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Nutresa 3Q 2021 Profits Rise 14% Year-on-Year

Saturday, 30 October 2021 08:18 Written by

Medellin-based multinational foods giant Grupo Nutresa on October 29 reported a 17% year-on-year hike in third quarter (3Q) 2021 net profits, hitting COP$173 billion (US$46 million).

Operating income rose to COP$3.36 trillion (US$893 million), up from COP$2.85 trillion (US$757 million) in 3Q 2020.

Meanwhile, 3Q 2021 operating profit rose 8.4% year-on-year, to COP$867 billion (US$230 million), according to the company.

As for nine-months 2021 results (January through September), sales so far this year are up 11.7%, to COP$9.1 trillion (US$2.4 billion), while sales in Colombia are up 14.5% year-on-year, hitting COP$5.5 trillion (US$1.46 billion), according to the company.

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) so far this year are up 5.4%, to COP$1.2 trillion (US$319 million), with a 12.9% margin on sales.

Net profit so far this year is up 14%, to COP$535 billion (US$142 million), according to the company.

International sales, up 7.7% year-on-year, hit COP$3.6 trillion (US$964 million), accounting for 39% of total sales.

Grupo Nutresa boasts of a direct corporate presence in 14 countries with 47 production plants, 45,861 employees and product sales in 78 countries on five continents.


Colombia-based Cemex LatAm Holdings – producer of cement, concrete and aggregates in six Latin American nations – on October 27 reported a third quarter (3Q) 2021 net loss of US$10.6 million, a big improvement over the US$110 million net loss in 3Q 2020.

Corporate-wide operating earnings before interest, taxes, depreciation and amortization (EBITDA) rose to US$56 million, up from US$50 million in 3Q 2020.

Net sales also improved year-on-year, to US$235 million, from US$209 million in 3Q 2020, once adjusting for foreign-currency fluctuations.

“Higher volumes in Costa Rica, Nicaragua, and Panama, as well as higher prices in Costa Rica and the ‘rest of CLH region’ [including Nicaragua, Guatemala, El Salvador], were the main drivers of the improvement,” according to the company.

In Colombia, “we estimate that our quarterly cement volumes slightly underperformed the industry on a year-over-year basis mainly due to our pricing strategy and competitive dynamics,” according to Cemex.

“In our ready-mix business [in Colombia], volumes improved 31% on a sequential basis, mainly due to a recovery in formal-sector activity and a base effect stemming from the protests that occurred mainly in May.

“We believe the outlook for cement volumes remains favorable [in Colombia], supported by record home sales, the resilience of the self-construction sector, the execution of the existing fourth-generation highway projects, as well as the rollout of new infrastructure programs,” the company added.

Colombia net sales for 3Q 2021 rose to US$117 million, versus US$115 million in 3Q 2020, but operating EBITDA dipped 5%, to US$27 million. Gray-cement prices in Colombia during 3Q 2021 fell 4% while aggregates dipped 1%, but ready-mix concrete prices stayed flat year-on-year.


EPM general manager Jorge Andres Carrillo revealed in a press conference here this morning (October 27) that it’s at least theoretically possible that the current Hidroituango construction contractors might continue their work well into 2022.

But that possibility of a temporary contract extension into 2022 remains to be confirmed, pending results of a follow-up meeting with the CCC Hidroituango consortium next week, Carrillo explained.

The driving factor is the expectation that Colombia’s Comptroller-General eventually will confirm its proposed COP$4.3 trillion (US$1.15 billion) fine against the construction contractors, part of a group of 26 individuals, companies and politicians named in the Comptroller’s lawsuit.

If the Comptroller confirms its charges, then the current contractors must abandon the Hidroituango project, under Colombian law.

However, the Comptroller’s expected final ruling is currently blocked by a 29th Circuit Court decision in Bogota, which arose from a counter-claim brought by one of the 26 defendants. That defendant is María Eugenia Ramos Villa, a former official in the administration of prior Antioquia Governor Sergio Fajardo.

Fajardo, along with the construction contractors and other former politicians, faces the same Comptroller allegations of “gross negligence” that supposedly caused a costly diversion-tunnel collapse at Hidroituango in 2018.

