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What did we learn from 1Q21 Mexican corporate earnings?

With Mexico’s first quarter earnings season over, we analyze how companies reported on average. Overall, the results were good, and Mexico’s corporate sector looks in fairly decent shape as we go into 2Q21, given improvements in economic growth, (helped by the US recovery), decline in COVID-19 cases, and the vaccination roll out. According to GBM’s sample of 60 listed Mexican companies, (91% of the IPC market cap) total revenues of Mexican companies grew by 4.5% Year on year, while EBITDA grew by an impressive 18.5% (versus GBM projection of 13.1%). 28 companies in the GBM sample beat EBITDA estimate by 5% or more, and only 8 companies missed by 5% or more. Nevertheless, some sectors (financials and speciality retail for the most part) continued to struggle in the face of remaining mobility restrictions, unemployment, and a challenging macroeconomic recovery outlook.

Media and Telecom: Mobile and Broadband did well overall in the pandemic times. However, Axtel failed to reach estimates, with sharp declines YoY. MEGA and Televisa beat EBITDA estimates while posting 8.6% and 1.5% YoY growth.

Food & Beverage: The sector performed especially well. On the beverage side, highlights include Arca Continental, which posted a 15.7% YoY growth in EBITDA, while Cuervo more than doubled EBITDA YoY. Bachoco was a stand-out as revenues grew by 28% and EBITDA by 470% as home consumption went up during pandemic times. Gruma as the only disappointment, hurt by Mexican volume and revenue decline.

Retail: The sector was mixed, as specialty retail (Liverpool, Alsea) was impacted by mandatory store closures in January and early February. On the other hand, supermarkets performed solidly, such as Walmex and Soriana.

Financials: Banks reported sharp declines in earnings (BSMX, BBajio, Regional, Inbursa, Gentera, Banorte) hit by provisions and lower NIM. Overall, the SME credit portfolio remains the most challenged. Seven of the 8 financials tracked by GBM missed earnings by more than 5%.

Transport: Airlines and airports reported sharp declines year on year, given mobility restrictions in part for the first part of 1Q21, but looked poised for a strong recovery from 2Q onwards. In the Infrastructure sector, GMXT and PINFRA posted growth in revenues and improving trends.

Real Estate FIBRAs: Industrials, except for FibraMQ, generally performed well, as nearshoring trends accelerated. Highlights include Fibra Prologis up 23.5%. Office and retail continued to struggle, although sequentially the situation showed signs of improving.

Basic materials and cement. GMexico and Peñoles (especially) had a strong quarter, as commodity prices recovered from 2020 levels, while production posted a steady growth. In petrochemicals, Orbia led the sector with a YoY 17.7% increase in Revenues, while Alpek posted a 15.1% growth. Overall, the petrochemicals sector performed very well, as revenues showed steady increases across the board thanks to much stronger product pricing.

Cement and infrastructure. Cemex reported another robust quarter as infrastructure spending picked up, especially in the US. Homebuilders such as VINTE, Consorcio Ara, Javer and Cadu, did much better, with solid cash flow improvement.

Contacts at Miranda Partners

Damian Fraser
Miranda Partners
damian.fraser@miranda-partners.com

Ana Maria Ybarra Corcuera
Miranda-IR
ana.ybarra@miranda-ir.com

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