CEMENTOS ARGOS S.A. Results as of September 30 , 2014 BVC: CEMARGOS, PFCEMARGOS

CEMENTOS ARGOS S.A.
Results as of September 30th, 2014
BVC: CEMARGOS, PFCEMARGOS
ADR LEVEL 1: CMTOY / ADR 144A: CMTRY - Reg-S: CMTSY
EXECUTIVE SUMMARY
1

Consolidated revenues for 3Q14 grew by 12% when compared to 3Q13, reaching
COP 1.5 trillion1 for the quarter. YTD revenues reached COP 4.3 trillion, representing
an increase of 16% compared to the same period in 2013.

Year to date consolidated EBITDA increased by 8% when compared to the same
period of 2013, reaching COP 805 billion. For 3Q14 it increased by 1% vs. 3Q13,
reaching COP 272 billion. EBITDA margin for this quarter was 18.3% and 18.9% as of
September, 2014.

USA Regional Division EBITDA reached USD 26.5 million during 3Q14, which
represented a y-o-y increase of 173%. As of September 2014, it reaches USD 52.3
million, 510% higher than that obtained in the same period of 2013.

Net income for 3Q14 reached COP 80 billion, registering a 44% increase vs. 3Q13
and a net margin of 5.4%, 118 bps higher than that in 3Q13. As of September 2014,
net income totaled COP 218 billion, 69% higher than that obtained in the first nine
months of 2013.

Volumes for the year as of September 2014 registered significant growth, with
dispatches of 9.4 million tons of cement and 8.3 million cubic meters of ready-mix
concrete, generating y-o-y growth of 9% and 18%, respectively.
For the purpose of this report 1 billion = 1.000.000.000 and 1 trillion = 1.000.000.000.000
RESULTS 3Q14
A solid third quarter where Argos continues exhibiting important increases in both revenues
and EBITDA, which have been primarily leveraged on the performance of USA Regional
Division, which is supported on the evident recovery of this market; and on the consolidation
of newly acquired operations in Florida, Honduras and Guyana.
Similarly, the results for this period demonstrate significant progress of the organizational
excellence program in which the company will continue working in the future, and which
includes important strategic projects such as the recently announced expansion of 2.3 million
tons in Sogamoso plant, the expansion of 900 thousand tons in Antioquia, the new vertical
mill at Harleyville plant (South Carolina), among other initiatives related to efficiencies in
production and distribution; that will allow the company to have what it takes to meet demand
optimally in all the geographies where we operate.
In addition, significant progress continues in terms of sustainability, a topic of great relevance
to Argos and deeply related to the current and future goals of the company.
RESULTS PER REGIONAL DIVISION
COLOMBIA REGIONAL DIVISION
VOLUMES AND MARKET PERFORMANCE
Dispatched cement volumes in 3Q14 increased by 5% when compared to 3Q13, reaching a
volume of 1.5 million tons for the quarter and 4.0 million tons as of September 2014,
representing the latter an increase of 3.4% vs. the first nine months of 2013.
For the ready-mix concrete business, as of September 2014 an increase of 5% is registered
when compared to the same period in 2013, reaching levels of 2.6 million cubic meters. In
3Q14, volume of ready-mix concrete reached 903k cubic meters, which represents an
increase of 1% when compared to 3Q13 and of 4% vs. 2Q14.
The competitive situation on the northern coast of Colombia temporarily affected volume
growth in the cement business, which through the implementation of a successful commercial
strategy, has led to reach the inflection point in mid-July 2014, showing important signs of
improvement, confirmed by increases of monthly dispatches and market share recovery.
This translates into higher growth expectations for 2015, underpinned by infrastructure
developments, residential construction and improved market dynamics supported on both,
public and private initiatives.
FINANCIAL RESULTS
Revenues for Colombia Regional Division totaled COP 1.8 trillion2 as of September 2014,
which represents a -4% variation when compared to the same period of 2013. For the quarter
a year-over-year decrease of 10% was recorded vs. 3Q13, by reaching COP 598 billion in
3Q14.
EBITDA for this regional division for the first nine months of 2014 reached COP 606 billion,
representing a decrease of 11% compared to the same period in 2013, and resulting in an
EBITDA margin of 34.0%, 270 bps below that registered as of September 2013.
This is evidence of the competitive situation in the northern coast of Colombia, where the
average price of bagged cement reached minimum lows during the quarter, condition that has
been contained to that area. The rest of geographies in the country have not been affected by
the circumstances described above, maintaining healthy price dynamics.
The outlook for the coming quarters is positive, by having the strength to continue improving
in terms of profitability, supported on both, our commercial strategy and value proposition for
our clients, as well as the transverse plan to improve the costs structure.
USA REGIONAL DIVISION
VOLUMES AND MARKET PERFORMANCE
USA Regional Division registered an increase of 60% in cement dispatches during the third
quarter when compared to 3Q13, reaching levels of 806k tons and of 2.1 million tons for the
first nine months of the year, representing the latter a 59% year-over-year increase.
As for the ready-mix concrete business, 2.0 million cubic meters were sold in 3Q14,
representing an increase of 28% when compared to 3Q13. For the first nine months of 2014,
the year-over-year increase registered is 27%, with volumes above 5.2 million cubic meters
for this regional division.
2
For the purpose of this report 1 billion = 1.000.000.000 and 1 trillion = 1.000.000.000.000
Organic contribution to this growth is generated from both, Southeast and South Central
states where Argos operates. When excluding volumes of cement and ready-mix concrete
from consolidation of Florida's operations for the first nine months of the year, growth levels of
13% and 6% are respectively registered. On a standalone analysis, a 48% pro-forma
increase in cement dispatches is recorded in Florida.
Additionally, it is important to mention that during the quarter cement exports started from the
port of Tampa to the Caribbean in order to source concrete operations in the region, reflecting
the strategic value of our port assets and solid interconnectivity of our regional divisions.
FINANCIAL RESULTS
USA Regional Division reached revenues of USD 308 million during 3Q14, representing a
46% increase when compared to 3Q13. As of September 2014, growth of 44% is registered,
with revenue levels above USD 804 million.
Operating leverage generated by the recovery in the U.S. market, allows reporting a positive
EBITDA of USD 26.5 million during 3Q14 for this regional division, which represents an
increase of 173% when compared to 3Q13. EBITDA for the first nine months of 2014
registered even higher growth reaching USD 52.3 million, in comparison to USD 8.6 million
for the same period in 2013.
These increases are the result of higher volumes achieved both, organically and thru the
consolidation of Florida´s operations, as well as the price increases that have been carried
out during the first nine months of the year in the businesses of cement and ready-mix
concrete in the states where Argos operates.
CARIBBEAN AND CENTRAL AMERICA REGIONAL DIVISION
VOLUMES AND MARKET PERFORMANCE
Caribbean and Central America Regional Division dispatched close to 788k tons of cement in
3Q14, which represents an decrease of 5% compared to 3Q13. A year-over-year increase of
8% is registered during the first nine months of the year, with volumes above 2.5 million tons
of cement.
As for the ready-mix concrete business, volumes sold reached levels above 141k cubic
meters in 3Q14, 3% below those registered during 3Q13. As of September 2014, volumes for
this regional division were 407k cubic meters, decreasing 3% when compared to the same
period in 2013 and increasing 12% vs. 2Q14.
These results reflect two counteracting factors. First, the increase in volumes due to the
consolidation of the operations in Honduras and French Guiana, as well as the construction
dynamics in each of the countries of this regional. Secondly, a significant reduction above
80% in volumes of trading business, and the decline in dispatches to the Panama Canal.
Several factors lead us to have a positive outlook on the performance of this regional division.
An example of this is the increase in our market share in Honduras during 3Q14, which is
achieved in positive circumstances due to the improvement of the institutional framework in
which the government is currently working on, creating better future conditions for
development and investment.
Another encouraging fact is Panama, where the market will continue to be highly dynamic by
its major focus on infrastructure, commercial and residential construction, making this sector
one of the main drivers of the economy.
FINANCIAL RESULTS
Revenues for the Caribbean and Central America Regional Division totaled USD 141 million
in 3Q14, representing a 27% growth when compared to 3Q13. This line reached USD 417
million as of September 2014, 22% above the result in the same period of 2013.
