Cementos Argos S.A.

Good morning. My name is Indira Diaz, Cementos Argos' IRO, and I welcome you to our third quarter results release.

On the call today are Juan Esteban Calle, our CEO; Carlos Yusty, our CFO; Maria Isabel Echeverri, the VP of Legal Affairs; Bill Wagner, the VP of the U.S. division; Tomás Restrepo, the VP of the Colombia division; and Camilo Restrepo, the VP of the Caribbean and Central America division.

Please note that certain forward-looking statements and information during the call or in the reports and presentation uploaded at www.argos.co/ir are related to Cementos Argos SA 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 today, and Argos does not assume any obligation to update such 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.

If you have a question, please raise your hand by pressing the icon at the bottom of your screen at any time during the conference. We will record this Q&A session and upload it in our webpage.

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

Thank you, Indira and good morning everyone. The third quarter of 2020 came along with the full reopening of all of our facilities, together with strong trends of consumer positivism and market recovery in emerging markets boosted by self-construction.

These trends led to outstanding performance of countries such as Honduras, Dominican Republic, Haiti, and Puerto Rico, which exceeded during the quarter cement volumes higher than last year's. Self-construction also had a positive impact in Colombia, as evidenced in the volume increase of 4.9% on September 2020, when compared to the same month of 2019.

The US on the other hand, continues to be resilient even in the midst of the spike in the pandemic and the political uncertainty that surrounded the presidential elections. Notwithstanding, we face adverse weather conditions derived from four hurricanes, two storms and 10 strain, which impacted our footprint.

Internally, we continue to be fully committed with all the initiatives within RESET, focus on achieving remarkable results by year-end, and encouraged by our vision of a strong recovery in all of our markets for the coming year. On the health and safety dimension, we would like to highlight the successful restart of our operations in Panama during September, after two month of complete closure, and three additional months of partial reopening.

We also continue working on the projects associated with operational excellence, such as Digital twins that use artificial intelligence to analyze historical data from our kilns and grinding stations to obtain the optimal mix of energetics and raw materials to produce cement with lower body a really deep, unexpected savings of $30 million per year by 2022. On liquidity, the initiatives continue to yield favorable results as evidenced by the robust free cash flow generation of COP472 billion during the quarter.

These cash surplus allow us to amortize debt for COP288 billion while closing the quarter with a cash position of CPO960 billion, which was very similar to the cash we had available at the end of June. Regarding SG&A and cost efficiencies, we obtained savings of $33 million during the quarter of which 43% were obtained from personnel, 23% from maintenance, 19% from services and 16% from our expense.

We expect to obtain additional savings of at least $8 million during the last quarter of the year. Now moving toward consolidated results, I would like to start by clarifying that all percentage changes in ready-mix dispatches and EBITDA are calculated based on the pro forma numbers of 2019, which exclude the operation from the ready-mix divestitures carried out in the US region on that year.

The execution of RESET at the strong record of demand in most of our markets propel us to obtain a total consolidate EBITDA of COP479 billion during the third quarter increasing 9.5% on a like-for-like basis when compared to the same quarter of 2019. These quarterly results lead to a year-to-date EBITDA COP1.24 trillion, representing an increase of 0.8% year-over-year on a comparable basis.

Cement dispatches reached 3.9 million tons during the third quarter of 2020, decreasing 8.4% when compared to the same quarter of 2019 and ready-mix dispatches reach 2.0 million cubic meters, posting a 19.5% decrease on a like-for-like basis. These results were affected by the adverse weather conditions in the US region where the rainy days during the third quarter of 2020, exceeded last year's by 66%.

The gradual recovery of cement and ready-mix volumes in Colombia, which has not yet reached pre-lockdown levels in housing and infrastructure also, had an effect on these numbers. Now, to start with our results in each region I would like to invite bill to provide more context about the performance of the US region and our midterm view for the market.

Thank you, Juan and good morning everyone. I'd like to start by highlighting the strong EBITDA performance for the US region, which reached $73 million during the third quarter of 2020.

This represents an increase of 10.5% on a like-for-like basis versus the same quarter of 2019. These results were produced through strong teamwork, and allowed us to implement the RESET program which seeks to optimize our operations and generate savings.

The program has generated $20.6 million during the quarter and has led to an EBITDA margin improvement of 470 basis points in a challenging market that experienced declining volumes across all our US footprint. As a result of lower than expected volumes total, revenue decreased 16.7% on a year-over-year basis in both the cement and ready-mix concrete businesses.

During the quarter cement and ready-mix concrete volumes posted a like-for-like decrease of 14.2% and 19.7% year-over-year respectively. The market driven volume impact was compounded by a significant increase in weather related disruptions.

During the 2020 Atlantic hurricane season, we had six major events being hurricanes or tropical storms that made landfall in quarter three alone. Average adverse weather days impacted our operations nearly doubled from 2019 going from 13 to 22 days for quarter three.

This weather pattern particularly affected Texas, which went from 13 to 26 weather days. Georgia also felt weather going from 14 to 33 weather days during the same quarter.

Despite a quarter with severe weather, we had been fortunate, as these events have not impacted the safety of our employees or materially impacted our facilities. In terms of pricing, our cement business rose slightly when compared to the same quarter of last year, posting a price increase of 0.5%.

The ready-mix business was also positive with a year-over-year increase of 4.2% during the quarter. Despite the public health situation and severe hurricane season in the US, the general macroeconomic conditions show a slightly slower but resilient economy, specifically in the building and construction sector.

