Cementos Argos S.A.

Good morning. My name is Manuela Ramirez, Cementos Argos IRO, and I welcome you to our Second Quarter Results Call.

On the call today are Juan Esteban Calle, our CEO; Marissa [ph] VP of Legal Affairs; Carlos Yusty, our CFO; Bill Wagner, the VP of the U.S. division; Tomas Restrepo, the VP of Colombia division and Camilo Restrepo, VP of Caribbean and Central America division.

Please note that certain forward-looking statements and information during the call or in the report and presentation uploaded at www.argos.co/ir are related to Cementos Argos S.A. and its subsidiaries, which are based on the knowledge of current facts, expectations, circumstances and assumptions of future events.

Various factors may cause Argos future results, performance or accomplishments to differ from those expressed herein. The forward-looking statements are made to date, and Argos does not assume any obligation to update their statements in the future as a result of new information, future events or any other factors.

Today, after the initial remarks, there will be a Q&A session. [Operator Instructions].

It is now my pleasure to turn the call over to Mr. Calle.

Thank you, Manuel and good morning, everyone. As part of our divestment strategy, we've completed during the second quarter the sale of our stake in Omya Andina and in Carton de Colombia raising around $27 million.

These divestments reflect our ongoing commitment to concentrate all of our resource’s energy and efforts on the growth on the development of our core business. In addition, we continued with the transformation of Argos in our goal to become a linear, more agile and customer-oriented organization As part of BEST, we have been very successful is streamlining our operations, and significantly adjusting headcount and contractors in our plans to become more competitive.

We are complementing that effort with a significant change in our corporate structure by simplifying the designer service areas and empowering the business unit our regions. We are now operating with a linear restructured and as more relevant and more agile Executive Committee comprised three regional BPs, USA, Colombia and the Caribbean, and Central America, and three design areas.

Finance, legal and sustainability and HR. Our key core transversal capability such as innovation, technical excellence, supply chain and alternative materials and fuels are operating out of the regions and the global sponsorship of original BP with the goal of generating more value to the businesses and to our clients.

Now moving on to our consolidated figures, I would like to start by emphasizing that for the purpose of facilitating the comparability of results during this call, we will be making reference to financial numbers net of the effect of IFRS 16. More detail on our financial after adoption of IFRS 16 can be found in the presentation and report already posted in our Investor Relations website.

Cement dispatches reached 4.1 million pounds during the second quarter decreasing 1.8%. When compared to second quarter of 2013, and ready-mix dispatches reached 2.6 million cubic meters, boasting a 6.8% decrease.

These volumes reflect the impact of heavy rains in the South-Central region of the U.S. challenging market conditions in Honduras and Panama and the short-term effect of our strategy to record prices in Colombia.

On a like-to-like basis, EBITDA posted a 5.9% decrease during the quarter as a result of the adverse weather in the U.S. a temporary loss of market share in Colombia, resulting from our price recovery strategy, and the challenging political environment in our main markets in Central America, and the Caribbean.

To start with our results in each region, I would like to invite Bill to explain the performance of the business in the U.S. and our view for the region.

Thank you, Juan. And good morning, everyone.

I'd like to begin by talking about our cement volumes, which grew 2.2% in the second quarter. I'd like to specifically highlight our performance in in Florida which is up 16%.

The Deep South, which is up 13%, Arkansas, which is up 2.7% and the Carolinas, which is up 2.5%. Our ready-mix volumes could not keep up as well as cement decreasing 9.8% mostly due to the incredible amount of rain we've seen across the region, specifically in the South-Central zone.

In this zone only 50% of the quarter solid dry days compared with 82% of the same period last year. As a result, EBITDA decrease 6.1% during the quarter.

However, I want to point out the good momentum of the concrete market in South Central region, or as a June our backlog posted a 24% increase on a year-over-year basis. We are working on some good and positive initiatives that are really starting to pay off our region.

We decreased our energetic costs by 5% mainly due to lower power rates, especially in Roberta and consumption optimization. In addition, as of July, we've achieved $11 million in cost efficiencies.

Thanks to our BEST 2.0 program. These costs efficiencies we're seeing across our operation and we're driven through continuous improvement initiatives.

We continue to advance in the analysis of our supply chain network optimization, with a goal of improving overall profitability, and sourcing from the most profitable location. In addition, our Newberry cement plant started in July using alternative fuels and we have an ambitious goal for December 2019 of 10% replacement and the 20% replacement for 2020 December.

