Letter to Shareholders
Armando Garza Sada
Chairman of the Board
José de Jesús Valdez Simancas
Chief Executive Officer

To our shareholders:

Two events of great significance during the year were our initial public offering in the Mexican Stock Exchange and the issuance of our first bond in the international debt market. These actions strengthened the Company’s financial position and constitute a first step in the development of strategic projects, such as the modernization of our installed capacity in the United States and vertical integration into certain raw materials.

Our performance in 2012 was positive, considering that the global petrochemical industry faced important challenges as a result of recent production capacity expansions in China and the slowdown in export markets such as Europe. Our low-cost operations and focus on consumer related end-uses in North America allowed us to mitigate the volatility in the environment and generate more than US$728 million in operating cash flow (EBITDA).

In the Polyester Chain, we finished integrating the strategic acquisitions made in 2011 that positioned us as the largest integrated PTA-PET producer in North America. We also sold the first Integrex® license, leveraging the advantages of our Polyester technology. Polyester volume grew 6% in 2012 and EBITDA reached US$531 million, despite an adjustment in the PTA price formula and pressure on our export markets.

In the Plastics and Chemicals Segment, the polypropylene (PP) volume grew more than 19% in 2012, driven by enhanced operating efficiency and an increased supply of propylene from the Pemex refineries and from imports. We also posted strong results for most of the businesses in this segment. Excluding caprolactam, EBITDA for Plastics and Chemicals grew 9% during 2012.

Caprolactam (CPL) was the product in our portfolio that faced the greatest challenges in 2012. Unlike our other products, which largely compete in North America, Alpek’s caprolactam is exported to China. The production capacity that recently came on line in that country and weak global demand resulted in an industry margin contraction.

Undoubtedly, 2012 saw the greatest financial transformation in our history. As a result, Alpek is today a publicly traded company with “investment grade” ratings from Fitch, Moody’s and Standard & Poor’s.

During the year, debt amounting to US$308 million was paid and US$650 million were refinanced to ten years. The net debt to EBITDA ratio fell from 1.5 times in 2011 to 0.8 times in 2012, while the average lifetime of our debt increased from 3.2 at year-end 2011 to 6.9 at the close of 2012. The strength of our balance sheet, combined with our access to capital and debt markets, gives us the financial flexibility needed to invest in attractive growth projects.

2012 capital expenditures totaled US$115 million. In addition to investments in standard maintenance activities, we began strategic projects that will further strengthen our low-cost position.

In May 2012, ground was broken for the construction of our electricity co-generation project in Cosoleacaque, Veracruz. With a total investment of US$130 million, the plant will come on line in the next twelve months. It will satisfy on-site steam needs and produce more than 95 megawatts of efficient electricity per year for internal consumption, and the sale of any excess.

During the year, we also began a project for eliminating bottlenecks at the Columbia plant in the United States. The project will add 65 thousand tons per year of PET-producing capacity as early as the first months of 2013 through a total investment of US$20 million.

Other strategic projects, such as the co-generation plant in Altamira, the integration to MEG (monoethylene glycol) and the modernization of our PTA-PET capacity in North America progressed as planned. We also continue to seek additional growth opportunities related to raw material integration and cost reduction.

Knowing that our people are the basis of our success, we will continue supporting the development of all our associates. It is an honor and a pleasure to work with Alpek’s committed and talented team on a daily basis.

Our environmental management initiatives are also an integral part of our business strategy. All our plants have programs to optimize the use of natural resources by encouraging emissions and input reduction and material recycling.

On behalf of the Board of Directors, I would like to thank you, our shareholders, for your trust during 2012, Alpek’s first year as a publicly traded company. We are also sincerely grateful to our customers, creditors, suppliers, associates and the community in general for their great support. The confidence you have shown motivates us to work even harder to exceed your expectations.

We reiterate our commitment to continue enhancing the Company’s low-cost position, capitalizing on attractive growth opportunities with sustainable competitive advantages. Alpek is beginning this new phase of its history from a position of strength, that will allow it to realize its full potential and extend its track record of disciplined growth, generating value for all our stakeholders.


Armando Garza Sada
Chairman of the Board of Directors

José de Jesús Valdez Simancas
Chief Executive Officer