Lamosa, first signs of a slowdown
After posting growth in revenues and margins in 2019, the Mexican group Lamosa reported the first minus signs in its Q1 2020 results.
Lamosa is not only the largest ceramic group in Mexico, it is also the third largest ceramic tile producer in the world with an output of 190 million sqm per year (600,000 sqm per day) spread over 15 plants (9 in Mexico, 2 in Argentina, 1 in Peru and 1 in Colombia), in addition to 14 plants producing tile installation adhesives.
Since March, the measures adopted to combat the coronavirus outbreak in Mexico, Peru, Argentina, Chile, Colombia and Guatemala have impacted production activities, forcing non-essential activities to close and pushing down sales.
Overall, in the first quarter of this year, the Mexican multinational’s revenues fell by 1% compared to the first quarter of 2019 to 4.4 billion pesos (approximately 169.6 million euros). This was despite the 1% increase in domestic sales, which only partially offset the 6% decline in exports to 1.2 billion pesos (about 46.9 million euros).
The ceramic tile sector, which makes up 74% of total revenues, was the worst hit with sales down 4% to 3.27 billion pesos (approximately 125.7 million euros). By contrast, the adhesives segment reported 9% revenue growth to 1.14 billion pesos (approximately 43.8 million euros). In the year ended 31/12/2019, the group led by President Federico Toussaint Elosúa had already recorded a poor export performance (down 7% on 2018, including export sales by the subsidiaries in South America). This was offset by stronger domestic sales despite the slowdown of Mexico’s economy and construction sector, resulting in overall 1% year-on-year growth in consolidated turnover in 2019 (17.9 billion pesos or around 848.6 million euros). Sales of ceramic tiles accounted for 76% of this figure (62% domestic sales and 38% exports).
Profit margins have been feeling the pressure in 2020 following the strong performance in 2019. In the year ended 31/12/2019, EBITDA grew by 6% (3.5 billion pesos, approximately 165.7 million euros), operating income by +3% (2.8 billion pesos, or 133 million euros) and net profit by +5.3% (1.4 billion pesos, or 67.6 million euros). The record fall of the peso against the dollar (-25%) that occurred towards the end of the first quarter of this year had a severe impact on the results for the period. EBITDA plunged by 19% to 745 million pesos, while operating profit slumped from 728 million pesos to 570 million pesos (-22%), a decline of 158 million pesos including a 147 million peso loss attributable solely to the exchange rate.
During the presentation of the quarterly figures, Grupo Lamosa’s top management confirmed that, while the true scale of the crisis remains unclear, the negative effects will be more evident in the second quarter of the year despite the measures adopted to minimise their impact.
The group has not ruled out new investments, although it will have to proceed with caution. It announced a $110 million investment plan last March, as well as its intention to evaluate the construction of a new adhesives plant in Mexico.
On 30 January, Lamosa signed an agreement through the company Porcelanite Lamosa to acquire 100% of the share capital of Eurocerámica, a company based in Medellin, Colombia specialising in the production of ceramic tiles and sanitaryware with more than 30 years’ experience. The value of the transaction, subject to adjustments, was set at $39 million and the closing of the transaction was conditional upon completion of the restructuring of Eurocerámica and approval from the Colombian competition authorities.
This would be the Lamosa Group’s second acquisition in Colombia following the 2016 purchase of Cerámica San Lorenzo (San Lorenzo and Cordillera brands) for $230 million, which with eight plants and distribution centres located in Argentina, Chile, Colombia and Peru had enabled the Mexican group to increase its production capacity in the ceramic tile sector by 40% and become a multinational company.