On the residential segment, we continue to see favorable single-family housing dynamics; the 30-year fixed mortgage rates at record lows of 2.9% and September 2020 improving unemployment conditions and low inventories continue to keep this segment on strong footing. Consumer confidence is being closely monitored as mixed signals in October 2020 reflected both positive ratings and consumers' assessment of current business and labor market conditions together with some negative expectations in the short-term derived from the health crisis with the surge of COVID-19 cases.

Housing inventory show a year-over-year decrease of 32% by the end of the quarter combined with a year-over-year increase of 11% in housing starts and 8% increase in permits. These are clear signs of the housing market positive trend.

In terms of commercial and institutions sub segments, industry indicators continue to reflect some deterioration. However, there are improvements versus previous months.

The Dodge Momentum Index is in its third consecutive positive reading as of September 2020, mainly driven by activity associated to warehouses and data centers from ecommerce and tech companies would continue to push projects forward. Regarding the infrastructure segment, there's positive news concerning the renewal of the Fast Act for one more year, with $13.6 billion added to the Highway Trust Fund and the announcement of Florida's 2020, 2021 Bolder, Brighter, Better Future budget that includes $9.8 billion in funding for the Florida Department of Transportation.

These initiatives will continue to boost infrastructure across our footprint until a comprehensive infrastructure plan is approved at the federal level. The reality is we don't know where things are going with this pandemic, we still lack visibility.

We have been taking a proactive approach to protect our employees, customers and suppliers under the conditions in which we operate. We are feeling hopeful about the end of 2020, but we are remaining cautiously optimistic.

Thank you, as you mentioned, with remain hopeful about the last quarter of the current year, and expect to see a more dynamic market for 2021 given all the improvements associated to the macroeconomic indicators within the US regions. Moving to Colombia we would like to highlight the progress of the cement volume during the quarter and its positive evolution when compared to the overall market.

Thomas will now provide additional color on this region.

Thank you, Juan and good morning. During the third quarter of 2020, the Columbia market presented a significant improvement in terms of volume, and provided positive signals of recovery that indicate the proximity of an inflection point towards sustainable growth.

The statistics published by the DANE for the quarter account for a slight decrease of the cement market of 0.5% versus 2019, improving significantly versus the second quarter and demonstrating stability month-after-month. Our volumes in line with the market trend improved versus the last quarter, but still have not recovered to the same levels of 2019 due to the mix of demand of the industry.

Our volumes are more tilted towards the infrastructure and housing segment of the market, which have not fully recovered yet. In that regard, the cement volumes fell 13.1% year-over-year, which compared with the overall market performance represent a market share improvement for Argos versus the second quarter of 2020 given an important recovery trend towards the end of the quarter.

The ready-mix volumes in that same line posted a year-over-year decrease of 12.8%. The volume decline was partially netted by the higher prices ending in a year-over-year decrease in revenues and EBITDA of 9.1% and 21% respectively, with a total EBITDA generated during the quarter of COP106 billion.

As previously mentioned, our pricing dynamic continued to be positive during the quarter, posting an increase of 8.6% year-over-year in cement and 3.5% year-over-year in ready-mix, consistent with our approach toward delivering value added products to our clients, such as the green cement and the suelo-cemento. The suelo-cemento, a solution for low cost paving in secondary and tertiary roads of the country that has been in the market for around four years, has been used for paving approximately 350 kilometers, proving to be an alternative to dynamize the rural infrastructure with lower cost and durable results.

Regarding the green cement, we continue to promote the product with good results accumulating as of September year-to-date sales of more than 300,000 tons of this product. We also continue to support our network of clients with programs such as the training of over 6000 construction workers during 2020 and the donations made by our employees to provide over 15,000 packages of groceries and first necessity items for them.

In terms of market dynamics, the retail segment continued to perform well, due to the boom in self-construction that has prevailed since the market reopening. On the industrial segment, there was positive news that signaled a prompt recovery.

During September, the sales of new houses in Colombia increased 34% versus September 2019, encouraged by the improvement in sales of social housing of 43% during the same period as a combination of the positive performance that has maintained this sector during the pandemic. Furthermore, the recovery on sales of non-social housing with a remarkable increase of 16% year-over-year during September demonstrate the positive impact of the new housing subsidy provided by the government together with a global trend of improvement of the residential segment during the COVID-19 crisis.

Regarding the infrastructure sector, the Bogota Metro executed on October 20, the work initiation act as the formal commencement of what's considered to be one of the most important projects within the country, with a total estimated consumption of 1 million cubic meters of ready-mix concrete. The procurement process is scheduled to finalize toward the end of next year, indicating the consumption of building materials associated to the project will more likely start on 2022.

Additionally, the Colombian government has announced investments for more than COP30 trillion divided in three groups. The first wave of 5G projects, the programs concluir, concluir, concluir and Vías para la Legalidad, which are expected to boost the infrastructure sector from 2021 to 2030.

Given the improvements experienced by the local market, and the positive news that indicate further growth on the cement consumption within the country, we maintain our positive view regarding the near future. And we affirm our belief of having the construction sector as one of the main catalysts for the economic recovery of our country.

Thank you, Tomas. Before we move to the following region, I would like to take a moment to congratulate Tomas for his promotion to Chief People and Transformation Officer within our company.

And to thank him for all the achievements made during this eight years in front of the Colombian region. I would also like to welcome Harry Abuchaibe who has been in our company for almost 20 years and currently serves as the Country Manager of Panama to his new position as Vice President of the Colombian Region.

Both Tomas and Harry are key talent within our company and are equipped with the highest human professional qualities. We are confident about the excellent role that they will play in the new endeavors.

Now moving on to the Caribbean and Central America region, I would like to highlight the improvement in terms of cement volumes and EBITDA during the quarter. Despite the fact that Panama was only fully reopen on September 2020.

