Sunday, May 27, 2018

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Roberto Peckham

Medellin-based multinational insurance and asset-management giant Grupo Sura announced February 27 that its full-year 2017 net profits fell 13% year-on-year – to COP$1.45 trillion (US$493 million) -- mainly because of changes in the exchange rate between the U.S. dollar and the Colombian peso (COP).

Excluding currency impacts and non-recurring items, net profit would have risen 7.7% year-on-year, according to the company. Consolidated revenues grew 12% year-on-year, to COP$20.5 trillion (US$6.9 billion), the company added.

Revenue growth is explained by “good dynamics of the subsidiaries Suramericana and Sura Asset Management, in a challenging environment,” according to Sura.

The year 2017 was “marked by lower economic activity in Latin America. This did not stop the growth of all businesses, which accentuated their efforts in efficiency, profitability and consolidation of their operations in insurance, pensions, savings and investment, among other financial services,” according to the company.

The Suramericana insurance group saw revenues jump 20.9% year-on-year, to US$ 4.8 billion, while Sura Asset Management operating income rose 12%, to US$808 million, according to the company.

“On the other hand, the consolidated expenses of Grupo Sura amounted to 14.5% (US$6.3 billion), after incorporating for a full year the integration of the operations acquired into RSA to Suramericana, as well as higher interest expenses on debt and amortizations. associated with that transaction,” according to Sura.

“However, the efficiency indicators improved in the two subsidiaries: operating expenses in Sura Asset Management increased by 6.5%, almost half of the revenues, while in Suramericana they did so at an annual rate of 20.4%, also lower than the variation of total income.

“In this context, the consolidated net profit reached COP$1.45 trillion (US$493 million), a reduction of 13% in relation to 2016, particularly affected by the foreign exchange impact (COP$173.88 billion), the aforementioned interest expenses and other non-recurring expenses. Without these aspects, the net profit of Grupo Sura would have an annual growth of 7.7%, supported by the operating results of the subsidiaries.”

"After a decade of international expansion, financial strengthening and diversification of the origin of our revenues, 2017 was a year to consolidate inorganic growth, emphasize the strategic management of the portfolio to optimize it and obtain greater profitability, as well as enhance the Group’s business in Latin America,” added David Bojanini, president of Grupo Sura.

As for fourth quarter (4Q) results, consolidated revenues totaled COP$5.3 trillion (US$1.799 billion), up 1.3% year-on-year, while 4Q 2017e consolidated net income was COP$357 billion (US$121 million), “with a remarkable growth of 102.5%, driven by a triple effect: lower constitution of reserves in the insurance business, higher yields of the investment portfolios of the subsidiaries and a decrease of 0.9% in the total expenses,” according to the company.

Sura Asset Management saw 2017 operating profit grow 16.9%, recorded in local currencies, and net profit was COP$615 billion (US$208.5 million), similar to 2016 results. The asset management division saw fee income rise 26% in the “voluntary savings” unit and 39% in assets under management.

As for the Suramericana insurance and risk-management division, this unit posted a net profit of COP$506 billion (US$172 million), up 26.1% year-on-year. Written premiums grew 23%, to COP$12 trillion (US$4 billion), while consolidated reserves reached COP$15.26 trillion (US$ 5.11 billion).

For all of 2017, Grupo Sura assets grew 2.8% year-on-year, to COP$69.4 trillion (US$23 billion), while equity attributable to shareholders reached COP$23.8 trillion (US$7.98 billion), up 5.2%, according to the company.

 


Japan’s Ambassador to Colombia Keiichiro Morishita this month unveiled new offices in Medellin of the Japan Chamber of Commerce and Industry (CCI).

The decision to open new offices here came following an initiative by local investment promotion agency ACI (Agencia de Cooperación e Inversión de Medellín).

According to ACI, the new CCI office aims to boost foreign investment in Medellin, fortify commercial exchanges and promote educational and cultural initiatives.

CCI already has offices in Bogota -- for more than 30 years -- but now aims to expand its efforts in Medellin.

