Wednesday, March 29, 2023

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Medellin-based multinational electric power, utilities and telecom-internet giant EPM announced March 27 that its full-year 2022 net income declined 10% year-on-year, to COP$3 trillion (US$645 million).

The decline is explained by a COP$1 trillion (US$215 million) write-down in the value of its partial holding in the Tigo-UNE telecom/internet company, according to EPM.

As a result of that write-down, EPM – 100% owned by the city of Medellin—will cut its contribution to the city of Medellin’s 2023 finances by COP$330 billion (US$71 million), according to the company.

Excluding that Tigo-UNE write-down, Grupo EPM otherwise posted in 2022 a 26% profit gain year-on-year, hitting COP$4.1 trillion (US$881 million), according to the company.

Grupo EPM revenues likewise rose 28% year-on-year, to COP$32.2 trillion (US$6.9 billion), while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 32%, to COP$9.8 trillion (US$2.1 billion), according to the company.

EPM owns and operates electric-power-generation and public utility operations in Colombia, Chile, El Salvador, Guatemala, Mexico and Panama.

Other financial highlights during 2022:

Investments in infrastructure projects totaled COP$4.8 trillion (US$1.03 billion). “Investments in the Hidroituango [hydroelectric project in Antioquia] and progress in the construction of the Tepuy Photovoltaic Solar Park stand out, a project that is in tune with the energy transition and that will provide 83 megawatts of non-conventional renewable energy to Colombia,” according to EPM.

“In the natural-gas business, the expansion and biogas projects at the San Fernando plant stood out. Likewise, investment was made in the expansion and modernization of wastewater treatment plants, guaranteeing the supply of water for the coming decades.”

As for its international subsidiaries, EPM invested in expansion project of a desalination plant in Chile, Advanced Measurement Infrastructure (AMI) in Guatemala; extensions and replacement of assets in the distribution system in El Salvador and the expansion of networks, replacement of assets and loss reduction programs in Panama.

Meanwhile, EPM’s TICSA subsidiary in México benefited from construction of treatment plants for the Don Julio tequila manufacturing plant in the state of Jalisco, along with water treatment plants for the city of León (Guanajuato state) and for Mexico City.

In Colombia, TICSA made progress in the construction of the “Tranvía” wastewater treatment plant in the municipality of Rionegro, near Medellin.

Meanwhile, to finance infrastructure projects, in December 2022 EPM signed its first “sustainable credit line” for US$700 million for various ventures.

During 2022, EPM contributed COP$1.8 trillion (US$387 million) to the city of Medellin, up 32% over 2021.

Hidroituango Cost Update

Meanwhile, EPM announced that it has updated the project cost of the 2.4-gigawatt Hidroituango hydroelectric project to COP$19.4 trillion (US$4.17 billion), up from a previous estimate of COP$17.6 trillion (US$3.78 billion).

“This change is due to the increase in direct investment and financial expenses and pre-operational costs, equivalent to COP$1.7 trillion [US$366 million],” according to the company.

The latest cost projection doesn’t include “possible variations in the value of the offers received as part of the of the new contracting process in which the company has been advancing to undertake the works for the completion of the second stage, which includes units 5 to 8,” the company cautioned.

As of February 28, 2023, EPM reported that Hidroituango construction is 90.68% complete, with total executed cost to date at COP$14.6 trillion (US$3.14 billion).

“In accordance with the evolution of the work fronts and the concentration of efforts of the company, generation units 3 and 4 are expected to come into operation before November 30, 2023, for compliance with the firm-energy obligations assigned in the reliability auctions in which it has participated in the project,” according to the company.

Medellin-based textiles and plastics-recycling giant Enka reported March 16 that its full-year 2022 net income dropped 58% year-on-year, to COP$24.6 billion (US$5.08 million).

Earnings before interest, taxes, depreciation and amortization (EBITDA) fell 29% year-on-year, to COP$54 billion (US$11 million).

The EBITDA decline was explained by “lower [sales] volume and difficulty of fully transferring higher material costs to sales prices, especially in the textile and industrial businesses,” according to Enka.

As for the net income decline, this came as a result of “lower operating income, the [Colombian peso versus U.S. dollar] exchange difference [for the domestic Colombia market] and higher financial expenses,” according to the company.

Gross revenues actually rose by 9% year-on-year, to COP$585.7 billion (US$121 million), from COP$534 billion (US$110 million) in 2021, “as a result of higher prices and international exchange rates [for export sales], which offset a lower sales volume,” according to Enka.

