Cementos Argos. Results 1Q17. Martinsburg plant, USA 1

Transcription

1 Cementos Argos Results 1Q17 Martinsburg plant, USA 1

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 1Q17 Highlights A quarter of firsts: 1 st large-scale pouring of RMC in the Flandes bridge gives a flag start to 4G project dispatches (Honda- Puerto Salgar) 1 st complete quarter consolidating Martinsburg's operation: Argos becomes the 4th largest cement producer in the US with a privileged footprint in fast growing states Approval to distribute a dividend of COP 240 per share, +20% vs 2015 in Argos s Annual General Assembly Completion of the divestment of our position in Bancolombia as part of our BEST program, between 4Q16 and 1Q17 Proceeds USD 172M 1 st large-scale pouring of RMC in the Flandes bridge 3

4 Co-processing in Rioclaro Plant, Colombia 1 Consolidated Results

5 1 1Q17: US region, our main division in terms of revenues 1Q Var Key Figures Revenues COP Bn 2,213 2, % EBITDA COP Bn % EBITDA margin % 19.2% 13.2% Net Income COP Bn n.a Net Margin % 4.5% -2.2% n.a Challenging quarter, offset by a positive outlook and focus on accelerating our BEST program Upward trend in cement dispatches and revenues in the US despite difficult weather conditions Signs of improvement in Colombian volumes with market share gain Optimization of our working capital needs Commitment to accelerate the implementation of BEST program in Colombia Reduction of cash cost by USD 3 / MT, 50% of total goal since June 2016 Reduction of 6.8% in SG&A during 1Q17, even with higher cement volume sold Additional savings in costs and expenses of COP 120 bn budgeted for Colombia for FY17 Consolidated margins per segment 1Q17: Cement: 21%, RMC: 2.4% Cartagena Plant 5

6 1 Consolidated volume: US volumes gaining importance 1Q YTD Var Var Cement 000 MT 3,447 3, % 3,447 3, % Colombia 000 MT 1,231 1, % 1,231 1, % USA 000 MT 935 1, % 935 1, % CCA * 000 MT 1,281 1, % 1,281 1, % RMC 000 m3 2,805 2, % 2,805 2, % Colombia 000 m % % USA 000 m3 1,902 1, % 1,902 1, % USA - SE * 000 m3 1,080 1, % 1,080 1, % USA - SC* 000 m % % CCA 000 m % % 1Q16 1Q17 Cement CCA CCA 11.5% 30% 37% Colombia Colombia 36% 35% USA 27% USA 35% *Definitions: CCA: Caribbean and Central American Region SE: South East Zone in USA SC: South Central Zone in USA RMC Colombia Colombia 29% USA - SE 30% USA - SE CCA 38% 42% 4% -6.0% CCA 4% USA - SC USA - SC 29% 24% 6

7 Privileged train connectivity at Martinsburg Plant, USA 2 USA Region 7

8 2 USA: Cement volumes growing above the market 1Q YTD Var Var Volumes Cement 000 MT 935 1, % 935 1, % RMC 000 m3 1,902 1, % 1,902 1, % Argos cement volumes +43.4%; excluding Martinsburg: +14% (whole US market +1,7% Feb YTD) +160 bps of market share in our states of influence Feb YTD (excluding Texas) PCA expects +3.3% cement demand growth in Texas for 2017 after 2 consecutive years of contraction -8.7% in RMC volumes: affected mainly in South Center (slow market and bad weather conditions in Houston, our most representative urban market) (Texas represents ~40% of our RMC volumes in the US) 43% of total business days in Houston were workable days (73% 1Q16) 1Q YTD Var Var Revenues USD M % % EBITDA USD M % % EBITDA margin % 10.1% 9.0% % 9.0% Price improvements in Florida and Virginia. Price increases announced for April in the rest of the regions and sticking 9.6% alternative fuels substitution Martinsburg acquisition increased our seasonality: 90% of FY17 EBITDA budgeted for the 2Q to 4Q Decrease in EBITDA margin explained by: Lower RMC volumes with a direct impact on operational leverage (>75% fixed costs in the 1Q17) Seasonality in the northern region affected Martinsburg`s EBITDA margin. Most maintenances completed in 1Q17. Margins per segment 1Q17: Cement: 16.7%, RMC: 1.9% 8

