Operator: Hi, everyone. We appreciate your interest in Alpek and your participation in this webcast to review our second quarter results. I am Barbara Amaya, IR Director. Here with me today are Jorge Young, our CEO and Rodrigo Prieto, our CFO. Before we begin, please note today's discussion will include forward looking statements based on current expectations and assumptions. Subject to certain risks and uncertainties. Actual results may differ materially. Alpek undertakes no obligation to update these statements. We express our financial results in U. S. Dollars unless otherwise specified. For your convenience, this webcast is being recorded and will be available in the Investor Center section of our site. Today's agenda is as follows. Jorge will begin with a quarterly overview, Next, Rodrigo will discuss our financial performance in greater detail. Then, Jorge will delve into outlook for the remainder of the year and revise guidance figures. And finally, following management's remarks, we will be happy to take your questions. Jorge, I will turn the call over to you.
Jorge Pedro Young Cerecedo: Good morning, everyone. Thank you for joining us. Throughout the quarter, the Middle East conflict continued to impact global supply leading to trade disruptions. This resulted in higher reference margins and Notion freight costs. While these industry conditions supported results, Alpek's performance was further enhanced by its operational readiness. Notably our business units were able to resolve all raw material supply challenges while growing and diversifying our customer base in key markets. Alpek's year to date performance also validates the successful execution of our multiyear strategy to strengthen our competitiveness and financial position. Through a more optimized asset base and disciplined capital allocation, we were well positioned to deliver significant comparable EBITDA growth and cash flow generation. I would like to take a moment to recognize and thank our employees across Alpek. For their dedication and commitment. Their hard work and focus on execution, were instrumental to our results. On behalf of the leadership team, thank you for your continued contributions to our success. Moving forward, we are entering the second half of the year with a stronger and more resilient operating and financial position. Allowing us to confidently navigate evolving macro, geopolitical,, and industry landscapes. Accordingly, we are raising our 2026 EBITDA guidance which I will come back to discuss in more detail after the financial results segment. With that, I will now turn the call over to Rodrigo.
Rodrigo Prieto Treviño: Hi, everyone. it is a pleasure to be with you today. Over the past quarter, I have had the opportunity to connect with many of you. And I look forward to continuing those conversations and getting to meet more of you in the future. Let's take a closer look at our financial performance. Reference margins increased throughout the quarter across our portfolio. Particularly Chinese integrated PET margins peaking in May of $336 per ton. Ocean freight rates to South America also increased sequentially throughout the quarter. Reaching a high of $347 per ton in June. Alpek effectively translated this into solid results. Maintaining a clear focus on cash generation and improving the balance sheet. We generated $127 million in operating free cash flow. Supported by higher EBITDA and a strategic capital allocation. This includes a $211 million investment in net working capital from improved volume and a higher pricing environment. This performance reflects our ability to reliably convert earnings into cash. Achieving a 31% conversion rate during the period. CapEx totaled $19 million. Including a $10 million recovery from the River Valley asset sale. We further strengthened our balance sheet by reducing net debt by $103 million and improved our leverage ratio to 2.2x. Accelerating our deleveraging path ahead of schedule. Turning to earnings, comparable EBITDA increased 169% year-over-year. Reaching $336 million and reported EBITDA totaled $407 million, a 300% improvement compared to the same period last year. This included a $66 million inventory gain associated with higher raw material prices. Volume for the quarter also improved reaching 1.18 million tons. Increasing 6% quarter on quarter and 5% year over year. As solid operating performance and strong demand was supported by customer diversification. Both business segments delivered their strongest quarterly results since 2022. Polyester achieved comparable EBITDA of $235 million, while plastics and chemicals delivered comparable EBITDA of $95 million. While this performance represents an important milestone, we remain committed to preserving financial strength and sustaining leverage within our target range of 2x to 2.5x. I will turn the call back to Jorge to discuss guidance and outlook for the remainder of the year.
