Good morning. My name is Daniel Zapata, Cementos Argos IR, I welcome you to our second quarter results call. On the call today are Juan Esteban Calle, our CEO, Felipe Aristizábal, our CFO, Maria Isabel Echeverri, the VP of Legal Affairs, Simon Bates, the CEO of Argos USA, Carlos Yusty, the VP of the Colombia Division, and Gustavo Uribe, the General Manager of the Central America Division.
Please note that certain forward-looking statements and information during the call or in the reports and presentation uploaded on our webpage are related to Cementos Argos SA and its subsidiaries, which are based on the knowledge of current facts, expectations, circumstances, and assumption of future events. Various factors may cause Argos' future results, performance, or accomplishments to differ from those expressed herein.
The forward-looking statements are made to date. 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. All discussion of the financial operational results held during the call will be based on digested figures, excluding non-recurring and non-core operations.
For a detailed reconciliation of the adjustments, please refer to the annexes of our quarterly report. Today, after the initial remarks, there will be a Q&A session. If you have any question, please raise your hand by pressing the icon at the bottom of your screen at any time during the conference. We will record this session and upload it to our webpage. It is now my pleasure to turn the call over to Juan Esteban.
Thank you, Daniel Zapata, and good morning, everyone. To start, I would like to address the positive development of the SPRINT program, launched in February, with the main objective of closing the gap between the market price and the fundamental value of the company throughout a series of initiatives. Since its launch, the share price has risen 60% in dollar terms and 28% in pesos.
As a reminder, the SPRINT consists of five pillars. First, focus on strong financial and operational results with a special emphasis in profitability. Second, increase dividend payments to shareholders by 15% year-over-year, for a total of COP 445 billion in 2023. Third, implement a COP 250 billion share buyback program. Fourth, continue to work on listing our business in NYSE. Fifth, improve the liquidity of our common stock by designating a local market maker.
Regarding the first pillar, we achieved outstanding results for the first half of the year. Revenues for Cementos Argos totaled COP 6.7 trillion, which represents a 25% increase versus last year. On the same line, EBITDA for the first semester increased 45%, reaching COP 1.3 trillion and a margin EBITDA of 19%, 256 basis points above last year's margin.
The positive results were, to a large degree, the consequence of commercial efforts made by each region to execute price increases and cost control measures to improve profitability. Regarding the dynamics for the second quarter, we evidence a continuation of the market fundamentals observed during the first three months of the year.
Revenues increased 17%, and EBITDA was 28% higher, resulting in a margin expansion of 177 basis points. As for operational performance, cement and ready-mix volumes for the quarter decreased 5% and 10%, respectively, on which we will provide further details in each region.
Moving on to the second pillar, it is to note that with the proposal to distribute COP 317 billion, approved by the extraordinary shareholders meeting last June, additional to the COP 128 billion that were distributed as dividends in April, we successfully completed this pillar of our SPRINT program, which, as mentioned before, was to distribute COP 445 billion as dividends to our shareholders in 2023, equivalent to an increase of 15% versus 2022.
On the third pillar, a first phase of the share buyback program of COP 425 billion was also approved by our shareholders. With this amount in share repurchases, plus the COP 445 billion in dividends, the company will be increasing distribution to its shareholders by approximately 50% compared to last year. In the short term, we will propose to our shareholders the expansion of the share repurchase program to complete COP 250 billion.
As for the fourth pillar, I would like to reiterate that from our side, the NYSE listing of Argos USA remains our top strategic priority. We continue the preparation to execute the operation once market conditions are appropriate. Developments will be disclosed once permitted by regulations. Finally, about the fifth pillar, we have evidenced an encouraging trend that has resulted in a significant improvement of the liquidity conditions of our common stock.
When comparing the final quarter of 2022, period in which we lost repo eligibility to the second quarter of 2023, the average daily trading volume expanded by 61%. We have successfully met all the criteria necessary to be eligible for repo operations during two straight quarters, as of this moment, are complying with all the requirements to remain eligible in line with our fifth pillar.
The market maker program has been a fundamental catalyst to achieve the recent increase in liquidity. First, it has considerably decreased the bid-ask spread from an average of COP 75-COP 35 since the implementation of the market maker, incentivizing the completion of orders, and second, by ensuring that there always is a counterpart to close an order, which is very important, especially on days with low liquidity.