If however the Comptroller succeeds in overturning the 29th Circuit Court ruling before the December 31, 2021 expiration of the current Hidroituango construction contracts, then EPM will have to rush to seek replacement contractors -- with potentially enormous costs from resulting construction delays.

Such delays potentially could wind-up costing EPM hundreds of millions or even billions of dollars, if expected counter-suits by the sacked contractors eventually prosper in some future court proceedings.

Since EPM has long expected that the Comptroller’s proposed fines eventually would be confirmed, Carrillo revealed that EPM has been working for more than one-year on a “plan B” to find replacement contractors.

So far, seven potential companies have shown relatively keen interest in bidding, but signing contracts with any such replacements will take many months, via a complex public-bidding process, he clarified.

Meanwhile, in a filing with Colombia’s Superfinanciera oversight agency this morning, EPM revealed details of last night’s (October 26) meeting with the CCC Hidroituango Consortium, where the parties explored alternative schemes that potentially could reduce construction delays from an eventual switch of contractors.

However, in that meeting, the Consortium flatly rejected the idea of assigning their existing contracts to some new contractors.

Instead, EPM and the Consortium will try to come-up with some interim scheme whereby the contractors supposedly would continue building Hidroituango for some months in 2022 while (somehow) also cooperating with EPM’s replacement contractors – that is, assuming that the Comptroller’s final ruling will indeed be adverse to the existing contractors, and that this ruling isn’t quickly overturned by some other court proceeding.

On another front, the majority owners of the Hidroituango project – that is, the Antioquia departmental government and its development agency, IDEA – unveiled an October 26 letter to EPM, demanding that EPM pay any and all costs of switching contractors.

This could wind up costing EPM hundreds of millions of dollars on top of all the other potential costs of switching contractors, including the possibility of insurance claim denials and possible loss of US$450 million in finance from the Interamerican Development Bank (IDB).

What’s more, continuing delays in finishing the Hidroituango project theoretically could provoke an eventual, catastrophic event at the dam, since the spillway – currently handling the entire Cauca River flow – wasn’t designed specifically to handle such massive flows indefinitely, according to the departmental government’s complaint.

Despite all these threats, Medellin Mayor Daniel Quintero this morning stated in a separate press conference that while EPM will continue to seek new contractors and pursue claims against Hidroituango project insurer Mapfre, the insurance policy wouldn’t cover costs for some unplanned diversion tunnels, some costly reinforcement works, portions of four-years of lost power sales, nor about US$200 million in deductibles.

As a result, the Mayor will continue with its parallel US$2.35 billion lawsuit against the contractors, in a separate proceeding to the Comptroller claims, he said.


Colombia’s projected GDP (“PIB” in Spanish initials) for full-year 2021 is now seen at between 8.19% and 9.5%, according to the latest forecast from Fedesarrollo, the nation’s leading economic think-tank.

Meanwhile, Colombia’s industrial confidence index (“Índice de Confianza Industrial,” ICI) has just hit its highest level in 41 years, according to Fedesarrollo -- highlighted in an October 25 announcement from Colombia’s Ministry of Commerce.

“The Fedesarrollo Industrial Confidence Index (ICI) reached the highest level in 41 years in September, driven by the current level of orders, a fall in inventories and an expansion in the indicator of production expectations,” the Ministry noted, citing Fedesarrollo’s latest study.

“The ICI stood at 20.4% in September in its original series, which represents an increase of 4.7 percentage points compared to August and an increase of 14.3 points compared to September 2020. The quarterly moving average was 17.4%, which is equivalent to an increase of 4.8 points compared to the same measurement last month.

“This result is mainly explained by the increase of 7.3 percentage points in the current volume of orders, together with a decrease of 4.4 points in the level of inventories and the increase of 2.5 points in the indicator of production expectations. for the next quarter.

“Regarding industrial employment expectations for the next quarter, these increased to 17.7%, which implies an increase of 6.0 points compared to the previous quarter,” the analysts added.

Meanwhile, Colombia just received another 1.5 million doses of Moderna’s highly effective vaccine against Covid-19, on the heels of receiving another 2.25 million doses from Sinovac – hence overcoming temporary shortages of both vaccines in various Colombian cities.

