GCC quintuples consolidated net income in 1Q18

Grupo Cementos Chihuahua (GCC) reported a 13.6 per cent YoY rise in net sales to US$188.7m in 1Q18. The Mexico-based cement producer saw its EBITDA rise by 40.6 per cent to US$45.9m during the first quarter and improved its EBITDA margin from 19.6 per cent in 1Q17 to 24.3 per cent in 1Q18. Consolidated net income more than quintupled YoY to US$11.3m from US$1.7m in 1Q17. An 18 per cent rise in Mexican sales and an 11.9 per cent increase in US sales were key drivers to the improved results.

In the US the company’s sales rose to US$133.2m and accounted for 71 per cent of GCC’s consolidated net sales. The strong growth mainly reflects higher cement sales volumes in Texas, New Mexico and Minnesota, said the company. US cement volumes were up 20.3 per cent, but concrete volumes fell 9.8 per cent, largely due to weather effects. Cement prices rose 2.8 per cent while concrete prices slipped 0.4 per cent. Oil well drilling, residential real estate and public sector construction were key growth markets.

Sales in Mexico accounted for 29 per cent of total sales and the company benefitted from a rise in cement and concrete prices, which saw an increase of 9.6 and 3.2 per cent, respectively. In addition, cement volumes edged up two per cent and ready-mix concrete volumes were up 4.8 per cent. Domestic sales were further supported by the appreciation of the Mexican peso against the US dollar. Growth was particularly robust in the housing, commercial, industrial and mining sectors.

Furthermore, GCC benefitted from a decrease in cost of sales, mainly due to operating leverage, higher prices, operating efficiencies and a fall in power costs in Mexico as well as slightly lower operating expenses at US$21.5m. Net financial expenses also decreased, by 24.7 per cent to US$11.1m. Income taxes totalled US$3.2m, compared to a tax credit of US$3.9m in 1Q17 resulting from a pretax loss in the prior-year period.