Alfa, S. A. B. de C. V. (ALFFF) Q4 2022 Earnings Call Transcript

Alfa, S. A. B. de C. V. (OTCPK:ALFFF) Q4 2022 Earnings Conference Call February 16, 2023 11:30 AM ET

Company Participants

Hernan Lozano – Vice President-Investor Relations

Eduardo Escalante – Chief Financial Officer

Roberto Olivares – Chief Financial Officer-Sigma

Carlos Jimenez – General Counsel

Conference Call Participants

Nikolaj Lippmann – Morgan Stanley

Rodolfo Ramos – Bradesco BBI

Alejandro Azar – GBM

Operator

Good morning, and invited to ALFA's Fourth Quarter and Year End 2022 Earnings Conference Call. At this clip each participants are successful a listen-only mode. Later we will behaviour a question-and-answer convention pinch instructions fixed astatine that time. However, you whitethorn taxable questions astatine anytime coming utilizing nan Q&A conception connected nan webcast. As a reminder, today's convention telephone is being recorded.

Now I would for illustration to move nan telephone complete to Mr. Hernan Lozano, Vice President of Investor Relations. Thank you. You whitethorn begin.

Hernan Lozano

Thank you, Rob. Good afternoon, everyone, and invited to ALFA's convention call. Further specifications astir our financial results tin beryllium recovered successful our property release, which was distributed yesterday day together pinch a summarized presentation. Additionally, this greeting we released our 2023 guidance. All are disposable connected our website successful nan Investor Relations section.

Let maine punctual you that during this call, we will stock forward-looking accusation and statements, which are based connected variables and assumptions that are uncertain astatine this time. It is my pleasance to participate successful today's telephone together pinch Eduardo Escalante, ALFA's CFO; Carlos Jimenez, ALFA's General Counsel; Roberto Olivares, Sigma's CFO; and representatives from each ALFA company. Before moving on, conscionable a speedy reminder that arsenic a consequence of nan approved spin-off, Axtel meets nan meaning of a discontinued cognition successful accordance pinch IFRS since nan 3rd 4th 2022. Unless different specified, each consolidated figures referenced successful this telephone exclude Axtel.

I will now move nan telephone complete to Eduardo.

Eduardo Escalante

Thank you, Hernan, and bully greeting everyone. We greatly admit your information today. 2022 was different very beardown twelvemonth for ALFA pinch a unsocial operation of coagulated financial capacity and transformational progress. We delivered grounds income and EBITDA, simplified further our firm structure, return superior to shareholders and our businesses invested successful early maturation while maintaining financial flexibility. We besides proceed to time off our committedness to ESG advancing connected general capacity targets and improving our ratings. Annual consolidated income were $18.1 cardinal and EBITDA accrued 13% to $2.1 cardinal boosted by Alpek.

Throughout nan year, Alpek successfully capitalized connected outer tailwinds, an integrated transformational acquisition reaching historically precocious volume, gross and EBITDA. The 4th quarter, however, people a displacement aft an extended play of favorable dynamics successful nan world petrochemical industry. Average Brent lipid prices declined during nan 2nd half of nan year; reference water freight rates dropped quarter-on-quarter; and Asian polyester margins were beneath $400 per ton for nan first clip since 3Q 2021. As a result, consolidated 4th fourth EBITDA was beneath our expectations, totaling $346 million. This fig includes a antagonistic effect of $84 cardinal from bonzer items astatine Alpek related to nan effects of little petrochemical feedstock prices. Adjusting for bonzer items, 4Q 2022 comparable EBITDA was down 13% year-over-year, resulting from declines astatine Alpek and Sigma. Alpek was negatively impacted by little polypropylene and PET margins astatine nan adjacent of nan year, while Sigma continued to look important inflationary pressures successful Europe.

I will now move nan telephone complete to Roberto Olivares, Sigma's CFO, to fto him elaborate connected nan company's consequence and advancement connected strategical initiatives. Please, Roberto.

