Good morning, and welcome to Alpek's fourth quarter 2022 earnings webcast. I am Anton Fernandez, Alpek IRO and t oday, I'm happy to be joined by our CEO, Pepe Valdez, our CFO, José Carlos Pons, and for the first time, Jorge Young, our incoming CEO. This presentation is divided into two parts. First, Pepe and José Carlos will comment on Alpek's fourth quarter and full year performance. Then Jorge will remark on the 2023 guidance figures. Afterwards, we'll move on to Q&A. Please note that the information disclosed here today may include forward-looking statements regarding the company future financial performance and prospects, which are subject to certain risks and uncertainties. Actual results may differ materially. The company cautions the market not to rely unduly on these forward-looking statements.
Alpek is under no obligation to update or revise any forward-looking statements publicly, whether as a result of new information, future events, or otherwise. I'd like to remind everyone that today's webcast is being recorded and will be available on the website at alpek.com. I will now turn the call over to Pepe.
Thank you Anton. Good morning everyone, and t hank you for joining us. I am very pleased to state that in 2022, we reached record figures, making it Alpek's best year to date. The continuous strong reference margins as well as high ocean freight costs and high demand throughout most of the year drove the company to achieve outstanding figures. On an annualized basis, the company reached the highest volume, revenue, reported and comparable EBITDA figures in its history. As per recent company announcement, on March first, I will be leaving my current role as CEO of Alpek and assuming the role of Senior Advisor at ALFA. Leading this incredible company for several decades has been a privilege, and I was able to oversee its growth across geographies, but most importantly, I was able to see our Alpek community develop and thrive.
Now, I would like to introduce you to a dear colleague of mine, Jorge Young. Jorge was appointed Alpek's new CEO by the board of directors and will assume his new role on March first. Course Jorge will also retain his responsibilities as President of the polyester business, which currently represents approximately 60% of Alpek's EBITDA. I have confidence in him as I have had the pleasure of working by his side for many years, and I'm certain that his experience and trajectory will enable him to lead the company successfully into the future. Throughout his extensive career at Alpek, Jorge has held key roles within our important polyester division, including President of PET and Staple Fibers.
Good morning. Thank you Pepe. I will do my best to maintain the momentum you have generated at Alpek throughout all these years. I very much appreciate your continued support for the business, for customers, and the people of Alpek. On behalf of everyone, thank you. I'm very excited for this opportunity and grateful for the trust from the board of directors. I look forward to working with you all.
Great Jorge. Let's begin by reviewing the main topics of today's presentation. First, Alpek's financial performance for the fourth quarter was below our guidance, driven by the polyester segment. Results for plastic and chemicals were above our expectations. José Carlos will review this in greater detail later on. Second, Jorge will provide insight into 2023 guidance figures and expectations, which we released earlier today. After three quarters of better than expected margins and results, this quarter we saw the following: Reduced demand across our products as a result of generalized stocking from customers on our value chain. Anticipated higher relative prices of Paraxylene in the Americas versus Asia, which impacted our volume and margins in the polyester business. Operating issues from one of our large PTA customers and longer than expected maintenance at our PTA Brazil facility.
Reference margins across our product portfolio were in the third quarter, but slightly higher than what was expected in the guidance. Another very important factor was faster than expected decrease in container freight rates from Asia, particularly for polyester and EPS going into South America and Europe. Regarding Alpek's ESG progress, we have made improvements on the following main material issues this year. On CO2 emissions and energy and energy efficiency, our Scope 1 and 2 emission decreased by 19% versus our 2019 SBTI base. One whole facilities transitioned to 100% renewable energy, which led us to increase our clean energy intake by 7%.
Two, circularity. We continue to make progress in PET circularity with the OCTAL acquisition and an additional to one of our facilities, we now have the capability to produce PET sheet with the different degrees of recycled content and additional Single Pellet Technology capacity. 33,000 tons of PET sheet post-industrial recycling in Cincinnati, 24,000 tons of Single Pellet Technology in the Salalah plant in Oman. Additionally, we incorporated 15,000 tons of SPT recycled capacity at our Pearl River facility. We will continue to explore possible projects in both PET sheet and PET resin recycling. Three, occupational safety. Our total recordable incident rate decreased by 5% versus our 2021 figures. We will continue to strive to be in the top decile of our industry, and our goal, of course, is to achieve zero accidents.
