Business Context and Reporting Period
Company: Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE: LOMA)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Second Quarter (Three months ended June 30, 2021) and First Half (Six months ended June 30, 2021).
Business Overview: Loma Negra is the leading cement producer in Argentina, operating a vertically integrated business model producing cement, masonry cement, aggregates, concrete, and lime. The company also operates a railroad segment.
Key Financial Metrics (2Q21)
| Metric | 2Q21 (Ps. Millions) | 2Q21 (US$ Millions) | YoY Change |
|---|---|---|---|
| Net Revenue | 14,269 | 147 | +46.6% |
| Adjusted EBITDA | 4,354 | 48 | +74.1% |
| Adjusted EBITDA Margin | 30.5% | 32.4% (ex-IAS 29) | +483 bps |
| Net Profit (Loss) | (1,265) | 49 (ex-IAS 29) | Loss vs. Profit |
| Net Debt | 2,484 | 26 | -86.8% |
| Net Debt / LTM Adj. EBITDA | 0.13x | 0.13x | -1.17x |
Note: Figures in Pesos (Ps.) generally reflect IAS 29 inflation accounting unless specified as "ex-IAS 29". US$ figures exclude IAS 29 impact.
Material Changes vs. Prior Period
- Revenue Growth: Net revenue surged 46.6% YoY to Ps. 14,269 million, driven by a 39.5% volume increase in the core cement segment and strong pricing performance.
- Profitability Expansion: Adjusted EBITDA increased 74.1% to Ps. 4,354 million. Margins expanded by 483 basis points to 30.5% due to operational leverage and higher sales volumes.
- Net Loss Driver: Despite strong operational performance, the company reported a net loss of Ps. 1,265 million. This was primarily caused by a one-off deferred tax charge of approximately Ps. 3.0 billion resulting from a recent Argentine tax reform.
- Debt Reduction: Net debt decreased significantly by 86.8% to Ps. 2,484 million, reducing the leverage ratio to 0.13x from 1.30x in 2Q20.
- Segment Performance:
- Cement: Volumes up 39.5%; Adjusted EBITDA margin expanded to 34.0%.
- Concrete: Volumes up 583.6%, but posted a negative Adjusted EBITDA margin of -6.8% due to soft pricing.
- Railroad: Volumes up 69.2%; margin deteriorated to 4.9% due to product mix.
- Aggregates: Volumes up 620.1%; margin improved to 7.7%.
Guidance, Outlook, and Management Commentary
- Outlook: Management expects strong recovery to continue in the second half of 2021, with expansion vis-à-vis pre-pandemic levels driven by seasonality and public works. However, they remain cautious regarding the macroeconomic context and pandemic uncertainty.
- Expansion Project: The L'Amalí plant expansion is 99% complete. The new kiln was inaugurated in June and is producing clinker. The new cement mill and dispatch center are expected to commission by the end of September 2021. The project aims to add 2.7 million tons of annual capacity.
- Share Repurchase: On July 2, 2021, the company approved a second share repurchase program with a maximum budget of AR$ 975 million (approx. 10% of capital stock). As of August 11, 2021, AR$ 320 million had been utilized.
- Risks: Key risks include changes in general economic and political conditions in Argentina, inflation rates, exchange rate fluctuations, and changes in construction demand.
Investor Verification Checklist
- Tax Reform Impact: Verify the long-term implications of the Ps. 3.0 billion deferred tax charge on future liquidity and effective tax rates.
- IAS 29 Adjustments: Distinguish between reported figures (IAS 29 adjusted) and operational performance (ex-IAS 29) to accurately assess underlying profitability.
- Debt Maturity: Review the debt profile, noting that 89.7% of total borrowings are short-term and 82.5% are denominated in U.S. dollars, creating exposure to currency fluctuations.
- Capital Expenditure: Confirm the timeline and cost overruns for the L'Amalí plant commissioning (targeted end of September 2021).
- Share Buyback Execution: Monitor the progress of the new AR$ 975 million share repurchase program and its impact on earnings per share.