Terpel Aviation Exports Affiliate begins operating This new affiliate began operating in August, devoted to the international distribution of aviation fuels. This will generate tax-related working capital efficiencies. These benefits are expected to materialize in 2020 when its operation matures. Fundación Terpel is celebrating its 15th anniversary in the country Fundación Terpel has positioned itself as a role model in education quality through its programs Aventura de Letras (Letter Adventure), Escuelas que Aprenden (Schools that Learn), Diseña el Cambio (Design the Change) and El Líder en Mí (The Leader in Me), which strengthen the education received by children in various regions in Colombia. During these 15 years, it has benefitted over 1 million people in the country’s 32 departments. Terpel Results Q3-19 Press Release September 2019 AAA Bonds (Col) - Fitch Ratings AAA Bonds (Col) - S&P BVC (Colombian Stock Exchange) Stock: TPL Terpel, among the best reputed companies Terpel has positioned itself as one of the best reputed companies in the last Merco ranking, climbing 4 points above the previous score (#25). Furthermore, its CEO, Sylvia Escovar, ranked 10th among the country’s best reputed leaders. She is the first woman in the history of Merco Colombia to become part of this group. Likewise, according to the SUMMA Magazine, among the companies with the best corporate reputation, Terpel ranks 24 in Central America and 11 in Panama. Its General Manager holds the 5th place among the best reputed Corporate Leaders. Such acknowledgments confirm Terpel’s commitment toward sustainable development. It is the best ally of its clients and suppliers, one of the best employers of choice, and an excellent option for its investors. Lubricants Colombia - Highlights Beginning on July 1, Lubricant Distributors migrated to a new Commercial Agency model, aimed at optimizing the network and ensuring better country-wide coverage. This translates into logistical efficiencies in transportation and storage. Thus, Terpel expects to retain its leadership with both the Terpel and the Mobil lube brands. It is worth mentioning that the 32nd version of the Mobil Delvac Grand Prix took place in July, attended by 25,000 people. By the end of September, volume grew 7.7% with regard to last year, jumping from 2.1 to 2.2 billion gallons. The period’s Consolidated EBITDA grew to COP$666.1 billion, for a growth of 13.2% as compared to the same period last year. The accrued net profit by the end of September closed at COP$176.8 billion. Consolidated Results for Q3-19 Highlights Teleconference on Results Date: Friday, November 22, 2019 Time: 2:00 pm (UTC-05:00) Bogota Telephone number in Colombia: 018009156924 Telephone numbers outside of Colombia: http://web.meetme.net/r.aspx?p=12&a=UjADQOEwsZAWMn ID #: 48884084 Webcast Registration: https://event.on24.com/wcc/r/2058434/BACCA7A8837FB573F82DF75C764CD75B Web Page:: www.terpel.com Investors’ Contact: [email protected]
Transcript
Terpel Aviation Exports Affiliate begins operatingThis new affiliate began operating in August, devoted to the international distribution of aviation fuels.This will generate tax-related working capital efficiencies. These benefits are expected to materialize in
2020 when its operation matures.
Fundación Terpel is celebrating its 15th anniversary in the country
Fundación Terpel has positioned itself as a role model in education quality through its programsAventura de Letras (Letter Adventure), Escuelas que Aprenden (Schools that Learn), Diseña el Cambio(Design the Change) and El Líder en Mí (The Leader in Me), which strengthen the education received bychildren in various regions in Colombia. During these 15 years, it has benefitted over 1 million people inthe country’s 32 departments.
Terpel has positioned itself as one of the best reputed companies in the last Merco ranking, climbing 4points above the previous score (#25). Furthermore, its CEO, Sylvia Escovar, ranked 10th among thecountry’s best reputed leaders. She is the first woman in the history of Merco Colombia to becomepart of this group.Likewise, according to the SUMMA Magazine, among the companies with the best corporatereputation, Terpel ranks 24 in Central America and 11 in Panama. Its General Manager holds the 5thplace among the best reputed Corporate Leaders.Such acknowledgments confirm Terpel’s commitment toward sustainable development. It is the bestally of its clients and suppliers, one of the best employers of choice, and an excellent option for itsinvestors.