Camilo will provide more information on the performance of the region.

Thank you, Juan and good morning everyone. The market dynamics during the third quarter of 2020 within the CCA region were mainly influenced by the self-construction trend, which represents an important portion of the market in the region.

Countries such as Honduras, Dominican Republic, Puerto Rico and Haiti experienced year-over-year volume increases of 20%, 8%, 30% and 6% respectively during the quarter and saw rapid recovery after the lockdown in April. This remarkable behavior was able to compensate the decrease in volume of Panama that remained partially closed during July and August and experienced, in consequence a year-over-year decrease of 43% in cement volumes during the quarter.

As a result, the region had an overall improvement in cement volume of 4.7% when compared to the same quarter of last year. The pricing environment continued to be stable quarter-to-quarter, but it's still [Technical Difficulty] second quarter of last year.

Countries such as Panama and Honduras posted a price decrease of 6% and 7% year-over-year, while Haiti and Dominican Republic on the other side posted [Technical Difficulty] when compared to the same quarter of 2019. This mixed trend of higher volumes and lower average prices lead to a contraction of the revenue percent [Technical Difficulty] for $2.9 million.

The EBITDA increased 3.3% year-over-year and the EBITDA margin improved to 28.8%. It is important to highlight that this EBITDA was negatively affected by the 43% revaluation of the Haitian gourde during September 2020 with an estimated impact of $1.2 million.

Our view for the Caribbean and Central America region continues to be positive. We're improving market dynamics, accompanied by appropriate commercial strategies and cost cutting initiative.

In Panama, which was finally reopened during September, we are implementing a new portfolio of ready to use products aiming at capturing the self-construction trend that is prevailing in emerging markets. These products will delight our clients and help them with increasing productivity, reducing leftover product and reducing total cost of construction.

In Puerto Rico, we have decided to change our business model from upgrading an integrated plant with high unitary costs to commercializing a wider portfolio of cements that will be produced in our grinding and blending facility that utilizes most of our already existing infrastructure. Our new portfolio will provide a wider solution to all our clients' needs.

The operational change will create important improvements in EBITDA regeneration. All these initiatives are part of a more comprehensive strategy of implementing local solutions to adapt to the changing market conditions of each country, aiming at maximizing our profitability on every operation.

With regards to the short-terms of the region, we expect the self-construction trend to continue for at least the fourth quarter, but remain cautious about the following months given the macro economic impact arising from the COVID-19 pandemic.

Thank you, Camilo. Now referring to our balance statement, I would like to highlight the improvement of the net debt-to-EBITDA ratio that ended September 4.08 times given the improvement in the EBITDA and free cash flow generation during the third quarter.

But the EBITDA growth, the cash generation was positively impacted by working capital efficiencies of COP164 billion arising from inventory efficiencies in Colombia and in the US for COP61 billion and non-recourse factoring line implemented in the US for $16 million an additional improvements in collections in the US region. We expect the leverage ratio to experience a slight increase towards the end of the year.

Given the non-recorded EBITDA generated on the fourth quarter of 2019 for an amount of $23.6 million originated by the divestiture of a cluster of ready-mix plants. Regarding the debt, the amortization of short-term facilities carried out during the third quarter for an amount of COP288 billion together with the renegotiation of certain credit facilities, whose maturities were extended into the long-term improved significantly the average life of the total debt of the company, ending with a total short-term debt of 17% as of September 2020.

Additional initiatives such as a local bond issuance, and the negotiation of a long-term loan, to replace short term facilities are being evaluated to be carried out during the fourth quarter, generating the possibility of further improvements in this ratio towards the end of the year. In relation to the divestitures, we remain committed with a total target amount of $400 million, but have decided to adjust the strategy regarding our ready-mix operations in Texas in light of recent market and operational developments.

Given the expansion of capacity at our Cartagena plant, which was increased by 10% with a marginal investment in CapEx and the devaluation of the Colombian peso, we have started to export cement from Cartagena, to our ready-mix business in Houston, with the goal of improving its performance. As a result, we have decided to explore the potential divestment of our ready-mix business in Dallas, where we have not been able to integrate our operations with cement or aggregates.

This new strategy would allow us to improve the profitability, the consolidated EBITDA margins and the return on capital employed in our US business. Regarding the divestiture of the real estate assets, we have negotiated the sale of one asset located in Columbia for an amount of $10 million taking advantage of the momentum that the residential segment is going through.

We expect to finalize the negotiations funding the sales during the fourth quarter of the year. I would like to end this conversation by emphasizing how proud we are of our company and our more than 7500 employees for their commitment and resilience navigating all the challenges generated by the COVID-19 crisis.

We have been able to continue operating in our safe Way wide significantly mitigating the impact of standard shutdowns in most of our operations. And at the same time, we have been taken advantage of all the opportunities that are arising from improving market dynamics, contributing to the recovery of the economies and employment in most of our markets.

Thank you all for your attention. Indira, we can now proceed with the Q&A section.

Thank you, Juan. For the Q&A session, please take into account that you need to raise your hand and you need to unmute your microphone before you speak.

The first question comes from Juliana Aguilar from Bancolombia.

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

I have two questions. My first one is regarding the US market.

You have been strategically decreasing your ready-mix dispatches to the commercial segment and increasing the share of the residential and infrastructure segments. Do you have a mixed goal you intend to achieve?

And if so when do you expect to reach it? And how will this impact margins?

And my second question is regarding Columbia, why we didn't see any research savings in this region? And are you expecting any savings going forward?

Thank you very much.

Thank you very much Juliana for your question. And as you have seen, we have been trying to balance a little bit more our portfolio in the US towards infrastructure and the residential segment of the market.

