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Mexichem Reports Fourth Quarter and Full Year 2017 Results

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Mexichem, S.A.B. de C.V. (BMV: MEXCHEM*) ("the Company" or "Mexichem")
announced its unaudited results for the fourth quarter and full year
2017. The figures have been prepared in accordance with International
Financial Reporting Standards ("NIIF" or "IFRS"), having US dollars as
the functional and reporting currency. All comparisons are made against
the same period of the prior year. Unless specified to the contrary all
figures are in millions. In some cases, numbers and percentages have
been rounded and may not add up.

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ROIC: Adjusted NOPAT for continuing operations/Adjusted Equity from continuing operations + Liabilit ...

ROIC: Adjusted NOPAT for continuing operations/Adjusted Equity from continuing operations + Liabilities with cost – Cash Income from continuing operations and NOPAT (EBIT-taxes) consider trailing twelve months. (Photo: Business Wire)

Please note that the presentation of Mexichem's 2016 fourth quarter
results reflect the effects of several actions taken by the Company in
2016 and 2017. A detailed review of these actions and their impact can
be found on Page 16 & 17 of this release. It is highly recommended that
you read these Clarifications prior to analyzing the Company´s 4Q17
results.

Fourth Quarter 2017 Financial and Operating Highlights (compared to
4Q16):

  • Revenues increased 15% to $1.5 billion. EBITDA was $277 million, a
    40% increase over EBITDA of $198 million. EBITDA Margin increased 337
    bps to 18.9%.
  • Income from continuing operations was $123 million, an increase of
    137%.
  • Consolidated net loss of $22 million resulted from PMV´s VCM,
    Ethylene plants and auxiliary services related to those plants,
    classified as discontinued operations, following the decision of its
    shareholders to not rebuild its VCM production capacity, announced on
    December 20, 2017.
  • Cash Flow before dividends was up 103% to $258 million and Free
    Cash Flow increased 73% to $197 million.
  • ROE and ROIC adjusted for continuing operations were 9.8% and 8.2%,
    up 110 bps and 150 bps, respectively.

CONSOLIDATED SELECTED FINANCIAL RESULTS

mm US$     Fourth Quarter     January - December
Selected Financial Results     2017     2016     %Var.     2017     2016     % Var.
Net sales     1,468     1,278     15%     5,828     5,344     9%
Operating income     162     116     40%     708     582     22%
EBITDA     277     198     40%     1,106     895     24%
EBITDA margin     18.9%     15.5%     337 bps     19.0%     16.7%     223 bps
Income (loss) from continuing operations     123     52     137%     357     311     15%
EBT     150     88     70%     535     422     27%
Consolidated net income (loss)     -22     83     N/A     214     247     -13%
Net majority income     14     72     -81%     194     263     -26%
Operating cash flow before capex     339     221     53%     683     558     22%
Total CAPEX (organic & JV)     -81     -95     -15%     -289     -414     -30%
Cash Flow before dividends     258     127     103%     394     144     174%
Free cash flow     197     114     73%     201     90     123%

For comparable purposes figures for 2016 and 2017 consider the
discontinued operation related to the decision of PMV´s shareholders not
to rebuild VCM production capacity. As such, adjusted figures present in
previous financial reports related to PMV are no longer reported since
they are allocated as a discontinued operation.

FY17 Financial and Operating Highlights (compared to 2016)

  • Revenues Increased 9% to $5.8 billion.
  • Company meets high end of EBITDA GUIDANCE range; EBITDA increased
    25% when compared to $884 million EBITDA reported a year ago and 24%
    to $1.1 billion compared to $895 million, which is the EBITDA adjusted
    for PMV´s VCM, Ethylene plants and auxiliary services related to those
    plants, classified as discontinued operations. EBITDA Margin increased
    223 bps to 19%.
  • Income from continuing operations of $357 million was 15% higher
    year-on-year.
  • Consolidated Net Income decreased 13% due to PMV´s VCM, Ethylene
    plants and auxiliary services related to those plants, classified as
    discontinued operations following the decision to not rebuild the VCM
    production capacity, announced on December 20, 2017.
  • Cash Flow before dividends increased 174% to $394 million and Free
    Cash Flow increased 123% to $201 million.

Company Expects EBITDA Growth of between 20% to 25% in 2018 including
Netafim´s results.

MANAGEMENT COMMENTARY

Performance and Outlook

The fourth quarter represented a strong finish to a record year for
Mexichem. EBITDA growth significantly outpaced revenue gains, and EBITDA
margin expanded considerably from year-ago levels.

Mexichem's fourth quarter results reflected improved market conditions
and increased efficiencies across most of our business groups, resulting
in considerable growth in operating profitability. Our Vinyl Business
Group continued to be a key contributor to EBITDA growth, benefitting
primarily from higher PVC pricing and the vertical integration benefits
of our joint venture ethylene cracker. In the Fluor Business Group,
strong demand for fluorspar, and higher refrigerant gas prices drove
double-digit EBITDA growth. As expected, Fluent LatAm recovered sales
momentum in the fourth quarter, and Fluent US/Canada and Europe each
improved their margins. Fluent Business Group's overall EBITDA was lower
year-on-year, due to the lag-time in passing through rising PVC input
prices to customers, economic headwinds in certain LatAm markets,
expenses related to the acquisition of Netafim and the provision related
to the CADE investigation in Brazil reported by the company in the 2Q16.

For the full year, we are pleased to report that Mexichem's EBITDA
performance came in at the high end of our guidance range, showing a
year-on-year increase of 25% when compared to the EBITDA reported a year
ago of $884 million, and a 24% increase when compared to the EBITDA
adjusted by the re-classification as a discontinued operation of PMV´s
VCM, Ethylene plants and auxiliary services related to those plants.
This strong comparison reflected effective execution across each of the
key pillars of our growth strategy, namely: greater vertical integration
of our PVC production, an expanded portfolio of specialty products
serving high growth markets, and the build out of our geographical
footprint. Specific highlights of the year included: the commission of
our joint venture ethylene cracker that became operational during the
first quarter 2017; the end market diversification of our fluorspar
business; the ITC resolution in March 2017 that supported higher
refrigerant gas prices; the benefits of several bolt-on acquisitions
that have added specialty products and new geographies to the Mexichem
platform; and our acquisition of Netafim, which was completed early in
2018.

In addition to positioning Mexichem as the leader in the high growth
micro irrigation market, Netafim is a transformational acquisition that
will accelerate our drive into specialty products and solutions, and one
that will enable us to address long term global issues around water and
food security. Netafim will be consolidated into our Fluent Business
Group for financial reporting purposes, and we will combine our
irrigation product line under Netafim. With this scale, we will be well
positioned in the worldwide agricultural sector.

Mexichem ended 2017 in a strong financial position and with very
positive financial performance metrics, as full year ROIC and ROE on
continuing operations increased by 110 and 150 bps, respectively. We
have entered 2018 with the strongest operating platform in our history
and a clear strategy for continued growth. We plan to maintain our focus
on increasing returns and rolling out cross selling initiatives and
operating synergies across the Company.

Based on our current business portfolio, we expect 2018 to be another
year of strong growth for Mexichem with contributions from each of our
key business areas. We are guiding to EBITDA growth of between 20% and
25% for 2018, supported by the full year benefit from our joint venture
ethylene cracker, assumptions of continued higher pricing for key
products, including PVC, fluorspar and refrigerant gases, recovery of
Fluent LatAm, increased demand for our Fluent Business Group's
industrial products and an eleven-month contribution from Netafim.

"These tailwinds and the determination and skill of Mexichem's over
18,000 employees worldwide and the more than 4,000 individuals coming
from the Netafim team, give us confidence in our ability to continue to
achieve significant profitable growth as a purpose-driven organization."

REVENUES

Fourth quarter 2017 revenues were $1.5 billion, up $190 million, or 15%,
from 4Q16 led by higher sales in all our Business Groups.

Revenue growth in our Resins, Compounds, and Derivatives business unit
continued to be driven mainly by positive market dynamics in the PVC
industry associated with oil prices and supply constraints in China due
to increased government environmental enforcement activities during the
quarter. These factors led to a 13% increase in revenues on a 2%
decrease in volumes, reflecting higher prices.

Fluent Business Group revenues grew 11% or $76 million, mainly due to
healthy revenue growth in US/Canada, Europe and LatAm, where sales
increased by 27%, 13% and 8%, respectively, which more than compensated
for the decline in AMEA.

