Hello, and welcome to Alpek's first quarter 2022 earnings webcast. I am Alejandro Elizondo, Alpek's IRO. Today, I have the pleasure of being joined by our CEO, Pepe Valdez, and our CFO, José Carlos Pons. This presentation is divided into two parts.
First, Mr. Valdez and Mr. Pons will comment on Alpek's first quarter performance, relevant events, and updated guidance figures. Afterwards, we will move on to Q&A. 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 uncertainty. Actual results may differ materially, and the company cautions the market not to rely unduly on these forward-looking statements. Alpek undertakes no obligation to publicly update or revise any forward-looking statements, 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 our website at alpek.com. I will now turn the call over to Mr. Pepe Valdez.
Thank you, Alejandro. Good morning, everyone, and thank you for joining us today. This morning, I am very pleased to start by saying that Alpek has kicked off 2022 on an extraordinarily strong note. Margins were more robust than expected across all the key products in our portfolio. This supported the company in achieving record quarterly highs for both comparable and reported EBITDA.
Let's start by reviewing the main topics we will cover in today's webcast. First, Alpek significantly exceeded financial performance expectations for the first quarter. José Carlos will review this in greater detail in his presentation. Second, we will discuss the progress related to the Octal acquisition. Third, we will cover Alpek's recent efforts to improve its governance practices. Finally, we will provide revised 2022 guidance per the earnings report released yesterday.
Providing some context for the first quarter result, the global economy remains strong as tightness increase in the marine freight industry due to the Russia-Ukraine conflict, resulting in higher costs and lower availability for vessels needed to balance worldwide supply chains.
In this environment, Asian integrated polyester reference margins averaged $420 per ton for the quarter, much higher than expected and only 3% lower than the previous quarter, with the spread between Chinese and Asian margins widening to $98 per ton. North American polypropylene reference margins also experienced a lower than expected quarterly decline, averaging $0.38 per pound, 20% lower quarter-on-quarter, but only $0.05 per pound lower than the corresponding figure for December.
In North America, EPS margin continued to reflect the strength they gained in the fourth quarter of 2021, declining by $0.07 per pound in the first quarter, but remaining at higher than historical levels. At this point, I would like to turn the call over to José Carlos, who will go into more detail regarding the impact of these changes on financial results.
Thanks, Pepe, and thank you all for being here with us today. I would first like to highlight some of Alpek's main achievements during the first quarter. Our overall volume increased to 1.2 million tons, on track with guidance. We achieved record quarterly comparable EBITDA of $333 million, with both the polyester and plastics and chemicals segments posting their highest figures ever for any quarter.
We gave a dividend to shareholders of $176 million, representing a 6.5% dividend yield at the time of payment. Leverage was further reduced to 1.0 times. If we start by taking a deeper look at volume, Alpek reached 1.22 million tons this period, 4% higher than last quarter, as demand for all of our products remained strong.
In the Polyester segment, volume was 3% higher quarter-on-quarter, largely due to strong demand and efficient operation across all of our sites, and a lack of weather-related events which affected us in 2021. In Plastics and Chemicals, volume was 6% higher quarter-on-quarter as polypropylene demand remained strong and Alpek was able to operate idle EPS reactors throughout scheduled maintenance at our U.S.-based facilities.
Moving on to raw material price dynamics, average spot Brent crude oil price increased to $97 per barrel, 23% higher than in the previous quarter, largely due to the effects of the Russia-Ukraine conflict. U.S. reference paraxylene prices increased by 21%, largely in line with the rise in crude oil. In Plastics and Chemicals, propylene prices remained stable, averaging $0.63 per pound, a 4% decrease when compared to the previous quarter.
Switching over to EBITDA breakdown for the first quarter, we can see that comparable EBITDA was a record of $333 million, and 11% higher quarter-over-quarter. This was primarily due to better than expected margins for our main products, as well as higher volume across both segments. Reported EBITDA was $456 million, 70% higher quarter-over-quarter.
