TLALNEPANTLA, Mexico–(BUSINESS WIRE)–Mexichem, S.A.B. de C.V. (BMV: MEXCHEM*) (“the Company” or “Mexichem”) today announced its unaudited results for the fourth quarter and Full Year ended December 31, 2014. The figures have been prepared in accordance with International Financial Reporting Standards (“NIIF” or “IFRS”) having US dollars as the functional and reporting currency. All comparisons are made against the same period of the prior year, unless specified to the contrary.

Fourth Quarter 2014 Financial and Operating Highlights

• Revenues increased 7% to $1.4 billion, reflecting organic and acquisition growth
• EBITDA was $157 million, a decline of 14%; EBITDA without Venezuela and PMV was $167 million, an increase of 3%.
• Net loss was $27 million
• Completed Vestolit acquisition on December 1, 2014
• Booked charge of $15m in 4Q14 related to regulator-mandated change in effective exchange rate for Venezuelan operations; charge corresponds to results for 2014

Full Year 2014 Financial and Operating Highlights

• Revenues increased 8% to $5.6 billion;
• EBITDA was $818 million, down 9%; excluding Venezuela and PMV, EBITDA was $784 million, down 2%
• Net income increased to $125 million
• Net Debt to EBITDA proforma ratio was 2.0x at year-end
• Operating cash flow was $699 million, boosted by working capital management
• Completed specialty acquisitions with combined revenues of over $214 million during the consolidated period (September ‘14-Dura-Line, December ’14-Vestolit)

Conference Call

Mexichem will host a conference call to discuss its 4Q14 results on Thursday February 26th, 2014 at 10:00 Mexico City / 11:00 NY. To access the call, please dial 001-855-817-7630 (Mexico), or 1-866-652-5200 (United States) or 1-412-317-6060 (International). All callers should dial in a minimum of 15 minutes prior to the start time and ask for the Mexichem conference call. The call will also be available through an audio only live webcast at http://services.choruscall.com/links/mexichem150226.html

A replay of the call will be available approximately two hours after the end of the call. The replay can be accessed via Mexichem’s website atwww.mexichem.com

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CONSOLIDATED RESULTS

Consolidated results without Venezuela and PMV:

MANAGEMENT COMMENTARY

Performance and Outlook

Several factors combined made the fourth quarter a very challenging period for Mexichem and our global industry peers. Price volatility and shortages in ethylene and VCM caused an increase in our input costs, revenues were reduced by pricing pressures and an overhaul on the PMV plant, and geopolitical conditions in Eastern Europe continued to affect product demand.

Fortunately, our strategic initiatives to expand Mexichem’s portfolio of specialty products, and to develop further end market and geographic diversification, succeeded in mitigating the full impact of this confluence of events. Thus, our consolidated EBITDA rose modestly on a year-over-year basis in the fourth quarter, excluding results from Venezuela and our PMV joint venture with Pemex, which underwent an extended overhaul shutdown in the quarter.

Our results for full year 2014 were more reflective of the progress that Mexichem has made in executing on our long term strategic growth plan—both through initiatives to drive organic growth as well as by completing important acquisitions. With respect to organic growth, in the second half of the year we saw a marked recovery in our Fluorine Chain, which is our highest margin business segment. In this segment, EBITDA grew 52% in the second half of the year, following the renegotiation of fluorspar contracts and positive market trends. Second, the Latin American operations of our Integral Solutions Chain posted improved EBITDA in 2014, benefitting from a more favorable product mix in Brazil and Central America from our recent investments in higher-margin products. And third, increased capacity in Colombia and Mexico as well as proportionally higher sales from Specialty Resins point towards improved performance in our Chlorine Vinyl Chain once the operating environment becomes more normalized.

The two acquisitions we completed in late 2014, while only modestly benefiting full year results, are important transactions that we expect to significantly enhance Mexichem’s long term market position. Strategically, both are fully aligned with our key objectives of expanding our portfolio of value-added products and accessing new end markets and geographies. Additionally, in the case of Dura-Line, the acquisition gives us major foothold in the U.S., the strongest economy of all of the markets we serve, and with Vestolit we gain advanced technology that we can leverage across our organization.

There is no question that 2015 will be a challenging period for Mexichem. Similar to our global peers, we are likely to be facing a difficult demand situation in Europe as a result of uncertain economic and geopolitical conditions. Lower oil prices, while benefitting our input costs on the Integral Solutions Chain is reducing at the same time our selling prices in the Chlorine-Vinyl Chain. However our transformational projects will bring significant long term benefits. The current behavior in oil prices is currently validating Mexichem´s strategy to reduce volatility through vertical integration. This strategy will provide important benefits when our JV´s with Pemex in 2015 and with Oxy in 2017 become fully operational.

