EX-99.2 3 d588305dex992.htm EX-2

Exhibit 2

Operating and Financial Highlights |  |

|  | January - June |  |  | Second Quarter |
|  | 2018 |  |  | 2017 |  |  | % var |  |  | 2018 |  |  | 2017 |  |  | % var |
Net sales |  |  | 11,879 |  |  |  | 10,989 |  |  |  | 8 | % |  |  | 5,988 |  |  |  | 5,627 |  |  |  | 6 | %
Gross profit |  |  | 4,957 |  |  |  | 4,892 |  |  |  | 1 | % |  |  | 2,511 |  |  |  | 2,320 |  |  |  | 8 | %
as % of net sales |  |  | 42 | % |  |  | 45 | % |  |  | (3pp | ) |  |  | 42 | % |  |  | 41 | % |  |  | 1pp |
Operating earnings before other expenses, net |  |  | 1,019 |  |  |  | 1,203 |  |  |  | (15 | %) |  |  | 463 |  |  |  | 435 |  |  |  | 6 | %
as % of net sales |  |  | 9 | % |  |  | 11 | % |  |  | (2pp | ) |  |  | 8 | % |  |  | 8 | % |  |  | 0pp |
Controlling Interest Net Income (Loss) |  |  | (535 | ) |  |  | 486 |  |  |  | N/A |  |  |  | (635 | ) |  |  | 137 |  |  |  | N/A |
Operating EBITDA |  |  | 1,724 |  |  |  | 1,824 |  |  |  | (5 | %) |  |  | 838 |  |  |  | 753 |  |  |  | 11 | %
as % of net sales |  |  | 15 | % |  |  | 17 | % |  |  | (2pp | ) |  |  | 14 | % |  |  | 13 | % |  |  | 1pp |
Free cash flow after maintenance capital expenditures |  |  | 1,435 |  |  |  | 827 |  |  |  | 74 | % |  |  | 715 |  |  |  | 1,067 |  |  |  | (33 | %)
Free cash flow |  |  | 1,251 |  |  |  | 591 |  |  |  | 112 | % |  |  | 645 |  |  |  | 904 |  |  |  | (29 | %)
Net debt1 |  |  | 12,836 |  |  |  | 13,863 |  |  |  | (7 | %) |  |  | 12,836 |  |  |  | 13,863 |  |  |  | (7 | %)
Total debt1 |  |  | 15,300 |  |  |  | 15,036 |  |  |  | 2 | % |  |  | 15,300 |  |  |  | 15,036 |  |  |  | 2 | %
Earnings per share2 |  |  | (0.10 | ) |  |  | 0.09 |  |  |  | N/A |  |  |  | (0.12 | ) |  |  | 0.03 |  |  |  | N/A |

In millions of Philippine Pesos, except percentages and earnings per share

1 | U.S. dollar debt converted using end-of-period exchange rate. See Debt Information on page 4 and Exchange Rates on page 7 for more detail.

2 | In Philippine Pesos

Net sales increased by 8% year-over-year during the quarter resulting from higher volumes, mitigated by lower prices.

Cost of sales were 5% higher during the quarter due to higher output and input costs. As a percentage of sales, cost of sales was at 58% versus 59% during the same period last year.

Fuel costs accounted for 25% of cost of sales, up from 20% during the same period last year. The increase was mainly driven by higher coal prices.

However, on a sequential basis, fuel costs as a percentage of cost of sales decreased as our coal costs continue to converge closer to 2017 levels.

Power costs accounted for 24% of cost of sales versus 21% during the same period last year. Higher grid rates in both our plants resulted to this increase.

Operating expenses increased by 9%. As a percentage of sales, this resulted to an increase of 1 pp year-over-year during the quarter.

Distribution expenses increased 23% year-over-year due to higher fuel costs, higher dispatched volumes benefitting from our debottlenecking efforts, and upgrading of vessels.