Despite the disappointing financial results, “Enka successfully completed its project for the new ‘EKO-PET’ [plastic bottle recycling] plant, complying with the estimated schedule and investment, which adds 24,000 tons of capacity and strengthens our leadership in the circular economy in Colombia,” according to the company.

“The year 2022 was a year of great challenges, especially due to the complex macroeconomic environment and disruptions in the supply of raw materials, mainly in nylon supply chain and electric power generation costs,” according to Enka.

“The company managed to offset some of this through supply diversification strategies, managing to standardize new suppliers and alternatives for raw materials for our nylon business and develop initiatives to use biomass to diversify our energy matrix.”

At year-end 2022, Enka’s total assets hit COP$808 billion (US$166.7 million), up COP$124 billion (US$25.6 million) from 2021.

The company credits those improvements to the new EKO-PET plant, working-capital hikes due to higher international prices, advanced purchases of raw materials to hedge the Russia-Ukraine conflict and a better tax situation.

Liabilities ended at COP$327 billion (US$67 million), up COP$106 billion (US$21.8 million) “due to the financing of higher inventories and financial disbursements for capex and inventories required for the new plastic-bottle recycling plant,” according to Enka.

“The index of net indebtedness ended at 3.5-times EBITDA, after having completed the investments in the new EKO-PET plant. With strategies implemented to diversify supplies, and realize sales from the new EKO-PET plant, we expect to reduce this indicator during 2023 in order to continue with the development of new growth projects,” the company added.

Sales abroad in 2022 rose 19% year-on-year, hitting US$60.7 million, representing 44% of total revenue. “Good behavior of the Brazilian markets and the market diversification strategy, especially in Europe, offset lower demand from North America, which showed some signs of slowdown in the second half of the year,” according to Enka.

“As a result, Brazil becomes the main export destination with 21% of sales, followed by North America with 16%,” the company added.

As for its “green” plastics-recycling products and markets, “the operating income of the green businesses grew by 27%, reaching COP$193 billion [US$39.8 million], or 33% of total sales, 86% of which correspond to sales in the local Colombian market, which reflects the high commitment of our customers with the environment,” according to Enka.

“The three recycling plants operated at maximum capacity in 2022, given the completion of the project for the new EKO-PET plant in the final quarter, whose technology has authorization from [Colombian sanitary standards regulator] Invima and the U.S. FDA [Food and Drug Administration], which allows access to both national and foreign markets.”

As for its “EKO-FIBRAS” textile line, “the development of new applications and markets for specialized sectors, such as geotextiles, automotive, cleaning and footwear, made possible an increase in the 72% in the consumption of post-consumer colored bottles, which have higher limitations for its recycling,” the company noted.
Meanwhile, the “EKO-Polyolefins” portfolio “was strengthened with the progress of approvals of our product with Dow Chemical, under its ‘Revo’ brand,” the company added.

Renault-Sofasa – for 53 years producing cars in the Medellin suburb of Envigado – announced March 16 a US$100 million expansion plan that will bring more-advanced technologies to its popular line of vehicles that already enjoy number-one market-share in Colombia.

Attending a special press event here were Colombia’s Minister of Commerce, Industry and Tourism Germán Umaña Mendoza and the Vice Minister of Finance Gonzalo Hernández. The company is eyeing the possibility of electric vehicle (EV) production here, having already achieved EV dominance in Europe.

“Our commitment is to generate real progress for the country, for our employees, for our suppliers and dealers and for our entire value chain, offering mobility solutions for thousands of Colombian families, as we have been doing for almost 54 years,” stated Ariel Montenegro, President and General Director of Renault-Sofasa.

Over its five decades of car assembly here, Renault-Sofasa boasts of producing more than 1.6 million vehicles, including 15 different models. Its current production lineup here includes Renault Sandero, Renault Logan, Renault Stepway and Renault Duster.

The company also imports and sells the Renault Kwid and Renault Zoe electric car for the Colombian market.

In 2022, Renault-Sofasa delivered 49,521 vehicles to the Colombian market, taking a 20.9% market share.

The company boasts of having 110 sales rooms in 52 Colombian cities, along with 75 mechanical workshops, 49 body and paint shops, 27 “Renault Minuto” quick service centers and -- for its electric vehicles -- 16 “E-Tech” workshops and 19 “E-Tech” sales rooms.

Medellin-based real estate developer Valores Simesa – owner of the “Ciudad del Rio” properties here on lands once occupied by a long-since-demolished iron foundry – announced March 15 a COP$778 million (US$160,000) net loss for full-year 2022, an improvement over the COP$4.56 billion (US$936,000) net loss in 2021.