Demonstrating our commitment and transparency toward our customers and investors, the company improved its ESG ratings with all agencies. Let me mention a couple of recent highlights. CDP has updated our climate change rating from a C to a B. For S&P, we have reached the top decile for our industry, and in Sustainalytics, we are in the 25 percentile in chemical industry. We will continue to work towards advancing on all of our materiality targets and prioritize action for our 2030 decarbonization goals. José Carlos will delve more into the financial results. José Carlos?
Thank you Pepe, and thank you all for being here with us today. Let me provide some context for the quarterly results. Asian integrated polyester reference margins averaged $338 per ton, higher than expected and 60% lower than in the previous quarter, with the spread between Chinese and Asian margins increasing to $114 per ton. Meanwhile, polypropylene reference margins declined to an average of $0.23 per pound, 32% lower quarter-on-quarter, mainly due to the following: the initiation of operations of added polypropylene capacity in Canada and the Gulf Coast in the U.S., and the weakening demand towards the end of the year. In North America, EPS average reference margins remained strong during the fourth quarter, declining to $0.64 per pound, 50% lower versus the previous quarter, yet remaining at high levels.
I would like to highlight some of our best main achievements during the quarter and overall for the year. Alpek surpassed its annual volume record, reaching 5.07 million tons and setting a new historical high for its polyester segment. Quarterly comparable EBITDA of $270 million, mainly due to normalizing reference margins for all products. Once again, obtaining the highest ever annual comparable EBITDA of $1.4 billion, 45% higher year-on-year, driven by better than expected margins across all business segments throughout most of the year, as well as incremental volume from the recently incorporated PET business. Recovered $3.5 million in guaranteed debt from M&G Mexico during the quarter, totaling $26 million for the year.
Leverage 1.3 times, while still delivering extraordinary dividend payment of $196 million to shareholders in the fourth quarter, for a total dividend payment of $372 million for the year. The payment of $94 million towards outstanding bonds. Volume reached 1.23 million tons this period, a reduction of 10% quarter-on-quarter. This was related to seasonality and the softening of demand. In the polyester segment, volume was 1.01 million tons, 9% lower quarter-on-quarter, amid typical seasonality effects and PET demand softening, as well as a maintenance at our Brazil facility. In plastics and chemicals, volume was 12% lower quarter-on-quarter, due mostly to seasonality and additional polypropylene supply in the region.
On a full year basis, overall volume reached an all-time high of 5.07 million tons, a 6% rise year-over-year, related to the incorporation of the PET business in the Middle East and the solid demand experienced throughout most of 2022. Moving on to raw material price dynamics. The fourth quarter was marked by a tight macroeconomic environment and continued inflationary pressures. The average spot Brent crude oil price decreased to $88 per barrel, 11% lower than in the third quarter. U.S. reference product Styrene prices decreased by 8%, in line with crude oil. In plastics and chemicals, Propylene prices declined, averaging $0.32 per pound, a 31% decrease when compared to the previous quarter. Moving on to the EBITDA breakdown for the quarter. We can see that overall comparable EBITDA decreased to $270 million.
This was 36% lower than in the previous quarter, primarily due to overall demand and normalization of reference margins across all products. Reported EBITDA was $186 million, 39% lower quarter-on-quarter. This result also included a negative inventory adjustment of $57 million, a negative carry-forward effect of $27 million, mainly generated by declining crude oil, paraxylene, and propylene prices. We review results by key segments, polyester comparable EBITDA was $151 million, 42% lower quarter-on-quarter, and only 5% lower year-on-year. This was mainly due to the decrease in Asian integrated polyester reference margins, which averaged $338 per ton, 60% lower quarter-on-quarter. Annual comparable EBITDA for the polyester segment totaled $828 million, 80% higher than in 2021.
