Business Context and Reporting Period
Loma Negra Compania Industrial Argentina Sociedad Anonima (Loma Negra) filed a Form 6-K on November 9, 2022, reporting results for the third quarter (3Q) ended September 30, 2022. The company operates in the cement, concrete, railroad, and aggregates sectors in Argentina. Financial results are presented in Argentine pesos (Ps.) and U.S. dollars (US$), with the latter derived from pre-IFRS 29 peso figures using average exchange rates. The company operates in a hyperinflationary environment, applying IAS 29 for "As Reported" results while also disclosing figures excluding this rule for performance comparison.
Key Financial Metrics
- Net Revenues: Ps. 33.9 billion (US$ 236 million), an increase of 4.2% in pesos and 33.7% in US dollars year-over-year (YoY).
- Adjusted EBITDA: Ps. 7.5 billion (US$ 68 million), down 12.7% in pesos but up 33.9% in US dollars YoY.
- Net Income: Net loss of Ps. 12.2 billion (Ps. 12.1 billion attributable to owners), compared to a net profit of Ps. 2.8 billion in 3Q21.
- Margins: Consolidated Adjusted EBITDA margin was 22.1% (down 426 basis points YoY). Gross margin contracted to 21.3% (down 448 basis points YoY).
- Debt and Liquidity: Total debt was Ps. 23.2 billion with cash and investments of Ps. 3.5 billion, resulting in Net Debt of Ps. 19.7 billion (US$ 134 million). The Net Debt to LTM Adjusted EBITDA ratio was 0.54x.
- Cash Flow: Operating cash flow was Ps. 11.4 billion. Capital expenditures were Ps. 1.6 billion.
- Dividends: Distributed Ps. 10.3 billion (US$ 81 million) in the quarter, totaling US$ 126 million for the year.
Material Changes vs. Prior Period
- Volume Growth: Cement, masonry, and lime volumes increased 12.9% YoY to 1.88 million tons, setting a record. Concrete volumes surged 35.6%, and aggregates volumes jumped 65.0%.
- Revenue Mix: While cement revenue grew 4.8%, concrete revenue rose 40.7% and aggregates revenue increased 54.7%. Railroad revenue declined 7.0% due to product mix impacts despite a 5.5% volume increase.
- Profitability Pressure: Gross profit declined 13.9% YoY due to higher energy costs (winter season), inflation, and depreciation from the L'Amalí line completion. Cement segment EBITDA margin contracted 516 bps to 24.3%.
- Financial Costs: Net financial expenses spiked to Ps. 18.2 billion from Ps. 0.5 billion YoY, driven by the cancellation of dollar-denominated debt with local funding and increased total debt. Foreign exchange losses were Ps. 885 million.
- Bottom Line: The shift from net profit to a significant net loss was primarily driven by extraordinary financial costs and foreign exchange losses, offset partially by a gain on net monetary position of Ps. 3.7 billion.
Outlook, Risks, and Management Commentary
- Outlook: Management expects the cement industry to achieve its strongest year in history, supported by robust demand and recent capacity investments. They anticipate energy cost pressures to soften in upcoming quarters as the winter season ends.
- Shareholder Returns: The company is executing a new share repurchase program and continues to distribute dividends.
- Risks: Key risks include Argentina's political and macroeconomic tensions, high inflation rates, peso exchange rate fluctuations, and volatility in raw material and energy prices.
- Unusual Items: The significant net loss is attributed to non-operating financial items (debt restructuring and FX losses) rather than operational performance, as Adjusted EBITDA in US dollars remained strong.
Investor Verification Checklist
- Verify the specific exchange rates used to convert peso figures to US dollars, as the filing notes these are for convenience and based on average rates excluding IAS 29 adjustments.
- Confirm the details of the new share repurchase program and the timeline for execution.
- Monitor the trajectory of energy costs in Argentina to validate management's expectation of softening winter-related expenses.
- Review the maturity schedule of the Ps. 23.2 billion debt to assess refinancing risks in a high-interest environment.
- Track the "As Reported" vs. "Pre-IFRS 29" figures to understand the full impact of hyperinflation accounting on the balance sheet.