GRUPO KUO, S.A.B. de C.V. (Formerly DESC, SA. De CV) Business Report FY ended Dec. 2015

Financial Overview

(in million MXN)
FY ended Dec. 31, 2015 FY ended Dec. 31, 2014 Rate of Change
Net Sales 19,621 18,753 4.6 1)
Operating Income 2,337 1,338 74.7 2)
-Transmissions SBU sales 3,849 2,828 36.1 3)
-Aftermarket SBU sales 2,516 2,302 9.3 4)
Sector Sales 6,366 5,130 24.1 -

1) Net Sales
-The Company’s net sales for the fiscal year ended December 31, 2015 increased by 4.6% over the previous year to MXN 19,621 million. Positive performances from the Company’s Transmissions SBU, its Herdez Deul Fuerte joint venture, and Aftermarket SBU contributed to the gain.

2) Operating Income
-Operating income increased by 74.7% in the fiscal year ended December 31, 2015 to MXN 2,337 million. Improved performances from the Transmissions, Aftermarket, and Plastics SBUs as well as extraordinary income generated by the sale of 50% of the Company’s Emulsion Rubber business were all factors in the increase in income.

3) Transmissions SBU sales
-Sales for the Company’s Transmissions SBU increased by 36.1% to MXN 3,849 million in the fiscal year ended December 31, 2015. Higher component requirements from Daimler and Volvo, a recovery in volume from AM General, stronger demand for high performance transmissions from Ford and FCA, and increased Dual Clutch systems all led to the increase in sales.

4) Aftermarket SBU sales
-The Aftermarket SBU had sales of MXN 2,516 million in the fiscal year ended December 31, 2015, an increase of 9.3% from the previous year. The increase in sales was driven by a recovery in the markets which improved performance the SBU’s main business lines. The SBU experienced higher sales volumes of engines, brakes and powertrains domestically and gaskets, seals and joints for exports.

Joint Ventures

-The Company announced that it has closed the transaction in which it contributes its emulsion rubber and nitrile businesses located in Mexico and China to Dynasol, a 50:50 joint venture with Spain-based Repsol. For the transaction, Repsol contributes its chemical accelerators business, located in Spain. The transaction was done to strengthen the two company’s partnership in the joint venture. As a result of the closing, the Company will receive approximately USD 70 million. The resulting company will target the high-performance tire, asphalt modifier, adhesive and compound market segments, as well as viscosity modifiers, non-woven materials and medical applications, increasing its global market presence across the synthetic rubber segment via high value-added products. The joint venture will have its headquarters in Madrid, with operating facilities in Mexico, Spain and China, as well as a sales office in the United States. Based on 2014 figures, the new entity's revenues are expected to total approximately USD 700 million, with a production capacity of over 500,000 tons. (From a press release on October 1, 2015)


-In 2015, the Company signed contracts for future deliveries of next-generation dual clutch transmission technology which is currently under development.

R&D Activities

-The Company is in the process of designing and prototyping next-generation dual clutch transmission technology due to the signing of a new contract for the delivery of the technology.

-With the strengthening of the Company’s Dynasol joint venture through the contribution of the Company’s emulsion rubber and nitrile businesses in Mexico and China, respectively, the Company has begun to place a larger focus on the development of high-performance tires.

Capital Expenditures

(in million MXN)
FY ended Dec. 31, 2015 FY ended Dec. 31, 2014 FY ended Dec. 31, 2013
Automotive 296 270 256
Chemical 78 651 449
Consumer 960 935 576
Others 3 63 36
Excluding Joint Ventures (411) (960) (420)
Total 925 959 896

Investment Activities

-Investments made related to the Company’s automotive sector include integration of the Company’s engine product lines, improvements in its brakes and pistons facilities, and development of its high performance tire segment.

-In 2015, the Company’s Transmissions SBU completed its investment in production capacity to manufacture six-speed manual transmissions for the new Chevrolet Camaro and Mustang Shelby GT350. Production for the transmissions began in the middle of 2015.

-In 2015, the Company invested in infrastructure to produce transmission components for Daimler and CNH.