CCI affiliates are mainly Japanese companies operating in Colombia as well as Colombian empresarios with commercial aims in Japan, added CCI executive director Oscar Romero.

Initially, CCI will locate its offices in Medellin’s “Ruta N” high-tech landing space, but later will move to its own headquarters, according to ACI.


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.


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.


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.


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 “carulla.com,” “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.


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.


Cemex Colombia fourth quarter (4Q) 2017 earnings before interest, taxes, depreciation and amortization (EBITDA) fell 20% year-on-year, to US$30 million, Cemex Latam Holdings (CLH) announced February 8.

Net sales for the CLH-Colombia division also fell 12% year-on-year, to US$134 million, according to the company.

For CLH's regional operations, “during the fourth quarter [2017] our working capital investment remained in negative territory for seventh consecutive quarter, with minus-14 average working capital days. During this period, we achieved negative trade working capital in our operations in Colombia, Costa Rica, Nicaragua, Guatemala, and El Salvador,” the company explained.

CLH’s net sales in the region for full-year 2017 declined 6% year-on-year, “mostly explained by lower cement volumes and prices in Colombia. As a result, operating EBITDA declined by 15% and 27% during the fourth quarter and the full year, respectively, compared to those of the same periods in 2016,” according to the company.

“Despite the positive traction of our value-before-volume strategy in Colombia, where our cement prices in December were about 3.5% higher than they were in June of 2017, as well as the positive results in Costa Rica and our rest-of-CLH region, during the [fourth] quarter not only cement price levels in Colombia continued well below those of last year, but also national cement consumption in Colombia and Panama remained subdued,” added Cemex Latam CEO Jaime Muguiro.

According to CLH, EBITDA “was negatively affected as our cement prices in Colombia declined by 12% and 19%, in local-currency terms, during the fourth quarter and full year, respectively, compared to those of the same periods in 2016.”

However, “in Colombia, after four consecutive quarters of declines in our cement prices, in local currency terms, they increased by 2% during the fourth quarter, on a sequential basis. Our successful cost containment efforts in Colombia helped us partially offset the negative effect of lower demand for our products in the country,” CLH added.

Maceo, Antioquia Plant Awaits License OK

Meanwhile, Cemex’s US$420 million cement plant in Maceo, Antioquia, continues to lack a crucial operating permit that would enable start-up at its rated capacity of 1.3 million tonnes per year. The company has expressed hopes that the permit snag could be overcome by year-end 2018.


Colombia’s national economic statistics agency (Departamento Administrativo Nacional de Estadistica, DANE) revealed February 5 that full-year 2017 exports jumped 19% year-on-year, to US$37.8 billion, up from US$31.7 billion in 2016 -- a year that saw exports drop 11.8% year-on-year.

By dollar value, petroleum and mining exports led the field, up 32.4% year-on-year, mainly from coal, petroleum coke and briquettes, DANE found.

Agricultural, food and beverage exports rose 7.2% -- mainly thanks to a rise in palm-oil export -- while manufacturing exports rose 2.4%, up from a 10% net decline in 2016, according to DANE.

By department, Antioquia once again led the nation in 2017, accounting for 18.1% of total national exports (excluding petroleum).

Exports in the broad “other” category in 2017 rose 15.7%, mainly from a rise in gold exports (dominated by Antioquia).

The USA once again led all nations in share of receipt of Colombia exports, at 29.7% of the total, followed by (in order) Panamá, China, Netherlands, México, Ecuador and Turkey, according to DANE.


The Supreme Court of Colombia on January 17 notified a group of investors suing a fiduciary over a failed medical-office-building project near Medellin that a fiduciary has extremely limited legal obligations to oversee performance of shaky real-estate development projects or verify crucial financial assertions made by the developer.

The group of investors had sued Colombian fiduciary Corficolombiana (a subsidiary of banking giant Grupo Aval) arguing that project developer Arcor Inmobiliaria SA had failed to achieve the mandatory 50% “equilibrium point” of funding from project investors -- as required by the contract -- before receiving the investor funds from Corficolombiana.

