Vitro posted 0.9 percent YoY increase in consolidated sales. However excluding Envases Cuautitlan and Vitro Fibras, divested in September 2003 and March 2004 respectively, sales gained 3.7 percent. Consolidated EBITDA fell YoY by 7.9 percent. Strong performance at Glass Containers partially offset the decline in Flat Glass and Glassware. On a comparable basis, however, consolidated EBITDA declined by only 3 percent with decreases at both the Flat Glass and Glassware business units. Consolidated EBITDA margins declined by 150 basis points and EBIT margins fell by 220 basis points.
Alvaro Rodriguez, Chief Financial Officer, commented: "On a comparable basis, all units reported increased sales on the back of volume growth. Flat Glass was up 3 percent, Glass Containers up 5.1 percent and Glassware gained 3.7 percent. Once again this quarter, the Glass Containers unit provided strong growth in both sales and EBITDA."
"While Flat Glass was not as strong as expected, it's important to note that this unit has stabilized. Quarter over quarter we see an improving trend in both sales and EBITDA. Volumes have continued to increase as well. Vitro has been able to successfully navigate an adjustment period absorbing the impact of price volatility over the last few quarters particularly in the Mexican market. At the same time we have gained market share."
Mr. Rodriguez continued, "Streamlining Vitro's capital structure continues to be our primary focus. In addition to paying down debt, we are increasing the company's financial flexibility to ultimately reduce risk and improve our cost of capital. This is a significant leg in our strategy. In the last 12 months we have successfully tapped the international and domestic capital markets raising a total of US$750 million in long-term funds using both public and private sources. On September 24, 2004 we obtained a US$230 million senior secured loan at Vitro Envases Norteamerica (VENA). Proceeds from this two-year maturity loan were used to refinance existing inter-company indebtedness between VENA and Vitro Holdco. This is part of our plan to reallocate debt from the holding company to the operating units. Before that, on July 23, 2004 VENA placed a US$170 million senior secured guaranteed note, due July 2011. Proceeds were used to repay existing third party indebtedness."
"In addition, the divestiture of Vancan to our partner Rexam on September 27, 2004", Mr. Rodriguez continued, "represented, to a large extent, the final leg in our strategy to become a pure glass company. We received net proceeds of US$22.5 million from the sale, which are being used to pay down holding company debt."
Mr. Rodriguez concluded, "Vitro today is a very different company. We are making progress on the priorities we set for ourselves: the first was to become a pure glass company, which we have achieved. We also continue to make progress on streamlining our financial structure. This will allow us to obtain the flexibility required to further strengthen our operations, improve cash flow and reduce cost of capital. Vitro continues to build on its strengths as a leading glass company, with a balanced portfolio of assets, geographical diversification, value added niche products, and leading-edge technology."
All figures provided in this announcement are in accordance with Generally Accepted Accounting Principles in Mexico, except otherwise indicated. Dollar figures are in nominal US dollars and are obtained by dividing nominal pesos for month by the end of month fix exchange rate published by Banxico. In the case of the Balance Sheet, US dollar translations are made at the fix exchange rate as of the end of the period. The exchange rate as of July 31, 2004 was 11.4079, as of August 31, 2004 was 11.3807 and as of Sep 30, 2004 was 11.3884 pesos per US dollar. Certain amounts may not sum due to rounding. All figures and comparisons are in USD terms, unless otherwise stated.
This announcement contains historical information, certain management's expectations and other forward-looking information regarding Vitro, S.A. de C.V. and its Subsidiaries (collectively the "Company"). While the Company believes that these management's expectations and forward looking statements are based on reasonable assumptions, all such statements reflect the current views of the Company with respect to future events and are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated in this report. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic, political, governmental and business conditions worldwide and in such markets in which the Company does business, changes in interest rates, changes in inflation rates, changes in exchange rates, the growth or reduction of the markets and segments where the Company sells its products, changes in raw material prices, changes in energy prices, particularly gas, changes in the business strategy, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not assume any obligation, to and will not update these forward-looking statements. The assumptions, risks and uncertainties relating to the forward-looking statements in this report include those described in the Company's annual report in form 20-F file with the U.S. Securities and Exchange Commission, and in the Company's other filings with the Mexican Comisisn Nacional Bancaria y de Valores.