Lubricants Colombia - Highlights
Beginning on July 1, Lubricant Distributors migrated to a new Commercial Agency model, aimed atoptimizing the network and ensuring better country-wide coverage. This translates into logisticalefficiencies in transportation and storage. Thus, Terpel expects to retain its leadership with both theTerpel and the Mobil lube brands. It is worth mentioning that the 32nd version of the Mobil DelvacGrand Prix took place in July, attended by 25,000 people.
By the end of September, volume grew 7.7% with regard to last year, jumping from 2.1 to 2.2 billiongallons. The period’s Consolidated EBITDA grew to COP$666.1 billion, for a growth of 13.2% as comparedto the same period last year. The accrued net profit by the end of September closed at COP$176.8billion.
Consolidated Results for Q3-19
Highlights
Teleconference on Results
Date: Friday, November 22, 2019Time: 2:00 pm (UTC-05:00) Bogota
Telephone number in Colombia: 018009156924Telephone numbers outside of Colombia: http://web.meetme.net/r.aspx?p=12&a=UjADQOEwsZAWMn
ID #: 48884084Webcast Registration: https://event.on24.com/wcc/r/2058434/BACCA7A8837FB573F82DF75C764CD75B
It recognizes the increase in assets and liabilitiessince the beginning of the lease.
Impact on Results (COP $ Billion)
It recognizes less expenses for leases, greaterdepreciations and financial expenses, and thedeferred tax that accrues on the balance sheetdifferences.
As of this year, Organización Terpel has adopted IFRS 16, which sets forth the single model for leaseaccounting. This standard eliminates the figure of operating leases except for short term agreements and thelease of low-cost assets.
IFRS 16 Impact
The adoption of standard IFRS 16 impacted both the balance sheet and the results of Q3. This was reflected inan increase of the assets as of September 2019, by COP$649.8 billion and of the liabilities by COP$665.3 billion.The net impact on the accrued net profit was COP$-12.1 billion, since it reduced leases by COP$50.5 billion andincreased depreciations and financial expenses by COP$4.3 billion. This effect is due to the fact thatdepreciation and financial expenses will be higher during the first years, as compared to the lineal leaseexpenses recognized by the previous standard.
*Balances at 2019
Summary of Results
During Q3/19, 751.2 million gallons were sold, for a 6.5% growth rate with regard Q3/18. Colombia, whichparticipated in the volume with a 74.3% share, grew 6.7% YoY. Panama, which contributed 9.5% of the volume,sold 15.7% more than in Q3/18. Ecuador contributed 11.5% of the quarter’s volume. Peru contributed 2.6% of thetotal volume and grew 20.5% thanks to the contribution of the operation acquired from ExxonMobil in Peru. InDominican Republic the volume contributed 2.1% of the total and grew 21.4% due to the growth of the volumesold to industrial clients in the country.
Q3/19 income amounted to COP$5.9 trillion, showing an 18.8% growth YoY. Colombia, which contributed 76.3%,grew 18.1% YoY while Panama, which contributed 10.5% of the consolidated income, grew by 17.7% YoY. Ecuador& Peru contributed 10.7% to the quarter’s consolidated income, for a 2.6% growth rate, mainly due to thegrowth of the fuel segment in both countries (due to an increase in regulated prices in Ecuador and thegrowth of the aviation business in Peru). Dominican Republic’s income grew by 24.8% during the quarter.
The gross profit for Q3/19 amounted to COP$572.5 billion, 33.6% over that for Q3/18. Colombia, whichconcentrated 71.3% of the gross profit, grew 28.9% YoY. Panama, which contributed 12.5%, grew 17.4% withregard to Q3/18. Peru, which contributed 8.9% of the quarter’s gross profit, grew 109.6% YoY. The remainingcountries contributed 7.3% of the quarter’s gross profit, growing at a 57.5% rate.
The Q3/19 EBITDA grew above that of Q3/18 by 26.3%, equivalent to COP$53.5 billion. In Colombia, the growthreached 27.0% as compared to Q3/18; the Mobil Lubes operation contributed COP$17,498 million during thequarter. Panama showed a result 39.4% higher than during the same quarter last year. Peru contributed 4.2%of the EBITDA and shrank 5.7%. The remaining countries contributed 5.14% of the quarter’s EBITDA, growing31.1%.