Fluor Business Group revenues increased 40%, fueled by significant
volume growth in our upstream businesses resulting from higher demand
from steel and cement industry customers and in our downstream
businesses by higher refrigerant prices in Europe and the US.

In 4Q17, the exchange rate translation effect negatively impacted
consolidated sales by $76 million, mainly due to the depreciation of the
Venezuelan bolivar against the US dollar, which more than compensated
the 9% appreciation of the Euro against the US dollar. Out of the $76
million net effect of FX, 148% came from Venezuela where inflationary
effect on sales was much higher than the devaluation effect of the
Venezuelan bolivar due to the hyperinflationary environment. Without the
Venezuelan impact, the translation effect would have a positive $37
million impact on consolidated sales, as such sales would have increased
12%.

In 2017, consolidated revenues increased $484 million or 9% year-on-year
to $5.8 billion. On a constant currency basis, total sales would have
increased 11% year-on-year. Foreign currency translations reduced total
sales by $106 million mainly resulting from the Venezuelan bolivar
devaluation, partially offset by a 2% appreciation of the Euro against
the US dollar. Out of the $106 million net FX impact, 107% came from
Venezuela. Without the Venezuelan impact, the translation effect would
have had a positive impact in consolidated sales of $7 million, and
sales growth for the year would have remained at 9%.

SALES BY REGION (DESTINATION)

The United States and Mexico represented 16% and 12%, respectively, of
total sales by destination in 2017; Germany accounted for 8%, and Brazil
and the UK represented 7% and 6%, respectively.

EBITDA

In the 4Q17 EBITDA was $277 million, compared to $198 million reported
in the fourth quarter of last year, an increase of 40%. EBITDA margin in
4Q17 was 18.9%, a 337 bps increase vs. the 15.5% of 4Q16. In 4Q17,
Fluent LatAm's EBITDA was reduced by the accrual of certain expenses
related to the acquisition of Netafim and the provision for a potential
liability in the region coming from alleged violations by the Company´s
Brazilian operations and some of its executives of Brazilian antitrust
regulations from 2003 to 2009 that have been investigated by CADE
(Administrative Council of Economic Defense) and that were disclosed by
Mexichem in 2Q16 (refer to contingent liability on page 12),
which together represent an impact of $24 million. Without this
impact, EBITDA in 4Q17 would be $301 million, an increase of 52% with an
implied EBITDA margin of 20.5%.

The Vinyl and Fluor Business Group´s EBITDA increased $91 million and
$14 million, respectively, while Fluent USA/Canada and Europe posted
double-digit EBITDA growth. This performance compensated for lower
EBITDA in Fluent LatAm and AMEA.

Overall positive results for the quarter are attributable to : i)
Increased profitability from the vertical integration in our Vinyl
Business Group due to the start-up of commercial operations of the
ethylene cracker in the 2Q17 that has not been operational in 4Q16; ii)
Improved refrigerant gas prices in the U.S. following the ITC resolution
announced by the Company on March 23th, 2017, as well as a favorable
refrigerant gas price environment in the EU; and iii)
better-than-expected Fluent sales in the US/Canada and Europe.

In 4Q17, the translation effect impacted EBITDA negatively by $35
million. Out of the total negative FX impact on EBITDA, 113% came from
Venezuela. Without the impact from Venezuela, the translation effect
would have been a positive $5 million, EBITDA growth would have been 37%
and the EBITDA margin remained at 19%. Adjusting EBITDA by these FX
effects excluding Venezuela, and by the Netafim expenses and CADE
provision, EBITDA growth and implied EBITDA margin would be 49% and
20.1%, respectively.

For 2017, the company delivered EBITDA results at the high-end of its
guidance range. EBITDA totaled $1.1 billion, a 24% increase from the
previous year and a 25% increase from the 2016 EBITDA reported a year
ago (pre PMV´s VCM, Ethylene plants and auxiliary services related to
those plants classification as discontinued operations), and EBITDA
margin reached 19%, 223 bps higher than in 2016. Netafim
acquisition-related expenses and the CADE provision for the year
represented an impact of $27 million. Without this impact, EBITDA would
increase 27% vs the previous year and 28% vs 2016 EBITDA pre PMV´s VCM,
Ethylene plants and auxiliary services related to those plants
classification as discontinued operations, and EBITDA margin would be
19.4%. On a constant currency basis, there was an impact of $41 million
on EBITDA, of which Venezuela represented 102%, meaning that without
that negative impact, the translation effect would have been a positive
$1 million, and EBITDA margin would remain in the same level.

OPERATING INCOME

For the 4Q17, Mexichem reported operating income of $162 million,
compared to the $116 million reported in the 4Q16, a 40% increase.
Excluding Netafim acquisition-related expenses and the CADE provision,
operating income would be $186 million, an increase of 60%. This was
mainly the result of the same factors mentioned above.

For 2017, operating income was $708 million, compared to the $582
million reported in 2016, an increase of 22%, and operating margin
increased 127 bps to 12.2%. Without the Netafim acquisition-related
expenses and the CADE provision, operating income would be $735 million
representing an increase of 26% and an operating margin of 12.6%

FINANCIAL COSTS

In 4Q17, financial costs decreased $14 million or 52% compared to 4Q16.
This decrease was mainly due to the profit originated by the inflation
effects in Venezuela of $29 million recognized in 4Q17, as in the period
the official accumulated inflation went from 500% to 2,616%. This effect
was partially offset by an increase of $13 million in interest expenses
related to the Company's issuance of a long term, international bond in
the amount of $1 billion that was completed in the third quarter.

Financial costs for 2017 increased $14 million or 9% to $176 million
compared to 2016. This increase was mainly related to the company's debt
denominated in Mexican pesos, as in 2017 the peso appreciated against
the dollar, generating an exchange rate loss of $14 million in the
period while in 2016, the peso depreciated against the dollar and an
exchange rate gain of $15 million was recorded, meaning an increase in
expenses of $29 million. Likewise, monetary losses of $33 million were
recognized in 2017 related to net obligations less liabilities (when
liabilities are greater than assets) recorded in currencies other than
the functional currency, while in 2016 the same recognition was
equivalent to losses of $13 million, generating an increase in expenses
in 2017 vs 2016 of $20 million. All of those effects were partially
offset by the profit generated in 2017 as a result of the inflationary
effects of Venezuela of $49 million which in 2016 was $17 million,
resulting in a benefit increase of $32 million and there was a net
decrease in commissions and interest of $ 3 million.

TAXES

In 4Q17, cash tax declined 89% or $55 million compared with 4Q16, mainly
due to the change in a mix of Mexichem's subsidiaries that generate net
earnings and those generating net losses added by the fluctuation of
different currencies against the dollar recognizing some taxable profits
in 2017 which are not accounting profits due to the functional and
reporting currency. Mexichem then used some of its net operating losses
(NOLs) to offset taxable income associated with the FX gains mentioned
above Additionally, the use of bonus depreciation in our cracker JV in
Texas allowed us to increase our Income from continuing operations
without increasing the Company's cash tax, reducing the cash tax rate
from 70% in 4Q16 to 4% in 4Q17.

Deferred tax expense increased from a benefit of $25 million in 4Q16 to
an expense of $20 million, mainly because of the use of NOL´s mentioned
above, which was partially offset by the reduction in the U.S. corporate
tax rate approved in 4Q17, which reduced the passive deferred tax
position of the Company.

Thus, income taxes decreased from $37 million to $27 million, resulting
in a decline in the effective tax rate to 18% in 4Q17 from 41% in 4Q16,
while income from continuing operations increased from $88 million to
$150 million.

In 2017, cash tax decreased from $189 million to $111 million mainly due
to the fact that in 2016 the U.S. dollar appreciated against the Mexican
peso while in 2017 it depreciated. In 2016, this generated exchange rate
profits in our Fluor Business Group coming from our dollar denominated
accounts receivable, while in 2017 there were losses, which reduced the
cash tax. Additionally, the start-up of the cracker in February of 2017
increased our income from continuing operations while the use of bonus
depreciation in the cracker JV in Texas eliminated the tax payment on
the income generated by the cracker. This resulted in a reduction in the
cash tax rate from 45% in 2016 to 21% in 2017.

