Good morning, everyone, and welcome to this webinar to discuss the results of the first quarter 2024 of Grupo Carso. Before we begin, I would like to remind you that this event is being recorded and that information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Hosting this conference today is Mr. Arturo Spínola, Chief Executive Officer of Grupo Carso, and me, Angélica Piña, Investor Relations, who will take you briefly through the first quarter's financial results, and then we will take your questions. Consolidated sales of Grupo Carso total MXN 46 billion. Grupo Sanborns reported a slight increase in sales, considering a retail environment marked by higher inflation and lower activity.
On the other side, the impact in the exchange rate, which suffered a 9% reduction versus the same quarter of 2023, affected revenues from dollarized domestic sales, exports, and sales from our foreign operations. Grupo Condumex, Elementia Fortaleza, and Carso Energy. Carso Infraestructura y Construcción posted a 7.5% reduction due to the conclusion of some construction projects. Consolidated operating income reached MXN 5.5 billion versus MXN 6.1 billion in the first quarter of 2023. This was mostly due to local costs affected by the higher inflation, by the higher inflation mentioned before, coupled with sales, including a stronger peso. By division, higher profitability came from Carso Infraestructura y Construcción and Elementia Fortaleza, with 13.5% and 12% increase, respectively, while the rest of the divisions showed reductions.
EBITDA from January to March 2024 was MXN 6.9 billion, compared to MXN 7.5 billion a year ago. The EBITDA margin changed to 20 basis points from 15.4% to 15.2% in relation to sales. The consolidated controlling net income reached MXN 3 billion, lower than MXN 3.8 billion last year, reflecting lower operating results. Explaining the performance by division, the total sales of Grupo Sanborns reached MXN 16.5 billion, almost stable, versus MXN 16.4 billion in the first quarter of 2023, in an environment marked by the so-called January uphill, or Cuesta de Enero, when families have lower income under several event expenses.
This result was in line with the modest recovery of 0.05%, reported in February and March, in the private consumption in the domestic market, but still below last year. Operating income in Grupo Sanborns totaled MXN 878 million, compared to MXN 1.1 billion a year ago. This reduction in profitability was explained by an 11.6% increase in operating expenses, which reflected the rebound in inflation from 4.4% to 4.42% annual rate in March. EBITDA reduced 16.1%, and net income reached MXN 718 million, compared to MXN 950 million in the first quarter of the previous year. The sales floor increased 0.4%, ending with 446 stores, due to the opening of three new DAX stores and one iShop.
In the industrial division, Grupo Condumex, its sales totaled MXN 10.8 billion versus MXN 12.5 billion in the same quarter of last year. This lower performance came primarily from a 9% reduction in the Forex rate, where the strength of the peso impacted our revenues in dollars. Lower volumes in telecom cables were observed, compensated with new projects for harnesses and automotive cables. Regarding operating income and EBITDA, these items reached MXN 1.2 billion and MXN 1.3 billion, respectively, compared to MXN 1.6 billion and MXN 1.8 billion previous. Carso Infraestructura y Construcción, its sales totaled MXN 10.1 billion.
The divisions that had the best performance were civil construction, which improved due to the progress in the Star Médica hospitals in different cities and other retail projects such as Pabellón Polanco Shopping Center, and manufacturing and services for the oil and chemical industry, with additional drilling and oil well reparations, while also including the construction of oil platforms like jack-up. The performances mentioned offset lower volumes of certain pipelines in the telecom network installations and in infrastructure, where the Mayan Train reached its final phase. The operating income and EBITDA in CICSA improved 13.5% and 13.2%, respectively. Controlling net income decreased 15.1%, totaling MXN 740 million.
The projects currently in place are telecom installation services, equipment for the petrochemical industry, drilling of deep wells for Pemex, various services and equipment for the oil industry, the construction of hospitals, shopping centers, and the conclusion of the Escárcega-Calkiní Section 2 of the Mayan Train. The value of total, MXN 32.1 billion, compared to MXN 33.4 billion a year ago. The sales of Elementia Fortaleza decreased 5.2% from MXN 8.2 billion to MXN 7.8 billion in the first quarter of 2024. This was related to the peso appreciation, since most of the division's revenues are generated outside of Mexico, either from exports or commodity base. The impact of the exchange rate affected metals and all operations of the Construsistemas segment. However, Elementia's profitability improved....