As of today (October 26), Colombia nationwide is about to surpass 46.5 million shots against Covid-19, for a population of just over 50 million people.

In Medellin, the Covid-19 vaccination campaign is now at 88% of targeted coverage, with 2.9 million doses already applied and “herd immunity” forecast to become effective by late November, according to the Mayor’s Office.

As for Antioquia generally (including Medellin and the metro area), more than 6 million people here have already gotten shots against Covid-19, according to the departmental government.


Colombia’s National Environmental Licensing Authority (ANLA) announced October 25 that it has decided to shelve -- at least for now, pending further studies – AngloGold Ashanti’s proposed copper/gold mine in Jerico, Antioquia, even despite 75% favorability for the project among the citizens in-and-around Jerico.

“With the analysis of the information on file, which was collected in the field visits and the concepts of other entities, the ANLA technical team established that it is not possible to issue a substantive decision on the request for the environmental license of the mining project, so it has to be archived,” according to the official ANLA bulletin.

“The main technical considerations that led to the ordering of the [shelving of the project] file by the Authority are related to the definition of the area-of-influence, the characterization of the hydrogeological, hydrological, geotechnical and biotic components, considerations regarding the tailings deposit (residues from mining activity) and subsidence, among others.

“This evaluation process included professionals from different disciplines, experts in hydrogeology, hydrology, geotechnics, geochemistry, ecology, air quality and socioeconomic issues, among others.

“During this environmental procedure, more than 211 third parties have been recognized to date, guaranteeing citizen participation and access to information on the environmental licensing process to the communities surrounding the project during the evaluation process,” ANLA concluded.

AngloGold Ashanti Response

Reacting to the disappointing announcement, AngloGold Ashanti Colombia this morning issued the following press bulletin:

“AngloGold Ashanti Colombia specifies that, to date, the company has not received any official notification from the environmental authority regarding the evolution of the licensing process.

“To the extent that a [ANLA] press release does not constitute, in any way, legal notification of any administrative act, it is not possible to pronounce on a decision-to-archive, the details of which are unknown.

“It is relevant to specify that the [project shelving] file is one of three possible responses to an environmental license request, namely: approval, denial or archive-the-file. The file is a decision that implies that the authority considers that it is not possible to rule on the merits of the license application and allows space to resubmit the license application, once the alleged missing information is completed and submitted, to a new evaluation by the authority.

“At AngloGold Ashanti we have the peace of mind and pride of having a rigorous and exhaustive Environmental Impact Study, with analyses carried out with the accompaniment of more than 27 expert external consulting firms, for more than 14 years, in a judicious and open process of dialogue. with the communities and different stakeholders of the Quebradona project, as well as having given a timely and sufficient response to each and every one of the 174 requests for additional information that were requested by ANLA at the time.

“Proof of the above is that the Minera de Cobre Quebradona project already has all the other permits and licenses required to begin its execution, including the environmental subtraction permit granted by Corantioquia and the approval of the PTO [‘Programa de Trabajos y Obras’ (Works-and-Tasks Program)] by the Ministry of Mines of the Department. Likewise, the relationship of trust and approval by the community currently has a favorable level of close to 75%. The environmental license is the last step to be issued.

“We regret that the ANLA has exceeded all the time-lines as required under the law to pronounce itself and we insist that, once the ANLA notifies us in the terms established in the law, only at that moment will we proceed to analyze the details of the decision and the argumentation that for law must accompany it.

“AngloGold Ashanti ratifies its determined commitment to continue in the country and fulfill its purpose of converting mineral wealth into environmental, social and economic development for the southwest of Antioquia and for the country. Neither the authorities, nor the communities, nor the mining companies can allow Colombia to miss the opportunity to advance in a better use of its natural resource potential and include sustainable and responsible mining as an essential part of its exports,” the company concluded.


Medellin-based Conconcreto President Juan Luis Aristizábal – head of one of the three principal contractors for the US$5 billion “Hidroituango” hydroelectric project here in Antioquia -- today contradicted disturbing damage claims being made by Colombia’s Comptroller General as well as Medellin Mayor Daniel Quintero.

