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GRUPO INDUSTRIAL SALTILLO
3Q18 Conference Call
October 24, 2018
1
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Forward Looking Statement
2
This presentation and discussion may contain forecasts or projections in accordance with the vision and
expectations of the Administration with respect to the performance of the Company, the businesses and future
events. These forecasts and projections are subject to risks, uncertainties and assumptions that are uncertain.
Several factors can cause actual results to differ materially from those forecasts, projections and plans of the
Administration, including, without limitation, business development and marketing of new products, the demand
for and acceptance of the Company’s products, economic conditions in the product markets and the different
regions, the cost of raw materials and energy and the fluctuation of the exchange rate.
FINANCIAL EXPECTATIONS
The financial expectations, forecasts and projections in this presentation reflect the current beliefs of the Company
and its Administration. The Company is not required and does not acquire duty to update this presentation or any
forecast, projection or expectation as a result of new information, events or circumstances subsequent to this date.
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MAIN HIGHLIGHTS &STRATEGIC OVERVIEW
3
JOSÉ MANUEL ARANA - CEO
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3Q18 Scenario
4
• Three countries concluded negotiations
• Supports GISSA’s strong position
• Growth potential for the auto industry
• Capturing more than half of the
population to vote
• Rejecting the status quo
• No setbacks
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Draxton Industry Overview
5
USMCA
• Strong position
• Attractive supply option
• Highly integrated in new regional content (above 90%)
60%
Revenues
Europe
+ China
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Accelerating Transformation Process
6
• Launching its long-term Technology Plan for Draxton
• Increase competitiveness and adapt production processes to the needs of our clients
• Draxton will invest heavily in technology, research and development worldwide
• To meet sector challenges and technological trends
US$ 7 million
1% of yearly sales
Could potentially
double our investment
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Construction Industry Overview
7
• Construction Industry performing well
• New government seeking to boost the
construction sector
• We expect to highly benefit from these
initiatives
• US increasing tariffs to tile imported from China
• Mexican economy has decelerated
• Domestic ceramic tiles contracted
• Housewares’ Mexican market facing exchange
rate & raw material increases
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4Q18 & 2019
8
• Continue to implement our Strategic Plan
• Focus on Vitromex turn around process
• Increase shareholder value
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FINANCIAL PERFORMANCE
9
JORGE MERCADO - CFO
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3Q18 Challenges … Energy increases
10Sources: FEAF (Spain), CAEF (Europa), BDGUSS (Alemania), My Steel (China) / EEX
Spain Ind. Energy Cost
Czech Republic Ind. Energy Cost
Italy Ind. Energy Cost
0.0000
0.5000
1.0000
1.5000
2.0000
2.5000
3.0000
3.5000en
e-1
7
mar
-17
may
-17
jul-
17
sep
-17
no
v-17
ene-
18
mar
-18
may
-18
jul-
18
sep
-18
no
v-18
Sin horario punta Con horario puntaWith-peak tariff Off-peak tariff
Mxp
/kW
h
Mexico Industrial Energy Cost
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3Q18 Challenges … Scrap
11Sources: FEAF (Spain), CAEF (Europa), BDGUSS (Alemania), My Steel (China) / EEX
Main Scrap References
Spain Germany Europe China
Scrap Metal (Busheling)
