $869 million,
respectively. EBITDA also reflects the
collection of insurance coverage on
CFG’s damaged assets. Sales volume
rose to 1.7 million tons of food products,
an increase of 16% over 2014.
During the year, the company executed
a capital expenditures and acquisition
plan totaling U.S. $660 million. This
figure includes resources invested in
getting full control of CFG by acquiring
37% of its shares formerly owned by WH
Group. This means greater flexibility for
executing the CFG strategic plan and
9
Acquires 37% of the shares
of Campofrio and assumes full
control of the company
capitalizing more rapidly on synergies
and best practices. Sigma also acquired
Ecarni, a maker and seller of processed
meats in Ecuador. This acquisition,
together with the purchase of Juris in
2014, makes Sigma one of the most
important companies in the processed
meat market of that country.
Also, Sigma boosted the growth of
the Foodservice business in Mexico,
through investments in infrastructure
multi-temperature and strengthening its
distribution network, as well as through
the association with PACSA, a leader
in the Foodservice industry in the
southeast of the country.
Responding to the challenges posed by
a fire at the CFG plant in Burgos, Spain
in late 2014, the company successfully
introduced a plan to swiftly restore
production levels and regain shelf
space. In November 2015, it concluded
negotiations with its insurance companies
and collected full coverage for the
damages and losses associated with the
fire. It also began building a new plant
on the same site, which will start up
operations in late 2016. The plant will
have the capacity to produce 76,000 tons
per year and will be equipped with stateof-the-art technology and production
processes.
In 2016, Sigma will focus its attention
on fully restoring operations at the
Burgos plant. It will also continue to
establish global processes in all of
its key activities, enabling it to better
take advantage of synergies and best
practices in operations across various
geographic regions.
Net Debt to
EBITDA
Interest
Coverage
2.2 times
8.5 times
Latin America
United States
15%
6%
Mexico
43%
Europe
36%
REVENUE
BREAKDOWN
2015
630
434
572
728
771
10
‘11 ‘12 ‘13 ‘14 ‘15
EBITDA
U. S. $ Millions
I
n 2015, Alpek reported stronger
results due to a combination of internal
cost-cutting initiatives, positive market
dynamics and other industry events. It
also continued developing its investment
program and announced new
strategic projects.
The Polyester business got a boost
from an improvement in PTA margins
in North America, which started up in
April 2015, together with revenue and
savings resulting from the full-capacity
operation at the cogeneration plant that
went on line in late 2014. Other factors
contributing to the results of this business
were preliminary favorable rulings in a
PET anti-dumping lawsuit in the U.S., and
temporary or permanent shutdown of
PTA plants in China.
The Plastics and Chemicals business also
brought in stronger results, due to higher
margins on polypropylene and EPS. In
the case of polypropylene, due to lower
raw materials prices in North America.
Regarding EPS, its performance was
helped by lower feedstock prices, which
decoupled momentarily from their Asian
benchmarks. Another key factor for this
business was the successful integration
of the EPS plants acquired from BASF
in North and South America at the
beginning of 2015.
Over the course of the year, total sales
volume for Alpek was 2% lower than
2014, but revenues fell by 20% because
of lower crude oil and feedstock prices.
Despite this decline, EBITDA rose by 45%
compared to 2014 due to better business
conditions, as explained above.
In 2015, Alpek invested U.S. $317 million
to increase its cost competitiveness.
Main projects were: the investment in
the PTA/PET plant being built by Mossi
& Ghisolfi’s in Corpus Christi, Texas;
11
Capital expenditures totaled
U.S.$ 317 million in 2015
the monoethylene glycol (MEG) tolling
agreement with Huntsman; and the
construction of two spheres for
propylene storage.
Also during the year, new projects were
announced, including a 110,000 tons per
year capacity expansion at the polyester
fiber plant in Pearl River, which is slated
for startup toward the end of 2016; a
75,000 tons per year expansion of EPS
capacity at Altamira, which will kick in
during early 2017; and the acquisition
of a 20,000 tons per year EPS plant in
Chile, which should become effective at
the start of 2016.
The beginning of 2016 has been marked
by a further drop in oil prices. Although
this circumstance may have a negative
effect on the petrochemical industry,
Alpek expects to cope successfully with
this situation thanks to the benefit of
recently commissioned projects, like the
MEG supply contract with Huntsman, the
potential final ruling in the anti-dumping
cases and a gradual improvement in
reference margins due to recent plant
closures in Asia. As for Plastics and
Chemicals, Alpek expects polypropylene
margins to hold steady at current levels,
and the business should benefit from the
incorporation of the EPS plant in Chile, as
well as a gradual increase in caprolactam
margins.
Alpek’s solid financial condition and
strong cash generation will allow the
company to continue to develop
strategic investments as it did in 2015.
Net Debt to
EBITDA
Interest
Coverage
1.1 times
10.7 times
Plastics &
Chemicals
17%
Polyester
Products
73%
REVENUE
BREAKDOWN
2015
759
702
623
508
388
12
I
n 2015, Nemak capitalized on a strong
automotive market in the U.S. and the
recovery in Europe to deliver solid results.
It also continued benefiting from the
growing trend of vehicle lightweighting in
the global automotive industry.
In response to increasingly stringent CO2
emissions and fuel economy standards,
automakers around the world are raising
aluminum content in order to reduce
the weight and as a result improve the
efficiency of vehicles.
‘11 ‘12 ‘13 ‘14 ‘15
EBITDA
U. S. $ Millions
Nemak has seized this opportunity to
bolster its leadership position in the
development and manufacturing of
high-tech aluminum auto components,
expanding its production capacity
and supplying products with higher
added value. In 2015, Nemak increased
profitability mainly on the back of higher
volumes, a richer product mix and
productivity enhancements.
In the U.S., sales of light vehicles grew
6% over 2014. Vehicle production in
North America grew by 3% in the same
period. The main factors behind these
increases were a pickup in consumer
confidence, favorable credit conditions
and lower fuel prices. In Europe, the
economic recovery drove year-over-year
increases of 3% in both production and
sales of light vehicles.
Total sales volume at Nemak reached
50.7 million equivalent units, 3% more
than in 2014. Revenues totaled U.S. $4.5
billion, and EBITDA was U.S. $759 million.
These figures were 4% lower and 8%
higher compared to 2014, respectively.
13
Nemak becomes a public company
by listing its shares on the
Nemak continued to expand its
manufacturing footprint. In September,
it opened a plant in Ulyanovsk, Russia,
to produce cylinder heads and engine
blocks. Nemak also made progress on
the construction of a high-pressure die
casting plant in Mexico where it plans to
make engine blocks, transmission cases
and structural components. This facility
will have a capacity of 2.2 million parts
per year and will be inaugurated in the
second half of 2016. In addition, as part
of its vertical integration strategy, Nemak
continued to expand its machining
capacity across all its operating regions.
During the year, Nemak won new
contracts to produce cylinder heads,
engine blocks, transmission cases and
structural components worth a total
of U.S. $1.2 billion in annual revenues.
Close to half of these revenues represent
incremental programs.
In July, Nemak successfully completed an
initial public offering, placing 19% of its
shares on the Mexican Stock Exchange.
By becoming a public company, Nemak
has diversified its funding sources and
improved its ability to finance growth.
Nemak plans to continue leveraging its
competitive advantages —including
state-of-the-art technology for the
production of aluminum auto parts, a
highly skilled labor force and global
manufacturing capabilities — to further
enhance its position as a leading player
in the development and manufacturing
of aluminum powertrain and structural
components for light vehicles.
Net Debt to
EBITDA
Interest
Coverage
1.6 times
10.2 times
Rest of the world
8%
North America
61%
Europe
31%
REVENUE
BREAKDOWN
2015
166
170
170
137
128
14
‘11 ‘12 ‘13 ‘14 ‘15
EBITDA
U. S. $ Millions
I
the principles of Design Thinking, which
are part of Alestra’s Innovation Method.
The company invested U.S. $101 million
in fixed assets, including an expansion
of more than 1,000 m2 in data centers,
which now cover 3,500 m2. Also, Alestra
extended coverage of its network
by adding last-mile access and IT
infrastructure.
The foregoing prepared Alestra to
offer more and better IT services, like
network management, hosting, systems
integration, data security and cloud
applications. Volume grew 45%. This in
turn resulted in a 12% increase in revenues
and 16% rise in EBITDA, measured in
pesos. In dollar terms, however, revenues
and EBITDA were U.S. $389 million and
U.S. $166 million, decreases of 6% and
2%, respectively, basically because of the
dollar´s appreciation against the peso
during the year.
n 2015, Alestra strengthened its
leadership in Information Technology
and Communications (ITC) services for
the enterprise segment of the Mexican
market.
Moreover, in the interest of supporting
an innovation culture, early in the 2015,
Alestra opened its Innovation Hub in
Monterrey, the official site of creation
of the company’s technology solutions.
It was designed together with experts
from Stanford University and is based on
In December, ALFA signed the definitive
agreement to merge Alestra and
competitor Axtel. The company formed
by this merger will enjoy a more solid
15
The volume of customer-access
circuits providing services
increases by 45%
competitive position in the ITC Mexican
market, with the capacity to provide
ITC services to business clients while
offering fiber-to-the-home (FTTH) tripleplay services to the high-end consumer
segment. ALFA owns 51% of the equity of
the new company, which retains the Axtel
name.
The new company will have an improved
competitive position: one of the most
robust networks of Latin America,
including a 39,500 km backbone of
optical fiber, metropolitan rings and
FTTH access network, in addition to
6,500 m2 of data center space and a
broader enterprise customers portfolio.
It is expected that the merger will
produce substantial synergies in terms
of cost savings, economies of scale,
network integration efficiencies, transfer
of skills and savings in financial expenses.
The closing of the merger will become
effective in February 15, 2016.
The new Axtel will remain in constant
evolution based on a process of
innovation, seeking to stay ahead
of technology trends to continue
positioning itself as the benchmark in its
industry.
Net Debt to
EBITDA
Interest
Coverage
1.3 times
24.3 times
Voice
(LD & local
services)
Managed
networks & IT
40%
22%
Data &
Internet
38%
REVENUE
BREAKDOWN
2015
67
120
91
66
28
16
‘11 ‘12 ‘13 ‘14 ‘15
EBITDA
U. S. $ Millions
N
ewpek is active in the hydrocarbons
industry in the U.S. and Mexico. In
the first of these countries it owns mineral
rights in southeast Texas, at the Eagle
Ford Shale, Edwards and Wilcox plays,
as well as in other areas of Texas (North),
Oklahoma, Kansas and Colorado. In
Mexico, it works in mature oil fields in the
state of Veracruz.
In 2015, most of its activity was
concentrated in southeast Texas, where
113 new wells were connected to sales
for a total of 610 in operation. Production
totaled 8.2 thousand barrels of oil
equivalent per day (MBOED), same as
2014. Production of liquids, including
oil, which have a much higher value than
dry gas, accounted for 59% of volume,
compared to 62% in 2014. As part of its
growth strategy, Newpek completed the
analysis and seismic interpretation of its
prospecting areas in other geographical
areas, identifying sites for drilling once
market conditions permit.
In Mexico, Newpek continued operating
service contracts for Pemex in two mature
oil fields. Production totaled 4.8 MBOED,
1% more than in 2014.
In 2015, low oil and gas price levels,
which have been weak since mid-2014,
continued affecting the company’s
results. Revenues totaled U.S. $138
million and EBITDA was U.S. $67 million,
down by 39% and 45%, respectively, from
the previous year. The above despite
various initiatives to cut production and
drilling costs by approximately 20%.
Over the past 10 years, Newpek has
built up extensive experience in the
exploration and production of shale
17
Newpek has built up extensive
experience in the oil & gas industry
gas and oil in the U.S. and in mature
conventional oilfields in Mexico.
Newpek is one of the few Mexican
companies with experience and asset
diversity in this industry, including
qualified and experienced technical
personnel, and world-class analytical
capabilities.
With parts of the Mexican oil industry
recently opened to private investment,
Newpek continued working on
the migration of its current service
contracts in San Andres and Tierra
Blanca, Veracruz, production-sharing
agreements. In addition, it participated
in the third phase of Round One, which
included public tenders for 25 mature on
shore fields. However, its bids were not
among the winners.
It also worked in the diversification of
its portfolio of assets. This included
the analysis of potential alliances with
strategic partners to take advantage of
economies of scale and reduce risks.
The year 2016 has started with a new
drop in the price of oil. This presents
new challenges to companies carrying
out activities in this industry, such
as Newpek. Faced with this reality,
the company plans to have a cash
flow-neutral year, investing only what
the operation itself generates. For
this reason, some prospecting and
drilling programs in the U.S. have been
postponed until oil price conditions are
better and the company plans to drill
fewer wells than in previous years.
Net Debt to
EBITDA
Interest
Coverage
2.2 times
10.5 times
Oil &
Condensates
59%
Dry Gas
41%
REVENUE
BREAKDOWN
2015
18
BOA R D OF DIREC TORS
u José Calderón Rojas
u Armando Garza Sada
2A
u Federico Toussaint Elosúa
3C
Chairman of the Board of ALFA,
S.A.B. de C.V.
Chairman of the Board and Chief
Executive Officer of Franca
Industrias, S.A. de C.V. and
Franca Servicios, S.A. de C.V.
Board member since April, 2005.
Member of the Boards of FEMSA,
BBVA Bancomer (Regional Board),
ITESM and UDEM. President of
Asociación Amigos del Museo
del Obispado, A.C. Member of
Fundación UANL, A.C. and founder
of Centro Integral Down, A.C.
u Enrique Castillo Sánchez
Mejorada 1A
Managing Partner of Ventura
Capital Privado, S.A. de C.V.
Board member since March,
2010. Chairman of the Board of
Maxcom Telecomunicaciones.
Board member of Banco Nacional
de México, Southern Copper
Corporation, Grupo Herdez,
Organización Cultiba and Médica
Sur. Senior Advisor of General
Atlantic. Alternate Board member
of Grupo Gigante.
1A
Chairman of the Boards of Alpek,
S.A.B. de C.V. and Nemak, S.A.B.
de C.V. Member of the Boards of
CEMEX, FEMSA, Frisa Industrias,
Grupo Financiero Banorte, Grupo
Lamosa, Liverpool, Proeza and
ITESM.
Chairman of the Board and
Chief Executive Officer of Grupo
Lamosa, S.A.B. de C.V.
u Claudio X. González
Laporte 1B
President of ALFA’s Audit
Committee. Member of the Boards
of Xignux, Grupo Iconn, Banco de
México (Regional Board), UDEM
and Centro Roberto Garza Sada
of the UDEM. Board member of
Consejo Mexicano de Hombres de
Negocios, A.C.
Chairman of the Board of
Kimberly-Clark de México, S.A.B.
de C.V.
u Guillermo F. Vogel
Hinojosa 1C
Board member since December,
1987. Member of the Boards of
Fondo México, Grupo México
and Bolsa Mexicana de Valores.
Advisor to Capital Group.
Chairman of the Board of Grupo
Collado, S.A.B. de C.V., and of
Exportaciones IM Promoción,
S.A. de C.V.
Board member since March, 2000.
Member of the Boards of Liverpool,
Grupo Aeroportuario del Sureste,
Grupo Bimbo, FEMSA, Coca-Cola
FEMSA, Grupo Coppel, Vitro
and ITESM.
Board member since April,
2008. Member of the Boards of
Tenaris, SanLuis Corporación,
Corporación Mexicana de
Inversiones de Capital, Innovare,
Novopharm and Universidad
Panamericana-IPADE. Member of
the Trilateral Commission and of
the International Council of the
Manhattan School of Music.
President of Servicios
Administrativos Contry, S.A.
de C.V.
u David Martínez Guzmán
u Carlos Jiménez Barrera
President of ALFA’s Planning and
Finance Committee. Member of
the Boards of Visa Inc., FEMSA
and CEMEX.
Member of the Boards of CEMEX,
Vitro and Sabadell Banc.
u Francisco Javier Fernández
Carbajal 1C
u Álvaro Fernández Garza
3C
President of ALFA, S.A.B. de C.V.
Co-Chairman of the Board of
Axtel, S.A.B. de C.V. Member
of the Boards of Alpek, Nemak,
Cydsa, Grupo Aeroportuario del
Pacífico, Vitro, UDEM, Georgetown
University (Latin American
Board) and Museo de Arte
Contemporáneo de Monterrey.
Chairman of the Advisory Board of
the Centro Roberto
Garza Sada of the UDEM.
u Ricardo Guajardo Touché
1B
1C
Chairman and Special Advisor
of Fintech Advisory Inc.
u Adrián Sada González
Secretary of the Board
1B
Chairman of the Board of Vitro,
S.A.B. de C.V.
President of ALFA’s Corporate
Practices Committee. Member of
the Boards of Gruma, Cydsa and
Consejo Mexicano de Hombres
de Negocios, A.C.
Keys:
1
Independent Board Member
2
Independent Proprietary Board Member
3
Related Proprietary Board Member
A
Audit Committee
B
Corporate Practices Committee
C
Planning and Finance Committee
19
MANAGEMENT TE AM
u Armando Garza Sada
u Álvaro Fernández Garza
Chairman of the Board
President
Joined ALFA in 1978.
Undergraduate degree from MIT.
Master’s degree from Stanford
University.
Undergraduate degree from Notre
Dame University. Master’s degrees
from ITESM and Georgetown
University.
u Mario H. Páez González
u José de Jesús Valdez
Simancas
President of Sigma
Undergraduate degree from
ITESM. Master’s degrees from
ITESM and Tulane University.
President of Alpek
u Armando Tamez Martínez
u Rolando Zubirán Shetler
President of Nemak
President of Alestra
ITESM. Master’s degree from
George Washington University.
UNAM. Master’s degree from USC.
Ph.D. from UANL.
u Alejandro M. Elizondo
Barragán
u Carlos Jiménez Barrera
Senior Vice President,
Development
ITESM. Master’s degree from
Harvard University.
u Ramón A. Leal Chapa
Chief Financial Officer
Universidad de Monterrey.
Master’s degrees from ITESM and
Harvard University.
ITESM. Master’s degrees from
ITESM and Stanford University.
Senior Vice President, Legal and
Corporate Affairs
Universidad de Monterrey. Master’s
degree from New York University.
u Paulino J. Rodríguez
Mendívil
Senior Vice President,
Human Capital
Undergraduate degree and
Master’s degree from the
University of the Basque
Country, Spain.
20
C O R P O R AT E G O V E R N A N C E
ALFA adheres to Mexico’s current
Code of Best Corporate Practices in
place in Mexico since 2000. This Code
was developed at the initiative of the
securities authorities of Mexico and
its purpose is to establish corporate
governance principles to increase investor
confidence in Mexican companies.
Companies whose stocks trade on the
Mexican Stock Exchange must disclose
the extent to which they adhere to
the Code of Best Corporate Practices.
This is done annually by responding to
a questionnaire, which is available to
the public through the Mexican Stock
Exchange’s web site.
The following is a summary of ALFA’s
corporate governance as stated in the
June, 2015 questionnaire, with any
pertinent information updated.
A. The Board of Directors comprises
11 proprietary members who have
no alternates. Of this number, 9 are
independent. This annual report
provides information on all of the
Board’s members, identifying
those who are independent and
the Committees in which
they participate.
B. Three Committees assist the Board
of Directors in carrying out its
duties: Audit, Corporate Practices,
and Planning and Finance. Board
members participate in at least
one committee each. All three
committees are headed by an
independent board member. The
Audit and Corporate Practices
Committees are formed by
independent members only.
C. The Board of Directors meets
every two months. Meetings
of the Board can be called by
the Chairman of the Board, the
President of the Audit Committee,
the President of the Corporate
Practices Committee, the Secretary
of the Board or by at least 25% of
its members. At least one of these
meetings is dedicated to defining
the company’s medium and long
term strategy.
D. Members must inform the Chairman
of any conflicts of interest that may
arise, and abstain from participating
in the corresponding deliberations.
Average attendance at Board
meetings was 93.5% during 2015.
E. The Audit Committee studies
and issues recommendations to
the Board on matters such as the
selection and determination of
fees to the independent auditor,
coordinating with the internal audit
area of the company, and studying
accounting policies, among others.
F. The company has internal control
systems with general guidelines.
These are submitted to the Audit
Committee for its opinion. In
addition, the independent auditor
validates the effectiveness of the
internal control system and issues
the corresponding reports.
G. The Planning and Finance
Committee evaluates all matters
relating to its particular area
and issues recommendations to
the Board on matters such as
feasibility of investments, strategic
positioning of the company,
alignment of investment and
financing policies, and review of
investment projects.
H. The Corporate Practices
Committee is responsible for
issuing recommendations to
the Board on such matters as
employment conditions and
severance payments for senior
executives, and compensation
policies, among others.
I. There is a department dedicated
to maintaining an open line of
communication between the
company and its shareholders
and investors. This ensures that
investors have the financial and
general information they require
in order to evaluate the company’s
development and progress.
C O N S O L I D AT E D
FINANCIAL
S TAT E M E N T S
Page
Management’s analysis
22
Independent auditors´ report
33
Consolidated financial statements:
Consolidated statements of financial position
34
Consolidated statements of income
36
Consolidated statements of comprehensive income
37
Consolidated statements of changes in stockholders’ equity
38
Consolidated statements of cash flows
40
Notes to consolidated financial statements
41
22
M A N A G E M E N T ’ S A N A LY S I S
2015
The following report should be read in conjunction with the Shareholders’ Letter (page 4 – 6) and
the Audited Financial Statements (page 33 – 105). Unless otherwise indicated, the figures from
2013 to 2015 are stated in millions of nominal Mexican pesos (Ps.). Percentage changes are shown
in nominal terms. Additionally, some figures are expressed in millions of US dollars (US$) and
millions of Euros (€).
The financial information included in this Management’s Analysis for the last three-years period
(2013, 2014 and 2015), has been adapted to comply with International Financial Reporting
Standards (IFRS). This information has also been expanded in some sections, to include three
years in compliance with the General Regulations, applicable to Security Issuing Companies and
other Securities Market Participants as issued by the National Banking and Securities Commission
(CNBV by its acronym in Spanish) up to December 31, 2015.
San Pedro Garza Garcia, N. L., February 2, 2016.
ECONOMIC ENVIRONMENT
During 2015, the world economy had a weak performance. Agencies, such as the International
Monetary Fund and the World Bank lowered their initial growth expectations faced by the
uncertainty of an economic recovery. At country level, contrasting circumstances were observed.
On one hand, the United States and the United Kingdom showed better growth figures than
those of prior years. On the other hand, countries such as China and some in the Eurozone were
disappointing. The volatility continued to be present in the financial markets, awaiting the decision
of the Fed on the increase of interest rates in the United States, which promoted a significant
appreciation of the US dollar vis-à-vis most of the world´s currencies, including the Mexican peso.
The Fed started increasing rates, although gradually, as anticipated. The less than expected
growth in China and the potential market entry of oil produced in Iran increased the pressure
on the prices of this raw material. Other raw material, such as food, also suffered a strong price
adjustment during the year. Reduction in oil prices and the appreciation of the US dollar have
continued into 2016.
The behavior of the GDP and other variables in Mexico that are key to better understand ALFA’s
results, are described in the following paragraphs:
Mexico’s GDP grew by 2.5% (estimated) in 2015, a slightly higher figure than that of 2014. Consumer
inflation was 2.1% (b) in 2015, lower to the 4.0% (b) figure recorded in 2014. The Mexican peso had
an annual nominal depreciation of 17.0% (c) in 2015, as compared to the depreciation of 12.5% (c)
experienced in 2014. In real terms, the annual average overvaluation of the Mexican peso with
respect to the US dollar amounted to 11.8% (d) in 2015 and 15.6% (d) in 2014.
With respect to interest rates in Mexico, the TIIE was at 3.3% (b) in 2015 in nominal terms, as
compared to 3.5% in 2014. In real terms, there was an increase, going from an annual accumulated
-0.5% in 2014 to 1.9% in 2015.
The nominal 3-month LIBOR rate in US dollars, annual average was at 0.3% (b) in 2015, higher than
the 0.2% (b) rate observed in 2014. Were the nominal depreciation of the Mexican peso to be
incorporated vis-à-vis the US dollar, the LIBOR rate in constant pesos went from 8.4% (a) in 2014 to
14.9% (a) in 2015.
Sources:
(a)
(b)
(c)
(d)
National Institute of Statistics and Geography (INEGI).
The Bank of Mexico (Banxico).
Banxico. Exchange rate to liquidate liabilities denominated in foreign currency and payable in Mexico.
Own calculations with data from INEGI, bilateral with the United States, adjusted for consumer prices.
23
ALFA continues expanding worldwide, successfully facing macroeconomic challenges
In 2015, ALFA faced a macroeconomic environment characterized by decreasing oil prices and a rising US dollar;
however, it was able to counteract such effect through production improvements and higher product margins.
RESULTS
REVENUES
The following table shows ALFA’s revenues for the years 2015, 2014, and 2013 breaking down its components by
volume and price (indexes are calculated using the 2010=100 basis):
2015
2014
2013
Var. 2015-2014 (%)
Var. 2014-2013 (%)
258,300
151.7
109.2
99.8
229,226
143.3
102.3
110.8
203,456
133.2
98.0
110.7
13
6
7
(10)
13
8
4
0
Concept
Consolidated Revenues
Volume index
Price index in Mexican pesos
Price index in US dollars
Likewise, consolidated revenues broken down by ALFA’s groups, were as follows:
2015
2014
2013
Var. 2015-2014
Var. 2014-2013
83,590
93,568
70,891
6,163
2,180
1,908
258,300
86,072
71,465
61,665
5,519
3,067
1,438
229,226
90,061
48,989
56,299
5,067
1,706
1,334
203,456
(2,482)
22,103
9,226
644
(887)
470
29,074
(3,989)
22,476
5,366
452
1,361
104
25,770
Concept
Alpek
Sigma
Nemak
Alestra
Newpek
Other businesses
Total consolidated
11
12 13 14 15
PRICES
11
152
143
133
130
117
111 111 100
109
98
109
117
102
99
101
Revenue indexes
(2010=100)
12 13 14 15
VOLUMES
Pesos
Dollars
24
The revenue behavior is explained below:
2015-2014:
Consolidated revenues in 2015 reached a total of Ps.258,300 (US$16,315), 12.7% over 2014 (decrease of 5.3% in US
dollars). Following is an explanation of the performance in the year for each of ALFA’s groups:
During 2015, Alpek’s revenues were 18% lower in US dollars than in 2014 as a result of the lower prices in crude oil and
raw material. The polyester business was privileged given the improvement in PTA margins in North America, starting
in April 2015, as well as by the revenues and savings resulting from the full operation of the cogeneration plant starting
in late 2014. Other factors that contributed to the results of this business were the favorable preliminary court rulings
in the PET antidumping case in the US.
In 2015, Sigma sold 1.7 million tons of food, 16% more than in 2014. Revenues amounted to U.S. $5,901, 10% more
than in 2014. This fact was facilitated by the consolidation for an entire year of the results of Campofrio Food Group
(CFG), as well as the good performance of US operations; on the other hand, it was affected in Mexico due to the
depreciation of the Mexican peso.
On the other hand, the revenue volume of Nemak grew 3%, totaling 50.7 million equivalent parts. In North America,
the production and revenue of light vehicles increased by 6% and 3%, respectively, as compared to 2014. Main factors
behind these increases were a stronger consumer trust, availability of credit at lower rates and lower fuel prices.