Conversely, 2017 deferred tax expense increased from a benefit of $79
million in 2016 to an expense of $66 million. This effect is mainly
explained by the fact that in 2016 FX losses generated a deferred tax
asset that benefited the company's results, while in 2017 the FX gains
offset tax losses, decreasing the deferred tax asset which increased the
deferred tax expense.

CONSOLIDATED NET INCOME (LOSS) AND MAJORITY INCOME (LOSS)

In 4Q17, the Company reported a Consolidated net loss of $22 million and
Net Majority Income of $14 million, compared to reported Consolidated
Net Income and Net Majority Income of $83 million and $72 million,
respectively, in the 4Q16. Results were affected by the decision of PMV
shareholders not to rebuild its VCM production capacity, which Mexichem
announced on December 20, 2017. Therefore, the joint venture's VCM
production, and the assets and liabilities associated with ethylene
production and auxiliary services associated with VCM and ethylene were
re-classified on that date as discontinued operations. This
re-classification was made on Mexichem's financial statements for the
years 2015, 2016 and 2017, since the decision implies the exit of PMV
from the VCM and ethylene businesses in Mexico, and therefore, all of
the impacts and the revenues recognized related to the incident at the
VCM plant are presented as discontinued operations.

The combined results of discontinued operations included in the
consolidated income statement and other comprehensive income are
detailed in Appendixes I and II.

Income from continuing operations before income tax increased 70% in the
4Q17, while income from continuing operations after cash tax grew 450%
to $143 million from $26 million, mainly due to the fact that the
cracker generated higher Income from continuing operations but does not
incur taxes due to the use of bonus depreciation.

Net Majority Income for the quarter declined 81% mainly as a result of
the discontinued operation classification despite lower cash taxes.

USD in millions     Fourth Quarter
Income statement     2017     2016     %

Income (loss) from continuing operations
before
income tax

    150     88     70%
Cash tax     7     62     -89%

Income (loss) from continuing operations
after
cash tax

    143     26     450%
Deferred taxes     20     (25)     N/A

Income (loss) from continuing operations

    123     52     137%
Discontinued operations     (145)     32     N/A
Consolidated net income (loss)     (22)     83     N/A
Minority stockholders     (36)     11     N/A
Net income (loss)     14     72     -81%
 

For 2017, the Company posted $214 million and $194 million in
Consolidated Net Income and Net Majority Income, respectively, compared
to the $247 million and $263 million reported in 2016.

Income from continuing operations before income tax was 27% higher,
however, Consolidated Net Income declined 13%, as a result of the
discontinued operation mentioned previously and higher deferred tax
expense effects that do not have any cash flow impact. Income from
continuing operations after cash tax increased 82%, due to the fact that
the cracker generated higher Income from continuing operations but does
not incur taxes due to the use of bonus depreciation.

Without the deferred tax impact, Net Majority Income in 2017 would have
increased 41%.

USD in millions     January - December
      2017     2016     %

Income (loss) from continuing operations
before
income tax

    535     422     27%
Cash tax     111     189     -41%

Income (loss) from continuing operations
after
cash tax

    424     233     82%
Deferred taxes     66     (79)     N/A
Income (loss) from continuing operations     357     311     15%
Discontinued operations     (143)     (64)     123%
Consolidated net income (loss)     214     247     -13%
Minority stockholders     20     (16)     N/A
Net income (loss)     194     263     -26%
 

OPERATING CASH FLOW HIGHLIGHTS

mm US$     Fourth Quarter     January - December
      2017     2016     %Var.     2017     2016     % Var.
EBITDA     277     198     40%     1,106     895     24%
Taxes paid     -18     -62     -71%     -122     -189     -35%
Net interest paid     -3     -39     -92%     -137     -152     -10%
Bank commissions     -6     -9     -33%     -27     -30     -10%
Exchange rate gains (losses)     -16     -2     700%     -33     -27     22%
Change in trade working capital     104     135     -23%     -103     62     N/A
Operating cash flow before capex     339     221     53%     683     558     22%
CAPEX (Organic)     -66     -54     22%     -215     -204     5%
CAPEX (Total JV)     -14     -77     -82%     -119     -376     -68%
CAPEX JV (OXY share)     0     37     -100%     45     166     -73%
NET CAPEX JV     -14     -40     -65%     -74     -210     -65%
Total CAPEX (organic & JV)     -81     -95     -15%     -289     -414     -30%
Cash flow before dividends     258     127     103%     394     144     174%
Shareholders' dividend     -61     -12     408%     -193     -54     257%
Free cash flow     197     114     73%     201     90     123%
 
  • Operating Cash Flow before Capex grew 53% in the quarter due to higher
    EBITDA, lower cash taxes and net interest costs (interest payments
    related to the debt offering announced on September 27, 2017 will not
    be paid until 2018). Working capital needs in the quarter declined 23%
    vs 4Q16 due to an increase in accounts receivable, partially offset by
    higher accounts payable.
  • For 2017 Operating Cash Flow before Capex grew 22% compared to 2016,
    benefitting from higher EBITDA, lower taxes and net interest costs
    (interest payments related to the debt offering announced on September
    27, 2017 will not be paid until 2018). Working capital needs for the
    year increased mainly due to the start-up of the cracker JV in Texas,
    and higher PVC and refrigerant gas prices, which increased the dollar
    value of accounts receivable and inventories.
  • Capital expenditures in 4Q17 decreased by 15% to $81 million, of which
    $14 million was utilized in PMV and $66 million was allocated to
    organic projects. For 2017 Capital Expenditures declined by 30% due to
    lower investments in the cracker JV in Texas.

NET WORKING CAPITAL

 

    2017 Variation     2016 Variation
      sep-17     dec-16    

▵ ($)

    sep-16     dec-15    

▵ ($)

Working Capital     287     184     -103     184     246     62
 

As of December 31, 2017, working capital needs increased by $103 million
compared to December 2016. This represents an increase of $165 million
in demand for working capital, compared to the $62 million in reduced
demand between December 2016 and December 2015. This increase in the
demand for working capital was mainly due to the startup of the cracker
in February 2017 and higher PVC and refrigerant gas prices in 2017
compared to 2016.

FINANCIAL DEBT

      Last Twelve Months
      Dec 2017     Dec 2016
Net Debt USD million     1,356     1,587
Net Debt/EBITDA 12 M     1.2x     1.8x
Interest coverage     5.7x     4.7x
Outstanding shares (millions)     2,100     2,100

Net debt USD includes $0.9 million of letters of credit with maturities
of more than 180 days that for covenant purposes are considered gross
debt, although they are not booked in the accounting debt.

Total financial debt as of December 29, 2017 was $3.2 billion, plus $0.9
million in letters of credit with maturities of more than 180 days, for
a total financial debt of $3.2 billion, while cash and cash equivalents
totaled $1.9 billion, resulting in net financial debt of $1.35 billion.
It is important to note that cash equivalents include the proceeds of
the international bond offering completed on September 27, 2017, which
were used to partially finance acquisition of Netafim, a privately-held
Israeli company and a leader in precision irrigation solutions, that was
completed on February 7, 2018.

The Net Debt/EBITDA ratio was 1.2x at December 31, 2017, while Interest
Coverage was 5.7x.

CONSOLIDATED BALANCE SHEET

      USD in millions
Balance sheet     Dec 2017     Dec 2016
Total assets     9,759     8,354
Cash and temporary investments     1,900     714
Receivables     975     848
Inventories     675     606
Others current assets     403     393
Long term assets     5,807     5,794
Total liabilities     6,079     4,772
Current portion of long-term debt     45     58
Suppliers     1,362     1,270
Other current liabilities     723     658
Long-term debt     3,210     2,241
Other long-term liabilities     738     546
Consolidated shareholders'equity     3,681     3,582
Minority shareholders' equity     878     904
Majority shareholders' equity     2,803     2,678
Total liabilities & shareholders' equity     9,759     8,354
 

Financial Assets

On April 20th, 2016, an explosion occurred in the VCM plant inside the
Pajaritos Petroquemical Complex, where two of the three facilities of
PMV are located (VCM and Ethylene). The chlorine and caustic soda plant
is located on a separate site. There was no damage to the
chlorine-caustic soda plant, but there was business interruption in the
supply of raw material. The VCM plant (Clorados III) is the one that
sustained most of the damage, the major economic impact of which was the
write-off of the asset and the shutdown of that plant. The direct
economic impacts of this incident are the following: (i) $276 million
related to the VCM plant asset write off (property damage), (ii) $44
million in costs related to the closure of the plant (damages to third
parties/civil liability, environmental, lawyers, advisors, partial
demounting, etc), for a total of $320 million.