Jorge Pedro Young Cerecedo: Given the current geopolitical environment, market volatility is expected in the near term. For our updated guidance, we consider that underlying overcapacity continues in the petrochemicals and polymers industries. Accordingly, our revised figures assume that disruptions subside throughout the second half. And that reference margins and ocean freights declined when compared to the second quarter. But still remain elevated relative to our original guidance at the beginning of the year. We are raising our guidance to reflect the stronger first half performance. And the following key assumptions for the remainder of the year. Average Chinese PET reference margins ranging from 170 to $200 per ton. As a reference, second quarter's average was 307 and as of today, July is averaging $215 per ton. Polypropylene reference margins at $0.17 per pound. Compared to an average of $0.20 per pound in the previous quarter. Such level remains so far in July. Ocean freight rates to South America ranging from $120 to $170 per ton. The average for the second quarter was $225 and is currently at $268 per ton. Based on these assumptions, we are raising our comparable EBITDA to a range between $750 million and $800 million Our operating free cash flow to a range between $300 million and $350 million And we are also adjusting our CapEx to $150 million to advance our 3 year polypropylene project and smaller investments in PET sheet and thermoforming in our Middle East region. Our guidance reflects our current outlook and does not include any potential upside from the monetization of non strategic assets. Which we expect to advance throughout the year. Nor impact additional tariff measures in our key markets. Notwithstanding and considering the most recent geopolitical environment, margins and freight cost, could remain elevated especially if feedstocks restrictions reemerge. In all scenarios, it is Alpek's priority to remain focused on operational excellence and to be attentive to our supply chains to anticipate and minimize risks. Moreover, we will preserve balance sheet strength and maintain disciplined capital allocation. Working to keep the leverage ratio within our target range of 2x to 2.5x. With the goal of remaining closer to the lower end. With this in mind, at the moment, we do not expect to resume dividend payments in 2026. This approach will ensure we maintain financial flexibility and position the company to navigate the cyclical nature of the petrochemical industry. While creating long term shareholder value. Notwithstanding, we will constantly evaluate these decisions as results are delivered and new information arise. Let me close by recapping our priorities for the remainder of 2026. Maintain operational efficiency across our global footprint to support customer demand as trade and supply dynamics continue to evolve. Enhanced portfolio quality by advancing higher value and specialty solutions to further diversify our businesses, develop emerging businesses, prioritizing high return opportunities requiring minimal capital investments to support long term growth. And protect cash flow generation through optimized working capital and CapEx management. In addition to advancing asset monetization initiatives further enhance financial flexibility. Overall, we enter the second half of the year with stronger fundamentals, building on the strong momentum we have established. I am very confident in our team's ability to deliver solid operating performance by staying proactive and agile responding to industry changes. Through this, we are aiming to position Alpek as a domestic supplier of choice by staying close to our customers and maintaining service. Excellence.
Operator: We will now begin the Q&A portion of today's webcast. Please use the raise hand feature. We will call on participants in the order they appear. And remember, you may also submit your questions through the Q&A function at any time. We will do our best to address as many questions as possible. Our first question comes from Tasso Vasconcellos with UBS. Tasso, please go ahead.
Tasso: Hi, Amaya. Hi, Jorge. Hi, Rodrigo. Thanks for taking my questions here. I have 2 on my side. 1, probably for Jorge. We have seen PET spreads with more resilient when compared to all your petrochemicals. Could you provide some additional color on how you were seeing the market and key risks for a stronger normalization in the second half of this year? Or maybe on the other side, opportunities that such spreads will be persistent at these levels throughout not only this year, but also in 2027. And then, Jorge, a second question, following this first 1. it is actually linked to the leverage ratio from the company. It already reached 2.2 times net debt to EBITDA in the second quarter. But we assume that Alpek would take a little bit longer to decide on the resumption of dividends in case spreads reduce and leverage, of course, moves back higher. How is the capital allocation discussion with the company at this moment and following all of this discussion? Those are the 2 questions. Thank you.
