Cementos Argos S.A. (CEMARGOS) Earnings Call Transcript & Summary

Good morning. My name is Indira Diaz, Cementos Argos IRO, and I welcome you to our first quarter results release. On the call today is Juan Esteban Calle, our CEO; Felipe Aristizabal, our CFO; María Isabel Echeverri, the VP of Legal Affairs; Bill Wagner, the VP of the U.S. Division; Lucas Moreno, the VP of Growth and Business Development of the U.S. division; Marlon Melo, the VP of Cement Operations of the U.S. division; Carlos Yusty, 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 S.A. and its subsidiaries, which are based on the knowledge of current facts, expectations, circumstances and assumptions and 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 upload it in our web page. It is now my pleasure to turn the call over to Mr. Calle.

Thank you, Indira, and good morning, everyone. For the first time in many years, our 3 regions are consistently and simultaneously facing strong demand and very constructive pricing momentum. We are currently operating at a very high capacity utilization level across our network. These dynamic conditions in our key markets have led to solid volume performance as well as to record price increases across the board, driving quarterly revenue to an all-time high of COP 2.6 trillion. In terms of pricing, we achieved the highest sequential increase in the cement business of the last 7 years, resulting from a more aggressive pricing strategy amidst favorable market conditions that allow us to increase prices by 10% to 15% in our main markets. Volumes evolved accordingly with a total of 3.9 million tons of cement and 1.9 million cubic meters of ready-mix concrete dispatched during the quarter. The main challenge during the period was operating in an environment of heightened inflationary pressure and lower-than-normal redundancies throughout the supply chain, leading to less headroom to manage internal or external disruptions to the business. On the aggregate, the increase in cost of sales versus last year on a comparable basis was around COP 385 billion, mainly offset by the COP 330 billion generated by the price increases. In terms of cost, this COP 385 billion were mostly related to the increase in raw materials with a total impact of around COP 120 billion and energetics with a total increase of around COP 80 billion. The remaining amount was due to freight and distribution cost, maintenance, labor and other production cost. On raw materials, the highest impact was on the CCA region, mainly affected by higher cost of imported cement and clinker associated to the trading business and the supply of our grinding stations. The U.S. also had an important increase in raw materials due to the higher volume of imported cement, resulted from the longer-than-expected maintenance works in Roberta and Martinsburg that reduced total cement production at these facilities during the period. The increase of the cost of aggregates in the production of ready-mix also impacted this cost in the U.S. On energetics, the highest contribution was from Colombia, impacted by the increase of natural gas and coal. To face the significant increase in cost of energetics, we have fixed an important portion of our fuel requirements for the current year as well as a minor portion of the estimated consumption for 2023. Other initiatives such as the increase of alternative fuel consumption and the redistribution of the fuel matrix toward less-expensive energetics were also part of our comprehensive plan to soften the impacts of the increasing fuel cost in our results. Our adjusted EBITDA for the first quarter accounted for COP 359 billion as a result of higher prices, inflationary pressures and headwinds associated to maintenance. Though lower than the 2021 first quarter EBITDA figure, this result is consistent with the expectations embedded into the EBITDA guidance for the year of COP 2.05 trillion to COP 2.15 trillion. Now moving to the regions. I would like to start by sharing some recent news on the senior management team. Camilo Restrepo, who has been leading the CCA region, has been appointed as President of the Cement business in the U.S., reporting directly to Bill Wagner, the CEO of the U.S. region. Camilo has been part of this company for over 17 years leading high-performance teams, delivering outstanding results, entering new markets, transforming business models and strengthening our value proposition while carrying Argos' DNA and its culture day-to-day. We want to congratulate Camilo for his new position and wish him and his team the best of luck moving forward. Regarding the result of the U.S., I would like to invite Bill Wagner to provide more context about the performance of the region and our view for the market.

