Cementos Argos S.A.

Manuela Ramirez – Investor Relations Juan Esteban Calle – Chief Executive Officer

Alejandra Obregon – Morgan Stanley Andres Soto – Santander Mauricio Serna – UBS Natalia Segovia – Porvenir Francisco Suarez – Scotiabank Angela Rodríguez – Corredores Davivienda Carlos Rodriguez – CrediCorp Capital Adrian Huerta – JPMorgan

Thank you, Samuel. Good morning and thank you for joining us for the Cementos Argos’ second quarter results.

On the call today are Juan Esteban Calle, our CEO; Carlos Yusty, our CFO; and Tomas Restrepo, the VP of the Colombian Regional Division. We have posted English and Spanish versions of the presentations and reports at www.argos.co/ir.

We will upload the conference in audio format to our website. It is now my pleasure to turn the call over to Mr.

Calle.

Thank you, Manuela, and good morning, everyone. I would like to begin on the Slide 3 with the key highlights for the quarter.

There is no doubt that 2017 is a transformational year for Cementos Argos. We are taking all the necessary steps to increase our competitiveness and to ensure the sustainability of the company.

Throughout this quarter, we continued working to improve our financial flexibility, including a successful bond placement in the Colombian market for COP 1 trillion, approximately $340 million to replace current debt and extend our debt average life from three to over five years. The market reiterated its confidence in Cementos Argos with a bid to cover of 1.3 times and very attractive interest rates.

The bond issuance and the progress of our divestment plan allow us to negotiate a waiver with our banks to increase to 4.5 times the maximum level of the net debt-to- EBITDA ratio until the end of the year. By then, we anticipate we will have lowered the ratio to around 3.5 times.

As part of a divestment plan, we are on schedule to sell the first three of nine inside the fence power plants in Colombia. We signed over 30 NDAs and have received strong interest from several parties.

We are now on track to complete the process before year's end. Regarding our operations.

In June, we posted the BEST consolidated results of the last 12 months. EBITDA for the month of June was COP 155 billion, 8% higher than June of 2016.

The EBITDA margin for the month was 21.2%, almost 200 basis points better than the previous year. The average selling price of cement in Colombia seems to have bottomed in May, and the results for our efficiency efforts have started to materialize.

Also during the quarter and as an effort to the improvement of transparency in the industry, we published our Value-Added Statement reinforcing our strong commitment to generate a positive impact on society and the environment. Through the implementation of BEST, Argos joins a select group of companies with higher standards on ESG.

On Slide 5, we will discuss our consolidated results, which once again benefited from our geographically well-diversified footprint. Results in the U.S., and the Caribbean and Central America partially offset the performance of our operations in the still challenging Colombian market, resulting in COP 367 billion of EBITDA and COP 48 billion for net income.

Although we faced challenging circumstances in Colombia this quarter, we are starting to see some encouraging signs that enable us to anticipate a stronger second half of the year and a positive outlook for the midterm. This moderate [ph] optimism is based on the following factors.

First, results are starting to reflect the execution of BEST. In June, we posted our consolidated EBITDA margin of 21.2% and a reduction of 3.8% in SG&A driven by a 24% decrease in SG&A in Colombia.

Second, at the corporate level, we are advancing the Phase 1 of the Fit to Grow project. We're adjusting headcount at the corporate structure with the purpose of gaining efficiencies and streamlining the decision-making process across all levels of our company.

Also, we will hit [ph] the prices in Colombia bottomed between April and May. In June, we experienced a marginal improvement in the overall cement price and EBITDA margin.

Moreover, at the end of July, we increased the sale price of our back cement to reflect movements in import parity prices. In the U.S., the price increases are sticky and the consolidation of the markets with operations is contributing toward a better innovation.

In the Caribbean and Central America, the market in Honduras continues its strong dynamic with very positive results this quarter. Finally, we have started to see signs of normalization in the global cement market.

