EX-99.1 3 file002.txt PRESS RELEASE EXHIBIT 99.1 GRUPO MEXICANO DE DESARROLLO REPORT OF FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2003 Mexico City, July 25, 2003 -- Grupo Mexicano de Desarrollo S.A. (GMD), a construction company founded in 1975, with over 400 projects in the sector, announced its financial results for the second quarter ended June 30, 2003. HIGHLIGHTS o In May 2003, negotiations with the Mexico State government regarding the cancellation of the Atizapan Venta de Carpio and Huehuetoca and Ecatepac branches concession were concluded. GMD was paid for a substantial portion of its construction work, the proceeds of which were used to pay off liabilities. o The company continues to reduce its corporate debt. In April 2003, a payment of Ps25 million was made to Banco Interacciones which permitted the long term restructuring of this debt. As of the end of this quarter, a 30.8% reduction in corporate debt was achieved compared to the same period last year. o At June 30, 2003, net income was Ps49.6 (US$4.7) million. o After its period of financial restructuring and as a result of its efforts, one of GMD's subsidiaries was granted a 15 year concession for the collection of waste in the eastern sector of the Merida Yucatan municipality, as well as the operation of a solid waste treatment plant. RESULTS OF OPERATION In the second quarter of 2003, revenues were Ps226.7 (US$21.7) million, an increase of 82.7% compared to the same period in 2002. This is due to (1) the second quarter 2003 results include the financial consolidation of the subsidiaries Cooper T. Smith, S.A. de C.V. and Servicios Urbanos de Puebla, S.A. de C.V., which, until June 2002, were accounted for under the equity method, if consolidated in 2002, revenues would have increased Ps38.7 (US$3.7) million, and (2) the payment in April 2003 for the work completed for the Atizapan Venta de Carpio toll road as a consequence of the cancellation of this concession. Costs of sales represented 49.7% of revenues compared with 40.9% for the same period last year. In the second quarter of 2003, operating losses were Ps0.6 (US$0.1) million, compared to operating profits of Ps34.9 (US$3.3) million for the same period in 2002, due mainly to legal and advisory costs incurred in 2003 in connection with the cancellation of the Atizapan Venta de Carpio toll road concession and the registration and payment of extraordinary compensation to GMD's corporate employees. In the second quarter of 2003, net income was Ps74.7 (US$ 7.1) million, compared with a net loss of Ps0.1 (US$0.01) million for the same period in 2002. The difference is a result of income received from the sale of certain real estate properties and from the cancellation of unused reserves. At June 30, 2003, revenues were Ps393.8 (US$ 37.6) million, a 54.9% increase over the same period of 2002, mainly due to payments received for work performed on the Atizapan Venta de Carpio toll road as a result of the cancellation of this concession. Costs of sales represented 51.4% of revenues compared with 43.3% in the same period last year, due to the reduced margins under which construction work was performed for this concession. Operating profits were equal to 5.3% in 2003, which compares to 19.2% in 2002, this difference is due to the increase in legal expenses and other operating costs as a result of the cancellation of the Atizapan Venta de Carpio concession and salary compensations to GMD's corporate personnel. Non operating revenues of Ps26.8 (US$2.6) million in 2003 and Ps 29.1 (US$2.8) million from the sale of non-strategic assets and the integral financing cost amounted to Ps 20.1 (US$1.9) million and Ps 95.4 (US$9.1) million in 2003 and 2002, respectively. The difference is due to the cancellation of unused reserves and due to the lowering of interest rates and the fluctuating rate of exchange in each year. GMD had a net profit of Ps49.6 (US$ 4.7) million compared to a net loss of Ps2.1 (US$0.2) million for the prior year. The 2003 results reflect the extraordinary items described in the second preceding paragraph and an increase in GMD's participation in the income of its subsidiaries. FINANCIAL SITUATION At June 30, 2003, dollar denominated short term debt was Ps154.3 (US$14.7) million, peso denominated short term debt was Ps39.2 (US$3.7) million, dollar denominated long term debt was Ps415.3 (US$ 39.7) million and peso denominated long term debt was Ps86.8 (US$ 8.3) million. Of the dollar denominated long term debt Ps304.5 (US$ 29.1) million is attributable to the subsidiary Desarrollos Hidraulicos de Cancun, S.A. de C.V. GMD and its subsidiaries are in compliance with their financial debts. Every project of the subsidiaries is fully complying with its own debt without any assistance from GMD. In April 2003, a Ps25.0 (US$ 2.4) million payment was made as part of the restructuring with Banco Interacciones reported last quarter; this complied with the condition set by this institution to extend the maturity of the remaining debt until 2006. Consequently, GMD has been able to meet its corporate obligations, carry out its on going projects and initiate its participation in new business opportunities. 