Nemak S.A. Business Report FY ended Dec. 2015

Financial Overview

(in million MXN)
FY ended Dec. 31, 2015 FY ended Dec. 31, 2014 Rate of Change
(%)
Factors
Net Sales 70,891 61,490 15.3 1)
Adjusted EBITDA 12,006 9,304 29.0 2)


Factors
1) Net Sales
-In the fiscal year ended December 31, 2015, the Company’s sales increased by 15.3% over the previous year to MXN 70,891 million. The increase in sales was driven by a positive impact from foreign currency fluctuation, a sales volume increase of 2.6%, and an improved sales mix. These increases were partially offset by a decrease in aluminum prices.

2) Adjusted EBITDA
-The Company’s adjusted EBITDA for the fiscal year ended December 31, 2015 was MXN 12,006 million, a 29.0% increase from the previous year. Factors contributing to the increase in earnings include an improved sales mix, gains in efficiency, lower energy costs and other macroeconomic effects.

Recent Developments

-The Company announced the completion of its MXN 10,752 million (approximately USD 685 million) initial public offering (IPO) of common stock. The shares were listed on the Mexican Stock Exchange (BMV). (From a press release on July 1, 2015)

Contracts

-During 2015, the Company was awarded new contracts worth a total of approximately USD 1.2 billion.

R&D Structure

-The Company has seven Product Development Centers, located in Austria, Canada, Germany, Mexico and Poland.

R&D Activities

-The Company’s research activities focus on enhancing vehicle efficiency through improvements to the powertrain and the vehicle’s body. Specific areas of focus include the following:
Alloy Systems
-High performance alloys for high powered engines
-Mechanical properties and microstructural predictions
-Body structural casting technologies
-Thin walls in cylinder heads

Complex Geometries
-3D printing for advanced powertrain prototypes
-Inorganic binders

Powertrain Component Integration
-Turbo housing integration to cylinder heads
-Range extender and aluminium electric motor components

Surface Treatment Technologies
-Bore coating
-Surface treatment for thermal efficiency
-Body structural casting technologies

-Processes such as Semi-Permanent Molding (SPM) for cylinder heads, Low-Pressure Precision Sand (LPPS) and High Pressure Die Casting (HPDC) for cylinder blocks enable the Company to operate more efficiently and manufacture higher quality products.

Capital Expenditure

(in million MXN)
FY ended Dec. 31, 2015 FY ended Dec. 31, 2014 FY ended Dec. 31, 2013
Overall 7,253 4,471 4,336

Investments in Mexico

-In 2015, the Company continued the construction of a high-pressure die casting (HDPC) plant in Monterrey, Mexico. When complete, the plant will manufacture engine blocks, transmission cases, and structural components. The facility is expected to be completed in the second half of 2016, and will create more than 500 jobs. The plant will have an annual production capacity of 2.2 million parts per year.

-In 2015, the Company started construction of a facility in Monterrey, Mexico dedicated to providing in-house machining services.

Investments outside Mexico


-The Company announced the inauguration of its new plant in the Zavolzhye Industrial Zone in Ulyanovsk, Russia. The new plant will initially supply cylinder heads and engine blocks to Volkswagen's engine plant in Kaluga. The plant has an extension of 12,000 square meters, an annual capacity of 600,000 equivalent units, and required an investment of more than USD 60 million. The plant’s start of production is scheduled for October 2015. (From a press release on September 11, 2015)