This result also included a non-cash inventory gain of $63 million and a positive carry forward effect of $66 million. In terms of results by key segment, we can see that polyester comparable EBITDA was $193 million, 21% higher quarter-over-quarter and 116% higher year-over-year, making this the strongest quarter ever for the segment.
Results largely benefited from the entry of 2021 contracts as well as the strong Asian polyester reference margins, which remain higher than expected, averaging $420 per ton. In plastics and chemicals, comparable EBITDA also set a new quarterly record of $142 million, an increase of 3% quarter-over-quarter and 46% year-over-year.
This was mainly due to solid EPS margins stemming from a strong demand, coupled with the higher import parity prices due to increased marine freight costs, as well as polypropylene margins, which remain higher than expected for this point of the year. With regards to free cash flow generation in the quarter, net working capital investment increased by $193 million, largely due to rising raw material prices during the quarter.
CapEx totaled $40 million and was mainly used for maintenance and minor asset replacements. Alpek paid $176 million shareholder dividend as approved during this annual shareholders meeting in March. Free cash flow resulted in $120 million as record EBITDA more than offset the increase in net working capital in the quarter.
Finally, I want to discuss the company's financial position during the first quarter. Alpek's net debt increased to $1.31 billion. Last twelve months EBITDA also increased to $1.28 billion, resulting in an improved leverage ratio of 1.0x net debt to EBITDA. If considering net debt to comparable EBITDA, we also see that Alpek also improved this ratio to 1.2x. That concludes my comments. I will now turn the call back to Pepe.
Thank you, José Carlos. Turning our attention to recent events, per our announcement earlier this year, Alpek reached an agreement to acquire Octal, a major PET sheet producer. The process has continued moving forward as planned, having already received the majority of necessary approvals from regulatory authorities.
This transaction continues to be expected to close by the end of the second quarter of this year. Upon closing, Alpek estimates an accretive EBITDA effect of $85 million during the second half of 2022, which is not included in the guidance figures. As we stated in the past, Alpek strives to maintain world-class governance practices.
To this point, the company implemented a series of initiatives during its latest annual shareholders meeting, which included increased disclosure on its proposals to shareholders such as financial reporting, board composition, and fees, as well as dividends.
The addition of a new member to Alpek's board, which would have increased the share of both independent and female members. On April 18, we were deeply saddened by the passing of Francisco Garza Egloff, a member of Alpek's board of directors.
We are grateful to him for his valuable contributions to the company. Our thoughts and prayers are with his family and loved ones. As of now, Alpek has no plan to replace his board seat.
Finally, regarding our outlook for the remainder of 2022, and based on the stronger than expected margins so far this year for the key products in our portfolio, Alpek has decided to revise its guidance upwards. Our new guidance figures are based on the following key market and business assumptions. Average Brent crude oil reference price of $100 per barrel.
Asian integrated PET reference margin of $355 per ton based on higher demand and freight costs, combined with the normalization in the Asia versus North America spread mentioned last quarter, as well as a lower decline for North America polypropylene margins, although still expected to close 2022 at original guidance levels.
Overall, volume and CapEx remain unchanged as both are currently on track with original guidance. Based on these assumptions, guidance for overall comparable EBITDA for 2022 is now set at $1.25 billion. As always, I would like to thank our team, customers, and suppliers for helping Alpek reach new heights. I would also like to thank you for your attention today. I will now turn the call back to Alejandro to open the webcast for Q&A.
Thank you, Pepe. At this time, we will now take your questions. To ask your question live, we ask that you raise your hand virtually through Zoom. We will call on participants in the order that hands are raised.
Alternatively, 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 Alejandra Obregón with Morgan Stanley. Alejandra, your line has been unmuted. Please go ahead and ask your question.
Hi, good morning, Alpek. Congratulations on the amazing numbers, and thank you for taking my question. The first one I think has to do with supply-demand dynamics. You have talked about this very tight environment in PET, and I guess some of your peers have also spoken about this. I was hoping to hear more on that.