In 2016, PMV gathered sufficient information to decide to recognize the
account receivable related to insurance coverages. During 2017 and 2016
associated to the incident in the VCM plant, PMV recognized $283 million
as revenue and accounts receivable related to property damage, damages
to third parties (civil liability) and directors and officer's insurance
coverages. The difference between $320 million for damages mentioned in
the paragraph above and the $283 million related to revenues and
accounts receivables recognized during 2016 and 2017 are dependent on
the assembly policy insurance coverage which is in process to be
claimed. PMV recognized business interruption insurance proceeds of $48
million for the VCM and Ethylene plants, $23 million for the
Chlorine-Caustic Soda plant and our Resins, Compounds and Derivatives
business unit recognized $18 million for our PVC plants.

On December 20, 2017, Mexichem announced the decision of PMV
shareholders not to rebuild its VCM production capacity. Therefore, the
joint venture's VCM production, and the assets and liabilities
associated with ethylene production and auxiliary services associated
with VCM and ethylene were classified on that date as discontinued
operations in Mexichem's financial statements for the years 2015, 2016
and 2017, since this implies the exit of PMV from the VCM and ethylene
businesses in Mexico. Thus, all of the impacts and the revenues
recognized by PMV related to the incident in the VCM plant are presented
as discontinued operations, except for the business interruption related
to the Chlorine-Caustic soda plant.

Additionally, the PMV decision not to rebuild the VCM plant triggered
the asset write-off of the Ethylene plant and auxiliary services related
to the VCM and Ethylene plants equivalent to $196 million, also
presented as discontinued operations.

Contingent Asset

As a result of the VCM Plant (Clorados III) incident described in the
financial asset disclosure, there is a difference between the $320
million in damages and the $283 million of revenues and accounts
receivable recognized during 2016 and 2017 related to the incident that
are dependent on the assembly policy insurance coverage which is in
process of being claimed. Additionally, and depending on the resolution
of the environmental authorities mentioned in Contingent Liabilities
below, the company would recognize revenue and accounts receivable
according to the conditions contained in the environmental insurance
coverage.

Contingent Liability

As a result of the VCM Plant (Clorados III) incident described in the
contingent asset disclosure, PMV performed an environmental assessment
to determine if any pollutants were deposited in areas surrounding the
facility, delivered the report to the environmental authorities and is
working with them in order to determine environmental damages, if any.
Also, PMV could be responsible for third party injuries, if any. Based
on the information the Company has as of this report, there is no
evidence that there are additional relevant liabilities.

As reported in 2Q16, Mexichem's Brazilian subsidiary was notified by
CADE of alleged violations of the rules of economic competition in
Brazil, committed by the subsidiary and some of its executives, from
2003 to 2009. Mexichem is fully committed to complying with local
regulations in all countries where it operates. As of the date of these
consolidated financial statements, Mexichem has recognized the amount of
the potential liability that it has been able to reliably estimate at
this stage of the process. As the process progresses, the amount of the
liability may change.

CONSOLIDATED INCOME STATEMENT

USD in millions     Fourth Quarter     January - December
INCOME STATEMENT     2017     2016     %     2017     2016     %
Net sales     1,468     1,278     15%     5,828     5,344     9%
Cost of sales     1,086     1,001     8%     4,375     4,078     7%
Gross profit     382     277     38%     1,453     1,266     15%
Operating expenses     219     161     36%     745     685     9%
Operating income (loss)     162     116     40%     708     582     22%
Financial cost     13     27     -52%     176     162     9%
Equity in income of associated entity     (1)     1     N/A     (2)     (3)     -33%

Income (loss) from continuing operations
before
income tax

    150     88     70%     535     422     27%
Cash tax     7     62     -89%     111     189     -41%
Deferred taxes     20     (25)     N/A     66     (79)     N/A
Income tax     27     36     -25%     178     111     60%
Income (loss) from continuing operations     123     52     137%     357     311     15%
Discontinued operations     (145)     32     N/A     (143)     (64)     123%
Consolidated net income (loss)     (22)     83     N/A     214     247     -13%
Minority stockholders     (36)     11     N/A     20     (16)     N/A
Net income (loss)     14     72     -81%     194     263     -26%
EBITDA     277     198     40%     1,106     895     24%
 

OPERATING RESULTS BY BUSINESS GROUP

VINYL Business Group (38% and 46% of Mexichem's sales (before
eliminations) and EBITDA respectively, in 2017)

mm US$     Fourth Quarter     January - December
Vinyl     2017     2016     %Var.     2017     2016     % Var.
Volume (K tons)     589     575     2%     2,505     2,454     2%
Total sales*     568     496     15%     2,317     2,026     14%
Operating income     98     30     227%     325     171     90%
EBITDA     150     59     154%     507     283     79%

* Intercompany sales were $51 million and $41 million in 4Q17 and 4Q16,
respectively, and as of December 2017 and 2016 they were $184 million
and $152 million, respectively.

 
mm US$     Fourth Quarter     January - December
Resins, Compounds & Derivatives     2017     2016     %Var.     2017     2016     % Var.
Volume (K tons)     517     525     -2%     2,226     2,179     2%
Total sales*     551     487     13%     2,254     1,982     14%
Operating income     93     35     166%     311     167     86%
EBITDA     143     62     131%     482     272     77%

* Intercompany sales were $59 million and $48 million in the 4Q17 and
4Q16, respectively, and as of December 2017 and 2016 were $215 million
and $184 million, respectively. Of these amounts $9 million and $7
million were invoiced to PMV in 4Q17 and 4Q16, respectively and $31
million and $33 million accrued to December 2017 and 2016.

 
mm US$     Fourth Quarter     January - December
PMV     2017     2016     %Var.     2017     2016     % Var.
Volume (K tons)     77     56     38%     309     314     -2%
Total sales*     26     17     53%     99     80     24%
Operating income     5     -5     N/A     14     4     250%
EBITDA     7     -3     N/A     25     11     127%

* Intercompany sales invoiced to Resins, Compounds and Derivatives were
$1.1 million and $0.8 million in 4Q17 and 4Q16, respectively. And, as of
December 2017 and 2016 were $6 million and $4 million, respectively.

In 4Q17, the Vinyl Business Group reported a 2% increase in volumes, and
15% growth in sales to $568 million, reflecting better PVC dynamics
globally, mainly associated with oil prices and supply constraints
coming from Asia. Also, revenues continued to benefit from the
integration of Vinyl Compounds, Ltd into our Compounds business.

EBITDA for the Vinyl Business Group was $150 million, compared to $59
million in 4Q16, an increase of 154%. This growth resulted from better
PVC market conditions (prices and volumes), product mix, efficiencies in
our operations, and the benefits of our increased vertical integration
across the ethane-to-PVC value chain due to the start of commercial
operations of our JV ethylene cracker in Texas. EBITDA margin was 26.4%
in 4Q17 compared to 11.9% in 4Q16.

For the quarter, Resins, Compounds and Derivatives revenues and EBITDA
increased 13% and 131%, respectively, to $551 million and $143 million
from 4Q16 levels, on a 2% decline in volumes to 517 thousand tons.
Revenues benefited from better PVC market conditions and our strategic
acquisition of Vinyl Compounds, Ltd. EBITDA improved dramatically
because of the previously-mentioned factors, but mainly due to a decline
in our PVC production costs as a result of increased vertical
integration and its associated benefits in the Vinyl Business Group.
Operating income for Resins, Compounds and Derivatives was $93 million,
an increase of 166% from the $35 million reported in 4Q16.

In 4Q17, PMV sales were $26 million, the majority of which came from our
chlorine-caustic soda operations. It is important to note that positive
$7 million EBITDA contribution from PMV in 4Q17 was entirely related to
its operations.

In 2017, the Vinyl Business Group's sales increased 14% due to better
market conditions in PVC (volumes and prices). EBITDA was $507 million,
79% higher than in 2016, because of better PVC trends and increased
vertical integration across the ethane-to PVC value chain and its
associated benefits, resulting in a 21.9% EBITDA margin, while in 2016
EBITDA Margin was 13.9%.

