Tecnoglass Inc (TGLS) 2015 Q4 法說會逐字稿

Greetings and welcome to the Tecnoglass fourth-quarter 2015 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Rodny Nacier, Investor Relations. Thank you. You may begin.

Good morning and thank you for joining us for Tecnoglass's fourth-quarter 2015 conference call. A copy of the slide presentation to accompany this call may be obtained on the investors section of the Tecnoglass website at www.tecnoglass.com.

Our speakers for today's call will be Jose Manuel Daes, Chief Executive Officer; Christian Daes, Chief Operating Officer; and Sergio Barake, deputy CFO. Also joining us on today's call is Santiago Giraldo, a new senior addition to our finance team.

Moving to slide number 2, before turning the call over to Jose Manuel, I'd like to remind everyone that matters discussed in this call except for historical information are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth, and future acquisitions. These statements are based on Tecnoglass's current expectations or beliefs and are subject to uncertainty and changes in circumstances.

Actual results may vary in a material nature from those expressed or implied by the statements herein due to changes in economics, business, competitive, and/or regulatory factors and other risks or uncertainties affecting the operation of Tecnoglass's business. These risks, uncertainties, and contingencies are indicated from time to time in Tecnoglass's filings with the Securities and Exchange Commission. The information discussed during the call is presented in light of such risks.

Further, investors should keep in mind that Tecnoglass's financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions, or otherwise.

In addition, today's call is not intended to and does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, or an invitation to purchase or subscribe for any securities for the solicitation of any vote or approval in any jurisdiction; nor shall there be any sale, issuance, or transfer of securities in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933 as amended.

Tecnoglass has filed the registration statement on Form S-4 with the SEC that includes a preliminary prospectus offer to exchange relating the warrant exchange offer. Tecnoglass will mail the definitive proxy offer to exchange to its warrant holders when the exchange offer is commenced.

Security holders are urged to read the prospectus offer to exchange and other relevant documents filed or to be filed with the SEC carefully when they become available, because they contain or will contain important information about the warrant exchange offer and related matters. Security holders may obtain free copies of the preliminary prospectus offer to exchange and other documents filed with the SEC by Tecnoglass through the website maintained by the SEC at www.sec.gov. In addition, copies of the prospectus offer to exchange and other documents filed with the SEC by Tecnoglass will be available free of charge by the Company's website www.tecnoglass.com.

With that, I'll now turn the call over to Jose Manuel.

Thank you, Rodny. And thank you, everyone, for participating on today's call.

Turning to slide number 3, I am very pleased with our Company's performance and accomplishments during 2015. We achieved record EBITDA of $65.5 million for the full year, representing 36% growth over the prior year. And we grew our revenue 31% to a record of $239.4 million. Our reported results were impacted by unfavorable foreign-exchange dynamics, but we were extremely pleased to deliver on our full-year objectives as we continue to better our position as a leader in the US and Latin American markets.

We made continuous strides to grow our presence in the US and gain market share. Our mix of revenue from the US expanded by 800 basis points to 60% for the year. This progress was also evident in our year-end backlog, which increased 34% to a record $375.2 million compared to the prior year, largely weighted towards the US.

During 2015, we further strengthened our vertically integrated capabilities with the completion of the startup of our new soft coat plant in September. This carefully weighted and balanced expansion was truly a milestone in the evolution of Tecnoglass.

We have already begun satisfying our internal demand. This is driving significant cost savings and the strategic benefits, which we expect to be more pronounced as we move forward in 2016 and 2017.

Overall, our manufacturing campus in Barranquilla has grown to 2.3 million square feet of well located, low-cost and efficient capacity through successful multiyear investments, including the recent buildout of the soft coat facility. When combined with a young, a skilled, and a scalable workforce we have in Colombia and our highly strategic location in Barranquilla, these advantages are very difficult to replicate in other parts of the world.

