Cements Argos: positive outlook after strong 2011 results

Cementos Argos, Colombia's largest cement producer, achieved more than COP3.6bn (US$2bn) in consolidated revenues for FY2011, representing YoY growth of 21% in peso terms as it reported strong performances in its Colombian and Caribbean divisions. In the US, results were still affected by the challenging conditions although the company sees interesting recovery prospects ahead.

According to latest figures from Cements Argos, EBITDA for the year increased by 26% in peso terms to COP682m (US$369m) while operating earnings were COP347m (US$189m). Consolidated earnings after asset impairment came to COP273bn (US$149m). Net profit reached COP370bn (US$306m) but is not comparable with the previous year given extraordinary items recorded over the last two years.

2011 proved to be a busy and progressive year for the company, which has a total installed cement capacity of 16Mta across its Colombian, Caribbean and US operations. As well as posting increased operating figures for the majority of its markets and reaching record shipments of cement and concrete in Colombia and the Caribbean, it also began to ship cement to the Panama Canal expansion project, inaugurated Colombia’s largest concrete plant in Bogotá and made progress in consolidating its new US facilities. Another significant event was the move to spin-off its non-cement assets to its investment arm, Inversiones Argos which is in the process of being approved by the relevant Colombian authorities.

Argos’ domestic market of Colombia has been booming of late, a trend which is forecast to continue. Last year, domestic revenues reached COP1.9bn, up 24% YoY as the buoyant economic situation combined with substantial investments in retail, housing and infrastructure projects led to steady increases. Cement sales reached 5Mt (up 19% YoY) and concrete sales advanced to 2.6Mt (+35% YoY). These were the highest volumes the company has shipped in Colombia to date. For 2012, Argos believes the outlook for the country is “very positive” notably in the infrastructure, housing and commercial segments. It is currently investing in its Colombian logistics network and sees cement volumes rising between 5-7% this year.

The Caribbean division also performed well last year mainly thanks to substantial infrastructure investments in Panama and the efficiency of Cementos Argos’ new line at the Cartagena. Consolidated revenues for the Caribbean division increased by 32% to US$422m. EBITDA went from US$62m in 2010 to US$105m last year, representing an increase of 70%. Cement sales for the year were up 20% to 2.23Mt. A spokesperson for the company told CemNet News that last year Argos completed the commissioning process of expansion in Panama where it doubled grinding capacity from 800,000tpa to 1.6Mta. In Haiti, the company has been ready to help with the reconstruction efforts and has just put in place ready-mix concrete facilities (whereas previously it only had a cement operation). As far as the outlook for the main Caribbean markets is concerned, Argos expects the construction sector as well as the economy to generally do well. With Panama continuing to invest significantly in infrastructure, cement volumes are forecast to increase by 7-9% in 2012 while in the Dominican Republic and Haiti volumes are seen increasing between 5-7%.

Another 2011 highlight for Argos was the acquisition of Lafarge assets in the USA which included a 1.6Mta cement plant in Roberta, Alabama, 1.1Mta a cement plant in Harleyville, South Carolina, as well a 0.5Mta grinding plant in Atlanta, Georgia. The agreement also included 79 ready-mix plants with a capacity of 3.3Mm3, 347 ready-mix trucks, five rail terminals and a terminal with port facilities in Alabama. The US$760m deal represented the company’s first foray into cement production in the US and made it the second-largest cement producer in the southeast and the fourth-largest ready-mix producer nationwide. The assets from the Lafarge purchase were included in Argos’ US division in the last three months of 2011. The company’s performance continued to mirror the ongoing market challenges faced in the region as well as reflect adverse weather conditions and a 34% hike in diesel prices.

The division posted US$441m in revenues, up 16% YoY but showed a negative EBITDA of US$27m including US$11m of non-recurrent extraordinary expenses related to the Lafarge acquisition. During 4Q11, however, Argos noted a slight YoY recovery in volumes with prices becoming more stable over the last few months of the year. Cement sales in 4Q11 were 0.36Mt, 26% higher than the figures reported by Lafarge for the same assets in the same quarter of 2010. For the coming year, Argos expects some recovery in the housing and commercial sectors but has conservative projections on infrastructure spending. In the US market, the company sees its volumes rising 3-5% in 2012.