Displaying items by tag: Colombia

Fernando A González and Cemex took to the virtual airways this week with Cemex Day 2021. The investors’ update comprised the usual greatest hits package explaining how well everything is going: earnings growth and leverage levels about to hit desired targets, selective investments and divestments on the way, new production capacity round the corner and punchy sustainability goals turning up earlier than expected. Or at least that’s the way that chief executive officer González and the team told it.

To be fair to Cemex, it seems to be in a good place right now. It weathered 2020 well and now its first quarter results in 2021 compared to the same period in 2019, before coronavirus hit, are looking rosy with cement sales volumes growth of 9%. How much of that is attributable to pent up demand from 2020 remains to be seen though. Its strategy of focusing on markets in North America and Europe appears to have paid off in recent years with its competitors copying it as they have retreated from riskier climes and concentrated on core territories. Its obsession with righting the ratio between its debts and earnings is closer than ever to being realised, with a 4.07x net leverage ratio in 2020 and a target of 3x or lower planned for 2023. That last target is crucial both materially and psychologically for the company as it starts to put it back in the same financial field as its Western multinational competitors and opens up new investment opportunities.

From a production angle, the big news from the event was a 10Mt/yr cement production expansion project between now and 2023. This wasn’t quite as promising as it sounded, as just under half of this was attributed to legacy projects in Mexico, Colombia and the Philippines and some of the new projects had already been announced, but it does bookmark a move from divesting plants to upgrading and building new ones.

The new projects comprise an additional 5.7Mt/yr capacity from on-going debottlenecking, new integrated plants, new grinding plants and reopening idle or mothballed plants. During the event José Antonio González, the Executive Vice President of Strategic Planning & Business Development broke it down into 3.5Mt in Mexico, consisting of 1.5Mt additional grinding capacity at the integrated Tepeaca plant, a 0.5Mt/yr expansion at the integrated Huichapan plant and 1.5Mt/yr from bringing both idled lines back into production at the CPN Hermosilla plant in Senora to support the US market. That last one notably was partly announced in February 2021. In Europe and the US the group plans to add 1.2Mt/yr including expanding grinding capacity at two plants in Europe with details to be announced later. Finally, the company plans to add 1Mt/yr of additional capacity in South American including restarting an idled 0.5Mt/yr kiln at a plant in the Dominican Republic and building a new 0.5Mt/yr grinding mill in Guatemala.

Cemex has also stepped up its target reduction in CO₂ emissions to below 475kg CO₂/t of cementitious material, an approximately 40% reduction in CO₂ emissions compared to 1990 levels, by 2030. The previous target for 2030 of 520 kg CO₂ has been brought forward to 2025. This compares to LafargeHolcim’s similar target of 475kg CO₂/t by 2030, HeidelbergCement’s target of 500kg CO₂/t by 2030 and CRH’s target of 530kg CO₂/t by 2030. The group is planning to spend US$60m/yr on its decarbonisation projects. This compares to a spend of around US$140m/yr on its 10Mt/yr cement production capacity expansion drive over the next three years. Or to put it another way, the group is spending more on growing than sustainability.

Unfortunately, it wasn’t all good public relations for Cemex this week with the news in the Colombian press that one of its former executives is set to be investigated by the authorities over his alleged involvement in the ongoing Maceo cement plant corruption case. The background to this one is that in 2016 Cemex fired several senior staff members, and the local subsidiary’s chief executive resigned, in relation to the building of a new integrated plant at Maceo. This followed an internal audit and investigation into payments worth around US$20m made to a non-governmental third party in connection with the acquisition of the land, mining rights and benefits of the tax free zone for the project. Legal proceedings followed in Colombia and the US. Many large companies have legacy problems to deal with. Just take LafargeHolcim’s continued connection to Lafarge Syria’s conduct in the early 2010s. At the time of writing the Maceo plant is still yet to start operation and is likely to be one of the ongoing projects mentioned above.

Cemex’s second quarter results are due to arrive towards the end of July 2021 but the group is presenting an upbeat image. Sales are up, debts are down, divestments are out and expansions are in. Confidence is important for a multinational trying to convince the rating agencies to give it back its investment grade, so whether this is strictly true or not it certainly knows how to talk the talk. One question going forward at least is how strictly Cemex will want to stick to its core markets if the good times really have returned?

Colombia: The Colombian prosecution service intends to summon former Cemex Colombia chief executive officer (CEO) Carlos Jacks to face charges in relation to the Maceo cement plant corruption case. Jacks was CEO of the company for 24 years and previously headed Cemex operations in Costa Rica, the Dominican Republic and Puerto Rico, according to the Noticias Caracol television channel. A statement made by Camilo González Téllez, the former Legal Vice President, has been used by the prosecutor’s office to press charges against Jacks. So far González is the only senior Cemex executive to have received a custodial sentence in relation to the affair.

