Business 653
Colombia Exports to Jump 16.5% in 2017; Big Improvement over 2016
Wednesday, 01 November 2017 13:33 Written by Roberto Peckham
The Economic Commission for Latin America and the Caribbean (ECLAC) announced October 30 in a new report that Colombia’s exports are forecast to rise by 16.5% for full-year 2017, up sharply from a 12.8% decline in 2016.
Meanwhile, imports to Colombia are expected to rise 5.2% this year, up from a 16.9% decline last year, according to ECLAC’s report (see: http://repositorio.cepal.org/bitstream/handle/11362/42316/1/S1700860_en.pdf).
For the entire Latin America and Caribbean region, collective exports are seen rising 10% this year. Only Brazil (up 18%), Honduras (up 29.6%) and Nicaragua (up 23.5%) are seeing bigger percentage increases in exports than Colombia in the Latin America region this year, the report shows.
“Socialist” Venezuela is the only country in all of Latin America showing a decrease in imports this year -- down 21.8% -- following a 35.7% decline last year and a 22.3% decline in 2015.
“South American countries are projected to post the strongest increases in [export commodity] prices owing to the greater weight of petroleum, minerals and metals in their export baskets, particularly those of Andean countries,” according to the report.
“Colombia is expected to post the strongest increases in prices as its main export products include petroleum and coal,” it added.
On the other hand, “success of traditional and modern services exporters in the region depends heavily on the public-private strategies in place to support this sector,” according to the report.
“Examples in the region are the Productive Transformation Program established in Colombia in 2009, with targets for 2019 for software and information technology (IT) services exports, business process outsourcing (BPO) and knowledge process outsourcing (KPO).
“Some countries have designed specific support instruments to promote modern services exports. In Colombia, ProColombia has designed special programs for the promotion of BPO, ITO and KPO service companies, including through the provision of buildings with operators that provide specialized services (communications, energy, security and mass transport for example) to exporting firms,” the report added.
EPM Successfully Places US$764 Million Bond Offering
Wednesday, 01 November 2017 09:07 Written by Roberto Peckham
Medellin-based multinational utilities giant EPM announced October 31 that it successfully placed a COP$2.3 billion (US$764 million) 10-year bond offering at 8.375% interest.
“This is the third international issue denominated in Colombian pesos,” according to the company. Wall Street bond rater Fitch gave the issue a “BBB+” rating while Moody’s gave it a “Baa2” rating.
“With this issuance, made in order to prepay debt in dollars, the profile of the company’s debt is improved,” according to EPM. The latest placement takes advantage of the “current financial conditions of the international market,” according to the company, whose sole shareholder is the municipality of Medellin.
For the issue, about 60% of the bond buyers were from the United States, Europe, Chile, and Peru, while the remaining 40% were Colombian investors, according to the company.
“Thanks to this issue, we managed to make an important debt-management operation, which will allow us to improve the maturity profile and the average life of the debt,” added EPM general manager Jorge Londoño de la Cuesta.
“In addition, we will increase our debt composition in Colombian pesos, which will allow us to reduce EPM’s exposure to debt denominated in dollars, thereby minimizing the impacts derived from foreign exchange risk,” he said.
Funds from the bond issue will prepay a loan due in 2020, which was signed with seven banks in 2015. In total, 45% of the issue funds are going toward the construction of the US$5.5 billion, 2.4-gigawatt “Ituango” hydroelectric project in Antioquia, with the remaining 55% going to support other investment plans.
Spanish bank BBVA, U.S.-based Bank of America Merrill Lynch, and UK-based HSBC served as placement bankers for the issue.
Fabricato Sees 3Q 2017 Net Loss Grow Year-on-Year; Cites Tax, Import Issues
Wednesday, 01 November 2017 08:31 Written by Roberto Peckham
Medellin-based textile giant Fabricato announced October 31 that its third quarter (3Q) 2017 net loss hit COP$19 billion (US$6.2 million), down from a COP$755 million (US$248,000) net profit in 3Q 2016.
Sales in 3Q 2017 also fell 23.5% year-on-year, to COP$85 billion (US$28 million), while earnings before interest, taxes, depreciation and amortization (EBITDA) margin fell to a negative 7.5%, down from a positive 12.8% in 3Q 2016.
“The period covered by this [latest quarterly] report was surely one of the most negative for the [Colombian] textile sector in recent years,” according to Fabricato.
“The textile and apparel sectors presented results that were much lower than those budgeted for the period, as well as being inferior to those generated in the immediately preceding year,” the company added.
While Colombia’s relatively feeble 1.8% growth in GDP this year is partly to blame for the declines, the hike in value-added tax (VAT) this year to 19% (from 16% last year) and relatively high interest rates were additional negative factors, the company noted.
Another key factor was the November 2016 termination of the “mixed tariff” on textiles, which had been relatively effective in preventing imports of products that were “under-invoiced” in order to avoid tax duties, according to Fabricato.
“With the termination of this [mixed] tariff modality, replaced by a model that only considers a percentage on the value of the imported product, some gaps emerged that facilitated the increase of unfair [textile and clothing import] practices, such as price declarations or product specifications that do not correspond to what is really important,” according to the company. “In order to combat this imbalance, the government is working with the private sector to prepare a decree that should be enacted shortly and that should set reference prices to avoid importing products with ostensibly low prices.”
In addition to under-invoiced imports, “there is an increase in the importation of products with prices below reasonable international costs, which characterizes ‘dumping,” according to Fabricato.
“In this case, to prove this unfair practice and take restrictive measures, the [remedy] process is longer and more complex. However, Fabricato and [fellow Medellin-based textile maker] Coltejer jointly initiated an anti-dumping process against denim fabrics of Chinese origin. This process should receive a first response from local authorities this year, and if accepted in all instances, could result in effective measures in favor of domestic producers in the first half of next year,” according to the company.
