Argos achieves revenues of COP2.1trn in 2Q20
From April to June 2020, Argos, part of Grupo Argos, reported revenues of COP2.1trn (US$553.5m), which represents a contraction of 9.1 per cent compared to the same quarter of last year. These figures were caused in part by lower volumes associated with lockdowns and the mandatory closings of operations in many markets.
Argos partially offset the decrease in volumes thanks to the resilience of the construction industry in the USA and the exchange rate of the Colombian peso, which continued to devaluate.
The adjusted EBITDA stands at COP414,000m (US$108.4m), down 6.4 per cent, and has been positively impacted by the savings initiatives achieved within the RESET programme during the quarter, which represented US$71m. The consolidated EBITDA in the 1H20 closed at COP57,000m (US$205.3m) with a decrease of four per cent compared to the 1H19.
Cement volumes during the 2Q20 reached 3.2Mt, a decrease of 23.3 per cent, and ready-mix amounted to 1.9Mm3, down 18.8 per cent. Figures were affected mainly by the quarantine measures in Colombia as well as in Caribbean and Central American countries.
"Even though all economies are forecasting a significant slowdown, we are closing the first half with satisfactory results, given the circumstances and with very good liquidity position. These were mainly boosted by our people's commitment to the implementation of the health and safety protocols, the savings initiatives contained in RESET, along with a better-than-expected dynamic in the United States and some of our markets in the Caribbean," said Juan Esteban Calle, Argos' CEO.
Regional performances
In the USA Argos obtained revenues of US$387m, a decrease of 5.2 per cent compared to the 2Q19. EBITDA was US$80m, down 2.3 per cent YoY. The US market continued to demonstrate its productivity despite the pandemic’s evolution in states like Texas and Florida. Cement volumes decreased by 5.8 per cent, primarily affected by the stringency of the closure measures in the northeast, as well as by the reduced demand from the wholesale segment throughout the country. Volumes of concrete increased 2.8 per cent in comparable terms, when excluding the divestment of operations in 2019. This is a result of the accumulation of orders and positive market conditions.
Argos estimates a good performance in the residential segment in the short term, driven by the low mortgage interest rate in the markets. Concerning the infrastructure segment, there is an expectation of an aid package, either in the form of a new bill passed by the Congress or a renewal of the FAST Act to further boost the country's recovery.
In Colombia revenues totalled COP316,000m (US$79.6m), representing a decrease of 44.2 per cent, and was affected by lower volumes due to the total lockdown in the country at the start of the second quarter, followed by a gradual reopening as of mid-April. Likewise, EBITDA stood at COP43,000m (US$10.3m), falling 61.9 per cent.
Due to the quarantine, shipments of cement and ready-mix were at 636,000t and 322,000Mm3 respectively, representing decreases of 46.5 per cent and 55.8 per cent, respectively. It is important to mention that, with the progressive recovery, the volumes in June were close to 80 per cent of the average demand during the months prior the pandemic. EBITDA in this month was 15 per cent higher than that of June 2019.
Regarding market dynamics, the residential segment has shown an improvement in the last two months but has not yet reached its full potential. In Colombia the government has announced subsidies for 200,000 homes to be divided equally between low-cost housing and non-low-cost housing, which would positively impact the residential segment in the medium-term. Regarding infrastructure, 5G projects were announced with an estimated investment of COP20trn in the first wave, which could begin the structuring process in early 2021.
In the Caribbean and Central America, Argos revenues represented US$87m during the 2Q20, with a reduction of 38.8 per cent compared to the same period in 2019. EBITDA declined by 40.6 per cent. The savings initiatives carried out in the region, which was US$10m, also contributed to the stability of the EBITDA margin, which was relatively similar to the same quarter of 2019, with a variation of 0.8 per cent. This stability was due to the strong recovery of countries such as Honduras and the Dominican Republic during June, and Haiti's performance throughout the quarter.
During the 2Q20 most countries in the region experienced total or partial lockdowns that affected cement and ready-mix volumes, which decreased 23.9 per cent and 90.6 per cent, respectively. Panama only started its partial reopening from the first weeks of June, when the reactivation of some infrastructure projects was allowed. As a result, Panama managed to recover volumes in June by 65 per cent compared to June 2019.