As a percentage of sales, distribution expenses increased from 19% to 22%.

Selling and administrative expenses declined by 10% during the quarter, a result of continued efforts to optimize costs.

As a percentage of sales, selling and administrative expenses declined from 15% to 12%.

Operating EBITDA increased by 11% during the quarter, mainly driven by higher sales.

Operating EBITDA margin during the quarter was 14%, slightly higher than the same period last year.

Controlling interest net income was negative during the quarter due to higher income tax expense mainly from the utilization of Net Operating Loss Carry-Over (NOLCO) credits for tax on intra-group dividends and subsequent decrease in amount of deferred tax assets (non-cash expenses).

Total debt at the end of June 2018 stood at PHP 15,300 million, of which PHP 13,837 million pertained to long-term debt owed to BDO Unibank, Inc.

2018 Second Quarter Results |  | Page 2

Operating Results |  |

Domestic Gray Cement |  | January - June |  |  | Second Quarter |  |  | Second Quarter 2018 |
|  | 2018 vs. 2017 |  |  | 2018 vs. 2017 |  |  | vs. First Quarter 2018 |
Volume |  |  | 12 | % |  |  | 8 | % |  |  | (1 | %)
Price in USD |  |  | (7 | %) |  |  | (5 | %) |  |  | 2 | %
Price in PHP |  |  | (3 | %) |  |  | (0 | %) |  |  | 3 | %

Our domestic cement volumes increased by 8% year-over-year during the quarter, driven by higher public infrastructure spending and a strong residential sector.

On a year-to-date basis, domestic cement volumes grew 12% versus the same period of the prior year. This performance reflects increased construction activity from both public and private sectors, progress from our debottlenecking efforts, and favorable weather conditions compared to the first half of last year.

Our domestic cement prices continued to recover during the quarter with a 3% sequential increase. Prices for the month of June were 6% higher than in the month of December last year.

Against the same period last year, prices during the first six months were still 3% lower as cement prices were higher at the start of 2017. For the second quarter, however, prices had already converged closer to prices of the same period last year.

2018 Second Quarter Results |  | Page 3

Operating EBITDA, Free Cash Flow and Debt Information |  |

Operating EBITDA and Free Cash Flow

|  |  |  |  | January - June |  |  |  |  |  | Second Quarter |
|  | 2018 |  |  | 2017 |  |  | % var |  |  | 2018 |  |  | 2017 |  |  | % var |
Operating earnings before other expenses, net |  |  | 1,019 |  |  |  | 1,203 |  |  |  | (15 | %) |  |  | 463 |  |  |  | 435 |  |  |  | 6 | %
+ Depreciation and operating amortization |  |  | 705 |  |  |  | 621 |  |  |  |  |  |  |  | 375 |  |  |  | 319 |  |  |  |  |
Operating EBITDA |  |  | 1,724 |  |  |  | 1,824 |  |  |  | (5 | %) |  |  | 838 |  |  |  | 753 |  |  |  | 11 | %
- Net financial expenses |  |  | 445 |  |  |  | 459 |  |  |  |  |  |  |  | 237 |  |  |  | 200 |  |  |  |  |
- Maintenance capital expenditures |  |  | 362 |  |  |  | 196 |  |  |  |  |  |  |  | 283 |  |  |  | 147 |  |  |  |  |
- Change in working capital |  |  | (747 | ) |  |  | 58 |  |  |  |  |  |  |  | (524 | ) |  |  | (862 | ) |  |  |  |
- Income taxes paid |  |  | 243 |  |  |  | 306 |  |  |  |  |  |  |  | 139 |  |  |  | 204 |  |  |  |  |
- Other cash items (net) |  |  | (14 | ) |  |  | (22 | ) |  |  |  |  |  |  | (12 | ) |  |  | (3 | ) |  |  |  |
Free cash flow after maintenance capital expenditures |  |  | 1,435 |  |  |  | 827 |  |  |  | 74 | % |  |  | 715 |  |  |  | 1,067 |  |  |  | (33 | %)
- Strategic capital expenditures |  |  | 184 |  |  |  | 237 |  |  |  |  |  |  |  | 70 |  |  |  | 163 |  |  |  |  |
Free cash flow |  |  | 1,251 |  |  |  | 591 |  |  |  | 112 | % |  |  | 645 |  |  |  | 904 |  |  |  | (29 | %)

