second quarter 2017 financial report alfa reports … · alfa´s second quarter 2017 2 summary of...

ALFA, S.A.B. DE C.V.

SECOND QUARTER 2017 FINANCIAL REPORT

ALFA REPORTS 2Q17 EBITDA OF U.S. $522 MILLION

Monterrey, N.L., Mexico, July 26, 2017.- ALFA, S.A.B. de C.V. (ALFA), a leading Mexican industrial company, reported today its 2Q17 unaudited financial results. Total revenues were U.S. $4,232 million, up 5% year-on-year due to higher sales achieved at all major business units. EBITDA was U.S. $522 million, down 19% vis-à-vis 2Q16, mainly explained by lower margins and inventory devaluation at Alpek, along with lower volumes and adverse metal lag impact in Nemak.

Alvaro Fernandez, ALFA’s President, commented on the Company’s results: “During the quarter, the Alfa companies delivered a mixed performance. We saw strong performance at Sigma mainly driven by its Mexican and European operations. In addition, solid results and the first phase of tower sales at Axtel also contributed positively to overall results. However, lower volumes in North America and adverse metal lag impacted Nemak’s results, while the

effect of lower oil prices and lower Polyester margins affected Alpek’s performance”.

Consolidated capital expenditures and acquisitions amounted to U.S. $227 million during 2Q17. Net Debt at the quarter end of U.S. $6,401 million was 6% higher when compared to the U.S. $6,032 million in 2Q16. At the end of the quarter, financial ratios were: Net Debt to EBITDA: 3.0 times; Interest Coverage: 5.7 times.

Majority Net Income was U.S. $76 million in 2Q17, compared to U.S. $46 million in 2Q16. This increase is mainly the result of lower operating results, which were offset by lower Comprehensive Financing Expense (“CFE”) due to lower foreign exchange losses during the quarter, compared to 2Q16.

SELECTED FINANCIAL INFORMATION (U.S. $MILLION)

2Q17 1Q17 2Q16

CH. % VS. 1Q17

CH. % VS. 2Q16

YTD. ‘17

YTD. ‘16

YTD Chg. %

CONSOLIDATED REVENUES 4,232 3,997 4,050 6 5 8,230 7,860 5 Sigma 1,503 1,350 1,445 11 4 2,853 2,799 2 Alpek 1,306 1,293 1,237 1 6 2,598 2,419 7 Nemak 1,165 1,123 1,122 4 4 2,288 2,198 4 Axtel 203 181 193 12 5 384 340 13 Newpek 29 26 25 10 16 55 50 10

CONSOLIDATED EBITDA1 522 528 642 (1) (19) 1,050 1,222 (14) Sigma 167 135 169 23 (1) 302 331 (9) Alpek 82 158 208 (48) (61) 240 380 (37) Nemak 206 190 221 9 (7) 396 430 (8) Axtel 81 58 63 40 29 139 111 26 Newpek 1 (2) (2) 129 129 (1) (3) 60

MAJORITY NET INCOME 76 154 46 (51) 65 230 188 22 CAPITAL EXPENDITURES & ACQ. 227 298 344 (24) (34) 525 665 (21) NET DEBT 6,401 6,359 6,032 1 6 6,401 6,032 6

Net Debt/LTM EBITDA* 3.0 2.8 2.5 LTM Interest Coverage* 5.7 6.1 7.1

* Times. UDM = Last 12 months

1 EBITDA = Operating Income + depreciation and amortization + impairment of assets.

CONTENTS: Summary of Groups…2 – Alfa Financial Tables…5 – ALFA Groups Financial Information…9

This release may contain forward‐looking information based on numerous variables and assumptions that are inherently uncertain. They involve judgments with respect to, among other things, future economic, competitive and financial market conditions and future business decisions, all of which are difficult or impossible to predict accurately. Accordingly, results could vary from those set forth in this release. The report presents unaudited financial information. Figures are presented in Mexican pesos or U.S. Dollars, as indicated. Where applicable, peso amounts were translated into U.S. Dollars using the average exchange rate of the months during which the operations were recorded. Financial ratios are calculated in U.S. Dollars. Due to the rounding up of figures, small differences may occur when calculating percent changes from one period to the other.

ALFA´S SECOND QUARTER 2017 2

SUMMARY OF GROUPS´ PERFORMANCE DURING 2Q17

Sigma’s revenues amounted to U.S. $1,503 million, an increase of 4% versus 2Q16. By region, sales in Mexico increased

10% y-o-y in peso terms, reflecting higher volume and price adjustments to absorb the effect of a higher exchange rate on

raw material costs. European sales continued to improve, increasing 3% in euro terms, while U.S. and Latin America

increased 3% and 2% in dollar terms, respectively.

In line with full year guidance, Sigma reported 2Q17 EBITDA of U.S. $167 million, down 1% year-on-year, mainly explained

by a solid performance of Mexican operations which benefited benefitted from a more favorable currency environment,

and strong results in Europe, which offset the start-up costs at new plant in Spain. In the U.S., results were impacted by a

lag between price adjustments and recent cost increases on raw materials.

On June 28, Sigma announced the acquisition of Sociedad Suizo Peruana de Embutidos, S.A. (SUPEMSA), a Peruvian

company engaged in the production and sale of packaged meats and dairy products. In 2016, the company generated sales

of U.S. $54.2 million. The acquisition was effective July 1st, 2017.

During 2Q17, capital expenditures totaled U.S. $50 million, funds were utilized for the new plant in Burgos, Spain, other

fixed assets and minor projects across the company. At the end of 2Q17, Net Debt was U.S. $1,940 million, similar to 2Q16.

Financial ratios at the end of 2Q17 were: Net Debt to EBITDA, 3.1 times; Interest Coverage, 4.4 times.

(See appendix “A” for more comprehensive analysis of Sigma´s 2Q17 financial results)

Alpek’s revenues for the second quarter totaled U.S. $1.3 billion, up 6% year-on-year, as lower average prices were

more than offset by volume growth. 2Q17 consolidated volume was up 6%, while average 2Q17 consolidated prices were

flat year-on-year, mainly due to lower feedstock prices.

2Q17 EBITDA was U.S. $82 million, down 61% from 2Q16. This quarter’s EBITDA includes a U.S. $29 million non-cash

inventory loss charge and a U.S. $12.5 million one-time gain from the acquisition of a controlling interest in Selenis Canada

Inc. in 2016. Adjusting for the inventory loss and one-time gain, comparable EBITDA was U.S. $99 million and U.S. $190

million in 2Q17 and 2Q16, respectively. Comparable 2Q17 EBITDA was lower than expected as Polyester segment EBITDA

was affected by higher costs associated with planned and unplanned outages, feedstock cost carryover and tight supply of

secondary feedstock prices (IPA and CHDM) that had an estimated impact of U.S. $21 million. Accumulated EBITDA as of

June 30, 2017 was U.S. $240 million.

2Q17 Capex was U.S. $65 million, compared to U.S. $110 million in 2Q16. The majority of these funds were invested in the

350 MW power cogeneration plant in Altamira, Mexico which is advancing as planned together with other projects such as

the EPS plant expansion. An important milestone this quarter was the on-schedule startup of the company’s propylene

storage spheres in Altamira, Mexico.

The acquisition of PetroquimicaSuape and Citepe from Petrobras for U.S. $385 million is advancing as planned. Alpek made

an initial deposit of U.S. $39 million in escrow, and the Administrative Council for Economic Defense (CADE) in Brazil has

begun evaluating the transaction. Closing is subject to CADE’s approval, among other conditions.

Net Debt as of the end of the quarter was U.S. $1,058 million, up 16% year-on-year, driven by the aforementioned

investment in strategic projects. At quarter end, financial ratios were as follows: Net Debt to EBITDA, 2.0 times; Interest

Coverage, 8.0 times.

(See appendix “B” for Alpek´s 2Q17 financial report)

Nemak´s 2Q17 sales volume was 12.8 million equivalent units, 2% lower than 2Q16. Sales volume declined in North

America mainly due to lower demand from Ford and FCA, which reduced and discontinued production of certain vehicle


lines, respectively. Volumes in Europe remained flat during the quarter. By contrast, Rest-of-World volumes reported

strong growth year-on-year, mainly due to the continued ramp-up of new programs in China.

Higher aluminum prices supported revenues, which showed a 4% year-over-year increase. 2Q17 EBITDA totaled U.S. $206

million, down 7% year-on-year, mainly as a result of lower sales volumes in North America, negative metal price lag, and

increased expenses associated with new programs. Additionally, the company recognized a non-recurring gain in the

amount of U.S. $18 million derived from the reversal of a provision related to a disputed tax on revenues. EBITDA per unit

was U.S. $16.10 in 2Q17, down from U.S. $16.90 in the same period last year.

Capital expenditures in the quarter amounted to U.S. $88 million as the company continued to move ahead with strategic

projects. Investments were made to increase production capacity to meet new demand coming from recently won

contracts. Likewise, resources were dedicated to the plant under construction in Slovakia, which will produce structural and

electric vehicle (“EV”) components starting in 2H17.

Net Debt at the end of 2Q17 totaled U.S. $1,397 million, up 4% from 2Q16, reflecting the capital expenditures during the

period. Financial ratios in 2Q17 were: Net Debt to EBITDA of 1.8 times, and Interest Coverage of 11.1 times.

(See appendix “C” for Nemak´s 2Q17 financial report)

Axtel’s revenues in the second quarter totaled U.S. $203 million, up 5% year-on-year, largely attributable to the

Company’s sales to Enterprise and Government segments as some legacy businesses are a drag on overall sales. Axtel has

cycled the 2016 acquisition and results are now on a comparable basis. In peso terms, total revenues increased 9% in the

quarter, reflecting 8% and 42% growth in enterprise and government segments, respectively, and flat mass-market

segment results. Enterprise and government segment represented 80% of revenues in the quarter.

2Q17 EBITDA was U.S. $81 million, up 29% year-on-year, explained in part by a U.S. $17 million benefit from the first

tranche of the tower sale. Excluding this effect, EBITDA increased 2% from 2Q16. In peso terms, EBITDA increased 32%

year-on-year. In an effort to reduce FX volatility, Axtel entered into a second “par-forward” transaction that fixed the

exchange rate for the interest and principal obligations denominated in dollars at 18.89 pesos per dollar from April to July

2018.

Capital expenditures totaled U.S. $16 million in 2Q17 (U.S. $35 million, excluding tower sales), including investments to

provide last-mile access to connect customers, to deploy IT infrastructure and to further increase data center capacity in

Queretaro, Mexico. At the end of 2Q17, Net Debt was U.S. $1,027 million, up U.S. $20 million year-on-year. Financial ratios

at the end of 2Q17 were: Net Debt to EBITDA of 4.1 times and Interest Coverage of 8.6 times.

(See appendix “D” for Axtel´s 2Q17 financial report)

Newpek’s revenues were slightly higher than 2Q16, as higher average oil and gas prices offset a decline in

production. West Texas Intermediate (WTI) oil price was up 6% from 2Q16, averaging approximately U.S. $48 per barrel,

and Henry Hub natural gas price increased 44% to an average of U.S. $3.1 per million BTU.

