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Edited Transcript of GRUPOARGOS.BG earnings conference call or presentation 15-May-20 12:30pm GMT

Q1 2020 Grupo Argos SA Earnings Call

Medellín May 15, 2020 (Thomson StreetEvents) -- Edited Transcript of Grupo Argos SA earnings conference call or presentation Friday, May 15, 2020 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alejandro Piedrahita

Grupo Argos S.A. - CFO and VP of Corporate Finance & Strategy

* Jorge Mario Velásquez Jaramillo

Grupo Argos S.A. - CEO & President

* Mauricio Ossa Echeverri Calle

Grupo Argos S.A. - CEO of Odinsa

* Natalia Agudelo

Grupo Argos S.A. - IR Director

* Pablo Arroyave Fernández

Odinsa S.A. - CFO

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Presentation

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Natalia Agudelo, Grupo Argos S.A. - IR Director [1]

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Good morning to you all. My name is Natalia Agudelo and I am -- I am -- my name, and good morning. First, I want to thank you for being with us today in this call. We will be speaking about results. But in this case, we want to generate this space of conversation and share first-hand information about the measures that Grupo Argos has taken to face the situation.

With me, we have Jorge Mario Velásquez, President of Grupo Argos; Alejandro Piedrahita, Vice President of Finances and Corporate Strategist; Rafael Olivella, Vice President of Talent and Corporate Matters; María Clara Aristizábal, Real Estate Business; Mauricio Ossa, President of Odinsa; Pablo Arroyave, President of Corporate Finances in Odinsa.

This conference is being translated into English simultaneously. And I want you remember that all our reports, relevant information and presentation, they are published in Spanish and English in our web page, www.grupoargos.com. In our website, you can also find all the information in the section of Financial Information. In the section of Reports, you'll find the presentation that we'll be following during this video conference that we're carrying out. I want to invite you all to check the presentation on Slide #3. And let me give the word to Jorge Mario Velásquez.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [2]

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Natalia. Good morning to every single one of you. Warm welcoming to this result teleconference that we want to share with you when we share the results of the first quarter of 2020. In a moment that's really important for the companies, for people, for humanity, it's a moment where values or principles and our future strategy that the company has developed has a special meaning in a very key important relevance. This moment, where the expense come out, our long-term vision comes out, where resilience is important. The resiliency of organization is important. We want to invite you all to approach this call in a way that will allow you not just to see the results of what has happened, but also to have a broader view of how the organization leading talent, how the organization is leading the actions to guarantee the continuity of our businesses, how are we handling the different operational matters in order to optimize and mitigate the effect of this huge tsunami that humanity is going through right now.

I want to invite you all and start by reviewing, from a humanistic point of view, from a structural point of view, how are we handling this current situation in different aspects? And from there, we'll derive our talk into the business, into the numbers and within the limitations that we all have today in terms of the visibility of what will happen in this situation. We've been able to give you the most transparent information and the broadest information we could give you in order for you to have an idea of what's happening within our organization.

So with this, I wanted to begin by sharing with you how have we been managing the situation. And I would start by saying that some weeks before the virus struck Colombia, and anticipating and evidencing the early impact that has been reflected in other regions of the world, we started taking decisions in an anticipated manner, establishing mechanisms, coordination mechanisms, that would allow us not just a safe holding, but also with our different subsidiaries, to move in an agile and flexible manner, in an assertive manner in order not just to do this, but take the necessary measures according to the situation. That's why we designed an architecture based on a solid and simple governance model focused on being able to manage this situation as fast as we could.

So we created a group of -- or a committee of presidents, presidents from a different companies of Grupo Argos, such as Financial, Human Talent, Units. And we divided this into 4 subgroups. We divided them in 4 groups of different tasks based on the chapters that we defined, which are health and life, financial and risk, business continuity in solidarity, philanthropy and corporate citizenship. With these committees, we are proving that our management -- our risk management system comes just with the capacity of visualizing the impacts, but also taking the necessary measures in order to manage those adversities with commitment, with agility being contingent in order to mitigate the effects of the businesses.

The committees that I just described function under 5 priorities that we defined and that lead the action framework of each one of the actions that we're taking, and I would summarize in the following way. First one is care and health of our collaborators and their families. This is our maximum priority in order to safeguard lives and the health of those 14,000 direct collaborators that we have and 42,000 collaborators that we have, indirect collaborators or induced collaborators that we have in 17 countries around the world. Our second priority was preserve to possible that employment that we have generated directly, indirectly or induced, also caring for the well-being of our collaborators. Simultaneously, the third chapter, we defined the positive management to identify all the actions that are in our reach in order to ensure the continuity of our businesses. And fourth and fifth place, we define a sense of solidarity and support society to those initiatives that tend to benefit on our populations. Simultaneously, we have decided to have an active support for institutions in order to make them participate in those scenarios where business development is required in order to support social benefits, economic strengthening of the country and a proper financial management, both municipal, departmental and national levels.

The upcoming minutes, I want to focus on explaining how have we been advancing in each one of these priorities. Let me begin by health and life. In the health and life front, we acted fastly in an anticipated manner in terms of the isolation measurements that were decreed by the government. Offering all the necessary resources in order for our collaborators could continue operating with ease from their home using for this a robust technological infrastructure that we have built through many years. This was replicated in the measure of possible in each one of the operations privileging the continuity of essential services that were authorized by law. To those collaborators to whom their role required a nonstop operation, we give them all the personal protection elements and with a rigorous personal protocol that has allowed us to keep safe and to contribute positively to prevention. This population that exceeds 5,700 collaborators includes technical personnel from Celsia, the cement operators in the geographies where the operation was maintained, and those operators that were exclusively necessary to operate concessions.

Up to date, we have more than 4,400 collaborators working remotely, which I count 100% of the population, the administrative population, of the holding. We're deploying all our efforts in order for, articulated with the government and with the health entity, we could lead testing campaigns and follow-up campaigns for our populations in order to take decisions with the most amount of information possible in this scenario that we live today. Under this line, we implemented a survey about the current state of health of our collaborators and families, if this is done on a weekly basis. In this, we identified risk potentials and vulnerabilities of our collaborators, which allows us to take necessary prevention measures or medical support measures or even isolation measures, which is useful to develop the continuity strategy and reincorporation strategy for our businesses, but more specifically, to care for all our collaborators.

During the last weeks, we've worked on the return strategy for our different business units in Grupo Argos. For those businesses that can operate already, we are doing this back-to-work in a scaled manner and following the conditions, the personal health conditions and the family health conditions of each one of our collaborators and following, obviously, a detailed protocol that we have defined for this aspect, focused and supported with medical specialists and attending the regulations of our health authorities in each one of the countries that we operate.

We have defined that we will only get back those that are strictly necessary. And we have established all the necessary control in order to ensure safe labor. In that line, we have been benefiting telework and work-from-home as a key way to attend those tests that allow to do so. I want to reiterate that our main priority is, and we'll keep on being the health and care of all of our collaborators in all our geographies. Because of this, we will keep on focusing our efforts in order to implement the necessary measures in order to achieve this.

