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Companies 318

Written by May 23 2020 0

Medellin-based multinational utilities giant EPM on May 22 posted a COP$276 billion (US$73 million) net loss for first quarter (1Q) 2020 --solely because its debt accounting is in U.S. dollars, rather than in sharply-depreciating Colombian pesos.

“Due to accounting standards and due to the depreciation of the Colombian peso, understanding the debt that the company has in dollars, this accounting loss is generated by re-expressing it to pesos in accounting in Colombia,” according to EPM, 100% owned by the city of Medellin.

“This accounting loss is the result of the historical depreciation of the Colombian peso, which reached 24.03% in March as a consequence of the unusual behavior of world oil prices.

“In this sense, EPM must comply with accounting standards that imply that the depreciation of the Colombian peso leads to an increase in the debt balance in pesos due to the restatement of debt balances in dollars, even when the value owed in dollars does not change. The restatement negatively affects profits and generates high volatility,” the company added.

While depreciation hurts its accounting balance, “borrowing in dollars allows the business group to access the necessary funds to enable investments in infrastructure and growth, which are essential in generating employment,” the company explained.

Despite the accounting loss, EPM nevertheless maintained an investment-grade rating, actually “the highest credit rating among Colombian companies,” it noted.

During 1Q 2020, revenues rose 11% year-on-year, to COP$4.7 trillion (US$1.2 billion), while operating earnings rose 1%, to COP$1.2 trillion (US$318 million).

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 5% year-on-year, to COP$1.5 trillion (US$397 million), with an EBITDA margin of 32%.

“The pandemic caused by the Coronavirus did not impact these figures, since its appearance in the country occurred at the end of the quarter,” according to EPM.

Despite the accounting loss, “these results reflect the health and financial strength of the organization” thanks in part to portfolio diversification, added EPM General Manager Álvaro Guillermo Rendón López.

“Of the COP$4.7 trillion [US$1.2 billion] in revenue as of March 31, 2020, EPM parent company contributed 49%, foreign subsidiaries 34% and national energy and water subsidiaries 17%,” he added.

Meanwhile, profit transfers to the municipality of Medellín in 2020 -- which will reach COP$1.5 trillion (US$397 million) or about COP$29 billion (US$7.7 million) weekly – “generate a decrease in equity as of March. The resources for transfers, which allow for greater social investment in the Antioquia capital, are guaranteed given EPM’s liquidity situation,” the company added.

At the end of 1Q 2020, EPM Group’s assets totaled COP$57.2 trillion (US$15 billion), up 4%, while liabilities totaled COP$34.5 trillion (US$9 billion), up of 12%. Equity now stands at COP$22.7 trillion (US$6 billion), down 6%, according to the company.

Written by May 17 2020 0

Medellin-based Grupo Orbis – owner of “Pintuco” paints, “Andercol” packaging products, “O-Tek” water treatments and “Mundial” hardware products – revealed in a May 15 filing with Colombia’s Superfinanciera oversight agency that it posted a COP$2.28 billion (US$582,000) net loss for first quarter (1Q) 2020.

That was a 32% improvement over the COP$3.34 billion (US$853,000) net loss in 1Q 2019, according to the company.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 7% year-on-year, to a positive COP$21.9 billion (US$5.6 million), according to the company.

“The first quarter of 2020 began with a positive dynamic for the Orbis Group,” according to the company, citing reduction of financial debt and smaller losses.

“Although the Group’s operations and sales were significantly affected in the last fifteen days of March by virtue of the measures adopted by governments to contain the impact of Covid-19, including preventive isolation and total closings. or partial closings of the production plants, as a Group we were focused on designing a strategy focused on the protection of life, health and well-being of all our stakeholders, optimization of existing capacities, profitability of recently made investments and the decrease in financial debt.

“To date, the impact and consequences that may be generated by the pandemic are uncertain and will largely depend on the extent and evolution of the contingency in the coming months.

“However, thanks to the level of diversification of the economic sectors in which the Group has a presence, the variety of goods and services offered, of which some participate in the chain of those declared ‘essential,’ we sit on strong foundations to combat uncertainty and continue to respond in a timely and effective manner to the emerging risks derived from the current situation.”