9 % 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% MT USA: Residential recovery and infrastructure catalyst to drive market to normalization Imports Production Ut Rate 1 Residential sector: main driver for cement demand recovery Housing inventories & months of turnover (2006-Feb 17): 92% 98% 98% 97% 95% 92% 84% Past Pre-crisis 63% 62% 61% 67% 69% 77% Present Recovering market 80% 79% ,500 4,000 3,500 3,000 2,500 2,000 1,500 1, % unemployment drives construction spending +8.2% residential, +8.7% non-res (QTD) 12 SMA (# US Home Inventories) SMA (Total months of supply FRED) Housing Inventories in minimum levels, increasing home prices +6% Cement consumption: 120 M MT Utilization rate: >95% Imports 28% of demand Future 1 Normalized market 1. PCA Estimates Source: Bloomberg, PCA, Argos estimates Cement consumption: 92 M MT Utilization rate: 79% Imports 14.5% of demand Cement consumption: 118 M MT With fixed supply (~110 MTA), Imports +20% of demand 95% of the ports owned by local producers (PCA), Argos has a privileged position with 10 ports Optimal utilization rate >85% 2 Infrastructure plans materializing: future catalyst for demand Florida: First state to release a detailed infra plan. Infrastructure Plan : Fighting for Florida s Future USD 10.8 bn Highway projects #1 #2 Our cement dispatches Our RMC sales +30% Florida s yearly construction spending 50% of total budget 9

10 Rioclaro plant, Colombia 3 Colombian Region 10

11 3 Colombia: Regaining market share with commercial strategy and strong value proposition 1Q YTD Var Var Volumes Cement 000 MT 1,231 1, % 1,231 1, % RMC 000 m % % Industry cement volumes 1Q %, Argos market share +320 bps +490 bps in central region and +340 bps northern region Bagged cement: price and commercial strategy allowed us to gain +520 bps of market share Market +8.7% in northwestern region Cement imports reduced by 40% Y-o-Y RMC volumes 2.3% while market -14.2% (Feb YTD), allowing us to gain +160 bps of market share (Feb YTD) 1Q YTD Var Var Key Figures Revenues COP Bn % % EBITDA COP Bn % % EBITDA margin % 30.7% 13.7% -1, % 13.7% -1,698.4 Revenues and EBITDA impacted by price dynamics due to market situation EBITDA affected by maintenance and ~COP 15 bn of non-recurring expenses (mainly severance payments from BEST program) Normalized EBITDA margin: 16.3% BEST program achievements since implementation: Reduction of USD 3 in our cash cost per MT since june-2016 (Goal: USD 6/MT for YE17) +7% of alternative fuels usage in the 2 nd kiln of Riclaro plant and ongoing project in Cartagena to start in 3Q17 Additional savings efforts of COP 120 bn will help reach budgeted EBITDA of COP 490 bn for 2017 Margins per segment 1Q17: Cement: 14.4%, RMC: 7.6% BEST efforts reflected in RMC EBITDA margin (+250 bps vs 1Q16) 11

12 3 Colombia: Our backlog supports positive outlook 70% of our RMC volume for 2017 is already committed to: 1 Housing Sector 2 Commercial sector 100% of all the malls to be built in Infrastructure Housing Sector- Examples Ciudad Verde Location: Soacha, Cundinamarca Description: 328 Ha, 49.5k house units, 3 schools, 2 malls and 1 hospital Commercial sector - Examples Mall El Edén Biggest mall to be built in the country Location: Bogotá, Cundinamarca Description: 315 k m 2 to be built with more than 330 shops Pionono Condominio Club Location: Sopó, Cundinamarca Description: 20 Ha with 2,500 apartments, a mall, office areas and hotel Mall Primavera Biggest mall in Medellín, Antioquia Description: 150 k m 2 12

13 3 Colombia: infrastructure is finally a reality 3 Infrastructure: Argos, the indisputable leader of awarded functional units of the 4G Program Total FU FU Aw arded Cement FU aw arded to Argos Argos Market Share FU Aw arded RMC FU Aw arded to Argos Argos Market Share Flandes bridge 1 st Wave % % 2 nd Wave % % 3 rd Wave 9 Public works % % Private Iniciative PPP's % % Total % % *FU= Functional Unit: Each project is divided into smaller separate segments, between 4-6, called functional units. Each functional unit, upon completion, can be used by traffic Flandes bridge Important milestone 1 st large scale pouring of RMC (~1.7 k m 3 during 3 days) to the Flandes bridge of the Honda-Puerto Salgar project of the 1 st wave. Total ready-mix consumption of 23 k m 3. 2 nd FU in project Honda-Puerto Salgar Bridge over the Magdalena River between Mompox and Magangué Pouring of microcement to Tunel de Oriente 13

