Business Context and Reporting Period
This Form 6-K filing by Loma Negra Compania Industrial Argentina Sociedad Anonima (Loma Negra) covers the first quarter of 2022 (ended March 31, 2022), with the report filed on May 24, 2022. The company operates in the cement, masonry, lime, concrete, railroad, and aggregates sectors in Argentina. Financial results are reported in accordance with IFRS, specifically applying IAS 29 due to Argentina's classification as a highly inflationary economy. The filing includes "As Reported" figures and selected figures excluding IAS 29 adjustments for comparison.
Key Financial Metrics
- Net Revenues: Ps. 19.3 billion (US$ 171 million), a decrease of 5.5% year-over-year (YoY) in local currency but an increase of 20.2% in US dollars.
- Adjusted EBITDA: Ps. 6.5 billion (US$ 60 million), down 11.2% YoY in local currency but up 13.9% in US dollars.
- Net Profit: Ps. 3.0 billion (As Reported); Net Profit Attributable to Owners was Ps. 3.2 billion.
- Margins: Consolidated Adjusted EBITDA margin was 33.6% (down 214 bps YoY). Gross margin contracted 288 bps to 33.4%.
- Liquidity and Debt: The company maintained a net cash position of Ps. 4.1 billion (US$ 37 million). Total debt was Ps. 1.0 billion. The Net Debt to LTM Adjusted EBITDA ratio was -0.15x.
- Cash Flow: Operating cash generation was Ps. 2.3 billion. Capital expenditures were Ps. 0.6 billion.
Material Changes vs. Prior Period
- Revenue Mix: Cement, masonry, and lime revenues decreased 6.5% YoY despite a 6.6% volume increase, driven by softer pricing. Concrete revenues fell 17.5% YoY due to volume declines following an extraordinary infrastructure project in 1Q21. Conversely, Aggregates revenues surged 89.0% YoY, and Railroad revenues increased 10.8% YoY.
- Profitability: Consolidated gross profit declined 13.0% YoY. Adjusted EBITDA decreased 11.2% in local currency terms. Net Profit Attributable to Owners dropped from Ps. 4.0 billion in 1Q21 to Ps. 3.2 billion in 1Q22.
- Financial Costs: Net financial expenses decreased by Ps. 205 million to Ps. 474 million, attributed to lower average debt and reduced FX depreciation effects relative to inflation. However, the company recorded a foreign exchange loss of Ps. 153 million compared to a gain of Ps. 33 million in the prior year.
- Shareholder Returns: The company paid a US$ 45 million dividend in April 2022 and repurchased shares totaling Ps. 0.6 billion in 1Q22.
Outlook, Risks, and Management Commentary
- Outlook: Management expects sustained growth for 2022, leveraging production capacity and operating efficiency. The company anticipates continued solid momentum in cement demand.
- Risks: Key risks include high inflation rates in Argentina, fluctuations in the peso exchange rate, geopolitical disruptions affecting energy markets, and local political and macroeconomic uncertainties.
- Unusual Items: The filing highlights the impact of IAS 29 accounting rules for hyperinflationary economies, which restates results to adjust for changes in purchasing power. Additionally, the Concrete segment's performance was impacted by a one-off infrastructure project in the prior year.
Investor Verification Checklist
- Verify the specific exchange rates used to convert Argentine pesos to US dollars, as the filing notes figures are for convenience and subject to rounding.
- Confirm the distinction between "As Reported" (IAS 29 adjusted) and "Previously Reported" (non-IAS 29) figures when analyzing year-over-year growth.
- Review the detailed breakdown of the Ps. 153 million foreign exchange loss and its impact on the net monetary position gain.
- Assess the sustainability of the Aggregates segment's 89.0% revenue surge and the Railroad segment's margin improvement.
- Monitor the company's ability to maintain a net cash position amidst high inflation and potential FX volatility in Argentina.