Freight tariffs have increased more than 18% in the past 12 months, and FOB prices in Turkey and the Mediterranean region are starting to rise. On Slide 6, our consolidated cement volumes were 4.1 million tons during the quarter, increasing 17.9% driven by a positive dispatch dynamic across all regions.

Our volumes operating mix were 2.7 million cubic meters with a decrease of 8%. On the next slide, we will discuss results for the U.S.

operations. Our cement volumes increased by 46%, 5.5% excluding Martinsburg, well in excess of the total U.S.

market. In ready-mix, volumes decreased by 8%, explained by less workable days due to work conditions and difficult market dynamics in Texas.

To recover profitability in that state, we have put in place a set of actions, which meant the reduction of headcount, adjustment of our structure, optimization of our footprint, of ready-mix plants and a shift in focus from the commercial to the residential sector. The EBITDA for the U.S.

expanded by 21% as a result of a 5% higher average ratio in price, the consolidation of our Martinsburg operation and the positive performance of our cement business. The EBITDA margin for the quarter was 16.7%, the highest recorded in the second quarter for this operation to date, increasing 156 basis points.

We expect further expansion of the EBITDA during the second half of the year, given the normal seasonality of the market. However, the already explained situation in the ready-mix business, we expect the full year EBITDA to be lower of our initial guidance.

It will be between $260 million and $280 million. Moving on to Slide 9, our comments on the U.S.

market. The positive fundamentals of the residential market had been the main driver for cement demand, which has increased 3.5% quarter-to-quarter through May.

Housing construction spending reflects the positive dynamic in the residential sector with a 4.8% growth year-to-date. Also leading indicators such as housing starts and new home sales, continue posting upward trends with particularly strong results in June.

Housing starts rose 8.3% in June to 1.22 million units and building permits 7.4% to 1.25 million units. We are very confident about this market going forward.

Infrastructure might become an additional positive catalyst for future cement demand growth through the execution of programs such as the FAST Act with an investment of $300 billion and the $11 billion Florida's infrastructure plans. Additionally, the U.S.

is advancing on the implementation of PPPs as a solution to overcome a challenging infrastructure deficit. The Federal government released more details about this infrastructure plan with a commitment of $200 billion in the budget expected to leverage $1 trillion in investments and a reductions in permitting requirements.

Altogether, the Portland Cement Association estimates a CAGR of 3.8% for total cement demand in the next four years and a 5.5% in our states of influence, which may allow us to continue growing at a faster pace than the market while benefiting from the operational leverage that comes with this growth. On Slide 11, we will present our results in Colombia.

Our cement volumes increased by 6.9%, which compares well with the increase of 5.8% estimated for the market. Imports continue falling as cement imports have decreased by 47% year-to-date and clinker imports by 26%.

The ready-mix segment has not recovered yet for the falling public construction. Our ready-mix volumes decreased 8% in the quarter, which compares fair with the reduction of 16% estimated for the market quarter-to-date through May.

In general, our results in terms of EBITDA were as difficult as anticipated during the first quarter conference call that showed an improvement compared with the previous quarter as we achieved an important reduction in costs and expenses that allow us to reduce the impact on EBITDA, derive it from the reduction in prices. Our efforts to accelerate the implementation of BEST resulted in a $7 per ton year-over-year cash cost cutback, more than half of the total extended goal of $12 to be accomplished by year-end.

SG&A was 24% lower in the quarter, with a noticeable 37% decrease in June, month in which our EBITDA margin climbed to 20%, the maximum level reported so far during 2017. Our efforts in term of our competitiveness are highlighted by the significant reduction of more than 1,600 direct and indirect employees in Colombia over the last 12 months related to the execution of BEST.

We foresee average second half of the year in terms of EBITDA as our cement prices reached the bottom between April and May. As previously stated, at the end of July, we increased the sale price of our back cement to reflect movements in import parity prices and the price increase is holding.

