Argos sees challenges at home

Argos sees challenges at home
14 August 2017

Cementos Argos announced a net income of COP48bn (US$16m) for the second quarter of 2017 as the US and central America/Caribbean helped to mitigate challenging dynamics in its home market of Colombia. 

Revenues were down by 1.6 per cent YoY and EBITDA fell by 15.9 per cent YoY to COP367bn. The US was the main contributor to both revenues (54 per cent) and EBITDA (47 per cent).

Consolidated cement volumes increased by 17.9 per cent in the second quarter of 2017 to 4.1Mt.

“The positive results in the US and the Caribbean and Central America region, compensated the challenges that we are facing in the Colombian market. As of 30 of June, 73 per cent of our revenues and 77 per cent of the EBITDA were generated abroad, in dollars or related currencies. Additionally, we expect a better second half of the year in Colombia driven by dispatches to the 4G projects and a recovery in consumption driven by the reduction in interest rates,” the company said in a statement.

In the US cement dispatches grew 46.1 per cent and 5.5 per cent excluding the Martinsburg operation, well above the total US market growth (3.5 per cent 2Q17 through May). In the ready-mix business, volumes fell 8.4 per cent, given adverse weather in the southeast and difficult market conditions in the south-centre, mainly in Texas.

Argos has put in place a set of actions to improve profitability on the ready-mix business in Texas,
including a reduction in headcount, an adjustment to its structure, the optimisation of plants network
and a shift in focus from the commercial towards the residential sector.

Demand growth in the southeast is coming mainly from the residential sector. Nevertheless, infrastructure programmes such as the FAST ACT and the Florida`s infrastructure plan may become a mid-term catalyst for the industry.

In Colombia cement dispatches in 2Q17 increased by 6.9 per cent YoY, while the Colombian national statistics office (DANE) reported a 5.8 per cent drop in volumes for the industry. Imports continue to decline, with a 47 per cent reduction in cement and 26 per cent in clinker, recorded YtD. A 15.3 per cent decline in revenues is attributed to lower cement selling prices which reached the bottom during April and May 2017, the company noted.

In the Caribbean and central America regional division cement volumes increased 4.9 per cent and 1.3 per cent excluding the newly-acquired operation in Puerto Rico. The organic growth was driven by Honduras, the eastern Caribbean, and trading and exports while Panama posted stable volumes. In Honduras the construction sector continued posting an upward trend given the positive performance of the residential segment and the US$1.3trn infrastructure plan. In Panama there was an 18 per cent rise in toll revenues from the Canal expansion, boosting economic growth. An acceleration in the execution of infrastructure projects during the second half of the year is also expected.

Published under Cement News