FLUENT Business Group (50% and 35% of Mexichem's sales (before
eliminations) and EBITDA, respectively, in 2017)

mm US$     Fourth Quarter     January - December
Fluent     2017     2016     %Var.     2017     2016     % Var.
Sales     765     689     11%     3,023     2,892     5%
Fluent LatAm     314     292     8%     1,132     1,100     3%
Fluent Europe     315     278     13%     1,321     1,269     4%
Fluent US & Canada     108     85     27%     449     384     17%
Fluent AMEA     31     38     -18%     138     149     -7%
Intercompany eliminations     (3)     (4)     -25%     (17)     (10)     70%
Operating income     31     57     -46%     234     284     -18%
EBITDA     76     93     -18%     385     421     -9%
 

In 4Q17, the Fluent Business Group's sales were $765 million, an 11%
increase compared to the $689 million reported one year ago, mainly
driven by higher sales in US/Canada, Europe and LatAm which grew 27%,
13% and 8%, respectively. Operations in LatAm, improved compared to the
first three quarters of 2017.

4Q16     mm US$    

4Q17

    4Q17     4Q17/4Q16
Sales         Sales     FX     Total     % Var
292     Fluent LatAm     314     99     414     42%
278     Fluent Europe     315     -18     297     7%
85     Fluent US/Canada     108     0     108     27%
38     Fluent AMEA     31     -1     29     -24%
-4     Intercompany Eliminations     -3     0     - 3     -25%
689     Total     765     80     846     23%
 

On a constant currency basis, total sales in the Fluent Business Group
would have been $846 million, which represents an $80 million negative
impact year-over-year, mainly as a result of the hyperinflationary
environment in Venezuela, where the inflationary effect on sales was
much higher than the devaluation of the Venezuelan bolivar. Out of the
$80 million, $112 million came from Venezuela. Without the Venezuelan
impact, the translation effect would have a positive $32 million impact
on consolidated sales, and sales would have grown 6.3%. The $32 million
FX positive impact is mainly due to the 9% appreciation of the Euro
against the US dollar.

EBITDA for 4Q17 was $76 million, an 18% decrease compared to 4Q16,
mainly impacted by the accrual of certain expenses related to the
acquisition of Netafim and the Company's decision to provision a
potential liability from CADE (Administrative Council of Economic
Defense) in Brazil (refer to contingent liability on page 12), which
together represent an impact of $24 million. Without this impact,
EBITDA in 4Q17 would be $100 million, an increase of 8%. It is
noteworthy to comment that EBITDA margin in the US/Canada and Europe
improved by 90 bps to 14.7% and 11.6%, respectively, compared to the
4Q16. Fluent´s Consolidated EBITDA margin was 9.9% compared to 13.6% in
4Q16, mostly due to the accrual of certain Netafim expenses and the
provision of the potential liability from CADE, but without those EBITDA
margin would be 13%. Operating income decreased 46% to $31 million, but
without the Netafim and CADE effects, the decrease would be only 3.5% to
$55 million.

EBITDA for 4Q17 had a negative impact from currency translation effects
of $37 million, out of which $40 million came from Venezuela where the
inflationary effect outpaced the devaluation of the Venezuelan bolivar,
due to the hyperinflationary environment. Without this Venezuelan
impact, the translation effect would have been a positive $1.6 million
impact, and also adjusting for the Netafim and CADE effects, EBITDA
would have increased 6%. For 2017 revenues increased 5%, growing in most
regions with the exception of AMEA where sales declined 7%. The
translation effect on sales was $92 million, out of which 113 million
came from Venezuela. On a neutral currency basis, sales would have been
$3.1 billion, up 8% vs. 2016, but without the Venezuelan effect, sales
would have grown 4%.

12M16     mm US$     12M17     12M17     12M17/12M16
Sales         Sales     FX     Total     % Var
1,100     Fluent LatAm     1,132     81     1,213     10%
1,269     Fluent Europe     1,321     14     1,335     5%
384     Fluent US/Canada     449     -1     448     17%
149     Fluent AMEA     138     -2     137     -8%
-10     Intercompany Eliminations     -17     0     - 17     70%
2,892     Total     3,023     92     3,115     8%
 

For 2017 EBITDA declined 9% compared to the same period in 2016 due to
the abovementioned effects, but without the Netafim and CADE effects of
$27 million for FY17, EBITDA would be $412 million, 2.1% below FY2016.
EBITDA margin was 12.7% compared to 14.6% the previous year. Adjusted
for the Netafim and CADE effects, implied 2017 EBITDA margin would be
13.6%.

On a constant currency basis EBITDA for 2017 would have decreased only
1% to $424 million, implying an EBITDA margin of 14%. From the negative
translation effect of $39 million, 107% is due to the Venezuela effect,
without which there would have been a positive impact of $3 million
which is roughly neutral to the EBITDA growth rate and to EBITDA margin.

FLUOR BUSINESS GROUP (11% and 23% of Mexichem's sales (before
eliminations) and EBITDA, in 2017)

mm US$     Fourth Quarter     January - December
Fluor     2017     2016     %Var.     2017     2016     % Var.
Sales     186     133     40%     681     583     17%
Operating income     53     41     29%     206     176     17%
EBITDA     68     54     26%     259     228     14%
 

In 4Q17, the Fluor Business Group reported a 40% increase in sales,
reflecting significant growth in both the upstream and the downstream
parts of the business due to improved demand for fluorspar from the
cement and steel industries, and higher refrigerant gas prices in the
U.S. and Europe.

EBITDA in 4Q17 grew 26% year-over-year to $68 million, and EBITDA margin
was 36.6%. Operating income was $53 million, a 29% year-over-year
increase. In 2017 revenues were up 17% to $681 million, while EBITDA
increased by 14% to $259 million. EBITDA margin was 38%, and operating
income rose 17% to $206 million.

Clarifications

  • As reported in 4Q16, as part of our core strategy of shifting to
    higher margin products in our Fluent Business Group, at the end of
    1Q16 we decided to exit from our pressure pipe business in the US,
    which impacted our Fluent US/ AMEA Business. This decision was made in
    order to shift our capacity from pressure pipes, where products have
    low margins to Datacom, where margins are higher. This is due to the
    reclassification of Fluent's pressure pipe business as discontinued
    operations, which had a net effect of $4 million, $7 million and $7
    million on revenues and $1.4 million, $2.4 million and $2.3 million on
    EBITDA during 1Q16, 2Q16 and 3Q16, respectively.
  • In 2016, Mexichem performed an analysis to determine whether the
    company is the "agent" or "principal" in terms of IAS 18 Revenue, in
    order to determine how freight costs should be recorded and reported
    on our P&L. The conclusion was that the company is "principal" and
    that freight costs should be included in Cost of Goods Sold (COGS)
    instead of Sales, General and Administrative Expenses (SG&A), as it
    was during the first three quarters of 2016 and in previous years.
    Consequently, in the fourth quarter of 2016, we reclassified the FY16
    freight costs from SG&A to COGS.

    The freight costs
    related to the 1st, 2nd, 3rd and 4th quarters of 2016 were $73
    million, $79 million, $78 million and $70 million, respectively. For
    the 2016 1st, 2nd, and 3rd quarters freight costs impacted 4Q16 COGS.
    This reclassification does not have any effect on EBITDA, but it does
    have an effect on reported gross profit.
  • As announced in our 4Q16 earnings report, Mexichem's Audit Committee
    and Board of Directors have authorized a change in the Company's
    accounting policy related to fixed asset valuation from the
    revaluation method to the historical cost recognition method.
    Effective in 1Q17, Mexichem reduced its fixed assets by $452 million,
    deferred taxes by $136 million and equity value by $316 million on its
    balance sheet by eliminating the revaluation value that has been
    accrued since Mexichem adopted IFRS in 2010. For comparative purposes,
    starting with the 1Q17 quarterly report, and during 2017, Mexichem
    includes quarterly information showing the 2016 changes in
    depreciation on the Income Statement, as well as the changes in fixed
    assets, deferred taxes and equity value on its Balance Sheet as if the
    accounting policy change would have been authorized in 1Q16.
    Additional details are contained on page 27.
  • On April 20th, 2016, an explosion occurred in the VCM plant inside the
    Pajaritos Petroquemical Complex, where two of the three facilities of
    PMV are located (VCM and Ethylene). The chlorine and caustic soda
    plant is located on a separate site. There was no damage to the
    chlorine-caustic soda plant, but there was business interruption in
    the supply of raw material. The VCM plant (Clorados III) is the one
    that sustained most of the damage, the major economic impact of which
    was the write-off of the asset and the shutdown of that plant. The
    direct economic impacts of this incident are the following: (i) $276
    million related to the VCM plant asset write off (property damage),
    (ii) $44 million in costs related to the closure of the plant (damages
    to third parties/civil liability, environmental, lawyers, advisors,
    partial demounting, etc), for a total of $320 million.