In a wide-ranging interview with El Colombiano -- Medellin’s biggest mainstream daily newspaper – Aristizábal points out that neither Conconcreto nor any of the 26 officials, politicians and companies named in the Comptroller’s COP$4.3 trillion (US$1.15 billion) damages claim over supposed “gross negligence” at the Hidroituango project have been given a chance to provide contravening evidence.

What’s even more disturbing is that there are indications that the Comptroller seems headed toward confirming its charges against the contractors in the next few weeks -- without ever hearing evidence from the accused, Aristizábal suggested.

Hence this Kafkaesque scheme – hearing only from the prosecution and almost nothing from the defense – could resemble a banana-republic kangaroo-court procedure, or Soviet communist dictator Josef Stalin’s murderous “show trials” of the 1930s -- rather than what people and companies in real democracies, such as in North America or Europe, deserve and ought to expect.

Even more ironic is that neither the Comptroller nor Medellin Mayor Quintero have any knowledge or experience in civil engineering, let alone hydroelectric dam-building. Yet both somehow are claiming to know the causes of the diversion-tunnel collapse at Hidroituango, which all engineering studies so far haven’t been able to prove conclusively.

If the Comptroller confirms its damage claims, then EPM must -- under Colombian law -- terminate the existing contracts of the affected Hidroituango builders and designers, then find and get-up-to-speed some unknown replacement contractors -- hence delaying the project likely for many months beyond the current June 2022 scheduled start-up of the first power turbines.

Such delays could cost EPM huge fines not only for failure to provide power to the national grid -- as it has legally promised by June 2022 -- but also untold hundreds of millions of dollars in revenues from lost power sales because of inevitable delays from training new contractors.

Then there’s an enormously costly US$450 million loan pre-payment obligation to the Interamerican Development Bank (IDB) if the project fails to come on-line by June 2022.

What’s more, these fines and costs would come in addition to possibly hundreds of millions or even billions of dollars in counter-claims that probably will be brought by contractors, along with civil torts brought against EPM by lawyers representing persons temporarily displaced downstream of Hidroituango as a result of the 2018 tunnel-collapse incident.

And as a final wound, Hidroituango project insurer Mapfre possibly could cancel all further insurance payments beyond the US$350 million already paid to EPM, and – potentially – demand repayment of what it has already paid, citing the Comptroller’s finding of “gross negligence” and Mayor Quintero’s repeated, unsubstantiated claims of “corruption” and mismanagement.

Following a pattern, Mayor Quintero continues making wild, unsubstantiated claims against the Hidroituango contractors, former EPM officials and former Antioquia elected officials.

The latest pot-shot claim from Quintero – made last week without offering a single shred of evidence -- is that the contractors used substandard construction materials and made reckless design and execution decisions, which supposedly led to the costly 2018 collapse of a diversion tunnel at Hidroituango.

In addition, Quintero now claims that Mapfre and lesser insurers have just decided to exclude insurance payments for diversion tunnels, for some required stabilization works, for much of future lost-power sales and for other Hidroituango project costs that collectively would total roughly US$1 billion.

But if Quintero and the Comptroller are successful in their campaign to blame the main contractors and some former officials and former politicians for the tunnel collapse – resulting in a mandatory switch of contractors, enormously costly delays and inevitable counter-lawsuits – then EPM could lose far more than the US$1 billion that supposedly has been excluded from insurance payments.

To date, Mapfre has not stated publicly what it plans to exclude from insurance payments, nor explain how much it had planned to pay EPM for supposedly covered losses at Hidroituango.

But many leading engineering firms, trade associations, trade unions, public-advocacy organizations -- and now even Colombia President Ivan Duque -- have publicly stated that the correct way forward for recovering Hidroituango damage costs ought to be via negotiations with insurers, rather than blaming contractors.

However, according to Conconcreto President Aristizábal, if blame must be placed on anyone, then the correct target ought to be EPM itself, rather than its contractors, as Aristizábal explained in the El Colombiano interview published today. This would mirror public statements made by some legal experts that Mayor Quintero's US$2.85 billion parallel lawsuit against Hidroituango contractors actually could wind-up as a case of EPM suing itself.

In the interview, Aristizábal pointed out that Conconcreto wasn’t involved in designing nor building the diversion tunnels, which actually were designed and then demanded by EPM, the general contractor for Hidroituango.

