Earnings Call: Q3 2024

Nov 15, 2024

Summary

YTD revenue was stable at COP 11.5 trillion while EBITDA rose 39%, with net profit boosted by major transactions. Infrastructure specialization advanced amid lower consolidated debt, weather-related energy pressure and ongoing portfolio restructuring.

Thank you all. I want to thank you for your presence today. This conference will be focused on presenting the financial results for Grupo Argos for the close of the third quarter 2024. In this space, we have Jorge Mario Velásquez, President of Grupo Argos, Alejandro Piedrahíta, Vice President of Corporate Finance for Grupo Argos, Rafael Olivella, Vice President of Public Relations for Grupo Argos, Mauricio Ossa, President of Odinsa, and María Clara Aristizábal, our Manager of Green Development Business, Pablo Arroyave, Vice President of Corporate Finance Odinsa, and then we have Ana, President of Pactia. I want to remind you all that on our website, we have placed all the information for the quarter together with the presentation that will be following during this teleconference. To download it, you can go into the menu, financial information, afterwards into the section reports. We are also transmitting this conference through the space of X. We want to invite you to move on to slide number 3 of the presentation so we could start. We want to give the word to Jorge Mario Velásquez, President of Grupo Argos. Thank you. Good morning to you all for being with us during this call. We will be sharing all the strategic advancements and the results for this third quarter of 2024. That has been very fruitful, as we will be able to share with you all. Our businesses have kept showing positive results, which has been reflected in positive figures that are consolidated for Grupo Argos, and that we will be sharing up next. Nevertheless, before presenting the financial results of the company, I want to share with you about some matters and recent announcements about the future of Grupo Argos investment in Grupo Sura. Last 25th of October, as you might all know, after the authorization that happened during the board in terms of potential conflicts of interest, Grupo Argos, previous to the approval of the board, described a memorandum of understanding with Grupo Sura. In virtue of this agreement, both parties committed to explore exclusively, and if possible, defining a transactional structure that has as a result that Grupo Argos and Grupo Sura will start being investors in a future business, both direct and indirectly. The transaction structure that is object of study and is being explored right now under the framework of this memorandum of understanding must guarantee an equitable treatment to all the shareholders of the companies that have been intervened. This has to be financially feasible, accounting feasible, and legally feasible in terms of execution also. When each one of the parts continue deepening its specialization, developing their business plan in the long term. This memorandum of understanding is aligned with the objective of reducing, in an orderly manner, crossed participations with Sura. Consolidating with the specialization of Grupo Argos, the management of the infrastructure investment, and guaranteeing the continuity of the business plan, opening a new chapter within the history of value generation of this company that we believe is important to place under context. That is why I want to come back to history. In 1978, a group of businesses within which we had Grupo Argos established a cross-participation structure and non-controlling with the purpose of driving the growth of the region and the growth of the country. It advanced in such way, a way of making businesses focused on positive impacts for the shareholders, clients, collaborators, communities, and for society in general. Today, 46 years afterwards, I want to start by recognizing that this structure has been fundamental for the growth, internationalization, the stability of the companies that have contributed to the development of strategic sectors of the Colombian economy and to all its related groups. When this was established, the investors were seeking for diversification. Nevertheless, the context changed with the opening of the economies and with the sophistication of the markets and the investors, by which we've moved to a world where capital's free flow and investors prefer to manage the diversification according with their own preferences, reason by which the cross-participation structure has become an investment alternative that is less attractive than what it was in the past. When someone purchased, in that time, a share of Argos, they were also accessing to a participation to a business group, Grupo Sura, and to a food group, in that time was Grupo Nutresa. That was a way of exposing to a proxy of three very important sectors of the Colombian economy. That diversification is preferred by the investors according to their own preferences. Grupo Argos, its strategic investments and portfolio investments, I must say this with pride, are leaders in their sectors with presence in all the American continent and are ready to take up the next step in terms of growth and consolidation. We consider that the simplification of the shareholder structure could become the main milestone in terms of value transfer and revelation to all the shareholders of Grupo Argos, and will be aligned with the appetite of the global investors and the market trends. Keeping, and I want to emphasize on this, simultaneously, the essence of the business philosophy, which is the positive impact over the rest of the related groups at revealing value for its shareholders. This new structure can also enable unexplored growth avenues that two super companies in terms of their equity, focalizing their businesses and with a more important role in the global context, could generate lots of growth and avenues of growth for its shareholders. Grupo Argos portfolio has experimented a significant transformation product of its most recent transactions, concentrating in infrastructure, a transit that will end in a 100% specialization once the company stops being a shareholder of Grupo Sura. On the slide you have in the presentation, we could see how the investment portfolio for Grupo Argos has transformed in the last 12 months. Taking as reference the values on the ledgers of our non-listed investments such as Odinsa, the urban development business, Pactia and others, and the price of the shares in the Colombian Stock Exchange of our listed investments such as Celsia, Cementos Argos, Grupo Sura, in this moment known as Sociedad Portafolio, and previously Grupo Nutresa. We can see that in terms of the third quarter of the previous year, meaning by this 2023, Grupo Argos portfolio has a price close to COP 3 trillion, reaching COP 19.3 trillion. This increase is supported in the close of strategic transactions and in the fruitful operational performance of our business. From another side, the disinvestment in Grupo Nutresa and the operations such as the ones we mentioned about cement materials, have allowed that for the infrastructure segment to increase, reaching two-thirds of the value of our investment portfolio of the company, aligned with the strategic route in order to keep on specializing it in the infrastructure sector. Now, I want to invite you to move on to slide 4, where we want to go over the breakdown and the evolution of separate expenses of Grupo Argos. It's important to remember that when we share the same company registration number than Grupo Argos, the administrative expenses of the separate financial states include both the structural expenses of the holding as well as those associated to the urban development business. Which as operational units inquire in expenses such as land taxes, vigilance, maintenance, and