We are working more closely with our customers and continuously seeking to improve the customer experience specifically through our digital strategy. As of June, we are proud to say that 21% of cement orders were placed through August 1.

Also, in our cement business, we're seeing better prospects for increasing market share in the North East. The Carolinas are seeing great growth as well as stabilization project.

And we are getting a big demand supply distribution and fulfillment centers, like the one in Ferris Point. In Florida, we are seeing a pickup in cement sales to third parties.

Along those same lines, we're improving the customer experience and our level of service through driver recruitment for our ready-mix business. We have had a net increase of 83 drivers with 21 of those being women as a result of our new recruitment strategy.

In terms of market, despite the dynamics at construction spending and the residential segment, we maintain a positive outlook. And our operation is more oriented toward the commercial segment, which makes up around 66% of our ready-mix business.

The Architectural Billing Index, or ABI, which measures the nonresidential construction momentum and it's considered positive when it is above 50 points close at 50.3 in June for firms oriented to commercial/industrial segment. Billings have softened except in the South region where Argos has present, where it sits at 51.9.

A monthly measure of the first report for non-residential building projects and planning, which linked construction spending by a full year posted a 4% growth in June to 146.1. This improvement suggests stability in the construction segment considering the number of projects that planning faced in the near term.

Our own insights also suggest the same. As for infrastructure, the U.S.

Department of Transportation announced $495 million in infrastructure grant for 327 airports and 46 states and the Pacific Islands. In addition, we're participating in the Georgia 400 Highway and I-285 Junction, which will be about 60,000 cubic yards.

Thank you, Bill. We remain optimistic about the performance of our business in the U.S.

for the remainder of the year. Especially taking into account the strong backlog in ready-mix, the healthy volume in cement and the progress of serving the execution of BEST 2.0.

Moving on to Colombia, I want to highlight the positive dynamic of the market and our strong commitment with the execution of the price recording strategy. Tomas will not provide the additional color on this region.

Thank you, Juan and good morning. During the quarter, the cement market presented a positive trend, posting a 2.3% growth.

However, and resulting from a 12% recovery in FOB prices in June when compared to year end 2018 we experienced a 333-basis points loss of market share in the quarter mainly in the Central and South Western regions of the country. This added to the effect of Easter week that took place in April this year led to an 8.2% reduction in cement volume.

Likewise, ready-mix posted a 2.1% reduction in volume during the quarter. As mentioned in previous calls, EBITDA margin continued to be impacted by increasing energetic cost in 195 basis points.

We expect a better cost dynamic for the second half of the year considering a better international trend in the coal price since June and the actions that we have taken in the past months such as the negotiation of better coal prices and an increase in the usage of natural gas and alternative tools in our operations. Also, our EBITDA margin was affected in 154 basis points by major scheduled maintenances in Cartagena plants during May and June respectively.

For the rest of the year, we expect improving dynamics in the residential inventories as the government announced multiple initiatives to consolidate the social housing segment and reactivate the regular housing and therefore cement demand. Regarding infrastructure, we remain confident considering the growth of this practice for civil work seen in the last month.

The governmental support for 4G products and an interesting pipeline of infrastructure products in Bogota, which includes the metro. Year-to-date through June, we have dispatched around 195,000 tons of equivalent cement to infrastructure including 4G, 63% more when compared to the same period of 2018.

We will continue to make progress in this segment to reaffirm and maintain our leadership based in our value proposition.

Thank you, Tomas. I would like to emphasize that we will continue our efforts to optimize energetic cost in Colombia and remain fully committed to implement our price strategy to improve profitability and propensity business [ph].

Price still well below in property that has been recording and the Colombian peso has been devaluing adding momentum to more constructive prices in the market. On the customer side, our go-to market strategy to offer our clients the best value proposition to our portfolio approach and [indiscernible] will be top priority.

In this sense, I am glad to mention that we remain at the forefront of the industry, as of July 63% of our cement and ready-mix dispatches were made to the platform. Moving on to Caribbean and Central America, the sales were affected by the challenging environment we’re facing in Panama and Honduras where imports have observing relevance.

However, I would like to point out the operations such as the Dominican Republic and Haiti continue with the positive performance highlighting the importance of our diversified in this region. Camilo Restrepo who leads our businesses in the Caribbean and Central America will explain the results.

Thank you, Juan, and good morning, everyone. Cement volume in our local operations decreased 6.8% resulting from a slow market in Panama.