In millions of Philippine Pesos

Debt Information

|  | Second Quarter |  |  |  |  |  | First Quarter |
|  | 2018 |  |  | 2017 |  |  | % var |  |  | 2018 |
Total debt1 |  |  | 15,300 |  |  |  | 15,036 |  |  |  | 2 | % |  |  | 15,327 |
Short term |  |  | 3 | % |  |  | 0 | % |  |  |  |  |  |  | 3 | %
Long term |  |  | 97 | % |  |  | 100 | % |  |  |  |  |  |  | 97 | %
Cash and cash equivalents |  |  | 2,464 |  |  |  | 1,173 |  |  |  | 110 | % |  |  | 1,851 |
Net debt |  |  | 12,836 |  |  |  | 13,863 |  |  |  | (7 | %) |  |  | 13,476 |

|  | Second Quarter |
|  | 2018 |  |  | 2017 |
Currency denomination |  |  |  |  |  |  |  |
U.S. dollar2 |  |  | 3 | % |  |  | 7 | %
Philippine peso |  |  | 97 | % |  |  | 93 | %
Interest rate |  |  |  |  |  |  |  |
Fixed |  |  | 43 | % |  |  | 37 | %
Variable |  |  | 57 | % |  |  | 63 | %

In millions of Philippine Pesos, except percentages

1 | U.S. dollar debt converted using end-of-period exchange rate. See Exchange Rates on page 7 for more detail.

2 | Pertains to related party loans with CEMEX Asia B.V.

2018 Second Quarter Results |  | Page 4

Financial Results |  |

Income Statement & Balance Sheet Information

CEMEX Holdings Philippines, Inc.

(Thousands of Philippine Pesos in nominal terms, except per share amounts)