The net profit for Q3/19 was COP $89.1 billion, as compared to the COP$58 billion of Q3/18 (impacted by thenon-recurring acquisition expenses of COP$9.9 billion during the quarter). The adoption of standard IFRS 16,together with the amortization of the intangible assets acquired under the ExxonMobil transaction and thetransaction’s pending expenses and a provision with a low recovery probability impacted the quarter’s netprofit by approximately COP$20.2 billion. Without such effect, the net profit would have been COP$109.3 billion.
Terpel has managed to consolidate its expansion plan in 5 countries of the region:
In Peru, where we mainly distribute NGV, the network comprises 45 SS. Terpel, with itsGazel brand, has positioned itself with a 13% market share in Lima´s NGV sector and is the
second largest NGV distribution company. It has also explored distributing LPG, liquid fuelsand Convenience Stores, the latter under the “Alto” brand. Terpel has a 34% share in theLubricant’s market thanks to the acquisition of Mobil. Furthermore, it acquired theoperation of the Lima airport.
In Colombia, the 2,009 Service Station (SS)network is composed of 1,921 liquid fuel SS, ofwhich 245 are Terpel’s own SS and theremainder are part of Terpel’s Allied SSOwner’s Network (allies). In the entire network,246 SS distribute Natural Gas for Vehicles(NGV). And of these, 158 SS also distributeliquid fuels.
Terpel has upheld its position as market leaderin the fuel distribution sector with a 41% sharein the liquid fuel market (SS and Industry), 47%in NGV and 77% in Aviation (servicing 21airports). Thanks to the acquisition of theExxonMobil operation, its share in thelubricants market has reached 42%.
In turn, in Panama, liquid fuel sales aresupplemented with the Convenience Storebusiness, the distribution of Lubes and theservice to the Industry, Marine and Aviationsectors (supplying fuel to the Tocumenairport).de
Terpel has managed to consolidate a network of 148 SS which hasallowed it to retain its second place in the ranking of the sector’scompanies, capturing 35% of the SS and Industry markets and 1% of theAviation market.
In Dominican Republic, Terpel serves 4 of the island’s main airports since 2011, andit began serving the Arroyo Barril Airport, in front of the Samaná Bay, in July 2015.This has allowed Terpel to increase its current share to 31% in the Aviation market.
Liquid SS Lubes NGV LPG Liquid Petroleum Gas Convenience Stores
Industry Aviation Marine Corporate Mobility
In Ecuador, the operation comprises 100 SS, fuel sales to industrial clients, and thedistribution of Mobil Lubricants. Thus, Terpel has a 13% market share in fuels and8% in lubes, consolidating itself as the fourth player in the market.
Consolidated Operating Results
Sales Volume(Million Gallons)
By the end of September 2018, 2.1 billion gallons had beensold, while during the same period in 2019 Terpelmanaged to sell 2.2 billion gallons, equivalent to a totalgrowth rate of 7.7%.
Regarding volume share, Colombia represented 74.2% ofthe accumulated consolidated volume, for a 5.3% growthrate. Panama contributed 9.8% at a growth rate of 15.5%YoY. Ecuador contributed 11.4% of the volume and grew by12.3% YoY, including 16.4 MM de gallons more than untilSeptember 2018 from the operation acquired fromExxonMobil. In Dominican Republic, volume represented2.1% of the consolidated volume, for a growth of 12.2%YoY, mainly due to the growth of the industrial sector.Peru contributed 2.5% of the consolidated volume, for agrowth rate of 32.8% YoY. Such growth includes 10.4 MMgallons more than during the same period in 2018 due toExxonMobil’s operation, of which 5.3 MM gallonscorrespond to the lubes business and 5.1 MM gallons toaviation (They began consolidating in April 2018).
EBITDA* (COP $ Billion)
Regarding the consolidated EBITDA, it experienced anaccrued growth of 13.2%, jumping from COP$588.5 billionat September 2018 to COP$666.1 billion at Q3/19. This wasdue to the EBITDA’s contribution in Panama and theconsolidation of the Mobil operation. ExxonMobil’sacquisitions contributed COP$84.6 billion to this result.
