Cementos Argos S.A Corporate presentation

Transcription

1 Cementos Argos S.A Corporate presentation 2016

2 DISCLAIMER This document contains forward-looking statements and information related to Cementos Argos S.A. and its subsidiaries (together referred to as Argos ) that are based on the knowledge of current facts, expectations and projections, circumstances and assumptions of future events. Various factors may cause Argos actual future results, performance or accomplishments to differ from those expressed or assumed herein. If an unexpected situation presents itself or if any of the premises or of the company s estimations turn out to be incorrect, future results may differ significantly from the ones that are mentioned herein. The forward-looking statements are made to date and Argos does not assume any obligation to update said statements in the future as a result of new information, future events or any other factors. Argos Innovation Center

3 Cementos Argos at A Glance Leading pure cement player in the United States, Colombia, Caribbean & Central America Installed capacity: Cement 21 M tons RMC 18 M m3 5-year CAGR of 21% in revenues and 23% in EBITDA Included in the Dow Jones Global and Emerging Markets Sustainability Index, for 3 consecutive years Key Figures (3M 2016 ) Revenues by Geography Revenues by Product EBITDA by Geography Others 0% Colombia 30% RMC 46% USA 23% Colombia 43% USA 49% CCA 21% Cement 54% CCA 34% COP2,213 M (USD678 M) COP425 M (USD130 M) 3

4 Argos: Leading Growing Multinational Cement Company Focused on Value Creation 1 #1 or #2 Positions in Key Emerging and Developed Interconnected Markets in the Americas 2 Flexible Operations with Vertical Integration and Extensive Logistics Network Operating in Countries with Significant Growth Potential Strategic Investments Further Enhance Efficiency & Competitiveness Track Record of Successfully Implementing Disciplined Growth Strategy Healthy Financial Position and Flexibility to Pursue Growth 7 Focus on Innovation and Sustainability Cartagena Plant, Colombia 4

5 1 #1 or #2 Positions in Key Emerging and Developed Interconnected Markets in the Americas Mixer trucks in the US

6 1 #1 or #2 Positions in Key Emerging and Developed Interconnected Markets in the Americas USA 49% of 3M16 revenues #2 RMC producer in US #2 cement producer in Southeast Capacity: 7.7 M tons cement & 13 M m 3 RMC ~36% of Argos cement capacity ~74% of Argos RMC capacity CCA 21% of 3M16 revenues 1 out of 2 producers 47% of seaborne trade Capacity: 4.1 M tons cement & 0.9 M m 3 RMC ~19% of Argos cement capacity ~5% of Argos RMC capacity Colombia 30% of 3M16 revenues #1 player Capacity: 9.5 M tons cement & 3.8 M m 3 RMC ~45% of Argos cement capacity ~22% of Argos RMC capacity Cement plants RMC areas Grinding facilities Port/Terminals Cementos Argos S.A. has a presence in Venezuela through its subsidiary Corporación de Cemento Andino C.A., which is currently a party to a legal proceeding regarding the expropriation by the Venezuelan government of its plant located in the state of Trujillo, Venezuela. Any compensation to which Cementos Argos S.A. or its subsidiary Compañía de Cemento Andino C.A. may be entitled to is subject to the decisions of the relevant courts in the Bolivarian Republic of Venezuela. Argos has filed a claim for its investment in that country. Argos maintains the claim for its investment in that country. 6

7 USA Regional Division Demand recovery driving operating leverage and EBITDA margin normalization Revenues 49% Of 3M16 EBITDA Cement Plants RMC Areas Grinding Facilities Ports/Terminals 23% Of 3M16 Installed capacity 13.0M m 3 Operating Leverage Amid Improving Environment #2 RMC player country-wide (#1 or 2 in most areas served) #2 cement producer in the Southeast 7.7M tons Newberry Plant, Florida Strategically located plants close to high growth and demand centers Cement shipments up 15.5% nationwide in 1T16, states like South Carolina (+43.4%), North Carolina (+41.2%), Georgia (+24.6%) and Florida (+22.2%) grew above the country average. Vertically integrated operations Comprehensive logistics network (sea, land and railway) enhance vertical integration Focus on innovation: sales of VASP +16% in 15 7