You're very close to capacity in PET. The Americas is a deficit market, and apparently global markets are actually very tight as well. I was just wondering if this is a point where we should be worrying about availability. Could this be an issue going forward, especially as we face seasonally stronger quarters ahead of us? Could this be a reason for you to change the way you're thinking of Corpus Christi? That's the first question.
I'll stop here and then ask the second one.
Well, Alejandra, I think you're right. The demand for PET has actually been higher than our estimates, not only for this year, but I would say for the last three years. It has compounded. Yes, the supply balance dynamic in particular in the U.S. is tighter than normal. But I do believe that the capacity is in place in North America to supply the demand within the next months. Of course, there will continue to be imports into North America. I do not believe issues of availability. I think the market will be well supplied.
Certainly, I would hope that this relatively high utilization rate will help, of course, maintain margins at a profitable level. This was the answer to your question. Again, we do expect, as I did mention, that you know, by the end of this second quarter, you know, the OCTAL product, I mean, the OCTAL project will be authorized. We are working very hard to make that actually end of May. If we can accomplish that would also give us more flexibility to increase imports of PET into North America. That would also help address this problem of availability.
Yes, the situation is, I mean, operation rate is high, but we do not foresee problem of shortages or problems of availability.
Understood. That was very clear.
Yeah.
That was very clear. Thank you. A second question, if I may, having to do with the contract-based part of your business. I was just hoping to understand these type of contracts, especially whether they have an energy and a transportation component baked into them.
When throughout a typical year can we expect to see all that portion of the contract base rolled over, in any given year? How does that work? Anything that can help us understand that will be very helpful. Thank you.
Well, normally, we sign, I'd say one-year contracts with our customers in North America or with most of our customers in North America. Typically these contracts are raw materials plus. It's cost plus. That probably answers one of your questions.
Yes, to the extent that these contracts are raw material plus, then they will take into account some of the increases in energy. That's on the one hand. In some cases, we even do contracts for more than a year, two years, perhaps three years at the most. That also sort of happens. As I said, these contracts are typically agreed at the end of the year, in the last quarter of the year.
Like for the U.S., we already have contracts with most of our customers for 2022, and we will revise these contracts in the last quarter of this year. That's more or less the way this works. At least on a year perspective, that gives us in our largest market, which is the U.S., a certain stability. Okay.
In South America, for example, the situation is different. In South America, our contracts normally based more on Asia prices plus. Okay. That's a different dynamic. By definition, they are not as stable as in the U.S., but they are certainly at least in terms of the volume, we know what we can sell there.
Margin can change depending on what changes in Asia, but volume-wise, they are, you know, very predictable. I think you mentioned also, Alejandra, Corpus Christi. Perhaps, you know, I'm sure this question will come up again. Let me tell you where we are at, in this moment, and perhaps as early as tomorrow, we are reviewing the status of the project.
Significant progress has been made, and we do have a very clear definition of the investment costs going forward. I would say that most likely a decision will be taken during next month, May. Let's say May probably, to sanction the project if all of the shareholders are in agreement.
From the perspective of the market, as I mentioned, you know, it's a positive situation. The cost, as I said, we believe we have more confidence in our estimate than months before. We believe we have a FEL3, which gives us a ±10% degree of change. We have the information ready for making the decision. As I said, I think we will announce what the final decision is within the next month and a half at the most.
Understood. That was very clear, and congratulations again. Thank you.
Thank you, Alejandra. Our next question comes from the line of Tasso Vasconcellos with UBS. Tasso, your line has been unmuted. Please go ahead and ask your question.
Hi, everyone. Thanks for taking my questions, and congrats on the quarter results. My first question is maybe a follow-up on the margins for both polyester and P&C segments. Margins are clearly remaining at very, very healthy levels, although some normalizations are expected looking ahead. Could you break down a little further the major upside and downside risks you view from both supply point of view and demand point of view?
