Summary of ICA Business Plan
June 17 2016 - 10:19AM
Empresas ICA, S.A.B. de C.V. (BMV:ICA) (NYSE:ICA)
made a preliminary summary of its business plan, attached to this
press release, publicly available to creditors and investors.
This preliminary business plan does not take into account the
signing of the US$215 million secured convertible loan announced
today, and as a result should not be relied upon by any party in
performing a valuation of ICA’s assets. In particular, these
projections do not account for the dilution of ICA’s interest in
certain concession and construction subsidiaries and entities that
would result from the exercise of the conversion feature or the
payment-in-kind option under the convertible loan.
ICA encourages a more comprehensive discussion
of its future plans, including any future restructuring of its
existing debt, with all of its stakeholders.
This press release contains projections or other
forward-looking statements related to ICA that reflect ICA’s
current expectations or beliefs concerning future events.
Forward-looking statements involve inherent risks and
uncertainties. We caution you that a number of important factors
could cause actual results to differ materially from the plans,
objectives, expectations, estimates and intentions expressed in
such forward-looking statements. These factors include
cancellations of significant construction projects included in
backlog, material changes in the performance or terms of our
concessions, additional costs incurred in projects under
construction, failure to comply with covenants contained in our
debt agreements, developments in legal proceedings, unanticipated
increases in financing and other costs or the inability to obtain
additional debt or equity financing on attractive terms, changes to
our liquidity, economic and political conditions and government
policies in Mexico or elsewhere, changes in capital markets in
general that may affect policies or attitudes towards lending to
Mexico or Mexican companies, changes in inflation rates, exchange
rates, regulatory developments, customer demand, competition and
tax and other laws affecting ICA’s businesses and other factors set
forth in ICA’s most recent filing on Form 20-F and in any filing or
submission ICA has made with the SEC subsequent to its most recent
filing on Form 20-F. All forward-looking statements are based on
information available to ICA on the date hereof, and ICA assumes no
obligation to update such statements.
Empresas ICA, S.A.B. de C.V., carries
out large-scale civil and industrial construction projects and
operates a portfolio of long-term assets, including airports, toll
roads, water systems, and real estate. Founded in 1947, ICA is
listed on the Mexican and New York Stock exchanges.
For more information,
visit http://ir.ica.mx/.
Summary of Empresas ICA, S.A.B. de C.V.
(“ICA”)’s Business Plan
Basis of Preparation
- The business plan was developed to be consistent with the
expected ongoing businesses of the Construction and Concessions
segments, while most of the other parts of the business are treated
as long-term investments (equity method).
|
|
|
|
|
|
Legal Entity |
Division |
Financial Statement Treatment (Q3 2015) |
Business Plan Treatment |
|
Controladora de Operaciones de Vivienda, S.A. de C.V. |
Housing |
Consolidated |
Held as an
unconsolidated investment, proceeds to be paid to its
creditors |
|
Grupo
Aeroportuario del Centro Norte, S.A.B. de C.V. |
Airport |
Consolidated |
Equity
Investment |
|
Controladora de Operaciones de Infraestructura, S.A. de C.V. |
Concession |
>50% owned
- Consolidated; < 50% owned - Equity Investment |
>52%
owned - Consolidated; <52% owned - Equity Investment with the
exception of DIPESA, MITLA & TUCA II which are treated as
investments |
|
|
Construction |
All Consolidated (Facchina, Mexican Construction, International
Construction, San Martin) except for Los Portales (Equity
Investment) |
Same but San Martin & Facchina treated as Equity
Investments |
|
Constructoras ICA, S.A.
de C.V. |
|
Ingenieros Civiles
Asociados, S.A. de C.V. |
|
|
- Note: The reason that the threshold for consolidating
concessions increases to 52% in the business plan (from 50%) is to
reflect the fact that the OVT concessions (which ICA own 51%) are
treated as equity investments in the business plan (vs. being
consolidated in the Company's financial statements). Also
note that Facchina and ICA Fluor are incorporated in the business
plan as long-term investments.
- Accordingly, the Business Plan has been simplified, and does
not follow the IFRS consolidating accounting policies that the
Company follows for its financial statements. However, this method
presents a clearer picture of these concessions’ profits and cash
generation that would be available for debt service.
Business Plan Principles
- The Company has adopted the following principles in developing
the Business Plan herein:
International and Housing / Real Estate
Divisions
1. The international Division along with the Housing / Real
Estate Division are being wound down.
2. In addition, the Company will be exiting its International
Concession projects that have not yet started.
Concessions
3. The expansion of the Concession division will be limited to
completing the Palmillas project in the near future. Post
restructuring, ICA will assess investing in new concessions,
although no such investments are reflected in the Business
Plan.
