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Cementos Argos SA
OTC:CMTOY
Cementos Argos SA
OTC:CMTOY
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Earnings Call Transcript
Earnings Call Recording
Other Earnings Calls
Good morning, everyone. My name is Indira Diaz, Cementos Argos' IRO. And I welcome you to our second quarter results release. On the call today are: Juan Esteban Calle, our CEO; Carlos Angarita, our Finance Manager, who is in charge of the Financial VP; Maria Isabel Echeverri, VP of Legal Affairs; Bill Wagner, EVP of the U.S. division; Carlos Yusty, the VP of the Colombian 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 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 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. [Operator Instructions]. We will record this Q&A session and uploaded in our web page. It is now my pleasure to turn the call over to Mr. Calle.
Thank you, Indira, and good morning, everyone. The second quarter of 2021 was marked by the continuation of a strong economic recovery in most of our markets. Notwithstanding, we still face some social, health and political challenges, mainly related to the impact of the pandemic in poverty and employment in some of our territories.
As a building materials company, we adjust course in society. We have not only learned to navigate through these uncertain times by adapting and overcoming these difficulties, I have also understood the important role that we play in the recovery of all the countries where we operate by providing sustainable solutions to our customers and quality employment to our people.
In Colombia and Honduras, we joined efforts with the local governments in the vaccination program and bought around 8,000 COVID-19 vaccines for our employees. At the end of July, 71% of our employees in Colombia and 77% in Honduras had at least their first dose of the vaccines, contributing to the economic reactivation of these countries and to the health and safety of our employees. We are supporting similar vaccination programs in all of our jurisdictions other than the U.S.
Our financial results during the second quarter were remarkably positive on our footprint, even though we faced close to 40 days of marches, blockades and social unrest in Colombia and social and political challenges in Haiti during several weeks. Adjusted EBITDA margin for the first semester of 2021, excluding the gain in sale from the ready-mix assets sold, reached a record of 20.2%, the highest since 2013.
This important milestone is not something fortuitous. On the contrary, it is the result of the consistent execution of BEST and RESET, our customer-centricity, quest for innovation and the constant pursuit of excellence and competitiveness in our operations. In that sense, we expect this level of margins to remain and improve in the mid-term for our company.
In that same line, we are very glad to announce that these outstanding results, together with the $183.8 million obtained from the Dallas ready-mix divestment, allow us to reach the target leverage ratio of 3.2x net debt-to-EBITDA plus dividends that we have committed to achieve by the end of 2021. We closed the quarter with a ratio of 3.1x, the lowest leverage ratio in 8 years.
Now referring to our consolidated results. The comparisons versus last year have benefited from the long basis, given the quarantines experienced during the second quarter of 2020 in most of our geographies. Adjusted EBITDA excludes for 2021 a $48 million gain in sale from the ready-mix Dallas divesture. In comparison versus 2019, adjusted EBITDA and adjusted ready-mix volumes for that year exclude the figures from the ready-mix plants divested at the end of 2019.
Cement dispatches reached 4.5 million tons during the quarter, increasing 42% versus the second quarter of 2020 and 9% versus the same period of 2019, driven by solid demand condition across all markets. Meanwhile, ready-mix volumes reached 2 million cubic meters, increasing 1.3% versus 2020 and decreasing 18% versus 2019 on a like-for-like basis, affected by the work conditions in Texas, which experienced heavy rainfalls during the quarter.
Revenues, on the other hand, increased 15.9% year-over-year and adjusted EBITDA reached COP 522 million, increasing 25.9% versus 2020 as a result of increasing volumes, strong prices and leaner operations associated with efficiencies gained with the execution of RESET. Adjusted EBITDA margin reached 21.1%, expanding 168 basis points versus 2020 and 225 basis points versus 2019. Year-to-date through June, adjusted EBITDA reached COP 967 billion, increasing 28% versus 2020 and more than COP 178 billion on a like-for-like basis versus 2019.
Now to start with our results in each region, I would like to invite Bill to provide more context about the performance of the U.S. region and our view for the market.
Thank you, Juan, and good morning, everyone. In the second quarter of 2021, we evidenced strong demand conditions in the U.S. due to positive momentum in the residential construction and a progressive recovery in the commercial segment. Consequently, both cement and ready-mix prices increased versus the first quarter of 2021 in 2% and 1.5%, respectively. Cement volumes grew 8% year-over-year while ready-mix dispatches decreased 13%, with different behaviors across our footprint.
