Cementos Argos: Cement

THE COMPANY: Cementos Argos is a cement and ready mix concrete producer company. The firm has operations in several Latin American markets and also has a presence in North America. In Colombia, the company is the industry leader with a 50% market share. It is the fifth-largest cement producer in Latin America with investments in Panama, Haiti, the Dominican Republic, St. Martin, St. Thomas, Antigua, Dominica, Surinam and Curacao. It is the second-largest producer of cement in the south-east US and the fourthlargest ready mix producer in the US. After the recent acquisition of Lafarge’s assets in the south-east US, Cementos Argos reached a total cement installed annual capacity of 16m tonnes and 14m cu metres of ready mix capacity. In Colombia, the installed capacity is divided between 10m tonnes of cement and 3.5m cu metres of ready mix. The Caribbean region adds 2.8m tonnes of cement from the Cartagena plant and 0.5m cu metres of ready mix. Colombia contributes to around 52% of consolidated revenues, while the US operations are responsible for 27% and the Caribbean for almost 20%. Colombia’s cement market has presented an attractive dynamic in the last 10 years, with about 8% CAGR. Nevertheless, domestic consumption is still below the country’s installed capacity. While the former was 10.5m tonnes in the past 12 months, the latter was around 16m tonnes. Meanwhile, since 2011 the Caribbean region has presented interesting growth rates mainly due to infrastructure projects in Panama, and the reconstruction of Haiti after the earthquake. On the other hand, the US cement market has been affected by the macroeconomic environment in recent years, though in the past months sold volumes have shown signs of recovery and prices have stabilised. In the past 12 months the company reported consolidated revenues totalling $2.4bn. This positive revenue performance was supported by the favourable market conditions in Colombia, the inclusion of the acquired assets’ operations and the encouraging signs of construction in the US, as well as the building and infrastructure trends in the Caribbean. Cementos Argos is listed on the Colombian Stock Exchange. The company is majority owned and controlled by Grupo Argos, which has a participation of 60.7%. The remainder is floated and is held by local institutional investors, foreign equity funds, corporations and individuals. Cementos Argos’ market capitalisation totals almost $6.6bn, its share stands at 3.9% in the COLCAP index, and the company trades a volume daily average of $2.3m.

DEVELOPMENT STRATEGY: Over time the company has added production capacity to meet demand in all regions where it has a presence. It has also developed a large logistics infrastructure network that allows it to transport raw materials and finished products easily at competitive costs. Cementos Argos has four ports in Colombia, three in the US, and port facilities and terminals in other Caribbean countries.

After the recent acquisition of Lafarge’s assets, the company was able to vertically integrate its cement and ready mix businesses in the US. In this sense, the Cartagena plant expansion may now be used to supply the growing domestic market or to meet demand in the Caribbean. Moreover, Cementos Argos announced its plan to expand its installed capacity in Colombia by 0.9m tonnes of cement, mainly concentrated in the Rio Claro plant. This investment of $93m is located in the centre of the country, where nearly 60% of the cement currently shipped is consumed. It will begin operations in the first quarter of 2014 and is expected to enable the company to participate in projects such as the roadway fourth generation concessions, the 100,000 housing programme promoted by the government and other infrastructure initiatives. The above is relevant since the positive outlook in the regions where Cementos Argos operates will be the driver of growth. The firm is ready to participate in the infrastructure drive in Colombia, growth in the Caribbean and the recovery of the US market.