Cementos Argos 1Q 2024 Profits Skyrocket on Summit Materials Deal

Medellin-based multinational cement/concrete giant Cementos Argos announced May 14 that it booked a one-time, year-on-year profit gain of COP$5.33 trillion (US$1.4 billion) thanks to combining its U.S. operations with Summit Materials.

As a result, Argos reported a first quarter (1Q) 2024 net income of COP$5.3 trillion (US$1.38 billion).

“With the money received [from Summit] in cash, Argos significantly reduces its debt by 70% and strengthens its financial position. For the first quarter, the ratio between net debt and EBITDA [earnings before interest, taxes, depreciation and amortization] closed at two-times,” the company explained.

But if that one-time gain with Summit were excluded, then adjusted 1Q 2024 profits were just COP$55 billion (US$14.3 million) – actually a year-on-year profits decline, from COP$118 billion (US$30.7 million) in 1Q 2023.

Gross revenues for 1Q 2024 also declined year-on-year, to COP$1.3 trillion (US$338 million), from COP$1.4 trillion (US$364 million) in 1Q 2023.

For 1Q 2024, Argos recorded an adjusted EBITDA of COP$291 billion (US$75.8 million), “2% above the value registered in the same period of the previous year, and an EBITDA margin of 22.2%, an expansion of 238 basis points,” according to the company.

“This result demonstrates the effectiveness of the strategies implemented to respond to the conditions of uncertainty and competitive challenges in local markets, which compensate for the 13% and 6% decrease in cement and concrete volumes and the consequent decrease in the 9% in consolidated revenues, largely due to the fact that there were five fewer business days in the period, due to the Easter holidays that for the current year were within the first quarter of 2024,” Argos added.

“Thanks to the combination with Summit, Argos now records in its financial statements 31% of the net income generated by Summit as an equity method,” according to Argos.

“Argos’s new business model leverages significant exposure to the U.S. building materials industry, through a 31% stake in Summit Materials,” the company explained.

The deal nevertheless “maintains the direct operation of cement and concrete assets in Colombia, Central America and the Caribbean with an annual EBITDA of nearly US$300 million, and strengthens growth-levers and additional ventures in trading, exports, calcined clays and aggregates,” the company added.

During 1Q 2024, Colombian cement shipments declined 9.1% year-on-year, but Colombian EBITDA actually improved 8.8% year-on-year thanks to price hikes and “rigorous cost discipline,” according to Argos.

As for Central America and Caribbean operations, 1Q 2024 EBITDA rose 14% year-on-year, according to the company.

“Particularly in Central America, the markets of Honduras, Panama and Guatemala remained stable during the first quarter of the year compared to 2023, with improvements in prices and costs that leveraged better margins.

“Regarding the Caribbean, the volume contraction of 13% compared to the previous year is entirely due to the situation in Haiti, whose social and political problems have been intensifying since the second quarter of 2023. Excluding this impact, cement volumes in the rest of the region’s geographies showed a year-on-year increase of 4%.

“The results of the Dominican Republic, Puerto Rico and the Antilles stand out, which were the main drivers of the 36.5% expansion in terms of EBITDA for the quarter and a global EBITDA margin of 19%, 668 basis points above the results of the first quarter of 2023,” the company added.