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USGNN Original StoryVitro 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 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 Central America.

CLICK HERE to read the company's entire fourth-quarter report.

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