Wednesday, September 20, 2017

Written by August 10 2017 0

Medellin-based textiles giant Fabricato announced August 10 that its first-half (1H) 2017 sales fell 5.6% year-on-year, to COP$90.8 billion (US$30 million), while earnings before interest, taxes, depreciation and amortization (EBITDA) margin fell by more than half, to 2.7%.

On the up-side, Fabricato recorded a COP$45 billion (US$15 million) gain on the transfer of its 70% fiduciary rights in the “Pantex” real estate development project to the promoter-builder. This boosted net income 17.8% year-on-year, to COP$16 billion (US$5.3 million)

“The transfer of fiduciary rights is executed with due guarantees, and said transfer does not imply or represent for Fabricato any impairment or decrease in the quality or valuation of the guarantees granted by the promoter-builder group in favor of the company,” according to the company.

‘Somewhat Better’ 2H Outlook

“The business environment of the second quarter of 2017 showed no improvement compared to the first quarter, which was admittedly one of the worst for the Colombian economy since the crisis of 2008-2009,” according to Fabricato.

“As for the textile sector, the demand rebound for finished [domestically produced clothing] products was not perceived, in spite of the constant promotions that we have seen in the points of sale during the whole semester [and also because of] increased importation of finishing clothing, the result of the change in the tariff policy produced in November 2016.

“Another relevant element was the perceived increase in technical contraband (under-invoicing) in the period. This is an unresolved issue for a long time, which is causing damage to the sector.

“Some elements allow a somewhat better scenario to be projected in the [2017] second half : (1) inflation and the interest rates to the downside; (2) the consumer confidence index maintains a recovery trend; and (3) the commitments assumed publicly by the [port] authorities to combat some practices of unfair competition.

“We understand that at Fabricato, our state-of-the-art technology and resource optimization were decisive in cushioning the negative impacts. But in any case, in a capital- and labor-intensive sector, reducing the utilization of installed capacity will always lead to a negative effect on our results.

“Fabricato reduced its [employed] installed capacity to 80% in the period, with the objective of optimizing its cash flow and consequently preserving the capacity to comply with all contracted obligations,” the company added.

On the labor front, Fabricato took a COP$13.8 billion (US$4.6 million) charge for eliminating 200 positions at the company -- although this move will cut future payroll expenses by about COP$900 million each month.

Written by August 09 2017 0

The U.S. Agency for International Development (USAID) announced August 8 that its “Oro Legal” program has already helped 205 miners and 176 informal/illegal gold-mining families in Antioquia convert to safer, legal mining – with many more miners targeted for help by 2020.

Working with the departmental government of Antioquia, “Oro Legal” projects (and the “Bioredd” predecessor projects) have already converted dozens of “mining production units” (“UPM” in Spanish initials) to legal operations, 36 of which now operate through service contracts with responsible miners that obey Colombia’s environmental, fiscal and social laws.

Thanks to “Oro Legal” educational efforts, newly formalized miners have helped slash annual toxic mercury dumping by seven tons, while 770 hectares of lands deforested and wrecked by irresponsible mining have now been reforested, according to USAID.

In three key gold-mining areas -- Buriticá, San Roque and El Bagre – legal miners produced eight tons of gold last year, according to the agency.

However, an estimated 1,664 illegal mines are still operating in the area, when including nearby townships including Caucasia, Cáceres, Nechi, El Bagre, Zaragoza and Tarazá, according to the agency.

“With a team of technicians and professionals, ‘Oro Legal’ helps small miners identify routes to legalization, which permits them to obtain [formal mining] rights,” according to USAID.

In areas where formal mining companies have yet to hold mining titles, “Oro Legal” also helps informal miners obtain legal-claim areas, according to the agency.

In areas where mining companies already have legal titles, the Oro Legal program helps illegal miners obtain subcontracts to work with legal miners -- while simultaneously preventing toxic mercury use.

Through July 2017, the “Oro Legal” projects have already legalized 38 “UPM” mine operations, of which six are in Antioquia’s Bajo Cauca region, 19 in the Northeast region and 13 in Buriticá, Don Matías and Barbosa, according to the agency.

Another 114 UPM operations are in process of legalization, 62 of which are located in Bajo Cauca, 36 in the Northeast and 16 others in the municipalities of Puerto Berrio, Buriticá, Don Matías and Barbosa, according to the agency.

Oro Legal also coordinated with Antioquia Governor Luis Perez on another 29 formalization subcontracts.

The agency also brought technical assistance to another 17 “UPM” operations in titled mining areas owned by Canada-based Gran Colombia Gold.