Roberto Olivares

Thank you, Eduardo, and bully greeting everyone. On nan business front, I'll statesman pinch an update connected quarterly and afloat twelvemonth financial results, followed by an overview of nan actions we person taken to mitigate inflationary pressures arsenic good arsenic a mates of noteworthy strategical initiatives. And lastly, I will remark connected 2023 guidance. Consolidated revenues reached a grounds of $1.96 billion, up 11% versus 4Q 2021, driven by pricing actions successful consequence to earthy worldly costs increases. Volume successful nan Americas grew by 4%, while nan little fig successful Europe was explained by operational adjustments successful our caller nutrient business successful consequence to marketplace conditions. In contrast, consolidated EBITDA was $167 million, down 17% from first precocious levels successful 4Q 2021.

Our squad delivered a amended than expected capacity successful nan Americas done businesslike gross guidance and costs optimization initiatives aimed astatine mitigating higher earthy worldly prices. Nonetheless, these results were much than offset by nan EBITDA diminution successful Europe, contempt nan double digit value increases. Due to continued inflationary pressures and nan little publication from Fresh Meats. European EBITDA was further impacted by nan 11% depreciation of nan Euro versus nan dollar.

Full twelvemonth revenues reached a grounds of $7.4 billion, 9% higher year-on-year driven by double digit maturation successful nan Americas. Meanwhile, afloat twelvemonth EBITDA was $652 million, down 12% versus 2021 owed to nan greater than expected effect successful Europe, which offset nan affirmative capacity successful nan Americas.

As I did successful nan erstwhile net call, fto maine return a infinitesimal to item ratio initiatives carried retired crossed each regions. This see those of Fuel, our companywide programme successful our resetting costs basis, leverage our world scale, reducing costs system complexity, and improving procuring practices. During 2022 Fuel’s initiatives resulted successful $41 cardinal successful savings and costs avoidance.

Additionally, we proceed to instrumentality initiatives to heighten profitability successful Europe. For example, during nan quarter, we further streamlined our footprint successful Spain, transferring accumulation lines from our works successful Olvega to nan rebuild works successful Burgos. Consolidating these operations is expected to summation capacity utilization and amended wide ratio successful this region.

On nan sustainability front, I would for illustration to mention that during 2022, our information system initiatives resulted successful nan avoidance of 1,360 tons of virgin integrative reaching much than 7,880 tons avoided since 2018.

Furthermore, for nan 2nd twelvemonth successful a row, we surpassed our mishap complaint simplification target by 23% much than 3 years anterior to our committedness date.

Moving connected to our 2023 guidance, we forecast revenues of $8.1 cardinal and an EBITDA of $705 million, considering comparatively unchangeable overseas speech rates year-over-year. In addition, 2023 EBITDA guidance includes nan $26 cardinal OpEx finance successful our maturation business portion arsenic initiatives precocious from exploratory to piloting phases. Keep successful mind that these figures includes nan operations successful Belgium and nan Netherlands, and this will beryllium revised upon completion of nan transaction.

Looking up to 2023, we person galore reasons to beryllium optimistic and expect a stronger twelvemonth amid nan little inflationary costs pressures, peculiarly successful Europe. At nan aforesaid time, our actions are aimed astatine maintaining user preference, reinforcing partnerships pinch clients and suppliers, and advancing your ain sustainability journey. Together we will flooded challenges and proceed our paths towards sustained semipermanent growth.

Thank you for your attention. I will now move nan telephone backmost to Eduardo for further comments and closing remarks.

Eduardo Escalante

Thank you, Roberto. On nan strategical front, we are very proud of Alfa profound translator since we announced a gradual and orderly process to unlock nan company's bonzer worth potential.

Looking back, Nemak was successfully a spinoff. Corporate expenses person importantly decreased. Sigma formed a world-class advisory board, and we are successful an precocious shape to a rotation disconnected Axtel. Importantly, we person a strengthened our financial position and maintained our finance people ratings passim this journey.

With respect to nan Axtel spinoff, we are actively engaged pinch nan Mexican Securities and Banking Commission, arsenic good arsenic different applicable parties to finalize this important milestone arsenic soon arsenic possible. Even though Axtel is now presented arsenic a discontinued cognition successful Alfa’s consolidated financial statements, I would for illustration to item Axtel's sequential EBITDA betterment since 1Q 2022, coagulated rate procreation and caller liability guidance efforts.

Another important advancement successful Alfa’s translator is disbursal simplification astatine nan firm level. Close coordination betwixt nan subsidiaries and nan powering institution person resulted successful a 30% alteration successful Alfa’s headcount and a 65% diminution successful firm expenses since 2019, which is nan twelvemonth earlier we began our transformational process.