To give you an example, there have been trading days in which the market maker has been present in up to 86% of the operations. With this progress, we have successfully accomplished the objective of three out of five pillars in SPRINT, reaffirming our commitment to continue working on closing the gap between the market price and the fundamental value.
Before moving on to the analysis of each region, I would like Felipe to address the effect on our portfolio investment in Grupo Sura of the recently announced agreement between Grupo Sura and Grupo Argos with IHC Capital Holding, Nugil, and JGDB Holding, for the exchange of shares of Grupo Nutresa.
Good morning, everyone. That's right, Juan. Currently, Cementos Argos is an important shareholder of Grupo Sura, with a 6% stake in the common shares of the company. This stake is worth over COP 1 trillion of market value. In the context of the announced transaction, Grupo Sura will transfer their 30% stake in the food business of Nutresa, in exchange for approximately 30% of the outstanding common shares of Grupo Sura and approximately 7% of the outstanding common shares of Grupo Argos.
As a result of this transaction, the total amount of shares outstanding at Grupo Sura will decrease, which in turn will increase Argos' participation in the company. Once this process is finalized, Cementos Argos will own around 10% of the common shares of the company.
We believe this transaction will be accretive for Cementos Argos, as it materially increases our economic interest in Grupo Sura. Most importantly, it creates a clearer path for Argos to monetize and capture the value of its investment in the company, which is aligned with Grupo Argos' public statement around its desire not to control or to consolidate Grupo Sura.
Thank you, Felipe. Now moving to the regions, I would like to invite Simon to discuss the results of the U.S., where we had very solid results through the first semester and are optimistic with the market cycle going forward.
Thank you, Juan. Good morning, everyone. To start, I'd like to highlight our solid execution on price and productivity improvements in the first half of 2023. This work has had an equal positive impact across both our cement and ready-mix businesses, and has helped us deliver a record operational EBITDA for the first half, and expanded our EBITDA margin by 362 basis points year to date.
For the second quarter of 2023, revenues in our North American operation grew by 6.5% versus the same period of 2022. This result was mainly the result of improved pricing. In the cement business, the average selling price improved by 17.5% year-over-year, while volumes were 4.6% lower due to heavy rainfall in June across the southern USA and operational issues in our Newberry plant in Florida.
Our port and terminal network has been fundamental to help us meet customer demand in the tight supply conditions we recently experienced. We were better able to meet our customer needs by importing close to 15% of our cement shipments during the quarter. In our ready-mix business, pricing also remained strong, with average selling prices improving by 18.1% year-over-year. Volumes were 12.5% lower than the second quarter of 2022, as we have been carefully selecting our business to prioritize profitability.
Regarding our cost matrix during the quarter, we continued to experience inflationary pressure on raw materials, but energy prices remained stable. We expect a favorable trend from fuels, power, and freight in the remainder of the year. EBITDA reached $93 million for the second quarter of 2023, which is $18 million higher than the same period of 2022 and equivalent to an increase of 24.2%.
Delivering on our objective to expand EBITDA margins, we accomplished an expansion of 300 basis points year-over-year, reaching 21% for the quarter. I'd like to highlight that on an accumulated basis, we reached an EBITDA of $158 million and an EBITDA margin of 18.4%, which are record first half figures for Argos in North America.
In terms of segments, housing indicators are showing a recovery trend as the steep declines in home sales and housing starts have moderated. It is expected that existing home sales will lag new home sales, leading to inventories remaining low and a stronger dynamic for new home construction. The industrial and infrastructure segments continue to gain traction, as evidenced by public construction spending, which has registered double-digit yearly growth during each month of 2023.
The Inflation Reduction Act and the IIJA are expected to provide a strong boost of demand for the next 3-4 years. To end, I'd like to reinforce that the strong financial results we achieved during the first half, and our continued strong pricing dynamics, and some improving macroeconomic conditions, support a positive outlook for the rest of 2023.
Thank you, Simon. In Colombia, even with the deterioration on the sales of housing, we have not evidenced a significant deterioration on the overall country consumption of cement, and we're able to successfully deploy our pricing strategy and take important steps toward our objective to recover EBITDA margin. Carlos will now share more details on the region.
Thank you, Juan, and good morning. With an outstanding effort from the whole team in the Colombian region, we were able to achieve solid results during the first semester of the year. EBITDA was COP 328 billion, 23.44% higher than last year, and an EBITDA margin of 22.7%, with an expansion of 240 basis points.