8 Colombia Regional Division Strategically located plants with nationwide coverage offer a strong competitive advantage Revenues 30% Of 3M16 EBITDA 43% Installed capacity 3.8M m 3 Best Positioned to Capture the Infrastructure and Housing Growth #1 cement and RMC player with market shares 46% and 44%, respectively (as of 15) Cement Plants RMC Areas Grinding Facilities Ports/Terminals Of 3M16 9.5M tons Sogamoso Plant, Colombia Sole producer with nationwide network serving all high-growth demand centers Vertically integrated operations, with ~80% energy requirements generated in-house Tailor-made model for each customer segment: Retail: Brand recognition, differentiated service and extensive distribution network Infrastructure & Industrial: Customized solutions, specialized technical assistance, lead time optimization, on-site labs and RMC mobile plants to serve remote areas Ability to use low cost production and dedicated port facilities for exports Improved competitive dynamics driven by FX depreciation Focus on innovation: sales of VASP +14% in

9 Caribbean and Central America Regional Division High long term growth prospects and strategic interconnection of all regions Revenues 21% Of 3M16 EBITDA 34% Of 3M16 Profitable and Growing Interconnectivity 1 of 2 leading cement producers Installed capacity 4.1M tons 0.9M m 3 Operations concentrated in Honduras and Panama, with 45% and 52% market share (YE15) Only cement producer in Haiti, Suriname and French Guiana; presence in Dominican Republic Highly efficient capital allocation through scalable network Controls 47% of the cement and clinker seaborne trade market Logistics platform, ports and fleet of vessels provides unparalleled access to mainland and island markets High levels of cement integration through own plants and logistic interconnectivity RMC plant in Panama Cement Plants RMC Areas Grinding Facilities Ports/Terminals 9

10 2 Flexible Operations with Vertical Integration and Extensive Logistics Network Newberry Plant, Florida, USA

11 Broad logistics and distribution network provides flexibility from strategically located assets Well established distribution network Roberta Newberry Harleyville One Interconnected Region USA plants & logistics network provide additional flexibility Efficient cement plants with access to rail and sea Potential to supply Caribbean & Central America via ports State of the art Cartagena plant, wellpositioned and flexible to serve domestic and export markets Efficient dry line, with cement capacity of 2.3 M MTPA Low cost limestone reserves & dedicated port Fully automated dispatch facility Favorable tax rates and tariff exemptions until Ports / Terminals 13 Cement Plants Cartagena 376 RMX Plants Mixers ~2,600 Cement Plants Ports/Terminals 9 Grinding Stations 69 Dispatch facilities & warehouses Currently supplied from Cartagena Potential supply 11

12 .. leveraging vertically integrated operations Strategic resource Geographical integration to supply our needs according to our market size Geographical integration that guarantees market coverage Competitive advantage in markets with high self-construction Limestone Clinker Aggregates Transport & logistics Energy Cement RMC ~25% of the production cost ~80% of the energy in Colombia is self generated USA and Honduras ~20% of alternative fuels 2nd in installed capacity in the Southeast (USA) Privileged location, distributed throughout Colombia Access to the largest market in Honduras 376 plants, 2,586 mixers, 18M m3 of installed capacity Access to infrastructure projects in the region 12

13 3 Operating in Countries with Significant Growth Potential Mixer trucks in USA

14 USA: Rapidly recovering cement market USA demand per capita of 278 tons still below pre-bubble levels of 433 tons Argos is well-positioned to satisfy import requirements as demand normalizes and expand market share USA cement market is poised for rapid recovery USA installed capacity ~ 110 M MTPA Cement Plants Grinding Facilities Ports/Terminals E 2017E 2018E 2019E 2020E Residential sector maintains positive performance Existing home sales of March 2016, Totaling 5.3 million units Housing starts are back to 2007 levels with an upward trend in the midterm USA Estados Argos 14

