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Cemex Latam Holdings
BANCOLOMBIA ANALYSIS: COLOMBIAN EQUITY RESEARCH – Quarterly Results
1Q15 Financial Results Affected by Colombian and
Panamanian Operations
Financial results came below our expectations with a 16.3% decrease in sales, mainly
affected by FX devaluation, as a result lower volume coming from the Colombian region,
and higher sales to the Panama Canal that had a negative impact on profitability. On the
other hand, operating EBITDA fell 20% against 1Q14 also affected by currency fluctuations
and lower sales in Colombia; as a result the EBITDA margin changed -158 bps.
The contraction in Colombian profits was mainly driven by their decision of increasing
prices 4% vs. 4Q14 leading to a decrease in market share which impacted cement
volumes by 15% during the period. It is worth bearing in mind that on a YoY basis, cement
prices declined 1% in local currency meaning that price declines came during 2H14.
Panama displayed the same pattern with net sales dropping 6% vs. 1Q14, reaching
USD72mn; operating EBITDA fell 11%, posting USD29mn for the quarter (the EBITDA
margin stood at 39.9%, -260 bp vs. 1Q14). Domestic demand of gray cement increased
9% against 1Q14, while that of ready-mix fell 9% and aggregates’ remained flat. Higher
volumes were demanded by the Panama Canal vs. 1Q14 when the project experienced
some trouble.
Costa Rica; the positive side of financial results with an increase of 410 bp in the EBITDA
margin from 41.6% in 1Q14 to 45.7% in 1Q15, mainly because of strong demand. Volumes
of cement, ready-mix and aggregates increased 8%, 10%, and 45% YoY, respectively,
thanks to important infrastructure projects such as the Chucás hydroelectric plant and the
Northern Inter-American Road project. The top line stood at USD43mn, up 31%, while
EBITDA closed the quarter at USD20mn, up 33% YoY.
Our view
We believe financial results were below expectations which mean the company could feel
some downward pressure given the strong competition in Colombia which is having an
impact on profitability margin. With this in mind, CLH consolidated results showed a
decrease of 8% in cement volumes, while those of ready-mix and aggregates were up 4%
and 8%, respectively, far from their 2015 guidance which aims at increases of 3%, 14%
and 13%, respectively, for FY15.
We expect further improvements in the coming quarters as the devaluation of the
Colombian peso should have a positive impact on local demand as import products turn
more expensive, leading to a potential recovery in profitability margins in the Colombian
regional.
Financials & Multiples
Net sales
Operating Income
EBITDA
Net income
P/E
EV/EBITDA
P/BV
Dividend Yield
2011
2012
2013
2014
2015E
1.269.801
278.018
347.917
161.223
N.A.
N.A.
N.A.
N.A.
1.591.748
480.014
547.621
264.799
13,3
9,4
2,9
0.0
1.750.116
535.296
632.681
264.102
16,4
9,1
3,2
0.0
1.724.710
481.131
576.942
273.398
16,3
9,8
3,2
0.0
1.745.334
499.807
604.174
273.491
13,2
7,8
2,2
0.0
Source: Bancolombia
1
Building materials
I
April 23, 2014
BUY
Overview
Target Price (COP)
Previous TP (COP)
Closing Price (Apr 23, 2015) (COP)
Upside
22,253
21,644
13,440
+66%
52 Week Range (COP) ord
Outstanding Shares (mn) ord
Market Cap (COPmn)
Floating ord
ADV 12 months ord (COPmn)
Dividend Yield ord
Total Return ord
Bloomberg
13,200 – 20,300
556
7,473,370
23.8%
7,298
0%
66%
CLH CB
CLH vs. COLCAP 12 Months (base 100)
125
115
105
95
85
75
Apr-14
Jun-14
Aug-14
Oct-14
CLH CB
Dec-14
Feb-15
COLCAP
Source: Bancolombia, Bloomberg
Analysts
Name:
Phone:
E-mail:
Germán Zúñiga Saavedra
(574) 6047045
gzuniga@bancolombia.com.co
Name:
Phone:
E-mail:
Jairo Julián Agudelo Restrepo
(574) 6047048
jjagudel@bancolombia.com.co
Apr-15
Cemex Latam Holdings I
Building materials
April 23, 2015
Conference Call Main Points
As guidance on a consolidated basis, CLH expect increases of 2%, 10% and 10% in
cement, ready-mix and aggregates, respectively, below the guidance published at the
beginning of the year. According to management, this is a more conservative
guidance taking into consideration the strong impact lower oil prices could have on
the Colombian economy.
