Business Context and Reporting Period
Loma Negra Compania Industrial Argentina Sociedad Anonima (Loma Negra) is an Argentine industrial company operating in cement, concrete, railroad, and aggregates sectors. This Form 6-K, filed on August 16, 2020, discloses the company's financial results for the second quarter of 2022 (ended June 30, 2022). The financial information is prepared in accordance with IFRS, specifically applying IAS 29 for hyperinflationary economies, though the presentation also includes figures excluding IAS 29 for comparison.
Key Financial Metrics
- Net Revenues: Ps. 25.3 billion (US$ 204 million), an increase of 8.0% year-over-year (YoY) in local currency and 38.7% in US dollars.
- Adjusted EBITDA: Ps. 7.3 billion (US$ 63 million), up 2.6% YoY in local currency and 31.7% in US dollars.
- Net Profit: Ps. 2.4 billion (attributable to owners), a significant improvement from a loss of Ps. 2.0 billion in 2Q21.
- Margins: Consolidated Adjusted EBITDA margin was 29.0% (down 151 bps YoY); Gross margin was 28.1% (down 205 bps YoY).
- Liquidity and Debt: Cash and cash equivalents totaled Ps. 13.3 billion against total debt of Ps. 13.6 billion, resulting in Net Debt of Ps. 0.3 billion (US$ 2 million). The Net Debt to LTM Adjusted EBITDA ratio is 0.01x.
- Cash Flow: Operating cash flow reached Ps. 1.9 billion, compared to Ps. -45 million in 2Q21. Capital expenditures were Ps. 1.1 billion.
Material Changes vs. Prior Period
- Volume Growth: Cement, masonry, and lime volumes expanded 19.3% YoY. Aggregates volumes surged 64.7%, and concrete volumes rose 26.3%.
- Revenue Drivers: Aggregates revenue jumped 105.2% YoY due to volume and pricing. Concrete revenue increased 27.5% YoY. Cement revenue grew 6.2% YoY, driven by volume despite softer pricing dynamics.
- Profitability Shifts: While Adjusted EBITDA grew, margins contracted in Cement (down 155 bps) and Railroad (down 144 bps) due to lower pricing and higher energy costs. Conversely, Concrete margins improved 371 bps to -3.1%, and Aggregates margins improved 203 bps to 9.7%.
- Financial Items: Net financial expenses improved by Ps. 203 million YoY due to lower interest rates relative to inflation. Foreign exchange losses of Ps. 398 million replaced a gain of Ps. 317 million in the prior year.
Outlook, Risks, and Management Commentary
- Outlook: Management expects the positive trend in cement demand to continue, noting that the first seven months of 2022 surpassed initial expectations. However, they cite local political and macroeconomic conditions as significant challenges adding uncertainty.
- Dividends: The company returned value to shareholders with a dividend of Ps. 5.2 billion (Ps. 8.8 per share) in 2Q22 and an additional US$ 81 million dividend paid in July 2022.
- Risks: Key risks include changes in general economic and political conditions in Argentina, inflation rates, peso exchange rate fluctuations, construction demand levels, and raw material/energy prices. The global energy crisis is noted as a sector-wide challenge.
- Unusual Items: The filing highlights the application of IAS 29 for hyperinflationary accounting, which restates results to adjust for changes in purchasing power. Figures in US dollars are derived from pre-IAS 29 peso figures using average exchange rates.
Investor Verification Checklist
- Verify the specific exchange rates used to convert Argentine pesos to US dollars, as the filing notes these are for convenience and based on average rates excluding IAS 29 adjustments.
- Confirm the sustainability of the 19.3% volume growth in the cement segment given the noted "softer pricing dynamic."
- Assess the impact of the global energy crisis on future energy input costs, which contributed to margin contraction in the cement segment.
- Review the company's ability to maintain dividend payouts given the volatile macroeconomic environment in Argentina.
- Monitor the "Net Debt" position, which is currently near zero, to ensure liquidity remains robust amidst potential currency fluctuations.