In Europe, the revenues of vehicles increased by 2%, showing a budding recovery of the industry. Altogether, the
revenues measured in US dollars, decreased 4% as compared to 2014 due to the decrease in the price of aluminum,
situation that did not affect the margins.
In Alestra, revenues amounted to Ps.6,163, an increase of 12% in comparison with 2014. One of the main causes of
this increase was the higher capacity of the company to offer IT services, such as network management, hosting,
system integration, network security and cloud-based services. However, when measured in US dollars the revenues
amounted to U.S. $389, 6% less than in 2014, due basically to the unfavorable impact of the depreciation of the
Mexican peso against the US dollar during the year.
Finally, in 2015, Newpek operated in a reduced oil price environment. In the Eagle Ford, Edwards and Wilcox formations
in South Texas, 113 wells were connected to revenues, for a total of 610, figure compared to the 122 connected wells
in 2014. The production amounted to 8.2 thousands of barrels of oil equivalent (BOE) per day in 2015, a similar figure
of 2014. Its revenues reached U.S. $ 138, 39% less than in 2014.
2014-2013:
Consolidated revenues in 2014 amounted to Ps229,226 (US$17,224), 12.7% higher than in 2013 (8.5% in US dollars).
Following is an explanation of the performance of each of ALFA’s groups:
Alpek’s sales in US dollars during 2014 were 8% lower than in 2013, due to an excess of capacity in Asia and the
raw materials price volatility. The plastic and chemicals business showed a favorable performance, except for
caprolactam, which continued to be affected by the excess capacity in China. However, the Company’s financial
performance allowed it to continue implementing projects seeking to reduce costs, as well as improve the efficiency
and integration of its operations.
In 2014, Sigma sold 1.4 million tons of food, 21% more than in 2013. Revenues were increased to US$5,359, 40% more
than in 2013 supported by the consolidation of Campofrío beginning on July 2014. On the other hand, the Mexican
consumer market showed weakness and the prices of raw materials experienced strong increases. The Company faced
this environment by strengthening its marketing and distribution efforts, launching new products, investing in brand
capital, as well as making operations more efficient. The Food service business was strengthened by capitalizing
synergies derived from the acquisition of ComNor in 2013.
On the other hand, the sales volume of Nemak grew 4%, adding 49.8 million equivalent pieces. As a result, revenues
increased to US$4,645, an increase of 6% compared to 2013. The Company took advantage of the North American
automotive industry growth, a slightly better performance in Europe and its new production capacity in Asia. As
evidence of the trust it has earned, during the year, Nemak got 60 new contracts, representing future revenues of
US$1.7 billion. Five of these are related to the production of structural pieces, new market with a great potential.
In Alestra, revenues added up to US$415, 5% more than in 2013. The increase was due to a growth in revenues from
added value services (AVS), mainly those related to IT security, integration of systems and cloud services, among
others. The AVS represented 85% of the Company’s total revenues.
Finally in 2014, Newpek connected 122 new wells to sales in the Eagle Ford Shale to add up to 497 producing wells in
such formation. In the Wilcox formation, nine exploratory wells were drilled and completed in the year. In Oklahoma,
Newpek operates 29 additional wells. Overall, the production of all these formations amounted to 8.2 thousand
average equivalent oil barrels per day, 21% more than in 2013. Sales amounted to US$ 226, 28% more than in 2013.
25
OPERATING PROFIT
ALFA’s operating profit in 2015, 2014, and 2013 is explained below:
2015-2014:
Operating profit
Revenues
Operating profit
Operating consolidated margin (%)
Alpek (%)
Sigma (%)
Nemak (%)
Alestra (%)
Newpek (%)
Variation by Group
2015
2014
Var.
Alpek
Sigma
258,300
24,058
9.3
9.1
11.7
10.4
26.2
-99.4
229,226
17,226
7.5
4.3
9.0
9.3
24.9
16.2
29,074
6,832
(2,482)
3,851
22,103
4,468
Nemak Alestra Newpek
9,226
1,677
644
241
(887)
(2,665)
Other
470
(740)
The 40% increase in consolidated operating profit from 2014 to 2015 is explained by the individual performance of
ALFA’s companies, as detailed below:
In Alpek’s case, the increase is due primarily to the following factors. The Plastics and Chemicals business produced
solid results due to better polypropylene and EPS margins. In the case of polypropylene, the improvement is due
basically to lower prices of raw material in North America, which translated into better margins. In the case of EPS,
higher revenues prices were achieved, which were temporarily disconnected from their references in Asia. Another
relevant factor for this business was the successful integration of the EPS businesses acquired from BASF in 2015 in
North and South America.
In Sigma, operating profit showed a significant increase, mainly promoted by the following factors: the consolidation
of Campofrío during the entire 2015 year. Additionally, decrease in prices of raw material, such as poultry, pork, and
milk, and the good performance of the US operations, although the reduction in costs of raw material was neutralized
in Mexico due to the depreciation of the Mexican peso affecting import of raw material. Finally, it is also due to the
fact that the figure including the collection of insurance coverage for the plant that caught fire in Spain was higher
than its book value.
In Nemak, the operating profit grew 29% measured in Mexican pesos in the year. This is due to the increase in revenues
explained above, as well as to the implementation of actions to reduce costs and increase efficiency. Measured in US
dollars, increase reached 9%.
In 2015, Alestra increased its operating profit by 18%, mainly due to the increase in revenues explained previously.
Measured in US dollars, it was able to keep a similar figure to that of the prior year, even with the unfavorable impact
of the depreciation of the Mexican peso against the US dollar during the year. Additionally, it had an extraordinary
impact from favorable legal resolutions in interconnection rates.
Newpek’s operating profit plummeted mainly due to the drop in oil prices.
26
2014-2013:
Operating profit
Revenues
Operating profit
Consolidated operating margin (%)
Alpek (%)
Sigma (%)
Nemak (%)
Alestra (%)
Newpek (%)
Variation by Group
2014
2013
Var.
Alpek
Sigma
229,226
17,226
7.5
4.3
9.0
9.3
24.9
16.2
203,456
14,085
6.9
3.2
10.8
8.0
26.2
48.2
25,770
3,141
(3,989)
813
22,476
1,159
5,366
1,203
452
45
1,361
(328)
Other
104
249
The 22% increase in consolidated operating profit from 2013 to 2014 is explained by the individual performance of the
Group’s Companies, as described below:
In the case of Alpek, additionally to the lower margin environment in global markets of polyester and caprolactam,
the price fall in crude oil put even more pressure on the margins and resulted in a non-cash charge of US$71 for
inventory devaluation. It is important to keep in mind that the operating profit for 2013 was affected by an impairment
of fixed assets due to the closing of the Cape Fear plant, amounting to Ps.2,421. In this sense, even though the above
explanation, the operating profit of 2014 is higher than of 2013.
In Sigma, the operating profit showed a strong increase mainly due to the consolidation of Campofrío beginning on
July 2014. Excluding this effect, the operating profit showed a slight decrease despite the increase in prices of raw
materials that had to be compensated through higher sales prices.
In Nemak, the operating profit grew 27% during the year. This was due to the increase in sales already explained
above, as well as to the implementation of actions to reduce costs and increase efficiency.
In 2014, Alestra increased its operating profit by 3%, mainly derived from an increase of added value service revenues
and reduced costs. It is important to point out that the operating profit of 2013 was benefited due to an extraordinary
revenue amounting to US$21 as a result of a favorable resolution of disputes over interconnection costs from prior
years.
The operating profit of Newpek decreased by 46% in 2014 vs 2013, mainly due to an extraordinary charge of Ps.310 for
depreciation not included in 2013. Without this charge, revenues would have increased by 47%, since the Company
currently has more operating oil and gas wells. The production of liquids, including condensed and oil, represented 62%
of the total volume as compared to 52% in 2013. The best production mix also contributed to a better operating profit.
REVENUES AND OPERATING PROFIT COMPOSITION
The percentage structure of revenues and operating profit of ALFA changed between 2015 and 2014 mainly due to
the decrease in revenues of Alpek and the increase in revenues of Sigma, as well as an increase in operating profit of
Sigma and Alpek, all of which are explained above.
The following table shows these effects:
Integration %
Revenues
Alpek
Sigma
Nemak
Alestra
Newpek
Other
Total
15
32
36
28
2
1
1
100
14
38
31
27
2
1
1
100
13
44
24
28
2
1
1
100
Operating profit
15
32
45
31
7
(9)
(6)
100
14
22
37
33
8
3
(3)
100
13
21
37
32
9
6
(5)
100
27
FINANCE COST
During the year, an exchange loss was generated, explained mainly by the macroeconomic environment of the year.
As explained earlier on, the Mexican peso had an annual nominal depreciation in 2015 of 17.0%; therefore, it was
considered a significant factor of ALFA’s Comprehensive Financing Cost during 2015. Another important element was
the impairment in the fair value of the financial investment available for the revenues of shares of Pacific Exploration
and Production Corporation (formerly, Pacific Rubiales Energy), item that did not represent cash flow.
Comprehensive financing cost determining factors
2015
2014
Overall inflation (Dec.- Dec.)
Variation % in the nominal closing exchange rate
Nominal closing exchange rate
Real depreciation of the Mexican peso / US dollar with respect to the previous year:
Closing
Year average
Average interest rate:
Nominal LIBOR
ALFA´s debt, nominal implicit
LIBOR in real terms
ALFA’s debt, real implicit
Monthly average debt of ALFA in US$
2.1
(17.0)
17.21
4.1
(12.5)
14.72
(15.3)
(17.7)
(9.0)
(1.3)
0.3
5.5
14.9
21.0
6,401
0.2
5.7
8.4
14.3
5,737
Expressed in US$, the financial expenses, net from 2015 to 2013 were $312, $328 and $295, respectively.
Variation in net financial expenses in US$
From (lower) higher interest rates
From (higher) lower net petty cash debt
Net variation
15/14
14/13
69
(53)
16
62
(95)
(33)
Net financial expenses in the statement of income include premiums paid in refinancing transactions and operating
interests in 2015, 2014 and 2013, additionally to bank financial expenses.
Measured in Mexican pesos, the Finance Cost, Net is comprised as follows:
Variation
Finance Cost, Net
Financial expenses
Financial income
Financial expense, net
Profit/loss from exchange fluctuation, net of derivative
financial exchange rate operations
Impairment in fair value of financial investment
available for sale
Total Finance Cost, Net
2015
2014
2013
15/14
14/13
(5,942)
575
(5,367)
(4,957)
222
(4,735)
(3,978)
270
(3,708)
(985)
353
(632)
(979)
(48)
(1,027)
(4,920)
(5,221)
(349)
301
(4,872)
(4,203)
(14,490)
(8,665)
(18,621)
(4,057)
4,462
4,131
(8,665)
(14,564)
The fair value of ALFA’s derivative financial instruments at December 31, 2015 and 2014 is as follows:
Type of derivatives, securities or contracts
Exchange Rate
Cross Currency Swaps
Interest Rate
Energy
Total
Fair value
(Millions of US dollars)
Dec. 15
Dec. 14
11
0
0
(89)
(78)
(5)
(49)
(1)
(72)
(127)
28
INCOME TAX (IT)
Following is an analysis of the main factors determining the IT in each one of the years compared, starting from the
IT basic income concept defined as the operating profit reduced by the comprehensive financing cost and other
expenses, net.
Variation amount
IT
2015
2014
2013
15/14
14/13
Profit (loss) before IT
Equity in results of associates recognized
through the equity method
9,284
(1,686)
9,987
10,970
(11,673)
284
9,568
30%
(2,870)
291
(1,395)
30%
419
41
10,028
30%
(3,008)
(7)
10,963
250
(11,423)
(3,289)
3,427
273
(836)
(563)
(3,433)
(3,433)
36%
875
(556)
319
738
(181)
557
39%
338
(139)
199
(2,809)
(383)
(3,192)
32%
(602)
(280)
(882)
(4171)
181
(3,990)
537
(417)
120
3,547
202
3,749
(5,420)
1,987
(3,433)
(3,539)
4,096
557
(3,531)
339
(3,192)
(1,881)
(2,109)
(3,990)
(8)
3,757
3,749
Statutory rate
IT at statutory rate
+ / (-) Effect of IT on permanent tax differences – accounting:
Tax vs. Accounting Comprehensive Financing Cost
Other permanent differences, net
Total IT effect on permanent differences
Provision corresponding to the operations of the year
Recalculation of taxes from prior years and others
Total IT provision (charged) credited to income.
Effective Income Tax Rate
IT :
Current Payable
Deferred
Total IT provision charged to income
2015 NET INCOME
During the year, ALFA generated a net consolidated profit , as detailed in the chart below, which is the result from the
explanation above regarding the operating profit, the Comprehensive Financing Cost and the taxes:
Variation
Statement of Income
Operating profit
Comprehensive Financing Cost (1)
Equity in results of associates
Taxes (2)
Net consolidated income (loss)
Net income (loss) from controlling interest
(1)
Comprehensive Financing Cost
(2)
Income tax (current payable and deferred)
2015
2014
24,058
(14,490)
(284)
(3,433)
5,851
3,778
17,226
(18,621)
(291)
557
(1,129)
(2,037)
2013
15/14
14/13
14,085
(4,057)
(41)
(3,192)
6,795
5,926
6,832
4,131
7
(3,990)
6,980
5,815
3,141
(14,564)
(250)
3,749
(7,924)
(7,963)
29
COMPREHENSIVE INCOME
Comprehensive income is shown in the statement of changes in stockholders’ equity and its objective is to show
the total effect of the events and transactions affecting earned surplus, regardless of their being recognized in the
statement of income, or directly in the capital account. Transactions between the company and its shareholders are
excluded, mainly regarding paid dividends. Comprehensive income of 2015, 2014, and 2013 were as follows:
Consolidated
Comprehensive income
2015
2014
2013
Net income
Efects of translation of foreign entities
Effects of derivative financial instruments
Actuarial losses from obligations of remeasurement of employees' benefits
Consolidated comprehensive income
Owners of the controlling Company
Non-Controlling interest
Comprehensive income for the year
5,851
3,598
(650)
(29)
8,770
4,794
3,976
8,770
(1,129)
3,679
(744)
(238)
1,568
(315)
1,883
1,568
6,795
456
234
734
8,219
7,740
479
8,219
A previous section in this report explains the relationship with the net income obtained in 2015, 2014, and 2013. The
translation effect of foreign subsidiaries, which is the result from using different exchange rates between balance
sheet accounts and income statement accounts.
During the present year, it had a significant change due to the volatility of exchange rates of the currencies in the
different countries where ALFA is present.
The effect in capital of derivative instruments represents the effect from energy derivatives that, in accordance with
International Financial Reporting Standards, is shown in stockholders’ equity.
The effect of actuarial losses from employees´ benefits is the variation in actuarial estimates.
DIVIDENDS DECLARED AND INCREASE IN STOCKHOLDERS’ EQUITY
During 2015, a dividend was declared for Ps2,380 equal to 0.46 pesos per share.
In 2014, no dividend was declared due to an extraordinary dividend paid in December 2013. In 2013, a payment of
an ordinary dividend was approved for Ps1,513, equal to 0.29 pesos per share. Also, in December 2013, an additional
dividend declared of Ps2,006 equal to 0.39 pesos per share.
In 2015, the stockholders’ equity had an increase of 15%. In the one hand, it increased due to the net income and the
public offer of Nemak and on the other hand, it decreased due to the minority acquisition of Campofrío, which was
part of the consolidated capital.
INVESTMENT IN DAYS OF NWC (1)
In 2015, the revenues to NWC ratio decreased at a consolidated level, which resulted in a decrease in the NWC days
of the consolidated capital, changing from 20 in 2014 to 19 in 2015.
Days in NWC
Alpek
Sigma
Nemak
Alestra
Newpek
Consolidated
(1)
Net Working Capital
2015
45
0
22
(22)
(59)
19
2014
2013
47
5
12
(32)
(28)
20
49
18
13
(32)
(44)
26
30
INVESTMENTS
Property, Machinery, and Equipment
Total investments by group were as follows:
Alpek
Sigma
Nemak
Alestra
Newpek
Other
Total
2015
2014
4,482
3,638
7,314
1,612
948
95
18,089
4,191
1,871
5,254
1,310
1,773
31
14,430
Variation %
15/14
Last 5 year
Investment
%
7%
94%
39%
23%
-46%
11,722
9,502
25,252
5,992
7,565
631
60,664
19
16
42
10
12
1
100
25%
Business Acquisitions
The acquisition process of Sigma for the minority of 37% of shares of Campofrío concluded in 2015, completing 94.5%
of this company thereof. In Ecuador, Sigma acquired Elaborados Carnicos, S.A., a company engaged in the processing
of cold meats in such country, expanding its presence in South America. Additionally, it acquired PACSA, company in
the foodservice business in Mexico. On the other hand, during 2015, through its subsidiary Styropek, Alpek finalized
the acquisition of the EPS business of BASF in Argentina, Brazil, USA, Canada, and Chile.
Nemak’s Public Offer
During July 2015, Nemak, S.A. de C.V. made an initial public offer of shares (IPO) in Mexico and a private offer of shares
in international markets (jointly denominated as “Global Offer”). In this sense, total resources obtained by Nemak as
a result of the Global Offer amounted to Ps.11,469
CASH FLOWS
Based on cash flows generated from operations, the following table shows the main transactions in 2015.
Cash flows provided by operating activities
Property, machinery and equipment, and other
Acquisition of financial shares available for sale
Business acquisitions
Increase in Bank Financing
Dividends paid by ALFA SAB
Dividends paid to the non-controlling interest
Repurchase of shares
Interest paid
Changes in the minority interest
Other
Increase (decrease) in cash
Adjustments in the Cash Flow from changes in the exchange rate
Cash and cash equivalents, and restricted cash at beginning year
Total cash at end of year
2015
2014
30,506
(16,987)
0
(1,947)
612
(2,380)
(1,378)
(458)
(5,127)
6,102
(2,062)
6,881
1,302
16,669
24,852
23,953
(14,430)
(14,135)
(1,353)
15,677
0
(183)
(258)
(4,490)
0
(707)
4,074
693
11,902
16,669
31
Main changes in net debt of ALFA and its groups were as follows:
Changes in debt net
of cash (DNC) US$
Consolidated
Alpek
Sigma
Balance at December 31, 2014
Long-term financing, net of payments:
Financing
Payments
Short term financing, net of payments
Total financing, net of payments
Currency translation effect
Debt variation in the statement of cash flows
Debt from acquired companies and other
Total debt variation
5,123
715
1,862
1,270
210
91
975
925
(439)
(405)
81
(121)
(40)
9
(31)
85
(43)
(6)
36
(33)
3
0
3
301
0
20
321
(81)
240
8
248
512
(308)
(192)
12
(44)
(32)
0
(32)
0
0
(3)
(3)
0
(3)
1
(2)
27
(49)
0
(22)
1
(21)
0
(21)
0
(39)
(224)
(263)
36
(227)
0
(227)
Decrease (increase) in cash and restricted cash
Change in interest payable
Increase (decrease) in debt net of cash
Balance at December 31, 2015
(305)
(2)
(338)
4,785
4
0
7
722
(182)
(3)
63
1,925
(30)
2
(60)
1,210
3
0
1
211
7
0
(14)
77
(107)
(1)
(335)
640
Debt by Group
short and long term
Balance of debt (US$)
Alpek
2015
2014
1,098
1,094
Sigma
2015
2014
2,435
2,189
Nemak
2015
2014
1,320
Alestra
2015 2014
Other
Other
2015
2014
1,352
257
260
1,103
1,361
Percentage of debt balance
Short term debt
2
3
4
5 years or more
Total
3
2
6
2
87
100
2
2
2
4
90
100
5
20
41
10
24
100
3
31
14
40
12
100
3
6
20
9
62
100
23
11
11
18
37
100
27
3
4
6
60
100
14
14
3
4
65
100
0
1
9
0
90
100
26
13
1
1
59
100
Average life of long-term debt (years)
Average life of total debt (years)
6.3
6.2
7.3
7.2
3.4
3.2
2.8
2.8
5.5
5.4
5.5
4.3
6.0
4.5
6.1
5.3
16.9
16.9
10.4
8.7
Consolidated debt
short and long term:
Short term debt
Long term 1 year
2
3
4
5 years or more
Total
Average life long-term debt (years)
Average life of total debt (years)
2015
US$
2014
Var.
Integral %
2015
2014
265
657
(392)
4
10
611
1,456
410
3,471
6,213
7.0
6.7
991
504
1,180
2,915
6,247
7.3
6.6
(380)
952
(770)
556
(34)
10
23
7
56
100
16
8
19
47
100
32
FINANCIAL RATIOS
LIQUIDITY
Debt net of cash / cash flow (in US dollars for the last 12 months)
Groups
Alpek
Sigma
Nemak
Alestra
Newpek
Consolidated
Interest hedging (in US dollars) *
2015
Alpek
Sigma
Nemak
Alestra
Newpek
Consolidated
2014
10.7
8.5
10.2
24.3
3.8
7.7
6.5
5.6
9.8
7.3
7.0
6.1
15/14
4.2
2.9
0.4
17
(3.2)
1.6
2015
2014
1.14
2.22
1.59
1.27
1.16
1.98
1.65
2.93
1.78
1.24
0.76
2.51
Change for
Cash
Financial
Flow
Expense
3.1
2.1
0.6
(0.2)
(3.0)
1.1
1.1
0.8
(0.2)
17.2
(0.2)
0.5
2015
2014
2.34
96
100
2.36
89
94
* Defined as the operating profit plus depreciation and amortization divided by the net financial expense.
FINANCIAL STRUCTURE
ALFA’s financial structure indicators improved during 2015, as observed in the following chart:
Financial indicators
Total liabilities / capital
Long-term debt / total debt (%)
Total debt in foreign currency / total debt (%)
33
INDEPENDENT AUDITORS’ REPORT
Monterrey, N. L., February 2, 2016
To the Stockholders’ Meeting of Alfa, S. A. B. de C. V.
We have audited the accompanying consolidated financial statements of Alfa, S. A. B. de C. V and subsidiaries,
which comprise the consolidated statements of financial position as at December 31, 2015 and 2014, and
the consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash
flows for the years ended December 31, 2015 and 2014, and a summary of significant accounting policies and
other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of the
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Alfa, S. A. B. de C. V. and its subsidiaries as at December 31, 2015 and 2014, and its
financial performance and its cash flows for the years ended December 31, 2015 and 2014, in accordance with
International Financial Reporting Standards (IFRS).
PricewaterhouseCoopers, S. C.
Miguel Angel Puente Buentello
Audit Partner
34
C O N S O L I D AT E D S TAT E M E N T S O F F I N A N C I A L P O S I T I O N
ALFA, S. A. B. DE C. V. AND SUBSIDIARIES
December 31, 2015 and 2014
(Millions of Mexican pesos)
Assets
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash and cash equivalents
Customers and other accounts receivable, net
Inventories
Financial assets available for sale
Derivative financial instruments
Other assets
Total current assets
NON-CURRENT ASSETS:
Property, plant and equipment, net
Goodwill and intangible assets, net
Deferred income tax
Investments accounted for using the equity method and others
Total non-current assets
Total assets
2015
Note
6
7
8
9
2.h
10
11
Ps
24,852
463
33,478
34,128
1,270
203
2,937
97,331
2014
Ps
106,376
44,615
12,754
5,629
169,374
12
13
18
10
14
Ps
266,705
16,669
504
30,357
30,758
5,613
23
1,419
85,343
93,908
40,452
9,880
27
3,270
147,537
Ps
232,880
35
2015
Note
Liabilities and Stockholders ‘equity
CURRENT LIABILITIES:
Short-term debt
Accounts payable to suppliers and other
Income tax payable
Provisions
Other liabilities
Total current liabilities
NON-CURRENT LIABILITIES:
Long-term debt
Provisions
Deferred income tax
Non-current income tax payable
Employees’ benefits
Other liabilities
Total non-current liabilities
Total liabilities
STOCKHOLDERS´EQUITY:
Controlling interest:
Capital stock
Retained earnings
Other reserves
Total controlling interest
Non-controlling interest
Total stockholders ‘equity
17
16
18
10
19
20
Ps
5,578
52,229
1,739
848
825
1,747
62,966
10,714
47,655
951
760
1,146
889
62,115
101,631
711
1,090
11,957
4,190
3,535
810
123,924
186,890
81,489
1,092
1,014
10,463
4,122
3,006
420
101,606
163,721
22
22
22
205
58,345
3,641
62,191
17,624
79,815
207
52,546
2,625
55,378
13,781
69,159
Ps
266,705
The accompanying notes are an integral part of these consolidated financial statements.
President
Ps
17
10
19
18
18
21
20, 24
Total liabilities and stockholders ‘equity
2014
Ramón A. Leal Chapa
ChiefFinancialOfficer
Ps
232,880
36
C O N S O L I D AT E D S TAT E M E N T S O F I N C O M E
For the years ended December 31, 2015 and 2014
2015
Note
Net sales
Cost of sales
Gross profit
31
25
Selling expenses
Administrative expenses
Other income, net
25
25
26
Ps
229,226
(187,705)
41,521
(13,489)
(10,933)
127
24,058
17,226
27
9,798
7,677
27
27
(20,085)
(4,203)
(14,490)
(17,633)
(8,665)
(18,621)
(284)
9,284
(291)
(1,686)
Share of losses of investments
accounted for using the equity method
Income (loss) before income tax
Income tax
Ps
(17,526)
(14,135)
1,731
Operating income
Financial income, including foreign exchange gain of
Ps.9,223 and Ps.7,455 in 2015 and 2014, respectively
Financial costs, including foreign exchange loss of Ps.14,143 and
Ps.12,676 in 2015 and 2014, respectively
Impairment of financial assets available for sale
Financial costs, net
258,300
(204,312)
53,988
2014
(3,433)
29
Net consolidated income (loss)
Ps
Income (loss) attributable to:
Controlling interest
Ps
Income (loss) per basic and diluted share, in pesos
Weighted average of outstanding shares (thousands of shares)
557
5,851
Ps
(1,129)
3,778
2,073
Ps
(2,037)
908
Ps
5,851
Ps
(1,129)
Ps
0.74
Ps
( 0.40)
5,129,188
President
5,143,480
37
C O N S O L I D AT E D S TAT E M E N T S O F
COMPREHENSIVE INCOME
2015
Note
Ps
Net consolidated profit (loss)
Other comprehensive income (loss) for the year:
Items not to be reclassified to income statement
Remeasurement of obligations for employees’ benefits,
net of taxes
Items to be reclassified to income statement
Effect of derivative financial instruments
designated as cash flow hedges, net of taxes
Effect of translation of foreign entities
Total other comprehensive income for the year
5,851
2014
Ps
(1,129)
21
(29)
(238)
10
22
(650)
3,598
2,919
(744)
3,679
2,697
Total comprehensive income for the year
Ps
8,770
Ps
1,568
Attributable to:
Controlling interest
Ps
Ps
(315)
1,883
Total comprehensive income for the year
Ps
4,794
3,976
Ps
1,568
8,770
President
38
C O N S O L I D AT E D S TAT E M E N T S O F C H A N G E S
IN STOCKHOLDERS’ EQUITY
Capital
Stock
Note
Balances at January 1, 2014
Transactions with Stockholders:
Repurchase of own shares
Dividends from subsidiaries to non-controlling interest
Changes in non-controlling interest
Ps
22
3.b
2
210
Retained
earnings
Ps
55,643
(3)
-
(255)
(490)
(3)
(745)
Net (loss) income
-
(2,037)
Total other comprehensive (loss) income
-
(315)
Comprehensive (loss) income
-
(2,352)
207
52,546
(2)
-
(456)
(2,380)
(2,657)
7,514
(2)
2,021
Net income
-
3,778
Total other comprehensive income
-
-
Comprehensive income
-
3,778
Balances at December 31, 2014
Transactions with Stockholders:
Repurchase of own shares
Dividends declared
Acquisition of minority interest
Balances at December 31, 2015
22
22
2.g
2.b
Ps
205
Ps
58,345
39
Total
controlling
interest
Other
reserves
Ps
Ps
588
Ps
56,441
Noncontrolling
interest
Ps
8,728
Total
stockholders´
equity
Ps
65,169
-
(258)
(490)
(183)
3,353
(258)
(183)
2,863
-
(748)
3,170
2,422
-
(2,037)
908
(1,129)
2,037
1,722
975
2,697
2,037
(315)
1,883
1,568
2,625
55,378
13,781
69,159
-
(458)
(2,380)
(2,657)
7,514
(1,378)
(2,710)
3,955
(458)
(3,758)
(5,367)
11,469
-
2,019
(133)
1,886
-
3,778
2,073
5,851
1,016
1,016
1,903
2,919
1,016
4,794
3,976
8,770
3,641
Ps
62,191
Ps
17,624
Ps
79,815
President
40
C O N S O L I D AT E D S TAT E M E N T S O F C A S H F L O W S
Note
Cash flows from operating activities
Income (loss) before income tax
Depreciation and amortization
Impairment of long-lived assets
Costs associated with seniority premiums and pension plan
Gain on sale of property, plant and equipment
Effect of changes in fair value of derivative financial instruments
Foreign exchange, net
Other expenses and income, net
Impairment of financial assets available for sale
(Increase) decrease in customers and other accounts receivable
Increase in inventory
Inventory advance payments
Increase in accounts payable to suppliers and other
Income tax paid
Net cash generated from operating activities
12, 13
12, 13
21
Ps
26
Cash flows from investing activities
Interest collected
Investments in financial assets available for sale
Acquisition of property, plant and equipment
Sale of property, plant and equipment
Purchases of intangible assets
Business acquisitions, net of cash received
Restricted cash
Dividends received
Related parties
Other assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings or debt
Payments of borrowings or debt
Interest paid
Dividends paid by Alfa, S. A. B. de C. V.