Newpek connected to sales four new wells at the Eagle Ford Shale (“EFS”) in South Texas. This brought wells in production

at EFS to 632 by the quarter’s end, compared to the 628 wells in production at the end of 2Q16. Production in the U.S.

averaged 4.2 million barrels of oil equivalent per day (MBOED) during 2Q17, down 46% from 2Q16 reflecting less drilling

and normal decline rate. In line with the 2017 operating plan, strategic drilling and completion activities continued at EFS

during the quarter. As a result, nine new wells are expected to be put into production during 3Q17 and seven during 4Q17,

for a total of 20 new producing wells during the year. In Mexico, production averaged 3.7 MBOED during 2Q17, up 12%

from 2Q16.


2Q17 revenues totaled U.S. $29 million, up 16% year-on-year, while EBITDA was U.S. $1 million, an improvement from the

negative U.S. $2 million reported in 2Q16. Capital expenditures in the quarter amounted to U.S. $7 million.

(See appendix “E” for more comprehensive analysis of Newpek´s 2Q17 financial results)

CONSOLIDATED FINANCIAL RESULTS

2Q17 consolidated revenues were U.S. $4,232 million, up 5% from U.S. $4,050 million reported in 2Q16. The increase is the

result of higher sales across all business units and mainly reflects higher sales volume in Alpek, higher aluminum prices

which offset lower volumes in Nemak, along with higher volumes and prices in Sigma. During the quarter, foreign sales

represented 64% of the total, in line with 2Q16. Year-to-date revenues were U.S. $8,230, up 5% from 2016, primarily for

the same reasons.

2Q17 Consolidated Operating Income totaled U.S. $278 million, down 33% from 2Q16, primarily due to weaker results at

Alpek, as oil-related feedstocks resulted in a U.S. $29 million inventory devaluation during the quarter, compared to a U.S.

$19 million inventory revaluation in 2Q16. In addition to lower results in the Polyester business mostly due to rising co-

monomer prices and further PET margin erosion; lower margins at Nemak stemming mainly from lower sales volume in

North America and a reversal of metal lag effect also contributed to the decline. These items were partially offset by a non-

recurring gain of U.S. $18 million from the reversal of a provision related to a disputed tax on revenues. In turn, Axtel´s

operating income benefitted by extraordinary income of U.S. $17 million stemming from the sale of transmission towers,

while Sigma was flat from 2Q16. Accumulated Operating Income was U.S. $571 million, down 28% from 2016.

2Q17 EBITDA was U.S. $522 million, down 19% year-on-year, reflecting the lower Operating Income explained above. Year-

to-date EBITDA was U.S. $1,050 million, down 14% from 2016.

ALFA reported 2Q17 Comprehensive Financing Expense (CFE) of U.S. $113 million, compared to U.S. $321 million in 2Q16,

mainly explained by lower foreign exchange losses during the quarter than those reported in 2Q16.

Majority Net Income was U.S. $76 million in 2Q17, compared to U.S. $46 million in 2Q16. This year-on-year increase is

mainly explained by lower operating results offset by lower CFE already explained. Year-to-date Majority Net Income was

U.S. $230 million, up 22% from the same period in 2016.

CAPITAL EXPENDITURES AND ACQUISITIONS; NET DEBT

Consolidated capital expenditures and acquisitions totaled U.S. $227 million in 2Q17. All subsidiaries continued to make

progress on their investment plans as discussed in the initial section of this report. At quarter-end 2Q17, ALFA’s Net Debt

amounted to U.S. $6,401 million, U.S. $369 million higher than 2Q16. At the end of the quarter, financial ratios were: Net

Debt to EBITDA, 3.0 times; Interest Coverage, 5.7 times. These ratios compare to 2.5 times and 7.1 times, respectively in

2Q16.


ALFA

TABLE 1 | VOLUME AND PRICE CHANGES (%)

2Q17 vs. YTD. 17 VS

1Q17 2Q16 YTD. 16

Total Volume 3.6 6.8 7.8 Domestic Volume 4.6 12.0 15.0 Foreign Volume 2.6 2.2 1.5 Avg. Ps. Prices (6.7) 0.7 4.8 Avg. U.S. $ Prices 2.2 (2.2) (2.8)

TABLE 2 | REVENUES

(%) 2Q17 VS. 2Q17 1Q17 2Q16 1Q17 2Q16 YTD. 17 YTD. 16 Ch.%

TOTAL REVENUES Ps. Millions 78,665 81,381 73,119 (3) 8 160,047 141,746 13 U.S. $ Millions 4,232 3,997 4,050 6 5 8,230 7,860 5

DOMESTIC REVENUES

Ps. Millions 27,962 28,344 25,653 (1) 9 56,306 49,525 14 U.S. $ Millions 1,504 1,393 1,422 8 6 2,897 2,748 5

FOREIGN REVENUES Ps. Millions 50,704 53,037 47,466 (4) 7 103,741 92,221 12 U.S. $ Millions 2,728 2,604 2,628 5 4 5,333 5,112 4

Foreign / Total (%) 64 65 65 65 65

TABLE 3 | OPERATING INCOME AND EBITDA


OPERATING INCOME Ps. Millions 5,137 5,977 7,444 (14) (31) 11,114 14,204 (22) U.S. $ Millions 278 293 412 (5) (33) 571 788 (28)

EBITDA Ps. Millions 9,679 10,748 11,599 (10) (17) 20,427 22,043 (7)

U.S. $ Millions 522 528 642 (1) (19) 1,050 1,222 (14)

TABLE 4 | COMPREHENSIVE FINANCING (EXPENSE) / INCOME (CFI) (U.S. $ MILLIONS)


Financial Expenses (108) (131) (103) 18 (5) (239) (212) (13) Financial Income 9 9 7 (2) 32 18 16 12 Net Financial Expenses (99) (122) (96) 19 (3) (221) (196) (13) Fx Gains (Losses) (18) 237 (218) (108) 92 219 (191) 214

PRE valuation 0 0 (7) - 100 0 (41) 100 Capitalized CFE 4 3 0 24 703 7 1 685 CFE (113) 118 (321) (196) 65 4 (428) 101 Avg. Cost of Borrowed Funds (%) 4.6 5.8 4.7 5.2 4.9


ALFA

TABLE 5 | MAJORITY NET INCOME (U.S. $ MILLIONS)


Consolidated Net Income (Loss) 121 231 68 (48) 78 352 280 26 Minority Interest 45 77 22 (42) 106 121 91 33 Majority Net Income (Loss) 76 154 46 (51) 65 230 188 22

Per Share (U.S. Dollars) 0.01 0.03 0.01 (50) 66 0.05 0.04 23 Avg. Outstanding Shares (Millions) 5,086 5,112 5,121 5,099 5,121

TABLE 6 | CASH FLOW (U.S. $ MILLIONS)


EBITDA 522 528 642.4 (1) (19) 1,050 1,222 (14) Net Working Capital & Others (9) (265) 19 97 (147) (274) (368) 26 Capital Expenditures & Acquisitions (227) (298) (344) 24 34 (525) (665) 21 Net Financial Expenses (103) (124) (106) 17 3 (227) (217) (5)

Taxes (88) (53) (63) (66) (40) (141) (185) 24 Dividends (ALFA, S.A.B.) 0 (170) 0 100 - (170) (172) 1

Other Sources / Uses (137) (133) (36) (3) (281) (270) (862) 69 Decrease (Increase) in Net Debt (42) (515) 113 92 (137) (557) (1,247) 55

TABLE 7 | SELECTED BALANCE SHEET INFORMATION & FINANCIAL RATIOS (U.S. $ MILLIONS)

2Q17 1Q17 2Q16 YTD. 17 YTD. 16

Assets 18,126 17,502 16,619 18,126 16,619 Liabilities 12,928 12,581 11,888 12,928 11,888 Stockholders’ Equity 5,198 4,921 4,731 5,198 4,731

Majority Equity 3,883 3,659 3,591 3,883 3,591

Net Debt 6,401 6,359 6,032 6,401 6,032

Net Debt/EBITDA* 3.0 2.8 2.5 3.0 2.5

Interest Coverage* 5.7 6.1 7.1 5.7 7.1

AppendixAALFA,S.A.B.deC.V.andSubsidiariesBALANCESHEETInformationinmillionsofNominalMexicanPesos

Jun-17 Mar-17 Jun-16 Mar17 Jun16ASSETS

CURRENTASSETS:Cashandcashequivalents 19,598 20,286 21,097 (3) (7)Tradeaccountsreceivable 26,766 28,059 31,612 (5) (15)Otheraccountsandnotesreceivable 6,279 5,271 6,226 19 1Inventories 39,714 41,186 38,174 (4) 4Othercurrentassets 12,580 10,788 9,471 17 33Totalcurrentassets 104,938 105,590 106,580 (1) (2)

INVESTMENTSINASSOCIATESANDJOINTVENTURES 2,072 2,075 2,448 (0) (15)PROPERTY,PLANTANDEQUIPMENT 139,570 141,775 132,155 (2) 6INTANGIBLEASSETS 56,420 57,655 52,143 (2) 8OTHERNON-CURRENTASSETS 21,415 22,102 20,967 (3) 2

Totalassets 324,414 329,197 314,293 (1) 3LIABILITIESANDSTOCKHOLDER'SEQUITY

CURRENTLIABILITIES:Currentportionoflong-termdebt 1,113 479 1,498 132 (26)Bankloansandnotespayable 9,889 11,297 5,693 (12) 74Suppliers 50,675 50,421 43,186 1 17Othercurrentliabilities 20,493 20,217 22,034 1 (7)Totalcurrentliabilities 82,171 82,414 72,411 (0) 13LONG-TERMLIABILITIES:Long-termdebt 124,011 127,861 127,808 (3) (3)Deferredincometaxes 14,194 14,998 13,493 (5) 5Otherliabilities 6,568 6,980 6,994 (6) (6)Estimatedliabilitiesforsenioritypremiumsandpensionplans 4,433 4,392 4,118 1 8

Totalliabilities 231,377 236,644 224,824 (2) 3STOCKHOLDERS'EQUITY:Controllinginterest:Capitalstock 212 212 213 - (1)

Contributedcapital 212 212 213 - (1)Earnedsurplus 69,281 68,607 67,701 1 2Totalcontrollinginterest 69,493 68,819 67,915 1 2TotalNon-controllinginterest 23,544 23,734 21,554 (1) 9

Totalstockholders'equity 93,037 92,553 89,469 1 4Totalliabilitiesandstockholders'equity 324,414 329,197 314,293 (1) 3Currentratio 1.28 1.28 1.47Debttoequity 2.49 2.56 2.51

(%)Jun17vs.

