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Written by October 30 2018 0

The Medellin City Council early this morning (October 30) voted 16-5 to approve EPM’s sale of an estimated COP$4 billion (US$1.25 billion) worth of non-strategic assets in order to fill a gaping fiscal hole left by problems with its under-construction “Hidroituango” hydroelectric dam here in Antioquia.

The vote followed dozens of public hearings, City Council subcommittee hearings, briefings with local, departmental and national politicians, regulatory agencies, interest groups, debt-funding sources and Wall Street analysts, plus massive public information campaigns.

The deal ultimately overcame objections from some Council members arguing that EPM would be better-off selling its half-interest in the telecom/internet company TigoUne rather than its 10% stake in Colombia power generator ISA.

EPM estimates that it should be able to complete the sales of all these assets by third-quarter 2019. Revenues from the sales will help EPM maintain its annual payments to the city of Medellin, its sole shareholder, as well as maintain its crucial investments in power, water and sewer infrastructures.

The approval also means EPM will sell its stakes in Chilean power and water companies and its small stakes in a handful of Colombian companies including Gas Natural de Oriente, Terpel, BBVA, Acerias Paz del Rio and others.

EPM also plans to slash some COP$1 billion (US$313 million) from operating costs and delay COP$2 billion (US$626 million) in investments in order to recoup an estimated COP$7 billion (US$2.2 billion) in lost electricity sales, repair costs and compensation costs from the three-year-delay in Hidroituango’s start-up.

In a question-and-answer document provided to the City Council and the public, EPM explained the rationale behind its sale decisions.

As to why the company decided against selling its Tigo-Une shares (also called “Une-Millicom”), EPM stated: “The approval of the sale of Une-Millicom would take more time, and the current situation demands greater agility to obtain the necessary resources for the development of the investment plan.”

Asked why it would sell its 10% stake in ISA, “if it is a profitable asset, even above other less strategic investments,” EPM stated: “As it is a non-controlling minority stake of 10.17%, EPM has no interference in the major decisions of ISA. Therefore, this investment does not contribute EBITDA [earnings before interest, taxes, depreciation and amortization] or income and its sale would not affect the covenants of the credit agreements and EPM bonds.

“Additionally, ISA is a highly recognized company in Latin America whose shares are listed on the stock exchange, so its sale has a high probability of execution. Finally, the sale of the shares of ISA would generate a significant amount of resources to EPM, which would be comparatively more favorable than the annual amount of dividends received annually, which on average in the period 2014-2018 represent approximately 3.5% annually on the capital that EPM has invested in ISA.”

Dam Nears Completion, Spillway Starts Operating

On another crucial front, EPM reported that the Cauca River is just about to pass over the engineered spillway at the Hidroituango power project, which will enable closure of the tunnel to the mechanical room -- that room temporarily being used as an emergency diversion tunnel ever since the main diversion tunnel collapsed last April.

Once the mechanical room has been cleared of water, EPM can begin repairs to the project, hopefully leading to start-up of power production no later than 2021.

Written by October 28 2018 0

Medellin-based multinational foods giant Nutresa reported October 26 that its third quarter (3Q) 2018 net profit rose 19% year-on-year, to COP$386 billion (US$121 million).

“This growth is the result of a balanced equation that includes rising sales, efficiency in purchase of basic materials, productivity programs, lower growth in operating expenses and a continuing decline in financing costs,” according to Nutresa.

Consolidated sales of Grupo Nutresa grew by 3.4% year-on-year, hitting COP$6.6 trillion (US$2.07 billion) while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 5.1% year-on-year, to COP$841 billion (US$264 million). EBITDA margin was steady at 12.7%.

Sales in Colombia rose 4.1%, to COP$4.2 trillion (USS$1.3 billion) thanks to a volume hike of 2.3% plus a price hike of 1.5%. Sales abroad also rose 4%, to US$829.8 million.

“Innovation continues to be an important driver of growth for the Group -- and sales resulting from this concept represent 22.1% of the total,” according to Nutresa.

Gross profit rose 5.2% year-on-year, to COP$3.0 trillion (US$943 million), “the result of the increase in sales accompanied by a strategy to improve productivity,” according to the company.

“Operating income amounted to COP$634 billion [US$199 million], equivalent to an operating margin of 9.6%, and representing an improvement of 4.7% compared to the same period of 2017. This result is a consequence of the efficiencies in sales, administration and production during the period.

Net post-operative expenses fell 46% year-on-year, to COP$100.7 billion (US$31.6 million), “mainly explained by the significant reduction in financial expenses, resulting from lower indebtedness, and better interest rates in the main markets where the Group operates,” according to Nutresa.

