Mexichem SAB de CV - aquisition of Dura-Line and Vestolit - M&A Call
Aug 20, 2014 AM EDT
MEXCHEM*.MX - Mexichem SAB de CV
Mexichem SAB de CV - aquisition of Dura-Line and Vestolit - M&A Call
Aug 20, 2014 / 08:30PM GMT
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Corporate Participants
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* Juan Francisco Sanchez Kramer
Mexichem SAB de CV - IR Director
* Antonio Carrillo Rule
Mexichem SAB de CV - CEO
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Conference Call Participants
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* Frank McGann
BofA Merrill Lynch - Analyst
* Nikolaj Lippmann
Morgan Stanley - Analyst
* Fernando Perez Lizardi
GBM - Analyst
* Luis Miranda
Santander - Analyst
* Paula Kovarsky
Itau BBA - Analyst
* Luiz Carvalho
HSBC - Analyst
* Caio Carvalhal
J.P. Morgan - Analyst
* George Atuan
Moneda Asset Management - Analyst
* Gustavo Gattass
BTG Pactual - Analyst
* Ricardo Fernandez
Explorer Investments - Analyst
* Andres Cuellar
BRAM - Analyst
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Presentation
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Operator [1]
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Good afternoon, and welcome to the Mexichem acquisition announcement call.
All participants will be in listen-only mode. (Operator instructions.) After today's presentation, there will be an opportunity to ask questions. (Operator instructions.) Please note questions will only be addressed over the phone. No questions will be taken through the webcast. Please note this event is being recorded.
I would now like to turn the conference over to Juan Francisco Sanchez, Investor Relations. Please go ahead.
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Juan Francisco Sanchez Kramer, Mexichem SAB de CV - IR Director [2]
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Thank you. Thank you all for being present. I would like to highlight some Safe Harbor first.
During this conference call, the management will make forward-looking statements to assist you in your understanding its expectations of the future. These statements are subject to a number of risks that could cause actual events and result to differ materially. And I would refer you to the Company's filings with Bolsa Mexicana de Valores for full details to those risks.
In addition, statements during this call, including statements related to the market conditions and future performance, are based on management's views as of today, and it is anticipated that future developments might cause these views to change. Please consider the information presented in this light.
The Company might at some point elect to update the forward-looking statements made today, but specifically disclaims any obligations to do so.
Now I would like to ask Antonio Carrillo, our CEO, to go ahead with the presentation.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [3]
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Good afternoon, everyone, and thank you for participating in today's call. As we have announced two significant acquisitions in the space of less than 10 days, we thought the timing was right for us to share our thinking with respect to these two transactions.
Each of them fits well with our strategy of continuing to emphasize on high value specialty products, accessing new geographies and high growth markets, developing market-leading positions across key products lines, and achieving vertical integration to develop resilience to market fluctuations.
From a strategic standpoint, Vestolit is a vertically integrated producer from salt through high-end specialty PVC. This transaction gives us the opportunity to enter new end markets segments, expand our European footprint, particularly in Germany, acquire new technology and additional best practices for our chloro-vinyl chain, especially in VCM and PVC.
In Vestolit, we are acquiring a top ranked PVC company that is a market leader in HIS-PVC, and the second largest producer of European-based PVC. Importantly, this is a producer which is fully integrated all the way from salt to suspension PVC and other specialties such as high impact suspension PVC, mainly used in tough weather-resistant windows' profiles, and paste PVC, which is mainly used in floor coverings, wallpapers, and automotive coatings.
Europe accounted for 89% of the company's revenues in 2013, significantly expanding Mexichem's footprint there. Also, 68% of the revenues last year were derived from specialty products, with base chemicals and suspension PVC accounting for 32% of the revenues.
We expect that for the 12 month period after the closing date, Vestolit's EBITDA will be about EUR30 million to EUR35 million, and its EBITDA margin will be in the range of 8% to 9% based on revenues similar to those of last year. We see multiple opportunities to achieve revenue synergies.