14 Honduras plant 4 CCA Region 14

15 4 CCA: Our largest contributor in terms of EBITDA 1Q YTD Var Var 14% Volumes Cement 12% Total Cement 000 MT 1,281 1, % 1,281 Volume 1, % Local markets 000 MT % % 8.6% 1Q17 Trading and Exports 000 MT % % RMC 000 m % % 9% 20% 10% 22% Panama Honduras Haiti Dom.Rep. Others Exports Trading Cement dispatches excluding the effect of the new cement plant in Puerto Rico: +4.0% Cement dispatches in Honduras (+20%), Panama eliminating the canal-base effect (+2%) and the Eastern Caribbean Operations (+28%) Opportunistic shipping explains the variability of trading operations 1Q YTD Var Var Revenues USD M % % EBITDA USD M % % EBITDA margin % 35.3% 31.4% % 31.4% EBITDA margin above 30% for a region with 6 grinding stations and only 2 integrated plants: Cement margin: 34.7% Normalized margin: 31.9%, eliminating the effect of Puerto Rican acquisition Honduras: Operational efficiencies: energetic consumption -460 bps, clinker to cement ratio: -50 bps Panama: Operational efficiencies: fixed costs 11%/MT, variable costs -4%/MT 15

16 4 Honduras and Panama: attractive pipeline of projects for 2017 Honduras Panama Public core investments for 2017: Public core investments for 2017: Public Projects USD 90 M Private projects USD 1,100 M Metro USD 660 M Housing USD 320 M Free Trade Zone USD 230 M Tegucigalpa USD 60 M San Pedro de Sula USD 50 M Education USD 180 M Roads USD 115 M Sewerage USD 95 M USD 1.3 bn Investments* USD 2.7 bn Investments* Construction GDP expected to grow 6%-6.3% in 2017 (Source: Central Bank) +240 bps above the total GDP growth for 2017E (Source: Central Bank) Construction GDP to grow ~5.6% in 2017 (Source: Contraloría) +50 bps above the total GDP growth for 2017E (Source: IMF) Highlights Honduras has regained its credibility internationally: Inter-American Development Bank increased lines of credits by 88% (USD 632 M) World Bank approved additional resources for USD 310 M Highlights Creation of a high level commission to boost the construction sector Feb YTD: +17% in toll revenues generated by the canal *Source: RealRisk Report 16

17 Bridge Juan Manuel Galvez, Tegucigalpa, Honduras 5 Balance Sheet 17

18 March 16 April 16 May 16 June 16 July 16 Aug 16 Sept 16 Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 March 17 5 Strong balance sheet and healthy maturity profile Net Debt / (EBITDA + Dividends) EBITDA / Financial expenses Increasing leverage reflects Martinsburg acquisition and seasonality Ongoing divestment plan will recover ratios to target levels of 3.5x YE17 6.0x 5.9x 5.0x 4.2x 4.4x 3.9x 3.8x 3.8x 4.0x 3.2x 3.5x 3.8x 3.9x 3.7x 1.9x 3.0x March 2017 Note: Net Debt / (EBITDA + Dividends) calculated with an EBITDA pro-forma of Martinsburg Currency mix Total debt: USD 2,439 M Consolidated cost of debt ST; 40% COP; 30% 11.3% 11.5% 12.0% 12.2% 12.2% 12.6% 13.0% 13.0% 12.3% 11.5% 11.4% 10.9% 10.4% LT; 60% USD; 70% 2.7% 2.7% 2.8% 2.8% 2.9% 2.9% 3.0% 3.0% 3.0% 2.6% 2.6% 2.6% 2.7% COP USD * FX rate as of March 31 st, 2017: COP 2,880.24/ USD Note: Since 2Q15, for Net debt to EBITDA + Dividends ratio, Net debt and EBITDA are calculated with the same FX closing rate 18

19 5 Strong balance sheet and healthy maturity profile debt as of March 31 st, 2017 Short term: USD 970 M April 17 May 17 June 17 July 17 Aug 17 Sept 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 March 18 Bank Loans Bonds Long term: USD 1,469 M Bank Loans Bonds 19