As for the future, Oro Legal aims to legalize 220 artesinal mining operations in Antioquia and Choco regions, involving about 17% of currently estimated illegal gold mining operations in the area.

This project would help some 3,800 mining families diversify incomes with alternative businesses, slash mercury dumping by 55 tons/year and legalize about US$280 million of currently illegal gold production, according to the agency.

Some Miners Refuse Help, Push Strike

Despite these good-faith efforts to promote environmentally and fiscally responsible mining, some miners don’t want the help – and some have mounted violent protests against legal mining over the past two weeks.

According to an August 8 report from Colombian daily newspaper El Tiempo – quoting statements from Antioquia Governor Perez – Colombian Army troops recently encountered caches of explosives and weapons used by violent demonstrators.

Meanwhile, another group of demonstrators protested outside the Governor’s offices this week in Medellin, with signs attacking multinational mining companies -- companies that don’t dump mercury, pay all required taxes and royalties, and  don’t support criminal groups that use violence and extortion in mining areas.

In contrast, informal, illegal miners “are not prepared for the ‘no-mercury’ mining norm,” the report quoted “Conalminercol” informal-miner association leader Rubén Darío Gómez as saying.

Meanwhile, Canada-based Gran Colombia Gold has sent tons of food and water to Segovia and Remedios where strikers have blocked roads. But some strikers/demonstrators armed with machetes and clubs stole the supplies from Gran Colombia workers, company spokesman José Ignacio Noguera was quoted as saying.

On a related front, another strike leader – Ramiro Restrepo, president of informal-miner association Asomineros – was quoted as saying that new legal-mining rules in Antioquia have made it nearly impossible for illegal-informal miners to sell their gold.

Now, such miners are required to get proper licenses and environmental permits. But informal miners don’t have time to do all this paperwork, Restrepo was quoted as saying.

Ironically, many of these illegal miners are now showing that they do have sufficient time to mount protests -- sometimes violent -- against legal mining and block roads to mining towns, preventing access to critical food and water supplies.

What's more, six employees of Canada-based legal miner Continental Gold died in a suspicious explosion two weeks ago, following an attack by illegal miners (see "Violence Slams Legitimate Canadian Gold Miners in Antioquia,"  Medellin Herald, August 1, 2017) .

Written by August 01 2017 0

Toronto, Canada-based Continental Gold announced July 29 that six of its security contractors died following a suspicious explosion July 28 at an illegal mine nearby its Buritica, Antioquia gold mine.

Just three days later, fellow Toronto-based miner Gran Colombia Gold announced August 1 that it is trying to deal with a massive outbreak of violence affecting its operations in Segovia and Remedios, Antioquia.

As for the Continental mining incident, “the contractors were performing routine underground inspections of a government-closed illegal mine as ordered by the national government of Colombia in order to maintain its post-intervention strategy,” Continental explained.

“Upon entering the underground mine, the contractors were accosted by illegal miners, followed by a subsequent explosion. A seventh contractor managed to escape and immediately notified all relevant authorities.”

“It is shameful that this incident has tarnished the remarkable progress made in establishing peace in the municipality over the past 18 months,” added Continental CEO Ari Sussman. “These efforts have been fully embraced by the local community, which has publicly voiced their strong preference for the benefits of legal versus illegal activities.”

Meanwhile, Gran Colombia Gold stated that despite the outbreak of renewed violence by illegal miners near its fully licensed, legal mining operations, the company “continues to negotiate in good faith with the Mesa Minera [association of mostly illegal and artesinal miners] of Segovia and Remedios toward formalizing activities of illegal mines operating within its mining title despite the actions being taken by certain illegal miners to disrupt the company’s operations.”

“Over the last 10 days, the company has been monitoring the actions of the Mesa Minera, a local mining collective comprised in its majority by illegal miners, as they attempted to convene a civil disruption and protest in response to the increased measures being implemented by the Colombian government to restrict illegal mining.

“The company estimates that approximately 30% to 40% of its workers are currently able to attend [their mining duties]. In addition, over the weekend, an explosion damaged a pipeline owned by the company that supplies water to 1,200 residents in Remedios.”

Meanwhile, according to a news report from Medellin-based El Colombiano, more shots were fired and explosions detonated in confrontations between illegal miners and Colombia’s “Esmad” riot police on July 31.

The rioters attacked police about three kilometers outside of Segovia where they had set-up a roadblock, according to Segovia Mayor Gustavo Tobon. Six policemen suffered injuries in the attack – five hurt by home-made bombs thrown by demonstrators and a sixth hit by shotgun fire.