Where operating income and EBITDA grew 12% and 7.3% respectively, reflecting cost efficiencies in the cement sector. The sales of Carso Energy totaled MXN 699 million, lower than MXN 822 million from last year. This was attributable to exchange rate effects in the revenue reported in Panama and the Samalayuca Gas Pipeline. While revenues from natural gas transportation services to the pipelines of Waha and Waha in Texas, USA, remained strong. The operating income and EBITDA of Carso Energy were MXN 495 million and MXN 575 million, respectively. The net result totaled MXN 199 million.
In this subsidiary, the construction of the compression station for the Samalayuca Gas Pipeline was completed in December 2023, and is finishing commission tests to increase the transportation capacity in the following quarters, depending on the demand. Also, in this subsidiary, the construction of the Centauro del Norte Gas Pipeline started, having signed an investment agreement with the CFE for the construction of 416 km to connect the Samalayuca Gas Pipeline to Baja California. With this, I finish my general comments to proceed to the Q&A session. Thank you. Please, if you have a question, raise your hand, and then we will open your microphone. Hello, Alejandro. Good morning. You have your microphone open now.
Hi, hi, guys. Angélica, Arturo, can you hear me now?
Yes. Yes, Alejandro, good morning.
Okay, great. Thank you. Thank you for taking my questions. I just wanted to understand a little bit on Grupo Sanborns. You know, last quarter was really tough for you guys. This quarter seems on the same direction. What is happening on the cost side and also on the sales side? Because, you know, sales were flat versus the industry, which grew a little bit. So that would be my first question, and the second one is on Carso Energy, if you can provide a little bit more color, Arturo, on after the compressor station starts producing revenues. How should we see that division? Because this quarter surprised us on the downside really, really hard.
So if you can also comment on how big is the impact from the hydroelectrics in Panama?
Yes, Alejandro. First, regarding Grupo Sanborns, we have two main reasons for the cost, I mean, the incurred cost. The first is the increases in wages and salaries. Because of the minimum salary increase, we have some impact because in certain categories, the wages increase, and we have to adjust all the payroll. And on the other hand, we finished the review of the bad debt, and we increased our reserve in this quarter. I mean, we adjust about MXN 400 million, but that was the final adjustment in that item.
So we have, for the next quarters, we have no more adjustment about that situation with the bad debts.
So the NPLs are increasing. Do you have the percentage of NPL from the credit portfolio?
You know, the NPLs are increasing, but not so much. The real reason is that we have a problem with our system that we're controlling credit area. But for example, in the case of Sears, we have around 3.6, Angélica?
Mm-hmm.
3.6 NPLs, and Carso is higher, but we are restricted our credit. But what's most around about a network of our system. The NPLs are in market as a Grupo Sanborns is 5%.
Yes. I think the ones that are, like, two digits is Claro Shop, like, around 13%. Sanborns is around 6%, and Sears is 3.5%, no? So that is, like, the combination. However, considering the 5.2 million credit cards, 3.9 million cards are from Sears. Then we have 800 or around 900 thousand cards for Sanborns and 364 Claro. So, let's say that 7% of our credit cards have double-digit NPLs, 16% have one digit, like, that is 5%, and then Sears, 75% of our credit cards have 3.5 NPL.
So in aggregate, I mean, it went up, but we are controlling more the online granting of credit, which is the one that was, like, most affected in this change in the IT system for credit. Our portfolio is around MXN 14.5 billion. I mean, with this, we are still managing a sound credit portfolio. We don't see any more changes in the NPLs in the following, in the rest of the year. And basically, that would be the explanation.
Super. And on the Carso Energy question?
Yeah. About the compression station of the Samalayuca-Sásabe pipeline, we just finished the commissioning phase, and we are starting with the production of this site in this month, even in this month. And that means, Alejandro, that we are going to increase our incomes in the pipeline since May in invoices. That is around $3 million per month, thanks to the compression station. That was the direct impact, but we can increase that $3 million with the other instrument that we are looking for.
Okay. And one more, if I may, Arturo, and this is just clarification. Our understanding about the new gas pipeline, I don't recall if the name is Centauro del Norte, the new one that you're going to build on, that is going to be linked to the Samalayuca-Sásabe. Was that— Is that a done deal? I mean, you already have the go-ahead from the CFE to do that? Or my thoughts were that you were in discussions with the authorities to see if that was going to be a true project, or... Can you clarify that for me, please?
I can say that the pipeline is now in process.
Okay.
We are beginning with the engineering phase. We have a contract with the CFE. We are even deciding some items about the road, for example. But I can say that it's a fact.