Dividends paid to the non-controlling interest
Repurchase of shares
Acquisition of minority interest
Other
Cash (used in) generated from financing activities
Net increase in cash and cash equivalents
Exchange losses on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2.h
12
2.a
13
2
7
30
17
17
22
22
2.b
2.g
Ps
9,284
11,911
2,472
222
(337)
439
4,920
3,873
4,203
(585)
(1,783)
(1,102)
950
(3,961)
30,506
President
Ps
(1,686)
9,607
283
287
(153)
397
5,544
4,157
8,665
357
(899)
1,925
(4,531)
23,953
435
(13,004)
407
(4,390)
(1,947)
(52)
62
(1,155)
(19,644)
215
(14,135)
(8,824)
(5,606)
344
(199)
362
(266)
(361)
(28,470)
30,838
(30,226)
(5,127)
(2,380)
(1,378)
(458)
11,469
(5,367)
(1,352)
(3,981)
6,881
1,302
16,669
24,852
41,965
(26,288)
(4,490)
(183)
(258)
(1,387)
(768)
8,591
4,074
693
11,902
16,669
2014
2015
Ps
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2015 and 2014
Note 1 - ALFA companies’ activities
Alfa, S.A.B. de C.V. and subsidiaries (therein after “ALFA” or “the Company”), is a Mexican company controlling five
business groups with the following activities: Alpek, engaged in the production of petrochemicals and synthetic fibers;
Sigma, a refrigerated food producer; Nemak, engaged in the manufacture of high-tech aluminum auto parts; Alestra, in
the telecommunications sector; and Newpek, a natural gas and hydrocarbons company.
ALFA has an outstanding competitive position globally in the auto parts segment as a producer of aluminum engine
heads and blocks, as well as in the manufacture of PTA (raw material for the manufacture of polyester), and is a leader
in the Mexican market for refrigerated foods. ALFA operates industrial production and distribution centers mainly
in Mexico, the United States of America (U.S.), Canada, Germany, Slovakia, Belgium, Czech Republic, Italy, Holland,
Portugal, France, Costa Rica, Dominican Republic, El Salvador, Argentina, Peru, Ecuador, Austria, Brazil, China, Hungary,
Spain, India and Poland. The company markets its products in over 45 countries worldwide and employs over 72,000
people.
ALFA’s shares are traded on the Mexican Stock Exchange, S. A. B. de C. V. and Latibex, the Latin American market of
the Madrid Stock Exchange.
ALFA is located in Avenida Gómez Morín Avenue Sur No. 1111, Col. Carrizalejo, San Pedro Garza García, Nuevo León,
México.
In the following notes to the financial statements references to “Ps”, mean millions of Mexican pesos. References to
“US$”, mean millions of dollars from the United States. In addition, references to “€”, means millions of euros.
Note 2 - Acquisitions and other relevant events
2015
a) Agreements between Alpek and BASF for the expanded polystyrene (EPS) and polyurethane (PU) businesses
During July 2014, Alpek (“Alpek”) and BASF (“BASF”) signed the agreements related to the expanded polystyrene
(EPS) and polyurethane (PU) businesses previously held through their joint venture Polioles, S.A de C.V. (“Polioles”) in
México, as well as the EPS business of BASF in North and South America, except for the Neopor ® (gray EPS) of BASF
business.
Alpek acquired all EPS business activities from Polioles, including an EPS plant in Altamira, Mexico. Likewise, BASF
acquired all PU business activities from Polioles, including certain assets located in Lerma, Mexico´s facility, as well as
all marketing and sales rights for the PU, isocyanate and polyol systems. Once the transaction was completed, Polioles
continued operating as a joint venture between Alpek and BASF, with a product portfolio comprising of industrial
chemicals and specialties.
Alpek also acquired the EPS business of BASF in North and South America, including:
• EPS sales and distribution channels of BASF in North and South America
• The EPS plants of BASF in Guaratinguetá, Brazil and General Lagos, Argentina, and
• The EPS transformation business of BASF in Chile (Aislapol, S. A.)
The combined capacity of all EPS production units acquired by Alpek is approximately 230,000 tons a year. This figure
includes 165,000 tons a year of Polioles plant in Altamira, Mexico. Approximately 440 employees work in the businesses
subject to the agreements, 380 of them in the EPS businesses and 60 in the PU businesses. Most of them continue
performing their roles under the new ownership framework.
42
Transactions included in this agreement were as follows:
PU business sale to BASF
In March 2015, through its subsidiary Polioles, Alpek completed the sale to BASF MEXICANA of all the polyurethane
(PU) business activities, including assets selected in the Lerma, Mexico plant, as well as all marketing and sales rights of
PU, isocyanate and polyol systems. From Alpek’s standpoint, the PU business sold was not considered as a business line
or segment; therefore, IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” dispositions respect
to the presentation as a discontinued operation, is not applicable. Rather, the transaction was carried out through the
sale of a group of assets at market terms, and the total consideration received was Ps407; net book value transferred
was Ps26. This transaction resulted in a gain of Ps381, which was recorded in the income statement as other income
(expense), net.
Mexico EPS business sale to Styropek
On March 31, 2015, Alpek transferred all its EPS business activities of Polioles, including the EPS plant in Altamira,
Mexico to its subsidiary Grupo Styropek, S.A. de C.V. (Styropek). Since BASF has 50% equity in Polioles, the transaction
between stockholders for the EPS business resulted in a Ps150 reduction in the controlling interest and an increase in
the non-controlling interest for the same amount.
This transaction had no accounting effects over the financial statements of Alpek, since they were transactions among
entities under common control, except for the increase in non-controlling interest of Ps150.
EPS business acquisition from BASF
On March 31, 2015, through Styropek, Alpek finalized the acquisition of BASF´s EPS business in Argentina, Brazil, USA,
Canada, and Chile. This acquisition included the working capital. A total of 450 employees work in the EPS line of
business. The consolidated financial statements include the financial information of BASF’s EPS business starting in
March 31, 2015.
At December 31, 2015, provisional purchase price allocation to fair values of acquired assets and assumed liabilities is
as follows:
Current assets (1)
Property, plant and equipment
Current liabilities (2)
Debt
Deferred income tax
Other liabilities
Purchase consideration
(1)
Current assets consist mainly of accounts receivable and inventories amounting to Ps333 and Ps290, respectively.
(2)
Current liabilities consist mainly of suppliers in the amount of Ps101.
Ps
Ps
623
425
(183)
(140)
(89)
(31)
605
Total purchase consideration was paid in cash.
Value of accounts receivable acquired approximates fair value due to its short-term maturity. Accounts receivable
acquired are estimated to be recovered in the short term.
No contingent liability has resulted from this acquisition that requires recognition. Neither are there contingent
consideration agreements.
Costs related to the acquisition amounted to Ps22 and were recorded in income as “other expense, net”.
Revenues contributed by BASF assets included in the consolidated statement of income since the acquisition date
through December 31 amounted to Ps5,482 and net income to Ps732. If the acquisition had taken place on January 1,
2015, revenues would have increased by Ps1,600 and net income by Ps185, approximately.
At December 31, 2015, the Company is in the process of concluding the final purchase price allocation to fair values of
acquired assets and assumed liabilities. This analysis will be concluded within a period not to exceed twelve months as
of the acquisition date.
43
b) Public Offer - Nemak
During July 2015, Nemak, S.A. de C.V. made an initial public offer of shares (“IPO”) in Mexico and a private offer of
shares in the international markets (jointly denominated as “Global Offer”), as follows:
• On June 15, 2015 Nemak, S.A. de C.V. held a General Ordinary and Extraordinary Stockholders´ Meeting wherein
it approved, among other corporate acts, the following: the issuance of capital stock, the change of legal regime
to a Sociedad Anónima Bursatil de Capital Variable (Stock Corporation with Variable Stock), this was conditioned
to the placement of new shares, the amendment of corporate by-laws, appointment of new Board of Directors,
incorporation of an Audit and Corporate Practices Committee, appointment of committee members, among others.
• On July 1, 2015 Nemak S. A. B. de C. V. carried out the Global Offer corresponding to the issuance of 537,600,000
shares at a placement price of 20.00 Mexican pesos. This offer included an over-allocation option of up to 80,640,000
shares. The total amount of this offer was Ps10,752.
• On July 29, 2015, following up on the Global Offer, the underwriters, in Mexico as well as abroad, executed the overallocation options agreed. The total amount of over-allocations was Ps1,145 corresponding to 57,232,845 shares at a
placement price of Ps20.00 each.
Derived from the aforementioned, total resources obtained by Nemak as a result of the Global Offer amounted to
Ps11,469, net of issuance costs amounting to Ps428. Subsequent to the Global Offer, the subscribed and paid-in capital
of Nemak is represented by a total of 3’080,747,324 Series “A” shares.
As a result of the aforementioned events, the equity in the capital stock of Nemak was diluted from 93% to 75% and the
monetary effects are shown in “non-controlling interest changes” item in the statements of cash flows and of changes
in stockholders’ equity. This stock dilution effect resulted in an increase in retained earnings of Ps7,514 and an increase
in the non-controlling interest of Ps3,955.
c) Alestra and Axtel merge
On December 3, 2015, ALFA together with its subsidiaries Alestra, S. de R. L. de C. V. (“Alestra”) and Onexa, S.A. de C.V.
(“Onexa”, Alestra’s holding company), signed a definitive agreement with Axtel, S. A. B. de C. V. (“Axtel”), a fixed-line
and integrated telecommunications Mexican company, together with a group of its main stockholders, to merge Onexa
with Axtel, with the latter as the surviving company and transforming Alestra, as established in the terms of the definitive
agreement, in a subsidiary of Axtel and Axtel in a subsidiary of ALFA.
The merge will allow combining the competitive advantages of both companies, including qualified human resources,
new technologies and a wide service infrastructure to meet the increasing market demand. Furthermore, scale economy
synergies will arise, as well as efficiency in network integration and skill transfer.
On January 15, 2016, Axtel and Onexa held Extraordinary Meetings where the Stockholders approved the merge and
the members of the Board of Directors, the General Director and the Audit and Corporate Practices Committees were
appointed. After finishing the legal, operating and financial review process and obtaining the approvals from authorities,
the transaction is estimated to be ready and effective on February 15, 2016, once all approvals and conditions established
in the agreements signed by all parties have been fulfilled, among which are obtaining a credit by Axtel to prepay its
valid bonds. At the date of the financial statements, the approvals and conditions are in the process of being fulfilled.
Axtel will remain as a company listed in the Mexican Stock Exchange and will issue new shares to be subscribed by
ALFA, which would represent approximately 51% of the combined entity’s ownership, and Axtel’s stockholders will
own 49%.
d) Strategic alliance between Sigma Alimentos, S.A. de C.V. and Kinesis Food Service, S.A. de C.V.
On July 31, 2015, the strategic alliance framework agreement was signed between Sigma Alimentos, S.A. de C.V. and
Kinesis Food Service, S.A. de C.V. (“Kinesis”), a company that through its subsidiaries (collectively identified as “PACSA”),
is leader in the distribution of meat and dairy products by means of a food service cannel in certain regions of the Mexican
Republic, mainly in the Southeast of Mexico. This transaction complements Sigma’s expansion strategy in Mexico through
the food service channel. According to the agreement, Sigma acquires total control over PACSA’s operations, subscribing
substantially all of PACSA’s shares with the right to vote. In accordance with the International Financial Reporting Standard
3, “Business Combinations” (“IFRS 3”), this alliance represents a business combination; therefore, it has been recorded
using the acquisition method established in IFRS 3. This alliance is included in Sigma’s segment.
Sigma’s contribution to this alliance amounted to Ps494, which was paid in cash. At the agreement signature date, the
Company had determined goodwill of Ps213 (difference between the amount of Sigma’s contribution and PACSA’s
net assets). To date, Sigma is in the process of determining the distribution of the acquisition price at fair values of the
assets acquired in terms of IFRS 3. This analysis will be concluded within a period not to exceed twelve months as of the
acquisition date.
44
as follows:
Current assets (1)
Property, plant, and equipment
Intangible assets (2)
Employee benefits
Debt
Deferred income tax
Goodwill
Consideration paid
Ps
Ps
204
111
173
(120)
(7)
(10)
(70)
213
494
(1)
Current assets consist of cash Ps13, accounts receivable Ps77, inventories of Ps107 and sundry debtors and other current items Ps7.
(2)
Intangible assets consist of brands Ps8, non-competition agreements Ps65 and customer relations Ps100.
(3)
Current liabilities consist of suppliers and accounts payable Ps82, taxes payable Ps3, short-term debt Ps33 and personnel benefits Ps2.
Goodwill is comprised mainly of the market share obtained through expanded capacities of Sigma’s asset basis. The
goodwill recorded is not deductible for tax purposes.
No contingent liability has arisen from this alliance that requires recognition. Neither are there contingent payment agreements.
Costs related to the alliance amounted to Ps3 and were recorded in the income statement in other expenses, net, caption.
Revenues contributed by PACSA’s assets included in the consolidated statement of income since the agreement signing
date through December 31, 2015 amounted to Ps356 and net income to Ps27. If the acquisition had taken place on
January 1, 2015, the revenues would have increased by Ps534 and net income by Ps11, approximately.
e) Acquisition of Elaborados Cárnicos, S. A. (ECARNI)
On August 31, 2015, the Company through its subsidiary Sigma acquired the total of the representative shares of the
capital stock of Elaborados Cárnicos, S. A., a company dedicated to the breeding of cattle, swine, sheep, as well as the
industrialization and marketing of derivatives of the aforementioned livestock, in Ecuador. This transaction complements
to Sigma’s expansion strategy in Latin America.
The total consideration paid amounted to Ps853 (US$51) in cash. Sigma at the acquisition date, determined goodwill
for Ps349 and at December 31, 2015 it is in the process of concluding the final purchase price allocation to fair values of
acquired assets. This analysis will be concluded within a period not to exceed twelve months as of the acquisition date.
as follows:
Current assets (1)
Employee benefits
Debt
Deferred income taxes
Goodwill
Ps
Ps
246
259
195
(67)
(51)
(23)
(55)
349
853
(1)
Current assets consist of cash Ps19, accounts receivable Ps95, inventories Ps98 and sundry debtors and other current items Ps34.
(2)
(3)
Current liabilities consist of suppliers and accounts payable Ps53, taxes payable Ps11 and short-term debt Ps3.
Goodwill is mainly comprised of market participation obtained through expanded capacities of the Company’s asset
basis. The recorded goodwill is not deductible for tax purposes.
No contingent liabilities have arisen from this acquisition from this acquisition that require recognition. Neither are there
contingent consideration agreements.
45
Costs related to the acquisition amounted to Ps6 and were recorded in the income statement under other expenses,
net, caption.
Revenues contributed by ECARNI’s assets included in the consolidated statement of income from the acquisition date
through December 31, 2015 amounted to Ps220, and net income to Ps12. If the acquisition had taken place on January
1, 2015, the revenues would have increased by Ps380 and net income by Ps29, approximately.
f) Acquisition of Fábrica Jurís, Cía
On November 21, 2014, the Company through its subsidiary Sigma acquired Fabrica Jurís, CIA, LTDA company
engaged in the production and marketing of meat products: sausages, chorizo, salami, bologna, pâté, pork rind,
hams, cold meats, pork snacks, among others in Ecuador. This transaction complements Sigma’s expansion strategy
in Latin America.
The total consideration paid amounted to Ps712 in cash and at December 31, 2014 it includes restricted cash as collateral
in favor of Sigma of Ps155. At the acquisition date, Sigma had determined a goodwill for Ps348.
At December 31, 2015, Sigma had concluded the purchase price allocation to fair values of acquired assets and
assumed liabilities.
Final purchase price allocation at fair value is as follows:
Current assets (1)
Employee benefits
Debt
Deferred income tax
Goodwill
Ps
Ps
139
238
172
(89)
(26)
(31)
(39)
348
712
(1)
Current assets consist of accounts receivable Ps69, inventories Ps64 and advance payments and other Ps6.
(2)
(3)
Current liabilities consist of suppliers and accounts payable Ps55, taxes payable Ps8 and short-term debt Ps26.
(*)
Certain prior-year balances, related to the distribution of acquisition prices, were modified in 2015 to recognize final fair values
of assumed assets and liabilities. At December 31, 2015, Sigma reclassified certain items of the balance sheet that had been
previously shown as part of goodwill. The reclassified amounts were adjusted by increasing the current asset value by Ps4;
increasing the value of non-current assets by Ps208; decreasing the balance of current liabilities by Ps16, increasing the balance
of non-current liabilities by Ps51 and decreasing the goodwill value by Ps181. The Company decided for comparative purposes
not to make these reclassifications retrospectively, considering that the aforementioned adjustments do not significantly modify
the value of total assets, short and long-term liabilities and stockholders’ equity at December 31, 2014. The reclassification
above had no significant impact on the figures of the consolidated financial statements, of stockholders’ equity and of cash flows.
Goodwill is comprised mainly by market participation obtained through the expanded capacities of Sigma’s assets
basis. Goodwill recorded is not deductible for tax purposes.
No contingent liabilities have arisen from this acquisition that requires recognition. Nor are there any contingent
consideration agreements.
Costs related to the acquisition amounted to Ps3 and were recorded in the income statement under other expenses,
net, caption.
Revenues contributed by the assets of Fabrica Jurís, CIA, LTDA included in the consolidated statement of income since
the acquisition date through December 31, 2014 were Ps64, and net income of Ps3. If the acquisition had taken place
in January 1, 2014, revenues would have increased by Ps461 and net income by Ps40, approximately.
46
g) Acquisition of additional shares of Campofrío from WH Group
On June 18, 2015, the Company through its subsidiary Sigma Alimentos Exterior, S. L. acquired 37% additional shares
of Campofrío Food Group, S.A. The shares that up to June 3, 2015 were owned by WH Group were acquired firstly by
ALFA, through the payment of a consideration of Ps5,367 (US$354), which were subsequently transferred to Sigma.
Prior to the acquisition date, the accounting value of 37% was Ps2,710, consequently, a decrease in retained earnings of
Ps2,657 was recorded.
After this acquisition, equity in this subsidiary is shown below:
Indirect equity of ALFA as of December 31, 2014
Acquisition of shares from WH Group on June 18, 2015
Indirect equity of SIGMA as of December 31, 2015
57.52%
37.00%
94.52%
On June 9, 2014, ALFA obtained control over Campofrío Food Group, S. A. (“Campofrío”) as a result of: i) the end of the
Public Offer of shares of Campofrío in the Spanish stock market and ii) the coming into force of the agreement signed
on January 1, 2014 between ALFA and WH Group Ltd. (WH). The aforementioned agreement was concluded on June 3,
2015. As a result of the acquisition of Sigma in the equity of WH Group Ltd. in Campofrío.
This agreement established several rights and obligations of the parties involved in relation with the corporate
governance and the transfer of shares of Campofrío, giving ALFA the capacity to guide relevant activities. The agreement
intended to fairly anticipate probable events in the future of the subsidiary and its stockholders during the effective
term of the agreement and to anticipate the way in which these will be treated. Examples include: the approval of the
business plan, the approval of ordinary and extraordinary corporate events; changes in the ownership of Campofrío;
the need for additional capital contributions of the existing stockholders or new investors and the resolution of claims
between stockholders. It also provided the flexibility to face unforeseen events, as may be maintaining the capacity to
make decisions quickly and effectively; establishing termination conditions when a shareholder wishes to terminate the
relationship for any reason; and basis for the solution of controversies among stockholders or to solve an agreement
interpretation issue. The agreement created incentives for the parties to be able to solve the controversies through
consensus, seeking to be determined as efficiently as possible so that Campofrío continues with minimum interruption.
The indirect equity of ALFA in Campofrío at the date the agreement became effective, accounted for using the equity
method, was 45% as shown below:
Equity of ALFA in Campofrío at December 31, 2013
Acquisitions at June 9, 2014
Sales at June 9, 2014
Equity of ALFA in Campofrío at June 9, 2014
46.31%
3.29%
(4.60%)
45.00%
Since the acquisition and up to June 9, 2014, net income of Campofrío was not material.
For business combinations made in stages, International Financial Reporting Standards (IFRS) require any previous equity
of the acquiring party in an acquired party is adjusted at fair value at the acquisition date and that any resulting gain
(or loss) is reported in the consolidated statement of income. IFRS also require all previously recorded amounts in the
consolidated comprehensive statement of income in relation with such investments be reclassified in the consolidated
income account, as if such investment had been sold. ALFA has estimated the fair value of 45% of equity in Campofrío
at Ps5,498 on June 9, 2014, date when control was obtained. The effect of measuring the 45% equity ownership of
Campofrío at fair value before the date when control is obtained was immaterial in the consolidated statements of
income for the year ended December 31, 2014.
Since no additional consideration was made by ALFA to obtain control (June 9, 2014), the fair value of 45% is considered
as the acquisition price of Campofrío.
The amount of the consideration paid for Campofrío at the date control was obtained amounted to Ps5,498.
47
Assets and liabilities recorded as a result of the business combination at June 9, 2014 are as follows:
Fair value
Trade and other accounts receivable, net
Inventories
Intangible
Investments recorded using the equity method
Other assets
Suppliers and other accounts payable
Debt
Income tax deferred and others
Employee benefits
Total identified assets, net
Goodwill
Total consideration paid
Ps 1,576
2,830
6,948
14,268
8,483
693
3,199
(11,829)
(10,820)
(6,671)
(1,144)
7,533
(4,143)
2,108
Ps 5,498
As a result of the transactions, goodwill was recorded in the amount of Ps2,108 at December 31, 2014, which was
allocated to Sigma’s operating segment. The factors contributing to the recognition of goodwill include scale economies
through combined opportunities, obtaining better operating margins in the packaging material and the exchange of
best practices. Goodwill associated to this business combination is not deductible for income tax purposes.
The acquisitions item at December 31, 2014 corresponds mainly to the acquisition of shares of Campofrío made after
the Public Offer of the non-controlling interest. Since control over Campofrío was obtaned. Consolidated statements
of income include revenues of Campofrío of Ps17,572 from June 9 to December 31, 2014. Campofrío contributed a
net income amounting to Ps223 in the same period. If the acquisition had taken place on January 1, 2014, Campofrío’s
contribution to the consolidated revenues for the year ended December 31, 2014 would have amounted to Ps33,972
and net income to Ps226. The information on combined revenues and net income for the period does not include any
savings in costs or other integration effects of Campofrío in ALFA. Consequently, these amounts are not necessarily
indicative income had the acquisition occurred on January 1, 2014, or those that may result in the future.
After taking control of Campofrío, ALFA acquired additional indirect equity, as shown below:
Indirect equity of ALFA at June 9, 2014:
Acquisitions at December 31, 2014:
Indirect equity of ALFA at December 31, 2014:
45.00%
12.52%
57.52%
The acquisitions item at December 31, 2014 corresponds mainly to the acquisition of shares of Campofrío made after
the Public Offer of the non-controlling interest. Since control over Campofrío was obtained as a result of the agreement
with WH, these transactions have been accounted for as acquisitions of non-controlling interest. The difference between
the accounting value of the non-controlling interest acquired and the price paid was recorded in retained earnings.
Additionally, expenses derived from transaction costs related to the acquisition were made in the amount of Ps84.
Campofrío’s shares were listed in the Spanish Stock Exchange up to September 19, 2014, when they were unlisted.
h) InvestmentinPacificExploration&Production,Corporation(formerlyPacificRubialesEnergy)
During 2014, ALFA acquired 59,897,800 ordinary shares from Pacific Exploration & Production, Corporation (PRE), which
represents approximately 19% of the total outstanding shares, in the amount of Ps14,135. The shares were acquired in
the Toronto, Canada stock market. PRE is a public company engaged in the exploration and production of oil and gas
in Colombia, listed in Toronto and Canada’s stock markets.
This investment was recorded as “Financial assets available for sale”, and is shown as current assets and recorded at fair
value. The changes in such value are recorded directly in stockholders’ equity. The accumulated effects of changes in the
fair value are reclassified to income, when is sold or when there is an impairment in the value. At December 31, 2015 and
2014, changes in fair value of such investment resulted in a cumulative loss of Ps4,203 (Ps2,945 net of taxes) and Ps8,665
(Ps6,065 net of taxes) in 2015 and 2014, respectively. At this dates, through the analysis of objective evidence available,
based on a significant decrease in the listing price of PRE’s share in the market, impairment in investment was concluded.
Due to this situation, at December 31, 2015 and 2014 an impairment loss was recorded for the total accumulated amount
in stockholders’ capital mentioned in the paragraph above corresponding to PRE’s investment. This loss is shown in the
income statement, as part of the financial cost, net.
48
2014
i) Debt issuance of ALFA 144A
During March 2014, ALFA issued a Senior Notes in international markets, in two segments with a nominal value of US$500
each one, the first maturing in 2024 (“Senior Notes-2024); and the second maturing in 2044 (“Senior Notes-2044”).
Interest of both Senior Notes will be paid half-yearly as of September 2014 at a rate of 5.250% (effective interest rate of
5.34%) for Senior Notes-2014 and 6.875% (effective interest rate of 6.94%) for Senior Notes-2044. In relation to the Senior
Notes, ALFA capitalized issuance costs in the amount of Ps193. The result of the issuance was used to fund projects
related to energy, anticipate the payment of debt and general corporate purposes.
j) Extraordinary Stockholders´Meeting
On November 4, 2014, ALFA held a General Extraordinary Meeting where stockholders unanimously approved an
increase in capital through the issuance of 400 million new shares with the same characteristics as those currently
outstanding, which would be placed among the investment public, both local and foreign. The stockholders also
approved cancelling 65.5 million of current shares kept in treasury.