We are pursuing a disciplined and balanced attack towards superior allocation. Combining strategical investments pinch nan continued transportation of worth to shareholders and reducing leverage, these priorities are highlighted by our actions successful 2022.

First, our businesses deploy $1.1 cardinal successful superior expenditures to support maturation organically and done acquisitions. Second, Alfa shareholders benefited from rate dividends and stock repurchases totaling $256 million, which correspond an aggregate output of 7.5%. And third, firm level nett indebtedness decreased by $66 cardinal versus year-end 2021.

Our consolidated nett debt-to-EBITDA ratio was 2.3 times astatine nan adjacent of nan 4th fourth comprised of 1.3 times ratio astatine Alpek and a 2.7 times ratio astatine Sigma. These are important metrics for america arsenic each businesses individual leverage and underlying expertise to make powerfully pinch information is important for nan early phases of Alfa’s unlocking worth process.

Let maine move topics to nan succession process announced precocious by Alpek, arsenic galore of you know, Pepe Valdez, Alpek CEO will modulation to a caller domiciled connected March 1 arsenic elder advisor astatine Alfa. Following a singular 46 twelvemonth tenure, his imagination and thrust resulted successful aggregate transformational acquisitions and agelong lasting strategical partnerships that boosted Alpek’s position successful nan world petrochemical industry.

We are each highly grateful for purpose, invaluable legacy, and excited that Alpha will proceed to use from his extended business experience. Jorge Young has been appointed CEO by Alpek’s Board of Directors, besides effective connected March 1. During his 32 years astatine Alpek, Jorge has served successful galore cardinal roles crossed nan polyester segment. He is presently nan President of Alpek Polyester, a business that contributes 66% of Alpek’s revenues.

We look guardant to Jorge's activity to proceed building upon nan galore opportunities ahead. It is important to statement that 2 of our subsidiaries implemented CEO level successions during 2022. We were thrilled to spot that nan Boards of Directors of some Alpek and Axtel appointed their caller main executives to soul promotions. This underlines nan astir valuable plus we person successful our organization, an bonzer talent pool.

Moving adjacent for a little update connected our advancement related to ESG, I would for illustration to return a infinitesimal to talk a very important societal initiative, ALFA Fundación. This programme focuses connected promoting societal mobility done education. Our squad useful intimately pinch nationalist schools successful Monterey, Mexico to place talented students and thief them create their afloat imaginable done inferior precocious schoolhouse and college.

We observe that ALFA Fundación completed its first 9 twelvemonth acquisition support rhythm arsenic 47 outstanding students obtained assemblage degrees successful Mexico and abroad. For reference, almost 2,000 students were enrolled during nan 2021-2022 schoolhouse year, and much than 5,200 person benefited from this inaugural since our first aft schoolhouse support center, began operations successful 2013.

On a much broad standpoint, Alfa summation its ESG people astatine nan S&P Global Corporate Sustainability Assessment for nan 3rd twelvemonth successful a statement and stay astir manufacture mean for conglomerates. Additionally, scores from CDP and MSCI amended year-over-year arsenic we proceed to incorporated champion practices into nan measurement we do business and lend towards creating a much sustainable future.

You tin study astir our ESG efforts successful our 2022 yearly study to beryllium released astatine nan upcoming shareholder assembly. Let maine adjacent pinch a little overview of our guidance for afloat twelvemonth 2023. The past twelvemonth was an exceptional 1 for Alfa and particularly for Alpek, pursuing 2 years of bonzer tailwinds, Alpek phases a return to much normalized conditions, including little reference margins and water freight rate.

In contrast, Sigma expects to use from nan moderation of power costs and different inflationary pressures successful Europe, arsenic good arsenic pricing actions and costs redeeming initiatives already implemented.

On nan macro front, we expect arsenic little GDP maturation successful Mexico, nan U.S. and Europe. Crude lipid prices are expected to moderate, but still beryllium astatine precocious levels. Reflecting these cardinal macro variables and nan individual driving factors astatine Alpek and Sigma, consolidated gross is expected to beryllium $17.4 billion, 4% little than Alfa’s grounds 2022 level.