“We are not responsible for the design, or the selection of materials, or the decisions that are made around all these activities,” Aristizábal stated in the interview. “We execute the construction, with the designer's guidelines, it is approved by the controller and received by our contractor EPM. All the works that we execute were supervised by the controller, approved by the designer, received by EPM and paid for by them.”

So, if anyone is to blame for the diversion tunnel collapse, then the blame ought to be put on EPM, which specified and approved all design, engineering and execution at Hidroituango, he said.

As a result, the Comptroller “should be investigating EPM. Furthermore, the resources managed by EPM are public resources. We are not fiscal agents because they did not give us an advance and because the money we received from EPM was a payment for services,” Aristizábal concluded, citing the Comptroller's responsibility for investigating public entities.

On another ominous note, Aristizabal pointed-out that Conconcreto’s principal stockholder is France-based Vinci. Hence the eyes of foreign investors are now fixed on the outcome of the current legal claims, which if adverse to some of Antioquia’s biggest and historically prestigious companies could discourage crucial foreign investment that generates tens of thousands of jobs, vital infrastructure development, huge tax revenues and economic progress for all Colombia, Aristizábal added.


Only one day after its fellow “Hidroituango” hydroelectric-project contractor Coninsa Ramon H filed for bankruptcy, Medellin-based construction giant Constructora Conconcreto likewise today (October 13) filed for bankruptcy, citing Colombia’s Comptroller-General proposed COP$4.3 billion (US$1.15 billion) fine for supposed “gross negligence” that allegedly caused an enormously costly 2018 diversion-tunnel collapse at Hidroituango, now almost completely recovered.

While Conconcreto states in the filing that its over-all financial outlook is “solid and positive,” nevertheless “the recent ruling in the first instance of the Office of the Comptroller General of the Republic for a figure of COP$4.3 trillion [US$1.15 billion] has an undeniable patrimonial and operational impact.”

The bankruptcy petition “aims to guarantee the sustainability of Constructora Conconcreto, maintain the more than 12,000 jobs that it currently generates, comply with all obligations and mitigate the uncertainty generated by speculation in the market and the eventual consequences of the ratification of the ruling of the Comptroller General of the Republic through the mechanisms provided by law,” according to the company.

“In the next few days, the negotiation phase of the reorganization agreement with the creditors participating in the process will begin,” the company added.

Commenting on the filing, Conconcreto president Juan Luis Aristizábal added: “We are prepared and committed to the country, Antioquia and their communities in the culmination of the Hidroituango project, critical for the energy stability of Colombia."

Antioquia Governor Gaviria Urges Insurance-Settlement Pathway

Meanwhile, Antioquia Governor Anibal Gaviria today publicly urged that any financial settlement over the diversion-tunnel collapse ought to be the exclusive province of Hidroituango project insurer Mapfre (along with other lesser insurers), with whom EPM has a damages policy totaling more than US$2 billion.

Mapfre has already paid US$350 million to EPM for Hidroituango damages, and likely would continue to make further payments -- barring some contradictory legal ruling putting blame for the tunnel collapse on contractors, consultants and politicians, rather than upon an unforseen, unpredictable tunnel fracture.

"The solution for Hidroituango has been, is and will be, as it should be: PAYMENT BY INSURANCE COMPANIES," Governor Gaviria publicly stated today, adding further emphasis by inserting all-capital letters.

This statement puts the Antioquia Governor in direct conflict with Medellin Mayor Daniel Quintero, who has issued wild, President-Trump-like conspiracy theories about "corruption" among former EPM officials and supposed negligence and/or conflicts-of-interest among contractors, consultants, former EPM officials and former politicians. Quintero has already sued the contractors and consultants for US$2.85 billion in a proceeding separate (but parallel to) the Comptroller-General's legal claims.

 


Medellin-based construction giant Coninsa Ramon H – one of the principal contractors to the US$5 billion “Hidroituango” hydroelectric project – this morning (October 12) filed a bankruptcy petition with Colombia’s Superintendencia de Sociedades (Supersociedades) regulatory agency.

Under Colombian law, the petition is known as an “Emergency Negotiation of a Reorganization Agreement (NEAR) under Law 560 of 2020,” according to Supersociedades.