Within this environment, we are focusing on driving EBITDA growth, while taking full advantage of opportunities to develop revenue synergies through cross-selling an expanded portfolio of products to a customer base. Importantly, we are prioritizing margin expansion over volume growth by emphasizing the specialty products in our portfolio.

As part of our program to eliminate low margin products, we will incur a restructuring charge of approximately $9 million in the first quarter of 2015, and additional $4 million in the second quarter of 2015 related to streamlining of several facilities. Based on current forecasts, we expect double-digit growth in EBITDA for full year 2015 (exclusive of results from PMV and Venezuela as well as restructuring charges). Furthermore, throughout 2015, we will continue to evaluate the long term growth potential of certain lower margin businesses and product lines to determine whether to continue to invest, or to divest and re-invest in other faster growing areas. In this continuous evaluation of each of our businesses we will also be working with our JV Partner in PMV to re-design part of the business model incorporating the lessons learned over the last 18 months of operation to make the company more flexible and efficient.

Additionally, we plan to scale back our capital maintenance expenditure budget as a percentage of sales from 4% to 3%, while the major portion of our 2015 capital spending will be allocated to our two large joint ventures, PMV and the construction of the ethylene cracker in Texas. These projects form the core of our strategy to increase Mexichem’s vertical integration, thereby ensuring us a long term stable source of raw materials.

Mexichem is also well positioned from a financial standpoint. In early September 2014, we raised $750 million through a 144A/RefS 30-year bond at an attractive rate of 5.875%. We ended 2014 with a reasonable net debt to EBITDA proforma ratio of 2.0, which is in line with our internal target. We were able to maintain our free cash flow for 2014, thanks to successful efforts to reduce working capital requirements. Thus, Mexichem has the financial flexibility to take advantage of business development opportunities that inevitably arise within our industry.

SALES

Sales in 4Q14 increased $90 million, or 7%, year-on-year to $1.4 billion, mainly due to the following factors:

• An increase of $86 million, or 12%, in Integral Solutions revenue, mainly due to the consolidation of Dura Line
• An increase of $6 million, or 4%, in the Fluorine Chain, due to higher prices for acid grade fluorspar and hydrofluoric acid as new contracts came into effect. Sales also benefited from modestly higher prices and volumes for refrigerant gases.

Sales in the Chlorine Vinyl Chain fell $28 million, or 6%. Sales of Resins, Compounds and Derivatives decreased by $21 million y-o-y mainly due to lower prices. PMV sales fell by 30% due to (1) lower sales of caustic soda to third parties, (2) limited output and sale of VCM and ethylene due to the impact of a prolonged overhaul shutdown.

For FY14, sales grew $406 million or 8% due mainly to an increase of $192 million in Integral Solutions, principally because of the consolidation of Dura-Line. In the Chlorine Vinyl Chain, sales increased $94 million, mainly due to the expansion capacity in Mexico and Colombia.

SALES BY REGION:

Please refer to Multimedia section.

EBITDA

In 4Q14, Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) fell $25 million, or 14%, to $157 million.

EBITDA from the Chlorine Vinyl Chain fell by $42 million, or 66%, as volatile commodity prices reduced EBITDA from Resins, Compounds and Derivatives by $30 million, while PMV reported a $12 million decline in EBITDA due to the prolonged overhaul shutdown at the facility.

The Integral Solutions Chain’s EBITDA decreased $12 million, or 16%, to $66 million. Without Venezuela EBITDA grew $7 million or 10% from $65 million to $72 million. Results for 4Q13 included non-recurring earnings of $17 million not related with Venezuela, creating a high base of comparison.

These negative effects were partially offset at a consolidated level by improved margins in the Fluorine Chain. EBITDA margin in the chain was 41%, excluding one-time revenue of $16.8 million related to a legal settlement, compared with 29% in 4Q13.

For full year 2014, EBITDA was $818 million, down from $899 million in 2013. The reduction was mainly due to:

(i) The weak economic environment in Europe, which affected the Integral Solutions Chain in 3Q14.

(ii) Performance in the Chlorine Vinyl Chain, which was impacted by volatile raw materials prices and availability.

(iii) A $15 million charge related of the revaluation of assets and operations in Venezuela. Following a change in Venezuelan regulation, companies including Mexichem were forced to revalue assets using the exchange rate from the last auction of dollar bonds by the country’s central bank. This entailed using an exchange rate of 12 bolivars per dollar, compared with 6.3 bolivars per dollar at the end of 2013. The full effect of 2014 was taken in Q4.

