Cementos Argos reports 13% rise in 3Q net income

Cementos Argos revenues edged up 1.1 per cent to COP2218bn (US$692.6m) in the third quarter of 2018 from COP2194bn in the 3Q17. In terms of sales volumes, the company increased its cement sales by 2.2 per cent to 4.242Mt and ready-mix concrete (RMC) volumes by 1.3 per cent to 2.699Mm³ in the quarter, reflecting improved dynamics in all regions.

The company's EBITDA increased 4.3 per cent YoY to COP425bn from COP407bn in the year-ago period while the EBITDA margin improved to 19.2 per cent from 18.6 per cent. Adjusted EBITDA, which excludes non-recurring severance payments related with the BEST programme, slips from COP428bn in the 3Q17 to COP426bn in the 3Q18. The adjusted EBITDA margin fell by 31.6 per cent basis points from 19.5 per cent to 19.2 per cent. Net income advanced by 12.9 per cent to COP75bn and the net margin improved by 35 basis points to 3.3 per cent.

“It’s been a year full of challenges and opportunities in which we have been focused on the strengthening of our value proposition, looking forward to be a strategic ally for our clients’ projects; improving the competitiveness of our operations through the execution of BEST, ensuring we have the financial flexibility to mitigate market risks, taking advantage of growth opportunities and becoming a leaner, more innovative and sustainable company for the years to come,” said Juan Esteban Calle, CEO of Cementos Argos.

In its domestic market of Colombia, the company reported a 1.7 per cent YoY rise in cement volumes to 1.359Mt and RMC sales were up by 3.2 per cent to 765Mm³. Revenues advanced by 5.1 per cent YoY to COP593bn in the third quarter of 2018 while EBITDA improved by 15.3 per cent YoY to COP115bn. Growth was driven by a seven per cent increase in bagged cement sales, reflecting an improvement in consumer confidence, as well as a 20 per cent rise in dispatches to ready-mix businesses as infrastructure programmes are being implemented. In addition, a 53 per cent rise in RMC deliveries to civil works supported the company’s revenues.

Cement volumes in the US increased 3.2 per cent to 1.562Mt while RMC volumes remained largely stable at 1.819Mm³. Cement sales were particularly in Florida, where they increased by double-digit figures. However, lower RMC volumes in the company’s South Centre area affected RMC sales. As a result revenues dipped by 2.7 per cent to US$393m and EBITDA remained level at 73.1 per cent.

In the Caribbean/Central America region offtake in local cement markets advanced by 5.5 per cent YoY to 926,000t, driven by a positive performance in the Dominican Republic (+22.3 per cent), Puerto Rico (+53.6 per cent) and the eastern Caribbean (+31.7 per cent). Panama and Honduras reported a fall in sales results of 3.1 and 4.9 per cent, respectively. However, the company expects to see improvement in Panama based on the pipeline of infrastructure projects, which include the IV Bridge over the Canal, the third metro line and the Corredor de las Playas. In Honduras, the economic outlook is positive, supported by a three per cent YtD rise in remittances in August and a 5.8 per cent in foreign investment in the 2H18. In addition, cement trading and export volumes dropped by 7.1 per cent to 396,000t in the third quarter. RMC volumes were up by 5.4 per cent to 115,000m3, supported by a 2.5 per cent YoY increase in sales in Panama and a 14 per cent growth in the Dominican Republic. In terms of revenues, an 8.1 per cent increase was reported to US$156m in the 3Q18 from US$145m in the year-ago period. EBITDA edged up by 3.5 per cent to US$44m.

January-September 2018 performance
For the first nine months of 2018, Cementos Argos reported a 1.8 per cent fall in revenues to COP6310bn from COP6426bn in the 9M17. However, EBITDA rose by 6.1 per cent to COP1124bn from COP1060bn in the year-ago period, leading to an margin improvement of 132.4 basis points to 17.8 per cent from 16.5 per cent. In terms of adjusted EBITDA, a 2.3 per cent gain was noted to COP1130bn. The adjusted EBITDA margin advanced by 72.6 basis points to 17.9 per cent.

In Colombia revenues declined by 2.6 per cent to COP1682bn as cement deliveries fell by 4.9 per cent to 3.817Mt and RMC dispatches were 5.3 per cent lower at 2.169Mm3 when compared with the 9M17. This result in a 2.6 per cent fall in revenues to COP1682bn from COP1726bn in the 9M17. EBITDA increased by 17.5 per cent to COP309bn in the 9M18 from COP263bn in the previous year’s equivalent period.

Deliveries by Cementos Argos in the US market remained largely stable, edging up by 0.2 per cent YoY in both the cement and RMC segments. Cement sales volumes reached 4.406Mt and for RMC dispatches were around the 5.403Mm3. However, revenues fell by 1.3 per cent to US$1147m but EBITDA were up 5.4 per cent to US$181.2m when compared with the 9M17.

In the Caribbean the performance of the company’s cement division was positive with total cement volumes improving 4.2 per cent YoY to 3.908Mt with local markets seeing a 5.1 per cent rise in offtake to 2.74Mt, and trading and exports reporting a 2.3 per cent gain to 1.168Mt. However, RMC deliveries fell by 6.9 per cent to 316,000m3 when compared with the 9M17. As a result, revenues advanced 4.4 per cent to US$455m in the January-September 2018 period from US$436m in the year-ago period. EBITDA improved 3.8 per cent YoY to US$142m.