CEMENTOS ARGOS S.A. Results as of September 30th, 2014 BVC: CEMARGOS, PFCEMARGOS ADR LEVEL 1: CMTOY / ADR 144A: CMTRY - Reg-S: CMTSY EXECUTIVE SUMMARY 1  Consolidated revenues for 3Q14 grew by 12% when compared to 3Q13, reaching COP 1.5 trillion1 for the quarter. YTD revenues reached COP 4.3 trillion, representing an increase of 16% compared to the same period in 2013.  Year to date consolidated EBITDA increased by 8% when compared to the same period of 2013, reaching COP 805 billion. For 3Q14 it increased by 1% vs. 3Q13, reaching COP 272 billion. EBITDA margin for this quarter was 18.3% and 18.9% as of September, 2014.  USA Regional Division EBITDA reached USD 26.5 million during 3Q14, which represented a y-o-y increase of 173%. As of September 2014, it reaches USD 52.3 million, 510% higher than that obtained in the same period of 2013.  Net income for 3Q14 reached COP 80 billion, registering a 44% increase vs. 3Q13 and a net margin of 5.4%, 118 bps higher than that in 3Q13. As of September 2014, net income totaled COP 218 billion, 69% higher than that obtained in the first nine months of 2013.  Volumes for the year as of September 2014 registered significant growth, with dispatches of 9.4 million tons of cement and 8.3 million cubic meters of ready-mix concrete, generating y-o-y growth of 9% and 18%, respectively. For the purpose of this report 1 billion = 1.000.000.000 and 1 trillion = 1.000.000.000.000 RESULTS 3Q14 A solid third quarter where Argos continues exhibiting important increases in both revenues and EBITDA, which have been primarily leveraged on the performance of USA Regional Division, which is supported on the evident recovery of this market; and on the consolidation of newly acquired operations in Florida, Honduras and Guyana. Similarly, the results for this period demonstrate significant progress of the organizational excellence program in which the company will continue working in the future, and which includes important strategic projects such as the recently announced expansion of 2.3 million tons in Sogamoso plant, the expansion of 900 thousand tons in Antioquia, the new vertical mill at Harleyville plant (South Carolina), among other initiatives related to efficiencies in production and distribution; that will allow the company to have what it takes to meet demand optimally in all the geographies where we operate. In addition, significant progress continues in terms of sustainability, a topic of great relevance to Argos and deeply related to the current and future goals of the company. RESULTS PER REGIONAL DIVISION COLOMBIA REGIONAL DIVISION VOLUMES AND MARKET PERFORMANCE Dispatched cement volumes in 3Q14 increased by 5% when compared to 3Q13, reaching a volume of 1.5 million tons for the quarter and 4.0 million tons as of September 2014, representing the latter an increase of 3.4% vs. the first nine months of 2013. For the ready-mix concrete business, as of September 2014 an increase of 5% is registered when compared to the same period in 2013, reaching levels of 2.6 million cubic meters. In 3Q14, volume of ready-mix concrete reached 903k cubic meters, which represents an increase of 1% when compared to 3Q13 and of 4% vs. 2Q14. The competitive situation on the northern coast of Colombia temporarily affected volume growth in the cement business, which through the implementation of a successful commercial strategy, has led to reach the inflection point in mid-July 2014, showing important signs of improvement, confirmed by increases of monthly dispatches and market share recovery. This translates into higher growth expectations for 2015, underpinned by infrastructure developments, residential construction and improved market dynamics supported on both, public and private initiatives. FINANCIAL RESULTS Revenues for Colombia Regional Division totaled COP 1.8 trillion2 as of September 2014, which represents a -4% variation when compared to the same period of 2013. For the quarter a year-over-year decrease of 10% was recorded vs. 3Q13, by reaching COP 598 billion in 3Q14. EBITDA for this regional