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In its Q3 2025 earnings call, Alpek (market cap: $1.09 billion) reported a notable increase in comparable EBITDA, which rose by 10% quarter-over-quarter to $137 million. The company also highlighted improvements in operating free cash flow, which surged by 41% compared to the previous quarter. Despite these gains, Alpek faces ongoing challenges, including global oversupply and fluctuating market margins. The stock rose by 2.96%, reflecting a positive investor sentiment. According to InvestingPro analysis, Alpek is currently undervalued, presenting a potential opportunity for value investors.
Key Takeaways
- Comparable EBITDA increased by 10% quarter-over-quarter.
- Operating free cash flow improved by 41% from the previous quarter.
- Polyester segment resumed operations, while non-core assets are considered for divestiture.
- Global oversupply and fluctuating margins remain significant challenges.
- Anticipated benefits from U.S. PET import tariffs in 2026-2027.
Company Performance
Alpek’s overall performance in Q3 2025 was marked by strategic operational adjustments and financial improvements. The company reported a total volume of 1.12 million tons, a 1% increase from the previous quarter but an 8% decline year-over-year. With an attractive free cash flow yield of 20% and a dividend yield of 11.51%, the company maintains strong cash generation despite market challenges. The polyester segment saw a resumption of PTA operations, while the plastics and chemicals segment maintained stable demand. Alpek’s efforts to optimize its footprint included closing several sites and exploring divestiture of non-core assets.
Financial Highlights
- Total volume: 1.12 million tons (+1% QoQ, -8% YoY)
- Reported EBITDA: $116 million
- Comparable EBITDA: $137 million (+10% QoQ)
- Operating free cash flow: $68 million (+41% QoQ)
- Net debt: $1.8 billion
- Net debt to EBITDA ratio: 4.0x
Outlook & Guidance
Alpek revised its full-year comparable EBITDA guidance to $500 million, reflecting cautious optimism amid market challenges. The company expects lower demand in Q4 due to seasonal factors but anticipates potential benefits from U.S. PET import tariffs in the coming years.
Executive Commentary
CEO Jorge Young emphasized the company’s strategic focus, stating, "We are bracing for a tough cycle and for actions on having the right footprint." CFO José Carlos Pons highlighted financial priorities, adding, "We expect to continue deleveraging throughout 2026."
Risks and Challenges
- Global oversupply pressures affecting market margins.
- Seasonal demand fluctuations impacting Q4 performance.
- Ongoing contract negotiations and leverage reduction strategies.
- Potential geopolitical and economic uncertainties.
Q&A
During the earnings call, analysts inquired about the potential impact of U.S. PET import tariffs, ongoing contract negotiations, and the company’s leverage reduction strategies. Executives confirmed their commitment to strategic investments and selective divestitures to enhance financial stability. For a comprehensive analysis of Alpek’s financial health (currently rated as FAIR by InvestingPro), including detailed valuation metrics and 12+ additional ProTips, subscribers can access the full Pro Research Report, part of InvestingPro’s coverage of 1,400+ top stocks.
Full transcript - Alpek SAB De CV (ALPEKA) Q3 2025:
Bárbara Amaya, Investor Relations Officer, ALPEK: Good morning, everyone. Welcome to ALPEK’s Third Quarter 2025 earnings webcast. I am Bárbara Amaya, ALPEK’s IRO, and I am pleased to be here today with Jorge Young, our CEO, and José Carlos Pons, our CFO, who will be presenting today’s material. Today’s agenda will cover the following topics. First, Jorge will provide an overview of the quarter. Then, José Carlos will cover the financial results in greater detail, as well as the process regarding the merger of Controladora ALPEK with ALPEK, following the successful completion of regulatory approvals. Afterwards, Jorge will discuss the outlook for the remainder of 2025 and an update on tariffs. Finally, we will conclude with a Q&A session. Please note that the information discussed today may include forward-looking statements regarding the company’s future financial performance and prospects, which are subject to certain risks and uncertainties.
