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Written by November 01 2017 0

Medellin-based multinational utilities giant EPM announced October 31 that it successfully placed a COP$2.3 billion (US$764 million) 10-year bond offering at 8.375% interest.

“This is the third international issue denominated in Colombian pesos,” according to the company. Wall Street bond rater Fitch gave the issue a “BBB+” rating while Moody’s gave it a “Baa2” rating.

“With this issuance, made in order to prepay debt in dollars, the profile of the company’s debt is improved,” according to EPM. The latest placement takes advantage of the “current financial conditions of the international market,” according to the company, whose sole shareholder is the municipality of Medellin.

For the issue, about 60% of the bond buyers were from the United States, Europe, Chile, and Peru, while the remaining 40% were Colombian investors, according to the company.

“Thanks to this issue, we managed to make an important debt-management operation, which will allow us to improve the maturity profile and the average life of the debt,” added EPM general manager Jorge Londoño de la Cuesta.

“In addition, we will increase our debt composition in Colombian pesos, which will allow us to reduce EPM’s exposure to debt denominated in dollars, thereby minimizing the impacts derived from foreign exchange risk,” he said.

Funds from the bond issue will prepay a loan due in 2020, which was signed with seven banks in 2015. In total, 45% of the issue funds are going toward the construction of the US$5.5 billion, 2.4-gigawatt “Ituango” hydroelectric project in Antioquia, with the remaining 55% going to support other investment plans.

Spanish bank BBVA, U.S.-based Bank of America Merrill Lynch, and UK-based HSBC served as placement bankers for the issue.

Written by November 01 2017 0

Medellin-based textile giant Fabricato announced October 31 that its third quarter (3Q) 2017 net loss hit COP$19 billion (US$6.2 million), down from a COP$755 million (US$248,000) net profit in 3Q 2016.

Sales in 3Q 2017 also fell 23.5% year-on-year, to COP$85 billion (US$28 million), while earnings before interest, taxes, depreciation and amortization (EBITDA) margin fell to a negative 7.5%, down from a positive 12.8% in 3Q 2016.

“The period covered by this [latest quarterly] report was surely one of the most negative for the [Colombian] textile sector in recent years,” according to Fabricato.

“The textile and apparel sectors presented results that were much lower than those budgeted for the period, as well as being inferior to those generated in the immediately preceding year,” the company added.

While Colombia’s relatively feeble 1.8% growth in GDP this year is partly to blame for the declines, the hike in value-added tax (VAT) this year to 19% (from 16% last year) and relatively high interest rates were additional negative factors, the company noted.

Another key factor was the November 2016 termination of the “mixed tariff” on textiles, which had been relatively effective in preventing imports of products that were “under-invoiced” in order to avoid tax duties, according to Fabricato.

“With the termination of this [mixed] tariff modality, replaced by a model that only considers a percentage on the value of the imported product, some gaps emerged that facilitated the increase of unfair [textile and clothing import] practices, such as price declarations or product specifications that do not correspond to what is really important,” according to the company. “In order to combat this imbalance, the government is working with the private sector to prepare a decree that should be enacted shortly and that should set reference prices to avoid importing products with ostensibly low prices.”

In addition to under-invoiced imports, “there is an increase in the importation of products with prices below reasonable international costs, which characterizes ‘dumping,” according to Fabricato.

“In this case, to prove this unfair practice and take restrictive measures, the [remedy] process is longer and more complex. However, Fabricato and [fellow Medellin-based textile maker] Coltejer jointly initiated an anti-dumping process against denim fabrics of Chinese origin. This process should receive a first response from local authorities this year, and if accepted in all instances, could result in effective measures in favor of domestic producers in the first half of next year,” according to the company.

“In addition to the unfair practices mentioned above, Colombia is the country with the lowest textile tariffs [10%] when compared with countries such as Argentina (26%), Brazil (26%) and Mexico, which varies from 10% to 20%.