Vestolit opens new end markets to us and will give us access to technology for VCM production, which will help us in our PMV joint venture. Additionally, it will add higher margin specialty products to our portfolio and provide opportunities for efficiencies and cost savings.
We see this as a win-win for both companies, and a transaction that will be accretive to Mexichem in 2015. Closing of the transaction is expected at the end of this year.
Now to our latest announcement, the acquisition of Dura-Line, through which we are gaining a manufacturer of high end products and important technological expertise that we can leverage to achieve significant revenue synergies.
We also intend to take advantage of their presence in key new markets for us like India, South Africa, and the Middle East where we see growth potential for our existing businesses, as well as their substantial operations in the US, which reinforce our footprint in a growing market for us.
Dura-Line is a leading worldwide manufacturer of high-density polyethylene pipes, which is the material of choice for high growth markets in data communications and energy piping, all new markets for Mexichem. Dura-Line has been a dominant brand in these markets for the last 40 years, with an enviable list of longstanding blue chip customers.
Growth in the company's datacom and power solution markets is being driven by substantial infrastructure spending to meet the demands for increasing data traffic, the greater use of mobile devices, and growing global adoption of fiber technology.
The growth in Dura-Line's energy and infrastructure solutions' business is supported by rising US energy production and consumption, and specifically the access to untapped shale gas resources that has come about thanks to new drilling techniques such as horizontal drilling and hydraulic fracturing.
With Dura-Line, Mexichem is achieving several strategic objectives. We are building our leadership position in specialty products serving high growth markets. We are adding a complementary product portfolio to our existing Amanco and Wavin businesses, and gaining immediate access to new markets and new customers, which represent important cross selling opportunities.
And at the same time, we are setting the stage for significant revenue synergies. We are diversifying our end markets, and creating a natural hedge against cyclical downturns in ethylene prices.
The Dura-Line transaction is scheduled to close at the end of September. We expect that, for the 12 month period beginning upon completion of this transaction, Dura-Line's EBITDA will add about $65 million to $70 million, and it's EBITDA margin will be in the range of 9% to 10% based on revenue levels similar to those of last year.
Given seasonal factors, you can expect the positive impact on Mexichem's results to be stronger in the second and third quarters of 2015 compared to the fourth quarter of this year and first quarter of 2015. Based on these projections, we anticipate the Dura-Line will be accretive to Mexichem beginning in the second quarter of 2015.
In summary, we have been working on these two acquisitions for some time now, and we are pleased to have been able to reach definite agreements to purchase these two highly regarded companies. Both companies have strong management teams in place, and we have put together special teams that will streamline the integration of each company and facilitate cross selling.
Based on our current projections and after completing these acquisitions, Mexichem will end the year with a net debt to EBITDA ratio of 2.2 to 2.3 times, slightly above our internal ceiling of 2 times.
But, we are confident that the significant growth opportunities we have as a result of these acquisitions, combined with the much more favorable outlook of our existing businesses in 2015, particularly in our higher margin fluorine business, will enable us to bring the ratio back under the target level in the medium term.
In summary, we continue to focus on specialty products, vertical integration, new geographies, and high growth markets. These two acquisitions will add between $110 million and $120 million of EBITDA to Mexichem's consolidated results in the 12 months following their closings.
Operator, now I would like to open the call for questions.
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Questions and Answers
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Operator [1]
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Thank you. (Operator instructions.) Frank McGann, Bank of America Merrill Lynch.
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Frank McGann, BofA Merrill Lynch - Analyst [2]
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Hi. Good afternoon, and thanks for the call to clarify things. I was wondering two things. One, if you could just give the EBITDA numbers again for both acquisitions and the estimate you have for the first 12 months EBITDA post closing, because there were a lot of numbers and information came very quickly in the call.