Maintenance and operating capex are expected to be around USD45mn in 2015,
mainly for the grinding facility in Antioquia and projects in Costa Rica and Nicaragua.
Maintenance works are scheduled for the second quarter which could have a
negative impact on financial results and margins.
In general, the current FX depreciation has helped offset the strong competition from
imported products in the north coast of Colombia which would help improve margin
and volume dynamics for the coming quarters.
The company is currently running at 90% of installed capacity, for which expansion
projects play a key role for future growth rates and cement supply for the 4G
concession program.
Colombia:
Decline in volumes in Colombia was driven by their decision to increase prices
which affected their market share. According to management, during March the
performance was much better than in January and February, for which they
expect this negative impact to vanish during the coming quarters, recovering
profitability and volume dynamics. In addition, Colombian currency devaluation
also played against profitability given their costs attached to COP.
The company is on schedule regarding their Colombian investment projects with
the intention of opening their new clinker line by 2Q16 in Maceo, Antioquia.
Colombia has approved funds for around USD14bn for infrastructure,
transportation and housing, which would keep positive demand dynamics. In
addition, it’s likely to be around USD21bn in additional funds to those approved
which could have an additional impact on the Colombian economy and cement
demand. These funds are divided in USD8.8bn for the first wave of the 4G
concession program, USD1.1bn for works in 39 airports, and USD4bn for
Government housing initiatives for the period 2014-2018.
In addition, USD8.9bn could be used by municipalities for PPPs (private and
public initiatives) in further waves.
Regarding housing initiatives in Colombia the company expects a meaningful
(mid-single digit) supply of cement and materials, attached to four different
housing programs which totalized 420,000 units with an investment of USD4bn.
The Colombian Government has been committed to low-income housing
projects, for which around 1.5mn people will be employed, and cement demand
will be important.
Prices in Colombia will smoothly recover as seen from 4Q14 to 1Q15 (4% on a
sequential basis for the local currency) as a result the market share will recover
as well during the follow months.
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Cemex Latam Holdings I
Building materials
April 23, 2015
Panamá:
In Panama, excluding volumes used for the canal project construction, the company
increased sales by 4% YoY vs. 1Q14.
More frequent maintenance in one of their kilns in Panama, added to the higher
proportion of sales to the canal, were the reasons for the 260-bp decrease in EBITDA
margin for the quarter, moving from 42.5% in 1Q14 to 39.9% in 1Q15.
The Government announced their intention to invest USD11bn in a 5-year public
investment that includes subway expansion, interstate highways, and water
management projects, among others.
Table 1 – 1Q15 Financial Results Comparison
USD 000
Net revenues
COGS
Gross profit
Operating profit
EBITDA
Net income
EPS
1Q15A
353.838
183.606
170.232
90.187
112.426
43.791
79
1Q15E
388.849
186.049
202.800
109.851
134.788
33.692
61
Var%.
-9,0%
-1,3%
-16,1%
-17,9%
-16,6%
30,0%
30,0%
1Q14
422.753
214.748
208.005
118.066
140.999
54.620
98
Var%.