The date to carry out the new issuance and conditions thereof would be determined in the short term. Once the new
shares are issued and those in treasury are cancelled, the capital stock of ALFA would be represented by 5’534’500,000
series “A” shares.
Resolutions adopted in the aforementioned Meeting, such as the increase in capital, cancellation of shares in treasury
and the offering of new shares depend upon obtaining the corresponding authorizations from authorities and organs
regulating the securities market.
k) Starting operations in the cogeneration plant
On December 1, 2014, Cogeneración de Energía Limpia de Cosoleacaque, S.A. de C.V. (“Cogeneradora”) started
operations derived from the agreement signed in 2012 to invest approximately US$130 million in a vapor and electric
energy cogeneration plant. This cogeneration plant will generate approximately 95 megawatts, as well as enough
vapor to cover the requirements of the facilities of PTA and PET of ALFA located in Cosoleacaque, Veracruz, México,
providing electricity to other entities of ALFA in other regions.
For the implementation of this project, Grupo Petrotemex and its subsidiary Dak Resinas Américas México, S.A. de C.V.
(both subsidiaries of the Alpek segment) created the aforementioned company at January 31, 2012. The project will
increase the efficiency of the facilities, ensuring the supply of energy at low cost and less emissions.
l) Co-investment agreement
On September 26, 2013, the subsidiary Grupo Petrotemex signed a co-investment agreement with United Petrochemical
Company (“UPC”), a subsidiary of Sistema JSFC (“Sistema”), for the construction of a plant integrated by PTA and PET
in Ufa, Bashdortostán, Russia. The agreement established the creation of two new entities: “RusPET Holding B.V.”
(“JVC”) and “RusPET Limited Liability Company” (“RusCo”), as well as those transactions of both entities reserved for
the approval of both stockholders.
On December 6, 2013, the incorporation by-laws of JVC were signed. JVC issued initial capital for €8, of which UPC
owns 51% (represented by ordinary Class A shares) acquired using a contribution of €4 and Grupo Petrotemex 49%
(represented by Class B ordinary shares), acquired with a contribution of €4. During 2014, additional contributions were
made amounting to Ps121.
Management carried out an analysis to evaluate whether ALFA has control over JVC in accordance to IFRS 10
“Consolidated Financial Statements” in order to evaluate if ALFA had control over JVC. Conclusions of such analysis
indicate that at the date of acquisition and at December 31, 2013, ALFA has joint control and investment shall be treated
as a joint venture investment and it shall be accounted for using the equity method.
Due to specific situations of UPC, during the month of December 2014, Grupo Petrotemex decided to terminate the
agreement and sold the shares of JVC. The settlement agreement establishes a sales price of approximately Ps63
(€4). Based on the above, management recorded an impairment in its investment value of Ps127 (See Note 26) and it
reclassified this investment, net of impairment, as an investment available for sale, shown in the statement of financial
position within the item financial assets available for sale.
m) Construction of the plant in Russia by Nemak
During May 2014, Nemak started the construction of an aluminum auto parts plant for engines in Russia announced in
2013. The plant supply engine heads and aluminum blocks for a new high-technology engine for group Volkswagen
in Russia. The initial capacity of the plant will be 600,000 equivalent units a year and it started production in 2015. At
December 31, 2015 the Company has disbursed Ps946 related to the construction of this plant.
49
Note 3 - Summary of significant accounting policies
The accompanying consolidated financial statements and notes were authorized for issuance on February 2, 2016, by
officials with the legal power to sign the basic financial statements and accompanying notes.
The following are the most significant accounting policies followed by ALFA and its sub-sidiaries, which have been
consistently applied in the preparation of their financial information in the years presented, unless otherwise specified:
a. Basis for preparation
The consolidated financial statements of ALFA, S.A.B. de C.V. and subsidiaries 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 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 recorded as non-controlling interest. Subsidiaries are consolidated in full from the date
on which control is transferred to the Company and up to the date it loses such control.
The method of accounting used by the Company for business combinations is the acquisition method.
The Company defines a business combination as a transaction in which obtains control over the business, by which has
the power to conduct and manage the relevant activities of all assets and liabilities of the business with the purpose of
provide 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 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 are recognized
in stockholders’ equity.
The acquisition-related costs are recognized as expenses when incurred.
Goodwill is initially measured as excess of the sum of the consideration transferred and the fair value of the noncontrolling 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.
50
If the business combination is achieved in stages, the value in books at the acquisition date of the equity previously held
by the Company in the acquired entity is remeasured at its fair value at the acquisition date. Any loss or gain resulting
from such remeasurement is recorded in income of the year.
Transactions and intercompany balances and unrealized gains on transactions between ALFA companies are eliminated
in preparing the consolidated financial statements. In order to ensure consistency with the policies adopted by the
Company, the accounting policies of subsidiaries have been changed where it was deemed necessary.
At December 31, 2015 and 2014, ALFA´s main subsidiaries are the following:
Country (1)
Alpek(Petrochemicalsandsyntheticfibers)
Alpek, S. A. B. de C. V. (Holding company)
Grupo Petrotemex, S.A. de C.V.
DAK Americas, L.L.C.
DAK Resinas Americas México, S.A. de C.V.
DAK Americas Exterior, S. L. (Holding company)
DAK Americas Argentina, S. A.
Tereftalatos Mexicanos, S.A. de C.V.
Akra Polyester, S.A. de C.V.
Indelpro, S.A. de C.V.
Polioles, S.A. de C.V. (3)
Unimor, S.A. de C.V. (Holding company)
Univex, S. A.
Grupo Styropek, S.A. de C.V. (4)
Styropek Mexico, S.A. de C.V. (7)
Styropek SA (7)
Aislapol SA (7)
Styropek Do Brasil (7)
Sigma (Refrigerated food)
Sigma Alimentos, S.A. de C.V. (Holding company)
Alimentos Finos de Occidente, S.A. de C.V.
Grupo Chen, S. de R. L. 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.
Sigma Alimentos Exterior, S. L. (Holding company)
Bar-S Foods Co.
Mexican Cheese Producers, Inc.
Braedt, S. A.
Elaborados Cárnicos SA (7)
Corporación de Empresas Monteverde, S. A.
Campofrío Food Group, S. A. (5)
Fábrica Juris Compañía Limitada (5)
Comercial Norteamericana, S de R.L. de C.V.
USA
Spain
Argentina
Argentina
Chile
Brazil
Spain
USA
USA
Peru
Ecuador
Costa Rica
Spain
Ecuador
Percentage (%)
of ownership (2)
2015
2014
Functional
currency
85
100
100
100
100
100
91
93
51
50
100
100
100
100
100
100
100
85
100
100
100
100
100
91
93
51
50
100
100
100
-
Mexican peso
US dollar
US dollar
US dollar
Euro
Argentine peso
US dollar
Mexican peso
US dollar
US dollar
Mexican peso
Mexican peso
Mexican peso
Mexican peso
Argentine peso
Chilean peso
Real
100
100
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
100
100
100
100
100
100
58
100
100
US dollar
Mexican peso
Mexican peso
Mexican peso
Mexican peso
Mexican peso
Euro
US dollar
US dollar
Nuevo sol
US dollar
Colon
Euro
US dollar
Mexican peso
51
Country (1)
Nemak (Aluminum auto parts)
Nemak, S. A. B. de C. V. (Holding company)
Nemak, S. A.
Modellbau Schönheide GmbH (6)
Corporativo Nemak, S.A. de C.V.
Nemak Canadá, S.A. de C.V. (Holding company)
Nemak of Canada Corporation
Camen International Trading, Inc.
Nemak Europe GmbH (Holding company)
Nemak Exterior, S. L. (Holding company)
Nemak Dillingen GmbH
Nemak Wernigerode (GmbH)
Nemak Linz GmbH
Nemak Gyor Kft
Nemak Poland Sp. z.o.o.
Nemak Nanjing Aluminum Foundry Co., Ltd.
Nemak USA, Inc.
Nemak Aluminum do Brasil Ltda.
Nemak Argentina, S. R. L.
Nemak Slovakia, S.r.o.
Nemak Czech Republic, S.r.o.
Nemak Rus, LLC.
Nemak Aluminum Castings India Private, Ltd.
Nemak Automotive Castings, Inc.
93
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
US dollar
US dollar
Euro
Mexican peso
Mexican peso
Canadian dollar
US dollar
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Yuan
US dollar
Real
Argentine peso
Euro
Euro
Russian ruble
Rupee
US dollar
100
100
100
100
Mexican peso
Mexican peso
Mexico
100
100
Mexican peso
Spain
USA
100
100
100
100
100
100
Euro
US dollar
Mexican peso
100
51
100
100
51
100
US dollar
Mexican peso
Mexican peso
Canada
USA
Germany
Spain
Germany
Germany
Austria
Hungary
Poland
China
USA
Brazil
Argentina
Slovakia
Czech Republic
Russia
India
USA.
Other companies
Colombin Bel, S.A. de C.V.
Terza, S.A. de C.V.
Alfa Corporativo, S.A. de C.V.
Functional
currency
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Germany
Alestra (Telecommunications)
Alestra, S. de R. L. de C. V.
G Tel Comunicación, S.A.P.I. de C.V.
Newpek (Natural gas and hydrocarbons)
Newpek, S. A de C. V.
Oil and Gas Holding España, S.L.U. (Holding company)
(formerly Alfa Energía Exterior, S.L.U.)
Newpek, L. L. C.
Alfasid del Norte, S.A. de C.V.
Percentage (%)
of ownership (2)
2015
2014
(1)
Companies incorporated in Mexico, except those indicated.
(2)
Ownership percentage that ALFA has in the holding companies of each business group and ownership percentage that such holding
companies have in the companies integrating the groups. Ownership percentages and the right to vote are one and the same.
(3)
The Company owns 50% plus one share.
(4)
Company incorporated in 2014.
(5)
Companies acquired in 2014, see comments in Note 2.
(6)
On May 2015, the 10% was acquired of the non-controlling interest.
(7)
Companies acquired in 2015.
52
At December 2015 and 2014, 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 income.
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 income statement. The fair value is the initial carrying value for
the purposes of accounting for any subsequent retained interest in the associate, joint venture or financial asset. Any
amount previously recognized in comprehensive income in respect of that entity is accounted for as if the Company had
directly disposed of the related assets and liabilities. This implies that the amounts recognized in the comprehensive
income are reclassified to income for the year.
iv. Associates
Associates are all entities over which the Company has significant influence but not control. Generally an investor must
hold between 20% and 50% of the voting rights in an investee for it to be an associate. Investments in associates are
accounted for using the equity method and are initially recognized at cost. The Company’s investment in associates
includes goodwill identified at acquisition, net of any accumulated impairment loss.
If the equity in an associate is reduced but significant influence is maintained, only a portion of the amounts recognized
in the comprehensive income are reclassified to income for the year, where appropriate.
The Company’s share of profits or losses of associates, post-acquisition, is recognized in the income statement and its
share in the other comprehensive income of associates is recognized as other comprehensive income. The cumulative
movements after acquisition are adjusted against the carrying amount of the investment. When the Company’s share of
losses in an associate equals or exceeds its equity in the associate, including unsecured receivables, the Company does
not recognize further losses unless it has incurred obligations or made payments on behalf of the associate.
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 “share of profit/loss of associates recognized by the equity
method” in the income statement.
Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company´s
equity in such gains. Unrealized losses are also eliminated unless the transaction provides evidence that the asset
transferred is impaired. In order to ensure consistency with the policies adopted by the Company, the accounting
policies of associates have been modified. When the Company ceases to have significant influence over an associate,
any difference between the fair value of 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 income statement.
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.
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 and associates should be
measured using the currency of the primary economic environment in which the entity operates (“the functional
currency”). In the case of Alfa, S.A.B. de C.V., the functional currency is determined to be the Mexican peso. The
consolidated financial statements are presented in Mexican pesos, which is the Company’s presentation currency.
53
As of March 15, 2015, the Company concluded that the most adequate functional currency of Sigma Alimentos S.A. de
C.V. is the US dollar (“US$”) based on the economic environment wherein the entity generates and uses cash. This is
due primarily to the fact that revenues from dividends and revenues from brand use, starting the aforementioned date
are collected in US$. The previous functional currency was the Mexican peso and in accordance with the International
Accounting Standard 21- “Effects of changes in foreign exchange rates” (“IAS 21”), the changes are made prospectively.
At the date of the change in the functional currency, all assets, liabilities, capital and income statement items were
translated into US$ at the exchange rate at 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 income statement,
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.
Translation differences on non-monetary assets, such as investments classified as available for sale, are included in other
comprehensive income.
iii. Consolidation of subsidiaries with a functional currency different from the presentation currency
Incorporation of subsidiaries whose functional currency is different from their recording currency.
The financial statements of foreign subsidiaries, having a recording currency different from their functional currency
were translated into the functional currency in accordance with the following procedure:
a. The balances of monetary assets and liabilities denominated in the recording currency were translated at the closing
exchange rates.
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 historical exchange
rates. In the case of the movements of non-monetary items recognized at fair value, which occurred during the
period, stated in the recording currency, these were translated using the historical exchange rates in effect on the
date when the fair value was determined.
c. The 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 income statement, except when they arose from
non-monetary items, in which case the historical exchange rate of the non-monetary items was used.
d. The differences in exchange arising in the translation from the recording currency to the functional currency were
recognized as income or expense in the income statement in the period they arose.
Incorporation of subsidiaries whose functional currency is different from their presentation currency.
The results and financial position of all ALFA entities (none of which is in a hyperinflationary environment) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
a. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the balance
sheet date;
b. The stockholders’ equity of each balance sheet presented is translated at historical rates.
c. Income and expenses for each income statement are translated at average exchange rate (when the average exchange
rate is not a reasonable approximation of the cumulative effect of the rates of the transaction, to the exchange rate
at the date of the transaction is used); and
d. All the resulting exchange differences are recognized in comprehensive income.
The goodwill and adjustments to fair value arising at the date of acquisition of a foreign operation so as to measure
them at fair value, are recognized as assets and liabilities of the foreign entity and translated at the exchange rate at the
closing date. Exchange differences arising are recognized in equity.
54
Listed below are the principal exchange rates in the various translation processes:
Country
Functional currency
Canada
USA
Brazil
Argentina
Peru
Ecuador
Czech Republic
Germany
Austria
Italy
France
Hungary
Poland
Slovakia
Spain
Russia
China
India
Canadian dollar
US dollar
Brazilian real
Argentine peso
Nuevo sol
US dollar
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Russian ruble
RenMinBi yuan
Indian rupee
Local currency to Mexican pesos
Closing exchange
Average exchange
rate at
rate at
December 31,
December 31,
2015
2014
2015
2014
12.39
17.21
4.34
1.33
4.90
17.21
18.70
18.70
18.70
18.70
18.70
18.70
18.70
18.70
18.70
0.24
2.65
0.26
12.70
14.71
5.55
1.74
4.93
14.71
17.81
17.81
17.81
17.81
17.81
17.81
17.81
17.81
17.81
0.25
2.37
0.23
12.41
15.85
4.29
1.52
4.97
15.85
18.09
18.09
18.09
18.09
18.09
18.09
18.09
18.09
18.09
0.24
2.62
1.25
12.04
13.30
5.66
1.64
4.68
12.04
17.63
17.63
17.63
17.63
17.63
17.63
17.63
17.63
17.63
0.26
2.16
0.22
d. Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank deposits available for operations and other short-term investments
of high liquidity with original maturities of three months or less, all of which are subject to insignificant risk of changes
in value. Bank overdrafts are presented as loans as a part of the current liabilities.
e. Restricted cash and cash equivalents
Cash and cash equivalents whose restrictions cause them not to comply with the definition of cash and cash equivalents
given above, are presented in a separate line in the statement of financial position and are excluded from cash and cash
equivalents in the statement cash flows.
f. Financial instruments
Financial assets
The Company classifies its financial assets in the following categories: at fair value through profit or loss, loans and
receivables, investments held to maturity and available for sale. The classification depends on the purpose for which the
financial assets were acquired. Management determines the classification of its financial assets upon initial recognition.
Purchases and sales of financial assets are recognized on the settlement date.
Financial assets are written off in full when the right to receive the related cash flows expires or is transferred and the
Company has also transferred substantially all risks and rewards of ownership, as well as control of the financial asset.
i. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this
category if acquired principally for the purpose of selling in the short term. Derivatives are also categorized as held for
trading unless they are designated as hedges.
Financial assets at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed
in the income statement. Gains or losses from changes in fair value of these assets are presented in the income statement
as incurred.
ii. Loan and receivables
The receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date.
These are classified as non-current assets.
Loans and receivables are measured initially at fair value plus directly attributable transaction costs and subsequently
at amortized cost, using the effective interest method. When circumstances occur that indicate that the amounts
receivable will not be collected at the amounts originally agreed or will be collected in a different period, the receivables
are impaired.
55
iii. Maturity investments
If the Company intends and has the demonstrable ability to hold debt securities to maturity, they are classified as held
to maturity. Assets in this category are classified as current assets if expected to be settled within the next 12 months,
otherwise they are classified as non-current. Initially they are recognized at fair value plus any directly attributable
transaction costs, and subsequently they are valued at amortized cost using the effective interest method. Investments
held to maturity are recognized or derecognized on the day they are transferred to or by the Company. At December
31, 2015 and 2014, the Company had no such investments.
iv. Financial assets available for sale
Financial assets available for sale are non-derivative financial assets that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless their maturity is less than 12
months or management intends to dispose of the investment within the next 12 months after the balance sheet date.
Financial assets available for sale are initially recognized at fair value plus directly attributable transaction costs.
Subsequently, these assets are carried at fair value (unless they cannot be measured by their value in an active market
and the value is not reliable, in which case they will be recognized at cost less impairment).
Gains or losses arising from changes in fair value of monetary and non-monetary instruments are recognized directly in
the consolidated statement of comprehensive income in the period in which they occur.
When instruments classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized
in equity are included in the income statement.
Financial liabilities
Financial liabilities that are not derivatives are initially recognized at fair value and are subsequently valued at amortized
cost using the effective interest method. Liabilities in this category are classified as current liabilities if expected to be
settled within the next 12 months, otherwise they are classified as non-current.
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
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 income
statement over the term of the loan using the effective interest method.
Offsetting financial assets and liabilities
Assets and liabilities are offset and the net amount is presented in the balance sheet when there is a legally enforceable
right to offset the recognized amounts and there is an intention to settle on a net basis or to realize the asset and settle
the liability simultaneously.
Impairment of financial instruments
a. Financial assets carried at amortized cost
The Company assesses at the end of each year whether there is objective evidence of impairment of each financial asset
or group of financial assets. An impairment loss is recognized if there is objective evidence of impairment as a result
of one or more events that occurred after the initial recognition of the asset (a “loss event”) and provided that the loss
event (or events) has an impact on the estimated future cash flows arising from the financial asset or group of financial
assets that can be reliably estimated.
Aspects evaluated by the Company to determine whether there is objective evidence of impairment are:
-
Significant financial difficulty of the issuer or debtor.
- Breach of contract, such as late payments of interest or principal.
- Granting a concession to the issuer or debtor, by the Company, as a result of financial difficulties of the issuer or
debtor and that would not otherwise be considered.
- There is a likelihood that the issuer or debtor will enter bankruptcy or other financial reorganization.
- Disappearance of an active market for that financial asset due to financial difficulties.
- Verifiable information indicates that there is a measurable decrease in the estimated future cash flows related to a
group of financial assets after initial recognition, although the decrease cannot yet be identified with the individual
financial assets of the Company, including:
(i) Adverse changes in the payment status of borrowers in the group of assets
(ii) National or local conditions that correlate with breaches of noncompliance by the issuers of the asset group.
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Based on the items listed above, the Company assesses whether there is objective evidence of impairment. Subsequently,
for the category of loans and receivables, when impairment exists, the amount of loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the original effective interest rate. The carrying amount of the asset is
reduced by that amount, which is recognized in the income statement.
If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate determined under the contract. Alternatively, the Company could determine the
impairment of the asset given its fair value determined on the basis of a current observable market price.
If in the subsequent years, the impairment loss decreases and the decrease can be related objectively to an event
occurring after the date on which such impairment was recognized (such as an improvement in the debtor’s credit
rating), the reversal of the loss impairment is recognized in the income statement.
b. Financial assets available for sale
In the case of debt financial instruments, the Company also uses the above-listed criteria to identify whether there is
objective evidence of impairment. In the case of equity financial instruments, a significant reduction of approximately to
30% of the cost of the investment against its fair value or a reduction of the fair value against the cost for a period longer
than 12 months is considered objective evidence of impairment.
Subsequently, in the case of financial assets available for sale, an impairment loss determined by computing the difference
between the acquisition cost and the current fair value of the asset, less any impairment loss previously recognized, is
reclassified from the other comprehensive income to the income statement. Impairment losses recognized in the
income statement related to equity financial instruments are not reversed through the consolidated income statement.
Impairment losses recognized in the income statement related to financial debt instruments could be reversed in
subsequent years, if the fair value of the asset is increased as a result of a subsequent event.
g. Derivativefinancialinstruments
All derivative financial instruments are identified and classified as fair value hedging hedges or cash flow hedges, for
trading or the hedging of market risks and are recognized in the balance sheet as assets and/or liabilities at fair value
and similarly measured subsequently at fair value. The fair value is determined based on recognized market prices and
its fair value is determined using valuation techniques accepted in the financial sector.
The 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 income statement. The change in
fair value hedges and the change in the primary position attributable to the hedged risk are recorded in the income
statement in the same line item as the hedged position. At December 31, 2015 and 2014, the Company has no derivative
financial instruments classified as fair value hedges.
Cash flow hedges
The changes in the fair value of derivative instruments associated to cash flow hedges are recorded in stockholders’ equity.
The effective portion is temporarily recorded in comprehensive income, within stockholders’ equity and is reclassified to
profit or loss when the hedged position affects these. The ineffective portion is immediately recorded in income.
Net investment hedge
Net investment hedge in a foreign business is recorded similarly to cash flow hedges. Any gain or loss of the related
hedged instrument with the effective portion of the hedge is recorded in comprehensive income. The gain or loss of
the ineffective portion is recorded in the statement of income. Accumulated gains and losses in equity are recorded in
the statement of income when partially the foreign operation is partially disposed of or sold. At December 31, 2015 and
2014, the Company has no derivative financial instruments classified as net investment hedges.
Suspension of hedge accounting
The Company suspends the hedges accounting when the derivative has expired, has been sold, is cancelled or exercised,
when it does not reach high effectiveness to offset the changes in the fair value or the cash flow of the hedged item, or
when the Company decides to cancel the hedges designation.
57
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 income
statement. When the hedge of a forecasted transaction appears satisfactory and subsequently does not meet the
effectiveness test, the cumulative effects in comprehensive income in stockholders’ equity are transferred proportionally
to the income statement, to the extent the forecasted transaction impacts it.
The fair value of derivative financial instruments reflected in the financial statements of the Company, is a mathematical
approximation of their fair value. It is computed using proprietary models of independent third parties using assumptions
based on past and present market conditions and future expectations at the respective balance sheet date.
h. Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the average cost method.
The cost of finished goods and work-in-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 transferred from equity corresponding to raw material purchases that qualify as
cash flow hedges.
i. Property, plant and equipment
Items of property, plant and equipment are recorded at cost less the accumulated depreciation and any accrued
impairment losses. The costs include expenses directly attributable to the asset acquisition.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flows to the Company and the cost of the
item can be reliably measured. The carrying amount of the replaced part is derecognized. Repairs and maintenance are
recognized in the income statement during the year they are incurred. Major improvements are depreciated over the
remaining useful life of the related asset.
Depreciation is calculated using the straight-line method, considering separately each of the asset’s components,
except for land, which is not subject to depreciation. The average useful lives of assets families are as follows:
Buildings and construction
Machinery and equipment
Transportation equipment
Telecommunications network
Furniture and laboratory equipment and information technology
Tooling and spare parts
Leasehold improvements
Other assets
33 to 50 years
10 to 14 years
4 to 8 years
3 to 33 years
6 to 10 years
3 to 20 years
3 to 20 years
3 to 20 years
The spare parts to be used after one year and attributable to specific machinery are classified as property, plant and
equipment in other fixed assets.
Borrowing costs related to financing of property, plant and equipment whose acquisition or construction requires a
substantial period (nine months or more), are capitalized as part of the cost of acquiring such qualifying assets, up to the
moment when they are suitable for their intended use or sale.
Assets classified as property, plant and equipment are subject to impairment tests when events or circumstances occur
indicating that the carrying amount of the assets may not be recoverable. An impairment loss is recognized in the income
statement in other expenses, net, for the amount by which the carrying amount of the asset exceeds its recoverable
amount. The recoverable amount is the higher of fair value less costs to sell and value in use.
The residual value and useful lives of assets are reviewed at least at the end of each reporting period and, if expectations
differ from previous estimates, the changes are accounted for as a change in accounting estimate.
Gains and losses on disposal of assets are determined by comparing the sale value with the carrying amount and are
recognized in other expenses, net, in the income statement.
j. Leases
The classification of leases as finance or operating depends on the substance of the transaction rather than the form of
the contract.
Leases in which a significant portion of the risks and rewards relating to the leased property are retained by the lessor
are classified as operating leases. Payments made under operating leases (net of incentives received by the lessor) are
58
recognized in the income statement based on the straight-line method over the lease period.
Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance leases.
Finance leases are capitalized at the beginning of the lease, at the lower of the fair value of the leased property and the
present value of the minimum lease payments. If its determination is practical, in order to discount the minimum lease
payments to present value, the interest rate implicit in the lease is used; otherwise, the incremental borrowing rate of
the lessee should be used. Any initial direct costs of the leases are added to the original amount recognized as an asset.
Each lease payment is allocated between the liability and finance charges to achieve a constant rate on the outstanding
balance. The corresponding rental obligations are included in non-current debt, net of finance charges. The interest
element of the finance cost is charged to the income for the year during the period of the lease, so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. Property, plant and equipment
acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.
k. Intangible
Intangible assets are recognized in the balance sheet when they meet the following conditions: they are identifiable,
provide future economic benefits and the Company has control over such benefits.
Intangible assets are classified as follows:
i) Indefinite useful life - These intangible assets are not amortized and are subject to annual impairment assessment.
As of December 31, 2015 and 2014, no factors have been identified limiting the life of these intangible assets.
ii) Finite useful life - These assets are recognized at cost less accumulated amortization and impairment losses recognized.
They are amortized on a straight line basis over their estimated useful life, determined based on the expectation of
generating future economic benefits, and are subject to impairment tests when triggering events of impairment are
identified.
The estimated useful lives of intangible assets with finite useful lives are summarized as follows:
Development costs
Exploration costs (1)
Trademarks
Customer relationships
Software and licenses
Intellectual property rights
Other (patents, concessions, non-compete agreements, etc.)