EBITDA is projected astatine $1.6 cardinal adjusting for nan nett bonzer summation of $60 cardinal successful 2022, comparable EBITDA is expected to alteration 20% year-over-year, chiefly reflecting nan precocious comparative level astatine Alpek. Total CapEx of $732 cardinal represents a 34% alteration versus 2022, which was boosted by Alpek’s Polyester business acquisition.

In closing, I want to convey each Alfa squad personnel for their important domiciled successful achieving these bully results by capitalizing connected favorable conditions, navigating a analyzable environment, and driving our transformational efforts. We entered 2023 well-positioned to proceed delivering connected our cardinal objectives.

This reason my remarks. We are now disposable to return your questions. Please Hernan.

Hernan Lozano

Sure. We would for illustration to statesman nan Q&A convention pinch questions connected Alfa. Eduardo, Carlos and I will return questions connected Alfa aliases firm matters. As a reminder, Sigma, Alpek and Axtel will beryllium disposable to reply individual questions later successful nan Q&A session. Rob, please instruct participants to queue for questions connected Alfa.

Question-and-Answer Session

Operator

At this time, we’ll beryllium conducting a question-and-answer session. [Operator Instructions] Our first mobility comes from Nikolaj Lippmann pinch Morgan Stanley. Please proceed pinch your question.

Nikolaj Lippmann

Hi, convey you very overmuch for taking my question. I was wondering if you tin talk nan determination to payout dividends from nan Alfa level vis-à-vis nan imaginable worth that is being – not being executed successful – shown successful nan marketplace to nan – conscionable nan number of nan worth of your existent liking successful Alpek is akin to your worth successful – of Alfa. So it looks for illustration there’s a important discrepancy.

So if you proceed to talk nan dividend versus nan imaginable stock appreciation, really you benignant of measurement nan two. So that’s number one. And number two, wherever do we guidelines successful position of nan illness of nan holding into Sigma? And what are immoderate of nan milestones that alternatively that you’re looking for complete nan adjacent twelvemonth aliases 2 arsenic you deliberation astir that? Thank you very much.

Eduardo Escalante

Sure. Thanks, Nikolaj for your question. Let maine statesman by mentioning what do we spot for dividends going into 2023 to person a small spot of context. We do expect to proceed paying dividends to shareholders and that is portion of a equilibrium attack that we person been pursuing and proceed to follow.

We deliberation a operation of dividends positive buybacks positive a nett simplification astatine nan holding level is nan champion measurement to spell guardant until we are successful a position to move up pinch nan adjacent phases of nan transformational process of Alfa aft we decorativeness nan spinoff of Axtel. And fto maine springiness you a image of nan measurement we saw 2022 and I deliberation that will thrust towards what we deliberation whitethorn hap successful 2023.

In 2022, nan holding institution received from Alpek and Sigma astir $450 cardinal successful dividends during nan year. Out of that, aft we screen liking and firm expenses and taxes and immoderate different items, nan superior allocation that stay disposable astatine nan holding institution was astir $320 million. We decided to usage those $320 million, again, connected a balanced attack betwixt dividends, we paid $196 cardinal dividends. We did $60 cardinal successful buybacks past year, beautiful overmuch taking advantage opportunistically of nan debased value of nan shares. And we besides trim nan data, nan holding institution successful astir $66 million. So, each successful all, we effort to return advantage of nan opportunities successful position of buybacks and besides move towards indebtedness reduction, and astatine nan aforesaid time, proceed paying dividends astatine nan holding company.

We consciousness nan costs of nan dividends and is portion of nan worth transportation that we should proceed doing to our shareholders together, successful peculiar until we scope a shape wherever we are fresh to move guardant pinch nan adjacent phases of nan restructuring of Alfa, which surely we do request to trim not only nan data, nan holding company, but besides we request for Sigma to amended nan results and get a much patient equilibrium expanse successful bid to move guardant pinch immoderate activity pinch Alpek and Sigma.

Nikolaj Lippmann

Thank you.

Hernan Lozano

You’re welcome.

Operator

Our adjacent mobility comes from Rodolfo Ramos pinch Bradesco BBI. Please proceed pinch your question.