15 Colombia: Strong infrastructure and housing deficits Large infrastructure deficit Residential and commercial construction deficit Ranking 2014/15 Spain 13 Panama Chile Mexico Suriname Uruguay Costa Rica Peru Honduras Colombia Nicaragua Brazil Argentina Venezuela estimated Housing deficit (units) Quantitative deficit: 0.6 M Qualitative deficit: 1.1 M Commercial need Emerging middle class Emerging cities Offices deficit Growing & young population E +60% below 35 years old M inhabitants Low cement consumption per capita Latin America cement consumption per capita (Kg / capita) Panama Suriname Dom. Rep Bolivia Ecuador Brazil Fr. Guiana Peru Mexico Florida Costa Rica Uruguay Argentina Chile Venezuela Colombia España Paraguay Guatemala Honduras Puerto Rico Countries where Argos has operations Source: Global Competitiveness Report (analysis of 144 countries) / ANIF, Infrastructure Commission, DNP, Ministry of Transportation, DANE, Argos calculations, The Global Cement Report Haiti El Nicaragua Salvador 15

16 addressed by government & private investments are expected to drive strong growth through 2024 Construction GDP %, above national GDP (3.1%) 4G Concession Program: ~COP47 Tn investment in infrastructure projects (moving ahead, more expected) Phase 1: 9 projects awarded (COP11.4 Tn) Phase 2: 9 projects awarded (COP12 Tn) 8 with financial closing Argos has signed 3 projects Phase 3: 2 projects in pre-bidding process (COP2.5 Tn) Cement dispatches expected to begin 2H16 with demand peaking Public private initiatives (PPPs) complement government programs 297 projects presented without public funding requirements: 9 approved and 7 granted in 2015, totaling ~COP7 Tn in CAPEX 30 in feasibility 146 in pre-feasibility 93 rejected Social urban housing initiatives Argos: best positioned to capture the opportunity 65% share of free houses program in 15 Strong presence in emerging cities Full coverage of the country 400,000 houses to be built in ,000 free houses Remainder subsidized Source: ANIF, Infrastructure Commission, DNP, Ministry of Transportation

17 Argos plants, best positioned to serve phase I and II of 4G concession program Government funding for 12 projects already secured Phase I Capex Kms 1 Conexión Pacifico 2 FC Honda - Girardot - Puerto Salgar FC Conexión Pacífico 1 FC Cartagena - Barranquilla FC Conexión Pacifico 3 FC Perimetral del Oriente de Cundinamarca FC Autopistas Conexión Norte FC Mulaló Loboguerrero Autopista Rio Magdalena 2 FC Total - COP Tn ,236 8 projects with financial closings FC 3 projects in pre-construction 310 bridges 29 tunnels Phase II Capex Kms 1 Pasto - Rumichaca Villavicencio - Yopal Puerta de Hierro - Palmar de Varela Santana - Mocoa - Neiva Santander de Quilichao - Popayán Bucaramanga - Barrancabermeja Transversal del Sisga Autopista al Mar Autopista al Mar Total - COP Tn ,844 Argos plants 2 projects with building contracts signed 7 projects in pre-construction 253 bridges 58 tunnels 17

18 Private public partnerships driving infrastructure growth with minor public funding requirements 6 4 COP11.2 Tn* (USD4.8 Bn) 9 privately funded road infrastructure projects approved and 7 awarded in projects awarded = COP7 Tn* Argos plants Public Private Partnership Capex Kms 1 Ibagué - Cajamarca Chirajara - Villavicencio Malla vial del Meta Cesar Guajira Cambao Manizales Antioquia Bolívar Tercer Carril Bgt Girardot Neiva - Girardot Vías del Nus Total - COP Tn ,235 APP Private Initiative 7 projects awarded; 5 on pre-construction 2 projects under study and award * 1 billion = 1,000,000,000-1 trillion = 1,000,000,000,000 18

19 +400,000 social houses to be built over the next 4 years Argos is best positioned to capture the opportunity: 65% share of free houses program in 15 Strong presence in high growth emerging cities Pipe 2 program: will add 61k social housing units (VIS) in 2016 and 69k in 2017 Free housing: 100k new homes to be built in municipalities with less than 30k inhabitants Mi Casa Ya: 130k middle income families to benefit from social housing in intermediate cities Rate subsidies: 130k additional interest rate subsidies for middle income families TACS Rates Savings: Access to new homes without down payment ( Tasa al Ahorro Construyendo Sociedad ) VIS in Colombia 19

