Senior Credit Analyst - Emerging Markets, EM Spreads

Leandro Gubler

Senior Credit Analyst - Emerging Markets

EM Spreads

Credit

<ul>
<li>Weak 4Q24 results, rising leverage, and lack of a clear plan heighten credit concerns.</li>
<li>We downgrade Pemex to Underperform. In our view, the absence of a clear financial plan under the current circumstances significantly undermines Pemex’s management credibility in addressing its serious debt challenges.</li>
<li>From a credit perspective, results were marked by a 27.1% sequential decline in LTM adjusted EBITDA, while total debt decreased by $2.1 billion.</li>
</ul>


Weak 4Q24 results, rising leverage, and lack of a clear plan heighten credit concerns.
We downgrade Pemex to Underperform. In our view, the absence of a clear financial plan under the current circumstances significantly undermines Pemex’s management credibility in addressing its serious debt challenges.
From a credit perspective, results were marked by a 27.1% sequential decline in LTM adjusted EBITDA, while total debt decreased by $2.1 billion.


PEMEX 4Q24: High Carry, But Risks Outweigh Rewards

<ul>
<li>Given the scale of these trade flows, any imposition of tariffs by the U.S. could create significant ripple effects on Mexico’s economic growth, investment climate, and employment</li>
<li>In LTM September 2024, Cemex generated ~31% of its revenues in Mexico and 31% in the U.S., while 44% of its EBITDA came from Mexico and 29% from the U.S</li>
<li>The U.S. market represents a meaningful portion of Pemex’s crude exports. In 2024, the company exported 460 kbd, accounting for 57.1% of total exports and 26.5% of total production</li>
</ul>


Given the scale of these trade flows, any imposition of tariffs by the U.S. could create significant ripple effects on Mexico’s economic growth, investment climate, and employment
In LTM September 2024, Cemex generated ~31% of its revenues in Mexico and 31% in the U.S., while 44% of its EBITDA came from Mexico and 29% from the U.S
The U.S. market represents a meaningful portion of Pemex’s crude exports. In 2024, the company exported 460 kbd, accounting for 57.1% of total exports and 26.5% of total production


U.S. Tariffs and Their Potential Impact on Cemex and Pemex

<ul>
<li>The LatAm Corporate Index tightened by 12 basis points (bps) to 306 bps in the week ending on Friday, January 31, 2025.</li>
<li>U.S. Treasuries saw decreases, with the 10-year yield down 11 bps to 4.51% and the 5-year yield also down 11 bps to 4.31%.</li>
<li>We initiated coverage on Suzano with a Market Perform outlook, Sheinbaum unveiled an energy reform, YPF completed its $327 million acquisition of Mobil, and Cemex finalized its $950 million divestment. </li>
</ul>


The LatAm Corporate Index tightened by 12 basis points (bps) to 306 bps in the week ending on Friday, January 31, 2025.
U.S. Treasuries saw decreases, with the 10-year yield down 11 bps to 4.51% and the 5-year yield also down 11 bps to 4.31%.
We initiated coverage on Suzano with a Market Perform outlook, Sheinbaum unveiled an energy reform, YPF completed its $327 million acquisition of Mobil, and Cemex finalized its $950 million divestment. 


<ul>
<li>We need to see concrete action from the Mexican government to maintain an Outperform recommendation.</li>
<li>Pemex’s deteriorating operational metrics will likely increase its need for government assistance.</li>
<li>Within Pemex’s capital structure, we continue to prefer the PEMEX (B3/BBB/B+) 5.950% 2031, the PEMEX 6.625% 2035, the PEMEX 6.625% 2038, and the PEMEX 7.690% 2050.</li>
</ul>


We need to see concrete action from the Mexican government to maintain an Outperform recommendation.
Pemex’s deteriorating operational metrics will likely increase its need for government assistance.
Within Pemex’s capital structure, we continue to prefer the PEMEX (B3/BBB/B+) 5.950% 2031, the PEMEX 6.625% 2035, the PEMEX 6.625% 2038, and the PEMEX 7.690% 2050.