In terms of labor care and keeping our jobs, we have complied with our commitment of caring for around 14,000 collaborators and we'll keep doing so in the measure of possible with the end contributing efforts in order to avoid that supply shock will move on to the demand shock, but also being coherent in terms of the priority that we offer in terms of human talents. For many years now in this organization, we are aware that the main efforts of this front will be essential to mitigate the huge impact that this situation represents for the economy and in order to avoid the deepening of the crisis that millions of families are going through. This measure has been extensive with the largest determination to our suppliers, understanding that we need to carry out a stronger and larger effort in order to maintain our value chains around the infrastructure of the industry and in such a way to mitigate the effects that this is having all around the economy.

Now let's speak about the continuity plan for our businesses, starting by Grupo Argos. The nature of the holding allows us today to upgrade up to 100% remotely. The effort of our 84 collaborators is orientated to perform a strategic follow-up to each one of the businesses with the end of supporting decision-making in a righteous, informed and coordinated manner. It's also worth to remember that the main revenues of Grupo Argos come from the dividends received from the portfolio investments, which have been decreed by the correspondent shareholder assemblies in March of this year and have not been altered or modified, nor in the amount, nor in the terms. In addition, we count with the urban development business revenues through the sale of real estate.

In terms of our financial health, thanks to the admission of COP 450,000 million, which were carried out in 2019 in order to improve the debt profile, we can have the Easter day that the company doesn't count with due dates up to 2022, which offers a stability in the financial cost at the same time of offering flexibility. In addition, we have taken the decision of following the initiatives offered via the banking system for the interest payment for the upcoming months up to 2020, which translates into a larger financial flexibility, which means COP 15,000 million in terms of petty cash. In addition, since the first week of March, prior of other signals that we have gotten from our risk management system, we started bidding activities with different banks and entities in order to ensure our liquidity and financial flexibility for our companies with disbursements done by local bank for more than COP 1 trillion for all the companies within the group, from which COP 75,000 of these are for Grupo Argos. So this is part of the strategy that has been coordinated in terms of risk continuity -- and business continuity that we started weeks before this COVID-19 situation in all the markets that we participate.

Retrospectively, we consider that this has been the right decision according to the strategic role that we have a safe holding, playing as an articulator and as a decision maker within the business group, which allowed us to assure resources for more than COP 1 trillion between 100 and 200 basis points under what would be the current reference rates in the market. In a moment -- this was done in a moment when the risk was not as materialized. This measure allows us to operate with larger ease under the stressful conditions that the economy currently faces. In order to add more resources during this period, Grupo Argos implemented an initial plan of cost and expense reduction for more than COP 20 billion, which equal 14% of our yearly budget. And that is constantly reviewed, attending the evolution of the situation.

This value adds to the progressive and permanent reduction that the company has executed during last 5 years. This exercise is being done in all levels of the business group, which has allowed us to reach a consolidated reduction in terms of costs and expenses close to COP 520 billion that add to the change of the investments that we have defined for COP 870 billion. And these 2 efforts, we add COP 1.4 trillion of resources. And if we add this to the bank credit disbursements that I have previously mentioned, for more than COP 1 trillion, this represents almost COP 2.5 trillion that broaden our maneuver margin that we have within the situation.

Going into the detail of each one of the businesses in terms of operations and financing -- finances, we could say that Odinsa has been impacted by the reduced measures, with the restrictive measures of reduced mobility of passengers. Authorities ordered the closure of El Dorado Airport at 23rd of March, enabling only cargo operation and humanistic flights. This asset is operating up to 45% of its capacity in terms of cargo in order to support the supply of food, medicine and raw materials. Seeking to maximize the liquidity of Opain, we have defined the investment that we have moved towards the future, the investment plan for COP 65 billion and a reduction in the expense operations for COP 46 billion. In terms of maintaining financial flexibility, we're executing operations to displace the services debt in Colombian pesos using the credit spots we have in the concession in order to attend the needs of the cash flow in the case of this being necessary. Equally, we are advancing in conversations with the National Infrastructure Agency in order to review the payment of that agreement and possible adjustments to our contract, given the current asset situation.

We will be speaking further on about this. As you can see, we're working in all the fronts in order to guarantee the continuity and sustainability of the airport. We maintain an open conversation with the national government and with the Bogotá Mayor's Office in order to determine the best way of reactivating the operations. We count with protocols, technologies and biosecurity procedures in order to care the health of our users, collaborators and all those that are part of the productive chain of El Dorado.

From another side, the Mariscal Sucre port in Quito closed its operations for passengers since 17th of March given the advancement of the virus in Ecuador and indirect coordination with the authorities of that country, as well as the Bogotá Airport. The operation is limited to cargo and humanitarian flights, counting with all the measures, all the safety measures, in order to guarantee a safe operation. At the beginning of this situation, the concession had a very solid petty cash position close to $75 million. Besides, we need to remember that it doesn't have due dates for 2020 given to the optimization strategy and the capital structure that we carried out in 2019. These conditions allows Quiport to keep on complying with its contractual obligations under the actual context. At the same time, in order to mitigate the effects of this contingency, we are working on negotiations with the municipality of Quito in order to change the due dates of $60 million in terms of development investments, and we also carried out an efficiency plan that allows optimization close to $8.5 million for the rest of 2020.

In respect with the growth in this agency, even though the particular impact in revenues and cash flows are relevant, the majority of the reconciliation contracts have compensation mechanisms -- risk compensation mechanisms through mechanisms such as the minimum guaranteed revenue and the collection differentials contractual tools that mainly allowed to ensure the cash flow of the projects in cases of events such as what we're going through. In the case of Pacifico 2, so we should say that the exception that -- given the included exceptions we -- under Decree 531, we're carrying out the constructive activities, necessary constructive activity, and we're close to 40% of the operation. But in the upcoming weeks, we will come back to a higher level of operation. We want to reiterate our commitment with Colombia to deliver this work.

In Odinsa, in our concessions, we have been working on a strict expense reduction and control program, close to COP 119 billion. Close to COP 235 billion are being moved throughout the future and we are also working on the investments close to COP 180 billion. We also carried out a disbursement, the last one with a paper for COP 170 billion in order to ensure cash and work capital. This allows us to have the necessary financial flexibility and liquidity in order to face the upcoming months. But our cement business, we can say that it has been successfully operating in the United States and Haiti with all normality. I'm going to highlight the behavior of the business in the United States that today represents 57% of the revenues of the organization. And we keep seeing a very attractive backlog in the short term added to federal reports that allow us to count with more ease. This becomes the geography with best projections once this situation has been overcome given the perspectives of economic reactivations and the investments of the government focused on infrastructure in order to dynamize the economy that's supported in 8 packages and incentives that are under approval for more than $3 trillion and a reduction of the interest rate from the Federal Reserve that will be between 0 and 0.25%.

Despite the fact that the rest of the geographies were affected by the partial or total suspension of the operations, we have restarted activities in several territories of the Caribbean and Central America, where we're dispatching around 40% of the volumes compared with a normal month, in exception with Panama that's still closed due to government restrictions. In Colombia, with the removal of the restrictive measures for infrastructure and for residential formal construction, commercial form of construction, we have observed recoveries of daily volumes of about 40% of a normal month, and during the first days of May of around 55%. We have restarted the Cartagena and Río Claro plants with the end of answering to this demand, and we keep restarting other plants. We will keep restarting other plants in the measure that's required. We counter with a very good expectation for what we have for the rest of the year in the country, bearing in mind that currently there's 29 contracted highways, from which 22 are under execution. According to what has been announced by ANI, we're expecting that for the end of the year, 95% of this 4G concessions will be reactivated and under execution, which would allow the sector to come back to that high dynamism. Last number that we have is at 65% of those contracts are coming back to operations.