However, we are still confident about the commercial segment of the market. It probably will change a little bit from offices to logistics centers and data centers and so on.

But we expect the commercial segment of the market to continue performing going forward. So our goal is more or less to have 45% commercial down from 55 and then increase our share in and residential infrastructure.

In Colombia, the reality is that we have our major maintenance in the plant in this quarter. So that is why the cost of the company didn't look that great, but the reality that we are very pleased with the efficiencies that we have achieved in Colombia.

So going forward, you should expect better margins or better performance of the region.

Perfect, thank you very much.

Next question is from Yassine Touahri from On Field Research.

Yes, good morning. So first, I would have a question on Colombia, where I'm a little bit confused by the price and volume dynamics.

So if I look at your sales, your revenue, we're now - we're down by 9%. And I understand that you had volume, which was voted down 13% across most of your business time.

So this would suggest that the price increase is only around 4%. But you are mentioning that the cement price is at 9%.

So am I missing something? Is there a mixer effects that I am missing?

That would be my first question. Then my second question is on your ready-mix business in Houston.

Are you seeing more competition from other independent - or from independent ready-mix concrete producer that can import cheap cement from Turkey or Algeria? I understand like for example, Cisco cements is ramping up a terminal in Houston.

Is it something that could impact the pricing dynamic in ready-mix increase in the following quarter and in 2021 because the pricing that you posted this quarter is quite impressive in ready-mix? And then my third question would be about your calcined clay initiative which is exciting.

Could you give us an update on where you are on? Are you already commercializing cement with calcined clay content?

Thank you very much Yassine for your questions. I mean, the performance of our volumes in Colombia is more related with the speed at which this different segments are picking up.

Recovery has been fully in the bag cement segment of the market, the consumer segment of the market, the housing segment of the market and infrastructure segment of the market, are performing well, but yet not at the historical level. So that is why our volumes are a little bit lower than the volumes of our competitors.

In terms of our pricing strategy, in reality the prices are up. 9% and I would like Tomas to give a little bit more color on that.

Thank you, Juan and Yassine how are you? So yes, the figures are correct.

So our revenues are down 9% and our volume in cement is down 13% in Colombia, but our revenues in ready-mix are also down 12.8% in Colombia. So the effect is indeed a mix effect between cement and concrete.

And that's why the price, the FOB price that is growing at 8.6% is the cement FOB price. The ready-mix price is growing at 3.5%.

So that's why you're seeing that effect. We're mixing - in your in your question, there was a mix between FOB cement prices and then cement volumes, but we were missing in that equation the ready-mix.

Now on to your question about calcined clay, cement production distribution, we have already commercialized 302,000 tons of cement with the calcined clay content. It is going very smoothly into the market.

We have done really our best to keep that in the same specs as the traditional portland cement. We started off with general use cement which is usually less demanding in terms of admixtures and technically speaking, but now we're starting to produce the ready-mix cement, the bulk cement for ready-mix manufacturing also with very good results.

Of course, the clay contents in those products are lower, but the most important part of our transformation in the industry is being able to take those clays into the higher performance cement. So we are very happy with the current performance and costs are already very - a little lower than clinker and as we scale up the process, we should be getting more and more savings out of that project.

Just on the pricing, is it fair that there is also a mix in cement where when we look at let's say the third quarter versus second quarter you might have sold a little bit more bulk cement - the mix between bag and bulk is a bit more throughout the bulk in the second quarter, which has also negative impacts in the mix.

That's right, Yassine as well. Our mix between the - what we call a retail business and the industrial business has usually been more towards the retail - the industrial business than the retail.

But as we've had much more trouble growing into the retail business lately, so we have been seeing more bulk cement or more industrial cement segment as a total of our sales. That's right.

It's also - so we have good FOBs, but it's a different business. That's exactly what you asked.

Thank you, Yassine much. Your question about the market in Houston, I mean it has been our intention always to integrate our ready-mix operations in Texas, it hasn't been easy.

But now with the additional capacity in Cartagena, the efficiencies that we have achieved in the Cartagena plant, I mean we think that we are in the best position that we can be to be competitive in Houston. Bill will give you a little bit more about the marketing in Houston.

Sure, Juan. Thanks.

Hi, Yassine. The competitive dynamics in Houston really haven't changed much.

I mean, there's a lot of downstream ready-mix players there. So your point is well taken.

So it was important for us to do what Juan had suggested in terms of trying to integrate. The biggest move that we made, you commented on the pricing there, but the move really stems from pursuing a different strategy and looking maybe more to diversify our balance between segments there.

And so as a result of that, and focusing a little bit more in the residential sector, I mean, we've had some price improvement of just around 6%. And which is pretty significant.

So we feel now we're in a better position to compete and be more effective in that market.

Is it fair to assume that we're in the third quarter in Texas; you had a strategy where you were focusing more on pricing, but on surely at the expense of your market share?

No, I think the Houston volumes namely in Texas were highly dependent upon the weather situation that we had. We'd not really, in our estimation, experienced much market share deterioration.

It's really more a shift of you have a commercial segment that we were very strong in, that has shown some declines in demand, and you've had some improvements and increases in the residential segment. And we weren't quite as strong there as we could have been.

And so we shifted our focus. And that's really the dynamic that's happening in our business.

So which means that there is a positive mix effect, the opposite of what happened in Colombia?

Yes.

And the question about the ramping up of independent terminal, is it something that you observe and that could have an impact on the pricing dynamics going into the first quarter of 2021?

I mean, we're aware, and I think we're monitoring it as time goes on to see, but as of right now, we don't see an immediate effect. I think our strategy is pretty solid there.

There's a lot of room in the residential segment. And we're just going to continue to focus there.

