2017 results reaffirm the company’s strengthening and profitability growth
The 2018 economic growth outlook is positive for both Mexico and Brazil
In 2016 presented several challenges, which was the most complicated year we have had at Pochteca in a long time. The drop in oil prices, the shutdown of most existing oil rigs in Mexico and Brazil, and a weakening of both demand and prices in the mining sector significantly affected portfolio demand and prices during 2016. Weakness in industrial activity in Brazil in recent years further magnified such negative performance.
Despite the difficult scenario of the previous year, during 2017 we achieved excellent results in Mexico and we snapped the negative trend in Brazil. During 2017, sales increased 3.2% compared to 2016. Gross income (Ps 75 million) and no capital gross margin (+70bp) improved, as well as, Operating Income and
EBITDA (Ps 113 million; +46%).
During the second half of 2017, the Brazilian economy experienced a slight recovery allowing GDP to grow 1.0% for the full year. GDP expansion extended to the industrial sector and Pochteca’s Brazilian business experienced a positive trend change.
Moreover, oil prices recovered 12% from USD 53.72 per barrel from 2016 to USD 60.42 in 2017. We are confident that this trend, combined with the success of the oil and gas tenders of Mexico’s energy reform, will lead to a reactivation of exploration and drilling activity.
We have not yet to see signs of a recovery in mining or oil exploration and drilling in Mexico. However, diversification into other sectors has compensated for the contraction in these segments, which until recently were Pochteca’s mainstays.
Industrial production recovered slightly in Brazil during the second half of 2017, allowing our operation in that country to stem its downtrend and embark on a gradual recovery.
The consensus among analysts for Mexico and Brazil to experience economic growth in 2018.
In Pochteca, we are focused on strategies to growth our profit margins, execution impulse our competitiveness and strengthening our cash position, through:
During 2017, we did not see evidence of a recovery in the number of active rigs in Mexico or Brazil persisting the oil industry's slowdown.
The number of oil rigs in Mexico and Brazil at the end of 2017 remained considerably reduced, according to data published online by Baker Hughes. Compared to the end of 2016, there were 21% fewer active rigs in Mexico. Brazil experience saw a trend change with an almost 8% rise, but in comparison to severely depressed levels. The number of rigs in both countries remains well below their peak of early 2013.
There has been an almost 88% contraction in the number of active rigs in Mexico since a 120 rig peak at the start of 2013; only 15 were reported at the close of 2017. During that same period there was an 88% drop in Brazil’s rig balance. Exploration and drilling is a key sector for Pochteca. As Mexico’s oil and gas Exploration and Production (E&P) bid rounds unlock investment
flows we look for a significant rise in the number of active rigs, thereby allowing Pochteca to recover part of the sales it once maintained in this sector.
Despite all of these conditions, in 2017 Pochteca achieved growth in sales and profitability.
In June 2017, Pochteca acquired Conjunto LAR de México S.A. de C.V. ("LAR"), specializing in the distribution of personal and home care products.
With that acquisition we seek to:
