• Company has gone from first to worst on the IPC since April 28
  • Executive departures, air pollution have also weighed on stock

OHL Mexico SAB appeared to dodge a bullet in March when it was fined only $1.4 million in a high-profile accounting probe that began after a series of embarrassing audio scandals. Now that sense of relief is nowhere to be found.

The accounting approach pushed by Mexico’s securities regulator would cause assets to tumble 50 percent, the company said April 28. The chief financial officer exited shortly before that announcement. The chairman left soon after. Then the toll-road operator took another blow when Mexico City’s worst air pollution in 14 years led to driving restrictions that took cars off its expressways.

Those events combined to send OHL Mexico to the biggest 30-day loss since last May, when audio recordings posted on YouTube purported to show executives discussing pay-offs to judges and free luxury hotel stays for public officials. While the company has denied wrongdoing and said it’s the victim of a “smear campaign,” the recent share declines show that OHL still has work to do in putting last year’s scandals behind it.

“It generates doubts on where the company is going,” Marco Medina, an analyst at Casa de Bolsa Ve Por Mas, said by telephone. “All this uncertainty is holding up investors since the last thing one would do would be to participate in a company with so many contingencies.”

Share Drop

Until OHL Mexico disclosed the balance-sheet impact of the government’s accounting recommendations, the company was posting a 60 percent surge this year, the biggest gain on the benchmark index of 37 Mexican stocks. Since then, shares have tumbled 23 percent, the biggest loss on the IPC.

OHL Mexico said it’s following through on long-term investment plans for Mexico and developing projects for more than 15 billion pesos ($820 million). The company declined to comment directly on recent management changes.

“In spite of the smear campaign it has faced, the company presented solid results for the close of 2015 and the first quarter of 2016,” it said in an e-mailed statement. “The company will now focus on managing the business, which is what it does best: generating value for its shareholders.”

Spain’s Obrascon Huarte Lain SA holds a majority stake in the company.

Accounting Effect

Regulators who probed OHL Mexico penalized the company for its accounting practices and alleged it didn’t properly inform investors about traffic and profitability levels on its highways. CEO Sergio Hidalgo said at the time the changes would have little impact on financial statements. Shares rose 10 percent the day the fine was announced.

But in the its first-quarter report, OHL Mexico said assets would be cut in half to about 62 billion pesos if it used the government’s accounting approach. That “strong difference” prompted some investors to sell shares, Corporativo GBM SAB analyst Javier Gayol said.

“There was a lot of momentum for the stock after the CNBV fine was thought to be marginal,” he said by telephone. “The valuations weren’t making any sense.”

Management, Cars

Adding to the unease, Chief Financial Officer Raul Revuelta and Chairman Andres De Oteyza left the company in an 11-day span. OHL Mexico cited personal reasons for both departures. The company said Hidalgo would become interim CFO while remaining CEO. Deputy Chairman Juan Luis Osuna Gomez will replace De Oteyza.

“We believe investors should still be cautious on the stock as there is still uncertainty related to recent management changes,” Barclays Plc analyst Pablo Monsivais wrote in a May 10 note to clients.

The final challenge came when Mexico City ozone levels spiked in late March. This led to authorities to ban 20 percent of cars from the metropolitan area’s roads each day through June. If pollution surpasses a certain level during this period, the percentage of vehicles taken off the road rises to 40 percent.

OHL Mexico gets 89 percent of toll-road revenue from three expressways in and around the capital. Traffic on those highways fell an estimated 7 percent in April, Hidalgo said in a conference call with investors and analysts April 29.

“It’s going to be compensated throughout the year with the growth that we have in different roads,” he said.

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