Dear shareholders,
During 2017 we achieved satisfactory operating profit and EBITDA results acording with our projections. We turned in an excellent performance in Mexico and during the second half of the year the negative trend in the Brazilian economy gave way to a gradual recovery tandem with a firming of industrial activity that was reflected in a favorable trend change at Coremal.
Oil prices recovered 12% as they rised from USD $53.72 in 2016 to USD $60.42 per barrel in 2017. However, in Mexico we have not seen signs of recovery in mining activity including oil exploration and drilling. We are confident that the success of Mexico’s energy reform and tender rounds will result in a reactivation of the oil and gas exploration and drilling sector.
The diversification of our customer and product portfolios constitutes key drivers part of our commercial strategy that has allowed us to increase sales and margins despite the loss of a relevant size of the business that we previously achieved in the sectors above mentioned.
Brazilian economy experienced a slight recovery during the second half of 2017 with GDP increasing +1.0% compared to 2016. The figures from our operations in Brazil also underwent a trend change including a slight recovery during the second half of 2017.
Our results remarks company’s strengthening and profitability growth. Sales grew 3.2% to Ps 6,333 million. Gross margin increased 70 basis points to 18.2% against 17.5% for the previous year; operating profit totaled Ps 234 million, a 101% increase compared to 2016. EBITDA expanded to Ps 361 million, 46% higher than Ps 248 million of the previous year.
Net consolidated debt at the end of 2017 totaled Ps 712 million, 2% less Ps 16 million vs. 2016. The reduction in net debt at the end of 2017 was largely based on our Ps 110 million cash generation.
One of the most relevant events last year was our acquisition of Conjunto LAR de México, S.A. de C.V. (“LAR”), a company with more than 30 years of experience specialized in the distribution of high value-added personal and home care chemical products. LAR achieved Ps 221 million in sales in 2016, attending more than 2,500 customers through its 3 stores and 2 warehouses in Mexico City. LAR acquisition allowed Pochteca to strengthen our specialty products portfolio, as well as, to strengthen LAR through its use of Pochteca infrastructure and expanding its footprint beyond Mexico City.
In order to propel growth and expand our earnings margins, which support our competitiveness and growth our cash position, Pochteca continues to execute the following strategies:
These results could not have been achieved without the support and commitment of human talent, customers, suppliers, shareholders and financial institutions to whom we express our deepest thanks.
Armando Santacruz González
Chairman of the Board of Directors
