Argos ONE

Versus 2022, in the first quarter of the year, Argos achieved an ebitda 41.3% higher and a net profit 8 times superior

  • Argos achieved an operating EBITDA of 127 million dollars, 41.3% higher than in 2022, which resulted in a margin expansion of 368 basis points.
  • The company reported a net profit of 25 million dollars during the quarter, eight times higher than the previous year. On April 17, the company reported that the ordinary share meets the criteria stipulated by the Central Counterparty Risk Chamber of Colombia and the BVC (Colombia Stock Exchange) to be eligible for repo operations again.
  • Exports from the Cartagena Argos Plant to the United States grew by 81%.
  • In its recent Shareholders’ General Assembly, the cement company appointed Carolina Soto Losada as the new member of its Board of Directors, replacing Esteban Piedrahíta.

The results of the first quarter of the year for Argos continue to show the benefits of its geographical diversification and presence in the United States. The company recorded an operating EBITDA of 127 million dollars, 41.3% higher than in 2022. Regarding consolidated revenues, it earned 721 million dollars, representing a growth of 11.9% compared to the previous year. These results account for the successful execution of the pricing strategy, efficient cost management and stable dynamics in the markets where the company operates.

In a consolidated manner, the cement company dispatched 3.9 million tons of cement, 0.6% less than in the first quarter of 2022, a loss largely caused by the slight falls that occurred in the Colombian market. Concrete volumes stood at 1.7 million cubic meters, with a slight decrease of 2.3%; this was mainly due to unfavorable weather conditions in the United States.

Taking into consideration the non-recurring divestments made in 2021 and 2022, the expenses associated with the process of listing its operations in the United States in the New York Stock Exchange and the non-monetary fiscal provisions related to the payment of intercompany accounts of Argos USA to Argos Cements, the net profit closed at
25 million dollars.

On the other hand, the leverage index stood at a level of 3.1 times, with a slight increase compared to December, mainly caused by the accelerated revaluation of the Colombian peso at the end of March.

“In the first quarter of the year we experienced a stable market dynamic in most of the territories in which we are presence, sequential improvements in costs, especially in fuels, energy and, in some cases, raw materials, and mixed macroeconomic signals that keep us optimistic about medium-term trends. Beyond the constant challenging conditions, we continue to take forceful steps toward our goal of creating value for the company, our investors, customers and other stakeholders. The effort, vocation and commitment of the nearly 7,000 Argos employees, and the solid fundamentals we have will continue to be key to capture growth opportunities and building the Argos of the future we dream of.” 

Juan Esteban Calle, Argos President.

During the year, the organization reported significant progress in the five pillars of its SPRINT program, acronym of Share Price Recovery Initiative, which seeks to promote initiatives for value creation:

  1. Focus on sound operating and financial results: In the first quarter of the year Argos achieved an EBITDA 41.3% higher than in 2022, representing a margin expansion of 368 basis points, and achieved consolidated net profit eight times higher than the previous year.
  2. Increase in dividend distributions to shareholders and share buybacks: The company paid 25 million dollars in dividends in April. It is also moving forward, in a committed manner, in the implementation of alternatives to achieve the distribution of additional dividends and the implementation of the repurchase program before its next Shareholders’ General Assembly in 2024.
  3. Improvement of the visibility of the value of operations and continuity of the process for listing the United States business on the New York Stock Exchange: The cement company will carry out the listing in the United States when market conditions are appropriate.
  4. Improvement of the liquidity of ordinary shares so that they are again eligible for repo operations within the Colombian Stock Exchange (BVC): Argos announced on April 17 that the ordinary share meets the criteria stipulated by the Central Counterparty Risk Chamber of Colombia and the BVC to be eligible for repo operations again.

As for the organizational structure, at the recent Shareholders’ General Assembly the company appointed Carolina Soto Losada as the new member of its Board of Directors, replacing Esteban Piedrahíta. Among other positions, Carolina was a senior advisor for the Private Sector and Competitiveness of the Presidency of Colombia and co-director of the Bank of the Republic. She is currently a senior associate of Dattis Comunicaciones.

 

United States of America

During the year, cement volumes increased by 7.1% and reached 1.5 million tons, leveraged by the import of the product incentivized by the organization’s extensive logistics network of ports and terminals. Concrete dispatches decreased by 2.5 % and were located at 1.1 million cubic meters, which were largely affected by harmful climatic conditions in the region, specifically in Georgia.

The United States reported revenues of 416 million dollars, which represents an increase of 22 % over the same period last year; and EBITDA was 65 million dollars, 77 % more than the first quarter of 2022, which led to the expansion of the margin by 483 basis points compared to that year.

Colombia

Cement volumes stood at 1.4 million tons, with a decrease of 4.6 %, mainly impacted by the fall of the local market and the closure of the main road between Popayán and Pasto, which altered the logistics efficiency of supply in the south-west of the country, where the company has a relevant presence. Concrete, on the other hand, closed by 621.000 cubic meters, with a reduction of 4.3 %.

Of the total dispatches, 345 million tons were sold abroad, an increase of 16%. Exports to the United States grew by 81%, which strengthens the organization’s presence in the North American market.

In a challenging environment, revenues reached 150 million dollars, 7.4% lower than in the same quarter of 2022. In addition, EBITDA stood at 38 million dollars, 15% higher than last year.

Caribbean and Central America

Cement dispatches were 1 million tons, with a reduction of 5.2% compared to the first three months of the previous year, this slight impact is the result of Argos’ strategy of replacing trading volumes with exports from its Cartagena plant, in Colombia, to supply its markets in the region. Those of concrete stood at 71.000 cubic meters, 22% higher.

The company reported revenues of 145 million dollars, an increase of 5%, and an EBITDA of 30 million dollars, which grew 2%.

These results were largely leveraged by the successful recovery of cement volumes in Panama and the Dominican Republic, which increased by 21% and 14% respectively, and the commitment to new products that diversify Argos’ value proposition in Panama.

Note: The financial and operational figures expressed here are based on adjusted numbers, excluding non-recurrent and non-essential operations.

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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. 

 

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    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.

 

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    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.

 

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    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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