Orbis does business in 15 Latin American countries, while its popular “Pintuco” paint manufacturing and supply network operates in 11 countries: Colombia, Ecuador, Venezuela, Curaçao, Aruba, Costa Rica, Panama, Honduras, El Salvador, Guatemala and Nicaragua.

Written by May 16 2020 0

Toronto-based Gran Colombia Gold -- Antioquia's biggest gold miner -- announced May 15 that its first quarter (1Q) 2020 adjusted net income soared to US$21.2 million, up from US$7.9 million in 1Q 2019.

The company – whose principal mining operations are in Segovia, Antioquia – credited the profits improvement to “revenue growth resulting from higher gold prices in 2020 and the increased volume of gold sales” in the latest quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) likewise rose to US$50.4 million, from US$35 million in 1Q 2019.

Commenting on the results, GCC executive chairman Serafino Iacono said:“Our first quarter results continued to show strength -- and that was when gold was more than $100 an ounce lower than where we are now [in mid-May 2020].

“The balance sheet also got stronger as we built up our consolidated cash position to about US$100 million and by the end of April, we had reduced our gold notes [debt] by 40% since the beginning of the year.”

GCC’s gold production in the first quarter of 2020 dipped to 56,247 ounces (from 60,601 in 1Q 2019) because of restricted movements of workers here during the Covid-19 crisis.

“The company’s mines have continued to operate during the national quarantine implemented in Colombia in late March,” according to GCC.

“However, restrictions on movement of people between communities has limited the availability of workers at the mines. Although April’s gold production totaled 12,602 ounces -- about 65% of the average monthly volume over the last 12 months -- the situation has improved and the Segovia [Antioquia] operations have been operating at about 95% of normal since mid-April,” the company added.

In other highlights, GCC announced that it has completed spin-out of its Marmato mining assets in Colombia through a reverse takeover transaction. As a result, GCC has a 74.4% interest in the resulting issuer, named “Caldas Gold Corp.”

Meanwhile, GCC recently signed a letter of intent with Renergetica Colombia to acquire am 11.2-megawatt solar-power project in Tolima, Colombia.

On yet another front, GCC announced May 25 the cancelllation of a proposed merger with Guyana Goldfields and Gold X, mainly to expand gold-mining operations in Guyana, South America. 

USAID ‘Legal Gold’ Project Sees Antioquia Rebound

On a related front, the Medellin-based “Legal Gold” project of the U.S. Agency for International Development (USAID) announced May 15 that gold miners in Antioquia are gradually returning to work following new Health Ministry protocols to avoid Coronavirus infections.

“The mandatory preventive isolation measure decreed by the national government on March 25, 2020, and which lasts until May 25, decreased the operations of the mining industry, despite the fact that this sector was included within the 34 exceptions of the Decree 457,” USAID noted.

“Large-scale mining companies tightened security measures and significantly reduced their operations. however, they gradually resumed them with biosecurity measures.

“A different scenario faced small-scale mining, especially the mining production units (UPM) of Bajo Cauca, North and Northeast Antioquia, and those of the department of Chocó, which had suspended activities due to the shortage of the supply chain, the fall of the local gold price, lack of buyers, mobility restrictions and fear of contagion by Coronavirus.”

These smaller-scale mining operations “began to resume activities gradually, motivated by the lack of income, the conditions offered by the territory and the isolation in which they find themselves, which [isolation] paradoxically becomes a point in favor of a possible active presence of the virus,” according to the agency.

“The commercialization of gold began to revive, despite the difficulties of moving within the municipalities -- especially in the UPMs that have contracts with international trading companies.

“In the case of the UPM of Antioquia (North, Northeast and Bajo Cauca) the picture is similar. Gold sales are made through the international trading company, located in Medellín, which is receiving the metal in this city but with a brief decrease in the price per gram -- between COP$10,000 and COP$12,000 [US$2.56 to US$3.07] --due to the unavailability of commercial flights, which has generated an extra cost for its mobilization.

“This situation has motivated some miners to sell their product to local gold purchases, where they are paid by the gram at a lower price,” USAID added.

Written by May 16 2020 0

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.