The increasing political turmoil that has affected Honduras since President Hernandez was reelected in a challenging competitive environment both in Panama and Honduras where imports have increased significantly year-to-date. To counteract the challenging conditions in the region, we are continuously working to achieve efficiencies through BEST and are committed to deliver a superior value proposition to our customers.

In this regard, I would like to mention some of the developments. In Panama, we have achieved around $5 per ton of savings in cement and around $6 per cubic meter of concrete through the cost optimization in our plants and the implementation of new technologies.

Nowadays for example, the dispatch process in organic facility is fully automated. On the customer side, I'm glad to announce that this month we are commissioning the dry [ph] plant that will allow us to offer our client a more diverse portfolio of products.

Also, we have been very successful in the implementation of our digital strategy through Argos ONE, the channel Argos Express. In Honduras we have reduced the clinker to its ratio 3 points and despite the inflation in most of our raw materials, we have reduced the cost per ton in operations.

Also, we are working to strengthen our value proposition to enhance portfolio of products as a superior experience to our clients. In the midterm, we remain cautiously positive about Panama considering the strong pipeline of infrastructure projects and initiatives announced by the new government to boost the construction sector, both in the residential and infrastructure segments.

Facts such as a public private partnership law, the extension of interest rate subsidies for social housing up to the $180,000 price bracket, and the adoption of technical rules or regulations in cement are very encouraging.

Thank you, Camillo. I would like to highlight that we will continue focusing the execution of first in the region to continue gaining competitiveness in a diverse and challenging competitive market.

Now, before we go to the Q&A, I will refer to our balance statement. We close the quarter with a net debt to EBITDA ratio of 4.17 times a level higher than our target.

We have been very clear that our priority and obsession is to gain financial flexibility and reduce this ratio to a level of 3.2 times net debt to EBITDA, by June of 2020, you can count on our full commitment to continue working towards improving the operational performance of our businesses, executing BEST 2.0 in the U.S., accelerate our divestment strategy and optimize our working capital cycle and CapEx in all the regions. We plan to divest another cluster of non-strategic or non-covered remixed assets in the U.S.

before year-end. Taking into account the challenges that we are facing in the Caribbean and Central America.

Our EBITDA guidance for 2019 has been adjusted to a range of between COP1.6 trillion to COP1.1 trillion passes without the adoption of IFRS. Finally, I would like to close the call by thanking you all for your attention and refining our commitment to continue transforming Argos to deliver more value to all of our shareholders Operator, you may now continue with the Q&A.

Hi, good morning, everyone. And thanks for the call.

I have two questions. My first one is regarding Colombia.

I was wondering if you, do you expect to recover the market share loss during this quarter? And this year in 2019 or do you expect market share to remain stable given your pricing strategy?

And my second question is regarding your operations in Central America specifically in Honduras and Honduras. If you could give us any color of how are you seeing the market dynamics going forward in this market?

Thank you very much.

Good morning, Juliana, and thank you for your questions. In Colombia, we are clear that our priorities to continue with our pricing strategy.

In our opinion prices are still well below equilibrium in Colombia. So, we will continue moving forward.

We plan to have better volumes in the remainder of the year and to finish the year, probably flat to 1% to 2% increase, but most likely due to our top priority of volume prices, we will end up the year losing some market share. In our opinion, we are looking to improve EBITDA, and the result of our operations in Colombia.

So, we are okay with that. In terms of what is going in in Honduras, the reality is that basically the demand has been impacted by the difficult political situation in the country.

We don't expect any improvements in the Honduras economy during the remaining of the year. However, we remain bullish about the future of Honduras.

It is our country in which our operations, as always perform extremely well, is just after the election of President Hernandez. The reality is that the political turmoil has made it difficult for the main infrastructure projects to gain momentum.

Perfect. Thank you very much.

Good morning, thank you for the call. I have two questions, and the first one is if you could give us some details about the initiatives, you're expecting to use to reach the additional 30 million in savings in the U.S.?

And my second question is, if you could give us some details about how you expected to reach 3.2 times leverage ratio, and how much could come from debt reduction? Thank you.

Thank you, Rodrigo. I will answer the first to your second question, I mean, our target of 3.2 times you said by June 2020.

So, our expectation as with a lower CapEx, better capital -- working capital cycle, and additional divestment, plus the record of our operations, we will be able to reach that target by June of 2020. In terms of the execution of BEST 2.0, I would like Bill to give you a little bit of more about the successful implementation of that program in the U.S.