division for the first nine months of 2014 reached COP 606 billion, representing a decrease of 11% compared to the same period in 2013, and resulting in an EBITDA margin of 34.0%, 270 bps below that registered as of September 2013. This is evidence of the competitive situation in the northern coast of Colombia, where the average price of bagged cement reached minimum lows during the quarter, condition that has been contained to that area. The rest of geographies in the country have not been affected by the circumstances described above, maintaining healthy price dynamics. The outlook for the coming quarters is positive, by having the strength to continue improving in terms of profitability, supported on both, our commercial strategy and value proposition for our clients, as well as the transverse plan to improve the costs structure. USA REGIONAL DIVISION VOLUMES AND MARKET PERFORMANCE USA Regional Division registered an increase of 60% in cement dispatches during the third quarter when compared to 3Q13, reaching levels of 806k tons and of 2.1 million tons for the first nine months of the year, representing the latter a 59% year-over-year increase. As for the ready-mix concrete business, 2.0 million cubic meters were sold in 3Q14, representing an increase of 28% when compared to 3Q13. For the first nine months of 2014, the year-over-year increase registered is 27%, with volumes above 5.2 million cubic meters for this regional division. 2 For the purpose of this report 1 billion = 1.000.000.000 and 1 trillion = 1.000.000.000.000 Organic contribution to this growth is generated from both, Southeast and South Central states where Argos operates. When excluding volumes of cement and ready-mix concrete from consolidation of Florida's operations for the first nine months of the year, growth levels of 13% and 6% are respectively registered. On a standalone analysis, a 48% pro-forma increase in cement dispatches is recorded in Florida. Additionally, it is important to mention that during the quarter cement exports started from the port of Tampa to the Caribbean in order to source concrete operations in the region, reflecting the strategic value of our port assets and solid interconnectivity of our regional divisions. FINANCIAL RESULTS USA Regional Division reached revenues of USD 308 million during 3Q14, representing a 46% increase when compared to 3Q13. As of September 2014, growth of 44% is registered, with revenue levels above USD 804 million. Operating leverage generated by the recovery in the U.S. market, allows reporting a positive EBITDA of USD 26.5 million during 3Q14 for this regional division, which represents an increase of 173% when compared to 3Q13. EBITDA for the first nine months of 2014 registered even higher growth reaching USD 52.3 million, in comparison to USD 8.6 million for the same period in 2013. These increases are the result of higher volumes achieved both, organically and thru the consolidation of Florida´s operations, as well as the price increases that have been carried out during the first nine months of the year in the businesses of cement and ready-mix concrete in the states where Argos operates. CARIBBEAN AND CENTRAL AMERICA REGIONAL DIVISION VOLUMES AND MARKET PERFORMANCE Caribbean and Central America Regional Division dispatched close to 788k tons of cement in 3Q14, which represents an decrease of 5% compared to 3Q13. A year-over-year increase of 8% is registered during the first nine months of the year, with volumes above 2.5 million tons of cement. As for the ready-mix concrete business, volumes sold reached levels above 141k cubic meters in 3Q14, 3% below those registered during 3Q13. As of September 2014, volumes for this regional division were 407k cubic meters, decreasing 3% when compared to the same period in 2013 and increasing 12% vs. 2Q14. These results reflect two counteracting factors. First, the increase in volumes due to the consolidation of the operations in Honduras and French Guiana, as well as the construction dynamics in each of the countries of this regional. Secondly, a