Ferromex transferred 61% of the total rail freight in Mexico and contributed 23.1% to Grupo México's EBITDA operating cash flow growth, a result of Rogelio Vélez's work for 9 years.
In the almost 9 years he oversaw Ferromex, Rogelio Vélez not only expanded the company's share of the rail freight business in the country, but also significantly increased its weight in the total operation of Grupo México (GMéxico).
Before Rogelio Vélez, a Business Engineer, took over the management of the group in March 2008, Ferromex moved 41% of the total rail freight in Mexico. That volume grew to 61 % by the end of 2016. That share includes Ferrosur, whose integration took place in March 2011 and in which Rogelio Vélez had a relevant participation.
"There were many rail related opportunities, Grupo México was always aware of that. We have taken advantage of them with relevant investments that made us grow within the group," Rogelio Vélez said a week ago during his last interview as CEO of Ferromex.
As of February 16, Vélez assumed the position of general management of Perforadora México, a 100 % owned company of GMéxico dedicated to oil perforationn and related sea and land services.
"Ferromex is a strong arm of the Grupo México division. Because the granted infrastructure concesion, Ferromex is a profitable business, even without capital injection. The railroad arrives faster to places where other means of transport cannot access carrying large volumes over long distances" said Juan Carlos Minero, chief investment officer at Black Wall Street Capital Partners.
Ferromex is the largest rail concession granted for 50 years by the Mexican government. It is endowed with 30 exclusive routes and with a possible renewal for an extension of 50 additional years.
Among the main routes handled by the firm are: Querétaro-Piedras Negras, for trans-border transportation of cars; Veracruz-Mexico City, the country's largest consumer market; and Manzanillo-Guadalajara-Tepic-Culiacán-Nacozari-Nogales, catering to agribusiness and national and international intermodal traffic.
The level of profitability of Ferromex is demonstarted by its growing contribution to the total operational flow (EBITDA) of the third largest copper producer in the world.
Between 2007 and 2016, its participation in GMéxico grew from 7.9 to 23.1 %. Analysts think this has also been a result of the fall in the price of copper, which impacted GMéxico's results.
"GMexico's transportation division is tied to the industrial activity in the United States and Mexico and has seen an increase in line with the growth of manufacturing," said Armando Rodríguez, analyst at Signum Research.
Due to the expansion and value achieved by GMéxico's transportation business, two years ago the group meant to spin off and place 15 percent of its shares in the BMV. At the time, there was talk of a total value of $7,500 million dollars for the division.
"Despite the good results it has shown, it was not possible to execute the placement due to market conditions," said Gerardo Ceballos, an analyst at Vector Casa de Bolsa. This is a project that is still pending, said Vélez.
HISTORICAL INVESTMENT
In 2016, Ferromex executed an investment of $ 406 million Dollars, the highest level since 1998 when Grupo Mexico took over the concession. According to company reports, during the last year of Vélez's management, $115 million went to infrastructure development, including replacements of track and supports, as well as to building and reconfiguring eight yards and terminals. Additionally, $ 111 million went to the acquisition of 50 locomotives now reaching 812 in number, and $57 million more were devoted to maintenance and hauling equipment. The rest of the investment went to telecommunications, security and other items.
In total, since 1998 to the end of 2016, GMéxico has invested $4,208 million dollars.
"In 1998, we took over a very wide network in bad condition, it required a lot of investment to make it provide safe rail transportation, one that could deliver customer service with certainty. Today, these actions have improved the productivity of the railroad," said Vélez.
Last year, Mexico ranked 59th out of 138 nations in the Global Competitiveness Index in the rail infrastructure category, according to data released at the World Economic Forum. Nine years before, Mexico was in spot 72. In other words, the system, where Ferromex is the leader, advanced 13 positions internationally.
Source: elfinanciero.com.mx