Thank you very much for the question, Rodrigo. I think that has been moving forward very well.

I think most of the saving so far is coming through our cement optimization and efficiency program. So, we expect that to continue for the balance of the year.

Our operations in Martinsburg have kind of turned the corner and are beginning to contribute fairly significantly, we expect in the second half. So again, significant cost efficiencies in our cement operation.

And in the ready-mix operation, our efficiencies are really improved because of our driver headcount addition, those drivers have added an additional $500,000 of capacity. And we're planning on taking full advantage of that in the second half of the year.

So, you know, I think there's a lot of good things going on. I think you're going to see maybe some improves audience.

We've seen some market share gains in cement and some cost improvements in cement also. So, we're looking forward to the second half.

Okay, thank you.

Hi. Thanks for taking my question.

It is also regarding prices. So, I was just wondering, if you could give us some color and how much more pricing is cyber saving for Colombia once [indiscernible] entering the first quarter of 2020 and how will that impact the market share?

Thank you, Regina. Prices in Colombia are still below $90 FOB on average.

In all of our calculations, the equilibrium price should be closer to 105 or 110. With the original devaluation of the Colombian peso and the market is starting to gain momentum in terms of demand growth.

We don't see any reason why prices shouldn't continue the recovery trend in Colombia. We have been able to increase prices over a 12% through July in Colombia.

And we will continue increasing prices until the level that we consider, it is [indiscernible]. But it is going to enter the market probably in January of next year.

But the reality is that Colombia still importing more of less 800,000 to 900,000 of equivalent tons of cement. And there are still so many small players that are not having a great time and their performance is not that healthy.

So, most likely the entrants of [indiscernible] will help to move the market towards consolidation as well.

Okay. Thank you.

Hi, good morning. And thank you for taking my question.

Actually, I have to if I may. The first one is with regards to the U.S.

strategy. I was just trying to understand, and we have seen a very active news flow with regards to M&A options and with regards to ready-mix and cementing the U.S.

space. So just trying to understand if you would be interested, perhaps in any specific assets like Balkan regal materials, perhaps.

And if this were the strategy to follow, would you be interested in looking at cement assets or maybe ready-mix. Anything that could help us understand what the strategy in the U.S.

will be very helpful? And then my second question is with regards to guidance.

In the U.S. guidance seems to be unchanged.

So, I just trying to have some sense on how to think about this slight guidance comp. Is it coming from the Caribbean or Colombia or maybe both, anything that could give us some sense here will be very helpful?

Thank you.

Thank you, Alejandra. In terms of our strategy in the U.S, I mean the reality is our main priority to improve the profitability and the efficiency for operations.

We are extremely happy with our current footprint and on a companywide basis, our top priority is to regain financial flexibility. So, we are not looking in adding assets or acquiring anything in the U.S.

at this point in time. About our guidance, the U.S is unchanged in the US we're including the original divestment of our cluster of ready-mix assets before year end.

So, it is unchanged taking into account that we will be divesting so much. So, the reviewed guidance would come from Central American and the Caribbean mainly and the little gap that we will have in Colombia as well.

Understood. Thank you very much.

Good morning everyone. My question has to do with the U.S volumes as you can give us more color on which were the state the drag the performance of volumes considering that that's Florida was quite strong 60%, if you can give us more color on other state specifically Texas.

Thank you.

Sure, Adrian thank you for your question, we're extremely happy with the performance for cement business in the U.S and we will provide additional color.

Okay, thank you for the question. Just to give specifics around the volume we've had very good success as you know in Florida.

I think biggest opportunity is in Martinsburg because there were some reliability issues late last year and the plan, we actually had a little bit of blip in what was on the customer side. So, we recovered that now and moved into this year.

So, we're looking at picking up significant volume in the North East in the second half of the year and we have pretty sizable amount of volume under contract already. So again, its thing new forward, that’s really where the shortfall was but we feel better about the second half.

And in Texas?

The Texas volumes that we done so far this year mainly have been impact weather situation predominantly in doubt and so far since then the Texas has picked up lately and we still feel pretty good about the second half of the year because we feel like the weather pattern maybe behind this.

And just to finish the ready-mix volumes in Texas they perform in the quarter?

The ready-mix volumes started out pretty strong. We were significantly impacted the last two months there because of really, really bad weather again mainly in Dallas.

