MEXICO CITY (Reuters) – Mexican conglomerate Alfa is anticipating a minor impact to earnings from a new law that will limit the ability of companies to subcontract workers, the company said on Wednesday.
The bill cleared a final hurdle in Mexico’s Senate on Tuesday, despite pushback from business groups who have said an overly restrictive policy could hurt economic growth.
Alfa Chief Financial Officer Eduardo Escalante said the company was still analyzing potential effects of the new law, but noted that more than 60% of Alfa’s revenue comes from outside of Mexico. He did not address how much of Alfa’s workforce is sub-contracted.
“The initial estimates suggest low single digit impact as percentage of consolidated EBITDA,” he said in a call with analysts to discuss first-quarter results.
Escalante also said Alfa has not yet determined when it could sell its telecommunications unit Axtel, but is analyzing alternatives across its units to monetize assets and reduce debt.
“It is difficult to pinpoint the timing for the sale of Axtel at this time,” Escalante said. Alfa, which also operates food and energy subsidiaries, late last year scrapped a plan to sell the business.
Escalante also told analysts that he expected Alfa to rejoin the MSCI index, which dropped the company from its Global Standard Indexes in February, sending shares plummeting.
The timing would depend on when the MSCI increases the foreign ownership limit, and could possibly come in the May or August review periods, he said.
Alfa on Tuesday said its first-quarter earnings fell 10% compared with the prior year, to 3.1 billion pesos ($153 million). Its revenues, however, climbed 6.3% year-on-year to 68.92 billion pesos ($3.38 billion).
The company also increased its EBITDA guidance for the year by 13% to $1.64 billion, citing stronger expectations for its petrochemicals company Alpek.
($1 = 20.4200 pesos at end-March)
(Reporting by Daina Beth Solomon and Abraham Gonzalez; editing by Diane Craft)