Additionally, in January 2016 we entered into a new credit facility which improved our borrowing costs, extended our debt maturities, and established a more efficient capital source to invest in our growing operations. We introduced new products and captured additional marketplace.

In summary, we are very encouraged by the progress we have made to position our business as a leader in the US and Latin America. Our strategic investment in capacity, products, and people, combined with our business development activities and growing project portfolio provides us with a firm foundation for further EBITDA improvement.

Demand in our commercial construction end market is growing. Our product offering are expanding, our reputation is widening, and our operating efficiencies are improving. We remain very excited about the outlook and the opportunities for delivering shareholder value in 2016 and beyond. With that said, I will turn the call over to Christian to provide some highlights on our business and operations.

Thank you, Jose, and good morning to all of you on the line. Turning to slide number 4, we continue to grow our Company, helped by improving demand, new markets, and new customers. We have successfully elevated our designs and completed more US dollars projects, and our business is benefiting as a result.

We are building customer relationships and gaining increasing traction with our new in-demand products. Our sales to the US have increased for 12 consecutive quarters. As a result, in the past two years we have gone from generating the sale of our revenue in the US to now nearly two-thirds. And we are firmly situated to drive an increasing mix of our business from this key region while also growing our Latin American presence.

As Jose mentioned, our backlog continues to grow as a result of a strong bidding activity we continue into 2016. Our backlog at year-end was $375.2 million, up $95 million or 34% from 2014. We also increased from $360 million at September 30, marking the sixth consecutive quarter of year-over-year improvement.

At December 31, approximately 65% of our backlog was for the US market, followed by Columbia at 25%, supporting our expectation for the US to represent an increasing share of our business. We introduced several new products in the marketplace since late 2015, which are also contributing to the improvement in backlog in all regions and providing us with strong visibility on our project pipeline in 2016.

Moving to slide number 5, you will see our new soft coat plant. During the fourth quarter 2015, we ramped up our new soft coat Low-E glass manufacturing line, and considerable success so far. The result has been better than we anticipated. We are producing high-quality glass, and operations are running very smoothly.

As a reminder, we previously sold our soft coat glass externally, as the raw materials were used in our windows and tempered glass production processes. We now have significantly more than enough capacity to meet all of our internal needs and supply external customers over time.

By the end of the first quarter 2016, we successfully scaled up production to meet all of our internal soft coat production needs. We estimate our internal demand for 2016 to be approximately 50% of the soft coat system's total 6 million square feet of capacity. The use of this new line is already beginning to generate savings and profits, and we continue to expect to be in the range of $6 million to $8 million for the full year of 2016.

We remain committed to expand output out of this increasingly in-demand soft coat product for external sales longer-term in both new and existing markets. We continue to believe that the new soft coat facility can generate $200 million to $250 million in additional annual sales as we ramp up excess capacity over the next several years. We are all very excited about how this will impact our future goal and profitability.

Turning to slide number 6, we have illustrated a significant embedded manufacturing and cost advantage of our business. Expansion of our well located, vertically integrated, and efficient capacity is just one of the many key factors allowing us to grow our market share and improve our margins. We are the low-cost producer in all of the regions that we serve, and we have industry-leading margins.

We have very favorable logistics due to, first, our location in Barranquilla, a port city on the most northern point of Colombia. Second, Colombia imports more goods from the US than we export to. So many of these containers would otherwise head back to the US empty, which has provided us with a significant cost advantage. As a result of these two factors, we can ship containers from Barranquilla to Miami or New York for up to 40% less on average than most of our US peers.

Under The US-Colombia Trade Promotion Agreement, Colombia has grown into one of the US's largest trading partners, which is very good for Tecnoglass. In addition, producing glass is a capital intensive but also very manual process. We have efficient access to highly talented workforce, and we estimate our fully loaded labor costs are on average 6 times lower than our US industry peers. So with these advantages, among others, we see our combined capacity, logistical workforce and multi-market approach supporting a very sustainable, low-cost platform to generate meaningful profit and cash flow in our business over the long term.

