Cementos Argos sees revenues rise, but Colombia challenges income

Argos reported an improvement in its revenues for 4Q17 with stable sales for the full-year 2017. While EBITDA results fell both for 4Q17 and 2017, adjustment for non-recurring severance payments and anticipated pensions took out some of the sting as adjusted EBITDA margins for 4Q17 and 2017 reached 17.8 and 17.3 per cent, respectively. However, positive dynamics in the USA and the Caribbean and Central America regions could not fully offset a more challenging home market in Colombia and the company's full-year net income fell to COP-13bn.

4Q17 cement volumes rise 17.6%

Consolidated cement volumes for Cementos Argos reached 4Mt in 4Q17, with a 17.6 per cent increase on 3Q17, driven by positive dynamics in the US and Central America and the Caribbean regions, says Cementos Argos. Concrete volumes in 4Q17 decreased 3.9 per cent QoQ to 701,000m³, explained by the lower dispatches in the USA and Colombia.

The adjusted EBITDA, excluding no-recurring items associated to the BEST programme, closed in COP375bn (US$127.9m) with a 17.8 per cent margin. "The results reflect the efforts in efficiency and the geographical diversification strategy, which allowed the company to partially offset the market conditions in Colombia. The net income reflects the lower sales in Colombia and non-recurring charges in the US, related to the deferred asset tax impairment of US$34.7m," said Cementos Argos.

USA

Cement dispatches in the USA grew 20 per cent excluding the Martinsburg operation, well above the total US market growth (4.7 per cent QtD as of November), and were boosted by a pent-up demand after the hurricane season, and the performance of the Carolinas and the southern states, where Argos has operations.

Total US cement volumes sold by Argos during 4Q17 reached 1.468Mt, up 52.3 per cent QoQ. The 1.6 per cent QoQ reduction in ready-mix concrete volumes to 1.761Mm³ in the quarter is explained by a decrease in the south-centre region, mainly in the Houston market, according to Cementos Argos.

US revenues increased 12.4 per cent QoQ to US$379m in 4Q17. EBITDA increased 57.7 per cent, including the non-recurring profit of ~US$17m explained by the sale of the block business assets and a higher demand.

Colombia

Cement volumes in Colombia decreased 1.3 per cent QoQ to 1.258Mt in 4Q17. The company's ready-mix volumes decreased 9.8 per cent to 701,000m³, explained by the performance of the mid-income housing segment, which was offset by civil works.

Revenues reached COP544bn, down 9.7 per cent QoQ and EBITDA saw a 12.5 per cent drop to COP109bn when compared with 4Q16. Adjusted EBITDA (excluding non-recurring severance payments and anticipated pensions) fell 7.2 per cent to COP115bn.

Caribbean and Central America

In the Caribbean and Central American market, total cement volumes in 4Q17 increased 9.8 per cent to 1.316Mt when compared with 4Q16, driven by the improved sales performance of Honduras (eight per cent), Panama (4.6 per cent) and Dominican Republic (26.8 per cent). The shipments of concrete remained stable at 105,000m³, highlighting the growth of seven per cent in Panama.

The region reported revenues of US$144m (+12.2 per cent QoQ) and EBITDA of US$35m (-42.7 per cent QoQ), which is not fully comparable due to the US$20.4m of extraordinary income recorded in Panama at the end of 2016, from the sale of real estate assets. The EBITDA margin in the 4Q17 was affected by a 12-day maintenance halt of the kiln in Honduras and the impact of Hurricane Maria in Puerto Rico (affecting the plant’s operation during 153 days) and in the eastern Caribbean islands.

Full-year 2017 performance

For the full-year 2017, Argos' cement volumes rose 16.5 per cent to 26.275Mt from 13.976Mt reported in 2016. However, concrete volumes fell 6.1 per cent YoY from 11.273Mm³ to 10.59Mm³ in 2017. The Colombia-based cement and concrete producer saw total revenues for 2017 edge up 0.2 per cent to COP8533bn from COP8517bn in 2016. EBITDA decreased 15 per cent to COP1479bn, but the drop was smaller at 11.5 per cent for adjusted EBITDA, which reached COP1479bn. The company's net profit of COP420bn in 2016 turned into a COP13bn loss and the net profit margin went from 4.9 per cent in 2016 to -0.1 per cent one year later. Argos attributes the drop in net income to lower sales in Colombia and non-recurring charges in the US, realted to the deferred asset tax impairment of US$34.7m.

USA

In the US a strong performance was reflected by a 47.8 per cent rise in cement volumes from 3.969Mt in 2016 to 5.867Mt in 2017. However, concrete volumes fell 6.2 per cent YoY to 7.154Mt from 7.626Mm³. 

Revenues were up 11 per cent YoY to US$1.541m and EBITDA advanced by 32.9 per cent to US$240.5m when compared with 2016 (US$181m). The EBITDA margin for the region increased from 13 per cent in 2016 to 15.6 per cent in 2017.

Colombia

In Argos' home market of Colombia, cement volumes were up 5.7 per cent YoY to 5.343Mt from 5.055Mt in 2016, but concrete volumes were down 7.1 per cent to 2.992Mm³.

Revenues fell 12.5 per cent YoY to COP2270bn and EBITDA saw a 44.3 per cent drop to COP371.7bn when compared with COP668bn reported in 2016.  As a result, the EBITDA margin contracted from 25.7 per cent in 2016 to 16.4 per cent.

Caribbean and Central America

There was a positive development in sales volumes in the Caribbean and Central America with cement volumes up 2.3 per cent to 5.065Mt and ready-mixed concrete volumes advancing 4.3 per cent to 444,000m³.

Revenues improved by 5.3 per cent YoY to US$580m from US$551m reported a year earlier, but the region's EBITDA fell 18.5 per cent to US$173m from US$212m in 2016. The Caribbean and Central America EBITDA margin declined from 38.4 per cent to 29.8 per cent in 2017.