And then secondly, I was just wondering if you could talk about the process that you see to integrate these two businesses and how you're thinking about whatever types of synergies, maybe a little bit more depth of synergies that can come from these from cross selling and the other things you mentioned, if there's any specifics that you could help that would enable us to just have a better idea of how we should see these positioned within the portfolio of companies that you already have.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [3]
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Of course. And thank you, Frank. So, just to repeat the numbers, on Vestolit in Europe EUR30 million to EUR35 million of additional EBITDA, and on Dura-Line $65 million to $70 million of additional EBITDA in the next 12 months after closing.
And let me now talk about the synergies, how we see synergies happening. Let me start with Vestolit in Europe. As you know, Mexichem is a significant exporter of PVC to the European markets. And there's significant opportunities to produce it there rather than to ship it only from Mexico or Colombia.
Second, the technology that Vestolit has for some of its products is something that Mexichem does not have. The applications of some of their products -- to give you an example, automotive coverings, coatings for the underground of the car or under floor of the car is something Mexichem doesn't have.
And Vestolit has a significant presence in that market, and has significant export opportunities to Latin America where we could either export from Europe or produce locally, applying the technology to some of our plants either in the US, Mexico, or Colombia, additional channels of distribution for our products, given their footprint globally, and additional channels for distribution given our footprint where we can distribute some of their products.
There is complementary technologies between our US operation and this operation in Europe. As you remember, last year we acquired the assets from PolyOne that we call now Mexichem Specialty Resins. And those technologies are complementary, so there's a significant opportunity there.
And finally, we also have -- Vestolit has VCM technology. They produce their own VCM. As you know, Mexichem did not produce VCM until we did the joint venture with Pemex. So, this would bring us some additional help and technologies on that joint venture. So, that's Vestolit.
On the side of Dura-Line, as I've mentioned before, Mexichem was not present on the pipe business in the US, which is a very significant market worldwide, growing especially in the applications where Dura-Line is present, on the datacom and on the oil and gas sectors. So, first of all, that's the first thing that it brings to Mexichem.
Second, even though we have a very small business in Europe selling some of the very, very basic datacom products, we really don't have a full portfolio or a full presence in Europe. So, with this we will have a full line of products that we can distribute and produce locally in Europe.
And we sell nothing in Latin America of these products. As you know, telephone and data infrastructure is growing very significantly worldwide. Specifically in Latin American, it's growing very, very fast, and we have no products to attack that.
On the oil and gas side, Mexican energy reform, but also all of Latin America will require significant infrastructure spending to be able to develop and move all the gas and oil coming out of the fields. And Dura-Line has a fantastic technology for getting in pipes there.
Then you have the geographic footprint. Dura-Line is very large in the US, and we can now use their presence to distribute and produce all of the Mexichem products. And also, they have a significant presence in India and South Africa and Middle East where we can also use their infrastructure as a way to introduce all of Mexichem's product lines.
So, if you add all of those things together, I think this is a fantastic -- both of them are fantastic acquisitions for Mexichem and will be joining the Company very soon.
On the integration process, both companies will remain independent, independent meaning that Vestolit will be consolidated into chloro-vinyls and Dura-Line will be consolidated under integral solutions.
However, given their specialty and their focus on specialties and on specific products, we want to continue maintaining that focus that they have on their markets rather than just integrating them into a more general product portfolio. Instead, we want to -- we think part of their success is staying focused, very focused, and we want to continue using that.
So, we have -- since these two acquisitions are in two different chains, we have independent teams working on both chains, on the chloro-vinyl and integral solutions, to be able to integrate these companies very, very fast and start the cross selling, the cost savings, and especially the growth that these two companies have.
I am not sure if the answer was clear.
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Frank McGann, BofA Merrill Lynch - Analyst [4]
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Yes, very clear. If I could just follow up on the oil and gas side, the main products, main pipes that are produced, is this primarily for gas distribution? Is that the way I understand it, or will it also be for longer pipelines as well or perhaps other applications?
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [5]
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It's that distribution not only locally but the long distances also, and also some oil applications. But, the main one is a gas application for distribution or short distances.
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Frank McGann, BofA Merrill Lynch - Analyst [6]
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Okay. Thank you very much.
