Cementos Argos S A : Report 3Q22

Higher prices and cost efficiency lead to an Adjusted EBITDA margin

expansion of 20 bp

Cementos Argos S.A. (Argos) is a geographically diverse rapidly growing cement and ready-mix concrete (RMC) company with presence in 16 countries and leading market positions in the US, Colombia, Caribbean & Central America (CCA) and total annual capacity of approximately 23.1 million tons of cement and 14.7 million m3 of concrete.

BVC: CEMARGOS, PFCEMARGOS

SANTIAGOX: CEMARGOSCL

ADR LEVEL 1: CMTOY / ADR 144A: CMTRY - Reg-S: CMTSY

We announced a comprehensive plan to close the gap between the fundamental value and the market value of Cementos Argos that includes:

1. Focus to improving further our financial performance with an emphasis on profitability, sustainability and growth.
2. We continue to work towards listing our US business on the New York Stock Exchange, once market conditions allow.
3. We intend to explore additional mechanisms to make distributions to our shareholders by means different from dividends, that are not limited by the company's accounting profits or reserves.

Consolidated Results

Adjusted EBITDA grew 27% and Adjusted EBITDA margin expanded 20 basis points during the third quarter, on a year-to-year basis. These results were supported by higher prices, strong market dynamics, and an efficient cost management along our footprint. Consequently, our leverage ratio decreased to a level of 2.84 times, the lowest ratio of the last 9 years.

Volumes - Adjusted			QUARTER			YTD
	2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Cement	000 TM	4,248	4,172	-1.8%	12,632	12,342	-2.3%
RMC	000 M	3	1,789	1,907	6.6%	5,309	5,772	8.7%
Key Figures - Adjusted		QUARTER			YTD
2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Revenue	COP Bn	2,487	3,118	25.4%	7,081	8,546	20.7%
EBITDA	COP Bn	469	594	26.7%	1,418	1,478	4.3%
Margin EBITDA	%		18.8%	19.0%	0.2%	20.0%	17.3%	-2.7%
Net Profit	COP Bn	85	149	74.7%	226	222	-1.7%
Net Margin	%		3.4%	4.8%	1.3%	3.2%	2.6%	-0.6%

For a detailed reconciliation of the adjustments please refer to the annex.

Results Per Region

USA

FOB prices increased 16.5% in cement and 16% in ready mix on September, compared to the same month of the previous year, remaining on the highest levels in our recent history in the US.

Cement volumes increased 6.2% compared to the third quarter of 2021, driven by solid demand across our footprint, especially in Florida and the Deep South region. On the ready-mix business, volumes increased 3.6% on a comparable basis versus 2021, with the residential segment driving demand growth.

EBITDA was 26% higher year over year on a comparable basis and the Adjusted EBITDA margin expanded 47 basis points compared to the same period of last year. This was achieved despite the adverse weather conditions generated by Hurricane Ian that affected Florida during the last week of September with an estimated impact on our EBITDA of USD 1 million.

Volumes - Adjusted		QUARTER			YTD
2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Cement	000 MT	1,498	1,591	6.2%	4,363	4,651	6.6%
RMC	000 M3	1,081	1,119	3.6%	3,407	3,549	4.2%
Key Figures - Adjusted		QUARTER			YTD
2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Revenue	USD M	337	414	22.9%	1,006	1,190	18.3%
EBITDA	USD M	61	77	26.0%	184	192	3.9%
Margin EBITDA	%	18.1%	18.5%	0.47%	18.3%	16.1%	-2.2%

For a detailed reconciliation of the adjustments please refer to the annex.

Colombia

The successful deployment of our commercial strategy has made possible to increase prices in the entire product portfolio and in every region of the country. Local prices for cement posted a 18.4% year over year increase and were 4.1% higher sequentially, while ready-mix prices rose 12% year over year.

Cement dispatches were flat during the quarter. Exports from Cartagena increased 37%, reaching 319 thousand tons, the highest quarterly result in the history of the company. In the national market, cement dispatches were 7.8% lower compared to the same period of last year due to the price hike implemented in July which had an impact in that month and was partially recovered in August and September. The ready-mix business continues its steady recovery, supported mainly by formal housing and infrastructure projects. Dispatches were 7.8% higher year over year and reached the highest quarterly result since the second quarter of 2019.