Rodolfo Ramos

Just a follow-up, for nan Axtel spinoff, erstwhile do you expect america to yet close, and past I missed your past remark connected nan – going forward, arsenic we look retired to nan adjacent steps successful your unlocking worth initiative. What are nan adjacent steps that you’ll beryllium looking to complete? I mean, it’s clear that EBITDA astatine nan Sigma level needs to go much normalized, but conscionable wanted to get a consciousness of what timeframe we are looking astatine here. Thank you.

Hernan Lozano

Thank you, Rodolfo, for your question. I’m going to inquire Carlos Jimenez Alfa’s General Counsel to remark connected Axtel’s spinoff. Please, Carlos.

Carlos Jimenez

Rodolfo, bully greeting and bully greeting to everyone. Regarding nan completion of nan process to spinoff Axtel, we person proceed diligently moving pinch nan CNBV and nan Bolsa Mexicana de Valores, and we judge that we’re going to beryllium fresh to complete nan process by adjacent month. So wrong this 4th nan first 4th of 2023 we estimate that nan process will beryllium afloat completed.

Hernan Lozano

Thank you, Carlos. And Eduardo, could you return nan adjacent mobility connected adjacent steps for unlocking worth and timing related to EBITDA betterment successful Sigma?

Eduardo Escalante

Sure. Thank you. Thank you, Hernan. And acknowledgment Rodolfo for nan follow-up question. The adjacent important milestone is finalizing nan Axtel spinoff. We are very focused connected that astatine this time. After nan spinoff is completed, we do person timing flexibility. We do not person a circumstantial timeframe to move guardant pinch nan adjacent phases of unlocking value. And nan logic for that is, we scheme to do an orderly process, which is we consciousness is cardinal for maintaining finance people ratings astatine some astatine Sigma and Alpek, arsenic good arsenic astatine nan genitor company. So we want to beryllium highly careful, what we do and erstwhile we do it. Adequate leverage ratios astatine Alfa, Alpek and Sigma are a cardinal information successful bid to beryllium capable to move forward.

Now, successful nan meantime, we will proceed attraction connected ensuring and orderly process successful each 1 of nan businesses. In nan lawsuit of Alpek, we will proceed trying to maximize profitability. Sigma, which you mentioned successful your question, we are moving towards and trying to accelerate nan betterment successful bid to amended leverage and fortify nan financial elasticity via higher EBITDA successful Sigma, which should let america to move forward. But again, we do not person a circumstantial timeframe to proceed pinch nan process.

Rodolfo Ramos

Thank you.

Operator

Our adjacent mobility comes from Alejandro Azar pinch GBM. Please proceed pinch your question.

Alejandro Azar

Hi. Good morning, Eduardo and Hernan. It’s a travel up connected nan holding debt. That should beryllium northbound to $1.1 billion, $1.2 billion. But my mobility is it seems that Alpek will not salary outer dividends successful 2024, astatine slightest from nan convention telephone that that they conscionable did astatine 9:00 AM. How – according to your numbers, Alfa will make astatine nan holding level astir $200 million, $300 cardinal earlier paying dividends that would return 4 years to destruct wholly nan nett debt. Is only dividend nan measurement to spell here, aliases are we still having immoderate divestments astatine subsidiary, aliases possibly astatine nan holding level? What tin you opportunity astir that? Thank you.

Eduardo Escalante

Sure, Alejandro and acknowledgment for nan question. Certainly, we are looking astatine different sources of costs successful bid to trim nan indebtedness astatine nan holding institution successful summation to nan dividends that we person from Alpek and Sigma. We person mentioned before, and we proceed successful nan process trying to waste nan onshore we person present successful Monterrey astatine nan firm offices wrong location is important worth location that we tin capture. Of course, that depends connected really nan marketplace for onshore evolves present successful Monterrey. But that’s an opportunity.

And we are besides looking astatine immoderate different opportunities successful bid to divest immoderate non-strategic assets successful bid to beryllium capable to accelerate this process. At this clip we person thing to talk aliases to announce, but that’s an alternative, surely successful bid to beryllium capable to accelerate nan simplification of nan indebtedness astatine nan holding company.

Alejandro Azar

And 1 more, if I may, Eduardo connected dividends. Dividends successful nan past 5 years person been very volatile, and limited connected really nan business Alpek and Sigma performed believing that, that, aliases seeing nan guidance of Alpek, should we expect that Alfa’s dividend of $200 cardinal is been – it's reduced successful 2023.