We have seen demand remaining very, very healthy, so believe risks here are more on the supply side, but would be great to hear additional thoughts from you on that. My second question, you mentioned that demand remained strong despite the situation in Eastern Europe during the quarter. Could you also comment where Alpek was most impacted by the conflict?
What did you feel so far as a consequence of the war, other than in pricing? What might be the major implications for the company afterwards? Those would be my two questions. Thank you.
As you mentioned, on the demand side, demand and supply you did mention there. Well, demand as I said before, we continue to believe that demand is gonna be very stable for the rest of the year. We don't see major issues with demand. And again, margins, at least in what respects to the U.S. market also, I would say, stable for the reasons I just mentioned before.
I did forget to mention during my presentation of a very important event that have significant for at least the next five years, and that is the fact that, on March this year, the ITC decided to extend for five more years the anti-dumping duties against China, India, Oman, and Canada in PET.
That's an important development since at least for the next five years will give us that certainty. That again, on the margin, that should represent an upside. On the volume, as I say, we see things as stable.
We don't see any threat of a significant reduction in volumes in both plastics and polyester. On the supply side, the supply side is where things could change. Polypropylene in the last quarter of this year, this is the start-up of a new plant in Canada. That could be, let's say, or represent a downside, if you wanna look at it that way.
Also, again, you know, once the plants start, it certainly takes some time to get in normal operation. On the supply side, in the short term, on polypropylene, well, there are two plants in the U.S. on force majeure, and a third plant that is having some mechanical issues. We believe that perhaps for the rest of May, those plants will not be operating, or at least not fully full capacity.
That in a way, you know, give us again confidence that margins could continue to remain healthy for a longer period of time. In terms of the implications, I mean, of the Russia-Ukraine war, I mean, other than, of course, the humanitarian consequences of that, which we very much regret.
In our business, the main impact has been through higher energy prices, crude oil and natural gas prices. Those have been the main, you know, impact that we've seen. The higher crude oil prices does not really impact our margins. In fact, sometimes, as we have explained to you, it does help our margins, but it does have an impact in our cash flow because it does increase our investment in working capital.
As prices are higher, receivables are higher. It does have, you know, implication on the cash flow of the company. During this first quarter, you know, a significant part of our EBITDA went to finance the increase in working capital. Part of that had to do with these higher crude oil prices.
Of course, it does impact our natural gas prices as well. We believe that the impact natural gas prices in the US, I mean, not globally, of course, globally, it has had a big impact. In the U.S, the impact or the reason we have seen increase in energy prices has more to do with weather-related factors and with prices of coal.
Prices of coal are very high, so that makes, you know, natural gas able to replace the coal, increases the demand. The higher or the colder weather, particularly during the month of April, has also had a significant impact in prices.
Again, I think in natural gas, it's more that than the war in Ukraine. The reason for that is the LNG facilities in the U.S. are working already at full capacity. There has not been a significant increase in LNG due to the war. It has increased the volume, but it had already been planned that way. That's those will be the, I say, the consequences of the Russia-Ukraine. We do have an operation in the U.K., as you know. You know, the increase in natural gas and power prices in that particular plant are more significant.
We are relatively hedged to those price increases in with the contracts that we have.
That's very clear. Thank you.
Thank you, Tasso. Our next question comes from Vanessa Quiroga with Credit Suisse. Vanessa, please unmute yourself and go ahead and ask your question.
Excellent. Thank you, Pepe, José Carlos, Alex. My question is regarding your assumptions for the new guidance. What are you assuming for the Asian spread of PET and for the North American spread for polypropylene in this guidance? Not for the average of the year, but for the end of the year, if possible. And also, how much is impacting freight costs in import parity at levels? Thank you.
Okay. Well, those are key questions, Vanessa. I would say, I think I did mention during my presentation that we are in terms of PET, I think we're assuming Asian margins of $350, I'm sorry, as opposed to $315 in the original guidance.