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Operator [7]
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Nikolaj Lippmann, Morgan Stanley.
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Nikolaj Lippmann, Morgan Stanley - Analyst [8]
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Hi, gentlemen. Thanks for the call and thanks for taking the questions. I have three questions, if I may. First, just on the European acquisition, if we think about that going forward a few years, do you think it would be possible -- and I know they do the VCM in Europe. But, would you be considering maybe moving some of that towards the US or Mexico so that you would export VCM to Europe? So, that's question number one.
In terms of the US acquisition on Dura-Line, could you give us the percentage of the product that is in the energy space in oil or gas?
And then finally, could you give us the liabilities that you will be assuming with these acquisitions, including potential funded, unfunded liability -- or unfunded liabilities on the pension fund side? Those are my three questions.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [9]
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Yes. So, first one, on the export of VCM, Vestolit, the company in Europe, is a balanced producer. So, they will not have VCM to export. They are very balanced in their operation.
So, the focus will be on keeping the VCM and increasing the throughput in that facility to supply local markets, or export some finished product which is technology driven, or a technology that's only based in that facility.
Second question on the liability that we are assuming, on the liability, you can assume that both transactions are basically cash transactions. So, when we mention liability, assuming liabilities, these two companies were owned by funds.
And as you know, these funds have significant leverage on these companies. So, the liability we are assuming is we are going to pay the debt down. And that's what it means, with one exception.
On the European side, part of the liability we are assuming is a pension fund, which we estimate about EUR47 million, which will not be funded. So, in the price we gave that we paid for the company, EUR290 million, EUR47 million are not cash out of the company. They will be funded as the company goes in the future. That is the local regulation, and that's how we're going to handle it.
And the third question is on what percentage is the energy. About 30% of Dura-Line is focused on energy. The rest is datacom and some other applications, but energy is about 30%.
I also didn't mention that they also have two facilities in Mexico producing pipe for the energy sector.
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Nikolaj Lippmann, Morgan Stanley - Analyst [10]
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Very clear. Thank you very much.
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Operator [11]
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Fernando Perez, GBM.
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Fernando Perez Lizardi, GBM - Analyst [12]
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Hi. Good afternoon. Thank you for the call. I have just one brief question. I was wondering if you can give the geographic breakdown of revenues of Dura-Line so that we can have more color of how big is the -- its operations in Middle East and India. Thank you.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [13]
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Sure. The revenue is about 70% in the US and 30% outside of the US, the biggest operation being India.
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Fernando Perez Lizardi, GBM - Analyst [14]
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Okay. Thank you very much.
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Operator [15]
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Luis Miranda, Santander.
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Luis Miranda, Santander - Analyst [16]
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Hi. Good afternoon. Thanks for taking my question. Antonio, I don't know if you could help us a little bit here, just give a color. After the recent acquisitions and the investment that you will make this year on BBM -- PMV, sorry, and the announcement of the Cactus project, what are the next steps in terms of the strategy in terms of M&A, or should we expect it through your self consolidation in the short to medium term? Thanks.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [17]
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Well, thank you, Luis. Let me just clarify. I think it's a very good question to ask about the cogeneration.
As we announced in the last few months, we have two large cogeneration projects. These two projects, the cogeneration projects, the first one being the Mexichem project, the one that will be inside the PMV, supply the PMV, those projects are still in the project state, meaning we're doing engineering. But, more importantly, in the case of the Mexichem project, we are doing the permitting, which will take over a year to get the permits.
So, these projects are three to four years away of being materialized. And even though they're fantastic projects, you should not expect significant cash flow coming out of Mexichem to fund them.
The other project, the Cactus project, that one that goes with Pemex, what Pemex announced a few months ago -- weeks ago was that they chose a consortium of Mexichem, Enesa, and Invenergy as their partners.
What does that mean? That we are going to develop together with Pemex, and Pemex will be a partner in this project, a very large project for the Cactus facility. But, the details are still being worked out and there is not much information. So, you should not expect also significant cash flow coming for that project.