And we believe that commercial will come back and some portions of that line, maybe not in office buildings, but in other pieces that we think like warehouse, data warehouse types of opportunities for us. So as that balance kind of shifts back we'll monitor that, but we would like to be stronger in infrastructure, as we've said, and which we think is going to be good in Texas, and specifically in Houston and Dallas and we want to be stronger in residential.

So we think we have the right strategy to mitigate any impact on the imports from smaller players.

Thank you very much.

Next question comes from Alejandro Chavelas from Credit Suisse.

Hello, guys, thanks for taking my question and congratulations on the results. Perhaps if you could tell us a little bit more of the of these new programs, the concluir, concluir, concluir and Vías para la Legalidad, a little bit more on pace and size that will be really useful.

And with regards to Central American operations, perhaps what do you believe is important priority levels for Panama right now because we're seeing obviously a challenging outlook in terms of prices. So where could we see prices stabilize there?

And finally, I did not understand the change of business in Puerto Rico or business model in Puerto Rico. If you could clarify a little bit it will be very useful.

Thanks.

Thank you, Alejandro. Tomas, can you expand a little bit more about the new programs of the government to incentivize the infrastructure to work to the record if the common economy?

Sure, thank you Juan and Alejandro. The program concluir, concluir, concluir is a COP2 trillion program of lots of roads around the country.

And Vías para la Legalidad should be around COP4.5 trillion, but still we don't know - we don't have the details of those programs. So as you know the quantities of cement that will be involved.

What I want to emphasize is the five generation projects. So we're talking 12 new road projects, for a total of COP12 trillion in budget, from which, as of today, it had been - it has been announced that the first five of them will start the adjudication process to be totally adjudicated in the beginning of next year, those five projects, and as well as at the beginning of next year, five more projects out of the - out of those 12 projects will start the adjudication process as well.

In parallel the government is moving a lot of new maintenance projects in roads that go both from secondary and tertiary roads. And we are estimating more than 300,000 tons of cement going into those projects.

So there's - we still have to make all the math out of those projects and to see, at the end of the day with the designs, what's the cement and ready-mix consumption going to look like, but from now, at least from the budgeting point of view, there's a lot of cement that's going to be consumed that for sure. So in the next calls, we'll be updating you with our view on those programs.

But we're very happy to see that the Colombian government boosting the infrastructure sector, once again.

Thank you, Alejandro. And regarding the prices in Panama, and we think that the market has really bottom in terms of volumes, I mean, October was a little bit or I mean, better than that September.

So we are seeing that the market is starting to pick up a little bit in volume. So it will help the prices in our opinion with the 30% tariff on cement inputs, plus the start of the recovery of volumes in Panama, we don't see any reason to the continuing deterioration of the prices.

So in our opinion they're close to the bottom of the cycle. Regarding Puerto Rico and the change in the business model, I would like Camilo Restrepo to give you a little bit more of information about the changes that we're making.

Sure, Juan and Alejandro. So the changes that we're doing in Puerto Rico, remember that we had initially entered the Puerto Rican market with the purchase of a terminal which includes a warehouse and the packing facility and then we purchased an integrated plant further in time.

So due to the market that's not as large as we would have liked it to be to be profitable utilizing the integrated plant and do also to electricity costs in the island, we believe that changing of the model which includes shutting down the [indiscernible], but making the Dorado plant, still operational is the way to go. So what we're going to do is we're going to import cement through the terminal, we're going to sell our type one cement from the terminal directly.

And then we're going to do blending. And with that we're going to utilize our existing mill and install a small blending equipment to produce different types of cement using the blending equipment.

So we'll do the type one from the terminal and the general use and then expand it to other products utilizing the blending facility in the in the terminal, I mean in the plant. So we continue to use some of the equipment in the plant and the terminal.

And we have a much lower cost of operation and a lower cost of observing the market as well.

That is very clear. Thank you very much.

Next question is from Rodrigo Sanchez from web in Dhaka.

Yes, good morning. Thank you for the presentation.

I've got two questions. The first one is how much of your savings target for 2020 will be sustainable for next year?

And how much of these efficiencies - of the efficiencies achieved this year have come from lower volumes? And my second question is, is there 400 million divestment strategy a final figure?

Or is it still possible to see this number going up to 700 million, as it has been mentioned before? And I will also like to understand, how is the export of cement from Cartagena strategic if you're currently in the process to divest the ready-mix concrete assets in Texas.

Thank you.

Thank you, Rodrigo. Thank you for your questions.

I mean, our goal is to maintain at least 50% of the savings that we are having this year in 2021. More or less 50% of those savings come from the shutdown of our operations for lower volumes, but our goal is to keep at least 50% of the savings that we are getting this year into the next year.

In terms of the target it is at least $400 million from divestment, I mean, it we are still fully committed to the leveraging the company to bring in financial flexibility, so the 400 million is the lower range of the target that we will be looking for. And as we mentioned in the call, we didn't change our strategy in Texas.

We want to keep the operation in Houston because we weren't able to integrate that operation with the Cartagena. And in our opinion, there is no plant in the world more competitive than Cartagena to serve the Houston market.

Our plant is as competitive and many plants in Tokyo [ph], in El Peso or anywhere, the freight is lower than the freight that you can get from any other source. So the reality is that we are very optimistic about the future of our business in Houston.

And that is why we are planning to keep the operation. Thank you.

Thank you, Juan Calle.

Next question is from Andres Soto from Santander.

Good morning. Thank you for the [Technical Difficulty]

Andres we lost you.

Yes, Andres go ahead.

Sorry, guys. Can you hear me now?

Yes, perfectly.