We will continue working diligently on several cost reduction strategies to maintain our long-term competitiveness. However, we have decided to reduce the EBITDA guidance for 2017 to between COP 400 million and COP 430 million in Colombia given the lower execution pace of the 4G projects and the market's competitive dynamics.

On Slide 12 and 13, I will comment on the highlights for the Colombian market. After a challenging 2016, the cement market in Colombia is still affected by the economic cycle, with the decrease in both back and bulk cement based on the figures through June.

However, the 4G projects are a reality, and we'll continue growing our leadership in this segment with our 70% market share based on the number of awarded functional units. Moreover, our dispatches of cement and ready-mix for these projects are growing consistently even though they are still not material to our total operation.

We'll continue reinforcing our value proposition for this segment, developing customized solutions for the projects, most of them located in complex geographies in Colombia. As you can see on Slide 12, we recently [indiscernible] plant for the Pacifico 2 project.

Most of the 4G first wave projects are currently under execution but at a slower-than-anticipated pace. On the next slide, you will see the figures from the residential market, representing a slow performance due to acceleration in economic activity.

However, the government has demonstrated its commitment to stimulate the market through subsidies to the residential segment. The policy has been successful as evidenced by the increasing social units sold yearly reaching 63,000 in 2017.

We find confidence in the measures taken by the government adding 100,000 subsidies and expanding the scope of the interest rate, subsidies to boost the dynamic of the middle-class housing segment. On Slide 15, we will discuss our results for the Caribbean and Central America.

Our cement volumes increased 4.9% and 1.3%, excluding the acquisition in Puerto Rico. Honduras, Eastern Caribbean trading and export contributed positively to our organic volume growth, while Panama reported stable volumes.

EBITDA closed at $47 million with an attractive 31.6% margin. The yearly decrease in the margin is explained mainly by the maintenance halt at the integrated plant in Honduras between May and June as well as the effect of the reopening of San Lorenzo’s grinding facility in this market.

This quarter’s results reflect the consolidation of the integrated plant we acquired in Puerto Rico. We are working to increase the profitability of the new 800,000-ton plant in a market where we see opportunities in the long-term.

On the next Slide, I will comment on the highlights on our core markets in the Caribbean and Central America. In Honduras, the construction sector continues its upward trend with a 4.6% expected expansion in 2017.

The outlook for the residential sector is positive, considering the 11% growth in building permits and the estimated 1 million housing units required over the next 20 years based on the Civil Engineers Association. Improvements in the Honduras’ visibility and flexibility, which supports construction activity were recognized by the Standard and Poor’s who recently increased the sovereign credit rating from B+ to BB- with a stable outlook.

In Panama, the annex expects a GDP growth of 5.8%, well level of the region boosted by an increase of 18% in total revenues derived from the canal’s expansion. A portion of these revenues will help the financing of a strong portfolio through infrastructure projects, including two bridges over the canal, our third metro line and the renovation of Colon city.

On Slide 18, we will discuss our debt level. At the end of the second quarter, our net debt-to-EBITDA proceedings was 4.4 times, affected by the increase of our Colombian operation.

As previously stated, our banks approved a waiver for our leverage covenant indicating confidence in our ability to reduce the leverage to levels between 3.5 times and 3.8 times and as such the EBITDA guidance for 2017 of between COP 1.8 trillion to COP 2 trillion. This guidance includes the nonrecurring profit from the sale of three inside the fence generation plants.

We predict our second half of the year with a higher contribution of the U.S. to our consolidated EBITDA based on the normal seasonality of this region.

We also anticipate a better performance of our Colombian operation due to a materialization of BEST in our cost structure and a better outlook in prices. Finally, we will continue working to complete our divestment plan to reduce our leverage and gain financial flexibility.

Once again, thank you very much for your attention. We will open now the call for questions.

Hi, good morning everyone and thank you for the call. I have a question regarding your BEST program.

Perhaps if you can give us some color on where these efficiencies are coming from specifically, and how should we think of it going forward? Have you decided or you have some identified efficiencies that would continue for the future?

And then does this mean that we can think of margin expansion going forward? Or perhaps you’re having more space to be more aggressive in pricing?

Any color regarding this will be very helpful. Thank you.

Thank you, Alejandra. Thank you for the question.

Our goal with BEST is twofold. I mean, first, we would like to improve our go-to-market strategy.

Meaning, improving our value proposition with our clients. And at the same time, our goal is to become as competitive as we can.

We want to become close champions, not only in Colombia, but in all our geographies. And in our opinion, we are doing extremely well in that regard.

We have identified some cost cuts that we have vis-à-vis our competitors, and we are moving ahead closing those gaps that will lead us to get a better competitive positions in all of our markets. We are working in several programs to do that.

First of all, we are looking at our footprint in Colombia, trying to concentrate production in the most efficient plants that we have. Those plants are Cartagena, Rioclaro, Sogamoso and Yumbo.

We’re also doing projects to increase the uses of alternative materials. We’re using the clinker-to-cement ratio that will help us to reduce our average cost, and we are also increasing the use of alternative fuels in an important way.

Just to give you an example, in our Rioclaro plant, we are already at 14% to 15% use of alternative fuels, and we plan to do that in all of our plants in Colombia. The BEST program is deployed not only in Colombia, but also in Central America, the Caribbean and the U.S.

So you can expect a much better competitive position from Argos in all of our geographies.

Okay. Thank you very much.

This was very helpful.

Good morning everyone. I have two questions, the first one regarding your current EBITDA margin.

Juan Esteban, you mentioned in Colombia, you got a 20% EBITDA margin during the month of June. Looking forward, what are you expecting this EBITDA to go to?

And to what extent price is going to be an important variable for EBITDA margin improvement? Or it is mostly based on your efficiency initiatives?

Thank you.

Thank you, Andres. I mean, midterm, we would like to be at least at 25% EBITDA margin in Colombia, consolidated EBITDA margin.

We said from the beginning that the execution of debt was going to take us between 12 and 18 months, so that means that we plan to see those margins next year.

Perfect. So that means that the main driver for this margin expansion is efficiency in those prices, correct?

Yes. I mean the main driver is cost efficiency.

Got it. My second question is regarding your covenant, the waiver that you got for your debt.

You see that you now can expand your leverage ratio to 4.5 times. And based on your comments, I understand that this means that you can increase your debt up to $600 million if you take it back to 4.5 times, and you include in this EBITDA calculation your non-recurring EBITDA from asset disposals.

What are you planning to use this increased debt flexibility? Are there any acquisitions in sight?

We are not planning to get any additional debt. What we’re planning is to lower that debt with a ratio to between 3.8 times and 3.5 times by the end of the year.

Once we’ve finished the divestment of our inside the fence power plants in Colombia, the first three of them.

Very clear. Thank you very much.

Hi, good morning everyone. Thanks for taking my question.

Just wanted to get a sense of the level of price declines, it seems that the strategy to lure out the importers has been working, so I just want to get an idea in the cement side. When we’re talking about lower prices, how much lower when – talk about it in a year-over-year basis?

And also you have indicated prices have bottomed out in May to just in June, how did those look sequentially and in cement as well? And how did – also this EBITDA margin of 20% looks versus April and May of this year?

Just to get a sense how should we look at the pace of the recovery in the second half of the year, probably should we still be looking at 20%, low 20% EBITDA margins? And as you mentioned, maybe 25% next year and in the medium-term going back to 30%?

Or just to get a sense on the shape of the inflection of the market. Thank you.

Thank you. Thank you, Mauricio.

Prices are, on average – we’re on average 28% lower year-over-year in the second quarter. As we said, we think that prices bottomed between April and May.

We increased prices at the end of July, impact cement by more or less 5% in all of our regions in Colombia. So we'll foresee better margins going forward.