|  | January - June |  |  |  |  |  | Second Quarter |  |  |  |
|  | 2018 |  |  | 2017 |  |  | % var |  |  | 2018 |  |  | 2017 |  |  | % var |
INCOME STATEMENT |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net sales |  |  | 11,879,333 |  |  |  | 10,989,341 |  |  |  | 8 | % |  |  | 5,988,074 |  |  |  | 5,626,964 |  |  |  | 6 | %
Cost of sales |  |  | (6,922,603 | ) |  |  | (6,096,885 | ) |  |  | (14 | %) |  |  | (3,477,178 | ) |  |  | (3,307,369 | ) |  |  | (5 | %)
Gross profit |  |  | 4,956,730 |  |  |  | 4,892,456 |  |  |  | 1 | % |  |  | 2,510,896 |  |  |  | 2,319,595 |  |  |  | 8 | %
Operating expenses |  |  | (3,937,242 | ) |  |  | (3,689,719 | ) |  |  | (7 | %) |  |  | (2,048,106 | ) |  |  | (1,884,971 | ) |  |  | (9 | %)
Operating earnings before other expenses, net |  |  | 1,019,488 |  |  |  | 1,202,737 |  |  |  | (15 | %) |  |  | 462,790 |  |  |  | 434,624 |  |  |  | 6 | %
Other income (expenses), net |  |  | 14,319 |  |  |  | 21,780 |  |  |  | (34 | %) |  |  | 12,043 |  |  |  | 2,614 |  |  |  | 361 | %
Operating earnings |  |  | 1,033,807 |  |  |  | 1,224,517 |  |  |  | (16 | %) |  |  | 474,833 |  |  |  | 437,238 |  |  |  | 9 | %
Financial expenses, net |  |  | (444,663 | ) |  |  | (458,612 | ) |  |  | 3 | % |  |  | (236,919 | ) |  |  | (200,134 | ) |  |  | (18 | %)
Foreign exchange loss, net |  |  | (411,142 | ) |  |  | (129,327 | ) |  |  | (218 | %) |  |  | (163,358 | ) |  |  | (41,282 | ) |  |  | (296 | %)
Net income (loss) before income taxes |  |  | 178,002 |  |  |  | 636,578 |  |  |  | (72 | %) |  |  | 74,556 |  |  |  | 195,822 |  |  |  | (62 | %)
Income tax expenses |  |  | (712,842 | ) |  |  | (150,525 | ) |  |  | (374 | %) |  |  | (709,678 | ) |  |  | (59,308 | ) |  |  | (1097 | %)
Consolidated net income (loss) |  |  | (534,840 | ) |  |  | 486,053 |  |  |  | N/A |  |  |  | (635,122 | ) |  |  | 136,514 |  |  |  | N/A |
Non-controlling interest net income (loss) |  |  | 16 |  |  |  | 15 |  |  |  | 7 | % |  |  | 6 |  |  |  | 7 |  |  |  | (14 | %)
Controlling Interest net income (loss) |  |  | (534,824 | ) |  |  | 486,068 |  |  |  | N/A |  |  |  | (635,116 | ) |  |  | 136,521 |  |  |  | N/A |
Operating EBITDA |  |  | 1,724,225 |  |  |  | 1,824,128 |  |  |  | (5 | %) |  |  | 837,777 |  |  |  | 753,433 |  |  |  | 11 | %
Earnings per share |  |  | (0.10 | ) |  |  | 0.09 |  |  |  | N/A |  |  |  | (0.12 | ) |  |  | 0.03 |  |  |  | N/A |

|  | as of June 30 |  |  | as of June 30 |  |  | as of December 31 |
|  | 2018 |  |  | 2017 |  |  | % Var |  |  | 2017 |  |  | % Var |
BALANCE SHEET |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Assets |  |  | 52,277,352 |  |  |  | 51,340,280 |  |  |  | 2 | % |  |  | 51,751,676 |  |  |  | 1 | %
Cash and Temporary Investments |  |  | 2,463,598 |  |  |  | 1,173,039 |  |  |  | 110 | % |  |  | 1,058,267 |  |  |  | 133 | %
Trade Accounts Receivables |  |  | 910,784 |  |  |  | 986,888 |  |  |  | (8 | %) |  |  | 833,259 |  |  |  | 9 | %
Other Receivables |  |  | 145,669 |  |  |  | 78,938 |  |  |  | 85 | % |  |  | 101,002 |  |  |  | 44 | %
Inventories |  |  | 2,688,193 |  |  |  | 3,179,122 |  |  |  | (15 | %) |  |  | 3,258,252 |  |  |  | (17 | %)
Assets held for sale |  |  | 22,653 |  |  |  | 0 |  |  |  |  |  |  |  | 90,629 |  |  |  | (75 | %)
Other Current Assets |  |  | 1,369,243 |  |  |  | 1,442,582 |  |  |  | (5 | %) |  |  | 1,310,504 |  |  |  | 4 | %
Current Assets |  |  | 7,600,140 |  |  |  | 6,860,569 |  |  |  | 11 | % |  |  | 6,651,913 |  |  |  | 14 | %
Fixed Assets |  |  | 15,454,036 |  |  |  | 15,592,084 |  |  |  | (1 | %) |  |  | 15,582,732 |  |  |  | (1 | %)
Investments in an associate and other investments |  |  | 16,197 |  |  |  | 15,273 |  |  |  | 6 | % |  |  | 15,407 |  |  |  | 5 | %
Other assets and noncurrent accounts receivables |  |  | 767,264 |  |  |  | 385,321 |  |  |  | 99 | % |  |  | 716,700 |  |  |  | 7 | %
Deferred income taxes - net |  |  | 580,021 |  |  |  | 627,339 |  |  |  | (8 | %) |  |  | 925,230 |  |  |  | (37 | %)
Goodwill |  |  | 27,859,694 |  |  |  | 27,859,694 |  |  |  | 0 | % |  |  | 27,859,694 |  |  |  | 0 | %
Other Assets |  |  | 29,223,176 |  |  |  | 28,887,627 |  |  |  | 1 | % |  |  | 29,517,031 |  |  |  | (1 | %)
Total Liabilities |  |  | 23,083,118 |  |  |  | 22,128,537 |  |  |  | 4 | % |  |  | 22,329,280 |  |  |  | 3 | %
Current Liabilities |  |  | 7,528,970 |  |  |  | 6,261,559 |  |  |  | 20 | % |  |  | 6,873,552 |  |  |  | 10 | %
Long-Term Liabilities |  |  | 14,618,237 |  |  |  | 15,036,198 |  |  |  | (3 | %) |  |  | 14,674,110 |  |  |  | (0 | %)
Other Liabilities |  |  | 935,911 |  |  |  | 830,780 |  |  |  | 13 | % |  |  | 781,618 |  |  |  | 20 | %
Consolidated Stockholders’ Equity |  |  | 29,194,234 |  |  |  | 29,211,743 |  |  |  | (0 | %) |  |  | 29,422,396 |  |  |  | (1 | %)
Non-controlling Interest |  |  | 205 |  |  |  | 231 |  |  |  | (11 | %) |  |  | 221 |  |  |  | (7 | %)
Stockholders’ Equity Attributable to Controlling Interest |  |  | 29,194,029 |  |  |  | 29,211,512 |  |  |  | (0 | %) |  |  | 29,422,175 |  |  |  | (1 | %)

