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TimePosted 21/05/2018 08:28:35

Cementos Argos sees falling volumes

Cementos Argos released its 1Q18 results this week, announcing revenues of COP1.9trn (US$670m), but cement sales fell by 4.1 per cent to 3.7Mt and ready-mix volumes by 7.5 per cent to 2.4Mm3. ICR reviews the state of Cementos Argos' regional markets and guidance going forward.

The outlook for the cement and ready-mix market for the rest of the year remains positive, mainly boosted by the residential segment, which is expected to continue gaining momentum, supported by the solid fundamentals of the country, said Cementos Argos. 

Group cement volumes for the 1Q18 totalled 3.68Mt, compared to 3.84Mt in 1Q17. Colombia saw the largest fall in volumes, but it distributed the most volume in the group at 1.35Mt. The USA was the next market in terms of volume at 1.34Mt of cement, and in the Caribbean and Central America the cement producers sold 1.24Mt of cement in the 1Q18. 

Colombia
In Colombia cement and ready-mix volumes decreased 14.1 and 15.6 per cent, respectively, reflecting the soft dynamic of the Colombian market, the effect of Easter week in March and an impact of the price recovery strategy, which has been implemented gradually to reflect the rising import parity prices, as well as fuel and labour costs, according to Argos. 

The company forecasts low single-digit growth for cement in FY18 with projects related to the country's 4G infrastructure programme requiring around 0.2-0.3Mt. 4G project-related off-take is expected to peak in 2019-20.

In February Argos started using used tyres as alternative fuels at its Cartagena cement plant and received the environmental permit to dispose impregnated waste in the same plant. The company is on track with the calcined clay project at the Rioclaro cement plant, which will allow the reduction of the clinker-to-cement ratio, with a positive effect on operating and capital expenditure, and lower CO2 emissions. 

USA
Cement and ready-mix dispatches decreased 6.8 and 4.1 per cent, respectively, explained by heavy rainfalls in Texas and a long winter that affected the east coast of the US, particularly the operation in Martinsburg. As a result of weather conditions Argos operated 61 per cent of workable days during the quarter, compared with 71 per cent in 1Q17.

Argos still hopes to see benefits come through quickly over the improvement in environmental permitting procedures for infrastructure projects in the USA, for which permitting lead times are expected to fall from 10 years to just two on infrastructure projects in the USA. As of March, housing starts were also up by 11 per cent YoY and new home sales rose by four per cent MoM.

The view for the cement and ready-mix market for the rest of the year remains positive, mainly boosted by the residential segment, which is expected to continue gaining momentum, supported by the solid fundamentals of the country. Ready-mix volumes rose by 10 per cent in the south-central area during April and Houston saw double-digit growth in April. 

Caribbean and Central America
The positive performance of the Dominican Republic and Haiti markets helped Argos to increase its sales volumes in these countries by nine and 24 per cent, respectively, while sales in Honduras remained stable. Clinker exports and trading increased by 24 per cent.

In Panama the market outlook continues to be promising, taking into account the fiscal situation, the expected economic growth and the pipeline of infrastructure projects for 2018, reports Argos.

In Honduras, following the political stabilisation after the 2017 elections, the perspective is positive, supported by the country's economic growth, boosted mainly by infrastructure projects.

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