Fitch: Colombia's positive cement cycle partially mitigates inflationary impacts

Fitch Ratings has said Colombian cement companies face a challenging operating environment as rising commodity and energy prices, global supply chain disruptions and political uncertainty pressure their cost structures. Since 2021, the companies have benefited from the recovery in demand, marked by construction of housing and infrastructure projects in the main markets where they operate. The rating's agency notes that sound volumes should sustain revenue growth, even though at lower pace, and should help to partially mitigate EBITDA loss due to margin deterioration.

Fitch estimates revenue growth for 2022 close to low double digits, while margins should drop between 100 and 150 basis points. Inflationary pressures, new supply chain constrains and the increase in interest rates could undermine consumer purchasing power weakening pricing strategies and profitability margins, it added.

The domestic price of cement is between US$100-105/t, above levels recorded in recent years that were under US$100/t, even reaching levels close to USD80/t Fitch highlights. Cement shipments as of March 2022 reached 13.1Mt in the last 12 months, up 11.8 per cent YoY to reach all-time high levels.