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Medellin-based textile manufacturing giant Coltejer revealed in a November 22 filing with Colombia’s Superfinanciera regulatory agency that it has hired a consultant to develop a financial restructuring plan in order to pay liabilities.

According to the filing, the company also seeks a credit worth COP$12 billion (US$3.7 million) to buy cotton feedstocks for its manufacturing plants here.

The company, whose majority shareholder is Mexico-based textile multinational Kaltex, revealed earlier this month that it posted a net loss of COP$19 billion (US$5.88 million) for third quarter (3Q) 2018, compared to a net loss of COP$7 billion (US$2.2 million) in 3Q 2017.

For the first nine months of 2018, Coltejer has posted a net loss of COP$32.7 billion (US$10 million) versus a net loss of COP$27 billion (US$8.3 million) in nine-months 2017.

The company employs 1,245 workers at two plants in the Medellin suburbs, one at Itagui and the other in Rionegro.

Textile makers in Colombia for years have been hit hard by below-cost Asian imports including contraband, resulting in heavy financial losses.


Medellin-based multinational power and utilities giant EPM announced November 27 that its board adopted a full-year 2019 budget of COP$17.4 trillion (US$5.3 billion), which includes a COP$1.1 trillion (US$337 million) payment of profits to its sole shareholder: the city of Medellin.

Another COP$1.1 trillion (US$337 million) in 2019 will go for repairs and continuing build-out of its 2.4-gigawatt “Hidroituango” hydroelectric dam in Antioquia, according to the company.

Fully 50% of the funds for the 2019 budget will come from continuing revenues (COP$8.6 trillion/US$2.6 billion); another 22% via the sale of its 10% interest in Colombian power producer ISA as well as its Chilean power and water assets (COP$3.8 trillion/US$1.16 billion); 6% from its credit resources (COP$1 trillion/US$306 million) and the remainder from other operations, including COP$438 billion (US$134 million) via dividends from national and international subsidiaries, according to the company.

Production and marketing costs will account for 32% (COP$5.5 trillion/US$ 1.7 billion) of the 2019 budget, while debt service will take 21% (COP$3.6 trillion/US $ 1.1 billion).

Operating expenses will account for 19% (COP$3.3 trillion/US$1 billion) of the budget, including payments to the city of Medellin. Other investments will consume 18% (COP$3.2 trillion/US$ 978 million) of the budget, while the remaining 10% (COP$1.8 trillion/US$550 million) will go to cash reserves, according to the company.

Credit-Line Approvals

Meanwhile, EPM announced November 22 that it won line-of-credit approvals totaling more than US$1 billion from two sources: Colombian banking giant Bancolombia as well as three divisions of global banking giant HSBC.

The Bancolombia line-of-credit for COP$1 trillion (US$313 million) will “facilitate the continuation of our investment plans in public-service infrastructure,” according to EPM.

That line of credit carries a three-year repayment term. These funds “will only be used when EPM requires them within the next 24 months,” according to the company.

Meanwhile, Colombia’s Treasury Ministry simultaneously cleared the way for EPM to sign separate contracts with three divisions of banking giant HSBC for a line-of-credit worth US$750 million, according to the company.

“Of these resources, US$215 million will be used to finance the investment plan (2014-2022) of the company and US$535 million will be used for general corporate purposes other than investment,” according to the Ministry.

Of that total, US$650 million will come from HSBC Bank USA and HSBC México S.A., while the other US$100 million will come from Grupo Financiero HSBC. Loan term is three years from the signing, at a six-month LIBOR rate plus 2.75% per year, and a 30-month availability period starting from the date of contract signing, according to the Ministry.

These new lines of credit “complement the plan to sell some assets of the company,” including EPM’s 10% stake in Colombian power generator ISA as well as Chilean power-and-water utility holdings, according to EPM.

The asset sales and new credit lines respond to future financial challenges resulting from problems with EPM’s "Hidroituango” hydroelectric project here in Antioquia.

EPM general manager Jorge Londoño de la Cuesta added that “this financing allows the company to strengthen its liquidity alternatives -- when our cash-flow requires that -- in the next 24 months.”


Medellin-based construction giant Conconcreto announced November 14 that its third quarter (3Q) 2018 net income rose 46.4% year-on-year, to COP$50 billion (US$15.6 million).

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 6.6%, to COP$147 billion (US$46 million), while EBITDA margin climbed to 20.9%, from 14.7% a year earlier.

