Loma Negra Compania Industrial Argentina Sociedad Anonima - 3Q20 Financial Summary
Business Context and Reporting Period
This Form 6-K filing, dated November 10, 2020, reports the financial results for Loma Negra, the leading cement producer in Argentina, for the three-month and nine-month periods ended September 30, 2020 (3Q20). The company operates in cement, masonry, lime, concrete, aggregates, and railroad segments. Financial figures are presented in Argentine Pesos (Ps.) and U.S. Dollars (US$), with some data adjusted for inflation under IAS 29.
Key Financial Metrics
| Metric | 3Q20 (Ps. Millions) | 3Q19 (Ps. Millions) | YoY Change |
|---|---|---|---|
| Net Revenue | 10,756 | 11,260 | -4.5% |
| Adjusted EBITDA | 3,389 | 3,037 | +11.6% |
| Adjusted EBITDA Margin | 31.5% | 27.0% | +454 bps |
| Net Profit | 6,449 | 83 | +7,715.7% |
| Net Profit (Continuing Ops) | 2,245 | (180) | N/A |
| Net Debt | 1,454 | 12,380 | -88.3% |
| Net Debt / LTM Adj. EBITDA | 0.12x | 1.05x | -0.93x |
Cash Flow (3Q20): Operating cash flow was Ps. 3,337 million. Investing activities generated Ps. 5,906 million, primarily due to the sale of the Paraguayan subsidiary. Financing activities used Ps. 9,994 million, largely for debt repayment.
Material Changes vs. Prior Period
- Revenue Mix: While total revenue declined 4.5% YoY, the core Cement, Masonry, and Lime segment revenue increased 5.3% driven by volume growth (2.9%) and pricing. Conversely, Concrete revenue plummeted 75.5% and Railroad revenue dropped 29.8% due to lockdowns and reduced demand for frac-sand and construction materials.
- Profitability: Adjusted EBITDA margin expanded significantly to 31.5% due to cost control and higher cement sales. However, the Concrete and Aggregates segments reported negative Adjusted EBITDA margins of -16.6% and -31.9%, respectively.
- Discontinued Operations: Net profit was heavily influenced by Ps. 4,204 million in income from discontinued operations resulting from the sale of the company's 51% stake in Yguazú Cementos S.A. (Paraguay).
- Impairments: A non-cash impairment loss of Ps. 851 million was recorded for property, plant, and equipment in the Railway and Aggregates segments due to changed business perspectives.
- Balance Sheet: Net debt decreased drastically by 88.3% to Ps. 1,454 million, driven by proceeds from the Paraguay divestment and strong operating cash flow.
Guidance, Outlook, and Management Commentary
- Operational Outlook: Management notes a "two-speed" demand environment. The Bag cement segment is recovering strongly (+18% YoY volume) driven by household demand, while Bulk cement, Concrete, and Aggregates remain suppressed by low execution of large public and private works due to COVID-19 lockdowns.
- Capital Projects: The L'Amalí expansion project, a key strategic initiative adding 2.7 million tons of annual capacity, is on track with 90% completion of civil and electromechanical works. Startup is expected in early 2021, though pandemic-related delays remain a risk.
- Dividends: The Board approved an extraordinary cash dividend of Ps. 2,400 million (Ps. 4.027 per share), fully distributed by the filing date, funded by the Paraguay sale proceeds.
- Risks: Key risks include the ongoing impact of the COVID-19 pandemic on construction activity, inflation rates, exchange rate fluctuations, and potential delays in the L'Amalí project startup.
Investor Verification Checklist
- Quality of Earnings: Verify the sustainability of Net Profit by excluding the Ps. 4,204 million one-time gain from the Paraguay divestment; continuing operations profit was Ps. 2,245 million.
- Segment Performance: Assess the divergence between the recovering Bag cement segment and the struggling Bulk/Concrete/Aggregates segments to gauge future revenue stability.
- Debt Structure: Confirm the currency composition of the remaining debt (84% USD, 16% EUR) and the average duration (0.8 years) to evaluate refinancing risks.
- Capital Expenditure: Monitor the L'Amalí expansion progress and total capital expenditure (originally estimated at US$350 million) against the timeline for early 2021 startup.
- Impairment Details: Review the specific rationale and future outlook for the Railway and Aggregates segments that triggered the Ps. 851 million impairment charge.