Okay.
The pipeline is in the first phase. We have two phases, but they are as old as all of these kind of projects have the problem, have the conditions, but it's a fact. We just begin with the engineering phase, and we have a good. We don't see a problem with the CFE.
Is there any way you could share some financials for us on that front? You mentioned two phases, but financing, size of it...
Well, the PF for this pipeline was signed last week. We have the financing ready. It is signed and is in process, Alejandro.
Okay. Thank you, Arturo and Angélica.
Thank you, Alejandro. Bye.
Hello, Miguel. Good morning. Please go ahead with your question.
Good morning. Hi, Angélica, Arturo. Thanks for the call. Just a quick one regarding Condumex: Could you provide some color of what you're expecting for the following quarters, considering the weakness in the telecoms segment? Thank you very much.
Yeah, Miguel, we don't see a... We don't have a extraordinary expectations about the communication companies because our related party changed its plans, and we don't see any progress for the rest of the year. I think we are going to maintain the level in the installation sector in CICSA and in the cables company. We are looking for other markets. Now, for example, we are selling cables, telecommunication cables, Aptiv, on the U.S., and we are increasing our presence in South America, for example, in Colombia and Brazil... And that is our view for now. The levels for Pemex and América Móvil is not going to increase a lot for the rest of the year.
But we are looking for other markets in order to compensate. For example, the construction cables are increasing. We are getting new business for hybrid and electrical cars, et cetera, or the telecommunication system. We don't see an increase in our risk levels. That is the position we can see now.
That's useful. Thank you very much. That's very useful. And a second one, if I may, is regarding the backlog for CICSA in coming months. Do you have any projects that could represent an increase in the backlog, or?
Yes. We have some bids in the case of Pemex for the platforms and other services, but two locations was delayed. I don't know if they are going to bid even in this year. But we are expecting news from Pemex. On the other hand, in infrastructure projects, we don't have a good expectation for this year. As you know, the elections and the change of government, et cetera, we don't see any important projects for this year. We are expecting just for 2025.
In the case of civil construction, we have a good backlog, and we can increase for the next year because we are now negotiating other buildings, for example, more hospitals and other commercial center. But the important projects for Carso this year, we don't see. We are participating in the Polos para el Bienestar, in the Istmo de Tehuantepec, but the backlog is not consolidated for us because we have just 25% of our consortium with Mota-Engil and consortium companies, and we are just beginning with that project. We have three blocks in that Istmo de Tehuantepec, but we are just beginning with the engineering phase, et cetera. And we are not going to consolidate our participations.
We have 25%, and the rest of the partners that is the newest project that we got. But I don't see new projects for this year to Carso Infrastructure.
Thank you very much.
We are expecting to reach sales more similar than 2022 than the 2023. I mean, we have a little decrease, but even with the same level than 2022.
That, that's very useful. Thank you, Arturo.
Thank you, William.
Okay, we have a question from Nicole Helms. Nicole, we are opening your microphone in order for you to make your question.
Okay.
Thank you. I just had a follow-up regarding the credit business in Grupo Carso. If I understood correctly, the extraordinary impact of the additional reserves was MXN 400 million?
No. for in this quarter?
Yes.
In this quarter, around MXN 300 million, almost MXN 400 million, for all of the quarter, and that is the last adjustment for that credit for quarter.
Okay, so this is in addition to the MXN 730 million that you had last quarter. So in total, it's been an impact of-
That, that's right. That's right.
Okay. And I think last quarter, you also mentioned that it was, like, the last additional reserve. So just to understand, where did this additional reserve accounts come from?
Well, it was just part of making the adjustment of this. I mean, the sales increased 0.9%, and then the gross profit improved 3.4%, and this includes the credit income. Our credit business is sound. However, we have still some accounts, mostly online, that we have to adjust, because some payments weren't like considering in the full period. That's why the operating income is 24.6%. This was because the expenses increased from MXN 4.3 billion-MXN 4.8 billion. That was mainly the impact. As Arturo said, I mean, it was a MXN 505 million increase in expenses, where 300 came also from the increase in the reserves.
But I mean, that was just for the total that we are considering, no?
Okay, thank you.
If you have another question, someone to participate, you can raise your hand, and we will open your microphone. Okay, for the moment, there are no additional questions. With this, we are concluding the conference. We thank you for participating, and we look forward to speaking with you again. Thank you, and have a good day.
Thank you.