EBITDA grew 6% year over year, when excluding the results from the exports division in which EBITDA was more than 3 times higher compared to last year, ratifying the importance of this division, not only for integration across the region, but also due to its contribution to our financial results. Overall, EBITDA reached COP 157 billion, 14.5% higher compared to the same period of last year. EBITDA margin was 22.3% on the quarter and posted an expansion of 75 basis points.

Volumes				QUARTER			YTD
		2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Cement	000	MT	1.554	1.537	-1,1%	4.359	4.517	3,6%
Local Market	000	TM	1.321	1.218	-7,8%	3.671	3.623	-1,3%
Exports	000	TM	233	319	37,0%	687	894	30,1%
RMC	000 M3	660	712	7,8%	1.757	2.016	14,8%
Aggregates	000	MT	346	332	-4,2%	1.094	1.063	-2,8%
Key Figures			QUARTER			YTD
	2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Revenue	COP Bn	637	705	10.6%	1,774	2,015	13.6%
EBITDA	COP Bn	138	157	14.5%	417	423	1.6%
Margin EBITDA	%	21.6%	22.3%	0.8%	23.5%	21.0%	-2.5%

Starting 2022, the exports division that was previously reported on the CCA region is reported in the Colombian region. Total cement represents local market and export volumes.

EBITDA and EBITDA Margin include for 3Q21 COP 5.7 billion generated by the export division

CCA

Cement prices grew 25.7% year over year as pricing power remains strong due to the global cement trading dynamics, which have influenced higher import parity prices in markets with high exposure to international supply.

Local market cement dispatches were 8.9% lower year over year, due to a very challenging social and political situation in Haiti that led to volumes being almost half compared to last year, as well as to the adverse weather conditions during the second half of September that had an impact of around 20 thousand tons in the region that could not be dispatched in that period. Additionally, the governmental transition in Honduras and the major maintenance performed in Dominican Republic also had an impact on cement dispatches. Trading volumes decreased 21% year over year due to our strategy to maximize the usage of our export capacity from Colombia, as well as to the lower dispatches to Haiti.

Despite the impact of more than USD 1 million from the hurricanes on the last half of September, EBITDA closed at USD 31 million, equal to the result obtained on the third quarter of last year, as our successful pricing strategy offset the cost inflation that has affected the region.

Volumes			QUARTER			YTD
	2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Total Cement	000 TM	1,197	1,045	-12.7%	3,911	3,174	-18.8%
Local Market	000 TM	816	744	-8.9%	2,599	2,386	-8.2%
Trading	000 TM	380	301	-20.9%	1,311	788	-39.9%
RMC	000 M3	48	77	59.2%	145	206	41.8%
Key Figures		QUARTER			YTD
2021.Q3	2022.Q3	Var	2021.Q3	2022.Q3	Var
Revenue	USD M	125	136	8.3%	397	411	3.6%
EBITDA	USD M	31	31	-0.5%	108	92	-15.2%
Margin EBITDA	%	24.8%	22.8%	-2.0%	27.2%	22.3%	-5.0%

Starting 2022, the exports division that was previously reported on the CCA region is be reported in the Colombian region. Total cement represents local market and trading volumes.

Adjusted EBITDA and EBITDA Margin exclude for 3Q21 USD 1.2 million generated by the export division

Indebtedness and coverage indicators:

Net debt to EBITDA plus dividends ratio decreased during the quarter, closing at 2.84 times due to the solid result in our last 12 months EBITDA and cash generation.

Cash Flow as of September 30th, 2022 (COP Billion1):

Cash flow (COP Mill)	Total
EBITDA	1,415,056
Net Op. Working Capital	(386,118)
Maintenance CAPEX + Profitability	(385,212)
Strategic CAPEX	(27,899)
Taxes	(217,056)
Leases operations (IFRS 16)	(131,462)
Total Free Cash Flow	267,309
Net Financial Expenses	(303,669)
Net Dividends	(194,704)
Net Other Non-Operating	79,083
Net Financial Operations	(110,433)
Divestments, Acquisitions and/or	360,617
Capitalizations
Total Financial Cash Flow	(169,106)
Total Cash Flow for the Period	98,203
Initial Cash Flow	483,229
Exchange rate effect	64,854
Final Cash Flow	646,286

Investment Portfolio as of September 30th, 2022:

Company	% Stake	Price per Share	Value	Value
(COP)	(COP million)	(USD million)
Grupo Sura	6.08%	37,500	1,064,810	235
Total			1,064,810	235

1* FX Rate as of September 30th, 2022: COP 4,532.07 / USD