In the financial aspect, we've ensured disbursements close to COP 400 billion in order to strengthen our liquidity supported by a CapEx reduction plan for COP 160 billion for the current year, concentrating the investment only in those projects that are considered essential for the operation under the conditions of current markets. Likewise, we have been executing a cost and expense reduction plan for a total of COP 325 billion in all our operations. It's also worth to mention the centralized control that we have developed for the cash management in order to guarantee an efficient use of liquidity under different market scenarios. Those measures have given, as a result, a significant increase in the company's cash that reaches more than COP 600 billion for the end of the first week of May.

In Celsia, we continue with the generation, transmission, distribution and commercialization operation, considering that this is an essential service. Because of this, our invoicing has not been affected and up to date, we continue in normal conditions, bearing in mind the subsidies that have been established by the national government during this situation. From a financial perspective, shares have focused on reducing the needs -- our cash needs for COP 350 billion in terms of savings for the rest of 2020. In terms of the original budget, privileging the quality of the service rendering the sites, credits and treasury credits have been disbursed close to COP 500 billion in order to guarantee a cash flow in the case of possible modifications in our work capital in the short term.

Aligned with this, it's important to highlight that we count with approved credits, both for local and international banks. Focused on strengthening our financial flexibility and maintaining an optimal capital structures, in Celsia, we have been leading a very successful bond -- ordinary bond admission for close to COP 200 billion in order to grow over the bonds that we're expiring in 2020, which eliminates the financial pressure for the payment of the debt in the next 2 years, given that its due date is in 2022. And besides that, this improves the financial cost in front of the previous bonds in close to 134 basis points.

Finally, our urban development business. We advanced in a count of 9 acres in Puerto Colombia, and we received proposals for 1.7x the offered area, which is equal to COP 126 billion, supported by several of the largest constructors in the country. We're estimating to transfer this real estate through the year. In the past, these lands were focused on housing for social income strategies, 5 to 6. Nevertheless, after the strategic analysis of the businesses, we reorientated the location of this land for the construction of social interest housing. This allows us to count with a portfolio that's much more resilient, given that the demand of these types of units reaches 7.3x the demand of housing of social income strategies 5 and 6. Nevertheless, after the strategic analysis of the businesses, we reorientated the vocation of these lands for the constructions of social interest housing. This allows us to count with a portfolio that's much more resilient, given that the demand of these types of units reaches 7.3x the demand of housing if social income strategies 5 and 6 and it in Barranqiulla and metropolitan area.

The urban development business is focused on the structuring and development of real estate portfolio of Grupo Argos. Because of this, 100% of our collaborators in this unit have been able to keep on working remotely. In addition, in terms of this situation, we have carried out a relevant effort with moving towards the future, certain investments and a rigorous plan for expense and cost reduction for this year reaches COP 20 billion.

In Pactia, our real estate rental business, preventive isolation has led to important implications. More specifically, our commercial businesses and hotel businesses, which represent approximately 40% of the operational net income. Pactia is leading conversations and negotiations with rent owners in order to facilitate the conditions of the rental payment and alleviating our cash situation, granting support of COP 7 billion, which support those that are renting during this situation. In addition, a very important investment plan is being reviewed, built in time for 2020, as well a complete reduction of the expensing cost structure that will allow to adapt the business to our new realities.

As you can see, each one of the actions that our businesses have been leading are aligned and led for Grupo Argos and seek to ensure the liquidity in the short term through important CapEx reductions, OpEx and debit reductions, too. But besides that, brand and liquidity credits and -- do the changes for payments and negotiations, both with local and international banks.

Philanthropy. I want to share with you management that we have been working on with -- as a business group in terms of solidarity. We're -- up to date, we have carried out volunteer contributions to different initiatives for more than COP 16 billion with donations for more than COP 13 billion, which strengthened our health system and close to COP 3 billion for the support of the most vulnerable population that depends on informal labor mainly supported on -- supports in terms of food. I also want to share with you that Grupo Argos and its companies have been leading a solidarity campaign called A Call to Empathy through Grupo Argos Foundation. This is an initiative that wants to collect resources in order to support informal workers up to date. This campaign has collected close to COP 700 million and Grupo SURA-Bancolombia and Nutresa Foundations will add to these efforts in order to benefit with food packages more than 110,000 Colombian families. All this has led us to reflect upon the challenge that we have as a society, as a collective sense of the importance of coming back to essentials and the importance of reconnecting with our personal and family values. And there, be able to transform and to carry out economic and productive transformation processes in order to contribute to a fair and more sustainable society.

As relevant actors in our society, Argos companies have a very important role and responsibility in supporting our institutions. Today, in Grupo Argos, we have leadership positions in several guilds and several think tanks, where we collectively contribute with the authentic purpose of improving the collective sense and improving the public policy construction that will benefit the majority of the society. We recognize the importance of exercising this leadership. And with this scenario, with these types of situations gaining even more value and these types of situations we're going through, let me speak about the financial results. After talking about the advancements that we have had as a business group facing this current situation with which we also confirm the capacity that we have to adapt in different dynamics, let me just proceed with a brief detail of the financial results for the first quarter. It's important to begin by mentioning that in this period, the businesses were partially affected, bear in mind that the first confirmed case of COVID-19 in Colombia was discovered in 6th of March and that the mandatory lockdown started 25th of March. So summarizing, March was a month that was highly affected by COVID-19. At a consolidated level, the group's revenues were COP 3.6 trillion, 3% less than what we registered in the first quarter of 2019. But looking at this in more detail, this confirm the good things about diversification. Despite the effects suffered by some of the businesses due to the social lockdowns, the consolidated contribution between cement, energy, concession businesses and urban development business for this quarter at COP 3.57 billion, COP 2.57 trillion, having a positive variation of COP 58 billion compared with the first quarter of 2019.

The contribution to consolidated results during this quarter of the energy business was close to COP 925 billion, contributing to EBITDA close to COP 330 billion at a consolidated level. Even though these are not comparable with December 2019, and bearing in mind the operation of Tolima distribution, which does not consolidate the generation of Termo Flores, this result demonstrates the stability in the base of assets that the company was able to consolidate in 2019. By its part, Cementos Argos, which has a larger geographic diversification, has been able to proceed with its United States operations. Today, this operation comes with a strong currency, which has allowed us to compensate in a certain way the impact of COVID-19 over the rest of the regions which have had more operational difficulties.

In Colombia, we evidenced an affectation in the month of March, given the lockdown recruited by the government. And despite the activity reduction, I want to highlight that our EBITDA for this region shows a positive variation of 15%. Central American operations were also affected by these measures. And economic activities were also closed, which led to impacts that came even from weeks before. This led to a revenue contribution of COP 2.2 trillion and an EBITDA of COP 345 billion that are sensibly similar to the ones that we had on the previous year that didn't have any effects due to COVID-19. The contribution of the concession business, including airport concessions, also COP 435 billion with a very negative variation of 4% in order to the main effect given to the lower activity in construction and a particular expense in Pacifico 2 that does not represent cash allocations, and it's also supported by future revenues that are expressed in U.S. dollars.