The main pillar to achieve this result was the successful execution of price increases during the period, aiming to offset the inflationary pressures and recover the EBITDA margin. In our cement business, average prices increased 19.3%, and in ready-mix, prices rose by 22.8% year-over-year. It is worth highlighting that our efforts, coupled with a lower exchange rate, bring us closer to regional pricing levels measured in US dollars.
In terms of cement volume, we experienced a slight decrease during the first semester of 5.6%, mainly due to the contraction of 9.6% in local market gray cement volumes, which represent most of our total volumes. Volumes on the export division expanded by 13.5% due to an increase of 49% to the USA.
Regarding ready-mix volumes, they decreased 5.5% during the semester as a result of our determination to prioritize profitability and lower demand, particularly in the southwest zone of the country, where we are already deploying a volume recovery strategy. These price and volume dynamics led to revenues being 8.4% higher than the same period of last year. Regarding our cost structure, the cost of both coal and gas have been comparatively lower than last year.
To control power costs, we have signed a new supply agreement as part of our strategy to provide reliability to electricity network and reduce the variable cost via energy tariff, which become effectively since April 1st. This resulted in a reduction of 12.5% in the energy fee, which implies COP 800 million in savings during the quarter, and an estimated COP 1.5 billion in savings for 2023.
Additionally, in line with our expectations, due to the persistence of inflation in the country, fixed costs were $8 million higher due to the maintenance expenses, labor, and a major maintenance stop in our Tolú plant that was planned for the second semester, but was performed in June by $1.3 million.
Despite the lower local market volumes and a high concentration of major maintenance stops during the quarter, we reached an EBITDA of COP 147 billion, which is 8.3% higher than last year's figure, and a stable EBITDA margin of 20%. I would like also to highlight that the ready-mix business, on the yearly basis, had an EBITDA 23% higher and an EBITDA margin that improved over 267 basis points a year.
The EBITDA of the exports division was 3.9 times higher than the 2Q of the year, reflecting the successful strategy to prioritize, to prioritize our exports in our network. Before I finish my intervention, I would like to mention some key aspects of the market dynamics in Colombia. During 2023, new housing sales have declined by 61% year to date.
Construction activity has continued, supported by housing starts, which on the last 12 months, have remained relatively stable. In this segment, the low level of sales in our, is our main concern going forward. Nevertheless, the assignation of subsidies resumed in May, and recently approved budget addition for the social housing program could improve the perspective for formal residential construction in Colombia.
The government has also announced programs to tertiary road paving and housing improvements, which could provide additional demand on bagged cement, but the timing of the implementation is still uncertain. In terms of infrastructure, we are currently participating in 4 key projects, which continue to develop, to develop normally, and in other relevant projects, such as Transmilenio Soacha, Transmilenio Avenida Sesenta y Ocho, Tunel del Toyo, and Puerto Antioquia.
Also, in this segment, we are expecting new demand during the 1st quarter of 2024, given that the 5 key project, Vía del Valle, Bogota Metro, and other important projects that continue to be structured and awarded. We remain focused on improving the profitability across all business line by optimizing our client portfolio, the segments we supply, and our logistic network.
Additionally, we are advising on a very robust efficiency plan in all our cement plants. We will closely monitor market conditions across and continue deploying our strategy initiatives to adapt in a changing environment.
Thank you, Carlos. Now moving to Central America and the Caribbean, the good traction of demand dynamics for the local markets continues, especially in Panama, where solid economic conditions prompted the recovery of volumes. Also, we are very happy to announce a couple of strategic projects that are fundamental to deploy our competitive strategy in the region. Gustavo will give more detail on the region.
Thank you, Juan. Good morning, everyone. To start, I would like to make two important announcements regarding strategic milestones achieved during the quarter. First, I am glad to share that we recently entered into an agreement to evaluate possible structures that would enable us to supply aggregates along the Caribbean basin from a source in Costa Rica.
We have already made some test shipments, obtaining very fair, overall results in terms of the quality of the material and the logistics process. This means we are advancing in our strategy to diversify our revenue sources through the region and across business lines.
Second, is that we started a project to expand our cement capacity by 25% in the Dominican Republic, which is expected to be completed in 1 year. This expansion will enable us to attend better a market that is in a context of a fully sold-out capacity.
Now, moving on to the results of the quarter and the first semester of the year, of our efforts to capitalize on the opportunities and unique aspects of each country led to a positive result, essentially backed on the adequate pricing dynamics across the territories and notable market conditions in Dominican Republic and the Panamanian market, which continues in positive trend.