Gross revenues however dipped 25% year-on-year, to COP$703 billion (US$220 million), from COP$938 billion (US$294 million) in 3Q 2017.

In a separate November 21 posting to Colombia’s Superfinanciera regulatory agency, the company pointed-out that problems with EPM’s under-construction, 2.4-gigawatt “Hidroituango” hydroelectric plant haven’t had any follow-on financial impact to date on the “CCC Ituango” construction consortium, of which Conconcreto is one of the company members. Nor do the company's recent sales of some assets have anything to do with EPM's financial problems arising from the three-year delay of power sales from that project.

In the company’s infrastructure projects segment in the latest quarter, Conconcreto explained that it has signed a deal with Colombia’s Agencia Nacional de Infraestructura (ANI) to terminate the existing “Via Pacifico” highway contract because of geological problems in the sector Loboguerrero-Mediacanoa.

A new ANI contract aims to overcome those issues – and simultaneously free Conconcreto from certain excess-cost issues arising from the geological problems.

In its highway concessions division, Conconcreto signed a deal to launch construction of a section of the Soacha-El Muña highway near Bogota.

As for the proposed “Doble Calzada Oriente” (DCO) divided highway project east of Medellin (between Sancho Paisa and El Tablazo), this project awaits a final approval from Colombia’s Treasury Ministry. Once that’s completed, the project then will be put out to bid, with Conconcreto aiming to become the construction contractor.

As for its over-all construction backlog, Conconcreto reported that as of end-September 2018, COP$1.975 trillion (US$619 million) in projects are outstanding, two-thirds of which are in infrastructure and the remaining one-third in housing.

So far this year, Conconcreto’s construction services division has focused on projects for the “Pactia” commercial real-estate venture including Hotel Corferias (Bogotá), the El Ensueño Shopping Center (Bogotá), and Cedi Colgate Palmira (Valle del Cauca).

“Execution was also focused on projects for third parties such as the Chamber of Commerce of Medellín [Poblado branch], Admininstration EPSA (Valle del Cauca), Torre Avianca Calle 26 (Bogotá), second-stage Nova (Jumbo, Valle del Cauca), and complementary buildings for the Ecocementos plant (Antioquia),” according to the company.


Medellin-based gold mining giant Mineros SA on November 20 reported a 10.2% boost year-on-year in third quarter (3Q) 2018 net income, to COP$19.7 billion (US$6 million).

Earnings before interest, taxes, depreciation and amortization (EBITDA) for 3Q 2018 also rose 7.6% year-on-year, while EBITDA margin rose 13.5%, according to the company.

Cash cost of operations dipped 2.9% year-on-year, to US$824 per ounce versus US$873/ounce in 3Q 2017.

A stronger U.S. dollar this year has hurt world gold prices, but Mineros managed to offset some of this penalty by dollar hedging.

Colombian alluvial output has dipped this year (down 1.9%), but 3Q 2018 operations still were profitable, with net income up 23%. Nicaragua net income has been even better in the latest quarter, up 49.7% this year versus last, and production rose 7.7%.

A pending deal announced last month with Argentina-based Yamana Gold is expected to be completed by year-end 2018. That deal and related plans to boost gold production elsewhere in South America could help Mineros win a stock listing on the Toronto Stock Exchange (TSX), coveted by major miners.

Gran Colombia Gold Results

Meanwhile, Toronto-based Gran Colombia Gold (GCG) announced November 13 that its 3Q 2018 net income rose to US$12.4 million, up sharply from a US$1 million net loss in 3Q 2017.

However, for the first nine months of 2018, GCG reported a net loss of US$13.0 million, , versus a net profit of US32 million in nine-months 2017.

“The net loss reported for the first nine months of 2018 includes $22.2 million of losses on financial instruments, primarily triggered by the extinguishment of the 2020 and 2024 debentures in the second quarter, and a $7.6 million charge for the costs associated with the offering completed in the second quarter of 2018.,” GCG explained.

In addition, “the net earnings in the first nine months of 2017 included a reversal of impairment of the Segovia [Antioquia] gold mining operations in the amount of US$45.3 million,” according to the company.

Commenting on the results, GCG executive co-chairman Serafino Iacono said: “We are very pleased with the continuing improvements in our operating and financial results and the strengthening of our financial position . . .

“Our senior debt is now down to US$88 million and our cash position increased further in the third quarter to reach US$29 million at the end of September.

