honduras

Mural of premixed architectonical ready-mix, Bogotá, Colombia
Acquisition of Lafarge´s assets in
Honduras
September 2013
1
Barco Selenna , muell de Haití
Exportaciones desde el puerto Cartagena, Colombia
Mixers in the Margaret Hunt Hill Bridge, Dallas, Texas, USA
DISCLAIMER
This document contains forward-looking statements relating to Cementos Argos S.A. and
its subsidiaries (Argos) based upon management projections.
These projections reflect Argos’ opinion on future events that may be subject to a number
of risks, uncertainties and assumptions. Various factors may cause actual results to differ
from those expressed herein.
2
Argos assumes no obligation to update or correct the information contained in this
presentation.
Agenda
1. Transaction details
4
2. Honduras
7
Macroeconomics, cement market, acquired assets details.
4. Rationale
Integration of the new assets to Argos network, the Argos Model and its
potential
3
12
Mixer trucks on the 4 South Bridge, Medellín, Colombia
TRANSACTION DETAILS
4
Overview
Relevant transaction for Cementos Argos:
+ 8%
+ 15%
Consolidated
EBITDA
Cement installed
capacity
17m t
Total cement
installed
capacity
5
14m
m3
Total concrete
installed
capacity
Argos reaffirms leadership in the
Central America & the Caribbean
regional
+ 51%
Cement installed
capacity
4m t
Regional
cement
installed
capacity
+ 68%
EBITDA of
the regional
USD 163m
EBITDA
of the
regional
Transaction structure overview
Asset
Valuation
100% funded with owned
resources, coming from the
preferred shares issuance
Acquired
ownership
Honduras
EUR m
434.6
53%
Positive impact to the
balance structure
Honduras
EBITDA
6
Cash out
EUR m
231.5
EV/EBITDA
8.6x
EUR 50.5 m
With a cash out of
53% of the total asset
value, we will
consolidate 100% of
the assets
Tegucigalpa
HONDURAS
7
Honduras, a country with growth potential and strong drivers…
Favourable demographics
GDP growth
2013
74% of the
+100
90 - 94
80 - 84
70 - 74
60 - 64
50 - 54
40 - 44
30 - 34
20 - 24
10 - 14
0- 4
1000 800
(1,000)
(800)
600
(600)
400
(400)
200
(200)
-
2020
Main Drivers:
Raw Materials
Exports
Agriculture
Textile Maquila
Remittances
6%
population
under 35
years old
4%
4%
4%
3%
3%
2007
2008
2009
2010
2011p 2012e 2013e
30% of GDP
-2%
-
200
400
200
400
600
600
800
800
1,000
1000
3,000
25.00%
2,892
2,900
8%
8,4 M
representing exports
to the US
Remittances (M USD)
2,808
2,798
2,800
2,700
inhabitants
2,600
2,609
2,581
2013
2,400
2020
16% of GDP
15.00%
representing family
remittances
10.00%
2,468
2,500
20.00%
5.00%
2,300
Population
growth
2,200
2008
2009
2010
2011
Revenues from familiy remittances
Source: CELADE
High correlation with
the US economy
0.00%
2007
2012
As % of GDP
Growth potential in Honduras given low per capita cement consumption
660
252 kg/hab
390
316
Panama
Ecuador
Mexico Venezuela
Source: Company´s estimates
8
278
271
Brazil
267
Costa
Rica
248
Peru
245
Puerto
Rico
245
Chile
229
Argentina
227
Bolivia
225
205
Colombia Guatemala
205
200
191
135
105
El
Uruguay Honduras Paraguay Nicaragua
Salvador
… with a cement market with high growth potential
Cement Consumption (M Tons)
Potential for market deepening
Cement per capita consumption: 191 kg
1.7
Market share
1.8
1.4
1.2
1.7
1.6
1.6
1.7
Cement consumption
(M TMPA)
Total market (2012):
1,718,352 MTPA
1.5
1.4
1.3
6%
53%
47%
94%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
In Honduras, the cement price is indexed in USD
Cement industry growth will be driven by:
Investment USD M
Roads
680
Airports
114
Ports
674
Energy
154
Services
30
Total
Argos
1652
Contractor
Source: Lafarge
Pre-cast companies
Ready-mix companies
4%
2%3%
4%
Distribution
Retailers
55%
Wholesalers 45%
87%
Urban Non residential construction demand (offices)
Source: BCH, Lafarge
9
Granel
Current distribution channels
Housing Deficit: 30k housing units and ~ 800k1 in need of
improvements.
