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By Lorraine Orlandi
MEXICO CITY, July 25 (Reuters) - Mexican retail and industrial conglomerate Grupo Carso reported weak second-quarter earnings on Thursday, hit by lagging national and global demand for its industrial products, especially cables.
One of Mexico's leading conglomerates and part of the business empire of Mexican billionaire Carlos Slim, Carso saw earnings before interest, taxes, depreciation and amortization (EBITDA), a key measure of profitability in Mexico, drop 14.6 percent from the second quarter of 2001, to 2.198 billion pesos, in line with forecasts in an earlier Reuters poll.
Revenue was down 3.9 percent to 12.448 billion pesos in the second quarter compared to the same period a year ago, Carso said.
"These results mainly reflect weaker operating results in the industrial subsidiaries," Carso said.
Condumex, which generates nearly a third of Carso's EBITDA and makes cables ranging from copper to fiber optic for the construction, automotive and telecommunications industries, had sharp drops in revenues and operating profits, suffering from low prices and lagging demand in Mexico and abroad.
Stronger performances in the automotive, cigarette and retail operations during the quarter, the latter helped by the spin-off last year of troublesome U.S. computer chain CompUSA, failed to offset the industrial slump.
Condumex sales fell 17 percent and its operating profit dropped 34 percent in the second quarter compared with the same quarter last year.
It was especially hard hit by reductions in capital expenditures at telecommunications firm Telefonos de Mexico (Telmex) , which also part of Slim's business empire.
Sector analyst Luis Miranda at Santander Investment in Mexico City said the results looked slightly better then he had forecast, "which gives reason to hope for improvement as the year goes on."
Analysts have said cost-cutting measures by the conglomerate, including jettisoning CompUSA, as well as an expected economic turnaround should brighten Carso's outlook for the second half of this year.
Bright spots in the second quarter included a 14 percent increase in sales and nearly 35 percent increase in operating profit at the Cigatem-Philip Morris cigarette unit, a partnership with U.S. Philip Morris Cos Inc. , as well as increased sales for its Sears Mexico and auto parts businesses.
The company said net profit fell 41 percent from the same period a year ago, to 497 million pesos. But for Mexican companies, EBITDA is considered a more reliable indicator of profitability than net income because the bottom line is skewed by noncash items such as exchange rate losses.
Shares in Carso closed down 2.19 percent on Thursday at 26.40 pesos before the report. The stock has fallen 13 percent this year, while Mexico's benchmark IPC index of 38 most liquid shares has fallen 7 percent.
($1 = 9.794 pesos)