Cementos Argos’ Revenue Drops in First Quarter

Cementos Argos’ consolidated revenues for the first quarter of 2017 were COP 2.08 trillion ($719 million), down 6.1 percent year-over-year, and EBITDA was COP 274 billion ($94.7 million), down 35.5 percent. The results were impacted mainly by operations in Colombia and the expected seasonality in the U.S. after the consolidation of the Martinsburg, W.Va., plant and eight related terminals from HeidelbergCement.

Consolidated volumes were reported at an increase of 11.5 percent in cement and a decrease of 6.0 percent in ready-mixed concrete. Cement volumes in the U.S. were up 43.4 percent, reaching 1.3 million metric tons (Mt) during the quarter, and 14 percent, excluding the Martinsburg operations. Ready mixed volumes were 1.7 million cu. m, a decrease of 8.7 percent compared to the first quarter 2016, due to the effect of lower oil prices in the Houston market and above average rain levels. However, the Portland Cement Association (PCA) expects an increase in cement demand of 3.3 percent for Texas after two years of decrease.

The positive dynamics of the residential and non-residential markets, as well as the potential demand for infrastructure, are expected to expand cement consumption to reach almost pre- crisis levels of 120 million tons in the coming years. As a local producer, Argos will benefit from the rise in consumption. The industry utilization rate is still low at 79 percent, when compared with the pre-crisis level of 95 percent. Argos’ utilization rate mirrors the industry at 79 percent. As utilization increases, the company expects its 10 ports to play a vital role because of their capacity to import more than 4 million tons.

Colombian cement dispatches in the first quarter increased by 10.3 percent, reaching 1.4 Mt. The Colombian National Administrative Department of Statistics reported a 0.4 percent increase in volumes for the industry. Argos’ commercial and price strategy allowed the company to significantly recover 320 basis points of market share, mainly in the central and northern region.

In the ready-mixed concrete business, Argos dispatched 782,000 cu. m for the quarter, 2.3 percent less than the same period of last year. Nevertheless, the company gained 160 basis points of market share as of February, explained by an increase of participation in the ready-mixed volumes for the residential segment.

The company remains confident regarding the outlook for this market based on a diversified backlog, which covers important housing, commercial and infrastructure projects. In the commercial segment, Argos is supplying cement and ready mixed for the three largest shopping malls currently under construction in Colombia. In the infrastructure sector, Argos secured the leadership position in the first wave of 4G projects with a market share of 82 percent in cement and 70 percent in ready mixed, based on functional units.

For the Caribbean and Central America region, in the first quarter Argos commercialized 1.14 Mt of cement, 10.7 percent less than first quarter of last year. The drop was driven by exports and trading, which fell 40.1 percent due to the normal variability of these businesses. Excluding the latter, the company’s dispatches grew 8.6 percent fostered mainly by an increase of 20 percent in Honduras and 2 percent in Panama after eliminating the canal-base effect. Lastly, the volumes for this quarter reflect the new acquisition in Puerto Rico.

Volumes for the ready-mixed concrete business reached levels of 119,000 cu. m, 16.8 percent above those in first quarter 2016, explained mainly by an increase in demand in Panama. For 2017, Argos expects a stable growth in cement and ready mixed driven by public investments in infrastructure of around $4 billion announced by the governments of Honduras and Panama for the construction of roads, bridges, houses, ports, etc. This is boosted by the better conditions on the fiscal side in both countries.

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