Thank you, Juan, and good morning, everyone. The market in the U.S. continued to be very strong during the first quarter, allowing us to achieve improvements in both volumes and prices versus last year. Our first price increase was carried out during January, effectively improving our average FOB prices for cement by 9% and for ready-mix by 9.5% year-over-year. Volumes evolved accordingly, increasing on a comparable basis 7.3% in cement and 2.6% in ready-mix year-over-year, mostly influenced by a resilient residential market. As expected, cost exhibited significant hikes during the quarter when compared to 2021. Total unitary costs increased 20.8% in cement and 13% in ready-mix year-over-year, resulting mainly from an increase of $5.8 million in energetics, $7.5 million in raw materials due to higher volumes of imported cement and $4.5 million of maintenance arising from nonrecurring expenses in Martinsburg and the dredging cost of the Houston port that takes place every 2 to 3 years. Regarding energetics, we fixed an important portion of our fuel requirements for the year, which allowed us to obtain an average cost increase significantly below current market impacts in both our cement and ready-mix businesses. To date, in the U.S., we have fixed the price of 40% of our natural gas consumption, 53% of our diesel consumption and 68% of our coal consumption estimated for the remainder of 2022. In addition to our negotiated fixed fuel prices, we continue to work on the use of alternative fuels as a measure to tackle the unprecedented inflationary pressures. During the first quarter of 2022, we replaced the equivalent of 12,000 metric tons of coal with alternative fuels such as biomass, RDF and TDF, which is a fuel derived from tires. In total, our substitution rate reached around 11% of our energetics matrix during the quarter. All of our plants are equipped to substitute fossil fuels with a potential overall substitution of 20%. We will continue to work on improving the substitution rate, which is key for both environmental and profitability reasons. Adjusted EBITDA stood at $40 million during the quarter, 17% below the 2021 figure with an EBITDA margin of 11%. This is a result of positive market evolution and a very successful pricing strategy that was overshadowed by the increase in maintenance expenses, the higher imported volumes in the cement business, the strong cost inflation in energetics and the result from the ready-mix business in Houston that were weaker mainly caused by the timing of the price increases, which were implemented at the start of the second quarter. Despite these challenges, we remain fully confident regarding our strong fundamentals of the market and the expected performance of the business going forward, taking into account the positive pricing dynamics, the evolution of the business in April and our operational and hedging strategies, which will allow us to obtain an optimum outcome for the coming quarters and reach the projected goal for the year. On the sustainability front, we recently launched our Ecostrong PLC, which is our brand for type 1L. The Roberta and Newberry plants will be fully converted to Ecostrong PLC cement by June and October, respectively, while the Harleyville and Martinsburg plants will achieve a 60% and 50% production rate of this product, respectively, by the year-end 2022. Our goal is to convert all of our cement production facilities to Ecostrong PLC cement by 2023. On the ready-mix business, we have successfully introduced our PLC cement in the Carolinas and Florida, and we are expecting to use this cement in all locations in the Eastern states by June. The Ecostrong PLC cement has a lower clinker factor ratio, reducing the variable cost per ton of cement and the CO2 emissions by up to 15% when compared to regular type 1 cement. Regarding the market dynamics. We continue to be confident about the positive evolution of the fundamentals. On the residential front, building permits and housing starts are showing a positive evolution with year-over-year increases of 6.7% and 3.9%, respectively, in March. On the commercial segment, the ABI index stood at 58 points during March, the highest figure since the pandemic started. The civil and infrastructure segment continues to be steady with a mild year-over-year increase of 1.7% as of March on public spending. We reaffirm our belief of strong market moving forward and a new cycle of growth based on the evolution of the macro indicators and the willingness of the current government to close the gap of underinvestment in infrastructure at a national level. Based on that growth forecast, we have decided to invest during the current year a total of $90 million in CapEx in the U.S., equivalent to 45% of the total CapEx of the company. This CapEx includes the purchase of 132 ready-mix trucks that will replace existing trucks and marginally increase the capacity due to their increased efficiency as well as the investment in the Houston port that will increase the import capacity in around 500,000 tons annually by 2024. We are confident in our ability to capture future growth in the U.S. with our local footprint, which is a result of 17 years of selective organic and inorganic growth for a long-term vision of the market and current investment plans.

Thank you, Bill. The strong fundamentals of the U.S. business, together with our commercial, operational and cost control initiatives, provide optimism to reaching our goals for the year. Now moving to Colombia. I would like to highlight the continuation of the positive market conditions in the Colombian market, which, in terms of cement dispatches, grew 2% year-over-year during the first quarter of 2022 and reached a historic record of 1.26 million tons in March. Carlos Horacio will now provide additional color on this region.