Turning to slide number 7, our low-cost footprint also allow us to invest in innovative new products and processes to enhance our position with customers. In particular, we are very excited about two newly introduced product lines.

In November 2015, we rolled up our ProBend product line, which has met with strong demand. ProBend also allows for the production of high quality cylindrical safety glass and has the capability to produce large size, bend-tempered, heat-strengthened and laminated glass. We are now one of the few manufacturers in our industry with the ability to deliver these products.

We are making good progress to introduce our TecnoAir product line during the first half of 2016. TecnoAir uses a new technology to produce the thinnest safety glass architecture in the world with lower weight, which delivers numerous advantages in areas such as material usage, energy consumption, more cost-effective handling, logistic and storage considerations. So far, early indications of interest have been very positive. Beyond this, though, we have a healthy research and development pipeline to build on our strong culture of innovation and further strengthen our market-leading position.

In closing, our operation and strategy are progressing very well. We expect our growth in US and Latin American markets to continue as we move forward in 2016, demand -- driven by a strong demand, the quality of our products, and the commitment of our entire team. With that, we will now turn the call to Sergio to provide additional color on our financial results, balance sheet, and outlook.

Thank you, Christian. During 2015 we had a good year of progress, with substantial revenue growth and favorable operating leverage, driving solid cash flow generation. I will provide an overview of results beginning with slide number 8.

Looking at our revenue bridges, we had meaningful increases in total revenue for the fourth quarter and full year, with growth in our core US and Colombian regions generating double-digit growth in both periods. Total revenue increased 50.2% to $66.4 million. On a constant currency basis, with FX rates held flat at 2014 levels, revenue increased 68.2% year-over-year, excluding an $8 million impact from unfavorable foreign currency. For the full-year, revenue increased 36.5% on a constant currency basis, excluding a $30.2 million FX impact.

This FX impact was primarily felt in our revenues from Colombia, which in local currency or on a constant currency basis more than doubled in the fourth quarter and increased 39.2% for the full year, reflecting new projects like Centro Comercial Buenavista, Torre Atlantico, Torre R, Aeropuertos de Oriente, One Plaza, among others. The FX impacts which I just described resulted in reported revenues from Colombia up 63.5% for the fourth quarter and up 1.5% for the full year.

In the US, revenues improved 40.1% for the full year, up -- for the fourth quarter increased 27.9%, reflecting increased project activity in Florida and diversification to a range of products in other states, including New York, New Jersey, Baltimore, Washington area, and Texas. Also during the fourth quarter some project delays impacted sales in the US; but in the other hand, we experienced an accelerated pace of project activity in Colombia. We believe these were temporary dynamics in both markets. Overall, we had a significant growth in revenue for the year, led by the US, which represented approximately 60% of our sales compared to 52% in the prior year.

Turning to slide 9, you can see improvement in our fourth-quarter and full-year adjusted EBITDA. On a reported basis, adjusted EBITDA grew $13.2 million for the fourth quarter and $65.5 million for the full year, which I will outline in our EBITDA bridges.

Beginning with the fourth quarter, gross profit increased by $9.6 million, comprised of $9.3 million related to volume along with additional benefits from price and product mix. In recent months, cost of aluminum is down 20%, also benefiting our results. Price of aluminum is currently stable.

These improvements, along with an improvement in D&A and other income, more than offset the $1.4 million of additional SG&A spend and an $11 million impact from unfavorable foreign exchange. Excluding the impact of FX, fourth quarter of 2015 adjusted EBITDA would have increased to $15.5 million.

In March of 2016, the Company completed a strategy to balance a significant majority of its US-dollar-denominated assets, with its US-dollar-denominated liabilities to limit the exposure of balance sheet FX and its impact to adjusted EBITDA results going forward. Looking at the full-year adjusted EBITDA bridge, nearly all metrics contributed to EBITDA growing to $65.5 million.

