Report of the Chief Executive Officer to the Board of Directors about the results of the fiscal year 2014.

During 2014, Grupo Carso recorded total sales of Ps.82,388 million, a 4.1% decrease compared to the previous year. This was due to fewer public tenders by Carso Infraestructura y Construcción (CICSA), such as in contracts for land drilling and the construction of oil platforms division, which represented 18.9% of the company’s total revenues. Additionally, a lower demand for integrated projects and transformers was observed in Grupo Condumex, which contributed 31.5% of total revenues. These results were offset by higher sales of the commercial division, a sector that participated with 50.0% of total revenues.

Operating income decreased 47.4%, dropping from Ps.17,277 million in 2013 to Ps.9,090 million in 2014. This was mainly due to the profit of Ps.7,589 million obtained in 2013 from the sale of our interest in Philip Morris Mexico.

Without considering the above-mentioned extraordinary effect, operating income for 2014 amounted to Ps.9,298 million and operating margin was 11.0%, which compared with a figure of Ps.9,688 million and a margin of 11.3% in 2013. The 6.4% decrease in operating income was due to greater expenses in the expansion plan of our commercial sector, as well as lower operating leverage in the infrastructure and construction business, since the industrial division improved its profitability.

EBITDA decreased 43.3%, to Ps.10,606 million, compared to the Ps.18,699 million figure observed in 2013. Without considering the effect of the sale of our interest in Philip Morris Mexico, EBITDA would have decreased 2.7%.

As for comprehensive cost of financing, Ps.1,056 million was recorded. This amount was mainly due to foreign exchange losses and losses on interest rate derivatives during the year, which compared unfavorably with the Ps.98 million figure registered in 2013.

Net controlling interest income decreased 59.2% to settle at Ps.5,685 million in 2014, which is primarily due to the effect of the sale of our interest in Philip Morris Mexico and, to a lesser extent, to a higher comprehensive cost of financing as previously mentioned.

Total debt on December 31, 2014 decreased 13.1% to Ps.7,720 million. The Group has maintained an appropriate debt structure in relation to its business plan and growth expectations, with short-term debt accounting for 35% of total debt. If compared to net debt, it was negative by Ps.6,370 million, against a negative net debt of Ps.1,671 million as of December 31, 2013. The Group’s financial position remains healthy with a net debt to Last 12 month EBITDA ratio of (0.6) times and an interest coverage of 24.1 times in terms of EBITDA to interest expense.

The Company has two programs for securitized notes: i) a short-term program for Ps.5,000 million approved in July 2013, for which no notes have been issued; and, ii) a dual, short- and long-term program of Ps.5,000 million (or its equivalent in U.S. dollars) authorized in February 2012 and which has been fully drawn down.




During 2014, Grupo Carso recorded accumulated sales of Ps.82,388 million.