Written by October 26 2018 0

Cemex LatAm Holdings reported October 25 that its Colombia division saw third quarter (3Q) 2018 sales dip 5% year-on-year, to US$134 million, but operating earnings before interest, taxes, depreciation and amortization (EBITDA) rose 11%, to US$26 million.

Gross profit also rose 11% year-on-year in Colombia, to US$53 million, while operating margin rose 15.9% year-on-year, hitting 19.4%, according to the company.

Meanwhile, for the first nine months of 2018, Colombian sales fell 8% year-on-year, while operating EBITDA here fell 12%, according to the company.

Volume sales of grey cement fell 8% year-on-year in 3Q 2018, while concrete sales fell 11% and sales of aggregates also fell 12% during the latest quarter here, according to the company.

Despite the year-on-year declines, “cement volumes increased 7% sequentially during 3Q 2018, reflecting the acceleration of industry demand after the [Colombian presidential] elections,” according to the company.

“Our EBITDA margin improved by 3.5 percentage points during 3Q 2018, due to higher prices, lower costs for cement maintenance and non-recurring effects that negatively impacted our 3Q 2017 results, partially offset by higher freight costs and lower volumes.”

Meanwhile, construction permits for Colombia’s social-housing market have increased by double-digits. This should boost demand for cement, the company noted.

“The new government recently announced the pillars of its housing strategy in the next four years, with a goal building 1 million new housing units in this period, or approximately 250,000 per year, including a new lease-with-purchase option and a new home-improvement program, along with other initiatives,” Cemex noted.

“During fourth-quarter 2018, we expect the residential sector to stabilize, supported by low interest rates, as well as improvements in the consumer confidence indicator and the home-purchase intention indicator.”

As for Colombia’s highway-infrastructure-building sector, “we continue shipping our products to several ‘4G’ [fourth-generation highway] projects that include the ‘Mar 1’ highway [in Antioquia], the Magdalena 2 highway, the Bucaramanga-Barranca-Yondó highway and the Bucaramanga-Pamplona highway,” according to Cemex.

“We estimate that 4G projects will demand 430,000 cubic meters [of cement] in total for 2018, of which we already have 130,000 cubic meters [in market share] and we expect to supply approximately 30,000 cubic meters more during 4Q 2018.

“We expect the infrastructure sector to increase by double digits during 4Q 2018; our volumes should continue to be supported by projects under execution,” the company added.

Written by October 25 2018 0

Colombia’s corporate oversight agency Superintendencia de Sociedades (SuperSociedades) announced October 25 that Medellin-based clothing manufacturer Everfit won approval for its bankruptcy reorganization plan.

According to SuperSociedades, “the [reorganization] agreement has an expected duration of six years and 10 months. This [deal] seeks the conservation of about 100 direct jobs and the productive [capacity].”

The deal also includes continuation of pension payments for 60 employees, at least through end-2018, according to the agency. “The payment to workers will be made in a single installment this year,” according to the agency.

SuperSociedades director Francisco Reyes Villamizar added that “the reorganization process seeks to recover and preserve the company as an economically productive unit, normalizing its commercial and credit relationships, through the operational and administrative reorganization of its assets or liabilities."

Everfit, founded here in 1923, filed for bankruptcy on July 29, 2016, as it was unable to compete against a flood of cheap textile and clothing imports -- mainly from China and elsewhere in Asia. Its web-page today features a “Compra Colombiano” (Buy Colombian) message (see photo, above). 

Written by October 22 2018 0

Medellin’s annual list of wine-tasting events featuring local and international wines continues to grow -- along with workshops led by leading producers and marketers.

One such event here on October 20 -- organized by local daily newspaper El Colombiano -- featured a lecture by Carlos Bravo, owner and founder of the “Viña Sicilia” vineyard and production facility at Olaya, Antioquia ( about 15 minutes from Santa Fe de Antioquia).

Viña Sicilia is a boutique grower and producer, making only about 4,000 bottles per year of its most famous, award-winning “Bianco” white wine, a 50-50-blend of “grillo” and “catarratto” grapes that trace their origins from Italy’s Sicily region, Bravo explained here.

This wine just won a “double gold” award at the August 2018 annual “Vinus” competition in Mendoza, Argentina, where producers from 17 nations put their wines through blind tastings for 63 international judges, he explained.

That was just the latest of 64 international prizes for various Viña Sicilia wines this year, following 43 prizes in 2017 and 22 in 2016, he added. Besides “Bianco,” Viña Sicilia also produces Malbec, rose, Syrah and late-harvest varieties.

