Loma Negra Compania Industrial Argentina Sociedad Anonima current report, Q1 FY2023

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Business Context and Reporting Period

Loma Negra Compania Industrial Argentina Sociedad Anonima (NYSE: LOMA), Argentina's leading cement producer, reported financial results for the fourth quarter and full fiscal year ended December 31, 2022. The filing, submitted on March 8, 2023, covers operations in cement, masonry, lime, concrete, aggregates, and railroad logistics. The company operates in a high-inflation environment, with financial statements prepared under IAS 29 (hyperinflationary accounting), though certain comparative figures are presented in U.S. dollars excluding IAS 29 effects.

Key Financial Metrics

Revenue and Profitability

  • 4Q22 Net Revenue: Ps. 36,763 million (US$ 215 million), a 2.0% decrease year-over-year (YoY) in local currency.
  • FY22 Net Revenue: Ps. 145,133 million (US$ 835 million), a 1.1% increase YoY.
  • 4Q22 Adjusted EBITDA: Ps. 13,173 million (US$ 91 million), up 5.4% YoY in adjusted pesos and 42.7% YoY in dollars.
  • FY22 Adjusted EBITDA: Ps. 43,345 million (US$ 289 million), down 3.8% YoY in adjusted pesos but up 34.3% YoY in dollars.
  • 4Q22 Net Profit: Ps. 7,452 million, a 36.9% increase YoY.
  • FY22 Net Profit: Ps. 1,807 million, a significant 85.4% decrease YoY.
  • Margins: 4Q22 Adjusted EBITDA margin expanded to 35.8% (up 252 bps YoY). FY22 Adjusted EBITDA margin contracted to 29.9% (down 152 bps YoY).

Debt and Liquidity

  • Net Debt (Dec 31, 2022): Ps. 15,859 million (US$ 90 million).
  • Net Debt / LTM Adjusted EBITDA: 0.37x (improved from -0.12x in 2021).
  • Cash and Equivalents: Ps. 4,911 million as of year-end.
  • Operating Cash Flow (FY22): Ps. 31,362 million, an increase from Ps. 29,316 million in FY21.

Material Changes vs. Prior Period

  • Revenue Mix: While Cement revenue declined 4.8% in 4Q22 due to softer price dynamics, Concrete revenue surged 29.4% and Aggregates revenue jumped 44.5%, driven by volume growth of 17.5% and 30.1% respectively.
  • Cost Pressures: Cost of sales increased 10.1% in 4Q22, driven by higher thermal energy costs and maintenance expenses, compressing Gross Profit margins by 810 basis points to 26.5%.
  • Unusual Items: 4Q22 results were significantly boosted by the sale of a non-strategic property in Olavarría, contributing Ps. 3,357 million to "Other Gains and Losses." Excluding this one-time gain, Adjusted EBITDA would have decreased 21% YoY.
  • Financial Expenses: Net financial costs for FY22 were Ps. 17,609 million compared to a net gain of Ps. 83 million in FY21, primarily due to the cancellation of foreign currency debt with local funding and increased total debt.

Guidance, Outlook, and Risks

Management highlighted that 2022 was a year of challenges and opportunities, with record cement shipments (nearly 13 million tons) driven by GDP growth and construction activity. The CEO emphasized a continued focus on capacity investment and efficiency.

  • Dividends: The company approved a 4Q22 dividend of Ps. 3,500 million (Ps. 6.00 per share). Total FY22 dividends distributed were Ps. 15,450 million.
  • Share Repurchases: The company repurchased Ps. 1,263 million of shares in 2022. A specific repurchase plan (Program V) was terminated after utilizing Ps. 735 million.
  • Recent Financing: On February 22, 2023, the company issued Ps. 25.6 billion in domestic bonds with an 18-month maturity and interest rate of BADLAR + 2%.
  • Risks: The filing includes standard forward-looking statement disclaimers citing risks related to Argentina's economic and political conditions, inflation rates, exchange rate fluctuations, and changes in construction demand.

Investor Verification Checklist

  • Impact of One-Time Gains: Verify the sustainability of 4Q22 profitability by analyzing Adjusted EBITDA excluding the Ps. 3,357 million property sale gain.
  • Currency Translation Effects: Distinguish between performance in local pesos (IAS 29 adjusted) and U.S. dollars (non-IAS 29) to understand the true operational growth versus currency devaluation impacts.
  • Debt Structure: Review the composition of debt (52.2% USD, 47.8% ARS) and the short average duration (0.7 years) to assess refinancing risks in a high-interest environment.
  • Margin Compression: Investigate the drivers behind the 810 bps contraction in 4Q22 Gross Profit margin, specifically the impact of thermal energy costs versus pricing power.
  • Segment Performance: Confirm the divergence between the declining Cement segment and the rapidly growing Concrete and Aggregates segments to assess future revenue mix shifts.