The South-East zone, for instance, had an outstanding performance in terms of volume during the quarter, increasing 6.6% year-over-year with remarkable growth, specifically in the Carolinas. The South-Central zone, on the other hand, was highly impacted by heavy rainfall in Houston and Dallas, where weather days increased by 100% and 50%, respectively, as well as by the Dallas divestiture that was carried out on June 15, affecting the last 15 days of sales with a lower comparable basis.
Both revenues and adjusted EBITDA remained strong and consistent year-over-year, posting an increase of 0.2% and a decrease of 1.6%, respectively. The cost efficiencies, together with the positive market dynamics, allowed us to obtain a record adjusted EBITDA margin of 20.2%, when excluding the $48 million from the gain on sale of the Dallas divestiture, very similar to the one obtained during the same quarter of last year, when most of the savings from the RESET program were executed in the U.S. As Juan previously mentioned, this margin is a result of hard work of our people in both maintaining the cost efficiencies and making commercial efforts to improve the margins via better negotiations.
In ready-mix, for instance, we have achieved around 17% of sales associated to value-added specialty products, which have an incremental margin of 8% above regular concrete. These products include colored concrete, macro or micro fiber concrete, which adds additional strength with less cracking, and sustainable products such as our pervious concrete, which allows the rain or storm water runoff to go through our concrete into the sub-base, filtering all of the contaminants of the rainwater and sending clean water back into our Aquaphor.
Our backlog continues to be strong in every segment. Several projects related to road-paving as well as commercial projects, such as the third phase of Facebook Campus close to Atlanta, which is scheduled to start in November and will consume 300,000 yards of concrete over a period of 3 years, are currently part of our ready-mix backlog.
Regarding market dynamics, leading indicators in the residential segment continue on a strong footing. Despite concerns on availability of land and high prices and supply constraints of materials, such as lumber, building permits and housing starts increased year-over-year 38% and 45%, respectively, and were relatively stable compared to the first quarter of 2021. Indicators that track commercial segment also suggests strong business conditions for the coming months.
The ABI, which is an indicator of the dynamic of the nonresidential construction in the next 9 to 12 months, has been in positive territory since February and reached in May one of the highest scores ever reported, driven by the robust growth of the economy. In the same line, the Dodge Momentum Index, despite a monthly decrease of 5%, remains near a 13-year high and well above last year with both commercial and institutional planning significantly higher than June 2020, driven by projects such as data centers, warehouses and hospitals.
On the civil and infrastructure front, all the attention remains over the bipartisan infrastructure framework announced by the White House with an expected investment of $550 billion to fund roads, water projects and power grid. The bill, which is expected to be fully approved soon, includes $110 billion in new spending for roads and bridges, meaning that we could evidence increased demand of materials by the second half of 2022.
We are confident that our unique footprint of local cement production and import terminals, the integration of our ready-mix plants and our superior value proposition provide a unique opportunity to take advantage of the positive industry trends that we are expected for the coming years. We continue making progress on our strategy to increase profitability by balancing our portfolio mix and asset base. And we'll monitor the external risks associated to the building materials industry to be prepared to face the challenges of a changing market environment.
Thank you, Bill. The strong momentum of the building materials industry in the U.S., together with the positive forecast for the years ahead and the outstanding team that we have in place, reinforce the unparallel opportunities that our U.S. business has to continue growing and improving its performance and profitability.
Now moving to Colombia. I would like to highlight the tremendous effort from our employees, specifically those in supply chain to continue delivering our products to customers amidst the social unrest experienced during the last week of April and the whole month of May.
Thank you, Juan, and good morning. As you just mentioned, during the second quarter, we experienced severe social conditions all over the country, arising from the economic difficulties from our population that worsened with the COVID-19 pandemic.
This social unrest had nationwide affectations but was more severe in the South-West zone of the country, where our Yumbo plant, that accounts for 18% of the sales of Colombia, had to be shut down for 40 days due to the road blockage that prevented our product from being delivered to our customers. The impact of this situation in our results was limited, thanks to the effort and commitment of our employees, who day in and day out gave their maximum effort to be able to safely serve our customers.
Cement volumes grew 74% versus the same period of 2020, benefited by a weak comparison base and were only 7% lower than the second quarter of 2019 with progressive weekly recoveries after the lifting of the nationwide road blockage and improvements in the market share of the company versus the same quarter of last year.
