Sigma Foods (SIGMAF) Q3 2024 earnings summary

Executive summary

• ALFA transitioned to a single-business structure focused on Sigma after the approved spin-off of Alpek and previous divestitures, ending the conglomerate model and enabling independent valuation for each business.

• The Alpek spin-off was approved and is expected to finalize in 2025, with shares to be distributed via Controladora Alpek.

• A capital increase of Ps $7,952 million (~US $400 million) was oversubscribed by 2.6x, with proceeds to reduce parent-level debt by US $575 million.

• Sigma achieved record consolidated EBITDA for the third consecutive quarter and 14th consecutive quarter of year-on-year growth, with all regions contributing.

• Credit ratings for ALFA, Sigma, and Alpek were affirmed or improved by major agencies.

Financial highlights

• Consolidated 3Q24 revenues were US $2.253 billion, flat year-over-year; Sigma revenues up 1% YoY, offsetting currency headwinds.

• Consolidated EBITDA reached US $275 million, up 13% YoY; Sigma posted record quarterly EBITDA of US $281 million (+10% YoY), with all-time high volumes and EBITDA in Mexico, U.S., Europe, and Latam.

• Alpek (discontinued) reported 3Q24 Comparable EBITDA of US $218 million (+37% YoY), with volume up 3% YoY.

• Net debt at quarter-end was US $2.988 billion, down 6% YoY and 8% sequentially; net leverage ratio improved to 2.9x.

• Sigma’s EBITDA margin improved to 13.3% in 3Q24.

Outlook and guidance

• Sigma estimates a further $50 million upside on its 2024 EBITDA guidance, reflecting better-than-expected progress.

• Alpek raised its 2024 Comparable EBITDA guidance by 13% to US $675 million.

• Spin-off and share distribution of Alpek expected to complete in 2025, pending regulatory approvals.

• Combined entity leverage is expected to approach 2.5x by year-end after debt repayment.