4. The Company will return or have the Government invest in the
Barranca Larga concession as it is not viable to complete on a
stand alone basis.
Construction
5. Going forward, the Construction Business will be limited to
the Mexican operations.
6. The strategy going forward will be to get back to the
basics:
a) Minimize the amount of work that is performed out of scope
and without a contractual change order.
b) Profitability will be the main driver.
Airports
7. Continue to own the control shares in OMA.
High Level Summary of Projected Income
Statement
- Presented below is ICA’s projected income statement from 2016
to 2020 in MXN million:
|
|
|
|
|
|
|
|
(in millions of
MXN) |
Proj |
Proj |
Proj |
Proj |
Proj |
|
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
Revenue |
|
14,479.9 |
|
|
12,659.3 |
|
|
11,890.8 |
|
|
9,982.8 |
|
|
11,266.2 |
|
|
Cost of Goods Sold |
|
(11,829.0 |
) |
|
(9,411.5 |
) |
|
(8,537.4 |
) |
|
(6,606.0 |
) |
|
(7,618.9 |
) |
|
Gross Margin |
|
2,650.9 |
|
|
3,247.8 |
|
|
3,353.5 |
|
|
3,376.7 |
|
|
3,647.3 |
|
|
Margin (%) |
|
18.3 |
% |
|
25.7 |
% |
|
28.2 |
% |
|
33.8 |
% |
|
32.4 |
% |
|
|
|
|
|
|
|
|
Selling General and
Administrative |
|
(1,691.9 |
) |
|
(1,002.0 |
) |
|
(1,048.1 |
) |
|
(1,095.3 |
) |
|
(1,146.8 |
) |
|
% of Sales |
|
11.7 |
% |
|
7.9 |
% |
|
8.8 |
% |
|
11.0 |
% |
|
10.2 |
% |
|
Operating Income |
|
959.0 |
|
|
2,245.8 |
|
|
2,305.3 |
|
|
2,281.4 |
|
|
2,500.5 |
|
|
% of Sales |
|
6.6 |
% |
|
17.7 |
% |
|
19.4 |
% |
|
22.9 |
% |
|
22.2 |
% |
|
|
|
|
|
|
|
|
Add Back: Depreciation
and Amortization |
|
194.9 |
|
|
477.4 |
|
|
441.9 |
|
|
395.6 |
|
|
395.6 |
|
|
EBITDA |
|
1,153.9 |
|
|
2,723.1 |
|
|
2,747.2 |
|
|
2,677.0 |
|
|
2,896.2 |
|
|
Margin (%) |
|
8.0 |
% |
|
21.5 |
% |
|
23.1 |
% |
|
26.8 |
% |
|
25.7 |
% |
|
|
|
|
|
|
|
|
Depreciation and
Amortization |
|
(194.9 |
) |
|
(477.4 |
) |
|
(441.9 |
) |
|
(395.6 |
) |
|
(395.6 |
) |
|
Interest Expense |
|
(1,631.0 |
) |
|
(1,697.0 |
) |
|
(1,672.9 |
) |
|
(1,555.1 |
) |
|
(1,455.7 |
) |
|
Foreign Exchange Gain
(Loss) |
|
(211.1 |
) |
|
(163.8 |
) |
|
(167.4 |
) |
|
(153.1 |
) |
|
(137.0 |
) |
|
Dividends |
|
72.3 |
|
|
194.0 |
|
|
133.2 |
|
|
235.9 |
|
|
357.3 |
|
|
Other Income
(Loss) |
|
510.0 |
|
|
367.0 |
|
|
351.9 |
|
|
331.9 |
|
|
357.0 |
|
|
Earnings Before Taxes |
|
(300.8 |
) |
|
946.0 |
|
|
950.1 |
|
|
1,141.0 |
|
|
1,622.3 |
|
|
|
|
|
|
|
|
|
Income Taxes @ 30% |
|
90.2 |
|
|
(283.8 |
) |
|
(285.0 |
) |
|
(342.3 |
) |
|
(486.7 |
) |
|
Net Income (Consolidated) |
|
(210.6 |
) |
|
662.2 |
|
|
665.1 |
|
|
798.7 |
|
|
1,135.6 |
|
|
|
|
|
|
|
|
|
Minority Interest |
|
97.3 |
|
|
(49.1 |
) |
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
Net Income Attributable to ICA |
|
(113.3 |
) |
|
613.1 |
|
|
665.1 |
|
|
798.7 |
|
|
1,135.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Revenues
- The following table summarize projected revenue by business
segment:
|
|
|
|
|
|
|
|
(in millions of
MXN) |
Proj |
Proj |
Proj |
Proj |
Proj |
|
Consolidated Revenues |
2016 |
2017 |
2018 |
2019 |
2020 |
|
Domestic
Construction |
7,911.7 |
8,159.7 |
7,175.0 |
5,038.6 |
6,077.4 |
|
International |
46.5 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Concessions |
6,521.7 |
4,499.6 |
4,715.8 |
4,944.2 |
5,188.8 |
|
Total
Revenue |
14,479.9 |
12,659.3 |
11,890.8 |
9,982.8 |
11,266.2 |
|
|
|
|
|
|
|
- Approximately 57.0% of the 5-year cumulative revenue is
expected to come from the Domestic Construction segment, with the
balance coming from the concessions segment.