As a percentage of sales, SG&A grew 40 basis points year-over-year to 19.4%. On a dollar basis, SG&A moved higher, mostly related to an increasing level of operations and some new expenses, like equity tax assessed on the Company, additional amortization expenses from new intangibles related to previous acquisitions, and higher shipping and handling costs related to additional sales to coastal and non-coastal markets in the US.

The impact of FX was less pronounced for the full year, with currency gains for the first three quarters of the year largely offsetting the drag in the fourth quarter. The fourth quarter was affected by some periods of a strengthening of the Colombian peso that affected receivables and payables recently booked in our balance sheet at year-end. Overall for the year, the Colombian peso depreciated 32% versus the dollar, which is consistent with the overall FX gain we had for the full year.

Now moving to slide number 10, our gross profit and gross margin each improved from prior year's fourth quarter, reflecting investments we have made in our operations. Gross profit in Q4 of 2015 rose by $9.6 million from last year's fourth quarter, while gross margin for the quarter improved by 40 basis points to 42.5% from 42.1% in the prior-year quarter.

For the full year, gross margin improved 240 basis points to 36% compared to the prior year. I would highlight a shift in our gross margin composition beginning with this reporting period and moving forward. Prior to Q4 of 2015, we had a portion of our shipping cost in the cost of goods sold line, which are now 100% reflected in our SG&A.

Beginning with today's results, in the fourth quarter and full year 2014 and 2015 periods, we now reflect this reclassification as shipping costs from cost of goods sold to SG&A. The dollar figure of reclassification is the same for the fourth quarter and the full year for this particular quarter, due to the catch-up of shipping costs in Q1 and Q3, which are included in the fourth quarter. This reclassification has absolutely no impact on our operating profit and margin; however, it optically increases our gross profit, also increasing our reported SG&A.

This reclassification of shipping will be used moving forward but does not impact our prior filings. Excluding this reclassification, our fourth-quarter gross margin increased 30 basis points to 31.4% year over year, and full-year increased 178 basis points to 32.9%. For comparability purposes and for your modeling purposes, we have provided in an appendix our reconciliation of gross profit and SG&A for 2015, consistent with our revised allocation of shipping moving forward.

For the fourth quarter, operating income increased to $11.5 million with an operating margin of 17.3%, up from $3.3 million or 7.5% of operating margin in the prior-year quarter. For the full year, our operating margin improved 280 basis points to 16.6% compared to prior year.

For the fourth quarter our net loss of $0.5 million or $0.02 per share as compared to net income of $13.3 million or $0.48 per share in prior-year quarter. Excluding the non-cash warrant liability, adjusted net income for the fourth quarter was $2.6 million or $0.10 per share compared to net income of $8.3 million or $0.30 per diluted share. This difference in adjusted net income was primarily due to a $2.3 million foreign currency transaction loss in the fourth-quarter 2015 compared to an $8.7 million foreign-currency gain in the prior year's quarter.

Turning to the balance sheet and liquidity on slide number 11, during 2015 we improved our cash generated from operations to $4.6 million. For the full year we invested CapEx of $32.2 million and $25.2 million on a net basis, including new equipment for our soft coat facility and new aluminum press and furnaces, partly offset by proceeds from asset sales. Net CapEx of $21.1 million in 2015 and 2014 mainly reflect a significant investment of our soft coat plant.

At December 31, 2015, our cash position stood at $18.5 million, and long-term debt was $138.4 million. After the end of the quarter, we entered into a new $109.5 million, seven-year senior secured credit facility. The facility extended the maturity of a significant majority of our debt by seven years while also lowering our cost of borrowing by providing an efficient source of liquidity to continue growing our business.