Eduardo Escalante

Thanks. Alejandro, I would opportunity it is early to mention a figure. What I tin show you is that Alfa’s people will find nan dividend for this twelvemonth and will make a connection to beryllium presented successful Alfa’s shareholders meeting, which will beryllium held connected March 9th of this year. We haven't – it has not been defined astatine this time. We surely by that day will person something, of course, nan Alfa committee will see elasticity and they recognize this twelvemonth pinch nan uncertainty that we person connected nan results they will astir apt effort to support immoderate elasticity connected nan magnitude of timing and the, of nan projected dividend, but it's excessively early to springiness you a figure.

Alejandro Azar

Great. Thank you very much.

Operator

There are nary further audio questions successful nan queue.

Hernan Lozano

Thank you, Rob. Let maine now move connected to a mates of questions that we're getting from our webcast. I judge that astir of them person been covered successful nan erstwhile section, but there's still 1 that asks astir our equilibrium of nett indebtedness astatine nan holding institution level and nan magnitude of dividends received successful 2022. Could you remark connected that Eduardo please?

Eduardo Escalante

Sure, sure, Hernan. The nett indebtedness astatine Alfa Corporate astatine nan extremity of past twelvemonth was $1.142 cardinal [ph] astatine nan closing of nan erstwhile twelvemonth 2021, it was $1.2 billion. All successful each nan nett indebtedness simplification was $66 million. And nan dividends that we received successful astatine nan holding institution past twelvemonth were $150 cardinal from Sigma, and $304 cardinal from Alpek. So each successful each is it was $454 million.

Hernan Lozano

Thank you. And nan adjacent mobility is, what needs to hap to see, aliases what are nan variables that, that could move successful favour of nan unlocking worth process to spot a bull lawsuit and Alfa concluding this process faster?

Eduardo Escalante

Sure. I would opportunity location are 3 angles to that question. One is Sigma's betterment successful position of results successful order, arsenic I mentioned earlier to summation elasticity to move guardant pinch a stronger Sigma’s equilibrium sheet. The different 1 is an betterment connected Alpek’s results from nan guidance that they provided this year. Certainly amended consequence successful Alpek will put them successful a position to summation their dividends going guardant and thief america astatine nan holding company.

And finally, nan different 1 that we person discussed plus monetization of immoderate non-strategic assets, which is besides connected nan table. I would opportunity those 3 factors are connected nan cards successful bid to beryllium capable to accelerate nan unlocking worth process.

Hernan Lozano

And we person 1 past mobility from our webcast, which relates to nan truth that Monterrey is becoming a cardinal hub successful Nearshoring, and whether we person considered a partnering pinch a developer for nan existent property wherever our existent wherever we – wherever our office are astatine correct now.

Eduardo Escalante

Yes, surely that's 1 of nan alternatives that we person been moving on.

Hernan Lozano

And I judge that is our last mobility from Alfa and nan webcast. So pinch that, we will past return questions connected Sigma. Roberto Olivares, Sigma’s CFO will reply your questions. Rob, could you please punctual for questions connected Sigma?

Operator

Sure. [Operator Instructions] Our first mobility comes from Rodolfo Ramos pinch Bradesco BBI. Please proceed pinch your question.

Rodolfo Ramos

Thank you for taking my question. I person a mates present connected Mexico and Europe. On Mexico, tin you talk astir nan labour costs pressures that we are starting to spot this year, nan picnic they increase, nan higher pension contributions conscionable to spot really are you expecting that to effect margins? And connected Mexico arsenic well, what benignant of pricing actions you're expecting this year? We saw consumers much than consenting to return value increases past year, but possibly this twelvemonth mightiness beryllium much challenging. So, that would beryllium my first mobility connected Mexico.

Roberto Olivares

Hi, Rodolfo. Thank you for your question. So, fto maine commencement pinch nan 2nd 1 regarding pricing actions. We do expect to proceed mitigating nan effects of costs aliases inflationary pressures successful each of nan regions including Mexico. We expect to – fixed nan existent situations that we person successful peculiar earthy materials, we do expect to walk immoderate value increases during this year. As you mentioned past year, we were capable to summation prices really if you spot prices successful 4Q 2022 versus 4Q 2021. We accrued prices adjacent to 11%. And measurement was resilient. Volume really accrued 3% successful Mexico. So fixed that history, and nan position that we person successful our brands, we judge we will beryllium capable to do so.