Actual results may differ materially, and the company cautions the market not to rely on these forward-looking statements. ALPEK undertakes no obligation to publicly update or revise any forward-looking statements, whether it is as a result of new information, future events, or otherwise. We express our financial results in US dollars, unless otherwise specified. For your convenience, this webcast is being recorded and will be available on our website. Jorge, I’ll turn the call over to you.
Jorge Young, CEO, ALPEK: Thank you, Bárbara. Good morning, everyone. Thank you all for joining us today. ALPEK’s financial and operating results show a 10% sequential improvement versus the previous quarter, while still reflecting the challenging environment in the chemical industry. The polyester segment reported a better product mix and steady volume levels, following the resumption of our PTA operations at the facilities that had undergone shutdowns in the previous quarter. Meanwhile, the plastics and chemical segment continued to deliver consistent results, supported by stable regional demand seen throughout these months. Operating free cash flow was $68 million in Q3. These financial results reflect ALPEK’s ability to partially offset the impact from global oversupply, which continues pressuring refinance margins as well as lower ocean freight rates. Now, I will turn the call over to José Carlos to provide our financial performance in greater detail.
José Carlos Pons, CFO, ALPEK: Thank you, Jorge. Good morning, everyone. Thanks for joining us today. Allow me to dive deeper into our quarter results. Total volume was 1.12 million tons, increasing by 1% from the previous quarter and decreasing 8% on a yearly basis, as it remained pressured from persistent market oversupply, particularly in the polyester segment. Reported EBITDA totaled $116 million, including a $21 million negative adjustment. This figure reflects extraordinary costs from the permanent closures of the Cedar Creek and the Beaver Valley site as part of our footprint optimization strategy. Comparable EBITDA resulted in $137 million, a 10% increase from the previous quarter, driven primarily by the polyester business. Moving forward to the... As operations resumed from prior maintenance shutdowns, yet still pressured by market oversupply, as mentioned previously.
Asian integrated PET reference margins averaged $276 per ton, declining by 10% from the previous quarter, and Chinese PET margins decreased by 14% to $134 per ton. Chinese reference margins stabilized during the quarter, a shift of the volatility seen in the first half of the year. However, it continued to be at very low levels. U.S. reference paraxylene prices increased 1% from the second quarter to $1,139 per ton, yet remained 8% lower compared to the same period last year. This narrowed the spread between North American and Asian prices to $253 per ton, an 8% decrease from the previous quarter. Polyester comparable EBITDA reached $88 million, a 24% increase quarter on quarter, supported by a better product mix and operational cost performance. On a year-to-year basis, global oversupply, trade-related headwinds, and lower freight costs continue to have a negative impact.
Meanwhile, the plastics and chemicals segments continue to deliver a stable performance. Volume totaled 195,000 tons, up 3% from the last quarter and down 12% from last year, as normalized demand levels persist. Moving on to industry references, polypropylene margins remained flat in line with our guidance expectations at $0.14 per pound, while average propylene prices declined to $0.36 per pound, down 5% from the previous quarter. On the other hand, North American reference margins for EPS averaged $0.38 per pound, up 22% sequentially, while average styrene prices decreased to $0.44 per pound, an 11% drop quarter over quarter. Plastics and chemicals comparable EBITDA was $47 million, an 8% decrease quarter on quarter and 25% lower year on year, as improving reference margins were offset by a slightly less favorable product mix.
Looking at free cash flow and capital allocation, net working capital improved by $38 million compared to the previous quarter, driven by better inventory management and targeted optimization efforts. This positive trend was further supported by a more stable raw material pricing environment, particularly for propylene. We remain on track to achieve a full-year recovery in the range of $60 to $70 million. CapEx for the quarter was $32 million, including $28.5 million in maintenance and $3 million in strategic investments, consistent with ALPEK’s ongoing focus on disciplined capital allocation. As a result, operating free cash flow totaled $68 million, a 41% increase from the previous quarter, totaling $123 million year to date. I would like to highlight that ALPEK continues to generate significant positive cash flow and maintains a strong free cash flow yield despite the challenging industry backdrop.