1 According to the National Statistics Institute of Honduras
Ensacado
Cenosa
Source: BCH, Lafarge
Distribution
High Infrastructure needs:
Sector
2012
Others
Efficient assets with a privileged location…
Competitive advantages
Privileged location
High Operational efficiency:
Clinker/cement factor: 62%
15% in alternative fuels
Load factor ~ 93%
• Privileged location closed to urban centers
Employee force: 189 direct employees
Local partner: Advantages of having knowledge of the
local economy
Cementos del Norte
(1.5 M MTPA)
La Ceiba
San Pedro Sula
184 km
158 km
Piedras
Azules
105 km
Tegucigalpa
Piedras Azules
Argos
(1.0 M MTPA)
Cenosa
Cement Plant
San Lorenzo Port
CESUR (0.3 M MTPA)
Grinding facility
Ownership structure
Private
Funds*
45.9%
Port
Argos
53.28%
Overview of the acquired assets
Integrated Plant
Piedras Azules
Piedras Azules: Dry process integrated
plant
Minority
shareholders
Cement capacity: 1 M MTPA
Limestone reserves: 100 years
Important puzzolanic reserves
10
0.9%
Cementos
del Sur
(Cesur)
Grinding facility
San Lorenzo
Cesur: Grinding facility
Location: San Lorenzo
Grinding capacity: 0.3 M TPA
Port facilities
Lafarge
Cementos
Piedras Azules Plant
*IPM de Honduras (Instituto de Previsión Militar): Autonomous agency
for pension, retirement and credit funding of the military forces.
… with growing margins
Cement Volume Sold
950
900
882
874
2011
2012
850
800
789
750
700
650
600
550
500
2010
Piedras Azules plant
EBITDA Margin
50%
49.7%
49.6%
49%
48%
47.6%
47%
46%
2010
11
2011
2012
Vessel in Haiti’s
port
Camiones
mezcladores
en Puente de la 4 Sur, Medellín, Colombia
RATIONALE
12
Advantages of our strategical geographic zone
Logistics synergies
given our
geographic
area, port
infrastructure and
maritime know-how
Countries with
consumption
per capita
growth
potential
Source: Cementos Argos
13
13
Balance
between
developed &
emerging
economies
Economies
with different
market
cycles
The integration of the newly acquired assets in Argos’
network
1
Bahamas
Cuba
Dom.Rep.
Lesser Antilles
5.5 M TM
0.08 M TM
0.08 M TM
1 M TM
Jamaica
Haiti
0.6 M TM
Puerto
Rico 0.07 M TM
0.08 M TM
Honduras
El Salvador
0.3 M TM
Costa Rica
Nicaragua
3.5 M TM
1.6 M TM
Venezuela
Panama
Guyana
0.2 M TM
Suriname
Colombia
Argos
14
14
14
Acquired
assets Ecuador
Cement
plant
Grinding
station
Terminal
Argos
Model
French
Guyana
Honduras is located within
our strategic geographic
area
The integration of the newly acquired assets in Argos’
network
1
Bahamas
2
Cuba
Dom.Rep.
Lesser Antilles
5.5 M TM
0.08 M TM
0.08 M TM
1 M TM
Jamaica
Haiti
0.6 M TM
Puerto
Rico 0.07 M TM
0.08 M TM
Honduras
El Salvador
0.3 M TM
Costa Rica
Nicaragua
3.5 M TM
1.6 M TM
Venezuela
Panama
Guyana
0.2 M TM
Suriname
Colombia
Argos
15
15
13
Acquired
assets Ecuador
Cement
plant
Grinding
station
Terminal
Argos
Model
French
Guyana
Honduras is located within
our strategic geographic
area
Potential for synergy
generation: operating,
administrative and
distribution
The integration of the newly acquired assets in Argos’
network
1
Bahamas
2
Cuba
Dom. Rep.
