Companies 514
Colombian banker Jaime Gilinski’s JGDB Holdings and its financing partner Royal Group (Abu Dhabi) on January 12 reported to Bolsa de Valores de Colombia (BVC, Colombia’s stock exchange) that it has finally acquired more than 27% of the shares of Medellin-based multinational foods giant Grupo Nutresa – far short of its 50.1% to 62% goal.
Meanwhile, the JGDB-Royal group simultaneously has now acquired at least 25% of Medellin-based multinational finance giant Grupo Sura -- also far short of any controlling interest.
However, the new shareholdings in Nutresa and Sura assure that Gilinski’s group will gain board seats on those companies, part of the so-called “Grupo Empresarial Antioqueño” (GEA), where each company holds significant shares in the others.
Beyond gaining board seats, no-one knows for sure what Cali, Colombia-born Gilinski proposes in order to make profitable changes with those companies -- although there’s an assumption that his GNB Sudameris bank eventually would merge with Bancolombia, the latter of which Grupo Sura already holds a commanding interest.
There’s also speculation that Gilinski eventually will launch further rounds of stock bids, in order to boost shareholdings above the 50% required for controlling interests.
Gilinski years ago had been in a lengthy legal battle over control of Bancolombia -- a lawsuit that essentially terminated with no winners or losers.
But some see his new shareholding in Sura (with Sura’s simultaneous holding in Bancolombia) as a sort of sweet revenge, given that he and his dollar-rich Abu Dhabi backers bought the new holdings using an historically favorable dollar-to-peso exchange rate.
The total investment by the Gilinski group in the new share acquisitions of Sura and Nutresa are just shy of US$2 billion – providing a big shot-in-the-arm to what had been a sagging Colombia stock market, as the value of the U.S. dollar against the Colombian peso has soared to around COP$4,000/US$1 in recent months.
BVC now only has to certify the Sura/Nutresa stock deals in the next few days, in order to make the Gilinski acquisitions official.
Medellin-based electric power giant EPM announced last night (December 23) that in addition to the US$983.4 million (COP$3.84 trillion) that project insurer Mapfre is paying for Hidroituango hydroelectric-project damages, Medellin-based insurance giant Sura just paid an additional US$100.6 million for “civil director” claims also arising from a 2018 diversion-tunnel collapse at Hidroituango.
In addition, lesser insurers Axa and SBS likewise just contributed US$5.3 million and US$500,000 toward the “civil director” insurance claims, according to EPM -- bringing the grand total of all insurance payoffs for Hidroituango to US$1.1 billion (COP$4.3 trillion).
As a result of these final payoffs, from now on EPM will self-insure against possible future damages at Hidroituango, according to the company.
EPM Forfeits Favorable US$450 Million IDB Loan
Meanwhile, on another front, EPM announced December 23 that it has now paid-off and forfeited a favorable US$450 million loan from the Interamerican Development Bank (IDB) for Hidroituango financing – as demanded by IDB as a result of an earlier Colombian Controller-General claim against 28 contractors, politicians, officials and insurers accused of “gross negligence” that supposedly contributed to a diversion-tunnel collapse at Hidroituango.
Colombia’s undemocratic system of Controller-General prosecutions and persecutions against companies and individuals utterly lacks the normal due-process guarantees given to all citizens and companies in democratic nations such as in North America and Europe.
Without constitutional guarantees of the right to bring a proper legal defense against prosecution -- along with an independent judiciary that ought to adjudicate such Controller-General claims – more companies will think twice about investing in Colombia, as the three major Hidroituango contractors have publicly warned here.
Such lack of reasonable, constitutional legal guarantees for all defendants could cost Colombia tens of billions of dollars in investments in urgently needed infrastructure projects, while simultaneously hobbling jobs growth, tax revenues and economic/social progress -- as many private companies, labor unions, trade associations, independent news organizations and civic-minded politicians have publicly warned here.
Medellin-based electric power giant EPM announced this afternoon (December 16) that it just finalized an agreement with the existing, principal constructors of the US$5 billion Hidroituango hydroelectric plant -- hence enabling continued construction through November 2022.
The deal includes an eight-months extension seen required to finish current installations that would guarantee start-up of the first power turbine in July 2022, and then start-up of a second turbine in November 2022 -- plus three months for training a new set of contractors expected during a hand-over period.
The 11-months contract extension deal comes on the heels of a December 10 agreement between Colombia’s Controller-General, EPM and Hidroituango project insurer Mapfre, which guarantees that Mapfre will pay US$983.4 million (COP$3.84 trillion) supposedly to cover Hidroituango damages, or else 90% of the projected cost to finish construction.
The other 10% supposedly would be covered by parallel policies with three lesser insurers to the project, including Medellin-based insurance giant Sura.