“In addition to the unfair practices mentioned above, Colombia is the country with the lowest textile tariffs [10%] when compared with countries such as Argentina (26%), Brazil (26%) and Mexico, which varies from 10% to 20%.
“Due to the ease of legal importation, unfair dumping and under-invoicing practices, what was noted on the supply side was a disproportionately high increase, while on the demand side, as we have already said, we have noticed a contraction. As a natural result of this combination of factors, an increase in inventory levels was perceived.
“With so much negative news and misinformation generated by some unions in the [textile] sector, financial institutions and insurers perceived an increase in the perception of risk, with the consequent credit restriction and increase in credit insurance premiums, in addition to the reduction in credit quotas.
“Even in the case of small or medium-sized companies, which are not financed through the financial system but through credits with the importing/distributing companies, credit was affected,” Fabricato concluded.
Bancolombia 3Q 2017 Net Profit Dips 1% Year-on-Year; 2.5% GDP Growth Seen in 2018
Saturday, 28 October 2017 07:49 Written by Roberto Peckham
Medellin-based banking giant Bancolombia – Colombia’s biggest bank and now a growing multinational – reported October 26 that its third quarter (3Q) 2017 net profit dipped 1% year-on-year, to COP$1.7 trillion (US$564 million).
However, Bancolombia’s gross portfolio grew 6.5% year-on-year to COP$158 trillion (US$52 billion), of which 25% corresponds to its international operations including Banistmo (Panama), Banco Agrícola (El Salvador) and BAM (Guatemala).
The ratio of 90-day past-due loans rose to 2.9%, up from 2.0% in 3Q 2016. But provisions for this portfolio are 161%, which “guarantees solidity in the midst of a challenging environment,” according to the company.
“Recognizing the current economic outlook, the bank continues its growth path,” added Bancolombia president Juan Carlos Mora. However, “provisions charges were increased in order to maintain a prudent coverage index and keep the balance-sheet solid,” Mora said.
As of September 2017, Bancolombia Group had 9,707 correspondent banking outlets, 5,504 ATMs, and reported 6.8 million downloads of its “App People” banking application as well as 50,000 “App Companies” users.
“The growth in these channels makes it more efficient for more people and companies to access the financial system in all the geographies in which Bancolombia is present,” according to the company.
Another highlight was the growth in international capital markets, according to the company. For example, Banistmo achieved placements in the international bond market of US$500 million, with bond-buyer demand exceeding bond supply by 450%. “With this issue, the four banks of the Group have already successfully entered the international capital markets, managing to diversify their funding structure,” according to the company.
In addition, “Bancolombia Group has enough capital to face the challenges of the coming years. Primary capital reached 10.3%, which represents more than twice the minimum required. Likewise, solvency [ratio] was 13.4%,” according to the company.
In a subsequent October 27 conference call with investment analysts, Bancolombia chief economist Juan Pablo Espinosa added that Colombia’s economic growth this year continues to be sluggish, with year-on-year GDP seen rising by only 1.9%.
However, productivity is expected to rise, and when combined with improved global demand and likely reductions in central bank interest rates, full-year 2018 GDP is seen rising by 2.5%, he said.
Full-year 2017 inflation is now seen at 4%, while full-year 2018 inflation is likely to dip to 3.5%, he added.
Colombian exports are forecast to grow by 20% this year and another 5% next year thanks to the relatively strong U.S. dollar versus the Colombian peso, combined with recoveries in global demand.
While the national government is likely to meet its fiscal deficit target of 3.6% of GDP this year, the government will need to take more austerity steps in 2018 -- and achieve more reforms in 2019 in order to keep fiscal deficits in check, he cautioned.
Nutresa 3Q 2017 Profits Rise 3.6% Year-on-Year
Friday, 27 October 2017 15:02 Written by Roberto Peckham
Medellin-based multinational foods manufacturer Grupo Nutresa announced October 27 that its third quarter (3Q) 2017 net consolidated profit rose 3.6% year-on-year, to COP$324 billion (US$107 million), while gross profit rose 3% year-on-year, to COP$2.8 trillion (US$930 million).
Sales in Colombia grew 3.1% year-on-year, to COP$4 trillion (US$1.3 billion), while consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) margin was 12.5%
Sales abroad -- excluding sales in “socialist” Venezuela – rose 5.8% year-on-year, to COP$2.3 trillion (US$797.7 million), representing 37% of total sales.
Consolidated revenues (not including Venezuela) rose 2.6%, to COP$6.4 trillion (US$2.1 billion), “the result of sales growth in the local [Colombia] market and a solid and sustained growth in international revenues,” according to Nutresa.
Net post-operatng expenses totalled COP$187 billion (US$62 million), “14.8% less than the same term in 2016, due primarily to the treatment of the investment in Venezuela as a financial instrument starting October 1 of such year,” according to the company.
Meanwhile, Nutresa for the seventh straight year entered the Dow Jones Sustainability Index and “continues to be the only company in the food sector from an emerging market to be part of this global index,” the company noted.
“In the economic dimension, [the company] obtained the maximum score in terms of health and nutrition, materiality, risk and crisis management, and tax management. In the environmental category, Grupo Nutresa received the highest score in environmental reporting and packaging. Finally, in the social dimension, it achieved the highest valuation in human rights,” according to the company.
Grupo Nutresa describes itself as “the leader in processed foods in Colombia (60.5% market share) and one of the most relevant players in the sector in Latin America, with consolidated sales of US$2.8 billion in eight business units: cold cuts, biscuits, chocolates, Tresmontes Lucchetti [Italian foods], coffee, retail food, ice cream, and pasta.”
The company has a direct operating presence in 14 countries and international sales in 72 countries.