In Colombia, the EBITDA grew 9.2% YoY and contributed78.8% of the consolidated EBITDA. This result was favoredby the result of the Mobil Lubes operation, whichcontributed to this growth by COP$45 billion as comparedto last year, and by the inventory adjustment for theperiod, which amounted to COP$69.3. Excluding Mobil’simpact, the inventory adjustment, and the provision withlittle recovery probability, the EBITDA growth would be4.4%.
Panama grew 49.5% YoY and contributed 10.8% to theconsolidated EBITDA due mainly to volume growth andhigher margins.
Dominican Republic generated an EBITDA of COP$19.5billion, COP$2.8 billion more than the total accrued atSeptember 2018. Without the foreign exchange rateeffect, it grew by 4.4%.
Ecuador contributed approximately COP$14.4 billion tothe EBITDA accrued by September 2019, includingCOP$6.8 billion from the ExxonMobil operation.
In turn, Peru generated COP$35 billion as of September2019, of which 93.7% was contributed by the operationacquired from ExxonMobil.
Operating results - Colombia
Accumulated Volume Composition
Accrued Gross Profit Composition
%: Share in total%: Accrued Growth
%: Gross Margin
As of September 2019, Terpel had distributed inColombia 1.6 billion gallons representing 5.3% more thanthe volume distributed during the same period in 2018of such volume, 69.1% was distributed through liquidfuel stations and 3.7% through NGV stations. Thus, theservice station segment represents approximately 72.8%of the total gallon sales. This is why significantinvestments have been made in the image of the SSsand in the construction of motorcycle islands, sinceinfrastructure is one of the key factors in attractingmore customers.
The Aviation business contributed 17% of the volumeand grew by 1.4% as compared to the same period in2018. The Industry segment volume represented 8.7% ofthe total volume distributed through September 2019and a 5.4% growth, thanks to the arrival of new clientsand the recovery of the oil sector. The Marine Fuelsector grew 8.3% with regard to last year, due to higherconsumption in the marine service station segment andinternational customers.
Although the share in the volume of the lubricantssector was 1.2%, this is one of the segments that mostcontributed in terms of gross profit. While the SScontributed 61.4% of the total gross profit and 72.8% ofthe volume, 1.2% of the volume corresponding tolubricants contributed 15.1% of the gross profit. Thisresult includes COP$127.3 Billion of the gross profitgenerated by Mobil Lubricants during the period.
Colombia’s gross profit through Q3/19 was COP $1.1Billion representing a 17% growth with regard to thesame period in 2018. This was the result of volumegrowth, the consolidation of the Mobil operation, andthe annual increase in the liquids wholesale margin. Thiscompensated for the smaller contribution of the NGV,which was affected by the devaluation.
Industry and Aviation contributed 4.4% and 6.9%,respectively, of the gross profit. Although the Marineand Supplementary Service segments both showedgreat growth and consolidation potential, their currentcontribution to the company’s gross profit was around1.4%, given that they are in their development stage.
Results in Colombia have been positively impacted by the implementation of the new customer-basedcommercial strategy comprising better service, better infrastructure and better prices. SSs have a reneweddesign and image, excellent restroom service, novel convenience stores and a carwash system that is unique inthe country.
VOLUME = 1.6 Billion GallonsAccrued Growth = +5.3% vs. Sep-18
By the end of Q3/19, the EBITDA had grown 9.2% as compared with the same period in 2018. This result wasfavored by the results shown by Mobil Lubricants, which contributed COP$45 Billion to this growth regardinglast year, as well as by the inventory adjustment, which amounted to COP$69.3 Billion.
Without Mobil’s impact, the inventory adjustment effect, and a provision with very little recovery probability,the EBITDA would have grown by 4.4%.
Operating Results - Colombia
EBITDA*(COP $ Billion)
Net Profit(COP $ Billion)
EBITDA Mobil
The period’s net profit was affected by the amortization of the intangible assets acquired from ExxonMobil,the adoption of standard IFRS 16, and the Mobil acquisition expenses. Without such effects, the result would beCOP$222.6 Billion.
