September 27, 2023

Enka 1Q 2023 Net Income Drops 66% Year-on-Year

Medellin-based textiles and plastics-recycling giant Enka announced May 12 that its first quarter (1Q) 2023 net income dropped 66% year-on-year, to COP$4.59 billion (US$1.01 million), versus COP$13.8 billion (US$3.05 million) in 1Q 2022.

Revenues likewise slipped to COP$146 billion (US$32.3 million), versus COP$156 billion (US$34.5 million) in 1Q 2022.

Earnings before interest, taxes, depreciation and amortization dropped by nearly half, to COP$9.1 billion (US$2.01 million) versus COP$17 billion (US$3.7 million) in 1Q 2022.

Declines in profits and sales came largely from “residual effects of the supply situation continuing from 2022 due to the conflict in Ukraine,” according to Enka.

On the other hand, “the approval processes for products from the new Eko-Pet [waste-plastics recycling] plant are advancing positively both in Colombia and abroad, which will boost the results in the coming months when recurring sales of this product begin,” the company added.

During 1Q 2023, Enka saw “signs of a slowdown in demand in some of our strategic markets and a greater competitive presence in Asia, after normalizing sanitary restrictions and logistics costs,” according to the company.

“This situation presents a major challenge for the company, since it has generated a reduction in international prices and makes it difficult to transfer to the sale price of inventory cost overruns caused by the war between Ukraine and Russia and inflationary increase in costs and expenses,” the company added.

Operating income dipped 6.3% year-on-year, to COP$146 billion (US$32.3 million), “as a consequence of a lower sales volume (-5%) and lower international prices,” according to Enka.

“Net profit also presents a decrease compared to 2022, as a consequence of the lower operating result and the increase in financial costs, mitigated by a positive result due to exchange difference from the revaluation of the Colombian peso against the U.S. dollar,” the company added.

“In the first quarter of 2023, exports reached US$14.6 million, similar to the levels of the previous year. However, the mix of destinations presents some changes due to the lower demand of some destinations, especially North America, which was offset by sales to Europe, Peru and Chile.”

In its “green” business lines (from recycling waste plastics), “accumulated revenues were COP$48 billion [US$ million], a decrease of 2.3% compared to the year above, mainly due to lower international prices that offset the higher 4% sales volume.”

Green products now account for 33% of sales, including “Eko-Pet,” “Eko-Fibras” and “Eko-Polyolefins” products.

As for its conventional textiles lines – accounting for 66% of all sales — “revenues for the quarter were COP$97 billion [US$21.4 million], 8% lower than the year above, mainly due to the slowdown in demand in all businesses and due to lower international prices,” of which exports amounted to US$13.5 million.

As for its rest-of-2023 outlook, Enka expects to see “low economic growth worldwide, which will make competition more intense, especially in markets with an Asian presence,” according to the company.

Nevertheless, “we are convinced that the strategy defined by Enka over the years — where the sustainability and added value are decisive — will allow us to continue growing and strengthening our competitive position in strategic markets,” the company added.

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