Jorge Pedro Young Cerecedo: Okay. Thank you for the questions, Tasso. Yes. On PET margins, as you saw second quarter Chinese PET margins reached close or around $300 per ton. They were very strong in March, April, May. There were some declines through June and July. And now they are approaching the higher end of the range we showed in our revised guidance to the second half. What we are yet to see is whether the most recent escalation in oil prices translates into a rebound of PET margins. that is yet to be seen. I think it will depend on whether the latest events translate into additional supply disruption. So that is that is yet to be seen. In our assumptions, and as I explained in my prepared remarks, we still observe there is, you know, underlying overcapacity. We are assuming the spreads will glide down However, given the you know, also observing some events, we expect spreads potentially to stay somewhat higher to the levels we saw last year, especially that were very low. So, again, these are variables that we cannot forecast in great detail. But you know, that is something that we think is very possible in the industry. Again, the peak was so far in the second quarter of 2 thousand 26. it is normal to expect some normalization to that level. But there are possibilities for the margins not to reach at levels that as low as last year. We are yet to see how industry evolves To the extent there are disruptions in supply, that could be conducive to higher to higher margins in our regions. you know, this volatility certainly you know, supports the case of domestic suppliers. We are the largest domestic supplier in The Americas of PET resin, We are the largest domestic supplier the only domestic supplier of polypropylene in Mexico, the largest domestic supplier of EPS throughout The Americas. We expect that volatile environment where risks are observed by customers. In trade flows that supports our case. And it is our duty to confirm and earn the trust for the customers by delivering product on time with quality and competitively. So, again, I see this as a opportunity for us to come stronger in the in the following periods. To your second question, as far as the capital allocation I think I mean, you pretty much answered the question yourself. We need to monitor how our results are delivered. We need to factor, again, scenarios where the margins could come down, where the margins could stay elevated. And based on all that information, we will make that decision accordingly in due time. Right now, we think we will end the year without further dividend payments. But as I explained in my prepared remarks, we still have 6 months more to go and we will observe how we deliver results. And new information. And more importantly, our outlook and forecast for. Next year. it is still early for us to have a forecast for next year. Again, just rehashing, We will plan for a range of scenarios where we need to remain very competitive. Our focus is to operational excellence. That we build and reinforce our position as a strong and the preferred domestic supplier for all customers. We do not take their business for granted, and we need to prove it and earn it. Again, that is the view. So we will remain flexible on the decision. We will focus on what we can control. And if we deliver the result and if the perspective is reasonable, that is when those are the conditions to discuss the dividend resumption. And right now, we need to see these results to materialize for longer. And that is where we are. This is a decision we will review together with our board of directors in due time. Very clear, Jorge. Thank you for the key answer.
Operator: Our next question comes from Leonardo Marcondes with Bank of America. Leonardo, please go ahead.
Leonardo Marcondes: Thank you for taking my questions. I have 2 from my end here. So the first 1 is if you guys could provide a bit more color on how the increase in U. S. Tariffs and or the news flow on the USMCA could impact Alpek? And my second question is regarding the supply capacity. Right? I mean, with the resumption of the war, how have you guys been seeing the impacts on supply capacity? And, how are you seeing the inventory levels for PET and PP, right now? Thank you very much.
