Loma Negra 2Q22 Financial Summary
Business Context and Reporting Period
This Form 6-K filing reports the unaudited financial results for Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE: LOMA) for the three-month and six-month periods ended June 30, 2022. The company is Argentina's leading cement producer, operating vertically integrated segments including cement, concrete, aggregates, and railroad logistics. The filing was released on August 11, 2022.
Key Financial Metrics
Revenue and Profitability (Three Months Ended June 30, 2022):
- Net Revenue: Ps. 25,268 million (US$ 204 million), an 8.0% increase year-over-year (YoY).
- Adjusted EBITDA: Ps. 7,328 million (US$ 63 million), a 2.6% increase YoY.
- Adjusted EBITDA Margin: 29.0%, a contraction of 151 basis points YoY.
- Net Profit: Ps. 2,413 million (US$ 55 million), compared to a loss of Ps. 2,075 million in 2Q21.
- Earnings Per Share (EPS): Ps. 4.2517, compared to a loss of Ps. 3.3967 in 2Q21.
Balance Sheet and Liquidity:
- Net Debt: Ps. 305 million (US$ 2 million), a significant reduction from Ps. 4,073 million in 2Q21.
- Net Debt / LTM Adjusted EBITDA: 0.01x (improved from 0.12x in 2Q21).
- Cash and Cash Equivalents: Ps. 13,293 million as of June 30, 2022.
- Operating Cash Flow: Ps. 1,971 million for the quarter, compared to Ps. -45 million in 2Q21.
Material Changes vs. Prior Period
Operational Volume Growth: Cement, masonry, and lime sales volumes increased 19.3% YoY to 1.67 million tons, driven by bulk cement demand. Aggregates volumes surged 64.7% YoY, and Concrete volumes rose 26.3% YoY.
Profitability Drivers: The shift from a net loss to a net profit of Ps. 2,413 million was primarily driven by a lower tax burden in 2Q22 compared to 2Q21 (where a higher income tax rate applied) and improved operating results. Gross profit remained relatively flat (+0.6%) despite revenue growth, as cost of sales increased 11.2% due to higher volumes and depreciation from the new L'Amalí production line.
Margin Compression: Adjusted EBITDA margin contracted to 29.0% from 30.5% YoY. This was attributed to margin compression in the core Cement segment and a higher mix of lower-margin businesses (Concrete and Aggregates) as their activity levels increased.
Guidance, Outlook, and Management Commentary
Management Outlook: CEO Sergio Faifman described 2Q22 as the "best second quarter in history" for the cement market, with the company on track to set a new historical dispatch record for the year. Management highlighted operational flexibility in facing global energy crises and local economic uncertainty.
Dividends: The company resumed dividend payments, distributing Ps. 5,150 million in June (Ps. 8.80 per share). Additionally, on July 1, 2022, the board approved a further dividend of Ps. 10,300 million (Ps. 17.59 per share), bringing total 2022 distributions to approximately US$ 126 million.
Capital Allocation: The completion of the L'Amalí Plant expansion has reduced immediate capital expenditure needs. The company maintains a focus on high profitability and shareholder value maximization.
Risks: The filing includes standard forward-looking statement disclaimers regarding risks such as changes in Argentine economic conditions, inflation rates, exchange rate fluctuations, and construction demand levels.
Investor Verification Checklist
- Verify the impact of IAS 29 (inflation accounting) on reported figures, as some tables exclude this impact for USD comparison.
- Confirm the sustainability of the 19.3% volume growth in cement given the cyclical nature of the construction sector in Argentina.
- Monitor the trajectory of the Adjusted EBITDA margin, which contracted despite volume growth, to assess pricing power vs. input cost inflation.
- Review the currency composition of debt (57.6% USD) against the company's revenue generation in Pesos to assess foreign exchange exposure.
- Validate the cash flow generation capability to support the resumed dividend policy, totaling over Ps. 15 billion in 2022.