- Revenue is projected to decrease in nominal terms at a 6.0%
4-year CAGR from 2016 – 2020.
High Level Summary of Projected Income
Statement
- For 2016, approximately 97.3% of revenues from the Construction
segment are projected to come from existing projects.
- Revenue from concessions only include the revenues of the
Autopista Río de Los Remedios Ecatepec (ANESA), Sarre and Papagos
Penitentiaries and the Autopista Apaseo – Palmillas (Palmillas)
concessions.
- Concession revenues are expected to decrease after 2016 as a
result of the completion of the construction of the Palmillas toll
highway.
- From 2018 to 2020 revenue from concessions is projected to come
exclusively from the operation of the concessions and it is
expected to grow at a 4.9% 3-year CAGR during 2017 - 2020.
Gross Margin
- Gross margin is projected to be 27.7% per year on average. The
Concession segment has higher margins which brings up the overall
average margins – compared to Domestic Construction which has much
lower gross margins.
- Gross margin is projected to increase after 2016 as a result of
the completion of the Palmillas highway, since the margin of
construction is significantly lower than the margin of a toll road
concession in operations.
- The Concessions segment is expected to increase its margin
mostly as result of the projected price increase of the ANESA toll
and the projected growth of ANESA and Palmillas’ traffic. Palmillas
is projected to start operations in late 2016.
EBITDA
- Projected EBITDA can be broken down by segment as follows:
|
|
|
|
|
|
|
|
(in millions of
MXN) |
Proj |
Proj |
Proj |
Proj |
Proj |
|
EBITDA
by Business Segment |
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
|
Construction |
|
327.4 |
|
|
303.9 |
|
|
202.7 |
|
|
(24.1 |
) |
|
46.8 |
|
|
Concessions |
|
2,051.4 |
|
|
2,932.4 |
|
|
3,081.3 |
|
|
3,262.0 |
|
|
3,436.7 |
|
|
Corporate |
|
(1,224.9 |
) |
|
(513.2 |
) |
|
(536.8 |
) |
|
(560.9 |
) |
|
(587.3 |
) |
|
Total |
|
1,153.9 |
|
|
2,723.1 |
|
|
2,747.2 |
|
|
2,677.0 |
|
|
2,896.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- For the projected period, for the most part, EBITDA is expected
to grow in line with revenue and gross margin.
- EBITDA margin is projected to remain between 21.5% and 26.8%
after 2016.
- For 2016, EBITDA margin is projected to be lower than in 2017 –
2020 because it includes the completion of the construction of the
Palmillas highway, and more significantly, one time severance
payments to right size the business.
High Level Summary of Projected Income
Statement
Other Profit and Losses Projected Items
- The interest included in the income statement relates to the
accrued interest related to the entities whose operations are
consolidated. These include the interest of the Construction,
Concessions and the International segments. Note that for the most
part the business plan does not accrue interest on the Corporate
debt.
- For the projected period, the Company is expected to have a
total foreign exchange loss mostly related the increase in US
denominated debt balance as result of the projected devaluation of
the Mexican Peso against the USD.
- Projected dividends include dividends from a partly owned water
treatment plant and partly owned Construction company, various
projects in Latin America, ICA’s 51% interest in OVT Concessions,
minority interests in other Concessions and OMA.
- Other income relates mostly to management fees from partially
owned subsidiaries.