On our balance sheet and financial position, net debt was $1.8 billion, up 2% year over year, yet declining by 3% from the previous quarter. Last 12 months, reported EBITDA totaled $458 million, resulting in a net debt to EBITDA ratio of 4.0 times, an increase from the previous quarter as anticipated. Notably, if we adjust for non-recurring items related to cost structure improvement and footprint optimization initiatives seen through the year, the performance leverage would have resulted in 3.7 times. As we approach year-end and as market conditions are taking longer than originally anticipated to recover, ALPEK expects leverage to remain at higher levels, and we will continue to be focused on taking the necessary measures to reduce its leverage through the following actions. One, footprint optimization.
We’ve taken decisive action by closing four facilities to date and are continuing to assess marginal sites as part of our cost discipline efforts. Two, divestiture of non-core assets. With a focus to maximize value for our shareholders, we are progressing with the potential divestiture of several non-productive assets. Three, continuous debt profile improvement. Thus far, we have successfully refinanced $690 million, improving our average debt maturity to 4.6 years, and we successfully refinanced all of our 2025, 2026, 2027 debt maturities, and we’re currently exploring opportunities for the remaining debt in 2028 and 2029. Four, free cash flow generation through net working capital and CapEx optimization, and finally, foregoing a dividend payment in 2025. Through these actions and amid a challenging industry landscape, ALPEK reiterates its commitment to continue its deleveraging efforts in line with our priority of maintaining a strong investment grade profile.
Finally, I am very excited to share that a key development for ALPEK, the National Banking and Securities Commission, or CNBV, has recently given the company the approval to merge Controladora ALPEK with ALPEK. Earlier this morning, we called for the extraordinary shareholders’ meeting to be held on November 25 to request approval for the merger between both entities. We also would like to remind our shareholders that in order to legally install the shareholders’ meeting, we require the attendance of shareholders who represent at least 75% of the capital stock. Therefore, we invite you to make sure that your shares are represented and that the respective vote is exercised. Your participation is very important to ensure that the merger is approved work-friendly and becomes effective once the legal process has been completed.
This is an important step in order for Controladora ALPEK and ALPEK to be listed as a single entity. Additionally, with 100% free float, ALPEK could become a candidate to join the Mexican Index, or IPC, among other indexes which could generate additional shareholder interest. Together with our continuous execution to prioritize competitiveness, ALPEK is confident in its ability to deliver long-term value for its shareholders. With that, I’ll turn the call back to Jorge.
Jorge Young, CEO, ALPEK: Thank you, José Carlos. Moving forward to the outlook for the remainder of the year, overcapacity will continue to be the main challenge in the industry. As a result, reference margins are estimated to remain pressured alongside low ocean freight costs, which are also expected to continue impacting our performance. In light of these dynamics, the company is revising its full-year comparable EBITDA guidance to approximately $500 million. We expect fourth quarter results to reflect lower demand from a typical seasonal effect alongside planned maintenance shutdowns in several of our sites. Looking ahead, we have a very significant development regarding trade regulations in the United States. Through an executive order effective September 8, PET has been removed from the list of exceptions on reciprocal tariffs, meaning that imports for both virgin and recycled PET into the U.S. will now carry an additional duty at the levels negotiated by the U.S.
government with numerous countries, including the key Asian countries exporting PET into the United States. This change is expected to create a more balanced competitive landscape for domestic producers. While we welcome this news, it is still early to quantify the impact of the new tariffs. Notwithstanding, we’re optimistic that we would see a favorable impact to ALPEK starting in 2026 and ending in 2027 as contracts are renegotiated and by gaining volume through displacing imports. We will provide an updated view when we issue our 2026 guidance concurrent with our full-year 2025 results release this coming February. Bárbara, I’ll turn the call back to you.
Bárbara Amaya, Investor Relations Officer, ALPEK: Thanks, Jorge. Before we start the Q&A session, I would like to restate what José Carlos mentioned regarding our upcoming extraordinary shareholders’ meeting for the approval of the merger between Controladora ALPEK and ALPEK. Your participation is extremely important to ensure the merger is effective, as in order to legally install the shareholders’ meetings, we require the attendance of shareholders which represent at least 75% of the capital stock. We strongly encourage all shareholders to participate and vote, whether by registering and attending the meeting or through proxy voting. If you have any questions, please reach out to me or anyone in the IR team. We would be happy to assist you. We will now proceed with Q&A. To ask your question live, please raise your hand. We will call on participants in the order they appear. You may also type your question through the Q&A function.