2018 Second Quarter Results |  | Page 5

Financial Results |  |

Income Statement & Balance Sheet Information

CEMEX Holdings Philippines, Inc.

(Thousands of U.S. Dollars, except per share amounts)

|  | January - June |  |  | Second Quarter |
|  | 2018 |  |  | 2017 |  |  | % var |  |  | 2018 |  |  | 2017 |  |  | % var |
INCOME STATEMENT |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net sales |  |  | 227,606 |  |  |  | 219,549 |  |  |  | 4 | % |  |  | 113,986 |  |  |  | 112,401 |  |  |  | 1 | %
Cost of sales |  |  | (132,636 | ) |  |  | (121,806 | ) |  |  | (9 | %) |  |  | (66,190 | ) |  |  | (66,066 | ) |  |  | (0 | %)
Gross profit |  |  | 94,970 |  |  |  | 97,743 |  |  |  | (3 | %) |  |  | 47,796 |  |  |  | 46,335 |  |  |  | 3 | %
Operating expenses |  |  | (75,437 | ) |  |  | (73,715 | ) |  |  | (2 | %) |  |  | (38,987 | ) |  |  | (37,653 | ) |  |  | (4 | %)
Operating earnings before other expenses, net |  |  | 19,533 |  |  |  | 24,028 |  |  |  | (19 | %) |  |  | 8,809 |  |  |  | 8,682 |  |  |  | 1 | %
Other income (expenses), net |  |  | 274 |  |  |  | 435 |  |  |  | (37 | %) |  |  | 229 |  |  |  | 52 |  |  |  | 340 | %
Operating earnings |  |  | 19,807 |  |  |  | 24,463 |  |  |  | (19 | %) |  |  | 9,038 |  |  |  | 8,734 |  |  |  | 3 | %
Financial expenses, net |  |  | (8,520 | ) |  |  | (9,162 | ) |  |  | 7 | % |  |  | (4,510 | ) |  |  | (3,998 | ) |  |  | (13 | %)
Foreign exchange loss, net |  |  | (7,877 | ) |  |  | (2,584 | ) |  |  | (205 | %) |  |  | (3,110 | ) |  |  | (825 | ) |  |  | (277 | %)
Net income (loss) before income taxes |  |  | 3,410 |  |  |  | 12,717 |  |  |  | (73 | %) |  |  | 1,418 |  |  |  | 3,911 |  |  |  | (64 | %)
Income tax expenses |  |  | (13,658 | ) |  |  | (3,007 | ) |  |  | (354 | %) |  |  | (13,509 | ) |  |  | (1,185 | ) |  |  | (1040 | %)
Consolidated net income (loss) |  |  | (10,248 | ) |  |  | 9,710 |  |  |  | N/A |  |  |  | (12,091 | ) |  |  | 2,726 |  |  |  | N/A |
Non-controlling interest net income (loss) |  |  | 0 |  |  |  | 0 |  |  |  | 0 | % |  |  | 0 |  |  |  | 0 |  |  |  | 0 | %
Controlling Interest net income (loss) |  |  | (10,248 | ) |  |  | 9,710 |  |  |  | N/A |  |  |  | (12,091 | ) |  |  | 2,726 |  |  |  | N/A |
Operating EBITDA |  |  | 33,036 |  |  |  | 36,443 |  |  |  | (9 | %) |  |  | 15,948 |  |  |  | 15,050 |  |  |  | 6 | %