This was driven by the import parity benefit of freight cost and the recently incorporated Middle East business. In plastic and chemicals, comparable EBITDA was $120 million, a 24% decrease quarter-over-quarter and 30% year-over-year. This was mainly due to a decline in both EPS and PP reference margins and lower consumer demand impacted by market inflationary pressures. In terms of 2022 overall results, comparable EBITDA was a record-breaking $1.4 billion, 45% higher than 2021 from better than expected margins and solid demand throughout most of the year across all key products. With regards to free cash flow generation, net working capital investment was reduced by $129 million as raw material prices began to drop, especially in North America, where paraxylene contract prices fell 8% versus the previous quarter.
Meanwhile, CapEx totaled $51 million and was mainly allocated towards maintenance, with a portion for the construction of the Corpus Christi Polymers facility. This all resulted in a positive free cash flow of $180 million for the quarter. It is also worth mentioning that Alpek distributed a total dividend of $247 million in the quarter, representing $196 million for shareholders. For the full year, Alpek distributed a total of $494 million with $372 million for shareholders and remaining amounts for minority shareholders, leading to a dividend yield of 13%. Finally, regarding the company's financial position during the fourth quarter, Alpek's net debt increased to $1.86 billion, 3% higher versus the previous quarter. Last 12 months, EBITDA was a hundred...
was $1.46 billion, resulting in a leverage ratio of 1.3 times net debt to EBITDA. With regards to credit ratings, in 2022, Moody's and Fitch upgraded their outlooks on Alpek from stable to positive and maintained their investment-grade rating, while S&P confirmed its investment-grade rating and stable outlook for the company. Alpek maintains its commitment to continuing to strengthen its ratings. Thank you, everyone. I will now turn the call back to Jorge.
Thank you José Carlos. To conclude, regarding 2023 guidance, Alpek expects a solid year while considering the continued normalization of PET, Polypropylene, and EPS reference margins, as well as ocean freight costs. Our guidance figures are based on the following key market and business assumptions. Average Brent Crude oil reference price of $90 per barrel. Average container ocean freight costs are expected to remain at low levels, mainly impacting Polyester margins in South America and the EPS business. Asian integrated PET reference margins of $320 per ton. A gradual decline in North American Polypropylene margins, which remained high in 2022 and are expected to normalize closer to previous levels. Volume slightly below 2022 levels due to the following. In the Polyester segment, mainly driven from lower exports due to continuous pressure from the disconnection between North America and Asian Paraxylene prices.
In plastics and chemicals, mainly EPS, driven from softer demand due to construction slowdowns and packaging demand returning to regular levels, as well as in polypropylene due to additional supply in North America. Based on these assumptions, overall comparable EBITDA for 2023 is expected at $920 million. Annual CapEx is expected at $445 million, which includes $330 million for strategic projects, particularly the construction of Corpus Christi Polymers and another portion for cost improvement projects, which may include footprint optimization opportunities. We anticipate a recovery between $100 million and $150 million in net working capital as raw material prices continue to normalize. Free cash flow generation before strategic CapEx and dividends is expected to be at similar levels versus 2022.
Finally, from a financial standpoint, Alpek has kicked off 2023 with a solid position of 1.3 times net debt to EBITDA ratio. We expect leverage to remain in line with our requirements as an investment-grade company and well below our target of no more than 2.5 times. I would like to thank our team, our customers, and our suppliers for supporting Alpek. I would like also to thank you, our audience, for your attention here today. Pepe, I'll turn the call back to you.
Thank you, Jorge. I would like to highlight that my departure from the role of CEO of Alpek culminates a five-year transition process to renew and strengthen our leadership team, which is now composed by individuals with an average age of 49 years and with great experience, because most in average, they have been in Alpek for 25 years. I am proud to have worked with each of these executives throughout their careers, and I am convinced that their expertise and tenure within the company will enable them to make significant contributions for Alpek going forward under Jorge's leadership. I would also like to take a moment to thank all of our stakeholders and each and every person, past and present, who has been a part of my journey here at Alpek.
You have contributed to my growth and expertise, both professionally and personally, and I am grateful for the opportunity you have given me to work with you these past 46 years. To you, our analysts and investors, thank you for your interest, your participation, and your commitment. You have my utmost respect for your professionalism and the work that you do on a daily basis. It has been a pleasure to speak with you all of these years. Tom, we can now go ahead and open the Q&A.
