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Medellin-based multinational utilities giant EPM announced July 28 that its first half (1H) 2020 net income fell 45% year-on-year, to COP$717 billion (US$192 million).

“In the first half of 2020 -- globally impacted by the coronavirus pandemic (Covid-19), which has implied significant financial challenges for the organization -- the EPM Group’s revenues amounted to COP$9.3 trillion (US$2.5 billion), with growth of 6% compared to the year before,” according to the company.

Operating income fell 7% year-on-year, to COP$2.1 trillion (US$564 million), while operating income margins fell 23%.

Earnings before interest, taxes, depreciation and amortization (EBITDA) dropped 4%, to COP$2.8 trillion (US$752 million), according to the company

Through first-half 2020, EPM transferred COP$1.044 trillion (US$280 million) to the city of Medellin, its sole shareholder. EPM profit transfers routinely account for nearly 25% of the Medellin’s municipal budget revenues.

Net results for 1H 2020 “were impacted by lower cash receipts and higher costs in the provision of services, due to the effects caused by the prolonged dry season and low hydrology in Colombia,” which affected the company’s hydroelectric power sales.

“Lower [power] demand associated with lower economic activity -- as a consequence of the coronavirus pandemic (Covid-19) -- and cost overruns due to the special measures implemented by EPM during mandatory preventive isolation in the country had a combined [negative] effect on the company, totaling approximately COP$320 billion (US$86 million),” according to EPM.

“To this is added a net accounting expense for a [Colombia peso to U.S. dollar] exchange difference of COP$723 billion (US$194 million), as a result of a restatement of the debt in dollars associated with the accumulated 14.7% devaluation of the Colombian peso.”

However, in the second quarter of 2020, EPM recouped some of the currency-exchange losses suffered in the first quarter. As a result, the company recorded a reversal of COP$612 billion (US$164 million) in prior expenses for exchange differences, “given the revaluation of the Colombian peso during the second quarter of 2020,” according to EPM.

During 1H 2020, EPM Group invested COP$1.2 trillion (US$322 million) in infrastructure.

As of July 2020, the business group totaled 14,046 employees.

Extra Cost Impacts from Covid-19

To help the poorer populations in Colombia during Covid-19 crisis, the national government ordered all utilities to slash the cost of power, water, sewer and natural-gas services and enable interest-free deferrals on repayment for “strata 1 and 2” groups.

In total, such mandatory cuts in revenue cost EPM at least US$104 million.

In addition, EPM contributed COP$3.2 billion (US$859,000) to outfit Covid-19 intensive care units (ICUs) at the University IPS hospital at the University of Antioquia. Likewise, the company allocated COP$1.21 billion (US$325,000) for the acquisition of Covid-19 biosecurity protective clothing.

Hidroituango Hydroelectric Budget Rises

On another front, EPM’s Board of Directors announced July 28 that the 2.4-gigawatt “Hidroituango” hydroelectric project in Antioquia is now estimated to cost at least COP$16.2 trillion (US$4.35 billion) -- 5.88% higher than the prior estimate – “as part of the approval process for future terms” of the over-all budget.

According to EPM, latest variations in the project budget include:

“• Increase in the costs of machine house and pipeline works; injections to contain infiltrations of water and consolidation of the massif of the southern zone (units 5 to 8, second stage); improvements to the left-margin alternative road approach; filters, dam drains and instrumentation; lining of galleries; and construction and shielding of tunnels to enable intermediate discharges.

“• Construction of vertical wells in units 5 to 8 that correspond to the southern zone or second stage of the project.

“• Update of the macroeconomic scenario, considering the impact of the increase in the representative market rate (TRM) of the Colombian peso to U.S. dollar.

“• A lower net value of the investments [including] equipment and civil works written off” because of the April 2018 diversion-tunnel collapse and resulting damage to the machine room.

“As of June 30, 2020, the value invested in the project amounts to COP$11.8 trillion (US$3.2 billion),” according to EPM.

“In addition, efforts leading to obtaining compensation payments from insurance companies continue, with which we expect to cover a significant part of the costs of recovering the affected works of the project. To date, US$150 million has been received,” according to the company.

EPM estimates that Hidroituango power-generation units 1 to 4 (first stage) will start operating in 2022, “fulfilling the obligations assigned by the national Energy and Gas Regulation Commission (CREG), in auctions for power-reliability charges in which the project has participated,” according to the company. “Units 5 to 8 (second stage) are scheduled to enter from 2024.”

However, “as new impacts or changes in the current situation are analyzed, both due to the Coronavirus pandemic and other circumstances that may be registered, they will be incorporated into the schedule and new possible entry-into-service scenarios will be established,” the company added.

Covid-19 infections among hundreds of workers at Hidroituango have already resulted in delaying start-up of the first power generation units to 2022, rather than the earlier estimate of December 2021.

Colombia-based cement/concrete giant Cemex LatAm Holdings announced July 27 that its second quarter (2Q) 2020 net income rose to US$11 million, up from a net loss of US$4 million in 2Q 2019.

The profit boost came despite a 36% drop in sales and a 32% decline in earnings before interest, taxes, depreciation and amortization (EBITDA), according to the company.

