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Medellin-based textile giant Fabricato announced May 1 that it posted a COP$11.6 billion (US$4.1 million) net loss for first quarter (1Q) 2018, 13% worse than the COP$10 billion (US$3.5 million) net loss in 1Q 2017.

Sales also dipped 13.6% year-on-year, while earnings before interest, taxes, depreciation and amortization (EBITDA) dropped 45% year-on-year, to COP$1.8 billion (US$637,000).

However, the 1Q 2018 business environment improved compared to the immediate prior quarter (4Q 2017) thanks to relatively low inflation, low interest rates, rising oil prices and an improved consumer confidence index, according to the company.

In addition, Colombia’s textile sector “is beginning to see the positive effect of [government] measures taken at the end of last year against illegal competition,” including “intensification in the fight against contraband [clothing imports] and especially the antidumping measure taken against denim imports from China,” according to Fabricato.

In addition, the start-up of the new free-trade agreement between Colombia and the Mercosur nations enables favorable flow of fabrics at zero tariffs between Colombia, Mexico, Peru, Argentina and Brazil, the company noted.

Meanwhile, Fabricato continues to transfer operations from its shuttered “Riotex” factory in Rionegro, Antioquia, to its centralized Bello, Antioquia, production facilities, hence boosting productivity. Completion of this operational transfer is expected by July.

Reviewing 1Q 2018 results, Fabricato highlighted what it termed as a “bad January, but a good February and March, with EBITDA positive, to a level aligned with our budget.”

In addition, “another relevant factor is our new business model, under which the volume of production is aligned with sales expectations for the period, instead of employing the concept of maximum capacity utilization,” according to Fabricato.

“This has reduced product inventory by 25% in [Colombia Peso] terms and 32% in volume terms, year-on-year,” the company added.


The International Monetary Fund (IMF) on April 30 announced that it foresees 2.7% growth in Colombia’s gross domestic product (GDP) this year.

In its latest annual “executive board” report (see: http://www.imf.org/en/News/Articles/2018/04/30/pr18154-imf-executive-board-concludes-2018-article-iv-consultation-with-colombia?cid=em-COM-123-36986), IMF found that during the 2017 calendar year, “adequate policy management brought Colombia near completion of its adjustment to large external shocks while further advancing inclusive growth.”

However, “economic growth moderated as private investment and consumption weakened in line with lower national income. Some delays in the infrastructure [development] agenda also contributed to the decline in private investment.”

On the other hand, “fiscal consolidation continued, guided by the fiscal rule and contributed to the narrowing of the current account deficit which was also buttressed by some recovery in oil and non-oil exports,” IMF found.

“Despite the growth moderation, social indicators improved with both poverty and income inequality decreasing in 2017.

“The current-account deficit declined to 3.4% of GDP and continued to be financed by FDI [foreign direct investment] to a large extent. Portfolio inflows moderated somewhat but remained ample with further increases in foreign participation in the local government debt market,” the organization added.

“Colombia’s outlook is favorable as continued efforts to advance the structural reforms will foster economic diversification and productivity growth. Economic growth is expected to rebound strongly in 2018 and further over the medium-term, led by strengthening investment and exports.

“The combined impact of the structural tax reform, a brighter outlook for oil prices and the authorities’ 4G [fourth-generation highway construction] infrastructure agenda will underpin investment while reducing Colombia’s relatively large infrastructure gap.

“Continued efforts to reduce trade barriers and some recovery in global growth will help sustain strong export growth. The implementation of the peace agreement will promote regional development and reduce inequality,” IMF’s report added.

On the other hand, “the economy remains vulnerable to uncertainties from a sudden tightening of global financial conditions and escalation of trade or geopolitical tensions.”

In addition, “placing public debt on a declining path is an appropriate fiscal target which would also leave room to fine-tune the consolidation pace as guided by the fiscal rule.

“IMF directors encouraged [Colombian] authorities to focus on improving tax administration, as associated revenue gains will create space for public investment. They highlighted the need for a comprehensive pension reform to increase coverage and progressivity.

“The current monetary policy stance should be conducive to a recovery in activity and reducing the [discount] rate further in line with inflation expectations could be warranted if the recovery faltered.

“Directors agreed that the flexible exchange rate regime has served Colombia well and should remain the first line of defense against global shocks as well as help accumulate adequate buffers.

“Directors noted that the banking system has been resilient amid the economic slowdown, reflecting partly effective financial supervision and ample capital and liquidity.

“They welcomed recent regulatory measures to homogenize banks’ loan restructuring practices and to bring regulation closer to Basel III standards, including through the implementation of the conglomerates law,” the IMF report concluded.


Medellin-based multinational foods giant Grupo Nutresa announced April 27 that its first quarter (1Q) 2018 net profits fell 13.1% year-on-year, to COP$121 billion (US$43 million).

The profit dip “is mainly explained by not accounting a portion of the dividends from our investment portfolio during the period, COP$26 billion [US$9.3 million], which will be registered during the second quarter of this year. Eliminating this effect, Grupo Nutresa’s net profit [for 1Q 2018] would have grown 5.7%,” according to the company.

Corporate-wide consolidated sales for 1Q 2018 rose 3.1% year-on-year, to COP$2.1 trillion (US$748 million), according to Nutresa.

“Sales in Colombia showed a positive performance -- in alignment with better consumption dynamics -- amounting to COP$1.3 trillion [US$463 million], which represents 64% of Grupo Nutresa’s total sales, a growth of 2.4% when comparted to the corresponding [1Q] in 2017, the company added.

