Alpek polyester margins hits record low

Alpek SAB (ALPEKA), the petrochemicals arm of Mexican conglomerate Alfa, engages in the production of polyethylene and polypropylene. Its main products include PAT, PET, polypropylene, expandable polyethylene, and polyester fiber. The company has 20 facilities with an installed capacity of 5.8Mt/y in three countries: Argentina, the US and Mexico, its revenue dropped the most on record after missing earnings estimates on weaker-than-expected margins on polyester, its biggest product.

Alpek, which got about 78 percent of total revenue in 2012 from polyester, said yesterday in a statement that margins on sales of the material were squeezed in the fourth quarter by overcapacity in Asia and “volatility of prices of raw materials.”

The current oversupply situation in Asia on the polyester chain will not change in the next two years and will keep the company’s growth under potential, Credit Suisse Group AG analysts led by Vanessa Quiroga wrote today in a note to clients. Credit Suisse cut its recommendation on the stock to the equivalent of sell from hold.

Total sales dropped 4 percent to 20.9 billion pesos, Alpek said. Polyester sales plunged by 9 percent from a year earlier.

The shares fell 9.2 percent to a record-low 23.93 pesos at the close of trading in Mexico City, the steepest drop since its April 2012 initial public offering. The stock was the worst performer on Mexico’s benchmark IPC index, which fell 0.9 percent. Alpek’s parent company, Alfa SAB, sank the second-most on the IPC, losing 6.7 percent, the most since September 2011.

Alpek is the sole polyethylene producer in Mexico, and operates the largest expandable polyethylene production facility in the Americas. The firm is headquartered in San Pedro Garza Garcia in the Mexican state of Nuevo Leon.