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What did we learn from 3Q21 Mexican corporate earnings?

With Mexico’s third quarter earnings season over, we have summarized the excellent quarterly earnings research from Mexico’s leading local broker, GBM. (Please contact GBM if a qualified client, interested in receiving their full research.) According to the GBM Research Sample of 62 listed Mexican companies, (99.4% of the IPC market cap) total revenues of Mexican companies were up by 10.2% compared to 3Q20 and 13.3% compared to 3Q19. EBITDA was up a strong 11.9% compared to 3Q20 and 20.9% compared to 3Q19. 20 companies in the GBM sample beat GBM sales estimate by 5% or more, and 5 companies missed it by 5% or more. Nevertheless, some sectors, like basic materials and capital goods, continued to struggle in the face of higher logistic costs and increased raw material prices.
These results continue to validate the strong performance of the Mexican stock market this year overall, as the relaxation of COVID-19 restrictions and the gradual recovery of the economy continues. 
Source: GBM
Food & Beverage: On the food side, Gruma and Bachoco were two of the companies whose EBITDA was more than 5% lower than GBM’s estimates. On the other hand, Herdez was the biggest winner, surpassing the estimates. On the beverage side, Arca Continental posted volumes above pre-pandemic levels, while profitability showed a mild contraction. KOF reported a 5.8% volume increase YoY and although volumes declined in Mexico, they were offset by an 11.7% increase in South America. 
Retail: This sector had a good quarter, driven by double digit growth in revenues from Chedraui, Alsea, and Grupo Sanborns. On the negative side, Soriana’s sales recovery remains slow, as they continue to lose market share.
Transportation: Airports performed well this quarter, with most of them posting revenues around pre-pandemic levels. OMA presented record high EBITDA margin and GAP hit a record high in revenues. PINFRA bested the estimates, with a 181% net income growth YoY. Grupo Mexico Transportes also surpassed expectations, surprising with an increase in their dividend, as they managed to offset a poor performance in the automotive division with efficiencies in the other segments. 
Basic materials: The sector was mixed, as GMEXICO, ICH, PE&OLES and AGUA missed GBM’s estimates by more than 5%, mainly affected by global supply chain pressures. On the other hand, AUTLAN, ALPEK, CYDSASA and ORBIA posted EBITDA levels more than 5% above GBM’s estimates. 
Media and Telecom: Overall, Media and Telecom’s results were in line with expectations. MEGA had sound subscriber additions and announced higher CapEx as part of their network update plan. However, Axtel posted negative results and below expectations, with a net loss of $302 million pesos in 3Q21. 
Banks and NBFIs: In this sector, BBAJIO, GFINBUR, REGIONAL, GENTERA and CREAL posted results above expectations, with NPL levels around 3%.  
Real Estate and Housing: Revenues in this sector remained in line with expectations. FIBRAMQ offers the highest dividend yield of GBM’s sample at 7.9%. TERRA had a steady performance and solid margins on account of lower property taxes and maintenance expenses. FUNO posted revenues slightly above estimates, however, pressures in the office segment persisted. 

Contacts at Miranda Partners

Damian Fraser
Miranda Partners

Ana María Ybarra Corcuera