2 OPERATION OF STRATEGIC PROJECTS Atizapan-Venta de Carpio Toll Road and Huehuetoca and Ecatepec Branches In May 2003, upon conclusion of negotiations with the Mexico State government relating to the cancellation of this concession, GMD recovered a substantial portion of the costs of construction work performed on this project. It is expected that in August 2003, GMD will obtain from the Mexico State government the recognition and payment of all interest related to this project. Punta Diamante Tourist Development This is a residential tourist development located south of Acapulco in the State of Guerrero, and includes plans to construct a tourist marina with 130 docking spots, a golf course and various single family real estate developments, condominiums and hotels. As of this date, an European investment fund is conducting a due diligence review of the project with the goal of participating in the project. There exist the possibility of obtaining a US$40.0 million finance from this fund, which would be applied to the construction of the golf course and the tourist marina, and to the conclusion of infrastructure work. Basic infrastructure construction work (drinking water, sewage and sprinkler services) continue to be performed in the project's "El Remanso" section, with 40% of the work reported as concluded. As of this date, eight lots have been sold in this section. Adjustments have been made to the executive project and to the environmental impact study and submitted for approval to the Secretariat of Environment and Natural Resources ("SEMARNAT"). SEMARNAT has requested an additional hydrodynamics study in the section, which will be delivered next September. The executive project was also submitted to the Secretariat of Communications and Transportation for approval, but no response has been obtained so far. GMD is undertaking direct and indirect negotiations with its partners in the project to acquire a 90% interest in the same. An agreement may be reached in the next few weeks. Punta Diamante Toll Road This road connects the Autopista del Sol road with the area called Acapulco Diamante, in the Guerrero State. There was a 8.36% car traffic volume increase as of June 30 in comparison with the same period last year, and revenues increased 13.1% in nominal terms and 8.5% in real terms as of such date. GMD continues to take the necessary steps to securitize the revenue collection rights from this project. The executive branch of the Guerrero State shall present before the state's legislature a request to extend the concession's term for an additional 20 years. 3 In the event the request for extension is approved, the securitization above-mentioned is expected to be implemented during the first quarter of 2004 which will pay off the loan granted by Banobras to this project. The operation of the project is in the process of being certified under norm ISO-9001. As of this date, it has advanced 96%. Petacalco Coal Terminal During the second quarter of 2003, 13 boats have unloaded at the terminal (a total of 75 boats have unloaded since the beginning of activities in May 1999). From January to June 2003, 3 million tons of coal have been unloaded. The daily average in the month of May 2003 was 539,222, which was the month with the highest daily average. Due to the project's efficiency, cost savings and increased revenues have been obtained. In May 2003, a collective bargain agreement was entered into with the Mexican Electric Sector Workers Union (Sindicato Unico de Trabajadores Electricistas de la Republica Mexicana - SUTERM) for the term 2003-2005, which was duly registered before the Mexican Conciliation and Arbitration Federal Committee of the Ministry of Work and Social Security. Both the operation and collection of receivables under this project are proceeding in a timely manner. Fees paid to GMD from this project will be used to pay a loan from a controlling shareholder. Desarrollos Hidraulicos de Cancun, S.A. de C.V. (DHC) Since this concessioned project began operations in January 1994, Aguakan, the operator of the project, has achieved important improvements in its level of coverage and efficiency. One hundred percent of the population of the localities of Benito Juarez and Isla Mujeres currently have drinking water. In April 2003, indebtedness owed by DHC to financial institutions became due and was refinanced, which refinancing included a payment by GMD of approximately Ps14.5 (US$1.4) million. The financial results of this project for the period from January to June 2003, in comparison to the same period of 2002, were as follows: o Water sales were 1.4% greater than the forecast, and revenues by sewage system increased 3.0%. o Total net sales for the first six months amounted to Ps191.2 (US$18.3) million , or 13.2% greater than total net sales for the first six months of 2002. 