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Written by February 27 2018 0

Medellin-based multinational electric power transmission giant ISA announced February 26 that full-year 2017 net profits rose 44.5% year-on-year, to COP$1.1 trillion (US$386 million), largely thanks to improved financial results in its Brazilian electric-power operations.

Earnings before interest, taxes, depreciation and amortization (EBITDA) hit COP$4.4 trillion (US$1.5 billion) for full-year 2017, while gross revenues rose to COP$6.9 trillion (US$2.4 billion), according to the company.

In Colombia, operating revenues dipped by 0.9% year-on-year, to US$570 million, while Brazil operating revenues jumped 75.6% year-on-year, to US$753 million.

Revenues in Peru fell 26% year-on-year, to US$473 million, while revenues in Chile slipped 6.9%, to US$399 million.

ISA not only builds and operates power transmission lines in Colombia, but also has highway concessions, telecom lines and network management systems in neighboring countries.

In fourth-quarter (4Q) 2017, ISA profits benefitted from the entry into operation of power transmission lines in Peru, the expansion of a substation and connecting power lines in Chile, and upgrades in Brazilian transmission systems.

As for over-all 4Q 2017 results, profits rose 57% year-on-year, to COP$269 billion (US$94 million), mainly because of reduced costs in Colombia, according to the company

However, operating revenues corporate-wide dipped 7.6% year-on-year in 4Q 2017, mainly because of a dip in construction revenues in Peru and Chile.

Brazil accounted for 30.5% of operating revenues in 4Q 2017, followed by Colombia (25.8%), Perú (22%) and Chile (19%), according to the company.

The company’s data-management systems division saw income rise in 2017 in part thanks to new control systems installed for Medellin’s “Metro” public-transit system, ISA added.

As for capital investments in 4Q 2017, ISA invested COP$1 trillion (US$350 million), including COP$799 billion (US$280 million) for Colombian power substations in Ituango and Caracoli, and new transmission lines between Chinú-Montería-Urabá and Cerromatoso-Chinú-Copey, the company said.

Written by February 27 2018 0

Medellin-based multinational foods giant Grupo Nutresa on February 22 reported a 6.2% year-on-year rise in profits for full-year 2017, hitting COP$420 billion (US$147 million).

Consolidated sales rose 2.4% year-on-year, to COP$8.7 trillion (US$3 billion), after excluding sales in economically failing “socialist” Venezuela.

In Colombia, sales rose 2.5% year-on-year, to COP$5.5 trillion (US$1.9 billion), representing 63.2% of Grupo Nutresa’s consolidated revenues.

Sales abroad (excluding Venezuela) rose 5.7% year-on-year, to US$1.1 billion, accounting for 36.8% of Grupo Nutresa’s total sales.

“Furthermore, exports from Colombia presented strong positive dynamics over the year, growing 19.4% in U.S. dollars,” according to the company.

“Gross profit improved by 3.5% in relation to 2016, amounting to COP$3.8 trillion [US$1.3 billion]. This outcome is the result of a strong commodities sourcing and management strategy, the favorable prices of some commodities, and the productivity programs set in motion by the company,” Nutresa added.

As for earnings before interest, taxes, depreciation and amortization (EBITDA), Nutresa realized a modest 1.5% gain year-on-year, to COP$1.04 trillion (US$364 million).

“This result is explained to a large extent by moderate sales in our local market, the execution of various productivity-focused projects, and a sensible pricing strategy focused on protecting volumes,” according to the company.

Meanwhile, Nutresa saw a 4.5% growth in total assets, closing the year at COP$14.3 trillion (US$5 billion). “This increase is largely due to a greater cash generation during the period and the higher valuation of the investments in [Medellin-based multinational companies] Grupo Sura and Grupo Argos,” according to Nutresa.

Written by February 26 2018 0

Medellin-based international banking giant Bancolombia announced February 21 that its fourth quarter (4Q) 2017 net income fell 20.25% year-on-year, to COP$902 billion (US$318 million), from COP$1.13 trillion (US$398 million) in 4Q 2016.

Net loans grew 4.9% in 4Q 2017 versus 4Q 2016 – an indicator of “moderation in credit demand in Colombia,” according to the company.

Meanwhile, investments rose by 25.39% in 4Q 2017 versus 4Q 2016, to COP$16 trillion (US$5.6 billion), according to the company.

