Business Context and Reporting Period
Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE: LOMA), the leading cement producer in Argentina, reported financial results for the three-month and nine-month periods ended September 30, 2021. The filing, submitted on November 11, 2021, details the company's operational recovery, capital allocation strategies, and financial performance under IAS 29 (inflation accounting) and non-IAS 29 metrics.
Key Financial Metrics
| Metric | 3Q 2021 (Ps. Millions) | 3Q 2020 (Ps. Millions) | 9M 2021 (Ps. Millions) | 9M 2020 (Ps. Millions) |
|---|---|---|---|---|
| Net Revenue | 17,800 | 16,399 | 49,370 | 38,842 |
| Adjusted EBITDA | 4,696 | 5,167 | 15,161 | 11,713 |
| Adjusted EBITDA Margin | 26.4% | 31.5% | 30.7% | 30.2% |
| Net Profit | 1,490 | 9,833 | 3,220 | 11,538 |
| Net Debt | (330) | 2,587 | (330) | 2,587 |
| Net Debt / LTM EBITDA | -0.02x | 0.27x | -0.02x | 0.27x |
| Operating Cash Flow | 5,391 | 5,389 | 8,912 | 10,112 |
Note: Figures in Pesos (Ps.) are inflation-adjusted per IAS 29. In USD terms (excluding IAS 29), 3Q21 Adjusted EBITDA was $51 million.
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 8.5% year-over-year (YoY) in 3Q21, driven by a 110.8% volume surge in Concrete, 8.4% growth in Cement, and 8.2% growth in Railway segments.
- Profitability Decline: Net profit dropped 84.9% YoY to Ps. 1,490 million. This sharp decline is primarily attributed to a one-time gain of Ps. 6,411 million in 3Q20 from the divestment of Yguazú Cementos in Paraguay, which is absent in the current period.
- Margin Compression: Adjusted EBITDA margin decreased 512 basis points to 26.4% in 3Q21. Management cited the normalization of seasonal winter costs (energy and maintenance) which were abnormally low in 3Q20 due to the pandemic.
- Balance Sheet Strength: The company moved from a net debt position of Ps. 2,587 million in 3Q20 to a net cash position of Ps. 330 million in 3Q21, resulting in a negative Net Debt/EBITDA ratio of -0.02x.
Outlook, Management Commentary, and Risks
Management Commentary
CEO Sergio Faifman highlighted the consolidation of cement demand near historical highs and world-class profitability margins. He noted that the L'Amalí expansion project began shipping cement in October 2021, with full operational benefits expected in coming quarters. The project adds 2.7 million tons of annual capacity and is expected to enhance sustainability and operational efficiency.
Capital Allocation
- Share Repurchase: The company initiated a third share repurchase program on September 28, 2021, with a maximum budget of Ps. 700 million. As of November 10, 2021, Ps. 465 million (66.5%) had been utilized.
- CapEx: Capital expenditures for the L'Amalí expansion totaled Ps. 552 million in 3Q21, representing 36% of total CapEx.
Risks and Contingencies
- Seasonality: Margins are subject to seasonal fluctuations due to winter energy costs and scheduled maintenance.
- Macroeconomic Factors: The company faces risks related to Argentine inflation, exchange rate fluctuations, and changes in construction demand.
- Discontinued Operations: Future comparisons may be skewed by the absence of the 2020 gain from the Paraguay divestment.
Investor Verification Checklist
- IAS 29 Impact: Verify the distinction between inflation-adjusted (IAS 29) and non-adjusted figures, as the filing presents both to show real economic performance versus accounting adjustments.
- One-Time Items: Confirm that the 84.9% drop in Net Profit is driven by the absence of the 2020 Paraguay divestment gain rather than operational deterioration.
- L'Amalí Expansion: Monitor the ramp-up of the new L'Amalí production line to ensure it delivers the projected volume and margin improvements in Q4 2021 and beyond.
- Currency Exposure: Review the debt composition (83.2% USD-denominated) against revenue generation to assess exposure to Argentine peso volatility.
- Share Repurchase Progress: Track the execution of the Ps. 700 million buyback program to gauge management's confidence in current valuation.