We use these proceeds from the new facility to refinance $83.5 million of existing debt, and the remaining $26 million is available for us to generate general corporate purposes. On January 7 of 2016, we had approximately $115.8 million of debt outstanding, including $83.5 million of borrowings from the new facility. This figure excludes $26 million of capital leases.

Moving to slide number 12: beyond our positive operational and financial momentum in our business, we continue to work hard towards improving our position as a publicly traded company, specifically in regards to our shareholder return, our distribution partners, and internal control enhancement. First, we are very focused on generating value for our shareholders. We believe our results have demonstrated our ability to execute our global objectives to significantly grow our business and produce profits for shareholders. Our adjusted EBITDA margin of 27% in 2015 is industry-leading, and we have laid out a platform to deliver EBITDA improvement.

We also remain committed to return a portion of that profit to shareholders via a dividend following the completion of our previously announced warrant exchange offer. We understand the completion of this warrant exchange offer has taken longer than originally expected; that said, earlier this month we filed an amended S-3 and S-4 to help advance our position in the process. And we will update you on our progress as appropriate as we move forward.

Second, with respect to ES Windows and Ventanas Solar, these two companies are owned in respective majorities by the Daes family and have been strategic partners in Tecnoglass's rapid expansion, particularly in the US, for over 10 years. With our Company's footprint now firmly established in the US, we continue to pursue alternatives involving these entities, including acquiring them and consolidating their operations into those of the Company to simplify our story and streamline our operations. We'll keep you updated on our efforts in this endeavor.

Finally, in regard to internal control enhancements, we continue to take prudent steps to strengthen our operations. We are pleased with the progress we have made, and we are already seeing the results. We continue to work with Deloitte, and we are on track to gain SOX compliance before the required date March 17 of 2017 as an emerging growth company. Under the Deloitte project, we are now moving to phase three, which includes the testing of our controls that are already being designed and implemented. Once we finalized the testing phase, we will be ready for PWC's testing of our controls in order to gain SOX compliance.

So overall, there is more work to do. But we believe we are taking the appropriate steps to deliver shareholder returns, simplify our story, and strengthen our operations.

Moving to slide number 13, we are very pleased with the positive momentum in our business through 2015. We remain optimistic for our prospects for 2016, and based on improving commercial construction markets, continued market share gains, and improving operating efficiencies, we reiterate our full-year 2016 outlook. We expect total revenues to grow approximately 20% and adjusted EBITDA to increase approximately 30% to $85 million. Our top-line outlook is supported by expansion in our backlog, and we see additional benefits to our bottom line from new products and processes, such as our soft coat glass line.

Our gross margin, based on the shift in shipping costs from cost of goods sold to SG&A which I discussed earlier, we now expect gross margin to be around the 34% to 36% range over time, depending on a number of factors including sales composition and raw material prices. This range compares to the 32% to 34% gross margin range prior to the 200 basis point difference, entirely offset by an equal increase in SG&A as a percentage of sales moving forward. We expect gross CapEx for 2016 to be in the range of $15 million to $20 million, including $8 million of estimated maintenance CapEx before the positive benefit of any proceeds from PP&E sales.

With that, we thank you for your continued support. We will be happy to answer your questions. Operator, please open the lines for questions.

(Operator Instructions) Jeremy Hamblin, Dougherty & Company.

Good morning and congratulations on the strong year. My first question is -- Christian, you had mentioned that backlog had improved nicely, and I think you had mentioned that you continue to see a lot of bidding activity and a lot of contract wins as we've entered into 2016.

In terms of thinking about backlog with the quarter just about wrapped up, is this something in which we should be thinking that backlog for Q1 2016 will have again increased from this $375 million level?

Yes, we expect this quarter to be the 13th quarter consecutive to gain increases in the backlog.

Even though -- Jeremy, this is Jose -- even though we are shipping more. So, I mean, we're taking a lot more from the backlog every month. And even though that it is increasing, because there is a lot of work -- I mean, we are getting a lot of bidding activity, and people are requesting our product everywhere.

