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Cementos Argos reports all time-high quarterly revenues

Cementos Argos reports all time-high quarterly revenues: 2,9 billion pesos

 

  • Ready-mix volumes were favored by solid sales dynamics, especially in the United States and
    Colombia.
  • Record revenues were mainly leveraged by the company’s commercial strategy and by the
    higher volumes.
  • Argos began a pilot test for the use of calcined clay in the USA, which reafirms its commitment
    to reducing emissions.

 

Consolidated Results:

Argos, the cement company of Grupo Argos, presented its quarterly results, highlighting record revenues and strong demand for cement and ready-mix, mainly in the United States and Colombia, as well as stable operating results in an environment of high-cost inflation thanks to the success of its commercial strategyin all geographies, the flexibility of its fuel matrix and the partial hedging of fuel prices.


From April to June, the cement company generated revenues for 2.9 trillion pesos, 15.3% higher compared to the same months of the previous year. Also, it obtained an adjusted EBITDA* of close to COP 525 billion, 2.6% higher than the second quarter of 2021. Net income*** decreased compared to 2021 due to non-recurring operations of asset sales that were reflected in the results of the second quarter of 2021.


It is noteworthy that the adjusted volume* of Ready-Mix in the period rose 13.4% and reached 1.9 million cubic meters, while the adjusted volume of cement* stood at 4.2 million tons, representing a comparable growth of 6.2% if the trading business is excluded and a decrease of 4% in general.


In line with its commitment to sustainability and, specifically, to the reduction of emissions, the company began a pilot test for the use of calcined clay in the United States and expects to reach production of three million tons of clay per year in all of its geographies by 2030, which translates into the production of green cement and concrete.

 

«We are convinced of the great opportunity that lies ahead to lead the industry in sustainability and generate greater value for our shareholders and all stakeholders. The calcined clay pilot that we are starting in the USA is another important milestone in our roadmap to produce carbon-neutral concrete by 2050. The results of the second quarter were very positive both in terms of revenue growth and volumes; driven, mainly, by the solidity of demand in the United States and the good dynamics of the Colombian economy amidst a challenging situation of high inflation and increase in interest rates».

Juan Esteban Calle, CEO.

 

The company reafirms its consolidated EBITDA guidance for the year between 2.05 and 2.15 trillion pesos for the end of 2022, as well as a return on capital of around 10% for the same period.

 

Results Per Region
USA: During the second quarter, revenues in this country were USD 416 million, 7.5% higher than those registered in the same months of 2021. Adjusted EBITDA*, remained stable at USD 75 million, results achieved in part by the USD 11 million in savings derived from the fuels hedging strategy. It is worth noting that, in June, Argos achieved the highest monthly EBITDA recorded to date since the company has been present
in the country.


Regarding adjusted volumes, the company experienced strong demand across most of its operations. Therefore, dispatches of ready-mix rose 6.4% and totaled 1.2 million cubic meters, as did cement dispatches, which also increased 6.4% and totaled 1.7 million tons.


As for the market, positive conditions continue in the residential and commercial segments. Argos continues to monitor the evolution of
macroeconomic variables and their possible impact on operations, although it remains optimistic in the medium and long term regarding the already approved bipartisan infrastructure bill, which will translate into greater demand in the medium and long term.

 

Colombia: The strong market dynamics continued during the second quarter of the year, supported by the retail segment, residential construction, and infrastructure projects. In the country, Argos’ revenues grew 27.1%, reaching 678 billion pesos, and adjusted EBITDA** increased 12.7%, totaling COP 136 billion.


Continuing with the positive performance, concrete sales rose 25.1% and reached 656 thousand cubic meters, cement sales increased 13.3%, for a total of 1.5 million tons shipped from April to June.


In the country, housing sales and the start of residential projects continue to be a support of the market. In terms of infrastructure, projects such as the Bogotá Metro and 5G will bring significant demand in the coming years.

 

CCA: In the second quarter, revenues were USD 138 million, while adjusted EBITDA** closed at USD 32 million, 18.8% below the same period of the previous year, affected by the combination of lower volumes in Honduras and Haiti and the already known inflationary pressures.

In this region, shipments of concrete were positive, increasing 58.9% and stood at 71 thousand cubic meters. For its part, cement volumes reached 1 million tons, with an improvement in those of the local market with respect to the first quarter of the year and a lower dynamic on the trading business, which resulted in a decrease in shipments of 30% cement.