Thank you, Juan, and good morning. First of all, I would like to clarify that from this quarter on, the export division, including volume and financial results that were previously reported on the CCA region, will become part of the disclosed figures of the Colombia region. The solid demand conditions in the country continued during the first 3 months of the year, driven by the retail segment, residential construction and infrastructure projects. In January, the company announced a national price increase of -- for all products. Therefore, our local prices for cement and ready-mix increased 8% and 4%, respectively, year-over-year, which was well received by our customers and by the industry overall. Despite lower-than-expected volumes during the first few weeks of the year, strong demand conditions rapidly took hold across the country, reaching in March the highest figure of monthly cement dispatches for Cementos Argos during the past 5 years. Accumulated dispatches for the local market as of March were 6% lower than the same period of 2021, and exports from Cartagena increased 32% year-over-year. On the ready-mix business, volumes continued their positive trend and grew 13.4% year-over-year, mainly driven by formal construction, especially in the residential segment. The main challenge we faced during the quarter were the inflationary pressures that affected not only the cost but also the availability of energetics in the country. Our team successfully deployed a strategy that ensured the supply of fuels to our cement plants at the lowest cost possible, allowing us to operate at full capacity during the entire period. The main initiatives around cost inflation were focused on the diversification of our fuel matrix and the adjustment of the mix between natural gas and coal, aiming at obtaining optimal clinker quality and generating savings by reducing the clinker factor. Unitary costs increased 28.4% in the cement and 6.3% in ready-mix, impacted mainly by COP 42 billion of higher cost in energetics and a tough comparison base on maintenance expenses of COP 4 billion related to the major maintenance of our Cartagena plant the -- that last year took place during the second quarter. Additionally, the increase in the unitary cost associated with the white kiln of the Cartagena plant that was restarted last year to capture incremental volumes mainly related to exports, and the higher price of slag also impacted the overall cost of the country. Looking forward, we intend to continue working on the adjustment of our optimal fuel matrix and on increasing the substitution of alternative fuels. This year, we expect to increase the use of alternative fuels in our Cartagena and Rioclaro plants by 50% compared to the previous year. The combination of higher prices, the impact on variable costs arising from energetics and a tough comparison base on maintenance expenses led to an EBITDA of COP 130 billion, which is 18% below last year's figure. I would like to point out here that if we exclude the results from the export division, the last year-over-year decrease is reduced to 13.8%, evidencing the good performance of the local market. The EBITDA margin stood at 20.5%, 344 basis points lower than the same period of last year. Nevertheless, we are in line with our budget and are certain that the actions being undertaken by the company will lead us to achieve our 2022 guidance. Regarding market dynamics. The residential segment in Colombia continues delivering positive signals. During the quarter, social and nonsocial housing sales grew 6.4% and 5.5%, respectively, year-over-year, despite a challenging comparison base. As a result of the strong housing sales that had been recorded in the past 12 to 18 months, housing starts grew 11% versus the first quarter of 2021 and reached 10 million square meters during the last 12 months, the highest level in 7 years. On infrastructure projects, we remain optimistic due to the positive advances being made on 4G projects that are expected to continue; the Bogota Metro, which is underway and is projected to generate an important demand during the next 3 to 4 years. On other projects such as Puerto Antioquia, a port located in the Uraba region with an estimated investment of $700 million, that is currently set to begin its construction phase. And its contract is in the process of being awarded to the bidders. For the last quarter of 2022 and for the 2023, 5G projects are expected to begin their construction phase, supporting positive demand conditions in the segment as other projects are completed. We expect strong demand conditions to continue in the short and midterm as both cement and ready-mix dispatches continue to exhibit an upward trend, and those macro fundamentals of the country provide solid support for the residential and infrastructure segments. We are confident that with our footprint, commercial strategy and cost containment plans, we are uniquely and well positioned to capture current growth and properly tackle all the headwinds arising from the current inflationary pressure.

Thank you, Carlos. Moving on to the Caribbean and Central America, I would like to highlight the continuation of the solid demand conditions across the region and the outstanding job that our team have been executing in order to mitigate a very challenging inflationary environment. Camilo will provide additional information on this subject.