AppendixBALFA,S.A.B.DEC.V.andSubsidiariesSTATEMENTOFCOMPREHENSIVEINCOMEInformationinmillionsofNominalMexicanPesos

2Q17 1Q17 2Q16 YTD'17 YTD'16 1Q17vs.(%) 2Q16

Netsales 78,665 81,381 73,119 160,047 141,746 (3) 8

Domestic 27,962 28,344 25,653 56,306 49,525 (1) 9Export 50,704 53,037 47,466 103,741 92,221 (4) 7

Costofsales (63,543) (64,555) (55,228) (128,098) (107,812) 2 (15)

Grossprofit 15,122 16,826 17,891 31,949 33,935 (10) (15)

Operatingexpensesandothers (9,985) (10,849) (10,448) (20,834) (19,730) 8 4

Operatingincome 5,137 5,977 7,444 11,114 14,204 (14) (31)

Comprehensivefinancingexpense,net (2,137) 2,269 (5,834) 133 (7,780) (194) 63

Equityinincome(loss)ofassociates 25 45 23 71 11 (44) 11

Incomebeforethefollowingprovision 3,026 8,292 1,632 11,317 6,435 (64) 85

Provisionsfor:Incometax (839) (3,639) (429) (4,479) (1,447) 77 (96)

Consolidatednetincome 2,187 4,652 1,203 6,839 4,988 (53) 82

Income(loss)correspondingtominorityinterest 816 1,546 386 2,362 1,633 (47) 111

Netincome(loss)correspondingtomajorityinterest 1,371 3,106 817 4,477 3,355 (56) 68

EBITDA 9,679 10,748 11,599 20,428 22,043 (10) (17)Interestcoverage* 5.7 6.1 7.1 5.7 7.1*LTM

2Q17vs.(%)


LUIS OCHOA

+52 (81) 8748.2521

[email protected]

JUAN ANDRÉS MARTÍN

+52 (81) 8748.1676

[email protected]

MARCELA ELIZONDO

+52 (81) 8748.1223

[email protected]

MBS VALUE PARTNERS

SUSAN BORINELLI

+1 (646) 330.5907

[email protected]

APPENDIX:

A SIGMA 10

B ALPEK 13

C NEMAK 25

D AXTEL 33

E NEWPEK 43

mailto:[email protected]





SIGMA | REFRIGERATED FOOD PRODUCTS

36% AND 31% OF ALFA´S REVENUES AND EBITDA IN 2Q17

Sigma is a leading multinational refrigerated food company that produces, markets and distributes quality branded foods,

including packaged meats, cheese, yogurt and other refrigerated and frozen foods. Sigma has a diversified portfolio of

leading brands and operates 68 plants in 17 countries across its four key regions: Mexico, Europe, the United States, and

Latin America.

INDUSTRY COMMENTS

During 2Q17, the consumer markets were mixed across Sigma’s main regions of operations. In Mexico, the average

consumer confidence index reported by INEGI (Instituto Nacional de Estadística y Geografía – National Institute for

Statistics and Geography) was down 6% year-on-year, but up 15% from 1Q17. In turn, 2Q17 same-store sales reported by

the National Association of Supermarkets and Department Stores (ANTAD) increased 5.7% year-on-year in nominal pesos.

In Europe, according to the European Commission, the average consumer confidence index for 2Q17 improved to negative

2.7, reaching a 10-year high. In the U.S., the index increased to 118.6 in 2Q17 as reported by The Conference Board, the

highest since 2000. Food retail sales reported by the U.S. Census Bureau increased 2% year-on-year, below the 3% year-on-

year growth in 1Q17.

Key raw material prices were mixed during the quarter and varied by region. In the Americas, the price of Sigma’s raw

materials increased when compared to 2Q16 levels. Turkey thigh and milk prices were up 14% and 11%, respectively,

although they were still below the record-high levels observed in 2013 and 2014. Conversely, turkey breast was 34% lower,

while pork hams were slightly lower than last year. In Europe, pork prices have increased since the second half of 2016

which resulted in 2Q17 prices 26% above the same year-ago period. In Mexico, the recent appreciation of the Peso vis-a-vis

the U.S. Dollar has eased the pressure in the cost of raw materials, as the industry participants import most of its meats

from the U.S.

OPERATIONS

During 2Q17, Sigma sold approximately 436 thousand tons of food products, up 2% from 2Q16, supported by growth in

Mexico and USA. In dollar terms, average prices increased 2% year-on-year mainly due to higher prices in Mexico and

Europe.

FINANCIAL RESULTS

2Q17 Revenues totaled U.S. $1,503 million, 4% higher than 2Q16, driven by higher sales volume and prices. In Mexico,

sales in pesos were 10% higher year-on-year, reflecting higher sales volumes and price adjustments to absorb higher raw

material costs. In Europe, sales in euros were 3% above 2Q16 driven by higher prices. In the U.S., sales increased 3% year-

on-year.

Sales in Mexico accounted for 42% of the quarter’s total, while Europe represented 34%, the U.S. 17%, and Latin America

7%. During the first half of 2017, revenues were U.S. $2,853 million, up 2% when compared to the same period of 2016.

In line with full year guidance, Operating Income and EBITDA were U.S. $116 million and U.S. $167 million in 2Q17, down

3% and 1% year-on-year, respectively. This was primarily due to a strong performance from Mexican operations which

benefitted from a more favorable currency environment, and positive results in Europe, which partially offset the start-up


costs of the new Burgos plant in Spain. In the U.S., results were affected by a lag between price adjustments and the recent

cost increases on raw materials.

CAPITAL EXPENDITURES AND ACQUISITIONS; NET DEBT

During 2Q17, capital expenditures totaled U.S. $50 million, funds were utilized for the new plant in Burgos, Spain, other

fixed assets and minor projects across the company.

On June 28, 2017 Sigma announced the acquisition of Sociedad Suizo Peruana de Embutidos, S.A. (SUPEMSA), a Peruvian

company engaged in the production and sale of packaged meats and dairy products. With 2016 revenue of U.S. $54

million, SUPEMSA is a leader in the production of premium packaged meats, with more than 25 years of successfully

marketing its products under highly recognized local brands such as Otto Kunz and La Segoviana. The acquisition was

effective July 1st, 2017.

Sigma´s consistent cash flow generation enables the company to finance capital expenditures and to maintain a solid

financial position. At the end of 2Q17, Net Debt was U.S. $1,940 million, similar to 2Q16. Financial ratios at the end of 2Q17

were: Net Debt to EBITDA, 3.1 times; Interest Coverage, 4.4 times. These ratios compare with those reported in 2Q16, of

2.3 times and 7.8 times, respectively, which includes insurance income in EBITDA from the Bureba Fire.


SIGMA

TABLE 1 | VOLUME AND PRICE CHANGES (%)

2Q17 vs. YTD. 17 VS

1Q17 2Q16 YTD. 16

Total Volume 5.2 2.0 2.6 Avg. Ps. Prices (3.3) 5.0 7.0 Avg. U.S. $ Prices 5.9 2.1 (0.6)

TABLE 2 | REVENUES

(%) 2Q17 VS. 2Q17 1Q17 2Q16 1Q17 2Q16 YTD .17 YTD. 16 Ch.%

TOTAL REVENUES Ps. Millions 27,940 27,462 26,089 2 7 55,402 50,477 10 U.S. $ Millions 1,503 1,350 1,445 11 4 2,853 2,799 2

DOMESTIC REVENUES Ps. Millions 11,766 11,370 10,683 3 10 23,135 20,856 11

U.S. $ Millions 633 559 592 13 7 1,192 1,157 3 FOREIGN REVENUES

Ps. Millions 16,175 16,092 15,405 1 5 32,267 29,621 9 U.S. $ Millions 871 791 853 10 2 1,661 1,642 1 Foreign / Total (%) 58 59 59 58 59


(%) 2Q17 VS.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD. 17 YTD. 16 Ch.%

OPERATING INCOME

Ps. Millions 2,159 1,709 2,169 26 - 3,867 4,286 (10) U.S. $ Millions 116 85 120 37 (3) 201 238 (15)

EBITDA

Ps. Millions 3,097 2,738 3,044 13 2 5,834 5,973 (2) U.S. $ Millions 167 135 169 23 (1) 302 331 (9)


2Q17 1Q17 2Q16 YTD. 17 YTD. 16

Assets 5,207 4,951 4,794 5,207 4,794

Liabilities 4,328 4,161 3,971 4,328 3,971

Stockholders’ Equity 879 790 823 879 823

Majority Equity 847 760 793 847 793

Net Debt 1,940 1,838 1,935 1,940 1,935

Net Debt/EBITDA* 3.1 2.9 2.3 3.1 2.3

Interest Coverage* 4.4 4.2 7.8 4.4 7.8 * Times: LTM = Last 12 months

Second Quarter 2017 (2Q17) |

This release contains forward‐looking information based on numerous variables and assumptions that are inherently uncertain. They involve judgments with respect to, among other things, future economic, competitive and financial market conditions and future business decisions, all of which are difficult or impossible to predict accurately. Accordingly, results could vary from those set forth in this release. The report presents unaudited financial information based on International Financial Reporting Standards (IFRS). Figures are stated in nominal Mexican pesos ($) and in current U.S. Dollars (U.S. $), as indicated. Where applicable, peso amounts were translated into U.S. Dollars using the average exchange rate of the months during which operations were recorded. Financial ratios are calculated in U.S. Dollars. Due to the rounding up of figures, small differences may occur when calculating percent changes from one period to the other.

Monterrey, Mexico. July 26, 2017 – Alpek, S.A.B. de C.V. (BMV: ALPEK)

Alpek reports 2Q17 EBITDA of U.S. $82 million

Selected Financial Information (U.S. $ Millions)

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Total Volume (ktons) 1,038 986 981 5 6 2,024 1,970 3

Polyester 807 759 743 6 9 1,566 1,497 5

Plastics & Chemicals 231 227 239 2 (3) 458 472 (3)

Consolidated Revenues 1,306 1,293 1,237 1 6 2,598 2,419 7

Polyester 930 916 871 2 7 1,846 1,708 8

Plastics & Chemicals 375 376 366 - 2 752 711 6

Consolidated EBITDA 82 158 208 (48) (61) 240 380 (37)

Polyester 33 87 110 (62) (70) 120 184 (35)

Plastics & Chemicals 49 70 98 (30) (50) 119 197 (39)

Profit Attributable to Controlling Interest 25 87 48 (72) (49) 112 120 (7)

CAPEX and Acquisitions 65 76 110 (14) (40) 142 142 -

Net Debt 1,058 1,175 910 (10) 16

Net Debt/LTM EBITDA(1) 2.0 1.8 1.3

Interest Coverage(1) 8.0 10.0 11.1 (1) Times: Last 12 months

Operating & Financial Highlights (2Q17)

Alpek

• 2Q17 Consolidated EBITDA of U.S. $82 million, including a U.S. $29 million non-cash inventory

loss and a U.S. $12 million one-time gain from the Selenis Canada acquisition (2016)

• The decline in oil and feedstock prices also had an estimated impact of U.S. $10 million on

2Q17 Comparable Consolidated EBITDA

• Net Debt down U.S. $118 million versus 1Q17 driven by positive Net Working Capital cash

flow

Polyester

• 2Q17 Polyester EBITDA of U.S. $33 million, including a U.S. $25 million non-cash inventory loss

and a U.S. $12 million one-time gain from the Selenis Canada acquisition (2016)

• Resilient demand; 2Q17 Polyester volume up 9% and 6% versus 2Q16 and 1Q17 respectively

• Initial deposit of U.S. $39 million in escrow to acquire PetroquimicaSuape and Citepe; Brazilian

authority (CADE) started transaction evaluation process

Plastics &

Chemicals

(P&C)

• 2Q17 P&C EBITDA of U.S. $49 million, including an U.S. $5 million non-cash inventory loss

• Better-than-expected polypropylene volume and margins despite high feedstock price

volatility

• 2Q17 caprolactam reference margins decreased to expected level after 1Q17 spike


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www.alpek.com 2

Message from the CEO

Alpek’s second quarter 2017 EBITDA reflects lower than expected Polyester segment EBITDA amid a weak oil

and feedstock price environment. In contrast with the favorable trends observed in 2Q16 and 1Q17, the average price

per barrel of Brent crude posted its lowest level year-to-date at the end of 2Q17.

Reference U.S. contract prices for paraxylene (Px) and propylene dropped 10% and 26% respectively, from

March to June, driven by lower oil prices as well as normalized propylene supply.