In terms of polypropylene, actually, we are assuming the polypropylene margins end up the year as in the original guidance, which is the belief that they're gonna. Again, reasons that I mentioned has to do with the start of the new facility, the new plant in North America. In those two segments, I mean, we do assume that they're gonna go gradually down.
In terms of ocean freight, you know, that's the most difficult variable for us to forecast, to be honest. What they are saying is that at least for this quarter, second quarter, the freights are gonna remain pretty much where they are today.
During the second half of the year, we assume that the cost per container is gonna go down to somewhere between $6,000-$7,000 per container, I'm sorry. Versus the $9,000-$10,000 that we have today. We do assume that the freight rates are gonna go down in the second half. Those will be the key assumptions.
In very simple terms, you could say that the guidance today is based on the fact that second quarter remains relatively strong, similar to first quarter, might even be a bit higher. Second half goes back very close to the original guidance. Again, if situation were to remain as they are, we might have an upside in the guidance of the year. We will discuss when the time comes.
Pepe, in dollars, per ton, how much is the freight?
In $ per ton, we are talking of depending on, you know, East Coast, West Coast, but you're talking around somewhere between $300 and $400 per ton.
Okay. Well, yeah. Thanks, Pepe.
Yeah, thank you.
Thank you, Vanessa. Our next question comes from Andrés Cardona with Citi. Andrés, please unmute yourself and ask your question.
Thanks, Alejandro. Good morning, Pepe and José Carlos. I have two questions, maybe stay with the previous question. I would like to understand what is your view of the market dynamics that are driving a kind of a reliability premium for the domestic production in the Americas.
How sustainable do you think it could be over the mid to long term? The second one is very strong cash flow outlook remains very positive. Re-leverage remains low despite the Octal acquisition. So how are you thinking about capital allocation nowadays, if you are still looking for M&A opportunities? Or how can you, like, prioritize it versus extraordinary dividends? If you can share your thoughts about these two points.
Let me perhaps start with the second question. For the time being, as you know, you know, we have the investment of the Octal facility, and that we're gonna have to pay within the next couple of months. That will significantly increase our debt short term. Of course, we have secured their contracts, which are very attractive at very attractive rates.
We are ready to do that. The second step, Andrés, would be the decision on whether to continue or not with Corpus Christi, which I would say is high probability that we will. That will. That also represents a commitment and CapEx commitment for the next two and a half years.
We also have to take that into consideration. In terms of what I would say very likely investments, those two are clear. The other question, will we continue to look for M&A? Well, of course we will continue to look for M&A opportunities.
Decision on whether to pay additional dividends or not are going to be based on the cash flow that we see during the rest of the year. Nothing has yet been decided other than the fact that we are ready to go ahead with Corpus Christi, and we are ready to go ahead with Octal. Your first question, you mentioned reliability premium.
Well, I do believe that's a good question. I think during these last couple of years, I think a lot of our customers, domestic customers in particular, I think they have become more appreciative of the advantages of having a domestic supplier.
Not only in terms of the cost or the freight cost, but also in terms of the delivery schedule or the certainty of delivery, reliability of the shipments. Yes, I think that, going forward, Domestic customers are gonna be more willing to accept a higher premium relative to imports. I am convinced that that's gonna happen and, but difficult to put a number on that right now.
Thanks, Pepe.
Thank you, Andrés. Our next question comes from the line of Jean-Baptiste Bruny with BBVA. Jean, please, unmute your line and ask your question.
Hi, thank you very much. Just a couple of question on Octal actually. Can you be a bit more specific on the authorization you already received and the one which are still pending? In the last call you mentioned that you expected an impact on EBITDA after consolidation of about $80 million from the consolidation of Octal. Is the number still the same at current stage, or are you a bit more optimistic or pessimistic? Thanks.
All right. Well, in terms of Octal, I actually believe we have very good news. We have obtained the most important regulatory authorizations. The project has been approved by pretty much every country where we had to request a permit, including USA, Saudi Arabia, Brazil.