Okay, great. And then I -- as a follow-up question that may be related, in terms of the guidance for the full year on sales of roughly $288 million, how much is included for the new soft coat business in terms of external sales that would be new business entirely? Not just the cost savings, which I understand is the $6 million to $8 million for the year; but is there anything built into that guidance that would be really new sales for the Company? Or is that not factored into guidance?

We've factored only a very small amount, like 200,000 square meters at around $13 FOB. So that's not very much. It's like $2.6 million. Because first of all, our business model is not to sell to third parties. We like to do a lot of fabrication, because the more you fabricate inside, the better prices you get for your product. So we just built in a little bit. If we sell it, good; if we don't sell it, it doesn't hurt the profit and loss.

Okay, great. And then in terms of just general business trends, you did mention that you saw a few projects that maybe were delayed towards the end of the year. In terms of us gaining comfort moving forward, I think there's been some thought in the investment community that softness in Latin America potentially could be a negative drag on commercial construction in the Florida market.

Could you address that -- on whether or not you're seeing that? Is the delays in some projects, do you think, related to what's happened with foreign currency and oils and the negative impact on Latin American countries? Could you just provide any color on that? That would be helpful.

Well, actually, most of the jobs delayed have been attributed, when we talk to the people, to -- they don't have enough concrete, for example, in South Florida. They don't have people to do the iron. They don't have people to do this or that.

There was a shortage of supplies, and that's why they were a little delayed. But everything is catching up. I mean, we are shipping more. We have record sales. Our backlog is growing, and I don't see any softness now.

In Colombia, even though the economy is not looking great because of the oil price coming down, I see strong activity still. I mean, we're quoting the largest jobs -- El Dorado Airport is going to have a second expansion or a third expansion. And they're even talking about making a totally new airport in another place.

So, I mean, we are very positive about the outlook.

Okay, great. And included in that guidance, since you mentioned Colombia, should we be thinking that the Colombian segment is expected to be up on a year-over-year basis?

It's going to be up, but in pesos. Depending on the currency exchange, we might be up from 3% to 10%, depending.

Okay, great; that's helpful color. Sergio, I wanted to see if you could help me understand the commentary around foreign-currency impact on the fourth quarter. So I think in the press release, you speak to adjusted EBITDA being $15.5 million, excluding foreign currency. But as I look at slide number 9 in your adjusted EBITDA bridge, there's a point in there about foreign-currency having a negative $11 million impact on EBITDA. Can you just reconcile those two different --?

Yes, the two-point -- the quarter of 2014 has a FX loss of $2.3 million, basically due to some appreciation of the Colombian peso during last 60 days of the year caused that. What you see in the bridge is actually the net difference between the loss that we have in Q4 of 2015 versus the gain that we have in Q4 of 2014, which was like $8 million or $9 million. So the difference of $11 million is what is bridging to the EBITDA from one year to the other.

Okay, understood. So the EBITDA gains were actually even more significant than it would appear. And I guess that's what's reflected in your operating income significantly increasing by over $8 million year-over-year.

Correct. And you have to see that in Q4 of 2014 we had a gain in FX of $8 million or $9 million --

Right, understood.

-- compared to the [$2.3 million] loss that we have in this year. Having said that, I would like to say that this loss is caused by the net effect of assets and liabilities that we have in our balance sheet. As of March of 2016, earlier this month, we successfully completed a strategic plan to balance our assets denominated in US dollars as well as our liabilities in US dollars, limiting -- or which, you know, will help us limit the exposure that we have to balance sheet FX going forward.

Great. So that other income line, other income, other expense -- that should be a much smaller impact going forward than it sounds like?

Well, limited to the maximum extent possible. So it will normalize a bit.

Okay, terrific, that's great to hear.