On the ready-mix business, volumes grew 63% year-over-year but at a lower pace of recovery in formal construction. A more severe business disruption in the main cities led to a 28% decrease when compared to 2019. Despite lower volumes, we were able to close the second quarter of 2021 with an EBITDA of COP 105 billion, which represents an increase of 143% versus 2020 and a decrease of 7% versus the second quarter of 2019, impacted mainly by lower revenues. EBITDA margin stood at 19.8%, a strong result taking into account the recent developments.
In terms of pricing, the positive momentum that the country experienced during the first quarter of the year was also affected by the social unrest, posting during the second quarter of 2021 a decrease of 0.8% in cement prices and 2% in ready-mix prices year-over-year. This decrease was also a result of lower sales in the South-West zone of the country that has a better average price in grey cement. In that line, we consider the situation to be temporal and expect the market to regain its inertia, given the global dynamics in cement trading and its improving prices due to the reactivation of the worldwide economy.
The current market dynamics of the country continue to be positive in both the residential and the infrastructure segments. Indicators, such as the housing starts, which reached during June 2021 a level not seen since 2018, together with the positive development of the self-construction trend and the bagged cement in the country, reinforce this idea.
On the infrastructure front, big projects, such as the Bogotá Metro that will start construction at the end of the current year and the Malla Vial del Valle that has continued in bidding process satisfactorily, provide positive support for the cement demand forecast during the coming years.
Other infrastructure projects, such as the eolic parks in the Guajira, which is comprised of 11 different projects of eolic energy, support the government's commitment to develop sustainable projects in the country. Our portfolio of green solutions that accounts for 16 different products in both cement and concrete had an outstanding performance during the first semester of the year.
In terms of volume, the cement and concrete sustainable products increased 168% and 24%, respectively, versus the first semester of 2020 as the result of our comprehensive strategy to deliver sustainable solutions to our clients. For the remainder of 2021, we remain optimistic. Total cement demand in Colombia was 1.07 million tons in June, fairly strong and back to normal levels, showing the resilience of the market and the speedy recovery of consumption after the marches in May. We are sure that housing and infrastructure will continue to play a central role in the recovery of economic activity and employment.
Thank you, Carlos. We believe the fundamentals in Colombia are strong, and there is room for more constructive prices going forward, taking into account the significant increases that we are seeing in the import parities.
Moving on to the Caribbean and Central America region. I would like to highlight the continuity of the positive market dynamics within the region. Camilo will provide additional information on the region.
Thank you, Juan, and good morning, everyone. I would like to start by highlighting the strong demand conditions throughout the region, which led to cement volumes reaching a new all-time-high monthly figure during June.
Cement dispatches increased during the quarter 73% year-over-year and 32% compared to the same period of 2019, driven by the strong dynamics of countries such as Honduras, Dominican Republic and Puerto Rico as well as by the strong performance of exports and the trading business. The Antilles and French Guiana also experienced solid demand and our supply chain has remained robust despite the impacts from the pandemic.
Exports from Cartagena to the U.S. accounted for 96,000 tons during the quarter, and together with the boosting local markets, led to the year-over-year increase of 246% in trading and 9% in exports. Additionally, an increase in freight cost, clinker and cement costs from Europe and Asia are having an impact on the cost of importers that could materialize in the third or fourth quarter of the year.
Ready-mix volumes were significantly higher compared to the previous year, coming from a low comparison base but are still 56% lower than in the second quarter of 2019, reflecting a slower dynamic of the industrial segment, especially in Panama. The weighted average cement price in the CCA region improved 1% year-over-year, led by a better pricing dynamic, especially in Honduras and Dominican Republic. Higher volumes and prices led to a revenue growth of 59% versus 2020 while EBITDA increased 88%, reaching $43 million and EBITDA margin expanded 486 basis points, closing over 31% for the second consecutive quarter.
In Honduras, the construction industry continues to outperform every month, driven by the high level of remittances and the government plans for housing reconstruction following the tropical storms in 2020, which have positively impacted the demand of bagged cement within the country. The increasing local demand has been successfully supplied from our integrated plant and our grinding station in Río Blanquito, located at the north of the country where the tropical storms of 2020 had the biggest impact. The higher production has also been benefited from the new pet coke yard in Rio Blanquito, which allows us to import bigger quantities of solid fuels, reducing costs and guaranteeing the stable quality of the material.
Haiti, with similar commercial dynamics related to the remittances, continue to present an increasing demand for cement used in self-construction, which unfortunately could not be fully captured during the second quarter by our operation due to technical, social and political difficulties experienced in our operation. From July on, the social unrest arising from the political stability of the country has continued to affect our production due to intermittent blockages that have hindered the entrance from our employees and contractors as well as the fuel supply to our operation.