For full-year 2017, consolidated net income fell 9% year-on-year, to COP$2.6 trillion (US$916 million). However, compared to 3Q 2017 net income, 4Q 2017 net income rose 100% -- to COP$902 billion (US$318 million), the company noted.

Net interest income in 4Q 2017 grew 7.4% year-on-year, to COP$2.65 trillion (US$934 million), “explained by higher volumes of peso-denominated loans and the year-on-year increase in net interest margin,” according to Bancolombia.

Net fees rose 11.3% year-on-year, to COP$658 billion (US$232 million), “mainly driven by an increase in fees related to credit and debit cards, bancassurance, as well as trust services,” according to the company.

Provision charges for the latest quarter hit COP$930 billion (US$328 million) and the coverage ratio for 90-day past due loans was 164.2%. “These provisions allow us to maintain a solid coverage ratio amid a challenging environment, as new past-due loans totaled COP$622 billion [US$219 million] for the [latest] quarter,” the company added.

At year-end 2017, Bancolombia’s assets totaled COP$204 trillion (US$72 billion), up 3.9% year-on-year but down 0.1% compared to 3Q 2017. “The increase in total assets during the quarter is largely explained by the growth in loans, cash and reverse repurchase agreements,” according to Bancolombia.

The company also noted that during 4Q 2017, the Colombian peso depreciated 1.6% versus the U.S. dollar, while over the past 12 months, the peso appreciated 0.6%.

“As of December 31, 2017, our operations in Banco Agricola in El Salvador, Banistmo in Panama and BAM in Guatemala, represented 25% of total gross loans,” according to Bancolombia.

“Gross loans denominated in currencies other than COP -- originated by our operations in Central America and the offshore operation of Bancolombia Panama as well as the U.S. dollar-denominated loans in Colombia -- accounted for 34% and decreased 2.2% during 4Q 2017 (when expressed in COP), explained mainly by the reduction of the loan portfolio in dollars in Colombia,” according to the company.

“Total reserves (allowances in the balance sheet) for loan losses increased by 5.0% during the quarter and totaled COP$8.223 trillion [US$2.9 billion], equivalent to 5.1% of gross loans at the end of the quarter.

“As of 4Q 2017, Bancolombia’s goodwill and intangibles totaled COP$6.631 trillion [US$2.3 billion], increasing 1.6% compared to 3Q 2017. This variation is explained by the depreciation of the COP against the U.S. dollar during the quarter,” the company added.

At year-end 2017, Bancolombia’s liabilities totaled COP$179 trillion (US$63 billion), falling 0.7% from the end of 3Q 2017 and increasing 3.3% compared to 4Q 2016, according to the company.

Deposits by customers totaled COP$131.96 trillion (US$48 billion) or 73.5% of liabilities at the end of 4Q 2017, increasing 3.2% during the quarter and 5.9% over the last 12 months. The net loans-to-deposits ratio was 115.4% at the end of 4Q 2017, the company added.

“Bancolombia’s funding strategy during the last months has been to reduce the average life of time deposits and promote saving and checking accounts in the consumer segment in order to keep the funding cost at a minimum,” according to the company.

“The objective is to build and maintain ample liquidity and reduce the sensitivity of the balance sheet to cuts in interest rates,” the company added.

“During the quarter, the deterioration of loans increased mainly in the consumer segment as well as some deterioration in SMEs [small and medium enterprises]. Provisions as a percentage of the average gross loans were 2.3% for 4Q 2017 and 2.2% for 2017.

“Bancolombia maintains a strong balance sheet supported by an adequate level of loan loss reserves. Allowances for loan losses totaled COP7.46 trillion [US$2.6 billion], or 4.8% of total loans at the end of 4Q 2017, increasing as compared to 3Q 2017,” the company added.

“Income tax expense was COP$346 billion [US$122 million] for 4Q 2017, increasing 40.9% when compared to the income tax registered in 3Q 2017. Income tax expense for 2017 was COP$1.239 trillion [US$436 million] with and effective tax rate of 31.0%,” the company explained.

“The variation in the income tax between 4Q 2017 and 4Q 2016 was due to the fact that during 4Q 2016, there was a tax reversion in the provision of the income tax after the income statement was finalized, meaning there was certainty about the payable taxes based on the income generated during the fiscal period.

