COVID-19 Causes Drop in Tecnoglass Q1 Revenues

Tecnoglass Inc.’s first quarter 2020 total revenues were down compared to the first quarter of 2019, according to the company’s financial results for the first quarter period, which ended March 31, 2020. Total revenues for the Q1 2020 were $87.3 million compared to $107.2 million in the prior year quarter. The decrease was primarily attributed to fewer days of invoicing in the second half of March as a result of the company’s decision to temporarily suspend plant operations in accordance with shelter-in place guidelines by the Colombian government in response to COVID-19.

Revenues in January and February were comparable to the same period in the prior year despite five days of scheduled maintenance in January 2020, which did not occur in the prior year quarter. Changes in foreign currency exchange rates had an adverse impact of $0.8 million on Colombia and total revenues in the quarter. U.S. revenues were $78.8 million compared to $92 million in the prior year quarter.

Gross profit for Q1 2020 was $30.5 million, representing a 34.9% gross margin compared to gross profit of $31.9 million, representing a 29.8% gross margin in the prior year quarter. The improvement in gross margin mainly reflected lower raw material costs, a higher mix of revenue from manufacturing versus installation and greater operating efficiencies from prior automation initiatives. Operating expenses were $17.3 million compared to $17.7 million in the prior year quarter. As a percent of total revenues, operating expenses were 19.8% compared to 16.5% in the prior year quarter, primarily due to lower sales.

Net loss was $18.7 million, or $0.40 loss per diluted share in the first quarter of 2020 compared to a net income of $7.3 million, or $0.18 per diluted share in the prior year quarter, including an after-tax non-cash foreign exchange transaction loss of $22.1 million in Q1 2020 and a $2.2 million gain in Q1 2019. As with previous periods, these gains and losses are related to the accounting re-measurement of U.S. dollar denominated assets and liabilities against the Colombian peso as functional currency. During Q1 2020, the peso devaluated 23% against the U.S. dollar. Adjusted net income was $4.5 million, or $0.10 per diluted share compared to an adjusted net income of $5.9 million, or $0.14 per diluted share in the prior year quarter.

“Our thoughts are with all those impacted by the COVID-19 pandemic. In this moment, our top priority is safeguarding our employees, customers, partners and the communities where we operate. All of our operations have been deemed vital and we continue to serve customers safely and responsibly,” says José Manuel Daes, Tecnoglass CEO. “We were pleased to deliver our highest first quarter gross margin and adjusted EBITDA margin since 2016, despite the pandemic’s temporary impact on our invoicing and business operations late in the quarter … We have a strong cash position and the capital resources to face the challenges ahead and situate our business for long-term success as we emerge from this volatile period.”

“As the COVID-19 crisis continues, we are closely monitoring its impact on the broader macro-environment and tailoring our operations accordingly. Our existing commercial backlog remains strong and many projects are progressing in all markets where construction activity is permitted,” adds Christian Daes, chief operating officer. “That being said, we are also bracing for a slower year as some projects get delayed or temporarily put on hold. We have implemented business continuity measures across our vertically integrated operations to address safety, cost reductions and non-critical spend while protecting existing jobs to the extent possible. In light of the uncertain times ahead, we are focused on maintaining financial flexibility and generating cash flow. We believe that our lean cost structure and diversified geographic presence leave us well prepared to manage through this unprecedented environment.”

COVID-19 Business Update

Since the outbreak of the COVID-19 crisis, Tecnoglass has adhered to mandates and other guidance from local governments and global health authorities. It continues to safely serve customers in all countries, states and regions where construction is considered an essential business and permitted, according to a company statement.

Tecnoglass temporarily suspended production at its facilities in Colombia from March 23, 2020 to April 13, 2020 during the initial phase of a nationwide shelter-in-place order by the Colombian government to prevent the spread of COVID-19. While the shelter-in-place order was subsequently extended to May 25, 2020, Tecnoglass resumed full operations at its facilities on April 14, 2020, given its exempted designation as a supplier of critical products to essential business sectors such as infrastructure and construction.

Construction of a second float glass plant through its joint venture with Saint Gobain, which had been scheduled to begin in 2020, has been put on hold at this time, pending better market visibility.

Business Outlook

Given the uncertain scope and duration of the COVID-19 pandemic, and uncertain timing of a global recovery and economic normalization, Tecnoglass is withdrawing its previously communicated full year 2020 revenue and adjusted EBITDA outlook. The company has suspended all future financial guidance for the balance of the year.