The market perspective continues to be positive in both Dominican Republic and Puerto Rico. As a result of the remittances as well as the funds for reconstruction of Puerto Rico Island following 2017's hurricanes, Irma and Maria, the reconstruction activity from tourism, which is expected to resume activity soon in the Dominican Republic, together with the success of the new operational model in Puerto Rico, support the positive outlook for these two countries. Panama, on the other side, remains affected but starts to show signs of economic recovery and better demand conditions as a result of a slight improvement in private construction and the construction of the third line of the metro, which is expected to begin in October.
We remain optimistic for the Caribbean and Central America region as there are clear signs of improving demand, conditions across our footprint, together with strong drivers associated to remittances and local recovery plans.
Thank you, Camilo. I would like now to make reference to our balance statement. In terms of debt management, we are proud to announce the disbursement of an ESG loan with Bancolombia for an amount of COP 135 billion. The loan, which was disbursed last month, will have reduced interest rates once the company achieves its targets for CO2 emissions for the consumption in the cement business and number of supplies evaluated in sustainability over the tenure of the loan.
During the quarter, we successfully closed on receiving funds from the divestiture of the ready-mix assets located in Dallas on June 15 for a final amount of $183.8 million, including the $180 million initially negotiated plus an adjustment of $3.8 million from working capital. The funds from the transaction were fully used to amortize debt, reducing our leverage and allowing us to achieve a net debt-to-EBITDA ratio of 3.1x at the end of June. We expect this ratio to be below 3x by the end of the year, the lowest since 2013, taking into account the positive evolution of the markets where we operate and the continuity of our strategy of deleveraging.
Given the outstanding results, the strong cash generation during the first half of the year and the positive outlook of our businesses going forward, our Board of Directors has decided to call an Extraordinary Shareholders' Meeting in order to request an approval for an extraordinary dividend of COP 79.97 per share to be distributed in one single payment during the month of September. With this dividend of COP 110 million, we intend to recognize and reward our minority shareholders, including the more than 10,000 individuals who are part of our investor base for their support and the trust they have placed in our company during these challenging times of pandemic and economic hardship.
I would like to end this intervention by honoring the memory of our colleague and friend, Harry Abuchaibe, who was appointed as Vice President of the Colombian region on October 2020 and unfortunately passed away last June. We were very fortunate to work side-by-side with him for the last 20 years. Our company will guard his legacy and continue to develop the outstanding ideas that he had for our future. May his family find the strength they need to overcome these difficult times.
Thank you all for your attention. Indira, we can proceed now with the Q&A session.
Thank you, Juan. We will proceed now with the Q&A session. [Operator Instructions]. The first question comes from Juliana Aguilar from Bancolombia.
Congrats on the great results. I have two questions, the first one regarding margins. Do you think the U.S. operation has reached the desired margin levels? Or do you see room for further improvement? And in Colombia, when do you expect to reach the 25% EBITDA margin you have previously mentioned as your mid-term target? And my second question is regarding ready-mix volumes in Colombia and Panama. When do you expect these volumes to reach recovered levels in these regions?
Thank you, Juliana, for the questions. I mean, we are extremely happy with the performance and the results of the U.S. business. But we still think that there is room for improvement. I mean, we have close to 115 basis point margin expansion in the cement business during the first half of the year in the U.S. However, the margins for ready-mix were flat compared to last year. And they were flat because volumes were impacted for the challenging work that we experienced in most of the half of the year.
So even though margins were above 20%, we still think that there is room for continue improving our margins and the performance of the business in the U.S. Similarly, in Colombia, we're expecting way better margins during the second half of the year. We are expecting higher volumes as most of our major maintenances in Colombia were during the first half of the year, so we're expecting to hit that 25% target during the second half.
Regarding the normalization of volumes in Colombia and Panama, the industry has been very strong in Colombia after the marches in April and May. And we are foreseeing a full recovery of the market for the second half. So the reality is that we will think that the industry will end up growing in 2021, normalizing our volumes in Colombia. In Panama, we think that volumes will improve starting in 2022 and most likely will normalize in 2023. We are not foreseeing a significant improvement in the dynamics in Panama for the remainder of the year.
Next question comes from Rodrigo Sanchez from Davivienda Corredores.
Congrats on the results. My first question is if you could please comment on your dividend policy strategy going forward. Especially considering this year, you reduced your dividend and offered to receive the dividend in shares that currently you have maintained a payout above 100%, which is well above the MSCI COLCAP average.