In 2016, PMV gathered sufficient information to decide to recognize the
account receivable related to insurance coverages. During 2017 and 2016
associated to the incident in the VCM plant, PMV recognized $283 million
as revenue and accounts receivable related to property damage, damages
to third parties (civil liability) and directors and officer's insurance
coverages. The difference between $320 million for damages mentioned in
the paragraph above and the $283 million related to revenues and
accounts receivables recognized during 2016 and 2017 are dependent on
the assembly policy insurance coverage which is in process to be
claimed. Additionally, PMV recognized $47 million related to the
business interruption coverage for the VCM and Ehtylene plants.

On December 20, 2017, Mexichem announced the decision of PMV
shareholders to not rebuild its VCM production capacity. Therefore, the
joint venture's VCM production, and the assets and liabilities
associated with ethylene production and auxiliary services associated
with VCM and ethylene were classified on that date as discontinued
operations in Mexichem's financial statements for the years 2015, 2016
and 2017, since this implies the exit of PMV from the VCM and ethylene
businesses in Mexico. Thus, all the impacts and the revenues recognized
by PMV related to the incident in the VCM plant are presented as
discontinued operations except for the business interruption related to
the Chlorine-Caustic soda plant.

Additionally, the PMV decision to not rebuild the VCM plant, triggered
the asset write-off of the Ethylene plant and auxiliary services related
to the VCM and Ethylene plants for $196 million, also presented as
discontinued operations.

The restructured figures with the abovementioned effects are shown in
Appendix I, Appendix II and Appendix III.

RECENT EVENTS

  • On February 7, 2018, Mexichem announced that it had completed the
    acquisition of an 80% stake in Netafim, Ltd. ("Netafim") from a
    company backed by the Permira funds following the receipt of all the
    governmental authorizations and the satisfaction of all the precedent
    conditions required by the Share Purchase Agreement had been obtained
    and completed. Netafim is a privately-held Israeli company and a
    leader in precision irrigation solutions. The total enterprise value
    of the transaction was US$1.895 billion. Kibbutz Hatzerim retains 20%
    ownership in Netafim, which will maintain its headquarters in Israel.
    As previously-disclosed, Mexichem financed the acquisition with a
    combination of cash and debt.
  • On February 7, 2018, Mexichem announced that its Board of Directors
    has unanimously ratified the appointment of Daniel Martínez Valle as
    the Chief Executive Officer of the Company
  • On January 22, 2018, Mexichem announced that it had acquired Sylvin
    Technologies Inc., a niche PVC compounds manufacturer based in Denver,
    Pennsylvania for an Enterprise Value of $39 million based on a debt
    free cash free valuation. Sylvin is expected to have total sales of
    $29 million for the full year of 2017. The Company has a 30-year
    history of serving a broad range of industries including: wire and
    cable, electrical, industrial, automotive, medical and food products.
    Mexichem will consolidate Sylvin under the Company's Vinyl Business
    Group as part of its Compounds Business Unit, a leading supplier of
    PVC compound solutions serving the global market.
  • On December 20, 2017, Mexichem announced the decision of PMV
    shareholders to not rebuild its VCM production capacity.

For all the news please visit the following webpage http://www.mexichem.com/news/

Conference Call Details:

Mexichem will host a conference call to discuss its 4Q17 results on
February 22, 2018 at 10:00 am Mexico City /11:00 NY. To access the call,
please dial 001-855-817-7630 (Mexico), or 1-888-349-0106 (United States)
or 1-412-902-0131 (International). All callers should dial in a minimum
of 15 minutes prior to the start time and ask for the Mexichem
conference call.

The call will also be available through an audio only live webcast
http://services.choruscall.com/links/mexichem161027.htmluntil
May 22, 2018http://services.choruscall.com/links/mexichem150722.html.
A replay of the call will be available approximately two hours after the
end of the call. The replay can be accessed via Mexichem's website at www.mexichem.comwww.mexichem.com

RECONCILIATION SUMMARY BY BUSINESS GROUP

Fourth Quarter 2017 Financial and Operating Highlights

Quarter     Sales     EBITDA     EBITDA Margin
mm US$     4Q16     4Q17     %Var.     4Q16     4Q17     %Var.     4Q16     4Q17     bps
Vinyl     496     568     15%     59     150     154%     11.9%     26.4%     1,456
Fluent     689     765     11%     93     76     -18%     13.6%     9.9%     -368
Fluor     133     186     40%     54     68     26%     40.5%     36.3%     -416
Energy     0     0           0     0                       0
Eliminations/ Holding     -40     -51     28%     -8     -16     100%     20.7%     31.1%     1,036
Mexichem Consolidated     1,278     1,468     15%     198     277     40%     15.5%     18.9%     337
 
 
4Q16     mm US$     4Q17     4Q17     4Q17/4Q16
Sales         Sales     FX     Total     % Var
496     Vinyl     568     -2     566     14%
689     Fluent     765     80     846     23%
1,185     Ethylene (Vinyl + Fluent)     1,333     78     1,412     19%
133     Fluor     186     -2     184     38%
0     Energy     0     0     0      
-40     Eliminations / Holding     -51     0     - 51     28%
1,278     Total     1,468     76     1,544     21%
 
 
4Q16     mm US$     4Q17     4Q17     4Q17/4Q16
EBITDA         EBITDA     FX     Total     % Var
59     Vinyl     150     0     150     154%
93     Fluent     76     37     112     20%
152     Ethylene (Vinyl + Fluent)     226     36     262     72%
54     Fluor     68     -1     67     24%
0     Energy     0     0     0      
-8     Eliminations / Holding     -16     0     - 16     100%
198     Total     277     35     313     58%

Sub=Subtotal

2017 Financial and Operating Highlights

      Sales     EBITDA     EBITDA Margin
mm US$     12M16     12M17     %Var.     12M16     12M17     %Var.     12M16     12M17     bps
Vinyl     2,026     2,317     14%     283     507     79%     14.0%     21.9%     790
Fluent     2,892     3,023     5%     421     385     -9%     14.6%     12.7%     -183
Fluor     583     681     17%     228     259     14%     39.1%     38.1%     -100
Energy     2     2     0%     1     1     0%                 0
Eliminations / Holding     -159     -193     21%     -38     -46     21%     24.2%     24.0%     -14
Mexichem Consolidated     5,344     5,828     9%     895     1,106     24%     16.7%     19.0%     223
 
 
12M16     mm US$     12M17     12M17     12M17/12M16
Sales         Sales     FX     Total     % Var
2,026     Vinyl     2,317     6     2,323     15%
2,892     Fluent     3,023     92     3,115     8%
4,918     Ethylene (Vinyl + Fluent)     5,340     98     5,438     11%
583     Fluor     681     8     689     18%
2     Energy     2     0     2      
-159     Eliminations / Holding     -193     0     -193     21%
5,344     Total     5,828     106     5,934     11%
 
 
12M16     mm US$     12M17           12M17     12M17/12M16
EBITDA         EBITDA     FX     Total     % Var
283     Vinyl     507     1     508     80%
421     Fluent     385     39     424     1%
705     Ethylene (Vinyl + Fluent)     892     40     932     32%
228     Fluor     259     1     260     14%
1     Energy     1     0     1      
-38     Eliminations / Holding     -46     0     -46     21%
895     Total     1,106     41     1,147     28%
 

About Mexichem

Mexichem is a global leader in plastic piping and one of the world's
largest chemical and petrochemical companies. The company contributes to
global development by delivering an extended portfolio of products to
high growth sectors such as infrastructure, housing, agriculture,
datacom and water management, among others. With operations in 41
countries, 137 facilities worldwide and more than 22,000 employees,
Mexichem has the rights to produce fluorspar in two mines in Mexico, as
well as 8 training academies and 17 R&D labs. Operations are divided
into three Business Groups: Fluent, Vinyl and Fluor. Mexichem has annual
revenues of US$5.8 billion and has been traded on the Mexican Stock
Exchange for more than 30 years. The company is member of the Mexican
Stock Exchange Sustainability Index and the sustainability emerging
markets index FTSE4Good.