Thank you, Pepe. At this time, we'll take your questions. To ask your question live, we ask that you raise your hand virtually. We will call on participants in the order that answers raised. Alternatively, you may also type your question through the Q&A function. We will attempt to cover as many questions as time permits. Our first question comes from Luiz Carvalho from UBS. Hi Luis. Please proceed with your question.
Hi everyone. Thanks for the opportunity. First of all, Pepe, congratulations and thanks for all your partnership during these years. Really glad to see your departure in a very good moment of the company, so thank you very much for everything and you know, good luck on your new phase. Jorge, good luck to you. Hopeful to have, you know, many interactions with you. If I may have two basically questions here. The first one would be to Jorge. I mean, you're taking. Of course, you have been with Alpek for years and, you know, taking a different position, so maybe we'd like to hear from you what would be your main goals and main challenges that you foresee for the next, let's say, two, three years.
The second question is more on the capital allocation strategy also. I mean, we see a very strong, you know, 2022 in terms of performance and dividends, you now have, I don't know, a CapEx with, I don't know, somehow expansion. What can we expect in terms of, I don't know, capital allocation for 2023? Thank you.
Good morning Luis. Thank you for your question. This is Jorge. I think, you know, for our long-term plans for the company is to continue the very solid strategy that, you know, I have been part of. I think among our main goals is continue to find growth opportunities and to conduct the business with financial prudence. You know, our key task and challenge is to find and deliver those opportunities that, you know, provide value to the key stakeholders, allows us to keep a very strong commitment with our customers, and show that through our actions of growth, you know, to reward investors with growth opportunities and the people, you know, to the extent we can grow.
That's the, again, our key goal and at the same time continue with financial prudence. Hope that answers your question Luis.
Yeah. Thank you. On the capital allocation for the year ahead, I mean, what are the plans in terms of deploying capital? Anything related to, I don't know, to potential dividends or, I don't know, any further projects in terms of growth? If you can share some updates on the Corpus Christi? I mean, how can we think about the capital allocation, you know, plans for the year?
Yeah. The capital allocation plan for 2023 has investments in projects and a dividend payout. The in the capital projects, the main one is the Corpus Christi PTA, PET plant that is under construction now. That's the largest projects. We also have other relevant projects in our portfolio to improve substantially our cost competitiveness. That's the... You know, as an example, we have in our PTA plans in general, opportunities to improve our competitive position in variable cost. We have advanced one of our projects for the Altamira PTA site, which is our largest plant. It's our expectation to wrap up the decision to start that project and start executing that later in the year.
That's also part of the key projects for 2023. Of course, in due time, in the next few weeks, there will be a communication to share the dividend plans for 2023.
Okay. Thank you very much. Good luck.
Thank you Luiz. Our next questions come from Leonardo Marcondes from Bank of America. Hi Leonardo. Please proceed with your question.
Hi guys. Good morning everyone. Thank you for taking my questions. Just first, I wanted to say good luck to Pepe in your future endeavors, and also congratulations to Jorge in his new role. Well, my first question is regarding the guidance. Could you provide a bit more color on what are the drivers that will lead to a reduction in PET spreads for 2023? If you could also provide if there is any upside to your projections here, and where that could come from. My second question is regarding the plastic chemical segment. Polypropylene spreads are known to be weaker this year given all the capacity being added in the U.S., right?
On the EPS side, how do you guys expect spreads to behave in this year after a very strong 2022? Thank you.
Yes, Leonardo. On your question first on polyester, we have captured in our guidance more, you know, competitive situation of... in general, in prices. In the case of polyester, the main effects are coming from the lower cost to ship products in containers. That affects some of our markets like South America, and that's being captured in the guidance. The other point of pressure that Pepe mentioned is raw material paraxylene. We expect that it will continue to stay elevated relative to Asian paraxylene prices. The issue or the implication is that it impacts our export margins and our export volumes, what has been captured in the guidance. In the case of EPS, the... have a similar situation.
The business is to be competitive with import parity prices from other regions, mainly from Asia. We have also significant opportunities to differentiate our offering. That's been. Both factors have been captured in the guidance.
Upside.