 

If this line is excluded, cement volumes fall 4.7%. Regarding these markets, the company remains cautiously
optimistic

 

Click here to see the key figures and volumes

 

* Consolidated Results and US Region: Adjusted EBITDA excludes: i) For 2Q22 a non-operational expense related to the listing process for COP 16.1 billion, equivalent to USD 4.1 million, ii) For 2Q21 EBITDA excludes COP 174 billion of the gain on sale of the Dallas divestiture, equivalent to USD 48.1 million, COP 1.5 billion generated by the Dallas operation, equivalent to USD 426 thousand, and COP 8.2 billion generated by the divested RMC operations in FL and NC, equivalent to USD 2.3 million.
Adjusted EBITDA Margin excludes: i) For 2Q22 a non-operational expense related to the listing process for COP 16.1 billion, equivalent to USD 4.1 million, ii) For 2Q21 EBITDA excludes COP 174 billion of the gain on sale of the Dallas divestiture, equivalent to USD 48.1 million.
Adjusted Ready-mix volumes for 2Q21 exclude 141k m3 sold by the divested Dallas operations and 115k m3 sold by the operations in FL and NC divested on 1Q22.
Cement volumes exclude since 3Q21 the product bought to third parties used to supply Argos’ operations of RMC in the US, particularly in Texas, to reflect better the degree of integrations of the operations.

For purposes of comparability, the adjusted figure for 2Q21 excludes 100k tons of cement purchased from third parties.
**Colombia and CCA Regions: Starting 2022, the exports division that was previously reported on the CCA region will be reported in the Colombian region. Total cement represents local market and export volumes. Adjusted EBITDA and EBITDA Margin include for 2Q21 COP 15.3 billion generated by the export division and exclude for CCA UDS 4.1 million generated by the export business.
***Net income for the second quarter of 2021 includes non-recurring income of 77 billion pesos associated with the divestment of Dallas

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PIEDAD MONSALVE

Gerente de Comunicaciones
pmonsalve@argos.com.co
(57 4) 3198700

RAQUEL YEPES

Directora de Comunicaciones
ryepess@argos.com.co
(57 4) 3198700 | Extensión: 64318
313 791 6901

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Atmospheric emissions

We are committed to reducing our emissions through actions that achieve more efficient processes and the implementation of abatement measures, contributing to good air quality in the places where we operate.  Our cement-, concrete- and aggregate-production processes generate punctual and scattered particulate matter (PM) emissions, as well as emissions of sulfur oxides (SO2) and nitrogen oxides (NOx) in the clinkering furnaces of the cement plants.

  • For society:  To contribute to mitigating the impact on air quality in the areas where we operate, acting responsibly and promoting relationships of trust with our Stakeholders.

 

  • For the company:  To develop more efficient processes that allow us to reduce our atmospheric emissions and contribute to responsible production, complying with local regulations in the countries where we operate and – in some cases – going beyond compliance with said regulations, contributing to the profitability of the business and preparing to face future challenges.

The “Emissions” pillar of our Environmental Strategy focuses on: Working on the adequate measurement, control and reduction of SO2, NOx and particulate-material (PM) emissions generated by our production processes in the cement business and on the prevention and mitigation of our dispersed emissions of particulate material (dust), originated mainly by the activities of transportation, transfer, unloading and storage of materials in the cement, concrete and aggregate processes. The foregoing, through operational control, optimization and renewal of emission-control systems to achieve continuous improvement.

Industry positioning

We position ourselves as strategic allies for the development of the territories where we are present, directly and through the empowerment of our value chain.  We do it through the construction of housing and sustainable infrastructure that enables the closing of socioeconomic gaps, the generation of employment, the improvement of the quality of life and the reduction of the impacts generated.

  • For society:  To sustainably respond to the growing demand for housing and infrastructure of the world population with the aim of improving people's quality of life, interconnecting regions and developing innovative solutions. 

 

  •  

    For the company:  To be strategic allies of the actors in our value chain in order to maintain the Company's leadership in the market, ensure its competitiveness over time and increase the generation of sustainable value.

We are committed to the role we have as a Company in the achievement of the 2030 Agenda goals, the consolidation of territorial development plans where we operate, and the economic reactivation of the countries affected by the pandemic. Therefore, we focus our efforts in the development of sustainable housing and infrastructure projects that contribute to closing socioeconomic gaps, generating employment under safe conditions, environmental protection, and investment in improving people’s health systems and quality of life. 

Our work unfolds in three large lines:

 

Cities for everyone:

 

With nearly 54% of the world  population living in urban areas, the pandemic made inequality of those who live in the cities of the world

manifest. Nearly 90% of the COVID-19 cases are concentrated in the urban

centers that have, among others, challenges associated with access to basic services and decent housing conditions. For this reason, we work together with our value chain to develop projects that benefit the lessfavored population, facilitate access to housing, and promote development in

the areas of influence.

 

Interconnected cities

 

The need to connect urban areas with rural areas to expand the coverage

of basic services, such as health, has been a priority of developing countries

since before the pandemic. Therefore, during 2020, we continued working on creating innovative solutions that allow us to be present in the large projects of the countries and territories where we are present.

 

Intelligent cities

 

In recent years, the acuteness of the effects of climate change became the

risk of greatest impact to the world. Therefore, in the global stage, a need

has grown to transition to a low-carbon economy, an opportunity that becomes more relevant amid post-pandemic recovery scenarios and the effort we are making as a Company to generate new business models that respond to environmental and social challenges. For this reason, our Climate-Change Strategy includes actions aimed at mitigating the impacts associated with our productive processes, adapting our operating model and innovating from the identification of optimization opportunities.

Supplier management

Supplier management is a fundamental pillar of our Supply Chain Strategy; it seeks to build and strengthen relationships with strategic allies who have the ability to contribute to the Company in terms of efficiency, productivity, customer service and innovation.  For this reason, we carefully select our suppliers, transfer knowledge to promote their development, promote good practices and recognize those who are an example of sustainable, innovative, safe and responsible management.

  • For society:  To develop our suppliers, promote transparent practices and responsible conduct, to improve the productivity and competitiveness of our society and support the construction of a better future.

 

  • For the company:  To seek to add value throughout the Company's supply chain, from the purchase of goods and services to the delivery of products to clients.  Through the mitigation of risks and potentiation of opportunities, the implementation of good contracting practices and service excellence, we create relationships of trust and turn suppliers into business allies.

Our management is divided into five stages:

  1. Identification: We determine the goods and services required for our operation and the category to which they belong, according to our Category Tree. This groups our suppliers into macro-categories which – in turn – are subdivided into two more specific levels.
  2. Pre-Selection: We validate the suitability of suppliers through due diligence and review aspects of sustainability and financial health to ensure long-term relationships.
  3. Negotiation: We select suppliers with high standards, considering technical, economic, sustainability and service aspects.
  4. Retention and evaluation: We carry out knowledge-transfer processes with those suppliers with growth potential.
    • We characterize our suppliers as critical suppliers or with potential risk in sustainability.
    • We measure the management of critical suppliers through performance evaluations in terms of quality, service, occupational health and safety, having constant feedback and identifying key factors for their development.
    • We apply the Sustainability Index to suppliers with potential sustainability risks, to identify challenges, opportunities, and to develop joint action plans in environmental, economic, social and Human-Rights matters.
    • We implement additional controls and development plans to suppliers belonging to categories where the greatest potential risks have been identified. This is how, for example, we develop road-safety strategies for our logistics suppliers; with mining suppliers, we carry out a more rigorous pre-selection process, and with contractors, we have special controls on occupational health and safety.
    • We have a Transparency Line for Stakeholders to report possible improper actions and to implement the pertinent corrective actions. 
  5. Recognition:  Every two years, through Growing Together (Creciendo Juntos), we recognize the suppliers that have shown outstanding performance in innovation, sustainability, health and safety and development and comprehensiveness.

 

Additionally, we have:

 

Contracting manual: transparent action framework that guides the negotiation and contracting of our suppliers to allow the process to be agile, make use of best practices and carry out adequate risk management.

 

Code of conduct for suppliers: in which we define the principles and behaviors that we expect from our allies in terms of respect for human rights, protection of workers, environmental management, business ethics and responsible business practices.

Ethics and compliance

We are convinced that ethics and integrity are fundamental and non-negotiable; that is why we live by these principles, integrating them into our operations, processes, and strategy, thus generating value responsibly for our business, our Stakeholders, and for society.  Through the Global Governance and Compliance Program, our ethics and business conduct system, we seek to promote that our actions are consistent with the pillars of corporate culture and integrity as the guiding principle of our business activity.

  • For society:  To promote transparent, competitive, and sustainable business environments that strengthen trust and ethics in business, generating positive impacts for the market and society.

 

  •  

    For the company:  To promote that our actions are consistent with the pillars of culture and that integrity is the inspiring principle of all members of the Organization.  This is how we consolidate ourselves as a competitive, reliable company in the eyes of investors and other Stakeholders.

We have voluntarily adopted a self-regulatory framework that confirms our commitment to business ethics as a way to promote transparent practices that contribute to the development of competitive environments. This framework* incorporates mandatory principles of ethics and conduct:

 

 

For the proper implementation and application of these guidelines, the strengthening of the ethical culture, the prevention and control of incorrect actions, our Board of Directors approved the Global Governance and Compliance Program (GGCP, in Spanish). The program structure incorporates international best practices to evaluate compliance programs, such as ISO 37001, ISO 19600 and the United States Department of Justice (DOJ) guidelines. The program has the following scope:

 

 

Likewise, it systematically groups together the activities carried out to promote integrity in the Company's actions, its employees, and members

of the value chain, which allow the updating and permanent strengthening

of the program. Operating Scheme:

 

Efficiency and productivity

We materialize our Corporate Strategy through actions aimed at the efficient use of resources, the improvement of our financial flexibility and the maximization of income generation and business profitability.  We focus on the application of efficient, safe production processes and circular economy models, on the diversification of energy management models and on the efficient management of the supply chain.

  • For society:  To provide solutions and products that meet the needs of our clients through the responsible, appropriate use of resources and the incorporation of raw materials and alternative energy sources.

 

  •  

    For the company:  To guarantee business sustainability, optimize working capital and capital investments, reduce costs and the level of indebtedness, and mitigate risks regarding the availability of resources necessary for our operation and the emergence of new business realities, environmental requirements and new regulations.

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