And in line with this previous question, I would like to know what's your target debt level for the coming quarters or years since you have significantly reduced debt, but you have also announced new credits. And my last question is if maybe considering the conditions that look a lot more stable than when we -- the pandemic began, if you could maybe provide any guidance on EBITDA for the remainder of the year.
Thank you, Rodrigo, for the question. I mean, we are extremely happy with the current leverage of the company. It is a significant milestone for us to end the second quarter below 3.2x. That was the target that we set at the beginning of the year. Going forward, our goal is to be below 3x by the end of December. And we will continue with the stronger momentum that the company has. I mean, we are fairly positive that we will continue deleveraging the company and regaining financial flexibility.
In terms of our dividend policy, a significant part of our investor base are individuals. So the reality is that it's important for us to continue paying dividends going forward. And we will do so as long as we continue with the strong cash generation that we are showing. We are completely sure that we will be able to continue deleveraging the company, but at the same time, rewarding our loyal investors that have been part of the company for quite a long time. In terms of guidance for the second half of the year, we are not providing guidance, but we are expecting a better second half of the year than the first half. So for sure, we will have a very strong 2021.
Next question comes from Adrian Huerta from JPMorgan.
It's on Colombia. You did mention that you expect pricing to start to recover. Can you give us a little better sense of who's -- your peers, are they operating closer to full capacity? Because what I've seen is that peers, excluding also CEMEX, have -- are selling now close a little less than 1 million more tons than what they were selling back in 2019. So I wonder who's gaining market share and if they're close to full capacity that could allow for better pricing. And if we could see better pricing, is that something that we could already start seeing in the second half of this year?
Thank you, Adrian. I mean, in our opinion, the fundamentals are there to continue with our price recovery strategy. Demand is strong, and we are foreseeing the demand will continue being strong going forward. And on top of that, import parity prices have been increasing in a significant way. Just to give you an example, import parity has increased close to $30 in Colombia.
FOB prices are close to $80 and import parity prices on the northern part of Colombia are close to $80 now -- yes, close to $80. And import parity prices, in general, overall in Colombia should be closer to $120, $115. So the reality is that all the fundamentals are there to continue with our pricing strategy recovery. I would like Carlos just to give you a little bit more color about the outlook in Colombia going forward.
Yes, thank you, Juan. No, I completely agree with you, Juan. And besides that, I think that we need as well to take into account the increase in the internal freight that we are suffering, that is in the case of Colombia, at the moment, because of the blockage, the price has increased by about 15% versus the month previous to the start of the marches and as well, the impact that we are having in the [indiscernible] cost because of the internal freight as well.
For that reason, we are -- because of that and because of the demand, we are seeing a very good second half of the year, internal prices as well and more optimistic in the '22 because there are -- because in the '22 probably, there are rollover in the contracts for the import cement or there is a new contract for the import cement better.
Next question comes from Alejandra Obregon from Morgan Stanley.
Congratulations on the numbers, Cementos Argos team. Two questions on my end. First, on the DOT funding in the U.S. I was just wondering if you could provide some color on what you have seen on the behavior of the states in which you operate, particularly on revenue management and the backlog as the states prepare for a greater match, I think, to the infrastructure package.
And then second, on the Cartagena exports to the U.S. and the economics here. So if you can help us understand, first, where they are booked in the volume and sales numbers that you reported. And how has profitability of your exports compared to that of your domestic production at this point?
Thank you, Alejandra. And I would like Bill to start by answering your question about the infrastructure in the U.S.
Yes, Alejandra. Thank you for the question. We feel like the estimated impact, I think, will be good. The local DOTs, I think, are still struggling a bit to kind of comprehend what's going on. I mean, where we've exceeded in our own position there, we've taken a pretty strong approach with the local DOTs, and we've improved our share fairly significantly in the last 4, 5 years of that market, and we want to continue that approach. But I think if the bipartisan infrastructure framework passes the White House at the $110 billion that was previously spoken about, I think that we're looking at maybe 3% to 5% increase in volumes through that segment by 2023, 2024, perhaps.
But the states I still think will have to wrestle with their own involvement in those programs. And it's pretty undetermined right now. I think we're monitoring okay. It's a little bit of a mix scenario, depending on the states that we operate in. One is a little bit closer to working things out than maybe others. But in general, I think there's an open-mindedness about everyone trying to work together to get this moving forward. So we have a positive outlook on that, and we're prepared to take advantage of that situation.