This quarter’s abrupt feedstock price movements had a U.S. $39 million impact on Alpek’s 2Q17 consolidated

EBITDA, comprised of a U.S. $29 million non-cash inventory loss and an estimated U.S. $10 million from feedstock cost

carryover in both business segments.

The oil-related impact on Alpek’s 2Q17 consolidated EBITDA was partially offset by a U.S. $12 million one-

time gain associated to the acquisition of a controlling interest in Selenis Canada Inc., in 2016.

Adjusting for the U.S. $29 million non-cash inventory loss and the U.S. $12 million one-time gain from the

Canadian acquisition, Alpek’s 2Q17 Comparable EBITDA was U.S. $99 million; below guidance as a result of subpar

Polyester segment performance.

Polyester segment EBITDA was U.S. $33 million in 2Q17. Adjusting for its U.S. $25 million non-cash inventory

loss and the U.S. $12 million one-time gain, Comparable 2Q17 Polyester EBITDA was U.S. $45 million. This quarter’s

higher costs associated to planned and unplanned outages, feedstock cost carryover and tight supply of secondary

feedstocks (IPA and CHDM) had an estimated impact of U.S. $21 million in Comparable Polyester EBITDA.

2Q17 Plastics & Chemicals (P&C) EBITDA was U.S. $49 million and Comparable segment EBITDA was U.S. $54

million; above Alpek’s 2017 guidance driven by our polypropylene (PP) business. Year-to-date, PP margins have been

better than expected despite high propylene price volatility.

Capex totaled U.S. $65 million in 2Q17 as progress is ongoing in the development of strategic projects. An

important milestone this quarter was the on-schedule startup of our propylene storage spheres in Altamira, Mexico.

We invested a total of U.S. $23 million in two storage spheres with an aggregate capacity of 5,000 tons that will

enhance the efficiency of our domestic propylene logistics chain and provide greater import flexibility.

The acquisition of PetroquimicaSuape and Citepe from Petrobras for U.S. $385 million is advancing as planned.

Alpek made an initial deposit of U.S. $39 million in escrow, and the Administrative Council for Economic Defense

(CADE) in Brazil started evaluating the transaction. Closing is subject to CADE’s approval, among other conditions.

The formal process to monetize our power cogeneration assets is also underway. Alpek concluded the first

phase of the sale process in 2Q17, and is engaged in a detailed due diligence with selected investors to reach a

potential agreement.

Alpek’s Net Debt totaled U.S. $1.058 billion at the close of 2Q17, down 10% quarter-on-quarter as low EBITDA

was more than offset by positive Net Working Capital cash flow.

We expect Alpek’s Consolidated EBITDA to return to guidance levels in 2H17 as a result of stable Polyester

plant operations, secondary feedstock price transfer initiatives, and a normalized oil price environment. Year-to-date

Comparable Consolidated EBITDA plus the one-time gain from the Canadian acquisition was U.S. $243 million, which

compares with U.S. $246 million EBITDA for 1H17, implicit in Alpek’s U.S. $502 million guidance.


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www.alpek.com 3

Results by Business Segment

Polyester (Purified Terephthalic Acid (PTA), Polyethylene Terephthalate (PET), Polyester fibers – 71% of Alpek’s Net Sales)

Second quarter 2017 Polyester revenue was up 7% year-on-year and 2% quarter-on-quarter as lower average

prices were more than offset by volume growth. Average 2Q17 Polyester prices decreased 2% when compared with

2Q16 and 4% versus 1Q17, mainly due to lower feedstock prices. The U.S. contract Px price posted its lowest level

year-to-date in June.

2Q17 Polyester volume was up 9% and 6% versus 2Q16 and 1Q17 respectively. Year-to-date, Polyester

volume is 5% higher than 2016 as growth associated to the integration of Selenis Canada Inc. (PET) was partially offset

by lower than expected PET volume in Mexico and Argentina.

Second quarter 2017 segment EBITDA was U.S. $33 million, including a U.S. $25 million non-cash inventory

loss and a U.S. $12 million one-time gain from the acquisition of a controlling interest in Selenis Canada Inc. (in 2016).

Adjusting for the inventory loss and one-time gain, Comparable 2Q17 Polyester EBITDA was U.S. $45 million, down

53% and 34% versus 2Q16 and 1Q17 respectively. Certain events had a negative impact on Polyester profitability.

Market events include this quarter’s decline in Px and monoethylene glycol (MEG) prices which causes a temporary

mismatch between end-product sale prices and feedstock costs. In addition, tight supply of secondary feedstocks

used to produce PET (IPA and CHDM) resulted in incremental costs. This increase has not been completely transferred

to PET prices. Moreover, planned and unplanned plant outages resulted in higher than expected 2Q17 conversion

and logistics costs. On aggregate, these events had an estimated impact of U.S. $21 million in Comparable 2Q17

Polyester EBITDA.

Plastics & Chemicals (P&C) (Polypropylene (PP), Expandable Polystyrene (EPS), Caprolactam (CPL), Other products – 29% of Alpek’s Net Sales)

2Q17 P&C revenue was up 2% year-on-year and flat quarter-on-quarter as a result of mixed price and volume

movements. Average second quarter 2017 P&C prices increased 6% when compared with 2Q16 driven mainly by

higher styrene prices. In contrast, the 2% average P&C price decrease versus 1Q17 reflects lower propylene and

styrene prices.

Second quarter 2017 P&C volume was down 3% versus 2Q16 and up 2% when compared to 1Q17. P&C

volume posted its highest level year-to-date in June as feedstock prices appear to have normalized after an extended

period of consecutive monthly declines.

Segment EBITDA was U.S. $49 million, including a U.S. $5 million non-cash inventory loss. Adjusting for the

inventory loss, Comparable 2Q17 P&C EBITDA was U.S. $54 million, down 43% versus 2Q16 which benefited from

higher PP margins. Yet, Comparable 2Q17 P&C EBITDA was above guidance, driven mainly by better than expected

PP margins and volume amid a volatile feedstock price environment.


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Consolidated Financial Results

Net Sales: Net Sales for the second quarter totaled U.S. $1.3 billion, up 6% year-on-year and 1% quarter-on-

quarter, as lower average prices were more than offset by volume growth. 2Q17 consolidated volume was up 6%

and 5% versus 2Q16 and 1Q17 respectively. Average 2Q17 consolidated prices were flat year-on-year and decreased

4% when compared with 1Q17, mainly due to lower feedstock prices. Accumulated net sales as of June 30, 2017

totaled U.S. $2.6 billion, 7% higher than the same period last year as a result of 5% and 3% increases in average prices

and volume respectively.

EBITDA: 2Q17 EBITDA was U.S. $82 million, down 61% and 48% when compared with 2Q16 and 1Q17 respectively.

This quarter’s Consolidated EBITDA includes a U.S. $29 million non-cash inventory loss and a U.S. $12 million one-

time gain from the acquisition of a controlling interest in Selenis Canada Inc. (in 2016). Adjusting for the inventory

loss and one-time gain, Comparable Consolidated EBITDA was U.S. $99 million, U.S. $131 million and U.S. $190 million

in 2Q17, 1Q17 and 2Q16 respectively. Comparable 2Q17 Consolidated EBITDA was lower than expected as Polyester

segment EBITDA was affected by a combination of internal and external events that had an estimated impact of

U.S. $21 million. Accumulated EBITDA as of June 30, 2017 was U.S. $240 million and accumulated Comparable

Consolidated EBITDA totaled U.S. $230 million. Year-to-date Comparable Consolidated EBITDA plus the one-time gain

from the Canadian acquisition was U.S. $243 million, which compares with U.S. $246 million EBITDA for the first half

of the year, implicit in Alpek’s U.S. $502 million 2017 EBITDA guidance.

Profit (Loss) Attributable to Controlling Interest: Profit Attributable to Controlling Interest for the

second quarter of 2017 was U.S. $25 million, compared to U.S. $48 million and U.S. $87 million in 2Q16 and 1Q17

respectively. 2Q17 Profit Attributable to Controlling Interest decreased versus 2Q16 and 1Q17 as a result of a lower

Operating Income. Accumulated Profit Attributable to Controlling Interest as of June 30, 2017 was U.S. $112 million,

down 7% when compared to the same period in 2016 as this year’s Fx gain and lower Income Tax were more than

offset by the decrease in Operating Income.

Capital Expenditures and Acquisitions (Capex): 2Q17 Capex was U.S. $65 million, compared to U.S. $110

million and U.S. $76 million in 2Q16 and 1Q17 respectively. Year-to-date, Capex of U.S. $142 million is flat vs the same

period last year. The majority of these funds were invested in the 350 MW power cogeneration plant in Altamira,

Mexico, which is advancing as planned together with other projects such as the EPS plant expansion. An important

milestone this quarter was the on-schedule startup of our two propylene storage spheres in Altamira, Mexico.

Net Debt: Consolidated Net Debt as of June 30, 2017 was U.S. $1.058 billion, up 16% year-on-year and down 10%

quarter-on-quarter. On an absolute basis, Net Debt decreased U.S. $118 million during 2Q17 driven by positive Net

Working Capital cash flow. Gross Debt as of June 30, 2017 was U.S. $1.246 billion, up 12% vs 2Q16 and down 4%

when compared to 1Q17. 2Q17 Cash and Cash equivalents balance was U.S. $188 million. Financial ratios as of June

30, 2017 were: Net Debt to LTM EBITDA of 2.0 times and Interest Coverage of 8.0 times.


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www.alpek.com 5

Appendix A - Tables

TABLE 1 | VOLUME (KTONS)

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Total Volume 1,038 986 981 5 6 2,024 1,970 3

Polyester 807 759 743 6 9 1,566 1,497 5

Plastics and Chemicals 231 227 239 2 (3) 458 472 (3)

TABLE 2 | PRICE CHANGES (%)

(%) 2Q17 vs. YTD17 vs.