In 2016 Cemex fired several senior staff members in relation to the Maceo project and its subsidiary’s chief executive resigned. This followed an internal audit and investigation into payments worth around US$20m made to a non-governmental third party in connection with the acquisition of the land, mining rights and benefits of the tax free zone for the project. Legal proceedings followed in Colombia and the US.

US: Colombia-based Cementos Argos is planning to export 0.4Mt of cement to the US in 2021. The cement producer’s exports to the country grew by 419% year-on-year to 135,000t in the first five months of 2021 from 26,000t in the same period in 2020. It says that it expects the US cement market to grow by 2.2% year-on-year in 2021.

The company is currently upgrading its integrated plant in Cartagena, Colombia and improving the associated port terminal. The US$40m project is scheduled to be completed in the second half of 2021. It is intended to support the export market to the US and elsewhere.

Colombia: Grupo Argos has formed an alliance with five other Colombian companies to boost the number of women and young people in work. The alliance will focus on creating sustainable and competitive job opportunities. The participants say that they will jointly offer 6000 mentorship places. Youth and female unemployment respectively rose to 25% and 31% nationally during the on-going Covid-19 outbreak. Grupo Argos said that it is part of its corporate social responsibility to take action to create quality work.

US: Colombia-based Grupo Argos subsidiary Cementos Argos has agreed to sell its 24 ready-mix concrete plants in Dallas, Texas, to SRM Concrete. The Diario Financiero newspaper has reported the value of the deal as US$180m. Cementos Argos called the sale an ‘important milestone’ in the fulfilment of its non-strategic asset divestment plan.

Colombia: Grupo Argos subsidiary Cementos Argos increased its consolidated net sales by 6% year-on-year to US$618m in the first quarter of 2021 from US$582m in the first quarter of 2020. Cement sales over the period rose by 19% to 4.1Mt from 3.5Mt. The company’s earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 30% to US$119m from US$91.5m. Its net profit was US$14.7m, compared to US$1.07m in the first quarter of 2021.

The company recorded increased cement volumes in all regions during the quarter. The sharpest regional increase was of 21%, to 1.4Mt from 1.2Mt in the Caribbean and Central America Region. In Colombia, volumes increased by 19% to 1.2Mt from 1.0Mt and net sales increased by 15% to US$161m from US$139m.

Chief executive officer Juan Esteban Calle said, “We are mindful of the social and economic challenges that Colombia is facing after more than 4m people fell below the poverty line as a consequence of the economic impact of the pandemic. We consider ourselves part of the solution and will continue working to build a better country with our optimism intact.”

The company also updated its climate change strategy in line with its target of carbon neutral concrete by 2050.

Colombia: Bancolombia has granted a US$108m loan to Grupo Argos. The loan’s interest rate is linked to two indicators, namely greenhouse gas emissions reductions and the increase in participation by women in the group’s upper management. These factors can decrease the interest rate by up to 100 basic points. The group said that signing the deal constitutes another milestone in realising its environmental, social and governance (ESG) commitment. The financing agreement modifies current conditions for debt and will have a five-year maturity. As such, it does not increase Grupo Argos’ current levels of indebtedness.

Group chief executive officer Jorge Mario Velásquez said “We are proud of this significant step, which reaffirms our commitment to driving gender equality and contributing to fighting climate change with concrete actions. Both of these topics lie at the heart of our Business Group’s strategy, in line with global goals defined in the 2030 Agenda for Sustainable Development.”

Cuba: Cuba’s full-year cement exports totalled 21,200t in 2020, down by 40% year-on-year from 35,200t in 2019. ADN Cuba has reported that the value of exports fell by 45% to US$1.04m from US$1.89m. The vast majority of exported cement went to Colombia. Cuba is currently experiencing domestic shortages of cement.

Colombia: Cementos Argos will hold the virtual launch of Argos Green Solutions on 17 March 2021. The company will use the group to set out its vision of innovation to build a sustainable future. President Juan Esteban Calle and sustainability vice president María Isabel Echeverri will host the event.

Colombia: BBVA has granted a US$45.1m loan to Grupo Argos subsidiary Cementos Argos. The loan includes a pricing adjustment mechanism which links its interest rate to the producer’s environmental, social and corporate governance (ESG) performance rating. The company said that the choice of financing arrangement aims to promote a greater commitment to sustainability management and compliance with socially and environmentally responsible practices that ensure the construction of a greener future. The transaction is the first of its kind in Colombia and constitutes Grupo Argos’ debut in sustainable financing.

Chief executive officer Juan Esteban Calle said, “This is a definite advance in line with our sustainability strategy that fills us with joy, not only because it contributes to our debt profile and reassures our commitment to sustainability as a strategic pillar and source of competitive advantage, but it is also a benchmark of trust for our investors and other stakeholders”