the payroll linked to its activities, which already appear reflected as lower present value in the Grupo Argos ledgers for this investment. That's why when we analyze the administrative costs of Grupo Argos, it's essential to exclude the specific expenses of the urban development business. Besides, in the last three years, some non-recurrent projects that have enabled the generation of value and the specialization of the company in terms of infrastructure, have generated superior expenses to the historic average. I'm speaking more specifically about those expenses associated to the attention of the OPA that have been launched by Grupo Sura and Grupo Nutresa, and even by Grupo Argos, that clearly do not correspond to the operational expenses of this company. Excluding the expenses associated to the urban development business and these non-recurrent projects, we focus on the expenses that reflect a daily operation of Grupo Argos as a holding, which have showed a significant drop, even lower than the inflation, with an annual growth rate of -4.5%. This once again, -4.5% between 2015 and 2023. In this same decade, the real expense reduction, the company doubled its EBITDA going from COP 2.6 trillion in 2015 to COP 5.5 trillion in 2023. It doubled the dividend distributed to its shareholders, going from COP 234 billion in 2015 to COP 548 billion to 2023, and reduced its consolidated debt, was to half in respect with its peak during the pandemic. The relation between the expenses of the holdings in the last 12 months, excluding the expenses of sales and land taxes of urban development business, as well as not recurring expenses for mergers and acquisitions, depreciations and amortizations, which reached COP 78 billion as a referendum value over our portfolio, this is lower than 0.5%. In terms of what we've covered this year, I want to mention the performance of the market. We keep on advancing in our repurchase programs, such as a mechanism to transfer value to all our shareholders in a consolidated manner. The companies of Grupo Empresarial Argos have executed more than $100 million since the repurchases began. This strategy has offered a larger dynamism and liquidity to the market at the moment that it has been required. In the last 12 months, the price of ordinary shares for Grupo Argos has increased 112%. The preferential shares have increased 108%. The ordinary shares for Cementos Argos at 82%, and the Odinsa shares at 56%. In this same period, the versatile capitalization of the companies for Grupo Empresarial Argos have increased more than COP 14.5 trillion. At the same time that the shares have a price, the average volume negotiated in the stock exchange has also increased. For the ordinary share, in the average for last month, it hits over three times the same figure of last month, 2023. For the preferential shares, the average of the month is four times if we compare this with the same period. Now, moving on to the company results we have accumulated for 2024. I wanted to check slide number 6, where we can see that Grupo Argos closed this part of the year with consolidated revenues of COP 11.5 trillion, which are stable compared with the same period, 2023, and an EBITDA of COP 4.5 trillion, growing 39% compared with the same period previous year. This bearing in mind that as the result of the combination agreement between Cementos Argos and Summit Materials, the company disposed of 100% of its associated subsidiaries in the U.S., by which the involved assets in that transaction were classified as a discontinuous operation. As a consequence, the company made changes in the presentation of its consolidated financial reports up to 30th of September of 2023, reclassifying all the associated parts to the assets disposed in the U.S. to a unique net profit line of discontinuous operations. Nevertheless, as investment holding, the result of Summit Materials is kept being seen in the first line of the consolidated results for Grupo Argos, registering this as a participation method. As a result, the net profit closed in COP 7.3 trillion and the net profit for the controller in COP 4.3 trillion. These figures reflect the profits generated both for the Summit transaction as well as for the exchange of Grupo Sura shares, which are the materialization of the value that has been generated during the period that this organization has managed these investments. Leverage under the good operational results of our infrastructure investments and driven by the same not requiring events that impacted the consolidated results. The separate financial results showed that the accumulated revenues for the year closed in COP 3.4 trillion, EBITDA at COP 3.3 trillion, and net profit reached COP 2.8 trillion. Now, I want to invite you to move on to slide number 8, where we can see a summarized structure of the assets that the company manages for the close of this first semester of 2024 and how this will be consolidated and will keep on registering financial results in the Grupo Argos ledgers. We could see that despite the fact that Grupo Argos keeps exercising control and consolidation in three main operational businesses such as Cementos Argos, Celsia and Odinsa, the investments that our subsidiaries have made in the last years have led that many of the results of assets and liabilities are not consolidated line by line in its financial reports, and as a consequence, neither in Grupo Argos. Now, this is reflected as participation method in the results of each branch and afterwards in the consolidated financial results of Grupo Argos. From now on, 31% of the participation that Cementos Argos owns in Summit Materials will be reflected in our consolidated financial results through the participation method. Likewise, as the Celsia asset management business, including C2 Energía platforms or Tesorito or Laurel or Caoba, where we anticipate a great part of the growth of this branch through the associations with third-party capitals, won't be registered line by line in the financial results of the company. Likewise, the growth of the road and airport platform for Odinsa in association with Macquarie, the results of those concessions won't be consolidated either. Because of this, it's important to consider that the consolidated financial results only incorporate a minority group of the assets managed by the company. In other words, the revenues and the consolidated EBITDA won't fully reflect the operational performance of our businesses. Now, I want to invite you to move on and go over the operational results of our businesses, which is found on slide 11. Starting with Cementos Argos, that has kept focusing on the profitability and the efficiency of its operations, reaching an EBITDA growth of 4% in comparison with the previous year, despite a brief reduction of the revenues. This has allowed the company to reach an EBITDA margin of 22% up to what we've covered this year, which represents an increase of 130 basis points in respect to the first nine months of the previous year. The company represents 46% of the total EBITDA generated by the industry in Colombia, with an average participation of 35% market participation, showing the effectiveness of its strategy focused on the optimization of client portfolio and in terms of the efficiency of its operational costs. This achievement is supported in a differentiated value proposal and in a solid brand positioning as deep work in terms of processing cost optimization, which is known as a cross-cutting effort from the mine up to the market. In terms of the 31% investment of Summit Materials, the integration of the Argos USA assets advances based on what has been planned. In last call, 31st of October, CEO of Summit Materials reassured the commitment of materializing $40 million in synergies during this year, keeping the EBITDA