Despite volume affectations, mainly driven by the trading business and our operations in Haiti, revenue and EBITDA grew 3.7% and 2.8% respectively, during the first semester of the year, leading to a stable EBITDA margin of 22.1%. On the same line, revenues expanded by 2% and EBITDA by 3.4% during the quarter. Average prices of cement in local market increased 5%.
As for local cement dispatches for the quarter, volumes increased in Central America 6.4%, where Panama remains the main catalyst, while in the Caribbean, dispatches decreased 18.5% as a result of the challenging social and political situation in Haiti. Trading volumes, on the other side, increased 15.6% year-over-year.
Total volumes in the Central American and the Caribbean region decreased 2.3% during the quarter. To provide some color in each country, in Panama, we continue to evidence a recovery trend in the volumes of bulk cement segment, with a 12.3% consolidated growth when compared to the same quarter of last year, coupled with higher prices, which benefit the profitability of our operations.
We remain positive regarding our expectation for the remainder of the year, supported on one hand by the housing sector, where we expect more projects being launched in the second semester, once the preferential interest law is passed. As for infrastructure projects, works regarding the metro lines one and three advanced satisfactorily at a good pace.
During the first semester of the year in Honduras, and similar to 20 to 2022, public spending has been lower than expected. Nevertheless, volumes increased 2.3% during the semester and 5.7% during the quarter. We expect further public spending to support volume during the second half of the year and towards 2024. Guatemala has continued with its expansion trend.
Total volume sold have been growing considerably when compared to the last year, and were 28% higher during the second quarter and 36% higher during the semester. We are confident that this is an attractive market with solid fundamentals, and we'll continue to work on the consolidation of our business in the country.
The Dominican Republic continues to exhibit robust pricing dynamics, increasing 9.3% year-over-year, remaining in historic highs. Demand conditions continue to be solid, despite a minor volume decrease during the quarter of 3% versus last year. As mentioned before, we expect to capitalize over the capacity expansion so that we are able to meet our clients' needs and capture additional market share. In Haiti, the social and political situation has deteriorated significantly since the beginning of April.
We continue to monitor the situation and looking for alternatives to navigate this uncertain period. We will continue to develop business models to suit needs of each market while diversifying our portfolio and geographic scope, aiming to increase profitability along the region and take advantage of accretive opportunities.
Thank you, Gustavo. Now, referring to our debt structure, I would like to mention that during this year, we have successfully either refinanced or paid over COP 750 billion. As part of this debt renewal, we recently announced a new credit facility with Banco de Bogota for COP 272 billion, which is linked to our performance in CO2 emissions and the number of suppliers evaluated in sustainability practice.
With this new ESG-linked facility, 31% of total debt is now linked to sustainability indicators. In order to control the impact of financial expenses, during this semester, we have hedged 50% of the debt tied to Colombian CPI, with all hedges being accretive at the moment. Also, 41% of the debt tied to SOFR has been hedged using a variety of instruments such as swaps, collars, and caps.
So far this year, hedging has provided savings in financial expenses for COP 20 billion. The net debt to EBITDA ratio remains stable at 2.9 times, in line with our guidance for the year. Despite having a stable net debt and a last 12-month EBITDA sequentially higher, the indicator did not decrease due to the Colombian peso revaluation of more than 10% during the quarter.
Before I finish my intervention, I would like to reaffirm that with the strong operational results we achieved during the first semester, we maintain our EBITDA guidance between COP 2.3 trillion and COP 2.4 trillion. Usually, the first semester is around 45% of our yearly EBITDA, and with an accumulated COP 1.26 trillion EBITDA, we have already achieved 54% of our guidance.
It is important to highlight that initially, with an assumption of COP 4,800 per dollar FX rate, while currently the rate has been around COP 4,000 per dollar. We will continuously monitor this impact in our yearly results and provide a guidance update during our third quarter results call.
I would also like to reinforce our commitment towards the SPRINT program, on which we have already made considerable progress. This is a very important step, and we'll continue to work decisively across the pillars of our strategy with a main focus: to create value for our shareholders. Thank you all for your attention. Danny, we can proceed now with the Q&A session.
Thank you, Juan. Before moving to the Q&A session, I wanted to let you know that the platform of the Financial Superintendence of Colombia has presented an error when uploading the documents of the second quarter financial results.