|  | as of June 30 |  |  | as of June 30 |  |  | as of December 31 |
|  | 2018 |  |  | 2017 |  |  | % Var |  |  | 2017 |  |  | % Var |
BALANCE SHEET |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Assets |  |  | 980,078 |  |  |  | 1,017,243 |  |  |  | (4 | %) |  |  | 1,036,485 |  |  |  | (5 | %)
Cash and Temporary Investments |  |  | 46,187 |  |  |  | 23,242 |  |  |  | 99 | % |  |  | 21,195 |  |  |  | 118 | %
Trade Accounts Receivables |  |  | 17,075 |  |  |  | 19,554 |  |  |  | (13 | %) |  |  | 16,689 |  |  |  | 2 | %
Other Receivables |  |  | 2,731 |  |  |  | 1,564 |  |  |  | 75 | % |  |  | 2,023 |  |  |  | 35 | %
Inventories |  |  | 50,397 |  |  |  | 62,990 |  |  |  | (20 | %) |  |  | 65,256 |  |  |  | (23 | %)
Assets held for sale |  |  | 425 |  |  |  | 0 |  |  |  |  |  |  |  | 1,815 |  |  |  | (77 | %)
Other Current Assets |  |  | 25,670 |  |  |  | 28,583 |  |  |  | (10 | %) |  |  | 26,247 |  |  |  | (2 | %)
Current Assets |  |  | 142,485 |  |  |  | 135,933 |  |  |  | 5 | % |  |  | 133,225 |  |  |  | 7 | %
Fixed Assets |  |  | 289,727 |  |  |  | 308,938 |  |  |  | (6 | %) |  |  | 312,092 |  |  |  | (7 | %)
Investments in an associate and other investments |  |  | 304 |  |  |  | 303 |  |  |  | 0 | % |  |  | 309 |  |  |  | (2 | %)
Other assets and noncurrent accounts receivables |  |  | 14,384 |  |  |  | 7,635 |  |  |  | 88 | % |  |  | 14,354 |  |  |  | 0 | %
Deferred income taxes - net |  |  | 10,874 |  |  |  | 12,430 |  |  |  | (13 | %) |  |  | 18,531 |  |  |  | (41 | %)
Goodwill |  |  | 522,304 |  |  |  | 552,005 |  |  |  | (5 | %) |  |  | 557,975 |  |  |  | (6 | %)
Other Assets |  |  | 547,866 |  |  |  | 572,372 |  |  |  | (4 | %) |  |  | 591,168 |  |  |  | (7 | %)
Total Liabilities |  |  | 432,754 |  |  |  | 438,449 |  |  |  | (1 | %) |  |  | 447,212 |  |  |  | (3 | %)
Current Liabilities |  |  | 141,151 |  |  |  | 124,065 |  |  |  | 14 | % |  |  | 137,664 |  |  |  | 3 | %
Long-Term Liabilities |  |  | 274,058 |  |  |  | 297,923 |  |  |  | (8 | %) |  |  | 293,894 |  |  |  | (7 | %)
Other Liabilities |  |  | 17,546 |  |  |  | 16,461 |  |  |  | 7 | % |  |  | 15,654 |  |  |  | 12 | %
Consolidated Stockholders’ Equity |  |  | 547,323 |  |  |  | 578,794 |  |  |  | (5 | %) |  |  | 589,273 |  |  |  | (7 | %)
Non-controlling Interest |  |  | 4 |  |  |  | 5 |  |  |  | (23 | %) |  |  | 4 |  |  |  | (13 | %)
Stockholders’ Equity Attributable to Controlling Interest |  |  | 547,320 |  |  |  | 578,789 |  |  |  | (5 | %) |  |  | 589,268 |  |  |  | (7 | %)

