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Cemex LatAm 1Q Profits Dip, but Colombia Outlook Brightens Cemex LatAm 1Q Profits Dip, but Colombia Outlook Brightens Source: Cemex LatAm Holdings

Coronavirus Crisis Temporarily Hurts Cemex LatAm; Colombia Rebound Starts on Highway Demand

Published in Companies Written by  April 30 2020 font size decrease font size increase font size 0
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Colombia-based Cemex LatAm Holdings (CLH) on April 30 posted a corporate-wide US$30 million net loss for first quarter (1Q) 2020 -- down from a 1Q 2019 net profit of US$16 million as the Coronavirus crisis slashed demand for cement and concrete.

In Colombia, cement demand looked relatively strong in January and February -- but then plummeted by 30% during March 2020 because of the national Coronavirus quarantine, which killed demand for all types of construction materials, the company noted.

While sales in the first two out of three months in Colombia were positive, net 1Q 2020 sales nevertheless fell 8% year-on-year in Colombia peso (COP) terms “due to lower volumes,” according to CLH.

For 1Q 2020, Colombian earnings before interest, taxes, depreciation and amortization (EBITDA) margin dipped slightly during 1Q 2020 as a “positive effect of higher prices was offset by lower volumes and higher distribution costs,” according to CLH.

On the other hand, the Colombian national government has since lifted quarantines on construction and infrastructure projects in Colombia. So, rest-of-2020 is looking much better.

For example: “fourth-generation” (4G) highway projects in Colombia are now being restarted, so “total demand for cement and concrete is expected to reach 1.2 million cubic meters during 2020, up more than 50% compared to 2019,” according to CLH.

Even so, regional highway projects “could be delayed as mayors and governors are redirecting previously budgeted resources for infrastructure to combat the Covid-19 crisis,” CLH noted.

As for concrete/cement trends in Colombia’s housing sector, “demand in the self-construction sector, despite being generally resilient in crisis, could be affected by an expected increase in unemployment and lower remittances” from Colombians working overseas, CLH noted.

On the other hand, “low-income housing should be restarted with the support of guaranteed government subsidies and lower interest rates, but new projects may be delayed."

As for launch of new industrial and commercial projects in Colombia, “lower oil prices could impact business confidence and delay” such projects, according to CLH.

CLH -- which besides Colombia also operates in Panama, Costa Rica, Nicaragua, Guatemala and El Salvador – saw corporate-wide 1Q 2020 sales fall 11% year-on-year, to US$214 million. Corporate-wide EBITDA fell 12%, to US$46 million, according to the company. 

In 1Q 2020, “consolidated prices in local currency terms for gray domestic cement and aggregates increased 3% and 11%, respectively, while prices for concrete decreased 1%” year-on-year, according to CLH.

Commenting on the over-all results, CLH director Jesús González said: “We started 2020 with a favorable dynamic of demand in Colombia, Nicaragua, Guatemala and El Salvador, and a better trend in Costa Rica. These positive developments began to be affected in March, when the Covid-19 pandemic spread and governments began implementing restrictions.

“We are responding to the Covid-19 crisis by focusing on three priorities: first, we strengthen health and safety, complementing our existing standards by developing and implementing special protocols and guidelines designed to protect our employees, customers and communities; second, we are supporting our clients and taking advantage of our ‘Cemex Go’ [trading platform] to carry out a digital experience; and third, we are taking steps to strengthen our cash position. We are suspending or reducing capital expenses, operating expenses, production levels and inventory,” he added.

Read 771 times Last modified on Last modified on April 30 2020

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