On the other part of your question, the focus in the near term is going to be to integrate these two companies, to extract all the synergies, and also to focus on reducing our net debt to EBITDA ratio in the short term as soon as possible.
And when I say as soon as possible, I don't want to set a drop dead date, because there is investments that will have to be made to get these two companies -- let's say to provide to these two companies the growth capital that they need, because they come, as I mentioned in my speech, with fantastic management, fantastic opportunities. And we want to be able to grow organically with these two companies.
So, that will be the focus of Mexichem in the near term, integrating, extracting synergies, and growing these two companies and growing the cross selling with the rest of Mexichem.
That does not mean that we are not going to continue looking for acquisitions. If something comes up that's extremely, extremely valuable to Mexichem, I don't want to close the door and say we won't do it. But, as you know, we have an internal cap of 2 times net debt to EBITDA. And for the moment, we have to go back below that.
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Luis Miranda, Santander - Analyst [18]
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Perfect. Thank you, Antonio.
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Operator [19]
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Paula Kovarsky, Itau.
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Paula Kovarsky, Itau BBA - Analyst [20]
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Yes. Hey, good afternoon. I also have two questions. The first one is a follow up to the previous. Shall we understand that the DuPont acquisition is now on hold? It's a big one, and you said the target now is to go back to below 2 times net debt to EBITDA. So, would that be a correct statement?
And then, the second question relates to your argument of diversifying away the ethylene volatility. As far as I understand, Dura-Line is also in the polyethylene business, which is also dependent on the ethylene. So, just help us understand a little bit more how do you see this as diversification because, again, both PVC and the PE are in the ethylene chain, and also if this means using, for example, the ethylene from the Oxy plant or any other possible upstream integration in the polyethylene value chain.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [21]
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Sure. Thank you, Paula. So, the first question on DuPont, DuPont, as you know, is going through a spinoff. And they are going to take their time doing that, so it's going to be until sometime late next year when they come, or mid next year when they spinoff that company.
As we've said in the recent past and tried to clarify, we are not interested in buying all of the DuPont assets. We are not even interested in buying all the fluorine assets, and they are not interested in selling them.
What they have talked to us about in the past is -- and today there is no conversation. I'm talking about specific assets, specific products where we could be interested that would not be significant acquisitions.
And to be honest, I really don't want to speculate on whether or not they will sell us those assets next year, because I don't know what's going to happen after the spinoff. As I mentioned before, it's something that's interesting to Mexichem, that makes a lot of sense, that has significant value to for the Company.
I don't want to rule it out, but for the moment you should not think about Mexichem going for those assets of DuPont in the near future until something else gets clarified, no? As I mentioned, we are going to focus on extracting synergies.
On the second question, it's diversification. I'm talking here more in the medium to long term. As you know, ethylene is reaching record prices in the North American market, and we are building our ethylene cracker which is on time, on schedule.
However, three, five, 10 years from now, the ethylene will go back to normal demand-supply scenarios. And at that time, having polyethylene pipe in our portfolio will allow us to get away from some of that volatility 10 years from now and have a more stable business in the downstream products, just like we have said in the PVC market, no? PVC gives you some reduction in volatility from the upstream business by having more stable demand profiles.
On the ethylene side, once we consolidate Dura-Line we will be adding about 450,000 tons of polyethylene purchase power and usage. And that means that our needs for ethylene will be a little over 1.2 million tons of ethylene, if you include all of our PVC and the polyethylene. And implicitly we are going to be about 65% to 70% integrated into ethylene once the cracker with Oxy starts and the JV with Pemex.
So, we will not be 100% integrated. We will be about 70%, 65% to 70%, and that will allow us some flexibility on that side. So, I think it's a good position to be, to be able to have the economics of ethylene either in the PVC or in the polyethylene side.
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Paula Kovarsky, Itau BBA - Analyst [22]
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Okay, thank you.
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Operator [23]
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Luiz Carvalho, HSBC.