(1)
5 to 20 years
40 years
15 to 17 years
3 to 11 years
20 to 25 years
5 to 20 years
Exploration costs are depreciated based on the unit-of-production method based on proven reserves of hydrocarbons.
l. 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.
m. Development costs
Research costs are recognized in income as incurred. Expenditures on development activities are recognized as
intangible assets when such costs can be reliably measured, the product or process is technically and commercially
feasible, potential future economic benefits are obtained and the Company intends also has sufficient resources to
complete the development and to use or sell the asset. Their amortization is recognized in income by the straight-line
method over the estimated useful life of the asset. Development expenditures that do not qualify for capitalization are
recognized in income as incurred.
n. Exploration costs
The Company uses the successful efforts method of accounting for its oil and gas properties. Under this method, all costs
associated with productive and non-productive wells are capitalized while non-productive and geological exploration
costs are recognized in the income statement as incurred. Net capitalized costs of unproved reserves are reclassified
to proven reserves when they are found. The costs of operating the wells and field equipment are recognized in the
income statement as incurred.
59
o. Intangible assets acquired in a business combination
When an intangible asset is acquired in a business combination it is recognized at fair value at the acquisition date.
Subsequently, such assets are as follows: trademarks, customer relations, intellectual property rights, no-competition
agreements, among others, are carried at cost less accumulated depreciation and accumulated impairment losses.
p. Impairmentofnon-financialassets
Assets that have an indefinite useful life, for example goodwill, are not depreciable or amortizable and are subject to
annual impairment tests. Assets that are subject to amortization are reviewed for impairment when events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
the asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped
at the lowest levels at which separately identifiable cash flows exist (cash generating units). Non-financial long-term
assets other than goodwill that have suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
q. Income tax
The amount of income taxes in the income statement represents the sum of the current and deferred income taxes.
The deferred income taxes are determined in each subsidiary by the asset and liability method, applying the rate
established by legislation enacted or substantially enacted at the balance sheet date wherever ALFA and its subsidiaries
operate and generate taxable income. The applicable rates are applied to the total of the temporary differences
resulting from comparing the accounting and tax bases of assets and liabilities in accordance with the years in which
the deferred asset tax is realized or the deferred liability tax is expected to be settled, considering, when applicable,
any tax loss carry forwards expected to be that are considered to be recoverable. The effect of a change in tax rates is
recognized in the income of the period in which the rate change is enacted.
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 ALFA 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.
r. Employeebenefits
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 balance sheet in respect of defined benefit plans is the present value of the defined benefit
obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using discount rates in conformity with the
IAS 19 that are denominated in the currency in which the benefits will be paid, and have maturities that approximate
the terms of the pension liability.
60
Actuarial gains and losses from adjustments and changes in actuarial assumptions are recognized directly in stockholders’
equity in other items of the comprehensive income in the year they occur.
The Company determines the net finance expense (income) by applying the discount rate to the liabilities (assets) from
net defined benefits.
Past-service costs are recognized immediately in the income statement
ii. Post-employment medical benefits
The Company provides medical benefits to retired employees after termination of employment. The right to access
these benefits usually depends on the employee´s having worked until retirement age and completing a minimum of
years of service. The expected costs of these benefits are accrued over the period of employment using the same
criteria as those described for defined benefit pension plans.
iii. Termination benefits
Termination benefits are payable when employment is terminated by the Company before the normal retirement date
or when an employee accepts voluntary termination of employment in exchange for these benefits. The Company
recognizes termination benefits in the first of the following dates: (a) when the Company can no longer withdraw the
offer of these benefits, and (b) when the Company recognizes the costs from restructuring within the scope of the IAS 37
and it involves the payment of termination benefits. If there is an offer that promotes the termination of the employment
relationship voluntarily by employees, termination benefits are valued based on the number of employees expected
to accept the offer. Any benefits to be paid more than 12 months after the balance sheet date are discounted to their
present value.
iv. Short-term benefits
The Company provides benefits to employees in the short term, which may include wages, salaries, annual compensation
and bonuses payable within 12 months. ALFA 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.
s. Provisions
Liability 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.
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 considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with
respect to any one item included in the same class of obligations may be small.
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.
t. Stock based compensation
The Company’s compensation plans are based on the market value of shares of Alfa, Alpek and Nemak in favor of certain
senior executives of the Company and its subsidiaries. The conditions for granting such compensation to the eligible
executives include among other things, compliance with certain metrics such as the level of profit achieved, remaining
in the Company for up to 5 years, etc. The Board of Directors has appointed a technical committee to manage the plan,
and it reviews the estimated cash settlement of this compensation at the end of the year. The payment plan is always
subject to the discretion of the senior management of ALFA. Adjustments to this estimate are charged or credited to
the income statement.
61
The fair value of the amount payable to employees in respect of share-based payments which are settled in cash is
recognized as an expense, with a corresponding increase in liabilities, over the period of service required. The liability
is included under other liabilities and is adjusted at each reporting date and the settlement date. Any change in the fair
value of the liability is recognized as compensation expense in the income statement.
u. Treasury shares
The Stockholders’ Meeting periodically authorizes a maximum amount for the acquisition of the Company’s own shares.
Upon the occurrence of a repurchase of its own shares, they become treasury shares and the amount is charged to
stockholders’ equity at purchase price: a portion to capital stock at its modified historical value, and the balance to
retained earnings. These amounts are stated at their historical value.
v. Capital stock
ALFA’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 deduction from the consideration received, net of tax. The
capital stock includes the effect of inflation recognized up to December 31, 1997.
w. Comprehensive income
Comprehensive income is composed of net income plus other capital reserves, net of taxes, which comprise the effects
of the translation of foreign subsidiaries, the effects of derivative financial instruments for cash flow hedging, actuarial
gains or losses, the effects of changes in the fair value of financial instruments available for sale, the equity in other items
of comprehensive income of associates, and other items specifically required to be reflected in stockholders’ equity and
which do not constitute capital contributions, reductions or distributions.
x. Segment reporting
Segment information is presented consistently with the internal reporting provided to the chief executive who is the
highest authority in operational decision-making, resource allocation and assessment of operating segment performance.
y. Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the
normal course of operations. Revenue is shown net of estimated customer returns, rebates and similar discounts and
after eliminating intercompany sales.
The Company grants discounts and incentives to customers, which are recognized as a deduction from income or as
selling expenses depending on their nature. These programs include customer discounts for sales of products based
on: i) sales volume (usually recognized as a reduction of revenue) and ii) promotions in retail products (usually recognized
as selling expenses), mainly.
Revenue from the sale of goods and products are recognized when all and each of the following conditions are met:
- The risks and rewards of ownership have been transferred.
- The amount of revenue can be reliably measured.
- It is likely that future economic benefits will flow to the Company.
- The company retains no involvement associated with ownership nor effective control of the sold goods.
- The costs incurred or to be incurred in respect of the transaction can be measured reasonably.
In the Alestra segment, revenues from services are recognized as follows:
- Revenue from the provision of data transmission services, internet and local services are recognized when services
are rendered.
- Revenues from national and international long distance outgoing and incoming services are recognized based on
minutes of traffic processed by Alestra and processed by a third party, respectively.
- Installation revenues and related costs are recognized as income during the period of the contract with the customers.
- The estimates are based on historical results, taking into consideration the type of customer, the type of transaction
and the specifics of each arrangement.
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 entity and the revenue can be reliably valued).
Interest income is recognized when it is likely that the economic benefits will flow to the entity and the amount of
revenue can be reliably valued by applying the effective interest rate.
62
z. Earnings per share
Earnings per share are calculated by dividing the profit attributable to the stockholders of the parent by the weighted
average number of common shares outstanding during the year. There are no dilutive effects from financial instruments
potentially convertible into shares.
aa. Changes in accounting policies and disclosures
The following accounting policies were adopted by the Company beginning January 1, 2015 and did not have a material
impact on the Company:
• Annual improvements to the IFRS - cycle 2010-2012 and cycle 2011-2013
• Defined benefit plans: Contributions - Changes to IAS 19
The adoption of these changes had no impact in the current period or any previous periods and it is not likely to affect
future periods.
bb. New accounting pronouncements
A new number of standards, amendments and interpretations to the accounting policies have been published, which
are not effective for reporting periods at December 31, 2015, and have not been adopted in advance by the Company.
The Company’s assessment of the effects of these new standards and interpretations are detailed below:
IFRS 9 - “Financial instruments “, addresses the classification, measurement and recognition of financial assets and
liabilities and introduces new rules for hedge accounting. In July 2014, the IASB made additional changes to the
classification and measurement rules and also introduced a new impairment model. These last changes now comprise
the entire new financial instruments standard. Following the approved changes, the Company no longer expects any
impact from the new rules of classification, measurement and decrease of its financial assets or liabilities. There will be no
impact on the Company’s accounting from financial liabilities, since the new requirements only affect financial liabilities
at fair value through income and the Company has no such liabilities. The new hedge rules pair up the Company’s
hedge accounting and risk management. As a general rule, the hedge accounting will be much easier to apply since the
standard introduces an approach based on principles. The new standard introduces extensive disclosure requirements
and changes in presentation, which will continue to be assessed by the Company. The new impairment model is a model
of expected credit losses; therefore, it would result in advance recognition of credit losses. The Company continues
assessing how its hedge agreements and impairment provisions are affected by the new rules. The standard is effective
for the periods beginning on or after January 1, 2018. Early adoption is allowed.
IFRS 15 - “Revenue from contracts with customers”, is a new standard issued by the IASB for revenue recognition.
This standard replaces IAS 18 “Revenues”, IAS 11 “Construction contracts”, as well as the interpretations to the
aforementioned standards. The new standard is based on the fact that revenue should be recorded when the control
over the good or different service is transferred to the customer, so that this control notion replaces the existing notion
of risks and benefits.
The standard allows for a complete retrospective approach and a modified retrospective approach for its adoption. The
Company is assessing which of the two approaches it can use and to date, it considers that the modified retrospective
approach might be used for adoption. Under this approach the entities will recognize adjustments from the effect of
initial application (January 1, 2018) in retained earnings in the financial statements at December 2018 without restating
comparative periods, by applying the new rules to contracts effective as of January 1, 2018 or those that even when held
in prior years continue to be effective at the date of initial application.
For disclosure purposes in the financial statements at 2018, the amounts of affected items must be disclosed, considering
the application of the current revenue standard, as well as an explanation of the reason for the significant changes made.
Management is assessing the new standard and has identified probable impacts, mainly in the automotive and
telecommunication sectors. The most relevant issues being assessed by Management are mentioned below:
• Depending on the contractual agreement, contracts that are currently considered as separate might have to be combined.
• The Company will have to identify, in customer contracts, the promises of goods and services qualifying as different
compliance obligations and compliance obligations might arise additional to those currently considered, or vice
versa, which may result in changes at the time of the revenue recognition. Upon the distribution of revenues among
each compliance obligation not previously identified, based on their related fair value, the amount of revenues to
be recorded for each compliance obligation might also change, which could change the time of recognition of the
compliance obligation, even though there is no change in the total amount of revenues per contract.
63
• In the case of goods and services that under the new standard do not qualify as compliance obligations that may be
separated, the costs to comply with the contract, such as production costs associated with these goods and services,
may have to be capitalized instead of recognized as expenses when incurred. Also, the incremental costs to acquire
contracts, such as commissions, might have to be deferred and recognized during the term of the contract instead of
being recognized immediately in income.
• The company is assessing if in any of the cases the time of revenue recognition might change from “at a point in
time”, to “through time”, in case all standard conditions are met, when dealing with the manufacturing of goods
without any alternative use for other customer, when there is a collection right for the work done.
At this stage, it is not possible for the Company to estimate the impact of this new standard in its financial statements.
The Company will perform a more detailed assessment of the impact in the next 12 months.
The standard is effective for periods starting in or after January 1, 2018; however, its advance application is allowed.
IFRS 16 - “Leases”. The IASB issued in January 2016 a new standard for lease accounting. This standard will replace
current standard IAS 17, which classifies leases into financial and operating. IAS 17 identifies leases as financial in nature
when the risks and benefits of an asset are transferred, and identifies the rest as operating leases. IFRS 16 eliminates
the classification between financial and operating leases and requires the recognition of a liability showing future
payments and assets for “right of use” in most leases. The IASB has included some exceptions in short-term leases and
in low-value assets. The aforementioned amendments are applicable to the lease accounting of the lessee, while the
lessor maintains similar conditions to those currently available. The most significant effect of the new requirements is
shown in an increase in leasing assets and liabilities, also affecting the statement of income in depreciation expenses
and financing of recorded assets and liabilities, respectively, and decreasing expenses relative to leases previously
recognized as operating leases. At the date of issuance of these financial statements, the Company has not quantified
the impact of the new requirements. The standard is effective for periods starting on or after January 1, 2019, allowing
for the advance adoption if the IFRS 15 is also adopted.
There are no other additional standards, amendments, or interpretations issued but not effective that might have a
significant impact on the Company.
Note 4 - Financial risk management
4.1 Financial risk factors
The Company’s activities expose it to various financial risks: market risk (including foreign exchange risk, interest rate
risk on cash flows and interest rate risk on fair value), credit risk and liquidity risk. The Company’s risk management
plan considers the unpredictability of the financial markets and seeks to minimize the potential negative effects on
the financial performance of the Company. The Company uses derivative financial instruments to hedge some risk
exposures.
The objective is to protect the financial health of the business taking into account the volatility associated with exchange
rates and interest rates. Additionally, due to the nature of the industries in which it participates, the Company has
entered into derivative hedges of input prices.
ALFA has a Risk Management Committee (the “Committee”), consisting of the Chairman, the Chief Executive Officer,
the Chief Financial Officer of the Company, and a financial executive of the Company who acts as technical secretary.
The Committee oversees derivatives transactions proposed by the subsidiaries of ALFA in which the maximum possible
loss exceeds US$1. This Committee supports both the Executive Director and the Chairman of the Company. All new
derivative transactions that the Company proposes to make, and the renewal of existing derivatives, require approval
by both the subsidiary and ALFA in accordance with the following schedule of authorizations:
Possible Maximum Loss US$
Business Group General Manager
ALFA Risk Management Committee
Finance Committee
ALFA Board of Directors
Individual
transactions
Cumulative
transactions
annual
1
30
100
>100
5
100
300
>300
64
The proposed transactions must meet certain criteria, including that the hedges are lower than exposures, and that they
are the result of a fundamental analysis and properly documented. Sensitivity analysis and other risk analysis should be
performed before the operation is carried out.
a. Market risk
(i) Exchange rate risk
The Company operates internationally and is exposed to foreign exchange risk, primarily related to the Mexican peso
and the currencies other than the functional currency in which its subsidiaries operate. The Company is exposed to
foreign exchange risk arising from future commercial transactions in assets and liabilities in foreign currencies and
investments abroad.
The respective exchange rates of the Mexican peso, the US dollar and the Euro are very important factors for ALFA due
to the effect they have on their results. Moreover, ALFA has no influence over their movements. ALFA estimates that
between 75% and 85% of its revenues are denominated in foreign currency, either because they come from products
that are exported from Mexico or because they come from products that are manufactured and sold abroad, or because
even if sold in Mexico the price of such products are set based on international prices in foreign currencies such as the
US dollar.
For this reason, in the past, in times when the Mexican peso has appreciated in real terms against other currencies such
as the dollar, ALFA’s profit margins have been reduced. On the other hand, when the Mexican peso had lost value,
ALFA’s profit margins have been increased. However, although this factor correlation has appeared on several occasions
in the recent past, there is no assurance that it will be repeated if the exchange rates between the Mexican peso and
other currencies fluctuate again.
The Company participates in operations with derivative financial instruments on exchange rates for the purpose of
controlling the total comprehensive cost of its financing and the volatility associated with exchange rates. Additionally,
it is important to note the high “dollarization” of the Company’s revenues, since a large proportion of its sales are made
abroad, providing a natural hedge against its obligations in dollars, while at the same time its income level is affected in
the event exchange rate appreciation. Based on the overall exchange rate exposure at December 31, 2015 and 2014,
a hypothetical variation of 5% in the exchange rate MXN/USD, holding all other variables constant, would result in an
effect on the income statement by Ps234 and Ps76, respectively:
The risk management policy of the Company is to cover as a maximum the following percentages with respect to the
predicted exposure:
Commodities
Energy costs
Exchange rate for operating transactions
Exchange rate for financial transactions
Interest rates
Current year
Prior year
90
65
70
90
90
90
65
70
90
90
The Company has certain investments in foreign operations, whose net assets are exposed to the risk of foreign currency
translation. The currency exposure arising from the net assets of the Company’s foreign operations are frequently
managed through borrowings denominated in the relevant foreign currency.
(ii) Price risk
In carrying out its activities, the Company depends on the supply of raw materials provided by its suppliers, both in
Mexico and abroad, among which are intermediate petrochemicals, beef products, pork and poultry, dairy products and
aluminum scrap, principally.
In recent years, the price of some inputs have shown volatility, especially those related to oil, natural gas, food, such as
meat, cereals and milk, and metals.
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, it has entered into derivative financial instruments transactions to hedge purchases of certain raw materials,
since these inputs have a direct or indirect relationship with the prices of its products.
65
The derivative financial operations have been privately contracted with various financial institutions, whose financial
strength was highly rated at the time by rating agencies. The documentation used to formalize the contract operations
is that based generally on the “Master Agreement”, generated by the “International Swaps & Derivatives Association”
(“ISDA”), which is accompanied by various accessory documents known in generic terms as “Schedule”, “Credit Support
Annex” and “Confirmation”.
Regarding natural gas, Pemex is the only supplier in Mexico. The selling price of natural gas at first hand is determined
by the price of that product on the “spot” market in South Texas, USA, which has experienced volatility. For its part, the
CFE is a decentralized public company in charge of producing and distributing electricity in Mexico. Electricity rates
have also been influenced by the volatility of natural gas, since most power plants are gas-based.
The Company entered into various derivative agreements with various counterparties to protect it against increases in
prices of natural gas and other raw materials. In the case of natural gas derivatives, hedging strategies for products
were designed to mitigate the impact of potential increases in prices. The purpose is to protect the price from volatility
by taking positions that provide stable cash flow expectations, and thus avoid price uncertainty. The reference market
price for natural gas is the Henry Hub New York Mercantile Exchange (NYMEX). The average price per MMBTU for 2015
and 2014 was 2.60 US dollars and 4.32 US dollars, respectively.
At December 31, 2015 and 2014, the Company had hedges of natural gas prices for a portion expected of consumption
needs in Mexico and the United States. Based on the general input exposure at December 31, 2015 and 2014, a
hypothetical increase (decrease) of 10% in market prices applied to fair value and keeping all other variables constant,
such as exchange rates, the increase (decrease) would result in an immaterial effect on the income statement for 2015
and 2014.
(iii) Interest rate and cash flow risk
The interest rate risk for the Company arises from long-term loans. Loans at variable rates expose the Company to
interest rate risk on cash flows that are partially offset by cash held at variable rates. Loans at fixed rates expose the
Company to interest rate risk at fair value.
For the purpose of controlling the total comprehensive cost of its financing and the volatility of interest rates, the
Company has contracted interest rate swaps to convert certain variable rate loans to fixed rates.
At December 31, 2015, 40% of the debt is denominated under a fix rate and 60% under variable rate. See Note 17.
At December 31, 2015 and 2014, if interest rates on variable rate loans were increased/decreased by 10%, interest
expense would increase/decrease by Ps22.0 and Ps7.4, respectively
b. Credit risk
Credit risk is managed on a group basis, except for the credit risk related to accounts receivable balances. Each
subsidiary is responsible for managing and analyzing credit risk for each of its new customers before setting the terms
and conditions of payment. Credit risk is generated from cash and cash equivalents, derivative financial instruments
and deposits with banks and financial institutions as well as credit exposure to customers, including receivables and
committed transactions. If wholesale customers are rated 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.
Individual risk limits are determined based on internal and external ratings in accordance with limits set by the Board.
The use of credit risk is monitored regularly. Sales to retail customers are in cash or by credit card.
During 2015 and 2014, credit limits were not exceeded and management does not expect losses in excess of the
impairment recognized in the corresponding periods.
The impairment provision for doubtful accounts represents estimated losses resulting from the inability of customers to
make required payments. In determining the allowance for doubtful accounts, significant estimates have to be made.
The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment
history and the customer’s current creditworthiness, as determined by a review of their current credit information. In
addition, the Company considers a number of factors to determine the size and appropriate timing for the recognition
of allowances, including historical collection experience, customer base, current economic trends and the ageing of the
accounts receivable portfolio.
66
c. 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 requirements 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.
The Company’s treasury invests those funds in time deposits and marketable securities whose maturities or liquidity
allow flexibility to meet the cash needs of the Company. At December 31, 2015 and 2014, the Company had time
deposits of Ps14,881 and Ps11,934, respectively, which are considered sufficient to adequately manage liquidity risk.
The following table analyzes the derivative and non-derivative, grouped according to their maturity, from the balance
sheet date 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.
From
1 to 2
years
Less than
a year
At December 31, 2015
Current and non-current debt (excluding debt issuance costs)
Other liabilities
Current and non-current debt (excluding debt issuance costs)
Other liabilities
From
2 to 5
years
More than 5
years
Ps
52,552
3,121
848
207
Ps
9,836
711
358
Ps
30,476
-
Ps
62,018
-
Ps
47,655
13,842
760
899
Ps
29,448
1,092
420
Ps
43,450
-
Ps
41,357
-
ALFA expects to meet its obligations with cash flows generated by operations. Additionally ALFA has access to credit
lines with various banks to meet possible requirements.
4.2 Equity risk management
The Company’s objectives when managing equity are to safeguard the Company’s ability to continue as a going concern,
so that it can continue to provide returns for stockholders and benefits for other stakeholders and to maintain an optimal
capital structure so as to reduce the cost of equity.
To maintain or adjust the equity structure, the Company may adjust the amount of dividends paid to stockholders,
return equity to stockholders, issue new shares or sell assets to reduce debt.
ALFA monitors equity based on the degree of leverage. This percentage is calculated by dividing total liabilities by
total equity.
The financial ratio of total liabilities/total equity was 2.34 and 2.36 at December 31, 2015 and 2014, respectively. Resulting
in a leverage to meet the risk management policies of the Company.
4.3 Fair value estimation
The following is an analysis of financial instruments measured by the fair value valuation method. The 3 different levels
used are presented below:
- Level 1: Quoted prices for identical instruments in active markets.
- Level 2: Other valuations including quoted prices for similar instruments in active markets that are directly or indirectly
observable.
- Level 3: Valuations made through techniques wherein one or more of their significant data inputs are unobservable.
67
The following table presents the ALFA’s assets and liabilities that are measured at fair value at December 31, 2015:
Assets
Financial assets available for sale current
Financial assets at fair value through profit or loss:
- Trading derivatives
Financial assets available for sale non-current
Total assets
Level 1
Ps
1,270
Ps
1,270
Liabilities
Financial liabilities at fair value through profit or loss:
Derivatives used for hedging
Employees’ benefits based on shares
Total liabilities
Level 2
Ps
-
Ps
203
203
Level 1
Level 3
Ps
-
Ps
336
336
Level 2
Ps
-
Ps
Ps
565
565
Ps
3
1,556
1,559
Total
Ps
1,270
Ps
203
336
1,809
Level 3
Ps
Ps
-
Total
Ps
Ps
3
1,556
565
2,124
The following table presents the ALFA’s assets and liabilities that are measured at fair value at December 31, 2014:
Assets
Financial assets available for sale current
Financial assets at fair value through profit or loss:
Financial assets available for sale non-current
Total assets
Level 1
Ps
5,472
Ps
5,472
Liabilities
Financial liabilities at fair value through profit or loss:
Employees’ benefits based on shares
Total liabilities
Level 2
Ps
141
Ps
35
15
191
Level 1
Ps
Ps
622
622
Level 3
Ps
-
Ps
268
268
Level 2
Ps
Ps
85
1,834
1,919
Total
Ps
5,613
Ps
35
15
268
5,931
Level 3
Ps
Ps
-
Total
Ps
Ps
85
1,834
622
2,541
There were no transfers between levels 1 and 2, or between levels 2 and 3 in the reported periods.
Specific valuation techniques used to value financial instruments include:
- Market quotations or offers from retailers for similar instruments.
- The fair value of interest rate swaps calculated as the present value of estimated future cash flows based on observable
yield curves.
- The fair value of forward exchange contracts determined using the exchange rates on the balance sheet date, with
the resulting value discounted to present value.
- Other techniques, such as the analysis of discounted cash flows, which are used to determine fair value for the
remaining financial instruments.
Level 1
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet
date. A market is considered active if quoted prices are clearly and regularly available from a stock exchange, dealer,
broker, industry group, pricing service or regulatory agency, and those prices represent actual and regular market
transactions at arm-length conditions. The trading price used for financial assets held by ALFA is the current bid price.
Level 2
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
These valuation techniques maximize the use of observable market data when available and rely as little as possible
on estimates specific to the Company. If all significant inputs required to measure an instrument at fair value are
observable, the instrument is classified at Level 2.
Level 3
If one or more of the significant inputs is not based on observable market data, the instrument is classified at Level 3.
68
The following table presents the movement in Level 3 instruments for the years ended December 31, 2015 and 2014:
Financial assets
available
for sale
Beginning balance at January 1, 2014
Purchases
Final balance at December 31, 2014
Purchases
Final balance at December 31, 2015
Ps
Ps
227
41
268
68
336
Note 5 - Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
5.1 Critical accounting estimates and judgments
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
a. Estimated impairment of goodwill
The Company tests annually whether goodwill has suffered any impairment, in accordance with the established
accounting policy (see Note 13). The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. These calculations require the use of estimates.
b. Income tax
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining
the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates
of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in
the period in which such determination is made. If income before taxes increases/decreases by 5%, income tax will be
increased/decreased by Ps33.
c. Fair value derivatives
The fair value of financial instruments that are not traded in an active market is determined by using fair value hierarchies.
The Company uses its judgment to select a variety of methods and make assumptions that are based mainly on market
conditions existing at the end of each reporting period. If the fair value estimation varies by 5%, the effect on income
would be modified by Ps9.
d. Contingent losses
Management also makes judgments and estimates in recording provisions for matters relating to claims and litigation,
primarily in relation to rates of interconnection services. Actual costs may vary from estimates for several reasons, such
as changes in cost estimates for resolution of complaints and disputes based on different interpretations of the law,
opinions and evaluations concerning the amount of loss.
Contingencies are recorded as provisions when it is likely that a liability has been incurred and the amount of the loss is
reasonably estimable. It is not practical to estimate sensitivity to potential losses if other assumptions were used to record
these provisions, due to the number of underlying assumptions and the range of possible reasonable outcomes regarding
potential actions by third parties, such as regulators, both in terms of loss probability and estimates of such loss.
5.2 Critical judgments in applying the entity´s accounting policies
a. Revenue recognition
The Company has recognized revenue amounting to Ps248,049 for sales of goods to third parties in the Nemak, Sigma
and Alpek segments during 2015. The buyer has the right to return the goods if their customers are dissatisfied. The
Company believes that, based on past experience with similar sales, the dissatisfaction rate will not exceed 2.5%. The
Company has, therefore, recognized revenue on this transaction with a corresponding provision against revenue for
estimated returns. If the estimate changes by 10%, the revenue will be reduced/increased by Ps600.
69
b. Basis of consolidation
The financial statements include the assets, liabilities and results of all entities in which the Company has a controlling
interest. The outstanding balances and significant intercompany transactions have been eliminated in consolidation.