Equally, we keep on seeing the effect of a larger leveraging aligned with the capital structure optimization strategy that was led during 2019 in the airport assets that's translated into a lower contribution to the participation method, which allowed to work on important flows -- dividend flows towards its shareholders. Passenger traffic begins to affect our numbers due to the airport closures with a reduction of 8% in the quarter, impacted by the results of these concessions. By this point, the urban development business registered cash flow that was 48% higher than the same period last year, which is explained by the activation of a part of clauses or bylaws in the previous contracts, given that there was a higher usage in terms of norms in commercial usage than what we had initially agreed upon. Those revenues are also reflected in the P&L, where we could see an increase of 5% compared with last year.

The previous reflects the capacity that the business have in innovating in the way that we carry out transactions, adapting itself to the needs of the customer and maximizing, in time, the value for Grupo Argos. In Pactia, gross effective revenue was COP 86 billion, growing 26% year after year, while the net -- the operational net revenue was COP 57 billion, growing 62%. The EBITDA was COP 41 billion with an increase of 99% year after year. This extraordinary increases in terms of net operational revenue and EBITDA are a result of a change that we had in our accounting before our taxes. Before, we were paying in January. Now it has been divided into installments, 12 installments through the years. Including this, the operational increase year after year was 26%, in terms of EBITDA, it was a 33% increase.

In terms of costs and expenses, for all the businesses of the group, we saw that for the quarter, there were reductions in terms of structural expenses. We're the only one that shows a positive variation in Celsia that is explained by the incorporation of the Tolima assets that's clearly much more intensive in labor than what we had the free trade zone plant in Barranquilla for Celsia. It's also worth highlighting that despite the devaluation of our currency in 13% in these 2 periods, many of the expenses of our branches are done in U.S. dollars or have an origin in currencies that are tied to with the U.S. dollars. And it's even more relevant that even with that increase, we didn't have increases in a consolidated level in terms of expenses. And in the contrary, we were able to have a reduction as we could see in the graph that you have in front of a 1% in order to totalize COP 439 billion.

The largest impact of the results in the first quarter came clearly from the portfolio investments for financial services, which are registered, in our case, through participation method where there's an affectation with a lower contribution to the EBITDA revenue level close to COP 160 billion, mainly created by the revenues coming from Grupo SURA created by the volatility of the market, and to the exchange rate that we have had in the last couple of weeks. This result has accounting implications. But nevertheless, it doesn't represent cash allocations. Consolidated EBITDA close to COP 819 billion, the same that we see in the revenue line, we could see how the contribution of the strategic businesses was kept relatively stable with the consolidated contribution of COP 842 billion with a positive variation of COP 8 billion in respect with the previous year and despite the already mentioned effects of COVID-19.

In terms of financial expense, I want to highlight that despite a higher indebtment at consolidated level, there was a variation of COP 2.5 billion, mainly explained by the currency variation, which explains almost all the variations close to COP 2.2 trillion. Market risk management policy and natural coverage strategies reflected the stability presented by the financial expense for the first quarter that's kept stable, as you can see on the right side of the graph, number close to COP 300 billion. We also want to highlight, the increase in the structural indebtment for this quarter is COP 337 billion, which responds in an anticipated manner to the disbursements carried out in all the branches in order to ensure the liquidity position through the period, as was previously mentioned.

Lower contribution through a participation method of our financial investments affected all of the lines of our state of results close to COP 160 billion, which arrives in a net profit of COP 26 billion and a net loss by the controller of COP 32 billion, excluding the impact of a lower contribution of the participation method, net profit of the controller, which is reduced to 14% in high closing, COP 123 billion. In this situation, the value generation coming from companies depends on the capacity of keep executing the business plans they have before and on the vision and strength to face the long-term. In that sense, the cash availability becomes a fundamental tool. That's why I want to invite you all to check Slide #18, which presents the state -- the cash data for Grupo Argos in a separate level for the end of the quarter.

In total, we closed with COP 115 billion, something that will sound atypical. With the last results, this company has kept as we have defined as policy, a minimum cash, which allows us to ensure the operation for the rest of the year. The strong liquidity position that we've reached under this contract done in an opportunistic manner offers a very good resilience to our organization and reflect besides the trust to that local and international bank has towards us as well as those different institutional players that are part of others. Today, Grupo Argos keeps our AAA rating made by Fitch Ratings and AAA minus rating by Standard & Poor's. It's also important to highlight the advancements that the group has achieved in terms of portfolio coming from a strategic portfolio confirmation focused on infrastructure, today, allows us to be more resilient and can count with several advantages.

First would be the business diversification and the market diversification sectors, currency exposure, which allows us to mitigate the exposure to one currency and -- or geographies. Second, is being able to act in a coordinated manner with the strength that we have as a business group that is cohesion, uniform and that has a unified vision in terms of strategy, in terms of long-term vision. Third, being in one of the sectors that have been invited to reactivate as fast as it can, the situation is more important than ever, the role that Grupo Argos is placed. This is not the first crisis that we faced as an organization in our close to 90 years of history, where we have to learned that challenging moments request a fast response, articulated response, but more specifically, consistent with the vision of a responsible operation within where investment that differentiates us in the long term, a cross-cutting management that we have carried out, built and constructed to lead out these businesses, strengthens us as a resilient organization and with the virtues of identifying and using in our favor the opportunities that these challenges come with. But always being loyal to the environmental, social and government and corporate government criteria that will orientate Argos without, no doubt, even that we're going through a moment of uncertainty, where visibility is precocious and -- but we are -- we believe in our capacities, in the talent that support this organization and reorientating our Crisis Committee, ensuring our livelihood, being sure that we could lead this fast reactivation process.

Before ending this part and starting the Q&A session, I wanted to keep being optimistic. To see this crisis as a source of opportunity, thinking on a common well-being and trusting our institutions, trusting our country and trusting our people. We will come out stronger after all this. I want to greet you all, hoping that you all are safe, both you and your families. And with this, let me give the word to Natalia in order to answer the Q&A sessions that you might have. So thank you for being with us.

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Questions and Answers

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Natalia Agudelo, Grupo Argos S.A. - IR Director [1]

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Thank you, Jorge. Let us open now our space for Q&A. (Operator Instructions) I will be moderating with questions. Let's begin. Here, we have a question from Juan Pablo Díaz from Porvenir. What strategies the group has to strengthen or to face a negative scenario of liquidity for Cemargos, bearing in mind the leveraging indicator that we have in terms of the risk rating company.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [2]

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Well, then, thank you, Juan Pablo. Thank you for your question. I would say the following thing. In Cementos, we have been working in both ways and under the following train of thought. First, we have the optimization of structural cash generation for the business. And in here, I want to emphasize that we have been decisively working in certain aspects. First is the maximization of the income through innovation strategies and through the revenue management optimization for the company in different countries and in different operations that the company has. Second is an articulated strategy. Optimizing the size and the cost of the organization we will be enacting in different areas. Last year, we reduced this in 80%. In real terms, this year, we're close to 14%. And we're still executing certain operations. So this is starting to give very important fruits.

