Business Context and Reporting Period
Company: Loma Negra Compania Industrial Argentina Sociedad Anonima (Loma Negra Corporation)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Three months ended March 31, 2022 (Q1 2022)
Filing Date: May 24, 2022
Business Overview: The Group manufactures and sells cement, masonry cement, lime, and concrete, and operates a rail freight network through its subsidiary Ferrosur Roca S.A. Operations are primarily located in Argentina. The financial statements are unaudited, expressed in thousands of Argentine pesos (ARS), and prepared in accordance with IFRS.
Key Financial Metrics
| Metric (in thousands ARS) | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenues | 19,309,788 | 20,436,019 |
| Gross Profit | 6,442,811 | 7,407,343 |
| Net Profit for the Period | 3,134,142 | 3,982,505 |
| Net Profit Attributable to Owners | 3,168,431 | 4,033,725 |
| Earnings Per Share (Basic & Diluted) | 5.41 ARS | 6.77 ARS |
| Net Cash from Operating Activities | 2,306,666 | 4,542,867 |
| Total Assets | 120,603,114 | 125,984,668 |
| Total Liabilities | 33,882,457 | 42,874,813 |
| Shareholders' Equity | 86,720,657 | 83,109,855 |
| Total Borrowings (Debt) | 992,748 | 2,914,678 |
| Cash and Cash Equivalents | 3,015,302 | 6,765,815 |
Liquidity & Solvency: The liquidity ratio improved to 1.38 (from 0.97 in Q1 2021), and the solvency ratio increased to 2.56 (from 1.94). The net debt to equity ratio is negative at -0.05, indicating a net cash position.
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by approximately 5.5% to 19.3 billion ARS compared to Q1 2021. This decline is largely attributed to the restatement of figures in constant currency and the deconsolidation of Yguazu Cementos S.A. operations in the prior year comparison.
- Profitability: Net profit decreased by 21% to 3.13 billion ARS. Gross profit margin compressed due to inflationary pressures on costs, though the company maintained positive margins.
- Debt Reduction: Total borrowings decreased significantly by 66% (from 2.91 billion to 0.99 billion ARS) due to substantial principal repayments of 2.58 billion ARS during the quarter.
- Cash Flow: Net cash generated from operating activities dropped by 49% to 2.31 billion ARS, primarily driven by increased inventory levels and changes in working capital.
- Segment Performance: The Cement segment remained the primary revenue driver (16.2 billion ARS), while the Railroad segment saw revenue growth to 1.55 billion ARS.
Outlook, Risks, and Unusual Items
- Rail Concession Transition: The Ferrosur Roca S.A. railway concession expires in March 2023. The Argentine government has rejected extension requests, mandating a shift to an "open access" model where the state manages infrastructure. The Group intends to continue operating as a rail cargo operator under new regulations, though specific terms and fee structures are still being negotiated.
- Dividend Payment: On April 14, 2022, the Board approved a cash dividend of 5.15 billion ARS (approx. 8.80 ARS per share), paid in April 2022. Shareholders had the option to receive payment in USD.
- New Financing: On April 24, 2022, the company secured a new loan of USD 56 million from the Industrial and Commercial Bank of China (Dubai Branch) at LIBOR + 8%, guaranteed by InterCement up to 51%.
- Macroeconomic Risks: The filing highlights high inflation in Argentina (50.94% in 2021) and fiscal deficits. The company notes that while economic activity grew in 2021, it remains below 2019 levels. Future performance depends on the resolution of macroeconomic challenges.
- Treasury Stock: The company continued its share repurchase program, acquiring 10.6 million treasury shares for a total of 3.37 billion ARS as of March 31, 2022.
Key Facts for Investor Verification
- Currency Impact: Verify the impact of Argentine inflation and exchange rate fluctuations on the reported ARS figures, as the company operates in a high-inflation environment requiring constant currency restatements.
- Railway Regulatory Status: Monitor the progress of negotiations with the Argentine National State regarding the post-March 2023 rail operator contract terms and infrastructure usage fees.
- Debt Maturity: Confirm the repayment schedule for the remaining foreign currency borrowings (primarily USD) and the impact of the new USD 56 million loan on future interest obligations.
- Dividend Sustainability: Assess the company's ability to maintain dividend payouts given the reduction in net profit and the significant cash outflow for the recent dividend payment.
- Inventory Levels: Review the increase in inventory (both current and non-current) to ensure it aligns with production demand and does not indicate obsolescence or working capital inefficiency.