(iv) An impact of $5.2 million from the appreciation of the U.S. dollar against global currencies since the end of 4Q13.

Excluding Venezuela and PMV, 2014 EBITDA was $784 million, down 2% from $802 million in 2013.

OPERATING INCOME

Operating income for the fourth quarter was $44 million, 40% lower than in 4Q13. This was due to the factors mentioned above and to higher depreciation and amortization costs as a result of an expanded asset base following the investment in PMV, and the capacity expansion in Mexico and Colombia in the Chlorine-Vinyl Chain.

For 2014, operating income was $403 million, down from $562 million in 2013.

FINANCIAL COST

In 4Q14, financial costs rose $27 million mainly due to:

• The appreciation of the US dollar against Latin American currencies led to a $10 million loss from the revaluation of local-currency denominated debt, compared with a $2 million gain in the fourth quarter of 2013. Also, the revaluation of cash held in local currencies led to an additional loss of $8 million
• Interest expenses rose $14 million from a year earlier partially due to the issuance of $750 million bonds in the international markets in September 2014. In addition, during 2013 the Company expanded capacity in its Chlorine Vinyl Chain in Mexico and Colombia through a lease contract. Following the start-up of operations of these plants in 2Q14, interest that was capitalized during the construction process in accordance with IAS16 “Property, Plant and Equipment” was accrued as an expense.

In FY14, financial costs increased by $83 million y-o-y mainly due to:

• A $33 million loss related with Venezuelan foreign exchange operations performed in 2Q14.
• The revaluation of cash held in local currencies that has dollar functional currency led to an additional loss of $16 million.
• Interest expenses rose $20 million from a year earlier, due to the increase in debt related with the $750 million dollar 30-year bond issued in September 2014 and to the capacity expansion in Mexichem´s Chlorine Vinyl Chain in Mexico and Colombia.
• These factors offset the increase of $4 million in gains on investment when compared to 2013.

INCOME TAXES

Income tax for 4Q14 decreased by $33 million y-o-y, mainly explained by an increase in deferred taxes from liabilities and from higher fiscal losses. This effect more than offset the increase of $9 million in cash tax due to a difference between the accounting depreciation and fiscal depreciation from the fixed asset revaluation carried out at the end of 2013 and to higher non-deductible expenses.

The effective tax rate was 29% in 2014 as compared to 40% in 2013. The lower effective tax rate registered during 2014 is related to lower cash tax expenses and higher deferred taxes.

NET INCOME

In 4Q14, the Company reported a net loss of $27 million compared to a net loss of $8 million in 4Q13. This loss is mainly explained by lower operating income, higher financial interest expenses and lower impact of discontinued operations. Net loss from continuing operations totaled $47 million, compared with a loss of $25 million in 4Q13, due to the aforementioned reasons.

Full year net income was $125 million, compared with $81 million in 2013, primarily due to lower income taxes in 2014 and to a reduction of $158 million in losses for discontinued operations.

CASH FLOW HIGHLIGHTS

Operating cash flow before capital expenditures was $301 million in 4Q14, compared with $417 million in 4Q13. For the year, operating cash flow before capital expenditures was $699 million, slightly lower than in 2013, as active working capital management helped offset the impact of lower EBITDA and $33 million loss from foreign exchange operations.

Capital expenditures in 4Q14 totaled $158 million. Of this figure, $54 million was invested in the ethylene cracker, $34 million in PMV, and $70 million was organic capital expenditures.

Capital expenditures for full year 2014 totaled $460 million, of which $166 million was invested in the ethylene cracker, $63 million was invested in PMV, and $231 million was organic capital expenditures.

NET WORKING CAPITAL

FINANCIAL DEBT

Financial debt as of December 31st, 2014 was $2.4 billion, while cash and cash equivalents totaled $620 million, resulting in net financial debt of $1.8 billion. The increase was primarily due to the acquisitions of Dura-Line and Vestolit.

The Net Debt / EBITDA ratio was 2.0x as of December 31st, 2014, based on proforma EBITDA of $885 million of 2014. The Interest Coverage / EBITDA ratio was 4.6x at the end of 2014.

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF RESULTS

OPERATING RESULTS BY CHAIN

INTEGRAL SOLUTIONS CHAIN

For 4Q14, the Integral Solutions Chain was affected mainly by high base of comparison due the one-time benefit in 4Q13 of $17 million, the revaluation effect in Venezuela and a $4.8 million impact from currency movements.