Still unresolved is a parallel COP$9.9 trillion (US$2.4 billion) damages lawsuit EPM earlier brought separately against the Hidroituango construction contractors, designers and consultants, a claim that -- if eventually upheld by some future court ruling -- would be cut by about half because of the Mapfre and other insurer payments.
According to Medellin Mayor Daniel Quintero (who chairs the EPM board of directors) that “other half” of damages claims – totaling roughly US$1 billion – supposedly would cover insurance deductibles and the cost of nearly four years of lost power sales, all caused by the 2018 collapse of a diversion tunnel at Hidroituango, setting-back completion by four years.
In a December 16 press release following EPM’s announcement of the Hidroituango contract extension, the “CCC Ituango Consortium” – including the three major contractors (Camargo Correa, Conconcreto and Coninsa Ramon H) – confirmed that they are almost certain to be excluded from the upcoming public bidding round to replace the existing EPM construction contract.
However, thanks to the Mapfre insurance payment, the three contractors wouldn’t be barred from participating in any other future local or national Colombian construction contracts, according to the CCC Ituango statement.
“The agreement between the CCC Ituango Consortium and EPM was achieved after the evaluation of the mitigation of the risks derived from the fiscal responsibility ruling issued by the Controller-General, which according to the statements of the Controller General of the Republic Carlos Felipe Córdoba, on the occasion of the agreement between EPM and Mapfre Seguros Generales de Colombia for the payment of compensation under the ‘All Risk Construction policy,’ at the moment the [insurance payment] resources enter [EPM’s coffers], any disability, any sanction, any effect due to rulings of the Comptroller General of the Republic” are nullified.
“We are grateful for the participation of President Iván Duque and of all the people who made possible the payment commitment of the insurers for the loss that occurred in the project.
“EPM’s decision to continue with the CCC Ituango Consortium [for the next 11 months] is a sign of confidence in our execution capacity and the quality of our services, and with this extension we reaffirm our commitment to execute as many works as possible in the defined period by EPM, so that the project objectives can be achieved,” according to the CCC Ituango Consortium statement.
However, thanks to certain questionable public accusations and political demagoguery employed by Medellin Mayor Quintero (and to a lesser extent by Controller-General Carlos Felipe Cordoba) in describing supposed construction/design errors, supposed “substandard materials” and non-specific allegations of “corruption,” the current contractors have suffered damage to their professional reputations – and Colombia has become a question-mark for foreign investors viewing the total lack of legal due-process in the prosecution and persecution against the contractors (at least to date), all despite what the contractors claim was the result of an undiscovered geological fault alongside the collapsed diversion tunnel -- and not any errors, substandard materials nor “corruption.”
Meanwhile, EPM, its electricity ratepayers, Medellin’s citizens (the actual owners of EPM) and the Colombian and international business sectors now can only hope that whatever future Hidroituango replacement contractors somehow (perhaps miraculously) will get up-to-speed inside the designated three-months hand-over period and complete the Hidroituango project on-time (by 2025, when all eight power turbines are supposed to be running), on-budget and on-quality.
But if Hidroituango isn’t well on-its-way to completion by 2025, then Medellin Mayor Quintero – who will have already left office by then (his term ends January 1, 2024) -- could see his political legacy sour thanks to his frenzied push to terminate the existing contractors, a decision that now puts Hidroituango’s timely completion at risk.
Medellin-based multinational gold mining giant Mineros SA announced November 15 that third quarter (3Q) 2021 profits fell 67% year-on-year, to US$8.2 million, as cost hikes in Nicaragua and Argentina hurt over-all results.
Corporate-wide gold production dipped by 1% year-on year, to 63,758 ounces, “in line with the company’s updated guidance for 2021,” according to Mineros.
Revenues dipped 1% year-on-year, to US$120 million, as the average realized price per ounce sold fell to US$1,782 in 3Q 2021 versus US$1,896 in 3Q 2020. “Key drivers were a decrease in average realized price of 6%, partially offset by a 4% increase in ounces sold,” according to the company.
Average cash costs in 3Q 2021 rose to US$1,235 per ounce, from US$1,020 in 3Q 2020, while all-in sustaining costs (AISC) rose to US$1,476/ounce, versus US$1,225 in 3Q 2020.
“The increase in average cash cost and AISC was a result of purchasing more material from artisanal miners at the Hemco Property [in Nicaragua] and higher production and sustaining costs at the Gualcamayo Property [in Argentina] as the mine nears end of life,” according to Mineros.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) fell 38%, to $32.4 million, compared to $51.9 million in 3Q 2020.
Meanwhile, capital investments rose 35% year-on-year, to $25.7 million, including investments into existing mines along with exploration and evaluation projects.
