ALFA (Mexico)

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ALFA S.A.B. de C.V.

Company type	Sociedad Anónima Bursátil de Capital Variable
Traded as	BMV: ALFA A BMAD: XALFA
Industry	Conglomerate
Founded	1974; 50 years ago (1974)
Headquarters	Monterrey , Mexico
Area served	Worldwide
Key people	Armando Garza (Chairman) Álvaro Fernández (CEO)
Products	aluminum auto components, petrochemicals, refrigerated foods, oil and natural gas
Services	IT and telecommunication services
Revenue	US$ 17.2 billion (2014)
Net income	US$ -119 million (2014)
Total assets	US$ 15.8 billion (2014)
Number of employees	68,000
Subsidiaries	Alpek Nemak Sigma Alestra Newpek
Website	www.alfa.com.mx

Alfa S.A.B. de C.V., also known as Alfa or Alfa Group, is a Mexican

Alfa has operations in Mexico, the United States and other 21 countries across the Americas, Europe and Asia. As of 2014, its portfolio comprised five businesses: Alpek, the petrochemical company; Nemak, the aluminum auto components company; Sigma Alimentos, the refrigerated foods company; Alestra, the IT & telecom company; and Newpek, the oil and natural gas extraction company.

Alfa is listed on the

Although Alfa formed joint ventures with Hercules and American Petrofina to produce polyester, Du Pont to produce other synthetic fibers, Ford to turn out aluminum cylinder heads, and Hitachi to make electric motors, it insisted on control. "We manage these ventures, always", Garza Sada told Forbes in 1979. "We demand that!" Alfa received $2.4 billion in loans from more than 130 foreign creditors and was planning to invest $3.5 billion by the end of 1984, almost three-fifths of it in money to be borrowed, mostly from sources outside Mexico. It was not only the leading private firm in Mexico but in all of Latin America. By 1980 it had 157 subsidiaries in 39 branches of the economy.

In retrospect, following Alfa's near-bankruptcy in 1982, Alfa's success bred arrogance. Many of the lower-management people had no practical experience, while the experienced upper management took charge of firms about which they knew very little. The company unwisely abandoned its prudent traditional policy of only integrating firms that had similar or complementary products. One observer said that Alfa "bought businesses like someone would buy candies for their children." A foreign bank representative recalled, "They were on the same kind of role that the Mexican government was on then.

Eventually, in 1986, Alfa paid off about five dozen foreign banks in stock. Under a complex arrangement, the creditor banks forgave $920 million in Alfa's debt in return for 45 percent of its stock. A 15-member board was named to govern the company, of which nine would be named jointly by the foreign banks and the Garza Sada family. A five-year voting trust for the stock was formed under which 16 percent of the Garza Sada family stock would be held with the 45 percent of the bank stock. The creditors also were paid $25 million by Alfa and $200 million in Mexican government debt.^[2]

Alfa also was required to divest itself of an undisclosed number of companies that were not part of its core business. By the end of 1988 it had sold most of its food, and all of its tourism, real estate, and electric home-appliance holdings, retaining only two dozen subsidiaries. "There are no family members in important executive positions", Business Latin America wrote, "and this has contributed to a more professional and predictable management style."^[2]

The settlement of Alfa's debt left unresolved Hylsa's own debt, which in 1988 reached $1.2 billion to 68 lenders, including about $300 million in overdue interest. About 70 percent of the foreign lenders agreed to exchange about $639 million of the debt for about $385 million in debt owed by Mexico itself and about $69 million in cash. In addition, foreign lenders who were owed $273 million and Mexican banks holding about $301 million in Hylsa debt agreed to stretch out the loan repayments over 15 years and received 21 percent of Hylsa's

Alfa celebrated the restructuring of its debts with an elaborate outdoor mass on a Monterrey baseball field in 1988, attended by 10,000 employees. The company recorded the most profitable year of its history in 1988. Operating income was a record $425 million and special gains related to the debt restructuring and the peso's stabilization against the dollar added $575 million more. Alfa did so well that the Garza Sada family was able to buy back much of the equity it had surrendered to its creditors.^[2]

Alfa in the Early 1990s

The early 1990s were not as good a period for Alfa, as world demand for

The collapse of the peso in late 1994 took a heavy toll on Alfa, as on other Mexican enterprises. Net sales rose to 14.21 billion pesos ($4.06 billion), but the company lost 2.16 billion pesos ($617 million). In 1995 Alfa returned to profitability, with net income of 2.09 billion pesos ($307 million) on net sales of 21.52 billion pesos ($3.16 billion). This was followed in 1996 by net income of 3.06 billion pesos ($400 million) on net sales of 27.83 billion pesos ($3.64 billion). Alfa's total debt was 18.5 billion pesos ($2.7 billion). The net worth of Bernardo Garza Sada and his family was estimated at $1.2 billion in 1996.^[2]

Alfa in 1996

Hylsamex's

Sigma Alimentos, S.A. de C.V. (formerly Salumni, S.A. de C.V.), which distributed Oscar Mayer and its own brand of packaged meat and other food products, enjoyed 36 percent of domestic market share in processed meats in 1995. Its distribution network included 50 refrigerated warehouses and a fleet of more than 800 refrigerated vehicles, including 570 delivery trucks. A frozen food plant and a cheese manufacturing facility were under construction. Sigma was planning to make frozen Mexican food for both the domestic and U.S. markets. This subsidiary accounted for 12 percent of Alfa's revenues in 1996.^[2]

Alfa's subsidiary Alpek, S.A. de C.V. was engaged in the manufacture of petrochemicals and synthetic fibers for use primarily as

In all, Alfa was operating ten petrochemical and synthetic fiber plants in 1995, seven steel plants and a service center, six refrigerated-food plants, two carpet and rug plants, two mattress plants, an aluminum cylinder-head plant, and two building supplies retail stores. It operated more than 70 distribution centers. Alfa was a party to 11 joint ventures with foreign companies.[2]

Recent news

In May 2015, Alfa and British energy firm

References

• "Alfa, S.A. de C.V" International Directory of Company Histories, Vol. 19. St. James Press, 1998