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One of the largest glass manufacturers in the world, Vitro S.A. de C.V. (VTO) produces, processes, distributes and sells a wide range of glass products to a variety of industries. With a special focus on quality and continuous improvement Vitro has implemented a variety of cost-cutting and optimization programs in order to improve its financial situation after the economic downturn. Based out of Monterrey, Mexico, and operating in 10 countries in Latin America, the U.S. and Europe, Vitro has 93% of its debt in USD.
Company Overview
With a 100 year history, Vitro produces, processes, distributes and sells a wide range of glass products to industries like wine and liquor, beer, cosmetic, pharmaceutical, food and beverage, and the automotive and construction industry. In 2008 the CEO Federico Sada G. was replaced by Hugo A. Lara Garcia. Over the last two year Vitro has taken steps to improve it financial position such as divesting non-strategic assets, simplifying the work force and eliminating activities determined to have a non-priority nature.[1]
Business and Financial Metrics
- A $34MM reduction of capital expenditures and a $30MM reduction in working capital are aimed at maximizing liquidity and improving Vitro’s cash position for the first half of 2010 – usually the lowest earning half of the year in accordance to the glass industry’s seasonal troughs and peaks. [2]
- Cash flow at the end of 2009 was $41MM. This was an increase from the same date in $27MM. This was a result of the previously mention recovery of $30MM in working capital, a reduced capital expenditures of $13MM and no dividend payment as compared to the previous year’s $10MM dividend payment.[3]
- Consolidated Sales in 2008 were $2.6BB and increase of 2.6% but the operating cash flow decreased 15.6% to $62MM [4]
- Income Taxes increased from a gain of $60MM to a decrease of $1MM due to lower deferred income taxes derived from the peso devaluation. [5]
- 2008 consolidated net sales had significant growth. The negative effects on the cash flows came from high energy costs derived from record high prices of natural gas and nationally the demand for glass bottles directly stemming from a smaller order from Grupo Modelo affected the market in Mexico. Positive effects/events that affected cash flow: the transfer of container producing plants from Mexico city to the Toluca Industrial Zone, the major repairs done to furnaces and Vitro winning many prestigious awards for the quality and innovation of products and services.[6]
- Secured $100MM in 2008 from a Mexican Development and only had to offer non-productive assets as collateral [7]
Business Segments
- Glass containers (53.200% as a percentage of Consolidated Net Sales) : dedicated mainly to servicing the beverage, food, wine and liquor and pharmaceutical industry. The glass container business unit is the leading manufacturer and supplier in Mexico and Central America and is the most important exporter to the U.S.
- Flat glass(46.800% as a percentage of Consolidate Net Sales) (Q309): focuses on the manufacture, processing and sale of float glass for the construction and automotive industry. The principal player in Mexico and Latin America, through Vitro America the flat glass business segment is making inroads in the US market. The European market share continues to grow as well.
Sales declined 40% in Glass Containers and 32% in Flat glass. This decrease reflects the high depreciation of the Mexican peso. The cost cutting and productivity programs that Vitro has in place as well as strict cash management control both aim to sustain operations in the long-term. [8]
Operations in Countries
- US: leading processor and distributor of flat glass and customized added value glass
- Mexico: largest producer, distributor, trader of glass containers and flat glass
- France: main glass producer for the central European construction market
- Spain: Leading processor of flat glass for the construction industry
- Colombia: processor of laminated and tempered glass products for the construction and auto industries
- Portugal: flat glass producer for the Portuguese construction industry
- Bolivia: producer of glass containers for soft drink, beer, food, liquor and pharmaceutical industry
- Costa Rica, Guatemala and Panama: leading producer and trader of glass containers for Central America and the Caribbean
==Key Trends and Forces==
Depreciation of the Mexican Peso vs. the USD and Euro
The Central Bank of Mexico has been increasingly more concerned witht eh devaluation of the peso fearing consumer price increases and eventually inflation. Though the central bank has cut the lending rate, it has been cautious not to allow an inflationary disaster. Some think that this cautious approach will have a negative effect and eventually weaken the peso further. This has had an effect on the individual in Mexico and the companies in it. [9]
High volatility of energy prices (gas and oil)
Especially for the glass industry, rising energy costs have a serious effect on the bottom line.
Mexican Development Banks=
In an effort to counteract the economic downturn Mexican Development Banks have been in charge of providing liquidity to companies in need of cash.
Growing demand for energy efficient glass
Coated glass (Low E. glass) and other such energy efficient glasses have a growing demand in North America and Europe. This is especially true in the construction business. [10]
Growing demand in laminated glass
There has been a significant growth of niche markets: impact resistance for hurricane zones, bomb/blast resistance, new decorative products and acoustic control.[11]
Competitors
- Saint Gobain
- O-I
The container industry is mostly dominated by the two above and Saint Gobain has a strong presence in Mexico [12]
- Global Fuentes, S.A. de C.V. (México)
- Vidriera Monterrey, S.A. de C.V.
These two are the next largest glass makers in Mexico.[13]
- ↑ Company 10k, 2008
- ↑ Company Q309,2009
- ↑ Company Q309,2009
- ↑ Company 10k, 2008
- ↑ Company Q309,2009
- ↑ Company 10k, 2008
- ↑ CNNExpansion Negocios, http://www.cnnexpansion.com/negocios/2008/11/05/vitro-toma-100-mdd-por-venta-de-activos, November 5, 2008
- ↑ Company Q309, 2009
- ↑ Allbusiness, http://www.allbusiness.com/economy-economic-indicators/economic-indicators/11862610-1.html, February 23, 2009
- ↑ Allbusiness,http://www.allbusiness.com/nonmetallic-mineral/glass-glass-manufacturing/156213-1.html,2004
- ↑ IDEM
- ↑ www.salusbury.info/uploads/gasworld-Mar-08.pdf
- ↑ http://www.conexionejecutiva.com/Oficinas/Lista/Spa/10/0/Producción%20de%20Vidrio%20y%20Productos%20de%20Vidrio/0/0/644
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