“With our trailing 12-months adjusted EBITDA surpassing the US$100 million level at the end of September, our focus on our high-grade Segovia operations to drive our cash flow generation is providing the funding required to support our ongoing exploration and capital programs.

“We are encouraged by the initial exploration results we reported in October from this year’s drilling campaigns at each of Segovia, Marmato and Zancudo and we will have further results to report as these program progress,” he added.


Wall Street bond rater Fitch announced November 16 that it has affirmed Medellin’s favorable “AAA(col)” long-term debt rating despite the financial challenges facing city-owned electric utility EPM because of problems with the giant “Hidroituango” hydroelectric power project.

According to Fitch, Medellin also enjoys a “stable” debt oulook and a favorable “F1+(col)” short-term debt rating.

“The rating action is based on the financial strength of Medellín, which is a reflection of its positive fiscal performance, supported by its importance within the national economic context,” according to Fitch.

“Medellín benefits from the important capital resources coming from the dividends received from EPM [rated ‘AAA (col)’ and ‘F1 + (col)’; stable perspective], which allows the city to be more flexible to allocate funds to finance capital expenditures.

“In general, EPM dividends have represented around 20% of the total revenue of the city since 2012. The transfers to Medellin in 2017 were COP$1.01 trillion [US$319 million], in addition, COP$300 billion [US$95 million] were paid corresponding to the sale of the participation of EPM in Isagen.

“The contingency of the Hidroituango hydroelectric project has impacted EPM’s financial plan, considering the expenses related to the resolution of its technical complications and the change in [power sales revenues] projections due to the delays presented. Fitch classifies EPM transfers as capital income used exclusively to finance Medellín’s capital spending program.

“Therefore, it is not expected that the difficulties in Hidroituango will have a significant effect on the key financial indicators of Medellin in the short-to-medium term. Likewise, Medellín has a high degree of financial flexibility that allows it to make the necessary adjustments to its medium-term financial plans in a scenario of decreasing EPM financial transfers.

“The city maintains a high share of its debt in foreign currency (49.5%), whose risks are under continuous monitoring. This aspect is compensated since 36% of the indebtedness is contracted at a fixed interest rate and [Medellin] has an adequate liquidity position in which the free destination liquid resources have more than once covered claims. In addition, the Medellín administration is working to have [adequate] external debt coverage to reduce the risk exposure at the exchange rate,” Fitch found.

As for the general economic outlook, Fitch rates Medellin as “strong with stable tendency."

"Medellín plays a very important role in the country's economic and social contribution. Its contribution to the national GDP is approximately 7.3% and maintains an unemployment rate of 10% to 11%, higher than the national average," according to Fitch. “However, due to its internal migratory attractiveness, Fitch notes the existence of high investment needs in various social sectors. The city continues on the path of investments that allow improving the coverage rates of its citizens at levels above 95% in education, health and public services,” the ratings agency concluded.


Wall Street bond rater Fitch on November 14 issued a “stable” outlook for Colombian sovereign debt and simultaneously upgraded its GDP forecast to 3.3% growth in 2019 and 3.5% in 2020.

“Ivan Duque’s 2018 presidential election victory is expected to lead to continuity in the government’s monetary and fiscal policies, including abiding by its fiscal rule,” according to Fitch. “The new president also has pledged to enhance the business climate in Colombia.

“Growth prospects are consolidating towards Colombia’s medium-term growth potential of 3.5% after three years of underperformance (with average growth of 2.1% in 2016-2018). Higher exports, supportive consumption and higher investment are expected to underpin higher growth."

On the other hand, “infrastructure projects related to the 4G [fourth-generation highways] rollout have witnessed several bottlenecks that have slowed their progress, representing downside risks to the growth outlook,” Fitch added.

Meanwhile, a proposed tax reform in Congress “is key to achieving the [government revenue] target as well as meeting spending pressures such as from the immigration crisis stemming from Venezuela, although higher expected oil revenues from Ecopetrol dividends will help,” according to Fitch.

However, “if the tax reform does not pass or is heavily watered-down, [then] we think the government would revise the 2019 budget passed by the Congress in October 2018 with significant cuts in budgeted capital expenditure,” Fitch concluded.

DANE: 3Q 2018 Rebound

On a related front, Colombia’s national economic statistics agency -- Departamento Administrativo Nacional de Estadística (DANE) – on November 15 released its latest study on national economic indicators.

