Xignux #BB+# Global Scale And #mxAA-/mxA-1# National Scale Ratings Outlook Remains Stable

Stocks and Financial Services Press Releases Wednesday March 8, 2017 10:20
MEXICO CITY--8 Mar--S&P Global Ratings

MEXICO CITY (S&P Global Ratings) March 7, 2017--S&P Global Ratings affirmedits global scale 'BB+' and national scale 'mxAA-/mxA-1' corporate creditratings on Xignux S.A. de C.V. The outlook remains stable.

The ratings affirmation reflect our view that Xignux's operating and financialperformance has been mostly resilient to the soft macroeconomic conditions inthe region, specifically as demand for copper and industrial activity slippedin the past few years. The ratings also reflect volumes stability and productportfolio expansion in the company's cable and wire business, coupled withfavorable foreign exchange effects. We believe that the company will operatein line with our expectations that will improve its leverage metrics in thenext few years, given a likely gradual recovery in copper prices. Furthermore,we still view the volatile copper prices as a main concern given its impact onXignux's prices in its cable and wire division. However, as the food segmentcontinues to gain greater importance for the group, given that this businesshas the ability to pass through higher raw material prices and the resilientnature of the food industry, we believe that Xignux can temper some pressureon its margins, accompanied by other operating efficiencies and competitiveposition.

Xignux's fair business risk profile includes our expectations that the companywill continue to be a significant player in Mexico's cable and wire industry.This is due to the company's ongoing efforts to strengthen its operations inthis segment through higher volumes sold, a stable food business that

continues to increase its scale, geographic footprint across the Americas, andproduct portfolio diversification. However, Xignux's cable business generatesabout 70% of total revenue. Our assessment also includes our view that thecompany is still smaller than its global peers, increasing competition in theindustries where it operates, and Xignux's exposure to the end markets'cyclicality and to price volatility of its raw materials.

Xignux's financial risk profile reflects the company's consistent cash flowgeneration, stable debt levels, and key credit metrics in line with ourexpectations. In our view, the these factors are due to Xignux's prudentfinancial policy, overhaul of its food business, operating efficiencies, costreductions, and positive effects of the dollar's strength on the company'scable and wire business because about 75% of its revenue are dollardenominated. Additionally, our assessment reflects an expected gradual

recovery of copper prices and an amelioration of macroeconomic conditions inthe Americas, mostly in Latin America.

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