Month of April, we had a very positive result coming from the United States market with an EBITDA higher than what we had budgeted under conditions that are positive, not just from a guild point of view, because, as we mentioned, we have certain problems in certain market situation, but in the cost expense reduction, which impact the EBITDA. But further than the P&L, we have been also working on cash use. The optimization of the financial cycle has been positively evolving. In the past, this cycle was close to 45 days. Right now, we're speaking of 35 days with an optimization of work capital of COP 230 billion at the beginning the year to optimizations close to COP 80 billion. This is part of a very conscious exercise of centralizing cash and optimizing our cash.

So from an operational optics, we have been working on the fact that our fundamental generation is strong enough in order to attend the debt and reduce the total liabilities that we have in the organization. If you remember last year, the company reduced liability close to COP 450 billion. In the last 3 years, it has been done around close to COP 1 trillion, accounting with resources of our own operations despite the competitive dynamics that we could see in different areas. That strategy proceeds and it's a fundamental basis that we have in terms of structural resources in order to reduce pressure in terms of debt.

Second, as it was mentioned before, there are some actions, some liquidity actions that allow the company to have a very reasonable liquidity position in order to attend the crisis that we are going through. Third point is the possibility -- the disinvestment of non-strategic assets. And there, we would have to do an observation, the balance of Cementos Argos as nonstrategic assets, different types of real estate investment or even operational that are in places where eventually we could look for these investments. Clearly, we have already executed this investment of the paper manufacturers or the Pulpa y Papel S.A., Colombates also. Colombates was also a manufacturing company in that sense.

And we did the only-in-Colombia disinvestments as a calcium carbonate producer for the Cement business, and we are looking at the possibility of disinvestment. We are disinvesting 3 real estate assets, 2 in Colombia -- sorry 4. Two in Colombia and 2 in [Czech-] Colombia. But in addition, as it has been previously announced, there's a process where we disinvest in certain assets, some concrete assets, similar to what we did in the first quarter last year in the United States. The dynamic of these processes, obviously, will be affected in this moment due to the pandemic, but I am optimistic that through the year, as we measured, that we have a higher visibility, those disinvestments have been thought can be carried out. Let's remember that our non-strategic disinvestment plan is around $700 million and the total debt that we have for cement is around $1.8 million, so -- $18 billion, sorry.

So we feel that we have operational leverages that are improving the cash availability and allowing to alleviate the pressure in the cash flow, even as I said, to reduce the leveraging, the liquidity position. It's very comfortable for the moment of the crisis in operation that despite the effects has been shown during April and May, important recoveries, not just in terms of volumes but also in terms of prices in Colombia.

In addition, we're proceeding in those disinvestments of nonstrategic assets. I would say that in general, the company has a toolbox that's broad enough that give us the possibility of adding different types of initiatives in order to mitigate the impact over indebtment. Obviously, our priority and the management's priority is precisely that, is caring for the cash flow, is accelerating disinvestment processes. But I would say that given the current perspectives in terms of cash flow optimization, in terms of operations, we see a strategy that clearly maintains a long-term liquidity for the company.

Now speaking about the road concession business and questions around this financial question. But is there an estimate of the impact of the revenue due to the current situation, and link this. How was the restart of Pacifico 2? And how was the impact of stopping the works during the lockdown? Let me give the words to Mauricio, and he's with us today.

I just wanted to emphasize on something, Mauricio. And that is -- it is very important to understand 2 things. So the first one, obviously, the toll collection have been affected due to the regulation established by the national government. Some tolls are now being charged and almost -- the majority of the tolls are not being charged right now. This is a temporal disruption. Because this has been applied today, but we hope that this changes in the future. But the concession contracts, the nature of the road concession contracts have traffic risk mitigation methods. It could be because of the minimum guaranteed revenue or differential or we compare the contracted revenue versus -- contracted implant revenue versus the executed. And we should recognize the differentials in money or where there's different types of mechanisms, in terms of the times within the concession. So the equity value is protected by this characteristics. So I just wanted to emphasize on this, and Mauricio, the floor is yours.

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Mauricio Ossa Echeverri Calle, Grupo Argos S.A. - CEO of Odinsa [3]

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Thank you, Jorge Mario. Greetings for all those that are part of this call. I want to also repeat a little bit. I wanted to give a bit of context before answering this particular question because I could see that this question is around the roads. Let me start by something simple. You know that we have a contract that's called Malla Vial del Meta. It's currently suspended, and it has -- it's facing 2 possibilities for its solution. In September, where we finished the contract beforehand or we reduce its scope in order for it to proceed, it doesn't have no investment commitment, nor debt, nor nothing. I say this because this contract is not part of what I'll be saying from now on in terms of general concessions.

Obviously, the strongest for us is the concession contract. And it's seen or thought in different ways, depending on the generation that, that contract has. If it's the first, second or third or fourth G. These concessions contemplate at least 3 groups of affectations: over-costs, not complying with the contractual times and the revenue.

These 3 types of affectations are within the contract, but this -- there's no space for controversies, too. They are part of all the norm that has aroused from this situation. And it's also thought that contractual mechanisms will be used for its mitigation, and it's also thought that there could be time exemption with no time limit in order to mitigate wherever there is an important damage. This, particularly for us, means that the totality of the revenue that has not been perceived in Autopistas del Café for April, and we hope that this ends in May. And a small fraction will be restituted completely within the contract. This means that delays that we have estimated for 2 months, for ending Pacifico 2, that actually, as Jorge mentioned, initially, we're up to 40%, and we have been advancing. In the next week we'll be 74%. And for the end of the month, we'll be 100% of the work reactivation, and we'll probably be finishing for December. And the nonperceived revenue will be compensated or through the minimum guaranteed revenues or through the collection differentials or through the expected revenue, as we were explaining before. So it's clear that there has been an affectation. I want to clarify that this is included within mitigations at the contract. Bear in mind that the conversation to seek and formalize these mitigations are underway. We hope having this solved in the upcoming months. Obviously, and that in order to support this situation, we estimate now, April and May, we have taken out the necessary measure that have been previously explained by Jorge Mario. In terms of going to each one of the contracts, doing an excessive review of their OpEx, CapEx, expenses and operations in order to adjust ourselves in order for the assets to be self-sustainable in terms of operational cash, not requiring resources from our part for them to have a way of keeping the contracts active under the current conditions that we need to keep in order to avoid tensions in terms of liquidity. I wanted to just specify a couple of information, if you allow me, Jorge. We also have Pablo. Maybe Pablo can tell us a little bit about this now that we're speaking of Pacifico 2 and Autopistas del Café in financial terms.

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Pablo Arroyave Fernández, Odinsa S.A. - CFO [4]

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Well, thank you. Thank you, Mauricio. Let -- just answering a little bit about this. With what Mauricio previously mentioned, I believe it's clear and I'll reiterate. In terms of growth concessions, the only revenue that we would have jeopardized is the exits in the minimum rent revenue that we have in Autopistas del Café. The worst-case scenario, last year, 2019, was COP 30 billion that we divided into the same -- in equal parts. So we could say that if the traffic scenario for 2020 recovery is as negative, that we're not able even to collect the minimum required revenue, we would be saying that for Autopistas del Café, we'll be losing COP 15 billion in terms of collections compared with 2019.