For the third quarter (3Q) of 2018, Colombia’s GDP (“PIB” in Spanish initials) grew at a 2.7% rate, up sharply from the 1.7% rate in 3Q 2017, DANE found.

Sectors showing relatively strong GDP growth (4.5%) in 3Q 2018 were public administration, defense, social security, voluntary pensions, health services and education, according to DANE.

Wholesale and retail commerce, vehicle repair, transport and warehousing, and hotel-and-restaurant services grew at a 2.6% rate, according to DANE. Industrial manufacturers meanwhile saw a 2.9% GDP growth in the latest quarter, the agency added.

In the mining sector, metals extraction grew by 14.3%, while oil-and-gas extraction rose 1.3%. However, carbon and lignite extraction declined by 4.1%, according to the agency.


Enka 3Q 2018 Net Income Jumps 66% Year-on-Year

Thursday, 15 November 2018 16:00 Written by

Medellin-based textile manufacturer and plastics-recycling specialist Enka Colombia announced November 14 that its third quarter (3Q) 2018 net income rose 66%, to COP$1.8 billion (US$564,000), from COP$1.09 billion (US$342,000)in 3Q 2017.

Both domestic and export sales revenues improved by 15% year-on-year, to COP$304 billion (US$95 million), from COP$264 billion (US$82.7 million), while volume (in tons) also rose 5% year-on-year, to 43,780 tons, from 42,660 tons in 3Q 2017.

Earnings before interest, taxes, depreciation and amoritization (EBITDA) also rose 19% year-on-year, to COP$19.8 billion (US$6.2 million), from COP$16.7 billion (US$5.2 million) in 3Q 2017.

Colombia revenues rose 19% year-on-year, while Brazil sales climbed 12%. USA/Canada sales jumped by 113% and Argentina sales soared 99%. The only sales declines were in Mexico, Peru and Spain, but these were relatively small.

Greater sales volumes and better realized prices in foreign markets were especially virtuous, given the weakening Colombian peso against the U.S. dollar, Enka noted.

The local Colombian market also improved thanks to greater efforts by the Colombian government to thwart below-cost contraband along with good performance in Enka’s recycled-plastics fibers markets.

Exports grew by 12% in pesos and 6% in volume, mainly in the USA and Canada, the company noted. Brazil and Argentina sales also rose despite recent economic difficulties in those nations, Enka added.

The “EKO-Fibras” line – derived from processing of waste plastics – saw a 16% boost in sales (in pesos) and 4% by tonnage, mainly to export markets, according to the company.

Meanwhile, the “EKO-Poliolefinas” recycling-production line is performing as expected in its first few months of operations here, according to Enka.

The export outlook for the fourth quarter 2018 is “in line with our expectations,” given a favorable situation in principal markets and a relatively weak Colombian peso-to-U.S. dollar rate. However, Enka added that it’s taking note of political and economic turbulence in Argentina and Brazil, which could affect future sales there.

As for the possible impact of higher USA tariffs on various Chinese goods, it’s possible that Colombian goods could gain greater market shares in the USA as a result. On the other hand, if China retaliates via devaluation of its currency -- and redirects more exports to South America – then this could negatively impact Colombian producers, Enka warned.


Medellin-based highway construction giant Construcciones El Condor announced November 14 that its third quarter (3Q) 2018 net income for its construction operations more than tripled year-on-year, to COP$53.5 billion (US$16.7 million), from COP$15 billion (US$4.7 million) in 3Q 2017.

The figures for the latest quarter “reflect a high level of project execution,” according to the company. "We note a 52.9% increase in construction services [in latest quarter] compared to the prior-year quarter.”

Likewise, earnings before interest, taxes, depreciation and amortization (EBITDA) improved along with a “very positive” boost in EBITDA margin, thanks mainly to efficient execution and favorable weather for outdoor construction, according to the company.

The improvement came despite a 7.6% decline this year in national construction activity in Colombia as measured by DANE, the national economic-statistics agency, El Condor noted.

Colombia’s “fourth-generation” (4G) highway construction projects continue to provide credits to construction companies, the company added.

Gross revenues so far this year are up 49%, hitting COP$676 billion (US$212 million), and the company expects similar growth in 4Q 2018.

Nine-month 2018 company-wide EBITDA dipped to COP$126 billion (US$39.5 million), from COP$252 billion (US$79 million), but this was because of a non-recurring, one-time sale of investments last year, El Condor noted.