1Q17 2Q16 YTD16

Polyester

Avg. Ps. Prices (13) 1 12

Avg. U.S. $ Prices (4) (2) 3

Plastics and Chemicals


Avg. U.S. $ Prices (2) 6 9

Total


Avg. U.S. $ Prices (4) - 5

TABLE 3 | INCOME STATEMENT (U.S. $ Millions)

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Total Revenues 1,306 1,293 1,237 1 6 2,598 2,419 7

Gross Profit 85 171 223 (50) (62) 256 408 (37)

Operating expenses and others (36) (48) (49) 25 26 (84) (96) 12

Operating income 49 123 175 (60) (72) 172 312 (45)

Financial cost, net (6) 17 (54) (137) 89 11 (70) 115

Share of losses of associates - - - (16) (243) - - 4

Income Tax (5) (34) (50) 86 91 (39) (68) 43

Consolidated net income 38 106 70 (64) (46) 144 175 (18)

Controlling Interest 25 87 48 (72) (49) 112 120 (7)


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TABLE 4 | REVENUES

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Total Revenues

Ps. Millions 24,275 26,339 22,341 (8) 9 50,614 43,633 16

U.S. $ Millions 1,306 1,293 1,237 1 6 2,598 2,419 7

Domestic Revenues

Ps. Millions 9,098 9,632 8,484 (6) 7 18,730 16,726 12

U.S. $ Millions 489 473 470 3 4 962 928 4

Foreign Revenues

Ps. Millions 15,176 16,707 13,856 (9) 10 31,884 26,906 18

U.S. $ Millions 816 820 767 - 6 1,636 1,491 10

Foreign / Total (%) 63 63 62 63 62


(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Operating Income

Ps. Millions 904 2,535 3,144 (64) (71) 3,439 5,628 (39)

U.S. $ Millions 49 123 175 (60) (72) 172 312 (45)

EBITDA

Ps. Millions 1,524 3,241 3,751 (53) (59) 4,765 6,840 (30)

U.S. $ Millions 82 158 208 (48) (61) 240 380 (37)

TABLE 6 | COMPARABLE EBITDA

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

EBITDA

Ps. Millions 1,524 3,241 3,751 (53) (59) 4,765 6,840 (30)

U.S. $ Millions 82 158 208 (48) (61) 240 380 (37)

Adjustments*

Ps. Millions 318 (550) (338) 158 194 (232) (207) (12)

U.S. $ Millions 17 (26) (19) 164 190 (10) (11) 16

Comparable EBITDA

Ps. Millions 1,841 2,691 3,413 (32) (46) 4,532 6,633 (32)

U.S. $ Millions 99 131 190 (25) (48) 230 368 (37) *Adjustments: Inventory and non-operating, one-time (gains) losses


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www.alpek.com 7

TABLE 7 | FINANCIAL COST, NET (U.S. $ Millions)

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Financial Expenses (19) (18) (21) (5) 12 (36) (40) 9

Financial Income 3 4 3 (18) (10) 7 8 (17)

Net Financial Expenses (15) (14) (18) (10) 12 (29) (32) 7

Fx Gains (Losses) 9 31 (36) (70) 126 40 (38) 206

Financial Cost, Net (6) 17 (54) (137) 89 11 (70) 115

TABLE 8 | NET INCOME (U.S. $ Millions)

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Consolidated Net Income 38 106 70 (64) (46) 144 175 (18)

Non-Controlling Interest 13 19 22 (31) (41) 32 55 (41)

Controlling Interest 25 87 48 (72) (49) 112 120 (7)

Earnings per Share (U.S. Dollars) 0.01 0.04 0.02 (72) (49) 0.05 0.06 (7)

Avg. Outstanding Shares (Millions)* 2,117 2,117 2,117 2,117 2,117 * The same number of equivalent shares are considered in the periods presented

TABLE 9 | CASH FLOW (U.S. $ Millions)

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

EBITDA 82 158 208 (48) (61) 240 380 (37)

Net Working Capital & Others 156 (64) (22) 342 797 91 (136) 167

Capital Expenditures & Acq. (65) (76) (110) 14 40 (142) (142) -

Financial Expenses (17) (16) (18) (4) 8 (33) (23) (42)

Income tax (33) (27) (45) (23) 26 (60) (119) 50

Dividends (9) (88) (69) 90 87 (97) (205) 53

Payment affiliated companies 1 - 52 100 (99) 1 64 (99)

Other Sources / Uses 3 (20) (3) 113 200 (17) (7) (133)

Decrease (Increase) in Net Debt 118 (134) (7) 188 1,836 (16) (189) 92


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TABLE 10 | STATEMENT OF FINANCIAL POSITION & FINANCIAL RATIOS (U.S. $ Millions)

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16

Assets

Cash and cash equivalents 188 126 204 50 (8)

Trade accounts receivable 577 582 521 (1) 11

Inventories 732 807 692 (9) 6

Other current assets 276 271 257 2 7

Total current assets 1,773 1,786 1,674 (1) 6

Investment in associates and others 29 29 26 1 10

Property, plant and equipment, net 2,088 2,028 1,820 3 15

Goodwill and intangible assets, net 574 571 573 1 -

Other non-current assets 234 227 123 3 89

Total assets 4,698 4,640 4,217 1 11

Liabilities & stockholders' equity

Debt 236 278 87 (15) 171

Suppliers 763 692 534 10 43

Other current liabilities 186 171 193 9 (4)

Total current liabilities 1,184 1,141 814 4 46

Debt 1,004 1,017 1,021 (1) (2)

Employees´ benefits 61 60 66 2 (7)

Other long term liabilities 371 372 343 - 8

Total liabilities 2,620 2,590 2,243 1 17

Total stockholders' equity 2,079 2,050 1,973 1 5

Total liabilities & stockholders' equity 4,698 4,640 4,217 1 11

Net Debt 1,058 1,175 910 (10) 16

Net Debt/EBITDA* 2.0 1.8 1.3

Interest Coverage* 8.0 10.0 11.1 * Times: last 12 months


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Polyester

TABLE 11 | REVENUES

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Total Revenues

Ps. Millions 17,303 18,670 15,733 (7) 10 35,972 30,820 17

U.S. $ Millions 930 916 871 2 7 1,846 1,708 8

Domestic Revenues

Ps. Millions 4,652 5,006 4,260 (7) 9 9,658 8,201 18

U.S. $ Millions 250 246 236 2 6 496 455 9

Foreign Revenues

Ps. Millions 12,651 13,663 11,472 (7) 10 26,315 22,619 16

U.S. $ Millions 680 670 635 1 7 1,351 1,253 8

Foreign / Total (%) 73 73 73 73 73


(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Operating Income

Ps. Millions 118 1,253 1,510 (91) (92) 1,371 2,358 (42)

U.S. $ Millions 7 61 84 (89) (92) 67 131 (48)

EBITDA

Ps. Millions 607 1,794 1,990 (66) (69) 2,402 3,312 (27)

U.S. $ Millions 33 87 110 (62) (70) 120 184 (35)


(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

EBITDA

Ps. Millions 607 1,794 1,990 (66) (69) 2,402 3,312 (27)

U.S. $ Millions 33 87 110 (62) (70) 120 184 (35)

Adjustments*

Ps. Millions 234 (395) (267) 159 188 (162) (68) 136

U.S. $ Millions 12 (19) (15) 165 184 (7) (4) 75

Comparable EBITDA

Ps. Millions 841 1,399 1,723 (40) (51) 2,240 3,243 (31)



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Plastics & Chemicals

TABLE 14 | REVENUES

(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Total Revenues

Ps. Millions 6,972 7,670 6,608 (9) 6 14,642 12,813 14

U.S. $ Millions 375 376 366 - 2 752 711 6

Domestic Revenues

Ps. Millions 4,447 4,626 4,224 (4) 5 9,073 8,526 6

U.S. $ Millions 239 227 234 5 2 466 473 (1)

Foreign Revenues

Ps. Millions 2,525 3,044 2,384 (17) 6 5,569 4,287 30

U.S. $ Millions 136 149 132 (9) 3 285 238 20

Foreign / Total (%) 36 40 36 38 33


(%) 2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

Operating Income

Ps. Millions 780 1,282 1,628 (39) (52) 2,062 3,281 (37)

U.S. $ Millions 42 62 90 (33) (54) 104 182 (43)

EBITDA

Ps. Millions 910 1,447 1,756 (37) (48) 2,357 3,540 (33)

U.S. $ Millions 49 70 98 (30) (50) 119 197 (39)


(%)2Q17 vs.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 Ch.%

EBITDA

Ps. Millions 910 1,447 1,756 (37) (48) 2,357 3,540 (33)

U.S. $ Millions 49 70 98 (30) (50) 119 197 (39)

Adjustments*

Ps. Millions 84 (154) (71) 154 217 (71) (139) 49

U.S. $ Millions 5 (8) (4) 160 215 (3) (8) 61

Comparable EBITDA

Ps. Millions 994 1,293 1,684 (23) (41) 2,286 3,401 (33)



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Appendix B – Financial Statements

Jun 17 Mar 17 Jun 16 Mar 17 Jun 16

ASSETS

CURRENT ASSETS:

Cash and cash equivalents 2,675 2,362 3,856 13 (31)

Trade accounts receivable 10,325 10,939 9,850 (6) 5

Other accounts and notes receivable 3,703 3,503 2,786 6 33

Inventories 13,105 15,187 13,089 (14) 0

Other current assets 1,922 1,599 2,075 20 (7)

Total current assets 31,730 33,590 31,656 (6) 0

Investment in associates and others 524 547 501 (4) 5

Property, plant and equipment, net 37,375 38,136 34,418 (2) 9

Goodwill and intangible assets,net 10,276 10,738 10,833 (4) (5)

Other non-current assets 4,181 4,269 2,334 (2) 79

Total assets 84,086 87,280 79,742 (4) 5

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:

Debt 4,218 5,228 1,646 (19) 156

Suppliers 13,651 13,009 10,091 5 35

Other current liabilities 3,323 3,216 3,651 3 (9)

Total current liabilities 21,192 21,453 15,388 (1) 38

NON-CURRENT LIABILITIES:

Debt (include debt issuance cost) 17,973 19,134 19,309 (6) (7)

Deferred income taxes 5,022 5,410 5,143 (7) (2)

Other liabilities 1,609 1,592 1,338 1 20

Employees´ benefits 1,089 1,127 1,243 (3) (12)

Total liabilities 46,885 48,716 42,421 (4) 11

STOCKHOLDERS´ EQUITY:

Controlling interest:

Capital stock 6,048 6,048 6,051 - (0)

Share premium 9,071 9,071 9,071 - (0)

Contributed capital 15,119 15,119 15,122 - (0)

Earned surplus 17,916 19,155 17,980 (6) (0)

Total controlling interest 33,035 34,274 33,102 (4) (0)

Non-controlling interest 4,166 4,290 4,219 (3) (1)

Total stockholders´equity 37,201 38,564 37,321 (4) (0)

Total liabilities and stockholders´ equity 84,086 87,280 79,742 (4) 5

ALPEK, S.A.B. DE C.V. and Subsidiaries

(%) Jun 17 vs.

STATEMENT OF FINANCIAL POSITION

Information in Millions of Mexican Pesos


[email protected]

www.alpek.com 12

ALPEK, S.A.B. DE C.V. and Subsidiaries

Information in Millions of Mexican Pesos

YTD17 vs. (%)

2Q17 1Q17 2Q16 1Q17 2Q16 YTD17 YTD16 YTD16

Revenues 24,275 26,339 22,341 (8) 9 50,614 43,633 16

Domestic 9,098 9,632 8,484 (6) 7 18,730 16,726 12

Export 15,177 16,707 13,857 (9) 10 31,884 26,907 18

Cost of sales (22,698) (22,826) (18,321) 1 (24) (45,524) (36,278) (25)

Gross profit 1,577 3,513 4,020 (55) (61) 5,090 7,355 (31)

Operating expenses and others (673) (978) (876) 31 23 (1,651) (1,727) 4

Operating income 904 2,535 3,144 (64) (71) 3,439 5,628 (39)

Financial cost, net (119) 317 (974) (137) 88 198 (1,264) 116

Share of losses of associates (3) (2) - (5) (269) (5) (5) (4)

Profit (loss) before income tax 782 2,850 2,170 (73) (64) 3,632 4,359 (17)

Income tax (89) (693) (904) 87 90 (782) (1,221) 36

Consolidated net income 693 2,157 1,266 (68) (45) 2,850 3,138 (9)

Profit attributable to Controlling interest 452 1,769 867 (75) (48) 2,221 2,149 3

Profit attributable to Non-controlling interest 241 388 399 (38) (40) 629 989 (36)

STATEMENT OF INCOME

2Q17 vs.(%)

April 24, 2017 1

Nemak posts 2Q17 EBITDA1 of US$206 million

Monterrey, Mexico. July 26, 2017. - Nemak, S.A.B. de C.V. (“Nemak”) (BMV: NEMAK), a leading provider of innovative lightweighting solutions for the global automotive industry, announced today its operational and financial results for the second quarter of 2017 ("2Q17"). What follows is an overview of the quarter’s main highlights:

Key Figures

For 2Q17, volumes decreased 2.3% year-over-year ("y-o-y") as a decline in North America ("NA") more than offset higher volumes in the Rest of World ("RoW") region and stable volumes in Europe ("EU"). Meanwhile, revenues were up 3.8% y-o-y, as higher average aluminum prices passed on to customers more than compensated for lower volumes. For 1H17, volume increased slightly, while revenues were 4.1% higher y-o-y mainly due to increased aluminum prices.