4 o Revenues from payments of connection rights, which are charged by DHC starting in 2002, were Ps15.2 (US$1.5) million. It is worth mentioning that such revenues are used exclusively to provide for the infrastructure of home builders. o There was a 19.0% increase of electric power costs from the forecasted amount, due to an increase in electric power prices. It is worth mentioning that electric power costs represent 23.0% of DHC operational costs, but notwithstanding that the latter was 5.1% less than the forecast as a result of savings obtained from other items. o As a result of the foregoing, DHC had a net profit of Ps20.7 (US$2.0) million, greater than forecasted and as compared to the prior year. The project is operating under normal conditions and has been originating the required cash flow to cover operating costs and to service its debt in a timely manner. Altamira Port Terminal The forecast for 2003 is to handle 1.9 million tons, or 15% more than 2002. During the first six months of 2003 it handled 1,067,000 tons, or 31% more than during the same period of 2002 and 15% more than the forecasted amount. With the beginning of operations of a third crane, the Terminal has handled up to 22,000 tons daily, which considerably reduced the docking time of ships and the costs of operation. The terms of the loan from Bancomext with a remaining balance of US$ 2 million have been duly complied with. In June 2003, an amendment to the Partial Rights Assignment Agreement was entered into with the Altamira, Tamaulipas Port Authority (Administration Portuaria Integral - API). Such agreement lays down the conditions and characteristics for the relocation of the Terminal, which would be done in two steps. In the first step, a second docking station will be built starting January 2004 and start operating during that year's fourth quarter. The second step would be implemented between 2005 and 2006. The approximate investment estimated for the construction of this new terminal is US$10 million, which does not include the dregging portion that will be conducted by API. A German bank is considering lending up to US$12 million, which will be used in the new terminal and to prepay an outstanding debt owed to Bancomext, which amounts to US$2 million as of this date. Due to the advance stage of negotiations, credit approval is expected in the next few months. 5 ECOSYS I and ECOSYS II Residual water treatment plants in the northern and eastern sections of the city of Toluca, state of Mexico. GMD has a 50% ownership. The project is operating since November 1994. Altogether, the plants have a projected capacity to treat 2,250 liters of water per second. In November 2001, there was a placement of CPOs issued by these companies, with the goal of paying off project liabilities. The notes bear a 10% interest rate and mature in February 2005. Interest payments are being paid quarterly with revenues from the project during the term of the bonds. As of this date, there are on going negotiations with the government of the state of Mexico to settle claims that payments during the last months have been delayed, which settlement is expected in the near future. Notwithstanding that, this project is operating under normal conditions, generating positive cash flows and timely servicing its financial obligations In the next few months, a new CPO issue is expected to cover the payments over the remaining term of the concession. The issuance is subject to the approval of the conditional credit line which supports this project. Servicios Urbanos de Puebla, S.A. de C.V. (SUPSA) Concession granted by the municipality of Puebla for garbage collection in the eastern section of the city. Operation has been normal, and it is generating enough operating and debt servicing cash flows. As a result of Puebla's decision to extend containerized residential garbage collection services to the entire city, a third amendment to the concession agreement was entered into last April 25 which authorizes this type of service. This results in benefits to GMD for it reduces vehicular stoppage and operating costs. Last July 15, a concession was granted for garbage collection and transport in the eastern section of the city of Merida, state of Yucatan, as well as for the operation of a sorting out plant with capacity for 10,000 tons per month. It will be submitted before the city council for ratification in the next days. The following financial results were reported: During the first six months of 2003, 119,000 tons were collected, expenses totaled Ps27.5 (US$2.6) million and revenues amounted to Ps30.5 (US$2.9) million. Income before taxes was 9.8%. Below is a table containing the operating results of GMD's main projects and for those projects that are not consolidated: 6 Grupo Mexicano de Desarrollo Projects Thousands of Mexican Pesos