-16,3%
-14,5%
-18,2%
-23,6%
-20,3%
-19,8%
-19,1%
48,1%
25,5%
31,8%
12,4%
52,2%
28,3%
34,7%
8,7%
-404,4
-276,2
-289,0
371,1
49,2%
27,9%
33,4%
12,9%
-109,2
-244,0
-157,9
-54,4
Gross margin
Operating margin
EBITDA margin
Net margin
Source: CLH 1Q15 financial results, Grupo Bancolombia
Table 2 – Regionals’ Detailed 1Q15 – Operating Information
EBITDA Margin
1Q15
Colombia
Panama
Costa Rica
Resto de CLH
33,7%
39,9%
45,7%
30,3%
1Q14
38,2%
42,5%
41,6%
27,1%
Volumes Growth Rate
Var bp
450
260
(410)
-320
Cement
-15%
9%
8%
-9%
Prices in Local Currency
Ready-Mix Aggregates
5%
-9%
10%
-19%
5%
0%
45%
60%
Cement
Ready-Mix
-1%
-3%
5%
4%
Source: CLH 1Q15 financial results, Grupo Bancolombia
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3 3
3%
-2%
-7%
5%
Aggregates
-1%
-2%
-5%
8%
Cemex Latam Holdings I
Building materials
April 23, 2015
Financial Multiples – Below Peers and Historical Levels
CLH is currently trading at 7.03x EV/EBITDA forward and 11.23x P/E ratio forward, above
Latin American cement companies, where P/E and EV/EBITDA stand at 20.35x and 8.79x,
respectively.
Table 3 – Regional Financial Multiples
Company
Country
Cemargos*
CLH*
Pacasmayo
Unacem
Bio-Bio
Moctezuma
Chihuahua
Cemex SAB
Average Latam
Colombia
Colombia
Perú
Perú
Chile
Chile
Mexico
Mexico
P/E
EV/EBITDA
P/BV
20,85
11,23
12,81
10,67
8,51
20,71
57,65
20,35
10,01
7,03
7,50
7,41
6,55
11,67
10,40
9,71
8,79
1,44
2,19
1,21
0,96
0,54
4,78
1,02
1,27
1,68
* Bancolombia estimations
Source: Bloomberg, Bancolombia
These multiples could be supported by the new green field project in Antioquia, Colombia,
opening more possibilities for production, backing up current plants with high installed
capacity levels.
Furthermore, if we analyzed CLH’s current multiples against its own historical trade, it
seems to be currently trading below its own track, surpassing one standard deviation,
which could send signals that is trading at a discount against its own history, supporting
our BUY recommendation.
Figure 1 – EV/EBITDA 12 Months Forward
14,0
13,0
12,0
11,0
10,0
9,0
8,0
7,0
6,0
5,0
4,0
Jul-13
Figure 2 – P/E 12 Months Forward
24
22
20
18
16
14
12
10
8
Oct-13
Jan-14
EV/EBITDA Fwd
Apr-14
Jul-14
Average
Oct-14
+1SD
Jan-15
Apr-15
-1SD
Oct-13
Jan-14
RPG fwd
Source: Bancolombia
Source: Bancolombia
1.
.
6
Jul-13
4 4
Apr-14
Average
Jul-14
Oct-14
+1SD
Jan-15
-1SD
Apr-15
Cemex Latam Holdings I
Building materials
April 23, 2015
Equity Sales
Equity Research
Rupert Stebbings
Jairo Agudelo
Equity Markets Vice President
Head of equity research
rstebbin@bancolombia.com.co
jjagudel@bancolombia.com.co
+574 6045138
+574 6047048
Natalia Agudelo Parra
Juan Camilo Dauder Sánchez
Equity Sales
Head Energy Analyst
naaparr@bancolombia.com.co
jdauder@bancolombia.com.co
+574 6045144
+574 6049821
Maria Paula Cortés Durán
Fixed Income
Head Financial & Small Cap
mpcortes@bancolombia.com.co
Pablo Caicedo
+571 353 6600 ext. 37387
VP International Business
pcaiced@bancolombia.com.co
Diego Buitrago Aguilar
+571 488 6000
Energy Analyst
diebuit@bancolombia.com.co
Economic Research
+571 7463984 ext. 37307
Juan Pablo Espinosa
German Zúñiga Saavedra
Head of Economic Research
Infrastructure and Industry Analyst
juespino@bancolombia.com.co
gzuniga@bancolombia.com.co
+571 7463991 ext. 37313
+574 6047045
Alexander Riveros
Federico Perez Garcia
Senior Economist
Oil & Gas Junior Analyst
egrivero@bancolombia.com.co
fedgarci@bancolombia.com.co
+571 7463980 ext. 37303
+574 6048172
Research Assistant
Claudia Restrepo
Research Editor
claurest@bancolombia.com.co
+574 404 3809
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Cemex Latam Holdings I
Building materials
April 23, 2015
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