Lesser Antilles
5.5 M TM
0.08 M TM
Honduras is located within
our estrategic geographic
area
Potential for synergy
generation: operating,
administrative and
distribution
0.08 M TM
1 M TM
Jamaica
Haiti
0.6 M TM
Puerto
Rico 0.07 M TM
3
0.08 M TM
Honduras
El Salvador
0.3 M TM
Costa Rica
Nicaragua
3.5 M TM
1.6 M TM
Venezuela
Panamá
Guyana
0.2 M TM
Suriname
Colombia
Argos
16
16
13
Acquired
assets Ecuador
Cement
plant
Grinding
station
Terminal
Argos
Model
French
Guyana
Potencial to adapt the Argos
Model and to offer value
added products
The integration of the newly acquired assets in Argos’
network
1
Bahamas
2
Cuba
Dom.Rep.
Lesser Antilles
5.5 M TM
0.08 M TM
Honduras is located within
our strategic geographic
area
Potential for synergy
generation: operating,
administrative and
distribution
0.08 M TM
1 M TM
Jamaica
Haiti
0.6 M TM
Puerto
Rico 0.07 M TM
3
0.08 M TM
Honduras
El Salvador
0.3 M TM
Costa Rica
Nicaragua
3.5 M TM
1.6 M TM
Venezuela
Panama
Guyana
0.2 M TM
Suriname
Colombia
Argos
17
17
13
Acquired
assets Ecuador
Cement
plant
Grinding
station
Terminal
Argos
Model
French
Guyana
Potencial to adapt the Argos
Model and to offer value
added products
Argos Model, understanding each client, adding value through a
segmented proposal with replicable results
Argos Model
One high-value
brand
Differential
service
Commercial
assistance
Value propositions for retail customers
Technical
assistance
Technological
platform
Value propositions for industrial customers
Promote our customers’ business growth
Tailor-made concrete solutions based on a unique
understanding of each project
Develop initiatives to create demand
Access to technology and equipment (on-site plants, placement
equipment)
Proximity and ease of access to our products
Specialized technical assistance: Durability, concrete
technologies
Recognition and use of our brand
Lead time optimization
With proven results
Satisfaction, loyalty and brand
recognition steadily maintained
above international standards.
Top of Mind
Argos is one of the 10
top of mind brands in
Colombia
18
We are participating in different high
impact infrastructure projects in the
three regional divisions.
Canal de Panamá
With the opportunity to offer a value proposition in Honduras…
Our Argos Model will allow us to:
Honduras today
Adapt our value proposition to the specific economic dynamics
of Honduras
6%
Capture value through market segmentation (retail and
industrial customers)
2012
Bagged
2012
Bulk
55%
Offer a product under one emotionally binding brand
Establish a distribution model adding value to our end
customers, as accomplished in Panama and Colombia
Argos Model
45%
Wholesaler
Retailer
94%
Panama
Colombia
21%
Bagged
Ensacado
2006
Bagged
Ensacado
34%
2006
Granel
Bulk
Granel
Bulk
66%
79%
33%
Bagged
Ensacado
2012
67%
19
Granel
Bulk
46%
2012
Bagged
Ensacado
54%
Bulk
Granel
Conclusions
We accomplish the goals that were set and communicated to the public within
the context of the shares emission, using the resources of said emission to
generate value for all our shareholders.
We are consistent with our growth strategy:
Geographical area with potential of interconnection
Strong economic and demographic indicators
The acquired assets will be incorporated into Argos’ current network,
creating operational synergies.
The assets have high operational efficiency and are exceptional EBITDA
generators, which makes this acquisition a profitable transaction even without
including the potential for synergies.
We are taking advantage of the historical momentum of the industry and our
capacity of integration.
We maintain our financial solidity and flexibility, using the resources raised
through the emission of preferred shares to finance the expansion.
Argos. Green Light.
Argos Panama plant
20
Mural of premixed architectonical ready-mix, Bogotá, Colombia
Acquisition of Lafarge´s assets
in Honduras
September 2013
21
Barco Selenna , muell de Haití
Exportaciones desde el puerto Cartagena, Colombia