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Nutresa 3Q 2022 Net Income Jumps 35% Year-on-Year

Thursday, 27 October 2022 11:31 Written by

Medellin-based multinational foods giant Grupo Nutresa announced October 21 that its third quarter (3Q) 2022 net income rose 35% year-on-year, to COP$723 billion (US$150 million).

Sales likewise jumped 33% year-on-year, to COP$12.2 trillion (US$2.5 billion). Revenues in Colombia grew 31.5%, to COP$7.3 trillion (US$1.5 billion), accounting for 60.2% of Grupo Nutresa’s worldwide sales.

International sales likewise rose 35.5% year-on-year, to COP$4.8 trillion, (US$1.2 billion), while exports from Colombia totaled US$337 million, up 38.5%.

“Grupo Nutresa continues managing the impact of global inflation and the restrictions along the global supply chain through an adequate administration and hedging of commodities, as well as a disciplined cost and expense agenda,” according to the company.

“Consequently, the company reports COP$4.5 trillion [US$935 million] in gross profits, achieving a 19.6% growth rate over the period.”

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 25.8% year-on-year, with an EBITDA margin of 12.2%

Meanwhile, “financial expenses grew 63.8% mainly due to the increase in interest rates in the multiple geographies where Grupo Nutresa operates,” the company added.

Cemex LatAm 3Q 2022 Net Loss Worsens Year-on-Year

Thursday, 27 October 2022 11:23 Written by

Colombia-based Cemex LatAm Holdings (CLH) announced October 27 that its third quarter (3Q) 2022 net loss more than tripled year-on-year, to US$37 million, from a net loss of US$11 million in 3Q 2021.

Cemex blamed the poor results on impacts of declining operating income along with its divestment of operations in Costa Rica and El Salvador, finalized on August 31, 2022.

“As far as divestments are concerned, CLH continues to actively evaluate other additional divestment opportunities, which could even be much larger than those already completed in Costa Rica and El Salvador,” according to the company.

“Regarding investments, CLH continues to evaluate and implement strategic investment projects in its portfolio, such as the Maceo [Antioquia] project in Colombia, with which it seeks to strengthen or improve its network of assets in the region.”

Despite the setbacks in profits and operating income, consolidated net sales during 3Q 2022 actually increased by 10% year-on-year, “adjusting for currency fluctuations,” according to the company.

“Higher cement and ready-mix prices, as well as higher ready-mix volumes were the main drivers of the improvement.”

Cost of sales as a percentage of net sales increased by 7.8 percentage-points, from 59.8% in 3Q 2021 to 67.5% in 3Q 2022. “The increase was mainly due to higher variable costs, especially in furnace fuel,” according to CLH.

Earnings before interest, taxes, depreciation and amortization (EBITDA) fell 20% year-on-year, “mainly due to higher operating costs, despite higher sales,” according to CLH.

EBITDA margin in 3Q 2022 likewise dipped by 5.9 percentage points, compared to 3Q 2021.

Colombia Results

“In Colombia, our domestic gray cement prices improved by 12% in local currency terms, while our volumes decreased by 5%, during the third quarter compared to the same period of the previous year,” according to CLH.

“Our focus on pricing strategy resulted in our cement volumes underperforming the industry during the quarter, compared to the same period last year. On a sequential basis during the quarter, our cement prices improved by 2% in local currency terms and our volumes by 17%.

“Our ready-mix prices improved 5% in local currency terms and our volumes increased 10% during the quarter, compared to the same period last year.

“In the ready-mix business, our volume growth during the quarter and year to date was supported by increased market demand in the formal [construction] sector and our recent investments to expand our presence primarily in the Bogotá and Cali metropolitan areas,” the company added.

Panama Results

“In Panama, our domestic gray cement and ready-mix volumes increased by 10% and 66%, respectively, during the third quarter compared to the same period of the prior year. Volume growth was mainly driven by higher activity in the infrastructure sector, mainly in the third line of the Metro,” according to CLH.

Guatemala, Nicaragua Results

In the “Rest of CLH region” (now including Guatemala and Nicaragua, “our domestic gray cement volumes decreased by 1% during the third quarter compared to the same period last year. In Guatemala, our cement volumes increased 1% during the quarter compared to the same period last year. Our cement volumes remained relatively stable mainly due to heavy rains in July and August, as well as our pricing strategy.