Turkey.
Turkey. I think pretty much every country has approved or authorized us to go ahead with the project. The only exception being Ukraine for reasons that I am sure you can understand. Ukraine, who was originally part of the agreement, we have a waiver to go ahead and close the transaction without authorization from Ukraine.
I would say from the regulatory perspective, we're all clear to close the transaction. What is pending right now is only the final, you know, the final agreements, mostly between Octal and their banks to be ready for closing. That's what I said, you know, we should, if things go as expected, be able to close sometime in May, actually, the transaction. We are very optimistic.
The last authorizations we received were over this week, last weekend. Friday from the U.S. and Sunday from Saudi Arabia. There's actually no more conditions to be met. It's just the paperwork, you know, that to close all the deal.
In my presentation, I mentioned that we expect, assuming that we close in June, we will expect an incremental EBITDA, not considering the guidance of $85 million. Again, this is aligned with sort of the assumptions behind our guidance, that second half is going to be very much in line with budget or with the guidance.
Should the margins continue, you know, as they are today, there is a significant upside on the EBITDA that we could get from OCTAL. Even more if we can close the transaction end of May, we will have an additional month. Yeah, I think there is an upside. Again, we're doing everything we can to close the transaction by the end of next month.
Perfect. Thank you. Thank you very much.
Thank you for your question, Jean. We will now move on to written questions. Our first question comes from Ben Isaacson with Scotiabank. Pepe, Ben asks,
"What is your aspiration between contracted versus spot PET volume? Why not move to 100% contracted and improve your multiple by reducing variability and investor uncertainty?
A significant portion, Ben, of our contracts is, I mean, it is on a cost plus basis. Pretty much everything in North America, Mexico as well. The only, as you say, spot prices that we have is South America, Brazil, and Argentina. Those are the biggest PET sales that are not strictly on their sort of a cost plus or fixed price.
As you mentioned, it's a matter of, yeah, we could increase the certainty of, or stability of our cash flow. Again, remember, just imagine what would have happened to us if those prices have been fixed two years ago. We would have lost a lot of upside.
It's a matter of again negotiating with the customers what they want. They just want to be more related to the prices in Asia. Again, in the last couple of years, that has been a very big advantage for us because the impact on the freight rates and the margins in Asia, we've been able to capture.
If we had been on a cost plus basis, the margins would have been significantly lower. You know, there is a. I understand your point. We would like to have everything stable, but you know, perhaps if you are suggesting what we should do is to fix those contracts at times like this, when the freight is high and the margins are high.
You can imagine our customers are quite tough. Yeah. I mean, the issue of trying to have more predictability, more stability is something that we will continue to work and then, as you say, try to increase our multiple based on that.
Thank you, Pepe. Our next question comes from Sofía Martín with GBM. Sofía asks,
"Given the higher than expected results and revised guidance, can we expect an extraordinary dividend?
Sofía, I think, again, as I mentioned, that is gonna depend on our, you know, cash flow generation from now on. And also, I would say Octal is pretty much a done deal from our perspective, and also the decision to move ahead with Corpus.
If those, I mean, if the results continue to be strong, you know, like guidance or a little better than guidance, which is a possibility, to be honest, then I would say yes. I think it's a good chance that the board will decide to increase the dividends. Always, of course, watching the leverage of the company. I mean, without going to something that would, and, you know, reduce our financial stability. That's a possibility.
Thank you, Pepe. Maybe following that thread of conversation, our next question is also from Ben Isaacson, who
Asks for a pro forma leverage post-Octal acquisition?
I would say with OCTAL only, I think it will be like, 1.5. Around 1.5.
1.5, 1.6. Yeah.
Our goal, as we have explained to you many times, would be to get closer to two. To 2x. That's something that we have some flexibility there. Hopefully we will continue to reduce our debt very quickly. I mean, when people say, yeah, what happens with your margins normalize? Well, I don't know.