Thank you, Juan, and good morning, everyone. During the first quarter, market conditions throughout the region remained positive, which allowed the continuation of solid pricing dynamics, with cement prices posting a double-digit sequential improvement and a 6% growth year-over-year. Nevertheless, cement dispatches decreased 11% compared to the same period of last year, mainly influenced by operational difficulties in Haiti and Dominican Republic, the governmental transition in Honduras and lower trading volumes. Honduras exhibited positive market fundamentals associated mostly to a strong yearly increase of 22% on remittances, which allowed us to continue deploying our price recovery strategy with a high single-digit adjustment during the quarter. However, the transition to a new government has slowed down demand in public infrastructure construction, impacting our cement dispatches for the quarter with a 9% decrease versus the same period of last year. Nevertheless, it is worth mentioning that this has been a very smooth presidential transition compared to previous changes in government. Solid demand conditions evidenced since 2021 continued in the Dominican Republic, leading to a double-digit growth in cement prices. However, during the first quarter, we experienced mechanical difficulties in our cement mill, which resulted in a 5% reduction in cement dispatches. This issue has been resolved, and the plant is running better than before. In Panama, cement volumes decreased 9% compared to the same quarter of last year, but we are optimistic for the following months as we expect a recovery in volumes due to advancement on some of the major infrastructure projects in the country such as the third and first lines of the Panama Metro and the positive evolution of the residential segment, especially on social housing. Operations in Haiti posted the largest price adjustment of the region during the quarter, but cement dispatches remained at low levels due to technical challenges at the plant and social unrest in the country, combined with complications in the fuel supply. This has been an ongoing situation since the second semester of 2021, but we expect this to be fully solved during the second quarter and are bullish on being able to take advantage of the positive demand conditions the country has experienced over the past months. Similarly, in Puerto Rico, prices maintained a positive trend with a mid-single-digit growth, while cement volumes decreased 8% year-over-year due to a slow start in January, disruptions in the supply chain of other building materials and a strong rainy season. Trading volumes decreased 11% during the quarter, mainly due to the increase in export that was explained previously by Carlos, which allowed us to supply our Puerto Rico operation from Cartagena and postpone 2 shipments that had higher FOB prices. In line with our expectations, cost inflation also impacted the CCA region during the first 3 months of the year. Unitary costs increased 17.3% in cement and 11.8% in ready-mix associated mostly to an impact of $8 million in the cost of trading business and $2 million in energetics. We were able to partially offset the impact on fuel cost as we managed to make the necessary purchases to fulfill our fuel needs for 2022 and part of 2023 before the recent price hikes. However, we have experienced significant increases in the cost of electrical energy in Honduras as part of the price hikes from the state energy company. In the Dominican Republic, we incurred an additional cost as we had to purchase cement from third parties to be able to supply our clients during the technical difficulties we experienced. In general, the quarterly results of the region were impacted as a result of higher import costs. During the quarter, EBITDA decreased 23.7% year-over-year, closing at $29 million, mainly affected by the previously mentioned cost impact across the region and in line with our expectations. The continuation of solid demand conditions across our footprint, the integration of the region with the Cartagena plant and the availability of our own fleet of vessels all contribute to a positive outlook for the rest of 2022 despite the volatile conditions that the industry is facing.

Thank you, Camilo. Now I would like to provide more context on the transaction that was announced to the market on mid-March related to the sale of 23 ready-mix concrete plants located in Eastern North Carolina and Southwest Florida and the execution of a medium-term cement supply agreement. This transaction was carried out for a total of $93 million and was executed in line with our rationale of focusing our ready-mix business in urban centers and in close proximity to our cement operations to ensure a higher degree of vertical integration and maximum profitability. With this transaction, we are finalizing the disposal program that started in 2019 with excellent results in terms of footprint optimization of our ready-mix business, rebalancing of the cement and the ready-mix portfolio of Argos USA, deleveraging and increasing business profitability. We are now entering a new cycle in all of our regions with ambitious targets in terms of return of capital and sustainable growth. Regarding our balance statement, I would like to highlight that our net debt-to-EBITDA-plus-dividends ratio remained stable during the quarter at 2.9x. From this quarter onwards, the ratio disclosed to investors will be exactly the same ratio applicable for our debt covenants, which includes, in addition to the exchange rate adjustment, additional EBITDA exclusions, including, among others, noncash items and the gain on sale of divestments. We remain committed with the guidance we provided last quarter, given the robust demand conditions in all 3 regions, the point of inflection in pricing dynamics that we evidenced during the quarter and the initiatives the company has deployed in order to control the cost pressure previously discussed during this call. I would like to end the call by thanking each one of our employees for their unparalleled commitment that makes possible the outstanding performance of the company under the challenging and volatile conditions the industry has faced during the last years. Thank you all for your attention. Indira, we can now proceed with the Q&A section.

[Operator Instructions] The first question comes from Gordon Lee from BTG.