Financial investments explain the big improvement, netting COP$6.9 billion (US$1.4 million) in 2022 versus COP$3.7 billion (US$759,000) in 2021.

The 2022 losses are “mainly explained by the lower value of [certain] properties located in Ciudad Del Río, partially offset by interest income derived from negotiations of the lots sold and the yields of the investment portfolio,” according to the company.

Valores Simesa also cited “low demand for non-residential real estate, an increase in construction costs above rental values, and the increase in builder loan-interest rates.”

Despite posting a net loss for the year, “2022 was a favorable year to continue consolidating the company’s strategy, which was affected in previous years by impact of the pandemic on the real estate sector,” the company added.

Meanwhile, Valores Simesa cites two promising real-estate projects in the works.

One is a US$23 million, multifamily rental-housing project from Hasta Capital, aiming to create about 300 residential units.

“The second project involves Conaltura, a developer with a long history that arrives for the first time in Ciudad Del Río with the construction of a housing tower for sale involving approximately 228 apartments. Both projects involve an attractive commercial first floor,” according to Valores.

“The agreed price for this lot was COP$34 billion [US$6.98 million], of which at the end of the year COP$15.28 billion [US$3.1 million) remains to be paid, to be collected in four semi-annual installments of COP$3.8 billion [US$781,000], according to the company.

Meanwhile, another project “currently being carried out with the municipality of Medellín could make three available lots of Valores Simesa more flexible -- allowing these properties to be in greater demand and in-tune with the trend towards the development of mixed-use projects that diversify the risks associated with vacancies of different segments and generate greater connectivity between population densities and the business centers of the cities,” the company added.

Medellin-based Coltejer – formerly a giant in Colombia’s multinational textile industry – on March 8 posted a COP$137 billion (US$28.8 million) net loss for full-year 2022, compared to a net loss of COP$121 billion (US$25.5 million) in 2021.

Sales likewise declined to a measly COP$3.1 billion (US$653,000) compared to COP$16.9 billion (US$3.56 million) in 2021.

Coltejer’s total income (including rental properties) fell to COP$40.37 billion (US$8.5 million) in 2022, versus $55 billion (US$11.6 million) in 2021.

Operating losses also worsened in 2022, at COP$80.3 billion (US$16.9 million), versus COP$76.8 billion (US$16 million) in 2021.

The company has shuttered all textile production since 2021, but continues to offer industrial properties for sale or lease in the Medellin suburb of Itaguí.

Meanwhile, the company announced that it is considering a proposed delisting of all its remaining shares traded on the Colombian Stock Exchange (BVC).

Medellin-based construction giant Conconcreto announced March 1 that its full year 2022 net profit rose to COP$61 billion (US$12.5 million), up from a COP$200 billion (US$41 million) net loss in 2021.

Revenues also rose 67% year-on-year, hitting COP$1.35 trillion (US$278 million), from COP$812 billion (US$167 million) in 2021, while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 40%, to COP$287 billion (US$59 million).

Despite relatively high interest rates and inflation, Conconcreto saw big improvements “thanks to the construction business in Colombia and in the U.S., in addition to our investments in concessions and the Pactia private capital fund,” according to the company.

During 2022, Conconcreto refocused its investments toward specialized construction, engineering and design, and operation and rental of assets, having now finished its work at the still-under-construction, US$5 billion “Hidroituango” hydroelectric plant in Antioquia.

“After more than 10 years of execution, the construction contract for Hidroituango hydroelectric project ended on November 30,” the company noted.

“During the fourth quarter of 2022, Empresas Públicas de Medellín (EPM) confirmed that the first two Hidroituango turbines are generating energy, thanks to the commitment and work of Conconcreto and other members of the CCC Ituango Consortium.”

Meanwhile, Conconcreto also successfully exited what it determined to be an unprofitable contract for the “Ruta 40” highway project in Colombia. “This transaction mitigates risks of trapping liquidity in long-term contracts and limits losses due to inflationary uncertainty, high interest rates and the global economy,” according to the company

Despite exiting the Ruta 40 project, construction backlog closed at COP$2.7 trillion (US$555 million), “equivalent to 2.7 years of income, with the business in the U.S. accounting for a 54% share,” according to the company.

Medellin-based Grupo Argos – parent of Cementos Argos, power producer Celsia and highways/airport concessionaire Odinsa – announced February 28 that its full-year 2022 net income rose 19% year-on-year, to COP$1.4 trillion (US$289 million).