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Luiz Carvalho, HSBC - Analyst [24]
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Hello, Antonio. Thanks for the call. I just have two questions here. The first one is to understand how do you believe that both acquisitions would contribute from the EBITDA margin front. How do you expect that both acquisitions will behave on this front?
And the second one, just to confirm the number that you gave on the EBITDA addition from both acquisitions. Are they already considering the synergies that you are looking for the future, or this is something with regards to the EBITDA that the companies are already, let's say, performing now? Thank you.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [25]
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Thank you, Luiz. So, the EBITDA that I mentioned and the margins I mentioned do not consider any material synergies yet.
And the reason for not giving you a specific number on synergies is that what we want to do is, once we -- we did very significant due diligence on these companies. We know them well.
But, what we want to do is, once this quiet period happens after -- between when you announce and you close a transaction, really work with management of both companies to develop a very detailed work plan to extract all the synergies, which we believe are huge. The management of both companies believe they are huge. And I think we will have a much better idea over the next few months once we have closed the transactions.
But, to answer your question, today the numbers I gave you do not have those -- any material synergy embedded in them. Therefore, since the synergies are not there, the margins I mentioned, of course, are lower than Mexichem's margins. And so, when you add them, you will have a reduction in margins simply because of the volume you add and not because it will affect Mexichem. But, it's just an adding -- a mathematical operation.
Once we have the synergies embedded, we believe that it will be a significant improvement, and it will be a very good add-on to Mexichem that should not have negative impact into our margin.
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Luiz Carvalho, HSBC - Analyst [26]
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Okay, that's clear. Thank you very much.
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Operator [27]
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Caio Carvalhal, J.P. Morgan.
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Caio Carvalhal, J.P. Morgan - Analyst [28]
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Hi. I really need -- I guess most of my questions were already answered, were already made by my colleagues. But, I would also like to follow up a little bit different than what we've seen about the fluorine, improving the fluorine business next year. I heard about the potential spinoff and merger at DuPont.
But, if you could tell us a little bit about have we already felt any effects from the trading case against the Chinese gas in the US? Is this something that we already perceived, at least a little bit, changing the volumes, or this is something that should wait a little bit more to happen?
And the second question specifically on the Dura-Line acquisition, could we expect the company to expand for the high-density polyethylene pipes in its plants in Latin America, or this is something that is not under their strategy as of now? Those are my questions. Thank you.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [29]
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Of course. Thank you. So, the first question, DuPont. This, of course, is a conference call for the acquisitions.
But, yes, as I mentioned in the conference call of the second quarter, since the preliminary duties applied in May there have been no imports of Chinese products into the US. Our volumes are much higher than last year on the refrigerant gas side in the US. And prices, as I've mentioned before, are responding.
But, based on our customer mix, which has -- half of them have yearly contracts and the other half have spot market contracts, we are seeing some improvement, but it will take a little longer.
As we've said, over the next few quarters, you will continue to see improvement both in volumes and in pricing on the refrigerant side. So, yes, we're seeing positive trends both on the volume and the pricing because of this dumping case.
On the second question on Dura-Line, I think you hit the nail in the head. Yes, we're going to move into polyethylene in Latin America. There is demand of polyethylene pipes in Latin America. We already produce some, even though very little.
But, if you look at Wavin, Wavin has about -- in Europe about 25% of its business is in polyethylene already. And in most markets you would see that PVC continues to grow, but also some applications require polyethylene pipe.
And we feel that Dura-Line's product line, expertise, buying power will add significantly to our growth in Latin America in polyethylene pipe for specific applications, without this meaning that we're going to stop producing PVC. PVC has its own markets and its drivers and will continue to grow in Latin America, but there is applications where we see significant growth in polyethylene.
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Caio Carvalhal, J.P. Morgan - Analyst [30]
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Thank you very much.
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Operator [31]
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George Atuan, Moneda Asset Management.