guidance for 2024 that's placed between $970 million and $1 billion for this year, which reflects the potential of this integrated platform in order to capture value in the construction material industry. Before going down into the operational performance of our cement business, it's key to mention the communication that has been issued by Summit Materials to the market last 24th of October, where the company informed about the reception of an acquisition proposal that has been requested. Summit has started preliminary conversations with the interested party, and in consultation with its advisors, the board will evaluate the proposal in order to act under the best interest of the company and of the best interest of the shareholders of Cementos Argos. It's also important to highlight that there's no guarantee that we'll reach a definite final agreement, and that Summit has indicated that it won't make any additional comments till the board makes a decision. For the moment, we cannot offer any additional details. Please, ask from you all to understand the situation. During the quarter, Cementos Argos dispatched 2.2 million cement tons and 654,000 sq m of concrete in its operations in Colombia, Central America, and the Caribbean, with a drop of 9% and 8% in respect to the same period last year. Despite the total dispatches of cement in Colombia have shown a deacceleration product of a lower activity in the residential segment, it's important to highlight that new housing sales have started to recover, registering an increase of 23% in which we have covered this year in comparison with the same period last year, which is actually a very promising signal. As this increase together with the moderation of the inflation and the reduction of housing rates should lead to stabilization of the cement demand short and medium term. Coming back to that growth trend in the close by future, supported on the fundamentals of the economy of the country. Once the market starts its recovery, Argos will find itself as a more efficient and agile company and fully prepared in order to take advantage of the demand expansion. In the infrastructure segment, it's relevant to highlight that the main cities of the country have ambitious plans to develop public infrastructure projects in the upcoming years, which also should drive the cement and concrete demand in the upcoming quarters. In the Central American and the Caribbean region, one of the main attributes of original presence is based on the diversification of the economies and the asynchronism of its cycles. This allows us to face challenging market conditions and reaching profitable and sustainable results, taking advantage of the opportunities that emerge from the complementarity of the market and the logistics connection that Argos has developed in this region. The accumulated EBITDA for this year in Central America and the Caribbean region grew a 10% comparison in compared to the first quarters, in 2023, reaching $106 million with a very healthy EBITDA margin of 24%. Now, I want to invite you to move on to the energy business results that can be found on slide number 12. The controlling net profit for Celsia presented a growth of 8% up to this moment of the year, despite weather volatility that resulted in rainfalls lower than what we had on average, more specifically during August and September. This situation reduced the flow of the rivers and also affected the reservoirs of the system, which impacted direct with the generation of the energy of the company, but also for the national electric system. Nevertheless, despite this climate situation that has been seen through all the year, we anticipate that Celsia will close with the consolidated net profit similar or even higher than the one that was recorded from 2023. Despite the fact that the results of 2024 do not include the contribution of this investment assets in Central America that did contribute to these figures in 2023. Now, this performance reflects how solid our assets are in the energy business, demonstrating their capacity to offer reliability in the electric system in critical moments. In addition, during the quarter, Celsia reached a milestone in the energetic transition for Colombia by inaugurating the first solar energy storage system with batteries that has been installed in Colombia. This innovation integrated into Celsia Solar Palmira. This farm will increase the self-generating capacity of the plant, allowing that the energy that is created during the day will be able to be delivered during the night. This system breaks the traditional limitation of the solar energy system, extending its availability to more than the daily hours, contributing like this to the investment of the energy matrix. I believe this is the beginning of the structural transformation that our global level the energy business will suffer with the penetration of this great scale storage. In Celsia, we see this as an opportunity in order to lead this transformation in the markets where we operate. From another side, the electric project of Carreto, located in the Atlántico department, reached important advancements. Necessary equipment for its operations have already reached the work site of the plant. We will continue exploring and investing in its commitment to expand the generation of clean and efficient energy. Now let's move on to see the results of Celsia. In the second quarter, the consolidated revenues for Celsia totaled COP 1.4 trillion, representing a reduction of 5% in comparison with the same period 2023. In the accumulation of this year, revenues reached COP 4.7 trillion, reflecting an increase of 3%. The consolidated EBITDA was of COP 345 billion, showing a drop of 17%, explainable to the lower energy generation coming from the climate situation and to the deconsolidation of the assets that we sold in Central America. When we consider the EBITDA of the investment platform for Celsia, the administrative EBITDA by the organization during the quarter reaches COP 465 billion. This figure, adjusted by the sold assets in Central America, will be equal to a reduction of 3% year-after-year in the EBITDA managed by the company, which proves the resiliency of the company when we face extreme weather phenomena such as El Niño. Explained better by its balance between regulated and not regulated businesses, as well as an adequate hiring policy, and also on the balance of energy generation industries. This is key for preparing the organization for the extreme cycles that the business might face. The energy generation during the quarter was 1,030 megawatt-hour, which represents a drop of 18%. Nevertheless, we want to highlight the growth in the solar energy generation of the company with an increase of 17% during the quarter and 45% during what we've covered this year. This has been reflected in C2 Energía, which is our platform of solar farms, which closed this quarter with 339 megawatts in operation, which means 39 more megawatts compared with the previous quarter. Besides this, C2 Energía accounts with 270 megawatts in 12 projects and another 632 megawatts in different phases of development, which will add more than 1,200 megawatts of install capacity for solar energy for the company in the close future. Now, let's move on to look at the results of Odinsa on slide number 17. On August 21, Odinsa and the governance of Antioquia, and the Concesión Túnel Aburrá Oriente and Grupo Argos jointly announced the beginning of the works for the second stage of Túnel de Oriente, which is a work that will represent a CapEx of COP 1.2 trillion and an OPEX of COP 1.2 trillion and will generate more than 2,000 direct employments. Since the beginning of its operations, the tunnel has facilitated the transit of more than 42 million vehicles. This is a figure that shows the importance of the