If compared to last year, there was a significant growth, since the profit was impacted by non-recurrentexpenses associated to the acquisition of ExxonMobil, including: loss of hedging and expenses for transactionconsultants.
Operating Results - Panama
Panama has also benefitted from the new commercial strategy: better service, better infrastructure and betterprices have made Terpel the second largest fuel distribution company in this country. SSs have a reneweddesign and image, excellent restroom service, novel convenience stores and a carwash system that is unique inthe country.
By the end of September 2019, Panama had sold 211.6million gallons, representing 15.5% more than thevolume sold during the same period in 2018. Of suchvolume, 72% was distributed through the liquid fuelService Stations, which in turn had a 77.1% share in theperiod’s accrued gross profit.
Contrary to Colombia, the supplementary servicesegment in the Panama Service Stations is a maturesegment contributing 13.6% of the gross profit. Thesetwo factors have led investments in Panama to focus onexpanding Terpel’s own SS network, renewing theimage of existing SS, and building new supplementaryservice formats.
On the other hand, the Industry business contributed23.9% of the volume and grew 51.5% with regard to thesame period in 2018, thanks to the consumption of thecountry’s most important clients in the mining andtransportation sectors. Regarding gross profit, itscontribution was 6%.
The share of the Marine segment in the volume was2.8% and its contribution to the gross profit was 1.4%.The Terpel-branded lubricants distributed in Panamarepresent 0.2% of the volume, although theycontributed 2.1% of the gross profit, for a growth rate of7.4%.
In Panama, the Aviation sector is in its developmentstage, after beginning distribution at the Tocumenairport in June 2019. This is why its contribution tovolume was 1.1% by the end of September 2019.
In Panama, the accrued gross profit was COP$219.9billion equivalent to a 21% growth rate as compared toSeptember 2018, mainly due to the growth in volume(industrial clients’ consumption) and higher margins.
VOLUME = 211.6 Million GallonsAccrued Growth = +15.5% vs. Sep-18
During Q3/19, the EBITDA grew 49.5% and, without the foreign exchange rate effect, the growth rate was 33%.This result is due mainly to an increase in volume (industrial clients' consumption), higher margins, spendingoptimization and good store performance.
The inventory adjustment (*) accrued during Q3/19 was COP $-1.6 billion.
Operating Results - Panama
The period’s Net Profit decreased by 2.2% and, without the rate of exchange effect, growth amounted to -12.8%. This reduction is the result of having adopted standard IFRS 16, whose impact was COP$7.837 billion.Without this effect, the net profit would have grown 81.3%.
EBITDA*(COP $ Billion)
Net Profit (COP $ Million)
Consolidated Net Worth Situation
The book value of Organización Terpel’s consolidated assets by September 2019 was COP$7.2 trillion, for a 7.7%growth focused on PP&E and Intangibles. This amount includes the right-of-use assets resulting from theimplementation of IFRS 16, which represent 9% of the total assets as of September 2019. Regarding thecomposition, current assets represent 34%, PP&E represents 32% and deferred and intangible assets represent23%.
Liabilities, which correspond to 70.3% of the assets, are mainly composed of: the remainder of the oldsyndicated loan used to acquire ExxonMobil’s assets, which was refinanced this year together with the shortterm loans amounting to COP$267.7 billion and the short-term obligations of the countries, which togetherrepresent 13%, the bonds issued in 2013, 2015 and 2018 representing 41%, and the current liabilities representing24%.
Furthermore, they include the lease liabilities arising from the implementation of IFRS 16 and which represent13% of the liabilities. Finally, the book value of the Net Worth as of September 2019 was COP$2.1 trillion, whichgrew with regard to 2018 as a result of the exchange rate of the dollar-denominated investments in theaffiliate that consolidated the operation acquired from ExxonMobil in Peru, (Organización Terpel Andina).