“In Nicaragua, our cement volumes decreased 2% during the quarter compared to the same period last year. Volumes were affected by heavy rains and lower activity in the infrastructure and self-construction sectors,” the company added.

Medellin’s city-owned EPM utility claimed in a September 19 filing with Colombia’s Superfinanciera oversight agency that an investigative report published September 18 in the local El Colombiano newspaper -- citing potentially corrupt Hidroituango contract manipulation – ought not to be considered as accurate.

The El Colombiano report reveals that EPM recently changed the US$5 billion Hidroituango hydroelectric-plant construction contract bidding in a way that presumably would solely favor China’s Yellow River construction company via partnership with a previously unqualified Colombian construction company.

This alleged scheme follows Medellin Mayor Daniel Quintero’s years-long efforts to eliminate Hidroituango’s current construction contractors in favor of a Chinese company that has been cuddling-up to Quintero (see Medellin Herald September 3, 2020).

While Quintero failed in his lawsuit attempting to revoke the current Hidroituango contractors, the Chinese Communist Party’s official People’s Daily newspaper published a fawning report on Mayor Quintero in its August 19, 2020 edition, under the headline: “Daniel Quintero, Mayor of Medellín: ‘We Have Seen in China a Strong Investment Ally.’”

In the new El Colombiano report -- citing EPM’s recent contract “addendum 7” -- EPM “did the Chinese three favors: first, they reduced the required volume [of prior construction experience] to 28,350 cubic meters. Second, they included that the [new] company could accredit that experience in the construction of ‘framed structures.’ In other words, they no longer had to have experience in more complex structures such as bridges, but building houses or buildings was enough.

“And third, if the Colombian partner did not have a way to accredit that experience in two prior works, as required in the original specifications, now it can accredit it in four works. That is, the company can add 28,350 cubic meters [of experience] in several houses or buildings,” instead of 94,500 cubic meters of experience as originally required, according to the report.

The amended contract also lowered the experience requirement for excavations and construction of wells, tunnels, or caverns to 57 square meters, rather than 80 square meters as specified originally.

José Fernando Villegas, president of the Colombian Chamber of Infrastructure in Antioquia, is quoted in the El Colombiano report as asking why EPM cut the experience requirements to very specific numbers, rather than roundabout numbers. “When one puts an indicator that is not a round figure, it means that someone in particular wants to win [the contract]. It's what they call tailor's sheet,” Villegas was quoted as saying.

Likewise, “in the case of tunnels, the natural thing [in a contract amendment] would be to go down from 80 square meters to 55 or 60, but not 57,” he added.

In response to those charges, EPM issued the following statement to Superfinanciera:

“The fundamental purpose of the public request for bids [via the new contract amendments] is not to change the construction firm, but rather to guarantee the continuity of the civil works of generation units 5 to 8 of the Ituango Hydroelectric Project, under a unit-price payment methodology. in accordance with the development of the work and the current state of the risks, seeking optimization in costs and control of the execution schedule of the project in its final stage,” according to EPM.

“This process has had seven addenda (modifications), among which are extension of the date for receipt of bids, updating of the readjustment formula and provision of complementary documentation to interested parties, information meeting with bidders, inclusion of construction plans of the exterior works and modification to the requested experience.

“As a result of an interdisciplinary analysis, EPM identified the need to modify the experience requested to encourage the participation of Colombian companies and seek a greater plurality of bidders. EPM clarifies that one of the fundamental requirements stipulated in the contracting process is the presentation of offers from national and foreign legal entities, under associative forms, which may not be made up of more than three members and at least one of them must be Colombian. EPM insists that the reason why it modified the experience was due to serious analysis and not at the request of one of the participants in the process (Yellow River).

“The reopening of the process, that is, the opportunity for new interested parties to acquire the right to participate, is not an alien or foreign matter to the contracting of EPM, since precisely to guarantee the principles of equality and plurality of bidders, the specifications of conditions establish the obligation to carry out a new opening of the process when participation requirements are modified. In this particular case, as the experience was modified in some aspects, it was imperative to once again exhaust the stage of reopening the process.