2Q17 EBITDA was US$206 million, a 6.8% y-o-y decrease. In addition to a difficult comparison vis-à-vis the same period in 2016, when Nemak reported a positive effect related to the time it takes to fully pass through changes in aluminum prices to customers ("metal price lag"), Nemak saw three main negative effects this quarter: lower volumes in NA; negative metal price lag; and increased expenses associated with new programs. On the positive side, RoW reported a strong result, driven mainly by the Chinese operations. Furthermore, Nemak recognized a non-recurring gain in the amount of US$18 million for the reversal of a provision related to a disputed tax on revenues. On a cumulative basis, 1H17 EBITDA was US$396 million, 7.9% lower than 1H16 primarily due to the same reasons already explained.

2Q17 capex was US$88 million as the company continued with investments to increase and adapt production capacity to meet new demand coming from recently won contracts. Likewise, resources were dedicated to the plant under construction in Slovakia, which will produce structural and electric vehicles (“EV”) components starting in 2H17. For 1H17, capex amounted to US$231 million.

Message from the CEO

This quarter, we continued to make progress in our growth strategy while at the same time weathering external headwinds—including lower demand from FCA and Ford in North America and

1 EBITDA = Operating Income + Depreciation, Amortization & other Non-Cash Charges

July 26, 2017 2

negative metal price lag due to rising aluminum prices—that weighed on our results. Higher expenses related to new program launches also hindered our financial performance, particularly in Europe. Meanwhile, our China operation remained on an upward trend, driving our RoW results higher in the quarter.

I want to emphasize our positive outlook on our business in China, where our results have gotten progressively better in recent years on the back of improved scale, product mix, and performance. Moreover, given our backlog of new programs and open bids, we expect RoW to remain our fastest-growing region through 2020.

Turning to strategic projects, I am pleased to share that we continued the scale-up of our structural and electric vehicle components businesses. This included successfully launching a new program for Alfa Romeo out of our plant in Poland and transferring production of a program for Audi´s new Q5 SUV from Poland to Mexico.

Additionally, we announced the creation of a global organization dedicated to structural and electric vehicle components, whose leader reports directly to me. We expect that this organization will help us drive growth in these promising new business lines across our regions.

Automotive Industry

In the quarter, SAAR for U.S. vehicle sales was down 3% compared to 2Q16, as a stable retail market was not enough to offset lower fleet sales. Meanwhile, North America vehicle production and Nemak customers’ vehicle production decreased 2.7% and 2.0%, respectively, mainly due to lower production of passenger cars as their demand softened.

In Europe, vehicle sales SAAR in 2Q17 remained flat y-o-y, as a slight increase in sales in Eastern Europe offset lower sales in Western Europe. However, vehicle production and Nemak customers’ production decreased 3.0% and 4.1%, respectively, as some OEMs adjusted their production schedules for inventory management reasons.

Recent Developments

Nemak successfully transferred a new program to produce structural components for the Audi Q5 from Poland to Mexico. This is Nemak´s first program in NA in this business line.

Nemak started development of E-drive housings in Europe and North America using proprietary casting processes.

July 26, 2017 3

Nemak began working with an Asian customer on the development of battery tray prototypes for a new electric vehicle model slated for the North American market.

Financial Results

What follows is an explanation of the results shown in the table above:

2Q17 total volume decreased by 2.3% y-o-y to 12.8 million equivalent units, with FCA’s 2016 discontinuation of its small- and- medium-size sedan lines in NA explaining the majority of the decrease and creating a difficult y-o-y comparison. Other Nemak customers, Ford in particular, also reduced demand due to lower sales of passenger cars. Regarding Europe, 2Q17 volume was flat y-o-y. Meanwhile, in RoW, volumes reported a strong y-o-y increase mainly due to the continued ramp-up of new programs in China. Despite the decrease in NA, 1H17 volume was slightly higher than 1H16 thanks to growth in Europe and RoW.

Turning to revenues, the effect of higher aluminum prices more than compensated for declining volumes, causing Nemak´s 2Q17 consolidated revenues to increase 3.8% y-o-y. Similarly, rising aluminum prices brought revenues 4.1% higher during 1H17.

2Q17 operating income decreased 12.7% y-o-y, mainly as a result of lower sales volumes, negative metal price lag, and increased expenses related to new programs. These factors were partially offset by the non-recurring gain already mentioned. The comparison vis-a-vis 2Q16 was even more difficult taking into account that the metal price lag effect had been positive that quarter. Lower operating income translated into an operating margin of 10.6%, 210 basis points below 2Q16. On a cumulative basis, 1H17 operating income was 14.1% lower than 1H16, for the reasons already explained.

The above-mentioned decrease in operating income resulted in a 6.8% y-o-y reduction in EBITDA. 2Q17 EBITDA margin was 17.7%, down from the 19.7% reported in 2Q16. 2Q17 EBITDA per equivalent unit was US$16.10, down from US$16.90 in 2Q16. On a cumulative basis, the lower 1H17 operating income affected 1H17 EBITDA, which was 7.9% lower than 1H16 for the reason already mentioned. 1H17 EBITDA margin and EBITDA per equivalent unit were 17.3% and US$15.20, respectively, which compared to 19.6% and US$16.60 in 1H16.

July 26, 2017 4

2Q17 net income increased 1.3% compared to 2Q16 as foreign exchange effects reduced deferred tax provisions. 1H17 net income was 16.7% lower than 1H16, mainly due to lower operating results.

Capital expenditures totaled US$88 million during 2Q17. As explained, investments were made to expand capacity in various regions, and to facilitate operational efficiency. For 1H17, capital expenditures amounted to US$231 million.

As of June 30, 2017, Nemak reported Net Debt in the amount of US$1.4 billion, including Cash and Marketable Securities worth US$108 million. Financial ratios were: Debt, net of Cash, to EBITDA, 1.8 times; Interest Coverage, 11.1 times. These ratios are slightly above those reported at the end of 2Q16.

Regional Results

North America

In 2Q17, revenues increased 0.8% y-o-y benefiting from higher aluminum prices, which more than compensated for the impact of lower volumes in the region. Turning to EBITDA, lower volumes and the adverse impact of metal price lag were the main causes of the 2.8% decrease y-o-y. This result includes the non-recurring revenue gain in the amount of US$18 million derived from the reversal of a provision related to a longstanding dispute on tax on revenues in Brazil. The gain was recorded at the holding company level, which for presentation purposes has been considered a part of North America.

Europe

In 2Q17, revenues in Europe increased 1.3% y-o-y mainly due to higher aluminum prices. Meanwhile, 2Q17 EBITDA decreased 21.1% y-o-y, mainly due to the effects of negative metal price lag and increased expenses related to new programs brought on stream in the quarter, and to a lesser extent, foreign exchange effects.

Rest of the World (RoW)

In 2Q17, revenues in RoW increased by 41.6% y-o-y reflecting a solid performance in China, with sales volumes growing 30.0%. 2Q17 EBITDA in RoW increased US$5 million in 2Q17 compared to 2Q16 due to higher profitability in Asia.

------------------

July 26, 2017 5

Methodology for presentation of results

The report presents unaudited financial information. Figures are in Mexican pesos or U.S. dollars, as indicated. For income statements, peso amounts were translated into dollars using the average exchange rate of the months during which the operations were recorded. For balance sheets, peso amounts were translated into dollars using the end-of-period exchange rate. Financial ratios were calculated in dollars. Due to rounding, small differences may occur when calculating percent changes from one period to another.

Conference call information

Nemak’s Second Quarter 2017 Conference Call will be held on Thursday, July 27, 2017, 11:30 a.m. Eastern Time (10:30 a.m. Mexico City Time). To participate in the conference call, please dial: Domestic U.S.: (877) 407-0790; International: 1-201-689-8561; Mexico Toll Free: 01 800 522 0034. The conference call will be webcast live through streaming audio. If you are unable to connect, the conference call audio and script will be available on Nemak’s website. For more information, please visit investors.nemak.com

Forward-looking statements

This report may contain certain forward-looking statements concerning Nemak’s future performance that should be considered as good faith estimates made by the Company. These forward-looking statements reflect management’s expectations and are based upon currently available data and analysis. Actual results are subject to future events and uncertainties, which could materially impact Nemak’s actual performance and results.

About Nemak

Nemak is a leading provider of innovative lightweighting solutions for the global automotive industry, specializing in the development and manufacturing of aluminum components for powertrain and body structure applications. The company employs more than 23,000 people at 38 facilities worldwide, generating annual revenues of US$4.3 billion in 2016. For more information about Nemak, visit http://www.nemak.com

Three pages of tables to follow

http://www.nemak.com/investors

http://www.nemak.com/

July 26, 2017 6

July 26, 2017 7

July 26, 2017 8

YTDIn millions 1Q17 2Q16 Δ%Revenues (Ps.) 3,780 3,683 3,478 3% 9% 7,463 6,124 22%

In USD 203 181 193 12% 5% 384 340 13%EBITDA (Ps.) (5) 1,507 1,177 1,139 28% 32% 2,684 2,002 34%

In USD 81 58 63 40% 29% 139 111 26%Net (loss) Income (Ps.) 598 1,020 -952 -41% n.a. 1,618 -777 n.a.

In USD 33 52 -53 -36% n.a. 85 -42 n.a.

Capital Expenditures (Ps.) 652 848 794 -23% -18% 1,499 2,088 -28%In USD 35 42 44 -16% -21% 77 115 -33%

Net Debt (In USD) 1,027 1,021 1,007 1% 2%Net Debt / EBITDA (6) 4.1x 4.4x 3.9x

YTD'17 YTD'162Q17 2Q161Q17(%) 2Q17 vs.

Investor Relations:

Adrian de los Santos [email protected] +52(81) 8114-1128

2nd 2017 Quarter

Media Relations:

Julio Salinas [email protected] +52(81) 8114-1144

Nancy Llovera [email protected] +52(81) 8114-1128

San Pedro Garza Garcia, Mexico, July 26, 2017 - Axtel, S.A.B. de C.V. (“Axtel” or “the Company”), a Mexican Information and Communications Technology company, announced today its unaudited second quarter results ended June 30, 2017(1). Results presented on this report reflect figures consolidated under Alfa S.A.B. de C.V. The complete unaudited second quarter results of Axtel have been filed with the Mexican Stock Exchange and are also available at the Company’s website, axtelcorp.mx .

Note: Financial information presented throughout this report includes unaudited consolidated results for Alestra S. de R.L. de C.V. and its subsidiaries (“Alestra”) up to February 14th, 2016, and for Axtel and its subsidiaries, including Alestra, from February 15th, 2016, and thereafter.