Thank you, Bill. And regarding the economics of our exports, I mean, we booked the exports in the Central America and Caribbean region. Our Cartagena plant is as competitive as you can get when you compare it with our global peers. And we have a freight advantage to export, not only to Central America and the Caribbean but also to the U.S.
The prices are recovering. So the reality is that we think that we have an extremely positive competitive advantage to continue increasing our exports out of Cartagena. We are planning to export close to 1 million tons out of Cartagena in 2021. And for 2022, with the increasing capacity that we have in Cartagena, we are expecting to increase exports by at least 50% going forward.
Understood, very clear. One additional question, if I may. It's on capacity in the U.S. You once mentioned in the past that the adoption of blended cement in the U.S. was perhaps a strategy that could be considered to liberate capacity in the U.S. So just wondering if it's too early for us to think about that and if you are implementing something linked to this already.
Yes, Bill, please answer the question as well.
Sure, Alejandra. No, I mean, given that the capacity is certainly high. I mean, building additional type of greenfield operations is not really practical for the -- and it takes an awful long time in the U.S. because of permitting issues and things that go on. So I think in the mid-term, we still want to continue looking at finding ways to improve our marginal capacity at our plants, and that's kind of our focus right now.
We also want to continue working with regulatory bodies to kind of support the use of SCMs, which is the supplementary cementitious materials, such as slag and pozzolans and things like limestone addition and clays. That's kind of our primary focus right now. We've had some success with that, and we can also look at maybe potentially increase imports from Cartagena.
Yes, Bill. And we will, I mean, complement that with close to 5 million tons of import capacity that we have in our terminals in the U.S.
Next question comes from Alberto Valerio from UBS.
It's about price in the U.S., if I may. I would like -- if it's having -- we heard that August and September might have some price increase in cement in U.S. My question is, if it is happening, how has been the other end to it?
Thank you, Alberto. It is happening in our footprint. And I would like Bill to give you a more specific answer.
Sure, Alberto. So I mean, as we've mentioned, I think, before, we put a price announcement out in April. And at this point, we've had very good traction. And we announced those increases across our entire footprint. Given the actual conditions in the industry right now, it's pretty tight in terms of supply. So I think all the fundamentals are very, very strong.
Our goal, as always, I don't like to talk specifically about pricing, but our goal as always is to cover all cost inflation that we have out there that we see and then also try to focus on improving our margins. So in that sense, we continue to monitor and we're trying to balance those decisions as we go forward. So that's kind of the way that we operate.
Next question comes from Vanessa Quiroga from Crédit Suisse.
It is regarding the outlook for capital allocation. Given that this year, you expect to reach leverage ratios below 3x, do you plan to invest more maybe in bolt-on acquisitions or expand in terms of products within your regions?
Thank you, Vanessa. What we want to do going forward is to do light CapEx investment in our current footprint and our current assets, some upgrades and to increase capacity. But other than that, we continue just trying to improve our ROCE and our results, taking advantage of the very good assets that we have in place.
Do you have specific targets regarding the return on capital employed?
Sure. We still have a gap to close in our ROCE. And our goal for next year is to be at least at the level of our weighted average cost of capital.
Next question comes from Yassine Touahri from On Field Investments.
A couple of questions. So could you tell us what is your -- what was your energy cost inflation per ton of cement in H1 2021? And what is your expectation for energy cost inflation per ton of cement for the full year 2021? And in this respect, we've seen a big increase in maritime freight, fuel prices, power prices. And do you see a risk of margin pressure in the second part of the year in some regions? That would be my first question.
And then my second question is on Colombia. You suggested some sequential price improvement. Have you been able to increase prices sequentially since the beginning of July despite the ramping up of Argos Cementos? And if you have been able to increase prices sequentially in Colombia, could you tell us what was the magnitude of the price increase?
Yes, thank you for your questions, Yassine. We are seeing some cost inflation in energy, for sure. The good thing is that we were mostly contracted in most of our markets. The more significant price increases, we have seen it in pet coke. And we don't use pet coke in the U.S. We don't use pet coke in Colombia. We only use pet coke in Honduras, and we were contracted for the year. So we were kind of able to mitigate that price increases.
We have seen a significant increase in freight. In our opinion, that is extremely positive for our company. It is positive for our cement business in Colombia. It is positive for our cement businesses in Central America and the Caribbean. And it is positive for our cement business in the U.S. because we have a lot of local capacity. So that means that import parity prices are increasing everywhere. I don't know if Bill, Camilo or Carlos would like to give a little bit more color on the impact of the cost inflation in energy in each of our markets.