Jorge Pedro Young Cerecedo: Yeah. Leonardo, thanks for the questions. The first part of your question was about tariffs. You know, there are several things going on, you know, in the various countries, but I will focus on the 1 you mentioned, the in The United States, you know, there are ongoing investigations on tariffs on multiple products. I think we are yet to see the results of those investigations on you know, partial results have been trickling down already. On the investigation relating unfair labor. There is no conclusion yet on that 1. But that 1, will probably maintain the current status quo that we have seen for the last several months where there is an underlying tariff The United States of about 10% across many countries. Again but we are within days of knowing the final outcome. There is another investigation relating excessive industrial capacity which the results are going to be out probably in the next couple of months. We are yet to see that. At the end, these investigations look to have fair trade conditions. For producers of many products in The United States You know, in our in The United States, there is still, you know, strong competition in the market from local competitors. So it is early to you know, to ask you know, to forecast exactly how we see the impact. I think we are waiting for the outcome. And, again, we are expecting that this tariff address some of the distortions in the markets and bring a fair level play field for producers of PET and many other industries and, again, it is our focus to remain very competitive and focus on our operational excellence to shine in markets, in all kinds of markets. So, again, on tariffs, we are still waiting for the on tariffs in The U.S. And as far as USMCA, the USMCA, you know, for now, it was not renewed in July, as everybody was expecting that. I think we expect there will be, you know, 1 year period revisions. The in the chemical industry, there is a strong trade surplus that The United States has with Mexico because all the feedstocks that are used in Mexico We do not think it is a critical sector from that regard. Most of the petrochemicals in Mexico are produced with US feedstocks. That are fully compliant with the you know, USMCA requirements and are to be fully compliant with the rules of origin. So we expect continuity from, you know, USMCA But, again, it is it is a process that you know, all of us will be observing, and we remain close to government officials on both sides to make sure we understand the how it is evolving and that points of view regarding you know, specific topics in our industry are that the facts are accurate. The second point, the resumption of war it is really hard to say what are the inventory levels. When the war broke down in you know, in early March, there was an increase in prices and in spreads throughout March. I think the in several industries, several petrochemical and polymers, there was probably an overreaction in March, April. On purchases expanded margins and volume significantly. Now there is another genuine disruption taking place but we are yet to see the margins and the volumes to rebound. We are beginning to see some signs it is very possible to see a rebound. But it is not observed yet. And it is probably, you know, a combination of markets in general, in some countries in Asia, remaining cautious. And, you know, learning from the lessons in April of accumulating excessive inventories. So those inventories might be now normalizing, and there has to be another round of purchases that could definitely support margins if these disruptions extend. So again, we are very eager to see this to evolve. Certainly, this brings you know, some potential upsides, but, again, we are yet to see those rebounds and something else. So that is the situation, Leonardo. Are still working on, you know, observing the markets and Of course. Very clear. Thank you, guys.
Operator: Next question comes from Ben Isaacson with Scotiabank. Ben, please proceed with your question. it is from our next question comes from Vanessa Quiroga with Eternal Capital.
Ben Isaacson: Hello? Sorry, Ben. Are you there? Yeah. Yeah. I am sorry. I am sorry. No. No worries. Go ahead. My question is I have 2 questions, and they are both on the cadence of the guidance update and in particular with PET. The first question is, can you, tell us what the, Spot contract split was in Q2? And what are the underlying assumptions, for the same question For Q3 and Q4? And my second question is on the contract volume: how much was repriced during the quarter? How much is still yet to be, and is there risk if everything were to go back to normal today that they could be repriced again? Thank you.
Jorge Pedro Young Cerecedo: Yes. Ben, thanks for the questions. Very good questions. In the second quarter, we significantly increase our sales in the spot market We have as we mentioned we felt we have good operational readiness to begin the second quarter. Our system of plans in general have been running well. Or inventory were on target. So that was key for us to capture opportunities on customers whose supply got disrupted? So Our percentage of spot of non spot sales definitely increased in the second quarter, and that was a huge contributor. To our additional profitability. We are working very hard to make some of those, relationships more contract type and more sustained. As we work not only through the balance of the year, but also looking forward. And us to continue to operate well and deliver good products sometime, competitively to these customers definitely enhances that opportunity. On the contract side, there were also some increases in volumes and to a an important extent There was some repricing And, again, that repricing was mostly designed to offset as much as possible additional cost that we had to incur. To secure our feedstocks in the second quarter Our feedstock were also disrupted We had feedstocks coming from The Middle East. That got disrupted. We had to go to alternative markets And with volatility also in shipping cost for liquids, we incurred costs. And that was the basis for us to another input that increased not only feedstocks, and that was the basis for us to have very positive discussions with our contracted customer base to offset those increases. The we are very appreciative of our customers We are very supportive across the board. With the vast majority of them supporting the pass through for the additional cost. And that was also very important for us to, you know, to deliver and supply well in the second quarter. You know, the how those conditions will evolve in the second half, I think we are still having discussions. I think there is some trend to ease some of those costs, but now we need to process the additional disruption in The Middle East. Right now, it is becoming very visible in oil. And as for the last few days, there is a new variable, which is the disruptions potentially on the Red Sea. And, again, we need to see how those disruptions will create changes in how they, you know, especially the ocean freights or the availability of carriers for both feedstocks and finished products. Are in you know, happening in the marketplace. But summarizing there was an increase in spot sales We are working very hard to expect not to see those as spot sales, but more than anything, as a stronger larger, and more diversified customer base. And there was also repricing on the contracts with tremendous support from our customers. Offset the additional expenses incurred in securing our raw material. But we were able to secure 100% of our supply of raw materials with significant challenges. But we are in a very good spot, and right now, our supply chains are looking good. Thank you very much.