“Due to the ease of legal importation, unfair dumping and under-invoicing practices, what was noted on the supply side was a disproportionately high increase, while on the demand side, as we have already said, we have noticed a contraction. As a natural result of this combination of factors, an increase in inventory levels was perceived.

“With so much negative news and misinformation generated by some unions in the [textile] sector, financial institutions and insurers perceived an increase in the perception of risk, with the consequent credit restriction and increase in credit insurance premiums, in addition to the reduction in credit quotas.

“Even in the case of small or medium-sized companies, which are not financed through the financial system but through credits with the importing/distributing companies, credit was affected,” Fabricato concluded.

Written by October 28 2017 0

Medellin-based banking giant Bancolombia – Colombia’s biggest bank and now a growing multinational – reported October 26 that its third quarter (3Q) 2017 net profit dipped 1% year-on-year, to COP$1.7 trillion (US$564 million).

However, Bancolombia’s gross portfolio grew 6.5% year-on-year to COP$158 trillion (US$52 billion), of which 25% corresponds to its international operations including Banistmo (Panama), Banco Agrícola (El Salvador) and BAM (Guatemala).

The ratio of 90-day past-due loans rose to 2.9%, up from 2.0% in 3Q 2016. But provisions for this portfolio are 161%, which “guarantees solidity in the midst of a challenging environment,” according to the company.

“Recognizing the current economic outlook, the bank continues its growth path,” added Bancolombia president Juan Carlos Mora. However, “provisions charges were increased in order to maintain a prudent coverage index and keep the balance-sheet solid,” Mora said.

As of September 2017, Bancolombia Group had 9,707 correspondent banking outlets, 5,504 ATMs, and reported 6.8 million downloads of its “App People” banking application as well as 50,000 “App Companies” users.

“The growth in these channels makes it more efficient for more people and companies to access the financial system in all the geographies in which Bancolombia is present,” according to the company.

Another highlight was the growth in international capital markets, according to the company. For example, Banistmo achieved placements in the international bond market of US$500 million, with bond-buyer demand exceeding bond supply by 450%. “With this issue, the four banks of the Group have already successfully entered the international capital markets, managing to diversify their funding structure,” according to the company.

In addition, “Bancolombia Group has enough capital to face the challenges of the coming years. Primary capital reached 10.3%, which represents more than twice the minimum required. Likewise, solvency [ratio] was 13.4%,” according to the company.

In a subsequent October 27 conference call with investment analysts, Bancolombia chief economist Juan Pablo Espinosa added that Colombia’s economic growth this year continues to be sluggish, with year-on-year GDP seen rising by only 1.9%.

However, productivity is expected to rise, and when combined with improved global demand and likely reductions in central bank interest rates, full-year 2018 GDP is seen rising by 2.5%, he said.

Full-year 2017 inflation is now seen at 4%, while full-year 2018 inflation is likely to dip to 3.5%, he added.

Colombian exports are forecast to grow by 20% this year and another 5% next year thanks to the relatively strong U.S. dollar versus the Colombian peso, combined with recoveries in global demand.

While the national government is likely to meet its fiscal deficit target of 3.6% of GDP this year, the government will need to take more austerity steps in 2018 -- and achieve more reforms in 2019 in order to keep fiscal deficits in check, he cautioned.

Written by October 27 2017 0

Medellin-based multinational foods manufacturer Grupo Nutresa announced October 27 that its third quarter (3Q) 2017 net consolidated profit rose 3.6% year-on-year, to COP$324 billion (US$107 million), while gross profit rose 3% year-on-year, to COP$2.8 trillion (US$930 million).

Sales in Colombia grew 3.1% year-on-year, to COP$4 trillion (US$1.3 billion), while consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) margin was 12.5%

Sales abroad -- excluding sales in “socialist” Venezuela – rose 5.8% year-on-year, to COP$2.3 trillion (US$797.7 million), representing 37% of total sales.

Consolidated revenues (not including Venezuela) rose 2.6%, to COP$6.4 trillion (US$2.1 billion), “the result of sales growth in the local [Colombia] market and a solid and sustained growth in international revenues,” according to Nutresa.

