Business Context and Reporting Period
Company: Loma Negra Compania Industrial Argentina Sociedad Anonima (Loma Negra Corporation)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2021 (Unaudited)
Business Overview: The Group manufactures and sells cement, masonry cement, lime, and concrete, and operates a rail freight network (Ferrosur Roca S.A.) and an industrial waste recycling business. Operations are 100% located in Argentina. The Group operates 8 cement factories and 10 concrete plants.
Key Financial Metrics (Nine Months Ended Sept 30, 2021)
All amounts in thousands of Argentine Pesos (ARS) unless otherwise noted.
| Metric | 2021 (9 Months) | 2020 (9 Months) |
|---|---|---|
| Net Revenues | 49,370,037 | 38,841,706 |
| Gross Profit | 15,075,773 | 10,685,145 |
| Net Profit (Continuing Ops) | 3,219,937 | 4,513,801 |
| Net Profit (Total) | 3,219,937 | 11,537,826 |
| Operating Cash Flow | 8,912,142 | 10,111,699 |
| Total Assets | 93,893,471 | 97,166,016 |
| Total Liabilities | 30,004,986 | 34,999,963 |
| Shareholders' Equity | 63,888,485 | 62,166,053 |
| Net Debt | (329,933) | 2,828,581 |
| Earnings Per Share (Basic/Diluted) | 5.60 | 19.18 |
Material Changes vs. Prior Period
- Revenue Growth: Net revenues increased by approximately 27% year-over-year, driven by a 26% increase in cement and lime dispatch volumes (4.45 million tons vs. 3.54 million tons).
- Profitability Decline: Net profit from continuing operations decreased by 29% compared to the prior year. Total net profit decreased by 72% primarily due to the absence of discontinued operations (sale of Yguazu Cementos S.A.) which contributed 7.02 billion ARS in profit in 2020.
- Impairment Charges: The Group recognized an impairment loss of 141,380 ARS on property, plant, and equipment at the Sierras Bayas plant due to the reallocation of production volumes to the new L'Amalí II plant. This compares to a significantly higher impairment of 1,296,928 ARS in the prior year.
- Debt Reduction: Total borrowings decreased from 8.82 billion ARS to 3.96 billion ARS. The Group achieved a net cash position (negative net debt) of 329,933 ARS, compared to net debt of 2.83 billion ARS in the prior period.
- Tax Impact: Income tax expense increased significantly to 7.55 billion ARS (from 3.31 billion ARS) due to changes in statutory tax rates and the recognition of deferred tax liabilities.
Outlook, Risks, and Management Commentary
- Capital Allocation: The Board approved three treasury stock repurchase plans totaling up to 2.425 billion ARS. As of the filing date, the Company acquired 7.58 million shares for a total value of 1.92 billion ARS to return value to shareholders.
- Expansion: Construction of the new L'Amalí II cement plant in Olavarría is ongoing. The oven and flour mill were inaugurated in Q3 2021 and are in full operation. Total investment in the plant reached 33.24 billion ARS as of September 30, 2021.
- Rail Concession Risk: The Ministry of Transportation rejected the request to extend the Ferrosur Roca S.A. railway concession. The current concession expires on March 10, 2023. The Group intends to continue operations as a freight operator under a new "open access" scheme, though regulations are still pending definition.
- Macroeconomic Context: Argentina faces high inflation (37% for the first nine months of 2021) and foreign exchange restrictions. The Group manages exchange rate risk through approved policy parameters.
- Discontinued Operations: Results from the Paraguayan cement operation (Yguazu Cementos S.A.) are excluded from continuing operations following its sale in August 2020.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the comparability of 2021 results against 2020, noting the 7.02 billion ARS profit from the sale of Yguazu Cementos S.A. is excluded from 2021 continuing operations.
- Railway Concession Status: Monitor the regulatory framework for the "open access" railway scheme post-March 2023 and the Group's ability to maintain market share without the infrastructure concession.
- Inflation and FX Exposure: Assess the impact of Argentine inflation and currency devaluation on the real value of the reported ARS figures and the Group's foreign currency debt (USD/EUR).
- Treasury Stock Plans: Confirm the final execution of the third treasury stock repurchase plan (approved Sept 24, 2021) and its impact on liquidity.
- L'Amalí II Efficiency: Track the operational efficiency and cost savings realized from the new L'Amalí II plant to offset the impairment charges at Sierras Bayas.