Operator: Our next question comes from Vanessa Quiroga with Itau. Vanessa, please go ahead.
Analyst: Yes. Hi. Thank you. So just to clarify, my question was very similar to the previous 1. Just to clarify on the dynamic. So on the on the spot side, you were able to increase spot sales because of the increase in demand and difficulty to get imported product. I assume. And on the contracted side, clients, your customers were willing to accept a pass through of the increase in feedstocks. Just confirm if my understanding is correct, and then how are you seeing the current conversations for upcoming contracts And do you expect to convert some of those spot sales into contracts? Do you expect any change in the structure of that contracts given these ongoing geopolitical risks and sourcing feedstock sourcing risks. Thanks.
Jorge Pedro Young Cerecedo: Yes, Vanessa, I think pretty much yes to all your points that you listed. It was a good recap. Certainly, this the spot sales not only represented additional volume, but also those came at very attractive margins given the reference margins, ocean freights, and the supply demand dynamics. So those were important contributors. But, also, we had increasing volumes in our in our contract customers and also support to pass through the additional cost. It is early to you know, we are we are just beginning discussions for the next period, 2027. You know, relatively few things have been into contracts by now or that we have finished The vast majority will happen in late later this quarter and probably even more in during the fourth quarter. Yes. I mean, we will we will, you know, we will try that. Our agreements reflect you know, you know, provide some flexibility to deal with unexpected events. But, again, I think we focus on reinforcing and building the trust with the customers that are our, you know, our value as domestic suppliers deliver you know, throughout the year. And make them feel that with us, they have secure supply, competitive supply, reliable and of good quality. And a broad offering of products. And we think that is going to be the basis to have a you know, a good a good contract renewal season this year. But we are a few months from that We just think the volatility and supply disruptions are conducive to those domestic suppliers that do their job well to earn continuous business with this customer base. How was your mix of spot versus contract volumes this quarter? You know, in second quarter, know, normally, in our business, when you add all the Alpek's businesses, normally, 80% contract. I mean, that is by business. In the second quarter, we probably added, you know, maybe 10 percentage points We were running well the plans, but we still had room to increase rates. And you know, we added, maybe in total, I would say, at least 10% increase in the mix of spot customers. Okay. Many of those are continuing as we speak. Second quarter was is typically the best in terms of seasonality. And there was also, you know, you know, a number of purchases that we are aiming to increase the, you know, pipelines for some customers. We might not see all of that in the second half as expected, but all of that is embedded in OR in our guidance figures. And just a final 1. Are the this increase in spot sales volumes, were they new customers or the ongoing spot customers that you have? Both. We have many new names. And we have many current customers that typically buy spot and contract. The we were able to satisfy additional volume requirements. Well, it was all kinds. Again, we again, we are ending with larger, but also more diversified customer base, which it is healthy for any business in general. For sure. Thank you. You are welcome.
Operator: Our next question comes from Thiago Casqueiro with Morgan Stanley. Thiago, please go ahead with your question.
Thiago Casqueiro: Hey. Good afternoon. Thank you for taking my questions. I think most of them were already addressed here. So, I have 1 on working capital. We saw that there was a significant pressure on working capital during this quarter. Obviously, it was largely due to higher raw material prices. And I know it is quite tricky, point of discussion, especially with the volatility picking up again. Brent already surpassing $100 per barrel today. But I would like to understand what are your current expectations, on working capital. Should we expect a strong relief already in the third quarter or this is something that takes longer? And then my second question is on asset sales. I would like to know if you could provide like, the evolution of discussions around the asset sales expected for this year And I know the Monterrey asset sale is more of a longer term goal, but are there any updates on that front also? Thank you.