connectivity of the Department of Antioquia, which connects the Aburrá valleys and San Nicolas valleys with José María Córdova Airport. Capital for this second stage will come from the shareholders of the Concesión Túnel Aburrá Oriente and the financing of the private banking. Project will include different parts in Santa Elena 2 tunnel with a length of 8.2 kilometers. The construction of Seminario Tunnel. It is a smaller tunnel that is a bit less than 1 kilometer, and the construction of 4.5 kilometers of roads, open air roads, that will connect both tunnels. A second road for Sajonia and the broadening of the axis of Vía Loreto that will improve the mobility of the Seminario Tunnel towards Las Palmas. Second stage of Túnel de Oriente also includes the construction of the road exchange for José María Córdova Airport that is being constructed right now, which reports an advancement of 49% of its works plan and represents a significant step in the consolidation of a modern and efficient road network between both valleys, reducing the traveling times between the sub-regions that are strategic and have a very high potential for the future of the Antioquia Department. For this expansion, Grupo Argos was positively transforming the life of improving not just the regional connectivity, but also generating employment and dynamizing key segments such as building tourism. From another side, our operational assets have positive performances in terms of airport traffic. The airport platform has mobilized 51 million passengers in the last 12 months. This is an increase of 16% in respect with the same period last year, from which 46 million correspond to the International Airport of El Dorado. This is a record figure for that asset that operates at a full capacity. The performance of El Dorado Airport, which traffic grows 18% compared with the first 9 months of 2023, reflects the consolidation of Colombia as a tourism destination and business destination, and also highlights the competitive position that Bogotá has in order to become into a regional hub that will connect all the American continents. The future of the airport sector and tourism in Colombia is very promising, and Odinsa is found in an ideal position in order to capitalize the value that will be generated from these activities. We expect that our private initiatives, such as the private initiative of El Dorado Max, that seeks to expand the capacity of El Dorado Airport to 60 million passengers, and the private initiative of the new airport in Cartagena, which proposes a construction an airport between Cartagena and Barranquilla, both of them under feasibility, will keep on with a good dynamic. On the other side, with a total investment July 31, Quiport announced the restart of the expansion works for the Mariscal Sucre Airport in Quito, which is a cross-cutting investment made with their own resources that will improve the experience of the passengers and will increase the operational capacity of that airport. This project will generate 400 direct employments and approximately 800 indirect employments, and it will keep strengthening the position of this asset as one of the most relevant airports in Latin America. Moving on to the operational results of Odinsa on slide number 16. The road platform, which represents growth compared to last year. The growth of the concession share grew 15% compared with the same period, while the EBITDA of the quarter was placed in COP 154 billion with an increase of 2%. The expected TIR for Autopistas del Café closed the quarter in 22%, the Túnel de Oriente in 18%, now including the expansion. The Concesión La Pintada 15%, and Malla Vial del Meta in 11%. In airports, which figures are detailed on slide number 17. The traffic during the quarter reached 13 million passengers, growing 12% from its side. The revenues and the EBITDA of the platforms that have been measured in dollars increased 7% and 2% in respect with the third quarter of 2023. As a result, the expected TIR for El Dorado Airport, which is 18%, while Quiport reaches 11%. I want to move on to share the results of Pactia and the urban development business. In the real estate business that has been detailed on slide number 18, the effective gross revenue was COP 125 billion, representing a growth of 10% year-after-year, and the EBITDA quarter was COP 67 billion, which represents an increase of 12% year-after-year. In terms of the same assets for the accumulated year, the operational net revenue and the EBITDA grew at 10% and 12% compared to 2023. In total, we've renewed contracts for 174,000 square meters, and we placed new contracts for 62,000 square meters. Till what we've covered this year. Till the end of this period, the fund closed with an occupation of the non-hotel portfolio of 97.2%. This is an increase of 47 basis points compared with the same period of 2023 and an increase of 58 basis points compared with the same quarter. Compared, for the third quarter of 2023, the hotel sector obtained a larger growth in terms of effective gross revenues with an increase of 14%, followed by offices with an increase of 12%. In the case of hotels, the results were driven by an increase of the rate, close to 14% year-after-year. In terms of offices, nine of the 10 assets of the portfolio achieved a commercial occupation of 100% at the end of the period. Finally, in respect with the trade assets, the brand sales and the traffic increased 0.8% and 1.1%, respectively, in comparison with the same period previous year. I want to invite you to check the results of the urban development business that's found on slide number 19. During the third quarter, the urban development business kept exploring new products and strategies in order to dynamize the real estate markets in the metropolitan area of Barranquilla and the island of Barú. In the accumulation of the year, we've structured four lots in Barranquilla and one in Puerto Colombia. Besides the rural land lots in Ciénaga, with a total of 1,286 hectares, which represents significant savings of the maintenance costs, surveillance, and land taxes for Grupo Argos. Nevertheless, the business represents a drop over the previous year, which should be understood under two dimensions. From one side, in terms of the P&L, the drop of the figures response mainly to an adjustment in the reasonable value of the land lots of Pavas and Barú that were made in February and that we had previously mentioned with you, where we reviewed the future appraisal, which resulted in a provision close to COP 96 billion in the financial ledgers. It is important to highlight that this adjustment is just an accounting adjustment, and will allow to explore additional usages for landlords, which also will lead to an acceleration of the sales towards the future. In terms of the cash flow, that is the second dimension accumulated in the year, we could see a drop compared with the previous year, attributable to a larger level of the expense, more specifically on land taxes, and more specifically due to the drop of the dynamic of the Colombian market, on the Colombian housing market that has been affected by the high interest rates. As I mentioned, the trend apparently is changing towards a more positive effect. This effect obviously affects figures because the de-acceleration of new housing in 2023 has impacted initiations of 2024. Nevertheless, given the growth of new housing market in Colombia, as we already explained, we anticipate that this situation will change in the close by future, with an urban development business positioned in a privileged way in order to capitalize the recovery of the real estate market, represented in this and non-this market in Barranquilla. Now let us move on to slide number 22 in order to analyze the evolution of the consolidated debt net of Grupo Argos. In this area, the