“EPM reiterates that the selection process to build the final civil works of Hidroituango is carried out in a transparent manner,” the statement concludes.

The Medellin City Council on September 29 decided to reverse an earlier vote that would have approved the sale of city-owned utility EPM’s 50% stake in telecom-internet giant UNE to Millicom Spain, which holds the other 49.9% of shares.

Following an earlier provisional vote to approve the sale, on September 29 some Council members stated that they had subsequently lost faith in promises that the estimated COP$2.8 trillion (US$633 million) proceeds from the sale would be dedicated exclusively to “strategic investments.”

Instead, a last-minute change to the deal -- inserted by Medellin Mayor Daniel Quintero – stated that part of the funds would go toward paying EPM debt and part for other city projects, such as stream-maintenance. That broke the back of the tentative deal.

For more than 18 months, the long-expected deal had been held-up over concerns of misuse of UNE sale proceeds by Medellin’s politically embattled Mayor Quintero, who has been hit by numerous charges of corruption as well as illegal meddling in the recent election of President Gustavo Petro.

Under the earlier, tentative deal, an academic committee was supposed to oversee and verify that all UNE sale proceeds would indeed go into a strategic investment fund at EPM rather than being diverted to political projects of Mayor Quintero.

Earlier this year, UNE (popularly known as “Tigo”) posted a COP$572 billion (US$150.5 million) net loss for full-year 2021, more than twice the COP$212 billion (US$55.8 million) net loss in 2020.

Beside posting net losses in 2021 and 2020, the UNE-EPM venture also posted another net loss in 2018, while its 2019 net profit came-in at just COP$519 million (US$128,000).

Medellin-based multinational supermarket and dry-goods retailer Éxito and its principal Brazilian shareholder GPA simultaneously announced September 5 that GPA soon will offer 83% of its shares in Éxito to more than 50,000 current GPA shareholders.

The deal ultimately means that tens of thousands of investors in the U.S., Brazil and Colombia collectively would become Éxito’s biggest shareholders – that is, holding 53% of the total -- during the first half of 2023, according to the companies.

“The transaction is expected to consist of the segregation of GPA and Éxito through a capital reduction of GPA with the objective of distributing approximately 83% of the shares of Éxito currently held by GPA to its shareholders,” according to the companies.

“Therefore, following the closing of the transaction, GPA would retain a minority stake of approximately 13% in Éxito, with a potential for monetization in the future,” while France-based Groupe Casino would continue holding a 34% share via its GPA shareholdings, according to the companies.

“As a result of this project, the company's shareholding base would be substantially expanded, in such a way that the floating capital tradable on the stock markets would increase from 3% to 53%, approximately,” according to a separate Exito press release.

“Casino and GPA (Grupo Pão de Açúcar), would jointly maintain a shareholding of approximately 47%.

“Grupo Éxito will continue to strengthen its investment in Colombia and will continue executing its strategy of omnichannel, commercial expansion and innovation, and traffic monetization, fulfilling its higher purpose of nurturing ppportunities in Colombia,” the company added.

“The transaction will take place through the pro rata delivery to GPA’s shareholders of Éxito common shares -- including in the form of Level II Brazilian Depositary Receipts (“BDRs”) or Level 2 American Depositary Receipts (“ADRs”) -- both representing Éxito’s common shares, in the manner to be disclosed to the market in due course,” according to GPA.

“GPA’s Board of Directors considers that the transaction, which has the objective of enhancing the market value of the shares of GPA and Éxito separately, has the potential to unlock the value to be captured equally by all GPA’s shareholders.

“GPA’s securities will continue to trade in Brazil on the B3 S.A.– Brasil, Bolsa, Balcão (“B3” exchange) and in the United States on the New York Stock Exchange (“NYSE”).

“Éxito’s securities will continue to trade in Colombia, and Éxito will file the necessary documentation with the CVM [Comisión de Valores Mobiliarios of Brazil] and the U.S. Securities and Exchange Commission to in order to have the BDRs and ADRs listed for trading in Brazil and the United States, respectively, in accordance with high levels of corporate governance and regulation applicable in each of the markets,” according to the announcements.

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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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