“Within the framework of the procedure, the company must set a notice regarding the duration of the negotiation, notify the creditors of the beginning of the emergency negotiation and all the judges and entities that carry out executive, restitution, and guarantee enforcement processes or coercive collection, in order to be suspended during the process, and the company must start the negotiation with creditors and enter into the reorganization agreement in a term no longer than three months for confirmation by the Bankruptcy Judge,” according to the agency.

“The Emergency Negotiation of a Reorganization Agreement, established in Decree Law 560, is a mechanism for rescue and business recovery for those debtors who are affected by the causes that led to the declaration of the State of Economic, Social and Ecological Emergency, which allows to avert the crisis and preserve the company and employment through negotiation with creditors and the confirmation of a reorganization agreement,” the agency added.

Coninsa Ramon H is one of 26 companies, politicians and former Hidroituango officials hit by a proposed COP$4.3 trillion (US$1.15 billion) claim brought by Colombia’s Comptroller General (Contraloria General) for alleged “gross negligence” that supposedly triggered a costly 2018 collapse of a diversion tunnel at Hidroituango.

Potentially, Coninsa Ramon H and other companies could lose the current construction contract at Hidroituango and be forced to pay huge damage claims, possibly threatening the future viability of those companies.

In a September 6, 2021 press statement following the Comptroller-General’s claims announcement, the CCC-Ituango Consortium -- of which Coninsa Ramon H is one of the principal member companies -- announced that they will appeal the Comptroller’s claims.

“From what has been analyzed so far, the [Comptroller’s] ruling corresponds to issues that are eminently technical (project scheduling and tunnel construction), and we hope that the totality of the evidence that we provide is taken into account by all the instances to which we will resort,” according to that press statement.


Colombia President Ivan Duque announced October 11 during a visit to Washington, DC, that the proposed “Puerto Antioquia” ocean freight port near Turbo, Antioquia just won another US$200 million in financing from the Interamerican Development Bank’s “IDB Invest” group.

The project – now estimated to start-up in the second half of 2024 -- has a total estimated cost of US$672 million, of which IDB Invest is putting-up a US$150 million in equity plus “mobilization of US$50 million of funds under administration of IDB Invest, which offers a long-term financing of 17 years not otherwise available in the [private equity] market, and necessary to ensure the financial sustainability of the project,” according to IDB.

The project earlier won a US$110 million term loan from New York-based Global Infrastructure Partners (see Medellin Herald July 9, 2020).

The new IDB Invest financing will support “construction, operation and maintenance of Puerto Antioquia, a new multipurpose port facility located in the Gulf of Urabá,” the agency noted.

The project developers already have obtained a 30-year concession contract with Colombia’s National Infrastructure Agency (ANI).

“Thanks to its geostrategic location and the construction of '4G' [soon-to-open fourth-generation] highways, it will be the port terminal closest to the main production and consumption centers of the country, becoming a key infrastructure for strengthening Colombian foreign trade,” IDB noted.

The project also has lined-up “mezzanine financing from Global Infrastructure Partners and loans of US$193 million from Colombian local banks,” IDB added. Puerto Antioquia also has an environmental license and enjoys Special Permanent Free Zone status.

Among Puerto Colombia’s project sponsors: international shipping company CMA CGM, the Colombian port development company Puertos, Inversiones y Obras (PIO SAS), the European construction company Eiffage and Colombian banana-exporting companies Agrícola Santamaría, Banafrut, C.I. Unibán and C.I. Tropical.

The project features a 16.5-meters-deep ocean draft to a marine platform including 1,340 linear meters of dockage, all connected to a 3.8-kilometers-long viaduct to a 38-hectares shoreside parcel, which will include “logistical and technological facilities necessary for the storage of general cargo, bulk, vehicles and refrigerated and dry containers,” according to the funding agency.

“IDB Invest has promoted the alignment of Puerto Antioquia with the highest international standards in socio-environmental matters, which also means that the project responds to the need to implement sustainable, safer and more efficient transport infrastructures, which contribute to improving global indicators, such as the Sustainable Development Goals,” according to the agency.

Puerto Bahía Colombia de Urabá S.A. is the formal entity holding the concession contract with ANI for the ocean-freight terminal project.

