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Enka's 1Q 2020 Results Positive Despite Covid-19 Enka's 1Q 2020 Results Positive Despite Covid-19 Source: Enka Colombia

Enka Colombia 1Q 2020 Net Income Improves, but 2Q Outlook Dims

Published in Companies Written by  May 16 2020 font size decrease font size increase font size 0
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Medellin-based textile and plastics-recycling specialist Enka Colombia revealed in a May 15 filing with Colombia’s Superfinanciera oversight agency that its first quarter (1Q) 2020 net income jumped to a positive COP$1.73 billion (US$443,000), up from a net loss of COP$3 billion (US$767,000) in 1Q 2019.

Earnings before interest, taxes, depreciation and amortization (EBITDA) likewise rose 79% year-on-year, to COP$11.3 billion (US$2.9 million), while EBITDA margin improved to 11.1%, from 6.2% in 1Q 2019.

“The first quarter ends with positive results, without significant impact from Covid-19,” according to Enka. “Our market diversification strategy has allowed us to expand our presence in the North American market -- up 33% -- reaching a corporate-wide sales share of 16%,” according to Enka.

“However, the effects of the mandatory quarantine measures will be seen and will be reflected as of the second quarter due to the reduction in sales and the stoppage of operations,” the company added.

Covid-19 Effects

“From the first period of mandatory preventive isolation ordered by the national government in Decree 457 of March 22, 2020, the company suspended most of its production, leaving only the ‘EKO-PET’ [plastic-bottle recycling] line in operation to guarantee the supply of an essential input for the manufacture of food packaging and cleaning products,” according to Enka.

“With the authorization of the national government and after the implementation of the biosafety protocols recommended by the Ministry of Health, on April 20 the company gradually resumed operations to supply raw materials to various sectors involved in managing the current situation, especially the manufacture of medical clothing, hospital equipment, agro-industrial products, supplies for the transport of goods, recycling of post-consumer waste, among others.

“Post-consumer bottle collection volumes have been reduced by some restrictions imposed on the recycling sector during the isolation stages.

“Said restrictions have been normalizing and, consequently, the collection volumes have been gradually recovering. In addition, to help waste recyclers over 60 years old, who cannot exercise their trade to protect their health, we coordinate resources with important companies such as Tetra Pak, Postobón, Bavaria and Alpina to deliver market-basket foods to more than 2,300 waste pickers in 17 departments, 40 municipalities and 108 waste picker organizations,” the company added.

Meanwhile, Enka has “strengthened its liquidity position by making use of its lines of credit with the financial sector to meet its commitments with its employees, taxes, suppliers and other stakeholders,” according to the company.

‘Green’ Businesses Mostly Positive

For Enka’s various recycling operations, total revenue in 1Q 2020 hit COP$33 billion (US$8.4 million), taking a 33% share of the company’s sales. Exports totaled US$1.5 million, equivalent to 16% of business income. So far in 2020,  post consumer plastic-bottle-collection has increased by 10% year-on-year.

The “EKO-PET” line (4,498 tons in 1Q 2020) “continues to operate at 100% of its capacity and has an increase in sales volume of 5%. Revenues for 1Q 2020 decreased 10% due to lower international PET prices, as a consequence of lower oil prices and lower world demand due to the effect of Covid-19,” according to Enka.

The “EKO-Fibras” line (3,162 tons) had a 15% increase in sales volume “mainly in the local market, covering greater market needs due to the uncertainty about the availability and prices of imported products by Covid-19 and the strong devaluation of the peso,” according to the company.

The “EKO- Polyolefins” line (566 tons) “continues to evolve positively, managing to consolidate recurring businesses in both the local and export markets. So far this year, sales have grown by 475 tons (up 521%),” according to Enka.

Textile, Industrial Business Lines

For this segment, revenue hit COP$69 billion (US$17.6 million), reaching a 67% share of the company’s total sales. Exports reached US$11.9 million, representing 61% of textile/industrial lines, with the United States, Canada and Brazil as main destinations.

The “Industrial Threads” line (3,083 tons) saw 5% sales growth “due to the good performance of the North American market and the development of new clients in this region, both in canvas for tires and in technical threads, which offset a lower demand from the automotive industry in Mexico and Brazil,” according to Enka.

The “Textile Filaments” line (2,533 tons) saw sales volume dip 5%, “mainly due to lower exports to Argentina due to credit restrictions and lower demand for textile ‘Nylon’ in Brazil, partially offset by the better performance of the local market,” according to Enka.

The “Resins” line (870 tons) saw sales grow 28% in tons “due to higher demand for Nylon resins for electrical cables -- especially abroad -- and higher demand for virgin PET for beverage containers and toiletries,” according to Enka.

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