Our backlog is very strong for the second half of the year. So again, if we have some normal weather patterns there, we feel really good about recovery in our volumes in Texas.

My question is regarding pricing in the U.S do you think that there could be a good pricing traction in the second part of year with more normalized weather conditions. Do you think that harsh weather has been, not continue moving in prices?

Bill, please answer that question as well.

Yes, I do think that the weather has impacted the ability to maybe new prices and I think when we if you have more of a normal circumstance and you can get your backlog through the system the price increase that are now will actually flow through into what equates to what equates to higher prices going forward and that's actually what we are seeing in a number of our markets right now specifically in Texas. So, when the weather was pretty bad, we couldn't get the backlog out and so the backlog was at the lower prices before the price increase this year.

And so now that things are moving through the system, we expect that to kind of push through and move forward. So, our volumes and cost center were down 16% actually and so we are expecting a recovery and we had a very strong month here recently and we're expecting the same in August.

So again, once the backlog goes through the system, we feel like we’re going to have some strengthening in pricing as well.

Great. And can I make a similar question for Colombia regarding prices if you can tell us more or less what’s the price increase that you achieved in the second quarter in Colombia?

The price in Colombia have increased 12% year-to-date. We made a 6% increase more or less in the second quarter and a 6% increase in the first quarter.

What we are happy about is that demand is growing again in Colombia. The market is going up close to 3% and the ready-mix market is going up 5% and we’re expecting to be up very positive momentum for the recovery of demand that will help our pricing strategy going forward.

Great. And do you expect to announce more price increases in the second half of the year, or will you wait for competitors to catch up with Cementos Argos price increases?

Since we strongly believe that price is well below equilibrium, we will continue with our pricing strategy in this third quarter of the year.

Excellent. Thank you.

Good morning. Thank you very much for the presentation.

I’ll ask two questions. The first is, if you can give us a guidance on the EBITDA margin, you’re expecting in Colombia considering your anticipation on energy prices?

And the second one is if you’re considering divesting some of your [indiscernible]?

EBITDA margin guidance for Colombia at least we have a 20% in 2019 our mid-term target is 25 with the energy cost pressure that we faced during the first part of the year, our target for the whole year is 20% EBITDA more or less in Colombia. In terms of our stake in [indiscernible], we have been extremely clear about some point in time and at the right time and at the right place we will sell that portfolio similarly to what we did with Bancolombia.

Okay, perfect. Thank you very much.

Hi good morning I have one question maybe you can tell us anything about any update about any possible - approach with cement materials in the United States about any merger between you and that company? Thank you.

Thank you, Roberto. Grupo was very clear, when they release information to the market that there is nothing material or significant or relevant that they should inform to the market at this point in time.

And we’re extremely clear as well that our top priority is improving our current operations and to leveraging our company.

Thanks.

Hi. Good morning.

Thank you for the call, gents. My first question actually and apologies for this, because I missed your comments earlier.

What are your few substitution rates in the U.S. in the short term and in the long term.

And the second question relates to some of your competitors have mentioned a lot of weakness in the North East markets both demand falling, supply increasing and I wonder if you can give us a little bit of color if that has impacted in anyway the Mid-Atlantic operations where you are operating and if you can give us a little bit of color on how things are going in Mid-Atlantic that will be very helpful. Thank you so much.

Morning. Thanks for the questions.

In the U.S. the current substitution rate is around 10% in some plants I mean with rich substitution rates about 20%.

And our midterm goal is to be about 20% in the U.S. and long term at least 30.

We are trying to reach similar levels in Colombia, when where we are just starting by, we're extremely bullish on the substitution opportunities in Cartagena and Rioclaro. In terms of our Mid-Atlantic market, Bill can give you a little bit more color, but the reality is that we have seen that demands strong.

Okay.

Yeah, Juan. I think that's exactly right.

I mean, I think we had, some operational constraints, like I said, earlier last year, those have been corrected. And we feel very good about the market.

We feel good about the structure. We feel good about our position there.

So, I think we're getting very strong position with the plant now to move forward in a real positive way. So, we're excited about the next six months and going into 2020.

Okay, so you haven't seen any initial shipments coming over from those regions in the northeast go into the mid-Atlantic at this moment.

No, I don't.

Okay, perfect. Thank you so much.

Hi, good morning, gentlemen. Thank you for taking my question.

Sorry, if you already answered this question. It was disconnected before, sorry if that's the case.