One last question I wanted to ask was related to Jose and Christian. In terms of the warrant exchange and the dividend, I guess my understanding now is that you actually could pay a dividend even prior to the warrant exchange getting completed? And at this point in time, is there some thought to potentially paying a dividend before you would even get the warrant exchange completed?

We already gave the option to our Board, and they will make the decision shortly. And we will let you know soon as possible. But we are also very close to finalizing the registration, so I think that will be over soon, too; the S-3 and S-4 issues.

Okay great, thanks I'll hop out and let others have questions. Thanks guys for answering them. And best of luck

Thank you, Jeremy.

Fang Li, Baleen Capital.

I actually had somewhat of a follow-up on the FX impact. And it's not an accounting FX, but rather from a business perspective, to understand why FX was a drag. So I think the reason -- is the reason -- let me walk through it, and maybe you can check if I'm correct. But the reason it's a drag is that: one, in Colombia you set your contracts -- the price is set in Colombian pesos, but you have raw materials costs in US dollars, so that when the FX -- when the peso depreciates, your profits in Colombia go down.

Let me explain there. You have two things going on with the FX, and what you describe is just translation of your financial statement. The drag that you see is not related to that.

The drag that you see is related to -- at that particular point in time our position, our liabilities in US dollar were larger than our assets in US dollars. We'll revalue at year-end with the rate at year-end; there causes a difference when you book those liabilities before, 60 days prior or 90 days prior. And that's what caused the difference, because there was a small appreciation of the Colombian peso versus the dollar during the last 60 days of the year.

Right, I understand that, but. But I'm actually referring to the business, not counting the $2.3 million loss, but on an ongoing basis -- if the peso depreciates, it hurts Colombian profits, because you have expenses that are denominated in dollars, because you're buying glass from the US.

Yes, but listen -- Sergio, Sergio, let me answer that. Fang, when we sell in Colombia, it's different than in the US, because we sell in pesos, but they give us 40% to 50% down payment. With that money, we buy all the raw materials. So we lock in the price. That's why they give us a 50% down payment.

Otherwise, if they don't give us -- and we give them the option of buying in dollars with no down payment, but most of them give us a down payment, I mean 99%, and buy in pesos because they want to lock in the price in pesos. So we have no currency liability when we sell in Colombia because when we buy the materials, we pay clients' money.

I see; that makes sense. You wouldn't lose money if the dollar appreciated.

Right. But if it goes either way, it doesn't matter. Even if the dollar depreciates for depreciates, it doesn't matter for that business.

I see. But from a US investor perspective -- let's say you made COP20 before. If the peso depreciates, then the US investor and the reported financials will show a smaller US dollar profit because of the depreciation.

Yes, of course. But by the same token, for the foreign investor, when the peso depreciates and I locked in the price of all of my sales to the US in dollars, then I will make a lot more money in dollars, because I paid all my employees in pesos. And they will cost less.

I understand. That's very helpful. So in other words, depreciation would reduce your profits from Colombia but increase your profits from the US.

Of course, yes.

And furthermore, you know, when I look at Q4 -- your revenue mix -- it looks like actually Q4 was one of the lowest percent of revenue from US that you have had in the last couple of quarters, actually.

Yes. Yes, and you see the profit went down because of that and the peso depreciation. Now, it turned around. This quarter we're selling mostly to the US, so things are looking much better.

I see. So going forward, this still -- it's a benefit to you. It just so happened that this quarter there was some US projects delayed and some Colombian projects pushed forward that changed the mix and affected your margins, actually.

Right, yes.

Thank you. That's very helpful. And then the other question I had was for the soft coating, the $6 million to $8 million of cost savings that you project for 2016 -- is that included within your $85 million of guidance?

Of course, that's why we increased from $80 million to $85 million. If you remember, we had a guidance of $80 million, and then we increased it to $85 million when the soft coat started into the operations.

Got it, awesome. This is very helpful. Thank you very much. I will hop off.

You're welcome. Bye.