To determine control, the Company considers whether it has the power to govern the financial and operational strategy
of the respective entity and not just the power of the capital held by the Company. As a result of this analysis, the
Company has exercised critical judgment to decide whether to consolidate the financial statements of Polioles and
Indelpro, where the determination of control is not clear. Based on the principal substantive right of Alpek in accordance
with the by-laws of Polioles to appoint the General Director, who has control over the relevant decision making and
based on the by-laws of Indelpro and supported in the General Law of Mercantile Organizations, which allow Alpek to
control the decisions over relevant activities by a simple majority through an Ordinary Stockholders’ Meeting, where it
holds 51% of Indelpro. Management has concluded that there are circumstances and factors described in the by-laws
of Polioles and applicable standards that allow the Company to conduct the daily operations of Polioles and Indelpro,
which therefore demonstrate control. The Company will continue to evaluate these circumstances at the date of each
statement of financial position to determine if this critical judgment is still valid. If the Company determines that it has
no control over Polioles and Indelpro, Polioles and Indelpro will need to be deconsolidated and be recorded using the
equity method.
c. Impairment in financial assets available for sale
The IFRS standards require that when there are objective signs of impairment in an investment available for sale, the
corresponding loss be recorded in the income statement; however, it does not establish the item within the income
statement where this loss has to be presented.
The Company considers the nature and objective for which it made the investment in PRE, which was initially acquired
as a strategic financial investment for ALFA and as of the date of acquisition and up to December 31, 2014, the different
options held by the Company have been assessed. Based on the market conditions and the energy sector and corporate
plans of ALFA, the investment in PRE, could be increased, sold or it could establish joint ventures with PRE to perform
joint operations in the energy sector in Mexico, which is estimated to happen in a period not to exceed twelve months.
ALFA has 19% of the capital of PRE and has publicly declared its intention to participate jointly with PRE in projects in the
energy sector in Mexico; however, these intentions are subject to future not yet established. Due to the aforementioned
situations, ALFA considers that this investment is not part of its operations with the Energy sector and that the most
adequate presentation in the statement of income of the loss incurred in this investment (see Note 28), is as part of the
financial income (loss), net.
d. Recognition of deferred tax assets
ALFA, individually, has tax losses to be applied arising mainly from significant losses in transactions with derivative
financial instruments in 2008 and 2009, which may be used in the following years and whose maturity starts in 2018.
Based on the projections of tax income and gains to be generated by ALFA individually in the following years through
a structured and solid business plan, including the sale of non-strategic assets, new services to be provided to entities
of the group, among others, management has considered that the current tax losses will be used before they expire;
therefore, it has considered appropriate to recognize a deferred tax asset for such losses.
Note 6 - Cash and cash equivalents
Cash and cash equivalents presented in the statements of financial position consist of the following:
At December 31,
2015
2014
Cash and bank accounts
Short-term bank deposits
Total cash and cash equivalents
Ps
9,970
14,882
Ps 24,852
Ps
4,735
11,934
Ps 16,669
70
Note 7 - Restricted cash and cash equivalents
The value of restricted cash is composed as follows:
At December 31,
2015
2014
Current (a)
Non-current, (See Note 14) (a) and (b)
Restricted cash
Ps
Ps
463
237
700
Ps
Ps
504
198
702
a) Applies to deposits relating to lawsuits with authorities arising from differences in the interpretation of some laws in
countries where two subsidiaries operate relating to Nemak segment.
b) This restricted cash is for proceedings before The Mexican Federal Telecommunications Commission in connection
with a dispute arising from a resale of interconnection rates that Alestra has with Teléfonos de Mexico, S.A. de C.V.
(“Telmex”) and Teléfonos del Norte (“Telnor”, a subsidiary of Telmex). The parties request a resolution regarding
tariff rates for interconnection of traffic telecommunication networks applicable during 2010 and the interconnection
traffic of long distance (interurban transport) during 2009 and 2008. On September 8, 2009, the Company and Telmex
created a trust with BBVA Bancomer (as trustee) to ensure the payment of fixed interconnection services on the
dispute applicable to 2008. The trust agreement was amended to include the amounts in dispute for 2009 and 2010.
The restricted cash representing the balance of the trust is presented in the statement of financial position within
non-current assets. At December 31, 2015 and 2014, the balance of the trust was Ps148 and Ps145 respectively
composed of contributions by Alestra and corresponding yields.
Note 8 - Customers and other accounts receivable, net
At December 31,
2015
2014
Customers
Recoverable taxes
Interest receivable
Other debtors:
Sundry debtors
Notes receivable
Provision for impairment of customers and other accounts receivable
Less: non-current portion (1)
Current portion
(1)
Ps 24,711
1,478
18
Ps 22,805
2,186
5
7,306
6,430
1,571
904
(762)
(1,069)
34,322
31,261
844
904
Ps 33,478 Ps 30,357
The non-current accounts receivable represent long-term receivables and other non-current assets, and are presented in the
statement of financial position in other non-current assets.
Customers and other accounts receivable include past-due balances of Ps3,961 and Ps4,418 at December 31, 2015 and
2014, respectively.
71
The analysis by age of the balances due from customers and other receivables not covered by impairment provisions is
as follows:
At December 31,
2015
2014
1 to 30 days
30 to 90 days
90 to 180 days
More than 180 days
Ps
Ps
2,054
558
337
1,012
3,961
Ps
Ps
1,896
840
302
1,380
4,418
At December 31, 2015 and 2014, trade and other accounts receivable of Ps35,082 and Ps29,235, respectively have
an impairment provision (represented by customers and sundry debtors). The amount of the impairment provision at
December 31, 2015 and 2014 amounts to Ps762 and Ps1,069, respectively. Trade and other accounts receivable impaired
correspond mainly to companies going through difficult economic situations. Part of the impaired accounts is expected
to be recovered.
Movements in the provision for impairment of customers and other receivables are analyzed as follows:
2015
Beginning balance (January 1)
Provision for impairment of customers and other receivables
Receivables written off during the year
Final balance (December 31)
Ps
Ps
2014
1,069 Ps
157
(464)
762 Ps
592
604
(127)
1,069
Increases in the provision for impairment of customers and other receivables are recorded in the statement of income
under sales expenses.
Note 9 - Inventories
At December 31,
2015
2014
Finished goods
Raw material and other consumables
Work in progress
Ps 10,631
16,013
7,484
Ps 34,128
Ps 10,110
13,343
7,305
Ps 30,758
The cost of inventories recognized as an expense and included in “cost of sales” amounted to Ps204,312 and Ps187,705
for 2015 and 2014, respectively.
For the years ended on December 31, 2015 and 2014 damaged, slow-moving and obsolete inventory was charged to
cost of sales in the amount of Ps32 and Ps167, respectively.
At December 31, 2015 and 2014 there were no inventories pledged.
72
Note 10 - Financial instruments
a. Financial instruments by category
Accounts
Receivable and
Liabilities at
amortized
cost
Financial assets:
Restricted cash
Customers and other accounts receivable
Other non-current assets
Ps
Ps
Financial liabilities:
Debt
Other non-current liabilities
24,852
700
33,478
844
59,874
Ps 107,209
52,229
825
Ps 160,263
Accounts
Receivable and
Liabilities at
amortized
cost
Financial assets:
Restricted cash
Customers and other accounts receivable
Other non-current assets
Ps
Ps
Debt
Other non-current liabilities
Ps
16,669
702
30,357
921
48,649
92,203
47,655
479
Ps 140,337
Available
for sale
Ps
Financial assets
and liabilities at
Derivative
fair value
contracted
through profit
as
and loss
hedges
1,269
Ps 1,269
Ps
Ps
Ps
203
203
Ps
-
Ps
24,852
700
33,478
203
1,269
844
61,346
Financial assets
and liabilities at
Derivative
fair value
contracted
Available
through profit
as
for sale
and loss
hedges
Total
Ps
5,881
Ps 5,881
Ps
Ps
Ps
Ps
-
Ps
Ps
35
35
85
420
505
Ps
Ps
Ps 107,209
52,229
1,559
1,183
Ps 162,180
Ps
3
358
361
Ps
1,556
Ps 1,556
Ps
-
Ps
Total
Ps
Ps
Ps
15
15
1,767
Ps 1,767
Ps
Ps
Ps
16,669
702
30,357
50
5,881
921
54,580
92,203
47,655
1,852
899
Ps 142,609
73
b.Creditqualityoffinancialassets
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external
credit ratings (if available) or to historical information about counterparty default rates:
At December 31,
2015
2014
Counterparties with external credit rating:
“A”
“A+”
“A-”
“BB+”
“BBB+”
“BBB”
“BBB-”
“BB”
“BB-”
Other categories
Ps
Ps
Counterparties without external credit rating:
Group X
Group Y
Group Z
Total unimpaired trade receivables
16
1,301
255
9
49
584
121
23
1,148
709
4,215
Ps
Ps
Ps
2,087
11,133
5
13,225
Ps 17,440
Ps
Ps
Ps
62
676
116
375
350
97
1,193
159
185
4,681
7,894
1,452
8,072
461
9,985
Ps 17,879
Cash and cash equivalents with and without restrictions, except for cash in hand:
“A”
“A+”
“A-”
“BBB+”
“BBB-”
14
7,449
96
7,559
672
Ps 15,790
8,749
455
787
520
Ps 10,511
Group X – new customers/related parties (less than 6 months).
Group Y – customers/current related parties (more than 6 months) without default in the past.
Group Z – current customers/related parties (more than 6 months) with some defaults in the past. All past-due amounts
were fully recovered.
74
c.Fairvalueoffinancialassetsandliabilitiesvaluedatamortizedcost
The amounts of cash and cash equivalents, restricted cash, customers and other receivables, other current assets,
suppliers and other payables, outstanding debt, provisions and other current liabilities approximate their fair value due
to their short maturity. The carrying value of these accounts represents the expected cash flow at December 31, 2015
and 2014.
The carrying value and estimated fair value of financial assets and financial liabilities carried at amortized cost are as follows:
Carrying
amount
Financial assets:
Non-current accounts receivable
Non-current debt
Ps
844
101,631
Fair
value
Ps
836
102,345
Carrying
amount
Ps
921
81,489
Fair
value
Ps
921
87,075
The estimated fair values as of December 31, 2015 and 2014 were determined based on discounted cash flows using
rates that reflect a similar credit risk depending on the currency, maturity period and country where the debt was
incurred. As part of the main rates used are the interbank equilibrium interest rate (“TIIE”) for the instruments in pesos
and Libor for instruments held in dollars. These fair values do not consider the current portion of financial assets and
liabilities, as the current portion approximates their fair value. This is a measure of fair value of Level 3.
d.Derivativefinancialinstruments
The effectiveness of derivative financial instruments designated as hedges is measured periodically. At December 31,
2015 and 2014, the Company’s management has assessed the effectiveness of its hedges for accounting purposes and
has concluded that they are highly effective.
Notional amounts related to derivative financial instruments reflect the contracted reference volume; however they
do not reflect the amounts at risk with respect to future cash flows. The amounts at risk are generally limited to the
unrealized profit or loss from the market valuation of such instruments, which may vary according to changes in the
market value of the underlying, its volatility and the credit quality of the counterparties.
The principal obligations which the Company is subject to depends on the type of contract and the conditions established
in each one of the derivative financial instruments in force at December 31, 2015 and 2014.
Trading derivatives are classified as current assets or liabilities. The fair value of hedges is classified as a non-current
asset or liability if the 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.
For the years ended December 31, 2015 and 2014, the Company had no effects from ineffective portions of fair value
and cash flows hedges.
During the last quarter of 2015, the following transactions in financial derivatives in Nemak were made, as detailed below:
Cancellation of Cross Currency Swap MXN / USD:
In December 2015, the Company paid in advance the total of its stock certificates amounting to Ps3,500. Consistent
with this prepaid, also canceled the “Cross Currency Swap” which converted via derivatives, the loan from MXN to USD.
The “Cross Currency Swap” was acquired as a hedging transaction at an average exchange rate of Ps12.30, therefore
Ps3,500 were converted to US$285 (Ps4,904).
The cancellation of the derivative resulted in an expense of US$83 (Ps1,412); however, it should be noted that the
exchange rate MXN / USD at the time of completion was 17.01 Mexican pesos, so Ps3,500 equivalent at that time to
US$206 (Ps3,504). These derivatives were designated as fair value hedges.
75
Cancellation of Cross Currency Swap EURO-USD
In November 2015, the Company terminated in advance a trading derivative that had contracted since 2012 in order
to increase exposure to the EURO, given the growing activities in that region. The transaction was agreed at a level of
exchange of 1.25 USD per EURO. The instrument had a remaining balance of €31 and final maturity in 2016. At the time
of cancellation, the exchange rate USD / EURO was approximately 1.06 resulting in a redemption value for Nemak of
US$5.3 (Ps89).
Cancellation of natural gas derivative
In December 2015, Nemak terminated in advance a hedge operation on 40% of its volume of consumption of energy for
its operations in North America. The early cancellation was decided in anticipation of further declines in the price of this
input. The termination of these hedges resulted in an expense for Nemak of US$27.7 (Ps476). At 31 December 2015, the
balance in accumulated other comprehensive income related to this coverage is Ps329. This amount will be reclassified
to income statement as the forecasted transaction.
a. Forward exchange contracts
Positions in foreign currency derivative financial instruments are summarized as follows:
Type of derivative,
value or contract
For hedging purposes:
USD/MXN
ARS/USD
Notional
amount
Ps
(688)
800
Value of
underlying asset
Maturity by year
Units
Reference
Peso/Dollar
PsArg/Dollar
17.21
12.94
Fair value
Ps
(13)
203
Ps 190
2016
(Ps
13)
203
Ps 190
2017
Ps
Ps
-
Collateral /
guarantee
2018+
Ps
Ps
-
Ps
Ps
-
Type of derivative,
value or contract
USD/MXN (CCS(1)) (2)
For trading purposes:
EURO/USD (CCS (1))
USD/MXN
(1)
Cross currency swaps
(2)
Fair value hedges
Notional
amount
Value of
underlying asset
Maturity by year
Units
Reference
Fair value
Ps (3,500)
Peso / Dollar
14.72
Ps (755)
Ps
Dollar / Euro
Peso/Dollar
1.21
14.72
35
(73)
Ps (793)
925
(986)
2015
2016
2017+
(PS
38)
Ps (340)
Ps (377)
Ps
14
(73)
(97)
21
Ps (319)
Ps (377)
Collateral /
guarantee
Ps
-
Ps
-
76
b. Interest rate swaps
Positions in interest rate derivative financial instruments are summarized as follows:
Type of derivative,
value or contract
on Libor (1)
(1)
Notional
amount
Ps
589
Value of
underlying asset
Units
% per year
Maturity by year
Reference
0.90
2015
Fair value
Ps
Ps
(10)
(10)
Ps
Ps
(8)
(8)
2016
Ps
Ps
(2)
(2)
Collateral /
guarantee
2017+
Ps
Ps
-
Ps
Ps
-
Cash flows hedges
c. Commodities
Positions in derivative financial instruments covering natural gas, gasoline and ethylene are summarized as follows:
Type of derivative,
value or contract
Ethylene (1)
Natural gas (1)
Ethane (1)
Notional
amount
Ps
Px (1)
Gasoline (1)
809
2,923
46
3,252
72
Crude Brent
5
Value of
underlying asset
Units
Maturity by year
Reference
Fair value
2016
Cent Dollar / lb 19.22
Dollar / MBTU
2.32
Cent Dollar/
Gallon
15.05
Dollar / MT
772
Dollar / Gallon
1.25
Ps (230)
(961)
Ps (230)
(250)
(5)
(309)
(38)
(5)
(309)
(38)
-
-
Dollar / BBL
(3)
Ps(1,546)
(3)
Ps (835)
Ps (204)
Ps (507)
38.91
2017
Ps
(204)
Collateral /
guarantee
2018+
Ps
(507)
Ps
-
Ps
-
Type of derivative,
value or contract
Ethylene (1)
Natural gas (1)
Ethane (1)
Px (1)
Gasoline
Crude WTI (1)
Crude Brent
(1)
Cash flows hedges
Notional
amount
Ps
7
3,802
2
1,585
1,023
39
46
Value of
underlying asset
Units
Reference
Maturity by year
2015
Fair value
Ps
(1)
(18)
Ps
(144)
Collateral /
guarantee
2017+
Cent Dollar / lb 45.38
Dollar / MBTU
3.08
Cent. Dollar /
Gallon
17.59
Dollar / MT
884
Dollar / Gallon
1.62
Dollar / BBL
59.29
Ps
(1)
(308)
(380)
15
(1)
(308)
(380)
15
-
-
Dollar / BBL
(12)
Ps(1,066)
(12)
Ps (705)
Ps (144)
Ps (217)
63.27
(1)
(379)
2016
Ps
(217)
Ps
-
Ps
-
77
At December 31, 2015 and 2014, the net fair value of derivative financial instruments above amounts to Ps1,356 and
Ps1,802, respectively, which is shown in the consolidated statements of financial position as follows:
Fair
Initial
value
position
Current assets
Current liabilities
Non-current liabilities
Net position
Ps
Ps
203
(848)
(711)
(1,356)
Ps
Ps
-
Ps
203
(848)
(711)
Ps (1,356)
Fair
Initial
value
position
Current assets
Non-current assets
Current liabilities
Net position
Ps
Ps
23
27
(760)
(1,159)
(1,869)
Ps
Ps
67
67
Net
value
Net
value
Ps
23
27
(760)
(1,092)
Ps (1,802)
Note 11 - Other current assets
Other current assets consist of the following:
At December 31,
2015
2014
Prepaid expenses (1)
Accounts receivable – affiliates (Note 8)
Total other current assets
(1)
This item comprises mainly advertising and insurance paid in advance.
Ps
Ps
1,224
1,713
2,937
Ps
Ps
1,242
177
1,419
78
Note 12 - Property, plant and equipment
Year ended December 31, 2014
Opening net book amount
Exchange difference
Additions
Additions from business combinations
Disposals
Impairment charge recognized in the year
Depreciation charge recognized in the year
Transfers
Carrying amount at December 31, 2014
Deemed cost
Accumulated depreciation
Opening net book amount
Exchange difference
Additions
Disposals
Impairment charge recognized in the year
Depreciation charge recognized in the year
Transfers
Cost
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Ps
Land
Buildings and
constructions
Machinery
and equipment
Transportation
equipment
7,122
273
364
1,681
(101)
(1)
(312)
9,026
Ps 11,737
886
390
5,320
(284)
(791)
1,249
Ps 18,507
Ps 41,034
3,602
1,217
6,092
(800)
(15)
(5,254)
6,052
Ps 51,928
9,026
9,026
Ps 31,694
(13,187)
Ps 18,507
Ps 115,741
(63,813)
Ps 51,928
Ps
9,026
495
235
90
(9)
(16)
(31)
9,790
Ps 18,507
1,572
135
170
(298)
(967)
926
Ps 20,045
Ps 51,928
5,920
1,470
326
(30)
(263)
(6,659)
5,742
Ps 58,434
Ps
9,790
9,790
Ps 35,748
(15,703)
Ps 20,045
Ps 135,812
(77,378)
Ps 58,434
Ps
Ps
Ps
Ps
Ps
Ps
1,314
20
115
31
(33)
(313)
83
1,217
3,291
(2,074)
1,217
1,217
34
498
20
(15)
(1)
(331)
95
1,517
3,899
(2,382)
1,517
Of the total depreciation expense, Ps8,455 and Ps6,764 were charged to cost of sales, Ps509 and Ps440 to selling
expenses and Ps473 and Ps412 to administrative expenses in 2015 and 2014, respectively.
At December 31, 2015 and 2014, there were no property, plant and equipment pledged as collateral.
Assets under finance leases comprise the following amounts in which the Company is the lessee:
At December 31,
2015
2014
Cost - capitalized financial lease
Carrying value, net
Ps
Ps
383 Ps
(238)
145 Ps
1,648
(343)
1,305
The Company has entered into various non-cancellable lease agreements as lessee. The lease terms are between 2 and
3 years, and the ownership of the assets lies with the Company.
79
Telecommuni
cation
network
Ps
Ps
4,104
2
46
(6)
(697)
704
4,153
Furniture,
fittings and
information
technology
Ps
Ps
891
50
137
192
(10)
(363)
389
1,286
Tooling
and
spare parts
Ps
Ps
Ps 13,039
(8,886)
Ps 4,153
Ps
5,007
(3,721)
Ps 1,286
Ps
Ps
Ps
Ps
Ps
4,153
6
20
(1)
(751)
1,127
4,554
Ps 14,059
(9,505)
Ps 4,554
Ps
Ps
1,286
218
123
24
(19)
(492)
380
1,520
5,746
(4,226)
Ps 1,520
Ps
Ps
Ps
Ps
Construction
in process
192
14
1
(1)
(171)
267
302
7,141
314
7,853
820
(476)
(2)
(8,528)
Ps 7,122
Ps
996
(694)
302
Ps
7,122
7,122
Ps
302
32
(221)
219
332
Ps
7,122
525
10,661
19
(151)
(27)
(8,398)
Ps 9,751
Ps
Ps
Ps
Ps
1,042
(710)
332
Ps
Improvements
to leased
property
Ps
Ps
9,751
9,751
Ps
Ps
Ps
329
18
(61)
(31)
30
285
Other
fixed assets
Ps
Ps
545
(260)
285
Ps
285
1
34
(3)
(26)
10
301
Ps
588
(287)
301
Ps
Ps
Ps
Ps
Total
110
6
32
(42)
(8)
(5)
3
(14)
82
Ps
73,974
5,167
10,173
14,094
(1,780)
(23)
(7,617)
(80)
93,908
Ps
249
(167)
82
Ps 186,710
(92,802)
Ps 93,908
82
14
119
5
(2)
(2)
(14)
(70)
132
Ps
93,908
8,817
13,295
654
(528)
(309)
(9,461)
Ps 106,376
300
(168)
132
Ps 216,735
(110,359)
Ps 106,376
80
Note 13 - Goodwill and intangible assets
Finite life
Development
costs
Cost
At January 1, 2014
Exchange differences
Additions
Impairment charge for the year
Transfers
Disposals
Additions
Impairment charge for the year
Transfers
Disposals
Accumulated amortization
At January 1, 2014
Amortizations
Additions
Disposals
Transfers
Amortizations
Additions
Disposals
Transfers
Net carrying value
Cost
Cost
Ps
Ps
3,407
(266)
625
18
9
3,793
Ps
560
867
(42)
5,178
Ps
Ps
(1,417)
(260)
(18)
(2)
141
(1,556)
Ps
(439)
(306)
(2,301)
Ps
Ps
Ps
Ps
Exploration
costs
Ps
Ps
Ps
Ps
3,263
1,742
1,752
6,757
(2,152)
6,924
(34)
(9)
153
Ps
(1,081)
(202)
(3,602)
5,178
(2,301)
2,877
Ps
Ps
Ps
Ps
117
13
8
40
(8)
170
26
-
Ps
Ps
Ps
1,132
1,187
(698)
(1,084)
(537)
(2,319)
3,793
(1,556)
2,237
Trademarks
Ps
Ps
Ps
(72)
(19)
(3)
3
(1)
(10)
(102)
Ps
(5)
(21)
(128)
6,757
(2,319)
4,438
Ps
6,924
(3,602)
3,322
Ps
Ps
Ps
Customers
relationships
Ps
Ps
2,688
220
102
226
3,236
Ps
395
185
2
41
3,859
Ps
(838)
(190)
(5)
(63)
(1,096)
Ps
(259)
(1,355)
170
(102)
68
Ps
153
(128)
25
Ps
Ps
Ps
3,236
(1,096)
2,140
3,859
(1,355)
2,504
81
Indefinite life
Software and
licenses
Ps
Ps
1,565
17
302
2,020
1
(28)
3,877
Ps
149
333
209
(1)
(191)
4,376
Intellectual
property rights
and others
2,249
157
299
(27)
(60)
2,618
Ps 11,425
80
2,937
(108)
Ps 14,334
658
1,442
(232)
4,475
704
562
Ps 15,600
(618)
(163)
(35)
57
(4)
(67)
(830)
Ps
-
Ps
-
Ps
Ps
392
99
4,720
Ps
(136)
(68)
(204)
Ps
(386)
(7)
156
(89)
Ps (2,811)
Ps
(105)
(67)
(376)
(175)
(23)
(14)
(Ps 1,042)
Ps
3,877
(2,485)
Ps 1,392
Ps
Ps
Ps
4,376
(2,811)
Ps 1,565
Ps
Ps
Ps
Goodwill
1,440
2,789
4,229
Ps (1,198)
(205)
(1,079)
10
(13)
Ps (2,485)
Ps
Other
Ps
(11)
Ps
Ps
1,440
(204)
1,236
Ps
5,407
(830)
4,577
Ps 14,334
Ps 14,334
4,720
(376)
4,344
Ps
4,475
(1,042)
Ps 3,433
Ps 15,600
Ps 15,600
Ps
Brands
Ps
Other
Total
Ps
5
1
1
3,110
3,117
Ps 28,883
2,050
5,583
12,483
249
(204)
Ps 49,044
Ps
31
148
36
3,332
4,657
4,203
921
(2,163)
(432)
Ps 56,230
Ps
-
Ps (4,977)
(1,989)
(1,135)
70
(12)
(549)
Ps (8,592)
Ps
-
(2,450)
(7)
133
(699)
Ps (11,615)
Ps 49,044
(8,592)
Ps 40,452
Ps 56,230
(11,615)
Ps 44,615
Ps
2,724
86
12
4,091
6,913
Ps
Ps
641
59
7,613
Ps
-
Ps
-
Ps
Ps
6,913
6,913
Ps
3,117
3,117
Ps
3,332
Ps
7,613
7,613
Ps
3,332
82
Other intangible assets consist mainly of patents, concessions and agreements not to compete.
Of the total amortization expense, Ps1,702 and Ps1,525, were charged to cost of sales, P200 and Ps97 to selling expenses
and Ps544 and Ps367 to administrative expenses in 2015 and 2014, respectively.
Research expenses incurred and recorded in the results of 2015 and 2014 were Ps59 and Ps45, respectively.
Certain customer relationships capitalized in the past as a result of the business combinations, have been eliminated
due to the termination of these relationships and are shown as disposals.
Goodwill was increased as a result of the agreements related with the business of polystyrene expandable (EPS) and
polyurethane (PU) in the segment of Alpek, the strategic alliance between Sigma Alimentos, S.A. de C.V. and Kinesis Food
Service, S.A. de C.V. and the acquisition of ECARNI and in 2014 for the acquisition of Campofrío in the Sigma segment.
Impairment testing of goodwill
Goodwill is allocated to operating segments that are expected to benefit from the synergies of the business combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units, as follows:
At December 31
2015
2014
Alpek
Sigma
Nemak
Alestra
Other segments
Ps
296
9,539
4,952
456
357
Ps 15,600
Ps
250
8,904
4,538
286
356
Ps 14,334
During the fourth quarter of 2015, the Company recognized an impairment which is related to the decrease in the value
of its oil and gas properties in the amount of Ps2,152 (US$ 132). This impairment was the result of the decrease in the
carrying value of its gas shale assets located in Eagle Ford and the low oil, gas and natural gas liquid prices.
The amount of recovery from the operating segments has been determined based on calculations of values in use.
These calculations use cash flow projections based on pre-tax financial budgets approved by management covering a
period of 5 years.
The key assumptions used in calculating the value in use in 2015 and 2014 were as follows:
2015
Estimated gross margin
Growth rate
Discount rate
Alpek
Sigma
Nemak
Alestra
Other
segments
6.8%
6.5%
10.05%
28.7%
30.9%
11.1%
18.99%
1.5%
9.6%
68.0%
5.0%
7.3%
8.0%
3.0%
10.0%
2014
Estimated gross margin
Growth rate
Discount rate
Alpek
Sigma
Nemak
Alestra
Other
segments
3.0%
3.8%
9.8%
7.0%
5.0%
9.3%
21.3%
3.7%
11.1%
67.0%
1.2%
10.6%
7.0%
3.5%
11.3%
With regard to the calculation of the value in use of the operating segments, ALFA Management considers that a possible
change in the key assumptions used, would not cause the carrying value of the operating segments to materially exceed
their value in use.