Just besides I want to reiterate nan connection that we're not only looking astatine value increases to offset nan costs pressures arsenic I mentioned successful my first remarks, we're moving a batch connected costs and disbursal redeeming initiatives successful bid to protect our brands and to beryllium very targeted pinch those value increases and beryllium capable to protect besides volume.

And successful regards to your first mobility regarding nan pressures peculiarly connected labour costs and nan higher pension et cetera, I will opportunity arsenic this is happening to nan full manufacture and not only us, but this lend to nan wide ostentation successful Mexico. We're taking that into information to interactions to mitigate aliases to protect our margin. So we already relationship for that successful our guidance and successful our scheme for this year. So we do not expect immoderate important effect coming from that.

Rodolfo Ramos

Thank you. And conscionable past 1 connected Europe. I don't cognize if you tin springiness america nan breakdown of your targeted separator for this twelvemonth and if you – really overmuch you expect nan resumption of caller pork nutrient to contribute?

Roberto Olivares

Sure. So successful regards to 2023 and again, fto maine divided nan business into nan packaged meats and nan caller pork nutrient business. In regards to packaged meat, we expect measurement to beryllium coagulated to person a growth, but besides further value increases successful consequence to nan higher nutrient and labour costs that we're still seeing connected nan affirmative broadside utilities arsenic Eduardo mentioned, are much favorable correct now. So we do expect to person little unit from that. In regards to nan caller pork nutrient business, successful this case, we expect little volumes because of nan operational adjustments to relationship for nan marketplace conditions. We will attraction connected serving nan astir profitable regions. As I besides – arsenic we explained successful our net release, we already recovered nan licence to export to China, truthful that will thief connected profitability. We do expect to person a amended consequence successful nan caller pork nutrient business this year. Due to that, but nan existent marketplace conditions betwixt nan value of nan ray highest and nan value of nan cuts are putting immoderate unit connected margins successful this peculiar business.

Rodolfo Ramos

Thank you.

Roberto Olivares

Thank you, Rod.

Operator

There are nary further audio questions successful nan queue astatine this time.

Hernan Lozano

Thank you, Rod. We do person a mates of questions from our webcast. So Roberto, if you could please remark connected CapEx breakdown by region. It's 1 of nan topics that I don't judge you've covered before.

Roberto Olivares

Okay. Thank you, Hernan. So retired of nan $250 cardinal of CapEx finance successful 2022, astir 45% are invested successful Mexico – were invested successful Mexico, astir 30% successful Europe, astir 15% successful nan U.S. and nan equilibrium will beryllium successful Latin America. And retired of that astir 30% is strategical and nan remainder will beryllium attraction CapEx.

Hernan Lozano

Thank you. And nan adjacent taxable would beryllium related to measurement breakdown by regions. What tin you talk astir nan outlook for measurement crossed a different region?

Roberto Olivares

So we expect to proceed increasing successful measurement successful nan processed nutrient business aliases successful nan halfway business successful each of nan regions. In astir of nan regions, we expect betwixt low- to mid-single-digit growth. Again nan only portion of nan business wherever we don't – do not expect nan measurement summation is successful nan caller nutrient business and this is again portion of nan strategy that we're – that we're taking to support aliases take sides portion of nan separator of nan business.

Hernan Lozano

That's great. And yet related to Europe, erstwhile do you judge is nan turnaround constituent regarding Europe's profitability?

Roberto Olivares

Sure. So first fto maine conscionable opportunity that a immense information of nan EBITDA maturation successful nan 2023 guidance travel from Europe. And what we will proceed to spot further affirmative capacity successful Americas, and support successful mind that that nan conflict successful Europe is still evolving, truthful we are – we're taking a cautious attack connected this. I deliberation we're successful nan correct way to scope a pre-conflict number successful nan pursuing years. Once, I would opportunity erstwhile nan conflict continues aliases results, it will put america successful a measurement amended position to proceed our way to nan target that we have.

Hernan Lozano

Thank you, Roberto. And that's it astir Sigma.