Highlights:

v  Performance during the quarter reflects Axtel’s strategy to provide world-class IT and Telecom solutions to the enterprise and government segments. Revenues from these two segments increased 8% and 42%, respectively, driving the 9% growth in total revenues.

v  During the quarter, Axtel closed an agreement with American Tower Corporation to sell 142 towers for US$56 million. On June 30th, the Company executed the first tranche of the transaction generating a benefit net of costs and expenses of Ps. 313 million in the quarter. The closing of this non-strategic asset sale should contribute to improve the Company’s capital structure.

v  To further strengthen the Company’s IT capabilities, in April, Axtel inaugurated the first 600 m2 hall of its second Data Center in Querétaro with a final capacity of 3,600 m2.

v  On May 1st, legal entity Alestra merged into Axtel consolidating operating processes and bookkeeping, among others, to increase its efficiency for the benefit of customers and shareholders.

80%

20%

Enterprise & Gov'tMass Market

77%

23%

Enterprise & Gov'tMass Market

YTDIn millions 1Q17 2Q16 Δ%

ENTERPRISE (Ps.) 2,463 2,388 2,272 3% 8% 4,851 4,198 16%In USD 132 117 126 13% 5% 250 233 7%

GOVERNMENT (Ps.) 568 523 400 9% 42% 1,091 731 49%In USD 31 26 22 19% 37% 56 41 38%

MASS MARKET (Ps.) 749 772 806 -3% -7% 1,521 1,195 27%In USD 40 38 45 6% -10% 78 66 18%

TOTAL (Ps.) 3,780 3,683 3,478 3% 9% 7,463 6,124 22%In USD 203 181 193 12% 5% 384 340 13%

YTD'17 YTD'16(%) 2Q17 vs.2Q17 1Q17 2Q16

2

Sources of Revenues

Quarterly revenues totaled $132 million, compared to $126 million in the same period in 2016, a 5% increase. In peso terms, Enterprise revenues in the second quarter of 2017 increased 8% compared to the same period in 2016, mainly due to an increase in Telecom managed network and internet revenues.

Telecom revenues in the second quarter increased 4% compared to the second quarter in the previous year. Voice revenues decreased 9% due to reductions in fix-to-mobile and international long distance revenues. Data and Internet revenues increased 6% due to strong demand for dedicated internet from existing enterprise customers. Managed networks recorded a strong increase of 16%, driven by a 50% growth in Ethernet solutions.

IT revenues increased 13% year-over-year, mainly due to a 26% increase in hosting and a 27% increase in both cloud and security services.

Enterprise

Total revenues increased 5% in the second quarter of 2017 compared to the same period in 2016. In peso terms, revenues increased 9%.

2Q16 2Q17

FTTx proportion within the revenue mix increased from 14% in 2Q16 to 15% in 2Q17 and wireless declined from 9% to 5%; Enterprise remained at 65% and Government increased from 12% to 15%.

YTDIn million USD 1Q17 2Q16 Δ%

TELECOM 119 106 114 12% 4% 224 210 7%Voice 33 30 37 12% -9% 63 66 -5%Data and Internet 45 41 42 10% 6% 86 79 9%Managed Networks 41 35 35 15% 16% 76 64 18%

IT 14 12 12 19% 13% 26 23 9%TOTAL ENTERPRISE 132 117 126 13% 5% 250 233 7%

(%) 2Q17 vs. YTD'17 YTD'162Q17 1Q17 2Q16

3

Government revenues amounted to $31 million in the second quarter 2017, compared to $22 million in the same period in 2016, a 37% increase. In peso terms, Government revenues in the second quarter of 2017 increased 42% compared to the second quarter of 2016 driven by an increase in Telecom managed networks, mitigated by a decline in IT revenues.

Telecom revenues increased 117%. Voice revenues increased 2%. Data and internet decreased 4% and managed networks posted strong results due to increase in VPN solutions and to an income cancellation recorded in the second quarter of 2016.

IT revenues declined 13% mainly due to a 75% decline in system integration services due to extraordinary revenues in the second quarter of 2016 related to equipment sales.

Government


TELECOM 18 16 9 19% >100% 34 17 95%Voice 3 2 3 28% 2% 5 4 25%Data and Internet 5 4 5 15% -4% 9 8 17%Managed Networks 11 9 1 19% >100% 21 6 >100%

IT 12 10 14 19% -13% 22 23 -5%TOTAL GOVERNMENT 31 26 22 19% 37% 56 41 38%

(%) 2Q17 vs. YTD'17 YTD'162Q17 1Q17 2Q16

4,634 5,067 5,519

12,980 11,588 12,009

2012 2013 2014 2015 2016 2Q17

Alestra Enterprise Government

Enterprise and Government Segment Evolution

(Revenues in MPs.)

(LTM)

* Pro forma figures include Alestra as of the beginning of each year.

(Pro forma)* (Pro forma)*

4

Revenues for the mass market totaled $40 million in the second quarter of 2017, compared to $45 million in same period in 2016, a 10% decrease. In peso terms, mass market revenues decreased 7%.

FTTx revenues totaled $30 million in the second quarter of 2017, compared to $27 million for same period in 2016, representing a 9% increase in line with a 15% increase in customers and an upward price adjustment starting February 2017. Voice revenues increased 11% resulting from increases in monthly rent revenues. Internet and video revenues increased 7% and 2% respectively, mainly due to increases in internet and video subscribers.

Legacy technologies revenues amounted to $10 million in the second quarter of 2017, a 40% decrease compared the same period in 2016, explained by a 41% decline in customers.


FTTx 30 27 27 11% 9% 57 40 0.41663Legacy Technologies 10 11 17 -5% -40% 21 26 -19%

TOTAL MASS MARKET 40 38 45 6% -10% 78 66 18%

(%) 2Q17 vs. YTD'17 YTD'162Q17 1Q17 2Q16

Mass Market (2)

16 16 17 17 YTD QTR

16 16 17 17 YTD QTR

16 16 17 17 YTD QTR

5

Cost of Revenues (in Mdlls.)

Expenses (in Mdlls.)

EBITDA (in Mdlls.)

Cost of revenues, Operating and other expenses and EBITDA

Cost of revenues(3) (excludes depreciation and amortization cost). For the three month period ended June 30, 2017, the cost of revenues represented $48 million, a 47% or $16 million increase, mainly due to an increase in Telecom costs due to an extraordinary voice-related benefit recorded in the second quarter of 2016. In addition, as part of the homologation accounting process between Axtel and Alestra, costs that were previously classified as operating expenses related to billing, collection and maintenance directly associated with customers are being recorded as costs as of 2017. This adjustment represents a year-over-year increase of $4 million in the quarter. In peso terms, Cost of Revenues increased 54% year-over-year.

Operating and other expenses(4) (excludes depreciation and amortization expense). In the second quarter of year 2017, total expenses totaled $74 million, 24% lower than the $97 million recorded in the same period in year 2016 mainly due to an 8% decline in operating expenses including personnel and outsourcing expenses related to the synergies’ initiatives implemented during 2016 and also due to $17 million of other income related to the first phase of the tower sale recorded during the quarter. In peso terms, expenses decreased 22% year-over-year.

EBITDA(5). For the second quarter of 2017, EBITDA totaled $81 million, a 29% increase compared to the same period in year 2016. This figure includes other income of $17 million related to the first phase of the tower sale; without this effect, EBITDA reached $64 million or 2% higher than the second quarter 2016. In peso terms, EBITDA increased 32% year-over-year. For the three month period ended June 30, 2017 and 2016, non-recurring merger and integration process expenses totaled $3 million and $2 million, respectively.

63

111

81

139

33

63

48

92

97

166

74

153

6

Comprehensive Financing Result

Total Debt. At the end of the second quarter 2017, total debt increased $22 million in comparison with second quarter 2016. The increase is explained by (i) a $2 million decrease in loans and other financing obligations; (ii) a $2 million increase in accrued interests, and (iii) a $22 million non-cash increase caused by the 6% appreciation of the Mexican peso.

Cash. As of the end of the second quarter of 2017, the cash balance totaled $69 million, compared to $68 million a year ago, and $61 million at the beginning of the quarter. The cash balance at the end of the quarter includes $9 million restricted cash.

Total Debt and Net Debt (7)

The comprehensive financing income reached $17 million in the second quarter of 2017, compared to a cost of $86 million in the same period of 2016. The comprehensive financing result is mostly explained by the FX gain during the second quarter of 2017 due to a 5% appreciation of the Mexican peso, compared to an FX loss in second quarter 2016 related to an 8% depreciation of the Mexican peso.

In the second quarter of 2017, capital investments totaled $35 million, compared to $44 million in the year-earlier quarter, a 21% decline.

Capital Expenditures

Million dollars 2Q17 1Q17 2Q16Syndicated Credit Facility 850 833 831 Other loans 213 214 198 Other financing obligations 25 27 40 Accrued interests 8 7 6 Total Debt 1,096 1,081 1,074 (-) Cash and cash equivalents (69) (60) (68) Net Debt 1,027 1,021 1,007

YTDIn million USD 1Q17 2Q16 ?%

Net interest expense (18) (18) (14) -3% -28% (36) (42) 15%FX gain (loss), net 36 73 (66) -51% n.a. 109 (44) n.a.Ch. in FV of fin. Instruments (1) (1) (5) -69% 78% (2) (4) 54%

Total 17 55 (86) -69% n.a. 72 (90) n.a.

YTD'17 YTD'162Q17 1Q17 2Q16 (%) 2Q17 vs.

Appendix Other important information

1)  Financial information presented is based on International Financial Reporting Standards (IFRS) in nominal pesos for the following periods:

–  Consolidated income statement information for the three month periods ending on June 30, 2017 and 2016, and March 31, 2017; and year-to-date periods ending on June 30, 2017 and 2016, and

–  Balance sheet information as of June 30, 2017 and 2016; and March 31, 2017.

2)  Mass market operating data:

3)  Costs of revenues include expenses related to the termination of our customers’ cellular and long distance calls in other carriers’ networks, as well as expenses related to billing, payment processing, operator services and our leasing of private circuit links. Costs that were previously classified as operating expenses related to billing, collection and maintenance directly associated with customers are being recorded as costs as of 2017.

4)  Operating and other expenses are those incurred in connection with general and administrative matters, such as personnel, land and tower leases, sales and marketing, maintenance of our network and net other not recurrent expenses including merger and integration expenses.

5)  EBITDA is defined as operating income (loss) plus depreciation and amortization, plus impairment of assets.

6)  Net Debt to EBITDA ratio: Net debt translated into U.S. Dollars using the end-of-period exchange rate divided by the respective LTM pro forma EBITDA translated into U.S. Dollars using the average exchange rate for each month.

7)  Total debt includes accrued interests for each period. Net debt is calculated subtracting cash and equivalents, including non-current restricted cash, from total debt.

* Revenue Generating Units, represent individual service subscriptions (line, broadband, video) which generate recurring revenues for the Company.

7

In thousands 2Q17 1Q17 2Q16FTTH

Customers 247 242 214 RGUs 676 661 579

Lines in service 306 295 247 Broadband subscribers 248 242 213 Video subscribers 122 124 119

LEGACY TECHNOLOGIESCustomers 156 182 262 RGUs 301 348 480

Lines in service 172 200 285 Broadband subscribers 129 148 195

8)  In June 2017, Axtel entered into a FX forward transaction fixing its dollar-denominated interest payments at an exchange rate of 18.8866 MXN/USD for the following amounts and dates:

January 2018 US$ 1.4 million April 2018 US$ 10.3 million

July 2018 US$ 10.3 million

9)  As part of the merger agreement approved on the January 15, 2016 Extraordinary General Shareholder’s Meeting, Alfa had the right to increase its ownership in Axtel by up to 2.5%, or the obligation to contribute cash to Axtel, depending on the average exchange rate of an 18-month period ending on July 14, 2017. Given that the average exchange rate of the period was above 18.50 pesos per dollar, Axtel transferred 1,019’287,950 Class “I” Series “B” shares to Alfa, equivalent to an additional participation of Alfa in Axtel of 2.5%. Resulting from this agreed-upon merger consideration, the number of outstanding, subscribed paid-up Class “I” Series “B” shares is 20,249,227,481 as of the date of this report. Please note seven Series “B” shares are equivalent to one AXTELCPO.