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George Atuan, Moneda Asset Management - Analyst [32]
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Hi. My question is regarding synergies. You mentioned that you have identified a few synergy potentials. How much of the synergies identified are in revenue growth or cross selling, and how much in cost synergies?
And my second question is where do you see the cost synergies, since you have mentioned that you want to keep the companies independent? Thank you.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [33]
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Well, yes. So, let me talk about synergies. As you know, what Mexichem is looking for is for growth. So, that's why our focus is going to be on trying to generate growth with these companies. And that's why we are more enthusiastic about the revenue synergies than the cost synergies.
The cost synergies I think will also important. There are -- just the amount of polyethylene that we will be able to buy and negotiate with the bigger volumes is a significant synergy, we believe.
But, at the same time also, using some of the structure of these companies to generate growth in different markets, specifically in Dura-Line's case, you will be able to grow without any significant cost structures to your businesses.
So, you will be able to use the structure that these companies have to generate the growth. And that will bring you some of the cost synergies.
As I said, we're going to go through the period of -- quiet period until we can really consolidate these companies. And we'll be able to come back with more details after that.
The other side is of course we have very efficient tax structures to generate this. That will not be EBITDA cost synergies but it will be significant cash synergies for the company, which we have identified because of the efficiency of these operations going into the company. And those are significant synergies.
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Operator [34]
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Gustavo Gattass, BTG.
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Gustavo Gattass, BTG Pactual - Analyst [35]
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Hi, guys. I had a couple of questions here. The first one is just to touch back on what Itau asked about, so what is embedded in these EBITDA expectations for the next 12 months. Could you just give us an idea, I don't know if it's possible, just to say how much EBITDA was in each of these business in 2013 just to get a sense of where we were before?
The second thing that I was just wondering, you just mentioned the appeal of growth. Is it at all possible to give us a sense of what the regional and basically what you see as potential market shares might be in these two businesses, just to get a sense of what kind of multiplier size growth potential is out there?
And just lastly, again, I don't know if you have enough data to work on this. But, is it at all possible to get a sense of just how much in 2013 operational capacity was, just how much was being used and how much was out there for potential growth just by capturing market share without any expansion? Thank you.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [36]
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Yes. So, let me start with the EBITDA. On the EBITDA side, as you know, when you acquire companies from funds, the way these funds and the incentives of these funds are different than from a public company. And therefore, the numbers that I would give you for the previous years, I would have to go through a lot of detail to try to explain them.
The numbers that we gave for the next 12 months is something that today both companies believe we can get comfortably, let's say. And both companies believe, and as I said, those numbers would come without any significant synergies taken into account.
So, we are using that case as a base case to be able to grow on top of that with the synergies. And I think both companies very comfortable with the numbers that we provided, no?
On the second question of the market shares, it is hard to tell you on each one. Starting with Vestolit, Vestolit is the second largest producer of specialty PVC in Europe. I think there is -- the capacity in Europe for PVC has been relatively low, so they have been in the 80% capacity run rate throughout Europe, maybe in the specialty a little higher.
So, there is some room for improvement in capacity. And as I have mentioned, that is part of what we're looking for, to be able to work our plants at full capacity with the exports we are doing from Latin America and get some of those synergies.
In the case of Vestolit -- Dura-Line, sorry, in North America, the plants in general are running at good capacities. But, there are significant opportunities to grow faster, given if we provide some capital for additional equipment, for modernizing equipment, for modernizing facilities, of changing some of the footprint in the geographic area, or adding some facilities.
They have, I think, a fantastic team of people that know what to do, have great, great engineering. And I think if we provide both Vestolit and Dura-Line with now the vision of growth rather than just extracting pure cash, we are going to be able to generate significant synergies because the management team, it's what they want. They're excited about this because of the growth opportunities that we bring, no?
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Gustavo Gattass, BTG Pactual - Analyst [37]
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Okay. Is it at all possible just to do one quick follow up? The numbers that you sent out, particularly on Dura-Line, do they assume any of those small and high impact investments in additional capacity, or is that figure already comparable with the kind of production park that they have today?