We will attempt to cover as many questions as time allows. Our first question comes from Thiago Cascado from Morgan Stanley. Thiago, please proceed with your question.
Hello. Thank you, Bárbara. Thank you, Jorge and José Carlos. I know this tends to have kind of a lagging effect on prices, and you mentioned the impact only in 2026 and 2027. With the U.S. government removing PET from the tariff exemption list, have you noticed any impact yet in new contracts or spot sales? Is it possible to see the effect flowing into 4Q results already? The second one is related to volumes. I know we have the seasonality effect on volumes in the fourth quarter and also the maintenance you mentioned. What trends have you observed in demand and volume so far in October, and what are your expectations for 2026? Thank you.
Jorge Young, CEO, ALPEK: Thank you for your questions. Those are very good questions. Yes, indeed, what we said is that we expect to see the impact of the reciprocal tariffs more into 2026. There are some relatively small positive reactions in the fourth quarter, but for the most part, we will see the effects in 2026 as contracts renew and also consider that imports had been heavy throughout the first nine months of the year. The market needs some time to absorb and still digest that pipeline. Yes, some small positive signals in the fourth quarter. The most relevance will happen in 2026. In particular, the fourth quarter, we have the low seasonality, which is typical of the fourth quarter.
I would say the last two or three years have been more acute than what we had seen in previous decades, I would say, but also compounding effects from the heavier levels of imports in the first nine months of the year. That mostly explains the more weakened view on volumes in the fourth quarter.
Thank you. Very clear.
Bárbara Amaya, Investor Relations Officer, ALPEK: Our next question comes from Ben Isaacson from Scotiabank. Ben, please proceed with your question.
Hi, can you hear me okay?
Yes, very good.
Oh, great, great. Thank you. I just have one question. When you think about your key chemicals, PET, polypropylene, EPS, etc., can you rank them in terms of two different things? One is through cycle return on invested capital, and then number two is free cash flow conversion. Can you just explain which of the chemicals are kind of more efficient from a use of capital point of view? Thanks.
Jorge Young, CEO, ALPEK: Generally speaking, our plastics and chemicals, polypropylene and EPS, are more efficient in return of capital throughout the cycle. I think we have some more elements for differentiation and a little bit less exposure to other markets. Most of our footprint is in North America in those two businesses.
Just to be clear, you would have a better return on capital, a better free cash flow conversion in the PMC segment. Does that mean that it deters you from investing capital in the polyester segment in the future?
Not necessarily. I think the polyester segment has very interesting opportunities to still improve its technologies and its cost. I think we are nurturing and working into those projects as we speak. When they’re ready, we will revisit our cash flows, and they will likely be still financed within the cash flows from the polyester division. That’s something we will see in due time.
Thank you very much.
Maybe just an addition to that, the way that we have also been able to compensate in the polyester segment is through acquisitions. We’ve made very attractive acquisitions in the past at below replacement cost of capital, and that compensates what Jorge just indicated.
That makes sense. Thank you.
Bárbara Amaya, Investor Relations Officer, ALPEK: Our next question comes from Leonardo Marcondes from Bank of America. Leo, please proceed with your question.
Hi guys, thank you for picking my questions here. I have two from my end. Regarding the readjustment guidance, I would like to understand a bit better. I mean, as you have already said, volumes in the first quarter are usually lower than in the third quarter. I would like to understand if all this revision of the guidance for this year is mainly attributed to these lower volumes, right? Because at the end of the day, spreads in October have been stronger than the third quarter average, and there’s also this PET import duties that, okay, we should see the effects a bit better in 2026, but maybe in the fourth quarter, there should be also an impact there. My first question is if the downward revision in guidance can be only attributed to lower volumes. The second question is regarding the PET market itself.
