CEMENTOS ARGOS S.A.
Results report as of December 31, 2013
BVC: CEMARGOS, PFCEMARGOS
ADR LEVEL 1: CMTOY / ADR 144A: CMTRY - Reg-S: CMTSY
EXECUTIVE SUMMARY
1

In 2013, Argos achieved historic results in terms of its EBITDA, which reached COP
978 billion1, representing an increase of 24% compared to the year before. The
EBITDA margin rose to 19.7%, which was more than 160 basis points higher than the
18.1% registered in 2012.

The consolidated EBITDA for 4Q13 rose 25% compared to that of 4Q12, reaching a
total of COP 233 billion. The EBITDA margin for 4Q13 rose to 18%, also a better
result than the 17% of 4Q12.

USA Regional Division obtained a positive EBITDA of COP 28 billion in 2013, which,
in pesos, represented an increase of 322% compared to 2012. For 4Q13, the EBITDA
was COP 11 billion, registering a significant increase of 320%, compared to 4Q12.

As for sales volumes, 2013 was also a very successful year for Argos, with significant
increases, dispatching 11.4 million tons of cement and 9.4 million cubic meters of
ready-mix concrete, generating growths of 5% and 10% respectively.

Consolidated revenue of Argos in 4Q13 grew 19% compared to 4Q12, amounting to
more than COP 1.3 trillion. For the year 2013, revenue totaled COP 5.0 trillion, which
represented an annual increase of 13%.

Consolidated operating profits for 4Q13 rose to COP 124 billion, an increase of 44%
compared to 4Q12. For the full year, this line increased 40%, for a total of COP 581
billion.

Pre-tax earnings, after excluding extraordinary divestitures carried out in 2012 for a
total of COP 277 billion, increased 189%, resulting in an increase of 67% for the
recurring net income.
For the purpose of this report 1 billion = 1.000.000.000 and 1 trillion = 1.000.000.000.000
RESULTS 4Q13
The company registered solid results for the fourth quarter, which contributed positively to the
consolidated results of 2013. It is worth highlighting the historic EBITDA, which was obtained
mainly organically, including only one month of results of the recently acquired operations in
Honduras. This achievement stems from three aspects:
-
Continuous efforts and engagement of the whole organization towards our focus on
organizational excellence.
A more and more evident recovery of the economy in the Unites States.
Positive market trends in the Colombian and Caribbean and Central American Regional
Divisions.
Various achievements, such as the growth in terms of volumes in each of the regional
divisions and the segmentation, price, and market penetration strategies, have allowed us to
make our operations more profitable, reaching an annual increase in sales higher than 13%.
Additionally, the program of operational excellence, together with increasing discipline in
terms costs and expenses control, allowed the consolidated EBITDA to grow by 24% in 2013.
This figure is especially relevant because it is much higher than the increase in terms of
income.
Recurring net income, after excluding extraordinary divestitures, registered an increase of
67%, even though, because of the devaluation of the Colombian peso compared to the US
dollar in 2013, at the closing of the year we recorded a COP 200 billion difference in the
provision for income tax line. This provision is related to current fiscal regulation in Colombia
in reference to the accounting of the exchange rate difference of investments in subsidiaries
abroad.
RESULTS PER REGIONAL DIVISION
COLOMBIAN REGIONAL DIVISION
VOLUMES AND MARKET PERFORMANCE
This regional division ended 4Q13 with positive trends, reaching dispatched cement volumes
of 1.4 million tons, increasing by 8% compared to the same quarter of 2012.
As for the total results of 2013, 5.2 million tons of cement were sold, representing an increase
of 1.2% compared to 2012. This clearly shows the recovery in terms of volumes during the
second semester of the year, after having seen a 4% drop in the first half of 2013. These
results are coherent with the general trend of recovery in the market, a development that is
expected to continue this year.
The ready-mix concrete business continues to see solid growth in 4Q13, with dispatched
volumes of 911 thousand cubic meters, rising by 26% compared to 4Q12, and of 3.4 million
cubic meters sold for the full year, a 15% increase compared to 2012.
