Duff & Phelps Reaffirms Ratings of Grupo Condumex Amid Economic Uncertainty in Mexico

Strategic Insights -

Duff & Phelps Credit Rating Co. (DCR) has reaffirmed its ratings of "BB" (Double-B) on the long-term non-Peso debt and "D-4" (D-four) on the non-Peso commercial paper of Grupo Condumex S.A. de C.V. despite the challenging economic conditions in Mexico. The company, a leading manufacturer and distributor of electronic, telecommunication, and automotive components, has demonstrated resilience in the face of economic uncertainties. Notably, Condumex's domestic sales, although down, did not decline as significantly as expected due to the company's reliance on indirect exports, which comprised 31% of total sales in the first half of 1995.

Key Takeaways:

  • DCR has reaffirmed its ratings of "BB" (Double-B) on the long-term non-Peso debt and "D-4" (D-four) on the non-Peso commercial paper of Grupo Condumex S.A. de C.V.
  • The company was placed on Rating Watch-Down in February 1995 due to economic uncertainties in Mexico but has since been removed from Rating Watch.
  • Condumex's consolidated sales in the first half of 1995 showed an increase of 8.2% versus the 1994 period.
  • The company's EBDIT coverage of interest expense remained at a comfortable 2.7 times during the first half of 1995, despite the appreciation of its U.S. dollar-denominated debt.
  • Condumex anticipates using a portion of its cash portfolio to reduce debt during the remainder of 1995.
  • The company's total debt/EBDIT ratio increased from 2.36 times at yearend 1994 to 2.51 times at June 30, 1995 due to the devaluation of the peso.

Statistics:

  • In the first half of 1995, Condumex's exports tripled compared to 1994 figures, comprising 31% of total sales.
  • The company's EBDIT coverage of interest expense was 2.7 times during the first half of 1995.
  • Consolidated sales in the first half of 1995 showed an increase of 8.2% versus the 1994 period.
  • The company's cash portfolio amounts to approximately 50% of its total debt.
  • The devaluation of the peso increased the company's total debt/EBDIT ratio from 2.36 times at yearend 1994 to 2.51 times at June 30, 1995 (based on annualized first-half 1995 EBDIT).

Sources:

  • Duff & Phelps Credit Rating Co. (DCR)
  • Duff & Phelps de Mexico, S.A. de C.V.
  • Grupo Condumex S.A de C.V.