Vulcan Materials Will Incur Signficant Losses in 2022
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Vulcan Materials Will Incur Signficant Losses in 2022

Photo by:   Kefentse Molotsane
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Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Thu, 06/02/2022 - 11:55

Vulcan Materials announced that due to the closure of its subsidiary Sac-Tun's La Rosita property and the suspension of its customs permit, the company expects to suffer significant losses in 2022. Furthermore, Vulcan stressed that it is seeking to take action through all domestic and international legal channels to resume operations as soon as possible.

In a report, Vulcan explained that if the company's issues with the government are not resolved, Vulcan is expected to lose between US$80 and US$100 million in 2022, which represents around 5 percent of its EBITDA. Previously, the company announced that it expected to reach between US$1.72 and US$1.82 billion in earnings before interest, taxes, depreciation and amortization.

The company explained that the main contributors to the company's monetary losses are the government's closure of its only limestone extraction property on May 5 and the suspension of its customs permit to export material from the Punta Venado dock on May 13. Mexican authorities indicated that these actions were taken because Vulcan did not comply with an agreement they reached, where the company had promised to stop its activities in exchange for resources to transform its facilities into a tourist attraction. However, Vulcan said that the government's actions were arbitrary and illegal, since the company respected the permits and agreements that they have held for years and remain in force. 

“The company intends to vigorously pursue all available legal avenues to protect its rights, both under Mexican and international law, and to resume normal operations as soon as possible. Moreover, if the court grants us the requested injunctions, we could resume normal operations, including the extraction, processing and export of materials,” said the company in a statement. 

Vulcan Materials has mined limestone in Quintana Roo, Mexico since 1986. However, in 2018, the company initiated arbitration against Mexico under the USMCA due to the revocation of its port concessions. The company explained that this revocation closed its operations and generated significant monetary losses, so it requested a compensation of US$500 million. According to the company, the Mexican government's actions were unilateral and violated existing agreements. For its part, the Mexican government has proposed several alternatives for the company to make use of the concession without resorting mining, since this would harm the ecosystem.

“We offered to facilitate the port of Calica, which is great for cruise ships. We also offered them an alternative tourism project because we will no longer allow material to be extracted. If an agreement is not reached, we will also go to national and foreign courts,” López Obrador said.

On May 23, López Obrador received Thomas Hill, CEO, Vulcan Materials, after tension between the company and the Mexican government escalated following the latter’s accusation that the company extracts and exports limestone to the US without the required permits. However, no agreement was reached.

Photo by:   Kefentse Molotsane

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