83
Note 14 - Investments accounted for using the equity method and others
At December 31,
2015
2014
Non-current portion of customers and other accounts receivable (Note 8)
Accounts receivable from related parties
Other assets
Restricted cash (Note 7)
Other non-current financial assets
Investment in associates
Joint ventures
Total other non-current assets
Ps
Ps
844
336
2,575
237
3,992
1,073
564
5,629
Ps
Ps
904
268
17
686
198
2,073
943
254
3,270
These assets are investments in shares of companies not listed on the market, representing less than 1% of their capital
stock and equity investments in social clubs. No impairment loss was recognized at December 31, 2015 and 2014.
Financial assets available for sale activity was as follows:
2015
Balance at January 1
Acquisitions (disposals)
Balance at December 31
Ps
Ps
268
68
336
2014
Ps
Ps
227
41
268
Financial assets available for sale are denominated in Mexican pesos.
Investments in associates
The accumulated summarized financial information for associates of the group accounted for by the equity method, not
considered material, is as follows:
2015
Operating profit
Comprehensive loss
Investment in associates at December 31
Ps
(71) Ps
(71)
998
2014
(233)
(233)
943
There are no contingent liabilities related to the investment of the group in associates.
The Company has no commitments in relation with associates at December 31, 2015 and 2014.
Joint ventures
The accumulated summarized financial information for associates of the group accounted for by the equity method, not
considered material, is as follows:
2015
Operating profit
Comprehensive loss
Joint ventures at December 31
Ps
(20) Ps
(20)
639
There are no contingent liabilities related to the investment of the group in joint agreements.
The Company has no material commitments with respect to joint agreement at December 31, 2015 and 2014.
2014
(290)
(290)
254
84
Note 15 - Subsidiaries with significant non-controlling interest
The non-controlling interest for the year ended December 31, 2015 and 2014 is integrated as follows:
Non-controlling
ownership
percentage
Alpek, S.A.B. de C.V.
Campofrío (1)
Nemak, S.A.B. de C.V.
of non-significant subsidiaries
2015
18%
5%
25%
Ps
Ps
(1)
Non-controlling
interest
at December 31,
income for the period
1,409
(25)
721
(32)
2,073
Ps
Ps
2014
2015
657
95
240
Ps 9,909
499
6,918
Ps
(84)
908
298
Ps 17,624
318
Ps 13,781
2014
8,542
3,470
1,451
See Note 2.g.
The summarized financial information at December 31, 2015 and 2014 and for the year then ended, corresponding to
each subsidiary with a significant non-controlling interest is shown below:
Campofrío
Food Group
2014
Statement of financial position
Current assets
Non-current assets
Current liabilities
Stockholders´equity
Nemak, S.A.B. de C.V.
2015
2014
Alpek, S.A.B. de C. V.
2015
2014
Ps 11,750
22,074
13,421
12,233
8,170
Ps 22,780
49,238
18,771
25,208
27,939
Ps 16,999
42,052
19,000
18,541
21,457
Ps 32,664
42,230
14,927
25,467
34,499
Ps 30,941
34,430
14,325
21,201
29,845
17,572
223
276
70,891
4,601
5,736
61,665
3,517
-
83,590
3,664
7,105
86,072
1,314
2,841
118
1
-
916
513
Dividends paid to non-controlling interest
-
-
-
-
-
Cash flows
Cash flows from operating activities
Net cash used from investments activities
Net cash used from financing activities
Net increase in cash and cash equivalents
1,964
2,277
(904)
3,318
10,208
(8,866)
(611)
631
7,090
(5,246)
(2,651)
(807)
9,280
(5,100)
(3,504)
674
6,593
(4,417)
(1,170)
1,007
Statement of income
Revenues
Net profit
Comprehensive income for the year
Comprehensive income attributable to
non-controlling interest
The information above does not include the elimination of intercompany balances and transactions.
85
Note 16 - Accounts payable to suppliers and other
At December 31,
2015
2014
Suppliers
Short-term employee benefits
Advance payments from customers
Taxes other than income tax
Other accounts payable and accrued expenses
Ps 38,914
1,390
1,438
3,427
7,060
Ps 52,229
Ps 35,167
1,980
1,378
2,745
6,385
Ps 47,655
Note 17 - Debt
At December 31,
2015
2014
Current:
Bank loans (1)
Short-term debt
Notes payable (1)
Total short-term debt
Ps
1,450
4,101
27
5,578
7,251
3,403
60
Ps 10,714
Long-term:
In US dollars:
Senior Notes
Secured bank loans
Unsecured bank loans
Finance leases
Other
Ps 54,345
1,553
35,782
14
774
Ps 46,627
1,678
19,821
73
222
In Mexican pesos:
Unsecured stock certificates
1,733
5,228
In euros:
Senior Notes
Finance leases
9,315
1,655
133
9,085
1,617
147
Other currencies:
Finance leases
Less: short-term debt
Long-term debt (2)
Ps
Ps
234
214
194
180
105,732
84,892
(4,101)
(3,403)
Ps 101,631 Ps 81,489
(1)
At December 31, 2015 and 2014, short-term bank loans and notes payable bore interest at an average rate of 3.46%, and
2.68%, respectively.
(2)
The fair value of bank loans and notes payable approximates their current book value, as the impact of discounting is not significant.
86
The carrying amounts, terms and conditions of long-term debt were as follows:
Description
Contractual
Currency
value
Costs of
debt
issuance
Interest
payable
Balance at
Balance at
December 31, December 31,
2015
2014
1,553
1,553
Ps
Interest
rate
1,678
1,678
31/12/2018
3.50%
Direct Fix rate
Secured bank loans
USD
1,547
-
6
Bancario
Bancario
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Bilateral
Club Deal
Club Deal
Club Deal
Club Deal
ECA
ECA
Syndicate
Syndicate
BRL
EUR
ARS
ARS
ARS
USD
USD
USD
USD
USD
USD
USD
USD
USD
EUR
USD
USD
USD
USD
EUR
USD
EUR
USD
EUR
USD
EUR
USD
64
3
33
120
13
408
344
344
294
860
1,228
8,058
2,065
1,377
2
3,269
516
146
129
841
4,345
822
4,097
73
19
539
8,364
(1)
(1)
(12)
(8)
(9)
(1)
(7)
(34)
(8)
(31)
(16)
(4)
(2)
-
1
2
2
1
1
3
1
3
8
4
21
5
1
5
1
7
4
2
64
3
34
122
13
410
344
344
861
1,228
8,061
2,061
1,373
2
3,281
520
146
129
835
4,316
815
4,073
8,636
37,671
44
170
297
296
297
736
1,050
1,671
2
2,804
443
147
111
1,019
4,566
57
15
541
7,386
21,652
15/01/2025
31/12/2016
03/10/2016
01/04/2020
02/12/2022
14/08/2018
02/04/2018
01/04/2017
01/04/2016
19/12/2019
13/11/2018
13/11/2018
23/12/2025
29/12/2025
03/09/2017
17/01/2024
07/10/2016
17/12/2017
22/10/2018
13/11/2020
13/11/2020
05/12/2018
05/12/2018
15/04/2024
15/04/2024
01/10/2015
13/11/2018
6.17%
1.80%
29.72%
22.45%
19.00%
1.40%
1.43%
1.51%
1.76%
2.40%
1.57%
1.05%
3.39%
3.40%
4.55%
3.73%
2.71%
5.18%
2.33%
1.25%
1.85%
1.50%
1.83%
2.28%
2.62%
2.96%
1.55%
MXN
MXN
MXN
1,000
668
3,500
-
48
17
10
1,048
685
12/07/2018
12/07/2018
10/11/2017
10.25%
5.32%
6.10%
1,733
1,048
670
3,510
5,228
Stock Certificate / Fix rate
Stock Certificate / UDIS
Stock Certificate
Unsecured stock certificates
Ps
Maturity
date
DD/MM/YYYY
Bond 144A/ Fix rate
Bond144A/ Fix rate
Bond 144A/ Fix rate
Bond 144A/ Fix rate
Bond 144A/ Fix rate
Bond 144A/ Fix rate
Bond 144A/ Fix rate
Bond 144A/ Fix rate
Bond 144A/ Fix rate
Senior Notes
USD
USD
USD
USD
USD
USD
USD
EUR
EUR
11,160
5,162
8,588
8,563
8,603
4,262
7,718
9,352
9,043
(79)
(39)
(79)
(79)
(133)
(20)
(20)
(130)
(78)
56
109
119
156
174
21
104
92
120
11,137
5,232
8,628
8,640
8,644
4,263
7,802
9,314
63,660
9,667
4,547
7,371
7,381
7,382
3,628
6,651
9,085
55,712
20/11/2022
08/08/2023
08/08/2024
08/08/2044
28/02/2023
16/12/2019
14/04/2018
16/12/2019
31/10/2016
4.50%
5.38%
5.25%
6.88%
5.50%
6.88%
5.63%
3.38%
8.25%
Other loans
Other loans
Other
USD
EUR
588
183
-
3
-
591
183
774
80
142
222
Several
Several
Several
Several
China Leasing
Others finance leases
Finance leases
RMB
USD
EUR
RUR
190
14
133
2
-
2
190
14
133
4
341
180
73
147
400
28/02/2026
Several
Several
30/04/2018
6.45%
Several
Several
4.05%
Ps 105,732
Ps 84,892
Total
87
At December 31, 2015, the annual maturities of long-term debt (excluding issuance debt costs) are as follows:
Bank loans and other
Senior Notes
Stock certificates
Finance leases
2017
2018
Ps 10,577
3,340
140
40
Ps 14,097
Ps 16,495
10,748
3,410
40
Ps 30,693
Ps
Ps
2019
2020
onwards
1,231
7,158
Ps 11,162
71,486
41
8,430
215
Ps 82,863
Total
Ps 39,465
92,732
3,550
336
Ps 136,083
At December 31, 2014, the annual maturities of long-term debt (excluding issuance debt costs) are as follows:
2016
Bank loans and other
Senior Notes
Stock certificates
Finance leases
Ps
3,817
9,043
1,575
144
Ps 14,579
2017
Ps
Ps
5,619
1,750
50
7,419
2019
onwards
Total
3,133
39,623
130
Ps 42,886
Ps 21,667
55,260
4,979
342
Ps 82,248
2018
Ps
9,098
6,594
1,654
18
Ps 17,364
Ps
At December 31, 2015 and 2014, the Company has contractual unused credit lines for a total of US$1,223 and
US$835, respectively.
Covenants:
Loan contracts and debt agreements contain restrictions, primarily relating to compliance with financial ratios, 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 satisfaction of creditors may cause the debt
to become demandable immediately.
Financial ratios to be fulfilled include the following:
a. Interest coverage ratio: which is defined as EBITDA for the period of the last four complete quarters divided by
financial expenses, net or gross as appropriate, for the last four quarters, which shall not be less than 3.0 times.
b. Leverage ratio: which is defined as consolidated debt at that date, being the gross debt or net debt appropriate,
divided by EBITDA for the period of the last four complete quarters, which shall not be more than 3.5 times.
During 2015 and 2014, the financial ratios were calculated according to the formulas set out in the loan agreements.
Currently, the Company is in compliance with all obligations and covenants contained in the credit agreements of its
subsidiaries; such obligations, among other conditions and subject to certain exceptions, require or limit the ability of
the subsidiaries to:
- Provide certain financial information;
- Maintain books and records;
- Maintain assets in appropriate conditions;
- Comply with applicable laws, rules and regulations;
- Incur additional indebtedness;
- Pay dividends;
- Grant liens on assets;
- Enter into transactions with affiliates;
- Perform a consolidation, merger or sale of assets, and
- Carry out sale and lease-back operations.
At December 31, 2015, and the date of issuance of these financial statements, the Company and its subsidiaries complied
satisfactorily with such covenants and restrictions.
88
Pledge assets:
At December 31, 2015 and 2014, Newpek has pledged assets under a line of credit for an amount up to Ps1,721 (US$100)
and Ps2,060 (US$140), respectively, maturing on December 31, 2018 which Ps1,549 (US$90) were used as of December
31, 2015 and Ps1,648 (US$112) were used as of December 31, 2014.
2015
a. During 2015, Nemak completed the following financings that improved substantially its debt profile:
• On November 13, 2015, a credit amounting to US $ 300 (Ps5,162) with seven banks (BBVA Bancomer as agent bank)
and a maturity of 5 years. Average life of 3.6 years and a variable interest rate with a margin over Libor fluctuating
in a range between 1.25% and 2.00% based on the level of leverage of the Company. The margin applicable at the
end of 2015 is 1.25%. Proceeds of this loan were used to prepay all of the unsecured “Nemak -07” by Ps3,500 that
would expire at the end of 2017.
• Financing amounting to US $ 200 (Ps3,441), on December 21, 2015 with Bancomext amounting to US$120 (Ps2,065)
and December 23, 2015 with NAFIN $80 (Ps1,376), with a total term of 10 years and average life of 7.9 years. The
interest rate is variable and the margin is 2.8% per year over the Libor rate during the life of the loan. Resources
were used to prepay substantially all short-term debt of the Company.
b. On June 15, 2015, Sigma contracted a credit with The Bank of Tokyo-Mitsubishi UFJ, LTD amounting to US$355 in
order to acquire approximately 37% of the remaining shares of Campofrio. The loan bears interest on a quarterly
basis; for the first year the interest rate is LIBOR plus 0.50%, for the second year LIBOR plus 0.90% and for the third
year onwards LIBOR plus 1.25% with three installments in June 2016 (US$55), June 2017 (US$150) and June 2018 (US$
150). The outstanding balance at December 31, 2015 is US$355.
c. On March 3, 2015, Campofrio issued a bond amounting to €500 in the regulated 144A, Reg-S standard international
market. The issued bond will be paid in seven years and the interest rate is 3.375%. The use of this loan was to
refinance the bond issued in 2009 by Campofrio. Interests are payable semi-annually in March and September.
2014
a. On February 24, 2014, Alestra S. de R. L. de C.V. (subsidiary of ALFA) paid in advance the principal amount of the
“Senior Notes 144A/Reg. S” issued in 2009. The outstanding payment of the principal at that date amounted to US$
200.
b. In March 2014, ALFA issued a Senior Note in the international market under Rule 144A, Reg-S, the Senior Note
amounted to US$1,000 in two equal “segments”. The first shall be paid in 10 years and the second in 30 years and
their interest rates are 5.25% and 6.875%, respectively. The Company capitalized costs of debt issuance of Ps145. It
was used for a partial debt payment, energy projects and general corporate uses.
c. On May 12, 2014, Sigma requested an additional amount from Bank of Tokyo-Mitsubishi UFJ, LTD (Broker Bank), in
the amount of US$325. The loan bears monthly interest based on the LIBOR rate plus annual 1.25%, with four equal
repayments in May 2017, May 2018 and November 2018, maturing on November 13, 2018. At December 31, 2014, the
balance amounted to Ps4,783.
d. With the acquisition of Campofrío, ALFA assumed certain obligations related to the debt it held with the company.
These obligations amounted to Ps9,043, which consist primarily of an issuance of convertible bonds in 2009 with a
nominal amount of €500 at an interest rate of 8.250% maturing on October 31, 2016.
e. On December 17, 2007, Sigma subscribed Ps1,000 and Ps635, SIGMA 07 and SIGMA 07-2, respectively, in stock
certificates maturing in 2014 at interest rates of monthly TIIE + 20 base points and fixed half-yearly of 8.75%,
respectively, mainly to pay the debt in the short term. The UDIs are instruments denominated in Mexican pesos
that automatically adjust the principal value of an obligation using the inflation rate officially published by Banco de
México.
f. On December 8, 2014 the stock certificates of SIGMA 07 y SIGMA 07-2 were paid at maturity in the amount of Ps1,000
and Ps635, respectively.
89
The finance lease liabilities are effectively secured as the rights to the leased asset which revert to the lessor in the event
of default.
At December 31,
2015
2014
Obligation for finance leases - minimal payments, gross
- Less than 1 year
- More than 1 year and less than of 5 years
- More than 5 years
Total
Future financial charges from finance leases
Present value of finance less liabilities
Ps
Ps
47
109
185
341
341
Ps
Ps
59
212
129
400
400
The present value of finance lease liabilities is analyzed as follows:
At December 31,
2015
2014
Less than 1 year
More than 1 year and less than 5 years
More than 5 years
Ps
Ps
47
109
185
341
Ps
Ps
59
212
129
400
Note 18 - Income taxes
Deferred income tax
The analysis of the deferred tax asset and deferred tax liability is as follows:
At December 31,
2015
2014
Deferred tax liability:
- To be recovered in more than 12 months
- To be recovered within 12 months
Deferred tax asset:
- To be covered in more than 12 months
- To be recovered within 12 months
Deferred tax (assets) liabilities, net
Ps 16,101
556
16,657
Ps
9,571
1,102
10,673
(11,173)
(8,079)
(6,281)
(2,011)
(17,454)
(10,090)
Ps
(797) Ps
583
The gross movement in the deferred income tax account is as follows:
2015
At January 1
Credit to income statement
Business acquisitions
Tax related to components of other comprehensive income
At December 31
Ps
583 Ps
685
(1,987)
214
(292)
Ps
(797) Ps
2014
2,323
(122)
(4,096)
2,899
(421)
583
90
The composition of the deferred income tax assets and liabilities was as follows:
(Assets) liabilities
At December 31,
2015
2014
Inventories
Advance payments
Intangible assets
Other temporary differences, net
Deferred tax liabilities
Ps
63
3,115
12,986
493
16,657
Ps
50
470
9,101
1,052
10,673
Customers
Employees ‘benefits
Valuation of derivative instruments
Provisions
Tax losses carryforward
Deferred tax assets
(96)
(3,891)
(2,635)
(209)
(902)
(39)
(312)
(998)
(2,605)
(10,964)
(7,177)
(1,257)
3,541
(17,454)
(10,090)
Ps
(797) Ps
583
Changes in deferred tax assets and liabilities during the year were as follows:
Balance at
December 31,
2014
Inventories
Advance payments
Intangible assets
Ps
50
470
9,101
1,052
10,673
Customers
Provisions
Deferred tax assets
(2,635)
(902)
(312)
(2,605)
(7,177)
3,541
(10,090)
Ps
583
Business
acquisitions
Ps
Ps
214
214
214
Charged
Charged
(credited)
(credited)
to other
Balance at
to income comprehensive December 31,
statement
income
2015
Ps
Ps
50
63
2,645
(3,671)
(559)
5,770
(96)
(1,256)
972
286
1,607
(3,787)
(4,798)
(7,072)
(1,302)
Ps
Ps
(279)
(13)
(292)
(292)
Ps
63
3,115
12,986
(93)
16,657
(96)
(3,891)
(209)
(39)
(998)
(10,964)
(1,257)
(17,454)
Ps
(797)
91
Balance at
December 31,
2013
Inventories
Advance payments
Intangible assets
Ps
22
72
395
8,443
2,249
719
11,900
Customers
Provisions
Deferred tax assets
(333)
(567)
(114)
(218)
(11,803)
3,458
(9,577)
Ps 2,323
Charged
Charged
(credited)
(credited)
to other
to income comprehensive
statement
income
Business
acquisitions
Ps
Ps
297
2,590
765
3,652
(59)
(463)
(231)
(753)
2,899
Ps
Ps
28
(72)
(222)
(1,932)
(2,249)
(432)
(4,879)
333
(2,635)
(174)
584
(2,156)
4,626
83
661
(4,218)
Ps
Ps
(102)
(319)
(421)
(421)
Balance at
December 31,
2014
Ps
50
470
9,101
1,052
10,673
(2,635)
(902)
(312)
(2,605)
(7,177)
3,541
(10,090)
Ps
583
Tax loss carry forwards is recognized as a deferred tax asset to the extent that realization of the related tax benefit
through future taxable profits is probable. Tax losses amounted to Ps10,357 in 2015 and Ps10,211 in 2014.
Tax losses carryforward at December 31, 2015 and 2014, expire in the following years:
Year of the
loss
2008 and prior
2009
2010
2011
2012
2013
2014
2015
Ps
Ps
5,082
304
165
107
1,039
1,331
2,329
10,357
Year of
expiration
2014
Ps
4,974
297
162
105
1,018
1,268
2,387
Ps 10,211
2018
2019
2020
2021
2022
2023
2024
Income tax payable
The income tax payable is as follows:
December 31,
2015
2014
Income tax incurred
Income tax from tax consolidation (regime until December 31, 2013)
Income tax from optional regime for groups of companies in Mexico
Income tax payable
Ps
Current portion
Non-current portion
Income tax payable
Ps
Ps
Ps
1,021
3,458
1,450
5,929
Ps
1,739
4,190
5,929
Ps
Ps
Ps
358
3,979
736
5,073
951
4,122
5,073
92
Income tax under tax consolidation regime in Mexico
Since the effective Income Tax Law effective up to December 31, 2013 was revoked, the tax consolidation regime was
eliminated; therefore, ALFA is obliged to make a deferred tax payment determined at that date during the following ten
years as from 2014, as shown below.
In accordance with paragraph d) of section XVIII of the ninth transitory article of the 2014 Law, and provided that the
Company at December 31, 2013 was acting as the controlling company and was subject, at that date, to the payment
system contained in section VI of the fourth article of the transitory provisions of the Income Tax Law published in the
federal official gazette on December 7, 2009, or article 70-A of the 2013 Income Tax Law that was revoked, shall continue
paying the tax consolidation deferred tax in fiscal years 2007 and prior years in conformity with the abovementioned
provisions, until payment is concluded.
Income tax from deferred tax consolidation at December 31, 2015 and 2014 amounts to Ps3,458 and Ps3,979, respectively
and will be paid off in installments in accordance with the table shown below:
Year of payment
2016
Tax losses
Dividends distributed by the controlled companies
that do not come from CUFIN and the reinvested CUFIN
Total
2017
2018
2019
onwards
Total
Ps
659
Ps
619
Ps
557
Ps 1,474
Ps
3,309
Ps
59
718
Ps
45
664
Ps
44
601
1
Ps 1,475
Ps
149
3,458
Optional regime for groups of companies in Mexico (incorporation regime)
Derived from the elimination of the tax consolidation regime in Mexico, the Company chose to incorporate to the
new optional regime for groups of companies beginning in 2014, this regime consists in grouping companies with
specific characteristics, which are able to defer part of the income tax payable in three years; the deferral percentage is
calculated using a factor determined in accordance to the amount of tax profit and losses of the year.
Note 19 - Provisions
Disputes
Business acquisitions (1)
Additions
Exchange effects
Payments
Business acquisitions (1)
Additions
Exchange effects
Cancelation of provisions (3)
Payments
Ps
Ps
492
29
(72)
449
Ps
21
21
5
(355)
(48)
93
Restructuring
and
demolition (1) (2)
Ps
Ps
416
696
(77)
1,035
Ps
14
54
(546)
557
Environmental
remediation (2)
Ps
Ps
377
(17)
360
Ps
59
(102)
317
Indemnitiesfor
dismissal
and other (2)
Ps
Total
Ps
91
Ps
55
370
96
(296)
316 Ps
1,376
780
370
96
(462)
2,160
Ps
816
76
(260)
948 Ps
21
910
135
(355)
(956)
1,915
2015
Short-term provisions
Long-term provisions
At December 31,
Ps
Ps
825
1,090
1,915
2014
Ps
Ps
1,146
1,014
2,160
(1)
This provision comes from Campofrío and its strategic redefinition process to obtain, among others, efficiencies and a higher
level of specialization in the production and logistics centers, as well as strengthening synergies.
(2)
Corresponds to the closing of the Cape Fear plant.
(3)
Corresponds to the write-off of provisions in the telecommunications segment as a result of favorable legal disputes related with
interconnection rates.
93
Note 20 - Other liabilities
December 31,
2015
2014
Share-based employee benefits (Note 24)
Dividends payable
Deferred credits
Accounts payable – affiliates (Note 31)
Total other liabilities
Current portion
Non-current portion
Total other liabilities
Ps
Ps
Ps
Ps
565
63
453
1,476
2,557
Ps
1,747
810
2,557
Ps
Ps
Ps
622
58
629
1,309
889
420
1,309
Note 21 - Employee benefits
The valuation of employee benefits for retirement plans (covering approximately 80% of workers in 2015 and in 2014)
and is based primarily on their years of service, current age and estimated salary at retirement date.
Main subsidiaries of the Company have established funds for the payment of retirement benefits through irrevocable trusts.
The employee benefit obligations recognized in the statement of financial position, by country, are shown below:
December 31,
Country
Mexico
United States of America
Other
Total
2015
Ps
Ps
1,454
1,102
979
3,535
2014
Ps
Ps
1,079
1,009
918
3,006
Following is a summary of the main financial information of such employee benefits:
December 31,
2015
2014
Liabilities in the balance sheet for:
Pension benefits
Post-employment medical benefits
Liabilities in the balance sheet
Ps
2,365
641
3,006
Ps
(265) Ps
(49)
(314) Ps
(261)
(37)
(298)
Actuarial losses recognized in the statement of other comprehensive income for the period
Ps
(929) Ps
(340)
Cumulative actuarial losses recognized other comprehensive income
Ps
Charge in the income statements for:
Pension benefits
Post-employment medical benefits
Ps
Ps
Ps
2,877
658
3,535
39
Ps
Ps
155
94
Pensionbenefits
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).
Amounts recognized in the balance sheet are determined as follows:
December 31,
2015
2014
Present value of defined benefit obligations
Fair value of plan assets
Present value of unfunded obligations
Past service cost not recognized
Liabilities in the statement of financial position
Ps
8,078 Ps
(5,746)
2,332
Ps 2,332 Ps
7,926
(5,561)
2,365
2,365
The movement in the defined benefit obligation during the year was as follows:
2015
At January 1
Current service cost
Interest cost
Employee contributions
Remeasurements:
Demographic actuarial losses/(gains)
Losses/(gains) related with experience of the employees
Benefits paid
Liabilities acquired in business combinations
Reductions
Settlements
At December 31
Ps
Ps
7,926
178
319
2
2014
Ps
5,371
198
306
1
(237)
289
(440)
54
(9)
(4)
8,078 Ps
629
623
(444)
1,260
(12)
(6)
7,926
The movement in the fair value of plan assets for the year was as follows:
2015
At January 1
Expected return on plan assets
Remeasurements - expected return on plan assets,
excluding interest income
Employer contributions
Benefits paid
Liabilities acquired in business combinations
At December 31
2014
Ps (5,561) Ps
270
(4,142)
(195)
(240)
(412)
(96)
(1)
294
Ps (5,746) Ps
(246)
(265)
(118)
(1)
295
(889)
(5,561)
Amounts recorded in the statement of income are as follows:
Financial revenues (costs), net
Loss from reduction
Total included in personal costs
Ps
Ps
2015
2014
(178) Ps
(79)
(8)
(265) Ps
(198)
(60)
(3)
(261)
95
Main actuarial assumptions were as follows:
December 31,
2015
2014
Discount rate
Discount rate
Inflation rate
Salary increase rate
Future salary increase
Medical inflation rate
MX6.75%
US1.00%
1.50%
5.25%
4.25%
7.50%
MX6.75%
US3.75%
4.25%
5.25%
4.25%
7.50%
The average life of defined benefit obligations is 13 and 14 years at December 31, 2015 and 2014, respectively.