Margins normalize, also the investment in working capital is gonna come down, most likely. And that will, you know, that will free a lot of cash flow. I think our investment in working capital over the last two years, you know, has been more than $400-$500 million. Yeah, we do have. Yeah. You say, well, margins normalize, EBITDA goes a little bit down.
The working capital most likely would also come down. Those are. That's the range then that we're considering. You know, trying to stay below two times even in the worst case.
Thank you, Pepe. Our next question is also from Ben, who asks, "
What debottlenecking opportunities are there to permanently increase both polyester or plastics and chemicals productions volumes? What is the timing and CapEx behind those?
We are already in process with some debottleneckings of some of our plants, not major debottleneckings. You know, small debottlenecking in our Brazilian PTA plant. We have that under consideration. The small debottlenecking in our Pearl River facility also is on the way. For the time being, those are the main projects.
We're, yeah, there is small debottlenecking in EPS in the US. Eventually, we do believe that we will pursue a project in Altamira to debottleneck PTA a little bit. More than debottlenecking, I think the objective is to improve the cost, to reduce costs, reduce cost and improve our or reduce our carbon emissions.
We do have some opportunities in all of those areas.
Thank you, Pepe. Our next question is also from Ben, who asks, "
The increase to your contract margin, how much of that was because of higher ocean freight rates? And if freight rates return to normal levels, how much of the contracted $100 per ton in PET margin could be lost?
That's a good question. I would say probably in the U.S. market, perhaps like $0.05 per pound-
Yeah.
could be lost
Okay.
from the contract.
Very well. Thank you, Pepe. We have another question coming in via live from Alejandro Chavelas. Alejandro, your line has been unmuted. Please go ahead and ask your question.
Hi, Pepe, José Carlos. Thanks. Thanks for the space, and congratulations on the results. Just a question. I've been looking at Asian polyester producers, and if I'm reading this correctly, polyester fiber margins have been falling a lot, and utilization of polyester producers has been falling a lot because of the COVID lockdowns.
Could you help us understand what is the impact of that in your business? Like, will PTA PTA spreads fall significantly? How do you read this? Because I know it's not exactly the same business as PET, but there are some cross-read implications. If you can help us understand that better, that's super useful.
Yeah. Well, of course, there are impacts. Our exposure to fibers, though, as you know, is very, very limited nowadays. We shut down our fiber capacity in the U.S. last year, so we have a really very small capacity in polyester fibers. The direct impact into fibers is very limited. In terms of PTA, I guess you are right, Alejandro.
I mean, when you look at the margins, PTA margins in Asia, under the circumstances, I would say they're on the low side. I think PTA margins in Asia are on the low side. I mean, on the low side, you consider all the cost of other chemicals into the PTA, which have been higher and cost of energy.
The margins, you look compared historically, they look okay, but if you add those factors, those cost factors, the margins are actually relatively low in PTA. I think the explanation is exactly what you're saying, the fact that the polyester fiber demand has not been as strong as expected. I think we already have some of that in our PTA margins.
Again, fiber is not an important sector for us. PET, what I explained before, we are sort of isolated, at least versus China because of the anti-dumping. In polyester fiber, we do have also anti-dumping filament to the US. We are going to have anti-dumping in Mexico against polyester filament from China and India also starting this October.
In Brazil, we have some textile filament as well. We also have an anti-dumping against China. I guess all of these factors sort of protect us a little bit from the Chinese or Asian situation in fibers.
Right. I understand. The impact on PTA margins from this struggling polyester industry is already reflected in current PTA margins now, so right now it's just.
I would say so.
It's more upside than downside at this point.
I think so.
Okay, great. Thanks, Pepe.
You're welcome.
Thank you, Alejandro. Well, that was the last question we have in our queue. As always, I'd like to remind you that you can find both a video recording of today's webcast as well as a full transcript on our website at alpek.com. Thank you all for participating today, and have a great day.