Business Context and Reporting Period
Company: Loma Negra Compania Industrial Argentina Sociedad Anonima (Loma Negra)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2020 (Unaudited)
Business Overview: Loma Negra is an Argentine industrial group primarily engaged in the manufacturing and sale of cement, masonry cement, lime, and concrete. It also operates in aggregates, railroad freight transportation (via Ferrosur Roca S.A.), and industrial waste recycling. The company operates 9 cement factories and 10 concrete plants in Argentina.
Key Financial Metrics (Nine Months Ended Sept 30, 2020)
All figures in thousands of Argentine Pesos (ARS) unless otherwise noted.
| Metric | 2020 (9M) | 2019 (9M) |
|---|---|---|
| Net Revenue | 25,474,779 | 33,011,946 |
| Gross Profit | 7,007,975 | 8,771,349 |
| Net Profit (Continued Ops) | 2,960,429 | 2,903,465 |
| Net Profit (Discontinued Ops) | 4,606,788 | 665,285 |
| Total Net Profit | 7,567,217 | 3,568,750 |
| Operating Cash Flow | 6,631,873 | 6,032,438 |
| Total Borrowings | 6,105,457 | 11,262,180 |
| Cash & Equivalents | 4,651,645 | 1,594,893 |
| Net Debt | 1,453,812 | 9,667,287 |
| Net Debt/Equity Ratio | 0.04 | 0.27 |
Material Changes vs. Prior Period
- Revenue Decline: Net revenue from continued operations decreased by approximately 23% year-over-year, driven by a 16% drop in cement and lime dispatch volumes due to the COVID-19 pandemic and economic contraction in Argentina.
- Discontinued Operations: The Group sold its 51% stake in Yguazú Cementos S.A. (Paraguay) on August 21, 2020. This resulted in a pre-tax gain of 5,182,092 ARS, significantly boosting total net profit for the period.
- Asset Impairment: The company recognized an impairment loss of 850,605 ARS on property, plant, and equipment, specifically affecting the Railroad and Aggregates cash-generating units due to reduced demand and economic uncertainty.
- Debt Reduction: Total borrowings decreased by over 45% (from 11.26B to 6.11B ARS) as the company used proceeds from the Yguazú sale to prepay approximately 8.7B ARS in financial debt.
- Financial Results: Net financial results improved significantly to a positive 402,798 ARS (from a loss of 1.69B ARS in 2019), largely due to exchange rate gains and the reduction in interest-bearing debt.
Guidance, Outlook, and Risks
- Operational Outlook: Management notes a normalization of operations with a strong recovery in the "bagged cement" segment (residential/retail). However, bulk cement, concrete, and aggregates segments have not yet seen significant recovery due to delays in large-scale public and private works.
- Construction Projects: Construction of the L'Amalí II plant in Olavarría was temporarily suspended due to pandemic restrictions but has resumed under strict health protocols.
- Dividend Distribution: A dividend of 2,400,000 ARS was approved on September 30, 2020, and paid on October 14, 2020.
- Key Risks:
- Macroeconomic Environment: High inflation and exchange rate volatility in Argentina continue to impact costs and financial results.
- Regulatory Changes: New tax measures (e.g., PAIS tax) and foreign exchange controls imposed by the Argentine government affect liquidity and repatriation of funds.
- Legal Contingencies: A class action lawsuit regarding the IPO remains partially active in the US District Court of the Southern District of New York, though a partial dismissal was granted in October 2020.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the sustainability of earnings by excluding the one-time gain from the Yguazú Cementos sale (5.18B ARS) to assess core operational profitability.
- Impairment Validity: Review the assumptions used for the 850,605 ARS impairment charge in the Railroad and Aggregates segments to ensure it reflects current market conditions.
- Debt Maturity Profile: Confirm the maturity schedule of the remaining 6.1B ARS in foreign currency debt (primarily USD and EUR) and the company's ability to service it amidst currency fluctuations.
- Volume Recovery: Monitor the recovery rates of bulk cement and concrete sales, which lag behind the retail bagged cement segment.
- Legal Status: Track the status of the US class action lawsuit to assess potential future liabilities.