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Cementos Argos shares financial results for first half of 2021

Published by , Deputy Editor
World Cement,

On a consolidated basis, during the first half of the year, Argos has reached sales of 8.6 million t of cement, with a growth of 27 %, and an EBITDA * of COP 967 trillion, 28% higher than what was recorded in the first half of 2020.

  • Argos closed the deal of concrete assets in Dallas, Texas (USA) for US$183.8 million.
  • The company held an exceptional shareholders' meeting in order to request the approval of an extraordinary dividend, considering the outstanding results of the first half of the year, as well as the outstanding cash generation that has Argos to close the period with the lowest indebtedness indicator since 2013.
  • Argos reassured its commitment to creating social value through job creation, investment in the Cartagena port and continuity of social programs in the different regions where they operate.

The solid performance of all the markets where Argos operates, in addition to the rigorous and continuous execution of the BEST efficiency programme and the RESET plan for adaptation to the effects of the pandemic and the sustainable restart, has allowed the company to achieve positive results during the first six months of 2021. The aforementioned is despite having 40 days of roadblocks in Colombia and several weeks of political and social instability in Haiti.

On a consolidated basis, revenues were US$1.3 billion, with an increase of 11 % compared to the same term in 2020. Likewise, EBITDA* rose 29.9 % and was US$266.7 million. It is especially noteworthy that the adjusted EBITDA margin for the first half, excluding the profit on the sale of concrete assets, reached a record of 20.2 %, the highest since 2013.

Cement shipments in these first six months were 8.6 million t, which means an increase of 26.9 %. This is favoured by the performance of the United States and the Caribbean and Central America region, as well as the low comparison base, considering the quarantines that were experienced in Colombia and in the Caribbean and Central America during 2020. Concrete volumes decreased 1.6 %, which were mainly affected by adverse weather conditions in Dallas, Houston, Texas, as well as the Carolinas in the US.

“We are very satisfied with the figures achieved during the first half of the year in our three regions, and we are optimistic about the future of our customers, the progress of their housing and infrastructure projects, which are contributing significantly to employment recovery, as well as the levels of economic activity and the creation of social value in all the countries and markets where we are present, and with the noteworthy recovery of the company's financial flexibility in recent months, which is thanks to the commitment, creativity, passion and innovation of all our employees and to the success in the deployment of the BEST and RESET programmes,” said Juan Esteban Calle, Argos CEO.

As of 30 June 2021, the net debt / EBITDA plus dividends indicator stood at 3.1 times, thus reaching the corporate target leverage of 3.2 times that the company had for the end of 2021.

Performance by region:

In the United States Region, revenues during the semester remained stable and were US$736 million. It is important to note that the recorded EBITDA * was US$128 million, an increase in comparable terms of 9%, without considering the proceeds and expenses of the Dallas divestiture.

From January to June, cement volumes saw a solid increase of 5.7%, because of the positive market dynamics in the country. Concrete volumes, on the other hand, fell 10.1% with different behaviours throughout the territory and strongly affected by the intense rains, especially in Houston and Dallas.

The divestment of non-strategic assets in Dallas, which closed on 15 June, also impacted the year-over-year variation, and affected the volumes of the second quarter of 2021, which do not include the shipments of these operations during the last 15 days of the quarter.

The US market continues to demonstrate its strength, positive dynamics, and high growth potential in the coming years. There is great expectation on the 1.2 trillion-dollar infrastructure plan agreed on between a group of Democratic and Republican senators and the Biden Administration. The residential indicators, such as construction permits and housing starts, increased 38% and 45%, respectively, versus the second quarter of last year and the reactivation of the commercial segment, mainly in warehouses and data centres, predict a positive cycle of volumes and prices for the industry and the company.

In the Colombia Region, revenues increased 37.7 % during the semester and stood at US$313.5 million. Likewise, EBITDA increased 54.1% and was US$69 million.

In the first six months of the year, cement shipments increased 40.1 % and concrete rose 25.2 %, despite the impacts of the marches and roadblocks that had a great effect on operations in the southwestern part of the country where the Yumbo Plant was closed for around 40 days.

The current dynamics of the market continue to be positive in both the residential and infrastructure segments. Indicators such as housing starts, which during June 2021 reached a level not seen since 2018, along with the positive evolution of the self-construction trend, reinforce this perspective. In infrastructure, large projects such as the Bogota Metro and Malla Vial del Valle provide positive support to the forecast of cement demand in the coming years. Other infrastructure works such as the 11 Wind Farms in La Guajira, which will produce 1800 megawatts of wind energy per year, support the government's commitment to developing sustainable projects in the country.

Lastly, the Caribbean and Central America Region, revenues for the first semester represented US$272 million, a growth of 31.8 %. EBITDA, meanwhile, experienced an increase of 58.9 % and was US$85 million. In this region, the 45.1 % increase in cement shipments during the period stands out, which was driven by the good dynamics of countries such as the Dominican Republic, Honduras and Puerto Rico, and the increase in exports from Cartagena to Houston. Likewise, concrete volumes increased 38% in the first half of the year, mainly due to the low comparable base; however, they remain low compared to 2019 given Panama's slow recovery from the start of the pandemic.

Prospects continue to be positive for this region given its correlation with the US economy, the significant growth in remittances, as well as the arrival of funds for the reconstruction of Puerto Rico after Hurricanes Irma and Maria. Likewise, tourism construction activity, which is expected to resume its activities in the Dominican Republic soon, along with the success of the new operating model in Puerto Rico, support the favourable prospects for these two countries. Panama, for its part, is still affected, but it is beginning to show signs of economic recovery and better demand conditions as a result of a slight improvement in private construction and the construction of the third metro line, which is expected to begin in October.

“Our strategy of creating social value is at the centre of the corporate strategy and in our higher purpose, and today, we are reassuring our commitment to contribute to the reactivation of the economy and to closing equality gaps. During this semester, we continued investing in the expansion of the Cartagena port, which generates additional employment and brings great social investment to the area. Additionally, we are making progress in initiatives such as Casa para Mi and Hogares Saludables that will allow us to contribute to the dreams of having decent housing for thousands of people in the country”, stated Juan Esteban.

Based on these excellent results, the strong cash generation of the first semester and the low financial leverage, Argos has requested a shareholders' meeting on 25 August to seek the approval of an extraordinary dividend of 79.97 COP per common and preferred share, to be distributed in a single payment during September. This dividend seeks to recognise and reward shareholders, especially minority shareholders, including the more than 10 000 individuals who are part of the investor base, for their support and the trust they have placed in the company during these difficult times of the pandemic and the subsequent effects on economies. The new dividend is subject to shareholder approval.

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