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Companies 318

Written by August 06 2020 0

Medellin-based multinational banking giant Bancolombia on August 5 posted a second quarter (2Q) 2020 net loss of COP$73 billion (US$19 million), a huge reversal from a COP$936 billion (US$249 million) net profit in 2Q 2019.

“The current situation associated with Covid-19 has caused uncertainty and business disruption globally, therefore significant impacts are anticipated on the performance of the global economy and macroeconomic variables in the countries in which Bancolombia operates,” according to the company.

“As a result, the banking sector in general, including Bancolombia, is exposed to changes in its business performance and outlook. The bank is exposed to deterioration of the loan portfolio by impacts on customers and by the materialization of losses from operational risk,” the company added.

In the meantime, “Bancolombia has focused its efforts on maintaining business continuity, the safety of its employees, operating the network of channels in an efficient way and structuring payments plan for lines of credit of its customers. These actions have impacted more than 2.2 million clients with loans that amounted more than COP$69 trillion [US$18 billion] in Colombia."

Corporate-wide gross loans grew 12.4% in 2Q 2020 versus 2Q 2019, while Colombian peso-denominated loans grew 9.6%.

“Deposits by customers reached COP$182 trillion [US$48 billion] during the quarter, increasing 24.8% in the last twelve months,” according to Bancolombia.

Net-loans-to-deposits ratio was 102.5% at the end of 2Q 2020, down from 104.0% at the end of 1Q 2020.

“Bancolombia’s funding strategy during the last months has been to maintain the average life and cost of time deposits and promote saving and checking accounts in the consumer segment in order to keep the funding cost at a minimum. The objective is to build and maintain ample liquidity and stable margins,” according to the company.

At end of 2Q 2020, capital adequacy ratio was 12.6%, “above the minimum regulatory [level] in Colombia,” according to the company.

Meanwhile, “the digital footprint and banking penetration in Colombia strengthened. The [latest] quarter closed with 6.6 million digital accounts, 3.4 million ‘Bancolombia a la mano’ users and 3.2 million users in ‘Nequi.’”

Loan provision charges for the quarter were COP$2.4 trillion (US$638 million), up 76% from 1Q 2020 and up 198% year-on-year. Coverage ratio for 90-day past due loans was 208.3%.

“This level of provisions was explained by Covid-19 and the update of macroeconomic variables in our expected losses models,” according to Bancolombia.

During 2Q 2020, net fees and income from services totaled COP$683 billion (US$181 million), down 14.2% compared to 1Q 2020, and by 9.5% compared to 2Q 2019. “The performance in fees was due to lower volumes of transactions and the reduction in the cost of some services, both as a result of Covid-19 pandemic,” according to the company.

“Fees from credit and debit cards decreased by 19.5% compared to 1Q 2020 and by 12.9% compared to 2Q 2019. Fees from asset management and trust services decreased by 12.5% compared to 1Q 2020 and by 10% compared to 2Q 2019. Fees from our bancassurance business increased by 6.8% compared to 1Q 2020 and by 19.9% with respect to 2Q 2019,” the company added.

 

Written by August 06 2020 0

Medellin-based multinational cement/concrete giant Cementos Argos reported August 6 that its second quarter (2Q) 2020 net profits dropped 79% year-on-year, to COP$12 billion (US$3.2 million).

Revenues likewise declined by 9%, to COP$2.1 trillion (US$555 million), while adjusted earnings before interest, taxes, depreciation and amortization fell 6.4%, to COP$414 billion (US$109 million).

For all of first half (1H) 2020, profits dropped 77.8%, to COP$16 billion (US$4.2 million), while revenues are down 4.6%. Adjusted EBITDA for 1H 2020 is essentially unchanged versus 1H 2019, according to the company.

Colombia Results

In Colombia, adjusted EBITDA for 2Q 2020 fell 62%, to COP$43 billion (US$11 million), while revenues fell 44%, to COP$316 billion (US$83.5 million), according to Cementos Argos.