A couple of questions on the U.S. specifically, actually. I was wondering, first, if you could give us a sense of whether you have seen any impact on the residential side from higher interest rates. And obviously, that's having an impact on refinancing activity. But I don't know whether you have been able to perceive any slowdown in starts or in backlog as a result on the residential front. And the other question on the U.S. is if you could share with us what percentage of your footprint saw price increases in the first quarter and what price increases you have scheduled for the remainder of the year.

Thank you, Gordon. Thank you for your question. In terms of any slowdown in residential, so far, we haven't seen any. I mean, the reality is that the fundamentals are very strong in the U.S., and that is why our volumes went up in cement in a good way and similarly in ready-mix. So up to now, we haven't seen any slowdown whatsoever in any of our markets. In terms of pricing, which explains in part the results of the U.S., we were very successful in increasing prices in all of our markets with the exception of Houston. The price increase in Houston was executed in April. But other than that, I mean, we are seeing very strong pricing momentum in the U.S. And going forward, our plan is to continue managing prices in order to mitigate cost inflation. But the reality is that we see very good fundamentals in the U.S. so far.

If I could just have a quick follow-up to the pricing question. Have you already advised your clients of a second price increase over the summer, which I know is something that a lot of your peers have done as well? Is that something that they've already baked in, as it were, into their own expectations?

In terms of pricing, Gordon, that is all the information that we would like to share with the market. But the reality is that, once again, we see very constructive pricing -- prices going forward.

The next question comes from Yassine Touahri from On Field.

Can you hear me?

Yes.

Okay. I understand when I'm looking at your results that the price increase for the first quarter was broadly 7%, 8% at the group level. And at the same time, you had a unitary cost inflation of maybe 15% to 20%. So I think -- what I would like to understand is that based on the current commodity price and based on the current situation, what kind of cost inflation would you expect for 2022? I think one European company named Vicat, they mentioned that they would expect a cost inflation of maybe 15%. They actually mentioned that they would need to increase prices by 15% to cover cost inflation. Is it something that is similar for you? Or is it something -- or is it too early to say?

Thank you for the question, Yassine. I mean, yes, we will have to go market by market. If you look at the U.S., I mean, the impact of cost inflation in terms of energetics plus electricity per ton, it was close to -- between $4 and $5 per ton. Our prices in cement increased close to $11 to $12 per ton already in the U.S. The main impact that we saw in the quarter in the result of the U.S. was mainly explained by lower production in our cement plants. We had like a lower production of close to 150,000 tons that were replaced by imports. So we think that in the U.S., we are ahead of the cost inflation in terms of pricing. And we don't see any operational challenges going forward in the remaining quarters in the U.S. In Central America and the Caribbean, where we have a more asset-light model, we are seeing a higher impact in terms of price inflation because we import cement and clinker to our operations. But in most of our markets, I would say that we are ahead of that inflation as well. Our results were impacted, as Camilo explained, by lower volumes of production in Haiti and in the Dominican Republic. And the reality is that in Honduras, because of the change of government, we suffered a little bit with lower volumes as well. And that market, we are expecting to continue increasing prices going forward to mitigate cost inflation. And in Colombia, prices are behaving well. But in the region, we suffered the highest impact in terms of the inflation of coal. So the reality is that our strategy going forward in Colombia is to continue increasing prices to mitigate price inflation. But in general, we still consider that we are on target to hit the guidance that we gave to the market the previous call.

Just to follow up on Colombia, could you give us an update on the parity between import costs and local prices? And I would like to -- if you could give us a little bit more color about why the market didn't bridge the gap over the past 6 to 12 months and why prices are not higher today. Is it because of the new entrant?

Yassine, I mean, Carlos can give a little bit of more color. But the reality is that in Colombia, demand has been very strong, as strong as we have seen in many years. In fact, as Carlos explained during the call, March was a record year in terms of demand of cement in Colombia. Infrastructure projects are going extremely well, and the housing market is behaving very well. Prices are still well below import parity prices, but the strategy is to continue recovering prices. Carlos can complement to give you more color.

Thank you, Juan. Yes, Yassine, as Juan is mentioning, really, the situation with the import parity in Colombia right now is totally different than 1 or 2 years ago. Now the challenge is the cost inflation and mainly the coal inflation because I don't know if you know, but Colombia is very rich in coal. But at the moment, every one of the coal miners are willing -- are deciding to export the coal. And the -- some of the international coal prices has rocketed. And for that reason, the most challenging situation in Colombia right now is the cost inflation. Really, it's not the import parity because the demand is growing very robust in all of the segments, in the industrial segment, infrastructure segment. The housing starts are in very good shape. The retail segment is really very robust as well, but the most challenging situation right now is the coal inflation.