significant reduction above 80% in volumes of trading business, and the decline in dispatches to the Panama Canal. Several factors lead us to have a positive outlook on the performance of this regional division. An example of this is the increase in our market share in Honduras during 3Q14, which is achieved in positive circumstances due to the improvement of the institutional framework in which the government is currently working on, creating better future conditions for development and investment. Another encouraging fact is Panama, where the market will continue to be highly dynamic by its major focus on infrastructure, commercial and residential construction, making this sector one of the main drivers of the economy. FINANCIAL RESULTS Revenues for the Caribbean and Central America Regional Division totaled USD 141 million in 3Q14, representing a 27% growth when compared to 3Q13. This line reached USD 417 million as of September 2014, 22% above the result in the same period of 2013. EBITDA for this regional division during 3Q14 registered a year-over-year increase of 72% by reaching USD 44 million, which represented an EBITDA margin 818 bps above that recorded in 3Q13, getting to 31% for the quarter. As of September 2014, EBITDA margin reached 29.5%, 512 bps above the result obtained in the same period of 2013. The EBITDA margin improvement this quarter is significant. Honduras and Panama are the main components of this achievement for this regional division, where both are examples of success in the organizational excellence program. Panama grew by 3 percentage points in the margin compared to 3Q13, based on significant improvements in costs. Meanwhile, Honduras reaches levels above 50% in the EBITDA margin, supported among other, by the use of alternative fuels, reduced energy costs and improvements in the institutional stability of the country. EXPORTS Cement and clinker export volumes reached levels of 254k tons in 3T14, registering a decrease of 24% when compared to the same period in 2013; and of 737k tons as of September 2014, representing a decrease of 31% vs. 9M13. This is mainly explained by the decrease of volumes of clinker dispatched to our cement operations that attend the Panama Canal; and our focus on profitability of the exports operations. SUMMARY OF RESULTS As follows a summary of the financial information consolidated and per region, as of September 30, 2014, is presented below: Revenues EBITDA COP$ Billion 2014 2013 Var (%) 2014 Mgn (%) 2013 Mgn (%) Var (%) Colombia 1,782 1,849 -3.6 606 34.0 679 36.7 -10.7 USA 1,558 1,042 49.5 100 6.4 17 1.6 484.1 809 631 28.2 239 29.5 154 24.4 55.2 Subtotal 4,149 3,522 17.8 944 22.8 849 24.1 11.1 Corporate 0 0 N/A -99 N/A -77 N/A N/A Other Businesses 104 139 -25.1 -25 -23.8 -27 -19.5 8.3 Florida closing expenses N/A N/A N/A -15 N/A N/A N/A N/A 4,253 3,661 16.2 805 18.9 745 20.4 8.0 Colombia 918 997 -7.9 311 33.8 366 36.7 -15.2 USA 804 560 43.6 52 6.5 9 1.5 510.1 Caribbean & CA 417 340 22.4 123 29.6 83 24.4 48.2 Corp. & other buss 53 75 -29.1 -63 -118.8 -56 -74.7 -12.9 Florida closing expenses N/A N/A N/A -8 N/A N/A N/A N/A 2,192 1,972 11.2 415 18.9 402 20.4 3.3 Caribbean & CA Consolidated Result US$ million Consolidated Result US$ CASH FLOW AS OF SEPTEMBER 30, 2014 (COP$ Billion): INVESTMENT PORTFOLIO AS OF SEPTEMBER 30, 20143: Company % Stake Price per Share Value Value (COP) (COP$ million)* (US$ million)* Grupo Suramericana 6.0% 40,640 1,145,368 565 Bancolombia 4.0% 27,680 565,700 279 Cartón Colombia 2.1% 4,500 10,390 5 1,721,458 849 Total * Exchange Rate as of September 30, 2014: COP 2,028.48 / USD DEBT AND COVERAGE RATIOS As of September 30, 2014, the financial consolidated debt of Cementos Argos reached USD 2,102 million, 43% of which was in Colombian pesos, and 57% in US dollars. The annual average cost of debt in Colombian pesos was 7.3%, while that of debt in US dollars was 3.0%. On a consolidated basis, as of September, 2014, debt coverage ratios continue at adequate levels as it can be seen as follows: Net Debt / EBITDA + Dividends = 3.43x; EBITDA / Financial Expenses = 6.00x; and Net Debt / Equity = 48.61%. 