“However, the operating flow margin was higher by 1.4 percentage points due to a proactive cost containment plan in all of our businesses and geographies” during the Covid-19 crisis, according to the company.

While EBITDA income declined, EBITDA margin improved by 1.4 percentage points, to 19.7%, “mainly due to a proactive cost control plan,” according to Cemex.

While 2Q cement volumes fell 33% year-on-year, “volumes recovered significantly in June, doubling the volumes sold during April [2020],” according to the company.

“Quarterly consolidated cement prices improved by 4%, compared to the same period of the previous year, and they remained stable sequentially, in terms of local currency.

Cemex LatAm also generated US$25 million of free cash flow and reduced its net debt by US$28 million during the latest quarter.

Commenting on the results, company general director Jesús González added: “With the support of our health and safety culture, as well as our more than 50 biosafety protocols, we are executing our operations safely and effectively in a Covid-19 world.

“Despite the fact that our volumes were significantly impacted by the measures to contain the pandemic, we reacted quickly and made significant achievements in the second quarter,” he added.

In Colombia, EBITDA fell 32% year-on-year, to US$12 million. Net sales decreased 45% to US$67 million as measured in dollar terms, and down 36% in local Colombian peso terms.

However, “fourth generation” highway construction projects were restarted during the latest quarter. As a result, “we expect the industry’s demand for concrete to reach 1.2 million cubic meters during 2020, 50% higher compared to 2019,” according to Cemex.

“In Bogotá, projects already awarded should start soon, such as three hospitals, Transmilenio [mass transit system] extensions and a water treatment plant. ‘Regiotram’ metro and train projects should start consuming cement next year

“For 2021, the [national] government is proposing a 10% increase, compared to 2020, in the physical investment budget, including road infrastructure, water plants, housing, among others,” the company added.

In Colombia’s residential, industrial and commercial sectors, “demand for cement from the self-construction sector recovered significantly during June,” according to Cemex.

As for the residential housing sector, “we are encouraged by the government’s announcement of 200,000 subsidies for new low- and middle-income housing in the next two years.”

On the other hand, “recent trends, such as telecommuting, restricted travel, and increased online shopping, could reduce demand for offices, hotels, and retail spaces,” the company added.

As for Panama operations, net sales fell 86% year-on-year, to US$7 million, according to the company.

In Costa Rica, EBITDA fell 27% year-on-year, to US$7 million. Net sales fell 26%, to US$20 million.

In the rest-of-Cemex LatAm markets (including Nicaragua, El Salvador and Guatemala), EBITDA increased 29% in dollar terms or 31% in local currency terms, to US$20 million for 2Q 2020. “Quarterly net sales reached US$56 million, an increase of 1% in local currency terms or stable in dollar terms,” according to the company.

Medellin-based multinational supermarket giant Grupo Exito announced July 27 that its second quarter (2Q) 2020 consolidated net income hit COP$12.8 billion (US$3.5 million) -- a complete reversal from the COP$18 billion (US$4.9 million) net loss in 2Q 2019.

Sales also rose 7% year-on-year (excluding currency change effects), to COP$3.56 trillion (US$968 million), while recurring earnings before interest, taxes, depreciation and amortization (EBITDA) rose 10% year-on-year, to COP$299 billion (US$81 million).

The good results “reflect a positive variation in operational results in Colombia and Uruguay and a lower level of financial expenses,” according to Exito.

“Sales of direct and electronic commerce channels grew 191% in Colombia and 116% in Uruguay, responding appropriately to changes in customer consumption habits, due to Covid-19,” according to the company.

“In Colombia, the performance of ‘Éxito Wow’ [large-format stores] and ‘Carulla FreshMarket’ stood out, with food sales growing in double digits,” the company added.

Colombia operations registered 2Q 2020 sales of more than CO$2.7 trillion (US$734 million), up 4.7% year-on-year, taking a 77% share of the group’s total sales.

In Uruguay, sales grew 13.3% in local currency, “driven by the results of the Devoto and Disco brands, and a solid increase in sales of 116% from e-commerce and direct channels,” according to Exito.

In Argentina, sales grew 23% in local currency. At the end of the quarter, Exito implemented a sales model whereby customers could order goods in advance and then pick them up later, “capitalizing on the experiences of the other business units of the Group” that are adapting to restrictions on customer movements during the Covid-19 crisis.

Throughout its operations, “e-commerce and direct channels have responded to the great need of customers for the health emergency and accounted for 14.7% of the company's total sales during the second quarter of 2020, compared to 5.2% in the first quarter of the year,” according to Exito.

The company recorded a 263% increase in sales from e-commerce channels ( and and more than 40 million internet site visits. In addition, home deliveries jumped by 127% with 2.6 million orders in the latest quarter.

“Adoption of mobile applications -- with more than 3 million downloads and more than 87,000 orders in this period -- rose 480% over the second quarter of 2019,” according to Exito.

“Expansion and strengthening of the purchase-and-collection service in 450 stores in Colombia, with more than 59,000 orders, meant growth of 194.7% compared to the second quarter of the previous year.