Revenues rose 31% year-on-year, to COP$21.3 trillion (US$4.4 billion), while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 21%, to COP$5.2 trillion (US$1.07 billion).

“The outstanding figures were accompanied by a de-leveraging policy that during the last three years implied a decrease in net debt of more than COP$3 trillion [US$619.6 million],” according to Argos.

On a related front, “Grupo Argos, Cementos Argos and Celsia will submit to their shareholders' meetings the authorization to carry out a share repurchase program for an aggregate amount that could exceed COP$1.0 trillion [US$206.6 million],” the company added.

“Cementos Argos reported the highest operating EBITDA in its history, reaching COP$2.1 trillion [US$434 million] and closed with a net debt/EBITDA ratio of 2.8 times, the lowest in the last nine years.

“Cementos Argos achieved a record export of 1.2 million tons, representing a 28% increase over 2021. Ready-mix volumes in Colombia increased 14%, driven by year-over-year growth in construction licenses in the country close to 30%.

“Celsia achieved historic results with revenues that reached COP$5.6 trillion [US$1.15 billion] and an EBITDA close to COP$1.8 trillion [US$372 million], growing 30% compared to the previous year. With its capabilities in solar generation, Celsia continues to consolidate itself as a key player in Colombia’s energy transition

“Odinsa [highways/airports] closed 2022 with a full recovery of road and airport traffic, which grew 15% and 63%, respectively,” the company added. “Traffic from highway concessions ended the year at more than 39 million vehicles.”

“We celebrate the results of the year 2022 that constitute the highest in the history of the Argos business group and ratify the fundamentals of the organization and the commitment to generate value with our shareholders,” said Grupo Argos President Jorge Mario Velásquez.

Medellin-based insurance, asset management and health-care multinational Grupo Sura announced February 28 that its full-year 2022 net income jumped 47% year-on-year, to COP$2.1 trillion (US$488 million).

Revenues also rose by 26% year-on-year, to a record COP$31.4 trillion (US$7.36 billion), the seventh straight year of revenue hikes (averaging 15.6% over those seven years).

The good performance was “driven by the recovery of Suramericana [insurance division[, the resilience of Sura Asset Management and the positive performance of Grupo Bancolombia, Grupo Nutresa and Grupo Argos,” the latter three in which Sura has equity interests, the company noted.

Adjusted return on equity stood at 9.9%, compared to 7.9% the previous year, “higher than what was budgeted at the beginning of the year.”

Sura also “improved its leverage indicator with a reduction in the ratio of net debt to dividends received from its investments from a multiple of 6.6 times to 3.9, thus advancing in our de-leveraging process,” according to the company.

“Despite a more challenging regional and global environment, the five strategic investments in the portfolio showed good dynamics in 2022. This gives us a very positive perspective on the expected cash flow of Grupo Sura for 2023 and will allow us to improve our debt indicators, as part of the gradual de-leveraging process,” added Sura vice-president Ricardo Jaramillo.

Grupo Sura’s equity closed 2022 at COP$33.7 trillion (US$7.01 billion), up 21% compared to 2021, the company added.

In the insurance division, profit boosts came from a 24% annual increase in retained premiums (COP$21.7 trillion/US$4.47 billion), including a 17% hike in life-insurance retained premiums and a 19% hike in health premiums, while “expense controls partially mitigated the increase in accidents, particularly in autos and health, which began to stabilize towards the end of the year,” according go Sura.

At Sura Asset Management, “results for 2022 were resilient in a difficult year for capital markets and a more challenging macroeconomic environment,” according to the company.

This division showed a net profit of COP$440.6 billion (US$104 million) “driven by the recovery of income from investments in the fourth quarter,” despite a “slight decrease of 4% in savings for retirement (pensions),” according to the company.

“During the last year we sought to mitigate with operational efficiencies, reduction of expenses and a positive performance of the labor markets in the region, effects such as lower returns from the financial markets and the regulatory reduction of the commission rate in Mexico,” said Ignacio Calle, President of Sura Asset Management.

Medellin-based multinational supermarket and dry-goods retailer Grupo Éxito S.A. announced February 27 that its full-year 2022 net income fell 79% year-on-year, to COP$99 billion (US$20.8 million), from COP$474 billion (US$99.6 million) in 2021.

Revenues rose 22% year-on-year, to COP$19.7 trillion (US$4.1 billion), while earnings before interest, taxes, depreciation and amortization) rose 8.3% year-on-year, to COP$1.66 trillion (US$349 million), according to the company.

Consolidated income data include results from Colombia, Uruguay and Argentina along with business eliminations.