Revenues outside Colombia grew 6.6% year-on-year, to US$265.2 million, accounting for 36% of total sales, according to Nutresa.

Consolidated gross profit rose 5% year-on-year, to COP$935.6 billion (US$333 million), “resulting from a sound commodities sourcing strategy,” according to the company.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 3.3% year-on-year, to COP$273 billion (US$97 million), with EBITDA margin at 13% of sales. “This is the reflection of our efforts in productivity and cost efficiency, along with a continued investment in the market,” according to Nutresa.

Grupo Nutresa boasts of a 59.8% market share in processed foods in Colombia “and one of the most relevant players in the sector in Latin America, with consolidated sales of COP$8.7 trillion [US$3.1 billion] in eight business units: cold cuts, biscuits, chocolates, Tresmontes Lucchetti [Italian specialties], coffee, retail food, ice cream and pasta,” according to the company.


Medellin-based national electric-power grid operator and power-trading center XM announced April 17 that power demand in Colombia is up 3% year-on-year through first-quarter (1Q) 2018, compared to a 1.8% net year-on-year decline in 1Q 2017.

Over the last 12 months through March 2018, Colombian power demand is up 2.5%, whereas power demand actually fell 1.5% over the comparable 2016-2017 period, XM found.

Meanwhile, power demand in Antioquia rose 3.7% year-on-year for the month of March 2018, versus a 3.2% net decline year-on-year in March 2017.

The power-demand figures indicate that Colombia generally and Antioquia specifically are starting to emerge from recessions that hit in 2016 and especially 2017, when a hike in value-added tax (VAT) slammed consumer spending and (consequently) industrial output.

For the month of March 2018, national power demand rose 4.4% year-on-year, compared to a 0.3% year-on-year contraction in March 2017, XM noted.

The relatively strong demand growth has exceeded prognostications by Colombia’s national energy-planning agency -- the “Unidad de Planeación Minero Energética" (UPME), XM noted.

Residential and small-business demand grew 4.4% in March 2018 versus March 2017, while combined industrial-commercial demand in March 2018 grew an even stronger 4.6% year-on-year, the agency noted. However, manufacturing demand in March grew by just 0.8% year-on-year, according to XM.

The greatest year-on-year demand growth in March 2018 was in Guaviare department (up 9.4% year-on-year), while the Tolima-Huila-Caqueta region saw demand jump 8.1%, and the Atlantic Coast region saw demand grow 6.8%, XM found.


Canada-based multinationals Gran Colombia Gold (GCC) and Red Eagle Mining (REM) in late March both reported progress in their gold mining operations here in Antioquia during 2017.
 
For GCC, adjusted net income for fourth quarter (4Q) 2017 nearly tripled, to US$9.1 million, from US$3.4 million in 4Q 2016. Similarly, for full-year 2017, GCC’s adjusted net income rose to US$23 million, up from US$15.6 million in 2016.
 
“The improvement in 2017’s annual adjusted net income compared with last year reflects the positive impact on income from operations of the higher gold production this year, lower financing costs due to debt reductions, and a decrease in Colombian wealth tax compared with the prior year,” according to GCC.
 
As for Red Eagle, full-year 2017 net loss worsened year-on-year, to US$15.7 million, compared to a net loss of US$6.9 million in 2016.
 
“The [2017] net loss increased compared to the 2016 period primarily due to increased mine site expenses, as less costs were capitalized during 2017, mineral property exploration costs [rose] at Santa Rosa as regional targets were drilled for the first time, and interest expense [rose]. Total assets and shareholders’ equity increased primarily due to increased mine development,” REM added. 
 
“The focus for the second half of 2017 was to complete enough underground development to support sustainable production and give access to underground drill pads.
 
“With most of the new equipment having arrived at site through February and March [2018] and the final scoops due for delivery in April, the mine is planned to ramp up to 750 tonnes per day in second-quarter 2018.
 
“The additional underground development and infill drilling will allow consistent production resulting in an estimated 45,000 ounces of gold produced during 2018. The mine now has sufficient underground development to support sustainable production,” REM added. 
 
GCC Highlights
 
Commenting on recent progress, GCC executive co-chairman Serafino Iacono added that “our 2017 results demonstrate that we are firing on all cylinders [as] 2017’s gold production was up 16% from 2016.
 
“Adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] increased by 14% over last year and is almost double the amount reported for 2015. Excess cash flow came in as expected at US$16.4 million.
 
“At Segovia [Antioquia], we added more ounces to our mineral resource estimate through exploration than we mined in 2017 and we reported our first ever mineral reserve for the project today.
 
“We continued to invest in the infrastructure at Segovia, not just in mine development and mining equipment but in areas that raise the bar in health and safety, environmental management and through our foundation, social projects that benefit the community,” he added.
 
Gran Colombia exceeded its guidance for 2017 with total gold production reaching 173,821 ounces, up 16% over 2016, according to the company.
 
“Fueled by continued growth in the company’s high-grade Segovia operations, total gold production increased to 51,699 ounces in the fourth quarter of 2017, up 26% over the fourth quarter last year.
 
“Gran Colombia expects its Segovia operations will produce 158,000 to 167,000 ounces in 2018, raising 2018’s total gold production guidance to a range of 182,000 to 193,000 ounces,” the company added.
 

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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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