Tecnoglass and Saint-Gobain Form Strategic Joint Venture Agreement

Tecnoglass Inc. of Barranquilla, Colombia, has entered into a joint venture agreement with Saint-Gobain through the planned purchase of a minority ownership interest in Saint-Gobain’s Colombian subsidiary Vidrio Andino. The subsidiary has annualized sales of approximately $100 million.

Vidrio Andino has been selling glass in Colombia and the region since 1997 and began production at its manufacturing facility located near Bogotá, Colombia in 2013. It has been a main supplier of float glass to Tecnoglass since then.

Vidrio Andino also plans to build a new glass manufacturing facility in Galapa, which is located approximately 12 miles from Tecnoglass’ existing production facilities. The new facility will have nominal production capacity of approximately 750 metric tons per day of float glass. Upon the expected completion of the new Galapa facility in 2021, Tecnoglass anticipates it will benefit from:

• Access to ample float glass supply for anticipated growth, with Vidrio
Andino more than doubling its float glass production nominal capacity;

• Reduced purchasing costs through expanded scale in its float glass procurement, elimination of raw material waste and lower inbound transportation costs given Galapa’s closer proximity to Barranquilla; and

• Control of nearly its entire production process, driving increased efficiency to provide enhanced service and improved lead times to customers.

The company’s investment for the minority interest in Vidrio Andino is
approximately $45 million, which is expected to be funded with cash of approximately $34 million plus land contributed at an aggregate value of approximately $11 million. Tecnoglass intends to fund the cash portion of the transaction with cash on its balance sheet and readily available lines of credit, while maintaining a pro forma net leverage position in line with recent quarters. The transaction is expected to be completed in the second quarter of 2019.

The initial $45 million investment into the joint venture from Tecnoglass
will be used to fund a portion of the construction cost for the new manufacturing facility near Barranquilla, which is expected to total approximately $160 million through 2022.

As part of this partnership, Tecnoglass and Vidrio Andino signed a long-term procurement contract stipulating the supply of glass from this float. Saint-Gobain already operates one float in Colombia, in Soacha, near Bogota. According to Saint-Gobain, this investment is
in line with the group’s strategy of expanding its presence in emerging countries and is an opportunity to consolidate and strengthen its long-term position in the region, especially given the geographical junction between the South American and North American markets.

U.S. Pauses Tariff Increase on Chinese Products

The United States did not raise the tariff rate on $200 billion worth of Chinese products to 25 percent on January 1, 2019 as previously planned, but the rate could be raised in March. Currently, tariffs are at the current 10-percent rate imposed on September 24, 2018. If a deal is not negotiated between the U.S. and Chinese governments by the end of March 1, 2019, then the tariff rate will rise to 25 percent on March 2, 2019 according to U.S. Trade Representative Robert Lighthizer.

The tariff list includes:

• Various float glass products

• Glass mirrors

• Glass frit

• Laminated safety glass

• Glass in the mass of fused quartz or other  infused silica; and

• Enamels, glazing, pigments, colors and lusters for the glass industries.

Base metal door closers suitable for buildings, base metal automatic door closers and base metal parts are also affected. Base metal, other than iron, steel, aluminum or zinc, mountings and fittings suitable for buildings are also included in the tariffs.

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