So I think, for example, in coal, I was looking at the coal prices in Colombia, it's mainly double what it was last year, so in -- when could we see an impact of that on your margin?
Yassine, this is Carlos. In the case of Colombia, really more than the energy because, like Juan Esteban mentioned, we have long-term contracts in energy. We are having some impact because of the energetics increase like the coal, yes? Especially the coal, probably this year, we have -- but more than the price of the coal itself, it's because of the freight of the coal. Because of that, we are having an increase of about 15% versus the inflation in Colombia for the year could be very close to 4%. It is pretty significant, yes, in the case of Colombia. But that is, converting that into dollars, it could be about $4 million for the whole year.
But from the U.S. perspective, it's basically what you said. I mean, we have negotiations that are protected through the year. We do see some inflation next year, especially in coal. And we just have to take that in consideration when we're managing our cost and our margins. So for us, this year, we're okay.
Yes, Camilo?
Yes, from the point of view of the Central and Caribbean region, Juan mentioned it already on the contractual type that we had on, also put an increase in pet coke under budget or in the budget. And additionally, we also had an efficiency out of a larger pet coke handling area that we built in the north of the country, which allows us to have bigger-sized vessels, which had a reduction in cost. So with respect to budget this year, we're okay. We'll see what happens for the remainder of the year in pet coke and freight prices.
And Yassine, I mean, in terms of your question about prices in Colombia and the impact of cement, I would like Carlos to give you the answer.
Yassine, we are analyzing that. We are analyzing what is how is the competitive environment in Colombia. Because all of these things, what is happening, we are seeing a better environment for the second half of the year and for sure, for the '22, yes? But we're analyzing what is the -- what could be the magnitude of the increase. But for sure, the cement price in Colombia, it has to increase because we are having a lot of pressure in our costs, on the cost side.
And the reality is, Yassine, is that current, I mean, prices in Colombia are the lowest prices that we have in our footprint. And there is a significant gap vis-à-vis import parity prices, demand is strong. So the reality is that we see a much, much better constructive pricing dynamic in Colombia going forward.
Next question comes from Carlos Enrique Rodríguez from Porvenir.
I have two questions. The first one is in the U.S. And I was wondering why was the reason for not having better margins in the U.S. with cement dispatches increasing and the ready-mix decreasing and taking into account that cement has better margins than the ready-mix business. So we didn't see any operational leverage of the cement business there. And my second question is in Colombia, and if you could share with us an estimate figures without the social unrest in Colombia, what level of revenues, EBITDA in cement and ready-mix will have been reached without the social unrest in Colombia.
Thank you, Carlos. I mean, we saw margin expansion -- a very good margin expansion development in our cement business in the U.S. The margins were close to 26.5% in cement. That is an expansion of close to 115 basis points vis-à-vis last year. So the reality is that we saw a very good margin expansion. Just taking into account that all the major maintenance and stoppage of the kilns that we're doing in the U.S., they happen to be in the first half of the year.
The reason why you don't -- I mean, we didn't see a larger margin expansion in the consolidated results of the company was because of the lower volumes that we experienced in the ready-mix business and seasonal rain in the U.S. in most of the -- during most of the quarter. So that was the reality that impacted our margins. But we are seeing an expansion in both the cement margins and the ready-mix margins going forward.
In terms of the impact of the marches in April and May in Colombia, we estimate that we lost close to 100,000 tons of sales in cement and significant -- and similarly, probably 50% of the sales of ready-mix during the month of May. So the impact was very important. Carlos probably will give you additional color on the figures.
Thank you, Juan. Carlos, yes, like Juan Esteban was mentioning, we could -- lost in a range between 80,000 to 100,000 tons because the southwest of the country was totally closed and our Yumbo plant, we shut down our Yumbo plant for very close to 50 days. The buildup from that market in -- for that amount of cement could be between COP 15 billion to COP 20 billion. Really, if you put that as a net EBITDA in the quarter, probably the margin EBITDA will increase in 2 percentage points. That's approximately the effect that we had because of the blockage in the southwest of the country.
Next question comes from Francisco Suarez from Scotiabank. Okay, Francisco, it seems like he's no longer asking a question. So next question comes from Andres Soto from Santander.
My first question is a follow-up about Carlos Enrique's question just now. Carlos, you mentioned a significant volume lost during the quarter due to social unrest in Colombia. I would like to understand now that the situation is a little bit more normal, have you seen some pent-up demand recovery or it's just the regular recovery that you were delivering before that?