Mxp
/kW
h33
4 36
5
37
1
34
1 37
3
37
6
37
8
38
7
38
9
39
7
40
7
40
0
38
3
100
200
300
400
500
1Q
17
2Q
17
3Q
17
4Q
17
en
e-1
8
feb-1
8
ma
r-1
8
ab
r-1
8
ma
y-1
8
jun-1
8
jul-18
ag
o-1
8
sep-1
8
US
D/T
on
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Consolidated Results
12
13%
15%15%
5,195
4,796
4,000
4,200
4,400
4,600
4,800
5,000
5,200
5,400
Q1 Q2 Q3
Sales Evolution
2017 2018
Ps Million
718
760
660
680
700
720
740
760
780
800
820
840
Q1 Q2 Q3
Fixed Expenses Evolution
2017 2018
One time benefitPs.58 million
Q3 vs Q2~(400) Ps MillionDraxton Driven
28% to 25%
• Platform replacement• Diesel vehicles sales temporary slowdown• US OEM global downsizing
29%
25%
Percentage = % Gross Margin
16% 16%
Percentage = Fixed Expenses to Net Sales
29%28%
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3Q18 vs 3Q17
13
13%
15%15%
Ps Million
181
30
-50
40 60
Draxton Mx Draxton E+A Vitromex Calorex Cinsa
Net Sales
-28 -32
-109
18 7
Draxton Mx Draxton E+A Vitromex Calorex Cinsa
Gross Margin
-18
-73
-142
30
-8
Draxton Mx Draxton E+A Vitromex Calorex Cinsa
EBITDA
3Q17 3Q18 Var %
4,535 4,796 6%
3Q17 3Q18 Var %
1,153 924 (20%)
3Q17 3Q18 Var %
657 465 (29%)
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Draxton Performance 3Q18 vs 3Q17
14
3Q18 3Q17 Change 9M18 9M17 Change
EBITDA 22 29 (24%) 89 92 (2%)Margin 14% 19% 18% 20%
North America 10 12 (16%) 39 39 1%Margin 15% 20% 20% 21%
Europe / Asia 12 17 (32%) 50 52 (5%)Margin 14% 19% 17% 19%
JVs 5 5 1% 16 14 11%Margin JVs 21% 23% 21% 26%
• Higher volumes in Irapuato + Surcharge
• Cost increases:‐ Scrap metals
‐ Ferroalloys
‐ Energy
‐ Launching of new parts
• One time benefit in 3Q17
• Temporary slowdown Diesel market - Europe
• Higher raw material & energy costs
• Scrap metal cost in China 50% rise:
‐ Environmental regulations
‐ Steel and foundry industries competing
EBITDA Draxton
29
1.4 0.3 1.6 2.53.8
22
201
7 E
BIT
DA
Vo
lum
e
Pri
ce
/ M
ix
En
erg
y
Non
-recurr
ing 3
Q1
7
Raw
Ma
teria
ls
201
8 E
BIT
DA
USD Million
Highlights NAFTA
Highlights EUROPE + ASIA
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Vitromex Performance 3Q18 vs 3Q17
15
• Gradual improvements on overall efficiency
equipment
• Recovering US customers
• Reduction of Inventory
• Domestic sales growth
• Strengthening relationships with key distributors
• US volume contraction
• Lower average price from inventory
reduction strategy
• Lower fixed cost absorption
* Volume includes deleveraging and absorption
Net Sales 3Q18 919.7
Gross Margin 3Q17 250.4 28.8%
Price (59.9) (6.9)%
Volume / Mix (39.4) (4.5)%
Deleveraging (9.0) (1.0)%
Fx (4.9) (0.6)%
Gross Margin 3Q18 137.2 15.8%
Var. (113.2) (13.0)%
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Calorex Performance 3Q18 vs 3Q17
16
• Growing construction industry
• Gained market share
• Brand reliability
• Operating efficiencies
Doubled EBITDA levels
Historical Greater EBITDA achieved in 4Q due to cycle
Exceeded Expectations
27
93
57
136
Q3 YTD
EBITDA Evolution
2017 2018
Ps Million
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Cinsa Performance Overview
17
• Market dynamics remained strong
• Double-digit top line growth
• Higher gas and raw materials costs
• Steady growth pace
16
58
8
71
Q3 YTD
EBITDA Evolution
2017 2018
Ps Million
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GIS Debt Position
18
• Total Debt USD 405 million
58% - USD
19% - EUR
23% - MXP
• Total Debt to EBITDA 2.9x
• Net Debt to EBITDA 2.5x
• Interest Coverage 5.1x
In line with the covenants set by the financial
institutions.
YTD Capex over Ps 500 Million – expect to reach around Ps 800 Million by year end.
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Q&A
19
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GRUPO INDUSTRIAL SALTILLO
3Q18 Conference Call
October 24, 2018
20