Now we believe that in the case of Autopistas del Café launch, the traffic constraints are removed. And once the tolls start charging again, at the end of the year, we can have the same collection or even higher than the minimum required revenue. So those COP 15 billion would be the most negative case that we could expect. As Mauricio and Jorge Mario said and the rest of the road concessions, we have mechanisms that allow in a certain way to compensate that revenue. For example, in the Túnel de Oriente, the collection that's not collected during this 2020, we will have more concessions used in collecting the upcoming use. In case of Dominican Republic, the collection has always been under the minimum required revenues, so there wouldn't be any losses there. In the case of Aruba, there is no collection because payment and bioavailability. So that will be the answer in terms of the impact of revenues in road concessions product of this specific situation.

Pacifico 2 and coming back to the activities, maybe Mauricio will be the right person to answer this.

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Mauricio Ossa Echeverri Calle, Grupo Argos S.A. - CEO of Odinsa [5]

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Yes. Thank you, Pablo. Additional comments. As you know, certain sectors have started coming back this week, coming back to a gradual formality following a series of protocols. This has been really important for the roads. That means, yes. There's no charges for the moment because the vehicles have been reduced and as the charge has been removed, and we hope that the collections come back. But the traffic movement during this week changed drastically. Up till today, almost all the roads are between 65% and 70% of normal traffic. So this means that at the end of the month, probably we'll be close to 75% of our virtual traffic, which shows the quality of the assets or at least of the road footprint that we have.

In the case of Pacifico, we have 1,500 people working. We have 30 work fronts, 6 fronts are back to work, around 602 people are working. We prioritized, obviously, on the existent compliance of all the protocols. And this is something that's fundamental that has built a daily field verification and it's fully documented to ANI. And this happens at all the works, but mainly in the -- mainly more in Pacifico 2, that has largest concentration. As I mentioned before, we should be close to 100% for the end of the month. We were allowed to open a couple of more fronts this week and obviously, following biosecurity protocols, biocentric protocols. Second was opening those works that we needed to start working on fastly in order to not acquire technical risks that had started before. This is fully controlled now.

And the third element was agreeing with ANI as the extension of the date, that we have until the 30th of October, we moved it to December, so we could mitigate that small delay that we had to do the suspension. And this has been granted already. So the project is advancing. The money to execute this work come from equity disbursements coming from the financial sector. And given the credits that have been hired or contracted, this has been -- from the financial sector, the disbursements have already happened. And also from Odinsa, according to what we had previously thought and according to the figures that Jorge Mario have previously mentioned in terms of cash. So we are -- we do feel easy in terms of that we are advancing on the work, and we should have a short delay, but has already been approved by the entity that grants the contracts within time.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [6]

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Thank you, Mauricio. So let me propose for us to move on. I see there are several questions on the list.

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Natalia Agudelo, Grupo Argos S.A. - IR Director [7]

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Yes, we have several questions. What I'm doing right now is trying to compile these questions. I'll try to just ask the airport questions. Okay. Just -- we'll try to answer them all in the measure that the time allows us, because there's some that are -- have much of detail. What I propose is that all the questions will be on written form, and we can also answer them in written form if we're not able to answer them all. But let's try to do this exercise. Let's start to group the questions. For those that have to do with airports, so we could try to answer those related with airports in that way, we could move on in an organized manner.

Okay. In airports, we have several questions. They want to know about the cash level that we have and the debt level that at Quiport, Opain, had, which is what put into position that these assets have and what's -- the expiry profile. Cash costs and revenues that we have been expecting, which are the impacts in deleveraging indicators. They also ask if a capitalization will be required for the airports. And more specifically, in the case of Opain, what's the Avianca exposition if the accounts receivable are set to go to be provisioned in 2020.

I believe that this summarizes airports. The other thing is in respect with CapEx. Which are the investments and that we -- that COP 65 billion investments that we are [pursuing]?

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [8]

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But just to give you a bit of context, I believe it's important, and there's other questions there, very specific questions that maybe Pablo can help us answering. What would be the position in terms of cash cost? We just mention something with the elements.

First thing, as we mentioned before, the affectation over the airports is important. The reduction in the traffic that we had during April and May, we hope that would be close to 100% to the traffic -- passenger traffic, commercial traffic, both national and international. And as I mentioned before, the airport is operating up to 45% in terms of cargo. This is the operation that's working right now in the El Dorado airport as well as in Quiport.

It's also very important, conceptually speaking, to understand the nature of the concessionary business. In the concessionary business, like in the country we have with 65% is a contract held with the Colombian government. Or in the case of Quiport, with the Quito municipality, which grants us rights and duties also for those that hold the concession. In this case, there's an affectation or a total affectation in virtue to a decision that had been taken by the Colombian National Government on suspending air traffic. So further than the reasons that leaked to all this and further than logic behind the collective health of Colombians, from a contractual situation that we have and open conversation and we will have to drill deeper even with the granters in order to establish or reestablish the contractual equilibrium that's derived from a stronger force or a nonvoluntary interruption.

What I want to say with this is that there is contractual elements where we protect the investors in both contracts. And there's an awareness from the other party also. And we'll have to look for the mitigation measures that this types of decisions come with. Just to say, what I'm not [in conversation is] so there's a higher affectation. And now I'll give the word to Pablo, so he could tell a little bit about the numbers. But in any case, and similar to what I just mentioned in terms of roads, there's a conversation that is open in order to establish, led by Opain, or to re-establish the terms. So I just wanted to specify on this.

And let me just take this other question, and then I'll give the word to Pablo and to Mauricio. This has to do with the CapEx, because I see that there are several questions around Capex. What we have done mainly in terms of the airport vertical is suspending investments in both our CapEx and OpEx and operational expense for development in private expansion initiatives like the [the office] in the airports. This happens due to the airport expansion in Bogotá, to the engineering studies, to traffic studies, environmental studies, pre-feasibility, also for Cartagena as well as for Bogotá. And as it was also mentioned before, this has been spoken with a granter in Ecuador in order to reach $60 million that have been accepted already. So what we have is a focus right now in persevering CapEx and reaching cash equilibrium and asset value.

Mauricio, the floor is yours.

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Mauricio Ossa Echeverri Calle, Grupo Argos S.A. - CEO of Odinsa [9]

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Yes, Jorge. Thank you. I think that you have been very clear. Stronger forces in both contracts. This speaks specifically of losses that are not received in cases of stronger forces. And the CapEx measurement reduction and OpEx reductions are transitory in order to avoid the stronger cash effort, that -- given the reduction of the revenues, as has been mentioned before. CapEx was associated to a master plan that had to be a development, but it has been approved to stop this CapEx. That's a new order, both buying CapEx or based on 100% of the CapEx or relevant CapEx will be executed. 100% of the CapEx has also to do with works that we have been doing. We had a saturation exposition in the airport. The airport traffic, up to 12th of May, was growing 10% compared with last year that had grown also by 10%. So in virtue of that stress that the airport was going through -- obviously, there is an airport that has been suspended because it's not required at this moment, and probably the recovery of the traffic will be slower so there won't be tension over capacity.