EBITDA for this regional division during 3Q14 registered a year-over-year increase of 72% by
reaching USD 44 million, which represented an EBITDA margin 818 bps above that recorded
in 3Q13, getting to 31% for the quarter. As of September 2014, EBITDA margin reached
29.5%, 512 bps above the result obtained in the same period of 2013.
The EBITDA margin improvement this quarter is significant. Honduras and Panama are the
main components of this achievement for this regional division, where both are examples of
success in the organizational excellence program. Panama grew by 3 percentage points in
the margin compared to 3Q13, based on significant improvements in costs. Meanwhile,
Honduras reaches levels above 50% in the EBITDA margin, supported among other, by the
use of alternative fuels, reduced energy costs and improvements in the institutional stability of
the country.
EXPORTS
Cement and clinker export volumes reached levels of 254k tons in 3T14, registering a
decrease of 24% when compared to the same period in 2013; and of 737k tons as of
September 2014, representing a decrease of 31% vs. 9M13.
This is mainly explained by the decrease of volumes of clinker dispatched to our cement
operations that attend the Panama Canal; and our focus on profitability of the exports
operations.
SUMMARY OF RESULTS
As follows a summary of the financial information consolidated and per region, as of
September 30, 2014, is presented below:
Revenues
EBITDA
COP$ Billion
2014
2013
Var (%)
2014
Mgn (%)
2013
Mgn (%)
Var (%)
Colombia
1,782
1,849
-3.6
606
34.0
679
36.7
-10.7
USA
1,558
1,042
49.5
100
6.4
17
1.6
484.1
809
631
28.2
239
29.5
154
24.4
55.2
Subtotal
4,149
3,522
17.8
944
22.8
849
24.1
11.1
Corporate
0
0
N/A
-99
N/A
-77
N/A
N/A
Other Businesses
104
139
-25.1
-25
-23.8
-27
-19.5
8.3
Florida closing expenses
N/A
N/A
N/A
-15
N/A
N/A
N/A
N/A
4,253
3,661
16.2
805
18.9
745
20.4
8.0
Colombia
918
997
-7.9
311
33.8
366
36.7
-15.2
USA
804
560
43.6
52
6.5
9
1.5
510.1
Caribbean & CA
417
340
22.4
123
29.6
83
24.4
48.2
Corp. & other buss
53
75
-29.1
-63
-118.8
-56
-74.7
-12.9
Florida closing expenses
N/A
N/A
N/A
-8
N/A
N/A
N/A
N/A
2,192
1,972
11.2
415
18.9
402
20.4
3.3
Caribbean & CA
Consolidated Result
US$ million
Consolidated Result US$
CASH FLOW AS OF SEPTEMBER 30, 2014
(COP$ Billion):
INVESTMENT PORTFOLIO AS OF SEPTEMBER 30, 20143:
Company
% Stake
Price per Share
Value
Value
(COP)
(COP$ million)* (US$ million)*
Grupo Suramericana
6.0%
40,640
1,145,368
565
Bancolombia
4.0%
27,680
565,700
279
Cartón Colombia
2.1%
4,500
10,390
5
1,721,458
849
Total
* Exchange Rate as of September 30, 2014: COP 2,028.48 / USD
DEBT AND COVERAGE RATIOS
As of September 30, 2014, the financial consolidated debt of Cementos Argos reached USD
2,102 million, 43% of which was in Colombian pesos, and 57% in US dollars. The annual
average cost of debt in Colombian pesos was 7.3%, while that of debt in US dollars was
3.0%.
On a consolidated basis, as of September, 2014, debt coverage ratios continue at adequate
levels as it can be seen as follows: Net Debt / EBITDA + Dividends = 3.43x; EBITDA /
Financial Expenses = 6.00x; and Net Debt / Equity = 48.61%.