Thank you. So you - want to say that you expect to maintain at least 50% of the savings towards 2021.

When I look at my numbers, I expect volumes across geographies to be not that very different in 2021 from those in 2019. So assuming you keep 50% of the savings that will mean that your EBITDA margin in 2021 will be close to 21%.

I would like first to understand if that's the view that you have at this point? And my second question is regarding margins in Colombia, I was a little bit surprised to see that your EBITDA margin this quarter was just 19%.

While - when I compare your volumes to those in the first quarter, you are having increases in both ready-mix and cement and with a similar product mix. So I was expecting you to have similar margin to that of the first quarter.

But what I see here is a deterioration of 400 basis points in terms of EBITDA margin. So I would like to understand what is going on there and if we can expect some improvements towards the fourth quarter?

Thank you, Andres. I mean we're still working the numbers for the 2021 budget, but our goal is to have margins at least of 20% of consolidated midterm going forward.

So the reality is that we are looking to improve the profitability of our business across all the regions. But we cannot comment yet on the guidance for next year until we finish the construction of the 2021 budget.

The impact in the margin in Colombia, we had some one-off items and on top of that they made your maintenance into your club, but Carlos and Tomas can give you a little bit more color about why the margins were lower in the third quarter in Colombia.

Juan, this is Tomas. Yes, as you said, the third quarter is - it was full of maintenances in Rio Claro and Cartagena, as well.

Some of the maintenance were programmed for before, but given all the restrictions of the pandemic, we couldn't actually run them on the months before that and we were also expecting to see how volumes ramped up and to find the right spot and the right moment to conduct those maintenance, so that's why. We are already seeing a much better situation in the months after that and we should be getting much better margins by the end of the year.

Carlos, if you want to comment on something?

No, I think that's very clear, your answer.

Okay.

Thank you, Yusty. If you can just quantify exactly what was the impact coming from those maintenance in the third quarter?

In the third quarter probably, Andres is about the $15 million the maintenance because remember that we - in the second quarter, obviously, we have the lock down on the stuff in the Colombian operation of like some of the - in other countries. But in the third quarter when we fully restarted our operations probably, we - because we increased the volumes, in particular in the Colombian market, as Tomas and his team went around the principal maintenance in Rio Claro and Cartagena isn't it?

That's right Carlos.

That's very clear. Thank you so much.

Okay, Andres.

Next question is from Roberto Paniagua from Corficolombiana.

Hi, can you hear me?

Yes, we can.

Yes, Roberto.

I have two questions. The first one is about - I want to know the prices strategies per region for next year and expected market share in Bogota Metro on 5G projects?

And my second question is about working capital improvement in the third quarter is sustainable or just a quarter impact? Thank you.

Thank you, Roberto. Price strategy we wanted to continue living the recovery of the prices of the market, we think that the prices is still way lower than import prices and demand is picking up.

So we'd like to continue leaving the recovery of prices in the market. Then region-by-region, we will try to increase prices at least by inflation to counterbalance the poorly inflation in cost in energetics.

In terms of the Bogota Metro, I mean we're doing our homework we have been in contact with the consortium and doing a - presenting all the proposals and options that we have to be the supplier of choice for the Bogota Metro just going to be of paramount importance, not only for our company, but also for the recovery of the Colombian economy. So we are extremely bullish about the Bogota Metro.

The major milestone in the contracting of the supplies of the metro will be next year at the end of the year. But we continue working closely with the consortium to try to convince them that we have the best value proposal for the metro.

And can you repeat the last questions that I didn't hear you well?

Yeah, I asked about the - when I just spoken about your market share in 5G projects and about working capital improvement in the quarter if it is sustainable or just a quarter impact?

Yes, in terms of 5G projects, we expect at least to have the same success that we have in the 4G way even we have close to 7% for the functional unit, so that would be our goal as well for the 5G projects. And in terms of our working capital management, I would like Carlos to give you some color about what is our strategy going forward?

Roberto, regarding to the working capital improvement, really it is totally sustainable. We are working very hard in the Colombian region, in particular, in the inventories.

In the year really, the performance of the collections has been great. And in the CCA, the Caribbean and the Central American region, we have some topics to improve in the inventory as well.

But really, in general, the working capital, as you can see in the report the performance has been very good. And we will consider we can sustain this performance by really working in different topics in this region, but really it is absolutely sustainable.

And just one final thing, can you tell us anything else about the debt plan, the new debt plan that you talk about in the four quarters, anything that you can tell us about it? Thank you.

About the bond issuance, Roberto?

Yeah.

We are planning our bond issuance by probably by the end of this month or by the first week of December. And really the use of proceeds will be 100% to replace short-term debt, including probably buyback some of the bonds that we have in the market.

And that has maturity in the '21 or '22 probably or just to pay off some of our short-term debt. And the amount could be up to COP300 billion.

Thank you so much.

Okay, Roberto.

Next question comes from Juan Pablo Arias from [indiscernible].

Hi, good morning. And thank you for the presentation.

I have two questions. The first one is a follow up on the divestments and the Houston strategy.

You mentioned during the presentation, the new strategy. I would like to know if this change in strategy will delay even further the plant divestments and if you could give us more detail on how you still plan to achieve the divestment guidance without selling these plants.

And my second question is about - regarding cement prices in Colombia. I would like to know what is the - what is your outlook for last quarter and next year's prices?

And still - for how long will we see a yearly increase? And how far are the prices from import party?

Thank you.

Thank you, Juan Pablo for your questions. I mean, we remain fully committed to reach the target of $400 million.

We are starting and we will be launching the process the competitive process to sell our assets in Dallas before the end of the year. So our goal is to divest the assets before the end of the second quarter of 2021.