3 The variations of the non-cement investment portfolio do not affect Cementos Argos’s income statement, but they do affect figures on its balance sheet, through the account of valuations and devaluations. All these companies periodically report their results. Therefore, they are not included in this report. CEMENTOS ARGOS S.A. CONSOLIDATED P&L STATEMENT As of September 2014 In COP million or USD million Real Sep.14 Real Sep.13 Var. (%) 4,252,674 3,661,063 16.2 2,192 1,972 11.2 3,265,247 2,835,386 15.2 3,012,779 2,580,164 16.8 252,468 255,222 -1.1 Gross profit 987,427 825,677 19.6 Gross margin 23.2% 22.6% Operating revenues US$ Dollars Variable costs Cost of goods sold Depreciation and amortization Overheads 484,865 368,694 31.5 Administrative expense 293,269 215,189 36.3 Selling expense 141,516 120,216 17.7 50,080 33,289 50.4 502,562 456,983 10.0 11.8% 12.5% 502,562 456,983 11.8% 12.5% 805,110 745,493 8.0 3.3 Depreciation and amortization Operating Profit (before Impairement) Operational margin Operating Profit (after Impairement) Operational margin EBITDA US$ Dollars 10.0 415 402 18.9% 20.4% 109,627 62,267 76.1 27,828 81,799 25,945 36,322 7.3 125.2 234,917 127,443 241,726 114,323 -2.8 11.5 107,474 127,402 -15.6 13,785 23,548 -41.5 Pre-tax earnings 391,057 301,072 29.9 Provision for income tax and deferred tax 138,040 166,323 -17.0 35,480 5,832 508.4 Net Income 217,537 128,917 68.7 US$ Dollars 111 69 60.6 5.1% 3.5% EBITDA margin Non-operating revenues Dividends and participations Other income Non-operating expense Net financial expense Other expense Profit (loss) due to exchange rate differences Minority interest Net Margin CEMENTOS ARGOS S.A. CONSOLIDATED BALANCE SHEET In COP million or USD million Sep-14 Dec-13 Var. (%) 368,956 851,849 643,862 563,725 59,817 528,013 590,989 235,305 402,435 28,240 -30.1 44.1 173.6 40.1 111.8 Total Current Assets 2,488,209 1,784,982 39.4 Permanent investments Accounts receivable Deferred items and intangibles Property, plan and equipment, net Reappraisal of assets Other assets 156,966 62,009 2,196,876 5,511,420 3,799,697 12,339 145,898 40,254 2,047,755 4,070,292 3,525,705 16,832 7.6 54.0 7.3 35.4 7.8 -26.7 Total Non-Current Assets 11,739,307 9,846,736 19.2 Total Assets USD$ 14,227,516 7,014 Cash, banks and negotiable investments Trade receivables Accounts receivable, net Inventories Prepaid expenses 11,631,718 6,037 22.3 16.2 Financial obligations Bonds payable Suppliers and accounts payable Dividends payable Taxes, levies and contributions Labor obligations Sundry creditors Other liabilities 792,759 111,400 1,189,152 140,710 78,144 81,764 29,007 500,951 289,290 192,575 533,559 68,824 195,940 69,347 27,554 344,758 174.0 -42.2 122.9 104.4 -60.1 17.9 5.3 45.3 Total Current Liabilities 2,923,887 1,721,847 69.8 Financial obligations Labor liabilities Deferred charges Bonds payable Bonus on placement of bonds Sundry creditors 1,486,230 237,632 39,234 1,634,823 -5,310 29,007 222,158 242,455 38,189 1,746,223 -6,568 55,107 569.0 -2.0 2.7 -6.4 19.2 -47.4 Total Non-Current Liabilities 3,421,616 2,297,564 48.9 Total Liabilities USD$ 6,345,503 3,128 4,019,411 2,086 57.9 50.0 Minority interest USD$ 370,671 183 369,756 192 0.2 -4.7 7,511,342 3,703 7,242,551 3,759 3.7 -1.5 14,227,516 11,631,718 22.3 Shareholders’ Equity USD$ Total Liabilities + Shareholders’ Equity RESULTS CONFERENCE CALL INFORMATION The conference call to discuss 3Q14 results will be held on Tuesday, October 28, 2014 at 10:00 a.m. Local Time (11:00 am Eastern Time). Conference ID #: 15129402 Telephone numbers: USA and Canada: (866) 837 - 3612 Colombia: 01800 518 0165 International/Local: (706) 634 - 9385 3Q14 results presentation and report are available from today Tuesday, October 28, 2014 at the Investor Relations website of Cementos Argos: www.argos.co/ir/en/financialinformation/reports IR CEMENTOS ARGOS - CONTACT INFORMATION Gustavo Uribe - IRO [email protected] Manuela Ramirez - IR Director [email protected] David Olano - IR Leader [email protected]