EM LATAM CREDIT: Nemak: 2Q Earnings EBITDA Increase - Positive

(TNEMAK; Ba2/BB/BB)

“Nemak 2Q Net Loss $23.8M Vs. Profit $45.3M Y/y” - Bbg

• Mexico auto parts company Nemak reported flat revenues, lower volume but an 11.7% increase in EBITDA YoY on operational cost improvements. Net debt leverage was reported flat sequentially at 2.5x and down from 2.9x a year ago. It was encouraging to see the company hold the line on revenues while growing EBITDA margins through efficiency.

• North American 2Q revenues were up 2.7% YoY while Europe revenues were down 6% and the rest of the world grew 9.3%. EBITDA rose 25% YoY in North America due to operating efficiencies. Europe EBITDA margin rose from 15% to 17% in 2Q, though overall EBITDA fell due to lower revenue.

• EBITDA YTD YoY grew 21.6% in North America. In Europe it fell 6.8% and rest of the world rose 11%.

• There was no mention of the expected tariff impact on profitability or operations though we would expect to hear some comments on the conference call later today at 1pm ET.

TNEMAK 2031s were last quoted T+309bp or 7.11% YTM, 140bp tighter since March 31st and 43bp tighter YTD.

In a post from April 4, 2025 when bonds were quoted T+487bp we wrote:
"At 8.54% the bonds look interesting as a ratings downgrade appears to be priced in while the company’s business model seems solid in terms of customer and geographic diversification as well as moderate balance sheet leverage even after the tariff impact."