BACKLOG As of June 30, 2003, adjusted backlog amounted to Ps8,744.1 (US$835.2) million, which was 0.92% above the amount reported for the same period in 2002. The principal projects comprising this backlog are concessioned toll roads, mass transportation and water services. 7 FINANCIAL HIGHLIGHTS AS OF JUNE 30, 2003 AND 2002 (Stated in thousands of Pesos) (unaudited)

(1) Expressed in terms of purchasing power of Mexican Pesos as of June 30, 2003. (2) Pesos were translated at Ps 10.47 per US dollar, the exchange rate quoted by Banco de Mexico on June 30, 2003. (3) Based on the following numbers of weighted average shares outstanding: 45,251,640 for the second quarter ended 2003 and 2002 and the 2002 year ended. (4) Total short-term debt includes short-term debt, short-term equipment notes payable, current portion of long-term debt and current portion of long-term equipment notes payable. (5) Excluding short-term debt and current portion of long-term debt. 8 CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2003 AND DECEMBER 31, 2002 (Stated in thousands of Pesos) (1) (unaudited)

(1) Expressed in terms of the purchasing power of Mexican Pesos as of June 30, 2003. 9

10 CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 FOR THE SECOND QUARTER ENDED JUNE 30, 2003 AND 2002 AND FIRST QUARTER ENDED MARCH 31, 2003 (Stated in thousands of Pesos) (1) (unaudited)

(1) Expressed in terms of the purchasing power of Mexican Pesos as of June 30, 2003. 11

12 CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Stated in thousands of Pesos) (1) (unaudited)

(1) Expressed in terms of the purchasing power of Mexican Pesos as of June 30, 2003. 13

14 RECONCILIATION OF MEXICAN GAAP TO U.S. GAAP FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002 AND THE SECOND AND FIRST QUARTER 2003. (Stated in thousands of Pesos) (1) (unaudited)

(1) EXPRESSED IN TERMS OF THE PURCHASING POWER OF MEXICAN PESOS OF JUNE 30, 2003. (2) CALCULATED ON NUMBER OF WEIGHTED AVERAGE SHARES OUTSTANDING. 15 FOREIGN CURRENCY LIABILITIES AS OF JUNE 30, 2003 AND DECEMBER 31, 2002 (In millions of U.S. Dollars) (unaudited)

16 ADJUSTED BACKLOG AT JUNE 30, 2003 AND 2002 (Stated in thousands of Pesos and U.S. Dollars)(1)(*) (unaudited)

ADJUSTED BACKLOG: The adjusted backlog considers in addition to the projects included in the official backlog the following: o Projects which we participate through joint ventures and we recognize the result through the equity method, these projects are: The ash recovery and Transportation System in the Petacalco Power Plant. o Projects that have been assigned to the company but the contracts have not been definitively documented. This project is: The Cibeles underground parking lot. o These expected income over the next six years for the water utility company in Cancun, State of Quintana Roo (the concession was granted for 30 years, 20 years and 6 months remaining). (1) Expressed terms of the purchasing power of Mexican Pesos as of June 30, 2003, and were translated a the rate of Ps 10.47 per US dollar, the exchange rate quoted by Banco de Mexico on June 30, 2003. (*) The execution of an important part of the adjusted backlog will depend on the availability of project financing in the Mexican and International markets.

MEXICAN DEVELOPMENT GROUP 6-K