net debt closed in COP 9.1 trillion. This is a drop of 24% compared with the same period last year. I would like to stop and highlight this achievement. Since the peak of COP 17 trillion debt that had reached in a consolidated manner at the close of first quarter 2020 during the pandemic, the group has been able to reduce its consolidated debt by to close almost half deleveraging, close to COP 8 trillion. During the same period, the companies have kept on strengthening its equity and reporting solid results, which are reflected in the performance that we are sharing with you today. Separated net debt of Grupo Argos detailed on slide 25, closed the quarter in COP 1.2 trillion. This is an increase compared with the same period last year. That is mainly explained by the cash that was disbursed for the joint OPA for the shares of Grupo Nutresa that was thought for this transaction. Wanted to remind you that for this transaction, the company used COP 432 billion from its cash without going into additional indebtedness. That is why when we analyze the gross debt of the company, we have seen that this just has increased 12% in respect to the same period, 2023, growing from COP 1.6 trillion to COP 1.8 trillion. This means that the attention of the OPA for COP 432 billion was done with the available cash that the company had, without getting more debt. Despite the increase of the net debt due to a lower cash, Grupo Argos keeps a very healthy net debt indicator closing this part of the year 1.7 times. Despite the disbursement of this OPA, the company conserves or keeps a solid cash position with fixed income investments for around COP 345 million, which has a positive carry given that its performance is over the cost of the net debt. Now closing, I want to speak about sustainability and reputation, and we want to share with you a news that fills us with pride. The companies of Grupo Empresarial Argos strengthen its performance in the sustainability index S&P Global, complying 12 consecutive years being as recognized for our performance and the management of environmental, social, and corporate governance topics for more than 3,500 companies around the world. The last measurement made by S&P Global ratifies the leadership of Grupo Argos, Cementos Argos, Celsia in terms of sustainability, granting outstanding ratings, which are over 82 points over 100 possible points. From another side, in last edition of Corporate Reputation Business Monitor done by Merco, Grupo Argos, Cementos Argos, and Celsia consolidated within the companies that have the best reputation in Colombia. In this ranking edition, Grupo Argos highlighted as one of the top 10 companies with the highest reputation in the country, while Cementos Argos was positioned in place 16 and Celsia in position 49. Likewise, Odinsa entered the ranking position 152, placing itself in spot number five for the construction sector and infrastructure. This recognition marks the third consecutive year for Grupo Argos appears within the 10 most best reputation companies of Colombia and the third consecutive year as the best business group of the country. This achievement, to motivate Grupo Argos to keep on working, not just to deliver better results for all its shareholders, but also to do this in an equilibrium with the rest of its group of interests. The company firmly believes that this balance is where the key of the construction of a solid reputation is based with the valuable assets that Grupo Argos has been working for the last 90 years, as a leader of the industry. Now I want to give the word to Juan Esteban Mejía so we could receive all the questions that you might have. I want to say once again that besides this space where we have our executive team to attend all those particular points that you might consider, outside this call, both me as the rest of those in the call are more than available to answer any questions, doubts, or queries that you might have around these topics. Thank you for being with us, and let me give the floor to Juan Esteban so he can moderate the Q&A session. Thank you, Jorge Mario Velásquez. For the moment, we do not have any questions for the Q&A session. We will be giving you a couple of seconds if we receive any questions, but just wanted to remind you all that in the webpage for Grupo Argos and on the last slide of this presentation, we have the emails. You can find my email and also the investor relations group that we might attend any questions that you might have, any doubts, questions, or queries, and then well, any ongoing questions that you might have about the company. Okay. We get a question from Katherine Martinez right now, which she asks as follows: Could we drill down on the upcoming steps that will be followed for the Grupo Sura disinvestment process? Okay, Katherine, let me answer that question. Thank you for attending to the conference and then for making the question. I am not going to be evasive, but I want to be careful with the answer, and let me explain why. As I was explaining during the call, and as we also stated publicly, this is a process that has the following path. For some time now, as publicly told the market in different opportunities, in different calls with investors, that our ambitions, due to the reasons I explained during the call, was the moment to look for a property structure for both holdings, that each one can have a position of not being shareholders of the other company and due to clarity, due to simplification, due to the attractiveness of the share, and due to focusing on our own business, and we do not do that this is necessary only, but this is also very convenient for the value generation. This was the first milestone, that conviction that the moment has come to transform that crossed property, if we could call it in such way. In those moments, the organization started a very in-depth process of analyzing the different alternatives, and this has been done by companies that have supported us globally, like JP Morgan, for example, or NP Global, analyzing similar schemes that have happened in some parts of the world, such as in Japan, for example. How have this evolved, which were the alternatives that we had, or which were the regulatory implications, which were the value implications that you might have taxation-wise for the company and for its shareholders. This is a process that is still being executed, and it is a very in-depth process. In the moment that the board considered that we were in a point that was advanced enough, we called a shareholder assembly. Grupo Sura did something similar in order to remove those potential conflicts of interest that maybe members of the board might have within the analysis, more an in-depth analysis and a more decision-making process. For example, Alejandro Piedrahíta and me, we are part of the board of Grupo Sura. Ricardo Jaramillo and Francisco are part of Grupo Argos' board. The board give the possibility of analyzing these alternatives. This was the second milestone that we checked in this process. The third checked milestone was described, and we announced to the market memorandum of understanding that basically places a general framework that should lead to a mutual and exclusive effort of finding a mechanism that will allow making that transaction in an ordered manner. As I mentioned before, attending to the best interest of all the shareholders and of all the groups of interest. That memorandum, that's where we are right now. That's the part of the process where we are right now, trying to understand which are the alternatives that we will select. This is still ongoing, and there will be additional steps that we will be also announcing to the market once we're ready and once the board considers right, that are not that far away, but they're not as immediate. When we'll share the market