About AXTEL Axtel is a Mexican Information and Communication Technology Company that serves the enterprise, government and residential markets with a robust portfolio of solutions through its brand Alestra (enterprise and government services) and its brand Axtel (residential and small businesses services).

With a network infrastructure of over 40 thousand kilometers of fiber and more than 7 thousand square meters of data center, Axtel enables organizations to be more productive and brings people together to improve their quality of life.

As of February 15, 2016, Axtel is a subsidiary of Alfa, which owns approximately 53.5% of its equity.

Axtel shares, represented by Ordinary Participation Certificates, or CPOs, trade on the Mexican Stock Market under the symbol “AXTELCPO” since 2005.

Axtel’s Investor Relations Center: www.axtelcorp.mx Enterprise and Government services website: www.alestra.mx Mass Market services website: www.axtel.mx

8

9

Axtel, S.A.B. de C.V. and Subsidiaries Unaudited Consolidated Balance Sheet (in Thousand Mexican pesos)

(%) Jun-17 vs.Jun-17 Mar-17 Jun-16 Jun-16

ASSETSCURRENT ASSETSCash and equivalents 1,085,102 975,031 1,128,269 (4)Accounts receivable 2,951,270 2,824,136 3,232,026 (9)Related parties 23,074 15,866 24,562 (6)Refundable taxes and other accounts receivable 788,648 910,106 1,010,391 (22)Advances to suppliers 413,190 539,345 728,060 (43)Inventories 171,608 130,897 98,792 74Financial Instruments (Zero Strike Call) 163,843 162,974 272,492 (40)Total current assets 5,596,735 5,558,356 6,494,592 (14)

NON CURRENT ASSETSRestricted cash 157,364 155,126 150,498 5Property, plant and equipment, net 19,390,406 19,596,073 19,692,789 (2)Long-term accounts receivable - - 77,845 n.a.Intangible assets, net 1,643,504 1,754,467 2,024,338 (19)Deferred income taxes 3,814,222 4,053,186 3,526,726 8Investment in shares of associated co. & other 22,260 1,708 18,131 23Other assets 191,716 199,788 177,789 8Total non current assets 25,219,473 25,760,347 25,668,116 (2)

TOTAL ASSETS 30,816,208 31,318,703 32,162,708 (4)

LIABILITIES & STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccount payable & Accrued expenses 3,210,665 3,268,279 3,342,188 (4)Accrued Interest 143,922 139,636 105,737 36Short-term debt 411,410 412,498 15,137 >100Current portion of long-term debt 437,714 450,110 509,442 (14)Taxes payable 144,474 185,697 57,319 >100Deferred Revenue 428,272 673,962 367,322 17Provisions 26,070 46,972 72,190 (64)Other accounts payable 2,013,642 2,066,356 2,258,504 (11)Total current liabilities 6,816,169 7,243,511 6,727,839 1

LONG-TERM LIABILITIESLong-term debt 18,492,992 19,178,670 19,450,433 (5)Employee Benefits 506,768 492,856 415,110 22Other LT liabilities 986,307 986,356 380,793 >100Total long-term debt 19,986,067 20,657,882 20,246,336 (1)

TOTAL LIABILITIES 26,802,237 27,901,393 26,974,175 (1)

STOCKHOLDERS EQUITYCapital stock 365,512 365,512 10,362,334 (96)Additional paid-in capital - - 644,710 n.a.Cumulative earnings (losses) 3,648,459 3,051,797 (5,818,512) n.a.

TOTAL STOCKHOLDERS' EQUITY 4,013,972 3,417,310 5,188,533 (23)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 30,816,208 31,318,703 32,162,708 (4)

10

Axtel, S.A.B. de C.V. and Subsidiaries Unaudited Consolidated Income Statement (in Thousand Mexican pesos)

2Q17 1Q17 2Q16 1Q17 2Q16 YTD'17 YTD'16 Δ%

Total Revenues 3,779,825 3,682,789 3,478,222 3 9 7,462,614 6,124,143 22

Operating cost and expensesCost of sales and services (900,331) (884,609) (584,944) 2 54 (1,784,940) (1,128,530) 58Selling, administrative and other expenses (1,372,427) (1,621,214) (1,754,006) (15) (22) (2,993,640) (2,992,828) 0Asset impairment (3,433) 970 (3,061) n.a. 12 (2,463) (3,264) (25)Depreciation and amortization Cost (885,910) (855,584) (825,109) 4 7 (1,741,494) (1,339,042) 30Depreciation and amortization Expenses (121,553) (156,481) (156,103) (22) (22) (278,034) (250,227) 11

(3,283,654) (3,516,917) (3,323,223) (7) (1) (6,800,571) (5,713,891) 19

Operating income (loss) 496,172 165,872 154,999 >100 >100 662,044 410,252 61

Comprehensive financing result:Interest expense (346,433) (369,001) (260,863) (6) 33 (715,433) (776,102) (8)Interest income 10,267 10,742 5,096 (4) >100 21,009 9,047 >100Foreign exchange gain (loss), net 665,219 1,438,212 (1,211,148) (54) n.a. 2,103,430 (816,495) n.a.Change in fair value of fin. instruments (22,060) (12,770) (96,046) 73 (77) (34,830) (72,608) (52)

Comprehensive financing result, net 306,993 1,067,183 (1,562,961) (71) n.a. 1,374,176 (1,656,158) n.a.

Equity in results of associated company 0 (0) (0) n.a. n.a. (0) (0) 20

Income (loss) before income taxes, 803,165 1,233,054 (1,407,962) (35) n.a. 2,036,219 (1,245,906) n.a.

Income taxes: Current 33,799 (219,603) (38,916) n.a. n.a. (185,803) (76,208) >100 Deferred (239,024) 6,134 494,445 n.a. n.a. (232,890) 544,710 n.a.

Total income taxes (205,225) (213,469) 455,529 (4) n.a. (418,694) 468,502 n.a.

Net Income (Loss) 597,940 1,019,585 (952,433) (41) n.a. 1,617,525 (777,404) n.a.

(%) 2Q17 vs.

Note: “YTD’16” figures include consolidated results for Alestra S. de R.L. de C.V. and its subsidiaries (“Alestra”) up to February 14th, 2016, and for Axtel and its subsidiaries, including Alestra, from February 15th, 2016, and thereafter.


NEWPEK | NATURAL GAS AND HYDROCARBONS

1% AND 0% OF ALFA´S REVENUES AND EBITDA IN 2Q17

Newpek is an oil & gas exploration and production company with operations in the United States and Mexico. The

company owns mineral rights in several states within the U.S. where it extracts oil, natural gas and liquids. In Mexico, its

operations are concentrated in two mature oil fields under a service agreement with Petróleos Mexicanos (PEMEX).

INDUSTRY COMMENTS

Hydrocarbon prices volatility continued during 2Q17, WTI oil price averaged U.S. $48 per barrel, 7% lower than the

previous quarter and Henry Hub natural gas price at around U.S. $3.1 per MMBTU, 2% higher than the previous quarter.

The uncertainty surrounding mid-to-long term oil prices remained and OPEC continued to grapple with whether to regain

market share or aim for higher prices while the US rig count continues to grow, which according to various analysts, is the

key factor driving oil prices in the short term.

OPERATIONS IN THE U.S.

During 2Q17, four new wells were connected to sales at the Eagle Ford Shale play (“EFS”) in South Texas. This brought wells

in production at EFS to 632 by the quarter’s end, compared to the 628 wells in production at the end of 2Q16. Sales volume

in the U.S. averaged 4.2 MBOED during 2Q17, down 46% from 2Q16, reflecting less drilling and normal decline rates.

Liquids and oil represented 67% of the total sales volume for the quarter, up from 62% a year ago. Strategic drilling and

completion activities continued at EFS during the quarter. As a result, nine new wells are expected to be put into

production during 3Q17, and seven during 4Q17, for a total of 20 new wells put into production during the year. Initial

results of the four new wells were very encouraging. These initial wells along with the remaining wells to be completed

during the rest of the year are being completed with enhanced completion technology that yields higher capital efficiency

than the original wells drilled in similar locations. The prospects in the other areas within the U.S. remained on hold during

the quarter, but drill ready locations have been identified and are expected to be drilled soon.

OPERATIONS IN MEXICO

In Mexico, production averaged 3.7 MBOED during 2Q17, up 12% from 2Q16. The San Andrés field represented 71% of the

total production for the quarter, essentially flat year-on-year. There were 133 wells in production in Mexico at quarter’s

end, a 5% increase from the 127 wells in production at the end of 2Q16.

FINANCIAL RESULTS; CAPITAL EXPENDITURES AND ACQUISITIONS; NET DEBT

Oil and gas prices increased significantly on a year-on-year basis, with WTI Oil price up 6% and Henry Hub natural gas price

up 44%, which was sufficient to offset the normal decline in production volume. This in turn, resulted in slightly higher

revenues in the quarter, which totaled U.S. $29 million in 2Q17, up 16% year-on-year. 2Q17 EBITDA was U.S. $1 million, an

improvement from the negative U.S. $2 million reported in 2Q16. Capital expenditures amounted to U.S. $7 million, while

net debt was U.S. $33 million at the end of the quarter.


NEWPEK

TABLE 1 | REVENUES


TOTAL REVENUES Ps. Millions 541 536 451 1 20 1,077 911 18 U.S. $ Millions 29 26 25 10 16 55 50 10

DOMESTIC REVENUES Ps. Millions 320 252 185 27 73 572 405 41 U.S. $ Millions 17 12 10 38 67 30 22 32

FOREIGN REVENUES Ps. Millions 221 284 266 (22) (17) 505 506 - U.S. $ Millions 12 14 15 (15) (19) 26 28 (8) Foreign / Total (%) 41 53 59 47 55

VOLUME (U.S. Assets) Thousands of Barrels of Oil Equivalent Per Day (MBOEPD) 4.2 5.1 7.7 4.6 8.2 Liquids & others as % of total sales volume 67 67 62 6.7 6.2


2Q17 1Q17 2Q16 YTD. 17 YTD. 16

Assets 350 345 512 350 512 Liabilities 305 295 304 305 304 Stockholders’ Equity 46 50 207 46 207 Net Debt 33 34 81 33 81 Net Debt/EBITDA* 2.8 3.7 1.8 2.8 1.8 Interest Coverage* 1.8 1.4 4.7 1.8 4.7 * Times: LTM = Last 12 months


(%) 2Q17 VS.

2Q17 1Q17 2Q16 1Q17 2Q16 YTD. 17 YTD. 16 Ch.%

OPERATING INCOME

Ps. Millions (112) (180) (243) 38 54 (292) (536) 46 U.S. $ Millions (6) (9) (14) 32 56 (15) (30) 50 EBITDA Ps. Millions 10 (40) (35) 126 130 (30) (63) 53 U.S. $ Millions 1 (2) (2) 129 129 (1) (3) 60

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