20 CCA: Positive market dynamics with significant infrastructure projects underway USA recovery driving growth in remittances across the region (Honduras +10% YTD June/15) Positive environment driven by government-sponsored infrastructure programs Significant benefits in lower oil prices as all countries are net importers of energy Panama: major infrastructure works Honduras: government initiatives USD900 M under execution in several road projects +25,000 social houses over the next 5 years Multiple canal side works: bridges, ports, hotels Inauguration of Canal expansion by in mid-year, expected to bring additional revenues of ~USD1,500 M, up 20% Y/Y Argos RMC dispatches for the 2nd Metro line started in Feb/2016 (40 months of execution and USD500 M in CAPEX) Increase in the budget for civil works led by the public sector Residential and commercial sectors expected to recover by 2016/17 Home subsidies boosting residential sector: subsidies ~USD2,000-3,500/family, lower interest rates and contractor financing Foreign direct investment promotion to boost infrastructure sector Economic activity keeps the upward trend Monthly economic activity index Nov/ Construction sector back to positive trend Country GDP vs Construction GDP 3Q15 Y/Y T14 2T14 3T14 4T T15 2T15 3T /13 05/13 09/13 01/14 05/14 09/14 01/15 05/15 09/15 PIB Nacional Country GDP PIB construcción Construction GDP 20

21 4 Undertaking Strategic Investments to Further Enhance Efficiency and Competitiveness Argos Innovation Center

22 4 Undertaking Strategic Investments to Further Enhance Efficiency and Competitiveness Organizational Excellence Program Initiatives Intensify in the use of alternative fuels Increase use the % of additives in the production of cement and RMC Optimize capex allocation Implement cost reduction program Shared Service Center Use of alternative fuels in the USA Regional Division 22

23 5 Track Record of Successfully Implementing Disciplined Growth Strategy

24 Disciplined growth strategy driving EBITDA growth and value creation Revenues (COP Bn) EBITDA (COP Bn) 3,023 3,668 4,380 4,968 5,817 7,912 1,653 2,213 1,600 1,400 1,200 1, EBITDA % EBITDA Margin % 18.1% % 16.6% 1, % 29.0% 27.0% 25.0% 23.0% % 19.0% 17.0% USD M 1,710 2,075 2,437 2,656 2,833 2,881 1Q Q 20163Q 4Q USD M % Q Q2016 3Q 4Q Note: figures in COLGAAP, figures in IFRS Completed organic growth Examples: Cartagena expansion USD 560 M Rioclaro expansion USD 93 M Colombia pow er plants USD 68 M Panama grinding expansion USD 65 M Harleyville mill USD 58 M Cartagena dispatch center USD 35 M White cement conversion USD 23 M Oil w ell cement development USD 1 M + Acquisitions Examples: Puerto Rico USD 18 M Lafarge CIGU USD 69 M Vulcan FL USD 720 M Lafarge Honduras USD 305 M Lafarge USA USD 760 M Holcim Caribbean USD 157 M RMCC USA USD 243 M Cemento Andino USD 192 M SSC USA USD 245 M + Focus & reorganization Examples: 2005: Merge of 8 cement companies in Colombia 2012: Spin-off of non core assets + USD 3.6 Bn Funded & invested during the last 10 years 21% CAGR Revenues % CAGR EBITDA

25 Disciplined growth strategy driving EBITDA expansion and value creation Acquisitions for +USD1.2 Tn Since 2013 New assets 2 Cement plants 2.6 M tons +25% Cement volume +19% RMC volume RMC installed capacity 3.3 M m 3 3 Grinding facilities 2.4 M tons 4 Ports Honduras-Lafarge Investment 231 M (53% participation) New assets: Cement 1.0 M tons plant Grinding facility 0.3 M m 3 Florida, USA Vulcan Cement Investment USD 720M (Asset acquisition) New assets: Cement plant Grinding facility 1.6 M tons 1.9 M tons RMC 3.3 M m 3 Blocks Port facility 109 M units/year 2 Puerto Rico Investment USD18.3 M (60% participation) New assets: Port French Guiana Lafarge Investment 65 M (Asset acquisition) New assets: Grinding 0.2 M tons facility Port concession Cement plant RMC area Port Grinding facility 25

