October 14, 2014 / 11:34 PM / in 3 years

UPDATE 2-Mexico's Alfa says eyeing subsidiary IPOs as 3rd-qtr profit falls

(Adds details on possible IPOs, background and CFO quote)

By Gabriela Lopez

MONTERREY, Oct 14 (Reuters) - Mexican conglomerate Alfa said on Tuesday it is planning a possible initial public offering of its Sigma and Nemak units next year, after earlier reporting a 67.4 percent drop in its third-quarter profit.

The IPOs would allow Alfa to lower its debt burden, Chief Financial Officer Ramon Leal told reporters, adding that the company was also evaluating alliances or additional investment with Canadian oil company Pacific Rubiales Energy Corp.

Leal said the IPOs for Sigma and Nemak could lower Alfa’s debt ratio to 1.5 times earnings before interest, tax, depreciation and amortization (EBITDA) by the end of 2015.

Sigma sells ham, cheese and yogurt among other refrigerated foods, while Nemak produces aluminum parts for the car industry.

Monterrey-based conglomerate Alfa reported quarterly profit of 721.47 million pesos ($53.75 million), compared with 2.21 billion pesos in the year-earlier period.

“The reduction is explained mainly by exchange rate losses after the peso depreciated during the quarter,” the company said in a statement.

The company said the quarter’s exchange rate losses totaled 1.67 billion pesos.

Revenue for the quarter was up 16.5 percent compared with the same quarter last year at 61.13 billion pesos.

Alfa also has a variety of energy sector assets, and Leal said the firm plans to migrate its existing oilfield service contracts with state-run oil company Pemex to more attractive licenses or production-sharing contracts, which is allowed under a recently-approved energy reform.

He said the company, through its Newpek unit, is negotiating the migrations with Pemex and Mexico’s energy ministry.

The company said in August that it will expand its power generation business in Mexico and was considering joint venture partnerships with Pemex in onshore mature fields.

Also in August, Alfa paid about $173 million to increase its total stake in Canada’s Pacific Rubiales Energy Corp to a little over 17 percent.

The company said at the time that the increased stake in Pacific Rubiales, which is Colombia’s second-biggest crude producer, is part of Alfa’s long-term strategy to diversify its energy-sector assets.

“As (Pacific Rubiales) shareholders, we have the opportunity to continue investing with them or form alliances,” said Leal.

Separately on Tuesday, Alfa’s petrochemical subsidiary Alpek reported that its third-quarter profit fell 26.7 percent to 394.04 million pesos.

Alfa’s shares were down 0.07 percent at 42.49 pesos before the quarterly results were announced. Alpek shares ended the day down 0.47 percent at 23.43 pesos. ($1 = 13.4235 pesos at end-September) (Reporting by Gabriela Lopez and Gabriel Stargardter; Editing by Jonathan Oatis and Diane Craft)

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