Business Context and Reporting Period
Loma Negra Compania Industrial Argentina Sociedad Anonima, a leading cement and construction materials producer in Argentina and Paraguay, reported its financial results for the third quarter ended September 30, 2019. The filing, submitted on November 8, 2019, highlights operations amidst Argentina's hyperinflationary environment, requiring the application of IAS 29 accounting standards. The company operates in segments including cement, concrete, railroad, and aggregates.
Key Financial Metrics
- Net Revenues: Ps. 9.2 billion (US$ 172 million), down 7.6% year-over-year.
- Adjusted EBITDA: Ps. 2.6 billion (US$ 52 million), up 2.7% year-over-year.
- Adjusted EBITDA Margin: Expanded 289 basis points to 28.8% (29.5% excluding non-recurrent costs).
- Net Income: Ps. 50 million (US$ -8 million), reflecting a net loss in USD terms due to foreign exchange impacts.
- Net Debt: Ps. 9.1 billion (US$ 157 million) as of September 2019.
- Leverage Ratio: Net Debt to LTM Adjusted EBITDA ratio of 0.87x.
- Operating Cash Flow: Ps. 3.6 billion.
- Capital Expenditures: Ps. 3.1 billion, primarily for the L'Amalí expansion.
Material Changes vs. Prior Period
Revenue declined 7.6% year-over-year, driven by a 37.7% drop in the Concrete segment due to a 33.9% volume contraction as new projects were delayed. Argentine cement volumes fell 7.5%, though pricing remained healthy. Conversely, the Aggregates segment saw a 2.0% revenue increase driven by favorable volumes. Despite revenue pressure, Adjusted EBITDA grew 2.7% due to margin expansion and cost control measures. Gross margin expanded 368 basis points to 26.6%, aided by prior footprint-adequacy efforts. Net financial expenses increased to Ps. 332 million, and foreign exchange losses rose to Ps. 1.51 billion, turning a prior year USD profit into a USD loss for the quarter.
Guidance, Outlook, and Risks
Management expects the L'Amalí expansion plant to be completed and start up in the second quarter of 2020. The company remains focused on productivity gains and leveraging its market leadership while awaiting policy clarity from the new Argentine administration to reestablish financial stability. Key risks include Argentina's high inflation, peso exchange rate fluctuations, changes in construction demand, and raw material/energy price volatility. The filing includes standard forward-looking statement disclaimers regarding these uncertainties.
Investor Verification Checklist
- Verify the impact of IAS 29 hyperinflation accounting adjustments on reported figures versus underlying operational performance.
- Confirm the timeline and capital requirements for the L'Amalí plant expansion scheduled for 2Q20 completion.
- Monitor the trajectory of the Argentine construction sector and new project approvals affecting the Concrete segment.
- Assess the sustainability of the 28.8% Adjusted EBITDA margin given the 7.6% revenue decline.
- Review the company's exposure to foreign exchange losses and the stability of the Net Debt/EBITDA ratio at 0.87x.