26 6 Healthy Financial Position and Flexibility to Pursue Growth Harleyville Plant, USA

27 Strong balance sheet and healthy maturity profile Strong balance sheet with solid debt ratios, particularly in the context of a US low-cycle Net Debt / (EBITDA + Dividends) 4.2x 3.7x 3.9x 3.6x 3.5x 3.7x 3.8x 3.0x 2.3x 2.3x EBITDA / Financial expenses 6.0x 5.9x 5.0x 5.0x 3.8x 3.2x 3.1x 1.9x March 2016 with an adequate currency mix Total debt: USD 1,853 M and a strong debt maturity profile Total debt: USD 1,853 M USD; 61% COP; 39% * FX rate as of March 31st, 2015: COP 3, / USD Bank Loans Bonds Infraestructure leasing 27

28 together with investment portfolio provide financial flexibility to grow organically and pursue strategic acquisitions Company % Stake Price per Share (COP) Value (COP million)* Value (USD million)* Grupo Suramericana 6.0% 39,900 1,124, Bancolombia 4.0% 24, , Cartón Colombia 2.1% 4,520 10,436 3 Inorganic growth strategy Defined core geography Undertaking Strategic Investments to Further Enhance Efficiency and Competitiveness Total 1,639, % 1% 69% Synergies targeted from: Vertical integration Market growth Cost optimization Grupo Sura Bancolombia Cartón Colombia 28

29 7 Focus on Innovation and Sustainability Argos Innovation Center, Colombia

30 Innovation Pillar for our sustainable growth +10% of 15 revenues from innovation Innovation management Research and development Alternative resources New businesses Technological routes for the future New materials Safe, clean and final disposals Use of resources Disposal of used tires Corporate entrepreneurship leveraged in the core business Cement and applications Development of innovation as an organizational competence Products with less consumption and emissions Alternative fuels and raw material cost savings Income from disposals Innovation: focus on people Intellectual property 20 7 Patent applications 1 Patent VASP in the portfolio Argos Innovation Center Preservation of nonrenewable fossil fuels Greenhouse gases reduction Adequate waste management 30

31 Sustainability Policy Profitability + Social development + Environmental impact 2015: Included for 3rd consecutive year as Received Silver Class distinction for 3rd consecutive year Argos is 1 of 3 cement companies that are part of the Global Index Siam Cement Group Argos is members of: Argos leading in Conduct, compliance and transparency; Risk management; Supply chain management; Tax strategy; Human Capital development; Social reporting 6 Colombian companies included in the Global Index and 9 Colombian companies included in the EM Market Index Environment Sustainability culture Communities OHSA Prevent, mitigate, correct and compensate the impacts of our operations Promote the culture of sustainability in all stakeholders Encourage the adoption of best practices Investment in communities COP ~79k M Maintaining good relations and being an agent that contributes to local development Safety: Industry challenge 45% reduction in the incident rate in 2015 Defining 2020 goals 31

32 Financial Highlights Sogamoso Plant, Colombia

33 Consolidated cement and RMC volume growth Cement volume 1 (mm MTPA) ,447 CCA 37% Colombia 36% 3,238 USA 27% RMC volume (mm m 3 ) Q Q 3Q Q ,805 USA - SC 29% CCA 4% Colombia 29% 2,538 USA - SE 38% Q Q Q 4Q 33

34 result in strong revenue performance, which together with cost savings initiatives, Revenues (COP Bn) 7,912 3,668 4,380 4,968 5,817 2,213 USA 21% Others 0% Colombia 30% 3,023 1,653 CCA 49% USD M 1,710 2,075 2,437 2,656 2,833 2, Q 2Q 1T 3Q 4Q Operating Costs + SG&A as a % of Revenues) (COP Bn) 8,000 Cost + SG&A % Revenues 6, % 6,000 4,000 2,000 3,966 3,321 2,804 93% 91% 91% 4,387 5,024 88% 86% 88% 120% 110% 100% 90% 1,488 1, % USD M 1,586 1,879 2,207 2,346 2,453 2,535 1Q Q2016 3Q 4Q Note: figures in COLGAAP, figures in IFRS 34

