On behalf of the Board of Directors and KUO Management Team, we would like to share with you the results achieved during this year. These figures reflect the Group’s financial, operational, and sustainable performance during 2021, as well as the projects that were executed to continue consolidating the Group’s strategy in coming years.
The year that just ended was a record period in terms of growth
The year that just ended was a record period in terms of growth, with 25% increase in Revenues and a 42% in EBITDA, driven by the high dynamism of all the businesses in the portfolio, which experienced strong demand, resulting in the expansion of margins and volume, as well as the strengthening of the financial structure, thanks to the management team’s focus on business continuity and effective communication.
All of this took place in an environment of high volatility and instability in global supply chains, which affected logistics and transportation times and costs, as well as the availability of containers and various inputs for our operations. In addition, there was a sharp increase in raw material prices such as steel, aluminum, corn, avocado, among others.
Being diversified in sectors, geographies, and currencies, as well as having a strong exposure to export markets, has been decisive in maximizing returns and mitigating risks. The success of the model has been evidenced by the rapid recovery observed during 2021, driven largely by economic growth in North America, with Europe in second place.
The strategy of continuing to increase sales outside the country resulted in a 23% growth in exports compared to the previous year, representing 57% of pro forma consolidated sales. This was driven mainly by the Chemical and Automotive businesses, given their ability to adapt and overcome the challenges of supply chain disruptions, as well as the recognition by customers and suppliers of high-quality processes and products.
It is important to mention the strong dynamism of the Synthetic Rubber and Polymers businesses in the Chemical sector, which grew in volume and prices, thanks to their focus on higher value-added applications, together with important operating efficiencies, contributing significantly to the growth of both export revenues and the portfolio’s EBITDA.
Regarding the Automotive sector, Transmissions business made an important contribution to export sales, given the high demand for the Dual Clutch Transmission (DCT) for GM’s Chevrolet Corvette Stingray platform. The Automotive Aftermarket business had a higher demand for engine, brake, and powertrain parts, along with improvements in operating expenses.
One of the most important projects carried out during the year was the inauguration of the Pork Meat Business processing plant in November. With an investment of close to 2 billion Mexican pesos, it has a weekly processing capacity of more than 40,000 pigs and will contribute to position national industry as a world reference in the pork meat sector, at the forefront in terms of technological innovation and sustainability. In addition, this investment will create more than 1,500 direct jobs and 7,000 indirect jobs, for a total of more than 10,000 jobs in this business.
+23%
export sales
vs. 2020
The resources used for the reconstruction came entirely from the insurance recovery, and it is worth mentioning that the agreement with the insurer concluded during the fourth quarter of the year.
Meanwhile, in the Herdez del Fuerte business, we noted a recovery in the Food Service segment in the United States, as well as a positive trend, mainly in the guacamole and salsas categories in that country.
We would like to thank the professionalism and commitment of all the working teams, medical and operations personnel, and the support areas that enabled us to maintain business continuity.
SUSTAINABILITY STRATEGY
During the year, we have made special emphasis on strengthening the Sustainability strategy, seeking to standardize the language and indicators through more effective communication tools, so that the results of the initiatives implemented over the years in the “ESG” (Environmental, Social and Governance) area are clear and understandable for all stakeholders.
As part of this comprehensive strategy, this is the first year that in addition to reporting under GRI, we will begin to report under SASB, understanding the importance of disseminating ESG information under global and uniform standards. Going forward, we will continue to strengthen our model, communicating commitments and results in this regard to the market.
We are convinced that sustainability is an essential condition to guarantee KUO’s value creation over time, which is why we maintain a solid commitment to all our stakeholders, carrying out concrete initiatives for environmental care, efficiency in the use of natural resources and strengthening circular economies; improving the quality of life of our employees and their families, emphasizing the well-being, health and safety of each person who works in the Group’s facilities, and promoting the development of the communities with which we coexist, focusing on the optimization of processes and products with customers and suppliers. All within a framework of transparency, integrity, and best practices in Corporate Governance.
The achievements reached during 2021 are the result of the talent of more than 24,000 employees, who have been key to achieve the results so far and to guarantee KUO’s continuance in the future. They are the example of the institutional values of Leadership, Teamwork, Innovation, Institutionalism, and Integrity that are lived in the Group.
The achievements reached during 2021 are the result of the talent of more than 24,000 employees
OPERATIONAL AND FINANCIAL HIGHLIGHTS
During 2021, we achieved pro forma consolidated revenues of $57,324 billion pesos and EBITDA of $7,016 billion pesos, representing growth of 25% and 42%, correspondingly, while the proportion of export sales was 57%. These figures are the result of the expansion in margins and volume of the portfolio’s businesses.
The Consumer sector accounted for 43% of the Group’s total revenues, followed by the Chemical sector with 31% and Automotive with 26%.
Revenue growth in the Consumer sector is mainly explained by the dynamism of the Pork Meat business, with higher prices and volume, increasing sales in its main distribution channels: export, Maxicarne retail network (which ended the period with 504 stores in operation), routes, consumption centers and live pork.
In the Herdez Del Fuerte business, there was an increase in demand in the categories of tomato puree, ketchup, and salsas in the domestic market, as well as guacamole and salsas in the United States, combined with the recovery of the “Food Service” segment in this territory. This offset the sharp increase in raw materials such as corn and avocado experienced throughout the year.
The two businesses in the Chemical sector had outstanding results, with better prices and volume, highlighting increased demand in applications for the tire, industrial and footwear segments in Synthetic Rubber business, and in electronics in Polymers business, combined with operating efficiencies.
The Automotive sector recorded strong increase in Revenues and EBITDA derived mainly from sales of DCT’s for GM’s Corvette platform, as well as higher demand for manual transmissions and components for other vehicles, along with increased displacement of brake, engine, and powertrain lines in Aftermarket business.
This offset the shortage of semiconductors and the increase in raw material prices, such as steel and aluminum.
The emphasis on operational continuity was reflected in a significant improvement in working capital and financial ratios, with net leverage at 1.5x and total leverage at 2.4x at the end of the year.
The balance of our business model, our exposure to export markets, as well as our investments in productive assets, have been decisive for the results achieved in this period.
In 2022, we will continue to focus and finding solutions to new challenges
MOVING FORWARD
In 2022, we will continue to focus on maintaining a solid balance sheet, capitalizing on the competitive advantages we have developed over the years, adapting, and finding solutions to new challenges.
We cannot ignore the challenges and volatility that we are already beginning to see, the recent conflict in Europe will undoubtedly bring further disruptions in supply chains, as well as increases in raw material costs. High levels of inflation in the markets in which we operate and the lack of availability of some raw materials will continue to be a constant in the coming months. However, we will seek operating efficiencies to ensure the continuity and growth of the portfolio’s businesses.
We will continue to invest in innovation and improvement in all operations, while our sustainability strategy will continue to focus on employee development, customer satisfaction, sustainable production processes and products, and the generation of operating efficiencies within a framework of transparency and integrity, with special care for the environment and natural resources, in order to continue creating value for our shareholders and stakeholders.
Finally, we would like to thank our partners, customers, suppliers, and shareholders for the trust they have placed in KUO, we are confident that our focus on creating value with profitability will continue to be the best strategy for the future.