The rise in revenues and recurring EBITDA came from “omni-channel (+18.9%) and innovation (40% share), despite inflationary pressures across the region,” according to Éxito.

“Other revenue grew 6% during 2022 and reflected improved performance of complementary businesses -- mainly real estate (+8.5%) -- despite a higher base of development fees and property sales,” according to the company.

The decline in net income is explained by “higher financial expenses (interest rates +827 basis points vs 4Q 2021), higher provisions of [online purchasing channel] TUYA -- required due to increased loans issued by 25.6% -- and other non-cash effects such as higher deferred tax in Colombia and Argentina and inflationary adjustments,” according to Éxito.

“Innovative formats reached a 40% share at consolidated level (41% in Colombia, +23 basis points versus 2021). The ‘Fresh Market’ model represented 59.6% of Carulla segment in Colombia, 52.9% in Uruguay and 29% in Argentina,” the company added.

During 2022, the company opened, converted or refurbished 92 stores -- 78 in Colombia, five in Uruguay and nine in Argentina, according to Éxito.

At year-end 2022, Grupo Éxito owned more than 2,000 stores, including food supermarkets, outlet stores and convenience stores. Among the 619 supermarkets, 492 were in Colombia, 94 in Uruguay and 33 in Argentina.

Medellin-based multinational banking giant Bancolombia announced February 24 that its fourth-quarter (4Q) 2022 net income rose 66% year-on-year, to COP$6.8 trillion (US$1.4 billion).

Gross loans increased 22.5% year-on-year, or 14.6% when excluding depreciation of the Colombian peso (COP) against the U.S. dollar during 2022.

“Thirty-day past-due loans stood at 3.24% and 90-day past due loans at 2.16%,” while total credit provision charges “represent a cost of risk of 1.6% as a percentage of gross loans, reflecting a gradual normalization of the credit cycle,” according to Bancolombia.

“Basic solvency stood at 10.37% and the total consolidated solvency ratio was 12.79% for 2022, surpassing considerably the minimum regulatory requirements,” the company added.

Digital banking continues to grow, with 7 million active customers using the company’s retail app and another 21.5 million accounts tapping financial inclusion platforms including 6.6 million users in “Bancolombia a la Mano” and 14.9 million in the “Nequi” platform.

“As of December 31, 2022, assets on a consolidated basis totaled COP$352.8 trillion (US$72.8 billion), which represents an increase of 21.7% compared to 4Q 2021. The increase in total assets during the last year is largely explained by growth in the loan book,” according to the company.

“During the last 12 months, peso-denominated loans grew 18.2% and the dollar-denominated loans (expressed in U.S. dollars) grew 8.1%,” the company added.

Operations at Banco Agricola in El Salvador, Banistmo in Panama and BAM in Guatemala represented 29.4% of total gross loans for 4Q 2022.

“Gross loans denominated in currencies other than COP -- generated by operations in Central America, the international operation of Bancolombia Panamá, Puerto Rico and the U.S. dollar-denominated loans in Colombia -- accounted for 37.3% of the portfolio, and decreased 1.5% (as expressed in U.S. dollars) during the quarter,” according to the company.

During 4Q 2022, the loan portfolio “exhibited a slowdown on a consolidated basis compared to the second and third quarter of 2022. The operation in Colombia displayed the largest expansion of the portfolio, reporting an increase of 3.7% in the quarter,” the company added.

“In volume, the commercial segment showed the highest growth, while the slower pace of the consumer portfolio is evident as a result of the increase in interest rates.”

Inside Colombia, “the loan portfolio of Bancolombia S.A. reported an increase of 3.7% in the quarter and 18.7% in 2022. The slowdown in the economy´s pace of growth starts to be reflected in originations. For 4Q 2022, there is a deceleration compared to the second and third quarters of the year. The segment with the greatest expansion during the quarter was home lending, growing 4.9%,” according to the company.

For Colombia operations, 4Q 2022 net income dipped 5.6% versus third quarter (3Q) 2022. “It is evident that the pace of growth shows a deceleration as a result of a greater increase in the cost of funding when compared to the interest income,” according to the company.

In Panama, “loans at Banistmo decreased 2.4% in 4Q 2022 compared to the previous quarter (calculated in U.S. dollars). This variation is explained largely by the commercial portfolio, in line with year-end seasonality when typically, some corporate clients close the year with a lower balance on debt,” according to the company.

Despite the loan slowdown, Banistmo in 4Q 2022 recorded its best quarterly profit for the year, thanks to higher interest rates and “good performance on investments income from debt securities operations and derivatives,” according to the company.

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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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