Prices are not reflecting this cost because we've seen in some other countries in the world, we could see price increase of 15%, 20%. Why did you have such a large cost increase? Is it because of the competitive situation? Is it some of your competitors that are focusing on market share rather than volume? I just didn't really understand why you don't increase prices as much as costs.

We are increasing -- like we said in the call, we increased the price in January 1, in the case of the cement, by 8%. We increased again in the second half -- in some part of Colombia in the second half of April, in the rest of Colombia, in the first half -- in the first week of May. And we are trying to catch up the cost inflation with the price increase.

Next question comes from Rodrigo Sanchez from Davivienda Corredores.

Yes. I have 3 quick questions. And the first one is if you could please comment on the difference in margins from the exports operation versus the traditional operation in Colombia. What do you expect in margins from the export operation going forward? Also, I would like to know if you could please share the net income figure excluding the divestments made during the quarter. Finally, regarding the U.S., I would like to know how would you compare the energetics and fuel prices. You mentioned you actually fixed versus the prices you faced during the first quarter.

Thank you, Rodrigo. I will take the first question, and then Felipe Aristizabal will comment on net income. And Marlon Melo will provide you a little bit more information about fuels in the U.S. We continue bullish on exporting from Cartagena. The reality is our plant is as competitive as any plant that you can get, I mean, to serve the U.S. market and Central America and the Caribbean. On top of that, we have a significant advantage in freight cost from Cartagena to serve those markets. So we are still making a decent margin on our exports. But once again, due to cost inflation, most likely, export prices out of Cartagena will increase as well in the following quarters. But we consider that it is still a very interesting and profitable business for us. Felipe will comment now on your question on net income.

Sure. Rodrigo and everyone, so effectively, the divestiture of the operation in North Carolina and Florida generated $93 million of cash. The gain on sale associated to that transaction was close to $22 million. So if we exclude the gain on sale on that operation, the net income would be reduced by that amount.

Thank you, Felipe. Now Marlon, can you give some color on fuel prices in the U.S., the portion that we have hedged and the remaining that we will get on the spot?

Yes. Sure. We have been able to fix a big part of the volumes that we need to use in our process. During the first part of the year, we fixed the 40% of the coal that we need, the total consumption that we need and the natural gas as well, something close to 40%, 53% of the diesel that we need for our operations, both operations, ready-mix and cement. We have a good hedging strategy in place for that purpose. And with that, we are offsetting big part of the inflation pressure that we are receiving now in the -- in all the operations. We are keeping -- working on that strategy as well, trying to increase our hedging during the second quarter. And that's exactly what we are trying to continue during the remaining of the year in terms to avoid any additional cost -- negative cost impact in our numbers. But again, as a summary, 40% in natural gas, roughly 50% in coal, 53% in diesel is the hedging we had and the volumes we fixed for all the fuel.

But if I may, would it be fair to say that in the U.S., the prices fixed are close to the prices you faced in the first quarter? Or should we expect significant differences going forward?

The prices are really high at this time for all the fuels. Compared with the last year, first quarter are higher in certain cases, something close to 40%, 45% in the case of coal. But with this strategy that we put in place, we are offsetting big part of that price increase. The average that you are seeing in the industry with the public data you can see in the market is that the people are receiving impacts in those prices almost double. We are around 40% higher than last year. We are offsetting -- as I said before, we are offsetting big part of that price increase.

And the reality, Marlon, is that with that hedging strategy, we are not foreseeing any additional pressure on the second quarter. I mean, we can expect like the cost of electricity plus energetics to be in line with the first quarter in the second quarter, right?

Yes. That's correct, Juan. What we are seeing now, all the trends, we are seeing similar in the second quarter, similar prices that you see -- that you saw in the first quarter. And we are not expecting to have anything different in the second part of the year. With the hedging strategy, we are covering all the possibilities there. I think we are going to be in good shape for the second semester.

Next question comes from Vanessa Quiroga from Credit Suisse.

So my question is, first, on the same energetics strategy for Colombia. Can you tell us what hedges you've entered in Colombia to protect you from the cost inflation? And the second question that I have is regarding maintenance, if you have any maintenance work scheduled for the rest of the year in the different regions.