So I believe the first message is clear. There are some mechanisms in the contracts. They're in process of becoming active. The granters are aware of the implications this has. And we will be, in the upcoming weeks or upcoming months, having this discussion in order for mitigating this impact. I wanted to give the word to Pablo, so he could speak about some numbers. And if I can come back afterwards, Jorge, just a bit of a vision that we have towards the airport. Why don't we speak about Avianca? I believe this is important.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [10]

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Good. Perfect, yes. Our vision with Avianca. We can answer the question and then vision that we have around this. Right now, us, we have accounts receivable close to COP 21 billion from that -- those outstanding loans, COP 18 billion are those air rates collected by Avianca. This is a money that comes from the concession contract. This is mandated with all the airlines that within the sale of the ticket, they collect this rate and, and at the end of the month, they reverse this money. During May, this has not happened yet. This is when the suspension began. Just remember, 6th of May, we have the first COVID patient. 17th of May, we have the emergency declared. During the 1st of March, last plane comes into Colombia and 31st of March last plane leaves Colombia -- last commercial plane leaves Colombia. So this -- that has to do with recent taxes as a different -- in the process at Avianca is following, and this money has to be reversed for the 11th of July. So for the 11th of July, the company needs to have paid all this for them to start operating now.

If it will be the case, we have money for the back office rentals. This will become in the category of priority branches, and they have to be -- they cannot have any debts in order for them to start operating. We have no exposition. We are expecting to collect this money in the upcoming weeks. It's not something that has been expired. It's simply just last month, money that has been with problems due to the close. But what happens in June after everything comes back to normal? In our opinion, Avianca will be a company that will be operationally strengthened to be a solid offer. In terms of airports, we need for the demand to have the appetite and for the demand to have the appetite of traveling, both business traveling, touristic traveling, but we also need to have a strong supply. And this decision makes Avianca operating in better conditions. They have to pay cash for the services that they'll be using from the airport and they start enriching the supply, that together with other airlines that have proven to have appetite, to keep on working on the business who are asking. So we have no exposition that we see as positive and flexibility that Avianca will have for them to be a relevant player in this travel supply.

Okay. Pablo will speak about the cash and debt.

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Pablo Arroyave Fernández, Odinsa S.A. - CFO [11]

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Yes. Opain has $415 million in debt versus COP 315 billion. All this indebtment are profiled according to the concession for projections, all of them being paid in 2026. That will be the end of the payment. It is the contract given that the contract ends in 2027. In nonconstrained cash, meaning by this cash that could be used by Opain for its operation without requesting any granter or any entities, they have COP 130 billion. In addition, it has in reserves as collaterals for those indebtments that I mentioned. In dollars, it has $32 million, and in pesos, COP 30 billion, could -- that are additional cash that could be used for honoring the debt. So in terms of nonconstrained cash, we have COP 130 billion and reserved cash, we have $32 million and COP 30 billion, respectively.

Quiport. Quiport has an indebtment of $400 million that expires in 2036 and the concession expires in 2041. The amortization profile for those $400 million is according to the cash flows that the asset will generate. So obviously, the majority of the capital is -- it's more than I said, because [it was] used enough last years. So in terms of cash, Quiport has its administrating cash, $78 million. And besides that, it has $75 million in research. I believe that summarizes the cash position. Now it was also asked about the cash flow measures, on the cash flow measures for Opain and concrete. Opain, in our month operations, would reach revenues between COP 90 million and COP 100 billion. And Opain, today, with the current situation and with decisions have been made, in terms of operations, they could spend COP 15 billion monthly in operations. This is obviously before paying interest and amortizing debt and paying, except with the nation. And in country, in 2020, from the debt I was mentioning that Opain had, Opain should amortize COP 200 billion for the rest of 2020. And in 2021, it would be about COP 250 billion. And so what's been done with what we're doing, both dollars and pesos, is speaking the possibility of moving this amortization that I mentioned from 2020 to 2021 [-- '31] for us to react upon this situation.

If the invoicing doesn't come back to levels we previously mentioned, once constraints are removed -- once the mobility constraints are removed, I believe this would be the summary of the information that was being asked. If I left something not [answered], just let me know. There are so many questions and some are partially answered or not.

Let's go back to the questions. I mean, those that we don't answer, we'll answer via written form. We could just let them open. It does need detail or something that has been left outside or something that hasn't been fully answered, you will be able to access to this information that's required.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [12]

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Upcoming topic? Okay. So let me move on to Pactia. They're asking how -- what has been the drop in collections, product of the situation, particularly in April and May, if we expect the deterioration of the unit value and what percentage of occupation do we have?

Let me give the word to Alejandro Piedrahita for him to answer the questions. It's important to speak about the graph that we have in the last or last slide or the 1 before the last slide. Not just about the revenue, but about the area of the construction of those 427,000 square meters. Are these distributed between commercial, stores, offices, industrial use and other uses? This is important for us to understand the dynamic of where and the applications are coming from Pactia

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Alejandro Piedrahita, Grupo Argos S.A. - CFO and VP of Corporate Finance & Strategy [13]

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Well, thank you, Jorge. I'd like to start giving you some numbers. In terms of where the Pactia results in March, both for the revenue plan and the real executed plan, adjusted EBITDA and a little bit above -- of what we're seeing, not just in March and April, with a little bit about what we're seeing in terms of the information we have right now. The revenue platform of March that we have for Pactia was close to COP 90 billion. And finally, that result, close to COP 85 million, were mainly the delta, as explained mainly by the hotel business. Hotel business has a reduction close to COP 3.7 billion. This is revenue-wise. Adjusted EBITDA -- the EBITDA close -- we had, as a plan of COP 36 billion and closed COP 41 billion. There was an over execution close to 410%. And basically, in terms of adjustment or in terms of reduction, revenue reduction that's mainly explained by hotels, we basically were able to reach the adjustments in terms of asset maintenance, a reduction of COP 2 billion and also the expenses from the capital fund close to COP 3.6 billion.

So in terms of the first quarter, Pactia had a positive effect on EBITDA. When you look at the information in May and April, if we look this towards the future, the projections that we have been carrying out with the Pactia team is that probably, the revenues could be close to 25% drop. And that 25%, we keep seeing mainly in the hotel business where -- what the Pactia administration has been doing and what many have been doing is use adjustments in terms of hotels, for example. There are certain zones where there's engineers coming from abroad, for example, in the oil business. And then we have to go into quarantine, and they have to be going to the hotels, receiving the designations and that those quarantines could be also used with the hotels in order for the drama to be as aggressive.

The other important aspect has to do with shopping malls. In shopping malls, during March and April, we've seen an affectation higher than 25% that I was mentioning before. Obviously, what we're trying to do with many of these, for those that had to have close, in the sense of operations that were still open in a certain way, their rental continues. But in terms of retail, for example, apparel, what we've done with them is a renegotiation, rental renegotiation and being able to defer many of those payments towards the future in terms of financing in order to have that flexibility. But if you look at the numbers, we're speaking, our production is close to 25%.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [14]

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Then we move on to questions related with Grupo Argos. This had to do with the cash flow. We estimated revenues close to COP 900 million. Has this changed? If those COP 115 billion that we closed with the first quarter 2020 are not covering dividends or not enough to cover dividends, could this affect the dividends that we receive? And we have -- and the other one is related with the repurchase shares considering current prices and how are we seeing this repurchase that we announced before?