Cement volumes fell 46% while ready-mixed concrete (RMC) volumes were down 56%. Aggregate sales likewise fell 61%.

“At the beginning of the second the quarter, Colombia experienced a complete lockdown across the country, with a gradual reopening starting from mid-April,” the company noted.

“The cement market has experienced a gradual recovery ever since, as evidenced by the monthly increases in cement consumption published by [Colombia’s economic statistics agency] DANE, up 191% month-on-month [MoM] in May and 28% MoM in June -- but still presenting monthly consumptions below last year’s levels,” according to Argos.

“Regarding the market dynamics per sectors, the residential segment has evidenced an improvement during the last two months, but it has not achieved yet its full potential. Sales of new houses during June increased 60% MoM, still implying a decrease of -13% year-on-year.

“On this segment, the government has announced a subsidy for200,000 houses, to be equally split between social housing and non-social housing, which we expect will have a positive impact in the residential segment in the mid-term.

“On the infrastructure front, the government has announced that around 90% of all the construction sites related to this sector have been already reactivated in the country, in line with our expectations of a good performance of the sector during the current year.

“The government has also announced the ‘5G’ [fifth-generation highway] infrastructure projects with an estimated investment of COP$20 trillion [US$5.3 billion] for the first package of concessions to be awarded, which could start its structuring process in early 2021,” according to the company.

U.S. Results

“The U.S. market continued to prove its resilience during the second quarter of 2020, with healthy market dynamics despite the evolution of the pandemic in states such as Texas and Florida,” according to Argos.

“Cement volumes experienced a decrease of 5.8% year-over-year, affected mainly by lower volumes in the Northeast region, due to the strictness of the lockdown measures, as well as by a reduced demand from the wholesale segment.”

Caribbean & Central America (CCA) Results

During 2Q 2020, “most of the countries within the CCA region experienced total or partial quarantines, affecting the volumes of the region,” according to Argos.

“Cement and RMC volumes decreased 23.9% and 90.6% respectively as a consequence of these lockdown measures. Honduras and Dominican Republic experienced a gradual recovery from mid-April on, to the point that the monthly volumes of June 2020 surpassed in 7% and 16% respectively when compared to the same month of 2019.

“Panama, on the other hand, only started its partial reopening from the first weeks of June, when some infrastructure projects were allowed to be reopened. During that month, the country managed to recover volumes in a 65%, when compared to the volume of June 2019,” Argos added.

“Haiti not only remained open during the whole quarter, but also experienced a 5.3% increase in volume, and a 9.7% increase in prices when compared to the same quarter of last year, as a result of the positive market dynamics that the country exhibits.

“This positive evolution within the [CCA] region indicates that some countries may recover faster than initially expected. We remain cautiously optimistic about the second half of the year, considering that countries such as Dominican Republic will face a change of President, and also taking into account the limited public budgets that these countries have to face the later consequences of the pandemic,” Argos concluded.

Written by August 01 2020 0

Medellin-based textile giant Fabricato on July 31 reported a 51.2% decline in sales for second quarter (2020) because of the Covid-19 health crisis.

Despite sales falling to COP$42.4 billion (US$11.3 million) in 2Q 2020, net loss came-in at COP$10.4 billion (US$2.78 million), an improvement over the COP$12.7 billion (US$3.4 million) net loss in 2Q 2019.

Earnings before interest, taxes, depreciation and amortization (EBITDA) also improved to a net positive COP$279 million (US$75,000), versus an EBITDA net loss of COP$469 million (US$125 million) in 2Q 2019.

“The social isolation and the closure of many economic activities [resulting from Covid-19 quarantines during 2Q 2020] put a brake on the positive trend that had been perceived since the second half of the previous year,” according to Fabricato.

“In general, the company’s focus was to take care of our workers and take maximum care of cash flow, especially since a freeze in collection flow was felt from the first days.”

To trim labor-cost overhead during the crisis, “a staggered percentage of salary was retained, from 15% to 50%, from the second half of March to the second half of June,” according to Fabricato.