High Level Summary of ICA´s Statements
of Cash Flows
- Presented below is ICA’s projected cash flows from 2016 to 2020
in MXN million:
|
|
|
|
|
|
|
(in millions of
MXN) |
Proj |
Proj |
Proj |
Proj |
Proj |
Proj |
Statement of Cash Flows |
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
2019 |
|
|
2020 |
|
Total |
EBITDA |
|
1,153.9 |
|
|
2,723.1 |
|
|
2,747.2 |
|
|
2,677.0 |
|
|
2,896.2 |
|
|
12,197.4 |
|
Change in
Working Capital |
|
|
|
|
Change in Accounts Receivable |
|
2,173.0 |
|
|
2,619.5 |
|
|
127.5 |
|
|
248.2 |
|
|
(548.3 |
) |
|
4,620.0 |
|
Change in Client Advances |
|
(1,791.1 |
) |
|
(638.6 |
) |
|
(263.2 |
) |
|
(207.9 |
) |
|
577.4 |
|
|
(2,323.5 |
) |
Change in Accounts Payable |
|
(3,431.8 |
) |
|
(3,184.7 |
) |
|
(1,938.7 |
) |
|
(1,247.7 |
) |
|
192.8 |
|
|
(9,610.0 |
) |
Monthly IVA Received / (Paid) |
|
5.4 |
|
|
0.0 |
|
|
(4.0 |
) |
|
8.7 |
|
|
(1.3 |
) |
|
8.8 |
|
Other |
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
Total Change in Working Capital |
|
(3,044.5 |
) |
|
(1,203.8 |
) |
|
(2,078.4 |
) |
|
(1,198.7 |
) |
|
220.6 |
|
|
(7,304.7 |
) |
Other Cash From
Operations |
|
(1,625.6 |
) |
|
(1,120.7 |
) |
|
(944.1 |
) |
|
(1,152.9 |
) |
|
(1,076.3 |
) |
|
(5,919.7 |
) |
Total Cash Flow From Operations |
|
(3,516.3 |
) |
|
398.6 |
|
|
(275.3 |
) |
|
325.4 |
|
|
2,040.5 |
|
|
(1,027.0 |
) |
|
|
|
|
|
|
|
Cash Flow From
Investments |
|
(1,867.2 |
) |
|
588.8 |
|
|
507.9 |
|
|
595.5 |
|
|
740.4 |
|
|
565.5 |
|
Cash Flow From
Financing |
|
630.6 |
|
|
(2,542.1 |
) |
|
(2,598.1 |
) |
|
(2,914.3 |
) |
|
(3,215.3 |
) |
|
(10,639.3 |
) |
|
|
|
|
|
|
|
Attributable Minority
Interest |
|
97.3 |
|
|
(49.1 |
) |
|
0.0 |
|
|
0.0 |
|
|
0.0 |
|
|
48.2 |
|
|
|
|
|
|
|
|
Change in Cash |
|
(4,655.6 |
) |
|
(1,603.7 |
) |
|
(2,365.5 |
) |
|
(1,993.4 |
) |
|
(434.5 |
) |
|
(11,052.6 |
) |
|
|
|
|
|
|
|
Cash Flow Summary |
|
|
|
|
|
Beginning Cash
Balance |
|
2,025.3 |
|
|
(2,630.3 |
) |
|
(4,234.0 |
) |
|
(6,599.5 |
) |
|
(8,592.9 |
) |
|
2,025.3 |
|
Change in Cash |
|
(4,655.6 |
) |
|
(1,603.7 |
) |
|
(2,365.5 |
) |
|
(1,993.4 |
) |
|
(434.5 |
) |
|
(11,052.6 |
) |
Ending Cash Balance |
|
(2,630.3 |
) |
|
(4,234.0 |
) |
|
(6,599.5 |
) |
|
(8,592.9 |
) |
|
(9,027.3 |
) |
|
(9,027.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- The change in accounts receivable is largely driven by
the collection of overdue receivables and then collecting going
forward in a normalized time frame.
- Client advances is mainly the amortization of the advances
during 2016 and 2017.
- The change in accounts payable is the amortization of the
outstanding payables. Most of the non-project payables are
amortized straight line over 3 years starting July 1, 2016.
- Other Cash From Operations primarily includes cash taxes (in
excess of MXN 5.1 billion during the projected period), and
one-time cash outflows including restructuring fees.
- Cash Flow from Investments mainly relates to distributions /
management fees from subsidiaries, assets that have already been
sold, offset by capital expenditures on the Palmillas Concessions
project in 2016.
- Cash Flow from Financing primarily includes debt service and
new financing in the Concession segment, and to a lesser extent the
Construction segment. The Company’s business plan excludes debt
service on Corporate debt and international project debt that is to
be sold or is unsecured.
Disclaimer & LimitationThis
summary contains information on the Company. Statements that are
not historical facts, including statements about the Company’s
strategy, plans, objectives, assumptions, prospects, beliefs and
expectations, are forward-looking statements. Forward-looking
statements are not guarantees of future performance and involve
inherent risks and uncertainties. These forward-looking statements
are based on current plans, estimates and projections, and
therefore the reader should not place undue reliance on them.
Actual results could differ materially and adversely from those
expressed or implied by the forward-looking statements as a result
of factors that may be beyond the Company’s control.
For more information, contact:
Christianne Ibánez
christianne.ibanez@ica.mx
relacion.inversionistas@ica.mx
+(5255) 5272 9991 x 3607
Pablo García
pablo.garcia@ica.mx
Chief Financial Officer
In the US:
Daniel Wilson, Zemi Communications
+(1212) 689 9560
dbmwilson@zemi.com