We plan to win 25 next year. So in June, we were at 20%.

And from June to December, we plan to start closing the gap between 20% and 25%. The price increase will help us.

Great, great. This is very helpful.

Thank you.

Hey, good morning. I have one question.

What do you expect in terms of volumes in the plants in Colombia in terms of prices and volume?

In Colombia, through June, the market was decreasing more or less 3%. We are expecting a better second half of the year, but we are not foreseeing important volume growth.

The 4G are a reality, but the dispatches to 4G are – and the construction of 4G project is taking longer than expected so the reality is we're expecting like a flat second half of the year in terms of volumes.

Okay. And how about the in terms of volumes margins within the plants.

Will that effect the prices?

The reality is that imports have been decreasing in an important way. So as we said, price has bottomed in – between May and April.

So the reality is that import prices, at the same time, import parity prices have been increasing, so we don't foresee much price pressure from imports in the second half of the year.

Okay. Thank you very much.

Good morning, thank you for the call. The question that I have is on the U.S.

operations. You have mentioned in that you are actually making some adjustments in your South Central region.

Can you elaborate a little bit of what exactly are you doing and is the South Central includes Little Rock? And if there is any difference of what you might be actually doing on your ready-mix business between Houston and Dallas?

Thank you.

Thank you, Francisco. The market in Houston, specifically, has been under pressure, lower volumes because of the oil crises.

I mean, there's the lower oil prices. So the reality is that the commercial sector slowed down in a significant way in Houston.

Our volumes in Houston are more or less 20% lower than they were one-year ago, so that is why we are making the adjustment that we mentioned. We are streamlining our operations.

We are reducing headcount, and we are adjusting our operation in Houston for the new reality of that market. We are switching our strategy at the same time to – towards the residential sector, which is showing better average perspective, and we plan to recover the profitability of our operation in Texas by the end of the year.

And is – the overall market in Dallas is different from what you are experiencing in Houston? And if you can you remind me that if Little Rock is also part of South Central?

Yes, Little Rock is part of our South Central division. The market in Little Rock is normal.

No problem with that market and Dallas is even much better shape than Houston as well. So our challenges are in Houston.

Understood. Thank you so much.

Good morning, thanks for taking my call. I have a question regarding additional maintenance in Colombia, Central America or the U.S.

lands for the rest of the years. Thank you.

Angela, thank you for your question. Nothing major is scheduled in maintenance for Colombia, Central America or the U.S.

for the second half of the year.

Okay, thank you.

Good morning gentleman, thank you for taking my questions. I only have one question.

I would like to know more detail on the U.S. operations.

I mean, what were the revenues and EBITDA only from Martinsburg of the $397 million or $66 million over some EBITDA gain of the region?

Thank you for the question, Carlos. Revenues for Martinsburg during the second quarter of the year were $50 million.

EBITDA for the plant was $17 million, cement volume was 430,000 tons. We are planning to sell 1.8 million tons in Martinsburg this year.

And our EBITDA for the plant is estimated at $70 million for the whole year.

Great, thank you very much.

Hi, good morning everyone. Thank you for taking my call.

Just very quickly, the guidance on ready-mix volumes for the U.S. and Colombia given the weak performance in the first half.

I mean, if you can just repeat, please, the guidance and total EBITDA for Columbia and the U.S.?

The guidance for the U.S., we lowered the guidance to between $260 million and $280 million. In Colombia, our guidance is between $400,000 and $430 million – thousand million pesos.

And we are not providing volume guidance for the ready-mix business in Colombia nor in the U.S.

Should we expect similar trends to what we saw in the first half? Or it's improving marginally?

We are foreseeing a better second half of the year, both in the U.S. and in Colombia.

Perfect. Thank you so much.

Thank you.

Once again, thank you very much for joining our conference call, and we look forward to speaking with you again for the third quarter conference call. Have a great day.