Nevertheless, a few minutes before the call, we uploaded relevant information and the supporting documents on our investor relations website. As soon as the error on the platform of the Superintendency is resolved, we will upload the documents on that site. We will proceed with the Q&A session. The first question comes from Vanessa Quiroga from Credit Suisse.
Hi, thank you. I hope that you can hear me well. I wanted to ask you about the operational problems at the Newberry plant in Florida. If you can explain if those were related to weather or what was the issue, and if it, that's already solved? Also, if you can review what is the competitive landscape right now in U.S. and Colombia, regarding pricing, for example, different pricing strategies. Thank you.
Thank you, Vanessa. Yes, the operational problems in Florida are already solved. I would like Simon to give a little bit more color on that, and similarly, about the competitive landscape in the US.
Hi. Well, I'm sorry, problem with the microphone. I've fixed it. First on the Newberry issue, yes, we had a challenge with one of our finished mills, and post-COVID, sometimes critical spare parts are hard to come by, but we managed to locate a critical spare part for the finished mill.
That has been resolved, and we're back in full production at our Newberry facility. In terms of the competitive landscape, in terms of pricing, we've been thoroughly pleased with our ability to implement pricing in the first half of the year. We are going through a sequence of further price increases for the second half of the year.
Actually, when we look at opportunities around pricing, be it product or customer, we see some significant opportunities to continue to improve our EBITDA margins by ensuring that we provide value for our customers, but also ensuring that we cover cost inflation, which still exists in the marketplace.
I will answer your question about the Colombian landscape, Vanessa. As Carlos mentioned, volumes has been slower than last year, mainly because of the slowdown in sales of housing. Notwithstanding, prices are very strong. It is the first time in such a long time that our prices in U.S. dollars are in excess of $100 per ton.
Our midterm objective is to bring prices back at least to $110, which we consider the equilibrium price. With the expansion in margins and what we are seeing towards the future, we are fully confident that Colombia will continue generating value in spite of the challenging conditions that we are facing this year in the market.
Excellent. Thank you very much.
Next question come from Nikolaj Lippmann from Morgan Stanley.
Hi, good morning. Thank you very much for, for taking my question. Sorry, it took me a little while there to unmute. Two questions if I, if I can. First of all, can you say anything about the plans to IPO the U.S. business? Whatever you could share there would be very interesting. Sorry if you mentioned that in the beginning of the call. I logged on a few minutes into the call.
That's number one. And number two, when, when you think about your different production plans, what, what would you argue would be roughly the export capacity from the Colombian and Caribbean region, when we-- in terms of sort of the maximum that you would be able to export to the U.S.? Thank you very much.
Thank you, Nick. In terms of the IPO, I mean, it remains our top strategic priority. We are making progress. I mean, we cannot comment more than saying that it is still-
Okay
at the top of our list, that, you know, it is, it is still our main objective. We will be announcing more information once we have regulatory clearance. The only thing that I can add is that once again, it is our, our top priority. In terms of our export capacity of Cartagena, is still 1.3-1.4 million tons.
Exports to the U.S. has been increasing in a significant way this year, as Carlos mentioned in the call. We continue to leverage that important strategic advantage of Cartagena, not only to export to Central America and the Caribbean, but to continue increasing export to the U.S. market.
Thank you.
Next question comes from Alberto Valerio, from UBS.
Hi. Good morning. Thank you, Juan, for, for taking my, my question. Thank you for Argos team. My question is, is related to the guidance. We have seen, Argos peers revising up the guidance for, for the year. I would like to know what is preventing Argos to, to also, do this, this movement, maybe something with Colombia or some different demand from, from the US?
My second question, is related to Colombia margins. I would expect a, a, a little bit, gain on margins quarter, year-over-year on the quarter. It came flat with the decreasing in energy price and, and input price. If you could provide any, any color on, on this, would help, very much. Thank you very much.
Thanks, Alberto. I mean, the only reason why we are not increasing the guidance is because of the exchange rate in Colombia. Our original budget, we use an exchange rate of COP 4,800 per dollar, and we are foreseeing more like the exchange rate is going to be more closer to COP 4,000 per dollar in the second quarter.
Even though we are exceeding our budget in a significant way through the second quarter, we are still conservative regarding the end of the year, just because of the exchange rate in Colombia. Other than that, I mean, we are completely confident about the performance of our three regions in the second half of the year.