“Usually, this adjustment occurs at the end of each year. Additionally, there was a reversion for the compensation of fiscal credits and the tax reform approved in December 2016, had an impact on deferred taxes because statutory tax rates were lower than those previously estimated,” the company added.

Meanwhile, Bancolombia noted that on December 12, 2017, Standard & Poor’s Global Ratings downgraded the ratings of Bancolombia and its subsidiaries from BBB- to BB+, “in line with a downgrade in the rating of the Republic of Colombia.”

In a subsequent conference call with investment analysts, Bancolombia chief economist Juan Pablo Espinosa added that the bank expects Colombia’s GDP to grow by 2.5% this year -- up from 1.8% last year and just 1.6% in 4Q 2017 -- the result of “poor performance” in manufacturing, agriculture and retail sectors.

Meanwhile, Colombia is likely to see 3.4% inflation this year, down from earlier forecasts, Espinosa added. As for monetary policy, the Colombian central bank potentially could cut another 0.25% from its current rate levels, he predicted.

Written by February 26 2018 0

Medellin-based multinational retail giant Grupo Exito announced February 21 that its full-year 2017 net profits rose five-fold year-on-year, to COP$217 billion (US$76 million).

Exito credited the improvement “mainly to solid operating results in Brazil,” lower interest rates in Brazil and Colombia, and productivity improvements corporate-wide.

Gross revenues rose 9.4% year-on-year, to COP$56.4 trillion (US$19 billion), while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 24.4% year-on-year, to COP$3.6 trillion (US$1.27 billion), according to the company.

Synergies generated between its coordinated operations in Colombia, Brazil, Argentina and Uruguay are now valued at US$100 million in EBITDA, according to Exito.

In Brazil, its “Pão de Açúcar” food store operations saw 8.2% sales growth year-on-year (measured in Brazilian Reais).

But in Colombia, a 2.8% contraction in average family buying power (as measured by Nielsen surveys) hurt domestic sales and operating results.

Despite those economic headwinds in Colombia, Éxito still managed to achieve domestic operating earnings of COP$11.2 trillion (US$3.9 billion) and EBITDA margin in Colombia hit 5.7%, the company added.

Also in Colombia, Exito “continued to focus on strengthening of its omnicanal [multichannel]” formats including the “Surtimayorista” cash-and-carry stores and the “Carulla FreshMarket” food-store formats.

Surtimayorista saw a 52.5% sales growth year-on-year thanks in part to the opening of eight new stores. Those stores borrow heavily from the “Assai” format as employed in Brazil.

Meanwhile, the first “Carulla FreshMarket” store debuted in Bogota, featuring a novel vegetable garden inside the store -- enabling fresh-picked lettuce.

Also during 2017, Exito’s “e-commerce” sales in Colombia via computer and home deliveries grew 19% year-on-year, totaling COP$270 billion (US$95 million), according to the company. As a result. Éxito became Colombia’s number-one home-delivery service via its alliance with Rappi. Those sales grew 26% year-on-year.

The electronic “,” “Domicilios Exito y Carrulla” e-commerce home-delivery services, digital catalogs and its “marketplace” web sites also recorded 51 million visitors and 837,000 orders last year. The “marketplace” platform for vendors and corporate partners now totals 700 companies -- offering 50,000 products, according to Exito.

In addition, Exito now offers to pay customers that find cheaper prices at competing stores double the savings that they would have realized at a competitor.

Meanwhile, Éxito’s Colombia-based comercial real-estate division (Viva Malls) saw a 25% hike in sales by its retail occupants, according to the company.

As for Uruguay operations, store sales grew 7.7% year-on-year (measured in local currency), exceeding the 6.55% inflation rate, while EBITDA margin there hit 7.8% as measured in Colombian pesos. The Uruguay operation expanded by nine stores, rising to a total of 33 “Devoto Express” outlets.

In Argentina, Éxito’s real-estate division helped generate positive operating income, thanks in part to 170,000 square meters of space either remodeled or expanded at the San Juan and Rivera Indarte malls.

During 2017, Éxito added 69 new stores (either ground-up or conversions) corporate-wide. As a result, Éxito now has 1,573 stores: 574 in Colombia, 882 in Brazil, 88 in Uruguay and 29 in Argentina. Store space now totals 2.8 million square meters, while employee count stand at 140,000.

