Construcciones El Condor Posts 1H 2022 Net Loss on Project-Finance Accounting

Medellin-based highway construction giant Construcciones El Condor on August 12 reported a first half (1H) 2022 accounting net loss of COP$17.5 billion (US$4.2 million).

“The results recognized by the equity method and the unrealized net-exchange difference generated a net result of negative COP$17.5 billion, which led the company to present a net margin of minus-4.98%,” according to El Condor.

“These methods have accounting effects, but do not have an impact on the company’s cash. If these effects are discounted, then net income was COP$9.57 billion (US$2.3 million) with a net margin of 2.72%.

“This effect will continue for several periods while the highway concessions begin to generate accounting profit, a behavior that obeys the normal cycle of concessions due to the nature of project finance,” the company explained. “The foregoing does not mean that the concessions do not meet their profit margins, but given the nature of project finance, this builds financially throughout the life of the contract.”

During 1H 2022, income from ordinary activities totaled COP$351 billion (US$84 million), up 25.34% year-on-year, according to El Condor.

“The increase reflects the upward curve of higher levels of work execution in the company’s main contracts: EPC [engineering, procurement, construction] with the Rio Magdalena highway, the Ruta al Mar highway and the Pacífico 3 highway concessions, and the Tunel del Toyo public-works contract [in Antioquia] with Invias,” according to El Condor.

Operating costs rose 16% year-on-year, to COP$302 billion (US$72.5 million), while gross profit came-in at COP$49 billion (US$11.7 million), “equivalent to a gross margin of 13.99%.” Administrative expenses reached 4.34% of revenues.

Operating profit came-in at COP$42 billion (US$10 million) equivalent to 11.92% of revenues, while earnings before interest, taxes, depreciation and amortization (EBITDA) hit COP$66.7 billion (US$16 million), with EBITDA margin at 18.98%, up from 14.92% in 1H 2021.

As of June 2022, El Condor reported total assets of COP$2.47 trillion (US$593 million), while liabilities closed at COP$1.43 trillion (US$343 million).

The company’s current ratio is stated at 0.88-times, decreasing compared to December 2021, when the ratio was at 1.38-times. “The decrease is explained by the reclassification to non-current liabilities of the structured credit that matures in June 2023 and has as a source of payment related to the investment portfolio,” the company added.

As of June 2022, construction backlog — the balance of works contracted and to be executed — was COP$3.26 trillion (US$783 million), according to El Condor.