The sensitivity analysis of the main assumptions for defined benefit obligations were as follows:
Effect in defined benefit obligations
Change in
Increase in
assumptions
assumptions
Discount rate
+1%
Increase by Ps192
Decrease in
assumptions
Decreases by Ps226
Pensionbenefitassets
Plan assets are comprised as follows:
December 31,
2015
2014
Equity instruments
Short and long-term securities
Ps
3,048
2,695
Ps
3,233
2,328
Post-employmentmedicalbenefits
The Company operates post-employment medical benefits schemes mainly in Mexico and the United States. 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.
Amounts recognized in the balance sheet are determined as follows:
December 31,
2015
2014
Present value of defined benefit obligations
Fair value of plan assets
Deficit in funded plans
Present value of unfunded obligations
Liabilities in the statement of financial position
Ps
Ps
663 Ps
(4)
659
659 Ps
644
(4)
640
640
The movements of defined benefit obligations are as follows:
2015
At January 1
Interest cost
Demographic actuarial losses/(gains)
Financial actuarial losses/(gains)
Reductions
Benefits paid
At December 31
Ps
Ps
644 Ps
16
33
15
2
21
(72)
659 Ps
2014
666
14
36
9
(52)
28
(13)
(44)
644
The movement in the fair value of plan assets for the year was as follows:
2015
At January 1
Expected return on plan assets without interest income
Benefits paid
At December 31
Ps
Ps
(4) Ps
(4) Ps
2014
(4)
(4)
96
Amounts recorded in the statement of income are as follows:
2015
Interest cost
Curtailment gain
Total included in personal costs
Ps
2014
(16) Ps
(33)
(49) Ps
Ps
(14)
(36)
13
(37)
The sensitivity analysis of the main assumptions for defined benefit obligations were as follows:
Effect in defined benefit obligations
Change in
Increase in
assumptions
assumptions
Medical inflation rate
+1%
Increases by Ps56
Decrease in
assumptions
Decreases by Ps 72
Note 22 - Stockholders’ equity
At December 31, 2015, the capital stock is variable, with a fixed minimum without withdrawal rights of Ps205, represented
by 5,200,000,000 “Class I” Series “A” shares, without par value, fully subscribed and paid. The variable capital entitled
to withdrawal will be represented, if issued, by registered “Class II” Series “A” shares without par value.
During 2015 and 2014, the Company repurchased 14,000,000 and 8,000,000 shares respectively, for a total of Ps458 and
Ps258, in connection with a share repurchase program that was approved by the stockholders of the Company and
carried out at the discretion of the Administration. At December 31, 2015 and 2014, the Company held 79,500,000 and
65,500,000 treasury shares and the market value of the share was 34.10 and 32.94 pesos, respectively.
The profit for the period is subject to the legal provision requiring at least 5% of the profit for each period to be set aside
to increase the legal reserve until it reaches an amount equivalent to 20% of the capital stock. At December 31, 2015
and 2014, the legal reserve amounted to Ps60, which is included in retained earnings.
On April 15, 2015, the Ordinary General Stockholders´Meeting approved the payment of an ordinary cash dividend of
0.03 US dollars for each of the outstanding shares, equivalent to approximately Ps2,380.
In accordance with the new Income Tax Law becoming effective on January 1, 2014, this law establishes a 10% tax on
income generated starting 2014 on dividends paid to foreign residents and Mexican individuals when these correspond
to tax profits generated starting 2014. It also establishes that for fiscal years 2001 to 2013, the net tax profit will be
determined as established in the Income Tax Law effective in the corresponding fiscal year.
Dividends paid are not subject to income tax if paid from the Net Tax Profit Account (CUFIN). Any dividends paid in
excess of this account will cause a tax equivalent to 42.86%if they are paid in 2014. This tax is payable by the Company
and may be credited against its income tax in the same year or the following two years or, if applicable, against the flat
tax of the period. Dividends paid from profits which have previously paid income tax are not subject to tax withholding
or to any additional tax payment. At December 31, 2015 and 2014, the tax value of the CUFIN and tax value of the
Capital Contribution Account (CUCA) amounted to Ps26,714 and Ps34,953 respectively.
In the event of a capital reduction, the Income Tax Law provides that any excess of stockholders’ equity over adjusted
capital contribution will receive the same tax treatment as dividends.
The movements in cumulative other comprehensive income for 2015 and 2014 are presented below:
Effect from
foreign
currency
translation
At January 1, 2014
Gains (losses) on fair value
Tax on gain (loss) on fair value
Gains on translation of foreign entities
Gains (losses) on fair value
Tax on gain (loss) on fair value
Gains (losses) on translation of foreign entities
Ps
Effect of
cash flows
hedge
derivative
instruments
Ps
Ps
677
3,679
4,356
105
(1,063)
319
Ps (639)
Ps
3,598
7,954
(929)
279
Ps (1,289)
Total
Ps
782
(1,063)
319
3,679
Ps 3,717
Ps
(929)
279
3,598
6,665
97
Foreign currency translation
The foreign exchange differences arising from the translation of financial statements of foreign subsidiaries are recorded.
The effect of derivative financial instruments contracted as cash flow hedges contains the effective portion of cash flow
hedges in force at the reporting date.
The directors and executive officers of the Company do not own more than 1% of its capital. Furthermore, no shareholder
owns more than 10% of its capital, or has significant influence or control or has power to govern the company.
Note 23 - Foreign currency position
At February 2, 2016, last date of financial activity before of the issuance of these financial statements, the exchange rate
was 18.29 Mexican pesos per dollar.
The figures below are expressed in millions of dollars, since this is the prevailing foreign currency for the Company.
At December 31, 2015 and 2014, had the following assets and liabilities in foreign currencies:
Dollars (USD)
Other currencies
Monetary assets
Liabilities:
Current
Non-current
Monetary position in foreign currencies
USD
Mexican
pesos
Ps
2,822
Ps 48,572
Ps
(1,146)
(5,168)
(3,492)
(19,717)
(88,926)
Ps (60,071)
Total
Mexican
pesos
USD
Mexican
pesos
Ps
617
Ps 10,612
Ps 59,184
Ps
(935)
(685)
(1,003)
(16,090)
(11,797)
Ps (17,275)
(35,807)
(100,723)
Ps (77,346)
Dollars (USD)
Other currencies
Monetary assets
Liabilities:
Current
Non-current
Monetary position in foreign currencies
USD
Mexican
pesos
Ps
3,746
Ps 55,137
Ps
(2,254)
(5,159)
(3,667)
(33,180)
(75,936)
Ps (53,979)
Mexican
pesos
Total
Mexican
pesos
Ps
8,069
Ps 63,206
Ps
(3,273)
(1,411)
3,385
(36,453)
(77,347)
Ps (50,594)
USD
Ps
548
Ps
(222)
(96)
230
Note 24 - Share-based payments
ALFA has a compensation scheme referenced to the value of its own shares and the value of the shares of Nemak and
Alpek for senior executives of ALFA and its subsidiaries. According to the terms of the plan, eligible executives will
receive a cash payment conditional on the achievement of certain quantitative and qualitative metrics based on the
following financial measures:
• Improved share price
• Improvement in net income
• Permanence of the executives in the Company
The program consists of determining a number of shares on which the executives shall be based. The bonus will be paid
in cash over the next five years, i.e. 20% each year at the average price of the share at the end of each year. The average
price of the share in 2015 and 2014 was Ps34.30 and Ps37.32, respectively.
98
At December 31, 2015 and 2014, the liability for share-based payments amounted to Ps565 and Ps622, respectively.
The short-term and long-term liability was analyzed as follows:
December 31,
2015
2014
Short-term
Long-term
Total carrying value
Ps
Ps
207
358
565
Ps
202
420
622
Ps
Note 25 - Expenses classified by nature
The total cost of sales, selling and administrative expenses, classified by nature of the expense, were as follows:
2015
Raw materials
Outsourced production
Employee benefit expenses
Maintenance
Freight charges
Advertising expenses
Lease expenses
Consumption of energy and fuel
Travel expenses
Technical assistance, professional fees and administrative services
Other
Total
Ps (141,929)
(7,972)
(32,414)
(7,449)
(11,911)
(6,501)
(2,441)
(1,771)
(7,856)
(926)
(5,897)
(8,906)
Ps (235,973)
2014
Ps
(137,552)
(6,194)
(28,328)
(6,791)
(9,607)
(5,131)
(1,591)
(1,252)
(8,106)
(656)
(3,411)
(3,508)
(212,127)
Ps
Note 26 - Other income, net
2015
Compensation and reimbursement from insurance
Refinancing expenses
Gain from sale of assets
Gain (loss) from sale of shares
Other
(1)
Other income
Damage to property, plant, equipment, inventory and others (1)
Expenses from acquisition projects
Valuation of derivative financial transactions
Impairment loss of assets (See Note 13)
Other
Other expenses
Total other income, net
(1)
Ps
Ps
3,873
337
-
2014
Ps
4,210
(2,472)
(7
(2,479)
1,731 Ps
1,766
3
153
(1)
325
2,246
(1,858)
(55)
(15)
(191)
-)
(2,119)
127
On November 2014 there was a fire in one of the production plants of the Sigma segment, specifically in the Campofrío plant,
located in the city of Burgos, Spain (“Accident”). At December 31, 2014 the losses recorded as a consequence of the accident
amounted to Ps1,858, affecting property, plant and equipment, inventory and other costs.
These assets are covered by an insurance policy. Based on the analysis and confirmations made by the Company’s management,
it has concluded that such policy covers material damages, loss of benefits resulting from the reduction of revenues and
additional costs that the Company may incur in to recover sales for a period of twelve months as of the date of the accident.
At December 31, 2014, the Company has recorded an income from reimbursement of accident amounting Ps1,766, of which
Ps1,275 were collected in cash. During 2015 the insurance payments were received in the amount of Ps2,598 and during the
month of November 2015, the closing of the insurance indemnity was done in a total amount of Ps3,873.
99
Note 27 - Financial cost, net
2015
Financial income:
- Interest income on short-term bank deposits
- Other finance income
Financial income, excluding foreign exchange loss
Ps
357
218
575
9,223
9,798
2014
Ps
176
46
222
Gain on foreign exchange
Total financial income
Ps
Ps
7,455
7,677
Financial expenses:
- Interest expense on bank loans
- Interest expense on exchange - traded debt certificates
- Interest expense on sale of receivables
- Interest cost on benefit to employees
- Interest expense of suppliers
- Interest rate swaps: fair value hedging
- Other financial expenses
Ps (2,095) Ps
(2,767)
(160)
(196)
(52)
(432)
(292)
(1,691)
(2,208)
(159)
(89)
(44)
(382)
(474)
Finance costs:
Less: amounts capitalized on qualifying fixed assets
(5,994)
52
(5,047)
90
Interest expense, excluding foreign exchange loss
Foreign exchange loss
(5,942)
(14,143)
(4,957)
(12,676)
Total finance cost
Ps (20,085) Ps (17,633)
Impairment of financial asset available for sale
Ps (4,203) Ps
Financing cost, net
Ps (14,490) Ps (18,621)
(8,665)
Note 28 - Employee benefits expenses
Salaries, wages and benefits
Contributions to social security
Employees’ benefits
Other contributions
Total
2015
2014
Ps 28,175
3,173
767
300
Ps 32,415
Ps 24,620
2,852
643
213
Ps 28,328
100
Note 29 - Income tax for the year
2015
Tax currently payable:
Income tax on profits of the period
Adjustment for previous years
Total tax currently payable
Deferred tax:
Origination and reversal of temporary differences
Total deferred tax
Income taxes credited (charged) to income
2014
Ps (5,420) Ps
(5,420)
(3,358)
(181)
(3,539)
1,987
1,987
Ps (3,433) Ps
4,096
4,096
557
The reconciliation between the statutory and effective rates of income tax was as follows:
2015
Profit (loss) before taxes
Share in losses of associates recognized through equity method
Income (loss) before equity in associates
Statutory rate
Ps
9,284
284
9,568
30%
Tax at statutory rate
(Add) deduct tax effect of:
Differences in calculating interest deductions
Other permanent differences, net
Provision based on operations of the year
Recalculation of previous years taxes
Total provision for income taxes (charged) credited to income
2014
Ps
(2,870)
419
273
(836)
875
(556)
(3,433)
Ps (3,433) Ps
Effective rate
(1,686)
291
(1,395)
30%
36%
738
(181)
557
39%
The tax charge/(credit) relating to components of other comprehensive income was as follows:
2015
Tax
charged
(credited)
Prior
taxes
contracted as cash flow hedges
Actuarial losses on labor liabilities
Translation effect of foreign entities
Other items of comprehensive income
Deferred taxes
Ps
Ps
(929)
(42)
3,598
2,627
2014
Ps
Ps
279
13
292
Ps
292
After
taxes
Ps
Ps
(650)
(29)
3,598
2,919
Prior
taxes
Ps
Ps
(1,063)
(340)
3,679
2,276
Tax
charged
(credited)
Ps
Ps
319
102
421
Ps
421
After
taxes
Ps
Ps
(744)
(238)
3,679
2,697
101
Note 30 - Related party transactions
Transactions with related parties during the years ended December 31, 2015 and 2014, which were carried out in terms
similar to those of arm’s-length transactions with independent third parties, were as follows:
2015
2014
Ps 23,940
1,919
Ps 20,321
1,991
Ps 18,782
1,668
Ps 14,689
2,539
Sale of goods and services:
Affiliates
Shareholders with significant influence over subsidiaries (1)
Purchase of good and services:
Affiliates
Shareholders with significant influence over subsidiaries (1)
(1)
Includes the effects of the agreements between Alpek and BASF on the PU businesses, see Note 2a.
For the year ended December 31, 2015, wages and benefits received by top officials of the Company were Ps748 (Ps754
in 2014), an amount comprising base salary and legal benefits, supplemented by a variable compensation program
primarily based on the results of the Company and the market value of its shares.
At December 31, 2015 and 2014, the balances with related parties were as follows:
December 31,
Nature
of the transaction
Receivables:
Affiliates
Shareholders with significant
influence over subsidiaries
Payable:
Affiliates
2015
2014
Sale of goods
Ps
25
Ps
1,302
Services rendered
Ps
257
Ps
23
Ps 1,402
Ps
629
Purchase of raw materials
Balances payable to related parties at December 31, 2015 are payable in 2016 and do not bear interest.
The Company and its subsidiaries report that they had no significant transactions with related parties or conflicts of
interest to disclose.
Note 31 - Segment reporting
Segment information is presented consistently with the internal reporting provided to the chief executive who is the
highest authority in operational decision-making, resource allocation and assessment of operating segment performance.
An operating segment is defined as a component of an entity on which separate financial information is regularly being
evaluated.
The company manages and evaluates its operation through 5 basic operating segments which are:
- Alpek: This segment operates in the petrochemical and synthetic fibers industry, and its revenues are derived from
sales of its main products: polyester, plastics and chemicals.
- Sigma: This segment operates in the refrigerated food sector and its revenues are derived from sales of its main
products: deli meats, dairy and other processed foods.
- Nemak: This segment operates in the automotive industry and its revenues are derived from sales of its main product:
aluminum engine heads and blocks.
- Alestra: This segment operates in the telecommunications sector and its revenues are derived from the provision of
data transmission services, Internet and long distance phone service.
- Newpek: This segment is dedicated to the exploration and exploitation of natural gas and oil fields.
- Other segments: includes all other companies operating in business services and others which are non-reportable
segments and do not meet the quantitative limits in the years presented and, therefore, are presented in aggregate,
as well as being substantially eliminated in consolidation.
102
These operating segments are managed and controlled independently because the products and the markets they
serve are different. Their activities are performed through various subsidiaries.
The transactions between operating segments are performed at market value and the accounting policies with which
the financial information by segments is prepared, are consistent with those described in Note 3.
The Company evaluates the performance of each of the operating segments based on income before financial results,
income taxes, depreciation and amortization (“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, EBITDA is not a measure
of financial performance under IFRS and should not be considered as an alternative to net income as a measure of
operating performance or cash flows as a measure of liquidity.
The Company has defined the ADJUSTED EBITDA as the result of adding to the operating profit depreciation and
amortization and asset impairment.
Following is the condensed financial information of these operating segments:
Statement of income
Revenue by segment
Intersegment revenue
Revenue from external
customers
Adjusted EBITDA
Impairment of assets
Operating profit
Finance cost, net
Share of losses of associates
Profit or loss before tax
Statementoffinancialposition
Other assets
Other
segments and
Newpek
eliminations
Alpek
Sigma
Nemak
Ps
83,590
(242)
Ps 93,568
-
Ps 70,891
-
Ps
6,163
(136)
Ps
2,180
-
Ps 4,365 Ps 260,757
(2,079)
(2,457)
Ps
83,348
Ps 93,568
Ps 70,891
Ps
6,027
Ps
2,180
Ps 2,286
Ps
9,974
(2,254)
(130)
7,590
(1,863)
(23)
5,704
Ps 13,892
(2,830)
(158)
10,904
(2,607)
(401)
Ps 7,896
Ps 12,006
(4,609)
1
7,398
(1,293)
48
Ps 6,153
Ps
Ps
Ps
2,629
(1,009)
(5)
1,615
(756)
859
1,074
(1,090)
(2,152)
(2,168)
(2,049)
93
(4,124)
Ps (1,135) Ps 38,440
(119)
(11,911)
(28)
(2,472)
(1,282)
24,057
(5,922)
(14,490)
(283)
Ps (7,204) Ps
9,284
253
74,642
Ps
Ps
Ps
272
8,019
Ps
83,188
68,835
Ps 14,353
72,018
44,080
Ps 27,938
10,446
6,967
Ps 3,479
Ps
8,291
4,186
4,105
17,867
266,705
22,878
186,890
Ps (5,011) Ps 79,815
Ps (3,638)
Ps
Ps
Ps
(948)
Ps
Ps
Total assets
Total liabilities
Net assets
Ps
74,895
39,944
34,951
Capital expenditures (Capex)
Ps
(4,482)
759
82,429
303
71,715
(7,253)
Alestra
8
10,438
(1,612)
Ps
Ps
Ps
42
17,825
Total
Ps 258,300
Ps
1,637
265,068
(156) Ps (18,089)
103
Statement of income
Revenue by segment
Intersegment revenue
Revenue from external
customers
Adjusted EBITDA
Impairment of assets
Operating profit
Finance cost, net
Share of losses of associates
Profit or loss before tax
Other
segments and
Newpek
eliminations
Alpek
Sigma
Nemak
Ps
86,072
(267)
Ps 71,465
-
Ps 61,665
-
Ps
5,519
(129)
Ps
3,067
-
Ps 3,668 Ps 231,456
(1,834)
(2,230)
Ps
85,805
Ps 71,465
Ps 61,665
Ps
5,390
Ps
3,067
Ps 1,834
Ps
5,710
(1,839)
(132)
3,739
(1,497)
(45)
2,197
Ps
8,495
(1,931)
(128)
6,436
(4,623)
(249)
Ps 1,564
Ps
Ps
Ps
1,592
(1,092)
(2)
498
(3,193)
8
(2,687)
Ps
Ps
2,260
(877)
(9)
1,374
(717)
(1)
656
(420) Ps 27,116
(121)
(9,607)
(283)
(541)
17,226
(7,891)
(18,621)
(43)
(291)
Ps (8,475) Ps (1,686)
Ps
694
70,794
71,488
55,547
Ps 15,941
Ps
218
58,873
59,091
37,593
Ps 21,498
Ps
127 Ps
1,197
17,879
231,683
18,006
232,880
20,111
163,721
Ps (2,105) Ps 69,159
Ps (1,871)
Ps
Ps
Ps
Statementoffinancialposition
Other assets
Total assets
Total liabilities
Net assets
Ps
150
65,222
65,372
35,527
29,845
Capital expenditures (Capex)
Ps
(4,191)
Ps
9,479
(3,747)
(12)
5,720
(700)
39
5,059
(5,254)
Alestra
Ps
Ps
Ps
Ps
8
9,241
9,249
5,721
3,528
Ps
Ps
9,674
9,674
9,222
452
Ps
(1,310)
Ps
(1,771)
Total
Ps 229,226
(33) Ps (14,430)
Below are revenues with external customers, as well as property, plant and equipment, goodwill and intangible assets
by geographic area. Revenues with external customers were classified based on their origin:
For the year ended December 31, 2015
Revenue to
external
customers
Mexico
United States
Canada
Central and South America
Other countries
Total
Property,
plant and
equiment
Goodwill
88,175
84,646
2,041
13,510
69,928
Ps 258,300
Ps 59,993
13,920
962
3,248
28,253
Ps 106,376
Ps 4,753
3
10,844
Ps 15,600
8,003
11,886
33
128
10,572
Ps 30,622
Revenue to
external
customers
Property,
plant and
equiment
Goodwill
Intangible
assets
Ps 52,830
12,464
989
3,066
24,559
Ps 93,908
Ps 4,717
247
9,370
Ps 14,334
Ps
Intangible
assets
Ps
For the year ended December 31, 2014
Mexico
United States
Canada
Central and South America
Other countries
Total
Ps
92,301
85,153
1,629
10,708
39,435
Ps 229,226
Ps
6,656
9,365
46
160
9,891
Ps 26,118
104
The revenue to external customers by product or service was as follows:
2015
Alpek
Polyester-Pet/PTA
Plastics and chemicals
Total
60,504 Ps
22,844
83,348
62,961
22,844
85,805
Sigma
Processed meats
Dairy
Other refrigerated products
Total
66,066
22,395
5,107
93,568
50,460
17,105
3,900
71,465
Nemak
Aluminum automotive products
Total
70,891
70,891
61,665
61,665
5,628
399
6,027
4,991
399
5,390
Alestra
Business segment
Other segments
Total
Newpek
Hydrocarbons
Total
Other segments
Total
Ps
2014
2,180
3,067
2,180
3,067
2,286
1,834
Ps 258,300 Ps 229,226
105
Note 32 - Contingencies and commitments
In the normal course of its business, the Company is involved in disputes and litigations. While the results of the
disputes cannot be predicted, the Company does not believe that there are current or threatened actions, claims or
legal proceedings against or affecting the Company which, if determined adversely to it, would damage significantly its
individual or overall results of operations or financial position.
At December 31, 2015, the Company and its subsidiaries had the following commitments:
a. During 2013, the Company through its subsidiary Grupo Petrotemex, signed an agreement with M&G for the rights
to supply the plant for 400 thousand tons of PET (manufactured with 336 thousand tons of PTA) a year, by which it
is obliged to pay an amount of Ps4,576 (US$350) during the construction of the plant, subject to compliance with
pre-established progress. At December 31, 2014 Grupo Petrotemex had made a payment of Ps2,925 (US$198.8),
presented within goodwill and intangible assets, net.
b. At December 31, 2015 and 2014, the subsidiaries had entered into several agreements with suppliers and customers
for the purchase of raw materials used in the production and sale of finished products, respectively. These agreements
have a maturity of between one and five years, and generally comprise price adjustment clauses.
c. In September 2007, a subsidiary renewed a contract with PEMEX Refinacion, for the supply of raw materials maturing
in December 2018.
Note 33 - Subsequent events
In preparing the financial statements the Company has evaluated the events and transactions for recognition or disclosure
subsequent to December 31, 2015 and through February 2, 2016 (date of issuance of the financial statements), and
except for the matter mentioned in the Note 2.c., the Company has no identified additional subsequent events.
President
106
GLOSSARY
Caprolactam: Raw material derived
from oil (cyclohexane), used for the
production of nylon.
Cloud applications: Business model
where applications are accessed
through the Internet, and are not
physically present in the customer’s
facilities.
Data security: A practice that includes
techniques, applications, and devices
responsible for ensuring availability,
integrity and confidentiality of the
data of information systems, data and
telecommunications networks.
EPS: Thermoplastic used for insulation
and packaging.
Ethane: Hydrocarbon product of
the bond between the carbon and
hydrogen.
Hosting: Service where applications
and websites are placed on a server.
Independent Board Member: A Board
member who does not own company
shares and is not involved in the day-today management of the company.
Independent Proprietary Board
Member: A Board member who owns
company shares but is not involved
in the day-to-day management of the
company.
Last-mile access: The physical link
between the location of the customer
and the nearest node of Alestra’s
telecommunications network.
Network Management: Services
provided by an external supplier
to operate, monitor, configure and
provide support in case of failure of
telecommunications equipment and
their value-added services.
Monoethylene glycol: raw material
primarily used for the manufacture of
polyester fibers.
PET (Polyethylene Terephtalate):
Plastic resin mostly used to
manufacture containers.
Polyester: Plastic resin used to
manufacture textile fibers, films and
containers.
Polypropylene: Propylene derivative
used in the production of plastics and
fibers, among other products.
PTA (Purified Terephtalic Acid): Raw
material used to manufacture polyester
Related Proprietary Board Member:
A Board member who owns company
shares and is involved in the day-to-day
management of the company.
Systems integration: Practice of
service which consists in designing
and building customized computer
solutions, combining and connecting
hardware and/or software of one or
several manufactures products.
Triple play: a marketing term for the
provisioning, over a single broadband
connection for voice, Internet and TV.
Nemak u
completes IPO on
the Mexican Stock
Exchange
ALFA is a company that manages a portfolio
Investor Relations
Enrique Flores
Vice-President Corporate
Communications
Phone: +52 (81) 8748 1207
[email protected]
of diversified subsidiares: Sigma, an important
producer, marketer and distributor of foods
through well recognized brands in Mexico,
the United States, Europe and Latin America;
Alpek, one of the world’s largest producers
of polyester (PTA, PET and fibers), which also
Luis Ochoa
Vice-President Investor Relations
Phone: +52 (81) 8748 2521
[email protected]
leads the Mexican market in polypropylene,
expandable polystyrene (EPS) and caprolactam;
Nemak, a leading provider of innovative
light-weighting solutions for the automotive
Raúl González
Investor Relations Manager
Phone: +52 (81) 8748 1177
[email protected]
industry, specializing in the development and
manufacturing of aluminum components for
powertrain and body structure; Alestra, a
leading provider of information technology
and communications services for the enterprise
Investor Relations
Phone: +52 (81) 8748 1676
[email protected]
in the hydrocarbons industry in Mexico and the
United States. In 2015, ALFA reported revenues
of Ps. 258,300 million (U.S. $16.3 billion), and
EBITDA(1) of Ps. 38,440 million (U.S. $2.4 billion).
ALFA’s shares are quoted on the Mexican Stock
Exchange and on Latibex, the market for Latin
American shares of the Madrid Stock Exchange.
u
DESIGN:
Sigma
NOTE: In this annual report, monetary figures are
expressed in nominal Mexican pesos (Ps.), and in
nominal dollars (U.S. $) unless otherwise specified.
Conversions from pesos to dollars were made using
the average rate of the month in which the revenues
or disbursements were made. The percentages of
variation between 2015 and 2014 are expressed in
nominal terms.
ALFA
Date listed:
August 1978
Juan Andrés Martín
segment in Mexico; and, Newpek, a company
(1)
EBITDA = operating income + depreciation and
amortization + non-recurring items.
Independent Auditor
PwC
acquires 37 percent
of the shares of
Campofrio and
assumes full control
of the company
signi.com.mx
Latibex
(Madrid Stock Exchange)
ALFA C/I-s/A
Date listed:
December 2003
ALFA, S.A.B. de C.V.
Av. Gómez Morín 1111 Sur, Col. Carrizalejo.
San Pedro Garza García, N.L.
C.P. 66254, Mexico
A N N U A L R E P O R T 2 0 15
www.alfa.com.mx
ANNUAL
REPORT

annual report

Transcription

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