Pemex: Lack of Concrete Action Weights on the Outperform Thesis

<ul>
<li>The LatAm Corporate Index tightened by 3 basis points (bps) to 319 bps in the week ending on Friday, January 24, 2025.</li>
<li>U.S. Treasuries saw modest increases, with the 10-year yield up 2 bps to 4.64% and the 5-year yield also up 2 bps to 4.45%.</li>
<li>Cemex – Mexico Construction Key Indicators, YPF/Vista - Shale Boom Drives Argentina’s Energy Trade Surplus.</li>
</ul>


The LatAm Corporate Index tightened by 3 basis points (bps) to 319 bps in the week ending on Friday, January 24, 2025.
U.S. Treasuries saw modest increases, with the 10-year yield up 2 bps to 4.64% and the 5-year yield also up 2 bps to 4.45%.
Cemex – Mexico Construction Key Indicators, YPF/Vista - Shale Boom Drives Argentina’s Energy Trade Surplus.


Mexico

Petroleos Mexicanos operates as an oil and gas exploration and production services. The Company offers pipeline carriage, petrochemical distributor and shipping centers, logistics, and fuel commercialization services. Petroleos Mexicanos serves customers in Mexico.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Petroleos Mexicanos (1232Z MM)

PEMEX 4Q24: High Carry, But Risks Outweigh Rewards

Pemex's weak 4Q24 results, rising leverage, and lack of clear financial plan lead to credit concerns, prompting a downgrade to Underperform.

Leandro Gubler

U.S. Tariffs and Their Potential Impact on Cemex and Pemex

Imposition of U.S. tariffs on Mexico could have significant economic impacts, particularly on companies like Cemex and Pemex with substantial...

Leandro Gubler

EM Spreads - Weekly News & Views

LatAm Corporate Index tightens, U.S. Treasuries decrease, key market updates include Suzano, Sheinbaum's energy reform, YPF acquisition, and Cemex...

Leandro Gubler

Pemex: Lack of Concrete Action Weights on the Outperform Thesis

Mexican government must take action to support Pemex as operational metrics worsen, specific bonds recommended for investment.

Leandro Gubler

EM Spreads – Weekly News & Views

LatAm Corporate Index tightens, U.S. Treasuries see modest increases, Cemex and YPF/Vista drive Mexico and Argentina's economic indicators.

Leandro Gubler

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

PEMEX 4Q24: High Carry, But Risks Outweigh Rewards

​Pemex's weak 4Q24 results, rising leverage, and lack of clear financial plan lead to credit concerns, prompting a downgrade to Underperform.

Leandro Gubler

U.S. Tariffs and Their Potential Impact on Cemex and Pemex

​Imposition of U.S. tariffs on Mexico could have significant economic impacts, particularly on companies like Cemex and Pemex with substantial...

Leandro Gubler

EM Spreads - Weekly News & Views

​LatAm Corporate Index tightens, U.S. Treasuries decrease, key market updates include Suzano, Sheinbaum's energy reform, YPF acquisition, and Cemex...

Leandro Gubler

Pemex: Lack of Concrete Action Weights on the Outperform Thesis

​Mexican government must take action to support Pemex as operational metrics worsen, specific bonds recommended for investment.

Leandro Gubler

EM Spreads – Weekly News & Views

​LatAm Corporate Index tightens, U.S. Treasuries see modest increases, Cemex and YPF/Vista drive Mexico and Argentina's economic indicators.

Leandro Gubler

Pemex's weak 4Q24 results, rising leverage, and lack of clear financial plan lead to credit concerns, prompting a downgrade to Underperform.

Imposition of U.S. tariffs on Mexico could have significant economic impacts, particularly on companies like Cemex and Pemex with substantial...

LatAm Corporate Index tightens, U.S. Treasuries decrease, key market updates include Suzano, Sheinbaum's energy reform, YPF acquisition, and Cemex...

Mexican government must take action to support Pemex as operational metrics worsen, specific bonds recommended for investment.

LatAm Corporate Index tightens, U.S. Treasuries see modest increases, Cemex and YPF/Vista drive Mexico and Argentina's economic indicators.