and everyone, which is the path that has been selected to carry out this process, we'll make this in a transparent manner, with all the information for everyone to understand. But today we are not yet ready, and we have not yet approved, and I cannot anticipate this. Once this has been defined, we will generate all the necessary documentations between both organizations that will allow for this framework agreement that will allow for this to be developed. This obviously will follow all the regulation approvals and institutional approvals that are required of the diffusion and conversation with the different shareholders and investors of these organizations in order to show the path that we will follow. Simply, I just want to reinforce the message that the spirit that supports this is very clear. Why and where do we want to reach? But what I want to reinforce is that all of the alternatives that are being studied part from a premise, and that's the equality and transparency within. For there not to be asymmetric transfers between groups of shareholders, and that all the shareholders will receive a fair and just treatment, and that will allow the organizations and them as shareholders to keep on exploring and generating value. So, once again, thank you for your question. I could not go further because we basically don't have a definition of what's the path that we should follow. We're working on it, and we'll keep on working on this analysis, that it's going to be a very in-depth analysis, very comprehensive analysis that bears in mind all the variables and obviously ask for all the necessary authorizations that are required. So we have been advancing, but we are not yet ready to define what is that transitional path. I don't know if Rafael Olivella would like to complement what I just said. Good morning to everyone. Thank you, Jorge. I believe that this was very clear. Any additional topic, as Jorge said, we are more than open to answer any questions that you might have the moment that you consider. Thank you. In addition, Catherine asked if we could give her more detail in terms of deterioration that some assets have had in the urban development business and what assets are we speaking of. We have María Clara Aristizábal from the urban development business. Catherine, a deterioration corresponds to the Barú assets and Pavas assets in Barranquilla. This is because of the increase in the raw materials for the urbanism component, understanding that the appraisal of the landlord's residual value and any increase in the cost impacts the value of those assets. Post-COVID and all the disruption within the global supply chain, we saw these increases, we reflected in the costs and obviously in the value of these assets. This is Barú and Pavas in Barranquilla. Thank you, María Clara Aristizábal. Okay. Following the order, third question that we received also comes from Catherine, and she says as follows: repurchases of shares have played a key role in the recovery of the market price. But at the same time, this is having a very important impact in the floating price, reducing the possibility of going into international indexes. She asks if we are bearing this in mind for the future repurchasing program steps. Let me allow Juan Esteban Mejía here to answer this. What I would say as well, and coming back to what Mario mentioned at the beginning of the call. Since the beginning of the repurchase program that started in March, February last year, 2023, shares have had a very positive performance, almost doubling their value. At the same time, Catherine, the liquidity and the transactional volume has increased. This, in the past, has been the main indicator for the entrance or for the increase of the weighing of Grupo Argos in these indexes. Since the beginning of the program, the preferential share of Grupo Argos has been negotiated four times more, and the preferential one, three times more. This obviously has had a distant effect there, which leads to a higher weighing of the index. We are also seeing that if Grupo Argos maintains the liquidity indexes that we have had in the last couple of months, we would be eligible to access other indexes. We do understand the point that you mentioned, and the measure that we repurchase shares, the floating price drops a little bit. But in the measure that the companies are more valuable and the shares are more valuable, this leads to a virtuous loop and we will be able to access other indexes and there will be more purchases. I hope that this answers the question, but we could go into more detail if you think so. In addition, we have an additional question from Sebastian Gallego. Good morning. Thank you for the presentation. In case you have been successful, that offer for Summit Materials assuming an attractive value, what investment options could be evaluated from Cementos Argos preliminary? Would you consider on staying with Summit Materials if this becomes a private vehicle? Thank you for the question, but I need to be very careful with the answer. Let me apologize for saying this openly, but due to a regulatory effect to a publicly listed share in the New York Stock Exchange, the only information that we could speak of in this term is the one that has been published by the company. That is 13D, that is a format that is made with SEC, which basically says what I mentioned during the call, and that is that the company has received an offer. It is an exploratory offer that was not requested and that is being explored by the board. Due to the, that I am part of Summit board and being part of Cementos Argos, I cannot speak more about that process because this would be very delicate for the value of the stock exchange. But besides that, speculating different exit routes for this process could also be inappropriate in this moment. Let me apologize. I cannot answer this question, but I cannot. In the measure that there is more information in any sense, the company will supply this information publicly and openly, and this information flows from Summit Materials will have the possibility of increasing or sharing any of the decisions that are made. Here we have a next question coming from Juan José Muñoz from BTG Pactual. Can you give us a bit more information about the EBITDA increase in the portfolio and others? Just speaks about units, but I think he is speaking about the sub-segments that we reported. I would like to understand what is included within those two lines. Then we have another additional question. The operational revenues, net participation revenues for the business results, what driven drove the growth? Can we have Alejandro Piedrahíta? Yeah, maybe Alejandro and Claudio can also answer the question if it is required. Well, let me give you the component of that EBITDA revenue. We usually do something, and that is that we calculate the pre pro forma of the EBITDA consolidated result for November 2024. If you could see the EBITDA that we present to the market, it is close to COP 4.6 trillion. The pro forma EBITDA, the index closed at COP 3.12 trillion. The component that weighs the most has to do with the participation method that we received from Grupo Sura, and that participation method of Grupo Sura has a large component explained by the transaction that Grupo Sura closed with Grupo Nutresa transaction this year. From that value, we have COP 1.64 trillion, which are the ones that comprehend that increase and reach COP 4.6 trillion. There are other small things that are also one-timers, such as the adjustment that we had during the urban development business. But the largest component of that change that is being asked is mainly related in terms of portfolio due to the transaction of Grupo Sura and Grupo Nutresa that comes as a participation method that is affecting both the revenue as well as the