I think regarding the upside, for our business, I think what could happen is, we see demand, you know, recovering. I think we have been somewhat conservative in our volume assumptions for demand of the business. So to the extent we see, you know, more normalization of the demand in our domestic markets and eventually in our export markets when. You know, this condition that we have been mentioning on the Paraxylene, we expect that to be of temporary nature. So when that situation normalizes, we would expect to recapture our regional export markets. So I would say those are among the key upsides.
In fact, to just complement Jorge, maybe I should also ask our investors to look at the free cash flow generation in the year. We do have a potential upside in the free cash flow generation as working capital is recovered throughout the year. I understand you'll judge the performance on based on EBITDA, but also free cash flow is very important and will be continued to generate it throughout the year.
Okay. Thank you. Regarding the plastic chemical segments and EPS?
I have mentioned in EPS a similar effect. We expect more competitive margins as the cost of shipping products through the ocean has come down. As I mentioned before, I think we have an opportunity or we can differentiate our offer with service, and we expect to maintain a premium over the import parity.
Perfect. Thank you.
Thank you Leo. Our next questions comes from Nikolaj Lippmann from Morgan Stanley. Hi Nic. Please proceed with your question.
Hi. Good morning. Thanks for taking my questions. Thanks for the call. Pepe, I also wanted to both congratulate you. Thank you very much for this decade-long partnership and, and of course, Jorge, congratulations on your new role. I look at the fourth quarter numbers and see this 9% quarter-on-quarter decline in volumes at the same time as pricing is coming down. It looks like there's a lot of destocking going on into the lower prices. I wanted to see if you can give a little bit of color on how that... if that's the right interpretation, that there's a bit of a buyer strike as prices are coming down. Related to that question, when we think about the third quarter, when... Well, clearly the pricing trajectory is different.
Sorry, the fourth quarter, we're clear that the pricing trajectory is different from the fourth quarter. How many months of weakness did we have? One, two, or three in this quarter? That's a bit of a long first quarter. Sorry. The second question I have, could you provide a bit of color on the reason behind the PX decoupling, the price decoupling in Paraxylene? I would appreciate that very much. If, especially if it's linked to Russian oil, being shipped to other markets and thus providing a competitive advantage to certain Asian clients. Thank you very much, guys.
Yes Nikolaj, this is Jorge. I think on fourth quarter volume, we saw a combination of the restocking as, you know, the customers experience adjustments in their inventory chains. It basically was throughout most of the months in the fourth quarter. I think it was, you know, a clear change between Q3 and Q4 in terms of that. As we mentioned, we also adjusted some of our exports volume and to remain competitive in Northam. On the question of Paraxylene and the decoupling, it's a complex story, but I'll try to put it in very simple terms. It has to do a lot with the Russian-Ukrainian situation. There was a big volume of refined products that were being exported by pipeline from Russia, mostly into Europe.
Those flows have been stopping or reducing significantly. The refined products keep flowing now through vessels. That is requiring much more vessels deployed to move refined products, and that is impacting the shipping cost of liquids, especially clean liquids like fuels and petrochemicals. That reduces or impacts our ability to import Paraxylene to offset the pressures. The other factor that is impacting the cost of Paraxylene is just the general situation in refineries. Refinery utilization rates globally are very tight. In particular, the precursors or the feedstocks to make Paraxylene bring blending properties to the gasoline, like octane and vapor pressure, and that's in particular for the feedstock of Paraxylene, that's another source of pressure. I hope that answers your question, Nikolaj.
Very clear.
Let me, Nick, let me add something that might help you also have a feeling of what could or how soon this can change. As Jorge mentioned, there are really three factors I think there are causing this decoupling. Number one, he mentioned is the war in. Let me put it in a different way. Number one, the most important difference is the gasoline spreads from refineries. The gasoline spreads normally are around $10 per barrel. They, last year, they, you know, increased in the summer up to $40-$50 per barrel, which is unheard of. Gradually it came back down to today, they might be around $25 per barrel. Again, the normal would be somewhere between $10 and $15. Right now, we are at $25.
