Enka 3Q 2024 Net Income Drops 39% Year-on-Year

Medellin-based textiles and plastics-recycling specialist Enka announced November 8 that its third quarter (3Q) 2024 net income fell 39% year-on- year, to COP$1.77 billion (US$406,000), from COP$2.9 billion (US$6.65 million) in 3Q 2023.

Revenues also fell 6% year-on-year, to COP$123 billion (US$28 million), from COP$131 billion (US$30 million) in 3Q 2023.

On the other hand, earnings before interest, taxes, depreciation and amortization (EBITDA) rose 6.6% year-on-year, to COP$9.9 billion (US$2.27 million), from COP$9.3 billion (US$2.1 million) in 3Q 2023.

“This [EBITDA] performance is due to the increase in the capacity used at the new [plastics recycling] bottle-to-bottle plant and the management of costs and expenses, which made it possible to offset the reduction in income from the textile and industrial businesses,” according to Enka.

“Thanks to the consolidation of the new bottle-to-bottle plant, our ‘green businesses’ now represent 55.4% of total sales — versus 40.6% at September 2023 — which offsets the 34.1% drop in revenues from the textile and industrial businesses,” the company added.

Debt ratio at the end of 3Q 2024 improved to 0.2x-EBITDA, “significantly lower than the 2.7x of the same period of the previous year,” Enka added.

As for nine-months 2024 (January through September), profits have dropped 39%, to COP$11 billion (US$2.5 million), versus COP$18 billion (US$4.1 million) in nine-months 2023.

Revenues are also down by 12.6% so far in 2024, to COP$365 billion (US$83.8 million), from COP$418 billion (US$96 million) in nine-months 2023.

Meanwhile, accumulated EBITDA for nine-months 2024 dipped 9% year-on-year, to COP$29 billion (US$6.6 million), although EBITDA margin rose to 8.1%, from 7.7% during nine-months 2023.

“The accumulated [nine-months 2024] results as of September 2024 have been impacted by the trade war that has been taking place between China, the U.S. and Europe,” according to Enka.

“The global slowdown has generated an imbalance between supply and demand, as China continues to supply world markets with products at low prices thanks to state subsidies, its excess installed capacity and raw materials from Russia.

“As a result, our operating income has ended at COP$364 billion [US$83 million], 12.9% below the previous year, explained by the textile and industrial businesses, which have suffered an increase in Asian competition at the same time that we see a reduction in demand,” the company explained.

In contrast to industrial-textile sales declines, “the green businesses continue to grow their income by 19%. This is due to the greater utilization of the new bottle-to-bottle plant, despite a challenging context where the raw material (recycled bottles) has suffered strong increases in cost due to the growing demand for export, at the same time that international reference prices (virgin PET) have contracted due to the oversupply of Asian producto,” according to Enka.

Gross revenues in Colombia so far this year have totaled COP$232 billion (US$53 million), while export revenues have fallen 29% versus nine-months 2023, on account of a 38% drop in textile-industrial sales, according to Enka.

On the other hand, “green” export sales “have increased constantly. In the third quarter of 2024, revenues from this line abroad accounted for 22.9% of our total sales,” Enka added.

As for the near-term outlook, “China operates its productive apparatus at maximum capacity, increasing its inventories and offering products at low prices, in some cases with losses subsidized by the government,” according to Enka.

“This has led countries such as the United States, Mexico, Brazil and members of the European Union to implement antidumping measures. Enka continuously monitors its strategic markets, especially regarding key raw materials such as caprolactam and recycled bottles.

“This monitoring allows timely decisions to be made to protect the company’s profitability and cash flow. Additionally, we will continue to evaluate growth opportunities in green businesses, seeking niches with high added value and high engineering, as well as new destinations, where we can continue to support the transformation of the industry towards production standards focused on sustainability and the circular economy,” the company concluded.