In terms of Colombia and why the margins didn't expand more than, what you saw in, in the results, Carlos Horacio will give you more color, but that it was basically related to the maintenance that was moved from the third quarter to the second quarter of the year. Carlos can complement.
Okay, hi, Valerio. Regarding the margin for Colombia, Valerio, in the second quarter, really, the margin it was about our budget. For the rest of the year, we're expecting a really higher margin than last year.
Fantastic. Thank you very much.
Okay, Valerio.
Next question comes from Steffania Mosquera from Credicorp.
Good morning. Thank you very much for the presentation. I have several questions, actually. The first one is regarding the new subsidies in Colombia, that you stated that could probably cause a recovery in, in the housing segment. I have questions regarding the process, because I understand that there are new requirements for granting the subsidies, including the Sisbén status.
Has this changed, or have you seen a more expedited process in the last weeks? Also, in the Colombian front, I would like to understand a little bit the detail on the decreases in energy prices and what is the term of the fixed contracts that you mentioned. Finally, in terms of cost of debt, you mentioned that you now have some hedges. Does the 14.8% reported cost of debt in COP that you reported for this quarter include that, those hedges?
Thank you, Stephanie. Carlos Horacio will answer the first 2 questions, and then Felipe will give you more color on your last question.
Hi, Steffania. Regarding the first question about the subsidies and the, well, really what we know, because we don't... In the reality, we don't manage the subsidies. The process is very complex. The Camacol, which is the constructions gremio, is trying to facilitate with the, well, is working very hard with the ministry, with the housing ministry, in order to get more easy this permit. Week by week, the numbers of the subsidies that has been assigned is increasing. We can't say that the permit is now totally easy, no, no, no. We are expecting in the...
The government has a compromise with Camacol that they are assigned for the rest of the year, about 50,000 more subsidies than the current subsidy that has been 35,000. We are expecting that number, which is not always important for us, really, which is actually important, but it's more important for the constructor.
Remember that they have a big number of housing in their hands, which this level of the interest rate, that is very, very complex to manage the liquidity for the constructor. The second question was the energy. This new contract is seven year, starting in April 2023. It is until 2030.
To Carlos now. Felipe will give more color on the hedges.
Good morning, Steffania Mosquera, and thank you for your question. Our overall cost of debt is close to 11%. The cost of our debt issued here in Colombia, as you mentioned, is closer to 14%. The interest expense that is already included in the financials is considering the benefit of the hedges that we have entered into recently.
Great. Thank you very much.
Of course.
Next question comes from Juan Camilo Dautt from Bancolombia.
Hi, good morning. Can you hear me well?
Yes, perfect, Juan Camilo.
Okay, thank you very much, Juan. Juan, I have a couple of questions. The first questions is in regards to your pricing strategy. How do you see it to continue, especially in Colombia, I mean, a cooling demand scenario? Do you think the market will be able to support and resist more further price increases in coming months in light of the lower dynamism in the overall sector?
The other question is in regards to cement and clinker imports. Do you see if we are any place close to maybe find maybe a point when those imports could have more dynamism in light of the its difference and its gap to the local price? Appreciate any color on that. Thank you.
Thank you, Juan Camilo, for, for your question. We still consider that prices in Colombia are below equilibrium and below import parity, on average, in the country. We have been doing a significant effort to bring those prices closer to equilibrium. In our opinion, probably this year we, we will not, we will not have, like, more chances to continue adjusting prices.
Midterm, our midterm objective continues to be to bring up prices to at least $110 per ton. We are at $100, for the remaining of the year, what we foresee is stability in prices. Regarding imports, since prices are still below import parity, prices in general, on average in Colombia, we don't foresee major pressure from, from imports for the second half of the year.
Thank you very much.
Next question comes from Juliana Aguilar, from Corredores Davivienda .
Hi, everyone. Can you hear me?
Yes, perfect. We can hear you well.
Okay, thank you for having my question. I would like to ask you something about the investment in Grupo Sura. There is any plan that the company has to disinvest after the transaction, the participation on Grupo Sura, or that is still unknown until the operation is completed?
My second question is to understand a little bit more about the market maker that you hire, and how has been the impact in the volumes? 'Cause I couldn't hear at the beginning of the conference the impact of the market maker that you hire in the first part of the year. Thank you.
Thank you, Juliana. Felipe, explain that easier, finally, after the closing of the transaction with Grupo Sura, we will increase our stake in Grupo Sura in a significant way. In our opinion, after the announcement that Grupo Argos made regarding its objective with Grupo Sura, we see a good opportunity for us to monetize that extremely valuable position. On the market maker, Felipe will give you more color.