3 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 September 2014
In COP million or USD million
Real Sep.14
Real Sep.13
Var. (%)
4,252,674
3,661,063
16.2
2,192
1,972
11.2
3,265,247
2,835,386
15.2
3,012,779
2,580,164
16.8
252,468
255,222
-1.1
Gross profit
987,427
825,677
19.6
Gross margin
23.2%
22.6%
Operating revenues
US$ Dollars
Variable costs
Cost of goods sold
Depreciation and amortization
Overheads
484,865
368,694
31.5
Administrative expense
293,269
215,189
36.3
Selling expense
141,516
120,216
17.7
50,080
33,289
50.4
502,562
456,983
10.0
11.8%
12.5%
502,562
456,983
11.8%
12.5%
805,110
745,493
8.0
3.3
Depreciation and amortization
Operating Profit (before Impairement)
Operational margin
Operating Profit (after Impairement)
Operational margin
EBITDA
US$ Dollars
10.0
415
402
18.9%
20.4%
109,627
62,267
76.1
27,828
81,799
25,945
36,322
7.3
125.2
234,917
127,443
241,726
114,323
-2.8
11.5
107,474
127,402
-15.6
13,785
23,548
-41.5
Pre-tax earnings
391,057
301,072
29.9
Provision for income tax and deferred tax
138,040
166,323
-17.0
35,480
5,832
508.4
Net Income
217,537
128,917
68.7
US$ Dollars
111
69
60.6
5.1%
3.5%
EBITDA margin
Non-operating revenues
Dividends and participations
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
Sep-14
Dec-13
Var. (%)
368,956
851,849
643,862
563,725
59,817
528,013
590,989
235,305
402,435
28,240
-30.1
44.1
173.6
40.1
111.8
Total Current Assets
2,488,209
1,784,982
39.4
Permanent investments
Accounts receivable
Deferred items and intangibles
Property, plan and equipment, net
Reappraisal of assets
Other assets
156,966
62,009
2,196,876
5,511,420
3,799,697
12,339
145,898
40,254
2,047,755
4,070,292
3,525,705
16,832
7.6
54.0
7.3
35.4
7.8
-26.7
Total Non-Current Assets
11,739,307
9,846,736
19.2
Total Assets
USD$
14,227,516
7,014
Cash, banks and negotiable investments
Trade receivables
Accounts receivable, net
Inventories
Prepaid expenses
11,631,718
6,037
22.3
16.2
Financial obligations
Bonds payable
Suppliers and accounts payable
Dividends payable
Taxes, levies and contributions
Labor obligations
Sundry creditors
Other liabilities
792,759
111,400
1,189,152
140,710
78,144
81,764
29,007
500,951
289,290
192,575
533,559
68,824
195,940
69,347
27,554
344,758
174.0
-42.2
122.9
104.4
-60.1
17.9
5.3
45.3
Total Current Liabilities
2,923,887
1,721,847
69.8
Financial obligations
Labor liabilities
Deferred charges
Bonds payable
Bonus on placement of bonds
Sundry creditors
1,486,230
237,632
39,234
1,634,823
-5,310
29,007
222,158
242,455
38,189
1,746,223
-6,568
55,107
569.0
-2.0
2.7
-6.4
19.2
-47.4
Total Non-Current Liabilities
3,421,616
2,297,564
48.9
Total Liabilities
USD$
6,345,503
3,128
4,019,411
2,086
57.9
50.0
Minority interest
USD$
370,671
183
369,756
192
0.2
-4.7
7,511,342
3,703
7,242,551
3,759
3.7
-1.5
14,227,516
11,631,718
22.3
Shareholders’ Equity
USD$
Total Liabilities + Shareholders’ Equity
RESULTS CONFERENCE CALL INFORMATION
The conference call to discuss 3Q14 results will be held on Tuesday, October 28, 2014 at
10:00 a.m. Local Time (11:00 am Eastern Time).
Conference ID #: 15129402
Telephone numbers:
USA and Canada:
(866) 837 - 3612
Colombia:
01800 518 0165
International/Local:
(706) 634 - 9385
3Q14 results presentation and report are available from today Tuesday, October 28, 2014 at
the Investor Relations website of Cementos Argos: www.argos.co/ir/en/financialinformation/reports
IR CEMENTOS ARGOS - CONTACT INFORMATION
Gustavo Uribe - IRO
guribe@argos.com.co
Manuela Ramirez - IR Director
mramirezm@argos.com.co
David Olano - IR Leader
dolano@argos.com.co