Written by May 15 2020 0

Medellin-based insurance and investment giant Grupo Sura revealed in a May 15 filing with Colombia’s Superfinanciera oversight agency that it suffered a COP$75.9 billion (US$19 million) net loss for first quarter (1Q) 2020, down from a COP$560 billion (US$143 million) net profit in 1Q 2019.

The company cited a “challenging environment that has forced companies to adapt many of their operating models to be able to continue serving their customers and fulfilling their goal of creating added value” in the face of the Coronavirus crisis.

Operating earnings fell 71% year-on-year, to COP$244 billion (US$62 million), mainly due to “lower investment income as a result of a widespread depreciation of financial assets on a global level, which had a greater impact on the income obtained from the legal reserves of our pension fund management firms” as well as “lower revenues obtained via the equity method from [part-owned] Bancolombia mainly due to higher provisions, as well as from [retirement-fund specialist] Proteccion given lower returns obtained from its legal reserves,” according to the company.

These negative factors undercut “sustained growth in operating income from insurance premiums, health care services and asset management fees and commissions,” according to Sura.

The company’s financial-segment losses hit COP$324 billion (US$82.8 million) -- down 161% year-on-year – “mainly due to the accounting effect of the depreciation of the Colombian peso on the exchange difference, related to the unhedged portion of the dollar-denominated debt maturing in 2026,” according to Sura.

“All of this produced a net loss of COP$75.9 billion (US$19 million), which is mainly due to the aforementioned negative effects that do not constitute any cash outflow,” the company added.

“The negative effect of exchange-rate differences and hedging appraisals [are tied to] the depreciation of the exchange rate during the first quarter of this year. The company has hedged its U.S. dollar-denominated debt, but a portion of the principal due in 2026 still shows a total exposure to the dollar."

The “Suramericana” insurance division posted a 14.6% gain in premiums -- mainly in life, property, casualty and health insurance -- to COP$4.3 trillion (US$1.1 billion). But net income nevertheless fell 9.89% year-on-year, to COP$106.7 billion (US$27 million).

“In spite of a positive level of operating performance, net income was affected by a decline with investment income, mainly due to the loss of marked-to-market investment portfolios in some geographies,” the company added.

The “Sura Asset Management” investment division posted a net loss of COP$129.8 billion (US$33 million), mainly because of loss-making performance of the company’s legal reserves “as well as revenues obtained from [retirement-fund specialist] Proteccion via equity method, all of which produced a negative contribution given lower returns from the aforementioned portfolios,” according to the company.

“These losses mainly correspond to the negative returns posted on the pension funds' own investment portfolios (legal reserves) which were negatively impacted by losses in value with the large majority of financial assets on a global level, which nevertheless managed to partially recover in April and May,” according to Sura.

Results also were hurt by a drop in investment income “given falling prices of fixed-income securities in Argentina” as well as a “26.1% drop in retained premiums in Chile” and “increased administrative expense on the part of our Uruguayan subsidiary.”

Sura’s health care segment showed a drop in net income “mainly due to the IPS [Colombia hospital and clinic] and diagnostic-aid providers, since these health care subsidiaries invested in expanding their capacities for providing the support and services required in preparation for the Covid-19 crisis,” according to the company.

“This entailed increasing the number of health professionals, which today number approximately 10,000, as well as deploying the required technology for providing on-line attention as well as defraying the cost of [Coronavirus] sample taking.”

On the other hand, Sura’s EPS health-insurance network in Colombia “performed much better than in 1Q 2019, thereby confirming the current trend toward obtaining better results during the second half of 2019 and first quarter of 2020," according to the company.

“At the end of 1Q 2020, the technical results posted by Suramericana did not present any significant impact due to the Covid-19 pandemic, since the infection curve, as well as the corresponding government actions and the measures taken by the company in the different countries where present, were still at a very early stage,” according to Sura.

“At this juncture, and given the situation that Covid-19 poses for our different businesses, the estimates drawn up by the company show that corresponding impacts shall place pressure on sustaining our operating results in the short term, particularly with regard to the life and health care insurance segments as a result of the increase in claims that this pandemic represents, as well as the non-life insurance segment, given the economic and social consequences that the current lockdown measures may cause mainly in 2020,” the company cautioned.

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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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