“Our strategic decision to diversify internationally is producing positive results for the organization,” added Éxito president Carlos Mario Giraldo.

“The competitive environment in Colombia is dynamic -- and we’re facing it with innovative options including a deepening of our strategies in electronic commerce, the recent alliance with Rappi to optimize time-of-delivery to homes, and the expansion of Surtimayorista, the cash-and-carry format.

“We have great opportunities to grow and monetize our activities with real estate in Colombia and Argentina, as well as with the start-up of the coalition with Bancolombia via the ‘Puntos Colombia’ [reward program],” Giraldo added.

The “Exito” credit card in Colombia has now grown to 2.6 million cardholders, while the “Viajes Exito” travel-agency service saw a 17% sales hike year-on-year, to 210,000 clients.

The “Movil Éxito” cell-phone service in Colombia also saw sales jump 40% year-on-year, now serving 950,000 cell phones.

Written by February 10 2018 0

Starting humbly from a garage workshop in 1971, Medellin-based clothing manufacturer Creytex has since become an especially successful innovator in the fiercely competitive global textile/clothing business.

It’s an exceptional story, as most local textile and clothing manufacturers here experienced sharp declines last year in the Colombian domestic market -- due mainly to a hike in value-added tax, combined with a national economic slow-down.

But amazingly, Creytex actually boosted its 2017 domestic sales by 20% year-on-year -- and simultaneously boosted profit margins– thanks to exceptional market intelligence, high technology, enthusiastic leadership, motivated employees, and a novel “fast fashion” production system, as company managing director Lina Bustamante revealed to Medellin Herald in an exclusive February 9 interview here.

However, international sales volume dipped last year when one of Creytex’s major international buyers -- with whom it had been supplying for nearly 12 years -- strategically switched production to a proprietary factory in Asia.

That switch wasn’t entirely unexpected, as Bustamante explained. Reason: This big buyer had been gradually withdrawing from various contract manufacturers and shifting production to proprietary factories for “commodity” clothing items where lowest-cost -- rather than fast-fashion -- is the deciding factor.

Even though Colombian textile/clothing production costs are much lower than costs in the USA or Europe, Colombia is still relatively costly -- if price alone is the over-riding factor – compared to certain Asian and Middle-Eastern producers, and even some Central American producers (such as Honduras), Bustamante explained.

So, to stay competitive in the domestic and global clothing business, Creytex has to specialize in “fast fashion” -- and avoid “commodity” production, she added.

Intelligent Evolution

As a result of losing that international “commodity” clothing buyer last year, Creytex now exports about 60% -- down from 70% previously -- of its nearly 4 million clothing items produced here annually, mainly to the U.S. market. The other 40% mainly goes to the Colombian domestic market as well as to nearby South American and Central American markets.

Celebrating its 47th anniversary this year, family-owned Creytex – along with Medellin-based technology partner Inn Solutions (which shares office space at Creytex) – showed-off a miniature version of their “intelligent factory/fast-fashion” system to more than 22,000 attendees at the annual Colombiatex 2018 textile-industry congress here last month.

The novel technologies Creytex employs include the “3Dress” computer-based fashion design system from Italy-based MorganTecnica, which features three-dimensional, on-screen “avatars” that substitute for conventional mannequins or live models in design and development work.

This novel system enables flexible design creations, fitment validations and subsequent adjustments in just hours or minutes– hence cutting many days, weeks or even months from older, conventional development-and-approval cycles in clothing-fashion design.

What’s more, this “3Dress” system also can transmit the final design instructions electronically to computer-driven stamping, sublimation and cutting machines on the factory floor, followed by “lean” final assembly by highly skilled seamstresses -- all overseen by an automated “Shopfloor” software-control system.

This novel system is now run by highly skilled Creytex employees -- with technical help from Inn Solutions and its bilingual (English-Spanish) general manager, Juan Pablo Mejia.

Leading the charge here is the ever-smiling, infectiously enthusiastic Bustamante, who inspires a team of 400 direct workers at Creytex’s clean, quiet, friendly, high-tech factory totaling 7,000-square-meters, spread-out over four floors. (The company also has additional indirect workers producing certain items at satellite workshops near Medellin).

Creytex not only designs and produces clothing for both domestic and international markets – touting a special expertise in needle-point knitting -- but also produces its own textiles, another key factor responding to the “fast fashion” trend sweeping global clothing markets.