Within this context, during 2013, we installed 18 new ready-mix concrete plants in Colombia,
allowing us to service 8 new intermediate cities. These figures illustrate our strategy of
strengthening the industrial business segment through more focus on infrastructure and on
the professionalization of the construction business. The latter is resulting in an increasing
demand of ready-mix concrete in the residential sector, where it is replacing the manual
mixing of concrete on the construction site.
This growth stems mainly from the positive trend that can be witnessed in residential and
commercial construction, in which social housing projects are playing an important role.
These projects are mainly driven by the government’s project of 100,000 free homes but also
by other initiatives that were proposed by the Ministry of Housing that seek to incentivize this
sector through subsidies towards the interests paid on mortgages.
FINANCIAL RESULTS
Revenue of the Colombian Regional Division totaled 2.6 trillion pesos in 2013, showing an
increase of 12% compared to 2012. For 4Q13, the increase was 21% when compared to
4Q13, for a total of COP 702 billion.
These results stem from the increasing trend in terms of sales volumes. This trend started in
the beginning of the second semester of the year and continued throughout the last quarter,
making it a very significant one for our operations.
This regional division’s EBITDA for 2013 amounted to COP 903 billion, registering an
increase of 12% compared to the COP 806 billion of 2012. For the quarter, there was an
increase of 7%, moving from COP 210 billion in 4T12 to COP 225 billion in 4T13.
The EBITDA margin improved by 14 bps to 35.4% for the full year 2013. This result is mainly
a consequence of the progress made in the operational excellence program. Additionally, it is
important to take into account that such improvement of the EBITDA margin is especially
significant because the higher growth of the ready-mix concrete business, which, by nature,
has lower operating margins, linked to lower capital investment.
Along these lines, during the last quarter of the year, some programmed maintenances were
carried out with the goal of being prepared for the growing demand in the interior of the
country and the expansion necessary to meet these new needs. This resulted in an increase
in terms of logistic costs due to the fact that certain markets had to be supplied from plants
that were further away, while such maintenances were performed. This, in its term, had its
effect on the margin of the fourth quarter.
With regards to the operational excellence program, we would like to highlight some initiatives
that were taken during the year, such as the use of natural gas as fuel in the dry process kiln
in Cartagena and Yumbo plant; the start of the use of alternative fuel in the Cartagena plant;
the improvement of the kilns’ reliability factor by 3%; the optimization of the global
clinker/cement factor by 2.4%; and the optimization of logistic costs by 5.7%.
As for the projects that are being developed in this regional division and that are of great
importance for the efficiency that we seek to reach in the future, we are pleased to report that
both, the project to expand the dispatching center in Cartagena, and the increase of the
production capacity in the interior of Colombia are on schedule and planned to be finished
and go into operation by the end of the first quarter and the second half of the year,
respectively.
USA REGIONAL DIVISION
VOLUMES AND MARKET PERFORMANCE
For 4Q13, USA Regional Division registered growth of 25% in sales of cement compared to
4Q12, reaching 481 thousand tons. For the year 2013, dispatched volumes totaled close to
1.8 million tons, which represents an increase of 12% compared to 2012. This is a very
positive result given the fact that the cement market in the Unites States grew by 4.5% and an
estimated 6% for the markets where we operate.
As for the ready-mix concrete business, in 2013 5.4 million cubic meters were
commercialized, an increase of 5% compared to 2012. During 4Q13, 1.3 million cubic meters
were sold, 1% higher than the volume in 4Q12. This result was visible in the growth of both
the South East and the South Central states of the country, though the South East region
registered faster growth.
With the positive trends in this regional division comes the continuing optimism towards the
recovery the United States is experiencing. This market continues to show encouraging
signals, ratifying its improving tendencies and our greater focus on strengthening the
operations in this strategic region. This potential demonstrates the ability to generate value,
supported in both our current assets and the recently acquired ones in Florida.
FINANCIAL RESULTS
Revenue of USA Regional Division for 2013 rose to USD 748 million, registering an increase
of 13% compared to 2012. In the fourth quarter, there was a growth of 13% compared to
4Q12, reaching to USD 188 million.
There was a definite positive impact of price rises, of 6% in the average price of cement, and
of 7% in ready-mix concrete. These rises are being seen both in the South Central area as in
the South East area, which confirms the encouraging outlook for this market.
