Cementos Argos EBITDA* grows 9.5% during the third quarter

  • On the third quarter of 2020, the company's consolidated EBITDA reached COP 479 billion.
  • Likewise, the operating EBITDA of the USA Region closed at USD 73 million during the quarter, with a growth of 10.5% and an improvement of 470 basis points of margin.
  • The generation of free cash flow was COP 472 billion, derived from the improvement in EBITDA and working capital efficiencies.
  • Outstanding performance of Honduras, the Dominican Republic, Haiti and Puerto Rico, countries that exhibited during these three months cement volumes higher than last year.

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Argos, the Grupo Argos cement company, delivered satisfactory results during the third quarter, amid the COVID-19 situation. The company reported an improvement in EBITDA despite the impact on volumes mainly caused by hurricanes and heavy rains in the United States.

During the period, consolidated shipments of cement and concrete* registered a decrease of 8.4% and 19.5%, respectively, and of 12.7% and 16.5% when analyzed year to date. This decrease was compensated thanks to the successful execution of the RESET program, which allowed the company to achieve significant optimizations in costs and expenses, accompanied by better prices in Colombia and the United States. As a result of the above, revenues from July to September were COP  2,364 billion, with a reduction of 5.6%, and 6,679 billion, with a contraction of 5%, if the accumulated results of the year so far are taken into account.

On the other hand, the consolidated EBITDA* for the quarter was COP 479 billion and registered a notable increase of 9.5%, a milestone reached, to a great extent, by the growing participation of the company in the United States market, the recovery of volumes in the Caribbean and Central America, and cost and expense efficiencies implemented throughout the company. Cumulatively, EBITDA remains stable with respect to 2019.

We are proud of our company and of our more than 7,500 employees. Thanks to their commitment and good energy, we have been able to overcome the challenges brought by COVID-19 and mitigate the impact of prolonged operation closures. We reaffirm our commitment to RESET initiatives and maintain our focus on achieving greater deleveraging and remarkable results by the end of the year, encouraged by an optimistic vision of the economic recovery and the purpose of continuing to generate employment, building dreams of housing and infrastructure, and contributing social value in all our geographies”.

 

Juan Esteban Calle, CEO

 

This is how RESET, the Argos plan to mitigate the effects of the pandemic moves on:

  • Liquidity: the company generated COP 472 billion in free cash flow, as a result of the improvement in EBITDA and the release of working capital, which allowed it to amortize debt for COP 288 billion. On the other hand, the savings during the quarter reached USD 33 million.
  • Operational excellence: Argos advanced in the implementation of digital twins, through the use of artificial intelligence, to analyze historical data from cement kilns and mills and, thus, obtain the optimal mix of energy and raw materials to produce cement. The expected savings are USD 13 million annually starting in 2022.
  • Health and safety: in September the Panama operation was successfully restarted after the government's decision to reopen the country after two months of total closure and three additional months of partial reopening, which made this the longest quarantine of the geographies where the organization operates.

Market highlights:

The United States - continued to show its strength even amid the rebound in the pandemic and political uncertainty surrounding the presidential elections. Likewise, the operating EBITDA of the USA Region closed at USD 73 million during the quarter, which represents an increase of 10.5% and an EBITDA margin improvement of 470 basis points. However, adverse weather conditions were experienced during the quarter, particularly in Texas, derived from four hurricanes, two storms and heavy rains that impacted the company's performance in the country.

The macroeconomic context continues to be moderately positive in relation to the construction sector. In infrastructure, the renewal of the Fast Act for one year with USD 13.6 billion added to the Highway Trust Fund and the announcement of the 2020-2021 Florida budget, which includes USD 9.9 billion in funding for the Florida Department of Transportation, ensures the funding at a state level in order to continue with the pipeline of projects on Infrastructure front, until a more comprehensive plan is approved at a federal level.

Colombia: During the third quarter, the company’s volume improved versus last quarter’s in line with the market but remained below the volumes of the third quarter of 2019.

The organization maintains its focus on delivering value-added products, such as green cement and suelo cemento (road binder). In the last four years, Argos' suelo cemento has been used to pave approximately 350 kilometers of tertiary and secondary roads and it has been shown to be an excellent alternative to boost rural infrastructure with lower costs and lasting results.

Regarding the dynamics of the market, social housing sales increased during September by 43% compared to the same month of 2019 and continue with the positive trend that they have managed to maintain during the COVID-19 crisis. More importantly, non-social housing sales during September, for the first time during the pandemic, increased 16% compared to the same month last year.

In infrastructure, the formal start of the procurement process of the Bogota Metro which will finalize towards the end of next year, together with the investments announced by the government for more than COP 30 trillion, divided in the first wave of 5G projects, the programs Concluir, Concluir, Concluir and Vías para la Legalidad, reaffirm the government’s commitment towards continuing investing in this sector and establish strong drivers for cement consumption in the country during the following 10 years.

Caribbean and Central America: it should be noted that this region benefited during the quarter from the self-construction trend that prevails worldwide in emerging markets, which led to improvements in EBITDA and cement volumes, especially in Honduras, Dominican Republic, Haiti and Puerto Rico. The volume of cement in the region showed a year-on-year increase of 4.7%.

In terms of market dynamics, Argos maintains a positive outlook towards the region, given by a mix of improving markets, appropriate commercial strategies, and cost-cutting initiatives.