Business Context and Reporting Period
This Form 6-K filing by Loma Negra Compania Industrial Argentina Sociedad Anonima, dated November 12, 2020, summarizes the company's financial results for the third quarter of 2020 (3Q20). The company operates in the cement, masonry, lime, concrete, railroad, and aggregates sectors in Argentina. Financial information is prepared in accordance with IFRS, specifically applying IAS 29 for hyperinflationary economies, though selected figures are also presented excluding IAS 29 for comparability.
Key Financial Metrics
- Net Revenues: Ps. 10.8 billion (US$ 143 million), a 4.5% decrease year-over-year (YoY).
- Adjusted EBITDA: Ps. 3.4 billion (US$ 48 million), an 11.66% increase YoY.
- Adjusted EBITDA Margin: Expanded 454 basis points to 31.5%.
- Net Profit: Ps. 6,449 million (US$ 113 million), compared to Ps. 83 million in 3Q19.
- Gross Profit Margin: Expanded 225 basis points to 28.0%.
- Cash Position: Ps. 4.7 billion (US$ 61 million) as of September 2020.
- Net Debt: Reduced to Ps. 1.45 billion (US$ 19 million).
- Net Debt to LTM Adjusted EBITDA: 0.12x (down from 1.17x in 2Q20).
- Operating Cash Flow: Ps. 3.4 billion.
Material Changes Versus Prior Period
While consolidated revenues declined 4.5% YoY, the core Cement, masonry, and lime segment grew 5.3% driven by a 2.9% volume increase and favorable pricing. Conversely, the Concrete segment revenue dropped 75.5% and Aggregates dropped 24.4% due to a standstill in large infrastructure projects. Adjusted EBITDA grew 11.6% YoY, primarily due to margin expansion in the cement segment and lower input costs. Net profit surged significantly due to a Ps. 4,204 million gain from the sale of the company's stake in Paraguay operations, alongside a shift from a net financial loss in 3Q19 to a net financial gain in 3Q20.
Guidance, Outlook, and Risks
Management expects the L'Amalí expansion project to start up in early 2021. The outlook indicates a clearer recovery pathway for the industry driven by household and retail demand, though a full economic turnaround remains uncertain. Key risks include Argentina's high inflation, exchange rate fluctuations, and the level of construction activity. The company distributed an extraordinary dividend of Ps. 2.4 billion (US$ 31 million) in October 2020. Forward-looking statements are subject to risks regarding global and local economic conditions, energy prices, and business strategy changes.
Investor Verification Checklist
- Verify the impact of IAS 29 hyperinflation accounting adjustments on reported figures versus underlying performance.
- Confirm the sustainability of the 31.5% Adjusted EBITDA margin given the volatility in the Concrete and Aggregates segments.
- Assess the timeline and capital requirements for the L'Amalí expansion project start-up in early 2021.
- Monitor the exchange rate used for USD conversions and its effect on reported liquidity and debt ratios.
- Review the specific terms and future implications of the Paraguay divestment proceeds.