If you guys could provide any update regarding the market dynamics, and mainly if you have seen any new announcement in shutdown capacity, and what could we expect from this regard for the next year? Thank you very much.
Jorge Young, CEO, ALPEK: Thank you for your questions. I think in the fourth quarter, while there is a small uptick in margin on reference margins, they still remain at a very low level. The other important variable is that ocean freights have come down from the second and third quarter levels. Also, in the third quarter, demand was, while it was steady and robust in some of our segments, it was somewhat below what we had expected earlier in the year. As I mentioned, in a very important market for us, like the United States, imports of Asian products had been very heavy in the first nine months of the year. There was a significant wave of imports before April when the reciprocal tariff dynamics were evolving. That still put pressure on third quarter. That’s basically the reason of our reduced expectations.
As far as PET market dynamics, I think we can see that several plants in Asia and in Europe are under tremendous pressure. There are rumors and discussions, but nothing that we can say specifically at this time.
Just maybe one follow-up here regarding the narrative of the anti-involution in China. Do you expect an impact from that on the petrochemicals, or so far, what has been announced has been softer than initially expected?
I think that’s just an emerging discussion. I think still there has been, again, in many products, even beyond petrochemicals, discussion on how to deal with the excess capacity in China. In the chemical field, this anti-involution is being discussed in the context that plants that are either 15 or 20 years old or older must be scrapped. Honestly, I don’t know exactly to what extent that is still, if indeed it’s happening. If at all, there will be a modest effect, I believe. I think we are bracing for a tough cycle and for actions on having the right footprint, having the high focus on cost efficiencies in our balance sheet. For us, that’s the way to go. We still have some selective opportunities to add investments in product differentiation and some debottlements. We will share some of those early next year.
This is navigating in a tough environment on a tough cycle. That is our assumption. If indeed some of these closures happen and happen at a higher magnitude or pace, that’s potentially an upside for us, we think.
Got it. Thank you very much.
Bárbara Amaya, Investor Relations Officer, ALPEK: Our next question comes from Pablo Ricalde from Itaú. Pablo, please proceed with your question.
Morning, ALPEK team. I have two questions. The first one is a follow-up on Leonardo’s question on the guidance. I just want to ask if your new $500 million assumes some benefits coming from the new reciprocal tariffs, or that’s an upside risk in case these new tariffs help on the PET markets. The other one is on the negotiation of contracts. If I’m not mistaken, you usually negotiate them around October, November. I don’t know if you can provide how those negotiations are evolving.
Jorge Young, CEO, ALPEK: Yes, Pablo, thank you for your question. Yes, I think in the guidance, we are factoring everything we know. As we have said earlier, the market is going to take some time to continue to digest the relatively large level of imports that came through the first nine months and is in the lowest quarter of the year. That’s why the effects are relatively small. Those are already factored. The negotiations, as you just said, are just beginning. This is the period where negotiations normally happen in the industry. A relevant portion of the volume is normally up for negotiation year after year, and that’s just beginning. That’s why we prefer to see how that process evolves. We go from there, and we’ll let you know more quantitatively in the beginning of the year. Just some facts.
Imports from Asia in an annualized pace through September are close to 800,000 tons into the United States, like 760,000. On the five or six main Asian countries that bring product into the United States, the change in the tariffs was between 15% and 20%. I think that will, again, provide us more opportunities to capture volume, potentially increase margin. We want to navigate those quarters. I think it’s just early, and again, the demand is quite soft to close the year. I think we like to take our time.
Perfect. Thanks a lot, Jorge.
You’re welcome, Pablo.
Bárbara Amaya, Investor Relations Officer, ALPEK: Our next question comes from Joao Barcello from UBS. Joao, please proceed with your question.
Hi, Jorge, José, thanks for taking my questions. I have two very quick questions from my side. Could you provide an update on the current investment plans in terms of how material potential movements could be and their timing? Moreover, considering the increase of leverage to 4 times the EBITDA, do you maintain the 2.5 times target? If so, when do you expect ALPEK to reach this goal? Could we consider a resumption of dividend payments out of next year’s radar? Thanks.