35 drive operating leverage and efficiencies supporting EBITDA growth, as we continue to invest in the business EBITDA & EBITDA Margin (COP Bn) 1,600 1,400 1,200 1, EBITDA % EBITDA Margin % 18.1% % 16.6% 1, % 29.0% 27.0% 25.0% 23.0% 21.0% 19.0% 17.0% USA 34% CCA 23% Colombia 43% USD M % Q 2Q 3Q 4Q Capital investments to expand capacity and drive operating efficiencies (COP Bn) Strategic Maintenance Sogamoso Project Additional Capacity 2.3 M tons Investment USD 450 M USD M Note: figures in COLGAAP, figures in IFRS Commissioning date

36 In Summary: Why Argos? #1 or #2 Positions in Key Emerging and Developed Interconnected Markets in the Americas Flexible Operations with Vertical Integration and Extensive Logistics Network Operating in Countries with Significant Growth Potential Strategic Investments Further Enhance Efficiency & Competitiveness A Leading Growing Multinational Cement Company Focused on Value Creation 5 Track Record of Successfully Implementing Disciplined Growth Strategy 6 Healthy Financial Position and Flexibility to Pursue Growth 7 Focus on Innovation and Sustainability Cartagena Plant, Colombia 36

37 CONTACT INFORMATION IR TEAM GUSTAVO URIBE MANUELA RAMIREZ ANA CASTAÑO Permeable RMC This recognition, called Reconocimiento Emisores IR is given by the Colombian Stock Exchange, Bolsa de Valores de Colombia S.A. It is not a recognition that certifies the quality of registered stock, nor does it guarantee the solvency of the issuer.

38 Appendix Modern Art Museum, Medellin, Colombia

39 Colombia: Focus on excellence Volumes 1Q Cement 000 MT 1,484 1, % RMC 000 m % Cement dispatches down 17.1% vs. market decrease of -0.05%, reflection of price dynamics Lower volume growth in central region; expected to boost once 4G projects and Bogota s infrastructure plan start demanding cement RMX volume up 0.7% vs 3.4% as of February of total market Increase of residential construction offset by deceleration of civil works Key Figures 1Q Var Var Revenues COP M 658, ,985 7, % EBITDA COP M 191, ,659 12, % EBITDA margin % 29.1% 30.7% EBITDA margin grew 160 bps: Price improvements Tangible results of organizational excellence program Investments fully operational: Rioclaro plant and Cartagena dispatch center General improvements: standard of service over 95%, up 900 bps YoY, total caloric intake reduced 5% YoY, ~40% use of additives in Type 1 cement production, Strategic work plan in pursuit of efficiency including: energy matrix, additives and logistics 39

40 USA: better weather brightens up margins Var Volumes Cement 000 MT % RMC 000 m 3 1,631 1, % 1Q Double digit volume growth in both segments Strong volume by pent-up demand RMX with better weather grew 17% YoY 75% good days / business days during the period (70% below the 5 years average) 1Q Var Key Figures Revenues USD M % EBITDA USD M % EBITDA margin % 5.4% 10.1% EBITDA margins significantly up reflecting the US come back Record EBITDA up 140% YoY Double digit EBITDA margin reflects excellent results considering seasonal effects for 1 st quarter Margin +479 basis points higher lead by imports and our operating leverage 40

41 CCA: market leader in Honduras and Panama Volumes Cement 000 MT 1,119 1, % RMC 000 m % 1Q Var 14% cement volume growth led by: Eastern Caribbean operations (+53%), trading (+45%) and exports (+30%) Cement market leader in Honduras and Panama Panama s cement national market dropped -6%: Slow market recovery explained by delay in starting up of public projects and construction permits granting Positive perspective for YE 2016 driven by Government investments in infrastructure and social housing EBITDA margin above 30% proof of high return on capital and logistical interconnections Honduras: Record EBITDA margin above 55% in Honduras (March 2016) Results of the organizational excellence program: +10% reliability factor, -4% energy consumption, -300 bps in Clinker-to-cement ratio, +60 bps in use of alternative fuels, among others Panama: Operational costs down 2% 1Q Var Key Figures Revenues USD M % EBITDA USD M % EBITDA margin % 32.9% 35.3% Clinker-to-cement ratio improved by 400 bps 41

42 Cementos Argos S.A Corporate presentation 2016