Let me introduce the question and maybe Alejandro can speak about the details.

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Alejandro Piedrahita, Grupo Argos S.A. - CFO and VP of Corporate Finance & Strategy [15]

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Yes, I do have that, Jorge.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [16]

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Listen, let me just make 2 comments related with the 2 questions. Maybe there is a modification to what we budgeted initially and to what we have today projected such as the cash forecast. The important difference between both is that we are not considering revenues due to asset, these investments at a Grupo Argos level, as we have previously announced. Also, we're looking for the possibility of having, in a certain moment, some assets that we could disinvest in order to invite business partners. In this scenario, despite that this could happen in the future, we are eliminating, from the cash flow, any effect that comes from disinvestments. And being like this, and afterwards, I could give the word to Alejandro with the exact numbers, we keep having a primary super EBIT between dividends received by the company versus the ones that are being paid. That's a very important strength, leveraged in 2 or 3 elements: first is a systematic improvement introduction in the expense level that we're holding. As mentioned before, in last 5 years, we've reduced 6% of the expense level of the holding structure. And our first revision that we just did, we're reducing 14% more of our current expense level. This would be close to COP 20 billion.

Second important source of revenue are those coming from the urban development business that, as it was read for, and maybe we could give the word what I kind of referred on. The vision that we're having for the demand that we were mentioning for the new usages of sun lots in Barranquilla is even positive compared with what we had forecasted. So what we're expecting as cash revenue, which is very important in the urban development business, is even the same or even higher than what we had initially. So with this scenario, in general terms, I would say that cash has a bit less on the super EBITDA we had thought initially. But it's still been a super EBIT, which allows us to have a primary super EBIT between what we received and paid. That's also supported in the real estate business and the cost reduction.

Let me give the word to Alejandro, who will go into details now on dividends. That's the source I think -- a great part of that flow. So the first consideration, I would say, dividends for 2020 were decreed by the assembly, and they will be distributed according to what each of the assemblies decreed. It's also worth mentioning that Cementos Argos and Odinsa are charged at the end of the year where there's still enough time to have a better visibility of the effects or government compensations or about the pandemic. But structurally, these have been decreed. And in cash, they have been moved towards the end of the year. We can stop here, and let me give the word to Alejandro, and he will speak about the numbers and then move on to the second question.

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Alejandro Piedrahita, Grupo Argos S.A. - CFO and VP of Corporate Finance & Strategy [17]

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Yes, about the point you were mentioning, we had announced a source of around COP 900 billion. With that -- with those adjustments that we have done, sources will be in COP 728 billion. From those COP 728 billion, COP 407 billion, are dividends. And remember that we paid dividends this year for COP 317 billion. So here, we basically have a differential close to COP 100,000 -- or COP 100 billion. But from those, there is around COP 106 billion that come from the urban development business. They're at their revenues that are close to COP 63 billion. This has to do with a disinvestment that has been done with the investments related with the Capital de Colombia and Colombates. These are COP 63 billion plus other disinvestments and other topics with our investments. And there's an additional credit source of COP 150 billion. This gives us at COP 728 billion.

When we look at the usages, the usage are COP 641 billion. So we've done adjustments in both sides. There's the dividend payment that's constant, COP 317 billion. There's some financial expenses that are close to COP 125 million. Taxes were COP 75 billion. Expenses, as was mentioned by Jorge, they have a reduction close to COP 65 billion. Urban development expense close to COP 59 million, that also has a reduction. So as you can see, as a super EBIT, when you look at sources and usages, close to COP 87 billion, and this has to do with the cash excess. Remember, Grupo Argos usually has cash excess close to COP 1.5 billion. In this case, we have an excess of COP 87 billion that's aligned with the sharp plan that we had and with the strategy of the liquidity excesses of all the companies that Jorge mentioned at the beginning of this call. So this excess of COP 87 billion also gives us the flexibility in the case of something happening.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [18]

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Okay. Let me take the first part of the first question, repurchase of shares. Let me come back to what was mentioned in the assembly. What we approved was a blueprint that will allow the Board, depending on the conditions and depending on the quality and the conditions of liquidity, could establish a reacquisition program up to a certain number to be executed, COP 400 billion around in a period of 3 years. The concrete answer to this concrete question, if this is regulated right now? It is not regulated yet. If we have thought of doing this in the short term, the concrete answer is no. We're not bearing this in mind for the short term. The question is that in case of an emergency situation of what was happening right now in coronavirus around the world, the priority has been focalized in keeping liquidity and the mechanisms in order to guarantee the continuity of the different companies. So the program is authorized, is applicable, but the Board has not considered it yet. And for the moment, it's not a priority within our agenda.

So I'll close with a last question. Corresponds more towards as rule as -- a holding rule in how has this been led during this situation. If there's a possibility of even reducing more CapEx than what we have announced.

Well, it's a very good question, and the concrete create answer is yes. The concrete create answer is yes. But in an exercise that we're doing with the companies, the CapEx reduction has to be careful. And that is that you cannot fiddle with CapEx. That's sensible for the continuity of the business or for the efficiency of the business or for the safety in the business operation. So this means that I shouldn't cut all the CapEx because of the deteriorating the condition of the operation. What is reasonable is to optimize, in terms of the option of CapEx, that one that has to do with development and future growth, where there's -- all the visibility for the moment could be stopped. That's what we have done already.

Second part of the work that we're doing right now such as in that of Odinsa airports, in the energy business, that's even operating over expected is going into the granularity in detail to ensure that we can keep that CapEx necessary for the operation to be efficient, and we prioritize the CapEx in order of return. So we're focusing on those that will give us a larger return, that CapEx. So there is a second round that's being studied. In the cement business, we have seen some alternatives that are being fine-tuned. And Mauricio and his team are working also likewise in the other businesses. But it's a Swiss number. That is that between CapEx and OpEx and the base is 1.5 in the Colombian business, but have a second one that's being studied right now.

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Natalia Agudelo, Grupo Argos S.A. - IR Director [19]

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I guess with this, we'd tried to answer almost all the questions. We have on the task of answering all these questions in written form and uploading it to our web page, so you can find them afterwards. So let me give you the word, Jorge Mario, for the closure.

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Jorge Mario Velásquez Jaramillo, Grupo Argos S.A. - CEO & President [20]

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So thank you all. Thank you very much to every single one of you. It's a pleasure being with you all, your questions, the depth of your questions. I hope that we could have answered in detail majority of the questions. And those that we couldn't, we want to answer them further on in written form. And as you might know, the communication channel is always open with any of us, Natalia, Alejandro and Diego, anyone, and we're more than open to answer these questions.

I would close by saying that clearly, we're going through a challenging moment for the humanity, for the businesses, but I'll also let you know that we have the structure, we have the talent, we have the capacity of driving roads in front. And when an organization that has this capacity, this condition and the assets and the strengths that we have developed for decades and decades since 1934, we started building what we have today. It's a very important foundation, a very important lever for us to find banks, for us to strengthen and why not finding opportunities in situations such this. And so I want to thank you all for being with us. And I hope that you and your families are well and we'll be more than open for the questions that you might have. So have a nice day.