And we will be complementing that divestment with probably some other rural clusters in the US plus real estate assets plus somewhere no [indiscernible]. As we said we still have.

So we remain fully committed to healing or exceeding the $400 million target that we will be executing in 2021. Regarding our strategy in Colombia, we think that there is room to continue improving the price in the market because the reality is that in our opinion, there is still $15 to $20 below input parity on average in the country.

So once the demand picking up and the reality is that October is going to be and November is going to be probably the fifth month with demand in excess of 1.5 million tons per month, which is already very, very strong taking into account the historical average. So in our opinion, we can continue with the strategy to recover prices in Colombia going forward, which in our opinion is the best strategy that we can push going forward to generate more value to our shareholders.

Thank you.

Thank you.

Next question comes from Steffania Mosquera from CrediCorp.

Steffania, I believe you are on mute. Hi, Steffania.

We still can't hear you.

Can you hear me now?

Yes, now is perfect.

Okay, perfect. Thank you very much.

I have two questions. My first question is regarding your expectations on the EU and the Columbia market.

We have seen a very positive momentum in house sales and I would like to know if you see this being translated into higher dispatches for the next year, or if you believe this is more explained by the subsidies by the government? And the second question is regarding your debt profile.

What are your maturity just for the remaining - remainder of 2020 and your maturities for 2021?

Thank you, Steffania. I mean, the reality is that we are seeing the market in Colombia 2021 going back to the levels that it has in 2019.

So we are expecting a good recovery of the market. In our opinion, it will be in excess of 12.6 million tons for the 2021.

And helped by the - the housing start simply realities that housing sales in September and October have keep record levels. So that will translate into housing stocks next year that will help the demand for cement and for some world building material products.

And the other thing that we are seeing very positive is the quality of infrastructure as well. So the reality is that all the signals have positive for the quality of the demand Columbia in 2021.

Regarding our debt maturities, Carlos Yusty will give you more information.

Hi, Steffania. We have some maturities for the rest of the year, from today to the rest of the year, in an amount of about COP50 billion and for the 2021 it's a little above COP1 trillion.

Perfect. Thank you very much.

And if I may, one last question. You have not fully recovered market share when comparing to last year.

Why do you believe is this dynamic? Do you think there's a new competitor taking market share like more from you?

Or do you think that then your competitor is taking market share on a pro rata basis?

Thank you, Stephanie. I mean, there are like some factors that explain the increase in market share for Argos.

I mean, the first one is the composition of demand. And the reality is that the segment that hasn't recovered the fastest is the consumer segment of the market.

We are stronger in the industrial segment of the market, so some of the decrease in market share is explained by that. The only one is that we have been leaving the recovery of prices in the market and that has hurt a little bit our short-term positioning in the market, but midterm and long-term.

We think that that is the right strategy to execute. And going forward once the infrastructure segment of the market, the housing segment of the market come back to historical levels, our market share will most likely increase in accordance to that recovery.

Great, thank you very much.

Next question comes from Francisco Suarez from Scotiabank.

Francisco your -

Sorry for that.

Okay. There you go.

Thank you for the call. And congrats on the results on the new changes for Tomas and Harry.

The question that I have is a follow up on market conditions in the US. I think that one of the reasons that you are so confident about your position in Houston relates with the fact that you have - an affiliate has port over there.

And there are no other - to my knowledge, there is no other independent marine terminal that may actually deterred that market position from you. So if you can elaborate a little bit on that.

And if you see in the market of Florida, is there a risk of higher expansions from competitors like CRH? And particularly those that are independent players on putting more independent terminals over there that may take a toll in your market position in Florida?

And lastly, in the Mid Atlantic, have you seen around market conditions in the Mid Atlantic get more tougher for you and particularly this question is linked with a performance and the overall capacity utilizations that your marketing support plan may have. Thank you.

Thank you, Francisco for your questions. I will answer the first one and Tomas can discuss our strategy in Houston.

I mean out port is a very valuable asset. I mean, the reality is that we couldn't exploit its importance, because we didn't have capacity in Cartagena.

But we were able to solve that challenge with the regional capacity that we have reached last year. So the reality is that we will be able to start supplying 100% for forward mixing in Houston with the expansion of the Cartagena plant and the expansion that we're doing of the of the port as well, we're expanding capacity in our port in Cartagena.

So the reality is that will allow us to finally integrate Houston into Cartagena. Regarding the situation in Florida and Mid Atlantic, I'd like Bill to give you the - his thoughts.

Yeah, Francisco Thanks for the question. I mean our view on Florida is still very positive.

I mean, I don't see or hear any plans of any further expansion into the state at this moment. So we have very strong assets there and very strong positions, in Newberry and Tampa, on the cement side, and a good distribution network through our ready-mix channel, which again, is in a number of locations, as you know, there.

So we're still very positive on the Florida market and positive on what the demand in the future looks like. They're doing some pretty good things on the infrastructure, which I mentioned in the commentary and residential still looks pretty strong.

And as long as interest rates stay very low, and you have a little bit of imbalance in terms of new housing starts versus demand, I think things are going to be okay there. The commercial sector, as we already touched on is pretty, pretty good as well.

So I mean, I think there could be some slowdown in office, but it could be picked up in other streams of construction demand. So again, we're very positive on market - on the market in Florida.

And to your question around the Mid Atlantic, our main focus there is still to focus on the Martinsburg plant and continue improving and increasing our utilization and then take opportunity to work our network of our terminals to maybe be more efficient on the terminal side and put through of our material. So we still think that the market up there is good, it's - there's a lot of demand coming from a lot of different segments.