Renzo Dancourt, Mallku.

I just had a couple of questions to follow up, in particular with the US portion of your backlog. Can you give us a little bit more color as to how that is distributed by geography?

At this moment, it's around 70% in Florida and 30% rest of the US. But that is going to be changing. As we progress in other areas other than Florida, it's going to be more and more to other states outside of Florida.

Okay, perfect. Now in terms of your foreign business, Colombia and Latin America, are you mostly selling architectural glass? Or are you also trying to position -- I know you guys launched a product that was tailored towards residential. Have you guys gotten any traction selling that product in Colombia, and what percentage of that sales would that be? And have you been able to penetrate other countries with that product?

Well, we are selling the Ecomax line in Panama, Colombia; in Peru we just have two jobs. And we plan to keep expanding. The problem is that at this moment we need to expand our lines, which we are doing in order to accommodate all that we have to sell.

And that line has been a success. You know, we're selling like $1.5 million a month in that line. And it's a brand-new line. It's like a year and a half old.

And in terms of -- then if you need to invest in your business, I know you guys guided for between $15 million to $20 million of CapEx, with $8 million being maintenance. Would that be enough to cover all of your needs through 2017? Or this is just primarily your investment? I just kind of wanted to get a sense of, too, where are you at in terms your capacity utilization, and how --?

With the CapEx -- this is Christian. With the CapEx that we are taking this year, we will have enough money to continue to grow in 2017 at a 20% rate.

Okay, got it. Perfect. I think that's all I have. Thank you very much, guys.

Carlos Rodriguez, Creditor Capital.

I have a couple of questions. The first one is: could you give us some details on the tax provision for the fourth-quarter 2015 year, please?

Yes, the nominal tax rate for 2015 was 39%, and the effective tax rate is around 41% to 42%. Now, while you see that, you have to take into account one of the entities that has been consolidated, which is Tecnoglass Inc. in the US, holds all the warrants. And the large loss that we have on the warrant, which is a non-cash item, is non-deductible under the tax provision that we have to set in Colombia. So to calculate that, you have to exclude the loss from the warrant provision from -- on other expenses that the Tecnoglass Inc. stand-alone has.

Okay, thank you. And regarding Colombia, and especially the social housing programs that the government is carrying out, maybe at some point do you benefit from this project or not at all?

Of course we do. That's why we designed the line Ecomax, which -- it means economy and maximum performance. It's a lower line with -- it's the only line in Colombia that actually meets code. The problem is that in Colombia, nobody enforces the code. So people get by with selling flawed products. We don't do that. We sell a product that is good; it's great. It has the performance and it has the guarantee from us.

Okay. And my last question is regarding the (technical difficulty) in Colombia started to change. What is your assessment so far of this dual listing? And are you comfortable with the capital structure that you have right now, or should we expect an equity issuance in the midterm?

Well, if we don't need to buy anything or do anything else, we don't think we need any more money to grow. We can grow with the cash flow and the $26 million that we have left on the credit line. And we're really good.

I mean, we are -- listen, our competition buys two companies for $220 million to gain $60 million more in sales, and we do that without any money. So I don't believe we need to buy anybody. We are growing organically. We are doing really good. We expect that 2016 good year, and even 2017 -- we're close to selling the total of 2017 too. We are very happy; we are very optimistic.

Okay, thank you, gentlemen. That's all I have.

Thank you. I'd like to turn the floor back over to Mr. Daes for any closing remarks.

Well, as I said to Carlos Rodriguez, we are very optimistic. And we see a strong demand for our products in other states, which means that we can keep growing even if the total demand in the US goes down.

And we thank you for participating in today's call and for your continued interest in Tecnoglass. And I look forward to speaking with any of you soon. You can call me; you can reach me anytime. And keep expecting the best! We're doing great.

Thank you. This concludes today's conference. You may disconnect your lines and have a wonderful day.