Economics: Pemex’s financial situation continued to deteriorate through the second quarter
Pemex's latest financial results, the last we can expect from current management, were rolled out with the CEO's customary optimistic flair even as the report shows a profound deterioration of its indicators through the first half of 2024, after recording systematic reductions in the company's debt rating in recent years and the need for a steadily mounting stream of support from the Federal Government. All were increasingly sacrificed on the altar of achieving "energy sovereignty" and self-sufficiency in fuel production.
Total sales fell a nominal 2.1% compared to the same period of 2023, while the cost of sales was up 8.6% yoy. The net loss excluding the accounting item of foreign exchange effects amounted to 125 billion pesos in the first half of the year. Pemex remains firmly on its extended path of losing money and vanishing free cash flows.
The next federal administration is facing enormous energy policy challenges. It comes as little surprise that the virtual president-elect has yet to say whom she will appoint as director of Pemex, while on Monday she appointed the next CEO of the Federal Electricity Commission (CFE). The latter, which has yet to suffer the terrible financial results of the NOC, has hardly been a model of management of a productive company, either. In this week’s Outlook we analyze Pemex's most recent results and their implications for the country.
In other news from last week, the Board of Governors of the Bank of Mexico (Banxico) decided to lower its target Overnight Interbank Interest Rate by 25 basis points. The rate now stands at 10.75% even as annual inflation rebounded once again, from 4.98% in June to 5.57% in July, while the balance of inflation risks remains biased to the upside. Likewise, headline inflation expectations for the coming months showed an upward adjustment. It is especially noteworthy that even given the current inflationary outlook, with Banxico itself reiterating that a restrictive stance is required, the institution decided to relax the degree of monetary tightening. Meanwhile, the industrial sector grew by less than a half percentage point in June, its weakest showing since November 2021.
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