However, Mesa Minera president Eliober Castañeda was quoted as saying that the violence was caused by police trying to break the roadblock and by shooting tear-gas canisters at protesters.

El Colombiano also quoted Jaime Arteaga -- director of the “Plan Buriticá” legal-mining promotional organization -- as saying that illegal miners have often used bombs, firearms or set fire to old tires inside mines to scare-off or attempt to asfixiate security officials that monitor illegal mines in the area. Buritica Mayor Humberto Castaño added that police and mining authorites have shuttered 213 illegal mines in the area over the past 18 months.

“Plan Buriticá” is led by the Mayor of Buriticá, the departmental government of Antioquia, plus 25 civil associations, companies and international organizations. The association is partly funded by the Interamerican Development Bank (IDB), of which the government of Colombia is a member.

Written by July 29 2017 0

Medellin-based multinational packaged-foods giant Grupo Nutresa announced July 28 that its first-half 2017 net profit rose 1.9% year-on-year, to COP$236 billion (US$78.7 million).

Earnings before interest, taxes, depreciation and amortization (EBITDA) dipped by 1.3% year-on-year, to COP$527 billion (US$176 million), according to the company.

Sales inside Colombia grew 3.9% during the latest period, to COP$2.7 trillion (US$901 million), while sales abroad (excluding Venezuela) grew 5.5% year-on-year, to US$516 million.

The company also touted recent successful launches of “Tosh” branded baked-snacks and cold-infusion drink lines, as well as the new “Bénet” brand of nutritional powdered beverages.

“Gross profit, of COP$1.8 trillion [US$600 million], increased by 1.1% over the same period last year as a result of various efforts in productivity, the constant search for greater efficiencies, and the favorable prices of some raw materials,” according to Nutresa.

“The group’s operating profit amounts to COP$397.383 million [US$132 million], with an operating margin of 9.6%, which takes into account an increase in sales expenses associated with greater investments in our distribution channels,” according to the company.

Nutresa describes itself as the “the leader in processed foods in Colombia (60.5% market share) and one of the most relevant players in the sector in Latin America, with consolidated sales of COP$8.7 trillion [US$2.9 billion] in eight business units: cold cuts, biscuits, chocolates, Tresmontes Lucchetti [packaged foods], coffee, retail food, ice cream and pasta.”

The company boasts of a direct operating presence in 14 countries, with international sales in more than 80 countries.

Written by July 26 2017 0

Medellin-based multinational utilities giant Grupo EPM announced July 25 that its first-half 2017 earnings before interest, taxes, depreciation and amortization (EBITDA) rose 33% year-on-year, to COP$2.6 trillion (US$862 million), while net profits rose 78% year-on-year, to COP$1 trillion (US$331 million).

The city of Medellin – EPM’s sole shareholder – so far this year has netted COP$785 billion (US$260 million) of an expected full-year COP$1.6 trillion (US$530 million) in profit contribution, according to the company.

So far this year, EPM also has invested COP$1.6 trillion (US$530 million) in infrastructure in Colombia, with COP$770 billion (US$255 million) of that dedicated to the continuing construction of the US$5.5 billion, 2.4-gigawatt “Hidroituango” hydroelectric plant in Antioquia, according to the company.

EPM’s Medellin-based operations contributed 47% of earnings, while foreign subsidiaries contributed 35%. Colombian national subsidiaries contributed the remaining 18%, according to the company.

EBITDA improvement came despite lower electric-power prices in Colombia, but were offset by productivity improvements, EPM general manager Jorge Londoño de la Cuesta, said.

EPM Group’s return on equity so far this year is 12%, up from just 4% in first-half 2016, he added.

“The higher profitability is explained by the better operating results of 2017, compared to a first half of 2016 [that was] impacted by the El Niño phenomenon and by the [fire and power-outage] incident recorded at the Guatapé hydroelectric plant,” according to the company.

Financial indebtedness stands at 38%, “similar to last year. At the same time, the debt-to-EBITDA [ratio] indicator of the EPM Group closed the first half at 3.56, compared to 4.46 in 2016,” according to the company.

Total assets now stand at COP$45.1 trillion (US$14.9 billion), up 5%, while liabilities now total COP$25.6 trillion (US$8.5 billion), up 10%. Equity now stands at COP$19.5 trillion (US$6.4 billion), down 1%, while cash and cash equivalents now total COP$1.7 trillion (US$563 million), according to the company.

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Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

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