Thank you, Joao. Very good questions. First of all, the divestiture of non-strategic assets, as we have already indicated in previous calls, we have around three sites that we shut down in the U.S. We’re exploring the opportunity to sell those assets. There are ongoing processes in two of them, and we’re progressing as fast as we can, but it takes time to be able to close the transaction. No update on the potential timeframe for closure. However, we’re doing whatever we can to proceed as fast as we can. That could be a smaller contribution, probably around $30 million to $50 million altogether, those three assets. On the other hand, the Mexican, the Monterrey site, we continue to evaluate opportunities for that asset. It seems less likely that we will be able to sell it as it is.
We might need to think of further options on splitting the asset or developing a little bit further. We are working on those options and evaluating the potential requirements of capital. We will continue to give you updates on a quarterly basis. No further update, but it’s a valuable asset that could contribute. We’re not in the mode of fire selling that asset at this moment. In terms of leverage, yes, our target continues to be 2.5 times. Unfortunately, our leverage increased in this quarter. We have done, as indicated in my initial comments, everything we can, and it’s in our hands to improve and to reduce the impact of different factors that have impacted us. We expect to continue deleveraging throughout 2026. We expect that we will be closer to the 2.5 times by year-end. Of course, we will continue to find avenues to reduce the leverage.
One item that we will evaluate potentially in the second half of the year is a dividend. Of course, it would depend on where we are and how we see the environment and the performance of ALPEK. At this moment, it seems difficult to give you a precise answer if there’s a dividend in 2026 or not.
Very clear. Thanks.
Thank you.
Our next question comes from Rodrigo Almeida from Santander. Rodrigo, please proceed with your question.
Hi, Jorge. José Carlos. Thank you for taking the question. Just one from my side. If you could give us an updated view on what to expect in terms of direction in working capital for the fourth quarter, and perhaps for early 2026 as well, if you can, just so we have a sense of your expectation in terms of cash generation for the next few quarters. Thank you.
Thank you, Rodrigo. Yes, as we indicated, this third quarter was positive and we were able to capture opportunities to reduce working capital. The majority of our expectation has already been delivered. By year-end, total benefit is expected to be in the order of $70 to $80 million. That would include the benefit of what we already achieved.
Thank you.
Our next question comes from Pierre Andreser from SMBC. Pierre, please proceed with your question.
Hello. This is Laura from SMBC. Thank you, Jorge and José, for your comments. In terms of guidance, you’ve mentioned $500 million for 2025. I know this is a little bit early, but do you have any idea of how EBITDA in 2026 will be impacted? How would the margins look and the CapEx for next year as well?
Jorge Young, CEO, ALPEK: Hi, Laura. Not yet. We’ll share all those details in our call in February. However, this event of the reciprocal tariffs is important, is relevant, and we would expect some sequential improvement. We like to go over the process of how the markets actually evolve on that topic. Again, it’s a positive event, but we will quantify it for you all in February.
We will see the benefit of some cost reductions that we have done in 2025 yielding results in 2026. That is something also positive for results in 2026.
Thank you. Where do you see the margins as of the end of the year?
Reference margins, we continue to see them steady on the low side. Reference margins, we mean the Asian margins. The ocean freights, which is important for us because ocean freights are correlated clearly to the import parity pricing of competing products from Asia, also remain on the low side. We would expect that environment to continue. It’s volatile, right? I think I like to say that both being on the low side, there might be opportunities for some upside, but limited, I would say. The key difference, again, in our market is the one that results from changes in trade activity, the main event being tariffs applying to Asian origins in the United States, right? Even the reciprocal tariffs are going through some challenge in the court. I think it’s our expectation from all the canvassing of opinions we’ve done throughout the industry and many industries that they will remain.
Even that event is still to be seen. That is also a reason for us to, once we are in the beginning of the year, we will have the full picture.
Got it. Thank you so much. Thank you.
Bárbara Amaya, Investor Relations Officer, ALPEK: Thank you. That was the last question in the queue. Thank you, everyone, for joining our webcast. We look forward to seeing you at our shareholders’ meeting. Have a great day.
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