We believe this year is going to be strong margins until new cap-refining capacity comes into the picture. On that side, I mean, there's uncertainty, but we are assuming in the guidance that this will remain for the year. The other reason that Jorge mentioned, and this is more volatile, is this increase in ocean freight rates for liquids. In fact, it was not an issue, and we did not talk about this, but summer 2022, it was the biggest disconnection between paraxylene in the U.S. and in Asia in history. We were at a point, I mentioned already that there were times where margins were close to $50 or $50-plus.
At that time, the disconnection in Paraxylene was very high, we've contained the impact of this disconnection because we have availability of low rates from Asia. We imported or Alpek Polyester imported a lot of Paraxylene. We were expecting that increase in the spreads for the summer. We prepared for that, and we had a lot of imported PX. That decoupling at that time, summer, May, June, July last year, which was much higher than what it is today, we could mitigate to a great extent with imports from Asia. At the time, freight rates from Asia, you know, were around $50 per ton of Paraxylene, which is manageable for us.
At the end of the year, normally, you know, gasoline spreads come down, end of the year due to seasonality effect, lower demand than in summertime and driving season. Unexpectedly, because I have to say we did not put this into or capture this into the guidance for the fourth quarter, the margins of gasoline came up again, and the disconnection started to hurt. At that time, first of all, we have not prepared to import more PX. Second, the freight rates were much higher than during summertime. That's a result of what Jorge was explaining, the Russo-Ukrainian war. What I'm saying is, difficult to predict how long this is gonna last, but we need the, you know, it could change.
I mean, when the spreads of gasoline go down, situation will improve. Two, if rates start to come down, then that will also go a long way towards solving this problem. Because as I said, with a normal freight rate, this decoupling is not a problem. Third, and the other factor which is, you know, more difficult for us to forecast, the only way that this decoupling can be reduced is by the Asian PX prices to improve. The Asian producers of paraxylene are hurting a lot. The fact that they have relatively low margins or low prices for paraxylene, I think to a certain extent has to do with the slow market in China for some of the products.
I think the Chinese Paraxylene producers are concerned about the demand being low and they're being very conservative with PX pricing. Any of these three factors. A change in any of these three factors could help mitigate this problem. We have to be monitoring all of these. In the meantime, what I can say is that we are now planning to significantly increase our imports for the remainder of Paraxylene for the remaining of the year, that we can contain the differential in prices between U.S. and Asia. That we have done. Hopefully that will help, as I say, reduce the problem.
Just to clear, one follow-up. Would it be fair to assume that it kind of hit you about one month, six weeks into the quarter? It didn't hit you right in the beginning of the quarter. We were kind of into October before many of these movements really started hitting you.
No. I think October was already a weak month for us.
Okay.
Again, as Jorge explained, this is part of the reason. I think together with the freight rates which hurt our margins in South America, I think this. The stocking, to a certain extent, was included in the guidance. We did include some of that in the guidance. The changes versus guidance, most important, freight rates and this, Paraxylene situation.
Okay. I guess it's good news that it gets divided into the three months, so v ery clear. Thank you. Thanks for a good answer.
Thank you Nick. Our next questions come from Vicente Falanga from Bradesco. Hi Vicente, please go ahead.
Hi Pepe. Hi Jorge, Jose Carlos, and Anton. I had a couple here. Related to the $320 per ton margin for PET in Asia, that was in your guidance. What sort of progression of this margin do you expect throughout the year? I mean, it is our impression here that it's, we're gonna have a gradual increase as oil prices recover, but wanted to see if that's the case. The second question on your CapEx. What sort of gains do you expect to have in your EBITDA from this optimization opportunities? If Altamira expansion is included in this optimization opportunities?
If you happen to have any incremental CapEx overruns in Corpus Christi in this $445 number. Thank you very much.
Yeah on the question, g ood morning Vicente. On the question on the spreads and the margin. You know, I think the fourth quarter already ended fairly close to that level in the 330s. I think we expect, you know, mostly steady throughout the years. We did not model, you know, sharp changes in that reference margin for PET. The question on the projects. It's mostly, it's more than anything a cost optimization project for Altamira, but that would be a longer term investment. It would be probably two years of execution. From that one, we would not see specific benefits to that one in 2023.
We have others, that we will have, you know, some benefit in 2023. We can provide some color and guidance, maybe in a separate session.
Great. Thank you very much.