Rodrigo Prieto Treviño: Hi, Thiago, Thank you for the question. With regards to net working capital, yes, it is it is kind of a tricky question how things are evolving this last few days based on crude going to $100. But what we have in the guidance in the updated guidance provided we do have a small recovery on net working capital We will see how prices evolve, but we remain very focused on having a very optimal net working capital for second half of the year. With regards to the asset sale, I mean, we divide it into 3 phases. Right? Phase 1 is what we have been working and communicating these last quarters. As we reported, we already we already did the Big River Valley asset sale We continue very diligently working on those issues, and the idea is to get to the $30 million to $50 million of sales this year. Right? Then we have a phase 2 which are another assets in The US, Mexico, and Brazil that will come after phase 1. And then definitely, we have the phase 3, which is the Monterrey asset sale that will take a little bit more time.
Jorge Pedro Young Cerecedo: that is very clear. Thank you.
Operator: Our next question comes from Alejandro Andrade Carrillo with JPMorgan. Alex, please proceed with your question.
Alejandro: Hi. Thank you for taking my question. Congrats on the results, everyone. So I have a question on volumes, right? So clearly, you are doing very well so far this year. And obviously, you raised the guidance, great high prices, good contracts, good spot prices, and so on. But my question is, like, going forward, how can you take, you know, full advantage of this upcycle especially, you know, focusing on volumes. Right? I mean, you did manage to increase volumes by 5%. But what happens if, you know, prices reverted fully back to, I guess, normal levels across the board? What would volume growth look like, and what sort of strategic actions can you take in the meantime to sort of secure a more balanced growth going forward? Thank you.
Jorge Pedro Young Cerecedo: Yeah, Alejandro, You know, that is certainly, we are fully aligned with you know, with the goal of, you know, growing our volume and increasing the quality of that volume you know, it is all you know, with the foundation of being a reliable supplier to this to our customer base., Our volume for the vast majority or relevant volumes are volume that we supply locally in each you know, country or region where we have our assets. For example, in our PET, our key markets, there are some level of imports that we can still, you know, replace. And we did actually in 2026, and again, it is a great opportunity for us to keep that continuity And if the spreads come down, again, I think, we have a great opportunity in front of us to even with spreads coming down to retain the volume. And again, in this process, we were also able to increase the mix of what we sell You know, we increase the sale of polymers. We will reduce the sales of intermediate because there is more margins, you know, doing the whole the whole chain. Again, it is a very high priority, but it is all it all rests on running well and delivering well to the customers. I mean, I am just fully aligned with that is very important, and we have an opportunity in front of us to you know, to retain this expanded customer base that we have with us now. Okay. Understood. So maybe low single digit growth is, you know, a normal base case for, you know, steady state long run growth in volumes, I guess. Yes. It is possible, but we are you know, we did have a very good utilization rate and volumes in the second quarter itself. So I think maintaining that volume yes. Year over year, we will expect to have some growth going into next year. But if you look at the quarter, second quarter, is a year where it almost reflects not totally full, but our asset base, you know, very highly utilized. And if that situation if that opportunity continues at those levels, you know, we will seek ways to the debottleneck our system or to relocate production from less strategic or less attractive markets to the most profitable markets. Our system has some points of flexibility to still capitalize on the opportunity. Okay. Understood. Congrats, and thank you again. Thank you.
Operator: Next question comes from the Q&A function. Raul Bhatt from 91. Please proceed with your question. Oh, sorry. it is What is the company's plan with the free cash flow generation this year? Any plan to repay or refinance near term debt, including the 2029 bonds? Thank you, Raul, for your question.
Rodrigo Prieto Treviño: We are we are maintaining a discipline to generate the cash flow. It is it is very important for us to convert this EBITDA to cash flow, and, absolutely, the idea is to use this cash flow to reduce and repay some debt. Together with that, we are evaluating refinancing facilities and with both proceeds we plan to significantly improve our debt profile.
Operator: It seems like that was our last question. On behalf of Alpek. Thank you for your participation and continued interest. Please contact us if you have any additional questions. Have a great day.