Net post-operatng expenses totalled COP$187 billion (US$62 million), “14.8% less than the same term in 2016, due primarily to the treatment of the investment in Venezuela as a financial instrument starting October 1 of such year,” according to the company.

Meanwhile, Nutresa for the seventh straight year entered the Dow Jones Sustainability Index and “continues to be the only company in the food sector from an emerging market to be part of this global index,” the company noted.

“In the economic dimension, [the company] obtained the maximum score in terms of health and nutrition, materiality, risk and crisis management, and tax management. In the environmental category, Grupo Nutresa received the highest score in environmental reporting and packaging. Finally, in the social dimension, it achieved the highest valuation in human rights,” according to the company.

Grupo Nutresa describes itself as “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 US$2.8 billion in eight business units: cold cuts, biscuits, chocolates, Tresmontes Lucchetti [Italian foods], coffee, retail food, ice cream, and pasta.”

The company has a direct operating presence in 14 countries and international sales in 72 countries.

 

Written by October 24 2017 0

Toronto, Canada-based PharmaCielo announced October 24 that it has become Colombia’s first medical-marijuana producer to win a license to cultivate cannabis with “unrestricted” percentages of tetrahydrocannabinol (THC) and cannabidiol (CBD) alike.

As a result, PharmaCielo becomes “the world’s largest licensed producer,” according to the company, which has its marijuana nursery, propagation and processing center in the Medellin suburb of Rionegro. The company first won a Colombian manufacturing license in 2016.

“To say that we are excited is an understatement, as to date the Colombian government has issued licenses only for the cultivation of non-psychoactive cannabis containing little-to-no THC,” said Federico Cock-Correa, CEO of PharmaCielo Colombia Holdings.

“Receipt of the dual licenses for psychoactive and non-psychoactive cannabis containing THC and CBD, combined with the fact that we have Colombia’s only fully functional cultivation and processing facility inspected and approved by the government, allows PharmaCielo the opportunity to become Colombia’s first and leading producer of medicinal-grade oil extracts.”

The cultivation licenses that enable the propagation of the full range of cannabis varietals “enables the company to develop a complete vertical offering of standardized, medicinal-grade formulations containing all active elements, including levels of THC greater than +1.0%,” according to PharmaCielo.

“PharmaCielo is now positioned as Colombia’s first unrestricted producer of medicinal-grade oil extracts and related products and is capable of providing reliable, standardized relief and wellness formulas for patients in need, including those requiring higher levels of THC.”

The Rionegro facility includes 12.1 hectares (1.3 million square feet) of open-air greenhouses ready for cultivation. “The facility has been independently reviewed and certified by the government as part of overall licensing, and in the future, will supply plant seedlings to over 1,000 hectares (2,500 acres) of contract growers’ open-air greenhouses for final cultivation,” according to the company.

“Over the past year, since we were granted our initial license, we have invested considerable effort and resources into building the infrastructure required for cultivation and processing of cannabis oils as well as working together with rural communities to help build a new Colombian agricultural sector to join coffee and flowers,” added PharmaCielo president Patricio Stocker.

“We intend to immediately begin cultivation, processing and scientific testing of highly standardized, premium-quality cannabis oil extracts and related products demanded by the international marketplace. We expect to initiate sales and distribution of finished products to the global marketplace in 2018, to the benefit of all stakeholders,” Stocker added.

Earlier this year, the company announced a partnership agreement with Cooperativa Caucannabis (comprised of 63 indigenous farmers), based in the department of Cauca, which separately applied for a cultivation license for a new greenhouse facility to be jointly operated with PharmaCielo.

“The members of Cooperativa Caucannabis have since been certified by the government as independent small growers and expect the government’s response to their application in the coming days,” according to PharmaCielo.

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SILLETEROS PARADE 2016 by JOHN AND DONNA STORMZAND (click to enlarge)

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.

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