Reports 17-Percent Drop in Flat Glass Sales for 2008 Fourth Quarter
In a conference call to discuss its fourth-quarter results, Hugo
Lara, chief executive officer of Vitro S.A.B. de C.V., opened by
stating, "We are here to bring you up to date on what we have
accomplished this quarter in terms of growing the operations, financial
restructuring [and] cost cutting." He said that the quarter
was a difficult one for Vitro and noted that Mexico has begun to
feel the effects of the global slowdown since the last quarter.
"Declining markets and tight credits have affected Vitro,"
said Lara. "While there are challenges, the important thing
is how we deal with [them]," he added, explaining that the
company has set out certain strategies to try and bring it ahead,
including a continued focus on quality and service as well as on
relationships with customers and suppliers.
Earlier this year Vitro announced it did not intend to make several
scheduled payments that were due on February 2, leading to a default
of several loans. CLICK
HERE for related article. Vitro had also initiated discussions
with investors, bondholders and creditors "to achieve an organized
financial restructuring to improve its balance sheet."
During today's call Lara explained that the company had issued
a detailed statement on December 31, which showed Vitro with a potential
total due amount of $358 million. This includes a loss of approximately
$33 million related to the only open derivative financial instruments
covering natural gas contracts from 2009-2011 with Pemex.
"We have taken steps internally to revitalize the company.
These cost reduction initiatives are most important; this includes
the temporary shut down of facilities to align production with demand.
This also involves a reduction in our workforce," said Lara.
(Editor's note: During the question and answer portion of the
call today USGNN.com attempted to find out how these initiatives
would affect U.S. operations, however our requests for comments
were not addressed. At press time subsequent requests for comment
had not been returned.) Lara added that at the corporate level,
further cost-cutting initiatives include canceling of airplane leasing
contracts, limiting employee business travel and eliminating out-sourcing
of non-strategic services.
"On the administrative side we are also implementing head
count reductions, close to 820 employees, representing 24 percent
of the total employee labor costs," says Lara. "By the
end of February 740 employees had already left the company. The
remainders are slated to leave at the end of the first quarter."
Lara continued, "Once implemented, all of these initiatives
will represent total analyzed savings ranging from $80 to $120 million.
We expect to have this finalized by mid 2009. So far, $40 million
of cost savings were implemented in 2008 so we will see the full
benefit in 2009."
In regards to the company's earnings statement, flat glass sales
decreased 17 percent from $312 million to $259 million. Domestic
sales were down 3.9 percent, due primarily to low-volume automotive
business and the float glass market coupled with the effect on the
Mexican peso depreciation during the quarter.
In addition, export sales were down 40.2 percent, though it was
slightly offset by increased float glass volumes sold to South and
HERE to read the company's entire fourth-quarter report.
Need more info and analysis about the issues?
HERE to subscribe to USGlass magazine.