Forward-looking Statements

In addition to historical information, this press release contains
"forward-looking" statements that reflect management's expectations for
the future. The words "anticipate," "believe," "expect," "hope," "have
the intention of," "might," "plan," "should" and similar expressions
generally indicate comments on expectations. The final results may be
materially different from current expectations due to several factors,
which include, but are not limited to, global and local changes in
politics, the economy, business, competition, market and regulatory
factors, cyclical trends in relevant sectors; as well as other factors
that are highlighted under the title "Risk Factors" on the annual report
submitted by Mexichem to the Mexican National Banking and Securities
Commission (CNBV). The forward-looking statements included herein
represent Mexichem's views as of the date of this press release.
Mexichem undertakes no obligation to revise or update publicly any
forward-looking statement for any reason unless required by law."

Mexichem has implemented a Code of Ethics that rules its
relationships with its employees, clients, suppliers and general groups.
Mexichem's Code of Ethics is available for consulting in the following
link:
http://www.mexichem.com/Codigo_de_etica.html
Additionally, according to the terms contained in the Securities
Exchange Act No 42, Mexichem Audit Committee established a mechanism of
contact, which allows that any person that knows the unfulfillment of
operational and accounting records guidelines and lack of internal
controls of the Code of Ethics, from the Company itself or from the
subsidiaries that this controls, file a complaint which is anonymously
guaranteed. The whistleblower program is facilitated by a third party.
The telephone number in Mexico is 01-800-062-12-03. The website is
http://www.ethic-line.com/mexichem
and contact e-mail is
mexichem@ethic-line.com.
Mexichem's Audit Committee will be notified of all complaints for
immediate investigation.

INDEPENDENT ANALYSTS

Currently, the following investment firms have analysts who cover
Mexichem:

  1. -Actinver
  2. -Bank of America Merrill Lynch
  3. -Banorte-Ixe
  4. -Barclays
  5. -BBVA Bancomer
  6. -Bradesco BBI
  7. -BTG Pactual
  8. -Citigroup
  9. -Credit Suisse
  10. -GBM-Grupo Bursátil Mexicano
  11. -Grupo Santander
  12. -HSBC
  13. -Intercam
  14. -Invex Casa de Bolsa
  15. -Interacciones
  16. -ITAU BBA
  17. -JP Morgan
  18. -Morgan Stanley
  19. -Monex
  20. -UBS
  21. -Vector

INTERNAL CONTROL

Mexichem's bylaws provide the existence of the Audit and Corporate
Practices Committees, intermediate corporate organs constituted in
agreement with the applicable law to assist the Board of Directors to
carry on their functions. Through these committees and the external
auditor, it is given reasonable safety that transactions and company's
acts are executed and registered in accordance with the terms and
parameters set by the Board and directives of Mexichem, the applicable
law and different general guidelines, criterion and IFRS (International
Financial Reporting Standards).

APPENDIX I: CONSOLIDATED RESTRUCTURED FIGURES OF QUARTERLY RESULTS AS
A CONSEQUENCE OF FLUENT BUSINESS GROUP'S DISCONTINUED OPERATIONS,
FREIGHT RECLASSIFICATIONS, FIXED ASSET ACCOUNTING POLICY CHANGES AND
PMV'S DISCONTINUED OPERATIONS.

CHANGES 1Q16

mm US$     Changes reported in 1Q16
INCOME STATEMENT    

1Q16
reported

   

Disc.operations and
freight
reclassification

    Fixed assets    

Disc. operations
PMV*

   

Total effect

   

1Q16
adjusted

Net sales     1,262     (4)     -     (4)     (8)     1,254
Cost of sales     903     67     (8)     (4)     55     958
Gross Profit     359     (71)     8     -     (63)     296
Operating expenses     250     (72)     (3)     (1)     (76)     174
Operating Income     109     1     11     1     13     122
Financial cost     43     -     -     -     -     43
Equity income of associated entities     (1)     -     -     -     -     (1)

Income from continued operations
before income tax

    67     1     11     1     13     80
Cash tax     40     -     -     -     -     40
Deferred tax     (22)     1     4     (6)     (1)     (23)
Income Tax     18     1     4     (6)     (1)     17
Income from continued operations     49     -     7     7     14     63
Discontinued Operations     1     -     -     (7)     (7)     (6)
Net Consolidated Income     50     -     7     -     7     57
Minority Interest     (1)     -     -     -     -     (1)
Net Majority Income     51     -     7     -     7     58
EBITDA     200     1     -     (5)     (4)     196

*Includes Clorados III, the ethylene cracker and other related
assets

 

CHANGES 2Q16

mm US$     Changes reported in 2Q16
INCOME STATEMENT    

2Q16
reported

   

Disc.operations and
freight

reclassification

    Fixed assets    

Disc. operations
PMV*

   

Total effect

   

2Q16
adjusted

Net sales     1,427     (7)     -     (1)     (8)     1,419
Cost of sales     998     70     (8)     (5)     57     1,055
Gross Profit     429     (77)     8     4     (65)     364
Operating expenses     549     (79)     -     (286)     (365)     184
Operating Income     (120)     2     8     290     300     180
Financial cost     43     -     -     -     -     43
Equity income of associated entities     (3)     -     -     -     -     (3)

Income from continued operations
before income tax

    (160)     2     8     290     300     140
Cash tax     52     -     -     -     -     52
Deferred tax     (82)     1     2     71     74     (8)
Income Tax     (30)     1     2     71     74     44
Income from continued operations     (130)     1     6     219     226     96
Discontinued Operations     1     (1)     -     (219)     (220)     (219)
Net Consolidated Income     (129)     -     6     -     6     (123)
Minority Interest     (96)     -     -     -     -     (96)
Net Majority Income     (33)     -     6     -     6     (27)
                                     
EBITDA     (29)     2     -     286     288     259

*Includes Clorados III, the ethylene cracker and other related
assets

 

CHANGES 3Q16

mm US$     Changes reported in 3Q16
INCOME STATEMENT    

3Q16
reported

   

Disc.operations and
freight

reclassification

    Fixed assets    

Disc. operations
PMV*

   

Total effect

   

3Q16
adjusted

Net sales     1,400     (7)     -     (1)     (8)     1,392
Cost of sales     1,012     69     (8)     (10)     51     1,063
Gross Profit     388     (76)     8     9     (59)     329
Operating expenses     14     (79)     -     233     154     168
Operating Income     374     3     8     (224)     (213)     161
Financial cost     50     -     -     -     -     50
Equity income of associated entities     -     -     -     -     -     -

Income from continued operations
before income tax

    324     3     8     (224)     (213)     111
Cash tax     36     -     -     -     -     36
Deferred tax     57     1     2     (83)     (80)     (23)
Income Tax     93     1     2     (83)     (80)     13
Income from continued operations     231     2     6     (141)     (133)     98
Discontinued Operations     (7)     (2)     -     140     138     131
Net Consolidated Income     224     -     6     (1)     5     229
Minority Interest     69     -     -     -     -     69
Net Majority Income     155     -     6     (1)     5     160
                                     
EBITDA     466     2     -     (227)     (225)     241

*Includes Clorados III, the ethylene cracker and other related
assets

 

CHANGES 4Q16

mm US$     Changes reported in 4Q16
INCOME STATEMENT    

4Q16
reported

   

Disc.operations and
freight
reclassification

    Fixed assets    

Disc. operations
PMV*

   

Total effect

   

4Q16
adjusted

Net sales     1,260     18     -     -     18     1,278
Cost of sales     1,230     (205)     (10)     (12)     (227)     1,003
Gross Profit     30     223     10     12     245     275
Operating expenses     (122)     232     (1)     51     282     160
Operating Income     152     (9)     11     (39)     (37)     115
Financial cost     28     -     -     -     -     28
Equity income of associated entities     1     -     -     -     -     1