The company also sought and obtained “extensions by financial institutions ranging from 90 to 180 days on existing credits,” and took advantage of emergency payroll subsidies from the Colombian government’s “PAEF” (formal employment subsidy program) from April to July.

Fabricato also converted part of its traditional textile output to production of non-surgical masks for local producers, “with strict vigilance, accompaniment and learning of the rules and requirements demanded by [Colombia’s medical-supplies regulator] Invima in the materials used for face masks,” according to the company.

“Thanks to the experience accumulated in recent years on textile finishes, we were able to bring to the market very quickly textile bases with anti-fluid and/or anti-microbial finishes,” according to Fabricato.

“Another market segment that had good dynamics and reduced the potential impact in the quarter were the textile requirements of the Armed Forces, which we met with the required level of quality, design and time.”

As for Fabricato’s real estate operations, its “Ciudad Fabricato” development in the northern Medellin suburb of Bello continues in construction, with the first five of six total towers of the “Oceana” apartment complex now being commercialized. For the nearby “Mediterranean” apartments, “the four towers of the project are being commercialized,” according to the company.

For the shopping-center portion of “Ciudad Fabricato,” construction progress is “approximately 46% over the first stage consisting of 50,000 square meters,” according to the company.

As for the Fabricato Industrial Park in Rionegro (Riotex), the company “finished the second quarter with the same 70% of the available area leased.”

However, “lessee companies [at Riotex] have also suffered the negative impact of [the Covid-19 crisis] in the period, which is why we made some payment agreements for the due dates of this quarter, basically extending the term for the payment thereof,” the company added.

Written by August 01 2020 0

Medellin-based multinational foods manufacturing giant Grupo Nutresa on July 31 reported an 8% year-on-year rise in second quarter (2Q) 2020 profits, hitting COP$140 billion (US$37.5 million).

Gross revenues in the latest quarter rose 9%, to COP$2.66 trillion (US$713 million), versus COP$2.4 trillion (US$643 million) in 2Q 2019.

As for first-half (1H) 2020, Nutresa net profits rose 6.2% year-on-year, to COP$331 billion (US$89 million).

Earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 15%, to COP$746 billion (US$200 million), while EBITDA margin came-in at 14%.

“During the first half of the year, Grupo Nutresa’s consolidated sales reached COP$5.3 trillion (US$1.42 billion), 14.6% higher than the sales reported for the same period of the previous year.
Organic growth reached 9.4%,” according to the company.

“Sales in Colombia totaled COP$3.2 trillion (US$857 million), with an increase of 8,4%. Organic growth in Colombia reached 5.3%.

“International sales increased to US$586 million, 7.7% higher than those reported in last year’s first half. In Colombian peso terms, such growth is equivalent to 24.9%. International organic growth was 0.4% in U.S. dollars and 16.4% in COP,” according to the company.

Excluding the acquisitions of Cameron’s Coffee in the United States and Atlantic Food Service in Colombia, Grupo Nutresa’s coporate-wide organic sales grew by 9.4%.

Financial revenue grew 36.4% “mainly due to Grupo Nutresa’s cash position over the term. In the context of financial expenses, the company reports a 5.1% growth as a result of an increased debt to finance the acquisition of Cameron’s Coffee in 2019,” according to the company.

Written by July 29 2020 0

Medellin-based multinational utilities giant EPM announced July 28 that its first half (1H) 2020 net income fell 45% year-on-year, to COP$717 billion (US$192 million).

“In the first half of 2020 -- globally impacted by the coronavirus pandemic (Covid-19), which has implied significant financial challenges for the organization -- the EPM Group’s revenues amounted to COP$9.3 trillion (US$2.5 billion), with growth of 6% compared to the year before,” according to the company.

Operating income fell 7% year-on-year, to COP$2.1 trillion (US$564 million), while operating income margins fell 23%.

Earnings before interest, taxes, depreciation and amortization (EBITDA) dropped 4%, to COP$2.8 trillion (US$752 million), according to the company

Through first-half 2020, EPM transferred COP$1.044 trillion (US$280 million) to the city of Medellin, its sole shareholder. EPM profit transfers routinely account for nearly 25% of the Medellin’s municipal budget revenues.