Thank you Vicente. Our next questions come from Guillermo Delgadillo from Santander. Hi Guillermo. Please go ahead with your question.
Yes, sure. Thanks for the call. Maybe on the first question. Considering the guidance, what you said about the EBITDA $920, what you said about the working capital, no, the comeback of the $150, CapEx $445. You're still generating a lot of cash flow, $275, which if it's not, no, the big number that everyone was expecting, at least most of the market was expecting some spreads normalization. Today, we got that. That's close to a 10% free cash flow yield at these levels of the stock price. The question is: How do you decide how much you're gonna put into the buybacks at these levels? You're trading around five-something times EBITDA, which is in the low range of your historical range, no? 1 standard deviation below.
At the same time, I'm guessing with the numbers that you released, you still have like double digits ROE.
Return on invested capital also, and on the other side, now you have enough room, as you said, to distribute at least the ordinary part of the dividend, which at this price is like 7%. When you decide how to use the cash flow, what are gonna be the main guidelines, not deciding between the buybacks, considering the valuation, return on invested capital, ROE, et cetera, and the dividend distribution, which is at least in my consideration, 10% of these prices versus the long-term rates, either dollar terms, Mexico or U.S., attractive enough. On the second question is the CapEx, we were expecting a little bit less, no? There's like $100 million more, so o n that side, what is the IRR of that project? Now, you mentioned something about Altamira two years payback.
When you decided to do this investment, now what was the IRR that throw you into the project?
Thank you Guillermo. José Carlos speaking. Well, thank you. Very good questions regarding our performance. First of all, I would like to state, return on investment or return on assets or however you measure. Well Alpek has performed very well throughout the last two or three years, well above our weighted cost of capital. We're very pleased with that. We've also been able to optimize some of our assets. The combination of good performance and optimization of certain assets, well, it turned out to close to 20%, in, and depending on what you measure, but, for sure, on a double-digit performance. Good performance on the company.
Regarding your question regarding free cash flow, certainly we will have availability to decide how we use best of capital. Jorge has outlined certain CapEx projects that we have. We're still working on them and CapEx, Jorge will comment more on that. What we will plan in terms of dividends, we'll have an assembly in the next few weeks. We will propose in that assembly, the shareholder assembly, an idea on dividends. It's at least our proposal will be similar to historical performance, not 2022, that was extraordinary, but at least to what we have been able to achieve, in line to what you're saying, 7%-8% dividend yield. Your question on buybacks, it's a tricky one. Regarding, I mean, it's...
Certainly believe that the Alpek's share, it's not reflecting the performance of the company. We think that there's upside on the value of the share. We are evaluating the opportunity for buybacks, but the issue is that we will take out liquidity to our stock, so that's also important to our investors. So we're kind of working throughout those limitations and see what we can do. But clearly, we're seeing how we can return capital to our shareholders, either to buybacks or dividends.
Great. Just finally, on the guidance, the number, no, of oil, when we see the PMIs around the world, U.S., China, Europe, it seems that we are getting some floor, no? We are having this focus on China reopening, et cetera. At the same time, no, we have had all the SPR releases from the U.S. government. If this passes and if this recovery continues, and if the U.S. manages to continue surprising on the economic surprise index, when would you be updating the guidance? If oil remains stronger, not unexpected, when would you do an update to the guidance? That will be after the first quarter or what usually is the time when you assess the stronger conditions for the crude oil guidance?
Guillermo, this is Jorge. We'll probably look at the. Depending on how significant are the changes, but potentially mid-year. I mean, we will need to decide that. It depends a lot on how drastically these general variables will change throughout the year.
Great. Thanks for the answers.
Thank you Guillermo. Our next question comes from Pedro Gama from Citi. Hi, Pedro. Please proceed with your question.
Hi. Good morning all. This is actually Andres Cardona from Citi. Most of my question has been asked. I have some very quick one, but before I go over there, I want to thank José for his partnership and congratulate Jorge, adding to the comments from my colleagues. Guys, if you can help me to understand in a little bit more detail the 3% decline in volumes. Can you comment a little bit on a per segment basis? How do you see this? The second is how do you see the Polypropylene margins at your 2023 guidance? The last one, if you can provide some color about the CapEx breakdown between maintenance, Corpus Christi and the new projects that you mentioned.
