Cementos Argos hit by Colombia’s infrastructure slowdown

In a trading update for the third quarter of 2016, Cementos Argos announced that its profits were down by 22.7 per cent YoY, with cement volumes falling by 7.4 per cent to 3.557Mt.

Figures for the nine months to the end of September 2016 were more positive, with the company’s net income rising by 18.7 per cent YoY to COP393bn (US$125m).

The third-quarter figures were negatively impacted by a slowdown in the company’s home market. Cement dispatches in Colombia fell by 22.1 per cent in 3Q16 to 1.314Mt and were down 17.9 per cent in the nine months to September. The firm said that the decline was due to a number of factors, including a transportation strike in July and a slowdown in infrastructure spending, the latter being particularly problematic given Cementos Argos’s major role as a supplier to this sector.

Finally, the company’s decision to maintain price stability in the face of discounting by competitors cost it further market share. Overall, cement dispatches in Colombia have fallen by 11 per cent in 3Q16, half the rate of decline seen by Cementos Argos.

In the United States, the company fared better, with cement volumes rising by 5.7 per cent in 3Q16 to 1.012Mt. For the year to September, volumes rose 20.1 per cent over the same period in 2015, to 3.005Mt.

In the Caribbean and Central America (CCA), Cementos Argos saw cement volumes rise more modestly – by 2.8 per cent in 3Q16 and 4.9 per cent in 9M16.

Looking ahead, the firm is optimistic that demand in Colombia will pick up, driven by the commencement of 4G projects and a construction sector that outperforms the economy as a whole. However, it warned of possible volume contraction if the slow pace of growth continues. The firm was more positive on prospects for the US and the CCA region.

Earlier this November, Cementos Argos received FTC clearance for its acquisition of the 2.2Mta Essroc Martinsburg cement plant from HeidelbergCement. The company expects to close the deal on 30 November 2016.