EBITDA. Well, thank you, Alejandro. In addition, we have two questions from the energy business that let me share them both together. One is from Gabriel Perez speaking about expectations that we have around the energy business for the rest of the year. The next question comes from Sebastian Gallego, and it goes as follows: Can you give us more information in terms of the Celsia project in Peru? What types of business partners are you looking for the company, and what new projects we could expect within that pipeline? Well, thank you for both questions. At the energy business, let me answer this separate because both are important questions for the energy business. Obviously, the El Niño phenomenon has created a huge impact due to the reduction of the energy availability in terms of hydraulic energy in our reservoirs. This obviously had an important effect when we compare this with the first quarters, more specifically for 2023, which had a contrary effect. This was a quarter where we had water availability conditions, and we were able to work with some regions of the country that were not affected by the drought with adequate prices. That is why in 2023, we had a very positive base, and because of this, the effect in 2024 that did not have the same behavior was less positive, and then we would have a drop that we mentioned before, that we would look at this in percentage terms, is reflected in the EBITDA in the 17%, but in the controlling net profit with a growth of 8%. How is this explained? This is a better balance of both businesses in terms of generation and distribution, that were not affected likewise or in the same proportion. Obviously, a generation is affected by the climatic effect and due to a drop in the expenses of the company, and more specifically, to the financial expenses that the P&L has. Given that the final line is that despite a very clear phenomenon, comparative-wise, the 2022, 2024 Celsia position is higher even under El Niño condition, where the industry is going through a difficult moment. I want to emphasize on this because I believe this is important for you to bear in mind, because this is a structural condition decided strategically and carefully designed from El Niño phenomenon for 2015 and 2016, where the company prepared step by step in its contracting policy, broadening different segments. From there on or from now on, the situation is a bit uncertain, given that even though that we have been having some rains, as you might all know, in Colombia, we have been having some serious rainfalls actually affecting certain populations and even cities. From an energy generation point of view, the recovery rate of the reservoirs is not happening as fast as we would like, and this will depend on the magnitude of the rainfalls for the rest of the year in order to understand how the prices in the stock exchange will behave. We have expectations in terms of levels of the reservoirs coming up, but we still have to wait and see how will this be absorbed by the market. With this, Celsia's structural condition is very favorable and very resilient to this phenomenon, but it is also supported with a very valuable asset that is TermoChuscutu. That is a 200 MW plant that is close to gas pits adjacent to the interconnectivity of the integrated national system, and that has operated in important manner in order to complement the energy matrix, that we will have no water, we can have thermal energy. This is also benefited by the solar energy increase that I already explained during the call. Summarizing, we have an effect that has been affecting the basis, and we have weather conditions that have affected the result till the moment. Besides this, we also have a positive last line result and product of the diversification, cost control, and financial structure of the company that allows us even to grow even in the last line. Third, the generation matrix and the actual conditions forecast that we will finish this year with a similar or even better condition than the one that we are reporting for this quarter. This is mainly explained by the reasons that I previously mentioned. Summarizing, we have been doing good. There was an effect, yes. At the end of the year, it looks like we will close pretty well based on the weather that we have been facing. In Peru, we have been doing very well. In Peru, there are two assets. One, that is called Hidromanta. It is a small hydro-electrical central that has 20 megawatts. It is right now in operation. Two, wind projects advanced in a fast manner, that we were able to obtain a good part of the permits that were required for building the exit lines of that first wind park. The equipment is available, and the structuring of the capital fund, by the capital fund that we have been exploring is in process, and it is advancing fastly. This includes investors that come from different areas. Institutional investors, not just Peruvian, but also international investors from large sizes to small and mid sizes. We are also exploring the appetite in family offices in small and medium investment vehicles, both for Colombian and Peruvian, and with very good expectations. The GAC fund, as we have called it, is on site. The team is right now in Peru. We are also exploring other growth avenues that we might find, not just from this that we have for both wind generation projects that totalize close to 450 megawatts, plus the water ones, but others that have also been mapped with very good perspectives. It is not the moment of making any additional announcements because they are under evaluation, they are under assessment, but we have been advancing on that front. Thank you. In addition, we have another question from Sebastian Gallego, where he asks the following. The company announced, going into a new water/infrastructure business. Can you give us more information about this investment? Size of the investment, possible business partners, geography and timing? Of course. Let me give the word to Mauricio Ossa. He is the President of Odinsa, and he is also responsible for the development of this new investment vertical. Well, thank you, Jorge Mario Velásquez. Greetings for you all. As the question says, a couple of months ago, Jorge Mario Velásquez announced to the market that we were going into this new initiative. We have been working on this. The first thing I would like to say is that within the value chain of the industry, in the water segment, we have established a focus concentrating in reuse. We understood that the sum of the capacity of Odinsa Grupo Argos allows us to build, manage these constructive processes, and to work and structure long-term contracts and finding certain opportunities in certain markets. Understanding that we will be looking at for the reuse treatment and the consulting process that we are including. With those specific order at Chile, Peru, and Mexico, we have identified that, speaking of the weather regime that Jorge Mario Velásquez was speaking about in terms of Celsia, there are some opportunities from, I think, high water stresses happening in the mining industry in Peru and Chile, and the agro industry in Peru, as well as in Northern Peru for establishing new industries. This is a stress generated because there is no way of having deposits and treatments and water recirculation that will allow the development of these industries that we just mentioned. Those three sectors have been having this very important dynamic, a growth index higher than what each country has in terms of GDP. They have been working on that problem, Chile first, Mexico second, and Peru third. They have been working on the public policies in order for private capital can enter and help with that stress. Besides that, a higher awareness in terms of water deficit, or sometimes in case of the excess, the countries are incorporating