Weak commodity prices to hit Mexico Kuo’s chemicals in Q4

17 October 2013 22:50  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--Mexican chemical, automotive and food conglomerate Grupo Kuo said on Thursday that ongoing lower commodity prices will impact its chemical subsidiary’s fourth-quarter sales revenues and margins.

The third-quarter results of the subsidiary’s synthetic rubber division were hurt by a 38% drop in butadiene (BD) prices, which led to an average selling price decrease of 17%.

BD is a major feedstock for styrene butadiene rubber (SBR) and butadiene rubber (BR), which are used in the production of tyres for the automotive industry.

“We will continue to be affected by the ongoing weak commodity price environment, which will result in lower prices for butadiene,” said Grupo Kuo’s chief executive office Juan Marco Gutierrez in a conference call with investors.

The division’s revenues reached $110m (€81m), down by 24% year on year, while earnings before interest, tax, depreciation and amortisation (EBITDA) were down by 17% to $10m. A 9% drop in volumes also affected the results, the company said.

The chemical subsidiary’s plastics division posted a 9% drop in third-quarter sales to $69m, while EBITDA totalled $2m, down by 33%, the company said.

Kuo attributed the result to lower sales volumes in both the domestic and export markets, the latter driven by a drop in consumption levels in the US and Europe.

“We expect that the last part of the year will remain challenging [for the chemical division], affecting our sales and margins more than we have seen over these past three quarters,” Gutierrez said.

The chemical subsidiary’s parent company, Grupo Kuo, which also owns Kuo Automotive and Kuo Consumer, posted third quarter sales of $470m, down by 7% year on year. EBITDA fell by 6% to $45m, the company said.

According to Gutierrez, a complex economic environment, moderate consumption behaviour and bad weather affected the group’s overall result.

“We remain cautiously optimistic that in the following months, and in particular in 2014, the economic environment will gradually improve and have a positive effect on the overall business conditions and on our group’s performance,” the executive said.

($1 = €0.74)

By: Simon West

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