Third Quarter of 2016
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TRANSCRIPTION OF THE EVENT QUARTERLY REPORT: THIRD QUARTER OF 2016 Good morning. Welcome to the conference on the Constructora Conconcreto Third Quarter 2016 results. Before beginning, we would like to give you some tips on how to use the platform. If you are watching this through streaming, in the left margin of your screen you will find a space where you may send us your questions. Also, in the upper right margin, you may enlarge the screen to see the presentation better. If you wish to download the presentation document, you will find an icon at the lower right. Also, you may download the report, a document that contains more detailed information of the quarter. If you are connected via telephone, remember that by pressing the nine (9) key at any time, you will be transferred to the Question Line, where you will be attended by an operator. If you wish to download the presentation document, the report of results or the financial statements with their notes, please enter our Webpage. When Doctor Juan Luis Aristizábal Vélez ends his presentation, we will answer the questions according to their order of arrival. With this brief introduction, I give the floor to Doctor Juan Luis Aristizábal, CEO of Constructora Conconcreto. Please begin your presentation. Good morning to all of you and thank you for joining us in this presentation of the Constructora Conconcreto Third Quarter 2016 results. As important events of this quarter, perhaps the most important is the signing of the contract for the construction of Vía Express, which is the road that joins Bogotá to the municipality of Giradot, and it is the first tranche that connects Bogotá to Buenaventura. In this project, we are going to execute a construction contract for COP 1.7 billion; the total value of the contract is COP 4.2 billion, including operation and maintenance, with the equity investment of shareholders being COP 1 billion. There, we will operate and maintain 142 Kms., of which 65 Kms. will be built as a third lane. The Average Daily Traffic (ADT) on this road is 38,000 1 / 14 vehicles; the collection is approximately COP 180,000 million per year. This project, like the 4G, have a preconstruction period of one (1) year and then five (5) years of construction, where we will execute nine (9) new vehicular viaducts; the extension of 14 viaducts; two (2) Kms. of short tunnels, comprised of four (4) tunnels; and the operation and maintenance during 30 years. In addition, this contract has the support of Grupo Vinci. In this concession, Constructora Conconcreto has 50% of this concession and Vinci Highways – an affiliate of Grupo Vinci – has the other 50%. This project has also awarded to Conconcreto, through a short bid in the process of public–private partnerships (PPP), according to the new law on public–private partnerships in Colombia. As for the relevant events of the Company’s execution, we have total revenues to September 2016 amounting to COP 1.1 billion; this is an increase of 24% of the cumulative total through the third quarter in 2015. Construction revenues went from COP 664,000 million in 2015 to COP 798,000 million in 2016, an increase of 20%. Investment income had a decrease of 49%, basically because in 2015 we were operating until the month of September, when the transfer of assets to the PACTIA Trust was reinitiated, and we were operating all the real–estate assets; in addition, within the income, there was a profit on the reasonable–value transfer of assets to the PACTIA Trust. As for EBITDA in the third quarter of 2016, the total accumulated EBITDA was COP 173,834 million, compared to COP 180,716 million to September 2015. Here, there is a decrease of 4%, which is basically related to the change in the accounting methodology of the EBITDA because, in 2016, the real–estate assets are already in the PACTIA Trust and, therefore, the EBITDA is not generated in Conconcreto. If we discounted or normalized these data, we would have a growth of approximately 73% over last year, subtracting the real–estate income of the real– estate EBITDA from last year. Regarding construction, we had an EBITDA in September 2015 of COP 71,000 million and an EBITDA of COP 112,000 million as of September 2016. This construction is discriminated between structure, building and income for equipment that is there by category of the business. For 2016, the construction business presents an increase or significant growth, both in income generation as well as EBITDA for the Company. And in the investment EBITDA, as I mentioned, we had a decrease; basically, you can see this reflected in the real–estate portfolio, where the EBITDA was COP 33,543 million as of September 2015; in 2016, the EBITDA generated by PACTIA and the real–estate assets, a few – a couple of real– estate assets left in Conconcreto – the EBITDA is COP 23,005 million. This is basically where 2 / 14 the difference is between the EBITDA accumulated in the third quarter of 2015 and 2016. As for the Company’s Backlog, at the end of September 2016, the Company had a Backlog of COP 3 billion, 362,000 million. This is a significant growth compared to 2015, basically due to the adjudication of the two concession projects in which Conconcreto is currently working: the Buga–Buenaventura highway, which has the current name of Vía Pacífico; and the third Bogotá–Giradot lane, which is the Vía 40 Express. This represents a significant growth in the Company’s backlog and which is also discriminated by years. In the rest of this year, between October and December 2016, we will execute COP 388,000 million; for 2017, we have contracted COP 904,000 million and for 2018, COP 843,000 million. If you basically look at these two years – which are a few years of somewhat complex transition for the Colombian economy and which will also have an impact on the global economy and with the price of oil continuing to impact Colombian economy – they are years in which Constructora Conconcreto has already contracted a high volume of contracts and which will allow us to continue with our strategy: working in those market niches where we have the best margins and where we can add greater value. We expect that by the end of 2015, we will surpass the sum of COP 1 billion in Backlog for 2017 and this would give us absolute tranquility for 2017. Of this Backlog, 64% is Infrastructure; the growth is important due to the two concession projects that I mentioned. There is 21% in Building and 15% for Housing Projects. In the bottom part of the chart, you can see the significant growth we had in what has been contracted in Infrastructure, which is COP 1 billion, 289,000 million, which is basically the two concession projects. In Building, we had an increase of COP 272 million, which is represented for the most part from the adjudication of the contract for the construction of the Corferias hotel. In addition, there are some small contracts, such as the expansion of Hotel Movich in Rionegro and the enlargement of the EPSA site in Cali for Celsia. In addition, in the area of Housing, we basically have some new housing contracts for COP 44 thousand million, which are less than the COP 55 thousand million, which were executed or which have been executed to September 2016. The concessions in operation, the two most important, are Devimed and CCFC, which is Fontibón–Faca–Los Alpes. In Devimed, as of the third quarter of 2016, we have accumulated an ADT of 35,465 vehicles and an accumulated operating income of COP 126,856 million and an EBITDA of COP 70,326 million. In these days we have had a crisis in the Copacabana toll station, on the Medellín–Bogotá highway, leaving Medellín for Bogotá; the road has been closed for several days and today, it is intermittently opened and closed due to the landslides of the 3 / 14 quarry at Km. 6 of this road. We are working together with the municipality of Copacabana to attend this landslide and we have managed to have the road open as many hours as possible during the day. We expect that this will be corrected in the coming days and that traffic will return to normal. The toll that is usually on the road in Copacabana, much of it has moved to the Las Palmas toll in Sancho Paisa. In the Fontibón–Faca–Los Alpes concession, the ADT through the third quarter of 2016 is 24,537 vehicles; the accumulated operating income as of the third quarter of 2016 is COP 100,236 million; the EBITDA is COP 36,196 million. These two concessions are very important for Conconcreto for the cash flow they generate, as well as the fact that they are concessions that show an interesting increase in the PPD basically because they are the urban tolls where there has been a great densification in the exit toward the west of Bogotá and in the exits toward the east of Medellín. In the next slide appears the Buga–Buenaventura road; this is the other end of the road that connects Bogotá to Buenaventura. In this road, we have already received the Lobo Guerrero toll station; at the present time, we are working on initiating operation of the road and in parallel, in the construction stage to advance with the environmental licenses and all the procedures beforehand, which have to do with the construction of the road.