So let's now move guardant and return questions connected Alpek and Axtel. We person Jose Carlos Pons, Alpek's CFO and Adrian de los Santos, Axtel's CFO. So Rob, could you please punctual for questions connected Alpek and Axtel?

Operator

Absolutely. [Operator Instructions] There seems to beryllium nary audio questions astatine this time. Excuse me. Someone jumped into nan queue. My apologies.

Eduardo Escalante

Okay, nary problem.

Operator

Okay. We do person a mobility from Alejandro Azar pinch GBM. Please proceed pinch your question.

Alejandro Azar

Hi guys. This is for Alpek, and if we could conscionable spell complete nan free rate flow, because it seems that moving superior this year, 2023 mostly affirmative for you guys to make northbound of $300 million, $400 million. Can we conscionable spell complete that, please?

Eduardo Escalante

Of course. Thank you for your question,

Alejandro Azar

Carlos, and my 2nd 1 would beryllium because I’m trying to look astatine really galore occurrence powerfulness you will person to salary dividends mean aliases bonzer stuff?

Carlos Jimenez

Okay. Thank you. I’ll effort to do my champion to reply your question. See regarding free rate flow, well, first of all, you request to see EBITDA, which is $920 [ph] cardinal for our guidance, we’re expecting moving superior betterment successful nan bid of $120 cardinal of betterment could beryllium a small spot more, but that’s our guidelines lawsuit astatine nan moment. Taxes and liking will beryllium astir a $100 cardinal each. So that would return you to astir about apt sorry, yes, $400 – considering already nan CapEx that we announced. So decidedly we will person opportunity to salary retired dividends aliases proceed looking for opportunities if of people that makes consciousness for shareholders.

As Eduardo indicated, we’re besides expecting to person a shareholders assembly successful nan adjacent pursuing days. We will denote location and propose a dividend. We’re not expecting to person thing different to what historically we person paid. So that’s much aliases little what we would for illustration to propose astatine nan moment. There will beryllium perchance opportunity for bonzer dividend. Well, we’ll spot depending connected nan capacity of nan company.

Alejandro Azar

Thanks, Carlos.

Carlos Jimenez

My pleasure.

Operator

There are nary further audio questions successful nan queue. Are location immoderate web questions?

Hernan Lozano

Yes. Thank you, Rob. So, we person respective questions for Axtel. And Adrian, could you please remark connected nan pursuing topics? The first 1 would beryllium nan position of nan slope loans that were precocious announced.

Adrian de los Santos

Yes, Hernan, nan slope indebtedness that, that we mentioned this greeting it’s a $100 cardinal five-year word loan. It’s a adaptable complaint loan. And margins will dangle connected nett leverage ratio. The applicable separator will go, will scope from 2 to 3.5, 3.75, depending connected what’s nan applicable nett debt. And that’s akin to what we spot successful nan marketplace coming for Axtel pinch commercialized banks successful general. So follow-up connected that if we are successful, if we were to refinance nan elder notes entirely, nan outstanding $314 million, that would summation nan costs of indebtedness of Axtel from astir 8.1% coming up 1% to 1.5%. So it will spell to 9%, 9.5% depending precisely connected really nan liking complaint curve moves successful nan pursuing month.

Hernan Lozano

Thank you. The adjacent mobility is related to EBITDA outlook. So really overmuch would EBITDA turn successful 2023?

Adrian de los Santos

Yes, EBITDA will turn 10%. That’s our guidance for 2023. It will travel from beardown capacity successful authorities conception a betterment successful Axnet. And besides successful nan endeavor conception will the, nan integer translator services will turn double digit compensating diminution successful different lines of work for illustration voice, which we expect a azygous digit diminution successful nan year.

Hernan Lozano

Thank you Adrian. And that’s each nan topics we person from nan webcast for Axtel and nan remainder of nan businesses. So pinch that, I would for illustration to convey everyone for their liking successful Alfa, and if you person immoderate further questions, please consciousness free to scope retired to us. We would beryllium pleased to assistance you. We besides widen our champion wishes to you and your families to enactment safe and healthy. Thank you very overmuch for joining america today, and person a awesome day.

Operator

This concludes today’s conference. You whitethorn disconnect your lines astatine this time. And we convey you for your participation.