The same structural and financial conditions that characterized the global economy in the past few years remained in force in 2012. Most significantly, the macroeconomic variables of developed nations continue to be problematic, which has an impact on global economic growth. On the other hand, developing countries, most of which have healthy fiscal and financial systems, have benefited from global monetary policies, since low interest rates and the easy availability of resources encourage the development of productive projects, make the economy more dynamic, and create jobs.

The United States has maintained a short-term monetary policy of negative interest in real terms in an effort to reactivate investment in production to accelerate economic activity and to make the payment of interest on its enormous government debt less onerous, even as it seeks to make mortgage payments more affordable for families. However, the problem of the high fiscal deficit remains, which forces the U.S. to continue to raise its debt ceiling by having agreed to a fiscal consolidation plan that allows it to meet its immediate spending commitments and reduce over the medium term the high deficit, which began to worsen in 2008, and lower the overall debt level, which in 2012 exceeded 100% of the country’s GDP.

For its part, Europe is facing similar circumstances, but with strong restrictions on spending, an overvalued currency, and high unemployment rates in many countries in the region. Growth is practically flat or even negative in some countries, and short and medium-term prospects are not promising.

Mexico’s economic variables remain strong. Since its low rates are higher than those of the developed countries, it is attracting a lot of foreign portfolio investment, a flow that in 2012 exceeded US$ 80 million, double that of the previous year. Although this reflects the confidence of investors in our country, this situation creates vulnerability since its duration is uncertain and because of the revaluation of the peso, which leads to higher imports and lower exports. With regard to foreign direct investment, the country has become a primary destination for manufacturing, especially for the automotive industry, due to competitive advantages in terms of cost attributable to production and proximity to the world’s biggest market. Inflation, however, is unstable.

Mexico’s banking system is well capitalized and characterized by sound public finances, interest rates that encourage financing and investment, long-term money availability internal and external savings, a young population, natural resources, and potential in terms of tourism, agriculture, energy, infrastructure, and mining, among other factors that encourage development. Therefore, despite an unfavorable global environment, our country has the opportunity to accelerate its expansion, adding millions of people to productive operations, creating wellbeing and consumption capacity, which are the only sustainable drivers of permanent growth.

Grupo Carso
Grupo Carso took advantage of Mexico’s macroeconomic stability and capitalized on its competitive advantages, despite the challenges mentioned above and which characterized other markets, such as the U.S. and Europe. This had a positive impact on our performance in the three sectors we consider strategic: Retail, Industrial, and Infrastructure and Construction.

In recognition of the Group’s confidence in the domestic economy and in consideration of a number of related macroeconomic and demographic factors, as well as the favorable prospects of the department store industry, on February 8, 2013, Grupo Sanborns held its global IPO. The offering was a success on the Mexican Stock Exchange, where 59.5% of the shares were offered to domestic investors while foreign investors bought the remaining 40.5%. Both equity holdings represented 17.2% of the company’s capital.

In 2012, the commercial division accounted for 47% of the Group’s revenues and 49% of its operating income. This division’s most significant activities included the opening of four iShops, a Sears Department store, and four Sanborns store-restaurants. It should also be noted that these stores have a newer look, which incorporates more efficient lighting, updated furnishings, and larger spaces.

With respect to the industrial division, Condumex continued to offer a broad array of products and services to the construction, energy, telecommunications, and mining sectors. During the year we faced challenges stemming from lower business volume in fiber optics and transformer procurements. Despite the difficulties in sales, better operating margins were attained because of efficiencies in operating expenses and costs in the automotive, construction, energy, and industrial metals production chains.

Grupo Condumex accounted for 31% of revenues and 22% of operating income.

Carso Infraestructura y Construcción confirmed its status as one of the most solid construction firms in the country, a claim bolstered by significant double-digit growth in both sales and operating results. In 2012, this division contributed 21% of revenues and 26% of operating income.

The sector that stood out the most was manufacturing and services for the chemical and oil industry, thanks to additions to drilling contracts and the awarding of public works contracts to build three offshore production platforms.

The dynamic performance of the three divisions was reflected in Grupo Carso’s consolidated sales, which grew 6.3% to 84,179 million pesos. Operating income and EBITDA moved up 32% and 27%, respectively. Operating margin was 11.0%, while EBITDA margin represented 12.6% of sales.

The Group’s financial condition remained solid, with net cash flow from operating activities totaling 7,663 million pesos. Total assets came to 76,862 million pesos, while consolidated stockholder’s equity ended the year at 41,881 million pesos. The liabilities to equity ratio stood at 0.3, while net debt represented 0.9 times the 12-month EBITDA.

Based on the above-mentioned figures, In May and October of 2012 Grupo Carso paid out cash dividends of $0.60 pesos per share. Capital expenditures totaled $1,791 million pesos.

Grupo Carso believes that the company’s financial structure will allow it to adequately address the diverse investment projects required by its several subsidiaries. We remain committed to diversification in order to introduce new categories of products and services to consumers and to consolidate best practices that allow us to continue generating value our shareholders through sustainable and profitable growth.

In 2012, all of the divisions engaged in sustainability efforts, such as reducing water and paper use and recycling programs. At Condumex ecological cables and processes were developed and robotics education programs were supported. Carso Infraestructura y Construcción conducted flora and fauna rescue and relocation programs, and Grupo Sanborns continued with donation of food, the historical building recuperation program, like the House of the Counts of Xala and employment of people with disabilities in the shops and restaurants.

Finally, on behalf of the Board of Directors, I would like to thank our shareholders, customers, and providers for the trust they have deposited in us. I would also like to thank all of our employees for their effort and commitment, since it is they who enable Grupo Carso to achieve its goals, to strengthen its performance, and to continue to contribute to Mexico’s development.


Carlos Slim Domit
Chairman of the Board of Directors