And it's pretty fragmented. Markets are pretty broad market and we think by being more effective on the terminal and efficiencies of the plant we can compete real well there.

Fantastic. Thank you for that.

Congrats again. Take care.

Thanks, Francisco.

Next question comes from Froylan Mendez - JP Morgan.

Hello, guys, do you hear me?

Yes, we can hear you.

Hi, thank you. I did this is Froylan from JP Morgan.

So can you remind me what are the cement requirements for your Houston operations and when should we expect to see the full cement requirements being provided by Cartagena? That would be my first question.

And secondly, how much of a margin improvement does this imply for your ready-mix business in Houston versus 2019. And lastly, as you still plan to sell the Dallas portion of the business, would you expect a very different multiple from your operations in Dallas versus what Houston could have meant?

Thank you so much.

Thank you very much Froylan for your questions. I mean, our current input capacity in Houston is 400,000 tons of cement and we will be ramping up the shipments from Cartagena in 2021.

Hopefully, we've reached that level. In our opinion, that will help us to increase the EBITDA, the consolidated EBITDA of the company in a range of between $5 million and $8 million more or less, combined between Columbia and the US.

And depending on the opportunities that we see going forward, I mean, we can still continue looking for more capacity in Cartagena and more input capacity in our own terminal in Houston. So we are committed to executing that.

That is the strategy. Can you repeat your second question, please?

Yes. Since you still plan to sell Dallas ready-mix operations, yeah.

Would you have expected a very different multiple -

[indiscernible] several times.

From Houston?

In our opinion, the assets that we have in Dallas are as valuable as you can get in terms of consumption of cement and aggregates. It is such an important volume for any player established in the market.

So we have high expectations about the revaluation of our assets in Dallas.

Okay. Thank you so much.

Next question comes from Gordon Lee from BTG.

Hi, everybody, thank you very much for the call. I have two questions.

The first is a follow up on the Houston and the Cartagena announcement or decision. And I was wondering what motivated the decision simply because I guess this is a sort of an opportunity that you've had since last year, as you mentioned since expansion of capacity in Cartagena.

And yet, I guess after that you decided to make the announcement that you would sell the assets. But now you've chosen not to.

Is that because you are more confident with the outlook for the US? Are you more confident with your own balance sheet?

Is there something in RESET that has changed the economics that makes that more viable? I'm just curious.

It seems like a good decision to me. But I'm just curious what motivated the change in the decision.

And the second question is on Columbia. I was wondering if you could provide a sense of where you think utilization rates for Eco Cementos are.

Has production they're stabilized? Sequentially looking at the fourth quarter or first quarter next year should we expect sort of their market share to be steady now relative to where it was in the second quarter?

Or is there more capacity to be filled up? Thank you.

Thank you, Gordon. The Houston, we took into account many factors that played in our favor and the first one is the exchange rate.

The devaluation of the Colombian peso makes the Cartagena plant extremely competitive, but now with the devaluation it is even more competitive, then the capacity expansion that we started last year. But the reality is that we are fully convinced that now that additional capacities are going to be a reality going forward.

On top of that, we are expanding the port and we are seeing like more opportunities to continue expanding Cartagena in the future. And then on top of that we have like the end of a supply agreement that we had signed to supply Houston when we didn't have capacity in Cartagena, and the supply agreement finished last August.

So at the beginning, we were kind of convinced that it was a good idea to sell Houston. But then when all these factors were taken into account, we are convinced that going forward, that is going to be a very good decision for the company.

So everything is playing out in our favor to keep Houston and grow the business in Houston. In terms of Eco Cementos and how the market is looking to Colombia, I would like Tomas to give you the answer.

Thank you, Juan. Hello, Gordon.

About your question towards Echo Cementos, I can't really comment on that. But what I want to emphasize is that we have seen the market growing at a very high rate.

The 5% growth of cement consumption in September year-on-year is not a negligible number, with 1.1 million tons of cement consumed in Colombia. So as these trends goes on and the retail, which is usually - where new commerce into the industry go firsthand being like, the lower barriers to entry segments.

So as the retail is growing, also very healthy. Because out of that 5% growth year-on-year as a total of the industry, the retail consumption grew by 5.5% year-on-year, so as this trend goes by and then as we mentioned before, in the call, the infrastructure and housing segments become more active, we will start to see stabilization gradually in our market share, and as a general rule in the market dynamics being more balanced, a little bit more balanced in terms of supply and demand.

That's very clear. Thank you very much.

Thank you, Gordon.

Next question comes from Mike Betts from Data Based Analysis. Mike, you are on mute.

Mike, we can't still hear you.

Can you hear me now?

Yes, that's perfect. Thank you.

Thank you. Sorry about that.

I've just got one area of questions left, please. And this is on self-construction and the sustainability of this market.

And the question is have you seen any slowdown in the growth in self-construction as countries have come out of lockdown, for example, and in your assumption for Colombia of 12 point - or at least 12.6 million tons next year, what are you assuming about the self-construction market? Thank you.

Thank you, Mike. We have seen the pickup in self-construction in all of our markets, is not only Columbia, Honduras, Dominican Republic, Haiti.

It is like a common phenomenon everywhere in our opinion, in spite of the high unemployment levels in most of our markets, the families are switching some consumption towards self-construction, because they realized with the pandemic, of the importance of having a like nice and comfortable home. So in your opinion, that trend will continue going forward with improvement in employment in the market.

And you see no slowdown at all in any of those countries?

We haven't seen any slowdown whatsoever, not at all.

Okay, that was all. Thank you very much.

Thank you, Mike. Juan that was our last question.

Okay, no, thank you all for attending our conference call and looking forward to the next one at the beginning of next year. Have a wonderful day.

And thank you for everything.