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Written by August 14 2017 0

Medellin-based multinational cement giant Cementos Argos reported August 11 that its first-half (1H) 2017 earnings before interest, taxes, depreciation and amortization (EBITDA) fell 26% year-on-year, to COP$641 billion (US$216 million).

Revenues dipped 4% year-on-year, to COP$4.2 trillion (US$1.4 billion), but second-quarter (2Q) net income rebounded over the first quarter, to COP$48 billion (US$16 million), indicating “better prospects in the market in Colombia . . . as well as a greater contribution to the results of the business coming from the United States,” according to Cementos Argos.

Through 1H 2017, Cementos Argos saw 73% of its corporate revenues generated in U.S. dollars, the company added.

Volumes of cement delivered rose 15% year-on-year, to 8 million tons, but concrete shipments dipped 7% year-on-year, to 5.4 million cubic meters, according to the company.

“The good results obtained in the U.S. and in the Caribbean and Central America far outweigh the challenges we are facing in the Colombian market,” said Cementos Argos president Juan Esteban Calle.

“As of June 30, 73% of revenues and 77% of EBITDA were generated abroad, in dollars or in highly dollar-denominated currencies. Additionally, we expect a better second half in the local [Colombian] market as a result of growth in shipments to 4G [fourth-generation highway construction] projects and the recovery in consumption that should be presented as a result of the reduction in interest rates,” he added.

As of June 30, Argos USA generated US$759 million in revenue and US$99 million in EBITDA, “in line with expectations announced by the company in early 2017,” according to the company.

“Argos supplies cement and concrete to important works such as Procter & Gamble in West Virginia, Liberty Mutual in Texas and State Farm in Atlanta, and is a key supplier in the construction of the Atlanta Falcons stadium, where ‘Super Bowl 53’ will be played in February 2019," the company added.

In Colombia, Argos is already involved in 39 of the 56 awarded “4G” highway construction projects and is bidding on another 46 projects currently under negotiation, according to the company.

At mid-year 2017, Colombian highway and infrastructure projects represented 28% of company revenue and 23% of EBITDA, according to Argos.

In its Caribbean and Central America markets, Argos recorded cement and concrete supply growth of 7.6% and 7.5%, respectively, compared to the first half of 2016.

“Honduras and Panama continue to be the main drivers of this region,” according to Argos. “The company’s participation in key projects for the development of the region include the European space station in French Guiana, the third bridge over the Panama Canal, the wastewater treatment plant in the Dominican Republic, the Civic Government Center in Honduras, the Royalton Hotel in St. Lucia and the Nobo Hospital in Curacao, among many others.

“Cementos Argos reached additional milestones during the semester, such as the opening of a new mill in San Lorenzo, Honduras, the purchase of an integrated cement plant in Puerto Rico, the launch of new products such as advanced concrete and cement and integration of the new plant in West Virginia, among others,” the company added.

Grupo Argos Sells Port Stake to Goldman Sachs

Meanwhile, parent company Grupo Argos announced August 11 that it has sold its 50% stake in the “Compas” ocean port facilities to an affiliate of U.S.-based investment banker Goldman Sachs.

The deal nets Argos US$137 million, a 2.5-fold return on investment since 2012, when it acquired the stake from affiliate Cementos Argos. In addition, the transaction is equivalent to 25 times EBITDA generated by Compas in 2016, according to Argos.

“Grupo Argos, through its investment in Compas, managed to transform a group of terminals --mainly bulk carriers dedicated mostly to the import and export of cement and coal -- into integrated logistics and multipurpose [terminals] with top national and international allies such as APM Terminals (Maersk group) and the Singapore Port Authority,” according to the company.

“This transaction consolidates Grupo Argos as a matrix of investments in infrastructure focused on the cement, energy and highway concessions and airports businesses, maintaining financial flexibility that allows it to efficiently manage its capital,” added Jorge Mario Velásquez, president of Grupo Argos.

Written by August 11 2017 0

Medellin’s downtown Olaya Herrera airport will eliminate all flights from September 4 through September 10 to accommodate enormous crowds expected for Mass ceremonies for Pope Francisco’s visit.

According to the official press statement from Olaya Herrera airport management, all flights that normally would arrive and depart from the downtown airport instead will be transferred to Medellin’s José María Córdova (JMC) international airport at Rionegro.

The Medellin Archdiocese estimates that some 800,000 people are expected to attend Mass ceremonies with the Pope – and such enormous crowds would best be accommodated by taking-over the vast area within the Olaya Herrera airfield, according to the airport agency.

Because of the shift in flight operations, JMC will have to accommodate an extra 144 daily flights serving about 2,800 daily passengers, according to the managing directors of both airports. Extra airport workers and special facilities will be assigned to JMC to handle the surge of baggage and passengers during that week.

A special bus service will operate to and from Olaya Herrera to handle the extra volume of passengers arriving and departing from JMC, according to the airport agencies.

Written by August 10 2017 0

Medellin-based banking giant Bancolombia announced August 9 that its second-quarter (2Q) 2017 profits rose 7% over first-quarter 2017, to COP$654 billion (US$223 million).

Meanwhile, Bancolombia’s 2Q 2017 gross portfolio grew 8.5% year-on-year, to US$52 billion, with 27% of the total corresponding to its international businesses represented in Banistmo (Panama), Banco Agrícola (El Salvador) and BAM (Guatemala), according to the company. However, credit demand in Colombia had “moderated” in the latest quarter.

The overdue-loans portfolio (exceeding 90 days) hit 2.6%, with coverage at 171%, “a good level that shows an adequate level of reserves,” according to the company.

Primary capital stands at 10.4%, “more than twice the minimum required. The solvency ratio ended at 14.3%, which indicates that the Bancolombia Group has sufficient reserves and capital to develop its business plan,” according to the company.

“These results speak to our purpose of having profitability that generates value to shareholders, customers and different groups of relationship,” said Bancolombia president Juan Carlos Mora.

The 2Q 2017 results featured “release of products and services that have technology and data analysis as tools to generate better experiences for customers,” according to the company.

Examples include the launch of “Puntos Colombia” as well as “InvesBot,” the securities robot, according to the company.

Equity also grew 5% quarter-on-quarter, to COP$22 trillion (US$7 billion), while assets grew 4% quarter-on-quarter, to COP$203 trillion (US$67 billion), the company added.

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) .

Page 8 of 14

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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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