Net results for 1H 2020 “were impacted by lower cash receipts and higher costs in the provision of services, due to the effects caused by the prolonged dry season and low hydrology in Colombia,” which affected the company’s hydroelectric power sales.

“Lower [power] demand associated with lower economic activity -- as a consequence of the coronavirus pandemic (Covid-19) -- and cost overruns due to the special measures implemented by EPM during mandatory preventive isolation in the country had a combined [negative] effect on the company, totaling approximately COP$320 billion (US$86 million),” according to EPM.

“To this is added a net accounting expense for a [Colombia peso to U.S. dollar] exchange difference of COP$723 billion (US$194 million), as a result of a restatement of the debt in dollars associated with the accumulated 14.7% devaluation of the Colombian peso.”

However, in the second quarter of 2020, EPM recouped some of the currency-exchange losses suffered in the first quarter. As a result, the company recorded a reversal of COP$612 billion (US$164 million) in prior expenses for exchange differences, “given the revaluation of the Colombian peso during the second quarter of 2020,” according to EPM.

During 1H 2020, EPM Group invested COP$1.2 trillion (US$322 million) in infrastructure.

As of July 2020, the business group totaled 14,046 employees.

Extra Cost Impacts from Covid-19

To help the poorer populations in Colombia during Covid-19 crisis, the national government ordered all utilities to slash the cost of power, water, sewer and natural-gas services and enable interest-free deferrals on repayment for “strata 1 and 2” groups.

In total, such mandatory cuts in revenue cost EPM at least US$104 million.

In addition, EPM contributed COP$3.2 billion (US$859,000) to outfit Covid-19 intensive care units (ICUs) at the University IPS hospital at the University of Antioquia. Likewise, the company allocated COP$1.21 billion (US$325,000) for the acquisition of Covid-19 biosecurity protective clothing.

Hidroituango Hydroelectric Budget Rises

On another front, EPM’s Board of Directors announced July 28 that the 2.4-gigawatt “Hidroituango” hydroelectric project in Antioquia is now estimated to cost at least COP$16.2 trillion (US$4.35 billion) -- 5.88% higher than the prior estimate – “as part of the approval process for future terms” of the over-all budget.

According to EPM, latest variations in the project budget include:

“• Increase in the costs of machine house and pipeline works; injections to contain infiltrations of water and consolidation of the massif of the southern zone (units 5 to 8, second stage); improvements to the left-margin alternative road approach; filters, dam drains and instrumentation; lining of galleries; and construction and shielding of tunnels to enable intermediate discharges.

“• Construction of vertical wells in units 5 to 8 that correspond to the southern zone or second stage of the project.

“• Update of the macroeconomic scenario, considering the impact of the increase in the representative market rate (TRM) of the Colombian peso to U.S. dollar.

“• A lower net value of the investments [including] equipment and civil works written off” because of the April 2018 diversion-tunnel collapse and resulting damage to the machine room.

“As of June 30, 2020, the value invested in the project amounts to COP$11.8 trillion (US$3.2 billion),” according to EPM.

“In addition, efforts leading to obtaining compensation payments from insurance companies continue, with which we expect to cover a significant part of the costs of recovering the affected works of the project. To date, US$150 million has been received,” according to the company.

EPM estimates that Hidroituango power-generation units 1 to 4 (first stage) will start operating in 2022, “fulfilling the obligations assigned by the national Energy and Gas Regulation Commission (CREG), in auctions for power-reliability charges in which the project has participated,” according to the company. “Units 5 to 8 (second stage) are scheduled to enter from 2024.”

However, “as new impacts or changes in the current situation are analyzed, both due to the Coronavirus pandemic and other circumstances that may be registered, they will be incorporated into the schedule and new possible entry-into-service scenarios will be established,” the company added.

Covid-19 infections among hundreds of workers at Hidroituango have already resulted in delaying start-up of the first power generation units to 2022, rather than the earlier estimate of December 2021.

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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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