Loma Negra C.I.A.S.A. — FY2021 Form 20-F
Business context and reporting period. This is an audited annual report for the fiscal year ended December 31, 2021, not a standalone fourth-quarter filing. Loma Negra produces cement and related construction materials and operates freight rail services, principally in Argentina. Financial statements are IFRS and expressed in Argentine pesos restated for hyperinflation to purchasing power at December 31, 2021; comparisons are on the same constant-currency basis unless noted.
Key financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | Ps. 73.668 billion | Ps. 62.827 billion |
| Gross profit / margin | Ps. 23.284 billion / 31.6% | Ps. 19.014 billion / 30.3% |
| Profit from continuing operations | Ps. 6.344 billion | Ps. 9.439 billion |
| Consolidated net profit | Ps. 6.344 billion | Ps. 17.180 billion |
| Net profit margin | 8.6% | 27.3% |
| Cash from continuing operating activities | Ps. 15.050 billion | Ps. 17.189 billion |
| Net cash used in investing activities | Ps. 8.845 billion | Ps. 2.158 billion |
| Net cash used in financing activities | Ps. 8.760 billion | Ps. 15.854 billion |
- Revenue rose 17.3%; sales volumes increased across cement, concrete, aggregates and rail services. Cement, masonry cement and lime sales volume rose 18.7%, while average selling price fell 3.1%.
- Cost of sales increased 15.0%, slower than revenue growth; energy, freight, maintenance and contractor costs rose. Gross profit increased 22.5%.
- Net profit fell 63.1% year over year, principally because FY2020 included Ps. 7.741 billion of discontinued-operation profit associated with the sale of the Yguazú Cementos stake. Continuing-operation profit also declined, as higher operating results were more than offset by increased tax expense.
- FY2021 income tax expense was Ps. 9.968 billion, including Ps. 3.329 billion of deferred tax expense; the reported effective tax rate was 61.1%, driven largely by the change in Argentina’s corporate tax rate and its deferred-tax impact.
Debt, liquidity and investment
- Year-end borrowings were Ps. 2.511 billion, down from Ps. 9.722 billion. Ps. 2.112 billion was current; 93% was U.S.-dollar-denominated and all borrowings carried floating rates. Average debt maturity was 0.4 years.
- The company reported net cash of Ps. 2.760 billion (net debt was negative), using its definition that offsets borrowings against cash and short-term investments. Current ratio was 1.15 and positive working capital was Ps. 2.486 billion. Cash and cash equivalents alone were Ps. 3.306 billion.
- FY2021 cash capital expenditure on property, plant and equipment was Ps. 7.088 billion. Operating cash flow was Ps. 15.050 billion; financing outflows included Ps. 6.876 billion of borrowing repayments and Ps. 2.387 billion of share repurchases.
- The second L’Amalí production line was completed and operating by year-end. The approximately US$320 million project increased installed cement capacity by 2.7 million tons annually; company-wide installed capacity reached 12.3 million tons. Cement, masonry cement and lime production rose to 6.0 million tons from 5.1 million.
Material changes, outlook and risks
- Loma Negra’s estimated Argentine cement market share was 43.2% at December 31, 2021. The company permanently closed the Sierras Bayas plant and converted Barker and San Juan from full cement lines to grinding and distribution centers.
- Management said demand and activity recovered as pandemic restrictions eased, but did not provide quantified FY2022 financial guidance. It stated that the duration and effects of COVID-19 developments remained uncertain.
- Argentina’s CPI inflation was 50.9% in 2021; the peso depreciated 22.1% against the U.S. dollar at the official rate. The filing emphasizes risks from inflation, currency controls, devaluation, fiscal conditions, government intervention and limited access to foreign currency.
- Energy is a material cost exposure: thermal energy and electricity represented approximately 13.7% and 9.8% of FY2021 cost of sales, respectively. Management cited rising fuel prices and potential supply constraints, including risks related to the Russia-Ukraine conflict.
- Ferrosur Roca’s railway concession is scheduled to expire in March 2023; the requested extension was rejected. The company expects to seek continued operations as a rail operator under a new open-access framework, but terms and implementation remain uncertain.
- At year-end, legal claims totaled approximately Ps. 1.463 billion: Ps. 232 million were classified as probable and provided for, Ps. 969 million as possible, and Ps. 262 million as remote. A labor-related fine received in March 2022 was appealed and remained pending.
- After year-end, the company paid Ps. 5.150 billion in dividends in April 2022. It also signed a US$56 million loan in April 2022, with principal amortizations at months 21, 24 and 27 and interest at three-month LIBOR plus 8%.
Important facts for investors to verify
- Confirm the constant-peso reporting basis and distinguish FY2021 continuing results from FY2020’s Yguazú-related discontinued-operation gain.
- Review the timing and refinancing of short-term, floating-rate U.S.-dollar debt, foreign-exchange access restrictions and the subsequent US$56 million loan.
- Assess the L’Amalí line’s ramp-up, utilization, cost efficiencies and the extent to which higher energy and freight costs can be passed through to customers.
- Monitor the railway concession transition and the consequences if the open-access operating arrangements are delayed or materially different from management’s assumptions.
- Evaluate inflation, currency, tax, legal and energy exposures, including the unprovided possible claims and the pending labor fine.
Audit and controls. The independent auditor issued an unqualified opinion on the IFRS consolidated financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2021; the auditor did not provide an internal-control attestation because the company qualified as an emerging growth company.