the neighboring communities as the public that will benefit from all this. We believe that this is very important because, the capacity that this business group has, that Grupo Argos has, in terms of managing different groups of interest and involvement with neighboring communities in sites where we have a certain type of interest or industrial development. We are looking at these three countries. Within that water focus, we are seeing certain sectors, and we are in that process. Nothing that it is worth mentioning, but in order to place this in the timing, it is under our expectation that during 2025, we could start going to the sector given the dynamic that all this analysis brings within and possible goals that we might have within that development. Initially, this is something that we have been working from Odinsa. It is a part of the scope of the platform that we have defined with Macquarie or established with Macquarie for roads and airports. We are thinking on us making this first. Once we have enabled all the capacities, eventually, on a certain asset under administration, growth throughout development of these upcoming years, we will be looking for investors and business partners. Well, thank you, Mauricio Ossa. In addition, we have a question coming from Catherine Ortiz about our expectations for 2025. It goes as follows: Can you give us, please, a guide of what you are expecting in terms of separate cash flow for Grupo Argos, more specifically for the expected dividends by company and by CapEx? Catherine, I want to thank you for your question. Let me give the word to Alejandro Piedrahíta. Let me frame this answer, in what is actual reality. This budget in terms of the business, is being executed as we speak, and they have not yet come to an end. The budget process for this company applies from different businesses, from different operations in different regions. This is done carefully until we consolidate this in all, in each one of the company, Cementos Argos, Celsia, Summit, Odinsa, each one of the concessions, the Quiport, and even the companies in which we participate in events such as Sociedad Portafolio, have been understood as Grupo Sura, for example. Any of these processes has yet ended, that's the truth of the matter. It wouldn't be right to give a figure or a certain type of perspective in terms of dividend value. This obviously will depend on each business and on each dynamic, but I would say that in general terms, this company has always kept dividend distribution policy towards its shareholders and from its businesses towards it through decades, through the years. It's a balanced policy that allows to keep simultaneously the resources to attend financial resources in terms of expansion and business maintenance and capturing opportunities. That policy that we apply within Grupo Argos towards our shareholders is also applied to the different businesses, to Grupo Argos. I wouldn't expect any surprises. Obviously, the advancements related to structural-related topics such as Grupo Nutresa, have new realities that will be incorporated in the budget. In the case of Sura, if we advanced in a certain measure, this will also have implications depending on the scheme that we choose. I'd like to give the word to Alejandro, but the framework of where we're at right now in the process, I believe in the first quarter next year, we'll have a better visibility and be more clear in order to give a more concrete answer. Well, thank you, Jorge. Yes, precisely as Jorge says, right now we are making or are developing the budget. This is information that's still being built. Nevertheless, I could give a certain explanation of how we're seeing the close of cash flow for 2024, that from a philosophical point of view, is the same structure of how the elaboration would happen for the 2025 components. Our cash flow, it's always presented under three components, so we analyze operational cash flow, so we basically have dividends received by the controlling companies that we control. We have revenues for the dividends, but the non-controlled ones, this would be Sura, Pactia. We also have other revenues related to the urban development business. If we look at this and the closing expectation, that operational cash flow, we have a total of expected dividends for this year. This will be around COP 664 billion. The urban development business will have a cash that will be close to COP 600 billion. When we look at the OPEX for the real estate business and for dividends that are COP 530 billion, this leads to an operational cash flow estimated for 2024 net after all these revenues that we received from dividends that we pay and additional resources coming from the urban development business. We have a superávit of COP 1 billion. This gives us a cash flow after taxes close to COP 39 billion. Besides this, we have something, CapEx, that's for our case, investment. That's the investment cash flow. Here we have two very important components this year. It's everything that has to do with purchase and repurchase of shares. We have an expectation of COP 570 billion. There's a revenue that we have for share sales is for COP 121 billion. There is a share sale that had to do with transactions that we did in its moment with Cementos Argos and with the participation that we had a product of previous transactions for Argos USA. This gives us a cash need of COP 450 billion. When we look at everything that has to do with financing flow between the money that we have to pay, disbursements that we receive as financial expenses, we are saying the financing net flow is COP 165 billion. We need to bear in mind also from previous periods, an excess flow of close to COP 900 billion. When you look at these three components that I am mentioning, the movement of the period is negative COP 524 billion. Last year, that is why us last year, we closed to COP 900 billion in cash because we knew that we would be facing this deficit situation product mainly to the investment we made in the transactions that we did with the Nutresa exchange that ended up with more shares of Grupo Sura. Looking at these movements and with the excess cash that we had from the previous year, we have forecasted this year we will close with a cash that will be close to COP 364 billion. Last year, we ended with a cash with COP 910 billion, and this year we have a cash COP 364 billion because let me say once again, we had estimated important investments, and we did not want to use leveraging, as Jorge Mario Velásquez said during the call, and we ended up with a cash ratio close to COP 364 billion. In terms of indicators, the net debt over adjusted EBITDA will close in 1.8 times, very aligned with those triple A rating that we have. In terms of debt stock, we want to end with the value of COP 1.75 billion. These are figures from last year's, and many of these components will be the same components that we will be using for the forecast of 2025. As Jorge Mario Velásquez said, it is being produced right now, or it is being developed right now. We also complement that with this budget, the companies will take to their boards a dividend distribution proposal that will be approved there. This is framed under a cash planning for Grupo Argos. Well, thank you very much. We do not have any additional questions in Zoom platform. We have had questions through text messages through the platform, but this is the platform over which we can answer the questions in an organized manner. We can answer any additional questions during the upcoming days. Okay. Thank you, everyone. Thank you for being with us. Thank you for your questions. Thank you for your queries, and we are more than open to answer and complement this analysis or any other questions that you might have. I hope you have a nice day, and thank you for being with us.