In years past, many of Medellin’s small-to-medium-sized enterprises (including Creytex) had depended heavily (or even exclusively) upon giant textile manufacturers (such as Coltejer and Fabricato) to supply feedstock textiles.

But the ever-growing “fast fashion” trend means that manufacturers like Creytex can’t wait weeks or months for certain critical supplies from big textile makers – and retailers likewise no longer can sustain excess inventories or suffer heavy mark-downs to move excess product that’s growing “stale.”

So, as part of its novel fast-fashion production system, Creytex instead makes its own textiles, including numerous blends of cotton and synthetic fibers, for example. This system boosts efficiency, cuts losses, cuts production time, avoids costly subcontracting, increases control and enables greater volume production and higher margins, Bustamante explained.

While “low-cost” Asian producers might out-compete Medellin producers on cost in “commodity” clothing, Creytex has multiple advantages with its “fast fashion” system – including low-cost, fast-delivery air freight from Medellin to Miami, she said.

This system can quickly deliver “high-demand” fashion items -- from design to production to delivery in Miami -- in just days, rather than the months-long delays typical of Asian manufacturers shipping to the U.S. market.

Batch Production

What’s more, Creytex can design, produce and deliver such “high-demand” items in customized, limited, serial batches – responding quickly to demand changes -- rather than producing and delivering huge (but slow-to-market) volumes that are typical of “commodity” producers.

In addition, Creytex now electronically gathers and analyzes customer demand at individual stores in Colombia, so that it can quickly respond to demand changes and adjust production for individual clothing items – avoiding inventory excesses and improving net profit margins.

“Fast fashion has to include the whole chain,” from design, to production, to shipping, to demand response, as well as employment of smart-technology and smart management, Bustamante explained.

“This is not a volume business. It’s about having the ideal product, in the ideal place, at the ideal time. And mass production can’t account for all markets. You also have to account for seasons, climates and the [socio-economic demographics] of each shop. This requires [investment in] more data analysis, but it also means better profitability.”

For the Colombian domestic market, Creytex has its own, proprietary leisure-wear and children’s-wear brands (“Belife” and “Baby Planet”), whereas its principal international buyers (mainly for leisure, performance and life-style wear) include Columbia, Concepts Sport, Gear for Sport, Little Me, Camp David, Pelo and Ripley, she said.

Beyond employment of high technology for “fast fashion,” Creytex also meets strict international standards for responsible social and environmental practices, as measured by buyers’ own periodic audits – such as the “Worldwide Responsible Accredited Production” (“WRAP”) protocol, she said.

Visitors to the Creytex facilities see more than just compliance with standards. They have been surprised by the clean, quiet, friendly, well-organized worker environment -- something not always seen in certain Asian or Middle-Eastern clothing factories, where conditions can almost resemble Medieval despair.

About which Bustamante remarked: “I’ve had clients tell me, ‘your employees look happy!”

However, continuous motivation and retention of skilled workers isn’t easy – especially in an age when many younger people would rather seek employment in (for example) call-centers rather than clothing factories, Bustamante told us.

While Medellin has a more-than-100-years-long history of industry leadership in textiles, clothing and fashion – and can boast of now having several generations of highly skilled textile/clothing workers – being successful in clothing manufacture today also requires exceptionally intelligent, inspiring leadership.

That’s why Creytex employs a “coach” at each sewing station to encourage and teach workers, and also includes a bonus system for exceptionally productive employees.

Bottom line: Competing successfully in international and domestic clothing markets with fast response, precision quality, close attention to profitability, market intelligence and socially responsible operations is an evolving process.

Creytex first began exporting 15 years ago – at a time when many industry experts told Bustamante that achieving success from Medellin in such foreign markets was dubious.

But clients visiting Creytex today will be greeted by Bustamante’s winning smile, warm intelligence, the voice of experience, and see impressive operations. Likely as not, they'll probably come away with proof that after more than 100 years of major textile/clothing/fashion experience, leading Medellin entrepreneurs still can compete successfully in one of the world’s toughest businesses.

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MEDELLÍN PHOTOS by Gabriel Buitrago (click to enlarge)


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About Medellin Herald

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.

Medellin Herald welcomes your editorial contributions, comments and story-idea suggestions. Send us a message using the "contact" section.

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