The improving tendencies in volumes and prices seen during this year, along with greater
operational efficiency, contributed to a positive EBITDA ten consecutive months as of
December 2013. For the full year, this meant an increase of the accumulated EBITDA, in
dollars, of 306%, reaching for the first time in the last 4 years to USD 14.3 million in this
period, and to USD 5.7 million for the fourth quarter, representing a margin of 1.91% for 2013
and of 3.05% for 4Q13.
CARIBBEAN AND CENTRAL AMERICA REGIONAL DIVISION
VOLUMES AND MARKET PERFORMANCE
The Caribbean and Central American Regional Division commercialized more than 3
million tons of cement in 2013, representing growth of 8% compared to 2012. For 4Q13,
a total volume of 742 thousand tons was registered, an increase of 13% compared to
4Q12.
The ready-mix concrete business recorded sales of 540 thousand cubic meters in 2013,
representing a year-over-year growth increase of 19%. The significant growth of this
business is mainly a result of the increasing trend that can be seen in the industrial
business segment in the vast majority of the countries of this regional division and of the
progress in our vertical integration, which has allowed us to increase our market share.
In Panama, our main market in this regional division, in 2013 cement and ready-mix
concrete volumes registered growth of 6% and 7% respectively when compared to 2012.
This increase in terms of volume can be associated with various infrastructure projects
that are being developed in different regions of the country in addition to the expansion
of the canal, since supply to the latter, which currently stands at a completion rate of
about 77%, has started to decrease.
Forecasts indicate that, due to the effect of this decrease, and especially given the
magnitude of the project, there will be a drop in dispatched volumes throughout 2014.
However, we expect to see a positive effect on the margins of this country, since the
cement to the canal is being commercialized under special price conditions , according
to the allocation contract.
This year was very important in terms of the expansion and growth of this regional
division because of the acquisition of 53% of the shares of Lafarge in Honduras, a
transaction that has strengthened our presence in the strategic area where we operate
and that is already being consolidated in our results.
Additionally, it is worth highlighting that during the year, we managed to successfully
migrate seven existing brand in this regional division to the Argos brand as part of an
ambitious marketing strategy that is allowing us to generate great er value for our
customers both in the massive and in the industrial market segments.
FINANCIAL RESULTS
For 2013, revenue of the Caribbean and Central American Regional Division totaled
USD 448 million, which is a 12% increase when compared to 2012. For 4Q13, revenue
reached USD 107 million, representing growth of 13% when compared to 4Q12. These
figures already include one month worth of operations of the recent acquisition in
Honduras.
The EBITDA of this regional division in 2013 registered an increase of 16% to USD 103
million, which resulted in an EBITDA margin that rose 60 bps above the one registered
in 2012, reaching to 23% for the full year.
It is important to mention that the margin in 4Q13 was affected by some non-recurring
expenses caused by the competitive situation in the Dominican Republic market, which
generated pressure on prices. However, this year, those prices are already showing a
new tendency.
Furthermore, there was also an effect on margins due to the particular imports of
clinker, necessary in Honduras to supply part of the operation there, while planned
maintenance activities were carried out as a part of the plan to integrate this new
acquisition into the Argos business model. Similar situation, as far as imports of clinker,
in Panama in order to compensate decreases in dispatches made by our local provider.
The regional division continues to show good control over costs and improvements in
productivity, visible in all its operations. Worth highlighting are the decrease of the unit
cost of production of grinding by 1.2% and of the unit cost of sales by 2.6%, both
compared to 2012. Part of these improvements were obtained thanks to the reduction of
raw material costs through a lower clinker/cement factor in all the grinding facilities.
Additionally, in Haiti, there was also a decrease in terms of electric energy consumption
and personnel costs fell compared to 2012 thanks to an increase in production.
In the Dominican Republic, the rest of unit costs also dropped due to increased
production compared to the previous year, and in Panama, there were savings on raw
materials of cement for general use, structural use and puzzolanic cement.
EXPORTS
As for cement export volumes, there was an increase of 53% at the closing of 2013 and
of 88% for 4Q13.
This rising trend of cement exports has been set in motion thanks to the fact that we
have managed to substitute clinker exports by higher added value cement exports.