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [38]
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It's compatible with what they have today. So, we are not assuming any major investment needed to do any of this. In the case of Dura-Line, there is -- more than having to do investments, I think there is a lot of opportunity to do investment to generate growth relatively fast.
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Gustavo Gattass, BTG Pactual - Analyst [39]
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Thank you, guys.
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Operator [40]
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Ricardo Fernandez, Explorer Investments.
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Ricardo Fernandez, Explorer Investments - Analyst [41]
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Yes. Hi, everyone. A couple questions. First is you mentioned obviously this growth CapEx, but does it change at all, either, I guess, looking at 2015 or 2016, your expectations of consolidated CapEx in a material way?
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [42]
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Well, today we are looking at our CapEx in the same way we were looking at it before. Of course, it's going to be a focus for us to streamline that CapEx number and make sure that we are still within the guidelines that we normally use.
We're going to be going through the detailed budget in the next few months. And I think we'll have a better view by the end of the year where it's going to be.
As I mentioned, neither company requires major CapEx. It's more if we see significant opportunities we will go for them. And in all Mexichem, every CapEx we do fights for the capital with the rest of the businesses. We'll go through the same process with Dura-Line and Vestolit, making sure that the returns are there and they are, let's say, fighting for the same amount of capital just allocated to the best return.
So, at the moment, we don't see any major change in our strategy. But, we will now more in the next few months when we go through our budget process. But, I don't think you should expect anything significantly different.
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Ricardo Fernandez, Explorer Investments - Analyst [43]
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Okay. And the opportunity you mentioned in Dura-Line in Latin America or other areas, does that require building capacity in the region, or would you essentially just export and distribute through your system that you have now?
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [44]
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No, in general, we would have to put capacity in the region. It's some machinery. It's not a significant amount of machinery.
And as I have mentioned before, we already have some polyethylene production in Latin America. We already have polyethylene in Europe. We have moved a significant amount of machinery from Europe to Latin America in polyethylene, and there is some equipment still there.
So, I think the capacity expansion in Latin America is not new plants. It's just starting lines to our current facility. So, it would be relatively an easy process, no?
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Ricardo Fernandez, Explorer Investments - Analyst [45]
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Okay. And then, last question I have is for modeling purposes. Are you going to report both of these companies in -- I guess either in solutions or in the resins? How is this going to be reflected in your next quarterly report?
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [46]
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Vestolit is going to be -- well, in the next quarterly report I don't think you are going to see --.
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Ricardo Fernandez, Explorer Investments - Analyst [47]
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Or whenever you do report it.
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [48]
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Yes. So, Vestolit, we expect it to close before the end of the year, and it will be consolidated under the chloro-vinyl chain. And Dura-Line, if everything goes well, we expect it to close before this quarter, but I'm not sure about that. And it will be reported on the integral solutions chain.
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Ricardo Fernandez, Explorer Investments - Analyst [49]
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So, Dura is integrated, and the other one is in the resins, correct?
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [50]
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Correct. Correct.
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Ricardo Fernandez, Explorer Investments - Analyst [51]
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Okay. And just one last question. What's the approximate revenue for Dura in the last 12 months?
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Antonio Carrillo Rule, Mexichem SAB de CV - CEO [52]
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I think you have the numbers there in what we gave you. But, I think about $650 million.
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Ricardo Fernandez, Explorer Investments - Analyst [53]
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Okay. Thank you very much.
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Operator [54]
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Andres Cuellar, BRAM.
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Andres Cuellar, BRAM - Analyst [55]
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Hi. My questions have already been answered. Thanks.
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Operator [56]
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At this time we show no further questions, and I would like to turn the conference back over to management for any closing remarks.
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Juan Francisco Sanchez Kramer, Mexichem SAB de CV - IR Director [57]
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Thank you all for joining us in this call. It was very instructive for us too.
We will keep you updated with the performance of these acquisitions. Thank you.
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Operator [58]
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The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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