Fourth quarter sales for the Integral Solutions chain rose 12% to $834 million mainly, due to the consolidation of the Dura-Line, acquired in 3Q14, offset by a 5% decrease in European sales. In addition, Integral Solutions’ Venezuelan operations revalued assets and operations using an exchange rate of 12 bolivars per dollar, compared with 6.30 bolivars per dollar at the end of 2013, resulting in a charge of $56 million booked in the fourth quarter.

Fourth quarter sales in Latin America (excluding Venezuela) decreased 6% to $343 million. Volumes increased in several markets, including Brazil Colombia and Peru volumes. The higher volumes are not fully reflected in revenue figures, due to the appreciation of the US dollar against Latin American currencies.

Fourth quarter EBITDA decreased 16% or $12 million. 4Q13 results included one-off revenue of $17 million, creating a high base of comparison, while lower EBITDA from Venezuela and the impact of a stronger dollar also contributed to the decline.

Operating income for the fourth quarter fell $11 million or 34% to $21 million primarily due to the factors mentioned above.

Full year 2014 sales increased 6% year-on-year to $3.2 billion, including the consolidation of 3.5 months of Dura Line sales. Revenue grew 3% in Europe, despite a marked slowdown in the second half of the year, and was broadly stable in Latin America.

Full year EBITDA was $357 million, a decrease of $16 million, or -4%, largely due to the $15 million charge booked by Venezuelan operations. Results were also impacted by lower EBITDA in Europe, though this was largely offset by the consolidation of Dura-Line.

Based on an exchange rate of $12 bolivars per dollar, 4Q14 EBITDA from Venezuelan operations was $(6) million, compared with $13 million in 4Q13. Full year 2014 EBITDA from Venezuelan operations was $17 million, compared with $47 million for 2013.

Full year 2014 operating profit was $176 million, down $33 million, or 16%, from the same period of 2013. This was mainly due to the increase in depreciation related with the fixed assets revaluation at fair value occurred in the 4Q14 in fulfillment of the Mexichem´s policy in relation with IAS 16.

CHLORINE VINYL CHAIN1

1 2013 data for Resins, Compounds and Derivatives as well as for PMV are pro forma data for comparative purposes.

In 4Q14, the Chlorine-Vinyl Chain results were reduced by volatile input costs and the PMV prolonged “overhaul” plant shutdown.

Revenues in the Chlorine Vinyl Chain decreased 6% to $433 million in 4Q14, from $461 million in 4Q13. Full year revenue rose 5% to $1.9 billion.

4Q14 EBITDA for the Chlorine Vinyl Chain declined 66%, or $42 million, to $22 million. Full year EBITDA declined 28% to $217 million.

In 4Q14, Resins, Compounds and Derivatives revenues decreased 5% due to lower prices, partially offset by the consolidation of Vestolit for the full month of December 2014.

4Q14 EBITDA for Resins, Compounds and Derivatives declined 54% to $26 million, due to conditions in the North American ethylene and VCM markets compounded by the significant drop in sales which follow trends in the oil market.

In Resins, Compounds and Derivatives, fourth quarter operating loss was $5 million, from an income of $25 million in 4Q13.

For the full year, Resins, Compounds and Derivatives revenues increased 10%, benefitting from higher volumes following the capacity increase in Mexico and Colombia, the consolidation of the specialty resins business acquired from PolyOne in June 2013 and the consolidation of Vestolit for the full month of December 2014. Full year EBITDA fell 20% to $200 million.

Full year Resins, Compounds and Derivatives operating income fell to $107 million from $183 million. Besides the factors mentioned above, operating income was impacted by higher depreciation as a results of a larger asset base.

In 4Q14, PMV revenues decreased 30% to $29 million, while EBITDA was $(4) million. During the quarter, PMV extended the length and scope of the overhaul shutdown of the ethylene and VCM plants to ensure safe and reliable operations following the restart of production in January 2015. These additional overhaul activities limited the production and sale of VCM, ethylene, and caustic soda.

FLUORINE CHAIN

The Fluorine Chain posted year-on-year EBITDA growth, with improved operations and a one-time benefit related to a legal settlement.

4Q14 revenues increased 4%, or $6 million, to $153 million. This was mainly the result of higher prices of acid grade fluorspar and hydrofluoric acid due to new contracts that came into effect in 2Q14, as well as modestly higher prices and volumes for refrigerant gases.

4Q14 EBITDA increased $37 million, or 87%, to $80 million, reflecting the aforementioned increases in price and volume, together with one-time benefit of $16.8 million related to a legal settlement. Excluding the aforementioned benefit, EBITDA increased by 47%, equivalent to a 41% EBITDA margin, an expansion of more than 12 percentage points.