Consolidated Financial Statements(COP $ Billion)
Income Statement Sep-18 Sep-19
Revenues 13.7 16.4
Gross Profit 1.3 1.5
Operational Profit 0.3 0.4
Net Profit** 0.1 0.2
Balance Sheet Sep-18 Sep-19
Assets 6.7 7.2
Financial Debt 3.3 2.7
Other Liabilities 1.6 2.3
Equity* 1.8 2.1
Consolidated Financial Debt
Consolidated Bridge Debt(COP $ Trillion)
Rate Breakdown
Term Breakdown
The total debt (excluding IFRS 16) as of September 2019 was COP$2.7trillion, composed mainly of obligations in Colombia, Panama andEcuador. In Colombia, the debt corresponds to the Bonds issued in 2018for COP$1.1 trillion, the bonds issued in 2013 and in 2015 for COP$985billion and short-term financial obligations. In Colombia, the 7-year bondseries issued in 2013 have a fixed cost, which represents 9% of the fixed-rate debt. The short-term financial obligations (mainly the oldsyndicated loan for COP$115 billion) are pegged to IBR and represent 10%.The cost of 69% of the debt is pegged to the CPI, associated to the bondissues. The debt subject to Libor (12%) corresponds to financialobligations in Panama and Ecuador.
80% of the debt has long-term maturities. The short-term maturitiescorrespond to the financial obligations arising from the old syndicatedloan, and a debt recently acquired in Ecuador (to fund the growth plan),which together amount to COP$288 billion. They also include thematurity in 2020 of a series of bonds for COP$241 billion.
Debt Maturity Profile (COP $ Billion)
The rest of the debt has significant maturities in 2021 for COP $91 million, 2022 for $435 billion, 2023 forCOP$529 billion, and between 2028 and 2043 for a total of COP$1.2 trillion, most of them corresponding to thebonds issued.
Regarding the company’s financial soundness indicators, the debt represents 3.30x times the EBITDA(excluding the IFRS 16 effect). As to hedging, the EBITDA (twelve months) represents 4.53x times the cost of thedebt (interests).
Fixed
CPI
TD IFRS 16
LT
ST
Consolidated CAPEX
CAPEX % per Country CAPEX % per Business
The company’s current strategy requires significant investment in assets in the medium term, in order toachieve the intended changes in the architecture and design of the SS, spotless restrooms and conveniencestores that reflect the service we intend to provide our customers. This implies making investments toppingthose that have been historically implemented, and their return will depend on volume growth and onconsumer loyalty in coming years.
The inclusion of new SS in the network, the remodeling of existing ones, owned both by Terpel and by its allies,as well as the construction of additional convenience stores, NGV conversions, the car wash services (Ziclos)and the operating investments necessary for the fuel plants, among other operating investments, demandedresources through September 2019 for COP$226 billion.
61.3% of such investment has focused on Colombia and 38.5% has been devoted to the expansion plan that isunder way in Ecuador, Peru and Panama. 69.5% of the investment has been made in the Service Stations, eitherin infrastructure, conversion of vehicles into NGV or construction of supplementary services. 16.8% has beeninvested in Industry, Aviation and Lubricants. In turn, 6.6% was invested in fuel storage and distribution plantsso as to maintain and increase the installed capacity, which is the key to preserving sound logistics in order todeliver the product and keep our promises to our customers.
Terpel Stock – Closing Price Evolution (COP $)
In 2014, as a result of the re-organizational merger, shares were registered at the Colombian Stock Exchangeon behalf of Organización Terpel. The security’s price at the closing of December 2018 was COP$9,600 andsince then, the price has grown by 11.5%. During this period, COP$48.9 billion were have been traded in 4.7million shares. By the end of September 2019, Organización Terpel’s market capitalization amounted toCOP$1.94 trillion.
The dividend decreed for 2019 was: $368,58 per share, and it was paid in full in a single payment on March 29,2019.
Consolidated Operating Results
Consideraciones sobre la información financiera y operacional
La información financiera y los resultados operacionales presentados en este documento corresponde a laOrganización Terpel y sus filiales en cumplimiento con las Normas Internacionales de Información Financiera(NIIF). La información de las filiales es reportada con las eliminaciones intercompañía, por lo cual, la suma de losresultados individuales puede que no corresponda a los resultados consolidados.
La información contenida en este documento no compromete ni sugiere alguna decisión de inversión.
