Weekly Mexico Market Monitor

November 3, 2023
9:48 am

Weekly Mexico Market Monitor

Friday AM, November 3, 2023

MARKETS

The FTSE-BIVA index closed on November 2 at 1029.38 slightly up from its October 26 close at 1,018.02.

The MXN/USD exchange rate strengthened to 17.51 pesos to the dollar on October 26, from its close of 18.15 pesos on October 26.

The Mexican 10-year bond (2031) closed on Thursday with a yield of 10.06%, down slightly from a yield of 10.11% on October 26.

The FTSE-BIVA Top Stock Gainers for the week were: FEMSA (+10.16%), GAP (+6.01%) and OHLA (+5.31%) and the Biggest Losers were: Grupo México (-4.91%), ALSEA (-4.18%) and INDUSTRIAS CH (-3.84%).

CORPORATE & MARKET NEWS

Mexican companies concluded third quarterly results, with multinational giants in the banking and e-commerce sectors performing especially well. Overall, according to GBM’s broad sample, sales grew by 4.3% (versus 2.5% expected), and EBITDA by 5.1%, (versus 4.8% forecast).

As of September, BBVA‘s operations in Mexico generated almost €4 billion euros for the bank – 55% of its global results. This means a growth of more than 22% compared to 2022, with consumer loans up 13.5%, credit cards 12.8%, mortgages 6%, SME loans 17%, and net fees and commissions up more than 23%, largely derived from credit cards and mutual fund management. In the third quarter, Banco Azteca contributed 63% of Grupo Elektra’s revenues; stores accounted for the remaining 37%. In the latter case, a large part of the growth came from sales of Italika motorcycles. Group EBITDA increased 17% to Ps. 4.8 billion. In Mercado Libre‘s quarterly results, Mexico stood out again, as the country where revenues grew the most (+66%). In the first nine months, total revenues generated in our country exceeded US $2 billion, vs. US $1.2 billion last year. Lala‘s profits tripled between January and September: from $600 million pesos last year, to $1.8 billion pesos in the first nine months of this year. In the pharmacy sector, Farmacias Guadalajara opened 25 “SuperFarmacias” in the last three months; they now have 2,657 branches and sold $27.3 billion pesos in the quarter – an 11% YoY increase. Meanwhile, Farmacias Benavides added 20 new branches to its network of stores, bringing its total to 1,154. Sales for the quarter reached $4.2 billion pesos – an increase of 5%.

LAMOSA has completed the purchase of the Spanish tile company Baldocer for approximately €425 million, €354 million now and at least €71 million in 2025, depending on performance. Baldocer’s EBITDA was €67 million last year but is expected to decline in 2023. After this deal, LAMOSA’s debt compared to its EBITDA is estimated to rise to about 2.1 times from 1.4 times in the third quarter.

ORBIA’s Koura division and Solvay have entered into a joint venture to manufacture suspension-grade polyvinylidene fluoride (PVDF). The partnership plans to invest around US$850 million in two production facilities in the U.S., expected to be up and running by 2026.

Infinitum, a US company specializing in designing and producing high-efficiency industrial motors, raised US $185 million in an investment round. According to the company, these resources will be used to build a new plant in Monterrey, where they plan to manufacture 150,000 motors by 2024.

Daedong Door, a Korean manufacturer of vehicle doors, will invest $600 million pesos in a new plant in Zacatecas.

With an investment of €50 million, Balluf, a German company specialized in sensors and automation, installed a plant in Aguascalientes, Mexico.

An IPO of Fibra Next – the vehicle created from the spin-off of the industrial properties held in Fibra Uno – could be the largest new listing by a Mexican company since 2018. The plan would be to raise around US $1.5 billion.

POLITICS

The recovery after the devastating hurricane in Acapulco last week continued, with the Mexican government promising US $3.4 billion in aid, tax breaks and infrastructure funding. It has left more than 100 people dead or missing in the coastal town, with more than 90,000 left without power for days. The government was criticized by some for a lack of advanced warning ahead of the hurricane and slow support for the coastal town in the immediate aftermath.

Claudia Sheinbaum’s lead over Xochitl Galvez in the race to become Mexico’s next President stood at 18 percentage points in October, according to a new poll by newspaper El Financiero. It showed Sheinbaum holding 46% of voter intention, versus Galvez’s 28%.

TRADE & ECONOMICS

According to Inegi, in the third quarter, Mexico’s economy grew by 0.9% with respect to the previous quarter, and 3.3% annually. Both results exceeded expectations by 0.1%. This growth was boosted by agricultural and mining activities, which saw a 3.2% quarterly and a 5.3% yearly increase. The industrial sector also did well, with a 1.4% increase since last quarter and 4.5% since last year. Lastly, the service sector grew by 0.6% this quarter and 2.5% over the past year.

Mexican workers living abroad sent the third largest amount of remittances home in September that the Banco de México has on record. The amount that arrived to Mexico in the ninth month of 2023 was US $5.61 billion, or 11.4% more than in September 2022.