2018 Second Quarter Results |  | Page 6

Definitions of Terms and Disclosures |  |

Methodology for translation, consolidation, and presentation of results

CEMEX Holdings Philippines, Inc. (“CHP”) reports its consolidated financial statements under Philippine Financial Reporting Standards (“PFRS”). When reference is made in 2018 and 2017 to consolidated financial statements, it means CHP financial information together with its subsidiaries.

For the purpose of presenting figures in U.S. dollars, the consolidated balance sheet as of June 30, 2018 has been converted at the end of period exchange rate of 53.34 Philippine pesos per US dollar while the consolidated income statement for the six-month period ended June 30, 2018 has been converted at the January to June, 2018 average exchange rate of 52.19 Philippine pesos per US dollar. On the other hand, the consolidated income statement for the three-month period ended June 30, 2018 has been converted at the April to June, 2018 average exchange rate of 52.53 Philippine pesos per US dollar.

Definition of terms

PHP refers to Philippine Pesos.

pp equals percentage points.

Prices all references to pricing initiatives, price increases or decreases, refer to our prices for our products.

Operating EBITDA equals operating earnings before other expenses, net, plus depreciation and operating amortization.

Free cash flow equals operating EBITDA minus net interest expense, maintenance and strategic capital expenditures, change in working capital, taxes paid, and other cash items (net other expenses less proceeds from the disposal of obsolete and/or substantially depleted operating fixed assets that are no longer in operation).

Maintenance capital expenditures investments incurred for the purpose of ensuring the company’s operational continuity. These include capital expenditures on projects required to replace obsolete assets or maintain current operational levels, and mandatory capital expenditures, which are projects required to comply with governmental regulations or company policies.

Strategic capital expenditures investments incurred with the purpose of increasing the company’s profitability. These include capital expenditures on projects designed to increase profitability by expanding capacity, and margin improvement capital expenditures, which are projects designed to increase profitability by reducing costs.

Change in Working capital in the Free cash flow statements only include trade receivables, trade payables, receivables and payables from and to related parties, other current receivables, inventories, other current assets, and other accounts payable and accrued expense.

Net debt equals total debt minus cash and cash equivalents.

Exchange Rates |  | January - June |  |  | Second Quarter |  |  | January - June |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
|  | average |  |  | average |  |  | average |  |  | average |  |  | End of period |  |  | End of period |
Philippine peso |  |  | 52.19 |  |  |  | 50.05 |  |  |  | 52.53 |  |  |  | 50.06 |  |  |  | 53.34 |  |  |  | 50.47 |
Amounts provided in units of local currency per US dollar |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

2018 Second Quarter Results |  | Page 7