Construcciones El Condor Posts Net Loss for 1Q 2021, but Contract Resolution Could Result in Net Gain

Medellin-based highway construction giant Construcciones El Condor on May 14 announced a COP$51 billion (US$13.8 million) consolidated net loss for first quarter (1Q) 2021 – but the loss could be reversed in a contract-dispute resolution proceeding.

“The loss is generated by the negative results reported by the Vías de las Américas Concession for a value of COP$56.1 billion [US$15 million], due to higher work execution costs invoiced by the EPC [engineering, procurement and construction contractor] derived from events that generated an economic imbalance in the contract,” according to El Condor.

“This imbalance has been presented to the ANI [Colombia’s national infrastructure agency] with the contractual tools for conflict resolution. To date there are two favorable awards totaling COP$59.4 billion [US$16.1 million] and an additional claim is being filed. The sum of these claims exceeds the consolidated loss that is presented,” the company added.

For 1Q 2021, income from ordinary activities totaled COP$154 billion (US$41.8 million), down 20% year-on-year, according to the company.

“The year 2021 is a year of start of projects, structuring and tendering of new contracts for both concession, public works and private EPC,” according to El Condor. “This implies that we will have lower-than-average returns on project closings and starts [during 2021], something totally normal within project cycles,” the company added.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were COP$10.3 billion (US$2.8 million), with an EBITDA margin of 6.99%, down from 14% in 1Q 2020.

The dip in EBITDA margin “is due to the transition that the company undergoes in 2021 upon completion of EPC contracts with 4G [fourth-generation highway] concessionaires and the beginning of the new construction contracts,along with the effects of the La Niña phenomenon declared by IDEAM, in which the increase in rainfall ranges from 10% to 60% of normal levels,” according to El Condor.

Among 1Q 2021 highlights:

–In January, El Cóndor booked COP$151 billion [US$41 million].via sale of a 21% stake in the Concesion La Pintada highway concession to West Valley JL Holdco Limited.

— On March 30, Colombia’s national highway agency Invias awarded a COP$418 billion (US$113.4 million) contract to El Condor for construction of access roads to the “Toyo Tunnel” (also known as Guillermo Gaviria Echeverri Tunnel), part of the new “Mar 2” highway connecting Medellin westward to Caribbean ports in Antioquia.

–On March 31, Invias awarded a 50% stake in a COP$1.15 trillion (US$312 million) contract for construction of portions of the San Franciso-Mocoa highway project in Putumayo department – a project expected to last nearly 10 years.

As of March 2021, El Condor’s assets totaled COP$2.37 trillion (US$643 million), of which 48% are current assets and 52% are non-current assets. Liabilities totaled COP$1.34 trillion (US$363 million), of which 75% are current liabilities and 25% are non-current liabilities.

Consolidated financial indebtedness for 1Q 2021 closed at COP$836 billion (US$227 million), according to the company.

“As of March 2021, the backlog, understood as the balance of works contracted and to be executed, stood at COP$1.97 trillion [US$534 million],” according to El Condor.

“This calculation takes into account COP$144 billion [US$39 million] of the billing executed during the quarter and the addition to the backlog of the Invias award to execute the works of the Access Roads to the Toyo Tunnel and 50% of the value of the award contract of the Invias of modules 1 and 2 of the San Francisco-Mocoa Bypass Section 2 and 3,” according to the company.