Income from continued operations
before income tax

    123     (9)     11     (39)     (37)     86
Cash tax     62     -     -     -     -     62
Deferred tax     (20)     (3)     5     (6)     (4)     (24)
Income Tax     42     (3)     5     (6)     (4)     38
Income from continued operations     81     (6)     6     (33)     (33)     48
Discontinued Operations     (5)     6     -     33     39     34
Net Consolidated Income     76     -     6     -     6     82
Minority Interest     11     -     -     -     -     11
Net Majority Income     65     -     6     -     6     71
                                     
EBITDA     247     (6)     -     (42)     (48)     199

*Includes Clorados III, the ethylene cracker and other related
assets

 

CHANGES FY16

mm US$     Changes reported in 2016
INCOME STATEMENT    

2016
reported

   

Disc.operations and
freight
reclassification

   

Fixed assets

   

Disc. operations
PMV*

    Total effect    

2016
adjusted

Net sales     5,349     -     -     (6)     (6)     5,343
Cost of sales     4,143     1     (34)     (31)     (64)     4,079
Gross Profit     1,206     (1)     34     25     58     1,264
Operating expenses     691     2     (4)     (3)     (5)     686
Operating Income     515     (3)     38     28     63     578
Financial cost     164     -     -     (1)     (1)     163
Equity income of associated entities     (3)     -     -     -     -     (3)

Income from continued operations
before income tax

    354     (3)     38     29     64     418
Cash tax     190     -     -     -     -     190
Deferred tax     (67)     -     13     (24)     (11)     (78)
Income Tax     123     -     13     (24)     (11)     112
Income from continued operations     231     (3)     25     53     75     306
Discontinued Operations     (10)     3     -     (53)     (50)     (60)
Net Consolidated Income     221     -     25     -     25     246
Minority Interest     (17)     -     -     -     -     (17)
Net Majority Income     238     -     25     -     25     263
EBITDA     884     -     -     11     11     895

*Includes Clorados III, the ethylene cracker and other related
assets

 

APPENDIX II: CONSOLIDATED RESTRUCTURED FIGURES OF QUARTERLY RESULTS
AS A CONSEQUENCE OF PMV'S DISCONTINUED OPERATIONS.

CHANGES 1Q17

mm US$     Changes reported in 1Q16
INCOME STATEMENT     1Q17 reported     Disc. operations PMV*     1Q16 adjusted
Net sales     1,395     (1)     1,394
Cost of sales     1,097     (11)     1,086
Gross Profit     298     10     308
Operating expenses     175     12     187
Operating Income     123     (2)     121
Financial cost     45     (1)     44
Equity income of associated entities     -     -     -

Income from continued operations
before income tax

    78     (1)     77
Cash tax     29     -     29
Deferred tax     (4)     -     (4)
Income Tax     25     -     25
Income from continued operations     53     (1)     52
Discontinued Operations     -     1     1
Net Consolidated Income     53     -     53
Minority Interest     1     -     1
Net Majority Income     52     -     52
                   
EBITDA     207     (5)     202

*Includes Clorados III, the ethylene cracker and other related
assets

 

CHANGES 2Q17

mm US$     Changes reported in 2Q17
INCOME STATEMENT     2Q17 reported     Disc. operations PMV*     2Q17 adjusted
Net sales     1,464     (1)     1,463
Cost of sales     1,083     (9)     1,074
Gross Profit     381     8     389
Operating expenses     152     13     165
Operating Income     229     (5)     224
Financial cost     75     -     75
Equity income of associated entities     -     -     -

Income from continued operations
before income tax

    154     (5)     149
Cash tax     40     -     40
Deferred tax     23     -     23
Income Tax     63     -     63
Income from continued operations     91     (5)     86
Discontinued Operations     -     4     4
Net Consolidated Income     91     (1)     90
Minority Interest     25     -     25
Net Majority Income     66     (1)     65
EBITDA     334     (7)     327

*Includes Clorados III, the ethylene cracker and other related
assets

 

CHANGES 3Q17

mm US$     Changes reported in 3Q17
INCOME STATEMENT     3Q17 reported     Disc. operations PMV*     3Q17 adjusted
Net sales     1,505     (1)     1,504
Cost of sales     1,137     (7)     1,130
Gross Profit     368     6     374
Operating expenses     172     1     173
Operating Income     196     5     201
Financial cost     44     -     44
Equity income of associated entities     (1)     -     (1)

Income from continued operations
before income tax

    153     5     158
Cash tax     34     -     34
Deferred tax     28     -     28
Income Tax     62     -     62
Income from continued operations     91     5     96
Discontinued Operations     1     (5)     (4)
Net Consolidated Income     92     -     92
Minority Interest     30     -     30
Net Majority Income     62     -     62
                   
EBITDA     297     3     300

*Includes Clorados III, the ethylene cracker and other related
assets

 

APPENDIX III: CONSOLIDATED RESTRUCTURED FIGURES OF BALANCE SHEET BY
QUARTER AS A CONSEQUENCE OF FIXED ASSET ACCOUNTING POLICY CHANGES

mm US$                
   

Consolidated
2015

  Adjustments  

Consolidated
2015
Adjusted

 

Consolidated
March 2016

  Adjustments  

Consolidated
March 2016
Adjusted

 

Consolidated
June 2016

  Adjustments  

Consolidated
June 2016
Adjusted

 

Consolidated
September
2016

  Adjustments  

Consolidated
September
2016 Adjusted

 

Consolidated
December
2016

  Adjustments  

Consolidated
December
2016 Adjusted

Current Assets                                                            
Cash and Cash equivalents   653   -   653   586   -   586   662   -   662   651   -   651   714   -   714
Net Account Receivable   884   -   884   975   -   975   988   -   988   1,277   -   1,277   1,181   -   1,181
Other current assets   698   -   698   716   -   716   702   -   702   704   -   704   644   -   644
Assets held for sale   17   -   17   16   -   16   15   -   15   15   -   15   21   -   21
Total Current Assets   2,252   -   2,252   2,293   -   2,293   2,367   -   2,367   2,647   -   2,647   2,560   -   2,560
Property, plant and equipment   4,203   (471)   3,732   4,305   (462)   3,843   4,167   (456)   3,711   4,213   (450)   3,763   4,202   (452)   3,750
Net other assets   2,215   -   2,215   2,242   -   2,242   2,228   -   2,228   2,222   -   2,222   2,044   -   2,044
Total Assets   8,670   (471)   8,199   8,840   (462)   8,378   8,762   (456)   8,306   9,082   (450)   8,632   8,806   (452)   8,354
                                                             
Current Liabilities                                                            
Bank loans and current portion of long-term debt   44   -   44   61   -   61   62   -   62   64   -   64   58   -   58
Suppliers and letters of credit of suppliers   1,201   -   1,201   1,240   -   1,240   1,244   -   1,244   1,292   -   1,292   1,270   -   1,270
Other current liabilities   554   -   554   513   -   513   604   -   604   558   -   558   645   -   645
Liabilities associated with asset held for sale   20   -   20   16   -   16   15   -   15   18   -   18   13   -   13
Total Current Liabilities   1,819   -   1,819   1,830   -   1,830   1,925   -   1,925   1,932   -   1,932   1,986   -   1,986
Bank loans and long-term debt   2,291   -   2,291   2,280   -   2,280   2,264   -   2,264   2,249   -   2,249   2,241   -   2,241
Long-term other liabilities   882   (142)   740   931   (137)   794   815   (135)   680   889   (132)   757   682   (136)   546
Total Liabilities   4,992   (142)   4,850   5,041   (137)   4,904   5,004   (135)   4,869   5,070   (132)   4,938   4,909   (136)   4,773
Capital stock   1,755   -   1,755   1,755   -   1,755   1,755   -   1,755   1,755   -   1,755   1,755   -   1,755
Retained earnings   1,007   256   1,263   1,074   263   1,337   1,036   269   1,305   1,192   274   1,466   1,126   281   1,407
Other comprehensive income   140   (569)   (429)   154   (572)   (418)   192   (575)   (383)   176   (577)   (401)   98   (582)   (484)
Controlling interest   2,902   (313)   2,589   2,983   (309)   2,674   2,983   (306)   2,677   3,123   (303)   2,820   2,979   (301)   2,678
Non-controlling interest   776   (16)   760   816   (16)   800   775   (15)   760   889   (15)   874   918   (15)   903
Total stockholders' equity   3,678   (329)   3,349   3,799   (325)   3,474   3,758   (321)   3,437   4,012   (318)   3,694   3,897   (316)   3,581

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