Sure, thanks, Julian, for your question. We designated a market maker back in February of this year. We've seen significant improvement in daily liquidity, which has improved by 60% when compared to average daily liquidity in the prior trimester.
We do believe that, I mean, we have achieved the objective of having our common shares being eligible for repricing transactions, as stated in the context of the SPRINT program. We're very pleased with the results of this initiative, and we expect to continue having this designated market maker improving the liquidity in the trading of our stock.
Okay, perfect. Thank you.
Next question comes from Felipe Barragan, from BTG.
Hi, good morning. It's actually Gordon here. Hope you're well. Thank you very much for the call. Just 2 questions, both of them on the strategic initiatives in CCA. The first is on the initiative for the supply of aggregates in the region. Does that imply a JV, or is it an acquisition in Costa Rica that you're contemplating?
The second question on the Dominican expansion, I noticed that your guidance for CapEx didn't change. Is that CapEx already incorporated, or was it already incorporated since the beginning of the year in your guidance? Is this CapEx gonna be more of a 2024 event? Thank you.
Thank you, Gordon, for, for your questions. I mean, regarding the opportunity in Costa Rica, it is going to be an acquisition. I mean, we foresee a, a significant opportunity to have an export platform in Central America and the Caribbean of aggregates. This is going to be, like, one of the first steps that we take in order to make that a, a reality. Regarding the CapEx question, I will ask Felipe to give you an answer.
Hi, Gordon. Thanks for your question. As you mentioned, this is CapEx that is gonna be incurred in 2024, so it is, our guidance for 2023, remains unchanged.
Perfect. Thank you very much.
Of course.
Next question comes from Francisco Suarez from Scotiabank.
Hello, apologies for my mic. Congrats for the results, impressive results, gents. The questions that I have are 2: basically, the liquidity on the shares have dropped significantly. Is there any plans to actually convert the preferred shares into common shares just to improve the overall liquidity and create a single stock structure? Is that something that might be in your plans?
The second question related to... It's a follow-up on Gordon's question as well. The if I remember correctly, you already have a plant that you purchased long ago. Will you be using that plant to the expansion in the Dominican Republic? Is that part of your plans, or if that is going to be something that you will decide, shortly, perhaps, for, for expanding capacity in Cartagena? Thank you.
Thank you, Paco. The question about the Dominican Republic, I mean, Gustavo will be able to give you a little bit of more color. Can you remind me the first one, please?
Yes, the first one was if there are plans or perhaps you are might be considering creating just a single stock structure, because the liquidity of the common shares have dropped significantly. Perhaps converting the preferred shares into common shares might help a little bit to the overall low liquidity on the existing shares.
Thank you, Paco. I mean, as part of SPRINT, I mean, we have contemplated all of our options, including the one that you mentioned, and we will be considering all the options in the future.
Got you.
So far, we're extremely happy with the result of SPRINT, but for sure, we have more, some more options that we will look at. Thank you for the question.
Thank you.
Paco, a pleasure to say hello. Regarding the Dominican Republic question, we are expanding our current facilities with installation of a pre-grinding process. It's a 5% increase through pre-grinding.
In terms of additional export capacity, Paco, it is something that in our long-term strategic plan, we will contemplate, and it could include expansions here in Cartagena or in other preferred location in the Caribbean. It is something that we have in our medium-term strategic plan.
Perfect. Can I ask just another question? This year is going to be wonderful in terms of overall free cash flow generation for you guys. If a way to improve the overall free cash flow conversion ratio could be actually getting rid of the local debt that is very expensive, and to be honest, it doesn't reflect well the overall risk profile of the company, given your overall exposure to the United States. The question is, why not paying more local debt that is so expensive?
A good question, Paco. It is in our plans. Felipe will give you more color on that.
That, that's right, Juan. Paco, yeah, we, we, we are in the process of pushing down more debt on the US operation so as to better match the, the, the cash profile generation of the business and also improve the overall cost of debt. We do expect that by the end of the year, a significant portion of our total debt would be denominating in dollars with a significant lower cost associated to it.
Makes total sense. Thank you so much. Take, take care.
Thanks. Juan, we have no more questions.
Okay. No, no. Thank you so much for connecting to our call, and looking forward to the third quarter results call in the near future. Have a great day, everyone.