The port initially will move an estimated volume of 7 million tons of cargo per year. “Due to its strategic location in the southeast of Urabá, the Colombian Caribbean coast, it will reduce the distance between the port and the main centers of production and consumption of the region by more than 350 kilometers,” according to the agency.


While the Medellin City Council is mulling Medellin Mayor Daniel Quintero’s proposed sale of EPM’s 50% stake in the UNE-EPM telecom/internet/cell-phone/cable-TV joint venture with Spain-based Millicom, a new report from Wall Street bond rater S&P (BRC Ratings) ironically sees a brighter outlook for the unit, contradicting Quintero's gloom.

In an October 4 filing with Colombia’s Superfinanciera oversight agency, UNE-EPM discloses the latest S&P/BRC ratings report, which finds that the UNE-EPM internet/telecom unit – commercially known as “Tigo” -- continues to enjoy a strong “AAA” bond rating.

“For the next few years we project profitability margins close to 32.5% and leverage indicators (measured as net debt to EBITDA) around 2-x (times), which we consider consistent with the rating,” according to the ratings agency.

“Despite an environment of greater competition and high investment commitments, the generation of the company's own resources will continue to provide favorable levels of liquidity for the continuity of its operation, which reflects a ratio of sources-over-uses above 1.2-x for the next two years.

“Our assessment of Tigo reflects its favorable market position in most of its business lines. It ranks second as the most relevant operator in the internet, fixed telephony and TV segments, and the third in the mobile [cell-phone] market nationwide.

“This is supported by an adequate spectrum mix between the high and low bands after the award of access to 40 megahertz (MHz) of 700 MHz in 2019, which we believe will continue to provide a competitive advantage in the telecommunications industry in terms of higher levels of digitization and coverage.

“Despite increased competition in 2021, all business segments maintain favorable results,” according to the report.

While UNE-EPM posted a net loss in 2020, “as of June 2021, consolidated revenues grew 6.5% compared to the same period of the previous year, a result that contrasts with the negative 1.2% of 2020 that incorporates the effects of the pandemic, and which is above the record of the last three years,” according to the report.

“In the next two years, we estimate that the home segment will mitigate the reductions in the mobile business and the small and medium-sized business market, so we project revenue growth of close to 4% in the next two years.

“The strengthening of its sales channels and the greater offer of prices have pressured profitability margins by about 1.6 percentage points during the first half of 2021, registering an EBITDA margin of 32.4% from 34% in 2020.

“In our opinion, the cost of these measures will be offset by the higher level of consumption offered by the sustainability of its customer base. Thus, for the next two years we estimate margins above 32.5%, in line with the rating agency’s expectations,” according to BRC.

“We project relatively stable levels of leverage over 2x, even under the continuity of its operational and investment commitments. Under the current scenario of cash flow generation, we do not foresee that the company will increase its debt in the next two years, because these resources will continue to be adequate to fulfill its investment plans, the commitments acquired in the 700 megahertz auction (MHz) of 2019, and the payment of the renewal of their spectrum licenses.

“This result compares favorably with that of its peers within the same industry and companies within the same rating at the national level,” BRC added.

UNE-EPM “maintains strict control of the stability of its debt levels and maturity profiles, for which in 2021 it advanced the prepayment of US$150 million of its syndicated debt against the issuance of bonds at the local level. This in order to minimize its exchange rate exposure, which, as of June 2021, its debt in dollars was close to 20.2% of the total, down from 36.7% in 2020, and [the company has] improved its payment profile which, to date of this review, it maintained an average term of more than six years,” the report explains.

As for the capex forecast, UNE-EPM will be spending “between 5% and 6% of income generation for 2021 and 2022, a share that would remain in line with what the company budgets,” according to BRC.

“Under our liquidity scenario, cash sources will be above 1.2-x and 1.3-x in the next 12 and 24 months, respectively. This result allows us to confirm that Tigo will have adequate resources to meet its operational requirements and payment of financial obligations.

"In addition, we consider that the company has mechanisms to face stress scenarios, such as the flexibility of its investment plan, access to the capital market and available quotas in the financial system, which, as of June 2021, amount to a value of COP$3.6 trillion [US$948 million],” according to the report.


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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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