On the health and safety front, “Mineros has vaccinated 100% of its employees at the head office in Medellin and over 90% of its employees at the Nechí Alluvial Property against Covid-19,” while in Argentina and Nicaragua, “Mineros employees are beginning to be vaccinated against Covid-19 through the respective countries’ [vaccination] programs,” according to Mineros added.
Medellin-based textiles and plastics-recycling giant Enka de Colombia reported November 12 net income of COP$42 billion (US$10.8 million) for nine-months 2021, a huge improvement over the COP$2.2 billion (US$566,000) net income in nine-months 2020.
Nine-months 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) likewise have nearly tripled year-on-year, to COP$61 billion (US$15.7 million), while revenues hit COP$398 billion (US$102 million), up from COP$$254 billion (US$65 million ) in nine-months 2020.
“The construction of the new PET [polyethylene terephthalate] Bottle-to-Bottle recycling plant, which will double the installed capacity, is progressing smoothly with investments of COP$29.7 billion [US$7.6 million] -- 27% of the total investment -- and it is expected to start operations by the end of 2022,” according to Enka.
The positive results came despite negative macro impacts of the global Covid-19 pandemic over the past 18 months, including global demand weaknesses and logistics problems especially in maritime freight, the company noted.
Fortunately, Enka management had accelerated its acquisition and supply of many raw materials “before the severe shortages” emerged, according to the company.
As a result, by the end of September 2021, Enka’s total assets grew by COP$81 billion (US$20.8 million) year-on-year, to COP$693 billion (US$178 million), “mainly due to an increase in working capital derived from the increase in sales and higher international prices, and due to capital investments for projects in execution,” according to the company.
Total liabilities also increased, to COP$244 billion (US$62.8 million).
“The company continues with a positive financial position at the end of this quarter, with available cash of COP$44 billion [US$11 million] and a low net debt of COP$5.8 billion [US$1.5 million], even after making capital investments in the year for COP$32 billion [US$8.2 million], mainly in the new PET Bottle-to-Bottle recycling plant,” according to Enka.
As for sales of its various products in various markets so far this year, “sales in the local [Colombia] market increased by 65%, reaching COP$233 billion [US$60 million], while exports increased by 46%, ending at COP$164 billion (US$44 million), going from a share of 44% to 45% of the total,” according to Enka.
In the NAFTA market (United States, Mexico and Canada), sales grew by 56% year-on-year, “mainly in the industrial wire line, positioning Enka as a strategic supplier to the main tire manufacturers. Similarly, the Brazilian market recovered and grew by 47%, increasing its share to 18% of sales,” according to Enka.
As for its “green” line of recycled products, sales grew 23% year-on-year, to COP$110 billion (US$28 million), accounting for 30% of total corporate revenues. Exports represented 13% of the income of the “green” lines.
The “EKO PET” (13,027 tonnes output) plant operation “is at full capacity. Virgin PET supply restrictions continue due to the international freight situation and some production problems from large global suppliers that affect supply,” according to Enka.
As for “EKO Fibras” (8,317 tonnes), sales volume increased by 17% year-on-year “due to the recovery of local and Brazilian demand affected by Covid-19 in 2020 and due to difficulties in the supply of Asian products due to high rates of logistical restrictions,” according to the company.
As for “EKO Poliolefins” (1,281 tonnes), sales “decreased by 27% due to consumption in 2020 of high inventories generated at the start-up of the plant and due to the negative impact of the national strike [the ‘Paro Nacional’] in May 2021 on the collection of bottles. This year sales are adjusted to the availability of byproducts (caps and labels) from current recycling processes,” according to Enka.
As for all the “Eko Red” lines that involve recycling plastic bottles, “bottle collection continues to recover after the impact of the pandemic in 2020. Bottle collection was related to the national strike, which strongly affected recycling volumes in the south of the country and generated difficulties and logistical cost overruns in much of the national territory. However, it has since been possible to recover pre-Covid-19 levels,” the company added.
As for the textile and industrial businesses lines, these grew 55% year-on-year “due to the recovery of strategic markets and the high international prices of raw materials,” according to Enka.
“Exports represent 59% of the revenues of this business segment and 91% of Enka's total exports, reaching US$40 million,” the company added.
As for industrial yarns (9,775 tonnes), “volume increased 18%, mainly in canvas (+ 30%) due to its positioning in strategic clients,” according to Enka.
The “Hilo Técnico” line grew by 7%, “mainly in the USA and Colombia,” according to Enka.
Finally, the “textile filaments” line saw sales grow by 34% year-on-year “due to the recovery in demand previously affected by Covid-19 and difficulties in the importation of Asian products, mainly benefiting the sales of nylon filaments, which already exceeded to those of polyester filaments,” Enka added.