20 5 Argos 2017 outlook Consolidated EBITDA Guidance FY17: ~COP tn Expected CAPEX FY17: ~USD M ~ USD M Maintenance ~ USD 90 M Commitments (Sogamoso) ~ USD 40 M Strategic USA: Continuous recovery of market driven by residential sector and positive infrastructure for 2018 PCA estimates low single-digit growth for our markets EBITDA guidance: USD M Colombia: Construction sector, main driver for economic growth Dispatches for 4G projects to commence in 2H17 Low single-digit growth for cement market CCA: Stable growth for cement market driving results Honduras and Panama will continue levering on positive fiscal fundamentals to promote infrastructure Strategic Focus BEST: Focus to reduce identified operational and administrative gaps in comparison to our competitors Comprehensive review of corporate structure and headcount Ongoing divestment plan to go back to normalized Net Debt to EBITDA + dividends of 3.2x-3.5x Continue with our focus on increasing usage of alternative fuels: Project commenced in Cartagena and Newberry plants Reduce clinker-to-cement ratio with light technologies to expand our total capacity by 1 M MT Initial goal: reduce the cost per ton by USD 6 /MT in Colombia Martinsburg Expected to achieve ~USD 8 M/year in synergies from logistical, operational and administrative opportunities Colombian market Strengthen our commercial strategy to improve our leadership position (Go to Market) 20

21 Reforestation of a Sogamoso quarry, Colombia 6 Appendix 21

22 6 Summary per regional division / other businesses Revenues EBITDA 1Q16 1Q17 Var 1Q16 Mgn (%) 1Q17 Mgn (%) Var COP Bn Colombia USA CCA Subtotal Corporate Other Businesses Consolidated Results % % % % 1,092 1, % % % % % % % % 2,213 2, % % % % NA % NA % 2,213 2, % % % % USD M Colombia USA CCA Corporate Other Businesses Consolidated Results % % % % % % % % % % % % NA % NA % % % % % 22

23 6 Operating profit and EBITDA (COP and USD) 1Q Var Key Figures Revenues COP Bn 2,213 2, % 2,213 2,0 COGS & SG&A COP Bn 1,951 1, % 1,951 1,9 Operating Profit COP Bn % EBITDA COP Bn % EBITDA Margin % 19.2% 13.2% % 13. Revenues USD M % COGS & SG&A USD M % Operating Profit USD M % 80 2 EBITDA USD M % EBITDA Margin % 19.2% 13.2% %

24 6 Consolidated Cash Flow (COP Bn) Cash Flow at Jan Cash EBITDA +252 Cash flow (COP Mill) Total Net Op. Working Capital Maintenance CAPEX Profitability CAPEX EBITDA 274,030 (+) No Cash Adjustments (18,052) Cash EBITDA 251,844 (+) Net Op. Working Capital (56,324) (-) Maintenance CAPEX 133,773 (-) Profitability CAPEX 50,536 Taxes -42 (-) Taxes 42,493 Net Financial Expenses Net Dividends Net Other Non-Operating Net Financial Operations Total Free Cash Flow (31,282) Financial Cash Flow (+) Net Finacial Expenses (90,700) (-) Net Dividends (63,051) (+) Net Other Non-Operating (7,134) (+) Net Financial Operations (120,299) (+) Divestments 278,822 (+) Acquisitions (12,501) (+) Exchange rate effect - Divestments +279 Total Financial Cash Flow (14,863) Total Cash Flow for the Period (46,145) Acquisitions -13 (+) Initial Cash Flow 582,893 Exchange rate effect +1 (+) Exchange rate effect 1,121 Final Cash Flow 537,868 Cash Flow at March

25 6 Investment portfolio improves Argos financial flexibility Company % Stake Price per Share (COP) Value (COP million) Value (USD million) Grupo Sura 6.0% * 39,080 1,101, Cartón de Colombia 2.1% 5,300 12,237 4 Total 1,113, * Argos holds a stake of the common shares. 1% 99% Grupo Sura Cartón Colombia Note: FX Rate as of March 31 st, 2017: COP 2, / USD 25

26 Ready-mix textures CONTACT INFORMATION IR TEAM MANUELA RAMIREZ CATALINA RICAURTE 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.