Andres, no, we are really seeing very close to normal market right now with a really strong demand in all of our different regions of Colombia, in the south and the north. Really, we are very optimistic for the second half of the year in all of our markets in this country. And like I was mentioning for the reason because of many different external factors, we are seeing a very good momentum for price increase probably in the second half, but for sure in the '22, Andres.
Great. And my second question is regarding leverage and dividends, maybe building up on some of the comments that were made before. When I look at my numbers, your net debt-to-EBITDA ratio should be at around 2.5x in 2022. I would like to understand is if this is your -- what you will see as your ideal level. Or you can -- you believe that you can even be at a higher level than that, closer to 3x. And based on that, if you are planning to use that space as room for increased dividend distribution looking ahead.
Thank you, Andres. I mean, we would like to be at 2.5x or lower, I mean, mid-term. Going forward, I mean, we consider that, that would be like a good target to reach. Our net income will increase significantly with the lower leverage and with the way much better performance of the company. So the reality is that, with that, we will be able to continue paying dividends to our significant base of investors that value dividends. So in our opinion, we will be able to do both. I mean, deleveraging the company, continue improving the balance sheet and the operating performance of the company and keeping our dividend payments going forward.
Next question comes from Francisco Suarez from Scotiabank.
Sorry, sorry for that. And sorry to hear about the loss of your colleague, sorry for that. The question that I have is a follow-up on the balance sheet question asked previously by Andres. It is about what is your overall strategy looking forward in terms of your overall targets on your balance sheet? Are you actually planning to -- or are you actually willing to aim to be an investment-grade company? And along that, are you planning to issue debt under such terms, I mean, within metrics of investment grade? Do you think that is a possibility?
And the second question that I have is on the U.S. market, related with import activity in your footprint from third parties. Do you see that there is -- have you noticed any disruption whatsoever from, say, Turkish imports or the like, someone that is not fully integrated in the regions that may affect the future price increases that this market should deliver?
Thank you, Paco. Thank you for your questions. I mean, to be investment grade will be a result of the objectives that we have. We have an objective to continue regaining financial flexibility. And in our opinion, we are making very, very good strides in that direction. And the second one, which is extremely important for us, is to reach a ROCE better than our weighted average cost of capital. And that is our target for 2022. And as a result of hitting those milestones, then we're completely sure that we can think about getting investment-grade going forward. But it will be a consequence of the main two objectives that we have for 2022.
Got it.
And in terms of the -- if we are seeing any disruptions in the market, not at all. I mean, we are seeing like the opportunity to continue improving prices in our coastal markets in the U.S. Because once again, similarly to what is going on in Colombia, import parity prices in our coastal markets in the U.S. are increasing to $30 per ton. So we are not foreseeing any disruption in the markets. We are seeing an opportunity to improve the profitability of our business.
Next question comes from Daniel Varela from Porvenir.
Just one question. Can you give us a net profit adjusted by the gain in sale from the Dallas divestiture?
Daniel, and I think that Carlos Horacio, Carlos Angarita can give you that figure. The gain on sale was $48 million and the taxes associated to that gain on sale were close to $27 million. But Carlos or Carlos Angarita can give you more detail.
Daniel, thank you for the question. And as Juan mentioned, the taxes for the operation was COP 96 billion, in dollar was $27 million. And the impact in gain of sale was COP 174 billion. So if we exclude that, the net income could be around COP 281 billion.
Next question comes from Andrés Niño from Euro Latina Finance.
The question is about the U.S. operations. I want to know the demand could be hit due to COVID surges in the U.S.
Thank you, Andrés. And Bill can give you more color about the current situation with the pandemic in the U.S.
Yes, Andrés, thanks for the question. That's an excellent question. I mean, I think you probably read a lot of media that's given a lot of attention to the growth in cases with the Delta variant. But in our current operation, we're still operating at 100%. We've not seen any slowdown. We have experienced an increased number of cases.
But at this point, we're not suspecting that the government is going to shut anything down. They've announced that they're not at this point. So we're keeping a close eye on it. I think the vaccine rates have begun to grow again, in terms of people getting vaccinated, it depends on what state. But overall, we don't see a disruption in the near future. And we're just keeping a close eye on it because the cases are increasing on a weekly basis.
Juan, we don't have any more questions.
Okay, Indira. And everyone, thank you very much for connecting to our conference call, and looking forward to the conference call for the third quarter of the year. Have a great day, and thank you for your interest in the company.