(Editor's full disclosure: Medellin Herald obtained a copy of the Court ruling directly from the lawyer who represented the plaintiffs, among which included myself and my wife).

Arcor asserted that it had accumulated COP$4.57 billion (US$1.6 million) in investor deposits for the project -- supposedly exceeding the Arcor-calculated 50% “equilibrium point” that triggered disbursement of investor funds from Corficolombiana to Arcor.

However, Arcor’s claim that it had supposedly reached the 50% “equilibrium point” lacked a required signed statement from the official financial auditor, the Supreme Court ruling noted.

Nevertheless, the Supreme Court ruled that the lack of this signed document was “insufficient to demonstrate the non-compliance of the fiduciary.”

The only actual work Arcor performed at the site was demolition of an old building, digging a hole for the proposed basement parking lot and erecting a handful of pillars. No new building was ever constructed, leaving the investors with a loss that collectively exceeds US$2 million.

Following Arcor's abandonment of the project, a Circuit Court in Cali (where Corficolombiana is headquartered) confirmed its liquidation. Years later, the lot upon which the building was to be erected was resold to a third party, the funds from which enabled the project investors to recoup about half their original investments.

A hard lesson for investors in Colombian development projects (“sobre planos”) supposedly guaranteed by fiduciaries: Don’t assume that fiduciaries are actually checking the performance of construction contractors or that they truly know whether the “equilibrium point” has in reality been reached. Under the Supreme Court ruling, fiduciaries can just take the word of contractors about contract compliance, no matter how phony or flimsy those claims may be.

For example: Arcor provided documents -- obtained by the suing investors -- claiming to show that it had bought numerous plumbing fixtures for the office building. But these fixtures never showed up at the site -- and neither the fiduciary nor the contractor ever explained to investors what happened to these materials.

Investors also had been led to believe that the 50% “equilibrium point” supposedly pertained to funds obtained for the actual proposed office building, not later add-ons. Yet Arcor had included in the “equilibrium point” funds it supposedly obtained from the sale of additional mini-booths (“burbujas”) – which in any case were never built.

So, a first warning: naive investors shouldn't assume that having a fiduciary involved in a new-build project in Colombia somehow provides guarantees protecting investors against contractor non-compliance or fraud.

Second warning: Investors also should note that Corficolombiana has been tied to several other, high-profile construction scandals in Colombia.

One example: Corficolombiana’s ex-president José Elías Melo is now facing criminal charges in the massive Odebrecht bribery scandal involving highway construction projects in Colombia.

Melo – who has denied the charges – is alleged to have known about bribes totaling US$6.5 million that Odebrecht officials admit they paid to high government officials in order to obtain contracts for the giant “Ruta del Sol” phase-two highway project, according to the Colombian attorney general.

Another example: More recently, 132 national and international investors in the unfinished, abandoned, multi-million-dollar “Meritage” condominium and commercial-center project adjacent to the "variante al aeropuerto" highway between Medellin and the international airport at Rionegro have been victimized by another scandal involving Corficolombiana.

In total, the Meritage investors had paid more than COP$47 billion (US$16.6 million) for future apartments and commercial spaces in a project snarled by criminal charges involving alleged narcotraffickers.

A lawyer representing investors filing suit to recover their funds claims that the investors have been “abandoned” by project fiduciary Corficolombiana as well as the Colombian attorney general, who moved to halt and seize the project.

According to the lawyer, the attorney general supposedly should have warned investors about investing in a site whose legal ownership is entangled in a dispute between alleged drug-mafia kingpins.

In an October 7, 2017 report about the Meritage scandal by Colombian daily newspaper El Tiempo, foreign investor Paul Torres was quoted as saying that “Colombia doesn’t offer any guarantees to foreign investors.”

Similarly, a June 15, 2017 report from Medellin-based newspaper El Colombiano had this to say about the Meritage scandal: “In this country, it’s no longer enough to study the history of property titles, according to the Civil Code, but rather one must search until infinity to discover possible crimes of previous [property] owners. A very grave issue for legal security.”


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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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