Examples of this are the cement for structural use that we are offering to the Haitian
market, which is exported from Colombia. Even though this substitution made clinker
exports drop by 6% during the year, it allowed us to improve overall results.
SUMMARY OF RESULTS
A summary of the main financial indicators, consolidated and per region, as of
December 31, 2013, is presented below:
Revenues
EBITDA
COP$ Thousand million
2013
2012
Var (%)
2013
Mgn (%)
2012
Mgn (%)
Var (%)
Colombia
2,551
2,287
11.6
903
35.4
806
35.3
12.0
USA
1,402
1,194
17.4
28
2.0
-13
-1.1
322.3
837
715
16.9
192
23.0
160
22.4
20.1
Subtotal
4,789
4,196
14.1
1,124
23.5
954
22.7
17.7
Corporate
0
0
N/A
-113
N/A
-116
N/A
2.8
179
185
-3.1
-33
-18.2
-47
-25.4
30.6
4,968
4,380
13.4
978
19.7
791
18.1
23.6
1,364
1,272
7.2
484
35.5
449
35.3
7.8
USA
748
664
12.7
14
1.9
-7
-1.0
305.8
Caribbean & CA
448
398
12.4
103
23.1
89
22.4
15.9
Corp. & other buss
96
102
-6.2
-78
-80.7
-91
-88.5
14.5
2,656
2,437
9.0
524
19.7
440
18.1
19.0
Caribbean & CA
Other Businesses
Consolidated Result
US$ million
Colombia
Consolidated Result US$
CASH FLOW AS OF DECEMBER 31, 2013
(COP$ Billion):
Cash Flow
at Jan. 2013
162
EBITDA
978
Net Op.
Working Capital
- 49
Maintenance
CAPEX
- 247
Strategic
CAPEX
- 188
Taxes
- 160
Net Financial
Expenses
- 156
Net
Dividends
- 207
Net Other
Non-Operating
- 30
Capitalization
+ 1.556
Net Op. Financial
Obligations
- 693
Acquisitions
- 562
Effect from consolidation
of acquisitions*
+ 124
Cash Flow
at Dec. 2013
528
0
500
1000
1500
2000
* Note: Effect of the minority portion not acquired, but consolidated in the
cash and equivalents of Honduras
INVESTMENT PORTFOLIO AS OF DECEMBER 31, 20132:
Company
% Stake
Price per Share
Value
Value
(COP)
(COP$ million)* (US$ million)*
Grupo Suramericana
6.0%
33,700
949,776
493
Bancolombia
4.0%
23,820
486,813
253
Cartón Colombia
2.1%
5,500
12,699
7
1,449,288
752
Total
* Exchange Rate as of December 31, 2013: COP 1,926.83 / USD
DEBT AND COVERAGE RATIOS
As of December 31, 2013, the financial consolidated debt of Cementos Argos reached USD
1,265 million, 67% of which was in Colombian pesos, and 33% in US dollars. The annual
average cost of debt in Colombian pesos was 7.0%, while that of debt in US dollars was
1.9%.
On a consolidated basis, coverage continues at adequate levels as it can be seen in the
following ratios as of December, 2013: Net Debt / EBITDA + Dividends = 1.91x;
EBITDA / Financial Expenses = 6.03x; and Net Debt / Equity = 26.45%.
2 The variations of the non-cement investment portfolio do not affect Cementos Argos’s income statement, but they do affect figures on its balance
sheet, through the account of valuations and devaluations. All these companies periodically report their results. Therefore, they are not included in
this report.
CEMENTOS ARGOS S.A.