Okay. Let me start with your last question Andres. Nice to talk to you. This is José Carlos Pons. Regarding CapEx maintenance, we're typically investing around $100 million on maintenance. That's what's included in our guidance. That would be in that order. The rest will be strategic CapEx, with the larger part of that CapEx being, Corpus Christi, and the project in terms of efficiency that we're evaluating in Altamira. In terms of Polypropylene margins, similar to the ones that we saw at the end of 2022. I guess we're looking at stability. We think that that's the level that they will maintain throughout the year. In terms of the decline in volume, well, it's basically stabilizations on maintenance that we'll have throughout the year.
We're not expecting a big change, and there could be a little bit of upside. Depends on how big the destocking trend continues.
Mm.
Of course. PDX has been an effect on volumes indirectly because of the cost that it has implied. We're rationalizing certain exports to not, of course, lose money in those exports. I hope that answers your question Andres.
Thank you Andres. Our next question comes from Sofía Martin from GBM. Hi Sofía. Please proceed with your question.
Hi. Thank you very much for your answers, and thank you for your time José, and welcome, Jorge, to your new position. I have two questions for you. The first one I wanted to understand better your free cash flow generation during the quarter. Could you further explain the positive working capital that you had? My second question was related to your P&C comparable EBITDA. It grew 1% during the year-over-year. This despite a negative volume effect year-over-year as well, and negative revenues. I just wanted to understand a little bit better how this breakdown was. Thank you.
Sofía, Jorge here. In the free cash flow generation during the fourth quarter, I think the main factor was declining prices. Not much yet on volume, perhaps a little bit in volume, but mostly declining reference prices that explains the working capital recovery in Q4. That's what we expect that will continue to some extent in 2023. We will also normalize some volumes. That's another source for our working capital.
Sofía, let me add something which is interesting also for you to understand. As Jorge said, normally our investment in working capital is very much related to sales prices. Sales prices are very much a function of crude oil prices. Higher crude oil prices, higher sales prices, higher investment in working capital. In particular, something that is gonna help us in 2023, the other factor that can impact investment in working capital, apart from crude prices, is margins. When your margins increase, your EBITDA, of course, increases, but there is an effect because your investment in working capital also increases. The higher your margin, the higher your investment in working capital, in receivables. Okay. What you will see in 2023 is a very strong cash flow.
Actually, I think we mentioned the free cash flow in 2023 is higher than in 2022. Part of that is investment in working capital was very important in 2022, and there is a negative investment in working capital. There is a recovery of working capital in 2023. Part of that recovery, of course, it has to do with prices, but the other important part is, as I say, a side effect of reducing margins is that you also reduce your investment in working capital. That's something to take into consideration. As you know, as I say, cash flow, free cash flow, when you do the numbers is in 2023 it's gonna be over $500 million, $540 million, if I remember correctly.
It's higher than in 2022. Again, I think this factor of margins also plays a role because at the end, it helps you reduce your working capital.
You should look at the consistency of free cash flow generation for the last five years.
Yeah. Yeah.
It's very resilient.
Yeah. But when your experience is when EBITDA comes down, you know, investment in... You recover working capital. When EBITDA goes up, you invest working capital. That's why as opposed to the EBITDA that has certain fluctuations or certain volatility, the cash flow has been extremely-
Very resilient.
... extremely stable over the last four or five years. At around this level that I'm talking about, the $500 million.
Sofía, just maybe to answer your question regarding the Plastic and Chemicals comparable EBITDA growth. Yes, you're right. The Plastic and Chemicals, the reported EBITDA grew at a 1% rate between fourth quarter of 2021 and 2022. We tend to point you to the comparable EBITDA, which we really see as a better measure of performance of the company. There was a decline in that metric vis-a-vis 2021, vis-a-vis 2022. The reason being is the adjustment of margins. All in all, well, we did see a normalization of margins and performance in the fourth quarter of 2022.
Perfect. Thank you very much.
I believe that was our last question in the queue. As always, I'd like to remind you that you can find both a video recording or played webcast as well as a transcript on our website. Thank you all for participating in our FX webcast. Have a wonderful day.