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2Q14 Results: Cemargos - Underperform

Inorganic growth boosted financials; local operations showed some weakness in 2Q14

Price: COP 11,600; Target Price: COP 9,950

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July 24, 2014 (www.investorideas.com newswire) The company released its financial results for 2Q14 reporting double-digit growth along its operating and bottom-line figures. However, we highlight that growth was mainly driven by inorganic growth coming from the operations acquired in USA, Honduras, and French Guiana. On the other hand, the operations in Colombia posted a weak quarter with revenues and EBITDA falling 3.4% and 15.7% y/y, respectively. Given the negative performance from the operations in Colombia we highlight that financial results were below our expectations, especially on EBITDA and the net earnings.

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During 2Q14 consolidated cement volumes grew 13.8% y/y (3.26 mn MT), while concrete volumes increased 21.6% (2.92 mn m3). Growth in volumes include a full quarter of Honduras and Florida, while Argos also consolidated 81 days from the operations of French Guiana. Despite this positive result driven by inorganic growth, we highlight that operations in Colombia showed weakness.

The negative performance from this regional was mainly related to weak volumes and prices. In addition, there were also non-recurring expenses related to the distribution center in Cartagena and the closing of a grinding facility in Barranquilla that have resulted in COP 43,000 mn. Nevertheless, we highlight that Cemargos expects to increase efficiency through these actions. On the other hand, we highlight that the positive effect from the new operation in Honduras was partially offset by lower volumes of concrete in Panama due to a strike in the Panama Canal operation.

On the positive side, the company continues to post a favorable turnaround in the USA operation. During 2Q14, Argos posted COP 47,000 mn in EBITDA relative to a negative figure of COP 13,000 mn reported in 2Q13.

Regards,
Credicorp Capital

La información contenida en este mensaje es confidencial y para conocimiento exclusivo del destinatario. La información y opiniones contenidas en este mensaje pertenecen únicamente al remitente, excepto cuando en el cuerpo del mensaje se establezca lo contrario y el remitente esté autorizado para enviar dicha información con carácter definitivo y oficial de Credicorp Capital. La información relacionada con su cuenta, los extractos, informes financieros y de productos, sólo será vinculante en la medida en que sea remitida por los canales y en los formatos que Credicorp Capital determine. Las opiniones, conclusiones o cualquier otra clase de información contenida en este correo no relacionadas con los fines del negocio de Credicorp Capital, deben entenderse como personales y bajo ninguna circunstancia son avaladas por Credicorp Capital. Si usted ha recibido este mensaje por error por favor proceda a eliminarlo, y notificar al remitente. De cualquier manera, usted no debe usar, divulgar, revelar, distribuir, imprimir, copiar o adulterar en forma parcial o total este mensaje. Credicorp Capital no se hace responsable por la eventual transmisión de virus o programas dañinos por este medio. Credicorp Capital, no se responsabiliza por eventuales daños o alteraciones como consecuencia de la recepción o uso del presente mensaje.

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