While the ambient temperatures around Viña Sicilia are relatively hot and dry -- the terrain is at just 550 meters above sea level and not far from the equator – the nearly complete “Hidroituango” hydroelectric dam is now raising the water level of the Cauca River adjacent to the vineyard.

This vertical and horizontal rise in Cauca water levels next to Viña Sicilia likely will drop average ambient temperatures by about 2 degrees Celsius, hence favoring the evolution of wine grapes, he said.

Also favoring production of finer wine-quality grapes is the sedimentary nature of the local soils -- left by thousands of years of rising and falling Cauca water levels -- as well as a relatively high luminosity enhanced by reflected sunlight off the waters, he said.

Meanwhile, with each year that passes, Colombia’s wine growers are gaining more experience, raising hopes that Colombia might one day be better known for producing several world-class wines, he added.

Villa de Leyva Wineries

Meanwhile, Boyaca boasts a growing number of specialist vineyards and wine producers, with two of them in the vicinity of the picturesque town of Villa de Leyva.

One of these is Viñedo Ain Karim, producers of the “Marques de Villa de Leyva” brand wines, including Cabernet Sauvignon, Sauvignon Blanc and Merlot varieties -- with vines imported from France -- as well as a Chardonnay from grapevines that came from California’s Napa Valley, according to the company.

“Ain Karim is an unusual vineyard, at 2,110 meters above sea level, nestled in the Andes mountain range,” according to the owners. “This place -- with ideal microclimate and calcareous [chalky] soil, with very high solar radiation and low temperatures at night -- incorporates a wine tradition from the colonial days, when the Spanish friars cultivated vines to make their own wines [for Catholic masses],” according to Ain Karim.

Meanwhile, the neighboring “Umaña Dajud” winery in nearby Sáchica – with vineyards at just-above 2,000 meters – has six hectares devoted to Cabernet Sauvignon (red and rose varieties) with most of the vines coming from France, according to the owner.

Another two hectares at Umaña Dajud are devoted to recently planted vines for a France-derived Chardonnay, but these aren't yet in production, the company added.

Elsewhere in Boyacá is the relatively large “Marqués de Puntalarga” winery at the little town of Nobsa, specializing in Pinot Noir and Riesling varieties -- thanks to its climate and soil conditions.

The “Rubi” and “Coral” Pinot noir varieties trace their vine origins to Borgoña, France, first planted at the Puntalarga winery in 1984, according to the owner.

As for the two types of Riesling wines, these grapes trace their origins to the Rhine Valley in Germany, also first planted at Puntalarga in 1984. Yet another novel wine offered at Puntalarga is a “Boyacau Nouveau” variety similar to Beaujolais, according to the owner.

Meanwhile, Puntalarga is organizing a consortium of 35 small grape producers in the nearby “Valle del Sol” area, aiming to expand total production capacity for Pinot noir, Riesling and Silvaner varieties.

Casa Grajales: Large-Volume Producer

Elsewhere, near Cali (Colombia's third-largest city), Casa Grajales -- Colombia’s biggest-volume marketer of both imported and locally produced wines – is now offering 27 national wine varieties and 17 imports, according to the company

“Using a combination of imported must (wine-grape juice) and locally produced grapes, we have been making wines since 1978, when we produced 1 million bottles that year, in 13 varieties,” according to Grajales.

Today, Grajales boasts of 4 million bottles/year of local wine production capacity, with 10 million bottles/year of total bottling capacity, plus 3,000 hectares of proprietary grape and fruit production as well as 1,300 employees.

Grajales offers five Colombia-produced wines under the “Valtier” brand: two whites including “Vino Blanco Semi-Seco” and "Vino Blanco Seco;” one rose dubbed “Vino Rose Semi-Seco;” and one red: “Vino Tinto Semi-Seco.”

Under its separate “Reservado” brand, Grajales offers two types: a white “Vino Blanco Seco” and a red "Vino Tinto Seco.”

Under its generic “Tinto” brand, Grajales also offers what it calls a “classic” red table wine, while its “Rose” generic brand is described as a “classic” table wine.

The company also makes four cooking wines (red and white varieties) as well as five fairly sweet wines (red and white) for the Catholic mass, plus two “fruit wines" (apple and peach, both sweet) and three other very sweet wines including a Moscatel variety.

Rounding-out the Grajales offer of nationally produced wines are two sparkling wines and two “Don Luis” branded premium wines.

Santander Wineries

Colombia’s other two wineries are both very small, and both in Santander: Viñedo Sierra Morena, maker of the “Perú de La Croix” red wines, and the nearby Viña Aldana, which combines boutique red-wine making with an “eco-oriented” hotel, according to the owner. 

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About Medellin Herald

Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

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