CONSOLIDATED P&L STATEMENT
As of December 2013
In COP million or USD million
Real Dec.13
Real Dec.12
Var. (%)
4,968,414
4,380,393
13.4
2,656
2,437
9.0
3,860,411
3,468,457
11.3
3,512,683
3,144,897
11.7
347,728
323,560
7.5
1,108,003
911,936
21.5
22.3%
20.8%
526,888
497,370
Administrative expense
303,597
303,515
0.0
Selling expense
174,026
140,791
23.6
49,265
53,064
-7.2
581,115
414,566
40.2
11.7%
9.5%
581,115
414,566
11.7%
9.5%
978,108
791,190
23.6
19.0
Operating revenues
US$ Dollars
Variable costs
Cost of goods sold
Depreciation and amortization
Gross profit
Gross margin
Overheads
Depreciation and amortization
Operating Profit (before Impairement)
Operational margin
Operating Profit (after Impairement)
Operational margin
EBITDA
US$ Dollars
5.9
40.2
524
440
19.7%
18.1%
109,192
403,753
-73.0
26,360
0
82,832
35,512
231,369
136,872
-25.8
-100.0
-39.5
324,612
149,434
400,370
201,822
-18.9
-26.0
175,178
198,548
-11.8
37,612
(1,160)
3342.4
Pre-tax earnings
403,307
416,789
-3.2
Provision for income tax and deferred tax
211,684
17,082
1139.2
7,913
12,088
-34.5
Net Income
183,710
387,619
-52.6
US$ Dollars
98
218
-55.0
3.7%
8.8%
EBITDA margin
Non-operating revenues
Dividends and participations
Profits from sales of investments
Other income
Non-operating expense
Net financial expense
Other expense
Profit (loss) due to exchange rate
differences
Minority interest
Net Margin
CEMENTOS ARGOS S.A.
CONSOLIDATED BALANCE SHEET
In COP million or USD million
Dec-13
Dec-12
Var. (%)
Cash, banks and negotiable investments
528,013
156,865
236.6
Trade receivables
590,989
498,400
18.6
Accounts receivable, net
235,305
298,119
-21.1
Inventories
402,435
355,379
13.2
28,240
24,910
13.4
1,784,982
1,333,673
33.8
145,898
145,095
0.6
40,254
39,718
1.3
Deferred items and intangibles
2,047,755
1,375,489
48.9
Property, plan and equipment, net
4,070,292
3,779,318
7.7
Reappraisal of assets
3,525,705
3,573,985
-1.4
16,832
19,438
-13.4
9,846,736
8,933,043
10.2
11,631,718
10,266,716
13.3
6,037
5,806
4.0
Financial obligations
289,290
653,308
-55.7
Bonds payable
192,575
77,200
149.4
Suppliers and accounts payable
533,559
486,176
9.7
68,824
49,317
39.6
195,940
124,320
57.6
Labor obligations
69,347
51,106
35.7
Sundry creditors
27,554
25,286
9.0
344,758
302,963
13.8
1,721,847
1,769,676
-2.7
222,158
369,717
-39.9
0
30,745
-100.0
242,455
255,627
-5.2
38,189
38,166
0.1
Prepaid expenses
Total Current Assets
Permanent investments
Accounts receivable
Other assets
Total Non-Current Assets
Total Assets
US$ Dolars
Dividends payable
Taxes, levies and contributions
Other liabilities
Total Current Liabilities
Financial obligations
Taxes, levies and contributions
Labor liabilities
Deferred charges
1,746,223
1,938,798
-9.9
Bonus on placement of bonds
-6,568
-8,210
20.0
Sundry creditors
55,107
75,857
-27.4
Total Non-Current Liabilities
2,297,564
2,700,700
-14.9
Total Liabilities
4,019,411
4,470,376
-10.1
2,086
2,528
-17.5
369,756
82,855
346.3
192
47
309.8
7,242,551
5,713,485
26.8
3,759
3,231
16.3
11,631,718
10,266,716
13.3
Bonds payable
US$ Dolars
Minority interest
US$ Dolars
Shareholders’ Equity
US$ Dolars
Total Liabilities + Shareholders’ Equity
RESULTS CONFERENCE CALL INFORMATION
The conference call to discuss 4Q13 results will be held on Tuesday, February 25, 2014 at
8:00 a.m. Colombian Time (8:00 am Eastern Time).
Conference ID #: 57166641
Telephone numbers:
USA and Canada:
(866) 837 - 3612
Colombia:
01800 518 0165
International/Local:
(706) 634 - 9385
4Q13 results presentation will be available today Monday, February 24, 2014 at the Investor
Relations website of Cementos Argos: www.argos.co/ir/en/financial-information/reports
IR CEMENTOS ARGOS - CONTACT INFORMATION
Gustavo Uribe - IRO
[email protected]
Manuela Ramirez - IR Director
[email protected]
David Olano - IR Leader
[email protected]