Acquisition of cement assets in the US

Cementos Argos
August 2016
Martinsburg Plant, US
1
DISCLAIMER
This document contains forward-looking statements and
information related to Cementos Argos S.A. and its
subsidiaries (together referred to as “Argos”) that are
based on the knowledge of current facts, expectations
and projections, circumstances and assumptions of future
events.
Various factors may cause Argos’ actual future results,
performance or accomplishments to differ from those
expressed or assumed herein.
If an unexpected situation presents itself or if any of the
premises or of the company’s estimations turn out to be
incorrect, future results may differ significantly from the
ones that are mentioned herein.
The forward-looking statements are made to date and
Argos does not assume any obligation to update said
statements in the future as a result of new information,
future events or any other factors.
Argos’ Innovation Center
2
Martinsburg plant: perfect fit with our current footprint
Rated as the US most energy efficient plant
Cement plant
New York
Cement terminal
Transportation capabilities
Rail
Barge
Truck
Solv ay
579 km
Bessemer
Pennsylvania
370 km
New
Jersey
Ohio
Martinsburg plant
Pittsburgh
305 km
Fredrick
Martinsburg
West
Virginia
Unique
Market
Opportunity
Due to the merge between HeidelbergCement
and Italcementi, they had to divest in order to
meet conditions from US regulators
grinding capacity
1.6 M MT
clinker capacity
*Pittsburg and Cesapeake with water and rail access
8 terminals
4 with water access
5 with rail access*
177 k total storage
Baltimore
Virginia
WashingtonAnnapolis
D.C.
241 km
Ashland 370 km
418km
New port New s
Chesapeake
New assets
2.2 M MT
Maryland
144 km
64km
Delaware
+29%
installed
cement
capacity in
the US
3
A profitable transaction with positive outlook
Transaction
amount
USD 660M
2017E Multiple
10x EBITDA
 US recovery: Housing & Highway Bill
 Operating leverage through increased
utilization
 Potential for price improvement driven
by favorable price dynamics
Normalized Multiple
2019 - 2021
7.7x EBITDA
Comparative multiples / MT (integrated plant)
Network of 8
USD 300 / MT
Greenfield
US
Recent US
transactions
LafargeArgos 2011
in USA
USD 400 /
MT
USD 200 280 / MT
USD 220-230
/ MT*
terminals
VulcanArgos 2014
in USA
USD 247 /
MT*
add value
through an
optimal
footprint
*Assets acquired at a time with negative EBITDA generation
Source: Cementos Argos estimates
4
Acquiring a world-class efficient plant
Key Highlights
Brand new, state of the art
plant commissioned in 2009

Marginal capex required in short term
1
Recognized as the most efficient plant in
the US
2
Ranked #1 plant in the US in energy
efficiency
3
Ranked #14 plant in the US in labor
productivity
4 89% reliability factor in 2015
Cement storage dom, Martinsburg
5
Limestone reserves: 54 years at full capacity
6
Energy star certified in 2014 and 2015
7
NESHAP compliant
Currently it has a supply agreement to use alternative fuels
with flexibility to adjust cost structure and increase savings.
5
With Privileged location in the Mid-Atlantic
Regional leader and has experienced
strong growth in core and nearby markets
Core states:
 West Virginia
 Pennsylvania
 Maryland
 District of Columbia
Nearby states:
 New York
 New Jersey
 Ohio
Increasing our demographic share in the US
Before Martinsburg
After Martinsburg
Reaching an important urban
region
19%
Of US total population
70,7%
+39%
29,3%
29,3%
6,5%
12,3%
Population Actual Argos
Population Others
Population increase vs
Argos before acquisition
51,9%
Population Actual Argos
Population New core
Population New nearby
Population Others
158 M
Argos’ states
total population
+20 bps
Expected population
growth above US
population (20162020)
6
Strong fundamentals with better dynamics for Argos
states give a positive outlook for construction…
5.1% CAGR expected in Construction Spending for Argos
states
Real GDP growth for Argos states above total US
3%
1.003
3%
2%
1.153
1.210
533
563
591
2018E
2019E
2020E
507
USD (Bn)
485
1.095
1.045
2%
1%
2016E
2017E
2018E
Total USA
2019E
2020E
517
2016E
101
50
109
51
117
54
565
597
630
2017E
2018E
Actual Argos
Housing permits (000 Units)
2019E
New core
2017E
Total US
Positive fundamentals for residential market…
93
49
2016E
Actual Argos+New core
Actual Argos+ New core and nearby
…drives cement consumption
125
57
661
2020E
8.124
5.073
8.433
5.273
8.741
5.483
7.642
4.741
7.847
4.892
31.955
33.994
36.298
38.432
40.480
2016E
2017E
2018E
2019E
2020E
Actual Argos
New core
Cement consumption (M MT)
New nearby
7
And potential to generate estimated synergies: +USD
50M
Expected value through
synergies of +USD 50 M
Logistical
 Enhance our actual plant network improving
markets supply
 Redistribution of production and demand
optimizing the supply chain
 Increase usage capacity of all our plants
 New transportation assets (ports, terminals &
rail cars) bring additional flexibility that
perfectly complement our existing footprint
Administrative/operative
 Potential to begin with the RMC, enhancing
vertical integration
 Integration of assets with no capex required or
additional headcount
Transfer of knowledge
 Energetic efficiency
 Alternative fuels
985 Rail cars
+258
1,243 Rail cars
12 Port-terminals
+8
20 Port-terminals
3,151 Headcount
+198
3,349 Headcount
8
Secure funding for an accretive transaction
Transaction
amount
USD 660 M
Funded with a bridge loan with J.P. Morgan
Repaid with:
1
Divestment of non – core & nonstrategic assets USD ~350 M
•
•
Sale of a 20% minority stake in
our Panama operation to a non
controlling partner
Self generation assets 120 MW
USD 700 M
Real estate USD 60 – 80 M
100% valuation for our
Panamanian operation
USD 126 M
Transaction value
Grupo Provivienda
2
Cash generation
New assets will
generate + EBITDA
 Local partner, controlled by Federico Salazar
(Colombo-Panamanian investor).
 It is part of Cusezar Group
No material increase in our
current level of indebtedness in
the short term
9
Improving figures amid market recovery
Higher Revenue CAGR driven by pricing recovery (USD M)
Volume growth in a mature market (k MT)
1.306
149
1.408
1.314
131
126
2013
2014
2015
2013
Potential growth for EBITDA as margin still below
normalized levels
28,3%
45
40
22,9%
22,8%
30
,0
%
25
,0
%
35
30
20
,0
%
25
2014
2015
Volume growth in the Martinsburg, Frederick,
Baltimore area as the company benefited
from a market recovery; improving market
scenario in the Newport News, Chesapeake,
Ashland area
15
,0
%
20
15
10
,0
%
10
5,0%
5
0
0,0%
2013
2014
EBITDA (US$mm)
2015
Strong bulk pricing growth at Frederick,
Solvay, and Newport News; recovery in the
Bessemer and Leetsdale area due to a
positive price impact with constant volumes
EBITDA margin %
*Pro-forma figures of the acquired assets
10
CONTACT
INFORMATION
IR TEAM
MANUELA RAMIREZ
[email protected]
CATALINA RICAURTE
[email protected]
ANA CASTAÑO
[email protected]
www.argos.co/ir
This recognition, called Reconocimiento Emisores – IR
is giv en by the Colombian Stock Exchange, Bolsa de
Valores de Colombia S.A. It is not a recognition that
certif ies the quality of registered stock , nor does it
guarantee the solvency of the issuer.
Permeable RMC
Concrete