Cementos Argos 1H results impacted by challenging Colombian market

Cementos Argos released its 2Q18 results this week with revenues up by 1.4 per cent at COP2.184trn (US$726bn) from COP2.154trn in 2Q17. The 1H18 revenue amounted to COP4.092trn, down from COP4.231trn in 1H17, a fall of 3.3 per cent. EBITDA and net income were affected by the US$24m fine imposed by the Superintendence and Commerce in Colombia. 2Q18 EBITDA amounted to COP328bn, down 11.2 per cent on the COP370bn of 2Q17. Adjusted EBITDA, excluding the fine reached COP404bn in 2Q18, was up 5.9 per cent YoY.

Cementos Argos saw cement volumes edge up by 0.9 per cent in 2Q18. Cement volumes amounted to 4.205Mt in the period against 4.169Mt in 2Q17, but for 1H18 cement volumes reached 7.889Mt, down 1.5 per cent on the 8.010Mt of 1H17. 


Ready-mix volumes in 2Q18 rose by one per cent to 2.747Mm³ from 2.719Mm³ in 2Q17, but slipped to 5.188Mm³ in 1H18 from 5.358Mm³ in 1H17, a fall of 3.2 per cent.

 Colombia's market leader in cement and concrete reported strong 2Q18 results in the Caribbean and Central American region for cement volumes, stable performance in the USA for ready-mix and cement but a fall in volumes in Colombia.

Colombia – disappointing 1H18 results
The Colombian market has seen a sharp fall in cement demand, which is reflected in Cementos Argos’ domestic volumes. In 2Q18 cement volumes in the domestic market fell 2.1 per cent to 1.294Mt from 1.322Mt in 2Q18 and in the first six months of 2018 they reached 2.459Mt, down 8.2 per cent in 2.679Mt in 1H17. In 1H18 he Colombian market accounted for 31.2 per cent of the group’s cement volumes.

Ready-mix volumes in the producer's homeland were more stable at 743Mm³ in 2Q18 from 767Mm³ in 2Q17, down 3.1 per cent. Over the 1H18, ready-mix volumes slipped further behind at 1.403Mm³ compared to 1.549Mm³ in 1H17, a drop of 9.4 per cent.

Colombian revenues rose slightly in 2Q18 to COP568bn up 0.9 per cent from COP563bn in 2Q17. Over the 1H18 revenues fell 6.3 per cent to COP1.088bn from COP1.162bn in 1H17. Non-adjusted EBITDA was down 74.2 per cent in 2Q18 at COP21bn compared to COP81bn in 2Q17, while 1H18 EBITDA registered COP194.2bn compared to COP163bn, up 18.8 per cent. Adjusted 2Q EBITDA was up 4.3 per cent to COP96bn while for 1H it advanced 6.6 per cent to COP198.4bn.

USA – ready-mix volumes are climbing
Cement volumes in the US account for 36.1 per cent of the group's cement volumes in 1H18. In the April-June 2018 period volumes recovered to 1.594Mt, up 3.2 per cent from 1.545Mt in 2Q17. Overall, 1H18 volumes were down 1.4 per cent to 2.845Mt compared to 2.886Mt in 1H17. There was double-digit growth in cement volumes in the Deep South and single-digit growth in Texas and Florida, reported Argos.


The US market showed positive signs for ready-mix volumes, which rose to 1.919Mm³ in 2Q18, up from 1.841Mm³ in 2Q17. For the first six months of the year volumes were stable at 3.584Mm³ compared to 3.580Mm³ in 1H17. The group's ready-mix volumes were strongest in the south-central zone, which saw volumes increase by 5.7 per cent in 1H18. The USA now accounts for 70 per cent of the group's ready-mix volumes.

US revenues were up five per cent at US$417m in 2Q18 from US$397m in 2Q17, but over the 1H18 they slipped 0.5 per cent to US$755m compared to US$759m in 1H17.

Meanwhile, EBITDA rose13.2 per cent in 2Q18 to US$75.2m from US$66.4m in 2Q17 and were up 9.4 per cent for 1H18 at US$108.1m compared to US$98.8m in 1H17.

Caribbean and Central America – cement volumes lead the way
Caribbean and Central American cement volumes were pretty much unchanged in 2Q18 at 1.317Mt compared to 1.302Mt in 2Q17, but 1H18 volumes had increased by 5.8 per cent to 2.586Mt from 2.445Mt in 1H17. At the end of June, the region's cement volumes accounted for 32.8 per cent of the company's total cement volumes.

The positive 2Q18 for cement volumes in local markets of the Caribbean and Central America was reflected in 3.8 per cent growth at 0.925Mt compared to 0.891Mt in 2Q17. Haiti saw volumes rise significantly YoY by 29.3 per cent, Puerto Rico by 16 per cent and Dominican Republic by 14.5 per cent during the period. Local market volumes in the region also rose in 1H18 to 1.814Mt, up from 1.730Mt in 1H17, or by 4.9 per cent.


There was less good news in the 2Q18 for ready-mix volumes in the region which amounted to 0.085Mm³, 23.2 per cent down from 0.111Mm³ in 2Q17. 1H18 ready-mix volumes dropped 12.7 per cent to 0.200Mm³ from 0.229Mm³ in 1H17. The construction strike in Panama impacted ready-mix volumes to some extent. 

Revenues for the region in 2Q18 rose 2.7 per cent to US$151m from US$147m in 2Q17 and by 2.6 per cent in 1H18 to US$299m when compared with US$291m in 1H17.

EBITDA rose 4.1 per cent YoY to US$49m in 2Q18 from US$47m in 2Q17 and by 3.9 per cent in 1H18 at US$99m from US$95m in 1H17.



2018 outlook
Cementos Argos gives an EBITDA guidance of US$270-280m FY18 and expects continuous market recovery in the USA on the back of the residential sector and infrastructure programmes. 


The Colombian market is forecast to see a mid-single digit decrease for cement in FY18. Dispatches for infrastructure projects in Colombia in FY18 of 200,000t are envisaged with peak years in 2019-20 offsetting the housing market dip.

The Caribbean and Central America will see more stable growth with Honduras and Panama expected to see the biggest gains in infrastructure development.