And you mentioned that the revised cadence includes impact from divestments. I was wondering if you could help me quantify this impact, especially in the U.S.

the guidance didn't change, but does it include any impact from divestment. And second question it be really appreciate if you could share some, some detail about the pricing in U.S.

in July, if possibility in terms of on your analysis. And the last question, do you have clear view on run the new [indiscernible] plant will come on stream in Colombia.

Okay, Paul, thank you for your questions. I mean, in terms of our guidance in the U.S., we're expecting $20 million to $25 million coming from the divestment of our cluster of ready-mix assets in the U.S.

It is included in the guidance. In terms of pricing in the U.S.

in July, I would like Bill to give you a little bit of more about that.

So, I think in July, the prices remained somewhat consistent to June, but we're expecting that they're going to improve a bit. So, in south, in the east side of the ready-mix business.

Florida prices tend to be a little bit lower than the rest of the areas where we operate. But we're seeing some pretty good growth year-over-year there and July would be consistent with that.

It would depend a little bit on, how Florida volumes are and going forward July and August. So, in South Central, we've seen some improvement in pricing in July, we should see that continue because we, as backlog pushes through we're going to see some increases take place there in third and fourth quarter of this year.

So again, I mean, we're pretty optimistic. We had a couple of our largest clients in Texas that has taken their increase.

So, they should go into effect here soon.

Thank you very much.

Your question about EcoCementos and when do we think they will start. I mean in our opinion they will start the last quarter of this year or first quarter of 2020.

The good thing for us is that we are already commissioning our calcined clay planting Rioclaro. And that will make our Rioclaro plant our most cost competitive plant in Colombia with not only extremely important environmental advantages, but also in our opinion, low OpEx an extremely high substitution rate for clinic.

So, we are ready

Thank you very much.

Hi guys, thank you very much for taking my question. Regarding and margins in the U.S., can you remind us the outlook for these years’ margins?

And how much you are it coming from cement and how much is coming from ready-mix? Thank you.

Thank you, Froylan. We are expecting cement margins to be close to 30%.

When we had some challenges in the ready-mix margins, Bill explained the challenges that we are facing in Texas because the word but our target for the ready-mix business to our margins with at least 5%.

So, in average, you're expecting around 20% margin or and how much is that in the full mix?

That will bring us to 819, little bit below 20%.

Thank you so much.

Good morning. Thank you for the presentation.

My question is related to financial expenses, we saw a significant increase this quarter. And I would like to understand if this is even compared with the 1Q I mean.

And I would like to understand if this is your recurrent financial expenses, or there is something extraordinary that we should take into account in these quarter numbers.

Thank you, Andres. Carlos will take your question.

Hi, Andres. The main reason is because of the dividends from SURA, that would recognize during the first quarter of the year.

And it was about COP17 billion. The other important point is that we are fine tuning the recognition of the IFRS 16.

We have more impacted in the second part of that in the first part about really that is part of the normalization of the adoption of these rule. This is about the 80% or 85% of the difference.

Thank you, Carlos, that should be clear. When you mean the fully reflection of IFRS 16, you mean that there is something additional being recognized in the second quarter that was not recognized in the first quarter.

And the split between the depreciation and finance expenses.

Correct. So, to make it clear, my question is, if this COP135 billion is what we can expect us recurring financial expenses at this level of leverage?

Probably, but not that amount. Probably it's more during the year, the forecast of the financial expenses is to be around COP450 billion, COP460 billion for the total year.

Got it. Thank you so much.

Okay, Andres.

Yes. Thank you very much.

I'm just wanting to understand and clarify the impact of IFRS 16, and the numbers being presented. Your leverage of 4.17 times, does that include the impact?

Do you know what that leverage number would have been without the impact? Similarly, for your target leverage of 3.2.

Is that based on inclusion or exclusion of IFRS 16? Thank you.

Thank you. Well, Carlos will give you more color.

Hi Brett. The ratio doesn't include the under IFRS 16 and the projection that was mentioned on the forecast for the target, the 3.2 times will not include the data under IFRS 16.

Okay. Thank you.

Okay.

Hi guys. I want to understand.

Yes, why the other, the increases in other income in the second quarter? Thank you very much.

Carlos, go ahead.

Hi, Roberto, I know that the other increases are really the impact of the divestitures of the developments in the second quarter, the Bancolombia and Omya Andina.

Thank you very much.

Okay.

Okay. Thank you all for tuning into our conference call and your continued support of our company.

And looking forward to our next conference call. Have a great day.