Thank you, Vanessa. And Carlos, you can answer the first question, please.

Sure, Juan. Vanessa, in the case of Colombia, we have more than a hedging contract for about 35% of our consumption of coal, yes, because that is with a big -- or with a very formal coal company. For the rest of that, really, the situation in Colombia is quite difficult. And why? Because in Colombia, we buy the coal mainly for small miners, yes. And really, with the situation of the -- with the international prices, it's really difficult that we can't sign out a contract, a long-term or inclusive mid-term contract with hedging or fixing the coal price. Really, they are not going to do that. Really, they are -- they like to be exposed to the international price. And for that, we are -- for that situation, we are trying to optimize the mix of energetics usually for the reason we are starting the consumption -- or increasing the consumption of natural gas. Right now, in Cartagena, for instance, we are consuming about 30% of natural gas in the kiln #4, which is the biggest kiln of our operation in Colombia. That is pretty similar situation in the case of the Yumbo plant. And we are consuming -- we are almost increasing by 50% the consumption of alternative fuels in Cartagena and Rioclaro in order to optimize the cost and in order to optimize as well the energetics charge in the kiln. But it's really difficult for us to increase the hedging of the coal in the case of Colombia, Vanessa.

All right. And regarding diesel, do you -- can you hedge anything for Colombia?

For the what, excuse me?

Diesel.

Diesel, really -- the diesel is not an issue in Colombia for the ready-mix trucks. But really, when you compare now the international price of diesel or the international price of gasoline in Colombia, it's really lower than -- the local price is really the half of the international price right now.

Thank you, Vanessa. In terms of maintenance, I mean, as you know, in the U.S., all the major maintenance are done during the winter months. So we don't have any major maintenance scheduled for the remainder of the year. In Central America and the Caribbean, the major maintenance in Honduras was made during the month of March and April. So what we have left is the Dominican Republican and Haiti. And Carlos, Cartagena was -- the maintenance for Cartagena was done during the first quarter. What is -- do we have left for the remaining of the year?

Yes. That's right, Juan. In the 2021, it was... [Technical Difficulty]

Hello?

It looks like we lost Carlos.

I can complement for pet coke in Honduras. We were also -- we were fully purchased before price hikes. So we don't have any exposition on pet coke for the Caribbean.

I think we lost part of the answer.

Carlos got cut out.

Sorry. Yes.

No. I'm just talking about the big maintenance that we made in the first quarter in Cartagena, and it was running in the second half of the 2021 in Cartagena. For that reason, it's not comparable. And we -- for this one, we increased the maintenance cost in the case of the Colombia by about COP 10 billion.

And do have, Carlos, in Colombia any other maintenance of cement plants scheduled for this remaining of the year?

No. For the rest of the year, obviously, we have another. But really, it's quite comparable with 2021. Really, the -- what is not comparable was the stoppage of the Cartagena plant.

Next question comes from Steffania Mosquera from CrediCorp.

I would like to touch on the maintenance of the Cartagena plant. Specifically, I would like to understand the impact it had in terms of dispatches. This is because, as you stated, the Colombian market increased 2% year-over-year, while your production in Colombia decreased slightly. So is this explained by the Cartagena plant maintenance? Or is there any other explanation?

Carlos, you can take that one.

Thanks, Steffania. Not really. Not really. The maintenance of the Cartagena plant was not the cause of the -- while we decreased 6% in comparison with the market, no. That -- really, it was because we increased the price in the -- in January. And so another competitors didn't do that. For that reason, in January, we lost -- in January and preceding February, we lost some market share. But we -- in March, we record the market share. And it was more because of the price increase, more than the Cartagena maintenance.

Great. And my question is regarding the expansion of the U.S. ports. What capacity are you expecting to reach? What import capacity are you expecting to reach by year-end?

I mean, we have plenty of capacity to import into the U.S. right now. We expect to be close to 500,000 tons of import in the U.S. from Cartagena without taking into account the operation in Puerto Rico. But we have close to 5.5 million tons of import capacity. And that is why we are increasing capacity in our terminals. And that is why we expanded the terminal in Cartagena because going forward, we see a significant opportunity to continue growing export in a significant way out of Cartagena.

We don't have any more questions, Juan.

Okay. So once again, thank you very much for joining the call and looking forward to our next conference call for the second quarter of 2022. Have a great day, all.