If the state-owned company were to operate as a private company, the Altman and Springate models that predict corporate insolvency place it with a high probability of entering that State.
MEXICO CITY (El Economista) – According to financial mathematical models for identifying financial risks for private companies, Petroleos Mexicanos (Pemex) is in the “bankruptcy zone.” This was reported by the Superior Audit Office of the Federation (ASF) in its report on the oil company’s corporate performance, after it doubled its negative return on assets in 2019, reaching negative 18.1%, and recorded a negative stockholders’ equity of 1.977 billion pesos, worsening 36% in this item.
The Congressional auditing body’s opinion revealed that Pemex obtained a negative return on assets of 18.1% and a return on capital employed of 9.3%, in addition to registering a negative stockholders’ equity of 1.997 billion pesos in 2019. This fiscal year had a negative net result for the fiscal year of 347,911 million pesos. It did not generate economic value in its operation by obtaining a negative aggregate monetary value of 48,156 million pesos.
With this analysis that the ASF performed for the second time for the state-owned oil company, it was determined that Pemex presented a high probability of technical bankruptcy if it were a private company. With the Altman model’s application,173/ the company registered a score of minus 1.16, which placed it within the “bankruptcy zone.” In contrast, with the application of the Springate model, it obtained a value of 0.38 points.
When reviewing the financial performance, generation of economic value, and profitability of the state-owned company, the ASF explained that in 2019, Pemex’s risk not being in conditions to generate added economic value in favor of the State materialized, since this was minus 48,156 million pesos. Unlike the 2018 exercise, in which it generated a value of 63,308 million pesos.
The company was not profitable either, since, in 2019, it obtained the following results: a return on assets of minus 18.1%, a percentage 9.4 percentage points higher than that recorded in 2018, which was minus 8.7%; it also recorded a return on capital employed of 9.3%, a result 10.5 percentage points lower than that recorded in 2018, which was 19.8%, and it was not possible to calculate the return on stockholders’ equity without incurring in a false positive, derived from the fact that both stockholders’ equity and the results of the fiscal year were negative.
In 2019, Pemex also presented a high probability of technical bankruptcy if it operated as a private company seeking to be sustainable. With the application of the Altman Z-SCORE and Springate models, used to forecast corporate insolvency, the company obtained minus 1.16 points and 0.38 points, which placed it in the “bankruptcy zone” of both models.”
As regards Pemex’s indebtedness, in 2019, the total debt balance reported in the Public Account was 1.913 trillion pesos, 5.3% lower than the figure recorded in 2018, which stood at 2.019 trillion pesos. However, as subsequent events, in the first half of 2020, Pemex’s debt increased by 28.7% to 2.461 trillion due to new contracts to have the flow for its operation.
With the audit, it was identified that, in 2015-2019, Pemex did not allocate the totality of the resources derived from the contracting of debt to invest in productive assets. In such a period, the company’s net capital expenditure (Capex) was 272,287.3 million pesos, while the net increase in the company’s financial debt was 557,940.9 million pesos.
In the same report, the ASF identified that Pemex was not in a condition to be profitable and presented a negative return on assets of 8.7%; had accumulated losses of 1,933 million pesos; negative stockholders’ equity of 1.459 billion pesos, and indebtedness above the balance of its total assets.