If only measuring construction activity -- rather than including the one-time asset sale last year -- then nine-months 2018 EBITDA was up 40% year-on-year, the company added.

Similarly, nine-months net income corporate-wide was higher in 2017 that in 2018. But this was the result of the same non-recurring sales-of-investments last year, the company noted.


Medellin-based multinational retail giant Exito on November 14 posted a third quarter (3Q) 2018 net loss of COP$9.6 billion (US$3 million), but nine-months 2018 profits soared by 293%, to COP$119 billion (US$37 million).

Gross revenues as measured in Colombia pesos dipped 8.4% year-on-year in 3Q 2018, to COP$12.7 trillion (US$3.98 billion), but actually improved 9.5% if excluding Colombian peso weakening.

For nine-months 2018, gross sales are off 3.3% measured in Colombian pesos but up 8.2% if excluding the peso-weakness effect.

Sales in the four South American countries where Exito operates showed increases in local currencies: Colombia up 0.6%; Brazil 12.9%; Uruguay 4.7% and Argentina 23.5%, according to Exito.

Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) were COP$661 billion (US$207 million) with an EBITDA margin of 5.2%.

In Colombia, nine-months sales hit COP$8.1 trillion (US$2.5 billion), spurred by new retail formats (“Exito Wow” and “Carulla FreshMarket,”) new strategies, growing credit-card sales, income from the “Viva” real-estate venture and growing “e-commerce” sales, the latter of which now account for 3.6% of all Colombian sales, according to Exito.

The gradual improvement in sales here during the latest quarter came despite a 0.7% decline in the Colombian consumer confidence index, which has been weak in seven of the last 12 months, Éxito noted.

In Brazil, 3Q 2018 food sales rose 12.9% year-on-year, thanks to strong growth at “Assaí” stores as well as improvements at the “Extra” and “Pão de Açúcar” outlets, according to Exito.

In Uruguay, sales so-far this year have grown 6.4% in local currency “amid a challenging economic situation in the neighboring countries,” Exito noted.

Operating profit margin in nine-months 2018 in Uruguay was 6.9% compared to 6.7% in the same period of 2017, while recurring EBITDA margin was 8% compared to 7.7% in the same period of 2017.

As for Argentina, the “Libertad” store chain in 3Q 2018 showed a “growth in its sales of 23.5%. Libertad had the best market performance, and according to Nielsen, to August of this year registered 18% of the market share in the territory where it operates. The recurring EBITDA margin in the third quarter was 4.7%, mainly leveraged by the real estate operation in its 15 galleries commercials that maintain an occupation close to 95%,” according to Exito.

At the end of 3Q 2018, Exito had 1,536 stores, of which 549 are in Colombia, 870 in Brazil, 88 in Uruguay and 29 in Argentina.


Medellin-based Grupo Orbis – which includes Pintuco paints, Andercol Chemicals and O-Tek water treatment technologies – on November 14 posted a COP$8 billion (US$2.5 million) net loss for 3Q 2018, compared to a COP$3.2 billion (US$1 million) net profit in 3Q 2017.

For the nine-months of 2018, Orbis posted a net loss of COP$35.5 billion (US$11 million), which was worse than the COP$6.5 billion (US$2 million ) net loss in nine-months 2017.

Revenues also declined year-on-year, to COP$367 billion (US$115 million) in 3Q 2018 versus COP$435 billion (US$136 million) in 3Q 2017, while nine-months 2018 revenues fell to COP$1.02 trillion (US$320 million) versus COP$1.2 trillion (US$376 million) in nine-months 2017.

“This result was impacted by the sales performance of the third quarter, decreasing by 2%,” according to Orbis.

“This situation is partly attributable to the slow performance during 2018 of the consumer, construction and industrial sectors, both in Colombia and in the other countries where we have a presence.

“In relation to the cost behavior, the group continues in its process of operational transformation with the transfer of its main chemical and piping business plants to the city of Cartagena, which has generated a temporary pressure on operating costs. Additionally, there has been a strong price increase in some strategic raw materials, which has temporarily affected the profitability of the businesses.

“To offset this performance, during the quarter adjustments were made in operating expenses, which are reduced by 12.3%. Accumulated [from January] to September 2018, the reduction in expenses is equivalent to 10.5% compared to the same period of 2017.

“Grupo Orbis continues with the goal of reducing its net debt, which in the last 12 months has been reduced 19%, or COP$95.9 billion [US$30 million],” 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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