Operating income for 4Q14 was $60 million, more than twice the $29 million reported in the same period of 2013. This was primarily due to the one-time benefit of $16.8 million and improved results in fluorspar.

Full year revenue fell 2%, or $14 million, to $659 million mainly due to weaker fluorspar performance in the first half of the year. Full year EBITDA 2014 increased 6%, or $14 million, to $254 million.

Full year operating income increased 1%, or $2 million, to $181 million, also due to the benefit associated with the legal settlement and to the improved results in fluorspar in the second half of the year.

RECENT EVENTS

• On January 6, 2015, Mexichem announced that Mexichem Fluor, one of its subsidiaries, had appealed the U.S. International Trade Commission (ITC) ruling of November 12, 2014. The ruling stated that the import of refrigerant gases from China, specifically R-134a, HFC-134a and 1,1,1,2 –Tetrafluorethane did not result in “material injury or threat of material injury” to the U.S. refrigerant gas industry. Mexichem expects the appeal before the United States Court of International Trade to take approximately one year.
• On December 31, 2014, Mexichem acquired the distribution and sale license for pharmaceutical grade HFC-227ea/P product for the regulated medical and pharmaceutical propellant market from Dupont Fluorochemicals, supporting the company’s strategy for global growth based on specialty products. The purchase price was US$4.1 million.
• On December 1st, 2014, Mexichem completed the acquisition of VESTOLIT GmBH for €219 million in cash and assumed liabilities. This acquisition will be consolidated under Mexichem’s Chlorine Vinyl chain for accounting purposes.
• On November 28, 2014 during the Company’s Shareholder’s meeting a cash dividend of MXN0.50 per share outstanding was declared. The dividend will be paid in four quarterly installments of MXN0.125 per share in each installment, excluding those shares held by the Company through the share buyback program as of the record date of each installment, according to the following payment dates in 2015: February 27, May 27, August 27 and November 27.

ABOUT MEXICHEM

Mexichem is a worldwide leader in plastic pipes, and one of the largest chemical and petrochemical companies, with more than 50 years of experience in LatAm. The Company contributes to the development of the countries by delivering an extended portfolio of products used in high growth sectors such as infrastructure, housing, telecommunications, drinking and potable water in Mexico, the USA, Europe, Asia, Africa (South Africa), Middle East (Oman), and LatAm. The Company has annual revenues of more than US$ 5 billion, and has been traded on the Mexican Securities Exchange for more than 30 years.

Forward-looking Statements

In addition to historical information, this press release contains "forward-looking" statements that reflect management's expectations for the future. The words “anticipate,” “believe,” “expect,” “hope,” “have the intention of,” “might,” “plan,” “should” and similar expressions generally indicate comments on expectations. The final results may be materially different from current expectations due to several factors, which include, but are not limited to, global and local changes in politics, the economy, business, competition, market and regulatory factors, cyclical trends in relevant sectors; as well as other factors that are highlighted under the title “Risk Factors” on the annual report submitted by Mexichem to the Mexican National Banking and Securities Commission (CNBV). The forward-looking statements included herein represent Mexichem’s views as of the date of this press release. Mexichem undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.”

Mexichem has implemented a new Code of Ethics that rules its relationships with its employees, clients, suppliers and general groups. Mexichem’s Code of Ethics is available for consulting in the following link: http://www.mexichem.com/Codigo_de_etica.html Additionally, according to the terms contained in the Securities Exchange Act No 42, Mexichem Audit Committee established a mechanism of contact, which allows that any person that knows the unfulfilment of operational and accounting records guidelines and lack of internal controls of the Code of Ethics, from the Company itself or from the subsidiaries that this controls, file a complaint which is anonymously guaranteed. The whistleblower program is facilitated by a third party. The telephone number in Mexico is 01-800-062-12-03. The website is http://www.ethic-line.com/mexichem and contact e-mail is[email protected]. Mexichem’s Audit Committee will be notified of all complaints for immediate investigation.

Independent Analysts

Currently, the following investment firms have analysts who cover Mexichem:

-HSBC

-Grupo Santander

-JP Morgan

-Bank of America Merrill Lynch

-BBVA Bancomer

-Citigroup

-Credit Suisse

-Morgan Stanley

-GBM-Grupo Bursátil Mexicano

-ITAU BBA

-BTG Pactual

-Actinver

-Invex Casa de Bolsa

-Banorte-Ixe

-Vector

-Monex

-Intercam