“Launch of the virtual platform of the ‘Viva’ shopping centers, with purchase and pick-up service, represented 7.8% of total tenant sales in the second quarter of the year.

“These positive results in the retail business are a consequence of the company’s ability to adapt and transform in the midst of the health emergency . . . [which] managed to offset the performance of other complementary businesses such as Viajes Éxito and real estate that faced challenging situations during the quarter” because of the Covid-19 lockdowns.

Meanwhile, on the Colombian charity front, Grupo Éxito donated 700,000 Covid-19 face masks to 42 municipalities and to the national government, worth COP$1.4 billion (US$380,000).

As for Exito’s continuing programs providing child nutrition to the poor, “especially in the midst of the pandemic, Fundación Éxito has delivered more than 146,000 food packages to Colombian children and families since the beginning of the emergency,” the company added.

Medellin-based PharmaCielo Colombia and its Toronto-based parent company announced July 8 that it won Colombian government authorization to cultivate 10 tonnes of marijuana with high content of tetrahydrocannabinol (THC, the psychoactive component of pot) and export of medicinal extracts.

The authorization “enables PharmaCielo to produce and deliver psychoactive extracts as part of the three-year extracts agreement the company announced in January [2020], intended for the German market,” according to the company.

“The government’s approval for PharmaCielo to grow, extract and export high-THC medicinal products is a significant milestone that significantly expands our product portfolio and complements our medicinal offerings of CBD oil and isolate,” added company CEO David Attard.

Henning von Koss, president of parent company PharmaCielo Ltd., added that “the truly successful medicinal use of cannabis depends to a great extent on managing its psychoactive and non-psychoactive properties. As we broaden our portfolio through 2020, we will be working concurrently with our customer base and the medicinal community to identify the appropriate formulations and concentrations of cannabinoids and terpenes to meet a variety of market-specific medicinal regulatory needs, and which are sourced from our proprietary strains that provide unique profiles.”

To date, PharmaCielo has developed and registered “30 proprietary strains in the national cultivar, including unique high-THC strains, enabling future production of a variety of psychoactive dominant extracts for medicinal purposes,” according to the company.

So far, PharmaCielo has developed 139 hectares of cultivation capacity in Colombia -- part of which is located in Rionegro, Antioquia, east of Medellin.

According to the company, its strategy is “focused on becoming a large-scale value-added supplier to large consumer packaged goods companies, pharmaceutical/wellness companies and other limited partnerships.

Its “phase one” processing and extraction center here can produce 24 metric tonnes/year of refined cannabis oil at a cultivation cost of Cdn$0.04 cents [US$0.03] per gram, thanks to a “natural and consistent 12-hour light cycle and temperate climate” as well as a “highly educated and skilled agricultural workforce” with “generations of experience working in the cut-flower industry,” a major employer in the “Oriente” region east of Medellin.

“Phase two” production facilities would enable extraction capacity to expand to 80-to-100 metric tonnes/year of refined cannabis oil, according to the company.

In its latest financial report, PharmaCielo posted a Cdn$6.8 million (US$5 million) net loss for first quarter (1Q) 2020, an improvement over the Cdn$7.7 million (US$5.7 million) net loss in 1Q 2019. The improvement came from a Cdn$494,000 (US$366,000) boost in gross revenues from sale of cannabis-derived products in early 2020, according to the company.

ANDI -- Colombia’s biggest industrial-commercial trade association -- announced July 8 that its most recent survey of 200 major companies shows that business liquidity is starting to improve thanks to the gradual reopening of various economic sectors during the current Covid-19 crisis.

During the height of the national quarantine and business shutdowns in April, surveyed companies had (on average) only 11 days of cash-on-hand to cover salaries, benefits, suppliers, taxes, overhead and outstanding loans, ANDI noted.

But thanks to subsequent, government-authorized exemptions to quarantines – paired with strict biosafety protocols – cash-on-hand doubled to 23 days in May and tripled to 35 days in June, the survey found.

“Government measures and the resumption of activities and operations have given companies oxygen,” said ANDI president Bruce MacMaster. “However, this liquidity survey shows that companies face a difficult situation. There are companies in big problems that require great support and even rescue plans,” he added.

The big improvements in liquidity seen in the latest survey “can be explained by several factors: a greater number of productive activities in operation, the reactivation of production chains and not only in isolated sectors, the rationalization of costs within companies, aid provided by the financial sector (grace periods, extensions, among others), national government measures such as the day without VAT [sales tax] and aid such as the payroll and ‘prima’ [mid-year worker bonus] subsidy, among others,” according to ANDI.

“As we have noted in previous versions of the survey, the situation in the business sector is not homogeneous. On the one hand, we find companies with a situation of marked illiquidity. This is the case of 20.6% of the companies surveyed, where cash-on-hand only covers between one and eight days to operate.

“Then there are another 10.8% of companies with between nine and 15 days [liquidity] and 26.3% between 16 and 30 days. Thus, 57.7% have cash to operate for a month or less.”

The survey also found that operating income declined for 72.8% of companies in May 2020 versus May 2019, while 20.4% of companies saw a year-on-year increase and 6.8% reported no change, according to ANDI.

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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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